Hi,

I'm L1 with husband, 4yo and 2yo on L2.

We both worked in AU until leaving for US in Sep 2012. I started work in US on Oct-1. Husband will not work in US for 2012 tax year.

What is our filing status?
Do we declare any AU income in US return? Whilst in US we will earn bank interest, rent and dividends in AU.
What relocation expenses/deductions can we file in US 2012 return - flights, shipping, temp accommodation?

Regards

You CAN file by yourself, filing as a non-resident by submitting Form 1040NR. With Form 1040NR, you will pay taxes ONLY on your U.S.-sourced income. You will be allowed to claim most of the moving expenses by submitting Form 3903 with the return.

OR

You can file a dual-status return and claim your husband and children as dependents. This will require you wait until late May 2013 to file, but you will be taxed only on your U.S.-sourced income. Also, your husband and children will need to submit Forms W-7 to get Individual Tax Identification Numbers (ITINs). Again, you will be allowed to claim most of the moving expenses by submitting Form 3903 with the return.

OR

You can file a joint tax return with your husband and claim your children as dependents. This will require you wait until late May 2013 to file, and you will be taxed on all world-wide income. You can file Form 1116 to claim the Foreign Tax Credit for taxes paid to Australia on the Australian income. Also, your husband and children will need to submit Forms W-7 to get Individual Tax Identification Numbers (ITINs). Again, you will be allowed to claim most of the moving expenses by submitting Form 3903 with the return.

I would have to model the return all three ways to determine which is best, but, most likely, the LAST option (joint return) is best because you probably will qualify for $2,000 in Child Tax Credits.

If you want my professional help, email me immediately using the email address in my profile, because the ITIN submission process is complex and time-consuming and it would be best if you get started immediately.