Frank S. Duke, Jr. wrote:

- quote -

I'm not 100% positive on this point but I believe there is
no such election available for the last year of residency.
The IRC (§ 7701(b)(2)(B)) says that the last day of
residency for a resident alien who is a resident because of
the substantial presence test, is the last day the person
was physically present in the US if the person is not a
resident for any period in the next year and during the
portion of the year after departing from the US, the person
has a closer connection to the foreign country. It appears
as though he falls into this category unless he can show
that from 9/1/03 to 12/31/03 he had a closer connection to
the US rather than to the Netherlands. This would make him
a dual status alien and require he file the 1040-NR with
either an attached 1040 or equivalent statement. It also
limits him to using itemized deductions.

--
Alan
http://taxtopics.net

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Frank S. Duke, Jr. wrote:

- quote -

What is the status of his Green card? If he surrendered the
card when he left the U.S., he is no longer a resident. If
he retained the card, he remains a resident for as long as
the card remains valid.

Assuming he kept the Green card, he files his returns just
as though he were in the U.S.. However, if he meets the
requirements of Section 911, he can claim the Foreign Earned
Income Exclusion by including Form 2555 with his return.
For 2003, he must qualify under the physical presence rules
or wait until after 1/1/2005 to claim bona fide residence.
You don't say what country he comes from; if he is from the
Netherlands, the bona fide residence could be a problem.

In any case, to the extent that his income in the
Netherlands is taxed, the related Dutch income tax can be
claimed as a credit, from Form 1116.

He must continue to file U.S. income tax returns as long as
he retains the Green card. Remember, the IRC applies to ALL
U.S. citizens and permanent residents. He is considered a
permanent resident until he surrenders or otherwise loses
the Green card.

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I have a client who has lived and worked legally in the US
for 4 years working for a multi-national US corporation. On
1 Sept. he transferred to the Netherlands and continued to
work for the same company. According to PUB 519, he can be
either a resident alien for 2003 or a dual status alien, a
resident up until 1 Sept and NR after that.

It looks like it is to his benefit to claim resident status
for the whole year. If he does this, how are the taxes on
his foreign wages handled? He has a W-2 covering up until 1
Sept but after that, nothing official. He was able to get
his company to issue a letter showing the wages and
deductions by month in Euros and the taxes and withholdings
in Euros. He translated them to $ using appropriate
exchange rates for each month and gave me totals. It looks
like the only way to get these wages in to the software
would be to create a non-standard W2 and enter only his
wages.

I assume that he reports these wages as he would have, had
he worked in the US and takes a Foreign Tax credit on f1116
for the taxes paid. Does that sound correct?

All freely provided advice guarantee correct or double your
money back

Frank S. Duke, Jr. CPA
Cincinnati, OH USA

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