Dual-status -- how to add up tax due from 1040 & 1040NR

[AlexEpix]

When preparing a dual-status return, how do I account for the tax due from the dual-status statement?

For example, I have a client who started as NRA and then got a green card in October.  I'm preparing 1040NR for Jan - Sep, and then 1040 from Oct - Dec.  1040NR is statement, and 1040 is return.

If there is money owed on the 1040NR statement, how do I add to the 1040 return?  Is there a particular line or schedule to enter the amount due from the 1040NR?

[sjrcpa]

The answer is in the instructions for Dual Status returns. I can't remember what it is.

[AlexEpix]

I've read the instructions for 1040 and Pub 519 several times but can't find the answer.  Where exactly did you find the instructions?  It doesn't say how you add up the tax liability.

I can only find the following (Pub 519, under Forms to File, Chp 6, Pg 34):

Resident at end of year. You must file Form 1040 or 1040-SR if you are a dual-status taxpayer who becomes a resident during the year and who is a U.S. resident on the last day of the tax year. Write "Dual-Status Return" across the top of the return. Attach a statement to your return to show the income for the part of the year you are a nonresident. You can use Form 1040-NR as the statement, but be sure to write "Dual-Status Statement" across the top.

[sjrcpa]

Paging @itonewbie 

[Expat_Helper]

In Lacerte you would input the amount in Screen 45.3, Other Taxes in the field labelled "Tax on noneffectively connected income (from Form 1040NR)" after computing the amount due on the 1040NR portion of the dual-status return. 

Dominic Ferguson EA 

[AlexEpix]

You mean Schedule 2 Line 8c?

IRS says "Tax on noneffectively connected income for any part of the year you were a nonresident alien (see the Instructions for Form 1040-NR). Identify as "1040-NR."

So even if the TP had W2 wage as a non-resident working in the U.S., which should be considered effectively connected income, you still put the taxes from the dual-status statement on this line?

[Expat_Helper]

No - in that case I would carry the amount to Form 1040NR line 60 b and include a statement such as "Dual-Status: see Form 1040 attached".  In Lacerte you could input the amount in Screen 45.3 at the very bottom in the Other taxes field.

[Expat_Helper]

PS: I don't think the Form 1040NR includes Schedule 2.

[AlexEpix]

I think I may have misunderstood the instructions before.  Please confirm if my current understanding below is correct:

For example, if earned wage was $20K when NRA, and earned wage was $40K when RA.  The form 1040 dual-status return would have wage of $60K, with 1040NR $20K.  Therefore, the tax liability on the 1040 dual-status return would cover the whole year income. 

The 1040NR dual-status statement just shows the income earned during NRA.  The tax liability on the 1040NR does not need to be aggregated onto the 1040 since the 1040 includes income during NRA and RA.

[Expat_Helper]

Re-reading the original post, it is not clear whether the client was already in the U.S. when the Green Card was issued.  If so, he probably would be a full-year tax resident, so not dual-status, because if physically present in the U.S. as a NRA having taken active steps to be a resident deems the taxpayer a resident.  Even if he was outside, and entered the U.S. in Oct on the GC, it may well be beneficial to elect to be treated a U.S. person for the entire year.  If definitely a dual-status, it is unusual to have tax due on the NR portion of the return because presumably the client is working outside the U.S. and therefore subject to tax in the foreign country on that earned income (income is sourced to the physical location where the services are performed, regardless of the location of the employer.)  _If_ tax is due on the NR portion it will have to be added because the software will not include it automatically. 

[AlexEpix]

"_If_ tax is due on the NR portion it will have to be added because the software will not include it automatically."

Where should the tax due on the NR portion be added on the 1040 form? Which schedule/line?

In this case, the cx started as NRA, but ended the year as RA.  So, the 1040 is the dual-status RETURN and the 1040-NR is the dual-status STATEMENT.