Are there disadvantages or caveats to be aware of when applying for an ITIN for a non-resident/non-citizen spouse?
As an American residing outside the US with a spouse who is not a US citizen I have always chosen Married Filing Separately for my filing status. The intent was to shield any income and assets she has from taxation by the US.
Now with a child who is registered as a US citizen I qualify to file as Head of Household with the IRS for my US taxes. This year I came across an H&R Block article which seems to imply the best treatment would come from applying for an ITIN for my wife.
In particular the following paragraph caught my attention:
Choosing ‘Head of Household’ status will also allow you to claim the spousal exemption if your spouse does not have any U.S. income and he or she acquires an ITIN, as discussed above. This is the most beneficial status you can choose without subjecting your spouse’s income to U.S. taxation. Neither this nor the aforementioned filing statuses invite any type of U.S. tax liability on your spouse.
If my wife were to receive an ITIN will she forever be obligated to file (or for me to include her in my filing) with the IRS?
This mentions income which I generically assume to be salary from working. But what if she has investments, will those be protected from a US tax liability too?
Are there any long term disadvantages or caveats I should consider before applying for an ITIN for my wife? I don't want to have a short term gain of claiming a spousal exemption only to find I'll pay for it down the road in some other way.
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If my wife were to receive an ITIN will she forever be obligated to
file (or for me to include her in my filing) with the IRS?
No.
This mentions income which I generically assume to be salary from
working. But what if she has investments, will those be protected from
a US tax liability too?
Whether she is required to file a US tax return and/or whether her sources of income are subject to US taxes is completely independent of whether she has an ITIN or not.
Are there any long term disadvantages or caveats I should consider
before applying for an ITIN for my wife? I don't want to have a short
term gain of claiming a spousal exemption only to find I'll pay for it
down the road in some other way.
No. The short term disadvantage would be the hassle of the ITIN application process.
p.s. This is not limited to Head of Household -- when you were filing as Married Filing Separately, you could also have claimed an exemption for your wife, as she had no income subject to US taxes and wasn't filing a US tax return.
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