How do I determine tax filing residency start date for 2018 tax returns to be filed next year in 2019? (For me and my wife situation)

[sehphing]

Hi Tax Experts, hope the following details can help to solve my puzzle in the future provided no change of the rules. 

Myself:

- I have arrived in San Jose, California on 1st Dec 2017 (Started work on 4th Dec 2017)

- Plan to file 2017 Tax return with non resident status.

- Will meet the substantial presence test in 2017.

- 2018 tax return (to be filed in 2019) has to be filed with US resident status.

My Wife:

- Has a job in overseas.

- Come to visit me on 14th Dec 2017 and back to her country to continue to work on 7th Jan 2018.

- Her job terminated in her country on 26th Jan 2018.

- She will come to San Jose, CA on 28th March 2018 and stay for the rest of the year.

- She will meet the substantial presence test in 2018 but she will not be working here (stay home mum).

Questions:

For year 2018 return (to be filed in 2019).

- If I file my return as US tax resident with marriage filing separately, can my wife file her tax as dual status alien?

- If my wife file the return as dual status alien, can the dates (1st Jan 2018 to 7th Jan 2018) be excluded so that her first day of residency started on 28th March 2018?  [As what I know, we can exclude 10 days as she is still working in overseas during that time]

- If her first day of residency start date is 28 March 2018, is all non US incomes prior 28 March 2018 not taxable?

Thank you!

[DanielV01]

It depends.  The one way you describe your situation above is one accurate interpretation of your wife's situation.  Click on this link for a full description:  Taxation of Dual Status Aliens | Internal Revenue Service.  However, it is quite likely that you will get a better tax treatment using a different option.

Since your wife will meet the substantial presence test, she qualifies as a resident for U.S. tax purposes as well.  This would allow you and your wife to file as Married Filing Joint, a much more favorable filing status, particularly since your wife will have very little income to claim (all worldwide income is included, but she can receive a tax credit for taxes paid to the other country on the income).  But by claiming this way, you can receive a much more favorable tax bracket (particularly now with the tax law changes that have been implemented.)  

This general provision is described in more detail if you click on the following link:  Nonresident Spouse Treated as a Resident.  (The basic laws on that page would apply to you, but you will not need to attach a statement because she actually will be a resident, by substantial presence test if not by green-card test.)

[sehphing]

Thank you for the answer. My wife's job terminated due to business shut down and received 6 months compensation. If her residency start date is 1st Jan 2018, then her compensation will be taxed. The interpretation of my wife's situation is based on my understanding of the publication 519. I hope that it is correct. The tax system here is quite complicated, and I may need to hire a tax consultant to help.

Thank you for your answer again!

[DanielV01]

I obviously would recommend for you to file in the most advantageous way possible.  You may choose to see it both ways to get the greatest benefit.  And while seeing a tax professional is an option, we also introduced TurboTax Live this year, which allows you to have a Professional assist you in preparing your return through TurboTax when your situation is a little more complicated.  Also, even when it is not tax season, this forum and community is open to answer your tax questions.  We're here to help you.