How to file tax - dual status year or not?
 

Hi All,

I've put off my taxes and didnt see anyone to get them done as I wanted a go myself first. The only think I cant seem to work out is how to file for my wifes situation. She was working for the UK branch in the US January and Feb and then took a position in the US company in March. The UK company salary was paid in the UK and taxed accordingly and we still had a residence.

Now for ease I wanted to file as Resident Alien, I came over in March and started work in May. We both have W-2's but I cant figure out for the life of me if or why we would need to declare overseas earnings. Me because I dont need to declare anything before POE and her because it's already been taxed in a tax treaty country. Any advice?

If it comes to it I'll have to bite the bullet and pay for a service, currently filling just the W-2's I've paid the right amount but I'm worried that if we start going into the foreign income then we'll be owing which makes no sense to me since it was work for a UK company and UK taxed..

Help..

Re: How to file tax - dual status year or not?
 

Hi:

Pay for the professional advice. I don't know the answer. If you are worried, you might figure out if the withholding on the w-2 covers the tax owing on that income -- if it does, then you request for the extension to August 15, 2008. If the withholding does not cover the W-2 income, an extension will require a payment of the further tax estimated to be owing.

Re: How to file tax - dual status year or not?
 

Folinskyinla is right on the money. Especially for the first year when things can be complex, it really is worth paying for professional advice when doing your return. I looked it up and the first year we were here, for joint filing with lots of complications and joint filing we paid $350 with a local outfit who had a specialist who knew all the wrinkles and deductions. Every subsequent year we have paid around $250, so I think in relative terms to some things in the US, this is quite a good deal.... I'm pretty sure they will be able to save you more than they cost!

- Tim

Re: How to file tax - dual status year or not?
 

we are getting help for our first year too (paid as part of the deal). The accountants have asked for details on a gazillion different things before and after we moved. They seem to want to pick over all the detail and then decide how to use it - discarding what they deem non-applicable. I had to give all my mortgage payments pre and post move, also all my employment and savings income in the uk even though i havnt worked at all in the us and it was taxed in the uk. We are still going through the service and have not yet seen a first draft of the return so dont know how any of the info will be used or which bits they wont use. i would not have a clue as to how to go about it myself.

Re: How to file tax - dual status year or not?
 

I think we are in a similar situation. My husband worked in the UK till April 2007 then arrived in the US May 2007 and has worked here since. I was self-employed in the UK till June 2007 but haven't worked since I arrived here.

We did our tax using TurboTax and took the professional review option.

We claimed the Foreign Earned Income Exclusion. We declared our UK income as Foreign Earned Income on our 1040 under Other Miscellaneous Income. We filled in a 2555 listing it as Foreign Earned Income. That way it doesn't get taxed again.

Hope that made sense...

We did used to get an accountant to do our taxes but I'm sure he made it more complicated than it needed to be.

Re: How to file tax - dual status year or not?
 

I second what Kins says: look into filing as resident alien for the whole year and using the "Foreign Earned Income Exclusion"
http://www.irs.gov/businesses/small/...=97130,00.html

You could use a dual status return, but it could have various disadvantages - I believe you wouldn't be able to file as "Married Filing Joint", you would have to itemize deductions, and you probably couldn't use Turbo Tax or file online.

I believe the only advantage to a dual status return would be if your UK income exceeded the max for Foreign Earned Income Exclusion.

Bottom line is that you shouldn't be taxed twice, and the UK was the correct place to pay tax on the UK income, so you've got no worries on that score.

By all means find an accountant, but personally I prefer to try and understand the issues otherwise I'd have no idea whether their advice was any good.

Re: How to file tax - dual status year or not?
 

Thanks all. I'm exactly like that I like to know what's going on myself rather than entrusting everything to someone else who may or may not be doing it the best way for me..ok check out foreign earned income exclusion then...

Re: How to file tax - dual status year or not?
 

Do not second guess it...pay for the tax advice. Although it may be costly for the professional advice, it could save you thousands down the road (literally)! There are a number of elections/positions that you can take during your first year of residency in the U.S and an experienced professional in the expat area will run your return 3-5 different ways to make the appropriate recommendations based on your future intentions.

For example, they should consider making a married filing joint election vs filing a dual status return (which you are taxed at a higher tax rate and are required to itemize your deductions). So by filing as a dual status alien, you could owe a lot more taxes. In addition to this, your accountant also has to consider to take the foreign earned income exclusion, foreign tax credits, or both! As you can see, this is a very complicated area and you could pay a lot more U.S. tax by not paying a seasoned professional.