- quote -

In the future, should you post to this board or any board,
it would be helpful if you included all the relevant facts.
Merely stating "but she is a US resident now" leaves out an
important fact. Namely, that she became a permanent lawful
resident of the US sometime in 8/05 and by definition was a
dual status alien in 2005 and not a nonresident alien.
There are very specific instructions for how dual status
aliens file. Those instructions start on page 29 of IRS Pub
519. You want to use the instructions for someone who was
nonresident at the beginning of the year and resident at the
end of the year.

Her return would appear to be straight forward as she
probably did not have any US taxable income prior to her
residency start date. Basically, she files a 1040 with the
words "Dual Status Return" printed across the top of page 1.
The 1040 will contain all the income that is US taxable.
This is all income she received starting with her first day
of residency.

She attaches to this return a 1040NR with the words "Dual
Status Statement" across the top. This document is not a tax
return per se. This statement is probably going to contain
zero income as she probably did not have any effectively
connected or not effectively connected income prior to her
residency start date. If she did have effectively connected
income, you would show it on the 1040NR and post it to the
1040 along with the other income identified in my previous
paragraph. Any effectively connected income is taxed on the
1040. Any not effectively connected income tax is computed
using the 1040NR and any tax treaty rules and the amount is
posted to the 1040 by including it on the dotted line next
to Line 63 and including the amount of tax on Line 63.

Note that there was no mention of her pay while she was
overseas working before arriving in the US as a permanent
resident. She has no obligation to report this income to
the US as it is nonresident income not subject to US tax..

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- quote -

My wife has a green card (i.e., she is a permanent resident
alien) which she obtained in August 2005. It is my
understanding, perhaps erroneous, that she does not have the
option of filing 1040NR as a non-resident. If she files
1040, how does she explain that she is excluding the portion
of her non-US income earned before she became a US resident?

- quote -

Her visa status is CR-1, her employer is a foreign
corporation that I will not name. There is a tax treaty
between her old country and the US, and we are familiar with
treaty benefits, but my question is about excluding income
earned before one became a US resident, not about treaty
benefits.

Thanks for the explanation of the FTC. I now see that she
would not be eligible for it in the US.

Thanks for your help!

<< ================================================== ===== > << The foregoing is intended for educational purposes only > << and does NOT constitute legal OR professional advice. > << > << The Charter and the Guidelines for submitting > << messages to this newsgroup are at www.asktax.org. > << Copyright (2006) - All rights reserved. > << ================================================== ===== >

texflyer[at]gmail.com wrote:

- quote -

If 2005 was her first year in the US, then for tax purposes,
she does not have enough days of presence in 2005 to be a US
resident alien. For 2005, she would file as a nonresident
alien. As she performed services in the US, her US income
for those services is taxable by the US as effectively
connected income. You did not tell us for whom she worked
nor did you tell us her visa status.

Without that information, we do not know if she is eligible
for any exclusion of income under a tax treaty with the
country she was last a resident of immediately before coming
to the US. Assuming no treaty benefit, as a nonresident
alien she only declares her income that was effectively
connected to her US trade or business (typically her income
from personal services rendered in the US) and any income
not effectively connected to a US trade or business and
sourced in the US (e.g. stock dividends).

Now we get to the foreign tax credit. Your wife is not
eligible for the FTC because her income for personal
services performed in the US is US source income and she has
to pay foreign income tax only because she is a citizen or
resident of that country. However, she should be eligible
for the equivalent of the FTC by that country for taxes she
has to pay the US on that same income.

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I am sure this question has come up before, but I can't find
anything in the archives that quite matches our situation.

My wife moved to the US last August, but continues to work
for her foreign employer. Her salary is paid and taxed in
her old country, but she is a US resident now, so it looks
like she needs to pay US taxes, too. We are trying to figure
out how to file her tax return for last year so that she does
not end up paying US taxes on the portion of her income earned
*before* she became a US resident.

We understand that we have the option of filing jointly and
declaring her a tax resident for the entire year, but this
would involve paying US taxes on all of her last year's income,
and this is something that we definitely want to avoid (the
income tax rate in her old country is much lower than US income
rates). So we plan on "married, filing separately" instead.

If my wife files a separate tax return, how does she exclude
her foreign income earned before she became a US resident?
Also, for the portion of her foreign income earned after she
became a US resident, how does she receive credit for the
foreign taxes? We reviewed IRS documents pertaining to
foreign tax credit, but they only talk about getting credit
for an entire year's worth of taxes, which does not apply in
her case.

Any advice will be appreciated.

<< ================================================== ===== > << The foregoing is intended for educational purposes only > << and does NOT constitute legal OR professional advice. > << > << The Charter and the Guidelines for submitting > << messages to this newsgroup are at www.asktax.org. > << Copyright (2006) - All rights reserved. > << ================================================== ===== >