# Which Residency Status for TAX



## Billius (Aug 17, 2010)

Hi, I moved here on Oct 1st 2010 (on an H1B Visa)

For the 2010 tax year I could have one of the following residency status's for TAX purposes (note - not to be confused with residency for immigration ):

Non-Resident Alien. 
Resident Alien
Dual Status

They all have pro's and cons AFAIK.

But the general info I got was that it would make more sense for me to choose resident alien for tax purposes because that way I would get the maximum tax credits/exclusions for my wife and two children.

The down-side is that my world-wide income for 2010 needs to be declared BUT because there is a UK/USA tax treaty I should be able to avoid double-taxation.

Does this match other people's understanding?

Thanks

Bill


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## Crawford (Jan 23, 2011)

Yes, you file as a Resident Alien - because you are resident here and are not a Green card holder or a citizen.

It is extremely unlikely that you will pay double taxation because of the Treaty, but you do need to declare your world wide income and investments.


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## Billius (Aug 17, 2010)

Thanks Crawford.

It might be useful for others to quote the IRS Publication 519. _(see below)_

As described here it becomes clear that you 1) have to file for an extension because by April 18th you'll not have have got substantial presence for 2011 2) you should fill out a 1040NR to calculare tax on US income as if non-resident

The one final thing I'm unsure about is if I have to do anything special for my wife who is on a H-4. Can a 4868 beb used for joint filing extension?

Thanks,

Bill

----

_Statement required to make the first-year choice for 2010. You must attach a statement to Form 1040 to make the first-year choice for 2010. The statement must contain your name and address and specify the following.
That you are making the first-year choice for 2010.

That you were not a resident in 2009.

That you are a resident under the substantial presence test in 2011.

The number of days of presence in the United States during 2011.

The date or dates of your 31-day period of presence and the period of continuous presence in the United States during 2010.

The date or dates of absence from the United States during 2010 that you are treating as days of presence.

You cannot file Form 1040 or the statement until you meet the substantial presence test for 2011. If you have not met the test for 2011 as of April 18, 2011, you can request an extension of time for filing your 2010 Form 1040 until a reasonable period after you have met that test. To request an extension to file until October 17, 2011, use Form 4868, Application for Automatic Extension of Time To File U.S. Individual Income Tax Return. You can file the paper form or use one of the electronic filing options explained in the Form 4868 instructions. You should pay with this extension the amount of tax you expect to owe for 2010 figured as if you were a nonresident alien the entire year. You can use Form 1040NR or Form 1040NR-EZ to figure the tax. Enter the tax on Form 4868. If you do not pay the tax due, you will be charged interest on any tax not paid by the regular due date of your return, and you may be charged a penalty on the late payment._


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## Bevdeforges (Nov 16, 2007)

Billius said:


> The one final thing I'm unsure about is if I have to do anything special for my wife who is on a H-4. Can a 4868 beb used for joint filing extension?


Normally, you would file as "married filing jointly" so you file the extension form using the same assumption. Don't have a copy of the 4868 form handy, but there should be something on there about your filing status - and a place to put the spouse's name and social security or ITIN.
Cheers,
Bev


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## twostep (Apr 3, 2008)

Crawford said:


> Yes, you file as a Resident Alien - because you are resident here and are not a Green card holder or a citizen.
> 
> It is extremely unlikely that you will pay double taxation because of the Treaty, but you do need to declare your world wide income and investments.


Green card holder is "resident alien".


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## Billius (Aug 17, 2010)

Bevdeforges said:


> Normally, you would file as "married filing jointly" so you file the extension form using the same assumption. Don't have a copy of the 4868 form handy, but there should be something on there about your filing status - and a place to put the spouse's name and social security or ITIN.
> Cheers,
> Bev


Yes I was thinking about the filing status.. on my W-4 in 2010 I already have put MFJ and added my two children as dependents. I did this after a month or so - so for some pay I was over-taxed and then it was correct - But only assuming I am filing as Resident Alien (i.e. First-Year Select option as I didn't meet substantial presence in 2010 and only will in May/June 20110)

so... if I was to follow their advice and use 1040NR to calculate my tax I won't be able to claim so many tax with-holdings right? So it will appear as if I've underpaid them tax - so I would have to send of a cheque now....

then when I do get substantial presence in May/June I would do the actual filing with a 1040 with all the tax witholdings and I would end up asking for a big fat refund...

so are you suggesting I calculate my tax for the filing extension with the witholdings ? i.e. a simplified 1040 where I only look at the US income since Oct 1st but with MFJ + 2 dependents?

The other complication is our house in the UK was sold on 5 Oct (i.e. after I started work). It was <$500,000 capital gains joint allowance, but over $250,000 single. So I think I'll need to declare that and that is the main reason I need to jointly file I suppose.

Finally, when I do get round to doing 1040 with world-wide income do I declare sale of stock in the UK prior to coming to US ? - there was no real overall gain on them in the 4 years I had them - so I haven't thought of them 'til now...

Thanks

Bill


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## Billius (Aug 17, 2010)

twostep said:


> Green card holder is "resident alien".


yes - but to be clear - I'm not a green card holder. I have H1B and my wife and children H4s. 

So for immigration purposes I'm currently a Nonimmigrant Alien. (i.e non resident or dual status for tax UNLESS I use First-Year Select once I have substantial presence for 2011).

The one thing I may have missed though is do I need to file w-7 forms for both of my children to get them an ITIN number for my 1040 when I file it?

Thanks,

Bill


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## Bevdeforges (Nov 16, 2007)

Billius said:


> The one thing I may have missed though is do I need to file w-7 forms for both of my children to get them an ITIN number for my 1040 when I file it?
> 
> Thanks,
> 
> Bill


Yes. If you claim them as dependents, they must have ITINs so get them their numbers now.
Cheers,
Bev


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## Bevdeforges (Nov 16, 2007)

Going back to your original questions, I would be tempted to go with filing as a "dual status alien" for 2010, as you were actually only resident in the US the last three months of the year and thus your tax status should by rights only start on October 1st. For Jan 1st through Sept. 30 you were a non-resident alien.

You don't have the option to choose the resident alien status for the entire year 2010 because you're not married to a US citizen or resident. (I'm assuming here that you came to the US with your wife and family in 2010.)

It's actually the most advantageous option for you as you won't have to worry about declaring or paying on any transactions before you moved to the US. Your withholdings should cover your tax obligation on your salary from the US job (maybe - the withholding tables don't always work out the way they should, but for your first year, you should be ok).

I'm not sure the status of the house sale, but I would think you can still exclude the married gain as long as you are filing jointly with your wife. (Check the information in pub 519 to be sure, but the way the exclusion is calculated it makes no sense to pro-rate it over the single year.)

The important thing for the moment is to file for the extension (jointly, with your wife) until you qualify for the substantial presence test. At that point you will file your 1040 for 2010 - but only including income from the date you arrived in the US.
Cheers,
Bev


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