# Tax for US Expat Living in UK



## ruksack

Good day expats,

My wife is a US citizen, living and working in the UK (I am her British spouse). She came here in 2009, we were married in 2010, she received Indefinite Leave to Remain in 2012 and citizenship in April 2014. She earns about £20k as a self-employed person, and neither of us have any intention of going to live or work in the U.S..

Given the above, please can someone advise on what she should do regarding U.S. tax? I believe she last filed U.S. tax in 2009, and she ccertainly did not earn enough in the U.S. to qualify for tax between then and when she departed the U.S.. Any advice would be greatly appreciated.

I have found similar cases, here, but not one which matches our situation as closely as I would like.


Thanks again,
ruk


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## Nononymous

Start with IRS publication 54 for the official advice. 

If she decides to become compliant, she would more than likely owe nothing but will have some paperwork to do: probably three years of 1040s and FBAR forms if there are bank accounts with more than $10k total. (Note that she's not required to file for those years where she earned so little that she didn't meet the threshold.)

If she now has UK citizenship and doesn't intend to return to the US, she also has the option of ignoring her filing obligations and remaining non-compliant. Saves her a lifetime's paperwork, though might one day cause future problems.


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## Bevdeforges

If she filed for 2009, then she's good up until that point. For 2010 and beyond, she "should" have filed if her income (that's worldwide income) exceeded the threshold amount for the married, filing separately category.

To get compliant under the current "streamlined" process, she would have to file 2013 (i.e. current year) plus three years in arrears (2010 - 2012) - at least for those years in which her gross revenues exceeded the threshold.

FBARs are a separate issue, but filing those depends on the high balances in any foreign (i.e. non-US) accounts she had or had signature authority over.

As Nononymous says, it's up to her the degree to which she wants to become compliant. Depends a bit on what assets or resources she might have back in the US, and how any future plans may or may not change.
Cheers,
Bev


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## BBCWatcher

FYI, the U.S. and the U.K. governments have agreed to exchange financial data with each other for tax compliance and other purposes.


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## ruksack

Nononymous, Bevdeforges, thank you both very much for your prompt and informative responses.

Bev, I can confirm that my wife has no assets in the U.S.. I know they say 'never say never', but it really is extremely unlikely that we will ever seek to return to the U.S. for anything more than a short holiday (visiting my in-laws, etc.).

Nononymous, I can see that, in IRS Publication 54, the threshold for the 'married filing separately' category is $3,900. My wife earned more than that, but in light of the above, remaining 'non-compliant' sounds like a reasonable option.

My wife has confirmed that the last year in which she filed a tax return was 2010. What happens if, for example, ten years passed during which an overseas, wage-earning, 'married filing separately' tax threshold-meeting, non-U.S. asset-owning, U.S. citizen earning less than the $95,100 threshold* did not file U.S. tax, but then decided to 'get right' with the IRS? Could the whole ten years be covered, retrospectively, without penalty?

Finally, if my wife lives out the rest of her days in the UK (only ever visiting the U.S. for short holidays, as mentioned above) and never owns a U.S. asset, and never inherits money from a deceased U.S. citizen, and never earns more than the tax-free earnings threshold, is there a risk that the IRS - or any other organization/body - will pursue her in the UK?


Many, many thanks in advance,
ruk

* "The latest threshold for tax-free earnings for US citizens is $95,100 of foreign earned income for the 2011/2012 tax year."
(From expatinfodesk.com)


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## BBCWatcher

Intentional refusal to file a FBAR (if required) is a felony in the U.S. The U.S. Treasury will probably (or at least could) learn about your wife's U.K. financial accounts (including joint accounts) as early as this year (2014). I don't recommend committing criminal acts in any country unless there's good cause, and on this occasion there isn't. FinCEN Form 114 is a free filing that takes about 30 minutes once per year.

"Assets in the U.S." also refers to family that one might wish to visit. The U.S. does control its borders -- mostly -- and outstanding arrest warrants (if it comes to that) make visits at least awkward.


