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Married to A Non-US Spouse? Filing the US Income Tax Return / FBARs and Form 8938 Part II

Part I of the posting can be viewed here.

Making an Election to Treat the Foreign Spouse as a US “Resident” – Section 6013(g) Election

 One can actively choose to treat the foreign spouse as “resident” alien for tax purposes by making what is known as a Section 6013(g) election. Making the election generally means the couple can file using MFJ status. In certain cases, this can be very advantageous – for example, tax benefits can result because of the lower tax rates and larger deductions that are available when the couple can file using MFJ status. Tax benefits can also arise because of foreign tax credits attributable to the foreign spouse. These credits can be used to offset US tax liability on foreign source income. Tax benefits can result, too, if one spouse is not working or that spouse’s income is excluded under the foreign earned income exclusion. In these cases, there is no additional income on which the couple would pay tax, but they would still get the benefits of MFJ status.

 Making the 6013(g) election means that each spouse must report and pay tax on his / her worldwide income. For the first year the election is made, the couple must file a joint income tax return. In subsequent years, the couple can file joint or separate tax returns, but each party must continue to be treated as US persons, reporting worldwide income, unless the election is revoked or otherwise terminated.

Once made, the election remains in effect for all subsequent tax years unless it is somehow terminated. This can occur in one of several ways – the taxpayers revoke the choice in writing, either spouse dies, a legal separation or divorce occurs, neither spouse is a US citizen or resident at any time during the year, or the IRS terminates the election (usually because it determines adequate recordkeeping has not been met).

Certain pitfalls in making the election should not be overlooked. A significant disadvantage to the election is that it can be made by a taxpayer only once in a lifetime. Thus, once the election is terminated for any of the aforementioned reasons, it will not be possible to make the election again with the same or a different spouse. For example, if the taxpayer divorces and remarries, or the taxpayer’s spouse dies, and the taxpayer later re-marries, the election cannot be made again.

Procedure in Making the Section 6013(g) Election

Making the election requires adherence to certain procedures including attaching a special statement to the tax return for the year the choice is first being made. This statement must be signed by both spouses and must contain certain identifying information as well as the Social Security Number (SSN) or Individual Taxpayer Identification Number (ITIN) of each spouse. To get an SSN, see Form SS-5, “Application for a Social Security Card” (if outside the US) or contact a Social Security Administration (SSA) office.

Use Form W-7 for obtaining an ITIN 

FBARs and Form 8938

In all cases, careful attention must be paid to so-called FBAR filings and filing with respect to “specified foreign financial assets” on Form 8938. If you do not know what an FBAR is, please read my article “Worldwide Tax Laws for American Expatriates” and see the sections titled: “Tax Information Reporting Requirements” and “Delinquent Tax Returns and FBARS” which discuss the required reporting for non-US bank and other financial accounts. Generally, US citizens and US residents must file an FBAR under certain circumstances, but the determination of whether an individual is a US “resident” is to be made without regard to having made the Section 6013(g) election.

With regard to “specified foreign financial assets” reportable on Form 8938, different dollar threshold limitations apply based on certain factors such as US versus non-US residency of the taxpayer, marital status and tax filing status.

If required, the Form 8938 is required in addition to the so called “FBAR”. One does not replace the other. You can read about Form 8938 in one of my earlier blog postings 

The IRS has issued a useful chart comparing the Form 8938 and FBAR 

 

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8 thoughts on “Married to A Non-US Spouse? Filing the US Income Tax Return / FBARs and Form 8938 Part II

  1. Nice post. I was watching continuously this site and I’m impressed! Extremely useful info especially the last part I care for such info much. I was looking for this particular information for a long time. Thankyou and best of luck.

  2. Making the election requires adherence to certain procedures including attaching a special statement to the tax return for the year the choice is first being made. This statement must be signed by both spouses and must contain certain identifying information as well as the Social Security Number (SSN) or Individual Taxpayer Identification Number (ITIN) of each spouse

    question: at the time of filing their return one of the foreign spouse does not have ITIN. A year later they got an ITIN, can they go ahead and prepare 1040x and elect to use MFJ? or should they have their valid SSNs/ITIN at the time of filing their returns, otherwise they cannot make the election at a later date?

    1. This is a good question, and one that would really require research. What I can tell you without doing specific research is to look at IRS Pub 17 p 23 – this is a good starting point. It provides that you can change your filing status by filing an amended return 1040X. It also states that if you or your spouse (or both of you) file a separate return, you generally can change to a joint return any time within 3 years from the due date of the separate return or returns. This does not include any extensions. Here is the Publication link http://www.irs.gov/pub/irs-pdf/p17.pdf

  3. with regards to ..”US citizens and US residents must file an FBAR under certain circumstances, but the determination of whether an individual is a US “resident” is to be made without regard to having made the Section 6013(g) election”.
    A joint checking account from a US citizen and a NRA (husband and wife) triggers an FBAR if >$10K but what portion is allocated to the USP and what portion to the NRA ?
    Thank you for your great blog

    1. @ TopSpin FBAR requires no ‘allocation’ betw USP and NRA – it requires the highest balance in the account at any time in the tax year. An income tax return is different from an FBAR. Allocation issues may arise if USP is not filing a joint income tax return w. the NRA – the Q will be how much of the interest income earned in the joint account belongs to USP versus NRA, in that case. In your example, you mention a checking account; such accounts usually do not earn any interest. I am happy you think the blog is great. Please let your friends and colleagues know about it and feel free to share it on Twitter and your other social media accounts. Take care!

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