Any tax specialists here?

[Usui Takumi 1,562]

So my wife came very late in 2008 and we were married in December. So how should I file? She has zero US income, She received UK income and continues to receive it through to this year. Do we file jointly and say she has had zero income?

I'll probably need a tax guy this year but my assumption is that a k1 visa holder does not need to report foreign income nor does someone who's status is I485 processing. (IE only perm. residence and citizens must report foreign income.

Just seeing what other people did in this situation as I assume 50% had some sort of foreign income the year they arrived and before EADs or greencards.

[Old Dominion 26]

Hers is not reported. Once she has the green card, then if she is still receiving income from overseas, it needs to be reported.

[USBrit 0]

I've been in touch with the IRS this appears to be the thing.

As you were married before or by Dec 31 2008 you HAVE to file as Married. You can file as Married filing separately although that MIGHT end up with slightly higher taxation, depending on circumstances. OR you can file as Married filing jointly. Your wife would need to write a letter and attach to the return saying she wishes to be considered as a resident for Tax purposes (v. different to PR status). If you do this you can take a deduction for her as well BUT she will need to report her UK income. However, if she qualifies she can apply for Foreign Income Exclusion and will probably (unless she's v well paid) not have to pay US taxes on most if not all her UK earnings. I'd spend some time running both scenarios to see which works best for you guys. Also call the IRS - they are very helpful.

[HighwayStar 0]

We seem to be in the same boat. We were married on Dec 23, but we'll be filing jointly (this will come in handy for AoS, should we be called for an interview later on). In Italy I was a gov't official, and was paid until the end of the year, though this year I'll probably see next to nothing because I'm on unpaid leave of absence, and will resign for good before the end of 2009. I also have income from rental property, though everything should be well under $87,000 (even allowing for the Euro/dollar exchange rate). In any case, according to the Tax Treaty between Italy and the US, I should not have to pay anything to the US gov't, since I have already paid taxes on both incomes in Italy.

[Usui Takumi 1,562]

I've been in touch with the IRS this appears to be the thing.

As you were married before or by Dec 31 2008 you HAVE to file as Married. You can file as Married filing separately although that MIGHT end up with slightly higher taxation, depending on circumstances. OR you can file as Married filing jointly. Your wife would need to write a letter and attach to the return saying she wishes to be considered as a resident for Tax purposes (v. different to PR status). If you do this you can take a deduction for her as well BUT she will need to report her UK income. However, if she qualifies she can apply for Foreign Income Exclusion and will probably (unless she's v well paid) not have to pay US taxes on most if not all her UK earnings. I'd spend some time running both scenarios to see which works best for you guys. Also call the IRS - they are very helpful.

Do you think you have to file as a resident? I also thought a spouse can never be counted as a deduction. In my case i'm already seeing a huge benefit since we are technically a 1 income couple (assuming foreign income isn't included).

Edited January 9, 2009 by lancer1655

[Mint518 0]

I've been in touch with the IRS this appears to be the thing.

As you were married before or by Dec 31 2008 you HAVE to file as Married. You can file as Married filing separately although that MIGHT end up with slightly higher taxation, depending on circumstances. OR you can file as Married filing jointly. Your wife would need to write a letter and attach to the return saying she wishes to be considered as a resident for Tax purposes (v. different to PR status). If you do this you can take a deduction for her as well BUT she will need to report her UK income. However, if she qualifies she can apply for Foreign Income Exclusion and will probably (unless she's v well paid) not have to pay US taxes on most if not all her UK earnings. I'd spend some time running both scenarios to see which works best for you guys. Also call the IRS - they are very helpful.

Do you think you have to file as a resident? I also thought a spouse can never be counted as a deduction. In my case i'm already seeing a huge benefit since we are technically a 1 income couple (assuming foreign income isn't included).

In general rule, it depends on how many days your wife was in the U.S. during 2006-2008 (which we do not have enough informatinon).

If she stayed in the US (i) over 31 days during 2008, AND (ii) 183 days during the period 2008 2007, and 2006, counting all the days of physical presence in 2008, but only 1/3 the number of days of presence in 2007 and only 1/6 the number of days in 2006 (called "substantial presense test") she is considered as resident alien for US tax purposes(There is an exception for “F,” “J,” “M,” or “Q” visa holder who timely filed form 8843.), and must report her world wide income.

