Filing Taxes for K-1 Spouse

[MattND3 0]

Hello, sorry if this is a redundant question but here goes...   my wife recently moved to the states on a K-1 Visa on December 10th, 2018 and we were legally married the following day.  For the duration of 2018, she of course had no US income.  She worked in Canada up til her move to the US.  What is she OBLIGATED to do now that she's in the US?  Since she was here such a short amount of time, if she doesn't have to I'd think filing single would be easiest.  What is recommended in this specific scenario?  Thanks in advance

 

Matt

[Cyberfx1024 7,980]

6 minutes ago, MattND3 said:

Hello, sorry if this is a redundant question but here goes...   my wife recently moved to the states on a K-1 Visa on December 10th, 2018 and we were legally married the following day.  For the duration of 2018, she of course had no US income.  She worked in Canada up til her move to the US.  What is she OBLIGATED to do now that she's in the US?  Since she was here such a short amount of time, if she doesn't have to I'd think filing single would be easiest.  What is recommended in this specific scenario?  Thanks in advance

 

Matt

You are both obligated to add her to your taxes but that is it. Since you two were not married and she was not a resident of the U.S. You do not have to report her Canadian income. 

[beloved_dingo 1,976]

3 minutes ago, MattND3 said:

Hello, sorry if this is a redundant question but here goes...   my wife recently moved to the states on a K-1 Visa on December 10th, 2018 and we were legally married the following day.  For the duration of 2018, she of course had no US income.  She worked in Canada up til her move to the US.  What is she OBLIGATED to do now that she's in the US?  Since she was here such a short amount of time, if she doesn't have to I'd think filing single would be easiest.  What is recommended in this specific scenario?  Thanks in advance

 

Matt

You cannot file single. 

"If you are married and living with your spouse, you must file as married filing jointly or married filing separately. You cannot choose to file as single or head of household. If you do face a marriage penalty, you can't get around it by continuing to file as a single person. That's because if you're legally married on December 31, you're considered married for the full year and you must therefore file as either married filing jointly or married filing separately."

From TurboTax. 

[Just Paul 4,595]

If you file Married together you get her standard deduction.

[geowrian 22,337]

You can file MFS or MFJ (or HOH with a qualifying non-spouse dependent).

Single is not a valid option for anybody married as of the last day of the tax year.

 

MFS is simpler but likely provides a higher tax liability. In this case she wouldn't even need to file as her re portable income is below the threshold necessary to file. You would file MFS and list her SSN or ITIN as needed, or NRA if she doesn't have one.

 

MFJ generally provides a lower tax liability. This requires that she has an SSN or ITIN.

In this case she she must be considered a resident alien for the entire tax year. As a spouse of a USC, she can provide a letter to be treated as such (although this letter means not being able to eFile).

Anybody considered a  resident alien must report their worldwide income.

The FEIE can typically exclude most to all of that income from being taxed.

[MattND3 0]

16 hours ago, geowrian said:

You can file MFS or MFJ (or HOH with a qualifying non-spouse dependent).

Single is not a valid option for anybody married as of the last day of the tax year.

 

MFS is simpler but likely provides a higher tax liability. In this case she wouldn't even need to file as her re portable income is below the threshold necessary to file. You would file MFS and list her SSN or ITIN as needed, or NRA if she doesn't have one.

 

MFJ generally provides a lower tax liability. This requires that she has an SSN or ITIN.

In this case she she must be considered a resident alien for the entire tax year. As a spouse of a USC, she can provide a letter to be treated as such (although this letter means not being able to eFile).

Anybody considered a  resident alien must report their worldwide income.

The FEIE can typically exclude most to all of that income from being taxed.

Thanks for the responses everyone.  geowrian, so just to be clear:

 

-For tax liability and best refund possible, MFJ is the way to go correct? (Why wouldn't people want to do this all the time?)

-We file MFJ and include a written statement (NRA election letter)

-We include all her foreign income.  What about things like retirement funds, stocks, the condo she owns, etc.?

-It has to be filed through the mail

-She would still file taxes in Canada

-Is the FEIE something that is applied for us or do we do anything in particular to trigger that?  

