Tax Filing question - AoS from K1

[KittyKyalesca 1]

I am having a terrible time understanding what needs to be done with taxes for myself and my husband. My husband came on a K1 from France and married in August 2021. From reading this forum and the IRS instructions it seems he would be considered a non resident alien for the 2021 tax year. At the same time it seems like there would be benefit for us to final Married - Filing Jointly regardless of this. Before now I've always had extremely simple taxes which only needed the very basic of tax programs to file with... I'm extremely intimidated about filing taxes for 2021. If anyone has general advice or the ability to answer the following questions it would be greatly appreciated.

Information that might be useful to answer questions:

- Husband arrived in the USA Aug 2021. We married that same month (Aug 2021).

- He was employed in France until the end of July 2021, his last paycheck was received before he landed on US soil

- He has two bank accounts, one of which is a savings account that earns very little interest and the other seems to be what we might consider a checking account (its attached to his debit card). Neither account has much money in it and we have transferred some of the money to our joint checking account here in the USA. 

- We reside in Wisconsin

- I have only one source of income which is my job. We did receive gift money from family for our marriage as well as for Christmas.

- He got his SSN shortly after arriving

- He is not working and has not worked since arriving, we have not received his work permit yet

 

Specific Questions:

1. In our case is it better to file jointly instead of separately? 
   • If so, is it possible to prepare the taxes using a program? (I understand we must file by mail to add a letter that opts us into filing jointly)
     • If yes, what tax program would be best for our case?
   • Do we need some sort of documents from his French bank accounts as well as his previous employer? They don't really get W2s and their taxes are filed at a different time and in a different way...
   • Is the interest on his savings account considered income? 
2. I am having trouble determining what needs to be done for state taxes, I have read some information available but it is not as detailed for non resident aliens as federal taxes with the IRS. If we file jointly for state do we report his foreign income at all since it wasn't earned in the state? 
3. Is there a template or standard wording for the letter we need to attach to our return to state we opt into filing jointly while he's still considered a non resident alien without income after he was on US soil?

 

Taxes have always been a source of anxiety for me, I have trouble understanding the document instructions and what is needed. Is there any other general advice? Should we just use a licensed tax preparer for this year?

 

[P055UM 286]

4 hours ago, KittyKyalesca said:

I am having a terrible time understanding what needs to be done with taxes for myself and my husband. My husband came on a K1 from France and married in August 2021. From reading this forum and the IRS instructions it seems he would be considered a non resident alien for the 2021 tax year. At the same time it seems like there would be benefit for us to final Married - Filing Jointly regardless of this. Before now I've always had extremely simple taxes which only needed the very basic of tax programs to file with... I'm extremely intimidated about filing taxes for 2021. If anyone has general advice or the ability to answer the following questions it would be greatly appreciated.

Information that might be useful to answer questions:

- Husband arrived in the USA Aug 2021. We married that same month (Aug 2021).

- He was employed in France until the end of July 2021, his last paycheck was received before he landed on US soil

- He has two bank accounts, one of which is a savings account that earns very little interest and the other seems to be what we might consider a checking account (its attached to his debit card). Neither account has much money in it and we have transferred some of the money to our joint checking account here in the USA. 

- We reside in Wisconsin

- I have only one source of income which is my job. We did receive gift money from family for our marriage as well as for Christmas.

- He got his SSN shortly after arriving

- He is not working and has not worked since arriving, we have not received his work permit yet

 

Specific Questions:

1. In our case is it better to file jointly instead of separately? 
   • If so, is it possible to prepare the taxes using a program? (I understand we must file by mail to add a letter that opts us into filing jointly)
     • If yes, what tax program would be best for our case?
   • Do we need some sort of documents from his French bank accounts as well as his previous employer? They don't really get W2s and their taxes are filed at a different time and in a different way...
   • Is the interest on his savings account considered income? 
2. I am having trouble determining what needs to be done for state taxes, I have read some information available but it is not as detailed for non resident aliens as federal taxes with the IRS. If we file jointly for state do we report his foreign income at all since it wasn't earned in the state? 
3. Is there a template or standard wording for the letter we need to attach to our return to state we opt into filing jointly while he's still considered a non resident alien without income after he was on US soil?

