In situations where a U.S. resident is married to a nonresident, an election can be made under IRC § 6013(g) to treat that nonresident spouse as a resident alien for U.S. tax purposes by attaching a statement making the election to the joint return. The statement must include: (1) a declaration that the election is being made and that the individuals meet the necessary requirements; (2) the name, address, and taxpayer identification number (TIN) of each spouse; and (3) the statement must be signed by both persons making the election.
The election allows the couple to file as “Married Filing Jointly” and may confer a number of tax benefits such as lower tax rates and larger deductions, as well as entitlement to certain credits such as foreign tax credits which may be attributable to the foreign spouse and used to deduct the U.S. tax liability. A couple may make this election even if both are nonresident aliens at the beginning of the year as long as one of them becomes a U.S. resident during the year. Treas. Reg. § 1.6013-6(c).
In the first year the election is made, the couple must file jointly, however in subsequent years they may file either jointly or separately but the nonresident spouse will continue to be considered a U.S. resident and taxed on his or her worldwide income unless the election is terminated. It is also important to note that, pursuant to Treas. Reg. § 1.6013-6(a)(2)(v), individuals making this election are generally prohibited from claiming benefits under a U.S. income tax treaty as a resident of a treaty country. Any subsequent year in which neither spouse is a resident nor citizen of the United States, the election will be suspended for that year. The election can be terminated in a number of ways:
- Revocation of the election by either spouse by filing a statement of revocation. If the spouse revoking the election is filing either a return or a claim for refund, the statement should be attached to those filings. If the spouse is filing neither, the statement should be filed by submitting it to the service center director with whom was filed the most recent joint return of the spouses. It must be filed on or before the last day on which the return for that year is due;
- Death of either spouse, in which case the election is terminated in the tax year following the death;
- Legal separation, in which case the election is terminated in the same tax year as separation; or
- Termination by the Secretary due to inadequate books and records, failure to grant access to such records or failure to supply certain information.
Only one such election can ever be made for a couple. If the election is ever terminated, either voluntarily or otherwise, the two individuals shall be ineligible to make the election under 6013(g) again.