Hello everyone

I just find this forum and get lots of useful information of Dual-status for US tax return and foreign tax credits, thank you for all your guys, but I still have some questions want to ask for this two topics including state tax.

I already read P519 ,I think we can do married jointly US tax return as resident for entire 2011 if we choose to be treated nonresident spouse as resident alien, but IRS rep who I called insist hubby can only do dual-status alien tax return for 2011, I do tax return as non resident alien. So I'm confused,I really want to know if we can do tax return either as resident alien or dual- status & non-resident. If the answer is yes, We will choose the better way by which we can pay less tax. My foreign tax credits and state questions will be followed.

Let me say sth about ourselves,we are Canadian move to US in summer of 2011, Hubby had TN visa and move to US on Jun 8th , I had my TD visa and came on July 26th.

So Hubby stays in US more than 183 days in 2011, I'm not. So I think he is Dual-status alien of 2011 , I'm non resident alien. But I find following information from P519 on Page9, which make me think we can do tax return as resident alien entire 2011 if we choose to be treated nonresident spouse as resident alien. Dual- status alien and NR alien is not the only way we can do US tax return.

Choosing Resident Alien Status

If you are a dual-status alien, you can choose to be treated as a U.S. Resident for the entire year if all of the following apply.

You were a nonresident alien at the beginning of the year.

You are a resident alien or U.S. Citizen at the end of the year.

You are married to a U.S. Citizen or resident alien at the end of the year.

Your spouse joins you in making the choice.

This includes situations in which both you and your spouse were nonresident aliens at the beginning of the tax year and both of you are resident aliens at the end of the tax year.

A similar choice is available if, at the end of the tax year, one spouse is a nonresident alien and the other spouse is a U.S. Citizen or resident. See Nonresident Spouse Treated as a Resident, later. If you previously made that choice and it is still in effect, you do not need to make the choice explained here.

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.

Question for foreign tax credits

Can we use tax paid to A country for the income from A as foreign tax credits when we do tax return for the same income at B Country and use tax paid to B country for the income from B as foreign tax credits when we do tax return for the same income at A Country ? Because we are treated as resident of both countries for two month of 2011.Really hope I can get some answer from you for this question

Details for the question is

If we choose to do tax return as US resident entire 2011. We need to report all our worldwide income to IRS. Which means we need pay tax for our income from Canada and US. We are treated as Canada resident from Jan to July 26 according to CRA's requirement, they use my leaving day as departure day for my family which related to some tie test. So we need pay all US and Canada income from that period to CRA as well. Now there is a double tax payment on our income from Canada and US. Which is from Jan to July. I think we can use the tax we pay on our Canada income to CRA as foreign tax credits when we do US tax return to decrease the tax we should pay on them to IRS. But how about the hubby's two month US income from Jun and July? We need pay tax of it to CRA & IRS as well, can we use the tax we paid to IRS on it as foreign tax credit and use it when we do Canada tax return to decrease the tax we should pay CRA on these income? I don't know if we can use foreign tax credit for each country tax return,they are not double used for the same income. They are for income from different country.

Even if we choose to do Dual-status and NR resident alien US tax return, we still can't avoid above problem. Hubby's two month's income will be taxed in both country because CRA and IRS regard he is resident of each country for that period.

Sth about foreign tax credit and State credit

The Last but not the least, I just find the tax paid to any province of Canada can not be foreign credits to any state of US. I can't find any related doc from states of US. The gross income from your 1040 will effect your state tax rate, the gross income from your 1040 may include your foreign income depend on your resident status, so my understandings is your foreign income report to IRS will up the rate of your state rate, which should lead more state tax which can not be deducted by any foreign credits. Does anyone have any idea of this?

I'm glad to hear sth from you and would like to share useful information with all of you.

Choice 1. Your hubby can file dual status tax return and you can file nonresident tax return. Both are separate returns. Or,
Choice 2. You can file joint return as residents. Both must report worldwide income for the year. If you paid taxes in the foreign country, you will claim credit for taxes paid in the foreign country by filing Form 1116 or can file form 2555 Foreign Earned Income Exclusion..
Another filing requirement may be Form TD F 90-22.1. and form 8938. Your U.S. Tax Return: U.S. Citizen or Resident with Foreign Income

Hi Mukata

Thank you for your answer.I'm so happy that you have same idea with me on choosing resident alien status, thank you for your suggestion of Form 1116 and TD F 90-22.1 If we choose to do tax return jointly as resident alien, we really need fill TD F 90-22 because we have more than 10K in our Canada bank account, we also need fill F1116 to get foreign tax credits to avoid double tax payment for our worldwide income. Form 2555 is not suitable for us, because we didn't satisfy those listed tests.

For 2555 you may satisfy physical presence test.

MukatA covers all the specifics very well, but, assuming you are using a tax professional to file, MAKE SURE the tax professional models the returns BOTH ways to determine which offers the lowest payment of taxes.

MOST of the time, filing jointly and claiming the tax credit is the best course of action.

As for the provincial tax, you CAN claim that on the Form 1116 for the federal taxes, but, for most states, you CANNOT claim it as a credit on the state tax return. Some states DO allow a credit for Canadian provincial tax; you need to call your state tax department and ASK!

If you determine that filing separately is the best course of action, do NOT prepare the dual-status return yourself. The dual-status tax return is NOT for amateurs! Get professional help from someone with experience filing such returns.

If you want my professional help, this IS what I do! Please click my name above and scroll down to my signature to get me email address.