US resident filing a joint return with spouse who is non-resident

Question

I am currently a H1B visa holder, and have been a resident (for tax purposes) for the last few years. I got married in Dec 2021, and my wife (who will be traveling to the US soon on an H4 visa for the first time) was not a US resident/citizen as of Dec 31 2021. We are planning to file the tax returns jointly for this year, and I want to have her treated as a US resident as part of this return. From my research, I believe the following are the steps I need to take to make that happen - would be great to know if that's correct, and if anyone has additional suggestions.

1. Draft a declaration about my wife being a non-resident, and me wanting to treat her as a resident for tax purposes, signed by both of us - as part of the 2021 return.
2. Fill out the usual Form 1040 listing both myself and my wife on it, leaving my wife's SSN field blank.
3. Apply for an ITIN simultaneously with the 1040, using Form W-7. We are planning to visit a Certified Acceptance Agent so they can verify her documents without having to mail them to IRS.
4. Add my wife's international income using Form 2555, and use the Foreign Earned Income Exclusion (Part VII) to remove her tax liability.
5. File returns by mail as opposed to online, because it includes an ITIN application.

Am I missing anything else?

Answer 1

You will unfortunately have to use married-filing-separately (MFS) status for 2021. You should read Pub 519, Tax Guide for Aliens. I’ll quote two pertinent rules from the instructions for form 1040.

Nonresident aliens and dual-status aliens. Generally, a married couple can't file a joint return if either spouse is a nonresident alien at any time during the year. However, if you were a nonresident alien or a dual-status alien and were married to a U.S. citizen or resident alien at the end of 2021, you can elect to be treated as a resident alien and file a joint return. See Pub. 519 for details.

If your spouse doesn’t have and isn’t required to have an SSN or ITIN, enter “NRA” in the entry space below the filing status checkboxes. For electronic filing, enter the spouse's name or “NRA” if the spouse doesn’t have an SSN or ITIN in the entry space below the filing status check-boxes.

If it’s any consolation, there is no great disadvantage in filing under MFS status for 2021. You might be ineligible for some tax credits, and the tax brackets will be close to those for Single status.

As for 2022, your wife will be a “dual-status alien” (meaning partially resident, partially non) because she will have arrived too late in the year. You may only disregard ten days of non-residency. The rules for dual-status returns are nightmarish, but the two of you will be eligible to file a normal full-year return jointly. It could get complicated if she will have earned income abroad in 2022 before joining you, but form 2555 should make it simple(r).

You will need an ITIN for your wife in 2022. When it comes time for her to apply, the process will be slow, in part because of the pandemic. It’s almost impossible to get an appointment at an IRS “taxpayer assistance center”. I would warn others in your situation against mailing a passport to the IRS because the IRS sits on documents for months and has a tendency to lose them. They should either get a certified copy from their home country’s embassy or consulate, or else visit a commercial “certified acceptance agent”, as you wisely plan to do.