If she does not meet the above test (i.e, her stay in 2008 was less tha 31 days OR less than 183 days during 2006-2008), she has two options. (A) she is treated as a non-resident alien (this is a default rule), and should report only her US source income (since she has no US income, no need to file US tax return), but in this case, you cannot claim her exemption and I think you should file married separately). Alternatively, (B) she can chose to be treated as resident and can file joint return with you for your and her world wide income.

If interested, you can find more detailed information in the instruction for 1040NR (http://www.irs.gov/pub/irs-pdf/i1040nr.pdf) and Pub. 519 (http://www.irs.gov/pub/irs-pdf/p519.pdf -- this is for 2007 return, and 2008 version should become available in due course, I think).

Having said that, in 2006, when we came back to the US, I had income in Japan and US and my USC husband did not have any income (so it is different with your case). And since I was non-resident under substantial presense test, for the ease of preparation of tax return, I filed 1040NR as married non-resident alien under which I could not claim exemption for my husband (meaning I did not file married jointly) for my US source income.

[Mint518 0]

I've been in touch with the IRS this appears to be the thing.

As you were married before or by Dec 31 2008 you HAVE to file as Married. You can file as Married filing separately although that MIGHT end up with slightly higher taxation, depending on circumstances. OR you can file as Married filing jointly. Your wife would need to write a letter and attach to the return saying she wishes to be considered as a resident for Tax purposes (v. different to PR status). If you do this you can take a deduction for her as well BUT she will need to report her UK income. However, if she qualifies she can apply for Foreign Income Exclusion and will probably (unless she's v well paid) not have to pay US taxes on most if not all her UK earnings. I'd spend some time running both scenarios to see which works best for you guys. Also call the IRS - they are very helpful.

Do you think you have to file as a resident? I also thought a spouse can never be counted as a deduction. In my case i'm already seeing a huge benefit since we are technically a 1 income couple (assuming foreign income isn't included).

In general rule, it depends on how many days your wife was in the U.S. during 2006-2008 (which we do not have enough informatinon).

If she stayed in the US (i) over 31 days during 2008, AND (ii) 183 days during the period 2008 2007, and 2006, counting all the days of physical presence in 2008, but only 1/3 the number of days of presence in 2007 and only 1/6 the number of days in 2006 (called "substantial presense test") she is considered as resident alien for US tax purposes(There is an exception for “F,” “J,” “M,” or “Q” visa holder who timely filed form 8843.), and must report her world wide income.

If she does not meet the above test (i.e, her stay in 2008 was less tha 31 days OR less than 183 days during 2006-2008), she has two options. (A) she is treated as a non-resident alien (this is a default rule), and should report only her US source income (since she has no US income, no need to file US tax return), but in this case, you cannot claim her exemption and I think you should file married separately). Alternatively, (B) she can chose to be treated as resident and can file joint return with you for your and her world wide income.

If interested, you can find more detailed information in the instruction for 1040NR (http://www.irs.gov/pub/irs-pdf/i1040nr.pdf) and Pub. 519 (http://www.irs.gov/pub/irs-pdf/p519.pdf -- this is for 2007 return, and 2008 version should become available in due course, I think).

Having said that, in 2006, when we came back to the US, I had income in Japan and US and my USC husband did not have any income (so it is different with your case). And since I was non-resident under substantial presense test, for the ease of preparation of tax return, I filed 1040NR as married non-resident alien under which I could not claim exemption for my husband (meaning I did not file married jointly) for my US source income.

I forgot to mention, even if she is a resident for tax purpose or chose to be taxed as resident, as USBrit and HighwayStar noted, she might be able to exclude her income (up to $87,600 in case of 2008) as foreign earned income under certain conditions (see http://www.irs.gov/businesses/article/0,,id=182017,00.html). Also, the income tax she paid to UK tax authorities which is attributable to the portions she could not exclude as foreign earned income can be used as foreign tax credit and will reduce her US tax obligation (http://www.irs.gov/taxtopics/tc856.html). So, at the end there might be no or just a little aditional US tax for her UK income, and considering the tax benefits, you might be better off filing as married jointly.