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This question is related to Tax filing in USA.

Hello,

I am an Indian Citizen. We(me, my wife and our son) came to USA on Oct 2013.I have filed a request for extension.I want to exercise the First Year Choice and want to file tax now (in 2014) after meeting the substantial presence Test.

Please help me on below questions

  1. Do I need to report my India Salary income?(Jan-Sept 2013)

  2. Do I need to include my India Bank interest income? If yes, do I need to report entire year interest income or only from Oct to Dec 2013?

  3. Do I get a foreign tax credit?

  4. Can I claim for Child Tax credit?

(I do have SSN and my wife and son ITIN)

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Do I need to report my India Salary income?(Jan-Sept 2013)

If it is last paid before you first stepped foot in the US - then no. You only report Indian salary paid after the date you moved to the US.

Do I need to include my India Bank interest income? If yes, do I need to report entire year interest income or only from Oct to Dec 2013?

Same thing. You only report what's been paid after you moved to the US. However, you report what's paid, not what's accrued, so if you are paid interest in December for the whole year - you report and pay US taxes on all of it, you don't get to prorate.

Do I get a foreign tax credit?

If you paid foreign taxes on income taxable in the US - you can claim foreign tax credit. If you paid taxes on income before you moved to the US - you cannot.

Can I claim for Child Tax credit?

Not for 2013, since you will only be partial year resident. For years where you're a full-year resident - you may qualify depending on the rest of the qualification requirements.

The statute addresses this:

(f) Taxable year must be full taxable year

Except in the case of a taxable year closed by reason of the death of the taxpayer, no credit shall be allowable under this section in the case of a taxable year covering a period of less than 12 months.

  • Thank you for the reply. I found below article about child tax credit just now. taxmap.ntis.gov/taxmap/instr/i1040s8-003.htm , can I claim for child tax credit based on this? – user17640 Jun 22 '14 at 23:40
  • taxmap.ntis.gov/taxmap/instr/i1040s8-003.htm First-year election. If your child was present in the United States for at least 31 consecutive days in 2013 and meets the substantial presence test for 2014, your child may be considered a resident of the United States for part of 2013 if you make a valid election. See First-Year Choice under Dual Status Aliens in Pub. 519. – user17640 Jun 22 '14 at 23:41
  • @user17640 see my edit re the child credit. – littleadv Jun 23 '14 at 0:45
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The first-year choice will make the two of you dual-status for 2013 -- resident for the period of time after you arrived, and non-resident for the period of time before you arrived.

Since you are married, you have the option of also choosing to be treated as residents for the whole year, and filing jointly.

To summarize, you have two options:

  1. Just do the first-year choice, but don't elect to be treated as residents for the whole year: You and your wife will be dual-status for 2013 -- resident for the period of time after you arrived, and non-resident for the period of time before you arrived. For the period when you're resident, you have to file U.S. taxes on your worldwide income. For the period when you're non-resident, you only have to file U.S. taxes on income connected to the U.S. As dual-status, you cannot file as Married Filing Jointly, so the two of you must file as Married Filing Separately, for both the resident and non-resident parts. Also, dual-status cannot use the standard deduction, and there are other restrictions.
  2. Do the first-year choice, making you dual-status, and then choose to be treated as residents for the whole year of 2013. You will file Married Filing Jointly (which is generally much better tax-wise than Married Filing Separately). The standard deduction is available. You have to file U.S. taxes on your worldwide income for the entire year. I believe you can claim the child tax credit in this case.
  • This is a very bad suggestion. It is very rarely beneficial. – littleadv Jun 23 '14 at 3:47
  • @littleadv: I didn't give any suggestions. I just listed the options and the consequences of each. – user102008 Jun 24 '14 at 1:03
  • @user102008 thank you for the answers. Meanwhile I also looked into documents. Option 2 you suggested is correct and looks best in my situation. Also Turbotax Support gave same answers. ttlc.intuit.com/questions/… . – user17640 Jun 24 '14 at 4:27
  • @user17640 keep in mind the limitations. You cannot use tax treaty, you must both continue filing as residents as long as you're in the US (even if your wife moves back), and you (both!) must include your worldwide income for the whole year as taxable in the US. – littleadv Jun 24 '14 at 14:10

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