Taxation. Green card holder in a year of first-entry

[Masskey]

Dear friends,

My family (a wife and 3 children) and I have entered the US in June 2018 for the first time with immigration visas obtained through dv lottery. We had never been to the US before June. I am now employed since the beginning of October (with the spouse leaving unemployed and not earnings any income whatsoever) and trying to figure out my residency status for taxing purposes. The information would also obviously help file W-4 with the employer.
The questions are:
1. Am I considered dual-resident for the tax purposes?
2. Can I claim child tax credits for all of my 3 children? An HR personnel has recommended not to include all 3 children as dependents within W-4 to avoid underwithholding. Cannot figure how it is risky to reduce withheld tax for children (all <7yo) I actually have.

Appreciate any help.
Thanks.

[miiki]

Dear friends,

My family (a wife and 3 children) and I have entered the US in June 2018 for the first time with immigration visas obtained through dv lottery. We had never been to the US before June. I am now employed since the beginning of October (with the spouse leaving unemployed and not earnings any income whatsoever) and trying to figure out my residency status for taxing purposes. The information would also obviously help file W-4 with the employer.
The questions are:
1. Am I considered dual-resident for the tax purposes?
2. Can I claim child tax credits for all of my 3 children? An HR personnel has recommended not to include all 3 children as dependents within W-4 to avoid underwithholding. Cannot figure how it is risky to reduce withheld tax for children (all <7yo) I actually have.

Appreciate any help.
Thanks.

I hope you aren’t trying to do your taxes yourself. Your question demonstrates a need for a professional to help you.

W-4 is strictly withholding. It only determines how much money is taken out of your check and sent to the IRS. The hope is that you?ll pay the taxes owed over the course of the year and not owe anything (possibly get a small refund) at tax time. Yes, it?s possible that if you take all the exemptions the worksheet says you can cause them to not take out enough. The W-4 does not affect your taxes. If all your children live with you and you take care of them, you can claim them.

It’s common for people to manipulate their W-4. You might keep it on Married and 2 most of the year, but when it’s time for bonus, you change it to married and 9 so they don’t take out an ungodly amount for taxes. Than change it back right after.

[newacct]

Dear friends,

My family (a wife and 3 children) and I have entered the US in June 2018 for the first time with immigration visas obtained through dv lottery. We had never been to the US before June. I am now employed since the beginning of October (with the spouse leaving unemployed and not earnings any income whatsoever) and trying to figure out my residency status for taxing purposes. The information would also obviously help file W-4 with the employer.
The questions are:
1. Am I considered dual-resident for the tax purposes?
2. Can I claim child tax credits for all of my 3 children? An HR personnel has recommended not to include all 3 children as dependents within W-4 to avoid underwithholding. Cannot figure how it is risky to reduce withheld tax for children (all <7yo) I actually have.

Appreciate any help.
Thanks.

1. You are by default dual-status for 2018, because although you are resident alien because you pass the green card test (as well as the substantial presence test), it's your first year of residency, so you are only a resident for the part of the year starting from the date you entered the US. Before that you were a nonresdient alien. Note that dual-status aliens cannot file jointly, and do not have the standard deduction.

However, you have the choice, if you want, to have both you and your spouse become resident aliens for the whole year, and then file as Married Filing Jointly. That way, you can get the standard deduction and other things. The tax rate is also generally better with Married Filing Jointly than Married Filing Separately. Note that as resident aliens for the whole year, your worldwide income for the whole year, including the part of the year before you came to the US, would be subject to US taxes, though you should be able to use the Foreign Earned Income Exclusion (since you were outside the US for more than 330 days in the 12-month period before you came to the US) so that you don't actually have to pay taxes on your foreign earned income in the part of the year before you came to the US.

2. I am not sure about this

[auditorpnine]

1. You are by default dual-status for 2018, because although you are resident alien because you pass the green card test (as well as the substantial presence test), it's your first year of residency, so you are only a resident for the part of the year starting from the date you entered the US. Before that you were a nonresdient alien. Note that dual-status aliens cannot file jointly, and do not have the standard deduction.

However, you have the choice, if you want, to have both you and your spouse become resident aliens for the whole year, and then file as Married Filing Jointly. That way, you can get the standard deduction and other things. The tax rate is also generally better with Married Filing Jointly than Married Filing Separately. Note that as resident aliens for the whole year, your worldwide income for the whole year, including the part of the year before you came to the US, would be subject to US taxes, though you should be able to use the Foreign Earned Income Exclusion (since you were outside the US for more than 330 days in the 12-month period before you came to the US) so that you don't actually have to pay taxes on your foreign earned income in the part of the year before you came to the US.

2. I am not sure about this

'your worldwide income for the whole year, including the part of the year before you came to the US, would be subject to US taxes,...'

does that mean:

post my gc, even if i do not have any earning in usa, but, have earnings in india, i still have to pay tax IN US$, IN USA, TO USA GOVT.

first visit post gc approval: sep18
returned to india: oct18 (before physical gc receipt)
received physical gc (by my family in usa): oct18 (ss not received yet)
again usa visit: dec18 or feb19 (will visit ss office)
will return to india: july19
again usa visit: july19 end/aug19 1st week - till not certain as of now...

would i have to pay taxes in usa on all my earnings in india sep18 onward...

regards

[newacct]

does that mean:

post my gc, even if i do not have any earning in usa, but, have earnings in india, i still have to pay tax IN US$, IN USA, TO USA GOVT.

Yes, and not just federal taxes, but state taxes too.

But you should be able to use the foreign tax credit to reduce your tax by the amount of tax paid to a foreign country, so that you effectively pay the higher of the two countries' taxes.