Interesting information on taxes

[Jughead 3]

Not sure if I'm posting this in the right forum. But since I'm petitioning for a CR-1 I'll throw it up here and see if others know.

My uncle is a retired financial executive and CPA so I have been asking him questions about what to do in regards to taxes when my wife gets her visa and moves here from Japan. He is still looking into this and said he will call the IRS and speak to them...but here's what he found out. The way the IRS law is written, when my wife comes over from Japan, any income she made at her job in Japan during 2013 we will have to claim on our 2013 taxes. He said that this applies specifically to legal permanent residents. I was quite surprised when he told me this...that the government will make us pay taxes on money she earned as a citizen in Japan that she already paid taxes on over there. But he said we might be able to deduct the amount of tax that she already paid in Japan on our 2013 taxes as well.

Has anyone else heard of this or had to do this when their spouse came to the US? Again, he's going to research more to find out for sure. But it looks like this what the IRS requires.

[The Mean Lady 604]

Not sure if I'm posting this in the right forum. But since I'm petitioning for a CR-1 I'll throw it up here and see if others know.

My uncle is a retired financial executive and CPA so I have been asking him questions about what to do in regards to taxes when my wife gets her visa and moves here from Japan. He is still looking into this and said he will call the IRS and speak to them...but here's what he found out. The way the IRS law is written, when my wife comes over from Japan, any income she made at her job in Japan during 2013 we will have to claim on our 2013 taxes. He said that this applies specifically to legal permanent residents. I was quite surprised when he told me this...that the government will make us pay taxes on money she earned as a citizen in Japan that she already paid taxes on over there. But he said we might be able to deduct the amount of tax that she already paid in Japan on our 2013 taxes as well.

Has anyone else heard of this or had to do this when their spouse came to the US? Again, he's going to research more to find out for sure. But it looks like this what the IRS requires.

Yes, here you go:

http://www.irs.gov/Individuals/International-Taxpayers/Foreign-Earned-Income-Exclusion

[SAT 9,609]

<cringe> tax question...

It just doesn't make sense to me. How can the IRS collect tax on income earned by someone not a LPR, or Citizen, and not living in the US? If she started working here during the tax year, then that portion of her income would generate tax liability.

You really should look harder into this...

[The Mean Lady 604]

<cringe> tax question...

It just doesn't make sense to me. How can the IRS collect tax on income earned by someone not a LPR, or Citizen, and not living in the US? If she started working here during the tax year, then that portion of her income would generate tax liability.

You really should look harder into this...

Please read what I posted.

[SAT 9,609]

KDH I read that link, it says "if you are a Citizen or Resident Alien.." The OP's fiance is not yet a resident alien, I think therefore the portion of her income earned as a foreign national not living in the US is not taxable by the US.

If I'm in the same boat, I would not report that as income. How would the IRS know anyway? There's no W2 or 10-99 that Japan sent to the IRS...

[Jughead 3]

KDH I read that link, it says "if you are a Citizen or Resident Alien.." The OP's fiance is not yet a resident alien, I think therefore the portion of her income earned as a foreign national not living in the US is not taxable by the US.

If I'm in the same boat, I would not report that as income. How would the IRS know anyway? There's no W2 or 10-99 that Japan sent to the IRS...

Doesn't she become a "resident alien" when she gets her CR-1 and green card? Is "resident alien" the same as "legal permanent resident?"

[NikLR 13,227]

If she moves during the year and becomes a resident alien (aka legal permanent resident) she would have to file taxes in the USA. She can declare her "world/foreign income" like many Americans do who work overseas. She won't be paying taxes on it, especially if there is a tax treaty between Japan and the USA. She has to "file" taxes that doesn't mean she has to "pay" taxes. Two different things.

[The Mean Lady 604]

Doesn't she become a "resident alien" when she gets her CR-1 and green card? Is "resident alien" the same as "legal permanent resident?"