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## BBCWatcher

Another problem: your spouse is presumably eligible for U.S. Social Security retirement benefits since she presumably lived and worked in the U.S. across at least two calendar years. And you would be entitled to spousal benefits as well. These are U.S. assets, too.

To safely assure receipt of those nice benefits your spouse ought to be tax compliant. Otherwise they can be withheld/garnished.

I don't see the point in potentially committing criminal acts simply to avoid filing two annual reports (IRS and FBAR) with zero financial outlay.


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## Bevdeforges

ruksack said:


> My wife has confirmed that the last year in which she filed a tax return was 2010. What happens if, for example, ten years passed during which an overseas, wage-earning, 'married filing separately' tax threshold-meeting, non-U.S. asset-owning, U.S. citizen earning less than the $95,100 threshold* did not file U.S. tax, but then decided to 'get right' with the IRS? Could the whole ten years be covered, retrospectively, without penalty?
> 
> Finally, if my wife lives out the rest of her days in the UK (only ever visiting the U.S. for short holidays, as mentioned above) and never owns a U.S. asset, and never inherits money from a deceased U.S. citizen, and never earns more than the tax-free earnings threshold, is there a risk that the IRS - or any other organization/body - will pursue her in the UK?


Unfortunately, this is The Great Unknown. At the moment, the IRS has a "simplified process" in place - which is actually a sort of codification of what had been a long-standing procedure for "getting right with the IRS" for overseas residents. Basically, it's a matter of filing the current year plus three back years' returns - plus back six years of FBARs - and all was forgiven, as long as you didn't owe anything (or much) and you changed your evil ways and filed going forward.

With the FATCA stuff going into effect this year (which is actually an international treaty thing supported by the OECD), the US will be "sharing" financial information with overseas governments (certainly all the OECD members) in the attempt to find tax evaders and money launderers. Now, to exactly what extent they are going to hunt down small time overseas US filers who elected to remain non-compliant because they didn't owe any US taxes remains to be seen.

And, as BBC mentions, there is the matter of US Social Security. If your wife worked for 10 years in the US, she'll be entitled to something through the US system on retirement - and given how retirement plans and benefits are going these days, you want to think long and hard about foregoing even a nominal amount. (Even if she didn't make a full 10 years, she may be eligible for some benefit at retirement age - and due to the reciprocity in many of the social security treaties, chances are the UK retirement agency will at least contact the US SSA as part of the benefits process.)

Speaking for myself (I'm in pretty much the same situation as your wife, except that I do have some financial accounts back in the US), the actual filing of the returns is fairly quick and simple - once you've been through it a couple times. The FBARs are pretty much a technicality - just a listing of overseas accounts, which they don't really seem to do much with (at least for those of us with nothing but standard savings and checking accounts). I figure it's a way to keep all your options open, even if you have no intention of ever actually living in the US in the future.
Cheers,
Bev


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## maz57

ruksack said:


> Good day expats,
> 
> My wife is a US citizen, living and working in the UK (I am her British spouse). She came here in 2009, we were married in 2010, she received Indefinite Leave to Remain in 2012 and citizenship in April 2014. She earns about £20k as a self-employed person, and neither of us have any intention of going to live or work in the U.S..
> 
> Given the above, please can someone advise on what she should do regarding U.S. tax? I believe she last filed U.S. tax in 2009, and she ccertainly did not earn enough in the U.S. to qualify for tax between then and when she departed the U.S.. Any advice would be greatly appreciated.
> 
> I have found similar cases, here, but not one which matches our situation as closely as I would like.
> 
> ruk


No one has commented on the fact that your wife naturalized as a UK citizen. According to US citizenship law becoming a citizen of another country is a "potentially expatriating act". What this means is that your wife lost her US citizenship on the day she became a British citizen if it was her intention to lose that US citizenship. Not even the US government can determine what her intent was; only your wife can know her own mind.

Of course, her actions since becoming a British citizen will become evidence of her intent. Such things as traveling on her US passport, voting in a US election, filing a US tax return or acting in any other way as a US citizen would show she did not intend to lose her US citizenship.

