Tax woes!

[together2love 0]

Hello folks!

I came to the US on 21st June 2006, and worked in the UK up to 20th June 2006.

After getting married and getting the greencard etc, I started a job here in the USA in December 2006.

Questions:

1. Since I've been here more than 6 months, am I right to say that I *have* to file as a resident alien?

2. Should me and the Mrs file jointly or seperately? What are the advantages/disadvantages of both?

3. I believe I have to use form 2555 to report my foreign income. Do I just report for the UK tax year (i.e. from April) or for the whole of 2006? Is it just earnings, or capital gains (i.e. my house sale) too?

4. Are these places like H&R Block etc any use, or am I just as well to file online for free?

Cheers guys!! Happy filing!!

Adz.

xx

1) It's not six months but 183 days... or if you got your GC in 2006... If those two apply, then yes, you are a resident alien for tax purposes...

2) Never file seperately unless absolutely necessary... there are many significant tax penalties if you file as married filing seperate... I'll go into just a few specifics (lower standard deduction which could push your taxable income into a higher tax bracket, if one spouse itemizes, the other must itemize even though they may have nothing to itemize, loss of many tax credits and deductions, etc.) There are really not that many advantages to filing seperately...

3) You use Form 2555 to exclude any foreign earned income... You use it for the time that you were a non-resident alien. The maximum exclusion for 2006 is $82,400. It is reduced by the ratio of days you were in the UK/365. In you case that would work out to $38,604. If you made more than the exclusion amount, you can take a foreign tax credit paid in the UK against any US taxes you would owe on the income. You use Form 1113 for that...

I am just a little confused after reading http://www.irs.gov/businesses/small/intern...d=96433,00.html

It says that you cannot file jointly if you are a dual-status alien? The only exception being http://www.irs.gov/businesses/small/intern...d=96370,00.html which says "A declaration that one spouse was a nonresident alien and the other spouse a U.S. citizen or resident alien on the last day of your tax year, and that you choose to be treated as U.S. residents for the entire tax year".

I hate taxes!!

If you were a resident alien in terms of US Tax purposes through the Substantial Presence or Green Card test, you must file a US Income Tax return.

If you are considered a non-resident alien because you did not fulfill the Substantial Presence or Green Card tests, you do not have to file a US Income Tax return. However, your USC spouse does. In this case, the USC spouse has the option to elect to treat you, the non-resident alien as a resident alien and be able to file a MFJ return which typically gives greater tax benefits.

However, if you opt to be treated as resident alien, you must delcare your worldwide income to the IRS as if you were a resident alien. But you do get to exclude up to $82,400 of that foreign source income for the time that you did not reside in the US...

So, my situation. . . in 2006 I didn't fulfill the Sustantial Presence (only 130 days within the 3 year test calculations) or Green Card tests, and didn't receive any US income for 2006 (the only income I receive after I moved to the USA in 2006 was just Canadian EI and a small amount of Canadian source investment intrest income) then I do not really have to file an income tax return to the IRS . . .correct? I had filed the 1040NR-EZ for both 2004 and 2005 because I worked in the USA for both of those summers. And my accountant in Canada who said he has filed US tax returns says that he is going to file me as a dual status alien under the "First-Year Choice" catagory. I do not have my greencard yet, and from what I can read in the Publication 519 from IRS http://www.irs.gov/pub/irs-pdf/p519.pdf (page 9) is that I cannot file the 1040 form for 2006 until I reach the substancial presence test in 2007, which won't be until May or June or if when I get my greencard, and therefore have to request an extension, blah, blah, blah! Does this guy even know what he is talking about? Sounds like I don't even need to file if I didn't meet the presence test. Or my husband can choose to file married file joint for 2006. Yikes, alot of issues. Am I right in thinking I hypethetically don't even need to file in 2006 to the IRS because I don't meet any of the test requirements?

[vvill 0]

If you were a resident alien in terms of US Tax purposes through the Substantial Presence or Green Card test, you must file a US Income Tax return.

If you are considered a non-resident alien because you did not fulfill the Substantial Presence or Green Card tests, you do not have to file a US Income Tax return. However, your USC spouse does. In this case, the USC spouse has the option to elect to treat you, the non-resident alien as a resident alien and be able to file a MFJ return which typically gives greater tax benefits.

However, if you opt to be treated as resident alien, you must delcare your worldwide income to the IRS as if you were a resident alien. But you do get to exclude up to $82,400 of that foreign source income for the time that you did not reside in the US...

I know I am a resident alien in terms of US tax purposes as I received a green card in 2006, but does that mean I am also a "dual-status alien"?:

You are a dual status alien when you have been both a resident alien and a nonresident alien in the same tax year.

(From http://www.irs.gov/businesses/small/intern...=96433,00.html)

If so, does that preclude me from filing jointly? The IRS site seems to imply so.