 

Taxes have always been a source of anxiety for me, I have trouble understanding the document instructions and what is needed. Is there any other general advice? Should we just use a licensed tax preparer for this year?

 

I am in a similar position to you (I moved on K-1 to Wisconsin in August 2021), so you're not alone! I'm not an expert since I haven't been through the process myself yet, but I have a few thoughts from my own preparations for filing:

• Firstly, it is worth checking if he *has* to file, i.e. whether he is US resident for tax purposes. That is determined by the Substantial Presence Test (https://www.irs.gov/individuals/international-taxpayers/substantial-presence-test). You can work out whether he has substantial presence using an online calculator. In the first instance this will at least tell you whether it is required or optional.
• If it isn't required and taxes really do give you a lot of anxiety, you at least have the option of ignoring it for this year, although financially it may not be the best move. 
• If you decide to treat him as a US resident, you have to make the election as you said. I found a template on VJ a while ago...I will see if I can find it again.
• Generally it will be better to file jointly, but this will completely depend on yours and his personal circumstances. There is no one size fits all solution to decide whether you should file together. You can exclude around $108k of foreign income for the year with the Foreign Earned Income Exemption (FEIE), but this is pro-rated so that'll come to approx. $65k for an August arriver. If he earned less than that it is likely filing jointly would be in your interests financially. I have been gaming these out on TurboTax to see how it looks. It was a little overwhelming at first but it gives you a good idea of how beneficial it is filing separately vs jointly. 
• If he earned more than that you could try the foreign tax credit, but that is getting more tricky.
• Re: documentation, I have been working on the basis that every number earned abroad needs to be supported by documentation (ie. payslips, bank statements), but you can't be punished for them being in a non-US format
• Re: State, I have also had some fun reading the Wisconsin guidance, and agree that it is not the easiest to understand. My understanding is that people who are not LPRs are never residents of Wisconsin, but can file jointly if they made the election at a federal level. They certainly will only tax the income earned in Wisconsin (i.e. they won't touch that which was earned in France), however not being a resident does bar you from a couple of small allowances that residents get (not really a big deal). Other thing to note is that any income not excluded with FEIE above will count towards reducing your Wisconsin deduction, even if it is not taxed directly.

This is just how I have been thinking about it and thought I'd share since I am in a very similar position to you. With all that being said if you really don't feel comfortable with it, that is exactly what experts are there for and someone will be able to help you. Might be worth doing some searching to see if there are any around who are experts in overseas issues

 

Hope this helps some!

[Wuozopo 4,293]

3 hours ago, AW1704 said:

• In our case is it better to file jointly instead of separately? 
  • If so, is it possible to prepare the taxes using a program? (I understand we must file by mail to add a letter that opts us into filing jointly)
    • If yes, what tax program would be best for our case?
  • Do we need some sort of documents from his French bank accounts as well as his previous employer? They don't really get W2s and their taxes are filed at a different time and in a different way...
  • Is the interest on his savings account considered income? 
• I am having trouble determining what needs to be done for state taxes, I have read some information available but it is not as detailed for non resident aliens as federal taxes with the IRS. If we file jointly for state do we report his foreign income at all since it wasn't earned in the state? 
• Is there a template or standard wording for the letter we need to attach to our return to state we opt into filing jointly while he's still considered a non resident alien without income after he was on US soil?

 You can use TurboTax Deluxe and do everything you need. TurboTax Basic would do, but it isn’t marketed or in stock locally much and Deluxe is often on sale for the same price.. 30 bucks or $40 with state income tax. I buy the disk and install. Online, I think they start charging you for higher versions when you get into foreign income so couldn’t tell you the cost. The installed one keeps trying to upsell you to fancier versions and add on audit defense and the like. You don’t need it. Just decline and move on. 
 