The point of all this is that if you and your wife truly do not ever intend to go to the US to live, wish to sever all financial ties with the US, and do not wish to report annually to the US government for the rest of your lives, this moment in time is a golden opportunity to make this decision. (By the way, eligibility for US Social Security is dependent on how much one has paid into their system, not citizenship.)

Think of the whole situation this way; your wife is already in arrears for the last few years re the IRS. There is no desperate need to act immediately to deal with this situation. You both need to sit down, do extensive research, and make a decision about how to handle things after you are armed with all the facts. No one on an internet forum can tell you what you "should" do. You have the time to think this all through clearly and make the choice that is right for you. Meanwhile, rest assured the IRS will not be knocking on your door anytime soon.


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## Nononymous

You've had the typical range of responses, from "there are criminal penalties for willful disobedience" to "****** off, Uncle Sam". 

It is ultimately your wife's decision, though yours too if you don't want your financial data on joint accounts reported via FBAR. It sounds like the paperwork would be minimal, and compliance would cost nothing - there is no penalty for filing late if you don't owe taxes, and by all accounts the FBAR fines are not assessed against normal folks.

However, if you're staying in the UK, choosing not to bother is an option. I wouldn't lose sleep about information sharing just yet - at least look into the UK agreement for details. (In Canada they won't get much, I'm happy to report.) 

Assuming she doesn't renounce US citizenship, one potential obstacle for your wife is passport renewal. She is required to enter the US on a US passport, and renewal requires reporting of her SSN. Currently they don't seem to follow up and check tax comliance, but who knows if that will be true in the future.


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## BBCWatcher

I would put the introduction of U.S. passport renewal obstacles in the range of 2017 to 2023. That prediction is based on my political and electoral calculus. "Within the next decade," in other words.

Renunciation or _documented_ loss of U.S. citizenship is another option. Ironically -- if the point is to avoid filing tax returns -- U.S. Social Security is U.S. source income and may still require filing some sort of tax returns when and while collecting it.


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## Bevdeforges

Just a note on the passport renewals. They have actually be requiring SSNs to renew passports for quite some time now, with little or no "checking up on things."

I mention this only because there are plenty of perfectly valid reasons for not filing - the main one of which is insufficient income. If your declarable income is less than the threshold level, then you don't have to file a return. 

The information that is being shared among the various tax services pertains to financial accounts and investments. There is considerably less visibility for the normal sorts of income items that are reported to and taxed by the government of the country in which one is resident, say, "earned income" and local benefits. 

Are the governments capable of sharing and exchanging such information? Certainly they are. Do they (or will they) exchange this information? Possibly, but to do so one government or the other would probably have to have some reason to ask for the information, normally if there was already an anomaly of some sort on one tax return or the other, and it's unlikely that either government will have the taxpayer i.d. of the person in the other tax system.

It's all in how you assess your own risk situation, and what the tax services are actually looking for.
Cheers,
Bev


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## ruksack

Thank you for your replies, Bevdeforges, BBCWatcher, Nononymous, and maz57.

After having read everything in this thread, several other tax-related Expat Forum threads, as much of Publication 54 as I could stand, and after having read some pertinent sections of the IRS website, I have decided to (e-)file tax returns (or 'help my wife with her own tax filings as much as I possibly can', to be precise).

I believe she will be filing in the 'married, filing separately' category. I have elected to use TaxSlayer(.com) to e-file; this was linked on the 'Free File: I Will Choose A Free File Software' section of the IRS website.

Has anyone had any experience of TaxSlayer? Are there any other free e-filing sites which you would recommend?

Thanks again for your incredibly useful responses.


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## Bevdeforges

Have not used TaxSlayer myself, but just make sure that it's one of the five (this year - used to be 8) Free File sites that can deal with foreign addresses. Taxpayers Abroad Can Choose IRS Free File; Don’t Forget to Report Foreign Accounts

Just be sure to check how to enter salary income. Since you don't have a W-2, you shouldn't just fill one in. There is a separate form (called a FEC, but not always specified as such in the tax programs) for reporting non-W-2 wages from a foreign employer. 

