Question on Wages, Salaries, Tips, etc

[NotSoFair]

This question is about what to include on line 7 of 1040, Wages, Salaries, Tips, etc.

Suppose my W2 amount is $40,000 and my non-resident alien DH earned $10,000 in a foreign country (no tax paid). Do I report a total of $50,000 on line 7 or only $40,000 because $10,000 is below the foreign income exclusion limit? We are filing MFJ this year.

Thanks

[mwcpa]

if your husband is a non resident alien you can file as married filing separate, but if you elect to file joint you need to go through the required reporting of the foreign earned income exclusion, assuming it applies.

All wages are reported in line 7 and then a deduction is claimed in form 2555

www.irs.gov/newsroom/article/0,,id=108276,00.html

you really should run the numbers to see what is best... and do not to forget to include his "world wide" income and the FATCA requirements and form 90-22.1 related to his foreign "bank and financial" accounts.

[NotSoFair]

Thanks. So, if I included his income on line 7, which line would be the deduction for foreign income exclusion? Is AGI calculated before or after the deduction? I like to file MFJ to take an exemption for him. Can I claim him even otherwise?

PS: he has no other worldwide income.

Thanks

[mwcpa]

the deduction is "before" AGI....
be careful of your tax calculation.... it can get confusing....
you do not compute tax on the taxable income after taking this break.... you basically lose out on the the 15% tax bracket associated with his 10K of income.... it's not quite that simple, it's just crazy tax math..... you may want to see a pro this year....(this provision was put in during the end of the Bush years to help pay for some other tax breaks given.... I have a few clients that get hurt over this provision)

and do not forget about state and local income tax issues

and no, you cannot claim an exemption for your spouse when you file MFS.....

[NotSoFair]

Yes, it is very confusing. I guess I will consult a pro and let them figure it out.

Thank you.

[mwcpa]

if you have never consulted a pro, be sure to ask family and friends for a referral, and if that does not work, ask co-workers....
be sure the person is "registered" with the IRS (they have a current PTIN)
be sure they do not promise results before they see your actual facts
be sure to ask about their background
be sure to meet with them
preferably, ensure that they are either and enrolled agent (EA), a certified public accountant that works in tax (CPA) or a tax attorney. going to a "once a year" firm that pop up during tax season may not be the best for advice.

and do not just rely on what they say..... you sign your tax return (even if e-filed) under penalties of perjury.... ask questions if something does not look right....