my wife works for the World Bank (IBRD) and is exempt of income tax. how do I reflect that on my return so turbotax doesn't assess a Tax Due

  • Could you clarify a few points?
    Is your wife a US citizen/permanent resident/resident alien/non-resident alien? Does she work in the US or abroad? Do you file a joint return?
  • Could you clarify a few points?
    Is your wife a US citizen/permanent resident/resident alien/non-resident alien? Does she work in the US or abroad? Do you file a joint return?
  • Hi i want to participate in the discussion.   My spouse is on H1-B working visa.  I have H-4 visa and I if I am going to be engaged for a short-term consultancy work for Asian Development Bank (international organization) outside the US, is my income taxable?  Thanks!
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If your wife is a US citizen or permanent resident/resident alien, her income is taxable and also subject to SE tax if no SS/Medicare is withheld.
If your wife is not a US citizen/permanent resident.resident alien and has a G4 visa, she is exempt from income tax and SS/Medicare. In this case she would be a non-resident alien and has to file a 1040NR.
If you want to file jointly, she would have o give up her non-resident status and her income becomes taxable.
A non-resident alien cannot file a joint tax return. You would file a married filing separate return.
You cannot use TurboTax for the 1040NR, you can download it from the IRS website or use for example CINTAX.
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    aep:
    You cannot claim the child care credit or get the FSA money tax free if your wife has no earned income.

    http://www.irs.gov/businesses/small/international/article/0,,id=97284,00.html
    • Thanks bine22. Just to clarify, by earned income you mean income that I can show as taxable? This whole situation is very frustrating: is there any supporting form that can be used to report that she was working as well (hence the use of child care) but that her income is exempt?
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    Technically, you could do it because you have earned income from both sides, just not taxable earned income. But you have to outweigh that with the risk of audit and whether the money you could get is worth having to go through the hassle of defending your position which honestly is only 50-50  on whether you would win against the IRS.

    I work for the IMF and am a green card holder and don't think the few hundred I would get from the daycare deduction is worth the risk of having to spend the extra few hundred to defend it if I was audited. I decided to just go along with TurboTax's software and not get the deduction (you can get the child tax credit though).
    • I am not sure about this audit thing - there is nothing illegal here.
    • Which version of Turbo tax did you use as a world bank employee (and US Taxpayer)?
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    Is your wife considered a statutory employee? If so, then she may be exempt from federal income tax and depending upon which state you live in, she may be exempt from state income taxes too. Some states defer to however the federal treats you. Hope this helps! (More info can be found on www.irs.gov and search for 'statutory employee'. Also, her W-2 should have the box checked 'statutory employee' if she is considered as such.)
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      I'm not sure what the source of the above post is, but a statutory employee is neither exempt from federal income, FICA or state income taxes.  Also, I doubt an employee of the World Bank would meet any of the definitions of a statutory employee.  From http://www.irs.gov/businesses/small/article/0,,id=179118,00.html

      "If workers are independent contractors under the common law rules, such workers may nevertheless be treated as employees by statute (statutory employees) for certain employment tax purposes if they fall within any one of the following four categories and meet the three conditions described under Social Security and Medicare taxes, below.

      A driver who distributes beverages (other than milk) or meat, vegetable, fruit, or bakery products; or who picks up and delivers laundry or dry cleaning, if the driver is your agent or is paid on commission.

      A full-time life insurance sales agent whose principal business activity is selling life insurance or annuity contracts, or both, primarily for one life insurance company.

      An individual who works at home on materials or goods that you supply and that must be returned to you or to a person you name, if you also furnish specifications for the work to be done.

      A full-time traveling or city salesperson who works on your behalf and turns in orders to you from wholesalers, retailers, contractors, or operators of hotels, restaurants, or other similar establishments. The goods sold must be merchandise for resale or supplies for use in the buyer’s business operation. The work performed for you must be the salesperson's principal business activity."
      • To clarify, she is a us permanent resident, Howe er notethat all her colleagues claim to be exempt fromus income tax. This is incidentally consistent with IRS website, which indicates that the world bank and the IMF enjoy us income tax exemption per executive order. It goes on to say that the employer would have to issue a form to enable employees to claim the exemption. Ultimately my question is, how do you capture this in turbotax? Sorry if am still inconclusive with my facts
      • could you post a link to the IRS website you mention? The only IRS site I found regarding this issue says, that US citizens and permanent residents employed by international organizations do pay income tax.
        Often those international organizations reimburse the amount the employee pays for taxes.
      • here is the link:

        http://www.irs.gov/businesses/small/international/article/0,,id=97284,00.html

        "If you work for an international organization in the United States and you are not a U.S. citizen (or you are a U.S. citizen but are also a citizen of the Philippines), your salary from that organization is exempt from U.S. tax.
        An international organization is an organization designated by the President of the United States through Executive Order to qualify for the privileges, exemptions, and immunities provided in the International Organizations Immunities Act."

