resident alien partial year interest and dividends

[dac10012]

My wife became a resident alien in August but will receive 1042-S not 1099-B/DIV. How do we report capital gains and interest and dividend income only earned after the date she got her Green Card and became liable for US income taxes?

[pk]

@dac10012 

(a) are you a US person ( citizen/GreenCard/Resident for tax purposes) ?  I ask because , if her actual residency start date is not start of year ( see  item (b) below ), but you are a US person,  you could request her to be treated as a resident for the whole calendar year.  This allows you to file MFJ plus use standard deduction but exposes her world income for the year to US taxes.

(b) Was she present in the US for all of 2025 i.e. prior to/awaiting GreenCard ( Aug. 2025 )?  I ask because for GreenCard holders, residency starts the on the first day of legal presence in the country.

(c) Because she is a resident  for the  year , you should inform the financial institutions to issue her 1099s rather than 1042-S  ( and withhold  the fed tax).

(d) which country is she a citizen of   ( for purposes of tax treaty considerations )

I will circle back once I hear from you --yes ?

[dac10012]

I am a US citizen and we will be filing married, jointly. Her brokerage is giving her a 1040-S and refuses to issue a 1099 even though she became a permanent resident during the middle of last year. Her employer is only reporting her income after she became a resident and we intend to report her investment income starting on that date too.  I don't believe her 125 days as a permanent resident meets the 183 day threshold required for the entire year tax liability. We can agree to disagree. We intend to follow this advice for reporting investments: "To report interest/dividends as a resident alien without a 1099, you must manually calculate the amounts from bank/brokerage statements for the period after you became a resident, report them on Schedule B (Form 1040) if over $1,500 total, and use Form 1040 for your U.S. return, understanding that you report all income from the date you became a U.S. resident for tax purposes."

My original question was how do we report capital gains and interest and dividend income only earned after the date she got her Green Card and became liable for US income taxes? My initial approach, since the brokerage refuses to give us a 1099 from August to December, is to take a corresponding percentage of interest, dividends and capital gains from the year end statement and input them into TurboTax. Or, if the numbers for the entire year are very low, just use what's on the statement. What do you think? Thanks.

[pk]

@dac10012 , while I digest your full response, please tell me when she actually entered the US  , when she  was admitted ( shown on the GreenCard -- what I remember from time back in 1967 ).   Please

pk

[dac10012]

It only says she became a permanent resident in August, as I said. We are getting off topic. Do you have any opinion on my posted question re reporting investment income for partial year residence? Thanks.

[pk]

@dac10012 , just for your information

(a) Standard deduction is available ONLY when a full calendar year  income is reported/recognized

(b) MFJ with one spouse on a partial year income ( part-year residency ) is not practical  and /or allowed.

(c) The  tax residency ( i.e.  by SPT  and/or GreenCard ) is  generally for the whole tax year except that the start date of the residency is generally  first day of legal presence in the year under consideration with some "ands" , "ifs" and "buts".  See this --> Residency starting and ending dates | Internal Revenue Service

Therefore my repeated request to you for her status prior to admission as GC.

(d) Note that as an NRA, one is still taxed by the US on all US sourced / connected income while world income becomes taxable to US  as a US person ( citizen/GreenCard/Resident for Tax purposes.  Also Tax Treaty benefits are generally not applicable for US person with a US tax-home and on US sourced/connected income.

(e)  you posted --"how do we report capital gains and interest and dividend income only earned after the date she got her Green Card and became liable for US income taxes".   For US Tax Purposes, NRA taxation is limited  to US sourced/connected income ( of any type ) while a US person is taxed on world income.  Thus during the NRA period of your spouse all her US sourced income is taxable to US ( absent a Tax Treaty condition/assertion/ limitation ). 

Foreign source passive incomes ( capital gain/interest/dividend) are generally effective ( i.e. recognizable/reportable ) on the date they were  constructively received by US person ( as part of world income and taxes paid to a foreign tax admin. may be eligible  for FTC treatment.

As mentioned above, US sourced passive income is taxable US income whether one is NRA or a US person all the time.

Does this make sense ?  Is there more I can do for you ?

[dac10012]

She is a Chinese citizen and has been here for many years. Her international employer is giving her a statement of taxable earnings that begins when she became a permanent resident in August, but I don't think it will say partial year. We have decided to report whatever the investments 1042-S says for income in Box 2 as realized capital gains but there is no Schedule K-1s, so I guess we don't have to report interest or dividends? We are taking the standard deduction because we have negligible itemized deductions.

[dac10012]

I am reading there is no Schedule K-1s for regular investments and she should receive a 1099 - INT and 1099-DIV for reporting stock interest and dividends but the brokerage is not issuing any 1099 to her, so it seems we don't report those?

Also, I am considering filing an amended 1040 for 2024, to change the filing from Married Filing Separate to Married Filing Jointly because her only income was investments and her employer says she had no income in 2024 and there is no Statement of Taxable Earnings from them. So, there is only a negligible amount of income from investments on her 2024 1042-S, and instead of the considerable amount of income taxes I paid for Married Filing Separate, I should receive a refund. However, I don't want to open a can of worms by reporting no wages for her for 2024. What do you think? Thanks.

[dac10012]

If You Receive Form 1042-S, Does That Mean You Have U.S. Tax Obligations?

