Question:
I've just started to decipher (or try to decipher) the instructions
for filing taxes for Reinhard, and quite frankly, I think we don't WANT
to file for him as a resident. If we do that, he's taxed on his whole
year's income, and we really only want to pay taxes on his income since
moving to the US.
He doesn't meet the phyiscal presence test, but I'm not sure about the
green-card test. He doesn't have a green-card, just the EAD. I know
you can say "That counts" but are you also allowed to say "That doesn't
count"?
Answer:
Green card test means you are a permanent resident - no more, no less. EADs
don't mean a thing as far as your filing status goes. If he doesn't meet the
physical residence test it may well be easier to file as a non-resident. I
filed the 1040-NR the first year I was here so that I wouldn't have to worry
about my UK income. Of course, I didn't have to think about a filing status
either whereas you have the complication of deciding whether it is more
beneficial to file jointly so that you get the higher allowances at the cost
of needing to deal with his overseas income. Remember that:
a) The first 72000 (is that still the figure) of overseas income doesn't
matter
b) Above that tax credits should kick in because Europe tends to have higher
taxes than the US (the only time you should end up paying tax in the US on
foreign-earned income which has already been taxed is if the foreign
taxation is lower than that in the US).
It's $76,000 US for the year 2000.
You will only pay taxed on his earnings when converted to US funds is
over $72,000(?) and there is a tax treaty in place between the US and
Austria. The DM is now about 50 to the US dollar which means you could
make 144,000 DM US taxfree if you paid taxes in Germany.
He does pass the physical test. It is not a calendar year, but a year
started on the date he arrived and moved back to the same date one year
earlier. There is no green card test.
I don't understand this. The test (forgetting about previous years) is -
have you been physically present in the US for > 186 days for the given tax
year. So, has he been present here for > 186 days between 1/1/00 and
12/31/00. I think the answer is no although, ironically, if he had not been
refused entry to the US that time (was that in 2000?) he might have been!
There is a "green card test". It says that green card holders are residents
for tax purposes.
If he had green card, he is a resident for tax purpsses even if he
spends less than half a year in the US.
If he doesn't have a green card, he is a resident for filing purposes if
he spent more than half the year (number of days???) in the US.
It's 183 days, and yes, he would have passed the substantial presence
test if he had been allowed in in March. Their loss ;)
But no "EAD" test ;)
Part of the problem is I know what I WANT to hear (that he pays US taxes
on 3 months of income) so I keep looking for a place where it says that ;)
There is a tax treaty between the US and Austria... and there are about
15 Austrian Schillings to the dollar lately, which means he can make
1,140,000AS. Not bad ;)
The problem we're encountering is that, according to his Austiran tax
advisor, now that he is working in the US he doesn't pay taxes in
Austria. (It has to do with strange laws over there dealing with being
self-employed - he pays VAT but not social security and other taxes over
there...)
That means his income until October was taxed in Austria, and can be
exempt, but since October it isn't being taxed there, which means it
needs to be taxed here.
We're still trying to figure out how to seperate these things for the
IRS. I suspect its an unusual case, and I'm on the verge of
recommending we go to H&R Block or something. :^p
So from October 7, 1999 - October 7, 2000? Then he doesn't pass
the physical presence test, because he was not here for 183 days
according to their formula. Unless I'm reading this whole thing totally
wrong.
According to the publication I've got (519 - US Tax Guide for Aliens)
there is something called the Green Card Test.
It says (page 3):
You are a resident alien of the US for tax purposes if you meet either
the green card test or the substantial presence test for the calendar
year (January 1 - Dec 31). ...
Green Card Test
You are a resident for tax purposes if you are a lawful permanent
resident of the United States at any time during the calendar year.
This is known as the "green card" test. You are a lawful permanent
resident of the US at any time if you have been given the privilege,
according to the immigration laws, of residing permanently in the US as
an immigrant. (etc. etc.)
(page 4)
Substantial Presence Test
You will be considered a US resident for tax purposes if you meet the
substantial presence test for the calendar year. To meet this test, you
must be physically present in the United States on at least:
1. 31 days during the current year, and
2. 183 days during the 3-year period that includes the current year and
the 2 years immediately before that, counting... (etc. etc.)
He doesn't meet substantial presence... the green-card test, if
interpreted strictly, he doesn't meet either because he is pending
adjustment - but I know he can choose to be a resident as my spouse.
We're trying to figure out how he pays part of the year in one place and
part in the other. I *think* he claims his entire year for US taxes,
does the exemption part through September, and isn't exempt for the last
3 months, since he hasn't been taxed on that yet.
I also think I'll be happier next year when it'll be a bit more
straight-forward.
This is true. As I said in my previous message, that's how I filed the first
year I was here. Have you looked at 1040-NR?
Joyce Johnson has a tax page where her husband has a foreign income
exclusion write up. We have one, too.
http://www.txdirect.net/users/mike38/irs2.htm
Maybe it will help, maybe not.
Jim did not take a green card test. He included a letter stating that
he had applied for adjustment of status based on marriage to a USC and
wished to be considered a PR for the purposes of tax filings.
As for the 186 day thing when I get home this evening I will pull out
the paperwork done by our accountant for the year 1998 and tell you
exactly how it was calculated.
