[JCAD42885]

Hello,

I'm hoping someone on this board can shed some light on my situation, as I don't have access to a qualified tax professional in my location.

I am a Michigan resident; I married a Pennsylvania resident last May ('07) and we lived for a very short time in Ohio - where we had attended university - before moving to Seoul, South Korea, where we presently reside.

My federal taxes this year are a snap: we're filing jointly, I'm filing form 2555 to exempt our foreign-earned income, and using a student loan deduction to eliminate tax on our domestic income.

State taxes, however, are tricky. Both my wife and I earned income in Ohio while we were still at school, and I earned a bit in Michigan. Since I was last a resident of Michigan, I intend to file a state return there, claiming my wages from OH and MI. The Michigan state form bases tax off the 1040 AGI, which does not include my foreign income - so I don't have to worry about that, and I'll end up owing just a few hundred to MI. I am required under MI tax law to file jointly, since I'm filing jointly on my 1040, but Heidi's domestic income was minuscule and again, her foreign income is irrelevant.

Heidi, however, is - as I mentioned - a PA resident, or at least she was. That's where her family lives, and she never changed her driver license or acquired property in Michigan or anywhere else before we moved to Seoul. And in Pennsylvania, you are evidently required to claim foreign income. There is a credit for overseas taxes paid, but it's complicated, and I can't even use it before April 15 because I won't have my Korean tax return until June-ish. Apparently, according to PA tax law, Heidi can file as an individual even though we're filing jointly on our federal taxes - but if she does this, she'll end up oweing hundreds on her Korean income.

Which brings me around to my question: is it possible for me to simple file jointly in Michigan and call Heidi a Michigan resident since she's married to me? Are there any steps we can take to eliminate the need to file in PA? How do married couples typically handle a situation like this?

Again - I'd appreciate some advice. I'd dearly love to tax the whole mess to some experienced tax professional, but I don't really trust the shady expat tax services in Seoul and I have limited recourse at this point. :-)

Thanks!

[AtlantaTaxExpert]

Filing jointly for Michigan will NOT relieve Heidi of her requirement to file the Pennsylvania return if she earned income while being a PA resident. She is in fact a part-year resident of Ohio and Pennsylvania,

Now, if there is NO audit trail, i.e. a W-2 that has Pennsylvania income taxes withheld, then Pennsylvania has no way of knowing that she lived in Pennsylvania and therefore owes taxes. If that is the case, then your plan will work, even if it is not technically correct.