Tax related question

[Keith & Xiang 0]

I'll be filing my 2006 taxes soon, very soon. Our wedding was November 5, 2006, I realize that I can claim "married, filing jointly", my question is this:

My wife and step-daughter arrived on October 29, 2006 from China. Now take into consideration that we're filing married, filing jointly are we entitled to claim our 12 year old daughter as a dependent on the taxes? Even though she had resided with me since October 29th she has lived with her mother the entire 2006 calendar year.

Thanks,

Keith

[john_and_marlene 162]

Yes

[payxibka 10,045]

While we all want the answer to be a definitive "YES", the real answer to your question is a definitive "MAYBE". You need to look at the 5 tests that MUST be met in order for a child to be your qualifying child. I think the one test you need to pay specific attention to is the "Residency" test.

Look at Part 1, Chapter 3 in IRS Publication 17

http://www.irs.gov/pub/irs-pdf/p17.pdf

Edited February 7, 2007 by fwaguy

[maya62 7]

I was in the very same boat a year ago. My husband and stepson (then 9) arrived on October 21, 2005. My husband started work almost immediately with a SSN and a temporary EAD from JFK. I puzzled over this question for a while and finally, after reading everything over, we filed jointly, included a W-7 for our son, and claimed him as a deduction on our taxes. I included a statement with our return detailing the exact circumstances, with dates, and saying that I wanted my husband to be treated as a US citizen for tax purposes (something that is allowed under specific circumstances). At any rate, I did something wrong and we got back more money than I thought we would, but the IRS sent along an ITIN number for our son, and did not seem to have any problem with us claiming him. I guess they're satisfied that we did things correctly.

I found this publication helpful: http://www.irs.gov/publications/p519/index.html

Best wishes,

Maya

Edited February 7, 2007 by maya62

[Keith & Xiang 0]

I was in the very same boat a year ago. My husband and stepson (then 9) arrived on October 21, 2005. My husband started work almost immediately with a SSN and a temporary EAD from JFK. I puzzled over this question for a while and finally, after reading everything over, we filed jointly, included a W-7 for our son, and claimed him as a deduction on our taxes. I included a statement with our return detailing the exact circumstances, with dates, and saying that I wanted my husband to be treated as a US citizen for tax purposes (something that is allowed under specific circumstances). At any rate, I did something wrong and we got back more money than I thought we would, but the IRS sent along an ITIN number for our son, and did not seem to have any problem with us claiming him. I guess they're satisfied that we did things correctly.

I found this publication helpful: http://www.irs.gov/publications/p519/index.html

Best wishes,

Maya

Maya,

Thanks for the reply. Just one more question please, what part of the publication helped you with the resolution to the problem?

Thanks and best wishes,

Keith

[payxibka 10,045]

I was in the very same boat a year ago. My husband and stepson (then 9) arrived on October 21, 2005. My husband started work almost immediately with a SSN and a temporary EAD from JFK. I puzzled over this question for a while and finally, after reading everything over, we filed jointly, included a W-7 for our son, and claimed him as a deduction on our taxes. I included a statement with our return detailing the exact circumstances, with dates, and saying that I wanted my husband to be treated as a US citizen for tax purposes (something that is allowed under specific circumstances). At any rate, I did something wrong and we got back more money than I thought we would, but the IRS sent along an ITIN number for our son, and did not seem to have any problem with us claiming him. I guess they're satisfied that we did things correctly.

I found this publication helpful: http://www.irs.gov/publications/p519/index.html

Best wishes,

Maya

Maya,

Thanks for the reply. Just one more question please, what part of the publication helped you with the resolution to the problem?

Thanks and best wishes,

Keith

If you look at the Pub 519 summary that that was referenced, it specifically mentions that a in order to be considered a qualifying child for exemption purposes, the child must meet the same tests attributable to a USC (ie the 5 prong test).

[Keith & Xiang 0]

Ok, yesterday I called the IRS. One of the options that they gave me was that because China has a tax treaty with the United States I can include my wife's income that she had while residing in China along with my own on the 2006 tax forms and file "married filing jointly" as long as her income isn't being double taxed, that is taxed in China and in the United States.

So, if I were to go this route shouldn't I then be able to declare my step-daughter as a dependent for tax year 2006? Her and her mother arrived in Detroit on October 29, 2006.

Maya, if you could please send me a private message on exactly how you had to go about resolving this issue. Your previous post is a good one but I'm in need of a further explaination, one that can be kept out of the forum.

