I am an H1B worker and have been since April 2014, so I pass the substantial presence test.
However, my wife and I were married in August 2016, and she moved to the US in September 2016. She did not work in the US in 2016, but did work in Canada.
1. File jointly?
2. Have her treated as a resident alien if we include a statement wishing to be treated as such?
3. Report her worldwide income? Will she be taxed on this in Canada as well as the US? It seems that the US and Canada have a taxation treaty preventing this.
Because you pass the substantial presence test, you are a "resident alien" for US tax purposes.
If you elect to have her treated as a resident alien (attaching a statement, etc.)
- You must file jointly this year (the first year you make the election)
- Both of you are taxed on worldwide income
You would report her Canadian income and she will be taxed on this income for US purposes but you can claim a "foreign income tax" deduction or "foreign income tax credit" for her income.
For more information about claiming foreign tax deduction vs foreign tax credit:
So you can file jointly with your spouse and if you are not reporting a lot of itemized deductions (mortgage interest, sales taxes, medical expenses, etc.) you will get the standard deduction that applies for all taxpayers using the married filing jointly status ($12,600 for TY16).
You would separately claim a foreign tax credit or deduction for foreign taxes:
Go to Federal>Deductions&Credits> Estimated and Other Taxes Paid
Under "Estimated and Other Taxes Paid, choose "Foreign Taxes".
One final question, does TurboTax allow you to E-File and append the statement saying you'd like to be treated as resident aliens? Or would we need to file by mail?
Does your wife already have an US tax identification number? If not, you will also need to complete an W7 application and submit it with the tax return.
<a rel="nofollow" target="_blank" href="https://www.irs.gov/pub/irs-pdf/fw7.pdf">https://www.irs.gov/pub/irs-pdf/fw7.pdf</a>