# Another US tax payer in UK



## Madison1980 (Jan 12, 2017)

I have been living here quite a while, and was not aware that I was to file. I don't earn a lot, but I am in a partnership with my husband. He thought it fair, but I'm really a stay at home mom. Anyway, did I read that right that you have to file if you earn over 400 dollars. 

And do I need to file something different than Form 1040, Forms 3520, 5471, 8938. We do have a house here - jointly owned. My husband is not a US citizen - no green card either. And some bank accounts. 

Can anyone tell me what I have to fill out and if I can do it on my own. I'm not altogether stupid (debatable!!).

Thanks in advance.


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## Bevdeforges (Nov 16, 2007)

Welcome to the club! (Well, not me personally - as an accountant by trade and a US CPA I always kind of knew we were supposed to file, so I have.) 

Don't get too crazy with the filing requirements, though. That $400 threshold for filing only applies if you are "self-employed." Otherwise the threshold is close to $4000 this year for "married, filing separately."

First thing you want to do is take a scan through IRS Publication 54 - for us overseas filers.

Whether or what you have to report from the partnership with your husband depends a huge deal on some of the specifics, whether you draw a "salary" from the partnership, how much is involved, etc. etc.

The jointly owned house actually is pretty much irrelevant until and unless you sell and have a gain more than the tax free allowance for selling your primary residence.

Chances are, you can do it all on your own. However, it's a couple more days before the IRS "Free File" links open up. Generally speaking, if you have less than $60,000 or so in reportable income for the year, you can use the IRS Free File software links to do your filing. There's a little questionnaire to find out which of the 15 or so offers you are eligible for. 

Closer to the end of the month, the IRS "Free File Fillable" forms section will open up - which is a fall-back position if you can't (or don't want to) use one of the Free File sites. 
Cheers,
Bev


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## Madison1980 (Jan 12, 2017)

Yes, I do take drawings from partnership. Very little. but guess I have to file. I downloaded the 1040 form starting with 2013, but think I'll change that to 2014 form (reflecting 2013). I think I am happy enough to do that and try to get it all out of the way. 
Can you tell me the exact forms? I did see somewhere on IRS website (it was under the Streamlined Filing Procedure) that I needed 3520, 5471 and 8938. I see everyone is talking about form 2555ez, which looks relevant. 
What about those other three?

Feeling really bogged down! And I haven't started. Thanks for taking time to reply.


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## Madison1980 (Jan 12, 2017)

Also, my mother died 3 years ago. I am the beneficiary of her IRA account. I take out very little every year. I have to - and I can't close it - because I was told I would be penalised. It's less than 18,000 US dollars. How do I enter this on 1040?


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## Bevdeforges (Nov 16, 2007)

Seriously, wait until the FreeFile site opens up - then do the current tax year (2016) to see what forms the program says you need to do. You can then use the current tax return as a model for doing the prior years (2013 - 2015) - with or without software to help you.

In general terms, though, the key forms for most expats are 1040, 2555 (if you treat your partnership draw as "salary") and possibly 1116 if you need to take the tax credit for taxes paid in the UK to avoid double taxation. Then, depending on the cumulative balance in all your non-US bank accounts (including any accounts held jointly with your NRA husband, and if you have signature authority over the partnership accounts), potentially FBARs (for which you need to backfile for 6 years. More information on this at Individuals Filing the Report of Foreign Bank and Financial Accounts (FBAR)

Frankly, I'd avoid filing those "fancy forms" ( 3520, 5471, 8938) if you possibly can. Treat the partnership as your "employer" and see if you can simply use the FEIE to eliminate the issue altogether. While they make all sorts of "threats" in the instructions, they are actually looking for high rollers using foreign corporations and partnerships to avoid taxation. If the amounts involved are relatively modest, you can probably just file fairly simply. The IRS has very few resources outside the US to check against your returns, and unless there is something "shady" on what you do file, it's very unlikely they'll bother you even with questions.
Cheers,
Bev


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## Madison1980 (Jan 12, 2017)

Thanks, Bev. I will take that advice. I don't think I have to worry about double taxation. It's very little. I have started reading Publication 54. It's actually ok - I can understand most of it. Maybe I'm being optimistic, because only started. They mention those FreeFile sites - sounds good, since they correct simple mistakes immediately. 
So that's me off the hook for another week or two. I will have to fill out 6 years of FBARs. Should I do that now or wait, too. 
Thank you soo, soo much. Lifesaver. You.


