Foreign Income earned before moving to the US

[pk]

@Melia003 , see the paragraph above that talks about "if you meet both the Green Card and  SPT---" . This implies that if you meet the SPT, then your year ( for resident for the year ) starts from the first day of your presence in the USA .   In your case because you visited the USA  prior to your entry with a work visa , I would contend:

1. your actual  date of becoming a resident for tax purposes would  just move i.e.  say you came on visitor for tow days in Feb1st.  and came back with work visa on March 31st then  your computation for SPT would include  the two days prior to admission with work visa -- ONLY for SPT purposes.

2.Textually correct procedure would be to file a Non-Resident return on form 1040-NR ( not supported by  TurboTax ) covering the period before becoming a resident for the year and a form 1040 ( supported by TurboTax ) for the rest of the year on your world income.

3. However, in my opinion, you can file for the whole year as a resident, paying taxes on the world income but starting residency from the date of admission .  This also meets the word for word  contention of the document that I quoted above.   To bolster your position you could send in a note ( thus having to file by mail )  requesting to be treated as a resident for the whole year.  In your particular case because the front-end is so short, perhaps it is easier to just file form 1040, assuming that you did not have any foreign income during the period till you passed the SPT.

Does this help ?

Stay safe

[bl_]

Hi @pk , I have a similar case but I am still not clear what to do an I wonder if you could help.

I moved to the US in April 2019 from Germany on an L1 visa. So I am filing a dual-status return.

The part where I am stuck is that after I ended my German work contract in March, I still received 3 more payments from Germany in April, July and November. These are different bonuses connected to my German employment and the tax was deducted in Germany.

Do I have to include these somehow on my US return?

[pk]

@bl_ , since you are filing as dual status person --- for the period  April ( exact date  ) till the day you pass the Substantial Presence Test  ( 183 days ) you are Non-Resident Alien and taxed only on your US sourced/connected income.  Thus  the first two bonus  paid in April and July should be outside  US purview.  The only IRS may quibble over is the  one made in November because at that time  you would  have been a  Resident Alien for tax purposes and therefore  this would be part of your world income ( to be taxed by the USA ).  However, I would argue that  ( and presumably you can prove this ) because this bonus was essentially delayed  payment  i.e. it is due to your work earlier, nothing to do with US employment or any earnings  by any productive effort by you ( not investment/ not pension / not rental  or similar with some effort on your part while in the USA ) -- that this amount should not have to be taxed by the USA. 

My position is also based on  my interpretation of article 15 of US-German tax treaty and I quote :

ARTICLE 15
Dependent Personal Services
1. Subject to the provisions of Articles 16 (Directors’ Fees), 17 (Artistes and Athletes), 18
(Pensions, Annuities, Alimony, and Child Support), 19 (Government Service; Social Security), and 20
(Visiting Professors and Teachers; Students and Trainees), salaries, wages, and other similar
remuneration derived by a resident of a Contracting State in respect of an employment shall be taxable only in that State, unless the employment is exercised in the other Contracting State. If the employment is so exercised, such remuneration as is derived therefrom may be taxed in that other State.

I have highlighted the area of interest --- you were employed, the income is from that employment and you were not also employed by that employer while in the USA.

That is where I stand on this.

Does this close your query ?   or do you need more help ?

[bl_]

@pkThis is very helpful, thank you!

So do you think I should just include these German income on my 1040NR line 6 and not include on 1040 (resident part)?

[pk]

@bl_ , 1040-NR covers ONLY US sourced/ connected income during the period you were still a Non-Resident Alien ( i.e  from the date of arrival/ admission  till you passed Substantial Presence Test ).  During the Resident for Tax purposes period you are taxed on "world income " -- from sources within and outside of the USA. Thus any foreign income can only show up on form 1040 and NOT 1040-NR.

I am sure you are aware that the SPT counts days present in the USA as follows  : all days  present in the current year, 1/3 rd of the days present in the preceding year and  1/6 th of the days present  of the 2nd preceding year -- thus in your case all the days in 2019, 1/3 rd. of the days in 2018 and 1/6th. of the days in 2017.

Does all of this make sense ? 

[par5]

I have similar question for L1 visa holder who first time arrived in US in January 2019 and received lump-sum Social Security benefit from Lebanon in December 2019.  The Social security benefits were received based on  employment in the Lebanon prior to moving to US. The Social Security benefit claim was filed with local the government before moving to US. Process was completed and distributions were received after 10 months. Should I include, this distributions on my US income tax return?

[pk]

@par5 , before I answer your question, I want to clear up something :  L visas are usually reserved for intra-company transfers ( meaning there is a presumption that this is  only a temporary work arrangement )  and so why would you have taken a distribution of your pension ( did you mean social security or private  pension ) ?  Would you have been qualified in Lebanon for the distribution or is it  because you would not be able to contribute to the scheme in Lebanon while in USA  ( absent a totalization agreement ) ?  Are you planning to stay here  "for ever" ?  

As far as I know  US does not have a Tax treaty with Lebanon -- nor a totalization agreement.  Please answer my questions  while I go  research this a bit

pk

[Sachinpatidar]

Hi,

I am in similar situation.

i moved to us on L1B visa in month of Jan 2020. I have received half month salary and some rsu bested in month of January 2020 and fully taxed in India. 
do I need to report that in my USA tax filing? If yes can this be added as foreign earned income exclusion? 

thanks,

sachin Patidar

[MarilynG1]

If you meet the Substantial Presence Test, you can report your salary for the Foreign Earned Income Exclusion.

You can report your RSU shares vested as if you had received a 1099-B.

Click this link for more info on Entering RSUs. 

Yes, you can take a Foreign Tax Credit for tax paid on these incomes.

This link has Tax Tips for Residents and Non-Residents you may find helpful. 

[pk]

@Sachinpatidar , assuming that    during the last three years ( 2018,2019 & 2020) this is your first  stay in the USA for any reason, that you are not a citizen /resident ( Green Card ) of USA,  since you entered  the USA on a work visa  in Jan 2020 ( exact date is important) , you are treated as a Non-Resident-Alien ( NRA) for the first 183 days of physical presence in the USA and  then after meeting  Substantial Presence Test  (  183 days counting  all the days  present in the current year, 1/3  of the days present in  the first prior year and 1/6 of the days present in the 2nd prior year) as a  Resident for Tax purposes   for the rest of the year.  Since during  that NRA period  you are taxed  ONLY on US sourced  income,  and  you received  salary ( for work prior to being admitted into the USA)  and other amounts  sourced  "foreign", you do not need to recognize/report on your US return.  However, any  & all income during the period  after passing the  SPT must be  reported  on US income, even if taxed by a foreign taxing authority.

Thus you file as DUAL STATUS person --- form 1040-NR covering ONLY US sourced  income till the SPT passing and  a form 1040 covering world income for the rest of the year.  

TurboTax does not support the  preparation of  form 1040-NR, so your options are as follows:

(a) you do your filing through SprinTax, TurboTax partner  whom handles  both Non-Resident and Dual Status filings    OR

(b) download form 1040-NR from the IRS site  ( it is a fillable .pdf ), fill it out by hand/ computer covering the  NRA period  income, sign/date;  the prepare the form 1040   ( covering all the earnings  from the period  after passing SPT ); Print, Sign/Date, write across the top  of the  form 1040 first page "DUAL STATUS FILER", attach the  form 1040-NR; send the whole package  to the IRS by mail.

Does that answer your query or do you need more help ?

Namaste

pk