US Citizen/Foreign Spouse couple in Taiwan

[death&taxes]

New client last year and the return is coming back in 2 weeks and I want to be sure I'm handling this correctly. So here's the scenario: Married couple, 3 small children, everyone lived together the entire year in Taiwan (and for the past 6 years). Children all US citizens. Husband is the US citizen, being paid by a US organization where all US taxes are being withheld $18,477. He does not file and report his income in Taiwan. Spouse (Taiwanese citizen) does not have an ITIN (which I strongly urged her to do and gave them forms last year to apply) She does not want to report her income on US return so files her income tax return in Taiwan. Previous preparer handled the US return in the same manner.

So, I prepared a mail-in return (no ITIN no efile), with an explanation of why we could not efile. Married filing separately, claiming the children, (No EIC - MFS and out of country) After MFS standard deduction and exemptions taxable income down to -0- and he gets a refundable Child tax credit.

Thoughts please. Would anyone handle this differently?

[Koss]

Nonresident Alien Spouse

He may be able to use Head of Household--even though they were married and living together the entire year.

No, really.

There's a special rule when your spouse is a nonresident alien.

But he still won't get EIC.

And on your fact pattern, it may not make a difference on the bottom line of his return. You said his tax liability was already zero, and he's getting the Additional Child Tax Credit.

But if he uses HOH, then he can e-file, since he won't have to provide an ITIN or SSN for the spouse.

You probably think I'm nuts. You can't use HOH if you are married and living with your wife.

In this case you can. But you still don't get EIC.

See my earlier post, in response to an almost identical scenario, in which I cited the applicable section of Publication 17:

http://www.thetaxbook.com/forums/showthread.php?t=18971

BMK