Filing Jointly, Substantial Presence Test, Foreign Earned Income, and MORE

[sweetswinks 400]

I need some serious help with my circumstances regarding rules of filing jointly and declaring foreign earned income

My presence in the USA for the last 3 years:

In US on visa waiver program Sept 8th to 30th, 2012: 22 days [22 days divided by 1/6th = 3.6 days]

In US on visa waiver program Aug 2nd to 13th, 2013: 12 days [12 days divided by 1/3rd = 4 days]

In US on visa waiver program Dec 6th to 31st, 2013: 25 days [25 days divided by 1/3rd = 8.3 days]

In US on visa waiver program Jan 1st to March 4th, 2014: 62 days

*March to August 2014 I am in my home country, Sydney Australia*

POE on K1 visa August 20, 2014 present until December 31st: 133 days

*My AOS NOA date is Oct 23rd, 2014*

So as you can see I am present in the US for a total of 195 days in 2014 alone.

During my time in Australia in 2014 I worked for a total of 3 months (May to August)
The Australian Tax year is from July 1 to June 30.

I have already paid Australian taxes for July 2013- June 2014 tax year for the period I worked (July to Dec 2013 and May to June 2014).
I have not yet paid taxes in Australia for the period I worked there 1 July to Aug 18, 2014 because it is not due until after July 1st, 2015 this year.

My questions:

1. Do we have to file Married Jointly and declare my Foreign earned income?

2. Do I need to declare the income I have already submitted on a tax return in Australia for the time of June to Dec 2013 and May to June 2014?

3. Because I was in the US for 195 days in 2014, are any of those days exempt due to some being on VWP?

4. Does it make a difference that I have only been present as a K1 visa older and AOS applicant for Aug-Dec 2014?

5. Does it make a difference that I am not a greencard holder (yet)?

6. How much of my foreign income will be taxed? (I only earned USD$12k in 2014)

7. What should I do?!

All of your input is welcome and appreciated!

[Nich-Nick 3,354]

My presence in the USA for the last 3 years:

In US on visa waiver program Sept 8th to 30th, 2012: 22 days [22 days divided by 1/6th = 3.6 days]

In US on visa waiver program Aug 2nd to 13th, 2013: 12 days [12 days divided by 1/3rd = 4 days]

In US on visa waiver program Dec 6th to 31st, 2013: 25 days [25 days divided by 1/3rd = 8.3 days]

In US on visa waiver program Jan 1st to March 4th, 2014: 62 days

*March to August 2014 I am in my home country, Sydney Australia*

POE on K1 visa August 20, 2014 present until December 31st: 133 days

*My AOS NOA date is Oct 23rd, 2014*

So as you can see I am present in the US for a total of 195 days in 2014 alone.

****Your days present in the US is over thinking and making this complicated. Did you earn any money while in the US? If no, then you have no obligation to file a tax return.

During my time in Australia in 2014 I worked for a total of 3 months (May to August)

The Australian Tax year is from July 1 to June 30.

I have already paid Australian taxes for July 2013- June 2014 tax year for the period I worked (July to Dec 2013 and May to June 2014).

I have not yet paid taxes in Australia for the period I worked there 1 July to Aug 18, 2014 because it is not due until after July 1st, 2015 this year.

My questions:

1. Do we have to file Married Jointly and declare my Foreign earned income?

****You never are forced to file jointly with a spouse. You may choose to since he is a USC.

2. Do I need to declare the income I have already submitted on a tax return in Australia for the time of June to Dec 2013 and May to June 2014?

****Only if you choose to file jointly. You may choose to if it helps your husband pay less taxes.

3. Because I was in the US for 195 days in 2014, are any of those days exempt due to some being on VWP?

****Don't need to count your days really. If you didn't earn in the US, you don't have to file at all. End of story.

4. Does it make a difference that I have only been present as a K1 visa older and AOS applicant for Aug-Dec 2014?

****If you didn't earn in the US, you don't have to file at all. End of story.

5. Does it make a difference that I am not a greencard holder (yet)?

****If you didn't earn in the US, you don't have to file at all. End of story.

6. How much of my foreign income will be taxed? (I only earned USD$12k in 2014)

****Your foreign income will not be taxed. It will be reported only if you CHOOSE to file a joint return with your spouse. There is a foreign income exclusion if you choose that route.

7. What should I do?!

****Since your USC spouse didn't even earn enough to file, then adding you jointly wouldn't do much for him. You have no greencard and no US 2014 earnings, so don't file. The only reason a person like yourself should choose to file jointly with a USC spouse is if he had a big income. It would lower his tax bill by adding a spouse with no US income and whose foreign income would be reported, but then subtracted out.

Get your head around this:

There are certain income levels published each year that require filing a tax return. If the American, or LPR didn't earn enough, they don't have to file. They may want to file if money got held out of any paycheck they did earn. Filing is the only way to get that money back. Why do they get it back? Because it got withheld and sent to the IRS toward the tax bill. But very low income isn't taxed, so that money that got sent in for taxes not owed after all, is returned. Another reason for filing. The government gave a rebate bonus several years back. If you didn't file a return, you couldn't claim your bonus. No special general bonus for 2014 like 2007 or 2008 offered.