"No, this does not trigger automatic U.S. filing requirements. As mentioned above, certain types of income received are passive in nature and are subject to a flat tax corresponding to the statutory 30% withholding. If that constitutes the entirety of your US-sourced income, you likely do not have a filing requirement, since IRS already has their money. " Does this mean I can leave out her 2024-S income when filing the amended MFJ 1040 for 2024? Also, I see there are multiple 1042-S from her brokerage for 2024, including 2 on 3-7 and 3 on 3-12. So, I am anticipating multiple 1042-S on different dates for 2025, which we will report because of her wages. Do we report all 1042-S income for all dates? Thanks.

[pk]

@dac10012 ,

What I get from your multiple posts ( thank you ) is :

(a) you a US person is married to an NRA  adjusted to  US person ( GreenCard)  in Aug 2025.

(b) you were married in 2024

(c) for 2024 you filed  MFS and considering  amending to MFJ 

(d) for 2025 you wish/plan to file MFJ

(e)Spouse was  ( for 2024) and is ( for 2025 ) employed by an international  organization, wages not taxed by the US and treated as NRA till status adjustment in Aug 2025

(f) Spouse has personal investment income ( for 2024 and 2025 ) and generally reported on 1042-S.

Assuming above is substantially correct  ( or correct me , if I mis-understood ) :

1.  Take on board the following -- > Employees of foreign governments or international organizations | Internal Revenue Service

and  -->  Employees of a foreign government or international organization - How to report compensation | Inter...

2. Note that the "exemption" covers only compensation  i.e. active earnings and NOT personal  investment / passive incomes.  NRAs are taxed  on US sourced income while US persons are taxed on world income.  There is however one nuance  --- NRA's  US tax-home  file form 1040-NR and generally are taxed just like normal --- the 30% flat fee on passive income is mostly applicable for purposes of  form 1042-S but not necessarily for  actual tax return -- depends on actual facts and circumstances.

3. Since spouse had personal income prior to becoming  Resident ( GreenCard)  -- US sourced -- these are still subject to US taxes.  Thus I see no reason / justification to recognize ONLY those  personal incomes actually taking place post status adjustment --- recognize all non-wages / passive and US sourced income for the whole calendar year and Wages only post status adjustment.

4. SE taxes are due on wages  earned as Resident.

5. Absent a request ( signed by both of you ) to treat spouse as Resident for the whole calendar year ( and thus exposing ALL wages for the whole year to US taxes ), there is no way to file MFJ and thereby use the standard deduction for the whole year.  My sense is that you would be better served ( tax liability wise ) to file MFS for the 2025 and from 2026 go the MFJ route.  However, I would also suggest that you try it out both ways to see which gives you the better outcome.

 Does this make sense ?

Is there more I can do for you ?

pk

[dac10012]

Thank you for all your deliberation, research and advice. The fact remains that the only wages we can report for her are those reported on her employer generated Statement of Taxable Earnings which are for August to December, so the point of reporting for the preceding months is moot. Perhaps I shouldn't have mentioned that, because it changes the focus of my other questions. 

So, here are my (hopefully) remaining questions:

1. Since she is a resident, why would I need to write a note asking that she be classified as a resident in order to file MFJ?

2. She received multiple 1042-S as a nonresident alien last year, 3 on 3-7-25 and 2 on 3-12-25. We are filing an amended 1040 for 2024 and need to know which realized capital gain to show: all of the 5 amounts, or does the more recent 3-12-25 1042-S supersede the older 3-7-25 form? Also, according to the below, since she had no other income than investments (there is no 2024 Statement of Taxable Earnings from her employer), perhaps we don't need to show any investment capital gains? Thanks.

If You Receive Form 1042-S, Does That Mean You Have U.S. Tax Obligations?

"No, this does not trigger automatic U.S. filing requirements. As mentioned above, certain types of income received are passive in nature and are subject to a flat tax corresponding to the statutory 30% withholding. If that constitutes the entirety of your US-sourced income, you likely do not have a filing requirement, since IRS already has their money. " 

[dac10012]

OK, I think I need the letter for the amended 2024 1040, as she was NRA that whole year, but now that she is a resident, I don't think I would need such a letter for the 2025 return and going forward. What do you think?

[dac10012]

UPDATE. I neglected to say my spouse had a G-4 visa, so was exempt from US income taxes. So, I can report all her income for 2024 and 2025 and we are good for MFJ and the standard deduction. But my last two questions remain concerning requesting resident status for 2024 and/or 25 and which 1042-S forms to get her capital gains from. The idea of not reporting her investment earnings for 2024 is now moot because we will be reporting her wages, although they are not taxable.  Thanks for your continued interest.

[dac10012]

My wife's colleagues have only reported what the Statement of Taxable Earnings says, so we have decided to report nothing for 2024 (per G-4 status and no Statement) and the 4 months wages in the Statement for 2025. Reporting investments does not appear to be necessary for 2024, per the advisory stated above but we will report the 1024-S box 2 income as realized gains for 2025 (because there are also wages earned as a resident) and going forward.  We have also decided to forego the note requesting resident status for income tax filing purposes for the 2024 amended filing, per her colleagues' example, and not necessary now, as she is a resident. Thanks.