How to file taxes for the first time on a L1A visa and foreign income?

[toro_rosso]

Hello,

I arrived as a expat manager to the U.S. with the L1A visa (manager inter-company) on February 29th, 2020 with spouse and kids. We have not left since then (pandemic). I started on the U.S. branch payroll on March 1st, 2020. Spouse doesn't work.

Reading through the forums I think I have figured out some think that concerned aliens' first timer filler; please correct me if i am wrong:

Assumptions I have:

1. I have come a go the U.S. (and many other countries) so many times in my life from 2016 to 2019 but always as a B1/B2 Business Trip. I don't think I have spent more than 14 days at a time. I don't want to deal with 1040NR.
2. However, I do pass the "tax residence test" for 2020 and I will file my taxes with the 1040 form.
3. Spouse has a SSN, but never worked.
4. I will filed married jointly.
5. The kids cannot have SSN with the L2 visas. So I need to get them a ITIN number with the W-7 form so I can claim them as dependents.
6. I sold some U.S. stocks and I'm filling the 1099B.
7. I do not own a house in U.S.

Foreign Wages

Before coming to the U.S. and up to February 29th, I was a manger in my own country branch (foreign country don't have a tax treaty) and received my wages in my own country bank for January and February 2020. I also received in my own country bank a severance package for my services when I move out. Every wages, bonuses, etc were taxed in my own country tax code and deposited directly to my foreign bank account.

Former Primary Residence (or still my residence?) and Foreign Bank Accounts

I also rented my former primary residence on February 2020 that's is still going on. I paid my property taxes.

I also own another property that in law are living on for free.

I have saving bank accounts on my foreign country with more than report tress hold.

My wife also has saving bank accounts with more than the report tress hold.

I also sold my primary car on February 2020 on my own country, paid my taxes in my own country, and leased a new one on U.S.

Questions

• Please confirm my assumptions.
• Obviously I want to pay the less taxes possible for the foreign transactions and I have already payed taxes for it !. So how I tackle this beast? 
• I don't want to deal with foreign transactions here and there and bank secrecy, should I move my cash from there to the U.S.?

[ReneeM7122]

You will file a 1040 if you are considered a resident alien.  

See IRS: https://www.irs.gov/individuals/international-taxpayers/taxation-of-resident-aliens

Family

• Your children with ITINs can qualify for the Child Tax Credit but only $500 each, not the full amount.
• Your wife and you can file Married filing jointly.  You should call the Social Security Administration and find out why your wife's SSN "never worked."  If it does not match her legal name according to the IRS database, then you will not be able to file a tax return.

Foreign Taxes

If you paid foreign taxes, you can get the foreign tax credit using form 1116.  However if there is no treaty between your country and the U.S., you cannot qualify.  Search for form 1116 from the Federal tab and follow through the questions.    Here is a list of countries with U.S. tax treaties: https://www.irs.gov/businesses/international-businesses/united-states-income-tax-treaties-a-to-z

Foreign Account

You do not have to move your accounts from overseas to the US if you don't want to.  Here is information you need regarding foreign accounts:

Turbo Tax will ask you if you have foreign accounts.  If you answer 'yes,' it will bring you to the place where you answer questions to complete Form 8938 (FATCA).  You can find the form by searching for it on the Federal tab.

The FBAR might be required as well.  You don’t file the FBAR with the IRS or with TurboTax.  It must be filed directly with the office of Financial Crimes Enforcement Network (FinCEN), a bureau of the Department of the Treasury, separate from the IRS.   TurboTax does not file the FinCEN.  Here is a link to the BSA E-Filing System.

If your foreign account has $10,000 or more in it that's when those forms come into play.   Again, these are the forms:

• FATCA - Form 8938

• FBAR - FinCEN Form 114 

 FBAR and FATCA are two separate reporting events filed in two separate places. 

Foreign Accounts Tax Compliance Act (FATCA)

Under FATCA, certain U.S. taxpayers holding financial assets outside the United States must report those assets to the IRS on Form 8938, Statement of Specified Foreign Financial Assets. The IRS receives information about foreign assets on form 8938 on your federal tax return. 

FBAR - Report of Foreign Bank and Financial Accounts (FinCEN Form 114) 

A United States person that has a financial interest in or signature authority over foreign financial accounts must file an FBAR if the aggregate value of the foreign financial accounts exceeds $10,000 at any time during the calendar year.   The name of the form to file If you have any questions or require technical assistance using the BSA E-Filing system, you may call them at 866-270-0733;  or if calling from outside the United States, 313-234-6146. 

 Report of Foreign Bank and Financial Accounts (FBAR)

   Here is an IRS article that explains the comparison between FATCA and FBAR requirements.