Overview

Households with a nonresident alien (NRA) partner face additional rules that affect filing status, taxable income, banking, and international reporting. My experience working with mixed-status couples shows the difference between a smooth tax year and costly mistakes usually comes down to early planning: confirming residency status, choosing the appropriate tax election, getting the right tax ID, and documenting account ownership.

Authoritative guidance: see IRS Publication 519 (U.S. Tax Guide for Aliens) for residency and tax rules, and the FinCEN guidance on FBAR (Report of Foreign Bank and Financial Accounts) for foreign account reporting (IRS Publication 519; FinCEN Form 114 instructions).

Key concepts that determine what you must do

  • Residency for tax purposes: An individual is an NRA if they do not meet the green card test or the substantial presence test (IRS Publication 519). Residency determines whether U.S.-source income only or worldwide income must be reported.
  • Filing choices: A U.S. citizen or resident spouse can elect to treat an NRA spouse as a resident for tax purposes (joint return election under IRC section 6013(g)), which changes tax liabilities and reporting obligations (IRS, Form 1040 instructions).
  • Tax ID: An NRA who needs to file or be claimed on a U.S. tax return typically needs either a Social Security number (SSN) or an Individual Taxpayer Identification Number (ITIN).
  • International reporting: Foreign financial accounts may trigger FBAR (FinCEN Form 114) and FATCA (Form 8938) reporting, depending on account type and aggregate balances.

Tax filing choices and the practical effects

  1. Filing separately (NRA files Form 1040-NR; U.S. spouse files 1040 individually)
  • The NRA generally reports only U.S.-source income on Form 1040-NR.
  • The U.S. spouse files as single or head of household if eligible; standard deductions and credits available to the NRA are limited.
  • This keeps the NRA’s foreign income outside U.S. taxation in most cases but can lead to higher combined tax for the household.
  1. Electing to file jointly (treating the NRA as resident)
  • The couple can choose to treat the NRA as a resident for the entire tax year; both must then report worldwide income on Form 1040.
  • This election can lower overall tax through joint brackets and the standard deduction, but it also brings foreign income into U.S. tax and can increase reporting obligations (Form 8938, foreign tax credit work).
  • The election is irrevocable for the year unless specific revocation rules or relief apply; consult a CPA before electing.

Authoritative links: see IRS guidance on filing options and the Tax Filing for Mixed-Status Households (US Citizen and Nonresident) for practical examples.

Banking, credit, and everyday money management

  • Opening accounts: Many U.S. banks will open accounts for noncitizens who provide a passport and ITIN or acceptable secondary ID. Online banks and regional banks sometimes have more flexible documentation requirements.
  • Joint accounts: Joint accounts are legal and common for shared living expenses, but consider the tax and estate implications if the NRA owner lives abroad or if the account receives foreign-sourced deposits.
  • Credit history: NRAs often lack U.S. credit histories. Building credit can require adding the NRA as an authorized user, securing a joint account, or applying for credit cards that accept ITINs.
  • Employer benefits and payroll: NRAs employed in the U.S. must confirm withholding status; payroll withholding differs if the individual is nonresident, resident, or covered by a tax treaty.

International reporting: FBAR, FATCA, and treaty considerations

  • FBAR (FinCEN Form 114): U.S. persons must file an FBAR if the aggregate value of foreign accounts exceeds $10,000 at any time in the calendar year. A U.S. citizen spouse making a joint household budget must be careful if the NRA spouse holds foreign accounts (see our guide: Reporting Foreign Bank Accounts and FBAR Basics).
  • FATCA (Form 8938): Reporting thresholds for Form 8938 are higher for married joint filers and depend on filing status and whether accounts are held abroad.
  • Tax treaties: Treaties can alter withholding and residency outcomes. For example, some treaties limit U.S. tax on certain pensions or scholarship income. Always read the specific treaty article and consult the IRS tax treaty resources or a tax advisor when treaty benefits are claimed (IRS tax treaties page; see also our explainer How Tax Treaties Affect International Income and Withholding).

State tax and residency traps

State residency rules differ from federal rules. An NRA living in one state while the U.S. spouse works in another can create multi-state filing obligations. Confirm the state’s residency test and look for nonresident withholding rules for wages or state-level filing requirements.

Estate and gift tax differences

Nonresident aliens are subject to different estate-tax rules. An NRA spouse who does not have U.S. citizenship may have different exemptions and may trigger U.S. estate tax on U.S.-situated assets. Gift tax rules and the unlimited marital deduction generally do not apply the same way to transfers to a nonresident noncitizen spouse; specialized planning (e.g., QDOT trusts) can be necessary.

Practical checklist to manage household finances

  1. Confirm residency status early (green card test or substantial presence test). Document days in and out of the U.S.
  2. Obtain the correct tax ID (SSN or ITIN) before filing season.
  3. Decide on filing strategy before year-end if possible. Model both separate and joint filings with a CPA.
  4. Inventory foreign accounts and track high-water marks to determine FBAR/FATCA exposure.
  5. Use secure, documented transfers between U.S. and foreign accounts to create an audit trail.
  6. Review estate documents and beneficiary designations to reflect cross-border realities.
  7. Keep clear records of foreign taxes paid — they matter for foreign tax credits if you elect to file jointly.

Common mistakes I see in practice

  • Assuming foreign income never matters: electing joint filing or long-term residency can bring prior foreign income into U.S. taxation.
  • Not filing FBAR or Form 8938: penalties for nonfiling can be severe. Correct earlier returns using available IRS or FinCEN voluntary disclosure programs when appropriate.
  • Using the wrong tax forms: an NRA with U.S. wages may need Form 1040-NR, or the couple may instead file Form 1040 if they elect residency — choose carefully.
  • Neglecting state tax rules that can create unexpected liabilities.

When to get professional help

Engage a CPA or tax attorney with international experience if any of the following apply:

  • The NRA has substantial foreign income or business interests.
  • The household will file jointly and the NRA has material foreign-sourced income or assets.
  • Foreign accounts exceed FBAR thresholds or you are unsure about FATCA reporting.
  • There are cross-border estate or gift planning needs.

In my practice I have found that a one-hour planning meeting before the end of the calendar year prevents most filing surprises and often pays for itself through optimized tax choices.

Professional disclaimer: This article is educational and does not substitute for tax or legal advice. Complex mixed-status tax issues often require personalized analysis by a qualified CPA or tax attorney.

If you want, I can help you assemble a short checklist or sample organizer to bring to a CPA meeting (budget, tax docs, foreign-account summary, and passport records).