Here's my problem...

My wife and I got married last year in HK. When I filed my federal tax return, I included Form W-7 for my wife along with copies of her IDs. While I was on vacation last month, a letter was sent to my home from the IRS saying that my wife's application for the ITIN was rejected due to missing or expired documentation and that my federal tax return has been forwarded for process. Shortly after, the refund (less than what I would have gotten as stated in my tax return but more than what I would have gotten for filing single) is credited in my bank account.

I have yet to file my state tax return and wonder when I do, what status should I file as? If I file married/jointly, I will need an ITIN for my wife in which she got rejected. If I file as single, then it won't match my filing status for federal as I will need to submit my federal tax return along with my state tax return. Is this going to be a problem?

You probably submitted the photocopy of an expired passport.

Resubmit the Form W-7 with your wife's current, unexpired passport along with Form 1040X to get her the ITIN.

If you need professional help, contact me at [email protected].

As for the California return, you can submit your joint return WITHOUT HER ITIN! California is one of two states (Indiana is the other) that allows this.