Filing taxes NRA and community property...help!

[travis1983 0]

Hello all

Ok, so my Filipina wife is in the last states of her spousal visa debacle and hopefully will arrive this summer. 

 

We have never filed jointly. Always MFS. No kids.

 

I live in New Mexico (a community prop state) and last year filed with no issues.

 

 

This year HR Block is shoving some form 8958 community property form to me. It is for us both etc etc.

 

I read the IRS site and it gives some exceptions for NRA, then contradicts them.

 

 

So, in general if she is treated as a NRA for tax purposes, am I compelled to file an 8958?

 

Thanks

[user555 195]

I'm looking at the same issue. It looks like we have to file the 8958 form and attach it to the 1040. 

[travis1983 0]

1 minute ago, user555 said:

I'm looking at the same issue. It looks like we have to file the 8958 form and attach it to the 1040. 

Only issue is if you and I (both seasoned tax pros I am sure lol) look at the IRS rule 555 it has so many exceptions. But it would seem to me if one is regarded as an NRA...it would trump all other issues.

[user555 195]

If you are a U.S. citizen or resident alien and don't choose to treat your nonresident alien spouse as a U.S. resident for tax purposes, treat your community income as explained next under Spouses living apart all year. However, you don't have to meet the four conditions discussed there.

 

If all these conditions are met, you and your spouse must report your community income as discussed next.

 

So it sounds like we have to fill it out. 

[Wuozopo 4,285]

If you assign half your income to the NRA wife, then she would be obligated to file a MFS return as well on half the income. Yet she has no SSN. If you obligate her to file, she needs an ITIN. If you go through that hassle, then you might as well elect for her to be a RA, file a joint return,  and get a better tax deal than filing two separate returns. As a NRA, she would file a 1040-NR and taxes would be even higher that on your return...taxed at a higher rate and no standard deduction allowed. Not to mention paying H&R to prepare two returns.  File a joint return and the 8958 goes away. 
 

 

[travis1983 0]

9 minutes ago, Wuozopo said:

If you assign half your income to the NRA wife, then she would be obligated to file a MFS return as well on half the income. Yet she has no SSN. If you obligate her to file, she needs an ITIN. If you go through that hassle, then you might as well elect for her to be a RA, file a joint return,  and get a better tax deal than filing two separate returns. As a NRA, she would file a 1040-NR and taxes would be even higher that on your return...taxed at a higher rate and no standard deduction allowed. Not to mention paying H&R to prepare two returns.  File a joint return and the 8958 goes away. 
 

 

it just seems bizarre that the IRS could compel a foreigner in a foreign land with no social or TIN who has never yet stepped foot in the US to file a return. God, I hate our tax system

[Wuozopo 4,285]

1 minute ago, travis1983 said:

it just seems bizarre that the IRS could compel a foreigner in a foreign land with no social or TIN who has never yet stepped foot in the US to file a return. God, I hate our tax system

It fits the masses,  but doesn’t work well for those quirky Catch 22 situations like yours. Did you use H&R last year? Is this a new form for 2019. We live in a community property state,  but haven’t  heard of this situation. 

[travis1983 0]

Just now, Wuozopo said:

It fits the masses,  but doesn’t work well for those quirky Catch 22 situations like yours. Did you use H&R last year? Is this a new form for 2019. We live in a community property state,  but haven’t  heard of this situation. 

Im going to visit them tomorrow. Last year my accountant screwed up the state return and put single, so that may have been why this was not an issue. May need to amend that,

 

As far as this form, I am at the point of saying screw it. It is not crucial and not even needed potentially. 

[user555 195]

community property states:

Arizona

California

Idaho

Louisiana

Nevada

New Mexico

Texas

Washington

Wisconsin

 

I married in 2018 and did not see this for when I filled out my taxes in 2019. In 2020, now the tax software is showing that I need to file this. 

[Wuozopo 4,285]

2 minutes ago, travis1983 said:

Im going to visit them tomorrow. Last year my accountant screwed up the state return and put single, so that may have been why this was not an issue. May need to amend that,

 

As far as this form, I am at the point of saying screw it. It is not crucial and not even needed potentially. 

I’m curious now and want to see what my TurboTax (desktop version) asks if I create a MFS  return. Wondering if it will launch into 8958. It hasn’t in the past because we sometimes try separate vs joint to compare. That’s why I was wondering if this was new. 

[travis1983 0]

2 minutes ago, Wuozopo said:

I’m curious now and want to see what my TurboTax (desktop version) asks if I create a MFS  return. Wondering if it will launch into 8958. It hasn’t in the past because we sometimes try separate vs joint to compare. That’s why I was wondering if this was new. 

it is a major pain

[user555 195]

It looks like this form has been around for at least 3 years, but it wasn't really enforced or people didn't know they needed it. 

[Wuozopo 4,285]

https://www.irs.gov/individuals/international-taxpayers/acceptance-agents-philippines
 

ITIN in Philippines.

[user555 195]

Nonresident Alien Spouse: If your spouse is a nonresident alien, he or she must have either an SSN or an ITIN if: • You file a joint return, or • Your spouse is filing a separate return

https://www.irs.gov/pub/irs-pdf/i1040gi.pdf (page 15)

(This sounds like we need an ITIN if the NRA is going to file a separate return. She isn't and so an ITIN is not needed)

 

Here is the direct quote from page 13 under the Married Filing Separately section: "If your spouse doesn’t have and isn’t required to have an SSN or ITIN, enter “NRA.” "

https://www.irs.gov/pub/irs-pdf/i1040gi.pdf

But that "isn’t required" phrase is what is tripping us up. 

To see if we need one, we have to look at https://www.irs.gov/individuals/individual-taxpayer-identification-number to see if all three things apply to our cases:

Do I need an ITIN?

Does the following apply to you?

1. You do not have an SSN and are not eligible to obtain one, and
2. You have a requirement to furnish a federal tax identification number or file a federal tax return, and
3. You are in one of the following categories.

• Nonresident alien who is required to file a U.S. tax return
• U.S. resident alien who is (based on days present in the United States) filing a U.S. tax return
• Dependent or spouse of a U.S. citizen/resident alien
• Dependent or spouse of a nonresident alien visa holder
• Nonresident alien claiming a tax treaty benefit
• Nonresident alien student, professor or researcher filing a U.S. tax return or claiming an exception

If so, then you must apply for an ITIN.

 

She meets 1 and 3, but number 2 could be debatable. She does not need to file a tax return, but does she have to furnish a federal tax identification number?

I used the IRS tool to see if I needed one for her and none of the options they provide pertain to my situation. I guess we don't need an ITIN. 

https://www.irs.gov/help/ita/am-i-eligible-to-apply-for-an-individual-taxpayer-identification-number

 

 

[user555 195]

I'm still reviewing the 8958 form, but I'm hoping that the way they define domicile for both parties will exclude my spouse since she is not domiciled in that US state.