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## Bevdeforges (Nov 16, 2007)

The FBARs have to be filed online at the site I linked you to. I would wait until the FreeFile site opens and you get started on the 2016 tax filing. At the same time, you can start filing the FBARs, starting with the current one (2016) and then working backwards from there as you get the hang of it.
Cheers,
Bev


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## Madison1980 (Jan 12, 2017)

I think I know the answers to this, but do I have to list my child's accounts on the FBAR. I am only a signatory on his account, and he is not a US citizen. One is very small - a child trust fund from gov't. The other is a savings account for him. 

Also, some accounts overlap - putting money in one until it was switched, which makes me look wealthier if you put all the high amounts in. They might have been high for 3 days? 

Thanks

Ann


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## iota2014 (Jul 30, 2015)

Madison1980 said:


> I think I know the answers to this, but do I have to list my child's accounts on the FBAR. I am only a signatory on his account, and he is not a US citizen. One is very small - a child trust fund from gov't. The other is a savings account for him.


Presumably you only have power to administer the account - change address, etc - and don't have the power to take out the money? If so, there's surely no need to mention your child's accounts at all, as they're not yours to spend. That would be my inclination.



> Also, some accounts overlap - putting money in one until it was switched, which makes me look wealthier if you put all the high amounts in. They might have been high for 3 days?


Inevitable result of being required to aggregate the totals of all accounts. Up to them to figure it out, if they care, which I'm guessing they probably don't.


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## Nononymous (Jul 12, 2011)

Before doing anything, ask yourself if filing and coming into compliance is a smart move. If you're planning to stay in the UK permanently, and eventually take UK citizenship, then you might be better off staying as far away as possible from US tax reporting. (Refer to the "cheerful bit of advice" thread posted one day ago.)

I would also wait at least a year to see what happens with the new US government. There's no reason to rush things. It's unlikely that the Republicans would actually end CBT (citizenship-based taxation) but they might get rid of FATCA, or at least hobble it so badly that you needn't worry about it. If your UK bank does not identify you as American, you can safely stay off the radar forever.


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## Bevdeforges (Nov 16, 2007)

Technically speaking, being a "signatory" on the account means you should report it in the section for accounts where you have signature authority "but no financial interest" in the account. (That's where people indicate, for example, when they have signature authority over a business or association account - say, as treasurer or accounting manager.) 

But what Nononymous says is true, too. Do evaluate your personal risk - i.e. accounts in the US, eligibility for US SS or similar dependencies. But unless you're talking millions of $ in accounts, you're still only small fry on the tax/FBAR scene.

I wouldn't worry too much about "double counting" of funds transferred between accounts. They really don't look too hard at the balances you report - it's mainly the information about the existence of the accounts that they are after. And double counting of balances is a pretty common occurrence in any event - with money transferred between accounts, things like selling a home or car and moving that money around, etc. 
Cheers,
Bev


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## iota2014 (Jul 30, 2015)

Nononymous said:


> Before doing anything, ask yourself if filing and coming into compliance is a smart move.


The OP mentioned an IRA, within easy reach of the IRS.


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## Madison1980 (Jan 12, 2017)

I would definitely go with this, except my father passed away last October and I will inherit some money - so I'm afraid of coming under their radar. If I didn't think, I would, I'd leave it. And then I worry because I've joined this, so now they know I can't claim ignorance. But am thinking of renouncing citizenship - such a hassle.


