Hi. I have some questions and hope you could give me an advice.

I'm a Filipino citizen, H1b holder, arrived in the US on June 2007 together with my spouse (H4) and 2 toddlers (H4). After I received my SSN, I started working in the US by last week of July 2007. I have no job in the Philippines from Jan-June 2007.

My husband was working overseas before we moved to US. He stayed in the US from June 2007 to Nov 2007, a total of 158 days. He's coming back to US on Jan 2008. His total earnings OVERSEAS (NOT American company) is approximately $30,000 for year 2007.

1. Since he didn't pass the substantial presence test of 183 days, should he consider himself as NR alien and his overseas income will not be liable for US tax?

2. What is our best option for filing our ITR? What should be our filing status? Thanks.

Pinokyo:

More than likely, it would be best for you to file JOINTLY with your husband and you both CHOOSE to be treated as resident aliens for all of 2007. While your husband's income will be taxed by the U.S. if you file jointly, you can file Form 1116 to claim a credit for income taxes he paid to another country, so there will be little if aby double taxation.

Filing jointly allows you to claim $2,000 in Child Tax Credits for your two children. If you file ANY other way, you forfeit the Child Tax Credit.

To give you a detailed analysis of your tax situation, I would have to model your tax return to determien your tax liability filing jointly and filing separately. A fee would be needed for such modeling. If you are interested, contact me at [email protected].

ATT, thank you so much for your advice.

Since my husband is an OFW (Overseas Filipino Worker), he is not liable for any income tax in the Philippines. Therefore he didn't pay any tax. I think filing jointly will make us paying more than filing separately, don't you think so? My total income for 5 months in USA is approximately $23,000 (including signing bonus) and nothing outside USA.

If I choose to file Married filing separately,
1. Can I claim my husband as my dependent?
2. Does he need to file his ITR or there's no need?
3. Does it mean I can only claim for my personal deduction of $3400 and standard deduction of $5350? Nothing for my husband? No child tax credit?

1) You CANNOT claim your husband as a dependent if you file separately, because you will have to file as a non-resident alien, filing Form 1040NR or 1040NR-EZ.

2) If he has NO U.S.-sourced income, no need for him to file a tax return.

3) If you file as a non-resident alien, you can claim your own personal exemption of $3,400 PLUS whatever treaty exemption is authorized under the US.-Philippines Tax Treaty, which I believe is $3,000. NO standard deduction is authorized.

Again, they only way to know for sure which is best is to mdeol it BOTH ways.

Quote:

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Originally Posted by AtlantaTaxExpert

1) You CANNOT claim your husband as a dependent if you file separately, because you will have to file as a non-resident alien, filing Form 1040NR or 1040NR-EZ.

2) If he has NO U.S.-sourced income, no need for him to file a tax return.

3) If you file as a non-resident alien, you can claim your own personal exemption of $3,400 PLUS whatever treaty exemption is authorized under the US.-Philippines Tax Treaty, which I believe is $3,000. NO standard deduction is authorized.

Again, they only way to know for sure which is best is to mdeol it BOTH ways.

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You need to check how many days you have been in the US. If you have been here since June, it is very likely that you have met the SPT and will need to file as dual status alien. Your husband is the one who may be a non-resident (but could elect residency).

TTE's note about dual-status is accurate.

I keyed on when she started working, not on entry date.

Thanks TTTE and ATE. Both of you are very helpful indeed.

May I know what's the difference between Dual Status Alien and Married Filing Separately? What's the implication of that regarding personal and dependent exemption as well as to the standard deduction? Do I still need to file an ITIN for my husband and kids? In what status a Child Tax credit is applicable (only on married filing jointly)?

I'm only confused for this year but for sure, we'll file married filing jointly in the succeding year. Thanks and god bless.

You CANNOT file separately and file as a resident alien. Your choices are:

- file jointly and you both CHOOSE to be treated as resident aliens, and claim your children as dependents. This allows youto claim a DOUBLE standard deduction of $10,700 and one personal exemption ($3,400) EACH for yourself, your husband and each child. You will also receive the $1,000 Child Tax Credit for each child. You must pay taxes on ALL world-wide income received in 2007.

- file as a dual-status alien. You can claim your husband and children as dependents, but NO standard deduction and NO Child Tax Credit, but you CAN ietmize and you DO get to claim the treaty exemption. However, your husband's income is NOT subject to tax.

Given the $30K your husband earned, I suspect that dual-status is best for you.

Let me summarize for you:

1. You currently have a dual status situation and your husband is NR.

2. Dual status means you have some part of the year resident and some part non-resident.

3. The only way for you to be a resident all year is for your husband to elect residency and for you both to elect to file resident all year as MFJ.

4. If you make the election, you'll get better tax results for you but your husband would need to include his foreign earnings.

As ATE suggested, without looking closely at all the details and the numbers it is not possible to say which is best. But looking at what you've said, probably the dual status would work out better.

Agreed!