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Robin D.
Robin D., Senior Tax Advisor 4
Category: Tax
Satisfied Customers: 7460
Experience:  15years with H & R Block. Divisional leader, Instructor
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My wife and I have a greencard and live in NY. I am a freelancer,

Customer Question

My wife and I have a greencard and live in NY. I am a freelancer, she works in the Mexican Consulate and has diplomatic status. We want to file our 2009 taxes jointly, and it is our understanding that since she receives her income only from the Mexican Government, and pays taxes there, she should not declare any income in her tax forms. In other words, she should not pay taxes yet I should be able to include her in my joint tax filing. Is that correct?
Submitted: 4 years ago.
Category: Tax
Expert:  Robin D. replied 4 years ago.

HelloCustomer

If you and your wife each have a Green Card, you are a U.S. resident for tax purposes beginning on the first day you are present in the U.S. as a lawful permanent resident(when you got that Green Card).

As a resident taxpayer you must report, for U.S. tax purposes, your worldwide income. You are also eligible to claim all deductions and credits available to U.S. citizens. You can file Form 1040, 1040A or 1040EZ, whichever is applicable to your situation, and if you are married you can file a joint return with your spouse. See the instructions for the forms. As a resident taxpayer, you still might be eligible to claim treaty benefits under the U.S. tax treaty with your home country.

As we have a tax treaty with Mexico your wife as a diplomat status holder would qualify to claim the treaty provision.

I am not an expert in VISA holder requirements but it seemed odd that you spouse as a diplomat status individual would be issued a Green Card.

I sincerely XXXXX XXXXX information is helpful,

Customer: replied 4 years ago.
Hello Robin, thank you very much for your answer.

I see what you're saying. But Under section 7701(b)(5)(B)(i), of the Internal Revenue Code,

(5) Exempt individual defined
For purposes of this subsection—

(B) Foreign government-related individual
The term “foreign government-related individual” means any individual temporarily present in the United States by reason of—
(i) diplomatic status, or a visa which the Secretary (after consultation with the Secretary of State) determines represents full-time diplomatic or consular status for purposes of this subsection.

Now, I understand that we are residents for Taxing purposes because we gave greencards. So these two seem to contradict. On the one hand clearly consulate employees do not pay taxes. On the other Greencard holders do. Is there a law that I can look at that says that if you fall under the law above mentioned, BUT you are a Greencard holder, you then pay taxes as a resident and are not exempt?

Also, what form to we need to fill to claim treaty benefits under the U.S. tax treaty with Mexico? Are those the 1040 forms you mentioned? Since we pay about 30% of taxes in Mexico we obviously don't want to pay twice.

Thanks again!
Expert:  Robin D. replied 4 years ago.

 

Employees working for a foreign government or an international organization in the U.S. are subject to some special tax rules. The tax treatment of their compensation can vary according to whether the employee is a U.S. citizen, a dual citizen, a green cardholder (lawful permanent resident), or a foreign citizen without a green card.

U.S. citizens and green card holders pay U.S. taxes on their compensation while working in the U.S. They report their compensation as income from wages on line 7 of their Form 1040, U.S. Individual Income Tax Return.

As residents of the US you could claim the Foreign Tax Credit. This would give you a credit on your US Form 1040 using Form 1116. It is used to claim a credit for income taxes paid to a foreign country when U.S. taxes are also paid on the same income. Form 1116 is to be used by individuals, estates or trusts.

Since you have green cards you are required to file 1040 form , you can file Jointly and then use the 1116 to get your credits for the tax paid on same income in Mexico.

 

Robin D., Senior Tax Advisor 4
Category: Tax
Satisfied Customers: 7460
Experience: 15years with H & R Block. Divisional leader, Instructor
Robin D. and 4 other Tax Specialists are ready to help you
Customer: replied 4 years ago.
Thank you. This is very helpful!
Expert:  Robin D. replied 4 years ago.
You are welcome.

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