Yes. OPs wife will be a resident alien in 2013.

It doesn't matter that she isn't now.

Also, even if OPs wife never comes to the US, if OP wants to file joint, same situation applies.

KDH I read that link, it says "if you are a Citizen or Resident Alien.." The OP's fiance is not yet a resident alien, I think therefore the portion of her income earned as a foreign national not living in the US is not taxable by the US.

If I'm in the same boat, I would not report that as income. How would the IRS know anyway? There's no W2 or 10-99 that Japan sent to the IRS...

You are not required to "prove" how much foreign income was made.

Honor System.

Edited January 28, 2013 by KDH

[Jughead 3]

If she moves during the year and becomes a resident alien (aka legal permanent resident) she would have to file taxes in the USA. She can declare her "world/foreign income" like many Americans do who work overseas. She won't be paying taxes on it, especially if there is a tax treaty between Japan and the USA. She has to "file" taxes that doesn't mean she has to "pay" taxes. Two different things.

Yes, I think my uncle said there are tax treaties between the US and Japan. So really all she is required by the IRS to do is to indicate how much she made in Japan but they won't make her pay tax on it?

[SAT 9,609]

Doesn't she become a "resident alien" when she gets her CR-1 and green card? Is "resident alien" the same as "legal permanent resident?"

Yes, and once she gets a greencard she will be an LPR. And that's when her tax liabilities begin as far as I can see. Anything earned abroad before that, there's no US tax liability.

Now I think if she stays in Japan and keeps working there (after receiving her LPR), and she is a bonafide resident of Japan. She can elect to pay taxes to Japan, she can claim foreign exclusion provided that Japan has an income tax treaty with the USA. I know Canada has such an income tax treaty.

And a Resident Alien can also include anyone legally working here, such as an asylum seeker with an EAD but no green card. a LPR is someone with a green card.

[SAT 9,609]

"Yes. OPs wife will be a resident alien in 2013.

It doesn't matter that she isn't now."

So her tax liability to the US starts now? Before she is a LPR?

[Roosha 51]

Even if you report her income it won't be taxed because she was living overseas at the time so it's foreign income. I've worked off and on for the past 7 years and my income is never taxed because I live overseas, ie my residence is overseas. For 2012 you can earn up to $92,000 and none of it will be taxed. So even if she becomes an LPR in 2013 and you file your 2013 taxes as joint, the income that she earned in Japan will not be taxed. There are two tests to determine your overseas residence. The physical presence test where you were out of the country for 330 days out of the year and the bona fide residence test where you answer a couple questions in order to prove that your reside overseas.

The tax treaty stuff and deducting taxes you paid in Japan from taxes you need to pay in the US is another subject. There's no tax treaty with Qatar so I never dealt with that, sorry!

[SAT 9,609]

Come to think of it, my friend did a stint for a year in Bosnia in the 90s and he wasn't taxed either...

[Jughead 3]

So her tax liability to the US starts now? Before she is a LPR?

Yeah, that's what doesn't make sense to me. I would think once she becomes an LPR and if she continues to work there before moving here to live with me that income could be subject to tax.

[Jughead 3]

Even if you report her income it won't be taxed because she was living overseas at the time so it's foreign income. I've worked off and on for the past 7 years and my income is never taxed because I live overseas, ie my residence is overseas. For 2012 you can earn up to $92,000 and none of it will be taxed. So even if she becomes an LPR in 2013 and you file your 2013 taxes as joint, the income that she earned in Japan will not be taxed. There are two tests to determine your overseas residence. The physical presence test where you were out of the country for 330 days out of the year and the bona fide residence test where you answer a couple questions in order to prove that your reside overseas.

The tax treaty stuff and deducting taxes you paid in Japan from taxes you need to pay in the US is another subject. There's no tax treaty with Qatar so I never dealt with that, sorry!

That seems to make sense. Hopefully my uncle can confirm this once he speaks with someone at the IRS.