Other than that, it should be pretty straight-forward.
Cheers,
Bev


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## ruksack

Hello again,

Since my last post, my wife has been gathering all of her financial details (for the last couple of years) in anticipation of filing her US tax return.

I have a question: if my wife files now, starting from the 2011-2012 tax year, then will she be penalised for filing late? For what it's worth, she does not earn enough that she actually owes any U.S. tax.

Finally, is there a good online resource for those, like us, who are going through this process for the first time?


Thank you, in advance,
ruk


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## Nononymous

No. The penalty for late filing is a percentage of tax owed. Ergo, no tax owed, no penalty.


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## ruksack

Thanks for that, Nononymous.

I've read a lot of posts, on this forum, in which people ask which forms they should fill out, how they should fill them out, etc., etc. This leads me to believe that, while I'm sure many people are doing everything correctly, there are some who, despite their best intentions, are unwittingly omitting certain information in their filings (perhaps there's a specific extra form they should fill out, which they are unaware of, for example).

I am concerned that, in the event that I move to the US with my wife (who is a US citizen) or in the event that we inherit some money from a deceased family member in the US, or in some other event, which I haven't yet thought of, the IRS (or some other US body dealing in tax matters) will flag something up and we will be penalised.

It is wishful thinking, I know, but it would be great if there were a way in which a well-intentioned, tax-filing individual could determine whether or not the IRS was satisfied with them.

I am a British citizen, and I live and work in the UK. I know that tax is taken from my salary, automatically; I have a 'tax code', and wherever an adjustment in my tax is necessary, this is made automatically and there is nothing I need to do about it (indeed, there is nothing I ever need to do, where my taxes are concerned). In my case, I know that HMRC (the UK tax authority) is satisfied with me. This is the situation my 'wishful thinking' would very much appreciate where my wife's US tax matters are concerned. I hope that makes sense.


Thanks in advance,
ruk


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## DavidMcKeegan

Probably your best bet would be to have your returns reviewed by an expat accountant...that is probably the most assurance you will get that everything has been completed correctly, etc. They can review all of the forms you completed, and make sure they are free from errors or missed exclusions. Tax reviews are also done for much less than standard preparation fees.

On the other hand, if the IRS sees any problems with your return, they will let you know. If you do not hear anything from them, take that as "no news is good news".

Good luck!


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## ruksack

Thanks DavidM, sounds good to me.


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## Bevdeforges

As long as your "taxes due" comes down to $0, and there is nothing overtly "funny" about your tax return, chances are you'll never hear anything from the IRS. (The old "no news is good news.")

I'm not out to deprive any tax preparers from earning a living here. But for most expats with salary income under the FEIE limit and with modest to no investments other than a bank account or three, there's no reason not to do your own taxes and save the fees altogether. Even if you make a mistake of one sort or another, if it doesn't affect the taxes due, you'll never get any feedback about it from our friends at the IRS. However if it helps you sleep at night, it's your money, so spend it however you want.

An inheritance from an American family member (or even a complete stranger who just likes you) won't change much either. Inheritance taxes in the US generally are collectable from the estate of the deceased and must be settled before any money or property is distributed. Now, if use that inherited money to set up a tax dodge in some offshore tax haven, then you definitely will need a tax adviser - but very few of us are that lucky.
Cheers,
Bev


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## ruksack

Thank you, Bevdeforges. My wife will be relieved to hear that she needn't fear the prospect of inheriting money from a deceased, US-based relative. We had both thought that it would be more trouble than it was worth.


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## ruksack

Good afternoon,

I hope you are all well since I last posted here. I am filling out 2014's tax return (1040 and 2555) and I'm using the 'Free File Fillable Forms' method to do it (freefilefillableforms.com).

So far, I have been unable to input 'NRA' for 'spouse's SSN' (form 1040) because the electronic form will not accept letters in that field.


