How to file jointly with Canadian spouse?

[ZaiKajou]

I'm married to a Canadian citizen, and I'm a US citizen. I live in the US, and they live in Canada, so I only earn US income, and they earn only Canadian income. We've elected to file jointly because I can't qualify for the healthcare credit anymore due to just my earnings being below the threshold required to get the credit for myself now due to marriage.

How would I file jointly with my spouse and add their income to my tax return?
They already have an ITIN number and already have a declaration written out, but I'm not sure how to add their income onto my return; since Canadians don't have W2s and have their equivalent which is a T4, would I convert their income and add it to mine, or does theirs need to go into the foreign income section somewhere?

And one other question, is it possible to amend my 2021 return and change the filing status from married filing single to filing jointly for last year?

Thanks for any advice and tips.

[tagteam]

@pk

[Critter-3]

Yes you can amend the 2021 return to change from Married Filing SEPARATELY  to MFJ.

To enter Foreign Earned Income -

• Click on Federal Taxes (Personal using Home and Business)
• Click on Wages and Income (Personal Income using Home and Business)
• Click on I'll choose what I work on (if shown)
• Scroll down to Less Common Income
• On Foreign Earned Income and Exclusion, click on the start or update button

Or enter foreign income in the Search/Find box located in the upper right of the program screen.  Click on Jump to foreign income

[pk]

@ZaiKajou Having read through your post and the very helpful  response by my colleague @Critter-3 , below are the additional steps  you would need to take to get the best tax outcome:

(a) your spouse  whom is living in Canada ( yes? ) would still be classed as Non-Resident Alien , even with ITIN and therefore her/his  foreign income is beyond the ambit of US.

(b) When you prepare your  Married Fling Jointly  ( MFJ ) you would need to add a statement / request  signed by both of you to request  that  she/he would like to be treated as a Resident for Tax purposes for the  tax year in question. This would mean  that you have to file by mail ( I do not believe that you can add this as an attachment  to the efile ).  This requirement is only for the first year  that  she/he wants to expose her/his  foreign income to US taxes and it remains valid  till changed.

(c) As part of the entries  that @Critter-3  outlined above , you will have to fill out the form 2555  -- Foreign Earned Income Exclusion ( FEIE) -- this is generally better than foreign tax credit / deduction  ( form 1116). However form 2555 will require you to

                                1. satisfy   one of two  tests to qualify --- Physical Presence Test  ( 330 full days  present  abroad  in any continuous 12 month test period) or Bone-fide Resident ( this requires IRS approval  )

                                2. Spouse has a tax home abroad

(d) The above path will have to be followed  even for the amendment of 2021.

TurboTax will walk you through all this  and if you run into any issues  and/or need clarification/ help  one of  will definitely walk you through .

Does all this make sense ?

[ZaiKajou]

That definitely helps with figuring it out some for sure, thanks for the information!

And that is correct, my spouse is a Canadian that lives in Canada and I'm a US citizen that lives in the US, no dual citizenship or anything like that, so that's correct there. So I only have a US income and they only have a Canadian income.

The only form I'm a bit confused about is Form 2555 does that need to be filed even if I have no foreign income, or can a non-resident alien utilize that form, sorry about that, just a bit confused on that one, learning the proper way to file all this stuff now.

Thanks so much for all the help, it's very appreciated.

[pk]

@ZaiKajou , perhaps I should have clarified ----- when you file jointly with your spouse , both your incomes  are taxed by the USA ( not matter where earned  -- world income ).   You use the form 2555 to exclude  your spouse's foreign income from US taxes  -- thus you get the benefit of joint filing  but do not have to bear double taxation on the spousal income.

Does this make sense ?

pk

[ZaiKajou]

Ah, okay, I wasn't aware I could use that form for my spouse since they are a nonresident, so I was assuming they couldn't get the exemption from that form.

