[Netspirit]

Hi,

I guess my situation is pretty much standard, so if you have a FAQ link somewhere, that would be a perfect answer.

My wife and I arrived to the U.S. on September 09/23/2007, we had never been in the country before. I am in H1-B status and have an SSN, my wife is in the H4 status and she has not applied for her ITIN yet. She will have no U.S.-connected income in 2007.

What is the best way to file for 2007?

Specifically,

1. Should we obtain ITIN for my wife before I file? If yes, should we do that in 2007 or 2008? What kind of tax return must she attach to W-7 (foreign income? 2007 or 2008?)?
2. Can/should we make the first year choice? Should I apply for an extension to file the first tax return (like in order to meet the SP test)?
3. Can we file a joint return, given that we are NOT full-year residents in 2007? Or should I file alone as "married filing separately" and claim an excemption for my wife?
4. What kind of excemptions and standard deductions will we be able to claim in general?

Thanks,
Igor.

[AtlantaTaxExpert]

Igor:

1) You will apply for an ITIN by filing Form W-7 WITH the 2007 tax return no earlier than 1 January 2008. Any application prior to that date will most likely be rejected unless there is an over-riding need for her to have the ITIN early (say to register for college).

2-4) You can make the First Year Choice, which will require you file an extension to qualify for under the Substantial Presence Test. Now, it MAY be more advantageous to file dual-status and claim your wife as a dependent instead of filing jointly with your wife.

Dual status filing means you get her $3,400 personal exemption (as well as your own personal $3,400 exemption), but NOT the $10,600 joint standard deduction. But you do NOT have to report your home country income earned prior to your Sep 07 arrival to the U.S.

Filing jointly gets you the double standard deduction ($10,600), but makes your home country income subject to U.S. income tax. This should be partially offset by claiming the Foreign Tax Credit (Form 1116), but that credit is NOT dollar-for-dollar.

It is likely you would have to prepare both returns and compare to determine which is best.

[francischie]

Hi, I'm also in similar situation. I came here in US last February, 2007 as H-1B visa and then my wife and kids followed on September 21, 2007 under H-4 visa.

Here's my questions?

1. What are the best option for to filing my income tax return?
2. I have 2 kids and my wife is not allowed to work, how many dependents can I declared including me?

[AtlantaTaxExpert]

1) More than likely, file jointly with your wife and choose to be treated as resident aliens for ALL of 2007.

2) If you file jointly with your wife, she is NOT your dependent. She is your Co-Filer. You WILL get to claim her personal exemption, PLUS claim a joint standard deduction of about $10,600. You will also be able to claim BOTH of your children as dependents.