[prakash_akshara]

This is the first year I am working in USA on H1 B visa. My family is coming to USA on 27th December. I just wanted to know minimum how many days the dependents should be in US to save income tax on them.

Regards,
Prakash

[MukatA]

If you are filing as resident alien for tax purposes (Form 1040EZ/1040), then you can file as Married Filing Jointly and treat your nonresident alien spouse as resident alien. You must get her ITIN. It does not matter for how many days she in the U.S.

You can get exemption for dependents only if they are citizen or permanent resident of the U.S. Then it depends upon if your family is your children and/or your parents. Then you must meet the requriements of Qualifying Child or Qualifying Relative for Dependent exemptions.

[AtlantaTaxExpert]

MukatA point about filing jointly and the ITIN is accurate.

The point about the dependents is less accurate. If you filing jointly with your spouse and you BOTH choose to be treated as resident aliens, then that choice is inferred to apply to the children as well as long as the children were in the custody of at least on of the parents for all of 2007.

This interpretation of the child's residency status has been thoroughly discussed with IRS representatives on the International Tax Hotline and confirmed TWICE in the past tax year.

[MukatA]

... If you filing jointly with your spouse and you BOTH choose to be treated as resident aliens, then that choice is inferred to apply to the children as well as long as the children were in the custody of at least on of the parents for all of 2007.

So if you are filing as Married Filing Jointly, then to claim your children as dependents you will need to get ITIN for them.

[AtlantaTaxExpert]

Yes, an ITIN will need to be applied for and issued by the IRS in order to claim the children.

As noted in an earlier, more comprehensive posting, I called the IRS for guidance on this issue.

Once I got clear guidance, I prepared multiple returns with the parents claiming their children, applying for and getting ITINs for them, even though the children were not physically in the U.S. at any time during the tax year.

[MukatA]

So for his 2007 return, Prakash can file as Married Filing Jointly and claim his children even if none of them is in the U.S. in 2007. But before filing he should get ITIN. Deductions will not be allowed without ITIN. If he files before getting ITIN of a dependent or spouse, he can always file form 1040X to amend his return.

[AtlantaTaxExpert]

MukatA:

Yes, it is true that Prakash can claim his children as dependents even though they are NOT in the U.S.

I really do not have a problem with this because, by filing as a resident alien, Prakash and his wife must also pay U.S. tax on ALL of their world-wide income, even the money she earned while in India. The United States, BTW, is unique among the family of nations in taking this position. Every other country does NOT tax its citizens on their world-wide income, but only on the income earned within that country's borders.

As for applying early for the ITIN, in 98% of the cases, he has to file the Forms W-7 (one for his wife and one for each child, with a notarized photocopy of their passport) WITH his 2007 tax return. The IRS will reject any early application for an ITIN with Form W-7 unless there is an over-riding need to get the ITIN early.

An example is the need to enroll the child or spouse in school. Many school systems (especially colleges and universities) require that the student have either a SSN or an ITIN as a means to uniquely identify them. Banks and other financial institutions will also require some type of unique ID number to open accounts in the spouse's or child's name.

The reason is rather simple: ITINs are supposed to be used exclusively for tax purposes. However, the IRS pragmatically recognizes that the ITIN is needed for other purposes.

The IRS just wants some level of control on how and when they are issued.