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bluto · Dec 16, 2009, 05:19 AM

Hello all, first time poster by I've been lurking for a few weeks. I'm preparing for taxes and am puzzled by my options.

I'm an American working overseas. I was married last year (2008) to a foreign girl and filed married separate in 2008.

I'm considering filing a joint return for 2009 but am not sure I should do this because that would expose her to US taxes, and she has never lived in the US ( I don't understand why my foreign income is excluded up to ~$84k, but she would have to pay? ).

And others write-offs? ) but since she had foreign earned income in 2009, we would have to pay taxes on that amount (which is not a huge sum since she worked only part of the year ~ 18k, but it has already been taxed once).

How in the world will the IRS know she had taxable income in another country?

She will not have taxable income for 2010, so maybe I should wait. One reason I want the large std. deduction this year is I would like to be able to realize some capital gains to use up my deduction. If I file jointly, I can realize another $5,000 + of gains without paying taxes on it.

When does one know which way they should file? I have read that filing separate is rarely the better choice, but I'm not exactly the average filer. Any help would be appreciated.

Five Rings · Dec 16, 2009, 09:40 AM

Actually, your situation is quite common.
The organization "American Citizens Abroad", a large group of expatriates, says that 34% of Americans abroad have alien spouses. I have written an article regarding that which you can access at:
ACA American Citizens Abroad - The Alien Spouse and Other Strange Beings

I believe you will wish to file as "Married Filing Jointly" from 2008 forward.
If your spouse wishes to be treated as a US resident under sec. 6013(g) she is entitled to elect the foreign earned income exclusion too giving you both a total exclusion amount of $87,600 each.

It will be required that she obtain an individual tax identification number (ITIN); see
http://www.irs.gov/pub/irs-pdf/fw7.pdf
Check box (e) and fill in the info required. Carefully read the instructions and follow them EXACTLY.
Submit the W-7 and a certified copy of her passport (or other acceptable documents) with your tax return to this address:
Internal Revenue Service
ITIN Operation
P.O. Box 149342
Austin, TX 78714-9342

I believe it will be worth amending your 2008 return to show MFJ rather than MFS.

AtlantaTaxExpert · Dec 16, 2009, 09:58 AM

If you need professional help either filing your 2009 return, applying for the ITIN or amending your 2008 return, contact me at [email protected].

Your type of tax situation is what we do!

bluto · Dec 16, 2009, 10:59 AM

Five Rings, I really appreciate your quick and thorough response. You make it sound clear and easy!

I will definitely file MFJ this year and consider the change for last year, though two years of taxes might send me over the edge! I'll have to go back and look at what it cost me, then I'm make a decision. I guess I can't overlook the opportunity to get some back!

Five Rings · Dec 16, 2009, 11:29 AM

Pick a nasty rainy day when nothing else is going on and amend your 2008 return. Even several hundred dollars is worth the effort unless you are so wealthy as to make that sum insignificant.

Have your wife do the W-7 and get that in order and you do the returns.

Then take her out for a nice romantic dinner.