I'm a US citizen who is marrying a Mexican National in 2018. How do i report her income om our 2018 return and do we need pay taxes on money she earns in Mexico ?

[DoninGA]

Does she have a US Social Security number or an ITIN issued by the IRS so that you can file as Married Filing Jointly?

[saiello111]

No. And she has no US source income

[DoninGA]

If you are legally married on or before 12/31/2018 then you can only file as Married Filing Jointly or Married Filing Separately.

If she does not have a SS number or an ITIN and you are not applying for an ITIN using IRS Form W-7 with your tax return then you can only file as Married Filing Separately.

If you do apply for an ITIN with a Form W-7 with your tax return then you can file as Married Filing Jointly.  She would have to enter her income from all sources, US or Foreign, in US dollars on the tax return.  If she worked and lived outside the US and has a foreign employer then she reports her Foreign Earned Income on IRS Form 2555 which is included as part of your personal tax return, Form 1040.  Up to $104,100 Foreign Earned Income is excluded from being taxed in 2018.

[saiello111]

Thank you for the information. If my spouse only works in Mexico for a mexican company and loves in Mexico does she even need to file a US tax return?

[Opus 17]

Read below.  If you want to file as married filing jointly on your US tax return, that means you must elect to treat her as a US resident.  US residents pay income tax on all their world-wide income—that's one of the extra costs you pay for the benefit of being a US resident. There is a credit or deduction for the amount of Mexico taxes she pays on the same income, which may partly or completely offset the US taxes.   If you file as married filing separately, then you only list your own income and deductions, but you may pay a higher tax rate than if you filed jointly.
  
You may want to test both scenarios or ask a professional for help.

[saiello111]

Great. I will look at both scenarios. Is there a form similar to our W2 that tells us what her taxes withheld were?

[Opus 17]

I have no idea what the tax forms are like in Mexico.  In any case, it would not be the amount withheld, but the actual amount of her tax bill.  When you prepare your final tax return, you would have to prepare Mexico first so you can apply the deduction or credit.  When you test the scenarios, you can estimate the taxes that will be paid in Mexico but I don;'t know how you will do that; presumably the tax authority in Mexico has some advice or methods for estimating taxes.

[Opus 17]

If you are a US taxpayer (citizen or resident alien) married to a non-resident alien you have two choices.

You can file as married filing separately. You do not list your spouse as a dependent.  Leave the spouse's SSN blank.  You can't e-file.  Print your return, write "NRA" for the spouse's SSN, and mail in your return.  Married filing separately has the highest tax rates and many deductions and credits are reduced or disallowed.

Or, you can make an election to treat your spouse as a US person for tax reasons, in which case you can file as married filing jointly.  Treating your spouse as a US person means you must report and pay US income tax on their income from anywhere in the world (there is an offsetting credit for foreign taxes).  You get lower tax rates and some other benefits by filing jointly, but the worldwide tax thing might cost you more than you save.  Your spouse needs an ITIN  (international tax ID number).  If you have it, you can e-file the MFJ return.  If your spouse does not yet have an ITIN, you can't e-file. You need to print your return and mail it to the IRS, along with a form W-7 ITIN application and any required proofs.  You may need a fake SSN to get through the interview, try 999-88-9999.  After printing the return, cover the fake SSN with white-out.  Mail your return and form W-7 to the address in the W-7 instructions, not the usual address for your tax return.

You won't be able to file your state tax return at the same time.  Once the IRS sends you back a letter with your spouse's ITIN, add that to your tax return and then print, sign and mail your state tax return.

https://www.irs.gov/uac/about-form-w7

https://www.irs.gov/individuals/international-taxpayers/nonresident-spouse-treated-as-a-resident