J1/J2 Resident Alien or non resident alien or dual status

[froggySF]

Hello

My wife is J1 Research Scholar, she arrived since September 2020. Her payroll software states she will become a US Resident for tax purpose with two dates:

- Residency Status Change Date: July 2022

- Residency Status Start Date: January 2022

In 2021, she filled a 1040NR as Single/Married filing separately.

I joined her as J2 in February 2021. I started a job in December 2021.

- Can we claim to be treated as US Resident Alien to fill our taxes together in 2022 (aka filing jointly)?

- Should she consider claiming the dual-status?

- Should I be considered as a non-resident alien based on my arrival date?

- When can we update our W4 form?  Should we do it in January?

If we are considered as US resident alien should we report the following form:

- FBAR - Fin CEN 114

- Form 8938

- Form 8621 (PFIC)

Thank you in advance

[DaveF1006]

It depends on a myriad of factors in your case. The simple answer is that you both qualify as resident aliens for income tax purposes because your wife spent the entire year in the US in 2021 and you spent substantially amount of time in the US since your arrival date in February.  Here is a IRS  link that explains the Substantial Presence Test for determining residency requirements.

It doesn't matter when your wife's citizen status was changed but the fact she was was in the country for the entire 2021 tax year that she was a resident alien. Here is an IRS link that explains the dual status taxation more in detail. In your wife's case, I would not recommend her filing as a dual-status resident unless she obtained an exemption by filing a form 8843 with the IRS. Please read this IRS link for more details about exemptions regarding scholars that have the J visa. 

I would suggest updating the W4 form as soon as possible to ensure that the correct amount of tax is withheld to avoid any tax liabilities at the end of the year.  

As far as FBAR, FINCEN, or 8938 requirements, this here is a handy IRS document explains fully what your reporting requirements are based on your financial holdings in your foreign country.  Here is another IRS source document that explains reporting requirements for form 8621.  

[froggySF]

Her citizen doesn't change only her tax residency status because her exemption for SPR ends in July. On the tax return that we will make next, should we declare as nonresident alien or declare as a resident alien (in this case I'll qualify as a resident alien, then we could do a filing jointly tax return)? Because in 2021 we were still nonresident alien but she is in 2022.

Sorry, I'm confused.

For others forms, it's noted!

Thank you I just update my W4.

[DaveF1006]

It depends what day in July her exemption ends. If ending on July 1, it is right at the wire at 183 days. Any date other than the July 1 date will not qualify her as a resident alien.

Now if you file as a resident alien, you can file jointly, file married filing separately, or you can file Head of Household if you have additional qualifying dependents. If you file jointly:

• You and your spouse are treated, for federal income tax purposes, as U.S residents for all tax years that the choice is in effect. However, for Social Security and Medicare tax withholding purposes, the nonresident spouse may still be treated as a nonresident. Refer to Individuals Employed in the U.S. – Social Security Taxes .

• You must file a joint income tax return for the year you make the choice (but you and your spouse can file joint or separate returns in later years).

• Each spouse must report their entire worldwide income for the year you make the choice and for all later years unless the choice is ended or suspended.
• Generally, neither you nor your spouse can claim tax treaty benefits as a resident of a foreign country for a tax year for which the choice is in effect. However, the exception to the saving clause of a tax treaty might allow a tax treaty benefit on certain specified income.

If you make this choice, you  must attach a statement, signed by both spouses, to your joint return for the first tax year for which the choice applies. It should contain the following information:

1. A declaration that on the last day of the tax year one spouse was neither a U.S. citizen nor a U.S. resident within the meaning of IRC section 7701(b)(1)(A) and the other spouse was, and that you choose to be treated as U.S. residents for the entire tax year.
2. The name, address, and identification number of each spouse. (If one spouse died, include the name and address of the person making the choice for the deceased spouse.)

 Please refer to this IRS link for additional details.