First year choice and nonresident spouse choice

[NursultanBS]

Hello, I wanted to double check if the steps that I'm taking are correct.

I have changed my status from F-1 to H-1B on October 2, 2023. My wife has changed from F-1 to H4. We are both nonresident aliens for tax purposes for 2023. Just a note that we've been in the US after October 2, 2023 till the end of the year.

1) I want to make a first-year choice to become a dual-status alien, by being a resident alien after October 2, 2023, but I need to pass the substantial presence test for 2024 (around May-June).

2) So, I and my wife want to file form 4868 to get an extension to file to pass the substantial presence test for 2024.

3) Since I'm considered a resident by the end of 2023 by first-year choice, I want to make a choice of treating my nonresident spouse as a resident for the whole 2023 year and also become a resident for the whole 2023 year myself, so that we can file a joint return for 2023. https://www.irs.gov/individuals/international-taxpayers/nonresident-spouse

4) Attach these two choices in a printed statement with signatures with the federal tax return.

So my questions are:

1) Is the process that I want to follow correct and will it allow me to file jointly for 2023?

2) When filing form 4868, should we file it separately or together?

3) When filing form 4868 and making balance due estimation. Should we make this estimation as nonresidents (form 1040NR) filing separately (since we did not meet the substantial presence test yet) or should I make this estimation as residents (form 1040) filing jointly (since we plan to file jointly by attaching the statement of making choices above)?

4) Is it possible to file form 4868 online?

5) Can I attach the statement (stating the choices that I make) with signatures when filing federal return electronically? Or should I file it by mail?

6) Should we write the statement by hand or can I print it and put the signatures on it?

7) Do I need to explain why I'm filing late in the statement with federal return even after filing 4868? Will there be any late filing penalties?

Thank you so much!

[DavidD66]

• The process you described is not possible and you cannot file a joint return for 2023.
• I suggest each of you file an Extension using Form 4868.  
• You should estimate tax for January 1 through October 1 as non-resident aliens (Form 1040NR) filing separately.  
• Yes, you can file an extension online using TurboTax.  Go to Free federal tax extension is now available
• You will have to file by mail.
• You should search the internet for correct wording of the statements that you need complete and sign, and file with your returns.  You should be able to find a template.
• If you file an extension, it is not late.  No additional explanation necessary.  If you pay all the tax you owe when you file the extensions, there will be no penalty.

If you meet the substantial presence test in 2024, you can elect to be treated as a dual status alien for 2023.  This means that for 2023, you file as a resident alien for the part of 2023 you were a resident in the US:  October 2 to December 31.  For that period you can file Form using Form 1040.  For the period prior to that, you must file Form 1040NR.  There are restrictions that apply when you are filing a tax return for a dual-status tax year, including:

• You cannot file a joint return.
• You cannot use the standard deduction allowed on Form 1040.  You can itemize certain deductions.

A nonresident who becomes a U.S. resident under the substantial presence test in the following tax year may choose to be treated as a dual status resident for this taxable year if certain tests are met.

For the part of the year you are a U.S. resident, you are taxed on income from all sources. Income from sources outside the United States is taxable if you receive it while you are a resident.

For the part of the year you are a U.S. resident, you are taxed on income from all sources. Income from sources outside the United States is taxable if you receive it while you are a resident.

For more information see the IRS web page Taxation of Dual-Status Individuals 

[NursultanBS]

Hi @DavidD66 ,

Thank you for your response. Could you please clarify why I cannot use the second rule of treating the nonresident spouse as a resident and become resident myself for the whole 2023? 

According to this post, it seems that it's possible, so I'm a little confused: https://ttlc.intuit.com/community/taxes/discussion/can-i-make-first-year-choice-and-be-the-resident-...

[DaveF1006]

To clarify, you mention you were F1 visa holders until October 2023 but you were in the US after October 2023. This is confusing to me.  Were you residing in the US prior to October 2023?  If so, when did you arrive or what were the periods of your residency?

@NursultanBS 

[NursultanBS]

Hi @DaveF1006,

I'm sorry if that was confusing. We were in the US for most of the 2023. I mentioned that we were in the US from October till the end of 2023 to say that we satisfied one of the first-year choice conditions.

[NursultanBS]

We have been in the US on F-1 visa for 3 calendar years.

[NursultanBS]

So, do we need to file form 4868 with an estimated balance due as nonresident aliens for the whole year (since if we were to file now both of us would have to file form 1040NR as a whole year nonresidents)? Or, since we plan to make these two selections to become full-year residents for 2023 after passing substantial presence test in 2024, do we need to estimate balance due based on filing jointly and being full year residents?

[NursultanBS]

Hi @DaveF1006 and @DavidD66 ,

I wanted to follow up on questions. Could you please help me understand if the procedure that I described (making a first year choice and treating a nonresident spouse as resident) is correct.

