Good evening.
I've done some searching through this great website, but haven't really found any specific answers to the questions that I have.
So, here is our situation/questions:
I am the US citizen, my wife is a Canadian, still living in Canada. She has her CR1 visa and will officially be entering in two weeks. I had planned on filing our taxes by the due date, but I am not confident the place we went to did them correctly.
Our return was completed with the 1040 and form 1116. We are expecting a refund, however, I believe it should be more. The worker who assisted us said we did not qualify to file using form 2555 since my wife was not a resident yet. Even though I was sitting there with the IRS pub. 519 that explained we could elect to treat her as a resident and use 2555 with a letter electing this. She basically told us we were incorrect and she had never heard of that. So, my next question to her was if I could file MFS, as I could itemize since I purchased a house last year and have all of the mortgage write-offs. We were told I could not file under this status because my wife would not be filing and itemized return.
So, my questions are:
1.) Can we use form 2555 instead of 1116 by submitting a letter electing to treat my wife as a resident since we were married in 2010?
If we were to use this form, does the fact she was present in the US more than 30 days (whatever the maximum days allowed are)? She visits me almost every weekend as that is where our house is. If so, we would need to list every time she entered the US in 2010 (which would be around 30-40 times).
2.) If we can not use form 2555, can I file MFS and itemize my return?
3.) I believe the preparer used $1.029 instead of $1.031 (which I found on the IRS website as the official conversion rate for 2010) as the conversion of Canadian dollars to US dollars on the return. I assume I should have this corrected?
Sorry this is so long.
I really appreciate all of the great information on this website.
Thank you!
Non-Resident Spouse / US-Canadian Taxes
Moderator: Mark T Serbinski CA CPA
[quote="nelsona"]1. Yes.
2. Yes.
3. Minor.[/quote]
Thank you very much Nelsona for your time and reply.
I forgot to mention that we did not file the return we had prepared, since I did not believe it was done correctly. I filed an extension to have some extra time.
As a follow up to my question #2, pertaining to filing MFS...Does my wife even need to file a return, since she has not lived in the US, has not activated her visa yet and did not earn any money in the US? When I fill out a 2555, I still seem to get a larger refund when I file MFS, as long as I itemize.
On a side note, the only reason we are waiting to activate her visa is because she sold her property in Canada and it will officially close and fund on May 12. Looking forward to 2011 taxes, would activating her visa before or after her physically receiving the funds affect the taxes on the profit in the US? When we file next year, my thought was that the profit she will be making (around $40,000) from the sale will be reportable to Canada, not the US, as long as she has not entered as a permanent resident before she receives the funds or has been elected to be a PR on this years taxes.
Thank you again Nelsona. I very much appreciate your time and assistance.
2. Yes.
3. Minor.[/quote]
Thank you very much Nelsona for your time and reply.
I forgot to mention that we did not file the return we had prepared, since I did not believe it was done correctly. I filed an extension to have some extra time.
As a follow up to my question #2, pertaining to filing MFS...Does my wife even need to file a return, since she has not lived in the US, has not activated her visa yet and did not earn any money in the US? When I fill out a 2555, I still seem to get a larger refund when I file MFS, as long as I itemize.
On a side note, the only reason we are waiting to activate her visa is because she sold her property in Canada and it will officially close and fund on May 12. Looking forward to 2011 taxes, would activating her visa before or after her physically receiving the funds affect the taxes on the profit in the US? When we file next year, my thought was that the profit she will be making (around $40,000) from the sale will be reportable to Canada, not the US, as long as she has not entered as a permanent resident before she receives the funds or has been elected to be a PR on this years taxes.
Thank you again Nelsona. I very much appreciate your time and assistance.
It is possible (but doubtful) that you end up paying less tax on MFS than on MFJ -- but only if you have high itemized deductions.
Her income should not be contributing any tax at all, since she too would file 2555 on her wages. I would be re-running the software on this. Remember that filing federally doe not make her taxable in your state.
But she does not, for 2010, need to file in US or state at all.
As regrds to 2011, she will need to file in 2011, and again the decision will need to be made on whther she should file full year, whether to joint file with you, or whether to file MFS.
As to the taxability of her property in either US or canada, that depends on type of propertry.
Her income should not be contributing any tax at all, since she too would file 2555 on her wages. I would be re-running the software on this. Remember that filing federally doe not make her taxable in your state.
But she does not, for 2010, need to file in US or state at all.
As regrds to 2011, she will need to file in 2011, and again the decision will need to be made on whther she should file full year, whether to joint file with you, or whether to file MFS.
As to the taxability of her property in either US or canada, that depends on type of propertry.
After 20 years, I am severely cutting back on responses. Do not ask specifically for my help. There are a few others on this board that can answer most questions. All the best
Thank you Nelsona.
Our last hurdle is to figure out the 330 day rule for from 2555. My wife and I live just across the border from each other, so she generally comes down to our house in the US every weekend. She spent over 35 days in the US last year, a weekend at a time, plus a few extra days when we got married. Being able to use form 2555 does increase our refund significantly.
Our last hurdle is to figure out the 330 day rule for from 2555. My wife and I live just across the border from each other, so she generally comes down to our house in the US every weekend. She spent over 35 days in the US last year, a weekend at a time, plus a few extra days when we got married. Being able to use form 2555 does increase our refund significantly.
There is no need to count days.
If you are electing to treat her as a resident alien (by filing jointly), then she is considered a resident alien. Therefore, since she is a Cdn citizen and canada has a tax treaty with US, and has a bona fide tax home outside US for the entire year, she is allowed to claim FEIE regardless of how much time was spent in canada.
So there is no need to establish that she has been physically outside US for any number of days.
This is more clearly expalined in Pub 54 , page 11.
If you are electing to treat her as a resident alien (by filing jointly), then she is considered a resident alien. Therefore, since she is a Cdn citizen and canada has a tax treaty with US, and has a bona fide tax home outside US for the entire year, she is allowed to claim FEIE regardless of how much time was spent in canada.
So there is no need to establish that she has been physically outside US for any number of days.
This is more clearly expalined in Pub 54 , page 11.
After 20 years, I am severely cutting back on responses. Do not ask specifically for my help. There are a few others on this board that can answer most questions. All the best
Now, what this should make you think about is how she will be treated in 2011. If she wants to use FEIE for 2011, she needs to make sure that she has the 330 days before she comes down, because she will not be able to use the bona fide tax home trst, since it will not be for the entire tax year.
After 20 years, I am severely cutting back on responses. Do not ask specifically for my help. There are a few others on this board that can answer most questions. All the best