Q: What if you live in a foreign country, your spouse is a nonresident alien and does not have a SSN, and all your income was earned in that country and is less than the Foreign Earned Income Exclusion? Would it still matter whether you filed joint or separate returns?
A: If you're married, your only option to file is as married filing jointly, or married filing separately. Filing as single is no longer an option. So how do you do that if your spouse doesn't have a U.S. tax I.D. number? Simple--get one. Form W-7 will take care of it, and can actually be filed with your 1040. Lots of documentation is needed, so be prepared to make some copies of passports and the like.
You then have a choice of married filing jointly or married filing separately. MFJ is only available if you choose to treat the non-resident spouse as a resident. While this gives you full use of the standard deduction and other benefits, it also opens up the non-resident spouse's income to worldwide taxation.
If you choose MFS, the U.S. spouse may lose out on some tax benefits (like Roth IRA contributions). However, if your foreign earned income exclusion cancels out all your income, this might be the best choice.
you should mention here that the US spouse can treat him/herself as unmarried for head of household status purposes if there is a qualifying person (other than the NRA spouse) that can make the US spouse a HOH.
Posted by: Les Edelman | 2007.12.15 at 07:29 PM
If I choose to file as MFJ and all of my income for 2007 was in the US and all of my spouse's was abroad (about 11,820) can I exclude her income? I've seen varying opinions about this. Thanks, great site by the way.
Posted by: Chris Lytle | 2008.03.29 at 11:01 AM