Hi.

I came to the United States in September 2004, on a R-1 (religious worker) visa. My wife is also here, on a R-2 visa, and as per her visa requirements, she doesn't have any US income source. I have a SSN, but my wife doesn't and she is not allowed to have one either (I guess she could apply for an ITIN, but I'm not sure it's necessary).

Last year, I did the taxes by myself, and filled a 1040-EZ form, and I was able to claim her as a dependent. I got my refund back, both from the Federal return and from the State (NY) return.

This past August (2005), I had a daughter born to us. She is a US citizen and has a SSN.

My questions are:

1. What forms should I file this year, both for my Federal return and for my NY State return? (our only income is still mine)
   
2. How can I claim my wife and my daughter as dependents, considering that my wife does not have a SSN? What do I write as her SSN on the forms?
   
3. If my wife needs to apply for an ITIN (which I've been told as a separate application mailed TOGETHER with your return), what do I write on my return(s) in the box for her SSN/ITIN (she will get the ITIN eventually, but at the time of the mailing of my return I will not have it, obviously)? Could I write "NRA" (non resident alien), although in 2005 we've been in the States all year long? Is there another phrase, such as "Applied for a ITIN" so something similar to write (I know for a fact that leaving the box empty is not allowed)?
   
4. Are there any special deductions or credits I can claim for my wife or child?

Thank you in advance for all the help. :)

Sorin:

I am confused and am surprised the IRS processed the 1040-EZ last year because. If you claimed your wife as a dependent, there is nowhere on the Form 1040-EZ to claim dependents. With Form 1040-EZ, you can only file jointly with your spouse, which would be impossible if she had neither the SSN nor the ITIN. Could you re-check your facts/posting?

As for the rest, I cannot answer until you clarify your post.

Further, you need to look at your situation and determine whether to change your visa status. Since your daughter is a U.S. citizen, you can probably apply for a green card to become a resident alien.

Finally, your country of origin would be helpful information.

Yes, thanks for your fast reply.

Indeed, it's my mistake. Last year we didn't have a "substantial presence in the US" (as we arrived at the end of September), so I filed on my own 1040NR-EZ, without claiming my wife as a dependent.

I would like to do this and to also add my daughter as a dependent, this year.

Hope this is more clear now. Thanks again.

Sorin

I am not intending to remain in the United States. I will return to Romania (where I come from) in the summer or 2007, so applying for a green card is not an option for me.

Thanks.

Sorin:

Since you now meet the Substantial Presence Test, you should file as a resident alien and file Form 1040 or 1040A. You cannot your wife as a dependent filing these forms, but rather should file jointly with her in order to claim her personal exemption and increase your standard deduction to $10,000. However, in order to be to file jointly with you, she must have an ITIN. You should apply for one using a W-7, and attach it to the tax return you mail in. Leave her SSN block BLANK; the IRS personnel will fill it in when they assign her the ITIN, then process your return.

Since your daughter has a SSN, claiming her as a dependent should not be a problem. You will probably qualify for the Child Credit ($1,000) if you owe any taxes. Depending on your wage level, you may also qualify for the Earned Income Credit.

For NY, you will file as a full-time resident of NY (Form IT-201, I believe).

Again, thank you for the reply. It was really useful.

One last question, though... I see that on form IT-201 the standard deductions vary according to the filing status: $7,500 for "Single" and $14,600 for "Married filling joint return". In order to get the $14,600, I guess I would have to file the Federal return and wait for the ITIN first (they say 6-8 weeks) and then use this ITIN for my wife on the State IT-201 return. Is that correct or is there another way to file the State and get the bigger deduction?

Thanks. :)

Sorin:

You must wait for the ITIN before filing the state return. They will not fill it in for you.

I started preparing my return using 1040A and I have the following problem: besides the wages that are reported on a W-2, I have a stipend that I got and I must report, and I can't seem to find any place on the form to report it.

I looked at the instructions for 1040A, and this is what they say:

Scholarship and fellowship grants. Scholarship and fellowship grants not reported on Form W-2 must be included in the total on line 7. Also, enter “SCH” and the amount in the space to the left of line 7. However, if you were a degree candidate, include on line 7only the amounts you used for expenses other than tuition and course-related expenses. For example, amounts used for room, board, and travel must be reported on line 7.

The scholarship/stipend is taxable for sure (all of it). Honestly, I don't know how to include it in box 7 on the form, as I already have the income from wages (W-2) in that box.

Should I add the two ammounts and write the total in box 7? Should I write only the amount of the stipend in another box? Also, where do I write "SCH" (I don't know where the "left of line 7" is)?

Thanks in advance.

Sorin:

Print the acronym "SCH" between the "W-2" and the "7". When they say "in the space to the left of line 7", they mean to the immediate left of the numeric 7.

Let's assume your W-2 wages and taxable scholarship stipend total equals $15,000. Once you are done, Line 7 would look like:

7 Wages, salaries, tips, etc. Attach Form(s) W-2 SCH 7 $15,000

The IRS requires the "SCH" entry so they know that the total includes some taxable scholarship money that caused the Line 7 entry to exceed the total of the W-2s which are attached to the From 1040A. Without that "SCH" entry, the IRS computer would assume that you had made a simple arithmetic error and reject the return as inaccurate.