        "If you file the waiver provided by section 247(b) of the Immigration and Nationality Act (Immigration Form I-508) to keep your immigrant status, you no longer qualify for the exemption from U.S. tax under U.S. tax law from the date of filing the waiver with the Attorney General....however, you do not lose the exemption if you file the waiver and .......work for an international organization if the international agreement creating the international organization provides that alien employees are exempt from U.S. income tax. Two international organizations that have such a provision are the International Monetary Fund (IMF) and the International Bank for Reconstruction and Development (World Bank). "
      • That article says that non-citizens are exempt from tax.  At the bottom it says,

        "U.S. citizens and resident aliens employed by a foreign government or international organization should refer to How to Report Wage Income Paid by Foreign Governments or International Organizations for Work Performed in the United States for instructions on how to file their U.S. federal individual income tax returns:"

        That article is here,
        http://www.irs.gov/businesses/small/international/article/0,,id=156499,00.html

        Your wife has to pay income tax plus self-employment tax.  It's actually more tax than employees of other organizations, and the bank may boost your wife's salary to cover this.

        Remember in 2009 when it was discovered that Obama's treasury secretary nominee Timothy Geitner had not properly paid his own taxes as an employee of the IMF?  Here;s one article on that,
        http://www.npr.org/templates/story/story.php?storyId=99320089

        Here's another article in plain language,
        http://www.banswer.com/taxes/2804-banswer.html
      • Thanks Opus... been through those pages... the guide actually states that "Green card holders and foreign citizens employed by a foreign government or international organization are not subject to self-employment taxes and may not voluntarily participate in the U.S. social security system." My wife is a green card holder. Geithner is a US citizen... your point is well taken, there may be an army of World Bank employees who are US citizens and are just confused as Geithner (I would be shocked though since the World Bank appears to be operating under the same assumption i.e. it does not issue W-2s) but I am worried about my Permanent resident spouse at this point.
      • Your spouse appears to owe income tax but not SECA tax.

        See first this page, to determine if your wife is a resident alien or a non-resident alien,
        http://www.irs.gov/taxtopics/tc851.html

        Then see this page,
        http://www.irs.gov/businesses/small/international/article/0,,id=156499,00.html

        You are correct that "Green card holders and foreign citizens employed by a foreign government or international organization are not subject to self-employment taxes" but from the same page, "U.S. citizens and green card holders pay U.S. taxes on their compensation while working in the U.S. They report their compensation as income from wages on line 7 of their Form 1040, U.S. Individual Income Tax Return."

        Now, exactly how to report and pay the income tax but not SECA using Turbotax is going to require some further research.
      • Here is the response I received from the World Bank Tax Department... please, can someone help out.

        "As far as US income tax is concerned, a non-US citizen (can be a green card holder) employed by the [World] Bank will not be taxed on his/her World Bank compensation. Short term temp (STT) are also considered as Bank staff, and non-US STT enjoy the same tax exempt treatment of their Bank compensation like the rest of our non-US staff. Her wages are paid on a net nontaxable basis. She does not receive a Form W-2, and her wages are not reported to the Internal Revenue Services as they are nontaxable."

        Does this mean I should exclude her income from Turbotax but then I don't get a deduction for childcare costs which is sizable. Every asnwer I received in this forum is consistent with Turbotax set up i.e. if I show her income and no deductions it assumes we owe the money to the IRS and assesses tax due. However, the world bank indicates that is not case... should I abandon Turbotax and go to a real person (I hate to do that).
      • maybe you should ask the World Bank to give you a copy of this agreement with the US government/IRS that no taxes are due.
        Anyway, if here income is really not taxable, you would save much more money on that than you would get from the dependent care credit.
        From my own experience with my employer (Harvard University) I can say that employers don't necessarily have a lot of knowledge about taxes especially when it comes to non-US citizens. You might want to ask a tax preparer that has experience with these kind of returns and not just go anywhere.
      • Hi TaxBoy01111- Am in the same quandary.  Did you get  an answer to this query on how to file? Any one you consulted in specific
      • Sidpad/Taxboy01111, I am in the same situation. Would you mind sharing your experience? I can provide my email or phone number if you want to discuss in private...
      • I was wondering if you guys have found a solution to this conundrum. I am especially interested in knowing TaxBoy's experience as I have a similar situation - a wife getting tax-exempt WB salary and I have used FSA for child support all year. Any help is appreciated.
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      You need to have income reported on a W2 or from self-employment to be eligible for the credit.
      You should take into account that you are saving a lot of taxes due to the exempt status.
      • Thanks again bine. And just to be clear - I am not saving on taxes because of the exempt status, the wages are net of tax already. That is why they do not have to pay taxes.
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