First time tax filing for married couple (spouse through K-1 visa, no US income)

[willandsara 0]

Hi there!

I'm a US citizen by birth and moved to the US in August 2015 (after being away practically my whole life). We applied for the fiancee K1 visa for my now-spouse, who moved to the US in November 2015 and we got married in December 2015!

Before the move I had to submit tax returns under the streamlined compliance filing procedures for the last 3 years as I had never submitted a US tax return, given I have been living in the UK all my life. Each of these I made use of the foreign earned income exclusion credit (form 2555EZ) and as I earned under the threshold I had zero tax to pay on each of these returns (last return to Dec-14).

This year I will be reporting both foreign earned income and US income (from my job since Aug-15) and was wondering if I have to file either a) married filing separately or b) married filing jointly.

For the purpose of the test, my wife is European and non-resident as she still does not have her green card. She has also not worked in the US since arriving. Therefore she'll be showing as zero US taxable income for the year.

I see here (http://www.visajourney.com/forums/topic/240722-2009-tax-return-filing-jointly-wife-k1-doing-aos/) that you can still get a deduction for them under being married.

If anyone has any experience or suggestions about how I should file that would be great!

Many thanks,

Will & Sara

[teeak 224]

You can get an ITIN for your wife and include your wife as a dependent.

https://www.irs.gov/Individuals/General-ITIN-Information

Edited March 8, 2016 by teeak

[rutabaga 209]

Check this out as well if you want to go the MFJ route: Nonresident Spouse Treated as a Resident

[Nich-Nick 3,354]

Publication 501, page 11, third column https://www.irs.gov/pub/irs-pdf/p501.pdf#page11

Separate return.

If you file a separate return, you can claim an exemption for your spouse only if your spouse:

-Had no gross income,

-Isn't filing a return, and

-Wasn't the dependent of another taxpayer.

This is true even if the other taxpayer doesn't actually claim your spouse as a dependent.

You can claim an exemption for your spouse even if he or she is a nonresident alien. In that case, your spouse:

-Must have no gross income for U.S. tax purposes,

-Must not be filing a return, and

-Must not be the dependent of another tax­ payer.

The person exemption is $6300 per person. You can't claim a standard deduction $4000 for her on a separate return.

You can also elect for your spouse to be treated as a resident alien for tax purposes and file jointly. She would also qualify for Form 2555EZ.

Work out two returns and see which is most advantageous. Hard to predict not knowing every detail of your income, etc. Married filing separately can have some higher rates. There are some things you can't claim on a separate return that are allowed on a joint, but those may not be anything that you want to claim anyway. It's all in the details so try both ways.

Edited March 8, 2016 by Nich-Nick

[willandsara 0]

Thanks a lot Nich-Nick! From this, do you think I could use TurboTax to check this out or do you think I'll have to go the manual route? I had to file my last 3 years streamlined so filled out forms manually so sort of familiar with the process but would prefer to file online.

Thanks

Publication 501, page 11, third column https://www.irs.gov/pub/irs-pdf/p501.pdf#page11
Separate return.
If you file a separate return, you can claim an exemption for your spouse only if your spouse:
-Had no gross income,
-Isn't filing a return, and
-Wasn't the dependent of another taxpayer.
This is true even if the other taxpayer doesn't actually claim your spouse as a dependent.

You can claim an exemption for your spouse even if he or she is a nonresident alien. In that case, your spouse:
-Must have no gross income for U.S. tax purposes,
-Must not be filing a return, and
-Must not be the dependent of another tax­ payer.

The person exemption is $6300 per person. You can't claim a standard deduction $4000 for her on a separate return.

You can also elect for your spouse to be treated as a resident alien for tax purposes and file jointly. She would also qualify for Form 2555EZ.

Work out two returns and see which is most advantageous. Hard to predict not knowing every detail of your income, etc. Married filing separately can have some higher rates. There are some things you can't claim on a separate return that are allowed on a joint, but those may not be anything that you want to claim anyway. It's all in the details so try both ways.

Check this out as well if you want to go the MFJ route: Nonresident Spouse Treated as a Resident

Thanks but don't want to have her income earned in the UK this year considered for US tax.

[rutabaga 209]

Thanks but don't want to have her income earned in the UK this year considered for US tax.

If you don't want to elect to treat her as a resident, then you can't file a joint return with her and must file MFS instead.

[Ontarkie 14,345]

~~Moved to Tax & Finances, from Moving here and your new life.~~

[Nich-Nick 3,354]

Thanks a lot Nich-Nick! From this, do you think I could use TurboTax to check this out or do you think I'll have to go the manual route? I had to file my last 3 years streamlined so filled out forms manually so sort of familiar with the process but would prefer to file online.

Thanks

.

I use the cheapest version of TurboTax desktop software ($30). You can download from Intuit or Amazon or purchase a cd version locally. With installed software, you can do the return one way, then "save as" and pick a name like Will_separate. Then you can change it up to a joint return without putting back in the names and addresses all over again. Simply "save as" to Will-Sara_joint. Now you have two versions you can open and work on, print two 1040's to compare side by side, or whatever. Sometimes I have three versions going looking at "want ifs".