I checked and my daughter qualifies for the Child Tax Credit. Now, my questions are: What is this credit? If I claim it now, will I have to give the money back at some point the future, or is it non-refundable? Will I have to report it in my next year's return (if yes, how)?

Thanks a lot.

Sorin:

The Child Tax Credit is $1,000 per child, but only if you have a tax liability of at least $1,000 on line 28 of Form 1040A.

The Child Tax Credit is a non-refundable credit, meaning that you have to owe taxes to get the credit. If your line 28 tax liability is less than $1,000, the Child Credit will be whatever your line 28 tax liability is.

Under reason for applying on the W-7 form, I think my wife doesn't fit any category:

Reason c: U.S. resident alien (based on days present in the United States) filing a U.S. tax return and not eligible for an SSN. A foreign individual living in the United States who does not have permission to work from the USCIS, and is thus ineligible for an SSN, may still be required to file a U.S. tax return. These individuals must check this box.

Reason e: Spouse of U.S. citizen/resident alien. This category includes:

• A nonresident alien husband or wife who is not filing a U.S. tax return (including a joint return) and who is not eligible to obtain an SSN but who, as a spouse, can be claimed as an exemption.
• A nonresident alien electing to file a U.S. tax return jointly with a spouse who is a U.S. citizen or resident.

(Taken from the Instruction to form W-7, page 3)

About reason c: Based on days present in the United States (all of 2005, basically), my wife is a RESIDENT ALIEN (the same as me), she is not eligible for a SSN, but she not required to file a US tax return (as her income is zero), instead she chose to file one jointly with me.

About reason e: As I said, my wife is a RESIDENT ALIEN and not a non-resident alien, so e. shouldn't apply, should it?

As far as I can tell, none of the other reasons apply either, so what box/reason for applying do you think I should check?

Again, thank you a great deal for all your help.

Check off Reason C, because she is a resident alien.

Where on form IT-150 do I report the stipend that I am getting? Do I also include it on line 1 ("Wages, salaries, tips, etc."), together with the wages (like I did on my Federal return)? If so, is there any correspondent to the "SCH" that I had to print at the left of box 7 on my Federal return? Or do I just write the total (wage+scholarship) - as this will clearly show a difference between form IT-150 and IT-2 (where the ammounts from W-2 go)? Is there maybe another form that I have to attach to include the scholarship?!

Thank in advance (again) :)

Sorin

Sorin:

You need to use Form IT-201 instead of IT-150. Report the stipend on line 15 "Other Income".

If you insist on using IT-150, then add it in with the wages line, but that might cause confusion with the NY state tax authority, as the figure will not match what is on your W-2.

As far as I understood so far, a refundable credit (as opposed to a non-refundable credit) is something that once claimed and received, I will have to return sometimes in the future. Although that could be wrong, that's my understanding at this point...

Now, about one of these refundable credits, namely New York City School Tax... Firstly, do I have to claim it if I qualify (I do qualify, I checked that)? I would honestly skip it, the amount is not huge anyway - $125, than having to deal with having to return it or account for it in the future...

Secondly, if I choose not to claim it (if that's allowed, of course), what do I do with boxes F (1) and (2) on page 1 of IT-201 ("Number of months lived in NY City in 2005" for me and my wife). Those boxes are specifically for calculating this credit, so do I have to fill anything in?

And another related question, about those boxes F (1) and (2): if I was out of the country for about a month and a half (contiguous period of time) in 2005, how many months do I fill in those boxes?

Thanks a lot for really all your advice. It does help a LOT! :)

Sorin:

Your interpretation of what is a refundable tax credit is not accurate.

A refundable credit is a tax credit that you get regardless of whether you owe taxes or not. The Earned Income Credit (EIC) is a refundable credit, which means that persons whose income is so low that they owe no income taxes will still get a tax refund (sometimes in the thousands of dollars) because they qualify for the EIC, even if they had no money withheld from their paycheck. There is no obligation to pay this credit back at some future date.

As for the NY City School Tax Credit, you do not have to claim it, but you will not have to pay it back at some point in the future if you do claim it.

Boxes F(1) and F(2) are used to determine your status as a NY City resident in deciding whether you are liable for NYC taxes. It does enter into the equation in determining whether you are eligible for the NY City School Tax Credit, but that is not its principal purpose.

Your temporary absence of six weeks is irrelevant if your intent was to return to NYC, which appears to be the case since you did in fact return to work.

The instructions for 1040A reads:

Scholarship and fellowship grants not reported on Form W-2 must be included in the total on line 7. Also, enter “SCH” and the amount in the space to the left of line 7.

I know you already answered me before, but I feel I need one clarification: in the space to the left of 7, do I write only SCH or SCH $1,000 (if the amount of the scholarship is $1,000)?

In other words, does my line look like this:

7 Wages, salaries, tips, etc. Attach Form(s) W-2 SCH 7 $15,000

Or like this:

7 Wages, salaries, tips, etc. Attach Form(s) W-2 SCH $1,000 7 $15,000

Or maybe even without the "$" signs, like this:

7 Wages, salaries, tips, etc. Attach Form(s) W-2 SCH 1,000 7 15,000

?

I know I might be crazy about all this, but I want to get the federal return right the first shot, so I can get the ITIN for my wife and file the state one before the deadline...

Thanks again

Sorin:

Enter the following:

7 Wages, salaries, tips, etc. Attach Form(s) W-2 SCH $1,000 7 $15,000