# No income last year, but considering self-employment in UK



## Water Dragon (Jun 28, 2011)

I hope someone can point me in the right direction as this tax stuff is more than I can handle!! I have no income of any kind for 2014 - are there any forms I need to file with the IRS at all? The alphabet soup of requirements is ridiculous. I'm also in the process of setting up a home-based craft business. I will be selling online and possibly at an occasional fair locally. Can anyone tell me what would be required by the IRS for such a thing? I have registered with HMRC and have my NI number. As far as the UK is concerned, I pay no taxes unless I make over 10,000GBP profit, and pay no VAT unless I sell over 80,000GBP. Any help would be greatly appreciated.


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## Bevdeforges (Nov 16, 2007)

The main thing you are concerned with for the IRS is whether or not you have reportable income that exceeds the filing threshold for your filing status: Publication 554 (2014), Tax Guide for Seniors the little chart at the top of the page. If you literally have no income for 2014, congratulations, you don't have to file at all! (And there is no need to notify the IRS that you're not going to file.)

As far as setting up a home business, you will fall into Schedule C territory (unless you incorporate the business). And, depending on the Social Security treaty between the US and UK, you may or may not have to pay "self-employment" tax (i.e. Social Security) on your earnings. If you're formally enrolled in the UK social insurance system, you should be able to get a certificate from them which would show you are covered and thereby exempted from the self-employment taxes.

Check the information on Self employment in IRS publication 54 (for overseas taxpayers). You can generally exclude your earnings in a self-employed business just like you do salary. Or you can take income taxes paid to the UK as tax credits against any US taxes due (but ONLY income taxes). VAT is just between you and the UK tax people.

The other potential "gotcha" is that you need to think about filing your FBAR (FinCEN 114 now) once your total "foreign" bank balances hit $10,000. (And even with no income for 2014, if the bank balances hit $10,000 in total at any point during the year, you still need to file the FBAR.)
Cheers,
Bev


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## Water Dragon (Jun 28, 2011)

Bevdeforges said:


> The main thing you are concerned with for the IRS is whether or not you have reportable income that exceeds the filing threshold for your filing status: Publication 554 (2014), Tax Guide for Seniors the little chart at the top of the page. If you literally have no income for 2014, congratulations, you don't have to file at all! (And there is no need to notify the IRS that you're not going to file.)
> 
> As far as setting up a home business, you will fall into Schedule C territory (unless you incorporate the business). And, depending on the Social Security treaty between the US and UK, you may or may not have to pay "self-employment" tax (i.e. Social Security) on your earnings. If you're formally enrolled in the UK social insurance system, you should be able to get a certificate from them which would show you are covered and thereby exempted from the self-employment taxes.
> 
> ...


Thanks so much, Bev! I do wish things would change in the US regarding expats being taxed, but I'm afraid it will get worse, not better. I will be doing some very serious thinking when/if I go for naturalization and UK passport in 3.5 years.


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## Bevdeforges (Nov 16, 2007)

Water Dragon said:


> Thanks so much, Bev! I do wish things would change in the US regarding expats being taxed, but I'm afraid it will get worse, not better. I will be doing some very serious thinking when/if I go for naturalization and UK passport in 3.5 years.


You and everyone else living overseas - as these things change and evolve over time. OTOH, in the intro to Pub 17 (the big overview of how income taxes work), you'll see the following:



> The explanations and examples in this publication reflect the interpretation by the Internal Revenue Service (IRS) of:
> 
> Tax laws enacted by Congress,
> 
> ...


Even the IRS admits they don't have all the answers.
Cheers,
Bev


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## Ex NRASpouse (Dec 28, 2014)

Water Dragon, if you're going to be a sole trader (rather than a limited company) you might consider choosing a 31 December year end for your financial year. I think you can do that - and it could might save you some time with the US return.


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