Nidwaldner

My husband and I (a USC) moved to the U.S. together from Europe (where we'd been living the past 7 years) late last year with me sponsoring his green card. Since 2000 we have always made the decision to do my U.S. taxes with having him treated as a resident for tax purposes so we could file jointly. This helped us not having to have a co-sponsor for the green card petition, even though we did have enough in savings not to worry about income anyway.

Now for 2004 taxes we would like to revoke the decision to have him treated as a resident for the majority of the year he was not a resident and for him to file under dual-status. As it turns out this would have big tax advantages for us this year if we didn't have to report his foreign income (the exchange rate made a big difference this year and the AMT kicked in). My question is, could this in anyway jeoporadize his green card status?

This is starting to do my head in. Thanks for any help!

Retire to Italy

Not to the best of my knowledge and belief.

ian-mstm

If this is allowable under IRS regulations, USCIS will not dispute it.

Ian

meauxna

I'm sure it would be nice to not have to count foreign-earned income, but I'm not sure that you can go that route.
http://www.irs.gov/taxtopics/tc851.html
"You are considered a resident alien if you met one of two tests for the calendar year.

The first test is the "green card test." If at any time during the calendar year you were a lawful permanent resident of the United States according to the immigration laws, and this status has not been rescinded or administratively or judicially determined to have been abandoned, you are considered to have met the green card test.

The second test is the "substantial presence test." To meet this test, you must have been physically present in the United States on at least 31 days during the current year, and 183 days during the 3 year period that includes the current year and the 2 years immediately before. To satisfy the 183 days requirement, count all of the days you were present in the current year, and one–third of the days you were present in the first year before the current year, and one–sixth of the days you were present in the second year before the current year. Do not count any day you were present in the United States as an "exempt individual" or commute from Canada or Mexico to work in the United States on more than 75% of the workdays during your working period. An exempt individual may be anyone in the following categories: "
(see link for more)

So, it may depend what immigration status he's here with now. If he's already got the Green Card...
See IRS pub 514 for the foreign tax credit worksheet.

Nidwaldner

meauxna, I'm not quite sure what your further point is. It also says under Pub. 19 that dual-status residents, since my husband was a non-resident from January-Sept, 2004. and a resident from Oct he qualifies to file a dual-status tax return and not
from Tax topic 852:
"For your first year as a resident alien, your residency starting date determines the period for which you will be taxed as a resident alien and the period for which you will be taxed as a nonresident alien. You may qualify as a resident alien under either the substantial presence test or the green card test. If you meet the substantial presence test, your residency starting date is generally the first day you are present in the United States during that calendar year. If you meet the green card test at anytime during the calendar year, but do not meet the substantial presence test for that year, your residency starting date is the first day on which you are present in the United States as a lawful permanent resident"

From Pub. 519 relating to dual-status tax returns:http://www.irs.gov/publications/p519/ch06.html#d0e6345
"Income from sources outside the United States that is not effectively connected with a trade or business in the United States is not taxable if you receive it while you are a nonresident alien" and instructions for the 1040NR "income you received from sources outside the United States while a nonresident alien is not taxable in most cases even if you became a resident alien after receiving it and before the close of the tax year"

So my husband's wages earned in Europe while a nonresident is not taxable if he files as a dual-status tax payer for 2004, or am I missing something??

Thanks again for all input!

scrubbedexpat099

I thought it was a once and for all election and you could not switch in and out, but I borrowed the tomb from the library and no longer have it. Worth having a look in your local library or book shop, there are a couple of them the size of a Phonebook.

So the next question is if you can claim for tax purposes that you were not resident can you subsequently have this used against you by the USCIS if they ever find this out.

That I do not know, my guess is that it would be difficult to find an edict, perhaps case law?

Well you know the safest option.

ian-mstm

Generally, he must declare his world income at the beginning of the 1040, and deduct it out later on because it has already been taxed and should not be taxed again. However, this may also depend on where he earned his income. The US has a number of tax treaties which allow one to avoid double taxation, but I'm not sure that all European countries have such a treaty. A little research may be in order to ascertain that. But, all else being equal, he will not pay US tax on income that has already been taxed by another country.

Ian

Nidwaldner

Ian, I believe you are referring to how someone choosing to be treated as a resident for tax purposes would file (1040 with foreign earned income exclusion and any eligible foreign tax credit). From my understanding Dual-Status tax payers files differently as a dual-status filer (a 1040 for U.S. related income, and a 1040NR statement for the U.S. income while a non-resident) and world-wide income not U.S. related is not reported at all for the part of the year you are a nonresident.

Has anyone filed as a dual-status before?

scrubbedexpat099

I thought about it, but it meant that you had to file seperately which would have cost us a bomb, also I would have missed out on some minuses I had at the begining of the year.

ian-mstm

Ah, well then... I've learned something new today!

Ian

Just Jenney

I know this is a little late -- being that the April 15th tax deadline has passed now -- but I came across this when reading the instructions for the I-131 application and figured I'd post this anyway...

If you are an alien who has established residence in the United States after having been admitted as an immigrant or adjusted status to that of an immigrant, and are considering the filing of a nonresident alien tax return or the non-filing of a tax return on the ground that you are a nonresident alien, you should carefully review the consequences of such actions under the Immigration and Nationality Act.

If you file a nonresident alien tax return or fail to file a tax return, you may be regarded as having abandoned residence in the United States and as having lost your permanent resident status under the Act. As a consequence, you may be ineligible for a visa or other document for which permanent resident aliens are eligible.

Learn something new every day...

~ Jenney