Can I choose to be a Resident Alien for the entire 2016 per First Year Choice?

[rajmilton]

Given that,

- I and my wife are from India, and have moved to the US on Nov 1, 2016 (on H-1B & H-4 respectively), and are residing in the US till date,

- My wife is a dependent (non-working in US),

- And, I am being considered as a "resident" in India for the purposes of filing tax returns, and I'm leveraging India-US Tax Treaty to avoid Double Taxation in India,

I have the following questions --

1. Can we opt for the "First Year" choice and consider ourselves as Resident Aliens for the entire 2016?

2. Can I claim exemptions for my India income earned during Jan-Oct 2016, based on the provision of "330-days' presence in foreign country, given that I'm also opting for the first-year choice of considering ourselves as Resident Aliens for the entire 2016?

3. If 1 & 2 are not possible, what particular choice should I make for the 2016 returns, to be able to file as resident aliens for the entire 2017 at least?

[TaxGuyBill]

1)  Deleted for wrong information.  See bine22's answer below.

2)  Deleted for wrong information.  See bine22's answer below.

3)  Yes, it sounds like you are already automatically a Resident Alien for 2017.


TurboTax is not able to do tax returns for Nonresident Aliens.  It would really be in your best interest to go to a tax professional that is EXPERIENCED with Nonresident Aliens for your 2016 tax return.  They will be able to help you to figure out if the First Year Choice would be a good or bad option to make.

[rajmilton]

Thank you TaxGuyBill for your guidance here.

[bine22 · Accepted solution]

1. There would be two choices involved. The first year choice would make you a resident alien starting November 1 (so a dual status alien for the year). Then you can make the choice to b treated as resident aliens for the entire year.

2. No you cannot use the foreign earned income exclusion, as you must have been a resident alien for the entire period you are exclusion. Your only option would be the foreign paid tax credit.

[TaxGuyBill]

Thanks for the correction.  I got the First Year Choice garbled with the election for Dual Status aliens to be full-year Residents.  I'll edit my comments above.

[rajmilton]

Thank you bine22 for your guidance here.

[rajmilton]

With regards to bine22's point# 2, if I were to use the foreign paid tax credit option using a Tax Treaty, I may not be able to exercise my choice of being considered as Resident Alien, since I'm also being treated as a resident of India under the Tax Treaty. Is that understanding correct? In other words, can I consider myself as resident of both India and US for the purposes of filing my tax returns, thereby also making use of India-US Tax Treaty provisions?

[bine22]

the foreign paid tax credit has nothing to do with the tax treaty.

[rajmilton]

I was referring to the "Effect of Tax Treaties" section within <a rel="nofollow" target="_blank" href="https://www.irs.gov/pub/irs-pdf/p519.pdf">https://www.irs.gov/pub/irs-pdf/p519.pdf</a>, which says,
"If you are treated
as a resident of a foreign country under a tax
treaty, you are treated as a nonresident alien in
figuring your U.S. income tax..."

... which is why I think I may not be able to exercise the choice of "Resident Alien" while filing my US returns.

[bine22]

But in India you are a resident because you meet the requirements to be a resident not because you are claiming the treaty.

[rajmilton]

So if I understand this correctly, since India's law considers me as a resident through its own substantial presence test, and "not because of applying the tie-breaker rules of the India-US Tax Treaty", I need not consider myself as non-resident alien, but instead, file my US returns "as a resident alien" by the choices which you had made clear in your first comment. Correct?

[bine22]

The choice to be considered as a residen alien in the US is a choice onlz. Zou do not have to make those choices, you could also file as nonresident alien

[rajmilton]

Cool. Makes sense. Thanks a lot for your assistance, bine22!