Does my military son have to include his wifes foreign wages on his tax return?

Question

My US Air Force Son is stationed in England. He is currently away from his family in Qatar where he can't find this type of info. His Wife who is not a US or English Citizen works and pays taxes in England. Does he have to include her wages on on his US income tax return ?

Answer 1

Generally speaking, if you live AND work outside the U.S., your son may be able to exclude all or part of her foreign earned income from taxable income (assuming they're filing a joint return). There are bona fide physical residence tests and dollar caps, but her income may qualify for exclusion. The applicable IRS publication:

Publication 54 - Tax Guide for U.S. Citizens and Resident Aliens Living Abroad
http://www.irs.gov/publications/p54/index.html

Tax Topic - Foreign Earned Income Exclusion
http://www.irs.gov/taxtopics/tc853.html
They'll also need Form 2555 for the Foreign Earned Income

To make sure he understand the regulations, he may wish to contact a JAG officer (judge advocate general, military-speak for attorney) via phone or email, if there isn't one in Qatar. I am sure they have encountered similar situations and could provide some guidance to him. That's what they are there for!

Good luck to him - and I hope they love England as much as we did!

Answer 2

It all depends...

If he wants to file married jointly and get the higher deductions and lower rates, he does need to include her international income.

OR

he could file single for his income, likely not pay much in taxes and get refunds due to the several military tax credits available for active duty military personnel and then he would NOT include his wifes international wages in his return.

You have to analyze or have a CPA professional tax preparer analyze which situation results in paying fewer taxes. I would guess that it all comes down to how much income does the English bride make? If she makes a lot, he should not include her since he'll get some active duty military credits and won't pay too much in taxes. If she doesn't make a lot it might be worth it to include her income and file a Married / Joint return.

Answer 3

Nobody has properly addresses a key underlying issue here -- your daughter-in-law's citizenship and residency status and how it impacts their filing status and tax situation.

She is a non-resident alien. As such, she owes no allegiance or taxes to the US. This impacts his ability to file a joint return with her.

Generally speaking, he cannot file a joint return with her unless she agrees to be treated as a US resident for the entire tax year and have all of her world-wide income subject to US taxes. The rules and procedures on this are somewhat convoluted but I'll try to cover it briefly here. However, your son should get a copy of IRS Pub 519 and read the first chapter carefully.

If she agrees to be treated as a US resident, they need to attach a joint statement to their return, agreeing to be subject to US tax laws and pay taxes on all world-wide income. Both of them MUST sign this statement. This statement is required every year that her tax status is Non-Resident Alien.

Since she does not have a SSN, she needs to prepare a Form W7, Application for Individual Taxpayer ID Number, and attach it to their return along with the required proof if identity specified on the Form W7. The IRS will process the W7 first and then apply her ITIN to the return and process it. The ITIN will be good for future tax years so this is only needed this year.

If they follow the above procedures, they may file a joint return but must claim all income from all sources world-wide.

Just to clear up a common mis-conception. Although some US taxpayers living abroad can exclude foreign earned income, this is NOT available to military personnel or other government employees. If he is serving in a combat zone he may be able to exclude some or all of his military pay (depending upon his rank) and he has other tax incentives available to him as well, but the foreign earned income exclusion isn't one of them.

Answer 4

If he is married and he files like he is they do!!! I am married to a girl from Barcelona and even if I file married but single I have to have her info!! Now if you just go and say he is single and let someone do the taxes for you they won't ask and they will file as he is single!! Problem is if the IRS wants to which is highly unlikly the first time around they can look into it and then get you for it but you will just have to make up the difference if there is one!!! Best thing is if you file him as seperate KEEP YOUR MOUTH SHUT TO EVERYONE or it could come back to bite you!!!

Answer 5

Yes if they are legally married and it has to be at the current exchange rate. She's contributing to the household income and it must be counted. You may need a CPA to sort through everything to get your best and most deduction.