Thanks,

Keith

[payxibka 10,045]

A good post that provides proper tax advice is a good post. A good post that provides improper tax advice might not be such a good post. Proceed at your own risk.

[elyjack 0]

My fiance' and stepson arrived on December 24th of 2004 and we got married on December 30th. I filed a joint return and claimed our stepson as a dependent.

[Keith & Xiang 0]

My fiance' and stepson arrived on December 24th of 2004 and we got married on December 30th. I filed a joint return and claimed our stepson as a dependent.

After some research I realize that I cannot claim the EITC on my step-daughter, would be nice though, but I'm going to claim her as a dependent on the tax form. I'm also going to include a statement to the IRS stating the facts (when they arrived in the US, the type of Visa, when we were wed, and so on). If the IRS determines otherwise they do have my contact information and of course are the IRS, I'm sure that if there's incorrect information they'll make the appropriate corrections.

Thanks,

Keith

[payxibka 10,045]

My fiance' and stepson arrived on December 24th of 2004 and we got married on December 30th. I filed a joint return and claimed our stepson as a dependent.

After some research I realize that I cannot claim the EITC on my step-daughter, would be nice though, but I'm going to claim her as a dependent on the tax form. I'm also going to include a statement to the IRS stating the facts (when they arrived in the US, the type of Visa, when we were wed, and so on). If the IRS determines otherwise they do have my contact information and of course are the IRS, I'm sure that if there's incorrect information they'll make the appropriate corrections.

Thanks,

Keith

You certainly can do it that way... however, please remember that the processors are not the examination division. The examination division has three years to review/audit your return. Your return may or may not get flagged. If you get selected and they make adjustements you may be subject to interest and penalties.

[zyggy 9]

Ok, yesterday I called the IRS. One of the options that they gave me was that because China has a tax treaty with the United States I can include my wife's income that she had while residing in China along with my own on the 2006 tax forms and file "married filing jointly" as long as her income isn't being double taxed, that is taxed in China and in the United States.

So, if I were to go this route shouldn't I then be able to declare my step-daughter as a dependent for tax year 2006? Her and her mother arrived in Detroit on October 29, 2006.

Maya, if you could please send me a private message on exactly how you had to go about resolving this issue. Your previous post is a good one but I'm in need of a further explaination, one that can be kept out of the forum.

Thanks,

Keith

FOr 2006, unless they have gotten their Green Cards, they are considered non-resident aliens in terms of taxation in 2006. However, the IRS allows you to opt to treat your SPOUSE as a resident alien for the tax year. THis will require you declaring all of her worldwide income for 2006. You can exclude her foreign income by the ratio of her days outside of the US by filing Form 2555 with your tax return. They do not allow you also elect to treat any children as resident alien for qualifying child purposes.

IRS Regulations are clear... if one is going to be considered a qualifying child the follwing must be met:

The child can't be claimed as a qualifying child by anyone else

The child must be a US CItizen, US National, US Resident Alien, or a resident of Canada or Mexico for some part of the year

In order to be treated as a resident alien for the tax year, you have to meet either the green card test or the substatial presence test. It does not appear that your spouse or child meets either test in 2006. However, there is an exception to the rule where you can establish yourself as a Resident Alien For Tax purposes in the first year of residence in the US if the following apply:

Be present in the United States for at least 31 days in a row in 2005, and

Be present in the United States for at least 75% of the number of days beginning with the first day of the 31-day period and ending with the last day of 2005. For purposes of this 75% requirement, you can treat up to 5 days of absence from the United States as days of presence in the United States.

When counting the days of presence in (1) and (2) above, do not count the days you were in the United States under any of the exceptions discussed earlier under Days of Presence in the United States.

If you make the first-year choice, your residency starting date for 2005 is the first day of the earliest 31-day period (described in (1) above) that you use to qualify for the choice. You are treated as a U.S. resident for the rest of the year. If you are present for more than one 31-day period and you satisfy condition (2) above for each of those periods, your residency starting date is the first day of the first 31-day period. If you are present for more than one 31-day period but you satisfy condition (2) above only for a later 31-day period, your residency starting date is the first day of the later 31-day period.

Statement required to make the first-year choice. You must attach a statement to Form 1040 to make the first-year choice. The statement must contain your name and address and specify the following.

That you are making the first-year choice.

That you were not a resident in 2004.

That you are a resident under the substantial presence test in 2006.

The number of days of presence in the United States during 2006.

The date or dates of your 31-day period of presence and the period of continuous presence in the United States during 2005.