Filing jointly will no doubt save you money. You will report his income but not be taxed on it. He needs no physical paper proof from France to submit with the return. The year we did this process, I made up a number for my salary that was the best estimate I could come up with for Jan to the end of August in the UK. I jotted down some notes on how I came up with the number and the exchange rate I used to convert to dollars to keep in my records in case of an audit. Audits are rare. 
 

You will report his interest, just like you report your interest for all of 2021, on the same page as yours,.and it is taxable. His savings balance or money brought over is not, nor is the wedding cash so forget about those. 

You are correct. Your husband is a nonresident alien because he doesn’t have a greencard and was not present in the US enough days in 2021 for qualifying on physical presence. So you will prepare the statement that elects for him to be treated as a resident alien for tax purposes. Otherwise as a nonresident alien, he couldn’t file a joint return. I will find my sample statement and post it after I finish this post.

 

If you end up with TurboTax, I can help you with questions it asks you. 

 

 

 

Edited March 5, 2022 by Wuozopo

[Wuozopo 4,293]

@AW1704

 

Forgot to explain why a  joint return helps you. 
Yes, you could file Married Filing Separately and he does nothing, BUT

1. The tax rates are lower for MFJ.
2. You get an extra standard deduction for him. The standard deduction of $12,550 is taken off your income to reduce the amount that is taxed. But with a spouse, you get his standard deduction as well. So $25,100 is subtracted off your income before they start taxing it. Since his foreign earned income is excluded and he had no US income, that is basically a big double chunk taken off your earnings before tax is calculated.
3. Because he has a SSN already, he qualifies for the economic stimulus payment of $1400. You likely already got your $1400 early in 2021. He can claim his on the 2021 tax return. 

 

 

[Wuozopo 4,293]

@KittyKyalesca

 

I quoted the wrong person by mistake. The previous two comments are meant for you in answer to your original post. . Sorry I tagged you in error @AW1704

 

This is the statement we wrote converted to fake names, etc.  You can use as a sample. 

————————————————-

 

 

Statement:  Nonresident Spouse Treated as a Resident 

 

We declare that on the last day of tax year 2015: 

• Mary A. Jones was a U.S. citizen. 
• John J. Jones was a nonresident alien.
• Mary A. Jones and John J. Jones are married. 

 We choose to be treated as U.S. residents for the entire tax year. 


__________________________________     2/4/2016 
Mary A. Jones  SSN 123-45-6789 
123 Main St. 
Smalltown, TX 77771 

 

__________________________________     2/4/2016 
John J. Jones  SSN 987-65-4321 
123 Main St. 
Smalltown, TX 77771 

 

————————

 

I hope that’s enough to give you something to go on. There is no official statement issued by the IRS. 

 

[KittyKyalesca 1]

Thank you both so very much for the responses! I feel much better about having a place to start now. 

[P055UM 286]

22 minutes ago, Wuozopo said:

 

 Sorry I tagged you in error @AW1704

 

No harm, no foul  

[Yu1988 3]

On 3/4/2022 at 1:43 PM, AW1704 said:

 

• Generally it will be better to file jointly, but this will completely depend on yours and his personal circumstances. There is no one size fits all solution to decide whether you should file together. You can exclude around $108k of foreign income for the year with the Foreign Earned Income Exemption (FEIE), but this is pro-rated so that'll come to approx. $65k for an August arriver. If he earned less than that it is likely filing jointly would be in your interests financially. I have been gaming these out on TurboTax to see how it looks. It was a little overwhelming at first but it gives you a good idea of how beneficial it is filing separately vs jointly. 

Is K1 spouse eligible for the FEIE?

