How Nonresident Alien Can Elect To File Jointly With U.S. Citizen Or Resident Spouse

Tax planning for an American married to a nonresident alien is always an interesting dilemma and it is very common in the yachting industry. Generally a joint return cannot be filed if either spouse is a nonresident alien at any time during the tax year. However, if one spouse is a citizen or resident of the United States, both spouses may file an election to treat the nonresident alien spouse as if he or she were a resident of the United States for the entire tax year, thereby permitting them to file a joint return.

A married couple usually benefits by filing jointly because a joint return, as compared with two separate returns, evenly splits their income, thereby possibly reducing the highest marginal tax rate to which it is subject. If you and your spouse decide to make the election, you must attach a statement to your tax return, which you both sign. The election, once made, applies to all subsequent years until terminated by revocation, death, separation or divorce, or termination by the IRS for failure to keep adequate records. Once the election is terminated, it may not be made again by the couple.

If you make the election, you and your spouse will be subject to tax on your worldwide income, whereas nonresident aliens generally are subject to U.S. income taxation only if they have U.S. source income or income that is effectively connected with the conduct of a trade or business within the United States. The decision to make the election, therefore, depends on the income each of you makes, and the sources from which it originates.

In my experience most of my clients will choose not to have the nonresident spouse file an American tax return. Typically a married couple working on a yacht will have their salary divided in such a way that the American spouse is claiming the smaller portion of the wages (they can do this because many husband wife crews are paid to one bank account). It is important to remember that the American spouse does not report an unreasonably low wage, you will need to consult with your accountant what the appropriate split should be. It is also very important to remember that if you are married to a nonresident alien that you are not a signer on their foreign bank account, if you are a signer or beneficiary on their foreign account you may be required to disclose this to the IRS, failure to do so may result in a up to $10,000.

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