Hi,

I am Arvind from India.
I came to US using L1A visa on July 30th 2011.
My 2 year old kid and spouse have L2 visa and joined me in October 2011.

Me and my spouse have a SSN but my Kid do not have SSN.

I need to file my returns for 2011 and need your help in doing this.

I do not pass the substantial presence test for 2011 as per my arrival date.
So I should file form 1040NR as I am a NRA for tax purposes for 2011. What is 1040NREZ?
Should I file jointly with my wife even though she had no income in 2011?

Does it make sense to delay to file a delayed return to be considered resident alien - aka First year choice?
Will it be more beneficial to use First year choice and file as a resident alien?

Please let me know what is the best way to go about my taxes for 2011.

Thanks,

Arvind

Arvind:

You can file jointly with your wife and you both CHOOSE to be treated as resident aliens. This will allow you to claim the $11,600 joint standard deduction plus two $3,700 personal exemptions (for yourself and your wife), PLUS an added $3,700 exemption for your child PLUS the $1,000 Child Tax Credit.

To apply for an ITIN, you need to complete Form W-7 for your child. You need to make a photocopy of his passport, then get the photocopy notarized. This can be done at your local bank in most states in the U.S.

The downside is that:

- You must wait until 12 May 2012 to meet the Substantial Presence Test before you can file for Tax Year 2011. You can file the extension (Form 4868).

- you must declare ALL 2011 world-wide income (your and you wife's home country income, if applicable). There is an offset available by either claiming the Foreign Tax Credit (Form 1116).

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

If you want my professional help, double-click on my title above and scroll down to my profile/signature. You will find my email address and websites there.

Thanks ATE for you're the detailed response.

My Federal withheld tax is only approximately $5000/- and state tax withheld is approx $1500/-.

If I choose to file as a resident alien, with all the claims above and foreign tax credit, will I get a return more than what is withheld - $6500/-?

If I file as a non-resident alien without claiming foreign tax credit and most other claims (as I won't be eligible), will I not get $6500/- as return?

I am just thinking if going for resident alien is worth?

To be sure, I would have to see your W-2 and model the returns BOTH ways, something I do routinely for my clients.

Dear ATE,

I am on a similar visa, however my situation is slightly different

After reading the post and response on other L1 Visa Holder queries, I think it’s more beneficial to file as resident alien after meeting the SPT in 2012.

I am UK National. I came to US on L1B Visa on 1st December 2011 with my 3 year old on L2. My wife entered US on L2 for 3 weeks vacation mid December 2011 and return back to UK in January 2012. She is likely to join us not before September 2012.

If after meeting SPT in 2012 (end of June 2012), under first year choice if I decide to be treated as resident alien for tax purpose in year 2011, according to IRS Pub 519, page 9- the residency starting date would be from the first day of 31 day period. In my case this would be 1st December 2011.
I have following questions
1) All the income I earned in 2011 from UK is before this date. Therefore my world wide income (which I need to declare as resident alien) for year 2011 would be from the residence starting date till end of tax year 2011? If so, this is only my US earned income.
2) Am I correct in assuming I should not be declaring income I earned from Jan 2011 till Nov 2011 in UK, because my residence starting date is 1st December 2011? OR I need to declare all of my 2011 income ( including worldwide income) I irrespective of residency starting date!! Please advise.
3) In case I need to report my worldwide income for all of 2011- I understand as I already paid tax on income earned in UK this can be excluded using Form 2555 or via foreign tax credit form 1116. Not sure which would be more appropriate in my case – Form 2555 OR Form 1116?

You MUST declare all worldwide income from 1 January to 31 December 2011. You CAN use form 2555 to declare the Foreign Earhned Income Exclusion, because you came in that narrow window that allows you to meet the requirement to be considered a resident at the beginning of the exclusion period while still being overseas the required 330 days.

Dear ATE,
Many thanks for the prompt response.

You mean I would have to be classed as Dual status alien for 2011?

i.e. - resident alient from 1dec to 31st Dec- I need to file 1040A
Non resident alien from 1st Jan 2011 to 30th Nov 2011 - I need to file 1040NR,

In your response,what do you mean by - 'beginning of exclusion period '. Just want to clear I came for 3 weeks holiday in Septemeber 2011 and 1 week orientation trip in November 2011. I was in full time employment in UK during this time. Therefore I was physically present for about 300 days in UK in 2011.

Would I still be classed as being overseas for 330 days? Anyhow I was continiously present in UK from September 2010 till September 2011.

One last important thing -
I travelled to US on 1st December 2011 arrived at 4:00 pm afternoon. Under days of presence in US this might be classed as an exception. Page 5 of pub 519 states, "do not count the day you are less than 24 hours in US and in transit".

If so, I would be present only for 30 continious days in 2011 and would not be able to file as resident alient even after meeting SPT in 2012 ?

Please Help !

I

No, you can file JOINTLY with your wife and BOTH of you sign a statement that you CHOOSE to be treated as resident aliens.

If you were in the United States for MORE than 35 days, then you CANNOT claim the Foreign Earned Income Exclusion (Form 2555), but rather you will file Form 1116 to claim the Foreign Tax Credit.

You can count up to FIVE days of absences as being present for the continuous presence rule. So you DO meet the criteria.

You will have to waiting until late June 2012 to file, but it MAy be worth the wait. You need to model the return both ways to be sure.

If you want my professional help, double-click on my title above and scroll down to my profile/signature. You will find my email address and websites there.

ATE,

Thank you so much.

However I had a quick meeting with my local H & R block tax advisor and she said up to FIVE days of absence as being present is only for the 75% requirement and not for 31 days continious stay requirements.

According to her I will not be eligible to file as resident alien even after meeting the SPT in 2012 as I would be classed as present only for 30 days and not 31 because the day of travel/transit- i.e. 1st December in my case would not be used for counting the 31 days continious presence.

I am not sure, if she is correct, but again looking at the exemptions under days of presence in US, page 5 of pub 519 states, "do not count the day you are less than 24 hours in US and in transit".

ATE, please prove her wrong !:)

You CAN count the first day as being present. The citation on page 5 of IRS Pub 519 applies only if you are in transit between one foreign country to another, i.e. you are travelling from Peru to Iceland, with a stop-over in New York. That part-day in New York does not count because you are "in transit between two places outside of the United States".

Your 1 December 2011 date has your trip ENDING in the United States, so, in my opinion, you CAN count it.

As further proof, look at Example 1 on page 9 of the IRS Pub 519. In that example, they have Juan DeSilva arriving on 1 November and departing on 1 December. In that example, they are counting BOTH the arrival AND the departure day as full, countable days for the 31-day test.

BOTTOM LINE: Count your 1 December 2011.

IF, after showing her the Example 1 on page 9 of the IRS Pub 519, the H&R Block lady will not help you, I WILL. You can contact me via email, using my email address under my profile.