Foreign Spouses and Children Archives | Bright!Tax Expat Tax Services

Spousal Social Security Benefits for Non-US Persons: What You Need to Know

Katelynn Minott, CPA & CEO — Tue, 08 Nov 2022 19:44:06 +0000

If you’re a US citizen or resident married to someone who doesn’t have financial ties to the US, you might have wondered if they are eligible for spousal social security benefits. Fortunately, there are a number of different circumstances in which they can be. Read on to find out what these benefits include, who is eligible to receive them, how to apply for spousal social security benefits, and more.

What Could My Non-US Spouse’s Social Security Benefits Include?

There are different forms of social security benefits, with spousal benefits typically including dependent benefits and survivor benefits.

Dependent Benefits

Dependent benefits refer to payments sent to the spouse or child (and sometimes ex-spouse or grandchild) of a social security income (SSI) recipient. These payments can equal up to 50% of the primary SSI recipient’s original payment.

Who’s Eligible

For your dependent to be eligible for dependent benefits, in general:

– You must have worked and paid into social security for at least 10 years
– You and your spouse must be at least 62, although this requirement is waived for caretakers of dependent children (under 16 or disabled)
- Note: Your spouse will receive only partial payments until you both reach the normal retirement age (between 65 and 67, depending on when you were born)

If you live abroad with your non-US spouse, it gets a little more complicated. As a rule, non-US spouses that have lived outside of the US for six or more consecutive months are not eligible to receive benefits. However, there are exceptions for non-US spouses who:

Are citizens, residents, or former residents of a country that has a social security agreement, also known as a Totalization Agreement, with the US
Have lived in the US for five or more years while married to the primary SSI recipient (a.k.a. the five-year test)
- Note: Does not need to be consecutive

Survivor Social Security Benefits

Survivor social security benefits refer to payments made to the widow/widower of an SSI recipient. These payments may equal up to 100% of the deceased’s original SSI payments.

Who’s Eligible

For the most part, requirements for survivor social security benefits are the same as requirements for dependent benefits. There are a few differences, though:

– Non-US spouses can apply for survivor social security benefits at 60 instead of 62* (with partial payments until they reach the normal retirement age)
- Note: Surviving non-US spouses who are disabled may apply at 50
– Non-US spouses who have not yet met the five-year test can move to the US to complete it, at which time they will become eligible for survivor social security benefits
– Non-US spouses can receive survivor social security benefits if their spouse died in active military service
– The non-US spouse must have been married to the primary SSI recipient for at least nine months (waived in the case of accidental or military deaths)

FAQs

Would my spouse still be eligible after divorce or remarriage?

If you were married for less than 10 years, social security benefits may not apply to your ex-spouse. To receive dependent benefits, a non-US ex-spouse must:

– Be 62 years or older
– Be currently unmarried
– Have been married to the SSI recipient for 10 years or more*

To qualify for survivor social security benefits, a non-US ex-spouse must:

– Have been married to the SSI recipient for 10 years or more*
– Not have remarried until age 60 or older

Can social security payments be made anywhere?

Social security income payments can be made to almost anywhere around the world, even if it’s to a foreign bank account. Neither US citizens/residents nor their non-US spouses can receive social security benefits while living in Cuba or North Korea. Additionally, it’s usually impossible to make payments to anyone living in Azerbaijan, Belarus, Kazakhstan, Kyrgyzstan, Moldova, Tajikistan, Turkmenistan, and Uzbekistan.

Will my spouse’s social security benefits be taxed?

Your spouse may have to pay taxes on their social security benefits, especially if they have another source of income. Additional income can also reduce payments if you and your spouse are below the normal retirement age. You should receive an SSA-1099 form that shows how much you’ve earned in benefits, which you will then use to complete your 1040 or 1040NR form.

How do I apply for spousal social security benefits?

You and your non-US spouse can learn more about and apply for dependent social security benefits here. The page on survivor benefits is here, although you’ll have to apply over the phone or in person at your local social security office.

* Requirement waived for carers of the primary SSI recipient’s dependent child

Get Clarity From a Tax Professional

Social security qualifications, especially for non-US spouses, are complex. If you want someone to help you navigate these complex rules, the professionals at Bright!Tax are here for you.

