[patbox77]

Hello,

We arrived together with my wife and my son March 1st 2006 on a L-1 visa (L-2 for my wife and my son). Before this date, we were resident of France. Our stay in the US could be from 1 to 3 years (could end this year or next year). After that, we will be again resident of France. Our stay in the US is anyway temporary.

My wife started working as an independent contractor from Oct 1st, after getting the necessary authorizations.

I am preparing the 2006 tax return, using form 1040 and filling jointly:

1. am I supposed to put on 1040 my French Wage from Jan & Feb 06 ? If so, is a specific form required ?

2. I was withheld social security and medicare taxes and I heard they might not be due with L-1 visa: is that a legend ?

Thanks for your support,

[AtlantaTaxExpert]

1) Yes. If you are filing as resident aliens, your France-based salary from 1 January 2006 IS subject to U.S. taxes. You report the income onLine #21 of Form 1040. Assuming you paid French income taxes on that salary, you can claim a Foreign Tax Credit using Form 1116.

2) That is a legend. Resident aliens ARE liable for Social Security and Medicare taxes. However, the U.S. and France has entered into a totalization agreement, so you should get credit for the payment of these taxes under the French equivalent of Social Security and Medicare.

If you need my professional help, contact me at [email protected].

[patbox77]

Thanks Atlanta Expert for your answer.
Is there a way to claim the exclusion of those foreign income (f 2555), as I was a resisdent of France until end of Feb 06 ? :rolleyes:

[AtlantaTaxExpert]

Perhaps, if you meet the criteria specified in the Form 2555 instructions.

[taxsearcher]

No there is absolutely no possible way that you meet the Foreign Earned Income Exclusion.

You can exclude the foreign income if you file a Dual Status return. This means that you were NR for part year and resident for part year. For the Non Resident part, your French income does not need to be reported at all.

If you elect to file as a resident for the full year, then you must include the French income but you may claim a Foreign Tax Credit.

[patbox77]

No there is absolutely no possible way that you meet the Foreign Earned Income Exclusion.

You can exclude the foreign income if you file a Dual Status return. This means that you were NR for part year and resident for part year. For the Non Resident part, your French income does not need to be reported at all.

If you elect to file as a resident for the full year, then you must include the French income but you may claim a Foreign Tax Credit.

Thanks for your comment Taxsearcher. Then:
=> For the "Non Resident" part of the year (Jan + Feb), is there a specific form to fill ?
=> For the "Resident Alien" part of the year, do I use a regular 1040 form ? Can I still fill jointly with my wife ?

[AtlantaTaxExpert]

After reviewing the pertinent IRS pub, I agree with TaxSearcher that the Foreign Earned Income Exclusion is not an option for you.

The Foreign Tax Credit IS an option.

BTW, income amounts before and after entry in the U.S. would help us better guide you.

[taxsearcher]

If you are going to file as a dual status alien, you don't have to file anything at all for the non-resident part (assuming you had no US income during that time). You need to file a 1040 for the part after that BUT you need to follow the directions for a dual status return (see Publication 519 from the IRS). It's not as straight forward as a usual return, so take some care. Good luck.

TS

[patbox77]

Thank you to both of you for your answers !

I hope Dual Status will help me reaching my goal = not to pay tax in the US on those 2 months of work in France... Because after a quick & dirty approach, if those French wages are taxed in the US, the US credit I could claim (with form 1116) would be much lower than the tax I would pay in the US = more money out ! So I'd better find a way to pay my taxes in France for those 2 months !

So, I will read (again and from a different angle) this p519 to see how I could use this Dual Resident Status as a way to avoid those 2 month to be taxed in the US, but in France instead.

Have a great Sunday ! :cool:

[AtlantaTaxExpert]

PatBox77:

If you are filing dual-status, I echo TaxSearcher's original advice: get professional help from someone who has experience filing such returns. They are very dificult returns to complete correctly.

[Pat1970]

1) Yes. If you are filing as resident aliens, your France-based salary from 1 January 2006 IS subject to U.S. taxes. You report the income onLine #21 of Form 1040. Assuming you paid French income taxes on that salary, you can claim a Foreign Tax Credit using Form 1116.

2) That is a legend. Resident aliens ARE liable for Social Security and Medicare taxes. However, the U.S. and France has entered into a totalization agreement, so you should get credit for the payment of these taxes under the French equivalent of Social Security and Medicare.

If you need my professional help, contact me at [email protected].

Hi,
I am in Miami and have a L1A VISA since May 2006 and getting a US-based salary since then.

Am I considered non-resident alien or resident alien ?

I got both foreign-based salary and US-based salary during all 2006.
What do I write in line #21 description ? "Foreign income" ?
Besides indicating in line #21 of form 1040 the amount of foreign-based salary are there other documents that need to be filed together with form 1040 regarding the foreign-based salary ?

A colleague of mine has L1A VISA but started from February 2006.
He did not get a salary from the foreign company during all year 2006; only US-based salary.
Does he have to indicate the amount of zero in the line #21 on the 1040 form for the foreign-based salary or leave it empty ?

Thanks for your help.

[AtlantaTaxExpert]

You are a dual-status alien for 2006. You do NOT report or pay taxes on your foreign-based income, just on the U.S.-sourced income.

Same for the colleague.

Report the foreign-based income on Line #21 applies ONLY IF you are filing as a resident alien.