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I live in the United States (Florida) since September 2019.

I'm married and have four children.

I'm on H1B, my wife and kids are on H4. I have an SSN, they don't. My wife does not have any US income.

I'm about to hire a CPA to do my 2019 taxes, but before I do that I would like to gather some understanding about the US tax system myself.

As far as I understand, I don't pass the substantial presence test for 2019 (we've been in the United states for about 100 days in 2019 and a couple of weeks in total in 2018 and 2017). We will meet the substantial presence test for 2020 by early May.

From what I have learned so far, I think I have three options:

  1. File as a non-resident alien (1040-NR) for the whole 2019.

    This way I will not have to report our income from the country of origin, neither report any foreign assets.

  2. Make the First-Year Choice and file two different tax returns (1040 and 1040-NR) as a dual-status alien for the two different parts of 2019.

    This way I will have to report my income from the country of origin for the relevant part of the year and file the FBAR and Form 8938

  3. Elect to choose the Resident Status and file a joint return with my wife as residents (1040) for the whole 2019.

    This way both me and my wife will have to report our incomes from the country of origin for the whole year and file the FBAR and Form 8938

My questions:

  1. Is my understanding of the above correct?

  2. Will I be able to claim my children as dependents on 1040 (if I elect to file as a dual-status alien)? They don't have (and are not eligible) for SSN, so I can't claim child tax credit for them, and they don't pass the substantial presence test for 2019. I'm not a national of Canada, Mexico, South Korea or India.

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All of your options 1,2,3 are correct. That's an impressive amount of learning you've done!

Option 3 oftentimes results in the lowest tax liability, even though this depends on how much foreign income you had.

Under option 3, your course of actions would be as follows:

  1. File for due date extension, so that you can meet substantial presence test before you file your tax return.

  2. Once you meet the substantial presence test, paper file your return as MFJ with your spouse, claiming your children as dependants. Attach five ITIN applications - one for your wife and four for each of your children. Claim foreign earned income exclusion (form 2555). Attach resident status choice (free form letter stating that you and your spouse choose to be treated as tax residents for the entire 2019).

With ITINs, your spouse and children are generally eligible for all the same benefits as if they had SSNs (but certain benefits such as child tax credit require an SSN, according to IRS - see comments below). You must paper file (no e-filing) in the year that you apply for ITINs. IRS will mail you letters with ITINs (takes ~2 months), then process your paper returns (another 1-2 months).

Starting with tax year 2020, you can e-file using these ITINs, same as you would with SSNs.

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  • thanks! about the ITINs being the same as SSNs: are you sure they're equal? I'm reading the 1040 instructions and it says: Did this child have an SSN valid for employment issued before the due date of your 2019 return (including extensions)? (See Social Security Number, later.) I understand that you can only claim the child as "other dependent" if he does not have an SSN, am I reading this right? – H1B holder Mar 2 at 19:00
  • Good point; I'm not familiar with the child aspect of this, so looks like I jumped into too many assumptions. Seeing how IRS specifically mentions SSN valid for employment, I'm thinking ITIN would not do here. I'm going to amend my answer. – void_ptr Mar 2 at 19:08
  • Thanks for the edit. Actually, my question was about the excerpt a little bit earlier: Was the child a U.S. citizen, U.S. national, or U.S. resident alien?. I understand that me and my wife (or just me) can elect to be treated as U.S. resident aliens (or dual-status aliens) by submitting the statements to the IRS, but how does it work for the children? Do I need to file some kind of statement on their behalf too for the IRS to treat them as U.S. resident aliens? – H1B holder Mar 2 at 19:16
  • I believe no residence choice statement is required on children's behalf - but tax treatment of children is an area I'm not too familiar with. – void_ptr Mar 2 at 19:44
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I am also in the same boat. I was in F-1 visa since 2016 and changed status into H1B since late September 2019. You cannot claim your children simply because they don't meet substantial presence test in 2019 and they were not resident of blah blah country. You can claim them in 2020. You can paper file joint return choosing your spouse to be treated as resident. This option would give you the best tax benefits unless you and your spouse have significant income abroad.

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