TurboTax will do Form 2555 and not the EZ version. Once you decide on a way to file, you can choose paper file and print it out. It will give you instructions and an address for mailing based on your address. And what I do is "save as" again to PDF like 2015_Will-Sara_FINAL and you have a copy for any need for immigration purposes.

Because your wife is still a non-resident, you would have to "elect" for her to be treated as a resident for tax purposes by writing the statement. There is no e-filing provisions for the statement so you would have to mail a paper return. The joy I find with installed software besides easily trying different scenarios, is it does all the calculations for me, neatly fills in the forms, checks for errors, and I can go to Print Center at any time to look at a specific form as a PDF even before getting to the end.

If you think you want to do it manually, I can point out some things to look out for that will be different this year with US and foreign income. Not going to do it now unless you need it. I am very familiar with manual as well.

Does she have a SSN for a joint return? You might be surprised that joint could work out better for you.

Edited March 8, 2016 by Nich-Nick

[willandsara 0]

I use the cheapest version of TurboTax desktop software ($30). You can download from Intuit or Amazon or purchase a cd version locally. With installed software, you can do the return one way, then "save as" and pick a name like Will_separate. Then you can change it up to a joint return without putting back in the names and addresses all over again. Simply "save as" to Will-Sara_joint. Now you have two versions you can open and work on, print two 1040's to compare side by side, or whatever. Sometimes I have three versions going looking at "want ifs".

TurboTax will do Form 2555 and not the EZ version. Once you decide on a way to file, you can choose paper file and print it out. It will give you instructions and an address for mailing based on your address. And what I do is "save as" again to PDF like 2015_Will-Sara_FINAL and you have a copy for any need for immigration purposes.

Because your wife is still a non-resident, you would have to "elect" for her to be treated as a resident for tax purposes by writing the statement. There is no e-filing provisions for the statement so you would have to mail a paper return. The joy I find with installed software besides easily trying different scenarios, is it does all the calculations for me, neatly fills in the forms, checks for errors, and I can go to Print Center at any time to look at a specific form as a PDF even before getting to the end.

If you think you want to do it manually, I can point out some things to look out for that will be different this year with US and foreign income. Not going to do it now unless you need it. I am very familiar with manual as well.

Does she have a SSN for a joint return? You might be surprised that joint could work out better for you.

Thanks Nick. Yes, she has a SSN and her income for the 2015 tax year would be below the foreign earned income exemption.

If we elect to treat her as a resident for tax purposes could this have a negative impact on other taxes, ie, on sale of property in the year (in Europe?). I'm keen not to open a can of worms here. Thanks

[Nich-Nick 3,354]

Thanks Nick. Yes, she has a SSN and her income for the 2015 tax year would be below the foreign earned income exemption.

If we elect to treat her as a resident for tax purposes could this have a negative impact on other taxes, ie, on sale of property in the year (in Europe?). I'm keen not to open a can of worms here. Thanks

Yes maybe, if she sold it in 2015. I don't believe the UK taxes gains, but if she is a US taxpayer in 2015 the gain (net profit on the sale) could be taxable. Not sure if she sold in a European country what their tax on property sales could be. Something to research on the IRS website...gain on property sale. There's always a billion exceptions and I don't have that fresh in my head.

Was your name on the property so it was your gain as well?

Edited March 8, 2016 by Nich-Nick

[willandsara 0]

Yes maybe, if she sold it in 2015. I don't believe the UK taxes gains, but if she is a US taxpayer in 2015 the gain (net profit on the sale) could be taxable. Not sure if she sold in a European country what their tax on property sales could be. Something to research on the IRS website...gain on property sale. There's always a billion exceptions and I don't have that fresh in my head.

Was your name on the property so it was your gain as well?

No, just hers, in Sweden where they have gains on property sales. I'm sure we could get some sort of double tax relief but I'd rather not even go there and save the headache.

To clarify, if I want to keep her as a non-resident for tax purposes but still get her deduction via married filing separately, I could do this, and if I went down the married joint filing route then we'd have to elect her as a resident for tax purposes which may open up the wormhole for property taxes?

Thanks just trying to see if my understanding is there.

[NikLR 13,231]

Yes.

[rutabaga 209]

No, just hers, in Sweden where they have gains on property sales. I'm sure we could get some sort of double tax relief but I'd rather not even go there and save the headache.

To clarify, if I want to keep her as a non-resident for tax purposes but still get her deduction via married filing separately, I could do this, and if I went down the married joint filing route then we'd have to elect her as a resident for tax purposes which may open up the wormhole for property taxes?

Thanks just trying to see if my understanding is there.

It still might be worth looking into, especially if the house would've been considered a primary residence in which case you might be able to exclude up to $500,000 of the value (and only owe tax on the rest) and, in general, you could claim a tax credit for the amount you paid in tax to the foreign country (up to the amount that you'd owe in the US).

I haven't looked into this in too much detail (I have property here in Serbia, but I don't intend to sell it when I leave), but I think that if the amount of tax your wife already paid on the sale is greater than the amount she'd pay in the US, then you wouldn't end up paying any tax on the sale in the US.