W7 and MFJ vs MFS

[_Diver 2]

I plan to marry an Australian citizen who is currently living with me in the US (I’m a USC, we are going to do AOS). I wanted to do it before the EOY so we can file taxes together and have W7 filed so she could get an ITIN sooner. I thought it would be faster than getting it thru AOS, but who knows. If going W7 route seems too difficult, we have an option to get married yearly next year and hopefully getting ITIN/SSN before the end of the next year.

 

It seems like there are two options if we marry this year.

 

File joint return with her as a resident alien. She has no US income, but substantial Australian income that she is already taxed on. She will also be taxed on it in US as well. So the disadvantage of this option is bigger tax liability. (It seems like there is $108,700 exclusion and only income above would be taxed in US?). And I assume messing with IRS and hiding foreign income is pretty dangerous.

 

File married separate return as no resident alien. She will have no foreign income liability at all, and she has no US income either. I do get taxed higher if filing MFS, but the hit will be smaller and return will be simpler. Can we file a return for her and request ITIN? It seems like there wouldn’t be any need from IRS point of view to give her ITIN since there is no tax liability. So I don’t think we can do that.

 

Any other options to get ITIN/SSN? Beside W7/taxes and AOS/EAD?

 

As for documentation – what qualifies as certified passport copy? Photocopy with stamp/3d seal/wet signature from public notary? Or does it have to be done by TACs only? Do I prepare the tax return and bring it to TAC center with the passport? Or can I certify passport and send the tax return to tax processing center instead? I’m a bit vague on the process.

 

Any implication on timing of AOS filling and filling taxes/applying for ITIN?

[Chancy 6,241]

37 minutes ago, _Diver said:

It seems like there are two options if we marry this year.

 

Options for 2022 tax filing if married by end of year --

1. File MFJ with W7 for ITIN.
2. File MFS, declaring NRA spouse.  After spouse gets SSN (after EAD or GC), file 1040X to amend filing to MFJ.  You'll have 3 years to file an amendment.
3. File for extension, if spouse does not get SSN before April 15.  Assuming spouse gets SSN before extension ends, file MFJ.

We had to make this choice for 2020.  We picked option 2.  If you browse this sub-forum, you'll see posts from other members who picked option 1 or option 3.

 

[Wuozopo 4,293]

1 hour ago, _Diver said:

As for documentation – what qualifies as certified passport copy? Photocopy with stamp/3d seal/wet signature from public notary? Or does it have to be done by TACs only? Do I prepare the tax return and bring it to TAC center with the passport? Or can I certify passport and send the tax return to tax processing center instead? I’m a bit vague on the process.

She needs to go in person to a TAC that offers certification services. They will certify a photocopy of her passport for the ITIN application and submit  the tax return, W7, and certified passport ID to the IRS for you. It is a free service.
 

There are also Certifying Acceptance Agents who are private practicioners approved by the IRS who can do the same thing. They usually charge for the service.

 

you can also just ask for the certification of the passport and do the mailing of tax return, W7, and certified passport to Austin, TX IRS address yourself if you like. 

[Wuozopo 4,293]

2 hours ago, _Diver said:

File joint return with her as a resident alien. She has no US income, but substantial Australian income that she is already taxed on. She will also be taxed on it in US as well. So the disadvantage of this option is bigger tax liability.

There is a tax treaty between Us and Australia which prevents double taxation. https://www.irs.gov/businesses/international-businesses/australia-tax-treaty-documents

She can take a foreign tax credit on a US return for taxes paid to Australia. Form 1116 https://www.irs.gov/forms-pubs/about-form-1116

 

2 hours ago, _Diver said:

(It seems like there is $108,700 exclusion and only income above would be taxed in US?).

You are referring to the Foreighn Earned Income Exclusion (Form 2555). It is only available to those who physically live in the foreign country as in Australia. And it is salary income or wages for work done, not investment earnings. You said she lives in the US with you. Since when has she resided in the US? Any income in 2022 received after moving to the US can not be excluded on Form 2555.  If she moved mid year, she can use it for the days residing in Australia, but she can’t take the foreign taxes paid credit for the same period. You can’t use 2555 and 1116 for the same time period. It’s one or the other. No double dipping.