That was the part that kind of threw me off. I was reading the IRS documentation and may have misread it, but from my understanding, that couldn't be used since they are a nonresident, but then filing jointly treats them as a resident for tax purposes, so maybe that was what threw me off there.

The main reason for filing jointly is to up the income enough to meet the ACA income requirement to get insurance; I'd qualify as single but don't meet the income by myself when married anymore, so that was a discussion we'd already had about it, etc.

I'm assuming using that it'd still consider our income combined and not apart, so that would meet the goal I'd imagine.

[ZaiKajou]

Also unfortunately I used TaxAct last year instead of TurboTax since they allowed eFile without mailing in, but last year we filed seperately so it looks like I'd have to do all mail in to amend my return without having to pay to do a 2021 return in Turbo Tax and then amend it that way.

So, besides my question about Form 2555 if I was to mail in the amended form 1040-X how would I add my spouse's income to that, would I attach Form 2555 to that and go from there (along with the letter stating we choose to file jointly, etc.)?

Going to be using TurboTax this year, though, since we will be filing jointly from now on, but was hoping to file an amended return so that hopefully I could use that to help get insurance for myself this year and meet the income requirements for married couples, even though my spouse is Canadian and doesn't need US insurance I know the income combined will meet the requirements according to their calculator.

Thanks again for all the help everyone, it's so very much appreciated and has been extremely helpful.

[Mike9241]

Don't know what your return has on it and don't know what your spouse has as income besides compensation, if anything, or deductions that would qualify for entry on Schedule A if you itemized.  the earned income exclusion has a limit and any unearned income she has would be taxed by the US. so it may not be as simple as manually filling out a 1040-X,  2555 and the letter. certain other lines might change such as the tax computation because you are going from MFS to Joint.   

[ZaiKajou]

I do know that between the two of us, even converting my spouses' income to USD, we'd still be below the standard deduction for joint filing, but it would bring our income up to the required for getting healthcare coverage for myself, which is why we discussed and decided that was the way to go since them being Candian they have healthcare in their Country already, but I didn't qualify for the ACA due to low threshold for being married, but would with the combined income for joint.

So, I know nothing of my income would change, it would just be declaring joint and then inputting their income in the correct places as far as I can tell based on what I've read so far.

And as far as I know, they only have work income, their bank account total was less than required for reporting (if I read it correctly, there was a specific limit before you had to report them).

I think at most they might have a small amount of unearned income from investments, but I'm not sure if that's setup as a trust for them by their grandparents of if it's in their name, but I'd assume that would be simple to add into the foreign income if there's a spot for that.

I'm still learning how it works reading over everything, but I think in terms of income for them it's work only and maybe some small investment income, but they are getting that info for me, that may not even be in their name it may be a trust type thing setup for them.

So, until I find out otherwise, I'm going with that it's just income from work and how to get the deduction since they are already taxed in Canada, the only other thing they get that I know of is some taxes back a few times a year, but I don't think that's income since that's from the Canadian government, but I could be wrong on that one.

I do appreciate all the help though, definitely filling in the blanks with how to best approach it.

[pk]

@ZaiKajou , as you point out, you want to show both your and your spouse's income on form 1040  and that even with two incomes ( both in US$) you would have zero taxable income  ( i.e. gross income less standard deduction ).  There is no real requirement  for you to file a form 2555 and try to take advantage of Foreign Earned Income exclusion. 

As far as  ACA eligibility  goes , I am not very conversant with that subject  but always though that most states  have expanded medicaid ( State medicaid eligibility ) to cover  those in-between   normal Medicaid and ACA.   Hopefully one of my  colleagues (@Opus17 ) can better answer this for you.

A question I have for you is -- you seem to refer as "they" when referring to income of your spouse  ---are there multiple earners in your family in Canada or what ?

[ZaiKajou]

Unfortunately, Florida is not one of those states that expanded. So, to meet ACA requirements, you have to have a certain income threshold to qualify.

And it's just my spouse in Canada. My apologies if that caused any confusion. I always end up just using them when I'm typing things out.