# Tax Filing Status - Spouse NRA



## AussieJester (Oct 10, 2015)

Hello All,

In preparation to move to USA I was looking at the various ways in to file my taxation status.

*Scenario*

* I begin work in Feb 2016 so for US taxation purposes in 2016 I will be a Resident Alien (sorted)
* My wife and children will remain in AUS until at least October 2016, possibly the full year of 2016 and coming in 2017.
* My wife will work in AUS whilst there. 

There are a few options I understand. As there is a taxation treaty between AUS and USA is it worth filing jointly. (I understand that my wife will have to get a ITIN).

Are there any pitfalls / issues with this (aside from the paperwork) ?

Cheers, Ryan


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## BBCWatcher (Dec 28, 2012)

AussieJester said:


> * I begin work in Feb 2016 so for US taxation purposes in 2016 I will be a Resident Alien (sorted)


Not _exactly_. Let's suppose you enter the United States on January 18, 2016, then you start work sometime in February, 2016. Ordinarily your U.S. tax residence begins on the date of entry, which in this example would be January 18, 2016. The year in which that occurs is your "dual status" tax year and requires filing both IRS Forms 1040 and 1040NR a particular way. Refer to IRS Publication 519 for more information on how to do that. (Some tax preparation software can do this for you. I think even the free edition of TaxAct.com can handle a dual status tax year.)



> There are a few options I understand. As there is a taxation treaty between AUS and USA is it worth filing jointly. (I understand that my wife will have to get a ITIN).


The tax treaty is unlikely to have much if any impact, at least from the U.S. perspective. Maybe it'll be helpful on the Australian side.

It's hard to say whether it'll be to your household's advantage to file a joint U.S. tax return or not. If you forced me to guess now based on the information you provided, I'd say yes, it would be advantageous. However, when the time comes (early 2017) I would use U.S. tax preparation software (such as the free edition of TaxAct or TaxSlayer) to run the calculation both ways. One run would be "Married Filing Separately" (and as "dual status"). The other would be "Married Filing Jointly," also dual status, but with your spouse making a Section 6013(g) election, if necessary. (Meaning, she voluntarily agrees to be treated as a U.S. resident for U.S. tax purposes even if she isn't.) For the second run you'd toss in her worldwide income. You could use the Foreign Earned Income Exclusion on her Australian earned income (plus the Foreign Tax Credit for other income taxed elsewhere), or you could skip the FEIE and just go with the Foreign Tax Credit for everything. (So actually you can run _four_ "What if?" simulations -- this is exactly what tax preparation software is good at doing.)

My "best guess": joint and skipping the FEIE (FTC only). But it's really not possible to predict until 2016 is in the past.


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## AussieJester (Oct 10, 2015)

Thanks Heaps BBC watcher.

So when I start my job what status should I put for withholding ? This obviously affects my 'take home' pay to a certain degree


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## BBCWatcher (Dec 28, 2012)

AussieJester said:


> So when I start my job what status should I put for withholding ? This obviously affects my 'take home' pay to a certain degree


You're referring to Form W-4 (for the benefit of other readers).

Your goal is to have just enough withholding so that you avoid a penalty for underpayment of tax(*), but no more withholding than that since the IRS doesn't pay you interest on overwithholding. I think you'll have to do what practically all of us do when taking a new job which is to answer A through H and just go with the answer you get on line H. In your case your spouse will be paying Australian income tax on her income from work (I assume), so I think you can safely stop at line H and not worry about the extra Two-Earner worksheet. Essentially you can treat her as if she weren't working, for 2016 anyway.

When the time comes to file your first U.S. tax return obviously you'll discover how good or bad that withholding number was, but chances are it'll be "good enough." You can then file a new W-4 sometime in 2017 if you think you can improve on your 2016 W-4 and want to adjust your withholding. Also, if/when your wife moves to the U.S. and takes employment there then I would adjust your, your wife's, or both W-4s to increase withholding.

If you get the withholding "wrong" (too little) it's not the end of the world. I recall that happening to me one year, but I also recall that the penalty was pretty minor since you're usually not far off anyway. I then filed a W-4 to bump up the withholding number by one, and that was that.

(*) Remember also to make your own separate quarterly estimated U.S. income tax payments if you have other, nontrivial income that is both not subject to withholding and not subject to a comparable or higher foreign income tax.


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## AussieJester (Oct 10, 2015)

Thanks Heaps. I think filing as single will be the best option. Reading the information on the IRS website when I file the W-4 is I have a spouse who is a NRA I tick the 'single' box.


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## Bevdeforges (Nov 16, 2007)

AussieJester said:


> Thanks Heaps. I think filing as single will be the best option. Reading the information on the IRS website when I file the W-4 is I have a spouse who is a NRA I tick the 'single' box.


Where did you find that? If you are married, your options are supposed to be between "married, filing jointly" and "married, filing separately." If there is an option to file as "single" when one is married to an NRA, I would be very definitely interested in that....
Cheers,
Bev


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## AussieJester (Oct 10, 2015)

Bev..

On the actual W-4 form it it states _Note. If married, but legally separated, or spouse is a nonresident alien, check the “Single” box"_

To sum it up - If I tick the 'Married filing separately" then does my wife have to file a return ? She will be a NRA and have no US based income (classifying her as exempt), however she still needs to get an ITIN as I need to put this information into the 1040 ?

Then can I claim the kids as dependents even though they do not live with me - looking at Pub 501 then not ? 

If there is no difference between the exemptions I can claim between single, or married filing separate then it seems I would pay more for being married as opposed to single.

Some it seems to be contradictory. Perhaps I should consult someone - can anyone recommend someone so I can get this cleared up - obviously running 2 households we want to maximise of "in the hand" cash.

It's all getting confusing now


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## BBCWatcher (Dec 28, 2012)

A W-4 is not a U.S. tax return. It's a form to help you and your employer figure out how much tax should be withheld. Follow its instructions.

If you're married, then, when it comes time to file your tax return, you have at least two choices for filing status (Married Filing Separately, Married Filing Jointly) and perhaps a third (Head of Household). Your wife may not be required to get an ITIN (or SSN), but cross that bridge if/when you get there. Same thing with your dependents -- you'll follow those rules when you file your tax return.


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## Bevdeforges (Nov 16, 2007)

The W-4 form is merely for your employer to determine the proper amounts to withhold from your pay. You're also permitted on the W-4 form to claim more or fewer allowances (for dependents) than what you actually have - all in order to get a better approximation of the withholding amounts. (Note, too, that there is no "married, but filing separately" option.)

So no, just because it says to do things one way on the W-4 doesn't mean the same applies to the 1040.
Cheers,
Bev


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## AussieJester (Oct 10, 2015)

OK thanks everyone ... I was getting confused with alot of different information floating around.

The W-4 is like a tax number declaration and the 1040 is the return. 

I just need to make sure I get all the information right.. first year I think will require someone to help me out.


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## ForeignBody (Oct 20, 2011)

Don't forget to deal with any state tax withholding that may be necessary also.


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## AussieJester (Oct 10, 2015)

I have state and county withholding sorted out - was just this single vs married filing a single federal issue I was struggling with understanding the correct status under which I should file.


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