The above minor point aside, I have a question about line 14 on form 2555. It concerns a trip to the US, which started in late 2013 and ended in early 2014:

When I filed last year (for the 2013 US tax year) I gave an 'arrival in the US' date of 11th December 2013 and a 'left US date' of 31st December 2013. In actual fact, the true 'left US date' was 8th January 2014, but the form was concerned with the 2013 tax year, and so I stuck to 2013 dates.

Now that I am filling out form 2555 for the 2014 US tax year, I am once again faced with the 'date arrived in US' and 'date left US' table (line 14). Should I enter the true dates, even though the 'arrived in US' date was in the 2013 tax year, and the form I'm filling out is concerned with the 2014 US tax year? Either way, there is going to be a descrepancy, because I have said (on the 2013 tax year form) that I left the US on 31st December 2013.

As an aside, the answers to the 'number of days in US on business' and 'income earned in US on business' questions are all zero, for every year.


Thanks very much in advance,
ruk


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## BBCWatcher

Answer all questions truthfully.


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## ruksack

Thank you for the succinct answer, BBCWatcher.
Basically, the holiday to the US passed through Christmas and new years, so my original intention was to split it over two US tax years on the forms. That way, with the 2013 and 2014 forms side by side, you would see the complete picture.

I think I'll take your advice and fill out the 2014 return so that it actually agrees with the stamps in the passport.


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## Bevdeforges

The Free File Fillable Forms won't take NRA for spouse's SSN. As of last year, you couldn't use Free File Fillable Forms if you are resident overseas anyhow. (Had to do with how you enter the address.) What you can do is use TaxAct's freebie version (not through the free e-file page on the IRS site, but just go to TaxAct). They'll let you enter NRA like you want to do. 

Last year I couldn't get the IRS to accept forms with NRA for spouse's name and SSN, but you can always print off the forms and just mail them in.
Cheers,
Bev


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## BBCWatcher

Bevdeforges said:


> Last year I couldn't get the IRS to accept forms with NRA for spouse's name....


(Sigh.)


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## maz57

Sooner or later there will be a US taxable person who really does have a spouse named Nra. I imagine the IRS will have to create a special form for that situation.


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## BBCWatcher

You mean like "Cher" or "Prince"?


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## Bevdeforges

ruksack said:


> Thank you for the succinct answer, BBCWatcher.
> Basically, the holiday to the US passed through Christmas and new years, so my original intention was to split it over two US tax years on the forms. That way, with the 2013 and 2014 forms side by side, you would see the complete picture.
> 
> I think I'll take your advice and fill out the 2014 return so that it actually agrees with the stamps in the passport.


However, when you include the "actual dates" you should only enter the "days in US" for those days falling within the tax year you're filing.
Cheers,
Bev


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## Bevdeforges

One quick addendum to the NRA vs name/number issue. There are a number of tax rules that apply when people choose to file as "married, filing separately" that require the IRS to locate and compare the separate filings of the two spouses. 

This is not the case for someone filing separately because they are married to an NRA with no US tax obligation. I figure I am saving the IRS the time and trouble of searching for DH's return, which does not exist.

Heck, even Publication 17 starts out with the disclaimer that everything in the booklet is only the IRS's interpretation of the various tax laws and regulations. Even they admit they don't get the last word.
Cheers,
Bev


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## BBCWatcher

So where in the IRC does it say that you can refuse to provide your spouse's name when the IRS demands it?

Bev, you can do whatever you want to do. That's your call. But let's provide accurate advice on what the IRS demands, OK? If there's no instructional, regulatory, or legal support for a particular tax approach, then let's make that clear. That's all -- it's very simple.


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## ruksack

Bev, thank you for explaining the 'days in the US (falling within the US tax year in question)' part of the return. I will enter actual arrival and exit dates on the 2014 return, and on future returns.


ruk


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## Bevdeforges

BBCWatcher said:


> So where in the IRC does it say that you can refuse to provide your spouse's name when the IRS demands it?
> 
> Bev, you can do whatever you want to do. That's your call. But let's provide accurate advice on what the IRS demands, OK? If there's no instructional, regulatory, or legal support for a particular tax approach, then let's make that clear. That's all -- it's very simple.


