[chance72]

I have traveled to USA on L1 visa in Aug 2008 and I am here with family. Since I do not have 183 days in 2008, I think I need to file my tax returns using 1040-NR form. On going through the publication 519, I figured out another clause which said that if this is my first year in the USA, I can also file under 1040 as "Dual Status".

For filing 1040 under "Dual Status", I have to wait till I become resident in the current year (2009).

I wanted to understand the difference in tax implication between 1040-NR v/s 1040 with "Dual Status"?

Is there additional tax credits or deduction available under 1040 (with dual status) if I wait for my resident status in 2009?

[MukatA]

For 2008 you can file resident tax return as Married Filing Jointly. You will have to wait to file your tax return till you meet the Substantial Presence Test in 2009. Read Your U.S. Tax Return: Substantial Presence Test

You will get standard deduction of $10,900 and exemptions for both of you and the kids.

You must both declare your worldwide income for 2008. If you have any foreign income, and on that income you paid taxes in the foreign country, then you can claim foreign tax credit (Form 1116) or you can use Foreign Earned Income Exclusion (Form 2555). Read: Your U.S. Tax Return: U.S. Citizen or Resident with Foreign Income

You will complete forms W7 (application for ITIN) for your spouse and children and attach with your tax return. You can also deduct moving expenses. Use form 3903.
Read about L1 tax filing: Your U.S. Tax Return: The U.S. Visas

[chance72]

Thank you Mukta for your quick and complete response.

On going through the Dual-Status webpage on IRS (attached below), it calls out some restriction, which is where I still have confusion. Can you please clarify on these?

The following restrictions apply if you are filing a tax return for a dual-status tax year:
- You cannot use the standard deduction allowed on Form 1040 (PDF). However, you can itemize certain allowable deductions.

- Subject to the general rules for qualification, you are allowed exemptions for your spouse and dependents in figuring taxable income for the part of the year you were a resident alien. The amount you can claim for these exemptions is limited to your taxable income (determined without regard to exemptions) for the part of the year you were a resident alien.

- Your total deduction for the exemptions for your spouse and allowable dependents cannot be more than your taxable income (figured without deducting personal exemptions) for the period you are a resident alien.

- You cannot file a joint return (However, a dual status alien who is married to a U.S. citizen or a resident alien may elect to file a joint return with his or her spouse. Refer to Nonresident Spouse Treated as a Resident for more information).

- If you are married and a nonresident of the United States for all or part of the tax year and you do not choose to file jointly with your U.S. citizen or resident alien spouse, you must use the Tax Table column, or Tax Rate Schedule for married filing separately to figure your tax on income effectively connected with a U.S. trade or business. You cannot use the Tax Table column or Tax Rate Schedules for married filing jointly or single.
You may not take the earned income credit, the credit for the elderly or disabled, or an education credit unless you elect to be taxed as a resident alien as the spouse of a U.S. citizen or resident alien in lieu of these dual-status taxpayer rules.

[AtlantaTaxExpert]

Chance72:

None of the restrictions you cite apply to you because you are filing a JOINT return with your wife and you both are CHOOSING to be treated as resident aliens.

You are doing this INSTEAD of filing as a dual-status alien by yourself.