Wife is Canadian, earns income only in Canada (foreign earned income and exclusion). I cannot complete dependent care credit as it thinks my wife made any money.

[jyee315]

The option to bypass this is to say she is a full time student. Is there any other way? Thanks

[Vanessa A]

You cannot take the foreign income exclusion and the dependent care credit together.  If you are excluding all of your wife's income, then she has no income to use for the calculation of the credit. 

[jyee315]

But its not like she did not make income. I treatrd her ad a non resident alien, married filing jointly. Her income is taxed in canada, thus foreign income exclusion, but she did make income. 

It seems like the omly thing to bypass this is to put her as full time student or disability, but this is not correct. I know this is a unique example, but is there any other way? Thx

[ErnieS0]

You do not have to exclude all your wife's income. You can include on your return an amount equal to what you paid in daycare, or $4,000 for one child and $8,000 for two or more children, whichever is less and see whether you get a better tax benefit doing it that way.

[jyee315]

Thx for replying. I dont know how else to include my wifes income. All her income is in canada, and she has noy even stepped foot into the US last yr, and she pays canadian taxes on her income already. 

[SusanY1]

Since your wife pays taxes to Canada, you could use the foreign tax credit rather than the foreign income exclusion to report her income.  This allows for credits that he use of the foreign earned income exclusion does not.  However, if your wife has used the foreign earned income exclusion in prior years, then not taking it this year constitutes "revoking" it, and she will not be able to take the exclusion for 5 years (without permission from the IRS which is expensive to request and not guaranteed to be granted.) 

You cannot exclude only part of her income unless her income exceeds the exclusion allowance. 

 

[Critter-3]

So the bottom line is you cannot do both AND not excluding the income this year will hurt for years to come ... so think this decision over carefully.  

[jyee315]

In f/u of this. I have been treating my Canadian wife and filing her as a resident, even though she is a non-resident, non citizen. I have been doing this since we got married in 2016. I never formally "elected" this to the IRS and just filed "married filing jointly". I have done my best to be as accurate on the tax return, but admittedly gets quite complex. I am sure I am doing it exactly correctly, but I know it is not that far off (if anything I probably overpaid the IRS a bit) thus I am not too worried about that. However I just learned about the PFIC rules which I never did consider in the past and this does tip it into getting too complex now that it is not worth it. Starting 2025 taxes, I think it is best to revoke 6013(g) indefinitely. The question is how should I proceed with this. 

   As I have not really ever officially "elected" for it, would it be foolish for me to officially "revoke" it by writing a letter. I am afraid by writing a letter to the IRS, it could lead to unnecessary audit. The other option is just to not file a tax return in 2025 (as she has no US income or assets) and for me to file "married filing seperately". Do you guys think this might be the most quietest way to move on.  

[Mike9241]

seek professional guidance.  We have no way of knowing if the IRS would catch the invalid election and have the right to open up all those prior returns and change them to MFS. you have an obligation to amend at least the open years to file amended returns using the MFS filing status. the IRS has placed more scrutiny on the 6013(g) election as there is a specific question under filing status on the 2024 returns.