Get started today to learn more about our services, and how we can help!

The post Spousal Social Security Benefits for Non-US Persons: What You Need to Know appeared first on Bright!Tax Expat Tax Services.

Expats With a Foreign Spouse: What You Need to Know About Filing US Taxes

Katelynn Minott, CPA & CEO — Fri, 12 Aug 2022 23:03:38 +0000

No one really wants to think about taxes while they are on their honeymoon. If you marry a foreign national spouse, however, it’s important to consider the impact on your US taxes (when the time is right, of course!).

In this article, we will go over some of the most common tax questions we get from our US expat clients who are married to foreign (also known as nonresident alien) spouses:

– Does my foreign spouse need to file a US tax return?
– Should we file jointly or separately?
– How do I file my US tax return jointly with my foreign spouse?

Does my foreign spouse need to file a US tax return?

Whether or not your foreign spouse needs to pay US taxes depends on the following factors:

Factor #1: Your foreign spouse’s residency status

Your foreign spouse is a US Citizen or has a Green Card

All US citizens and Green Card holders must file their US tax returns yearly. US citizens & green card holders retain this requirement, even if they physically live overseas. Why? It’s because of the US citizenship-based taxation system.

Regardless of where they live, American expats, including Green Card holders, must declare their worldwide income to the IRS. So if your foreign spouse is a US citizen or Green Card holder, they’ll likely have to file a US tax return each year.

Read more: What Is Citizenship-Based Taxation?

To avoid double taxation, they could take advantage of IRS tax relief programs, such as the Foreign Earned Income Exclusion (FEIE) or Foreign Tax Credit (FTC).

Your foreign spouse passes the Substantial Presence Test

Even if your spouse isn’t a green card holder, they still may be considered a US tax resident if they pass the Substantial Presence Test.

To meet the test, your foreign spouse must be present in the US for at least 31 days during the current year. On top of that, they must also have spent 183 days in the US across three years.

This timespan must include the current year and the two immediately prior, prorating days from earlier years as follows:

– Count all the days that they were present in the current year
– Add ⅓ the number of days they were physically present in the US during the previous year
– Add ⅙ the number of days they were physically present in the US during the second prior year

If the sum of these days in the US equals 183 or higher, your foreign spouse is considered a US tax resident and may need to file a US tax return.

Factor #2: Your foreign spouse has US-sourced income

Passive income originating from the US qualifies as US-sourced income, regardless of where the person receiving the payment currently lives. That can include rental income, interest, or dividends.

If your foreign spouse receives any form of US-sourced income, they must file a return to declare it with the IRS, even if they’re not a US citizen.

For example, let’s say you are an American citizen married to a Brazilian partner who doesn’t hold a green card and only spends about 3 weeks in the US each year. However, your Brazilian spouse has various investments in the US, such as a home in San Diego, California, and an apartment in Chicago, Illinois, that generates rental income.

In this case, while your foreign spouse may not be a resident of the United States, their income qualifies as US-sourced income because it is physically situated there. Your Brazilian partner will have to file a US tax return (Form 1040NR) to the IRS and declare any income the US-based properties generate.

Factor #3: You and your foreign spouse elect to file jointly

If your foreign spouse is a nonresident, you can declare your spouse as a US resident for tax purposes by making a special election with the IRS on your tax return. You can benefit from the higher standard tax deduction that comes with filing jointly as a married couple, and other tax advantages that we’ll discuss a bit later.

For example, you are a US citizen married to a French citizen that doesn’t have any income. If you elect to file your taxes jointly, you’ll be eligible for a standard deduction of $25,100 instead of $12,550.

Quick callout – if you elect to file jointly with your foreign spouse, which in turn treats them as a US resident for tax purposes, their worldwide income, just like yours, becomes taxable. That might not seem a problem right now if your spouse doesn’t currently work or makes little income.

However, in the long term, you’re roping your spouse into exposure to the US tax system. If your foreign spouse starts to increase their earnings level, they’ll have to pay taxes to the IRS on that income.

