I am on L1 and my wife and daughter (4 years old) are on L2 visa in California since June 1st 2008. My queries are as below:
1) Are we considered as resident aliens?

2) While filing my return online I get the following question:
Is this dependent (or qualifying child) a US citizen or resident alien?

So should I answer "Yes" to this question or "No"

Thanks in advance,
Asutosh

Asutosh:

You CANNOT file on-line.

You can file jointly with your wife and you both CHOSE to be treated as resident aliens. This will allow you to claim the $10,900 joint standard deduction plus two $3,500 personal exemption (for yourself and your wife) plus one $3,500 for your child PLUS the $1,000 Child Tax Credit.

The downside is that you must declare ALL 2008 world-wide income, but you can at least partially offset any double taxation by claiming a Foreign Tax Credit (Form 1116).

If you choose this option, you and your wife must sign a memo stating that you BOTH choose to be treated as resident aliens for all of 2008. This signed statement requirement prevents you from filing on-line.

Also, if your eife and child have no SSN, you will need to submit Forms W-7 with your return to get ITINs for your wife and child. The Form W-7 cannot be filed electronically; it must be mailed WITH the tax return.

Even with the downside, this is probably the best way for you to file.

David Kempe