 

The IRS website says, 

 

"you must be one of the following:

• A U.S. citizen who is a bona fide resident of a foreign country or countries for an uninterrupted period that includes an entire tax year,
• A U.S. resident alien who is a citizen or national of a country with which the United States has an income tax treaty in effect and who is a bona fide resident of a foreign country or countries for an uninterrupted period that includes an entire tax year, or
• A U.S. citizen or a U.S. resident alien who is physically present in a foreign country or countries for at least 330 full days during any period of 12 consecutive months."

Thanks!

[KittyKyalesca 1]

40 minutes ago, Yu1988 said:

Is K1 spouse eligible for the FEIE?

 

The IRS website says, 

 

"you must be one of the following:

• A U.S. citizen who is a bona fide resident of a foreign country or countries for an uninterrupted period that includes an entire tax year,
• A U.S. resident alien who is a citizen or national of a country with which the United States has an income tax treaty in effect and who is a bona fide resident of a foreign country or countries for an uninterrupted period that includes an entire tax year, or
• A U.S. citizen or a U.S. resident alien who is physically present in a foreign country or countries for at least 330 full days during any period of 12 consecutive months."

Thanks!

The way I read the IRS instructions, in my husband's case as a K1 in AoS limbo who doesn't meet the residency tests (green card/substantial presence test), if we choose to file Married Jointly then we must submit a letter stating that we are electing to have him treated as a resident alien. At that point we follow the rules of reporting for a resident alien. 

 

"Generally, a married couple can't file a joint return if either spouse is a nonresident alien at any time during the year. However, if you were a nonresident alien or dual-status alien and were married to a U.S citizen or a resident alien at the end of 2021, you can elect to be treated as a resident alien and file a joint return. See Pub. 519 for details." 

 

Pub 519 pg 9 "Nonresident Spouse Treated as a Resident"

"If, at the end of your tax year, you are married and one spouse is a U.S. citizen or a resident alien and the other spouse is a nonresident alien, you can choose to treat the nonresident spouse as a U.S. resident. This includes situations in which one spouse is a nonresident alien at the beginning of the tax year, but a resident alien at the end of the year, and the other spouse is a nonresident alien at the end of the year.
If you make this choice, you and your spouse are treated for income tax purposes as residents for your entire tax year. Neither you nor your spouse can claim under any tax treaty not to be a U.S. resident. You are both taxed on worldwide income. You must file a joint income tax return for the year you make the choice, but you and your spouse can file joint or separate returns in later years."

 

So if I'm reading this right, my husband would be treated as a resident alien and either the second or the third bullet would apply? It does not specify that it has to be 2021 tax year just a tax year/any period of 12 consecutive months.

 

This is where my confidence drops. At the same time, my husband didn't make more than $30k last year in France so it shouldn't be that bad for us per what Wuozopo stated.

 

 

[Yu1988 3]

2 hours ago, KittyKyalesca said:

The way I read the IRS instructions, in my husband's case as a K1 in AoS limbo who doesn't meet the residency tests (green card/substantial presence test), if we choose to file Married Jointly then we must submit a letter stating that we are electing to have him treated as a resident alien. At that point we follow the rules of reporting for a resident alien. 

 

"Generally, a married couple can't file a joint return if either spouse is a nonresident alien at any time during the year. However, if you were a nonresident alien or dual-status alien and were married to a U.S citizen or a resident alien at the end of 2021, you can elect to be treated as a resident alien and file a joint return. See Pub. 519 for details." 

 

Pub 519 pg 9 "Nonresident Spouse Treated as a Resident"

"If, at the end of your tax year, you are married and one spouse is a U.S. citizen or a resident alien and the other spouse is a nonresident alien, you can choose to treat the nonresident spouse as a U.S. resident. This includes situations in which one spouse is a nonresident alien at the beginning of the tax year, but a resident alien at the end of the year, and the other spouse is a nonresident alien at the end of the year.
If you make this choice, you and your spouse are treated for income tax purposes as residents for your entire tax year. Neither you nor your spouse can claim under any tax treaty not to be a U.S. resident. You are both taxed on worldwide income. You must file a joint income tax return for the year you make the choice, but you and your spouse can file joint or separate returns in later years."