When you elect to file jointly with your foreign spouse the IRS expects you to file jointly moving forward, as the election is continuous, until you opt out, which you can only do once. In other words, you can’t just declare your spouse one year and not declare them the next: you only have the option to turn this election on and then off again once.

If you decide not to declare your foreign spouse as a resident, you might be able to file with the head of household status.

This will depend on whether you are responsible for more than 50% of your household expenses, and whether a qualifying person (which can include dependent children, parents, and a few others) lives in your household with you for more than half of the year.

If you file using head of household status, you’ll benefit from a standard tax deduction of $18,880. You can learn more about the head of household status on this IRS page.

Should my spouse & I file jointly or separately?

There are a handful of advantages to filing jointly with your foreign spouse! If your foreign spouse decides to file their taxes jointly with you, you’ll benefit together from a higher standard tax deduction.

Married couples that file jointly get a standard tax deduction of $25,100. On the other hand, the standard deduction for single or married filing separately filers is only $12,550.

(Quick glossary check: A standard deduction is an amount that filers may subtract from their income before income tax is applied.)

They can also take advantage of the following tax credits:

How do I file my US tax return jointly with my foreign spouse?

Seems obvious, but you’ll need to select the Married Jointly Filing status when filing your tax return. The tax return must declare one spouse is a US citizen, while the other is a non-resident alien. Both partners must sign a document that is attached as an election statement to the return.

Next, you must register your foreign spouse as a US taxpayer either through a Social Security Number (SSN) – which they’re likely ineligible for without US tax residency – or an Individual Taxpayer Identification Number (ITIN). If your foreign spouse has neither an SSN nor ITIN, here are the forms you must file to get them:

– Social Security Number (SSN): You’ll need to file Form SS-5-FS to the Social Security Administration (SSA).
– Individual Taxpayer Identification Number (ITIN): You must file Form W-7 to the IRS to apply for an ITIN.

The ITIN application can be submitted with the US tax return by mail to the IRS. Social security applications are typically submitted at US social security offices or US embassies and consulates located abroad.

Still have questions about filing your US taxes with a foreign spouse? Let Bright!Tax Help!

Marriage with a foreign spouse can change how you (should) file your taxes. Things can get more complex if you decide to live in your foreign spouse’s country permanently.

If you still have questions about filing US taxes with a foreign spouse or declaring your worldwide income, Bright!Tax can help. Our team of CPAs can assess the situation with your foreign spouse to find the best solution for you both.

Get started today by scheduling a call with our team. We’re standing by and ready to assist!

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US Tax Guide for Americans Gifting to a Foreign Spouse

Katelynn Minott, CPA & CEO — Thu, 25 Feb 2021 07:19:36 +0000

A gift to a foreign spouse (a Nonresident Alien or NRA spouse in IRS speak), can be an effective strategy for Americans living abroad to reduce their US tax bill.

Americans living abroad married to a foreign spouse are required to file US taxes on their global income every year. This is true of all American citizens (and Green Card Holders) worldwide, a well as all American residents, due to America having a citizenship-based taxation system.

When Americans file from abroad, they can claim IRS provisions such as the Foreign Earned Income Exclusion and the Foreign Tax Credit, by filing the appropriate forms, that will reduce their US income tax bill, often to zero.

Making a gift to a foreign spouse can also be part of an overall financial strategy to help reduce an American’s US tax bill.

This is because most American expats who are married to a foreign spouse elect to file separately from their spouse on their US tax return, which keeps their spouse outside of the US tax system.

Gifting to a foreign spouse – US gift tax

Whereas there’s no limit on the size of a gift from an American to an American spouse, Americans gifting to a foreign spouse should be mindful that there is an annual limit on the amount they can gift before it becomes reportable and counts towards their lifetime credit for transfer and estate taxes. Amounts over the annual limit must be reported on IRS Form 709, the United States Gift Tax Return.

“Effective gifting of assets is a long-term estate planning strategy for many American families who live abroad.” – Thun Financial

The limit rises with inflation each year. For 2020, it was $157,000.

Gifting to a foreign spouse – reducing US capital gains tax

Furthermore, gifting assets to a foreign spouse means that future increases in the value of the assets won’t be liable for US capital gains taxation.

