[amolhan]

Hi,

Me and my wife moved to US on Nov 7 2010 and we were in US for the whole 2011 year.
I filed tax return for 2010 as a NR (so individually, not joint) and now I want to amend it as a return filed by resident jointly with my wife.

We both had income in India from Jan 2010 to Oct 2010.
My wife is not working in US.
We plan to make the first year choice for 2010.

Can we file joint return as resident even if my wife is not earning.
Can I opt for standard deductions and exceptions for me and my wife if we file joint return? What would be the amount ?
Should I first file my new return for 2011 so IRS has my resident status and then amend the 2010 return or vice versa?
If in case we file 2010 amendment after filing 2011 return, do we need to amend 2011 return also ? Even if there is no difference ?
I understand that I need to show both our foreign incomes in for 1040. What place should be put that income ?
Should foreign income be the income with tax paid to indian govt. Included ?
Should we file the Form 1116 for foreign tax credit ?

[AtlantaTaxExpert]

Yes, you can file jointly even if your wife is NOT earning income. In fact, she does not even have to be in the United States. That WILL allow you to claim the joint standard deduction of $11,400 for 2010.

File the amendment first, and submit Form W-7 to get your wife an Individual Tax Iedentification Number. Once the ITIN is issued, you can then efile the 2011 return when you file jointly for 2011.

The foreign income is shown as wages on Line #7 of Form 1040. Show the gross wage before ANY deductions.

Yes, file Form 1116 to claim the Foreign Tax Credit.

If you need professional help doing this, this IS what I do! Look up my email address on my signature below if you can see it. If not, my email address can be found in my profile.

[amolhan]

Thanks AtlantaTaxExpert,

This was very helpful.

Can we fill form 2555 to get indian income excluded.

When I am adding my indian salary to US salary for 2010 , I am falling into higher tax slab as per US tax slabs. Deducting Indian tax is not helping much either. Can you please advice.

[AtlantaTaxExpert]

1) Be sure you adjust for the Alternative Minimum Tax. The tax software usually adds AMT automaticxally, but there is an adjsutment required when AMT kicks in due to the Foreign Tax Credit.

2) You CANNOT claim the Foreign Income Exclusion (Form 2555), because you will NOT have been outside of the U.S. as a resident alien for an entire year.

[amolhan]

As I understand further, I will just have to show the Foreign income from Jan-Oct , but that will not be taxed as it was earned before my Residency start date. Isn't that true ?

If so, I really don't have to show foreign tax credit, right ?

[AtlantaTaxExpert]

No, that is NOT the case. If you amend the 2010 return to file jointly with your wife, you BOTH must sign a statement that you both CHOOSE to be treated as resident aliens for 2010. In signing this statement, ALL 2010 world-wide income becomes subject to U.S. income taxes.

You file the Form 1116 in order to claim the Foreign Tax Credit for taxes paid on the Jan - Oct 2010 income which you DO include on your 2010 amendment.

You file the Form w-7 with the amendment to get your wife her ITIN.

As a result of the amendment, your wife should be issued an ITIn about 2-3 weeks after submitting the amendment. She can then use that ITIN to file the 2011 return, which can then be submitted electronically.

[amolhan]

Thanks for the info..

I would like to discuss this personally with you , but I am unable to find your email address.

[AtlantaTaxExpert]

Please double-click on my name (Atlanta Tax Expert) above to access my profile. You will find my email address in the signature portion of the profile (scroll down to the BOTTOM of the page).