Also, if we should file form 4868 with an estimated balance due as nonresident aliens for the whole year (since if we were to file now both of us would have to file form 1040NR as a whole year nonresidents)? Or, since we plan to make these two selections to become full-year residents for 2023 after passing substantial presence test in 2024, do we need to estimate balance due based on filing jointly and being full year residents?

Thank you!

[DaveF1006]

To clarify, you said you were in the US for most of 2023. What dates were you out of the country?

[NursultanBS]

@DaveF1006  - It was during my F-1 status, from June 2 to July 14, 2023.

[DaveF1006]

No, for this first year, you would need to file separately because you are a non-resident alien at the end of 2023 because you did not satisfy the requirements of the substantial presence test, which states you need to be in the US for 183 days. Any days you are exempt because of a Visa status does not count toward the 183 day requirement.

1. Since you would need to file separately this first year, the 4848 will be issued in your name only since you are the only TP on the return.
2.  Prepare your return prior to filling out the 4868. To fill out the 4868, you need to know the amount of tax liability on line 16 of your 1040 plus any payments reflected between lines 17-25 in your tax return. Turbo tax should have these values populated in your tax return you just prepared. Again, I would strongly suggest not filling this out without first preparing a tax return because you may be clueless on what to report.
3. Form 4868 can be filed electronically from Turbo online or the software. Once you prepared your 1040 return, you can use the search bar with the magnifying glass and type the words Form 4868.  Then there will be a link that appears that says, jump to 4868.  Select that this will allow you to fill out and then submit electronically.
4. You would need to submit you tax return by mail when making the first year choice. it cannot be filed electronically. 
5. The statement will be printed as well and included with the mailed tax return. It can be typed & printed but the signatures need to be made by hand. 
6. No, you would not need to include an explanation for filing a 4868. This will be provided when you actually mail in your return making the First Year Election choice.
7. If there is a tax due, you will be expected to pay it to avoid a late filing penalty. There is no grace period in paying the tax, only for filing the return.

Now, how to report your return filing separately. You would need to report your wife in your return even though you are reporting Married filing Separately in this first year. In 2024, you may file jointly if you plan on being in the US for the year and that you are a resident alien in 2024.

1. Prepare your return in TurboTax by choosing the option as Married Filing Separately.
2. When you get to the Let’s get ready to e-file screen, select File by Mail.
3. TurboTax will give you an error regarding the missing Social Security number or ITIN for your spouse. Proceed to print with the error, but write Nonresident Alien or NRA in the space for your spouse’s Social Security number before mailing in your return.
4. If your wife already has a Social Security Number or ITIN, ignore step 2.
5. Mail the return, along with the other documents we mentioned previously, to the address on the instruction sheet that prints with the return.

@NursultanBS 

[NursultanBS]

Hi @DaveF1006,

Thank you for your response. I think that with first-year choice I'm becoming the resident from October 2 and will be a resident at the end of 2023. I'll be able to use first-year choice after I pass the substantial presence test in 2024. Considering this, I still believe that I can treat my nonresident spouse as a resident and become a full-year resident myself. I think the main condition is that I must be the resident on the last day of 2023 (which will be the case) even if I was a nonresident the other half of the year. Could you please clarify why do you believe that I will not be the resident at the end of 2023 after passing SPT for 2024 and claiming first-year choice? 

Thank you. I appreciate your patience.

[DaveF1006]

It depends. I am following the guidelines from the opening paragraph from this IRS source. The paragraph states "If, at the end of your tax year, you are married and one spouse is a U.S. citizen or a U.S. resident within the meaning of Internal Revenue Code (IRC) section 7701(b)(1)(A) and the other is not, you can choose to treat the nonresident spouse as a U.S. resident for tax purposes. This includes situations in which one of you was not a U.S. resident at the beginning of the tax year but was at the end of the year, and the other was not a U.S. resident at the end of the year".

You were not a resident alien at the end of the year because you hadn't satisfied the terms of the Substantial Presence Test but you will become one for tax purposes in 2024. In fact, if you select the link above for US resident, it mentions "you are a resident  of the United States for tax purposes if you meet either the green card test or the substantial presence test for the calendar year (January 1 – December 31)".

The problem is, it doesn't specifically state that you can file jointly if using the first year election option. When there is no clear guidance, I can only advise you to file separately in the first year only.

[NursultanBS]

Hi @DaveF1006 ,

I see, okay. Thank you for your help!

Yeah, I don't think that there will be a clear guidance on how the tax rules can be combined. With first-year choice, I will meet the SPT for 2024 and become a resident for tax purposes from October 2, 2023, so I think that it's likely that I can use that rule to treat my nonresident spouse as a resident, since I'll become a resident at the last day of the year even though I was a non-resident for the other half of the year and did not meet SPT for 2023. 

Could you please help me with how I can further explore if it's possible to combine these two rules?

Thank you so much!

[DaveF1006]

To clarify, are you asking if you can make the first year election and claim your non-resident wife on a joint return? Are these the two rules you wish to combine?