US citizen married and living and working in Australia/Foreign Tax Credit and US tax return

[PEK]

My grand daughter is living and working in Australia and married to an Austrailian.

The tax year in Australia runs from June 2018 to June 2019. How do you do the Foreign Tax Credit and how do you report her US income on the US tax return when the equivalent to our W-2 in Australia reflects the amounts from June 2018 - June 2019?

Also would she file married filing separate in the US? Her husband doesn't have a Social Security number. Does he have to get a special ID#?

Thank you,

Pam

[sjrcpa]

She should file MFS in the US, probably, unless she wants to subject his worldwide income to US tax.

She may want to use foreign earned income inclusion.

@itonewbiemay come along and answer the rest. I have had this situation before but don't remember the answers and don't have time to look it up.

[itonewbie]

I would highly recommend your grand-daughter hire a competent tax professional who specializes in expat tax and understands Australian tax (as we do).

Australia has a fiscal year and its tax regimes for employment income, benefits-in-kind, and investment income are not commonly understood by US tax accountants who deal mainly with domestic US tax issues.

In addition, US tax treatment as well as reporting of Superannuation fund is something even expat tax specialists do not always agree on.  To throw a spanner in the works, income tax treaty between the US and Australia will come into play.

While MFS may seem like an easy answer for US taxpayers with spouses who are nonresident aliens, it is not the panacea because there are still complicated gift and estate tax considerations.  Furthermore, depending on each individual's finances and circumstances, it may sometimes be beneficial to elect joint filing.

[sjrcpa]

Thanks Jensen.

[itonewbie]

Anytime, Susan! 😄

[BobKamman]

@itonewbie "While MFS may seem like an easy answer for US taxpayers with spouses who are nonresident aliens, it is not the panacea"

Well, see, that's an example of the tax tail wagging the common-sense dog.  I had a client who met a guy from Australia and moved there to teach school.  Fortunately, they didn't get married.  She discovered that too many Australian men are male chauvinist pigs, and moved back in a year.  Filed single, and they allow electronic filing without all the folderol we have here.  So be careful about signing up for joint liability unless you are really sure you can survive a good old-fashioned American audit of both incomes.  

[itonewbie]

@BobKammanWhat follows that was "because there are still complicated gift and estate tax considerations."  That's where common sense often fails - they know what they know but don't know what they don't know.  An advisor's job is to help clients understand their options as well as the pros and cons of each, so that clients can make an informed decision - but never to make a decision for a client.  As for marriages with foreign nationals, we can trade stories of many varieties as with everything else in life but don't think there's enough time, lol.