Foreign Income Exclusion - New Immigrant

[wanderlust88 17]

Hello,

I have the following scenario and I can't find a tax form which fits my requirement!

Income before becoming US permanent resident in foreign country: Jan-April 2018

Became a US permanent resident: May 2018

Living in US: May 2018 to present

Income in US: September 2018 to present

 

I can't fill Form 2555 as I don't meet the bona fide residence or physical presence test requirement (I think). What form should I submit to exclude my foreign income (Jan -April 2018) from being taxed? I will be filing jointly with my US citizen husband.

 

[payxibka 10,045]

38 minutes ago, wanderlust88 said:

Hello,

I have the following scenario and I can't find a tax form which fits my requirement!

Income before becoming US permanent resident in foreign country: Jan-April 2018

Became a US permanent resident: May 2018

Living in US: May 2018 to present

Income in US: September 2018 to present

 

I can't fill Form 2555 as I don't meet the bona fide residence or physical presence test requirement (I think). What form should I submit to exclude my foreign income (Jan -April 2018) from being taxed? I will be filing jointly with my US citizen husband.

 

Seems to me that the green card test is passed

[wanderlust88 17]

it is, but im wondering how to exclude my overseas income from being taxed, which was earned before i set foot in the US.

[battsher 0]

1 hour ago, wanderlust88 said:

I can't fill Form 2555 as I don't meet the bona fide residence or physical presence test requirement (I think).

Just filed our taxes and used the physical presence test. Like you, my spouse lived in the US from May 2018 to the end of the year so doesn't qualify for the physical presence test if you use the 12 month period 1/1/18-12/31/18. So we inputted their last 12 month period of residency in their home country (5/15/17 - 5/14/18). That made TurboTax happy and gave us the result we wanted so...

[payxibka 10,045]

20 minutes ago, wanderlust88 said:

it is, but im wondering how to exclude my overseas income from being taxed, which was earned before i set foot in the US.

It is automatically excluded because your start date for us tax purposes as a us taxpayer is the day you stepped foot on us soil.  Any income earned prior is not a part of your taxable income for us purposes.  You dont bring it on the form at all.   You can voluntarily elect to be treated as a us taxpayer for the entire year at which time you become eligible to use the 2555 

[wanderlust88 17]

44 minutes ago, battsher said:

Just filed our taxes and used the physical presence test. Like you, my spouse lived in the US from May 2018 to the end of the year so doesn't qualify for the physical presence test if you use the 12 month period 1/1/18-12/31/18. So we inputted their last 12 month period of residency in their home country (5/15/17 - 5/14/18). That made TurboTax happy and gave us the result we wanted so...

 

39 minutes ago, payxibka said:

It is automatically excluded because your start date for us tax purposes as a us taxpayer is the day you stepped foot on us soil.  Any income earned prior is not a part of your taxable income for us purposes.  You dont bring it on the form at all.   You can voluntarily elect to be treated as a us taxpayer for the entire year at which time you become eligible to use the 2555 

in that case, do you list the overseas income in the 1040 as part of "worldwide income" or you don't include it as it is part of foreign excluded income filed through 2555?

[payxibka 10,045]

11 minutes ago, wanderlust88 said:

 

in that case, do you list the overseas income in the 1040 as part of "worldwide income" or you don't include it as it is part of foreign excluded income filed through 2555?

If not electing full year residency it is not put on the 1040 at all because it is out of scope, thus eliminating any need for that to be put on the 2555

[wanderlust88 17]

Please let me know if my thought process is incorrect:

 

As I have a green card, I will be counted as a resident for the full year (green card test). I would also have to do this if I want to file jointly with my husband.

 

As a US resident for 2018, I will have to declare all my income for the year, even the ones earned overseas before I became a resident, on the 1040.

 

This is why I would have to submit a 2555 along with 1040 to exclude the foreign income from being taxed. I will use the physical presence test and mention the 12 month period as April 2017 to April 2018.

 

OR

 

I do not mention the foreign income earned before becoming a resident on the 1040

 

I do not file a 2555

 

OR

In this scenario I can't file a joined return:

 

I file a dual status 1040 for the income earned while in US

 

I file a dual status 1040NR and report nothing on it, for the income earned as a NRA outside US

 

https://www.irs.gov/individuals/international-taxpayers/taxation-of-dual-status-aliens

 

Who knew US tax laws were so complex!

 

 

 

 

 

 

Edited January 23, 2019 by wanderlust88

[battsher 0]

18 minutes ago, wanderlust88 said:

in that case, do you list the overseas income in the 1040 as part of "worldwide income" or you don't include it as it is part of foreign excluded income filed through 2555?

The foreign income was added to the taxable income (as if it was just another W2) then subsequently subtracted a few lines later because it was well under the limit.

 

1 hour ago, payxibka said:

It is automatically excluded because your start date for us tax purposes as a us taxpayer is the day you stepped foot on us soil.  Any income earned prior is not a part of your taxable income for us purposes.  You dont bring it on the form at all.   You can voluntarily elect to be treated as a us taxpayer for the entire year at which time you become eligible to use the 2555

We were working under the assumption that foreign income earned during 2018 must be reported. Did this so that we could file "Married Filing Jointly" and take advantage of the lower tax rate versus "Single"; foreign earner earned nothing in the US last year (no EAD).

[payxibka 10,045]

2 minutes ago, battsher said:

The foreign income was added to the taxable income (as if it was just another W2) then subsequently subtracted a few lines later because it was well under the limit.

 

We were working under the assumption that foreign income earned during 2018 must be reported. Did this so that we could file "Married Filing Jointly" and take advantage of the lower tax rate versus "Single"; foreign earner earned nothing in the US last year (no EAD).

You only need to qualify for MFJ as of the last day of the year

[battsher 0]

13 minutes ago, payxibka said:

You only need to qualify for MFJ as of the last day of the year

Of course; my wording was poor. Point was that our assumption was that since we both were filing tax returns, then any income, US or foreign, must be reported.

 

I'm not claiming it's a good assumption, but that's the way TurboTax steered us.

Edited January 23, 2019 by battsher
typo ("working" vs "wording")

[wanderlust88 17]

Just now, battsher said:

Of course; my working was poor. Point was that our assumption was that since we both were filing tax returns, then any income, US or foreign, must be reported.

 

I'm not claiming it's a good assumption, but that's the way TurboTax steered us.

that's what i understand as well.

 

Filing jointly --> assumes non US citizen spouse was a Resident Alien for entire tax year --> all income for that year needs to be reported 

 

[payxibka 10,045]

40 minutes ago, wanderlust88 said:

that's what i understand as well.

 

Filing jointly --> assumes non US citizen spouse was a Resident Alien for entire tax year --> all income for that year needs to be reported 

 

Nope.  Just can't file electronically 

Edited January 23, 2019 by payxibka

[wanderlust88 17]

6 minutes ago, payxibka said:

Nope.  Just can't file electronically 

this is from the IRS website:

 

 

 

https://www.irs.gov/individuals/international-taxpayers/nonresident-alien-spouse

 

 

[payxibka 10,045]

1 minute ago, wanderlust88 said:

this is from the IRS website:

 

 

 

https://www.irs.gov/individuals/international-taxpayers/nonresident-alien-spouse

 

 

Exactly,  you are making the election to be treated as a US taxpayer for the entire year