Example if she moved to US April 1, 2022.

• Jan 1-Mar 30. Resident in Australia. Can Exclude Australian earned income (from a job) on Form 2555. She can’t exclude the maximum $108k because that is for a full year’s residence abroad. In our example, she was only resident abroad for 3 months (25% of a year) so can only exclude up to 25% of the maximum. That’s $27,175. She can not also exclude foreign taxes paid for this period if she takes an income exclusion.
• April 1-Dec 31. Residing in US. She can take the foreign tax credit (Form 1116) for Australia taxes paid during these 9 months. 

 

Date she moved to the US determines if she is a US person for taxes. There’s the greencard test. (No). And the physical presence test (???). 

 

[_Diver 2]

39 minutes ago, Wuozopo said:

You are referring to the Foreighn Earned Income Exclusion (Form 2555). It is only available to those who physically live in the foreign country as in Australia. And it is salary income or wages for work done, not investment earnings. You said she lives in the US with you. Since when has she resided in the US? Any income in 2022 received after moving to the US can not be excluded on Form 2555.  If she moved mid year, she can use it for the days residing in Australia, but she can’t take the foreign taxes paid credit for the same period. You can’t use 2555 and 1116 for the same time period. It’s one or the other. No double dipping.

Example if she moved to US April 1, 2022.

• Jan 1-Mar 30. Resident in Australia. Can Exclude Australian earned income (from a job) on Form 2555. She can’t exclude the maximum $108k because that is for a full year’s residence abroad. In our example, she was only resident abroad for 3 months (25% of a year) so can only exclude up to 25% of the maximum. That’s $27,175. She can not also exclude foreign taxes paid for this period if she takes an income exclusion.
• April 1-Dec 31. Residing in US. She can take the foreign tax credit (Form 1116) for Australia taxes paid during these 9 months. 

 

Date she moved to the US determines if she is a US person for taxes. There’s the greencard test. (No). And the physical presence test (???). 

 

 

I assume latest I94 entry will be considered as moving to the states. In which case it would be 9/21. She left Australia 5/2 and travelled since with multiple trips to the US. I guess 9/21 could be treated as start  of her "residence" in the states.

 

she doesn't pass any residency tests, so she is non resident alien. but i can choose to treat her as resident alien on the joint file return.

 

all income is salary and some minimal crypt trading needs to be handled as well.

[Wuozopo 4,293]

@_Diver

ok. I can understand your situation better. Yes, if you marry this year, she can file jointly with you and elect to be treated as a resident alien by submitting a signed statement. 
 

The substantial presence test would count days in US for 3 years. Maybe work that out if you haven’t already. ( I think I called it physical presence above. I meant substantial presence.)

See test https://www.irs.gov/individuals/international-taxpayers/substantial-presence-test 

 

If the days/formula don’t add up to 183 days, then she is not a “US person” for taxes and does not have to file 2022. If married, you could file Married Filing Separately and she would file nothing. No need for an ITIN.
Or you could file jointly with an ITIN application.  Or don’t marry and file single.
 

I think it’s best to try all ways using tax software and see what works out the best deal. It’s often surprising how they turn out different than you expect. 

[_Diver 2]

1 hour ago, Wuozopo said:

@_Diver

ok. I can understand your situation better. Yes, if you marry this year, she can file jointly with you and elect to be treated as a resident alien by submitting a signed statement. 
 

The substantial presence test would count days in US for 3 years. Maybe work that out if you haven’t already. ( I think I called it physical presence above. I meant substantial presence.)

See test https://www.irs.gov/individuals/international-taxpayers/substantial-presence-test 

 

If the days/formula don’t add up to 183 days, then she is not a “US person” for taxes and does not have to file 2022. If married, you could file Married Filing Separately and she would file nothing. No need for an ITIN.
Or you could file jointly with an ITIN application.  Or don’t marry and file single.
 

I think it’s best to try all ways using tax software and see what works out the best deal. It’s often surprising how they turn out different than you expect. 

she doesn't pass any residency tests. the only reason i want her to file is to get ITIN sooner

[MA_EUR 1]

Wanted to quickliy add for others the following link - https://www.irs.gov/instructions/i1116