I am an american Citizen, my wife is german and we recently married in August. She is here on a H1B visa for work that still has two years on it. The year before that she was here on a J1 Visa for school where she obtained a SSN. She still continues to use that SSN. We are now coming upon filling our taxes. Since we are now married should I file jointly or speerate? And what papers must I file with my taxes?

You have a choice of filing jointly or separately. Suggest you prepare it BOTH ways to determine which is best for you.

No special paperwork is required if she was on H-1B for all of 2007, because she is already a resident alien.

If she converted to H-1B in 2007, then, if you file jointly, she has to submit a statement that she is a non-resident alien spouse of a resident alien and that she CHOOSES to be treated as a resident alien for all of 2007.

So since Bush is giving couples a refund that of 1200.00 who make less then 150,000 the best bet is to file jointly. Would you say that is a correct statement?

Also another question is when she does apply for her green card will she start paying Soc Sec and medicare? Or will she stay exempt until she becomes an american citizen?

You will qualify for the tax rebate regardless of how you file.

As for Social Security and Medicare taxes, she should ALREADY be paying these taxes. She became liable to pay them the day her H-1B visa became effective.

If these taxes are NOT being withheld from her pay, she has the legal obligation to tell the employer about that omission.