 

So if I'm reading this right, my husband would be treated as a resident alien and either the second or the third bullet would apply? It does not specify that it has to be 2021 tax year just a tax year/any period of 12 consecutive months.

 

This is where my confidence drops. At the same time, my husband didn't make more than $30k last year in France so it shouldn't be that bad for us per what Wuozopo stated.

 

 

I understand that K1 spouse can be treated as a resident for the tax purpose. 

 

I am just not sure if K1 spouse met the requirement of the second or third bullet in the IRS instructions I quoted. What exactly is the "an entire tax year" and "any period of 12 consecutive months"?  Does it refer to the tax year we are filing for? If not, anyone lived in a foreign country for more than one tax year qualifies FEIE forever?

[Wuozopo 4,293]

12 hours ago, Yu1988 said:

Is K1 spouse eligible for the FEIE?

Yes if they have a SSN before the filing deadline (April) or before the extension deadline (October) if they file for the extension. 
 

Make a timeline and profile. It’s helpful to those that answer questions. 

 

11 hours ago, KittyKyalesca said:

The way I read the IRS instructions, in my husband's case as a K1 in AoS limbo who doesn't meet the residency tests (green card/substantial presence test), if we choose to file Married Jointly then we must submit a letter stating that we are electing to have him treated as a resident alien. At that point we follow the rules of reporting for a resident alien. 

Exactly correct, especially your point: At that point we follow the rules of reporting for a resident alien. 
 

Reasons why I say YES

 

The 1040 instructions https://www.irs.gov/pub/irs-pdf/i1040gi.pdf are your source for filing.

Find the worksheet for claiming the Payment 3. Print the worksheet on page 59 and work through it. See if you find anything that kicks you out of eligibility.

Their discussion of the credit starts on page 57. Generally, you are eligible to claim the recovery rebate credit if in 2021 you (or your spouse if filing a joint return) were a U.S. citizen or U.S. resident alien, weren't a dependent of another tax- payer, and have a valid social security number. Use the Recovery Rebate Credit Worksheet to figure the credit, if any, you can claim. For more information on the recovery rebate credit, go to IRS.gov/EIP3QA.

So go over to the referenced IRS.gov/EIP3QA and then Topic B https://www.irs.gov/newsroom/questions-and-answers-about-the-third-economic-impact-payment-topic-b-eligibility-and-calculation-of-the-third-payment#marriedfilingjointly

 

Remember you qualify as a resident alien by having

• a greencard, or
• physical presence (generally K1s arriving before July do), or
• being married to a USC and electing to be treated as a resident alien for tax purposes (the statement). That’s a perk 

Do I qualify for the third payment if I’m a resident alien? (added March 26, 2021)

A person who’s a qualifying resident alien with a valid SSN is eligible for the payment only if he or she is a qualifying resident alien in 2021 and may not be claimed as a dependent of another taxpayer.  A nonresident alien in 2021 isn’t eligible for the payment. An alien who received a payment but isn’t a qualifying resident alien for 2021 should return the payment to the IRS by following the instructions as described in Returning the Economic Impact Payment for instructions.

 

 

 

[P055UM 286]

On 3/8/2022 at 8:16 PM, Yu1988 said:

Is K1 spouse eligible for the FEIE?

 

The IRS website says, 

 

"you must be one of the following:

• A U.S. citizen who is a bona fide resident of a foreign country or countries for an uninterrupted period that includes an entire tax year,
• A U.S. resident alien who is a citizen or national of a country with which the United States has an income tax treaty in effect and who is a bona fide resident of a foreign country or countries for an uninterrupted period that includes an entire tax year, or
• A U.S. citizen or a U.S. resident alien who is physically present in a foreign country or countries for at least 330 full days during any period of 12 consecutive months."

