Tax Status - Resident or nonresident alien for Roth IRA while AOS is pending?

[brownbears13 19]

Hi all,

 

My husband is adjusting from F-1 status to become a permanent resident. Our NOA-1 date is December 9th, and we are currently waiting for our interview. He has an SSN and received his EAD card and just got a new job. We are thinking of opening a Roth IRA for him, but are wondering if he should be considered a non-resident alien or a resident alien?

 

We looked at the IRS's guidance on Determining Alien Tax Status. I don't think he meets the green card test as that document is currently pending. For the substantial presence test, he's been here for a few years now, but had an F-1 status, so years under that status are to be excluded from the continuous presence days. 

 

Our question is, what exactly has his status been since our NOA-1 date (12/9/2019)? If that status is not exempt and does indeed count towards substantial presence, can we wait until 183 days after January 1, 2020 -- which would be July 2 -- and open up his Roth IRA while selecting "resident alien" as his status? Ideally, we'd like to open the account before July 15th, as that is the 2019 contribution deadline.

 

Thanks for your help!

[geowrian 22,337]

He will qualify to elect to be treated as a resident alien via https://www.irs.gov/individuals/international-taxpayers/nonresident-alien-spouse.

So he can be treated as either an NRA or RA....he will need to make an election.

Personally, if he plans to be treated as an RA (this is required if you will file jointly), then I would mark RA on the form.

 

Edit: This assumes he will not meet the substantial presence test in 2020 due to being in F-1 status. If he does meet that, then there is no election to make.

Edited June 15, 2020 by geowrian

[brownbears13 19]

Thanks for your response. We filed our 2019 taxes jointly, so I'm assuming that means he is being treated as a resident alien. 

 

Is his current status F-1 right now? I believe that status has been terminated as he's no longer attending school. I assumed right now he's just in limbo while AOS is pending - so we're not sure at all what his current status is.

 

Working off the assumption that he's not in F-1 status, he should meet the substantial presence test in early July (after 183 calendar days of 2020). Should we wait until that date to open his IRA? Or can we do it now, since we filed 2019 taxes jointly, meaning he has been treated as a resident alien for tax purposes.

 

EDIT: Sorry, I just now read through the link you sent. I see it doesn't matter that he's met the substantial presence test, as we are married and have filed a joint tax return. Thanks!

 

Just to clarify, being considered a resident alien for tax purposes is enough to check off the "resident alien" box while signing up for the Roth IRA right?

Edited June 15, 2020 by Sara + Kevin

[geowrian 22,337]

27 minutes ago, Sara + Kevin said:

Thanks for your response. We filed our 2019 taxes jointly, so I'm assuming that means he is being treated as a resident alien. 

If you filed jointly, he must have been treated as an RA.

 

Quote

Is his current status F-1 right now? I believe that status has been terminated as he's no longer attending school. I assumed right now he's just in limbo while AOS is pending - so we're not sure at all what his current status is.

His F-1 status was terminated with his SEVIS record.

AOS does not grant a legal status. He technically is out of status. He has a period of authorized stay due to the pending AOS application (so he's not accruing unlawful presence, but also holds no legal status).

 

Quote

Just to clarify, being considered a resident alien for tax purposes is enough to check off the "resident alien" box while signing up for the Roth IRA right?

Correct. They are referring to tax status, not immigration status.

Edited June 15, 2020 by geowrian

[Wuozopo 4,293]

1 hour ago, Sara + Kevin said:

EDIT: Sorry, I just now read through the link you sent. I see it doesn't matter that he's met the substantial presence test, as we are married and have filed a joint tax return. Thanks!

 In order to file a joint tax return with a nonresident alien, you and he have to elect on paper with a signed statement sent with the tax return. Did you do that?  The act of filing jointly does not make him a resident alien for tax purposes. It’s the signed statement. See the link posted to you before.

 

How to Make the Choice

Attach a statement, signed by both spouses, to your joint return for the first tax year for which the choice applies. It should contain the following information:

1. 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 the tax year, and that you choose to be treated as U.S. residents for the entire tax year
2. The name, address, and identification number of each spouse. (If one spouse died, include the name and address of the person making the choice for the deceased spouse.)

[geowrian 22,337]

5 minutes ago, Wuozopo said:

The act of filing jointly does not make him a resident alien for tax purposes. It’s the signed statement.

True, it's the statement that does so. Although the statement only applies for filing jointly.

Without being treated as an RA, they couldn't have filed jointly in the first place.

Chicken and egg issue...

[brownbears13 19]

26 minutes ago, Wuozopo said:

In order to file a joint tax return with a nonresident alien, you and he have to elect on paper with a signed statement sent with the tax return. Did you do that?  The act of filing jointly does not make him a resident alien for tax purposes.

@Wuozopo We definitely did not do that, but we did file our return jointly. Now I'm a little confused, does that mean he is considered a nonresident alien, despite the joint return?

[geowrian 22,337]

52 minutes ago, Sara + Kevin said:

@Wuozopo We definitely did not do that, but we did file our return jointly. Now I'm a little confused, does that mean he is considered a nonresident alien, despite the joint return?

Sounds like you filed jointly but were not qualified to do so. The election letter is what qualifies them to be an RA for the entire tax year, and filing jointly requires both individuals to be RAs for the year.

 

https://www.irs.gov/pub/irs-pdf/i1040gi.pdf

Page 12 (Filing status)

Quote

Nonresident aliens and dual-status aliens.

Generally, a married couple can't file a joint return if either spouse is a nonresident alien at any time during the year. However, if you were a nonresident alien or a dual-status alien and were married to a U.S. citizen or resident alien at the end of 2019, you can elect to be treated as a resident alien and file a joint return. See Pub. 519 for details.

 

[Wuozopo 4,293]

1 hour ago, Sara + Kevin said:

@Wuozopo We definitely did not do that, but we did file our return jointly. Now I'm a little confused, does that mean he is considered a nonresident alien, despite the joint return?

I agree with Geowrian
Theoretically your joint return was filed incorrectly because nonresidents are not permitted to file jointly. Your husband by status should have filed a 1040NR.  But there is an IRS perk for NRAs who are married to US citizens. Had you submitted the signed statement with your joint return, choosing for him to be a RA for tax purposes, that allows him to file jointly and follow the same tax rules as RAs. You left off the thing that makes him an RA.

 

He is a NRA.

❌He files a joint return.
Nope, not allowed. It should be a 1040NR

 

She is a US citizen

❌She files a joint return with a NRA

Nope, not allowed. She should file Married Filing Separately

 

—or—

He is a NRA married to a US citizen
✅ He and US wife sign a statement and file a joint return including the statement

Now he is a RA for IRS purposes and the return is filed correctly according to tax law.

 

 

 

Edited June 15, 2020 by Wuozopo

[brownbears13 19]

Looks like I will need to amend my return, and possibly seek an accountant's advice. Thanks, all.

[Wuozopo 4,293]

2 hours ago, Sara + Kevin said:

Looks like I will need to amend my return, and possibly seek an accountant's advice. Thanks, all.

There is nothing to amend really. Your tax return will look exactly the same. IRS will probably not even notice or know his status. But if you want to cover your bases and be 100% correct, write the statement and mail it to the IRS center where a paper return would go based on your zip code.  Photocopy it for your records.