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New green card holder - filing status and foreign income

imaltesers — Mon, 05 Apr 2021 01:53:26 GMT

Could I please get some advice on how to file taxes for my situation?

I immigrated to the US in August 2020 on a Green Card
I have an American wife who has been living and working in the US for all of 2020
I earned foreign income up until August 2020 and did not have any foreign or US income for the rest of 2020

Am I supposed to file jointly? If so, do I need to report my foreign income earned before immigrating in August? Even though I paid taxes for it in the foreign country?

Re: New green card holder - filing status and foreign income

pk — Mon, 05 Apr 2021 04:29:54 GMT

@imaltesers just to be sure , let me cover the situation as I understand ---

(a) you , a foreign citizen ( which country - Malta ? ) was admitted to the USA on August , xx, 2020

(b) you were in foreign country till that date ( ??) and had earnings from the foreign country

Now the question is how should you file --- Married Filing Joint or Married Filing Separate; and do you need to recognize the foreign earnings prior to your entry into the USA .

First generally it is better to file Married Filing Joint -- it is more tax benign

Second, because you have the Green Card, you are therefore are treated as a resident for the year and subject to US tax on your world income. The question here is when is the start of your "year" --- generally it is the first full day that you were present in the USA during the tax/ calendar year. Thus if you have had zero US presence during 2020 before the entering on August XX, 2020, then you are Non-Resident Alien / Non-US person till that date and hence your foreign earnings are not taxable by the USA.

So for a clearer answer we need to know all your presences in the USA during 2018, 2019 and 2020 -- please provide --yes ?

Re: New green card holder - filing status and foreign income

imaltesers — Mon, 05 Apr 2021 11:42:19 GMT

Thanks for your answer, let me make my situation clearer:

I am an Australian citizen but I lived and worked in Taiwan before August 2020
I was in Taiwan until August 2020 but I did visit the US a couple of times (more details below); I had foreign earnings only (no US earnings)
Yes, my wife is an American citizen and had US earnings for 2020

Here are the dates I visited the US for the years you asked for:

August 15-28, 2018
January 27-February 8, 2019
July 21-August 12, 2019
January 23 - February 25, 2020

I hope this is clear!

Re: New green card holder - filing status and foreign income

pk — Tue, 06 Apr 2021 02:46:29 GMT

@imaltesers , as I mentioned earlier a person is considered a resident for the whole year when one passes the Green Card test. Also it states that the year is from the first day of presence in the USA. Thus , given your answers as to presence in the USA, I would surmise that you are a resident for the whole calendar year and thus subject to world income taxation for the year 2020.

When you file jointly , there are benefits especially when you have children etc. If you do not have such a situation, i.e. ONLY two of you, may I suggest that you file as Married Filing Separate--

(a) this will allow your spouse to file normally and I assume that he/she would use standard deduction

(b) this would , since you have zero US earnings for the year, to declare your foreign earnings, and then claim the foreign taxes as foreign tax credit. This credit while recognized fully is allowed only on a ratio basis --- foreign income to world income-- and in your case these being the same, you will get to deduct/credit for all the taxes paid. This would be beneficial, especially if you do not have foreign income in follow-on years.

Does this make sense or do you need more help/explanation etc. ?

Re: New green card holder - filing status and foreign income

imaltesers — Tue, 06 Apr 2021 19:56:39 GMT

That makes sense, thanks a lot for your help!

Re: New green card holder - filing status and foreign income

imaltesers — Tue, 06 Apr 2021 20:18:20 GMT

@pkI actually have a different issue now; I was about to post it in the "after you file" section but figured it would be easier if I just reply here.

I actually already filed my tax return without entering my foreign income because I thought I only counted as a resident since August, not for the whole calendar year (this was before I asked about it here). The tax return has been approved and I'm waiting for the refund to arrive.

I went through the TurboTax software again, this time including my foreign income, and the software tells me that I'm able to deduct all of my foreign income. My federal and state refund amounts did not change.

So my question now is, do I still need to file an amended return? If so, when do I do it? And how do I do it using the software? (I am using TurboTax Home and Business)

Re: New green card holder - filing status and foreign income

imaltesers — Tue, 06 Apr 2021 20:21:13 GMT

Sorry I forgot to mention that I am still married filing jointly; I didn't change it to married filing separately. Also to be clear I received a deduction, not a credit.

Re: New green card holder - filing status and foreign income

pk — Tue, 06 Apr 2021 20:39:07 GMT

@imaltesers ,

1. yes indeed , you can file joint and be able to take a deduction for foreign taxes paid, assuming that (a) you itemize; (b) your total foreign tax plus any state taxes withheld for your spouse, plus property taxes are total less than 10,000 ( SALT limit ) and of course (c) your total itemized deduction is greater than 24,800. For most people it does not work and so they stay with standard deduction.

2. Note that if your AGI changes with the foreign income, then you should file an amended return after the the original return has been processed ( your refund issued is a stand-in). Although in your particular case there is probably no way for the IRS to be aware of this --- but .....

3. If I remember right generally 4/15 ( I don't know if this is also extended this year) is the deadline after which one cannot change from MFJ to MFS, even as an amended return.

4. Please also note that during 2020 if you had a foreign bank account you would come under FBAR and FATCA rules

Stay safe

Re: New green card holder - filing status and foreign income

imaltesers — Wed, 07 Apr 2021 00:50:01 GMT

@pkI made a mistake, I didn't get a deduction——I was able to exclude my foreign income from being taxed (sorry about that!).

Anyway thank you for the info!