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## Bevdeforges (Nov 16, 2007)

Assuming your father was a US citizen living in the US, inheriting from him shouldn't pose any particular problems for you - as long as you make sure everything goes through the appropriate probate process before you take possession. It's when you inherit from a non-US person that the US tax side of things can get complicated.
Cheers,
Bev


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## iota2014 (Jul 30, 2015)

Madison1980 said:


> I would definitely go with this, except my father passed away last October and I will inherit some money - so I'm afraid of coming under their radar. If I didn't think, I would, I'd leave it. And then I worry because I've joined this, so now they know I can't claim ignorance. But am thinking of renouncing citizenship - such a hassle.


Do you mean because you've joined this forum? I don't think you need to worry about that. As far as I can see, the IRS doesn't go looking for people on the tax forums - though I suppose they might if they were desperately seeking evidence in a high-value Swiss bank tax evasion case. 

But there are advantages to complying for now, if you're thinking of renouncing after your US inheritance is settled. If you're compliant, and don't have any UK assets that set off IRS alarm bells (PFICs, etc), renouncing and exiting the tax system can be very quick and easy. 

It's horses for courses. For some, keeping under the radar works better; for others, including me, minimalist compliance + renunciation is what suits.

Only, consider your US assets before making the decision to renounce. I think it is possible to move money from an IRA to the UK - I saw a recent discussion about it on the UK-Yankee tax forum - but I believe you have to be careful how you do it or you end up being double-taxed. So it might be better to get that done before renouncing (if you decide to renounce).

Regarding your son's accounts: can I suggest again that you just leave them off your FBARs? If that bothers you, couldn't your husband have the signature authority instead of you?

Personally, I would never ever mention the names of my children on an IRS form, however remote the possibility of future comeback for them.


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## Madison1980 (Jan 12, 2017)

Thanks - a lot to consider. I think I may take advice on son and make husband signatory. Thanks. I do appreciate everyone's help and two cents. It does help - great support.


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## Nononymous (Jul 12, 2011)

Regarding children, if your sons were born in the UK and do not have a US birthplace, they are very FATCA-proof so it's worth preserving their anonymity vis-a-vis the US government, and ensuring that UK financial institutions never catch a whiff of their US personhood.

This of course assumes that you qualify to pass on US citizenship to them.

If they are UK-born, then if you haven't already registered their births with the US consulate, you might consider not doing that. If you already have, it's no big deal, but I would keep their names off of any IRS or FBAR forms, should you choose to become compliant.


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## Madison1980 (Jan 12, 2017)

Yes, he was born in UK, and I haven't registered his birth with US consulate. Thought I was being rather neglectful - everyone telling me how important it could be...but maybe these things DO happen for a good reason. Yes, I'm glad that I didn't do that now.


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## Nononymous (Jul 12, 2011)

Good, you didn't register the birth. Do not do this. If you do become compliant, do not mention him on any US paperwork. If FATCA enforcement becomes more onerous in future you may want his father to set up accounts for him at different bank so that he is in no way associated with your name. 

What I would do, however, is make sure you have all the documentation required to "activate" his US citizenship, should he wish to do so. Put that somewhere safe, and when the time comes, let him know where it is hidden. Then he has the option to take advantage of it one day.

Two caveats: 

It's possible that you could qualify for free money from the US government, a refundable child tax credit of about $1000 per year. Look into the rules for this. If you are eligible, and willing to jump through the hoops (i.e. it might require reporting your husband's income, though not necessarily identifying him by name) then you might find tax compliance profitable. Or you decide that you don't need the money badly enough to justify putting your child on the radar.

Family travel to the US is potentially an issue. If one parent has a US passport but the child does not, an especially alert custom officer might take note and ask if the child has US citizenship, or assume that the child does and then ask why he doesn't have a US passport. Unlikely but possible. (Some parents legitimately do not meet the criteria to pass on citizenship, but if you do, it's unwise to lie to while crossing the border.) Just be aware that it's potentially an issue, though if it happened you'd probably get off with just a warning. When I've entered the US with my daughter I've always used my Canadian passport with US birthplace, and she her Canadian passport with German birthplace, and they've never asked questions. However it might be different coming in from the UK - even if you have dual citizenship and use a UK passport you likely won't sound British if you grew up in the States.


