# U.S./Chile, Chilean non-citizen spouse has foriegn income, filing jointly



## Oregano (Jan 28, 2014)

I have a bit of a strange situation and I welcome any insight. 

I'm a U.S. citizen, married to a Chilean citizen who was visiting the U.S. on a Fulbright scholarship. Last year we both earned income in the U.S. and filed "married but filing separately" because of Fulbright regulations. This year he's not required to have Fulbright prepare his taxes. He does not have a green card and was in the U.S. on a J-1 visa.

This year we moved to Chile. We both had 9 months of income in the U.S., and he had 1 month of income in Chile. 

We were planning on filing jointly, but I wasn't sure how to report foreign income for a non-U.S. citizen. Does a non-citizen have to report foreign income on their U.S. taxes? It seems counter-intuitive (as if anything about taxes is intuitive) that a non-U.S. citizen would have to pay taxes on income earned abroad in their home country.  On the other hand, if we're filing jointly, is that money kind-of considered mine? And thus an asset for a U.S. citizen?

I'd love to know of any online resources that could help me figure out if filing jointly is in our best interest. 

Thanks in advance!


Edit: If it's relevant or useful, my spouse has a SSN.


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## Bevdeforges (Nov 16, 2007)

If you're filing jointly, then you are electing for him to file as a US resident for the whole year, which means he will have to declare the income in Chile.

What you could do is take a look at IRS Publication 54. There may be the option of "excluding" the foreign income (via form 2555) but only after you have lived there for a full year (i.e. one entire calendar year, or 12 consecutive months). The details of this are explained in Pub 54, including how to handle the extension of your return until you reach the one year outside the country point. (You also have the option to file now, pay the tax and then after you have the full year outside the country, amend your return to claim the 2555 earned income exclusion and have your taxes on that foreign income refunded.)

Take a look here for most of the relevant IRS publications on filing taxes from overseas: U.S. Citizens and Resident Aliens Abroad
Cheers,
Bev


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## Oregano (Jan 28, 2014)

Thank you very much, that's so helpful!


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## BBCWatcher (Dec 28, 2012)

Could you elaborate on the Fulbright regulations, by the way?


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## Oregano (Jan 28, 2014)

I was referring to the fact that Fulbright prepared his taxes and he wasn't able to file jointly with me as a result. I don't know if this was because we didn't notify them of our marriage in a timely fashion, or if it's their policy.


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## Oregano (Jan 28, 2014)

I'm still trying to figure out where to report our foreign income on the 1040... Any clues? It seems like the IRS document 54 seemed to mostly cover the Foreign Income Exclusion (which we don't qualify for). All the e-file software I've used so far doesn't seem to be able to accommodate reporting foreign income when the credit and exclusion don't apply. And of course, expat accountants are $150/hour and I'm a graduate student...


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## BBCWatcher (Dec 28, 2012)

Oregano said:


> I was referring to the fact that Fulbright prepared his taxes and he wasn't able to file jointly with me as a result.


Well, he has the option of filing an amended return if he wishes. He is solely responsible for his tax return. Fulbright cannot force him to file a certain way.

Yes, Fulbright might have assisted him in filing his tax return, in that case as a separate return. Maybe (maybe) Fulbright refused to assist him with a joint return, but refusing to assist is different. (Not very nice perhaps, but different.) And an amended return is still possible.


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## BBCWatcher (Dec 28, 2012)

Oregano said:


> I'm still trying to figure out where to report our foreign income on the 1040... Any clues?


See that giant word "Income" on the front (page 1) of IRS Form 1040? It's on the left hand side, roughly in the middle of the form. That's a clue!

That's also the correct answer. You report your income on one or more lines in that section (lines 7 through 22 inclusive on 2013 Form 1040). Which line(s) you use depend(s) on the type(s) of income you received.

As another clue, the core form is only 2 pages, and nothing else on the form looks like a candidate, does it?