This is true for real estate as well as financial assets: gifting a partial interest in a property, can reduce or eliminate the requirement to pay capital gains tax when the real estate is sold.

Gifting to a foreign spouse – reducing income tax

Gifting assets to a foreign spouse can also be a strategy to reduce US income taxes, as if the assets produce income, the income will no longer be liable to US taxation.

Gifting to a foreign spouse – other benefits

Another way that Americans abroad can benefit from gifting assets to their foreign spouse is that it can reduce their US reporting.

For example, an American who has foreign registered assets or corporations often has to report them on IRS Form 8938 and Form 5471 respectively. Americans with foreign registered financial assets often also often have to file a Foreign Bank Account Report (FBAR) to FinCEN, the US financial crimes authority.

Gifting foreign registered assets or corporation ownership to a foreign spouse alleviates the compliance burden of filing these forms annually.

Furthermore, an American who gifts a majority stake in a foreign registered corporation to a foreign spouse will avoid GILTI tax on their corporation’s profits.

Catching up

Americans who have been living abroad for a while but not filing US taxes can catch up without facing penalties under an IRS amnesty program called the Streamlined Procedure, so long as they do so voluntarily before the IRS contacts them about it.

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CARES Act Stimulus Payments for Expats Married to a Foreign Spouse

Katelynn Minott, CPA & CEO — Mon, 04 May 2020 06:34:40 +0000

The CARES (Coronavirus Aid, Relief and Economic Security) Act provides a one-time Stimulus Payment to Americans, including expats, based on certain criteria. The payment is intended to help those whose incomes have been affected by the Coronavirus outbreak and the measures implemented by governments to limit its spread.

In this article we look at how being married to a foreign spouse affects expats’ entitlement to receive a Stimulus Payment.

CARES Act Stimulus Payments

The CARES Act was passed on March 27th 2020 to provide financial relief to American businesses and individual taxpayers.

The Stimulus Payments are worth a maximum of $1,200 per individual who earns up to $75,000, with the amount gradually phasing out up to a maximum income of $99,000. These figures all double for Americans who are married and file jointly (although caveats may apply for those Americans married to a foreigner – read on for more details on this).

Expats with dependent children under the age of 17 receive an additional $500 per child, if the children have US social security numbers.

The IRS uses Americans’ adjusted gross income as reported on their 2019 tax return, or, if they haven’t filed one yet, their 2018 tax return.

The Foreign Earned Income Exclusion, which many expats claim to reduce their US tax bill, reduces their adjusted gross income, whereas the Foreign Tax Credit doesn’t.

The Stimulus Payments are paid automatically by direct deposit into a US bank account if one was provided on their most recent tax return. Otherwise, expats can provide their US bank details using the IRS Get My Payment tool, or if they don’t have a US bank account, they will be mailed a check.

“When spouses file jointly, both spouses must have valid SSNs to receive a Payment with one exception,if either spouse is a member of the U.S. Armed Forces at any time during the taxable year.” – The IRS

Stimulus Payments aren’t considered taxable income by the IRS, though they may be by foreign countries.

Expats married to a foreign spouse filing status

Expats married to a foreign spouse (who isn’t a US taxpayer) can choose to file jointly or separately. Most choose to file separately, as this keeps their spouse outside of the US tax system, which will otherwise involve reporting all of their worldwide income and assets, and potentially paying US tax.

There are certain circumstances when it can be beneficial to file married jointly to a non-US taxpayer foreign spouse, but there are rare.

Stimulus Payments for expats with a foreign spouse

The CARES Act contains some important details concerning Americans who are married to foreigners, and how their spouse and filing status affect their entitlement to a Stimulus Payment. For married Americans, Stimulus Payment eligibility is best summarized as follows:

– An American citizen or green card holder whose spouse has a US social security number but who file separately – each can receive a Stimulus Payment if each of their income is under $99,000.

– An American citizen or green card holder whose spouse has a US social security number and who file jointly – if their joint income is under $198,000, they will receive a double Stimulus Payment.