Essentially, I have two chunks of income, the first earned before I immigrated which know will be below the days/365 * $82400. The second is a much smaller amount and I assume I have to declare it as well. Does this then mean my taxable US income goes up by that amount? Even if it already taxed in Australia?

Thanks in advance.

[together2love 0]

If you were a resident alien in terms of US Tax purposes through the Substantial Presence or Green Card test, you must file a US Income Tax return.

If you are considered a non-resident alien because you did not fulfill the Substantial Presence or Green Card tests, you do not have to file a US Income Tax return. However, your USC spouse does. In this case, the USC spouse has the option to elect to treat you, the non-resident alien as a resident alien and be able to file a MFJ return which typically gives greater tax benefits.

However, if you opt to be treated as resident alien, you must delcare your worldwide income to the IRS as if you were a resident alien. But you do get to exclude up to $82,400 of that foreign source income for the time that you did not reside in the US...

I know I am a resident alien in terms of US tax purposes as I received a green card in 2006, but does that mean I am also a "dual-status alien"?:

You are a dual status alien when you have been both a resident alien and a nonresident alien in the same tax year.

(From http://www.irs.gov/businesses/small/intern...=96433,00.html)

If so, does that preclude me from filing jointly? The IRS site seems to imply so.

Essentially, I have two chunks of income, the first earned before I immigrated which know will be below the days/365 * $82400. The second is a much smaller amount and I assume I have to declare it as well. Does this then mean my taxable US income goes up by that amount? Even if it already taxed in Australia?

Thanks in advance.

I just got off the phone with the international IRS people in Phili and I would recommend calling them if you don't mind being on the phone on hold for a little while. They are really helpful. That number is (215)516-5441 with hours of operation M-F from 6am-11pm Eastern Time.

If both that income was earned and Australia and US have a tax treaty together then you should not have to pay taxes in the US for that since you are already taxed in Australia. But you need to file a 2555, like Ziggy has said. And you are allowed to file jointly just as long as you attach a letter signed by both you and your spouse and saying that you wish to do this along with the information found in Publication 519 http://www.irs.gov/pub/irs-pdf/p519.pdf on page 9, 3rd column stating that you make a declaration to choose to be treated as US residents for the entire year. Hope that helps.

[zyggy 9]

If you were a resident alien in terms of US Tax purposes through the Substantial Presence or Green Card test, you must file a US Income Tax return.

If you are considered a non-resident alien because you did not fulfill the Substantial Presence or Green Card tests, you do not have to file a US Income Tax return. However, your USC spouse does. In this case, the USC spouse has the option to elect to treat you, the non-resident alien as a resident alien and be able to file a MFJ return which typically gives greater tax benefits.

However, if you opt to be treated as resident alien, you must delcare your worldwide income to the IRS as if you were a resident alien. But you do get to exclude up to $82,400 of that foreign source income for the time that you did not reside in the US...

I know I am a resident alien in terms of US tax purposes as I received a green card in 2006, but does that mean I am also a "dual-status alien"?:

You are a dual status alien when you have been both a resident alien and a nonresident alien in the same tax year.

(From http://www.irs.gov/businesses/small/intern...=96433,00.html)

If so, does that preclude me from filing jointly? The IRS site seems to imply so.

Essentially, I have two chunks of income, the first earned before I immigrated which know will be below the days/365 * $82400. The second is a much smaller amount and I assume I have to declare it as well. Does this then mean my taxable US income goes up by that amount? Even if it already taxed in Australia?

Thanks in advance.

No.. you are not a dual status alien... you are a resident alien in accordance with the US tax code for the entirety of 2006...

You can file a Form 2555 and exclude the foreign source income that you earned while you were outside of the US...

If you earned foreign source income after you arrived in the US.. you cannot exclude it, but you will not be double taxed on it as you can file a 1116 to get a foreign tax credit on the taxes that you paid on that foreign source income to Australia...

Edited March 1, 2007 by zyggy

[zyggy 9]

If you were a resident alien in terms of US Tax purposes through the Substantial Presence or Green Card test, you must file a US Income Tax return.

If you are considered a non-resident alien because you did not fulfill the Substantial Presence or Green Card tests, you do not have to file a US Income Tax return. However, your USC spouse does. In this case, the USC spouse has the option to elect to treat you, the non-resident alien as a resident alien and be able to file a MFJ return which typically gives greater tax benefits.

However, if you opt to be treated as resident alien, you must delcare your worldwide income to the IRS as if you were a resident alien. But you do get to exclude up to $82,400 of that foreign source income for the time that you did not reside in the US...

I know I am a resident alien in terms of US tax purposes as I received a green card in 2006, but does that mean I am also a "dual-status alien"?:

You are a dual status alien when you have been both a resident alien and a nonresident alien in the same tax year.

