Filing taxes first time since coming to the US - Am I missing something?

[Pat2021 43]

Hi, so I moved to the US on IR1 Visa on the 11th of Jan 2023.

Before that my wife and I lived and worked in the UK.

 

My wife always filed as married, filing separately, as I didn't have ITIN / SSN / Green Card.

She always claimed foreign income exclusion, as her income was from UK employer and she paid taxes there.

She's done that with a CPA through her parents.

 

Now, since we want to "take matters into our own hands", I started filing taxes using TurboTax, as that seems to be the recommended place to file both State (CA) and Federal taxes for "newbies".

Trying to fill this out, we thought going down the married filing jointly route - is that correct? Even though I was not a LPR nor had an SSN in 2022?

If so, we've come to a weird TurboTax thing - the foreign income for her she can exclude no problem.

 

For me, it asks if I'm US Citizen - No, so then it asks if I was LPR in 2022 - again No. 

 

It then says "since XXX was a nonresident Alien in 2022, XXX must file form 1040NR, ..., unless XXX was married to a US Resident" (now the last part is a Yes).

"We don't include form 1040NR on TurboTax".

 

It then tells us that we owe quite a bit in taxes - because my foreign income did not get excluded. However, I believe this to be incorrect as a foreigner with no green card in 2022 I don't owe the IRS anything, right?

 

So my question is - should we proceed with this, and file this form 1040NR somehow separately, or is it not worth the hassle and for 2022 she should still file as married filing separately and I'll only start filing for 2023, the year I actually became resident?

If the latter, will this provide a hurdle for N400 3-year rule down the line?

 

What does VJ recommend?

Thank you!

[JeanneAdil 6,489]

Turbo tax is not great at the non resident alien spouse part

u can print out the forms and file as MFJ by paper 

leave the SS # blank if not yet received

u don't need the ITIN as a SS # will be forwarded to u if u marked the box on DS 260

 

Foreign income needs to be declared but form 2555 exludes up to the following

 

However, you may qualify to exclude your foreign earnings from income up to an amount that is adjusted annually for inflation ($107,600 for 2020, $108,700 for 2021, $112,000 for 2022, and $120,000 for 2023). In addition, you can exclude or deduct certain foreign housing amounts.Nov 14, 2022

[Crazy Cat 41,812]

28 minutes ago, Pat2021 said:

Hi, so I moved to the US on IR1 Visa on the 11th of Jan 2023.

Before that my wife and I lived and worked in the UK.

 

My wife always filed as married, filing separately, as I didn't have ITIN / SSN / Green Card.

She always claimed foreign income exclusion, as her income was from UK employer and she paid taxes there.

She's done that with a CPA through her parents.

 

Now, since we want to "take matters into our own hands", I started filing taxes using TurboTax, as that seems to be the recommended place to file both State (CA) and Federal taxes for "newbies".

Trying to fill this out, we thought going down the married filing jointly route - is that correct? Even though I was not a LPR nor had an SSN in 2022?

If so, we've come to a weird TurboTax thing - the foreign income for her she can exclude no problem.

 

For me, it asks if I'm US Citizen - No, so then it asks if I was LPR in 2022 - again No. 

 

It then says "since XXX was a nonresident Alien in 2022, XXX must file form 1040NR, ..., unless XXX was married to a US Resident" (now the last part is a Yes).

"We don't include form 1040NR on TurboTax".

 

It then tells us that we owe quite a bit in taxes - because my foreign income did not get excluded. However, I believe this to be incorrect as a foreigner with no green card in 2022 I don't owe the IRS anything, right?

 

So my question is - should we proceed with this, and file this form 1040NR somehow separately, or is it not worth the hassle and for 2022 she should still file as married filing separately and I'll only start filing for 2023, the year I actually became resident?

If the latter, will this provide a hurdle for N400 3-year rule down the line?

 

What does VJ recommend?

Thank you!

If you were married as of 12/31/2022, you COULD file married Filing Jointly.....but if you had significant income, it might be better for your wife to, again, file separately.  You will not be required to file until after the end of the 2023 tax year. 

[Pat2021 43]

Thank you both. I think for simplicity we'll file MFS. Playing with TaxAct now, and the Federal return looks good - same as last year's.

But CA apparently does not allow to exclude foreign income so it's telling me my spouse owes CA $$$.

 

However, apparently there is a "safe harbor" rule if you've been out of the country for 570 days. Which my spouse has been (UK resident since 2017). But I don't see how / where to enter this on the website.

 

Anyone able to help? I don't want to E-File wrong and have to pay. Thank you.

[Ayrton 965]

Does Turbo Tax asks you if you are a LPR or if you are a resident? In order to file jointly, you must be considered a resident for tax purposes, that's not the same as being a Permanent Resident per USCIS. The tax form doesn't ask what your immigration status is, that's why it's odd if they are asking if you are a LPR. If they are asking if you are a resident, you can say yes (as you elect to be treated as a resident for tax purposes). I'm not sure if turbo tax have that, but usually that choice is made by signing a letter asking to be treated as a resident.

