# Dual Status Alien Tax Filing



## EFAnne (Oct 13, 2012)

Hello.
I have been reading a ton about our tax situation, and I am not sure I am on the right track. My hope is that my resident alien husband will not need to file this year.

Situation:

I am a US citizen and my husband came over on an IR-1 visa that we filed via Direct Consular filing in the UK. He arrived in the US on Dec 30, 2015.

We both worked in the UK in 2015, neither of us worked in the US or had any US income.

My understanding is that in the 1st year, my husband is considered a dual status alien, and is responsible for all US income (so, none) and worldwide income after the date he became a resident alien (also, none as he stopped working in the UK in August).

I was hoping to file married filing separately, and under the dual status rules, my husband would not need to file for 2015 as he had no income, US or otherwise for the 1 day that he was a resident alien. 

My questions are:

1) Can I proceed this way? (There is no benefit to file jointly as we had foreign income and I will fall under the exclusion amount.)

2) Because he was a resident alien for 1 day in 2015, does he need to file FBARs and FACTAs for 2015 as well?

I am also wondering how you keep from going crazy with the complexities of US tax law! Any advice would be greatly appreciated.


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## BBCWatcher (Dec 28, 2012)

He has a 2015 FinCEN Form 114 ("FBAR") filing requirement -- and an IRS Form 3520 filing requirement if it applies. IRS Form 8938 ("FATCA") only applies, if it applies, if he has to file a tax return.

So does he? I think so. The discussion of filing thresholds seems to be all based on annual figures with no allowance for apportioning in dual status situations. What a difference a day or two makes. 

That said, why don't you look into filing a joint return together for all of 2015? He can elect to do that for 2015. You can also both consider skipping the FEIE for 2015. Skipping the FEIE just might toss some valuable Foreign Tax Credits into the calculation from/for both of you. It'll depend on your U.K. tax rates, but there's a reasonable chance that path will work better since U.K. tax rates are fairly high.


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## EFAnne (Oct 13, 2012)

Thanks. Had I known I think we would have just not spent New Years Together 

Are you suggesting filing form 1116 Foreign Tax Credit rather than 2555 Foreign Earned Income Exclusion? I have been looking into both because I am also in the process of back-filing 3 years of expat taxes via the Streamlined Offshore Process- yup, this is my time to pay amends for my tax ignorance.

My assumption was that FEIE and FTC are sort of means to the same end, and while I don't know how we will fare with FTC, I know that we will be under the FEIE threshold. Also, I have been back in the US since October, so I wont be eligible for the full FEIE. Is there a way to calculate which option is more beneficial? Are there advantages to FTC that I am not seeing?

I guess since I am going over a bunch of meaty tax issues, I was looking for the simplest way to file for 2015. It seems complicated to file with two different partial-year bonafide resident end dates (mine Oct, his Dec) and his dual status, and my understanding was the bottom line would be the same- no tax owed. If there is an advantage to filing jointly, then that would make for an easy decision. 

I am not sure what you mean by the filing thresholds seems to be based on annual figures. Are you saying that he does need to file if he makes the threshold (I think $10,300 for 2015) at any point in the tax year, in contrast to the info about only being liable for non US income after his resident date?

Thanks for clarifying FBAR, and 8938. He will prob need to do both. What a difference a day makes, indeed. I am also in the process of weighing if there is any advantage to using the physical presence test for our 4 years abroad vs bonafide- even though we are a pretty clear bonafide case. It seems that when you come back to the US, your FEIE eligible days end on the day you leave the country, but with the physical presence test, you can count back 330 days within 12 months and you get a more advantageous exclusion.

Can you tell I have gone down the rabbit hole? Its so nice to have this forum to turn to.


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## BBCWatcher (Dec 28, 2012)

All I'm suggesting is that you might want to run your tax calculation a couple different ways: once taking the FEIE, once skipping it. If you're using tax preparation software it's pretty simple to see which path works best for you.

