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US tax return - married filing jointly and UK non resident spouse

US tax return - married filing jointly and UK non resident spouse

Old Mar 29th 2012, 10:41 pm
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Default US tax return - married filing jointly and UK non resident spouse

Hi All,

I hope one of you are familiar with this situation and able to shed some light for me.

I am a US permanent resident (UK citizen) married to a UK citizen who I am petitioning to become a PR also, her priority date should be current in the next 6 months. I operate a US company.

I wish to file my US tax return as 'married filing jointly' to take advantage of the deduction this provides. In doing so I will have to declare my wifes worldwide income and this would be subject to US taxation.

1. My wife pays UK tax via the PAYE system in the UK, would she then have to pay US tax on this income despite already having paid UK tax? She earns approx £30k p/a

2. Are there any taxation treaties preventing double taxation for my wife in this situation?

Any assistance or guidance would be much appreciated.

Thanks!
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Old Mar 29th 2012, 11:56 pm
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Default Re: US tax return - married filing jointly and UK non resident spouse

Originally Posted by Rooferdoofer View Post
I wish to file my US tax return as 'married filing jointly' to take advantage of the deduction this provides. In doing so I will have to declare my wifes worldwide income and this would be subject to US taxation.
You will need to declare her worldwide income, but the US/UK tax treaty should negate any US taxation.


1. My wife pays UK tax via the PAYE system in the UK, would she then have to pay US tax on this income despite already having paid UK tax?
No.


2. Are there any taxation treaties preventing double taxation for my wife in this situation?
Yes - see above. You include her income at the beginning, and subtract it out at the end as having already been taxed.

Ian
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Old Mar 30th 2012, 12:33 am
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Default Re: US tax return - married filing jointly and UK non resident spouse

Ian, thank you for the help - I'm tearing my hair out trying to piece info together on this myself. I have a US accountant but not familiar with immigration and international tax.

1. Do you have any idea of the forms I need to use?

2. Will filing jointly and presumably a 1040-NR for my wife affect my GC in any way? I know that if I was to file a NR return I would be kissing goodbye to my GC so concerned if filing jointly and a 1040-NR is used.

3. I'm not sure if you're able to assist with this one but I am about to file an Affadavit of Support for my wifes I-130, I have only been resident in the US for a year so can only provide one federal tax return transcript which will be this one we're discussing - it will show income of around $80k, is this acceptable or would I need to document assets also?
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Old Mar 30th 2012, 1:09 am
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Default Re: US tax return - married filing jointly and UK non resident spouse

Originally Posted by Rooferdoofer View Post
Ian, thank you for the help - I'm tearing my hair out trying to piece info together on this myself. I have a US accountant but not familiar with immigration and international tax.

1. Do you have any idea of the forms I need to use?

2. Will filing jointly and presumably a 1040-NR for my wife affect my GC in any way? I know that if I was to file a NR return I would be kissing goodbye to my GC so concerned if filing jointly and a 1040-NR is used.

3. I'm not sure if you're able to assist with this one but I am about to file an Affadavit of Support for my wifes I-130, I have only been resident in the US for a year so can only provide one federal tax return transcript which will be this one we're discussing - it will show income of around $80k, is this acceptable or would I need to document assets also?
I believe it is form 2555 and 1116. The foreign income and housing exclusion wouldn't apply since she is not a USC or LPR so just take the foreign tax credits.

http://www.irs.gov/pub/irs-pdf/f2555.pdf
http://www.irs.gov/pub/irs-pdf/f1116.pdf
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Old Mar 30th 2012, 2:42 pm
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Default Re: US tax return - married filing jointly and UK non resident spouse

Thanks Michael!

One more question:

1. If I'm correct in thinking form 2555 will be filled out for the foreign income exclusion what is the purpose of the form 1116 mentioned?
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Old Mar 30th 2012, 2:44 pm
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Default Re: US tax return - married filing jointly and UK non resident spouse

Originally Posted by Rooferdoofer View Post
2. Will filing jointly and presumably a 1040-NR for my wife affect my GC in any way? I know that if I was to file a NR return I would be kissing goodbye to my GC so concerned if filing jointly and a 1040-NR is used.
If you're filing jointly, you'll both use a single 1040... the one that's appropriate for you, not the one that's appropriate for her. USCIS and the IRS are completely different agencies... how you file taxes for you wife will have no affect on your status. The only thing that USCIS will care about is whether or not you file as "married" (either jointly or separately) or "single". Don't file "single"!


I'm not sure if you're able to assist with this one but I am about to file an Affadavit of Support for my wifes I-130, I have only been resident in the US for a year so can only provide one federal tax return transcript which will be this one we're discussing - it will show income of around $80k, is this acceptable or would I need to document assets also?
If you only have one return, that's all you can provide. Since you've only been in the US for a year, you had no prior obligation to file a US tax return. $80k is well above the required amount for 2 people, so you'll be fine with that.

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Old Mar 30th 2012, 2:49 pm
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Default Re: US tax return - married filing jointly and UK non resident spouse

Thanks Ian. This information is so valuable!

I entered the US on 24th Dec 2010 as a PR for the final stage of processing my Green Card. Would I have been required to file a return for 2010?
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Old Mar 30th 2012, 3:06 pm
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Default Re: US tax return - married filing jointly and UK non resident spouse

Originally Posted by Rooferdoofer View Post
I entered the US on 24th Dec 2010 as a PR for the final stage of processing my Green Card. Would I have been required to file a return for 2010?
I'm not sure, but my gut feeling is yes, you probably should have. I think that if you're resident at any point during the year, you need to file a return for that year. You can file a late return for 2010 though, and you'll not likely have any US tax burden.