Thanks!

As far as I understand, if you were married in 2021, make the election to be treated as a resident alien (per previous post), and satisfy either of the tests for FEIE.

[Yu1988 3]

 

On 3/10/2022 at 7:11 AM, AW1704 said:

As far as I understand, if you were married in 2021, make the election to be treated as a resident alien (per previous post), and satisfy either of the tests for FEIE.

Thanks!

 

On 3/9/2022 at 7:32 AM, Wuozopo said:

Yes if they have a SSN before the filing deadline (April) or before the extension deadline (October) if they file for the extension. 
 

Thanks! 

[Yu1988 3]

On 3/4/2022 at 5:29 PM, Wuozopo said:

 You can use TurboTax Deluxe and do everything you need. TurboTax Basic would do, but it isn’t marketed or in stock locally much and Deluxe is often on sale for the same price.. 30 bucks or $40 with state income tax. I buy the disk and install. Online, I think they start charging you for higher versions when you get into foreign income so couldn’t tell you the cost. The installed one keeps trying to upsell you to fancier versions and add on audit defense and the like. You don’t need it. Just decline and move on. 
 

Filing jointly will no doubt save you money. You will report his income but not be taxed on it. He needs no physical paper proof from France to submit with the return. The year we did this process, I made up a number for my salary that was the best estimate I could come up with for Jan to the end of August in the UK. I jotted down some notes on how I came up with the number and the exchange rate I used to convert to dollars to keep in my records in case of an audit. Audits are rare. 
 

You will report his interest, just like you report your interest for all of 2021, on the same page as yours,.and it is taxable. His savings balance or money brought over is not, nor is the wedding cash so forget about those. 

You are correct. Your husband is a nonresident alien because he doesn’t have a greencard and was not present in the US enough days in 2021 for qualifying on physical presence. So you will prepare the statement that elects for him to be treated as a resident alien for tax purposes. Otherwise as a nonresident alien, he couldn’t file a joint return. I will find my sample statement and post it after I finish this post.

 

If you end up with TurboTax, I can help you with questions it asks you. 

 

 

 

Sorry for asking question here. I use TurboTax for our tax return but confused with the state resident status. I searched here and couldn’t find the answer.
My fiancé came to US October 2021 with K1 visa, and we married in November. We live in California. For the Federal return, we choose to be treated as U.S residents for the entire tax year and file Married Filing Jointly. For the California state tax return, should we file as resident or part year resident? TurboTax asks some very confusing questions to determine the resident status and I am totally lost. Please help. Thanks!

[Wuozopo 4,293]

1 hour ago, Yu1988 said:

Sorry for asking question here. I use TurboTax for our tax return but confused with the state resident status. I searched here and couldn’t find the answer.
My fiancé came to US October 2021 with K1 visa, and we married in November. We live in California. For the Federal return, we choose to be treated as U.S residents for the entire tax year and file Married Filing Jointly. For the California state tax return, should we file as resident or part year resident? TurboTax asks some very confusing questions to determine the resident status and I am totally lost. Please help. Thanks!

It does ask confusing questions to try to steer you down the right path. For your Federal return, it doesn’t really matter what you say about state of residence but it may populate the CA part. And you probably don’t have to be a resident of CA the full year just because you are for the IRS since they are separate taxing authorities. She could have lived in Idaho part year and CA only care when you lived in CA.  As far as CA state taxes, I don’t know how TurboTax does those. We live in Texas and don’t have state income tax. 
 

Here’s a link that explains resident and non-resident of CA. https://www.ftb.ca.gov/file/personal/residency-status/part-year-and-nonresident.html  Are you actually on a state return, not in the TurboTax federal part?

 

What are the questions? My Turbo won’t show me CA questions. I would answer factually.. did you live in CA all year…NO.  

Edited March 21, 2022 by Wuozopo