(From http://www.irs.gov/businesses/small/intern...=96433,00.html)

If so, does that preclude me from filing jointly? The IRS site seems to imply so.

Essentially, I have two chunks of income, the first earned before I immigrated which know will be below the days/365 * $82400. The second is a much smaller amount and I assume I have to declare it as well. Does this then mean my taxable US income goes up by that amount? Even if it already taxed in Australia?

Thanks in advance.

I just got off the phone with the international IRS people in Phili and I would recommend calling them if you don't mind being on the phone on hold for a little while. They are really helpful. That number is (215)516-5441 with hours of operation M-F from 6am-11pm Eastern Time.

If both that income was earned and Australia and US have a tax treaty together then you should not have to pay taxes in the US for that since you are already taxed in Australia. But you need to file a 2555, like Ziggy has said. And you are allowed to file jointly just as long as you attach a letter signed by both you and your spouse and saying that you wish to do this along with the information found in Publication 519 http://www.irs.gov/pub/irs-pdf/p519.pdf on page 9, 3rd column stating that you make a declaration to choose to be treated as US residents for the entire year. Hope that helps.

Correct.. as a non-resident alien for 2006 (you did not meet the substantial presence or green card test) you are not required to file. However, your spouse is required to file as either married filing separate or as head of household (if they have an appropriate dependent). However, a USC can opt to have their non-resident alien spouse be treated as a resident alien for tax purposes for the tax year and file as married filing joint. They have to file a statement to that effect with their return as well as declare their non-resident alien spouses worldwide income. However, they can exclude their non-resident alien spouses worldwide income earned outside the US by filing Form 2555.

[vvill 0]

If you were a resident alien in terms of US Tax purposes through the Substantial Presence or Green Card test, you must file a US Income Tax return.

If you are considered a non-resident alien because you did not fulfill the Substantial Presence or Green Card tests, you do not have to file a US Income Tax return. However, your USC spouse does. In this case, the USC spouse has the option to elect to treat you, the non-resident alien as a resident alien and be able to file a MFJ return which typically gives greater tax benefits.

However, if you opt to be treated as resident alien, you must delcare your worldwide income to the IRS as if you were a resident alien. But you do get to exclude up to $82,400 of that foreign source income for the time that you did not reside in the US...

I know I am a resident alien in terms of US tax purposes as I received a green card in 2006, but does that mean I am also a "dual-status alien"?:

You are a dual status alien when you have been both a resident alien and a nonresident alien in the same tax year.

(From http://www.irs.gov/businesses/small/intern...=96433,00.html)

If so, does that preclude me from filing jointly? The IRS site seems to imply so.

Essentially, I have two chunks of income, the first earned before I immigrated which know will be below the days/365 * $82400. The second is a much smaller amount and I assume I have to declare it as well. Does this then mean my taxable US income goes up by that amount? Even if it already taxed in Australia?

Thanks in advance.

No.. you are not a dual status alien... you are a resident alien in accordance with the US tax code for the entirety of 2006...

You can file a Form 2555 and exclude the foreign source income that you earned while you were outside of the US...

If you earned foreign source income after you arrived in the US.. you cannot exclude it, but you will not be double taxed on it as you can file a 1116 to get a foreign tax credit on the taxes that you paid on that foreign source income to Australia...

Australia's tax year ends at the end of June 2007, so I won't have been taxed on the second income amount yet. Can I file a pre-emptive tax credit? Or do I have to wait until I'm filing for 2007? (It is just interest income from a savings account.)

Thanks again, zyggy.

[together2love 0]

Thanks for the clarification, Zyggy.

[ninamyers 0]

This topic makes my brain hurt but unfortunately I will have to file taxes in the not very distant furture (i.e. as soon as I get round to it...) I'm hoping that mine should be quite straightforward, as I didn't earn enough in the UK to pay tax, so should get that back, and I didn't earn enough in the US last year to have to pay any tax, so should also get that back! I would hope anyway... Even combined I don't think I went over either limit. Although with the exchange rate... Aaahhh! Madness.

[Yodrak 7]

zyggy,

Does that exclusion apply to (all) income or only to earned income?

Yodrak

....

However, if you opt to be treated as resident alien, you must delcare your worldwide income to the IRS as if you were a resident alien. But you do get to exclude up to $82,400 of that foreign source income for the time that you did not reside in the US...

[Yodrak 7]

Adz,

You report your foreign income on the appropriate lines 7 - 21 of Form 1040.

You use Form 2555 to calculate the allowed exclusion of foreign earned income, and report the result as a negative number of Form 1040 Line 21. (Note that the word 'earned' has significance.)

Yodrak

Hello folks!

I came to the US on 21st June 2006, and worked in the UK up to 20th June 2006.

After getting married and getting the greencard etc, I started a job here in the USA in December 2006.

