Income earned abroad before Immigrating mid-year

[James Joyce 0]

Hello,

 

My wife immigrated to the U.S. middle of this year on a k-1 and we married a few weeks after her arrival. We filed for adjustment of status and are awaiting our interview. We are going to file taxes jointly for 2019. My question I have is, is the income my wife earned abroad (in Sweden) PRIOR to her immigrating on her k-1 taxed in the U.S.? She worked January & February in Sweden before immigrating to the U.S. in April, and she payed taxes on this income in Sweden (where she was a legal resident at the time). We are planning to get an accountant, but I am trying to roughly figure out now the amounts we'll owe for financial reasons.

 

So two questions really: (1) does her pre-immigration income get taxed here, and (2) does her pre-immigration income count as part of our gross adjusted income?

 

Thanks so much!

 

[Moe428 129]

It won't get taxed, and you shouldn't report it to the IRS as income. 

[Wuozopo 4,293]

On 12/18/2019 at 6:09 PM, James Joyce said:

Hello,

 

My wife immigrated to the U.S. middle of this year on a k-1 and we married a few weeks after her arrival. We filed for adjustment of status and are awaiting our interview. We are going to file taxes jointly for 2019. My question I have is, is the income my wife earned abroad (in Sweden) PRIOR to her immigrating on her k-1 taxed in the U.S.? She worked January & February in Sweden before immigrating to the U.S. in April, and she payed taxes on this income in Sweden (where she was a legal resident at the time). We are planning to get an accountant, but I am trying to roughly figure out now the amounts we'll owe for financial reasons.

 

So two questions really: (1) does her pre-immigration income get taxed here, and (2) does her pre-immigration income count as part of our gross adjusted income?

 

Thanks so much!

 

A condition of filing jointly is that ALL income of both parties must be reported on the US tax return. Your wife had Swedish income in 2019 that must be reported. There is a tax treaty between the US and Sweden that means you won't be taxed on the same money by both countries. You have two options:

 

1. The foreign income exclusion Form 2555EZ for the money she earned in Sweden.  There is a worksheet that basically figures A) the US Tax on the total joint income and then figures B) the US tax that her excluded Swedish income would be. A minus B equals the tax you owe. Or use TurboTax and it just figures it out for you.

 

2. Foreign Tax Credit where you do not exclude her Swedish income when figuring the tax, but at the end take a credit for the tax she already paid to Sweden straight off the tax you owe. Because Sweden has a pretty hefty income tax, that may be your best choice. Just two months of income excluded (#1 option) probably wouldn't generate a huge amount to taxes to deduct, whereas a big credit off your tax liability for the Swedish taxes might be more beneficial. I would do taxes both ways and see which bottom line is in your favor. 

 

Look at the 2019 tax tables and see how much her income alone would be taxed. Then compare it to how much she paid Sweden. That is a brief explanation but a way to get an idea what might be your best option. You still need to fully work out both ways to really know. TurboTax Deluxe can handle it.

Edited December 21, 2019 by Wuozopo

[Moe428 129]

On 12/19/2019 at 11:14 AM, Moe428 said:

It won't get taxed, and you shouldn't report it to the IRS as income. 

I'd like to correct myself.  I think the post above this one is correct.  If you are filing jointly, you should report world wide income for the year even while you were not working in the US.