Green Card taxes - married filing joint, married filing separately or separate individual & foreign income exclusion

[Annetta]

Hi everyone,

My husband and I are desperately looking for advice on our situation.

We both became Lawful Permanent Residents (LPR) during 2019 (precisely, we entered the U.S. as LPR on the 21st of September). Before that, he got an F1 visa since he is a Ph.D. student from 2016 who used to file his taxes as a single individual because I kept living abroad since we got married in July 2017 (during 2019, I only came to visit him for two weeks during April).  

After I entered the U.S. on the 21st of September, I came back to Europe on the 28th of September to wrap up my things, and I moved everything to the U.S. at the beginning of 2020. He stayed here in the U.S. for his Ph.D. (so, he spent more than 200 days in the U.S. during 2019).

Given our situation, how do we have to file our taxes? As MFJ, MFS, or Separate individuals?

Given that I have a dual-alien status, can I be treated as a U.S. resident for the full year?

I saw that the IRS guide states for the "Choosing Resident Alien Status" that "If you are a dual-status alien, you can choose to be treated as a U.S. resident for the entire year if all of the following apply.
• You were a nonresident alien at the beginning of the year.
• You are a resident alien or U.S. citizen at the end of the year.
• You are married to a U.S. citizen or resident alien at the end of the year.
• Your spouse joins you in making the choice.
This includes situations in which both you and your spouse were nonresident aliens at the beginning of the tax year and both of you are resident aliens at the end of the tax year."

Would our situation be included in this choice? Considering that he is a resident alien for the full 2019, and I have a dual-status?

Furthermore, given that during 2019 I earned only foreign income from my European employer, can I apply for the foreign income exclusion? Would that be ok from the immigration point of view?

We are really trying to find the right way to file our taxes to be fully compliant with the immigration requirements stating that "An individual shall cease to be treated as a lawful permanent resident of the United States if such individual commences being treated as a resident of a foreign country under the provisions of a tax treaty between the United States and the foreign country, does not waive the benefits of such treaty applicable to residents of the foreign country, and notifies the Secretary of the commencement of such treatment." 

Thank you so much!!! Any help would be much appreciated

@KarenJ2   #greencard #filingstatus #foreignicomeexclusion

[pk]

@Annetta ,  the simple answer is   (a) since you are both with Green Card as of Sep-2019, you can file as MFJ and resident i.e. use TurboTax to prepare and efile form 1040.  (b)  this does mean that your world income comes under the US tax system, and generally you will be a resident for the whole  year 2019.

Absent specific questions ( which I would gladly answer ) I would refer you to IRS Pub. 519 -- it is available at www.irs.gov ( both in html and  .pdf version )

Welcome to the US of A  ( even with all the current issues )

[Annetta]

Thanks @pk for your replya nd your welcome!

I read all the document you mentioned, but indeed there are still some points that we cannot fully understand, like the foreign income exclusion application.

Most of all, did you or anyone in the community have experience with a situation like ours? 

Our biggest concern is to do everything to both file correctly our taxes and be compliant with all the requirements and best practice for not losing our Lawful Permanent Residents' status.

thanks!

[pk]

@Annetta , just to be sure I understand the situation , let me write down my understanding of the situation:

(a) Husband  entered USA on F-1 in 2016 with NO prior presence in the USA during the last six years i.e. from 2010 on wards.

(b) Husband is exempt from counting days  through calendar year 2020 ( five calendar ears starting with year of admission)

(c) Husband is therefore Non-Resident Alien  till adjustment of status in Sept. of 2019.  His residency start date is  Sept., xx, 2019

1. Wife entered USA with non-immigrant visa in April 2019 ---- NRA

2. Wife  entered USA as Immigrant  ( Green Card  ) Sep. 21 2019  --- Resident Alien

3. Wife's residency starts on  Sep . 21 2019

4. Wife has foreign income during Jan through   Sep. 20th. 2019  as NRA  ( not subject to US taxes );

5. Wife has foreign income ( ??)  during Sep. 21, 2019 through Dec 31st. 2019 as a Resident ( subject to US taxes ).

Now the question is how do you file your return,  Dual status Alien or Resident for the whole year ?  How to deal with the foreign income of the wife ?  Is that about right ?  Which country are you each from ?  Do you both have SSN or are  you awaiting that ?

Your question on seeing a similar situation on the community ---   Have seen general questions of this nature i.e. mid year adjustment of status or entering  with LPR.  What I have not seen is adjustment from F-1 to Green Card .  However, fiftyfive years ago I came  in as F-1  and then three years later converted to Green Card  ( without going through  work visa  ).  So I understand the anxiety to make  sure that one follows  the rules  exactly.

Please answer my questions please  and I will come back and follow up with you--yes ?

[Annetta]

Dear @pk,

thanks for your reply and sorry for my delay.

Here below I summarize our situations following your scheme:

(a1) Husband entered the USA on J-1 in 2015 with NO prior presence in the USA during the last six years i.e., from 2009 onwards.

(a2) Husband J1 expired in 2016 and entered the USA on F-1 in September 2016 (PhD)

(b) Husband is exempt from counting days through the calendar year 2020 ( five calendar ears starting with year of admission)

(c) Husband is therefore Non-Resident Alien till adjustment of status in Sept. of 2019. His residency start date is Sept., xx, 2019

1. Wife entered USA with non-immigrant visa in April 2018 ---- NRA (two weeks visit)
1a. Wife entered USA with non-immigrant visa in April 2019 ---- NRA (two weeks visit)
2. Wife entered USA as Immigrant ( Green Card ) Sep. 21 2019 --- Resident Alien
3. Wife's residency starts on Sep . 21 2019
4. Wife has foreign income during Jan through Sep. 20th. 2019 as NRA ( not subject to US taxes );
5. Wife has foreign income during Sep. 21, 2019 through Dec 31st. 2019 as a Resident ( subject to US taxes ).

The questions you said are precisely the ones we have. We are both from Italy and we both have SSNs (my husband since 2016, and I have it since February 2020).

We live in California, so we are also trying to understand how we should both appear on that return (wife as part-year resident and husband as full year resident, I guess). But in case the wife is a full-year resident no the federal return, does she have to appear as a full year resindent on the California return too?

thank you so much!!!

[pk]

Hello @Annetta .

Based on the answers you have  provided about the situation, my conclusions are 

(a) Assuming that your  husband's  income is all associated with the school i.e. scholarship and stipends  etc. and covered by 1098-T from the school, you can file as Married Filing Joint but keep your foreign income outside US purview because your residency start date  is Sept. 21.2019.

(b) The cleanest filing would be for your husband to file a Dual Status.  This would mean filing  form 1040-NR or 1040-NR/EZ ( as he has done for the past few years -- and not supported by TurboTax, but his school or SprinTax  can help ) covering.  Then preparing a form 1040 ( supported by TurboTax ) as Married Filing Joint, covering the rest of the year.  Note that this could mean filing by mail but it may be a better ( besides being conservatively correct )  taxwise.  It also excludes your foreign income since your residency started on Sep. 21 2019.

(c) For California purposes,  there is two approach again ----  1. you file a joint return where  your husband is a  resident for the year and the wife's residency start date is Sept. 21 2019 -- thus excluding your   prior foreign income.;  2.  your husband files a resident return  ( married filing Sep  ) and  you do not file anything.    Method one is the most conservative and meets the intent of the law.   Also note that whichever you file, the federal and state should be in tune -- since California ( like most states ) depend on the federal return for congruence.

Hope this helps.   If you have more , especially  since your scenario is becoming specific to you  and probably not helpful to others, you can PM me