Questions:

.....

3. I believe I have to use form 2555 to report my foreign income. .....

Adz.

xx

Edited March 2, 2007 by Yodrak

[zyggy 9]

If you were a resident alien in terms of US Tax purposes through the Substantial Presence or Green Card test, you must file a US Income Tax return.

If you are considered a non-resident alien because you did not fulfill the Substantial Presence or Green Card tests, you do not have to file a US Income Tax return. However, your USC spouse does. In this case, the USC spouse has the option to elect to treat you, the non-resident alien as a resident alien and be able to file a MFJ return which typically gives greater tax benefits.

However, if you opt to be treated as resident alien, you must delcare your worldwide income to the IRS as if you were a resident alien. But you do get to exclude up to $82,400 of that foreign source income for the time that you did not reside in the US...

I know I am a resident alien in terms of US tax purposes as I received a green card in 2006, but does that mean I am also a "dual-status alien"?:

You are a dual status alien when you have been both a resident alien and a nonresident alien in the same tax year.

(From http://www.irs.gov/businesses/small/intern...=96433,00.html)

If so, does that preclude me from filing jointly? The IRS site seems to imply so.

Essentially, I have two chunks of income, the first earned before I immigrated which know will be below the days/365 * $82400. The second is a much smaller amount and I assume I have to declare it as well. Does this then mean my taxable US income goes up by that amount? Even if it already taxed in Australia?

Thanks in advance.

No.. you are not a dual status alien... you are a resident alien in accordance with the US tax code for the entirety of 2006...

You can file a Form 2555 and exclude the foreign source income that you earned while you were outside of the US...

If you earned foreign source income after you arrived in the US.. you cannot exclude it, but you will not be double taxed on it as you can file a 1116 to get a foreign tax credit on the taxes that you paid on that foreign source income to Australia...

Australia's tax year ends at the end of June 2007, so I won't have been taxed on the second income amount yet. Can I file a pre-emptive tax credit? Or do I have to wait until I'm filing for 2007? (It is just interest income from a savings account.)

Thanks again, zyggy.

The US Tax year runs from January to December.. you will have to prorate the amount of income that you earned in the calendar year 2006 to do your US taxes... You would file for the income that you earned in 2007 in 2007..

[vvill 0]

Australia's tax year ends at the end of June 2007, so I won't have been taxed on the second income amount yet. Can I file a pre-emptive tax credit? Or do I have to wait until I'm filing for 2007? (It is just interest income from a savings account.)

Thanks again, zyggy.

----

The US Tax year runs from January to December.. you will have to prorate the amount of income that you earned in the calendar year 2006 to do your US taxes... You would file for the income that you earned in 2007 in 2007..

Ok so, imagine I earned say $1000 from July 2006 to Dec 2006 - that would not have been taxed in Australia yet. I declare it for my US 2006 tax return, and am I taxed on it. And then when I do my 2006-7 Australian tax return I may be taxed again, and in 2007 I file for a foreign tax credit on that Australian tax?

[zyggy 9]

Australia's tax year ends at the end of June 2007, so I won't have been taxed on the second income amount yet. Can I file a pre-emptive tax credit? Or do I have to wait until I'm filing for 2007? (It is just interest income from a savings account.)

Thanks again, zyggy.

----

The US Tax year runs from January to December.. you will have to prorate the amount of income that you earned in the calendar year 2006 to do your US taxes... You would file for the income that you earned in 2007 in 2007..

Ok so, imagine I earned say $1000 from July 2006 to Dec 2006 - that would not have been taxed in Australia yet. I declare it for my US 2006 tax return, and am I taxed on it. And then when I do my 2006-7 Australian tax return I may be taxed again, and in 2007 I file for a foreign tax credit on that Australian tax?

[vvill 0]

Australia's tax year ends at the end of June 2007, so I won't have been taxed on the second income amount yet. Can I file a pre-emptive tax credit? Or do I have to wait until I'm filing for 2007? (It is just interest income from a savings account.)

Thanks again, zyggy.

----

The US Tax year runs from January to December.. you will have to prorate the amount of income that you earned in the calendar year 2006 to do your US taxes... You would file for the income that you earned in 2007 in 2007..

Ok so, imagine I earned say $1000 from July 2006 to Dec 2006 - that would not have been taxed in Australia yet. I declare it for my US 2006 tax return, and am I taxed on it. And then when I do my 2006-7 Australian tax return I may be taxed again, and in 2007 I file for a foreign tax credit on that Australian tax?

umm, is that a yes?

[zyggy 9]

No...

For some reason my response did not come out..

Not only would you prorate the earned income that was earned in 2006.. you have to prorate the amount of tax was or would have been levied on the income in 2006 as well for any foreign tax credit. However, if you earned less than the exclusion amount, you would not have to worry about it..