@dag444gad , as I understand from your post :
(a) you a US citizen are married to a non-Resident Alien, have children, live abroad along with your spouse and children abroad
(b) your past tax filing status has been MFS ( Married Filing Separate ) and you do not have tax id ( SSN or ITIN ) for your spouse.
(c) your spouse now has foreign earnings -- i.e. local earnings but NO US sourced earnings
(d) 2020 you wish to include your children as dependents, assuming that they have a tax ID ( SSN or ITIN).
(a) Since you are maintaining a household for your children, you can always file as Head of Household ( HoH ) --- this ameliorates the tax situation --- your standard deduction is halfway between single/MFS and Married Fling Joint ( MFJ)
(b) Note that if your spouse files with you ( along with an ITIN), and a note signed by both wanting to treat her as a US resident, her world income gets taxed by the USA ( even though her earnings may come under foreign earned income exclusion).
(c) If your spouse has no desire to currently return to USA, then it may be simpler to get the ITIN/SSN for the children and you file as HoH -- you get all the benefits and yet her earnings are not taxed by the USA. She can then change her status as and when she deems worthwhile.
(d) HoH filing status does mean that you become the "custodial parent" for tax purposes but has nothing to do with anything beyond that-- does not abridge her rights as a parent. -- This is only because she as a "no-resident -alien" is a Non-US Person for tax purposes.
(e) This is pretty common situation for many US citizen ( not just the young ones either )whom have settled down abroad.
Is there more I can do for you? BTW I do not believe that TurboTax would require you to get a signed statement releasing her rights to claim the children --- she is NRA ( and there is I believe , an exclusion for that )
Perhaps you should go through the following "
1. https://www.irs.gov/individuals/international-taxpayers/us-citizens-and-resident-aliens-abroad-head-...
2. https://www.irs.gov/pub/irs-pdf/p501.pdf ----------
"Nonresident alien spouse.
You are considered
unmarried for head of household purposes
if your spouse was a nonresident alien at any
time during the year and you don't choose to
treat your nonresident spouse as a resident
alien. However, your spouse isn't a qualifying
person for head of household purposes. You
must have another qualifying person and meet
the other tests to be eligible to file as head of
household."
3. https://www.irs.gov/forms-pubs/about-publication-54
Is there more I can do for you ?
