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mel366 · Feb 1, 2011, 10:43 AM

Hi,

My husband an I moved to the US on 21st of October 2010. My husband is here on a H1B visa and I am on a H4. I tried to figure out how to file taxes this year and managed to collect the following information:

According to the SPT we are non-resident aliens at the moment. So if my husband would file now he could only file as a married non-resident alien. As I do not have any US income I would not need to file at all.

If we would like to file married jointly we would have to wait till end of May 2010 to be able to make the choice to file as residents (because then we would be able to meet the requirements of the SPT). This option would also require an extension of the filing period because actually my husband would need to file till 18th of April 2010.

My questions now are, is the information above correct (did I understand everything correctly)? And if so, which would be the better option and most importantly why?

Thanks a lot for your help in advance,
Best,
Mel

compiler · Feb 1, 2011, 12:01 PM

Why do you not file 1040NR, Other married nonresident alien but 1040, Married filing jointly?

mel366 · Feb 1, 2011, 01:01 PM

Hi compiler,

I am not sure if I understood your comment correctly. 1040NR would be the form to file as a nonresident, so my husband would only have the possibility to file as a married nonresident but we would not have the possibility to file jointly - this is actually the problem we have with 1040NR.

The form 1040 is for U.S. citizens and residents (from a tax perspective) only. With this form we could file jointly but the problem is that we are not meeting the requirements for residents because we are not in the United States for that long.

AtlantaTaxExpert · Feb 9, 2011, 02:50 PM

Mel366:

You can file jointly with your husband and you both CHOOSE to be treated as resident aliens. This will allow you to claim the $11,400 joint standard deduction plus two $3,650 personal exemptions (for yourself and your husband).

To apply for an ITIN, you need to complete Form W-7 for yourself. You need to make a photocopy of your passport, then get the photocopy notarized. This can be done at your local bank in most states in the U.S. The Form w-7 is submitted with the tax return.

The downside is that:

• You must wait until 1 June 2011 to meet the Substantial Presence Test before you can file for Tax Year 2010. You will need to file the extension (Form 4868) to extend the filing time to 15 October 2011.

• You must declare ALL 2010 world-wide income (your's and your husband'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.

mel366 · Feb 11, 2011, 08:49 AM

Hi Atlanta TaxExpert,

Thank you so much for your detailed answer. If you do not mind I would still have an open question.
You said, that we have to declare ALL our 2010 world-wide income, which would hold for us because we both had jobs back in Europe. According to the Tax Guide for Aliens from the IRS, we would be residents (if we choose to be treated as resident aliens) from the first day of our 31 day period, which would be the 21st of October 2010, in our case. So we would be treated as residents from that day on. Why would we need to declare our complete income of 2010 if we would only be residents from 21st of October on?
Thanks a lot for your help,
Best,
Melanie

AtlantaTaxExpert · Feb 11, 2011, 11:34 AM

Melanie:

You have to declare ALL world-wide income because, in your statement, you CHOOSE to be treated as residents for ALL of 2010.

In exchange for being allowed to claim the standard deduction and be taxed at the favorable joint tax rates, you declare all world-wide income. By claiming the Foreign Tax Credit, you avoid double taxation.

If I prepared your return, I would model the return BOTH ways to determine which method results in the lowest tax bill and largest refund.

If you need professional help filing your return, email me at [email protected].

mel366 · Feb 23, 2011, 09:40 AM

Hi AtlantaTaxExpert,

Once again, thank you so much for your reply. I am still confused about having to declare all our world-wide income of 2010 if we decide to be treated as residents.
According to the U.S. Tax Guide for Aliens from the IRS, we would be treated as Residents from the first day of our 31-day period, which in our case would be the 21st of October 2010. So if we are only treated as Residents from that day on, why would we have to declare our European income from the time before? We were not living in the US before and did not have any connection to the States. The Tax guide of the IRS says one can only choose to be treated as a Resident for the WHOLE YEAR if one would be a dual status alien in 2010. As we were not present before 21st of October we are NOT dual status aliens for 2010. I am really confused now because your statement is not corresponding to the TAX Guide of the IRS. Could you explain this to me? Thank you so much! Best, Melanie

AtlantaTaxExpert · Feb 23, 2011, 02:54 PM

Melanie:

You would be treated as a resident from 21 October 2010 ONLY IF you choose to file as a dual-status alien.

If you file JOINTLY, it is for the entire calendar year, and you are CHOOSING this option voluntarily, and WITH that choice comes the requirement to declare ALL world-wide income.

Your tax being paid WILL be somewhat higher because of the world-wide income, but the credits you get plus the LOWER joint rate usually offset that and then some, resulting in a somewhat higher refund than if you filed dual-status.