That said, if you don't meet the IRS' substantial presence test for filing, perhaps you don't need to. That's something you're going to want to research.

And that said, it's probably always better to file when you don't need to than take the chance that you were supposed to but didn't.

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Old Mar 30th 2012, 3:50 pm
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Default Re: US tax return - married filing jointly and UK non resident spouse

Originally Posted by Rooferdoofer View Post
3. I'm not sure if you're able to assist with this one but I am about to file an Affadavit of Support for my wifes I-130, I have only been resident in the US for a year so can only provide one federal tax return transcript which will be this one we're discussing - it will show income of around $80k, is this acceptable or would I need to document assets also?
The affidavit of support (form I-864) is for your wife's Immigrant Visa (not her I-130, which you've already filed).

If all you have is one US tax return, then that's all you can attach. It shouldn't be a problem.

However, it's not the income from that tax return that "counts" on the I-864...it will be your current income, expressed on a yearly basis, and that is what you need to document. Most people use a letter from their employer stating that the job is full time and permanent, and their income (either hourly, monthly, or annually). Also include several recent pay stubs.

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Old Mar 30th 2012, 3:52 pm
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Default Re: US tax return - married filing jointly and UK non resident spouse

I just noticed you said "I operate a US company". Does this mean you own the company? Are you self-employed? If so, you'll have to do a bit more work in proving your current income.

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Old Mar 30th 2012, 4:16 pm
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Default Re: US tax return - married filing jointly and UK non resident spouse

Originally Posted by Noorah101 View Post
I just noticed you said "I operate a US company". Does this mean you own the company? Are you self-employed? If so, you'll have to do a bit more work in proving your current income.

Rene
Yes, I'm CEO of my US company, I know for the UK company I operated that I was actually an employee aswell as the director, not sure if it works this way in the US?

Would it be easier to qualify on an asset basis, I have a mortgage free property in FL, also what savings would I need to demonstrate?
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Old Mar 30th 2012, 5:06 pm
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Default Re: US tax return - married filing jointly and UK non resident spouse

Originally Posted by Rooferdoofer View Post

Would it be easier to qualify on an asset basis, I have a mortgage free property in FL, also what savings would I need to demonstrate?
x3 of the required salary income if you are using assets.
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Old Mar 30th 2012, 5:15 pm
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Default Re: US tax return - married filing jointly and UK non resident spouse

Originally Posted by Rooferdoofer View Post
Yes, I'm CEO of my US company, I know for the UK company I operated that I was actually an employee aswell as the director, not sure if it works this way in the US?
If you pay yourself a paycheck from the company, then you can use that income on the I-864.

If you do not pay yourself a paycheck from the company, you'll have to find a way to demonstrate that your personal income (i.e. the profit from the business) is enough to cover your household size plus the immigrant. Form I-864P shows you what amount of income is needed. The important thing to remember is that for self-employed folks, the business income cannot be used on the I-864...only your personal income. So, for example, if your business earns $80,000 a year, but you have $65,000 in business expenses, then your own personal income is only $15,000 which is not enough.

Would it be easier to qualify on an asset basis, I have a mortgage free property in FL, also what savings would I need to demonstrate?
Assets can be used in lieu of income, yes. Property is not the best asset, especially in this market, and especially if that is your primary residence. Assets must be able to be liquidated within one year, with no undue hardship to the USC, at the value you put on the I-864. If you list the property you're currently living in on the I-864, you might not be able to actually sell it within 1 year, nor at the value it is today, and it would be a hardship to you because you'd have to then find another place to live.

Cash in the bank works best as an asset.

Assets must be 3x the amount that would have been needed in income.

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Old Mar 30th 2012, 5:52 pm
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Default Re: US tax return - married filing jointly and UK non resident spouse

Originally Posted by Rooferdoofer View Post
Thanks Michael!

One more question:

1. If I'm correct in thinking form 2555 will be filled out for the foreign income exclusion what is the purpose of the form 1116 mentioned?
Since she is not a US citizen or LPR, I don't believe she can use the exclusions. However if she can and had income greater than those exclusions, then she could use foreign tax credits earned above the exclusion amounts to offset us taxes owed. So when exclusions are used, foreign tax credits only accrue above the exclusion amounts. However, if exclusions aren't used, foreign tax credit accrue immediately to offset US taxes.

The exclusions are normally only useful if you reside in a country that has a lower effective tax rate than the US (ex. Cayman Islands).

You should probably contact Peter Newton who is a member of BE and a tax accountant specializing in US taxes for expats. Many on BE use him.
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Old Mar 30th 2012, 7:18 pm
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Default Re: US tax return - married filing jointly and UK non resident spouse

Originally Posted by Noorah101 View Post
So, for example, if your business earns $80,000 a year, but you have $65,000 in business expenses, then your own personal income is only $15,000 which is not enough.
$80k after expenses but demonstrating the ability to maintain this may be tricky, I note the earlier points made.

Originally Posted by Noorah101 View Post
Property is not the best asset, especially in this market, and especially if that is your primary residence.
OK.

Originally Posted by Noorah101 View Post
Assets must be 3x the amount that would have been needed in income.
1. So according to I-864p, household size of 2, I would need to demonstrate $18,912 x 3 = $56,736. If I submit the affadavit of support now and her visa number doesn't become available for 6 months would I have to demonstrate that those cash assets hadn't been expended?

2. It says only complete the assets part if you need to use the value of assets to meet the income requirements - in my situation I wouldn't need to use it but would prefer to qualify on an asset basis as can't demonstrate ability to maintain business income. Would that be acceptable?
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