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kiwi_wait Feb 1st 2011 6:24 am

Tax - First Year Choice
Hi all,

Firstly, apologies for asking a cheeky tax question, Ive actually completed the returns (Both as resident and NR), and dont want to engage an accountant for one question.

Essentially 2010 was our first year in the USA, and Im trying to find a way that we can file as residents to get the maximum deductions.

We fall short on the substantial presence test (SPT) by 3 weeks (due to a wedding back in NZ!), and are on L1's.

But I have read about the First Year Choice. From what I understand, once you meet the conditions of the SPT, you can file the first year you were in the country as a resident using the first year choice option.

So in our case, we were in the country for 166 days in 2010, and will be here all year this year. The 166 days from 2010 will count as 83 days according to the SPT formula, can we wait for 100 days in 2011 to meet the 183 day qualification, and then file 2010s return as a resident using first choice?

Can anyone clarify that?

Thanks in advance!

ian-mstm Feb 1st 2011 3:44 pm

Re: Tax - First Year Choice

Originally Posted by kiwi_wait (Post 9143246)
Essentially 2010 was our first year in the USA, and Im trying to find a way that we can file as residents to get the maximum deductions.

I'm sure someone will correct me, but I believe you are always allowed to be considered resident for tax purposes... even if you don't meet the SPT. The difference is that if you meet or exceed the SPT you must be considered resident. In your case, it's a choice.


rew1000 Feb 2nd 2011 1:02 am

Re: Tax - First Year Choice
I don't believe you can opt-in to being treated as a resident unless you meet the substantial presence test for the following year (we had to file for an extension so that we could wait until that point to file).

An additional thing to consider is whether to opt to be treated as resident for the whole year (in which case you might need to look into "Foreign Earned Income Exclusion" for any non-US earnings), or whether to go for "Dual Status" where you split the year into "Non-Resident" and "Resident".

kiwi_wait Feb 2nd 2011 2:00 am

Re: Tax - First Year Choice
Thanks so much for the replies!

Rew_1000, we would use the "Foreign Earned Income Exclusion" as you mention.

It sounds like your scenario was similar to ours.
So we would wait until the 100th day of 2011 in our case (to meet the SPT formula), and then file for 2010?
We would likely apply for an extension as well just to be safe.

Thanks again.

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