# Becoming compliant



## bobsescapades (Oct 8, 2016)

Hello - I am a dual national US/UK citizen that has lived in the UK since 16. Now late 20s.

I have never filed before, but probably need to!

I am hoping my situation is fairly simple but would appreciate some advice so I haven't got the wrong end of the stick on what forms I need to file. I earn less than the foreign income exclusion, and have done in previous years.

As far as I can tell, do I just need to fill in 2555EZ to confirm this and also fill in 1040 with zeros to show I have no US earnings? I also have earned less than 1500 in dividends/income, so believe I don't need to fill in schedule B. Is there anything else I am missing? It seems like since I don't need to claim other exclusions to avoid tax I don't need any more forms.

Can I literally mail these forms and I am done? I have also seen I may need to file the previous 3 years at once to become compliant.

I am obviously very late this year for filing, but it is not clear this matters if I have no liability. I also need to fill in the FBAR and have not done that yet!

Any help appreciated. It's very hard to get to grips with all of this!


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## Bevdeforges (Nov 16, 2007)

Just to clarify, you need to report your worldwide income on US tax forms. And actually, you need to include your foreign "earned income" (i.e. salary) on form 1040, line 7. The instructions on the form 2555 tell you how to post the "adjustment" to your income on the front of the 1040 form.

If you have "foreign" (i.e. non-US) bank accounts with a total (all accounts combined) of $10,000 or more, you have to fill out a Schedule B - if only for the section at the bottom that asks about bank accounts. If you total bank balance is less than $10,000 then never mind.

The interest income has to be declared on the appropriate line of your 1040 form - and then you follow down the page, turn the form over and follow through the "adjustments" for personal exemption and standard deduction, which will most likely bring your taxable income down to 0 (or less). If salary and bank interest are your only sources of income, it should go pretty quickly, and you just fill the forms out and mail them in to the address for "overseas taxpayers" - check the IRS website and/or Publication 54 for details.
Cheers,
Bev


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## CutPasteAssemble (Oct 7, 2016)

Hey - 

At a first glance, I would consider taking a look at the foreign streamline procedures to see if they apply.

irs.gov/individuals/international-taxpayers/u-s-taxpayers-residing-outside-the-united-states

I typically default to filing schedule B if there is any interest/dividends with the foreign questions answered. I am assuming you would check yes on 7a Question 1 & 2 as you say you need to file FBARs as well.

One more form to consider depending on your account balances and other items is Form 8938. For unmarried individuals with a tax home outside the US the filing threshold is $200,000. Sounds like a ton, but I get a lot of shock from my UK people who don't realize how strong the GBP has been against the USD. For example in 2015 the treasury rate was .6750. You'd hit the 200k USD value at GBP 135,000.

irs.gov/pub/irs-pdf/i8938.pdf
irs.gov/businesses/small-businesses-self-employed/treasury-department-end-of-year-exchange-rates

This form is information only and basically repeats the FBAR info but comes with some pretty rough penalties. 10,000 for a failure to file and then another 10,000 per month after 90 days of it not being filed to a maximum of 50,000. (see above reference) As it does not cause any additional tax, my default is to file.

Also, if you have any non-us mutual funds, pooled investments, unit trusts or anything else that could be called a PFIC you're going to want to be aware of Form 8621. The rules are fairly complicated and the penalties are ridiculous even for compliant taxpayers. 

irs.gov/pub/irs-prior/f8621--2015.pdf

On top of the tax and interest for this form, the cost of compliance is overwhelming. From the instructions below the IRS estimates it takes 20 hrs and 34 mins to prepare........ half of a work week.... Note, there are some exceptions to this form also included in the link below you may want to consider.

irs.gov/pub/irs-pdf/i8621.pdf


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