[dimoniy]

Hello,
I came to US to work on H1b from Russia. I've entered US on 29-th of October. I'm currently looking to file my taxes for 2009 (yes, I filed the extension :))
Here is my plan:
1) Make first year choice for 2009.
2) I'm married and my wife joined me in the US on 3-rd of December. As I am considered a resident for 2009 because of 1) she may choose to be considered a resident as well and we may file jointly.
3) We are going to use standard deduction for the filing. Each of us will fill out form 2555-EZ for the foreign income exclusion. Could the income on 2555 be an estimate?
Questions:
- It's in the foreign currency and I don't know the exact amount I got paid. Can I use an estimate as long as it's << than exclusion allowed?
- Foreign income should be included in line 7 of 1040 but not reflected on line 22 (at least that's something 2555's instructions say),right?
- Do I need to provide any supporting documentation for the foreign income?
4) TurboTaxes really wants me to have $775 for making work pay credit, which makes IRS to refund me more than I actually paid in federal taxes (so I get everything I've paid back + $775... too good to be true?

Thanks a lot!

[AtlantaTaxExpert]

1 & 2) Yes, you can file Married Filing Jointly under the Married option of First Year Choice.

3) You CANNOT claim the Foreign Earned Income Exclusion, because, to claim the Foreign Earned Income Exclusion, you must be resident BOTH at the beginning AND at the end of the exclusion period, which must be one year long. By definition, you are NOT a resident at the beginning of the exclusion period; hence, no Form 2555. You CAN claim the Foreign Tax Credit for the INCOME taxes you paid in your home country on your home country earned and passive income.

4) If you qualify for filing jointly as resident aliens for ALL of 2009, then, yes, you DO qualify for the Making Work Pay Credit.

[dimoniy]

Hello, thank you for your reply.
Hmmm... I thought I'll have no problem with 2555.
I need to qualify two tests to be able to file the form. That's what 2555-EZ says:

<blockquote>2 Physical Presence Test
<b>a</b> Were you physically present in a foreign country or countries for at least 330 full days during ...
... any other period of 12 months in a row starting <b>or ending in 2009</b>?
</blockquote>

- yes

<blockquote>
<b>b</b> The physical presence test is based on the 12-month period from
</blockquote>

10/28/2008 to 10/29/2009

<blockquote>
<b>3 Tax Home Test.</b> Was your tax home in a foreign country or countries throughout your period of bona fide
residence or physical presence, whichever applies?
</blockquote>

- yes, since I've been working in Russia before coming to US, which includes the period stated in 2.b.

Where am I wrong?

[dimoniy]

Doh, just wanted my prevous post to look nice. Here it is again:

Hello, thank you for your reply.
Hmmm... I thought I'll have no problem with 2555.
I need to qualify two tests to be able to file the form. That's what 2555-EZ says:
2 Physical Presence Test
a Were you physically present in a foreign country or countries for at least 330 full days during ...
... any other period of 12 months in a row starting or ending in 2009?
- yes

b The physical presence test is based on the 12-month period from
10/28/2008 to 10/29/2009

3 Tax Home Test. Was your tax home in a foreign country or countries throughout your period of bona fide
residence or physical presence, whichever applies? - yes, since I've been working in Russia before coming to US, which includes the period stated in 2.b.

Where am I wrong?

[AtlantaTaxExpert]

As a tax preparer for international returns, I have access to IRS guidance on specific forms.

One of those guidelines is that Form 2555 can be filed ONLY be a resident (U.S. citizen, U.S. national or resident alien) who is filing Form 1040.

So far, so good for you.

However, it was clarified by the IRS that the taxpayer must be a resident BEFORE the 12-month period begins, i.e. he has to have been a resident for the entire 12-month period, beginning with day one and ending on day 365. You are a resident at the end but NOT at the beginning, so you CANNOT claim the Foreign Income Exclusion.

[dimoniy]

First of all, thank you for your reply!
But now I'm totally confused...
Since I'm using the First Year choice I will be considered a resident for the whole 2009, right? Otherwise, I'll have to file as dual-status or non-resident.
Which resident should I be and when then?

[dimoniy]

Clarification for above post:
To be considered as a US tax resident for the entire year I'm going to do the following:

1. Make first-year choice for myself. That makes my residency start at the first day I arrived to the US.
2. My wife chooses to be treated as a resident because I'm the resident.
3. We both choose to be threaded as residents for the entire year based on the following part of 519:
   Choosing Resident Alien Status
   
   
   • You were a nonresident alien at the beginning of the year.
   • You are a resident alien or U.S. citizen at the end of the year.
   • You are married to a U.S. citizen or resident alien at the end of the year.
   • Your spouse joins you in making the choice.
   
   This includes situations in which both you and your spouse were nonresident aliens at the beginning of the tax year and both of you are resident aliens at the end of the tax year.

[AtlantaTaxExpert]

You WERE a resident for all of 2009 under the First Year Choice.

However, the 330-day time that the Form 2555 covers goes back into 2008, a time when you were NOT a resident. Hence, Form 2555 cannot be used to exclude your home country income. That IS the law!