“I live abroad and have a moderate freelance income. Because I work freelance I can't claim the foreign earned income exclusion even though my income is way way way below the maximum threshold for the exclusion.”---->Yes you can; you can claim your FEIE as a freelance, a self employer filing Sch C/SE.As a US person, as you can see, you are subject to US taxes, both federal and state taxes, on both US source and world wide income; to qualify for the foreign earned income exclusion, you need to have foreign earned income( income you receive in a foreign country),i.e., professional fees. Self-employment income: A qualifying individual may claim the FEIE on foreign earned self-employment income. The excluded amount will reduce your regular income tax, but will not reduce your self-employment tax that you need to pay to the IRS(you must fiel Sch SE for SECA taxes as long as the amount on Sch SE line 4 is $400 or exceeds $400). Also, the foreign housing deduction – instead of a foreign housing exclusion (Self-employed persons working abroad do not qualify for the foreign housing exclusion. Instead you can deduct your allowable housing expenses from your gross income. The housing deduction is calculated on Form 2555 Part VI and IX. The deduction is then reported on Form 1040 Line 36 and you write "Form 2555" on the dotted lines next to the line. The Foreign Housing Deduction reduces your regular tax liability, but does not reduce your Self-Employment Tax liability) may be claimed. However, to claim your FEIE, you must reside in that country for "an uninterrupted period that includes an entire tax year." A tax year is January 1 through December 31. The qualifying period for the bona fide residence test must include one full calendar year. OR, you must be physically present in a foreign country /countries if you reside in that country / countries for at least 330 full days in a 12-month period. You can live and work in any number of foreign countries, but you must be physically present in those countries for at least 330 full days. The qualifying period can be any consecutive 12-month period of time. You do not have to begin your qualifying period with your first day in a foreign country. You, as a self employer, a freelance, need to file Sch C of 1040 as long as the amount on line 29/31 is $400 or exceeds $400 and also as long as the amount on Sch SE line 4 is $400 or exceeds $400, you must file Sch SE to pay self-employment ax to the IRS.
Please visit the IRS Website here:
Publication]Publication 54 (2011), Tax Guide for U.S. Citizens and Resident Aliens Abroad 54 (2011), Tax Guide for U.S. Citizens and Resident Aliens Abroad
http://www.irs.gov/businesses/small/...0.html]Foreign Earned Income Exclusion - Can I Claim the Exclusion or Deduction?
Here is the tricky bit:My spouse is a non-resident alien with no financial ties to the United States and as such refuses, on her own moral grounds, to register for an Individual Taxpayer Identification Number with the IRS. Since she doesn't live in the U.S. and is not a U.S. citizen she has no legal responsibility to have anything to do with the IRS. I love my spouse but she can be very stubborn. So, my question is how do I complete my taxes?”---->As long as your marriage is registered in US( as I assume it); you must file your return either aw MFJ/or MFS, NOT as single; you are married NOT single filer. You may file Married Filing Separately if you wish, but will probably pay more tax if you do. You can file as married filing jointly (MFJ) or married filing separately. In most cases, it is better to file as MFJ. If filing jointly, it is important to also determine the amount of your own and your spouse's foreign income (if any), as well as your own and your spouse's U.S. income if any. As long as your foreign spouse doesn't have any U.S. income at all, as you said, she is not required to pay taxes to the IRS In such case, you can choose the MFS for your own tax return. Your spouse who has no U.S. income means she has no gross income that needs to be declared to the IRS. Taxes on foreign income that you or your spouse already paid in another country may be eligible for claiming of the foreign tax credit ,Form 1116 and report it on 1040 line 47 or on Sch A line 8, as long as you file your return as MFJ or you may use the foreign earned income inclusion ,Form 2555. The US has tax treaties with most countries, meaning you will more likely get credit for foreign income taxes already paid in other countries. You will also get the usual standard deductions and exemption deductions based on your filing status.
“If I file married separately the IRS requires the Individual Taxpayer Identification Number for my spouse. “---->As your spouse is a nonresident alien and you file a joint or separate return, your spouse must have either a Social Security Number or an ITIN.; pencil in NRA in SSN box.it is not necessary for your foreign spouse without any U.S. income to file at the IRS. You need to get your foreign spouse either a SSN#/ITIN# only for joint return with her.You may choose the marriage filing separately option if your foreign spouse does not choose to be taxed on her foreign income.Filing separately has higher tax rates and fewer benefits (you won't be able to claim the elderly and disabled tax credit, child and dependent care tax credit and earned income tax credit, among other deductions and creditsor etc on your US return). Yet, filing separately generally releases you from the burden of any issues or lies made by your spouse in your own tax return.
If I file as Single I am lying about my marriage status and obviously I don't want to do this. Perhaps the forms have changed with the IRS and I need an updated tax form but as far as I know my wife needs a number.”---->Agreed/Exactly.As described above, as long as you are married, you can’t file your return as single. So, I guess you need to weigh your options whether you choose to file one joint return ,married filing jointly, or you want to file separate returns ,married filing separately, or you will only file a separate return for yourself as a U.S. citizen or permanent resident(UNLESS your marriage is registered in US). I mean you can file your return as if you were single and file seperately for an ITIN for your spouse. Once your spouse has her ITIN you can then file an ammended return with the proper identification. As you can see, this is NOT recommendable since it seems like more work.
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