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August 18, 2017 - Phil Hodgen

Yes, A Married Person Can Claim Head of Household Filing Status

Summary

“Head of Household” filing status is desirable–it can save you some tax.

Proving you qualify for head of household status is not easy.

Among other things, head of household filing status is for unmarried taxpayers only.

But it is possible for U.S. citizens (or resident aliens) who are married to nonresident aliens to qualify for head of household filing status. All you need is to maintain a household, and a dependent who is not the nonresident alien spouse.

The Requirements

The requirements for claiming head of household status are:

  1. Be unmarried at the close of the tax year.2
  2. Not be a surviving spouse.
... continue reading
Friday Edition
August 4, 2017 - Phil Hodgen

Nonresident Real Estate Investors, Zero Income, Mandatory Tax Return Filing

This discussion is inspired by an email I received from A.A., a CPA living and working outside the United States.1

Nonresident Real Estate Investors, Zero Income, and U.S. Tax Return Filing Requirements

When are nonresidents required to file U.S. income tax returns? Let’s ignore the obvious situation–when they earn income in the United States.

Let’s look instead at a vastly more interesting question. When must a nonresident individual file a U.S. income tax return (Form 1040NR) even when there is zero income earned in the United States?

Because yes, nonresidents with zero income must sometimes file U.S. income tax returns.... continue reading

Friday Edition
July 21, 2017 - Phil Hodgen

The Section 6013(h) Election for Nonresidents to File a Joint Tax Return

How to Become a U.S. Resident Taxpayer

People who are not citizens of the United States and are not residents of the United States are called “nonresident aliens”. The U.S. will impose income tax on them only if they earn income from U.S. sources.

Noncitizens of the United States who are residents of the United States (for income tax purposes, not necessarily for immigration law purposes) must pay U.S. income tax on all of their income, earned anywhere in the world.

There are three ways that a noncitizen of the United States becomes a “resident alien” taxpayer:

  • Have a permanent resident visa (aka green card);1
  • Spend too much time in the United States (this is called the substantial presence test);2 or
  • Choose to be treated as a resident alien by filing the right kind of paperwork–a special tax election.
... continue reading
Friday Edition
July 7, 2017 - Phil Hodgen

Who Can File a Joint Tax Return

U.S. Citizen Wants to File a Joint Tax Return

U.S. citizens living abroad will often (gasp) marry someone who is not a citizen of the United States. The married couple lives happily outside the United States, so the noncitizen spouse is not a resident of the United States in the eyes of the IRS.

Everything is fine until tax return season. The U.S. citizen looks at the “filing status” part of Form 1040, and silently wishes for that “Married Filing Jointly” status. (Filing a joint tax return with your spouse usually means that you pay less tax).

Who Can File Joint Tax Returns

A U.S.... continue reading

Friday Edition
June 23, 2017 - Phil Hodgen

How to Not Pay U.S. Social Security Tax While Working Abroad

Americans who move abroad to work face a particularly difficult job in preparing tax returns. Let’s cheerfully ignore income tax problems today, and instead look at Social Security taxes.

Technically, I am talking about FICA1 taxes: the taxes you pay to fund your old-age pension, survivor’s pension, disability insurance, and Medicare benefits. But for simplicity’s sake–and to match the way normal people talk about these taxes–I will refer to these taxes as “Social Security” taxes.

Let’s look at the semi-established digital nomad. You are a U.S. citizen who owns an operating U.S. business, formed as a corporation. You plan to move abroad and travel for a few years.... continue reading

Friday Edition