Hi
I hold a valid H4 visa whereas my wife is working in USA on H1-B visa. I am currently employed full time in UK. I have visited USA only on H4 - twice and that too in last 6 months. Both time my stay was just for about a week. Hence my total stay in USA is not more than 15 days. Since my wife has to file tax returns, we need clarification on certain matters:

1. Can my wife claim me as dependent, even though I have earnings abroad?

2. How should she file? Jointly or Married filing separately ?

3. Since I do not have SSN, will she need my ITIN for her tax filing? I do not have ITIN either. How do I get one whilst in UK?

4. What tax deduction would she be liable for?

5. Will she have to include my foreign earnings in her filing? Is my foreign income taxable in USA even though its already taxed in source country i.e. UK?

6. Will her status be considered as of Dual Status Alien as she only started working in July 2008? If yes which category should she file her tax under?

Kindly advise. It will help us to clarify a lot of confusion as you would imagine.

Thanking in anticipation

Anuj

Assuming that your wife was not present in the U.S. on any days in 2006, or 2007, or in 2008 prior to July 2008, she has three choices on how to file for 2008. She can file Form 1040NR as a nonresident alien. She can elect to file dual status being treated as a U.S. resident when she came to the U.S. in July 2008. She can also elect to file a joint return with you.

Filing as a nonresident alien for 2008 is the simplest approach, but you may pay more tax under this approach (she will not be able to claim any standard deduction or claim an exemption for you). You do not need to get a U.S. tax ID and your income does not need to be included on the U.S. tax return.

Electing to be treated as a resident from July 2008 (as dual status) is likely not beneficial.

Alternatively, she can elect to file a joint tax return (Form 1040) with you where you both will be treated as U.S. residents for the entire year. By electing to file a joint tax return, you will both be subject to U.S. tax on your worldwide income for the entire year 2008. However, she will be able to claim a standard deduction of $10,900, as well as two exemptions ($7,000). You can claim the U.K. taxes paid as credits against U.S. tax (subject to certain limitations). You may be able to claim the foreign earned income exclusion. She cannot elect to file a joint tax return for 2008 until she meets the substantial presence test in 2009. She may need to extend the filing of her tax return to meet this requirement. She will need to include Form W-7 with the tax return along with the documents indicated in Form W-7 for you to get a U.S. tax ID number.

Assuming that your wife was not present in the U.S. on any days in 2006, or 2007, or in 2008 prior to July 2008, she has three choices on how to file for 2008. She can file Form 1040NR as a nonresident alien. She can elect to file dual status being treated as a U.S. resident when she came to the U.S. in July 2008. She can also elect to file a joint return with you.

Filing as a nonresident alien for 2008 is the simplest approach, but you may pay more tax under this approach (she will not be able to claim any standard deduction or claim an exemption for you). You do not need to get a U.S. tax ID and your income does not need to be included on the U.S. tax return.

Electing to be treated as a resident from July 2008 (as dual status) is likely not beneficial.

Alternatively, she can elect to file a joint tax return (Form 1040) with you where you both will be treated as U.S. residents for the entire year. By electing to file a joint tax return, you will both be subject to U.S. tax on your worldwide income for the entire year 2008. However, she will be able to claim a standard deduction of $10,900, as well as two exemptions ($7,000). You can claim the U.K. taxes paid as credits against U.S. tax (subject to certain limitations). You may be able to claim the foreign earned income exclusion. She cannot elect to file a joint tax return for 2008 until she meets the substantial presence test in 2009. She may need to extend the filing of her tax return to meet this requirement. She will need to include Form W-7 with the tax return along with the documents indicated in Form W-7 for you to get a U.S. tax ID number.


Thanks a lot for your response. My wife was in USA in 2006, 2007 and 2008 but on B1/B2 visa. She was not working during those times. Which would be the best option for us in this case? I guess 3rd?? Kindly advise.

Since she was in the U.S. some days during 2006 and 2007, choice one above (filing as a nonresident for the entire year) may not be available. I need to know the day she arrived in the U.S. in 2008 and the number of days she was in the U.S. in 3006 and 2007 to make this determination.

You will probably owe less tax by electing to file jointly. Depending on various factors, your U.S. tax filings may be complex. Without getting into specific details, I cannot tell you which approach is best for you.

Since she was in the U.S. some days during 2006 and 2007, choice one above (filing as a nonresident for the entire year) may not be available. I need to know the day she arrived in the U.S. in 2008 and the number of days she was in the U.S. in 3006 and 2007 to make this determination.