Where in the IRC does it say to leave lines blank if they don't apply to you, rather than fill in every line with a 0? Where in the IRC does it say which line to report foreign pension income from each specific country? Where in the IRC does it say anything specifically about the forms themselves? 

The IRC grants lots of things to the IRS to make regulations to cover - and no, the IRS regulations don't cover all circumstances, either. And actually, the regs don't cover the forms, either, in many cases. 

Truth be told, how any individual (or tax preparer) fills in the forms reflects their interpretation of the various laws and regulations. It's not all written in stone. (And that's certainly how the big public accounting firms handle their tax compliance.)
Cheers,
Bev


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## BBCWatcher

Here's what IRS Form 1040 says:

_If a joint return, spouse’s first name and initial / Last name_

and then, on Line 3, next to the checkbox:

_Married filing separately. Enter spouse’s SSN above and full name here._

The form couldn't be clearer. Unless and until you can find something -- anything! -- that says a married filer is allowed to put something/anything else in those spaces except his/her spouse's name (or leave those spaces blank), you're just providing bad advice with no legal, regulatory, or instructional foundation.

Again, I don't care what _you_ do -- that's your business. I do care when bad advice is conveyed. Let (other) adults be adults and make their own decisions, in knowledge of the facts. The earth is not flat, human-caused global climate change is real, Wesley Snipes really did owe income tax, and the IRS really does demand your spouse's name on Form 1040. This really is not fair to readers who deserve the truth.


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## Bevdeforges

"Demand" or "ask for"? It's all a matter of interpretation. As long as you're disclosing everything they need to process your forms and assure themselves that you have owned up to your proper tax obligation (oh, and paid it, too) you've done your civic duty. They "demand" that you give them a telephone number, too, but trust me, the IRS isn't going to call overseas - and you'd just confuse them with the "non conforming" phone number anyhow.

"Render unto Caesar" and be done with it.
Cheers,
Bev


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## maz57

BBCWatcher said:


> Again, I don't care what _you_ do -- that's your business. I do care when bad advice is conveyed. Let (other) adults be adults and make their own decisions, in knowledge of the facts. The earth is not flat, human-caused global climate change is real, Wesley Snipes really did owe income tax, and the IRS really does demand your spouse's name on Form 1040. This really is not fair to readers who deserve the truth.


Huh? The earth isn't flat? I'm now going to have to go back are report this to the society!


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## BBCWatcher

Bevdeforges said:


> "Demand" or "ask for"? It's all a matter of interpretation.


No, sorry, this one really isn't "a matter of interpretation." It's simply not fair to readers to misrepresent _facts_ when providing tax (or other legal) advice. The distinction is very simple:

Fact: The IRS clearly requires married filers to provide their spouses' names on their tax returns (and on some other IRS forms).

Personal Opinion (not mine): You should/could/can try to ignore/violate/disobey the IRS's clear instructions.

Let's treat readers like the adults they are and not lie about or misrepresent the facts. Then it's up to them what they want to do.


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## Bevdeforges

BBCWatcher said:


> Fact: The IRS clearly requires married filers to provide their spouses' names on their tax returns (and on some other IRS forms).
> 
> Personal Opinion (not mine): You should/could/can try to ignore/violate/disobey the IRS's clear instructions.


Your "fact" is actually a personal opinion, too. An "interpretation" of the wording of the instructions.

And your "interpretation" of what I have stated (clearly, I might add, as being an alternate opinion/interpretation of the instructions) is inaccurate. I have never said "should/could/can try"... Merely that it is acceptable in practice to use the NRA designation under specific circumstances if the NRA spouse has no US filing obligation.

There are many NRA spouses who very specifically do NOT want their information relayed to the IRS. Perhaps your NRA spouse doesn't mind, but others do. Meanwhile, I think we've beat this as dead as it's going to get. :deadhorse:
Cheers,
Bev


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