Hi all,

Below is my situation.Your advice is greatly appreciated.

I hold a valid H1b Visa and was working in US from june2004. I left US on August 2'nd 2006. I got married on August 27'th 2006 and never returned back to US and my wife never visited US before. So she doesn't have a SSN. My status is Resident Alien. Both of us are Indian Citizens.

My question is

1. What's my filing Status - Single or Married filing jointly
2. If filling jointly do my wife also have to sign the TAX forms ( federal and State).

Thanks a lot
Balaji

Balaji:

Unless you return within the next few months, you are an expatriate dual-status alien. If you return, you can continue to file as a resident alien, claiming that your trip back to India was temporary just to marry and return with your spouse. You would be able to claim the $5,150 Standard Deduction, but you would have to file Married Filing Separately because your wife was never resident in the United States in 2006.

As a dual-status alien, you need to file Form 1040NR with a Form 1040 as an attachment. You will NOT be able to claim the $5,150 Standard Deduction. You will file SINGLE status on the Form 1040, but you cannot claim your wife as a dependent because, as noted above, she was NEVER in the U.S. You can file MARRIED status on the Form 1040NR, but that is irrelevant because the income reported on the Form 1040NR will NOT be taxed by the United States.

Dear AtlantaTax Expert,

I might not be returning within the next month or so, but might be back in the country probably by June of next year and stay until end of that year. Do I still have to apply as a dual-status alien.

For which period I should apply as a non-resident and as a resident. I also have capital loss and gain that I need to file for this year. I lived in Atlanta,GA for this year. Does my status affect in anyway for my Georgia returns, advice.

Thanks again
Balaji

Balaji:

You will be out of country TOO LONG to say that it was a temporary absence, so, yes, you need to file as a dual-status alien for 2006.

You will have to file as a dual-status return for 2007 as well.

For Georgia, you file a normal return, reporting ONLY the income earned while in Georgia.

If you need help, contact me at [email protected].

If you are a resident in 2006 and you are also a resident in 2007, then your residency is considered to be continuous under US law. That is, your 2006 residency extends all the way to Dec 31, 2006. And your 2007 residency begins on Jan 1 2007.

If you are also a resident in India, then you would need to look to the Treaty.

TaxSearcher:

Continuous residency was my initial impression as well, until Balaji noted he was not coming back until June, 2007, with a departure at the end of 2007. He is out of country for over nine months between 2006 and 2007. Further, he is not even sure he is coming back.

I could not find any provisions in the tax treaty or U.S. tax law that allows him to file as a resident alien under those circumstances. Can you cite either the tax law or the IRS Pub that covers your interpretation?

I will concede that he could probably file as a resident alien for 2006. He could even file jointly with his wife, applying for an ITIN by submitting Form W-7 and a notarized copy of her passport with the tax return. It is likely the IRS would not challenge the return. However, the 2006 tax return would not be valid if he never came back in 2007.

My advice is for him to wait until he knows for sure if and when he will return. Otherwise, if he filed jointly as a resident alien with his wife, then never returned in 2007, he would have to amend the return and pay back a portion of his refund to set the record straight.

ATG, see below:


Reg § 301.7701(b)-4(e)

(2) Residency in following year. An alien individual who is a United States resident for any part of the current year and who is also a United States resident for any part of the following year (regardless of whether the individual has a closer connection to a foreign country than the United States during the current year) will be taxable as a resident through the end of the current year. For purposes of this paragraph (e)(2), it is immaterial whether an individual is considered to be a resident under the substantial presence test or the green card test.

(4) Example. The following example illustrates the application of this paragraph (e).

Example. B, an alien individual who is a citizen of foreign country M, comes to the United States for the first time on May 1, 1985, and remains in the United States until November 5, 1985, when he returns to country M. B comes back to the United States on March 5, 1986 as a lawful permanent resident and remains in the United States until September 10, 1986, when he ceases to be a lawful permanent resident and returns to country M. B is not a resident in calendar year 1987. B's United States residency in calendar year 1985 continues through December 31, 1985, because he is a United States resident in the following calendar year. In calendar year 1986, B's United States residency is deemed to begin on January 1, 1986 because B qualified as a resident in the preceding calendar year. Thus, B's residency period in the United States begins on May 1, 1985, and ends on September 10, 1986.

TaxResearcher:

Excellent! That means he can file as a resident alien in 2006 once he returns to the United States. For now, he has not yet met the criteria of "United States resident for any part of the following year".

My advice as amended stands. He should wait until he returns before he files if he thinks it likely that he will return in 2007.

Thanks for your help, TaxResearcher!

ATG / Tax Researcher,

Thankyou so much for your valued insight. I am still at bay with my marital status.
Should i have to file as single or married filing seperately or married filing jointly. This was my initial worry.

Thanks,
Balaji

Balaji:

We are glad to help!

However, in my initial guidance, I said: "You would be able to claim the $5,150 Standard Deduction, but you would have to file Married Filing Separately because your wife was never resident in the United States in 2006."

That turns out to be wrong! I re-read IRS Pub 519, and conferred with TaxSearcher off-line via e-mail, and we both agree: Your spouse's physical location in 2006 does not matter. If she chooses to be treated as a resident alien, she can file jointly with you for 2006 if you return to the United States anytime in 2007. She will have to apply for an Individual Tax Identification Number (ITIN) and, if she made any income in 2006, that income will be subject to U.S. taxes, but the benefits of filing jointly (a combined personal exemption of $6,600 plus a combined Standard Deduction of $10,300) will probably far outweigh any drawback of paying taxes on income she earned. If she earned no income in 2006, there is nothing to tax, so there is NO dawback at all.

You can contact me at [email protected] if you have any questions.