[rakeshagl]

Hi,

I have been in USA on H1B and my wife and 1 year old daughter on H4, I do not meet the substantial presence in the 2011 tax year, is there any other way and where I can file as resident alien... I heard there is a tax rule called "first year choice" in IRS?

My US presence:
In 2009: Feb 28 to July 6th
In 2010: Not present
In 2011: Aug 20th to Dec 31st
In 2012: Jan 1st to current

Can I file as resident alien and married filling jointly or separatley?

Thanks,
Rakesh

[MukatA]

Yes, you can file joint return as residents for 2011. You must wait to file you tax return till you meet substantial test in 2012. This is First Year Choice. You must both report worldwide income for 2011.

[AliTax]

Your residency starting date would be August 20th if you make the first-year choice. You would be an RA on and after that date and an NRA before that date. This is important because for the period that you are an RA your worldwide income is subject to US tax. This would make you a Dual-Status Taxpayer for 2011. Page 34 on pub 519 explains how to file like this. You will want to calculate your tax both ways to see which is lower, remembering that for the period in which you are a RA you must include your worldwide income, but for the period in which you are a NRA you include only your US-source income.

You will need to file an extension before April 17th, because you cannot meet the SPT before then for 2012. Hope that helps. Email me if you need more help.

[MukatA]

If you plan to file joint return as resident for 2011, you MUST both report worldwide income from Jan 1, 2011 to Dec 31, 2011.

[AliTax]

Correct! And since you would use the MFS tables for separate filings that will likely be unfavorable. Don't forget to figure the applicable foreign tax credit if you paid tax abroad.