Are dual-status aliens choosing to be treated as US residents for the entire year eligible for standard deduction and earned income credit?

Forum|Forum|2 years ago
January 30, 2024
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Hi! Me, my spouse and kids are resident aliens at the end of 2023 through the green card test. The first 8 months of 2023 we lived in a foreign country. At the end of August 2023 we moved to the US and lived here for the last 4 months of the year. My spouse and I are 40 years old, kids are below 17 and they lived with us for the whole year, and all of us have SSN. Our AGI is below $40,000, including foreign and US earned income, and we don't have an investment income.

We are considering to choose to be treated as resident aliens for the entire year ("Choosing Resident Alien Status" of Pub.519) and file a joint return. In this case, are we eligible for standard deduction and earned income credit?

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Choosing Resident Alien Status (Pub.519)

If you are a dual-status alien, you can choose to be treated as a U.S. resident for the entire year if all of the following apply.

You were a nonresident alien at the beginning of the year. (YES)
You are a resident alien or U.S. citizen at the end of the year. (YES)
You are married to a U.S. citizen or resident alien at the end of the year. (YES)
Your spouse joins you in making the choice. (YES)

This includes situations in which both you and your spouse were nonresident aliens at the beginning of the tax year and both of you are resident aliens at the end of the tax year. (YES)

If you make this choice, the following rules apply.

You and your spouse are treated as U.S. residents for the entire year for income tax purposes.
You and your spouse are taxed on worldwide income.
You and your spouse must file a joint return for the year of the choice.
Neither you nor your spouse can make this choice for any later tax year, even if you are separated, divorced, or remarried.
The special instructions and restrictions for dual-status taxpayers in chapter 6 do not apply to you.

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Rule 4—You Must Be a U.S. Citizen or Resident Alien All Year (Pub.596 EIC)

If you were a nonresident alien for any part of the year, you can’t claim the EIC unless your filing status is married filing jointly. You can use that filing status only if your spouse is a U.S. citizen or resident alien and you choose to be treated as a U.S. resident. If you make this choice, you and your spouse are taxed on your worldwide income. If you need more information on making this choice, get Pub. 519, U.S. Tax Guide for Aliens. If you were a nonresident alien for any part of the year and your filing status isn't married filing jointly, enter “No” on the dotted line next to line 27 (Form 1040 or 1040-SR).

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Best answer by DaveF1006

Yes, if you were granted green-card status during the year, you are treated as a citizen for the entire year. You will be eligible for the standard deduction as well as the EIC. Just remember, you must include all of your world-wide income earned in 2023 You also have FATCA and FBAR reporting requirements for 2023.

DaveF1006Answer

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JanXAuthor

Thank you DaveF1006 for your answer, I appreciate it.

QandA1

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Konda

Hi - thanks for this information. Is the same true for dual-status aliens who meet the substantial presence test for the year? I’m trying to help a humanitarian parolee family who arrived in April 2023. They were dual-status aliens in 2023. Can they elect to be treated as resident aliens all year (despite having arrived in April 2023) and get the benefit of the 2033 standard deduction? This married couple made a total of $18,000. I’m trying to figure out if they can get all the taxes they paid back, plus get the refundable Earned Income Credit, and child tax credit. Any help figuring that out would be appreciated!

Konda

Hi - thanks for this information. Is the same true for dual-status aliens who meet the substantial presence test for the year? I’m trying to help a humanitarian parolee family who arrived in April 2023. They were dual-status aliens in 2023. Can they elect to be treated as resident aliens all year (despite having arrived in April 2023) and get the benefit of the 2023 standard deduction? This married couple made a total of $18,000. I’m trying to figure out if they can get all the taxes they paid back, plus get the refundable Earned Income Credit, and child tax credit. Any help figuring that out would be appreciated!

DaveF1006

Yes, if they arrived in April, they can be treated as a resident alien under the terms of the Substantial Presence Test because they were here for 183 days in 2023. They should be able to get all taxes back because their income does not exceed their filing threshold of $27,700.

Now my question is, do each member of the family have a valid Social Security Number, including the children? if not, they would not be eligible for the EIC or the child tax credit. An ITIN would not be valid to claim these credits.

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NursultanBS

Hi DaveF1006,

I did not find anyone asking this on the Internet, but I was curious about this situation.

Me and my spouse were nonresident aliens on F-1 status in 2023 till October 2, 2023, when we changed our status to H-1B and H-4 respectively. We can both claim the First-Year Choice to become resident aliens for tax purposes from October 2, 2023. However, to do this, we need to become resident aliens in 2024, which will happen somewhere in May, so we can both file form 4868 to postpone the federal tax filing deadline. It means that both of us can be dual-status aliens for 2023, right?

So, is it possible to claim Full-Year Resident status for both of us and file jointly? Conditions state that "You are married to a U.S. citizen or resident alien at the end of the year" and "You are a resident alien or U.S. citizen at the end of the year.", so can I treat my spouse (or vice versa) as a resident alien at the end of the year if we're dual-status aliens?

Also, another question, my employer started to pay FICA taxes from October 2, 2023. If we become full-year residents in 2023, will both of us owe FICA taxes for the income that we have previously earned as non-residents?

Thank you so much! I would appreciate any advice!

QandA1

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QandA1

DaveF1006

Yes, if a green card was issued during the year, then you are a citizen for the entire year. there is no need to make the first year choice election. it does not need to be amended.

Although, it doesn't specifically address EIC eligibility of children of green card holders, i would suggest following the letter of the law and not claim EIC for this year. This is one of those gray areas that happen and I tend to lean conservative on my positions.

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