– An American citizen or green card holder whose spouse has no US social security number and who file separately – the American citizen or green card holder will receive a single Stimulus Payment if their income is under $99,000.

– An American citizen or green card holder whose spouse has no US social security number and who file jointly using a taxpayer ID number (also known as an ITIN) – neither can receive a Stimulus Payment.

The only exception relating to the last group is for expats who serve in the US military, though there are currently some legal challenges in motion to allow expats married to and filing jointly with a foreigner with no US social security number to also receive a stimulus payment.

Seek advice

Filing abroad is more complex than filing from the US, and expats almost always benefit from advice from a US expat tax specialist, to ensure that they’re filing to their maximum benefit.

Expats who haven’t filed a 2018 tax return and who want to receive a Stimulus Payment should ensure that they catch up using an IRS amnesty program such as the Streamlined Procedure before October 15th.

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US Taxes for American Expats Married to a Foreign Spouse

Katelynn Minott, CPA & CEO — Mon, 13 Mar 2017 00:00:00 +0000

Taxes are most probably the last thing on expats’ minds when they fall in love with a foreigner. Once the wedding bells have chimed and the dust has settled however, understanding the US tax implications should be on every American expat married to a foreigner’s to-do list.

This will be the first time that you hear your new spouse referred to as an alien, either resident or non-resident, as the IRS takes a less romantic view of them than you do.

If your foreign spouse is a green card holder but not a US citizen, they still have to file their own US tax return if they earn over around $10,000 (or just $400 of self-employment income), despite living abroad. In this scenario, you may benefit from filing jointly, as this will give you a higher standard deduction, as well as a personal exemption each.

If your foreign spouse isn’t a US citizen or green card holder meanwhile, you have three options in terms of your filing status: ‘married filing separately’, ‘married filing jointly’, and ‘head of household’. If in doubt as to which to choose, as always, seek help from an expat tax specialist, as making the wrong choice could negatively affect your tax liability.

Married filing separately

If you check ‘married filing separately’, your foreign spouse will remain a non-resident alien in the IRS’s eyes, and they won’t have to file and pay US taxes.

This can be a good option if your spouse has significant income levels (e.g. more than the Foreign Earned Income Exclusion limit of around $100,000), or if you think they will in future, or if they have significant assets or investments that will at some point be liable to US capital gains or other taxes, as well as extra filing requirements relating to FATCA and FBAR.

It’s worth thinking long term, as perhaps they will inherit money, investments, or assets at some point, or their income will increase significantly over time. In any of these scenarios, it will be advantageous in the long run to exclude their finances from US tax

“Expats who are U.S. citizens married to non-U.S. citizens face an additional layer of complexity when they file their taxes.”
– The Wall Street Journal

Filing separately is also a good idea if you are earning a very high salary or have significant investments and assets, as you can gift them to your foreign spouse over time to take them out of reach of the US taxman. (This would only be a good strategy if your spouse isn’t liable to pay higher taxes on them to a foreign government of course, so it depends on where you live and what your circumstances are).

Married filing jointly

Married filing jointly brings your spouse into US tax liability and makes them a ‘resident alien’ in the eyes of the IRS.

This is a good strategy if they are earning very little or nothing, as it will reduce your tax liability by letting you apply both your and your spouse’s deductions and exclusions to your combined income, which in this case would more or less be just your income.

If you go down this road though, you will also have to go through the process of registering your foreign spouse as a US tax payer.

This will include obtaining them a US Social Security Number (SSN) or Individual Taxpayer Identification Number (ITIN).

Head of household

If you have dependent children who are US citizens with social security numbers living with you, and you pay for at least half of your household’s living expenses, you can file as ‘head of household’.

Similar to filing separately, this option allows you to leave your foreign spouse outside US tax liability, but it gives you a higher standard deduction and lower effective tax rates.

While this article is intended to give you an overview of filing options for American expats married to foreigners, when it comes to minimizing your US tax liability, the devil is often in the detail. How much you both earn, what investments and assets you both have (and may have in future), and the tax regime in the country where you live are all important factors. As such, if you have any doubts or questions about your US tax situation as an expatriate married to a foreigner, we strongly recommend that you contact a US expat tax specialist for some advice.

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