[ratsybunga]

My spouse is foreign who has never lived in the US and has earned only about $10,000 for the entire year. I understand I need to file a W7 along with the federal return but do I need to file any other forms such as an IRS 2555 form to report the foreign income? If so, do I send all these forms along with the return together to the IRS? I'm a California resident, do I report the $10,000 on the state taxes as well?

[AtlantaTaxExpert]

He CAN claim the Foreign Income Exclusion if he has never left his home country, because he will have met the Physical Presence test all in 2008, the year he is considered to be a resident alien.

So, yes, you would attach Form 2555 to your federal tax return.

Unfortunately, if you file jointly on the federal return, you must do the same on the state return, and most states, California among them, considers ALL of their resident's world-wide income as being subject to their state income tax.

So, yes, you must add the $10,000 to the state return as well.

[ratsybunga]

Thanks for responding. He made 3 visits to the US in 2008 amounting to about 60 days total. These are the only trips he has done to the US. I have read the physical presence info the IRS website, according to that he doesn't appear to qualify for an exclusion because of his visits.
1. do I still need to file 2555 or are there any other forms I need to file?
2. I still need to attach a letter stating that the spouse wishes to be treated as a resident alien for tax purposes, correct?
3. I have always filed my taxes electronically from the H&R block site before getting married. These sites won't let you leave SSN blank, are you aware of any sites that will let you bypass the SSN for one spouse so you can get to the end to print the return?

[Five Rings]

Well, first you have to get him a individual taxpayer identification number (ITIN) by filling out Form W-7 and having all the supporting indentification documents correctly certified.

For a 2555 exclusion he must have been a bona fide resident for an entire tax year. If he was resident in whatever country he lives in for all of 2007 then he can take the exclusion for 2008 and compute his exclusion amount by dividing the number of days in the foreign country by 365 and then multiplying that fraction by $87,600.

Then you do all your taxes, add the W7 and all the necessary documents for that, and send all those paper to:
Internal Revenue Service
ITIN Operation
P.O. Box 149342
Austin, TX 78714-9342

Forget e-filing this year.

[IntlTax]

The bona fide resident test for the foreign earned income exclusion only applies to U.S. citizens. However, if he is from a treaty country, he may be able to claim the exclusion under the bona fide residence test using the non-discrimination portion of the treaty.

[Five Rings]

The exclusion may be claimed by any NRA electing under sec. 6013 (g) or (h). Calling upon the treaty is not necessary.

[IntlTax]

I believe that you are referring to claiming the exclusion under the bona fide residence test. Under the bona fide residence test the individual must be a U.S. citizen. Code § 911(d)(1)(A). How does making an election to be treated as a U.S. resident make them a U.S. citizen?

[Five Rings]

Sorry; you are right.