I am on L1 visa with family (Wife and TWO kids) and have been in US since Aug 2008. Going by the substantial presence test, we do not have 183 days for 2008. But, there was a mention of first year choice where it says if we pass the test for yr 2009, we can file 1040 jointly with Dual Status for 2008.

Can you please help with the RIGHT form to use? Is it better to file 1040-NR for 2008 or 1040 with DUAL status?

What TAX (credits) benefits can I avail as DUAL status?

You can file jointly and you BOTH choose to be treated as resident aliens for all of 2008. You can do that now, but you must claim your home country-based income from 1 Jan 08 on the tax return.

You will file Form 1040 and attach a signed statement stating that you qualify to file as resident aliens and that youCHOOSE to be treated as resident alien for all of 2008.

You will be able to claim the Child Tax Credit for your two children.

Both your wife and children will need to submot Form W-7 to get ITINs.