Table of contents:
Spouse documentation
Q: Do I have to report my spouse's income?
A: The short answer is no. You don't have to. However, it may be in your interest to file together. We will analyze your situation and advise you of this. This is one of the core services we offer to our clients.
Q: My wife has an expired green card, but it has not been renounced. What are her tax return options?
A: Your wife is considered a U.S. resident for tax purposes until she officially renounces the green card. Therefore she is required to file U.S. tax returns. She can file jointly with you.
Q: I file a joint return with my husband in our resident country. We will file separately in the U.S. How should I report the tax I paid myself?
A: Please prorate the tax you paid yourself using the household's total tax at the income distribution rate between spouses.
Example: Your spouse earned $80,000, and you earned $20,000. You paid a $10,000 joint tax. Pro-rate the tax paid for your share using your joint tax rate of 10% - i.e., allocate $2,000 to the tax you paid.
Q: I am married to a non-US citizen. Do I have to include their details in the T.Q. (and, by extension, my U.S. tax return)?
A: You must file as married and provide the IRS with basic details about your spouse if you are married. If your spouse is not a U.S. citizen, information about your spousal income is optional and does not have to be included in your tax return (but doing so may benefit you). This can be discussed with your accountant. We will make sure to take the position most beneficial to you.
Q: I have an interest in a Foreign Partnership owned jointly with my husband
A: Husband and wife partnership can be treated on a U.S. tax return as a "qualified joint venture", i.e., you and your husband each report their share of income/expenses on a separate Schedule C as a Sole Proprietorship.
If your spouse is a non-US citizen/green card holder and will not be listed on your tax return filed separately, please only report your share of income/expenses on the Passive Income > Interest section:
Click the Configure Life & Income button on the left side of the Tax Questionnaire you are working on.
Click Yes next to Self-employed or Independent Contractor.
Click Next Step.
Click Yes next to I earn interest.
Click Submit.
Navigate to Income > Passive Income > Interest section.
Q: I'm applying to the Streamlined Program and changed my marital status during these years
A: You need to complete a Tax Questionnaire for each year. Thus, indicate your marital status separately for each year. At any point in time, you can:
If you were married for an entire year, select I am married during the T.Q. creation or click the Configure Life & Income button on the left side and click Yes next to I am married.
If you were not married for a year, but, for some reason, you see the Family subtab, you can click the Configure Life & Income button and click No next to I am married question.
If you were married for a part of a year, select I am married during the T.Q. creation, then answer Yes to the question Were you married for only part of the filing year? and provide details. For example, you were married in 2014 and split up in 2015. For the 2014 and 2015 years, select I am married, for 2015, answer Yes to the question Were you married for only part of the filing year? For the 2016 year, don't select I am married.
Note: you can click the Change Income Types button at the left and select I am married at any time.
Q: My spouse is a nonresident alien. Can I e-file?
A: Various options e-filing options are available. However, they all require that each person listed on the return have a U.S. tax ID (either a Social Security Number or an ITIN).
Option 1:
Submit Form W-7 with your tax return and request an ITIN number for your NRA spouse. This will be your last paper filing. Once your spouse has been assigned an ITIN number, you can e-file. You can continue filing separately, and your spouse will not have any obligation to report to the IRS.
Option 2:
If you have a dependent with a U.S. Social Security Number (a child or other dependent who lives with you), you may qualify as head of household: a status that allows you not to include your NRA spouse on your return.
Option 3:
If you have a child who lives with you but does not have a U.S. tax ID number, you can obtain a Social Security Number or ITIN number for that child and then file as head of household (see option 2).
Q: Should I file jointly with my spouse?
A: If you are married, you are not allowed to file single. Your choices are to file jointly or separately - but you cannot claim you are single. In 98% of cases - if you are both US citizens/GC holders, you are better off filing jointly (MFJ). It makes more sense to file separately in rare instances, but this is a rule of thumb.
If one spouse is not a US citizen, head of household (HOH) and married filing separately (MFS) are often used. We will handle this analysis for you during tax preparation.
❗ Important note: if you file a Non-resident return (1040NR), you must file separately.
FEIE and spouse
The foreign earned income exclusion is individual; each person has their calculation for it, even if you file jointly.
Q: My spouse is not a U.S. person. Do I have to mail in my tax returns?
A: If your spouse is not a U.S. citizen or a Green Card holder, in most cases, you will be required to file separately and must therefore send your return in by mail rather than filing electronically.
If you obtain an ITIN for your spouse, you may be able to e-file your returns. Please note that you do not have to file a joint return or declare your spouse’s income. If you want an ITIN for your spouse, we can file Form W-7 for you along with your tax return. Once your spouse has obtained an ITIN, you will still be able to file separately, and your return will qualify for e-filing.
The other option is that you can obtain a U.S. Social Security number for you if you have a child. This will allow you to file as Head of Household, and your return will qualify for e-filing.
Q: I have a spouse who’s a nonresident alien (NRA), is it better to file jointly or separately?
A: In general, married filing jointly is the most beneficial filing method. However, other issues can complicate this, such as the desire not to include a foreign spouse's income on a tax return. You can make a one-time election (to treat a foreign spouse as a U.S. person for tax purposes) and revoke this choice only once. Please choose wisely when you do this, as you cannot flip-flop each year. When we prepare your return (after the E.L. is signed), we will be able to advise you on whether filing jointly would be beneficial.
