My wife already detailed out her issues with the Canadian government and taxes. I also detailed some of my initial issues/concerns with American taxes. After returning from Canada, I have had some high-priority projects to work on, including getting some final answers on our tax needs. Luckily, we planned ahead and M got the required documentation together and notarized just in case I needed it.
Today I have been reviewing the documentation for the 1040. The instructions are very seemingly contradictory. In some places they say I cannot file Married filing Jointly because she is a nonresident alien. In another place it says we can file that way, if we both show in writing that we agree to. In another place it says that I have to claim her "world income" and will be taxed on it regardless of whether she was taxed on it in another country. In yet another area the rules state that we get a huge exception for her as long as we can prove she is a nonresident alien (how do you prove someone is NOT a resident?!). These rules led me to not one, not two, but three different other sets of rules that I should read. What I found in those rules seemed equally contradictory to me.
I said screw it and decided to call the IRS 800 number and speak with someone. The first person with whom I spoke could only help me by determining if my wife qualified for an ITIN (which I already knew she did and have all the forms). However, Nancy then transferred me to the more specialized Advanced Individual Tax Law area and I got Tony to aid me with the "how should I file due to these extenuating circumstance" question. I explained in detail what we did last year, and then explained I was sure, based on the very confusing rules I was reading in the various documents, what status I should use to file (Married Joint, Married Separate, Single) and, if Married Joint or Married Separate, how my wife's status as a nonresident alien affected what I should enter and how.
He went through the points of the Married Joint and it seemed like a poor choice for our situation. While we could do it, it would require a lot more paperwork (three additional forms on top of the 1040) and this status would then make her have to state that she is a resident of the US for the next three years, regardless of her residency status. That didn't seem good with me moving to Canada. The rules for Married Separate seemed much more amenable to our situation.
I then further explained that she does not have an SSN or an ITIN yet, but that I assumed she needed an ITIN and we had all the paperwork together to process that. Tony said, "Hold on a minute. Does she need one?" He then went through and explained in detail that she may not, in fact, need anything at all. He said that it is very common for spouses to turn in tax forms with their spouses name on it and no SSN or ITIN for a variety of reasons. That one of the benefits of filing Married Separate is that, excluding the two fields where her name and SSN/ITIN would go, the rest of the form is entirely devoted to my information as though I am a single person. He said that if I turn in my 1040 with no SSN or ITIN for her, they will process it without that with no problem. I also verified that the IRS doesn't "look for" a corresponding tax return from a Married Separate form to match up the two married people (as in my case they would never find one). He did say that, if I did have the paperwork for the ITIN, it shouldn't hurt anything to include that and send the tax return to the appropriate secondary address to get her one. However, he couldn't verify doing so wouldn't negatively affect filing in the future-- especially since I'm moving to Canada.
The only important caveat is that I cannot e-file my return if I do not have a tax identification number for her. I have to paper-file. No real problem, really. Just means it might take a bit longer to get my money back.
So, after some initial panic, this seems like the route to go. File as Married filing Separately status, do not include her tax ID number, and then do my taxes like a single person and send it in. I think this weekend I will spend much time doing just that.
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