Visa issues

[appelman]

Client has an H1-B visa with a social security number valid for work with INS approval. Spouse and 13-year-old child have H4 visas. All have been in the country for several years. Two questions:

1) Is there any reason taxpayer and spouse can't elect to be treated as residents for tax purposes, apply for an ITIN for spouse, and file jointly?

2) Is child considered a resident for tax purposes by virtue of his physical presence, and can he then obtain an ITIN and be claimed as a dependent?

[Koss]

Resident vs. Nonresident Alien

It isn't really an election.

First, you need to check and make sure that they are not covered by provisions of a tax treaty. That depends on what country they are from.

Assuming that's not applicable, then the taxpayer is either a resident alien or a nonresident alien for tax purposes. I don't think there is an election to be made by the taxpayer.

He may well be considered a resident alien for tax purposes based on the substantial presence test. Pub. 519 has a really good flowchart for determining whether someone is a resident or nonresident alien. With the substantial presence test, you need to be careful, because some days of presence in the US don't count. It depends on the type of visa, and some other strange variables.

The substantial presence test also applies to the spouse and children.

So to answer your original question, yes, it may be in their best interest to file a joint return, and take the children as dependents, and that will involve having the spouse and children apply for ITINs.

Head of Household is another possibility. But that would still require an ITIN for the children, so they might as well go the whole nine yards and do an MFJ return.

You probably think I've lost my marbles, because I'm talking about HOH, and the taxpayer and spouse are living together.

But HOH is an option when the spouse is a nonresident alien, even if they were not living apart.

See my earlier post:

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

BMK

[appelman]

Actually, there is an election

If a resident is married to a non-resident spouse, they may both ELECT to be treated as residents for tax purposes and file jointly. However, this election does not apply to dependents; a dependent must be a US citizen, resident, or national, or a resident of Canada or Mexico. So my biggest uncertainty is whether the H4 visa trumps the presence rules and prevents the child from being considered a resident. Incidentally, these people are from Hong Kong.

[Koss]

Election

Yes, when a nonresident alien is married to a resident alien, they can elect to treat the nonresident alien as a resident alien because of the marriage.

But why wouldn't the spouse automatically be considered a resident based on days of presence anyway?

BMK

[Koss]

H4 Visa

I don't see the H4 as somehow overriding the substantial presence test.

Pub. 519 goes into great detail about how certain days of presence don't count, and there's a lot of visas that cause the days of presence to be excluded. They involve students, teachers, and employees of a foreign government. H isn't on the list. I think the child is a resident alien based on days of presence.

BMK