When you complete the Tax Questionnaire, please answer the question Are you filing jointly with your spouse? with Not sure.
❗ Important note: filing jointly means that your spouse will be considered a U.S. resident for tax purposes. Your bank will be required to request Form W-9 to obtain their Taxpayer Identification Number (TIN), which may be either their Social Security Number (SSN) or their Taxpayer Identification Number (ITIN).
Q: My spouse doesn't have a Social Security Number. What should we do? Does that mean they need an ITIN?
A: No, they do not necessarily need an ITIN. If you are married to a non-U.S. citizen or a G.C. holder, you can choose to leave them off of your return. If you wish to add your NRA (nonresident alien) spouse to your return, this can be done by filing for an ITIN (Form W-7, which we can prepare for you in conjunction with your return for an additional fee). This will allow you to e-file in the future and file jointly with your NRA spouse.
More information on ITINs and whether or not you should include your nonresident alien spouse on your tax return:
Q: I am a U.S. citizen. My spouse is not a U.S. citizen and doesn't have a Green Card. What documentation will I need to provide for my spouse?
A: It depends on which filing status you use. You have three options:
Married Filing Jointly (MFJ)
Married Filing Separately (MFS).
Head of Household (HOH) (only possible if you have children).
To file as MFJ, we can apply for your spouse's ITIN (Individual Tax Identification Number) when we file your return. To request an ITIN for your spouse, we will need a certified copy of their foreign passport.
To file as MFS or HOH (a more beneficial filing status than MFS), you do not need to provide any documentation for your spouse.
Child and dependent documentation
Q: My children don't have U.S. Social Security numbers. Should I mention them as dependents in the T.Q.?
A: Yes, you should. That information will allow us to optimize your return. You can leave the S.S.# field blank.
Remember, we work for you, not the IRS, and we will advise on the best way to file for you.
Q: Child benefits of any kind
A: If this is already included in the gross income you reported, then there is no need to separate and provide it here. There are non-taxable child benefits paid for children with special needs or to single mothers. You can indicate the type of benefits in the CPA comment box by clicking the pencil icon.
Q: Did you incur childcare or other dependent care expenses?
A: Childcare means establishments (or individuals) that provide child welfare and safety. Establishments that fully or partially provide for education are not eligible - neither in the U.S. nor abroad. Thus a daycare facility would be eligible, while a kindergarten or preschool would not.
❗ Important notes:
Do not report childcare expenses for children over 12 by the end of the year. If you do, you have a very high chance of being audited by the IRS. Likewise, do not report expenses for overnight camps or extracurricular programs where parents must accompany children.
This expense is only deductible if you are single or both spouses are employed.
This can be anyone paid for providing child care (either family or hired help). It can be individuals and organizations, foreign and U.S., nurseries and afterschool programs - but not educational institutions. Child care is a deductible expense if procured for child safety and well-being but not for education.
If this is a U.S. person, their Social Security or EIN is reported, and that person includes this payment on their tax return. No tax I.D. is required if it's a foreign person, and we report expenses paid to the foreign care provider.
Child Tax Credit
If you have a child under the age of 17 with a social security number, you may be eligible to receive up to $1,500 per eligible child, even if you have made no tax payments. However, to do so, you cannot also take advantage of the Foreign Earned Income Exclusion (FEIE).
Suppose you claimed the Foreign Earned Income Exclusion (FEIE) in the prior year. In that case, you must revoke the exclusion for five years following the year of revocation to claim the Additional Child Tax Credit (ACTC).
Q: How do you know whether to revoke or not to revoke FEIE?
A: For the five years:
It would be best if you lived in a high-income tax country.
You should pay a high level of income tax to that foreign country.
It would be best if you had little income from the U.S.
It would be best if you worked most of the time in a foreign country.
You must have earned income (passive income does not qualify for the ACTC).
Recommended that the child(ren) remain under 17 for five years.
Pros:
May benefit from receiving $1,400 per eligible child.
$1,500 beginning with the 2022 tax year.
Cons:
Can't claim FEIE for the five succeeding tax years.
You have fewer choices to avoid tax because you can't claim FEIE.
Risky to revoke FEIE because it depends on unknowns like future income, tax, children, where you live, etc.
This may result in more tax due in coming years than had you not revoked FEIE.
These are only some of the factors to consider. If you are uncomfortable with the risks, do not revoke them.
Q: Am I eligible to claim the Child Tax Credit while living abroad?
A: In the past, we have processed a refundable child tax credit for each child for expats with earnings under $100K. A small loophole enabled expats to claim this credit regardless of the foreign-earned income exclusion.
The wrinkle:
The IRS has recently closed this loophole. If you utilize the FEIE, you cannot claim the Child Tax Credit. Although it has not explicitly been stated, the credit may no longer be claimed when amending prior-year returns.
What can we do:
Depending on your situation, there are still ways to claim the Child Tax Credit. We can look over your previous year's tax return for an additional charge and let you know if it is possible for you to do so and if it makes sense to file an amendment for up to 3 years. Should an amendment be warranted, this additional charge will be applied toward tax preparation fees.