[joe.pune]

Hi,
I came to US in July 2011 and my wife joined me in August 2011.
I came on L1 and was working since July. My wife started working in November.
Since I do not pass the substantial presence test, I would be a non resident for the tax purpose and hence would have to file 1040NR or 1040NR-EZ forms.
Scenario A:
In this case we would not be able to file married filing jointly.
Hence if we file as Married filing separate:
We cannot claim standard deductions.
Exemptions... I can claim one only. Or can both os us claim an exemption each?

Scenario B: If I file for an extension, and once I pass the substantial presence test say in June, I would be filing married filing jointly as a resident.
In this case - I would be able to have standard deductions / multiple exemptions / lower tax slabs.

Was wondering whether Scenario B would be right for me OR I am missing out on some information?

Thanks,
Joe

[AtlantaTaxExpert]

Joe:

You have to Model it BOTH ways to deteemine which way is best.

If you want my profeaaional gelp, look up my email address in my profile.

[joe.pune]

Thanks Atlanta for the reply and helping the community grow and be more aware of the tax laws.

I came to US on 17th July, 2011 (on L1 visa) and my wife joined me on 13th August, 2011 (on L2 visa).
I have been working since the first day and my wife joined office on 1st of November, 2011.

W2 details for self:
Wages : 31814.05
Federal income tax withheld : 3958.87
Social Security wages : 31814.05
Social Security Tax withheld: 1336.19
Medicare Wages : 31814.05
Medicare Tax withheld : 461.30
State : MA
State Wages : 31814.05
State Tax withheld : 1463.66

W2 details for spouse:
Wages : 10202.79
Federal income tax withheld : 1769.44
Social Security wages : 10202.79
Social Security Tax withheld: 428.52
Medicare Wages : 10202.79
Medicare Tax withheld : 147.94
State : MA
State Wages : 10202.79
State Tax withheld : 498.35

My initial assignment was to end in March 2012. So the original intent for staying was for July 2011 to March 2012.
However, now I would be staying till 2012 end for sure.So I am confident of clearing the substantial presence test for 2012 (maybe sometime in May / June). Wanted to ask you whether the days are calculated from July 2011 when I came in OR should I use 13th August for the calculation fof days when my wife joined me here?

Also, in the last year some information I would like to share are:

1. Paid rent 4250$ total.
2. Paid Utility bills - Gas, Electricity.
3. Bought Car. Fuel expenses are not reimbursed.
4. Bought 2 Phones. Used for official purposes mainly. Cost borne by me.
5. Bought an iPAD for my official work. Cost borne by me.

Let me know if you need any more information.

With this in background, would want your expert advise on whether :
A) I should be filing as Married Filing Separately (for Non Residents). I guess we would not be able to claim standard deductions , but would we be eligible for personal exemptions for both?
B) I should file an extension for Federal and State. Then file it as resident married filing jointly for 2011.

What would the benefits be in either of these or some other scenario you can suggest for us.

Thanks a lot. Waiting for your reply.

Have a good day!!

Regards,
Joe

[AtlantaTaxExpert]

Filing separately, YOUR refund is $758 and your wife's refund is $1,246, for a combined refund of $2,004. Since you are staying BEYOND one year, you CANNOT claim daily living expenses like rent or utilities.

Filing jointly, your refund is $3,124. The difference is $1,120 in FAVOR of filing jointly, but that is WITHOUT your home country income, which MUST be added to your combined incomes with you claiming the Foreign Tax Credit for income taxes paid to your home country.

[joe.pune]

Hi Atlanta,
Many thanks for the prompt reply and sharing the numbers too.
I really appreciate the efforts which you take to help all of us at this forum.

Sorry for bombarding you with some more questions:

First case:
When you say filing separately - you mean as NON-RESIDENTS - 1040 NR EZ?
And you have calculated just one exemption in the first case. Rt?
Also, Since the original intent was for 8 months, can I not claim rent / utilities etc?
I have project assignment note to prove that.

Second Case
About filing jointly - If I have say 25000 USD as income and 5000 USD as tax paid in India... how would the scenario look like?

Thanks once again for showing us the way always.

Joe

[joe.pune]

Hi Atlanta,
In addition to what I have written in the earlier post-
My calculations show:

In married filing separately as NON RESIDENTS-
My case-
Income 31814
Less: Exemptions - 3700
Taxable income - 28114
As per the table tax is 3794... so I have paid tax less to the extent of 35 $.

Spouse:
Income 10202
Exemption - 3700
Taxable income 6502
As per table tax is 653. I have paid 1769. So refund of 1116.

Your figures show 758 and 1246 as refund values... Am I going wrong with my calculations?

Thanks,
Joe

[AtlantaTaxExpert]

Joe:

The calculations are getting too involved and are taking too much time. Your figures are close to mine, and both were done manually, so some variance IS possible.

If you did not KNOW that your stay was going beyond a year, you could claim daily living expenses, However, you DO know that it will be longer than one year, so you cannot claim the daily living expenses.

[joe.pune]

Hi Atlanta,
But is my calculation looking correct... I do agree that you would have given the refund figures after a rough calculation.

Also, another question I had is about foreign tax credit. You said that I can claim the tax credit for the amount paid back home.
Can you throw some light on foreign income exclusion and foreign tax credit?

Thanks as always.

Joe