Generally, a U.S. citizen or a U.S. resident who is married to a nonresident alien must file as Married Separate. However, a person who is a nonresident alien at the end of his taxable year, and who is married to a U.S. citizen or a U.S. resident can be treated as a U.S. resident for income tax purposes if the spouses so elect (Code Sec. 6013(g)(1)). By making the election they can file as MFJ.
In so doing, both spouses must agree to subject their worldwide income for the taxable year, and future years unless the election is terminated, to U.S. taxation. (Code Sec. 6013(g); Code Sec. 6013(h))
Both parties must make the election. One party must have been, at the close of the taxable year for which the election was made, a nonresident alien individual married to a citizen or resident of the United States (Code Sec. 6013(g)(2)). To qualify for the election, the U.S. resident or U.S. citizen spouse needs to be a U.S. resident or U.S. citizen only at the close of the taxable year (Reg § 1.6013-6(a)(1)).
How To Make the Choice - Attach a statement, signed by both spouses, to the joint return for the first tax year for which the choice applies. It should contain the following information:
- A declaration that one spouse was a non-resident alien and the other spouse a U.S. citizen or resident alien on the last day of the tax year, and
- That the non-resident alien spouse chooses to be treated as a U.S. resident for the entire tax year.
Provide the name, address, and identification number of each spouse. (If one spouse is deceased, include the name and address of the person making the choice for the deceased spouse.) Generally this will require obtaining an ITIN for the non-resident spouse. (Reference Pub 519)
Once made, and as long as one of the spouses is a U.S. citizen or resident, the election applies not just for the year for which it is made but for all future years until it is terminated. If the election is terminated, neither spouse is eligible to make the election for any subsequent tax year. (Code Sec 6013(g)(6))
Terminating the Election – The election terminates at the earliest of any of the following events:
- Revocation by taxpayer or spouse - Either spouse may revoke the election by filing a statement of revocation by the due date for filing the tax return for the tax year.
- Death – Death of either spouse terminates the election beginning with the first tax year following the year the spouse died. However, if the U.S. citizen or resident spouse is the surviving spouse and meets the requirements for the qualified widow(er) status, the election continues for two years following the death of the non-resident spouse.
- Legal separation - If the couple legally separates under a decree of divorce or of separate maintenance, the election terminates as of the beginning of the taxable year in which the legal separation occurs.
- IRS action – The IRS may terminate the election for any tax year for which it determines that either spouse has failed to keep or provide sufficient books, records, and other information with which to determine tax liability. (Reg. §1.6013-6(b)(4))
Another Factor to Consider – Taxpayers with investment income are subject to a 3.8% surtax on net investment income. However, this tax does not apply to nonresident aliens. Therefore, when weighing the pros and cons of making the election to treat a nonresident alien spouse as a U.S. resident, how the 3.8% tax will affect the couple’s total tax picture must be considered.
CAUTION: It the client qualifies for child credit, EITC and/or AOTC, keep in mind the PATH Act of 2015 added program integrity provisions, which in the case of the child tax credit (Act Sec 205), EITC (Act Sec 206) and the AOTC prohibits an individual from retroactively claiming the child credit by amending a return, or filing an original return if he failed to file, for any prior year in which the individual or a child for whom the credit is claimed did not have a taxpayer identification number.
You might consider filing an extension instead of amending later – the following is from the instructions for Form 4868:
Amending a MFS Return to a MFJ Return - A taxpayer may file a joint return after filing married separate if the change is made within THREE YEARS from the unextended due date of the original return (Code Sec. 6013(b))
Extension Where ITIN Not Yet Acquired - If you’re a nonresident or resident alien and you don’t have and aren’t eligible to get an SSN, you must apply for an ITIN. Although an ITIN isn’t required to file Form 4868, you’ll need one to file your income tax return. For details on how to apply for an ITIN, see Form W-7 and its instructions. If you already have an ITIN, enter it wherever an SSN is requested. If you don’t have an ITIN, enter “ITIN TO BE REQUESTED” wherever an SSN is requested.