@sebastianf10-gma , for your Non-Resident Alien and working for a Foreign Govt. institution, there are few things to consider :
(a) generally while an NRA or US Person works for a Foreign Govt., ( ie.,e. in a Consulate/ Embassy ) the income is not taxed by the USA under international; norms ( I am not sure but I think it is pursuant to Basel Agreement.
(b) However, US citizens/ Persons still are subject to SEC A ( Equivalent of FICA at 15.3 % but with no employer participation ) -- they often have to file a Schedule-SE to pay the SECA.
(c) The States may or may not hold these employees ( NRAs ) immune from State taxes ( Tell me the state you live in and I can look up ).
Thus , if you both agree for your spouse to be treated as a Resident for Tax purposes, you will be exposing her salary to both Federal and State Taxes , in addition to SECA. The benefit of a larger standard deduction and ability to participate in IRA contributions etc. may not be enough to offset the tax implications.
I would highly recommend that you use a CD/ Download version of TurboTax ( my favorite being Home & Business because of ability to handle complex situations ) and try out what-if scenarios. This will indeed allow you to see the impacts of such a decision.
If you proceed on this path --
1. Her first day as a resident would be the first day present in the USA and if this results in the full 365 days then the standard deduction is available to both -- else you must use itemized deduction
2. You prepare your return using both TINs ( SSN or ITIN ).
If she does not have an ITIN, then you need to add that application along with your return . Note that in such a case you have to prepare the return with a dummy TIN, then print the return and replace the TIN with " NRA". The application -W-7 along with all the documents required -- see here -->
About Form W-7, Application for IRS Individual Taxpayer Identification Number | Internal Revenue Ser...
If he does have a TIN then you are all set.
3. You then have to print the return, sign date ( both spouses )
4. You then include a letter signed and dated by both the spouses requesting that the NRA spouse be treated as a Resident for Tax Purposes.
5. You now need to send all these documents along with your return to the IRS and the State ( along with a copy of the federal return ). Please use a mail service like UPS / FedEx so the delivery can be traced. IRS will generally grant ITIN retroactively.
Obviously this being by mail and the requests to be processed , it is going to take a while to hear back from the IRS.
Does this make sense ?
Is there more one of us can do for you ?
pk