You will probably owe less tax by electing to file jointly. Depending on various factors, your U.S. tax filings may be complex. Without getting into specific details, I cannot tell you which approach is best for you.

Here are the exact days when she was in USA:

19 July 2000 - 22nd August 2000 (35)
28th oct 2005 - 25th mar 2006 (65/84)
30th sep 2006 - 1st nov 2006 (33)
1st dec 2006 - 9th dec 2006 (9)
16th jan 2007 - 20th mar 2007 (64)
23rd jul 2007 - 19th oct 2007 (89)
11th nov 2007 - 28th feb 2008 (51/59)
22 jun 2008 - 5th sep 2008 (76)
21st sep 2008 - till date (101/75)

In summary total days in
2000 - 35
2005 - 65
2006 - 126
2007 - 204
2008 - 236
2009 - 75 ~

She met the substantial presence test in 2007 and in 2008. Unless she can claim that she was not a resident under the treaty, she will be a resident of the U.S. for the entire 2008 year.

She met the substantial presence test in 2007 and in 2008. Unless she can claim that she was not a resident under the treaty, she will be a resident of the U.S. for the entire 2008 year.

How can she claim that she was not a resident 'under which treaty'? She was on B1/B2 i.e. Business/visitor visa prior to 22 Jun 2008

How can she claim that she was not a resident 'under which treaty'? She was on B1/B2 i.e. Business/visitor visa prior to 22 Jun 2008

Does she need to claim as non-resident? Is it better to claim as resident or non-resident or dual status?

What country or countries did she live in when she was outside the U.S. during 2007 and 2008? Of what country is she a citizen?

What country or countries did she live in when she was outside the U.S. during 2007 and 2008? Of what country is she a citizen?

She has lived in UK and India. She is citizen of India

She has lived in UK and India. She is citizen of India

She has also travelled to France and Switzerland just for tourism. Will this count as living abroad?

Was she a resident (e.g. subject to tax) of the U.K. or of India during 2007 and 2008?

Was she a resident (e.g., subject to tax) of the U.K. or of India during 2007 and 2008?

She was a resident of UK as my dependent. She wasn't working in UK at all and hence was not subject to any UK tax. In 2007 and 2008 she only visited India to see family and was not resident there or subjected to any tax.

Her presence in the U.S. under the B visa is counted for determining residency for U.S. tax purposes. She likely would be considered a resident of the U.K. for purposes of the U.S.-U.K. Income Tax Treaty. Therefore, she likely can claim under the tie-breaker rules of this treaty that she was not a resident of the U.S. prior to her working in the U.S. under the H visa.

If she doesn't claim that she is a U.K. resident under the treaty, she will be treated as a U.S. tax resident for all of 2007 and all of 2008.

Claiming treaty relief for 2008 probably doesn't provide her any benefit. She can file as a resident for the entire year as married filing separately or married filing jointly. Filing MFS is more simple for her, but she may owe more U.S. tax. Filing MFJ is more complex, but you and she may owe less U.S. tax. You and she need to balance the additional complexity of including your earnings and activities on a U.S. tax return with the tax savings of filing jointly.

Her presence in the U.S. under the B visa is counted for determining residency for U.S. tax purposes. She likely would be considered a resident of the U.K. for purposes of the U.S.-U.K. Income Tax Treaty. Therefore, she likely can claim under the tie-breaker rules of this treaty that she was not a resident of the U.S. prior to her working in the U.S. under the H visa.

If she doesn't claim that she is a U.K. resident under the treaty, she will be treated as a U.S. tax resident for all of 2007 and all of 2008.

Claiming treaty relief for 2008 probably doesn't provide her any benefit. She can file as a resident for the entire year as married filing separately or married filing jointly. Filing MFS is more simple for her, but she may owe more U.S. tax. Filing MFJ is more complex, but you and she may owe less U.S. tax. You and she need to balance the additional complexity of including your earnings and activities on a U.S. tax return with the tax savings of filing jointly.

Right. Thank you for the detailed explanation. Where do we go from here now? I think we should go for MFJ. It may be complex at this stage but probably would make future filings simple. Kindly guide us in right direction and if possible, a step by step procedure on what should we do to file this year's returns.

Many Thanks

You should speak with a tax professional to assist you with the preparation of your tax return.

She met the Substantial Presence Test in 2007 and would have filed a dual-status return for 2007 if she earned any money while present in the U.S.

That being the case, she would be considered a resident alien under the continuous presence policy for 2008 whether she files Married Filing Jointly or Married Filing Separately.