Hi,
My husband and me (German) are about to file taxes for the first time. My husband is in the US on a L-1 visa since April 15th 2006. I am in the US on a L-2 visa since June 2006. We have a child born here in August.
We both came here from Taiwan were we filled income tax for the period we were present in 2006 before we left. Now my question, what would be the best choice for us, to file as non-resident or to file later in 2007 as resident? Would we have to pay additional taxes on our income in Taiwan if we go for the first year choice?
Additional info, here we only have one income, however we both have SSN. Is there any tool were we can calculate the difference between the two choices?
Second question, we already went to a tax-agent ("you got people"... ) to help with the filing, however even on a second visit they were not able even to point out the possibility of first-year-choice to us and the documents they have prepared are wrong. Now we already paid 350$ for nothing. Any chance to get that money back?
Thanks a lot.
Silvia

The first year choice is not relevant at all in your situation. You are both residents at the end of the year and you would need to file as dual status aliens. The only election you could make would be to file as residents for the full year. This would mean you would need to report your worldwide income (and then claim a foreign tax credit on tax you paid in Taiwan).

If the documents your tax agent prepared are in fact wrong, you should ask for them to be corrected at no charge or for a refund. It would be best for you to know exactly why you believe that they are wrong so that you can point it out to them.

Why is the first year choice not relevant? Please explain.
As far as I understand we are not residents because we do neither fulfill the substantial presence nor the green card test.
If we indeed are dual status would we have to pay back taxes if the tax ratio in Taiwan is lower than here? How to apply for a foreign tax credit?

From the information given, you do meet the substantial presence test. It looks to me like you have both been in the US over 183 days this current tax year (2006).

This immediately means that you are dual status for 2006 and as a result the first year choice (which is elected by non-residents) is not relevant.

You can either file dual status (which means you do not have to report your Taiwanese income during the non-resident part of the year) or you can elect to file jointly as residents for the full year (and report your worldwide income). You can claim the foreign tax credit (you just need to follow the appropriate directions on the tax form or use software to help).

According to the tax preparer we went to, only 1/3 of 2006 counts. Therefore she said we are non-residents. I read the 519 again and again and as I understand it (although it doesn't make sense if you compare it to other countrys 183 day regulations) we can count all of 2007, 1/3 of 2006, 1/6 of 2005. (That's also as the Lady mentioned above calculated) Current year as I understand it in the examples given is 2007 not the current tax year as you write. Could you please confirm that "current year" in this regulation means 2006 as a "current tax year" and not 2007 as "current calendar year"? Or could you point out a document of the IRS saying so, as we already went to that Tax Bureau 2 times and they keep on saying we are non-residents.

My understanding is that you are doing your 2006 year tax return. If you arrived in April 2006 and stayed in the US all that time, you have been here more than 183 days in 2006 and that makes you a resident for 2006.

If the tax preparer you are working with is counting only 1/3 of the 2006 days when they are doing a 2006 return, then they obviously do not have any idea about dealing with Non-Residents and I would very urgently find another tax preparer. In fact, I would also ask for a full refund of any money that you have paid already.

[PS If you want to PM me then I will help you put together a letter requesting a full refund for the incorrect work done by your tax preparer.]

Appreciate your help, I will PM you if we decide to go for your suggestion.

And because you will need to file as a DUAL STATUS alien, please don't let these people do the work for you. It is not a simple straightforward situation and they obviously don't understand international tax.

Good luck with it.

Silvia:

If TaxSearcher cannot take you on as a client, I will.

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