[maevee]

Hi all,

I'm French and moved to the US (Illinois) on Aug 24, 2011 under a L1 visa, to work for a US company.
I worked for this company until October 14, 2012, and left the USA on October 15, 2012, to go back to France.

In 2009, I spent 0 days in the US.
In 2010, I spent 5 days in the US for tourism purpose.
In 2011, before moving to the US under my L1 visa, I spent 20 days in the USA for tourism purpose.
In 2012, while I was leaving and working in the USA, I spend 27 days out of the USA.

For 2011, I filed as a non-resident, since I was not meeting the presence test.

For 2012, I'm really confused : I do meet the presence test, since I spent more that 183 days in the USA, however, I definitely left the country in October, moved back to France, and started to work in France again. I haven't returned to the USA since my departure.

Do I have to file as a resident alien or should I file as a dual status?

I first filed as a dual status/non resident (1040NR), but I had my return reviewed by one of this famous online company, but they changed my return back to a 1040. They told me that the presence test outdoes the dual status, and that it does not matter if I was non-resident on the last day of the fiscal year, what matters is the fact that I spent more than 183 days in the USA.

But by doing so, I owe 800$ more taxes than when I first drafted my return as a non-resident with dual status, because it includes my foreign earned income (that I earned in France after leaving the USA) in my gross income.

However, I have some doubts because my tax reviewer does not have any experience with foreign people's tax returns, and I even had to send her IRS links about dual status specificities.

What is your opinion? How should I file? I only have a few days left to file, I'm in a almost panic mode...

Thanks in advance for your advice
SB.

[maevee]

I forgot to mention that I'm not married and have no kids

[AtlantaTaxExpert]

The dual-status return (expatriate form) IS the correct return for you to file. You cannot claim the standard deduction with the dual-status return, so you must itemize.

You are correct that you pay taxes ONLY on the U.S.-sourced income.

You must also submit a Residency Termination Statement with the tax return.

The dual-status return is NOT FOR AMATEURS! If you need professional help, email me at the email address in my profile.

[maevee]

Thank you so much for your response.
Do I have the choice to choose between dual status or resident, or MUST I file a dual-status return?

[AtlantaTaxExpert]

You MUST file the dual-status return.

[maevee]

Ok, then in theory I am dual status.

But, the IRS international assistance team told me earlier this month that I have the choice between filing:

1) as a resident, since I meet the presence test and can use can use the default Residency Termination Date of 31 December 2012

2) or as a dual-status, since I was not a resident at end of the year and can elect a early termination date (however… I don’t have any proof on that matter, expect my termination letter and the stamp I got on my passport when I left)

Thus, the IRS officer told me that it was up to me to make my choice considering that:

a) If I file as a resident I get the standard deduction but have to include my worldwide income (that I earned after moving out of the US), on which I get a foreign earned income credit

b) If I file as a dual status, I lose the standard deduction and can itemize (but I’m single, no kid, no property, no medical expense…), and I don’t have to include worldwide income after my departure date.

Either way, I understand I will have to submit residency termination statement.
I also forgot to mention than for 2011 I filed as a non-resident, if that information matters.

Is my understanding correct AtlantaTaxExpert?

[AtlantaTaxExpert]

The resident return is not available to you in my opinion because 2012 was the FIRST year you qualified for the Substantial Presence Test.

What is not commonly known (even by some of the IRS representatives) is that a dual-status return is required in the first year UNLESS the taxpayer is in the country for the ENTIRE YEAR. If they are in non-resident status for just ONE day, they CANNOT file as a resident UNLESS they are married.

[AtlantaTaxExpert]

Besides, you yourself said that filing as a resident will cost you more in taxes, so filing dual-status seems to be the better choice.

[maevee]

Thank you, very helpful... although it's getting more and more complicated!

I was wrong, I ran a simulation with a 1040 and a simulation with a 1040NR, and filing as a dual-status divides my return by 2...
So now I really don't know what do you - if I don't HAVE to file as a dual status, I would rather elect the resident option.

[AtlantaTaxExpert]

Since 2012 was BOTH your FIRST and LAST year in country, you CAN file as a resident if you wish. I had to do re-think the situation and then do some research to confirm my interpretation.

What I posted earlier IS true: if you spend as little as ONE day in a non-resident status in your FIRST year, you must file as a non-resident alien if you fail to meet the Substantial Presence Test OR file as a dual-status alien if you DO meet the Substantial Presence Test.

However, the guidance in IRS Pub 519 states that the termination date for residency in the LAST year is December 31st of the last year of residency, which, by default, makes you a resident for the entire year and allows you to file as a resident, filing Form 1040 with Form 1116 to claim the Foreign Tax Credit.

This guidance for your status for the LAST year of residency supercedes the guidance for the FIRST year, because the Residency Termination Statement is required.