[sweetswinks 400]

Tha k you for your reply. My concerns arose while my husband was filling in turbo tax for his tax return we read the following on the IRS website

Substantial Presence Test

"You will be considered a U.S. resident for tax purposes if you meet the substantial presence test for the calendar year. To meet this test, you must be physically present in the United States on at least:

31 days during the current year, and

183 days during the 3-year period that includes the current year and the 2 years immediately before that, counting:

All the days you were present in the current year, and

1/3 of the days you were present in the first year before the current year, and

1/6 of the days you were present in the second year before the current year."

So basically this substantial presence test means nothing?

[asisflyer 47]

I disagree with a few technical points mentions by the commenter above. Specifically related to Foreign Unearned Income and LPR. LPR can only use 330 day physical presence test. LPR cannot use Bona Fide Foreign Resident for FEI. LPR attests to domicile or intent to domicile in US so how can there be a bona fide intent to not be.

If AOS applicant had appreciable foreign income without sufficient deductions and was granted LPR status in the Calendar year, they can and do have double taxation issues arise and would generally take the Foreign Tax Credit for anything they paid on their foreign income since its nearly impossible for them to do FEI with 330 day physical presence and as I said before, the Bona Fide method on the LPR does not work. If LPR not granted, then physical presence takes over. USC is different story.

METHOD

1. The calendar year in which an LPR is approved, LPR becomes a resident for tax purpose retroactive to January 1st of that year. AKA Green Card Test. YOU DID NOT HAVE GC IN 2014 SO YOU CAN IGNORE THIS TEST for 2014.

2. The day at which the Alien reaches 183 days presence in a calendar year OR the # Days Current year + (Days-last-yr /3 ) + (Days-2yrs-back / 6) reaches 183.

You calculate the EXACT DATE at which you first MET THE PHYSICAL PRESENCE TEST standard.

So calculate the date at which you reached the 183 days in 2014. 3.6 + (4 + 8.3) + 62 through your first trip in 2014 = 78... 183 less 78 = 105 .. so 105 days forward from Aug 20 return date. Puts you pretty close to the end of the year (around December 2014) where you changed from NRA to Resident for tax purposes.

You then SPLIT. On that date. You were a Non-Resident Alien (NRA) up to that point and a Tax Resident after it. NOW this does not mean you necessarily have to file a return as the commenter said as it will vary with the standards for each form. 1040 NR for Part 1 of the year .... and 1040 for Part II.. .each written clearly on the heading DUAL STATUS RETURN or whatever text is recommended written on top of each in the IRS booklet for Aliens Taxpayers.

Non Resident Alien Period - If the Australia money was from an Australia company and not owned by an American and you had No Investments, Trades, or other US business transactions (see the big list in the 1040NR instructions) and you had no US income derived during you early trip to US that year. Then most likely you would not meet to requirement to file this.

Resident Alien Period - You had your EAD perhaps. But did you exceed the typical US standard deductions. TurboTax and the like can help with this. Just put in data relevant to 2014 period at the end of the year. I am guessing you don't meet the standard to file either.

If that occurs, you wound up with no paperwork and your husband filed as MARRIED FILING SEPARATELY and where it asks for your social he writes NRA on his.

NOW If you attempt to file Jointly with your Husband in 2014, it will be an election for the Non-Resident to be Resident for tax purposes. You will have to disclose the Australia income and as an LPR candidate, you lose the ability to file for Bona Fide method for foreign earned income and you also do not meet physical presence test. If you file jointly, your joint return will show the AUSSIE income on the return and take a Foreign Tax Credit for the aussie taxes.

SO Married File Separately. Makes life easier. Especially if you are in a community property state !!!!

[mesnuggles30 2]

This is how i understand it based on reading IRS publications and forums here.

By Dec 31 2014, we established that:

1.) You are married.
2.) Your husband is USC or LPR.
3.) You are NRA (AOS pending, no Green card yet).
4.) 2014 entire tax year, you have no US income but had a foreign income.

Options for filing: MFS (Married Filing Separately) or MFJ (Married Filing Jointly)

MFS:

1.) He files MFS and put "NRA" on SSN option if you don't have one.

2.) You don't have to file anything since you have no US income.


MFJ:

1.) From IRS publication:
"If, at the end of your tax year, you are married and one spouse is a U.S. citizen or a resident alien and the other spouse is a nonresident alien,you can choose to treat the nonresident spouse as a U.S. resident."

(Note: This option needs to paper file and include the letter stating that you choose to be treated as US resident for tax purpose, include name, address and SSN/ITIN)

with this election, you need to declare your worldwide income. You can file Foreign Earned Income Exclusion if worldwide income is less than $99,200.

Sources:

http://www.irs.gov/Individuals/International-Taxpayers/Determining-Alien-Tax-Status

http://www.irs.gov/Individuals/International-Taxpayers/Nonresident-Spouse-Treated-as-a-Resident

http://www.irs.gov/Individuals/International-Taxpayers/Foreign-Earned-Income-Exclusion

also,

Determining Alien Tax Status:
-Green Card Test
-Substantial Presence Test

but being an NRA, married to a USC and making an election overrides the green card test and the substantial presence test

[sweetswinks 400]

Thank you everyone for your detailed replies! I will not be electing myself to file a tax return and my husband will be filing as Married Filing Separate.