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## Madison1980 (Jan 12, 2017)

I have always travelled with my US passport into US (thought I had to!!) and my son with his Irish passport (we live in N.Ireland). I am dual Irish / US. We have landed at Newark and I have gotten in the non-US line, because son has no US passport. They have never said anything except a couple of times in a friendly way - you should get him a passport. Recently, I have just gone in the US line and no questions asked. It is much shorter and I thought they might object since he's not US, but didn't care. Also, I am lucky that I can clear US immigration in Dublin a lot of the time. It's way easier. Don't think I'd bother about tax credit. So I am Irish/US living in UK and paying UK taxes. Not sure what Brexit will throw up.......


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## anglo1558 (Apr 29, 2013)

I'm also figuring this out for the first time! Anyone know if there is a cheap option/free file option for using the IRS streamlined filing processes to get caught up with filing? I've lived in the UK for over 7 years and want to get caught up, just so it's off my mind! But most accountants are over £1,000 for the service! Argh!


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## Bevdeforges (Nov 16, 2007)

See if you are eligible for the Free File services for the current filing year (2016). https://www.irs.gov/uac/free-file-do-your-federal-taxes-for-free

Do the 2016 filing to get an idea how things work. Then, you'll have to buy the software (or online services) to do the back filings. Check the website (not the Free File site) for whichever vendor you used for the 2016 return, and there you can order the prior year software. TaxAct has traditionally been the least expensive (especially if you do them online rather than downloading the software), but I believe all the software packages have something available for the three prior years.

As far as FBARs (FinCEN 114) go, that's a file-it-yourself online thing anyhow, and pretty simple to do once you get through the first one.
Cheers,
Bev


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## iota2014 (Jul 30, 2015)

Don't Streamlined submissions have to be sent by post? With "I am a bad delinquent taxpayer" scrawled in red on the top of every page? 

Alternative possibility: just backfile without entering Streamlined, if no or little tax is due.


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## Bevdeforges (Nov 16, 2007)

You can't do backfilings by e-file in any event. As far as I know, you can always file the current year electronically, then backfile the three priors by post (whether or not you want to mark them as part of the streamlined program - it's certainly possible to just file the past three years as "late filings" if you owe little or nothing).

In any event, the "old" tax prep software pretty much has to allow you to print the forms.
Cheers,
Bev


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## anglo1558 (Apr 29, 2013)

Thanks guys! Appreciate it. In this case, although I'm loathe to do it, I think I may just pay the accountant this year and get it done with - that way I know it's correct. But really good to know about the free filing from HR Block! And the FinCen online filing looks pretty easy, it's just that I've never done it before, so I kind of feel like I should have the accountant's 'official' stamp on it this year...Argh! That's goodbye to £1200...!


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## arlekin (Jan 24, 2017)

iota2014 said:


> Don't Streamlined submissions have to be sent by post? With "I am a bad delinquent taxpayer" scrawled in red on the top of every page?
> 
> Alternative possibility: just backfile without entering Streamlined, if no or little tax is due.


if you need to add any information forms (which have penalties) , this is not a good approach. Let's say you file FATCA form - it immediately can have penalty even if you owe no tax.


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## Bevdeforges (Nov 16, 2007)

To be honest about it, the fees the accountants are demanding for filing your FBARs are extortionate. The forms are pretty easy to fill out yourself, and even if you don't get it "perfect" someone will contact you if there is a question (as they did once with me).

But it's not just H&R Block that offers the free e-filing (assuming you meet their requirements).
Cheers,
Bev


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## iota2014 (Jul 30, 2015)

arlekin said:


> if you need to add any information forms (which have penalties) , this is not a good approach. Let's say you file FATCA form - it immediately can have penalty even if you owe no tax.


See https://www.irs.gov/individuals/international-taxpayers/delinquent-fbar-submission-procedures


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