Skipping the FEIE makes financial sense if your effective foreign tax rate on the excluded income is higher than what your U.S. rate would be. That wouldn't be terribly surprising for U.K. residents. The higher foreign tax means you accumulate excess tax credits on the U.S. side, and then you should be able to spend those excess credits, to reduce or wipe out your U.S. tax on that October to December, 2015, period, for example. (And in the future.) The FTC is also one possible reason why you might not want to use the Streamlined Program. Under current tax rules you can carry excess FTCs forward up to 10 years. If the years prior to your Streamlined years are excess FTC years, then ideally it'd be nice to carry those excess FTCs forward, too.

I'm not advocating a particular path, just recommending a bit of investigation to figure out the best path for you both.

"Dumb" question.... You mentioned the Streamlined Program. How did you get your husband into the United States without submitting your tax returns as part of his visa process? I didn't think that was possible, at least not if you're the financial sponsor.


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## Bevdeforges (Nov 16, 2007)

Take a look at IRS Publication 519 for information about your husband's filing requirements as a dual status alien. https://www.irs.gov/publications/p519/ch01.html

FEIE and the FTC aren't actually two approaches to the same thing. For the FEIE you have to have actually worked outside the US, and it applies only to "earned income" (salary and salary-like earnings). The FTC is available to anyone who has paid income taxes to a foreign government (the UK in your case) and who is therefore eligible to offset any US taxes with tax paid to the other government. The FTC can be applied to salary or to "passive income" (interest or investments, for example).
Cheers,
Bev


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## EFAnne (Oct 13, 2012)

Thanks for both of your responses. I did not understand that FEIC and FTC were different in the ways described, I will look into it to see what works best for our situation as suggested. Also thanks for Publication 519, I will take a look. Somehow I did not come across it in all my googling.

To answer your question, BBCWatcher, my father was my husbands sponsor and submitted his financial records with his affidavit. I did not initially submit any of my info, as it was not clear to me that I also needed to be his sponsor for liability purposes, even if I could not provide the financial support required. As you may have guessed, his initial application was rejected at interview because I did not also provide the affidavit of support. I then submitted a signed affidavit of support (in supplement to all my father's info) which was just the form filled out with my signature (no financial records, as I was not in a position to sponsor him anyway). I had a moment where I thought his application was going to be rejected, but actually, they accepted it. It seems all they wanted was my signature on a piece of paper so I could be liable in addition to my father, I guess. Not that I would advocate this method for anyone else, but I am so glad it worked for us. My husband just got his official green card in the mail yesterday, actually.


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## BBCWatcher (Dec 28, 2012)

No problem, EFAnne. I was just curious.

"Best guess" is that a 2015 joint return (full year) will be the simplest approach -- your husband would have to elect to do that versus filing his own individual dual status tax return -- and then you'd "run the numbers" to figure out if taking or skipping the FEIE makes the most sense. But that's a mere guess. Dual status tax returns are kind of complicated, and then filing separate tax returns is a bit more complicated again. Making what's called a Section 6013(g) election isn't too terribly common, but in this case it probably makes sense just for the greater filing simplicity if nothing else.

I'd recommend getting your overseas Streamlined Program (if that's what you choose) done and dusted before your ordinary 2015 tax filing deadline. You can put in a request for an automatic extension on your 2015 tax return(s) now using IRS Form 4868.


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## Bevdeforges (Nov 16, 2007)

I'd take a look at pub 519 - IIRC, for the dual status year, if your husband has no US sourced income and only arrived on December 30th (hence, max. two days in the country), he probably has no filing obligation for 2015. That would make it easiest for you to simply file as married, filing separately and then work out the details when it comes time to do your 2016 filing next year.

If you file jointly, you'll have to declare all his income in the UK for the year - which does seem a bit extreme when he only spent two days in the country with no income during that time.
Cheers,
Bev


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## BBCWatcher (Dec 28, 2012)

EFAnne's husband presumably passes the "green card test" (Publication 519, page 7), so a December 30th arrival appears to be enough to put 2015 in the history books as his first tax year. Obviously that's worth rechecking, but I did check once. 

Yes, a Section 6013(g) election means reporting the full year of income on a joint tax return. I still think it'd be the simpler way to go and at least as tax advantageous as the alternative (dual status tax year filing). I could be wrong, but that's a reasonable guess in the circumstances. We're dealing with U.K. income, foreign excludable and/or foreign tax creditable. It should work just fine.


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