First year of residency - file as dual-status?

Forum|Forum|3 years ago
October 8, 2022
2 replies
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I have read the other posts but I am still very confused what to file. I was a DV winner and arrived in the US on Nov 19, 2021 and reside there until today. My wife arrived on Nov 28, 2021 and then was back to Hong Kong on Dec 14, 2021. I have already quitted my job in HK before admission to the US but my wife still has her job in HK. We have never been to the US before. Therefore, should both of us file as dual status? Also, are we not eligible for the first year choice?

I think we need to file the following:

1. 1040 for the part as resident alien and attached 1040-NR for the part as non-resident alien.

2. My wife has to file the foreign income 2555 for the period since the first admission the US.

3. Form 8938 (Statement of Specified Foreign Financial Assets) and FBAR (Report of Foreign Bank and Financial Accounts) for our bank accounts in Hong Kong.

Please correct me if I misunderstood.

Thanks so much!

Best answer by pk_

@pk12_2 Thanks so much for the explanation. I really appreciate that. The example you given has made me much more clear about what to file now.

But let me ask a question about the foreign income exclusion.

In your point(b)(i), about the requirement for qualifying HK as the foreign tax home for excluding the foreign income in 2021, does it mean she has to stay in HK for at least 330 days in the 12 month period (11/29/2021 - 11/28/2022)? But it involves a future time at this moment. So if my wife eventually stays in HK for less than 330 days in this period, will the exclusion become invalid?

@leo_oel

about whether for purposes of being able to exclude the foreign earnings from US taxes , she would need to be abroad for 330 days in a test period of continuous 365 days --- that establishes the tax home. If she comes back to the USA early, then the whole effort is lost . Then the only option available to reduce the bite of double taxation is to use the foreign taxes paid as a credit against the US taxes to be levied ( usually not 100% because it is based on a ratio of the filer's foreign income to world income-- so US income reduces the ratio and therefore the credit available for the year ) or as a deduction if one itemizes ( but then there is a SALT - Sate and local Taxes limit). I have known of a lot of people , when I was an expat, that will finish their foreign assignment and stay an extra few days in Canada or somewhere abroad just to satisfy the 330 days abroad clause to meet the Physical presence test.

We are talking about future , only because while the foreign tax credit for 2021 may not be much , if indeed she plans to stay for the whole of 2022, then you could possibly exclude most if not all of her foreign income from US taxes -- and yes it is future. As I said , how you proceed depends on your longer term plans -- where you work , where you each stay etc. etc.

Hope that clears the up things

Anonymous_

Level 15

I will page @pk12_2

pk_

Level 15

@leo_oel , I don't know what you mean by DV ( lottery ? ) Did you mean GreenCard?

Assuming that you did mean Green Card ( Permanent Resident ), then

(a) if you pass the Green Card test at any point in the year ( 2021 in your case ) you are considered resident for the year. The year starts on the first full day that you spend in the USA for that year. Thus you are Resident Alien for the year 2021 starting from Nov. 20th 2021 and your spouse ( whom entered on Nov. 28th. ) on Nov. 29th., 2021. So you are not dual status , you file as a resident for Tax year ( Calendar year ) 2021. You world income from the date on which you became a resident is taxable by the USA.

(b) Because your spouse went back to HK and continues working there ( correct ? ), you can file joint and her wages / earnings can be excluded as foreign earnings once one meets the physical presence test ( 330 days abroad in any consecutive 12 month test period ). For 2021 this would mean excluding foreign income from Nov 29th. through Dec. 31st. 2021.

(c) Because you are resident, you are also under FBAR and FATCA regs -- thus your foreign financial accounts ( foreign bank accounts that you own/control/ signature over US$10,000) and Specified financial Assets ( form 8938 on non-liquid assets -- stocks , bonds etc. held by local brokers/financial institutions etc. , the threshold depends on filing status and your tax home -- note your spouse may be having a foreign tax home).

TurboTax will walk you through all of these items ( not the FBAR though -- that you file form 114 at FinCen.gov / BSA-efile).

Is there more I can do for you ?

leo_oelAuthor

Level 2

@pk12_2 Thanks so much for your response.

Yes. I mean the green card thru the lottery.

(1) So we just need to file the worldwide income obtained since the date that we become resident? In other words, only my wife need to file the foreign income?

(2) Yes. She went back to HK to continue her working there.

(3) So we have to file FBAR online at FinCen.gov website. But the form 8938 can be filed thru TurboTax. Is it correct?

I am still a bit confused with the concept of "tax home". So in the case of my wife, her tax home would be "Hong Kong". But what should be the date established (i.e. the line #9 in form 2555)? Is it the start date of the 12-month test period for the physical presence test?

pk_

Level 15

@leo_oel thank you for updating

1. The world income you report for 2021 and if you file jointly ( usually the most tax benign ), you include both of your incomes no matter where earned. The special case here is that your spouse earns the monies abroad and as such depending on circumstances, may be eligible to exclude this from US taxes because she can claim foreign tax home and because she is paying taxes to HK

2. -- see above

3. Yes you are both subject to FBAR and FATCA regs. and as mentioned above. TurboTax will help you file the FATCA form ( simple questions and answers ) where as for the FBAR, you will have to log in to

https://bsaefiling.fincen.treas.gov/NoRegFBARFiler.html

and look for form 114. You file as filing for yourselves -- two forms one for each owner of foreign accounts -- just follow the links and it will walk you through the form.

4. To be able to exclude foreign earned income from US taxes ( avoid double taxation ), you need to have a foreign tax home. You could be having a tax home in the USA and your spouse could be living in HK and have a foreign tax home and still file jointly ( it is unusual but nothing prevents it . The other way would be for you to file as married filing separate and because you had no income in 2021 as a resident, there is no need to file. She can then file as a Married Filing Separate, with a tax home abroad and exclude the allowable amount of foreign income and hopefully pay no taxes to the USA on the foreign income.

Does that explain more ? Do you need more help ?