Question

Assignments Note: Each Case is worth 20 Points. To achieve all your points, please following the memo instructions and do proper research to support the advice you're giving the taxpayer. Case 1: John and Mary Baker married on January 1st 2019. He is a U.S citizen, and resides at 2110 Newkirk Ave Brooklyn NY. His wife lives in Jamaica all of 2019 and is not a US resident or citizen. She earns about 25,000 US dollars annually. He wants to know, what his filing status options for 2019 are and which option will benefit him the most. Due February 10, 2020:

Answer 1

If your spouse has neither a green card nor resident alien status, he/she will be classified as a nonresident alien (NRA). If this is the case, you have 2 choices, each of which comes with its own set of complexities:

A) Choose to treat spouse as resident alien for tax purposes.

• If you follow this route, you must understand that you will have to report your spouse's worldwide income (as described above) and it will be subject to U.S. tax. You also should realize this is an active choice you make and there are certain procedures that must be followed to make it effective:
  • First, you have to attach a statement, signed by both spouses, to your tax return for the first year to which the choice applies. The statement must include a declaration that one spouse is a nonresident alien and the other is a U.S. citizen or resident alien, and you are choosing to both be treated as U.S. residents for the tax year. You also have to include the name, address and Social Security number (or Individual Taxpayer Identification number) of each spouse.
  • You also have to include the name, address and Social Security number (or Individual Taxpayer Identification number) of each spouse.
  • Second, note that for the first year you make the choice, you have to file a joint return. But in later years you can file joint or separate returns. It is also important to realize you must continue to file this way (treating both as U.S. citizens or resident aliens) unless you (or circumstances) end the choice. This can happen if either spouse revokes the choice in writing, either spouse dies, you have a legal separation or divorce, or the IRS ends the choice because it feels you haven't kept adequate records.
• If you intend to have your foreign spouse apply for a green card and eventually for the U.S. citizenship, it is in your best interest to treat him as a U.S.resident and file jointly.
• If your spouse has a self-employment income you may choose to treat him as a nonresident and file separately. Then, his income is not a subject to U.S. income tax and self-employment tax.
• If your non-resident spouse has foreign income from assets (e.g., rental income, capital gains, etc.) and you file as married filing separately or as head of household, this income is not a subject to U.S. income tax. If you file jointly, you must report this income on U.S. tax return.
• Married individuals are not allowed to file under the single filing status, and when you are married to a non-U.S. spouse (referred to as a nonresident spouse) you are also unable to file a joint return unless a separate election is made to do so.