[Pat2021 43]

16 hours ago, Ayrton said:

Does Turbo Tax asks you if you are a LPR or if you are a resident? In order to file jointly, you must be considered a resident for tax purposes, that's not the same as being a Permanent Resident per USCIS. The tax form doesn't ask what your immigration status is, that's why it's odd if they are asking if you are a LPR. If they are asking if you are a resident, you can say yes (as you elect to be treated as a resident for tax purposes). I'm not sure if turbo tax have that, but usually that choice is made by signing a letter asking to be treated as a resident.

Yeah that's probably it, last year I was not a resident, neither for tax purposes nor an LPR. So MFS it is!

[Ayrton 965]

7 minutes ago, Pat2021 said:

Yeah that's probably it, last year I was not a resident, neither for tax purposes nor an LPR. So MFS it is!

You can still elect to be treated at resident alien for the whole year in order to file jointly.

 

" if you are a nonresident alien married to a U.S. citizen or resident alien, and you and your spouse make an election for you to be treated as a resident alien for the entire calendar year"

 

https://www.irs.gov/taxtopics/tc851

Edited February 17, 2023 by Ayrton

[Pat2021 43]

2 minutes ago, Ayrton said:

You can still elect to be treated at resident alien for the whole year in order to file jointly.

 

" if you are a nonresident alien married to a U.S. citizen or resident alien, and you and your spouse make an election for you to be treated as a resident alien for the entire calendar year"

 

https://www.irs.gov/taxtopics/tc851

Thank you, but there doesn't seem to be any benefit in doing so, as the income is below any tax threshold anyway.

[top_secret 2,407]

19 hours ago, Pat2021 said:

Thank you both. I think for simplicity we'll file MFS. Playing with TaxAct now, and the Federal return looks good - same as last year's.

But CA apparently does not allow to exclude foreign income so it's telling me my spouse owes CA $$$.

 

However, apparently there is a "safe harbor" rule if you've been out of the country for 570 days. Which my spouse has been (UK resident since 2017). But I don't see how / where to enter this on the website.

 

Anyone able to help? I don't want to E-File wrong and have to pay. Thank you.

 

Was your wife a resident of California at all last year or have any California income?  If she was a UK resident, it would seem she was not a California resident so therefore wouldn't even need to file a CA tax return. If she was a California resident for part of 2022 she might owe CA taxes on worldwide she earned while a CA resident, but it seems unlikely she would have UK income during her CA residency.

[Pat2021 43]

44 minutes ago, top_secret said:

 

Was your wife a resident of California at all last year or have any California income?  If she was a UK resident, it would seem she was not a California resident so therefore wouldn't even need to file a CA tax return. If she was a California resident for part of 2022 she might owe CA taxes on worldwide she earned while a CA resident, but it seems unlikely she would have UK income during her CA residency.

Yeah it seems CA is one of those states that requires you to file state taxes even if you are a resident abroad, as long as you are domiciled in CA which she is / was.

However, looking at the income on https://www.ftb.ca.gov/file/personal/residency-status/index.html, the income was below the requirement to file, so I think we're in the clear by not filing?

We just filed the federal ones as MFS though, and next year we'll switch to MFJ for 2023, which makes sense. Then I can wait until we submit the return for 2025 and file N400 then

[top_secret 2,407]

1 minute ago, Pat2021 said:

Yeah it seems CA is one of those states that requires you to file state taxes even if you are a resident abroad, as long as you are domiciled in CA which she is / was.

 

She was domiciled in California, but a resident abroad last year?  Or she moved back to the US from her UK residence and presumably UK domicile  sometime during 2022?

[Pat2021 43]

2 minutes ago, top_secret said:

 

She was domiciled in California, but a resident abroad last year?  Or she moved back to the US from her UK residence and presumably UK domicile  sometime during 2022?

She was a resident of the UK from 2017 to 2023 (moved back Jan '23), but domiciled in CA. It seems in CA it is nearly impossible to sever ties, so you're always domiciled unless you take specific actions (moving to other states for example) before leaving to go abroad. As she was registered to vote, had driving license, bank accounts, etc. all in CA.

[Crazy Cat 41,812]

2 minutes ago, Pat2021 said:

She was a resident of the UK from 2017 to 2023 (moved back Jan '23), but domiciled in CA. It seems in CA it is nearly impossible to sever ties, so you're always domiciled unless you take specific actions (moving to other states for example) before leaving to go abroad. As she was registered to vote, had driving license, bank accounts, etc. all in CA.

I think I read that California is trying to make state taxes follow you even if you move to another state. 

[Crazy Cat 41,812]

I was serious.

California Exit Tax & Wealth Tax: What Is it & How it Applies to You (sambrotman.com)

 

The California exit tax is a one-time tax that must be paid by businesses and individuals who relocate outside of California. The tax is based on the value of the business or individual's assets, including property, stocks, and other investments.

Edited February 17, 2023 by Crazy Cat

[top_secret 2,407]

Just now, Pat2021 said:

She was a resident of the UK from 2017 to 2023 (moved back Jan '23), but domiciled in CA. It seems in CA it is nearly impossible to sever ties, so you're always domiciled unless you take specific actions (moving to other states for example) before leaving to go abroad. As she was registered to vote, had driving license, bank accounts, etc. all in CA.

OK, I get it.  Yea, the safe harbor rule would apply.  She shouldn't file a CA return.