Mid Year US Tax - Foreign Earned Income Treatment

[manjprak]

I moved to US on April 15 2023 on L1 visa from India. While my spouse also moved with me on same day on L2. We plan to file taxes as Married Filing Jointly. Do I need to report foreign income earned prior to April 15? 

[Vanessa A]

Since you moved here on April 15th, you would have met the Substantial Presence Test, you would be considered a Dual Status Resident. 

This means, you will report your income earned after you met the substantial presence test (183 days) on your form 1040.  This can be filed through TurboTax. 

For the income you earned prior to meeting the substantial presence test, you would report on 1040NR.  TurboTax does not support the 1040NR, however Sprintax.com does. 

Income you received prior to arriving in the US would not be taxable to the US, if you were not a US Resident or Green Card Holder. 

[manjprak]

Can we choose to file as a resident for the full year since we arrived here instead of filing two returns, I can file only one return for the full period beginning my date of arrival in the US?

[pk]

@manjprak  , having read through this thread and reply from my colleague @Vanessa A  ( and substantially agreeing with ), like to point out that :

(a) when one passes SPT ( Substantial Presence Test ), one is generally treated as a Resident for Tax purposes for the  year.  The start of the year begins with the first day one is present in the USA.   Thus you can file as a Resident for the year .   Form 1040  is for US persons  ( Citizen/GreenCard/Resident for Tax purposes).

(b) The disadvantages of this is that you are subject to your world earnings --- So while your foreign earnings  are excluded till the date of entry into the USA, that post entry  is subject to US taxation.

(c)  Another issue is that you are limited to using ONLY itemized deduction because the standard deduction is available  ONLY  for full year US persons.  There is no way to allocate this deduction.

Does this help? 

Is there more I can help you with.?

Namaste ji

pk