The date or dates of absence from the United States during 2005 that you are treating as days of presence.

You cannot file Form 1040 or the statement until you meet the substantial presence test for 2006. If you have not met the test for 2006 as of April 17, 2006, you can request an extension of time for filing your 2005 Form 1040 until a reasonable period after you have met that test. To request an extension to file until October 16, 2006, use Form 4868, Application for Automatic Extension of Time To File U.S. Individual Income Tax Return. You can file the paper form or use one of the electronic filing options explained in the Form 4868 instructions. You should pay with this extension the amount of tax you expect to owe for 2005 figured as if you were a nonresident alien the entire year. You can use Form 1040NR or Form 1040NR-EZ to figure the tax. Enter the tax on Form 4868. If you do not pay the tax due, you will be charged interest on any tax not paid by the regular due date of your return, and you may be charged a penalty on the late payment.

Once you make the first-year choice, you may not revoke it without the approval of the Internal Revenue Service.

If you do not follow the procedures discussed here for making the first-year choice, you will be treated as a nonresident alien for all of 2005. However, this does not apply if you can show by clear and convincing evidence that you took reasonable actions to become aware of the filing procedures and significant steps to comply with the procedures.

The above was written in Publication 515 for the 2005 tax year... The same rules apply, just substitute 2005 for 2006 and 2006 for 2007.. etc...

For the Substantial Presence Test to be met the following must apply...

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

⅓ of the days you were present in the first year before the current year, and

⅙ of the days you were present in the second year before the current year.

If your spouse and daughter arrived in October 29, 2006, you would meet this test on April 30, 2007.

I am not your tax advisor and do not know all the details of your tax situation, so I can not give you advice on your specifics.. but I would not be declaring your daughter as a dependent at this time... I you want to file an extension and file your return after April 30, that would appear to be fine...

Edited February 8, 2007 by zyggy

[elyjack 0]

After reading the whole thread I see my own situation was substantially different from yours so pay no attention to my experience. My wife had no income in her home country and I was supporting both her and her stepson for at least half of the year even before they arrived. I think that is a major difference.

I did my taxes with Turbo Tax and just answered the questions as they were asked. It said I was eligible to claim my stepson as a dependent and I think I even got the child tax credit though I'm not sure about that. So far the IRS hasn't disagreed with Turbo Tax.

My fiance' and stepson arrived on December 24th of 2004 and we got married on December 30th. I filed a joint return and claimed our stepson as a dependent.

[Keith & Xiang 0]

After reading the whole thread I see my own situation was substantially different from yours so pay no attention to my experience. My wife had no income in her home country and I was supporting both her and her stepson for at least half of the year even before they arrived. I think that is a major difference.

I did my taxes with Turbo Tax and just answered the questions as they were asked. It said I was eligible to claim my stepson as a dependent and I think I even got the child tax credit though I'm not sure about that. So far the IRS hasn't disagreed with Turbo Tax.

My fiance' and stepson arrived on December 24th of 2004 and we got married on December 30th. I filed a joint return and claimed our stepson as a dependent.

The thing about it is that China is one of the many countries that has a "tax treaty" with the United States. I was informed by an IRS agent that we would have to claim my wife's income that was earned in China on our tax forms. The IRS agent also stated something about if my wife was taxed in China on her income (which she was) that there would be special provisions. So, once again, more research to be done this weekend.

Thanks,

Keith

[payxibka 10,045]

After reading the whole thread I see my own situation was substantially different from yours so pay no attention to my experience. My wife had no income in her home country and I was supporting both her and her stepson for at least half of the year even before they arrived. I think that is a major difference.

I did my taxes with Turbo Tax and just answered the questions as they were asked. It said I was eligible to claim my stepson as a dependent and I think I even got the child tax credit though I'm not sure about that. So far the IRS hasn't disagreed with Turbo Tax.

My fiance' and stepson arrived on December 24th of 2004 and we got married on December 30th. I filed a joint return and claimed our stepson as a dependent.

The thing about it is that China is one of the many countries that has a "tax treaty" with the United States. I was informed by an IRS agent that we would have to claim my wife's income that was earned in China on our tax forms. The IRS agent also stated something about if my wife was taxed in China on her income (which she was) that there would be special provisions. So, once again, more research to be done this weekend.

Thanks,

Keith

I do not think there is any doubt that what you understand about how to handle your filing status and your wife's income is correct (tax treaty and special exception). The question that I think you need to come to a final conclusion is how to handle the child.