EricK

Can anyone point me to any reading, or offer any advice on this tax question (I have been googling without luck):

My wife is Taiwanese. She lives here with me on an L2. She does not work here, and does not have a SSN. She does however have investment income in Taiwain from various trust funds etc. That income does not leave Taiwan.

What are her tax liabilities given she already pays taxes on the income in Taiwan? I was looking for tax treaties between US and Taiwan and can't find anything that seems to answer the questions. Will she be double taxed?

theOAP

You need to establish whether your wife is a 'US person' and/or a 'resident alien' (especially under the substantial presence test). The following link may help you:

http://www.irs.gov/businesses/small/...=96414,00.html

If she is subject to US taxation, she can avoid double taxation (to some degree) by filing Form 1116 (with 1040) to offset US tax due (if any) by the tax paid to Taiwan.

EricK

Thank you - yes she would be considered a resident alien under the substantial presence test as outlined in the link that you posted. I will also look into form 1116 and 1040 as you suggested.

Steve_

Read IRS publication 519.

But basically if you're filing a 1040 (as opposed to 1040NR) then you're going to be treated as resident and because she's your spouse and you're filing jointly I assume then she is treated as resident for tax purposes as well.

So she has to claim a foreign tax credit on Form 1116. Also the trust funds themselves will probably need to be declared on Form 3520s.

There are other ways of doing it though because you're in a non-immigrant category, you could file separately and she could file a 1040NR and thus only need to declare her US-source income. But eventually she would be deemed resident under the substantial presence test (as explained in 519), however some tax treaties allow you to maintain non-resident status, by filing an 8833 with the IRS and specifically claiming the tax treaty exemption.

I'm not an expert on the US-Taiwan tax treaty, your first port of call is to call the number in 519 for the non-resident tax dept. in PA (their phone system is a bit crappy but eventually you should get through). They will be able to explain if and how to do this, if she wants to.

Obviously if you plan on staying and getting LPR status, then you might as well bite the bullet now, figure out which bits of paperwork to file and do it the way a US citizen would.

theOAP

I'm glad Steve brought up the trust question and Form 3520. I'll have to admit I ran like hell to avoid it in my reply.

I'll bow to Steve on the 1040 vs. 1040NR, and the visa situations. EricK, your post is lacking in some important details, and I understand not wanting to post too much info on a public forum. But it's worthwhile for you to consider the following issues.

1) You used the words 'Taiwan.....various trust funds etc.'. Make very sure what type of funds these are. A 'foreign trust' can set off all sorts of alarm bells, both on 3520 and other forms (like FBAR, and 8938). The word 'trusts' could be used as a shortcut to describe the source.

2) The filing status for you and your wife, and the amount of income from the 'trusts'.
Does the amount take your wife over the threshold for filing separately, even if resident, if you both chose to file separately. If the amount is over, and whether she decides to file separately and/or you decide to file jointly, I would suggest you talk to a professional advisor if you do in fact have a 'trusts' situation. Foreign trusts can become quite tricky.

There are a number of ways this can (or must) be played, and you'll want to explore all of them.

EricK

Thank you all for your replies, I knew this was going to get complicated!

Ernst and Young are my tax accountants, I will start discussions with them now regarding our specific set of circumstances to give us plenty of time to prepare the filings correctly.

S Folinsky

FWIW, when I was in practice, ownership of family assets in Taiwan could get quite fuzzy and not what it seemed. It is good to look at the paperwork. Just saying.

penguinsix

You might also want to check into the FBAR requirements for those trusts and whether you need to be filing an FBAR every year.

http://www.irs.gov/businesses/small/...148849,00.html

Steve_

Um, just flicking through 901, there is no tax treaty between the ROC and the US. So on that basis she has to file as a resident as soon as she meets the substantial presence test (or more than 183 days pa if claiming a closer connection, but that would expose her to the 30% NRA tax - not a good idea).

I suppose this shortens the conversation with the accountants!

nun

There's a US/China tax treaty, but it doesn't include Hong Kong or Taiwan. I wonder how China signed off on that as they obviously claim Taiwan as part of China.

Are the foreign trusts something like a family trust or an investment vehicle like a unit trust?

rangdaa

I hope to be a Green Card holder some time this year.

As a GC holder I know that I am liable to Federal tax on my worldwide income.

How about State income taxes in those states which charge tax? Am I liable to State income tax on my worldwide income or just income arising in the USA or perhaps just income arising in the State?

JAJ

Most States will take your income as defined for federal purposes (with some adjustments) as what you need to pay for State tax.

rangdaa

JAJ,

Thank you for a quick reply - much appreciated.