# Newbie - Basic Tax Questions



## Shelster (Apr 3, 2014)

hi - 

Glad I found this forum - am already grateful for all the useful info here!

Some background: I'm a US citizen who moved to UK in 2005 to marry my British husband. We've only ever lived in the UK, and he makes no US income. I make a little US income on some investments (between $8,000 - $15,000/year). I work very part-time here in the UK; hubbie is the breadwinner. I filed my taxes in 2006 for the 2005 tax year (we filed married filing jointly then) which was the last year I worked in the US but haven't filed since (for stupid reasons, namely ignorance). 


The immediate question for me is the benefit/downside of married filing jointly v married filing separately - ? I feel like I'm getting conflicting info from everything I read:


- if we are MFJ, wouldn't the threshold to determine whether I had to file be $18,000 of US income? In other words, if hubbie makes $0 in US income and I make less than $18,000 in US income, I wouldn't need to file - is that correct?? Or does the $18,000 include income earned outside the US (i.e., our combined UK earnings)? 

or 

- if instead I opt to change status and file married filing separately, doesn't the determining threshold drop to $3,900? I've made in excess of that amount each year that I've been here. If that's true, am I not then facing years of back taxes since I earned over $3,900 each year on my US investments?

So -- doesn't it make more sense to decide I'm continuing to file MFJ, in which case, since we make less than $18,000 per year in US income I don't need to file??

Apologies in advance for being thick!


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## caminokris (Apr 2, 2014)

Shelster said:


> hi -
> 
> Glad I found this forum - am already grateful for all the useful info here!
> 
> ...


/SNIP/reno
Actually no, because if you file married filing jointly you have to include your husband's income as well. He is working, correct? Do you have children or is it just the two of you?

If children, you can file head of household. Otherwise file married filing separately. Because you have investment income, you cannot get the exclusion for that. You can only exclude your earned income. The problem is that just as you receive tax statements, so does the IRS. 

Have you not received any IRS notices?

Kris


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## Bevdeforges (Nov 16, 2007)

No, if you file jointly with your husband, then you are electing to treat him as a US resident - and you would have to report ALL of his *worldwide* income (along with your own). You would also have to get him an ITIN if he doesn't have a US social security number. 

Yes, the threshold for MFS is ridiculously low, but making more than $3900 doesn't mean you'll owe taxes on it. You still get your personal exemption ($3900) and the standard deduction (which is $6100 for MFS this year). 

Download and take a look at Publication 54 from the IRS to get a feel for how this taxation of overseas taxpayers works. Basically you can "exclude" (using form 2555) your earned income (basically salary income) so that won't be double taxed. Or, you can take credits against any US tax liability for income taxes paid in the UK - however splitting your UK income tax bill between "your" tax and your husband's tax may be more pain than it's worth.

The good news is that, filing from overseas, you get an automatic extension of time to file until June 15th, so you're not pressed for time. If your tax liability is $0 for those prior years, I'd just start filing now. However, if that interest and investment income is from the US, you'd probably better back file and get that sorted out.

Just don't panic. Even assuming you owe some back taxes, if the amount isn't too much, they aren't going to come after you. Just file this year (2013) and then start working on at least the last three years. There are a number of threads here on the "Streamlined Compliance" program that might give you an idea how to resolve the back filing issue relatively easily.
Cheers,
Bev


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## Shelster (Apr 3, 2014)

caminokris said:


> /SNIP/reno
> Actually no, because if you file married filing jointly you have to include your husband's income as well. He is working, correct? Do you have children or is it just the two of you?


Thanks, Kris. No, we don't have children. He's working and earns the lion's share of our income.


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## Shelster (Apr 3, 2014)

Bevdeforges said:


> No, if you file jointly with your husband, then you are electing to treat him as a US resident - and you would have to report ALL of his *worldwide* income (along with your own). You would also have to get him an ITIN if he doesn't have a US social security number.


Thanks, Bev. I think I was misled by H&R Block, who did our MFJ taxes in 2006. I don't remember having to provide anything regarding his income!



Bevdeforges said:


> Yes, the threshold for MFS is ridiculously low, but making more than $3900 doesn't mean you'll owe taxes on it. You still get your personal exemption ($3900) and the standard deduction (which is $6100 for MFS this year).


That's exactly what I was trying to find - the standard deduction. Couldn't quite wrap my brain around how the threshold, personal exemption and standard deduction work!



Bevdeforges said:


> Download and take a look at Publication 54 from the IRS to get a feel for how this taxation of overseas taxpayers works. Basically you can "exclude" (using form 2555) your earned income (basically salary income) so that won't be double taxed. Or, you can take credits against any US tax liability for income taxes paid in the UK - however splitting your UK income tax bill between "your" tax and your husband's tax may be more pain than it's worth.


Thanks again; I think if I take the credits against the taxes I've paid in the UK I'll be okay.



Bevdeforges said:


> The good news is that, filing from overseas, you get an automatic extension of time to file until June 15th, so you're not pressed for time. If your tax liability is $0 for those prior years, I'd just start filing now. However, if that interest and investment income is from the US, you'd probably better back file and get that sorted out.
> 
> Just don't panic. Even assuming you owe some back taxes, if the amount isn't too much, they aren't going to come after you. Just file this year (2013) and then start working on at least the last three years. There are a number of threads here on the "Streamlined Compliance" program that might give you an idea how to resolve the back filing issue relatively easily.
> Cheers,
> Bev


More good advice. I've hired a firm in the US to help me get up to speed with this.
Thanks again for all your help!

Now on to my FBAR questions


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