K1 - NR Alien? Resident Alien?

[arae 81]

Hi all, seeking some guidance now that the deadline to file US taxes is quickly approaching (even with the extension). Here's a bit about our situation:

• My husband is Canadian and moved to the US on the K1 visa on December 12, 2020
• He earned all income in Canada and has filed Canadian taxes for 2020
• He has zero earned income in the US in 2020
• We would like to file married filing jointly
• He has an SSN

 

I've started and stopped my return on TurboTax multiple times. I get stuck when I get to the Foreign Earned Income section where it checks to see if we can exclude foreign income from US taxes. 

 

The first question on Turbo is did my husband live and work outside the US in 2020. The answer is yes. He lived and worked in Canada until December 12, 2020

The next question whether he was a US citizen in 2020 while working outside the US. The answer is no.

 

This is the question that stops me: was he a resident alien while living and working outside the US in 2020 (with a note that it is possible for a nonresident alien to elect to be treated as a resident alien and to consult a tax pro if this is your scenario). The choices are:

• Yes he is a US resident alien
• No he is not a US resident alien

 

Selecting "Yes" brings me to the Bona Fide Resident Test or the Physical Presence Test.

Selecting "No" brings me to the 1040NR.

 

Any guidance is greatly appreciated! You all have been so helpful in the past.

[Crazy Cat 41,886]

He can choose to be either a full year resident alien for taxes or a dual status alien for taxes  (part year non-resident alien/part year resident alien).  I would run the numbers both ways, then determine the better tax strategy.  

[Wuozopo 4,293]

5 hours ago, arae said:

This is the question that stops me: was he a resident alien while living and working outside the US in 2020 (with a note that it is possible for a nonresident alien to elect to be treated as a resident alien and to consult a tax pro if this is your scenario). The choices are:

• Yes he is a US resident alien
• No he is not a US resident alien

 

Selecting "Yes" brings me to the Bona Fide Resident Test or the Physical Presence Test.

Selecting "No" brings me to the 1040NR.

 

Any guidance is greatly appreciated! You all have been so helpful in the past.

If he is a nonresident alien, you can’t file a joint return.  So you want to elect for him to be a resident alien for tax purposes. That is a statement you write and both sign. A perk for being to a US citizen. Are you already familiar with that statement thing?  He will also qualify for stimulus payments if your total income is less than the threshold.

 

On TurboTax, choose resident alien (because you are going to elect he be treated as such on the tax return).

Bonafide resident test is easiest. They want to know he was legally allowed to live and work in Canada and not just an American on holiday trying to skip some taxes. If he was born in Canada, then his bonafide residence began on the date of his birth. You will be ask “what visa for the foreign country”. It’s not the K1 as many people get wrong. It is what visa allowed him to work in the foreign country of Canada. Say none needed, none, Canadian citizenship...anything to get Turbo to move on.

 

 

Edited April 5, 2021 by Wuozopo

[arae 81]

34 minutes ago, Wuozopo said:

If he is a nonresident alien, you can’t file a joint return.  So you want to elect for him to be a resident alien for tax purposes. That is a statement you write and both sign. A perk for being to a US citizen. Are you already familiar with that statement thing?  He will also qualify for stimulus payments if your total income is less than the threshold.

 

On TurboTax, choose resident alien (because you are going to elect he be treated as such on the tax return).

Bonafide resident test is easiest. They want to know he was legally allowed to live and work in Canada and not just an American on holiday trying to skip some taxes. If he was born in Canada, then his bonafide residence began on the date of his birth. You will be ask “what visa for the foreign country”. It’s not the K1 as many people get wrong. It is what visa allowed him to work in the foreign country of Canada. Say none needed, none, Canadian citizenship...anything to get Turbo to move on.

 

 

Cannot thank you enough for this thoughtful reply! This is exactly what I needed.

 

I am not familiar with the statement but I'm sure I can find it here or do some research...

[arae 81]

@Wuozopo am I correct in understanding that I'd need to file by mail then? To include the statement electing resident alien status?

[Wuozopo 4,293]

1 hour ago, arae said:

@Wuozopo am I correct in understanding that I'd need to file by mail then? To include the statement electing resident alien status?

Yes, that’s the bummer. On TurboTax print menu, there is a “print for filing” so you only print the necessary pages without all the extra gazillion worksheets Turbo creates. Add your statement. 
 

Here’s what IRS says:

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. 

 

• 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 your tax year, and that you choose to be treated as U.S. residents for the entire tax year. 

• The name, address, and identification number of each spouse.

 

Mine was something like:

 

Mary K. Smith and Joe R. Smith are married.

Mary K. Smith is a US citizen and Joe R. Smith is a nonresident alien on the last day of tax year 2020.

 

We choose for Joe R Smith to be treated as a resident alien for tax purposes for the entire year.

___________________________________   date__________.  

Mary K. Smith 

SSN: xxx-xx-xxx

123 Cherry St

MyTown, TX 77777

 

___________________________________  date_____________

Joe R. Smith

SSN: xxx-xx-xxx

123 Cherry St

MyTown, TX 77777

 

 

 

[arae 81]

1 minute ago, Wuozopo said:

Yes, that’s the bummer. On TurboTax print menu, there is a “print for filing” so you only print the necessary pages without all the extra gazillion worksheets Turbo creates. Add your statement. 
 

Here’s what IRS says:

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. 

 

• 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 your tax year, and that you choose to be treated as U.S. residents for the entire tax year. 

• The name, address, and identification number of each spouse.

 

Mine was something like:

 

Mary K. Smith and Joe R. Smith are married.

Mary K. Smith is a US citizen and Joe R. Smith is a nonresident alien on the last day of tax year 2020.

 

We choose for Joe R Smith to be treated as a resident alien for tax purposes for the entire year.

___________________________________   date__________.  

Mary K. Smith 

SSN: xxx-xx-xxx

123 Cherry St

MyTown, TX 77777

 

___________________________________  date_____________

Joe R. Smith

SSN: xxx-xx-xxx

123 Cherry St

MyTown, TX 77777

 

 

 

Thank you for the template letter!

 

Last question, I promise.

 

I worked through and Turbo gives me this big warning that there was $0 in foreign income exclusion which is "very rare".

The language is: "J's foreign earned income exclusion, after subtracting all deductions related to foreign income, is $0. The IRS will reject this return if electronically filed because the exclusion is not a positive number. A paper return must be mailed to the IRS."

 

Any concern with this? I followed all the prompts, included his salary made from work, and he had nothing else because he was living at home with his parents before he moved.

[Wuozopo 4,293]

2 hours ago, arae said:

Any concern with this? I followed all the prompts, included his salary made from work, and he had nothing else because he was living at home with his parents before he moved.

Yes, that is a concern.  If his salary was $25k (converted to USD) then his exclusion should be $25k. 

Look at the forms view in TurboTax.
Form 1040

Line 1 should be your income PLUS his income. Yes/No?
 

Form 2555, Part 2

10. [birth date], “continues”

11. Any of those

12a “No”

12b “n/a”

13a “No”

13b “Yes”

14. Can put in visit dates but “0” for the c and d columns

15a  “none” or n/a

b “none” or n/a (because he didn’t need a visa to the UK)

c “No”

d “No”

e “n/a”