I got married to a UK citizen in October. I currently live in the UK but am employed by a US company. My husband works for a UK company. What's the best way to file.

[DS30 · Accepted solution]

If you are a US citizen, you will need to file a US income tax return for all your worldwide income (in USD) and since you are married you will need to file as either married filing jointly or separately.

If your nonresident alien (NRA) spouse doesn't have any US source income, the easiest way to file is married filing separately and not claim an exemption for your NRA spouse (see option #2 below).

Since your income is sourced where it is earned (and not by where the company paying you is located), if you met the Bona Fide Residence Test or the Physical Presence Test, you may be able to claim a IRS - Foreign Earned Income Exclusion that would exclude a portion of your foreign source income (up to $101,300 for 2016). You may also be able to take advantage of the foreign housing deduction. TurboTax will guide you on taking the foreign earned income exclusion and foreign housing deduction.

If necessary, you can get an extension of time to file your tax return if you need the time to meet either the bona fide residence test or the physical presence test to qualify for either the foreign earned income exclusion or the foreign housing exclusion or deduction. The tests, the exclusions, and the deduction are explained in Foreign Earned Income Exclusion.

You should request an extension of time to file if all three of the following apply:

• You are a U.S. citizen or resident alien,
• You expect to meet either the bona fide residence test or the physical presence test, but not until after your tax return is due, and
• Your tax home is in a foreign country (or countries) throughout your period of bona fide residence or physical presence, whichever applies.

Generally, if you are granted an extension, it will be to 30 days beyond the date on which you can reasonably expect to qualify under either the bona fide residence test or the physical presence test. However, if you have moving expenses that are for services performed in 2 years, you may be granted an extension to 90 days beyond the close of the year following the year of first arrival in the foreign country. You may file Form 1040 any time before the extension expires.

How To Get An Extension

To obtain an extension, you should file Form 2350, Application for Extension of Time To File U.S. Income Tax Return, with the Internal Revenue Service office as specified in the instructions for Form 2350

If you decide to file jointly with your Nonresident Alien (NRA) spouse or claim a NRA spousal exemption but if your NRA spouse does not have a Social Security Number (SSN) or Individual Taxpayer Identification Number (ITIN), you will need to apply for one. To apply for an ITIN, you would use Form W-7 and would need to attached your tax return to this form (see below).

Click here for more information about Claiming Non-Citizen Spouse and Children On Your Taxes.

You have 3 main options for filing your income tax return:

• Option 1 - Married Filing Jointly and you claim an exemption for your NRA spouse. Your NRA spouse will be treated as a US resident alien for US tax purposes and all of your spouse's worldwide income in USD will be subject to being taxable as a US citizen or resident alien.

Additionally, if you file as married filing jointly and your NRA spouse lives outside the US and meets the Bona Fide Residence Test or the Physical Presence Test, your NRA spouse might be able to claim an IRS - Foreign Earned Income Exclusion that would exclude a portion of your NRA spouse's foreign source earned income (up to $101,300 for 2016).  TurboTax will guide you on taking the foreign earned income exclusion when you enter your NRA spouse's foreign source income under Federal Taxes> Wages and Income>I'll choose what I work on (or jump to full list)> Less Common Income (show more)> Foreign Earned Income and Exclusion.

Here are some additional steps for filing married filing jointly if spouse needs an ITIN. 

• leave NRA spouse's SSN blank and print a paper copy of your tax return.
• skip error check section if only error is missing SSN for spouse.
• under the file tab, you will need to select "file by mail" and print a copy of your federal income tax return.
• attach a statement, signed by both spouses, to your joint return for the first tax year for which the choice applies (Nonresident Spouse Treated as a Resident). It should contain the following information:
•  A declaration that one spouse was a non-resident alien and the other spouse a U.S. citizen or resident alien on the last day of your tax year, and that you choose to be treated as U.S. residents for the entire tax year.
• The name, address, and identification number of each spouse.
• apply for NRA spouse’s Individual Taxpayer Identification Number (ITIN) using Form W-7 (Click ITIN). (You will need to apply for a ITIN if filing married filing separately and taking an exemption for NRA spouse and that NRA spouse does not have a SSN. (see option 3 below))
• attach a copy of your Form W-7 (along with the necessary supporting documents) to your tax return (For the supporting documents, one option is for your NRA spouse to get a certified copy of his/her passport which will need to be included with your tax return filing.) Click here for IRS website  ITIN - Frequently Asked Questions .
• mail your tax return along with your declaration statement, Form W-7 and supporting documents to the IRS. According to the IRS, because you are filing your tax return as an attachment to your (ITIN) application, you should not mail your return to the address listed in the Form 1040, 1040A or 1040EZ instructions. Instead, send your return, Form W-7 and proof of identity and foreign status documents to:
  
       Internal Revenue Service
       Austin Service Center
       ITIN Operation
       P.O. Box 149342
       Austin, TX 78714-9342 
  
  You may also apply for an ITIN using the services of an IRS-authorized Acceptance Agent or visit some key IRS Taxpayer Assistance Center in lieu of mailing your information to the IRS in Austin

• Option 2 - Married Filing Separately (includes head of household (HoH), if you have a "qualified relative"- see US citizens and Resident Aliens Abroad - Head of Household) and you are NOT taking an exemption for your NRA spouse.
• leave NRA spouse's SSN blank.     
• hand-write "NRA" in all of the places on your tax return that require your NRA spouse's SSN (IRS - Married Filing Separately).
• skip the error check section as long as your only error is missing spouse's SSN.
• mail in your return (you will not be able to efile your tax return so choose "file by mail" in TurboTax).
• mail to IRS address printed with your return.
• Option 3 - Married Filing Separately (or HoH) and you claim an exemption for your NRA spouse (You can claim an exemption for your spouse only if your spouse had no US source income, isn't filing a US tax return, and isn't the dependent of another person other than yourself).
• leave NRA spouse's SSN blank (if no SSN or ITIN). 
• Under the Personal Information section, choose the box for "NRA spouse" option and select all the questions on the next screen regarding your NRA spouse.
• skip the error check section as long as your only error is missing spouse's SSN.
• If your NRA spouse does not have a SSN or ITIN, under the file tab, you will need to select "file by mail" and print a copy of your federal income tax return.
• apply for NRA spouse’s Individual Taxpayer Identification Number (ITIN) using Form W-7 (Click ITIN)(see above for information about filing a Form W-7 with your tax return.)
• mail in your return with Form W-7 to the IRS address listed above.

Please note : If you have foreign bank accounts, you may be required to file a Report of Foreign Bank and Financial Accounts (FBAR) if are a US citizen or resident and:

1. you had a financial interest in or signature authority over at least one financial account located outside of the United States; and
2. the aggregate value of all foreign financial accounts exceeded $10,000 at any time during the calendar year reported.

To be directed to the US Treasury Government Website to prepare a Report of Foreign Bank and Financial Accounts, click FBAR (TurboTax does not support this form)