Facts: The taxpayer has always been S.African resident. The RSA/USA DTA states in the tie-breaker clause that he is a RSA tax resident. 2002 he gets a Green Card. He continues to remain in S.Africa to date. The DTA provisions trump what the IRC says - he should have remained a US non-resident. His CPA following the Green Card table published by the IRS gets him to MJF with his US citizen wife - incorrectly.
He should have continued to file the US wife as MFS. And should have filed husband1040NR. He didn't!
Now the husband realizes after getting advice that the CPA was wrong. This has been done since 2002!!
How does one undo this mess?
Re-file wife as MFS from 2009?
Re-file husband as 1040NR?
Husband and Wife did not make any statement as required by the IRS that he was consenting to becoming a US tax resident.
Tax Professional Answers
section 6013(g)(2) of the IRC:
(2) Individuals with respect to whom this subsection is in effect
This subsection shall be in effect with respect to any individual who, at the close of the taxable year for which an election under this subsection was made, was a nonresident alien individual married to a citizen or resident of the United States, if both of them made such election to have the benefits of this subsection apply to them.
The double Tax Agreement between RSA and USA
The Husband and Wife did not expressly make the 6013 election. The CPA apparently said filing a 1040 was the easiest route - any other route would be too complicated to follow.
Now turning to the DTA, the tie-breaker clause states that Husband and Wife are tax resident in RSA.
That trumps what is in the IRC.
Wife will have to file 1040X amended returns as MFS from 2009 - explaining the above.
Husband will refile 1040NR's from 2009 - with an attached 1040X no tax ref. no.explaining the above as well.
I would be interested in the views of my other colleagues.
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