Tax Returns & Co Sponsor

[squirty]

I am a student and therefore did not make any income these past 3 years. I have my sister sponsoring me and have her tax transcripts for past 3 years. My question is, because I did not make any income do I have to submit tax returns to the VO? If so, where can I get them filed. I am in China now.

Also, is it okay to file all zeros for income since I have a sponsor? I am under the assumption that as long as I have my sponsor's paperwork in line that I should be fine. Please advise.

[xiaofeizhu]

I am a student and therefore did not make any income these past 3 years. I have my sister sponsoring me and have her tax transcripts for past 3 years. My question is, because I did not make any income do I have to submit tax returns to the VO? If so, where can I get them filed. I am in China now.

 

Also, is it okay to file all zeros for income since I have a sponsor? I am under the assumption that as long as I have my sponsor's paperwork in line that I should be fine. Please advise.

 

 

Hi,

 

I was also a student when I filed and had no income. The first year (2005) I had some earnings so I filed, in 2006 and 2007 all I had was like $70 from earned interest in my bank accounts. I had to back file for those two years. I was in China also, and the way I did it was my mom (who was my co-sponsor) sent me the forms and I filled them out and sent them back to her. She filed them for me and then I ordered the three copies of tax transcripts. I believe that you must file even with the zero income because you are the petitioner. After that, it's all the co-sponsor's income that they look at.

 

Also, you may want to be careful of domicile issues, so what I did was include copies of letters from my bank saying that I had been using their accounts (I had been using my American credit card, checking account, etc.) They wrote that I was a member of good standing as of _____ (date).

 

Another thing that I did for my taxes is I filed jointly by getting an TIN for my husband. This number allows people without a social security card to file taxes. I am not sure, but I think it helps to file jointly to show you are seriously married to a person, even if your income was zero.

[Scott DB]

I am a student and therefore did not make any income these past 3 years. I have my sister sponsoring me and have her tax transcripts for past 3 years. My question is, because I did not make any income do I have to submit tax returns to the VO? If so, where can I get them filed. I am in China now.

 

Also, is it okay to file all zeros for income since I have a sponsor? I am under the assumption that as long as I have my sponsor's paperwork in line that I should be fine. Please advise.

 

 

Hi,

 

I was also a student when I filed and had no income. The first year (2005) I had some earnings so I filed, in 2006 and 2007 all I had was like $70 from earned interest in my bank accounts. I had to back file for those two years. I was in China also, and the way I did it was my mom (who was my co-sponsor) sent me the forms and I filled them out and sent them back to her. She filed them for me and then I ordered the three copies of tax transcripts. I believe that you must file even with the zero income because you are the petitioner. After that, it's all the co-sponsor's income that they look at.

 

Also, you may want to be careful of domicile issues, so what I did was include copies of letters from my bank saying that I had been using their accounts (I had been using my American credit card, checking account, etc.) They wrote that I was a member of good standing as of _____ (date).

 

Another thing that I did for my taxes is I filed jointly by getting an TIN for my husband. This number allows people without a social security card to file taxes. I am not sure, but I think it helps to file jointly to show you are seriously married to a person, even if your income was zero.

 

 

Did you really have to file, even though your income was under the minimum level required for filing? I'm confused about this point. Have there been any cases here where a VO rejected a written explanation stating the income of the petitioner was lower than the minimum required to file on the IRS publications? (Assuming the joint sponsor submits their tax returns, of course.)

Edited March 22, 2010 by Scott DB (see edit history)

[Randy W]

 

Did you really have to file, even though your income was under the minimum level required for filing? I'm confused about this point. Have there been any cases here where a VO rejected a written explanation stating the income of the petitioner was lower than the minimum required to file on the IRS publications? (Assuming the joint sponsor submits their tax returns, of course.)

 

 

 

The problem with that is that it requires that the VO actually READ the explanation AFTER they have noticed that there is no tax return for the expected year. They have been known to not look past the end of their nose once they notice that a required document is apparently MISSING.

 

Best to INCLUDE the expected (required) document, and then let them read it for content.

 

No surprise is a good surprise in this case.

 

To my way of thinking, it's not even necessary to mail the return - fill it out and follow the instructions, which say to NOT mail it in - although it certainly can't hurt to do so.

[Scott DB]

Which form(s) should someone use to file if they've been living and working abroad? I'm guessing the 1040EZ doesn't cut it.

[shenzhen]

Which form(s) should someone use to file if they've been living and working abroad? I'm guessing the 1040EZ doesn't cut it.

 

Unless you have given up your citizenship you are required to file income tax reports on your "global income" including your wife's if you file "married-joint return".

