In our ever more globally connected world, it is not at all uncommon for U.S. citizens to meet and fall in love with a citizen of a foreign country. Of course, the last thing anyone wants to think about is tax consequences on such a joy-filled occasion as the marriage of two people. While it may be okay to wait until after the honeymoon, however, taxes are unfortunately definitely something you and your new spouse are going to have to discuss. If you, or they, choose to remain abroad, at least for most of the year, one of the biggest decisions you must make is whether to elect to treat the non-resident alien spouse as a U.S. citizen for tax purposes. Our skilled tax attorneys and CPAs at the Tax Law Offices of David W. Klasing have helped many clients who have married foreign citizens who remained abroad consider the pros and cons of what is known as a “6013(g) election.”
Section 6013(g) of the tax code allows U.S. citizens or residents married to non-residents to elect to treat their nonresident alien spouse as a resident alien for the purposes of their U.S tax return. In order to qualify as a non-resident alien, the spouse cannot be a U.S. citizen or green card holder or meet the “substantial presence test.” This test is met if the non-resident spouse spends 31 or more days in the U.S. during the tax year and 183 days in the country during the 3-year period that includes the current year and the 2 years immediately before that.
If the foreign spouse qualifies to make the election, there is a rather complex process required in order to do so. In sum, a statement must be attached to the joint return for the first taxable year for which the election is to be in effect. The statement must contain the following:
Failing to comply with this process exactly could result in your being unable to make the election. As such, it is best not to try to file this statement without the assistance of an experienced tax attorney like those at the Tax Law Offices of David W. Klasing, who can make sure everything is done properly and filed according to the requirements.
The election allows the couple to file as “Married Filing Jointly.” This comes with a number of tax benefits such as lower tax rates and larger deductions, as well as entitlement to certain credits such as foreign tax credits which may be attributable to the foreign spouse and used to deduct your U.S. tax liability. However, there is also a downside if you have a working spouse in that you will have to disclose your spouse’s income on your return, which can lead to steep tax assessments, especially if their income is already being taxed by their home country. Consulting with an experienced tax professional like the CPAs and tax attorneys at the Tax Law Offices of David W. Klasing before choosing to file in this way can help ensure that you are making the wisest financial decision.
If the non-resident spouse chooses not to make the election or is not eligible to make the election under 6013(g), they will be considered a non-resident alien for tax purposes. In this instance, you will typically use the filing status of “married, separate.” You will lose deductions and tax credits compared to filing jointly, but you will not have to report the income or worldwide assets of your foreign citizen spouse on your tax return, which makes this a good option if your spouse makes a lot of money. So long as the spouse does not have any U.S.-based income and is not claimed as a dependent by another U.S.-based taxpayer, you can request and be granted an exemption from reporting the earnings and assets of the non-resident alien spouse when you file your return.
There is also another option aside from filing as “married, separate” if you have dependent children who are U.S. citizens and spent at least half of the year living with you in the U.S. This involves filing as Head of Household, which gives you access to certain deductions that are not eligible to those without dependent children. As always, consult with an experienced tax attorney like those at our firm before deciding how to file.
Whether or not it is financially beneficial for you to make the 6013(g) election to treat a foreign spouse as a resident for tax purposes depends greatly on the details of your situation. Furthermore, if your spouse has unknowingly met the substantial presence test, they may be ineligible for the election. As such, before making the election, you should speak with a skilled dual tax attorney and CPA like those at the Tax Law Offices of David W. Klasing. We can advise you on what the best choice is for you and spouse’s finances, and help you complete the complex process with as minimal effort on your part as possible. Call us today at (800) 681-1295 to set up a consultation.
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