Hi,

This is my first visit to the US from India on a L1 Visa.
I am accompanied by my wife who is currently not working and a kid who was born in India.
All three of us landed in the state of Massachusetts on 29th July 2005.
We were in Massachusetts till December 31st and then on 1st jan 2006 relocated to California.

Since I stayed for less than 183 days in the US in 2005 I become a non-resident.

Now I understand that I have the option of either filing a 1040NREZ before April 17 2006
Or wait till may and file 1040 asking to consider my first year choice as a resident.

If I do the latter I will be getting more federal refund.

My wife and kid do not have a TIN.

My questions are

1.) Should I submit form 4868 and extend my federal return only and file Massachusetts state tax form 1 NR/PY or should I extend both?

I see that in this forum you have advised several others to file for state tax only after getting a TIN for the dependents...

When I extend my federal return should I file federal in the month of may (to pass substantial presence test in 2006) wait till I get a TIN and then file my state taxes? Or should I file 4868 for federal now along with form 1NRPY for state taxes?

If I should file my mass return before apr 17th am I allowed to claim my child as a dependent?

2.) If I extend my federal return, when I file in may to consider me as a resident should I file 1040 or 1040a.

I have a feeling that 1040a is for people with children. Am I right?

3.) I believe when I file as MFJ I can either
Inclue any income from india for both me and my wife and then try to exclude it with form 2555 OR
Take foreign tax credit

Which of the above options is more beneficial and why?

4.) when I declare my global income what is the kind of proof that I should be providing the IRS if at all I need to provide?

Regards
Madhusudhan S.

Madhusudhan S:

1 & 2) File the extension using Form 4868 immediately, then wait until mid-May to file a resident tax return (Form 1040 or 1040A) under the First Year Choice option. You need to prepare two W-7s (one for your wife and one for your child) to apply for the ITINs. Attach these W-7s, along with a notarized photocopy of their passposts, to your Form 1040/1040A and mail them to the address on the W-7 instructions. The IRS will issue the ITINs, put them on the tax return, process the return, then mail you the ITINs. Once you get the ITINs, then (and only then) can you file your MA state tax return. For this reason, you should also file an extension for Massachusetts. Massachusetts has its own extension form, which requires a signature. You can download it off the Massachusetts government website.

3) If you file jointly as resident aliens, you have to report ALL your income from all world-wide sources. You can then exclude the India-based income using Form 2555. This is likely the most beneficial option because your standard deduction filing a joint resident tax return is $10,000, whereas the standard deduction for a Form 1040NR is oonly $5,000.

4) A copy of your Indian tax return is best, but a copy of your last paystub which shows all the taxes paid to the Indian government will suffice.