 

You can take a credit to exempt the income from US tax if you paid China tax on your income. You should use Form 1040 and the required Foreign Tax Credit (1116) and Foreign Earned Income (2555). The limit for 2009 was $91,400. The foreign earned income exclusion will reduce your regular tax liability, but not your self employment tax if self-employed. Form 2555 EZ can also be used in most cases if you do not have salary amount over the income exclusion limit.

 

Here is something most expats seem to forget or not know:

A common misconception that contributes to the international tax gap is that this potentially excludable foreign earned income is exempt income not reportable on a US tax return. In fact, only a qualifying individual with qualifying income may elect to exclude foreign earned income and this exclusion applies only if a tax return is filed and the income is reported.

 

Q: I already report my income to my foreign country of residence. The Foreign Earned Income Exclusion eliminates that income for U.S. tax purposes. So why should I report to IRS?

 

A: Because if you don't report your earnings - even though they are 100% excluded - the IRS can later deny you the exclusion and tax you on that income (even though the foreign country already taxed the income).

 

One other point: If married and file jointly that you can double the income excusion but you must fill out Form 2555 for each person. In other words one cannot make 181,000 USD and the other make 0 USD and you exclude all of your income from US tax. Lastly, if you exceed the exclusion limit they start your US tax rate basis your income as if you earned it all in the US, meaning you are not taxed starting from the lowest bracket but taxed at the highest bracket your AGI would have fallen into (this was changed a few years ago --- another one of the millions of hidden tax increases you never heard of).

 

Then again it always amazes me you do not have to prove that you actually paid any foreign tax to get the foreign income exclusion---oh damn--if they see that it will become a new tax rule for expats...

 

 

Here are two links to the issues:

http://www.taxbarron.com/faqs.php

http://www.taxmeless.com/IRS593Publication.htm

http://www.irs.gov/businesses/article/0,,id=182017,00.html

Edited March 22, 2010 by shenzhen (see edit history)

[Randy W]

Thanks for the input there, Alan. I'll be facing that next year, with income from both US and Chinese sources.

[david_dawei]

excellent info... I want to pin this for now.

[Rob and WeiLing]

As promised here, I'm posting my letter explaining the $0.00 income on my own I-864.

The I-864 instructions read:

 

If you were not required to file a Federal income tax return under U.S. tax law because your income was too low, attach a written explanation. If you were not required to file a Federal income tax return under U.S. tax law for any other reason, attach a written explanation including evidence of the exemption andhow you are subject to it.

To follow the directions, I attached the following signed letter (not notarized, just signed). I also attached copies of the documents specified within.

 

Name: Robert Middle Surname
Address: 123 Street Lane
City, STATE 12345
USA
U.S. Telephone: +1 (800) 555-1212
China Telephone: +86 4008 123-123
Email: name@example.com

Date: July 6, 2010

RE: Income Tax Exemption

Dear Sir or Madam:

I, Robert Middle Surname, am currently enrolled as a full-time student of American College, located in City, STATE, USA. For the 2009-2010 academic year, I have studied at Chinese Univeristy, located in Some City, Some Province, P.R. China. I am including a copy of my Chinese University student identification, a copy of my International Student Identity Card (ISIC), and a copy of all
relevant pages of my passport: Biography Page, Chinese Visa for Study (X visa), and two (2) separate Chinese Residence Permits (one for each academic semester).

According to the IRS Form 1040 instructions obtained from www.irs.gov/pub/irs-pdf/i1040.pdf, I am not required to file a Federal income tax return. Chart B on page 9 states that a married dependent, who is neither age 65-or-older nor blind, must file if:

• Unearned income was over $950.
• Earned income was over $5,700.
• Gross income was at least $5 and his/her spouse files a separate return and itemizes deductions.
• Gross income was more than the larger of—
• $950, or
• Earned income (up to $5,400) plus $300.

I am listed as a dependent on my father's (SURNAME, First Middle) IRS Form 1040 and I do not meet any of the above criteria.

Please also note that my father's adjusted gross income does not include untaxed Social Security benefits listed in line 20a on page 1 of his IRS Form 1040.

Thank you for your time and consideration.

Sincerely,

Signature

Robert Middle Surname
Petitioner for SURNAME, WeiLing
Case Number: GUZ1234567890

I've underlined everything that I changed to maintain privacy and make the letter more generic. In my case, the letter fit perfectly onto one printed page. On the I-864, I did not check box 25, and I left all three tax year items blank. Also of note, since there was no specific option for students, I marked that I am employed (box 22a) as a Full-time Student. I listed Employer #1 as the American school and Employer #2 as the Chinese school.

Hope this reference can help others in similar situations...