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Married Couple both US Citizens but Wife and Kids moved to India mid year for personal reasons, what is the filing status to use?

Forum|Forum|1 year ago
October 14, 2024
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We are a married couple and both US citizens. We typically use Turbo Tax to file our returns and use Married Filing Jointly status to file our taxes. Last year, my wife and kids had to make an urgent relocation to India in June to take care of ailing mother in law.

She moved within her company to an Indian entity while I continue to work in US. We wanted to file takes separately, since my Wife's taxes will be handled by her employer as it involves part US and part India employment.

I would like to file for my own taxes separately using TurboTax, which I have installed and ready to file. Can you please provide guidance on which filing status should I use? I am thinking Married filing separately in my case and only file for my portion of the taxes. Any guidance will be helpful.

PS - I have applied extension and prepaid taxes when I filed for extension based on an estimate from last year filing.

Thank you

Filing Status

Best answer by pk12_2

@Blueclouds , Namaste ji

Having gone through your post, I would have the following suggestion:

1. You can still file as Married Filing Joint ( MFJ)

(a) Under personal income Tab, enter your W-2 details.

(b) Then ( I think it is next screen ), choose "I will choose what I work on". This would then provide you a list of different types of incomes ( grouped by major categories) Go down the list till you see Foreign Earned Income and Exclusion -- FEIE.

(c) Select FEIE and now you will be asked questions about your wife's income etc. This is filling out form 2555 ---> Her Tax home is India, Her total Foreign Income in US$, when did she arrive in India XX/XX/XXXX, when did she establish Foreign Tax home ( the first 24 hr day after arrival, because you arrive in India early in the morning, few hrs. past mid-night etc. ) Go through all the screens carefully. What you should end-up with is that her income is all excluded from US taxes. Go to forms mode and make sure that this is so.

(d) You will essentially end -up paying US taxes ONLY on your income except that your tax rate would be a bit higher -- because it uses the world income for the couple to compute tax bracket and then deducts the US taxes allocated to her excluded income. This also allows the standard deduction for MFJ and not MFS.

If you need more help on this , you can add to this thread or PM me ( if the questions are not of interest to general user -- just NO personally Identifiable Information).

Is there more I can do for you ?

Namaste ji

pk

A

Anonymous_

Employee

No text available

B

BluecloudsAuthor

Thank you! Appreciate the support.

P

pk12_2Answer

Employee

@Blueclouds , Namaste ji

Having gone through your post, I would have the following suggestion:

1. You can still file as Married Filing Joint ( MFJ)

(a) Under personal income Tab, enter your W-2 details.

(b) Then ( I think it is next screen ), choose "I will choose what I work on". This would then provide you a list of different types of incomes ( grouped by major categories) Go down the list till you see Foreign Earned Income and Exclusion -- FEIE.

(c) Select FEIE and now you will be asked questions about your wife's income etc. This is filling out form 2555 ---> Her Tax home is India, Her total Foreign Income in US$, when did she arrive in India XX/XX/XXXX, when did she establish Foreign Tax home ( the first 24 hr day after arrival, because you arrive in India early in the morning, few hrs. past mid-night etc. ) Go through all the screens carefully. What you should end-up with is that her income is all excluded from US taxes. Go to forms mode and make sure that this is so.

(d) You will essentially end -up paying US taxes ONLY on your income except that your tax rate would be a bit higher -- because it uses the world income for the couple to compute tax bracket and then deducts the US taxes allocated to her excluded income. This also allows the standard deduction for MFJ and not MFS.

If you need more help on this , you can add to this thread or PM me ( if the questions are not of interest to general user -- just NO personally Identifiable Information).

Is there more I can do for you ?

Namaste ji

pk

B

BluecloudsAuthor

Thank you @pk12_2 ji! thank you for your guidance and support. I will follow your instructions and get back to you if I have any questions.

One question I have: Is married filing jointly preferable over married filing separately in my case? I am asking because, my wife's employer is taking care of her taxes this year through a third party accounting firm. Please let me know.

Thank you!!

P

pk12_2

Employee

@Blueclouds my two cents ( and if I assume that your wife will eventually come back to USA and work either at the same entity or a different on), would be to let the accounting firm do the her Indian filing ( as only she would have Indian tax liability, and you do the US return covering MFJ. I say this because when she comes back you will have to pick-up from what the accountant have done for her US filing ( She as a US person is taxed on her world income for the calendar year by the USA and Distinct from her Indian taxes. I fully understand that this will be hard on you now but is better prepared for later.

The other option is you file as MFS, do your own taxes ( not that your state taxes may get a bit confusing if you live in a community property state like CA ). Then when her filings are completed, you do a dummy prepare it again on your own for the wife -- this way you will be familiar with what was done by the accountants. Will make the future transition easier.

If you have time you could try it both ways and see which is more tax beneficial -- doing it as joint will raise your tax bill a bit ( higher marginal tax rate possibly ) but doing MFS will reduce your own deduction. I say this because depending your individual world incomes it may or may not make a huge difference.

I hope this helps.

Namaste ji

pk