 

Thanks for all the help.  I'm used to just waiting for my W-2 and Mortgage documents and getting on Turbo Tax and doing it in 10 minutes hahah, little different waters to navigate now.  

[geowrian 22,337]

3 minutes ago, MattND3 said:

-For tax liability and best refund possible, MFJ is the way to go correct? (Why wouldn't people want to do this all the time?)

There are limited situations where MFS provides a lower tax liability. There's also higher requirements for MFJ (SSN or ITIN required, and must be considered a resident alien for the entire tax year).

There's also some cases where one spouse doesn't want to be joined to the other's tax obligations.

But in the vast majority of cases, MFJ is the better option. Most tax prep software will take this into consideration already and let you know if the other filing status may be better.

 

3 minutes ago, MattND3 said:

-We file MFJ and include a written statement (NRA election letter)

Correct.

3 minutes ago, MattND3 said:

-We include all her foreign income.  What about things like retirement funds, stocks, the condo she owns, etc.?

Income. Unless she is withdrawing pre-tax retirement funds, cashing out stocks, etc., then those are assets.

Unless she is receiving rent (income), then the condo is only an asset as well.

 

Note that an FBAR may be needed. I'm not as familiar with that form, sorry, but it pertains to foreign accounts in excess of $10,000. I'm not sure if retirement accounts qualify or not, but bank accounts definitely would.

 

3 minutes ago, MattND3 said:

-It has to be filed through the mail

Correct, due to the election letter. Seriously...that little short letter is the only thing preventing electronic filing. It's 2019! /rant

 

You can still prepare the return through tax prep software or services. I personally used TurboTax for 2017 when my now-wife moved to the US.

 

3 minutes ago, MattND3 said:

-She would still file taxes in Canada

I'll defer to others on Canadian filing requirements. Presumably she would need to file there for income earned there. I don't think Canada taxes based on worldwide income so that's simpler for future years.

 

3 minutes ago, MattND3 said:

-Is the FEIE something that is applied for us or do we do anything in particular to trigger that?

Probably. Here's the flow to determine that: https://www.irs.gov/individuals/international-taxpayers/foreign-earned-income-exclusion-can-i-claim-the-exclusion-or-deduction

 

NOTE: "Were you a bona fide resident of a foreign country or countries for an uninterrupted period that includes an entire tax year?" -> Be careful with the reading. "An entire tax year" does not necessarily mean it has to be all of 2018. For instance, you can be a bona fide resident of Canada from 1/1/2017 through 7/31/2018, which includes the entire 2017 tax year. The available exclusion would be proportional to the time prior to moving to the US. This is calculated on the 2555/2555EZ.

 

3 minutes ago, MattND3 said:

Thanks for all the help.  I'm used to just waiting for my W-2 and Mortgage documents and getting on Turbo Tax and doing it in 10 minutes hahah, little different waters to navigate now.  

I hear ya. Personally, we got like an extra $5000 for filing jointly since my wife had no US income her first year, so it was worth an extra 30-60 minutes. haha

[MattND3 0]

geowrian... back again.  We finally got her Canadian equivalent of W-2 for her work so we are finally ready to get going.  Should she file her Canadian tax return first then  do the US?  Or does it matter?  And is one tax program preferred over others?  When I was playing around with Turbo Tax, I wasn't sure where I'd enter her income.  

[geowrian 22,337]

5 hours ago, MattND3 said:

geowrian... back again.  We finally got her Canadian equivalent of W-2 for her work so we are finally ready to get going.  Should she file her Canadian tax return first then  do the US?  Or does it matter?  And is one tax program preferred over others?  When I was playing around with Turbo Tax, I wasn't sure where I'd enter her income.  

Which one she files first isn't important.

I used TurboTax (Online) for 2017 taxes with my wife. It's a little out of the way to find online...I think foreign income is in the section for uncommon/less common income sources. But I'm very confident it exists in the income section, as does the 2555.

I'll likely use H&R Block online this year, and have done so in the past.

Others prefer to use the on-device software instead of doing it online. The UI for that at least doesn't change as much every year compared to doing it online.