....Sorry, I'm being a bit flippant. Actually, this is a sign you need to take a break from your tax preparation and relax a bit. Listen to some music, go out and enjoy a nice dinner, take a nap, walk in the park, whatever. Your brain probably needs a rest. Been there.


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## Bevdeforges (Nov 16, 2007)

Oregano said:


> I'm still trying to figure out where to report our foreign income on the 1040... Any clues? It seems like the IRS document 54 seemed to mostly cover the Foreign Income Exclusion (which we don't qualify for). All the e-file software I've used so far doesn't seem to be able to accommodate reporting foreign income when the credit and exclusion don't apply. And of course, expat accountants are $150/hour and I'm a graduate student...


If you're talking about salary income, it goes on line 7. It can take a little bit of hunting around on the tax filing software to find how to report this, because for e-filing purposes, there is a special "form" that is supposed to be a substitute for the standard W-2.

Make sure you scroll down to the bottom of any list of options for entering salary income - the "foreign salary" option normally turns up dead last on the list.

OTOH, for income that would be 1099 type income (i.e. interest or other sorts of investment income) you can usually just dummy up a 1099 form in the software. Those aren't submitted with the tax filing. Only the information you input is transferred to the appropriate line of the form. Just leave blank any of the lines of the 1099 that are not needed (code numbers and the address of the bank or other institution).
Cheers,
Bev


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## Oregano (Jan 28, 2014)

*Fulbright Regulations*



BBCWatcher said:


> Well, he has the option of filing an amended return if he wishes. He is solely responsible for his tax return. Fulbright cannot force him to file a certain way.
> 
> Yes, Fulbright might have assisted him in filing his tax return, in that case as a separate return. Maybe (maybe) Fulbright refused to assist him with a joint return, but refusing to assist is different. (Not very nice perhaps, but different.) And an amended return is still possible.


From the Fulbright newsletter:
"GRANTAX is the tax management service used by IIE in New York. GRANTAX expert tax preparers will submit your annual United States tax report (commonly referred to as an income tax return) to the IRS at no cost to you. All Fulbright grantees are eligible to use GRANTAX services; however, if you receive your funding directly from IIE, you are required to use the GRANTAX service. "

He was bound by contract. As part of accepting the Fulbright scholarship, he was _required_ to use their tax preparation services. Then we married and found out that part of the fine print is they reserve the right to not prepare a joint return for the Fulbright scholars. They told us he was not eligible, and that's what it says on the paperwork, too. Probably because when Fulbright is the only source of income for the student, the tax refund goes directly back to the sponsor.

But yes, maybe we could file an amendment now.


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## BBCWatcher (Dec 28, 2012)

Yes, all that agrees with what I wrote, including the option to file an amended return.

There's also a tricky bit of legal language there. Note that he was required to use their tax preparation services. He was not required to file the tax return they prepare. He can't be. That would be entirely illegal, because he's the one that has to swear it's an accurate tax filing. So what he could have done is said, "Thank you very much," taken the preparer's work, constructed his own joint return, then filed that. Or, alternatively, he may have been able to pay that preparer a supplement for a joint tax return.

Yes, I speak from experience on testing that legal issue. I won.


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## Sha007 (Feb 7, 2014)

Hi,

Re Thread: U.S./Chile, Chilean non-citizen spouse has foreign income, filing jointly

Is there a reason you wish to file Married Filing Jointly (with non resident spouse)?


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## Bevdeforges (Nov 16, 2007)

There are various schools of thought on the advantages and disadvantages of filing jointly vs. separately when it comes to mixed couples (i.e. an NRA married to a US Citizen) filing from overseas. It can depend on a whole bunch of things, like the US tax situation of the NRA spouse, your income bracket, your tax situation in your country of residence, etc.

There is also the interpretation of various passages in the IRS regulations and/or instructions regarding an NRA spouse "voluntarily" joint filing with their USC spouse.
Cheers,
Bev


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