# Urgent Tax Help!



## awkwardpeach

Hello All!

I am in a bit of a massive predicament; stupidly I have only just caught on to this.
I moved to the UK in September 2010 when I was only 18 years old on a Student Visa. I worked only 10 hours a week as that is what I was limited to. I acquired a National Insurance number so I was and still am up to date with HMRC. 

As I would assume many people use this excuse and I did not know that I needed to file a tax return in America. Since then I continued to work 10 hour weeks until October 2012 when I got married to my husband, a UK resident. I switched into a Spousal Visa and worked unlimited hours. From October 2012 to until July 2014 I worked roughly 25-30 hours a week on minimum wage. Again all up to date with HMRC. From July 2014 to date I now work for the National Offender Management service making roughly £15,500 a year. I only heard of having to declare my earning literally when my Mother rang to say that her accountant asked if I have been filing US Tax Returns. Since then I have been having panic attacks regarding this.

The worst part of it is that I have made the US aware of my name change; well I thought I did by changing my name on my US Passport but I just got a letter from 8 months ago from my local polling station in my maiden name; like a complete idiot I assumed that if I changed my passport then everything else would change automatically. This is also down to the fact that I'm only 23 and still learning lifes lessons and it seems to be the hard way.

My husband had an industrial accident in 2010 and was awarded £20,000 compensation in 2012 and we put that in a joint account.

Being confused and reading up online about all these penalties and horrible realities he is threatening to leave me if the IRS takes any of his money even if my name was just on the account because I did not declare that or my current account to them along with all my earnings.

I don't want the IRS to think I have purposely been avoiding them but after making the Department of State aware of my move and name change along with the Passport Office I thought that would be sufficient... I never knew social security and such are separate. I know I will be penalized but not sure of who to turn to, how much this will cost me for legal aid or in actual penalties, and what to do when my life goes pear shaped because at this point I really am not interested in going back to America and am happy to relinquish my citizenship when I apply for British Citizenship.

I hope this post makes sense but I am just terrified and living in absolute hell at the moment. Does anyone out there know what I should do and have any advice??

Thank you!

Emma x


----------



## nyclon

I have moved this to the tax forum. 

I don't know what if any penalties you'll incur for not filing however at your current and previous salaries you shouldn't owe any tax. There is an exclusion of something like $90,000 meaning if you make less than that/year you won't pay any tax in the US. You've got a couple of years before you're elligible for UK citizenship so you have some time to consider whether you really want to give up your US citizenship. It costs several thousand dollars to give up US citizenship.


----------



## diharv

Relax
You have come to right place as you will get all the advice you need to get everything set right if that is your desire. I don't know know enough to give specific advice and I tend to get emotional and go off on tirades against the USG but you will get advice here. You can do it yourself or get an accountant to help you. Your cost will be accountant fees if you choose that route, no taxes owed based on your income level and no penalties at all because you have a valid excuse. If penalties are threatened or levied tell'em to take hike and pound sand or salt or whatever. The US govt is a multilimbed beast and the right hand does not know what the left hand is doing does not know what the right foot is doing does not know what the left foot is doing etc. Each branch seems to only know what you tell them , they don't tell each other anything. Relax and heed the advice that will come .


----------



## BBCWatcher

OK, from your description you probably owe zero U.S. income tax so far. The penalty for non-filing if you genuinely owe zero is zero -- there is no penalty. That said, it might be in your interest to file because you just might be entitled to free money from the IRS. Check the rules carefully for the American Opportunity Tax Credit in particular and starting with tax year 2011. If you qualify, get your 2011 tax return in the IRS's hands by April 15, 2015, to claim that free money.

Otherwise, you've got more time. You can start with tax year 2014, due at the IRS by June 15, 2015. That's another "interesting" year because your income is going up, so that'd be the next year to focus on.

As a separate matter, your joint account has triggered FinCEN Form 114 filing requirements, so you should have filed that form at least for 2012 and 2013. The 2014 report isn't due until June 30, 2015, so you're not late for 2014 yet. There is again good news: we have heard zero reports of penalties for late filing this report if you have a reasonable explanation ("I didn't know" is popular) and if your filing is unprompted and voluntary, meaning you haven't heard from the U.S. government on this matter first. So I'd recommend getting those reports filed, including your late reports, to get that issue behind you.

You have the option of participating in the IRS's Streamlined Compliance Program if you wish. That program is a plea for better treatment than the normal penalties. It's not a bad idea and you might wish to choose that option, but from your description it seems like the normal outcome is zero penalties anyway -- and maybe, just maybe even depriving yourself of free money because you didn't file. (There was $400 of free money for tax years 2009 and 2010 for practically everybody who worked, but you're too late to collect that. "Water under the bridge," lesson learned.)

Anyway, you're in good shape, really. Just take a little time -- the next week, say -- to do some reading on the American Opportunity Tax Credit and the Streamlined Program, then just tidy things up, especially your FinCEN Form 114s since those definitely need to be tidy.

I would also recommend you find out whether a parent claimed you as a dependent on their tax return and when. You'll need to know that when you file. I doubt they're able to do that now, but back a couple years ago, maybe.


----------



## BBCWatcher

I shouldn't assume genders when you refer to your husband, so I'll add this point: if you're a male then you also need to register with U.S. Selective Service if you haven't already.


----------



## Bevdeforges

No need to panic. If, indeed, you have been required to file (i.e. if your earnings exceeded the filing threshold for your filing status in prior years) then you can simply take advantage of the Streamlined Compliance Procedure. Start here: Streamlined Filing Compliance Procedures and then click on the link on the left side for taxpayers living abroad.

As BBCWatcher says, the chances are you'll owe nothing. But you will get square with the IRS.

The FBAR filings are only to declare your foreign bank accounts or those you have joint signature authority over. Although you declare the high balance for the year, the FBAR declaration itself has no affect on your taxes. It's informational only.

And, since your marriage, you should probably be filing as "married, filing separately" which means that you only declare your income. The award to your husband for his accident is his and his alone. You do not declare or pay tax on that one, no matter what kind of account it's in. Whether or not you declare one-half of the interest paid on that joint account is kind of a moot question - there are justifications for considering all the interest as "his" income and leaving it off your US tax form altogether, but you have to do what you can live with. (Even if you declare "your" half of the interest, you may still owe no taxes.)

Take a look at the link I gave you on the Streamlined filing process, and then look through IRS Publication 54 Publication 54 (2014), Tax Guide for U.S. Citizens and Resident Aliens Abroad (This is the html version - you can, if you like, download a pdf version.)

If your income is less than $60,000 this year, you can use one of the Free File e-filing sites, but be careful because only about 6 or 8 of them can handle foreign addresses and the forms you'll most likely need for filing from overseas. http://photos.state.gov/libraries/france/5/irs/efiling.pdf If you want filing software for earlier years, you'll probably have to pay. Hint: TaxAct is probably the cheapest for the back years ($15 a year) - but prepare your current year return (2014) first to get a feel for how the software works. 

The first return is always the toughest - but after that it becomes "fill in the blanks." Don't panic - you are far from the only expat to have just discovered your filing obligation. And given that you probably owe $0 anyhow, you're WAY far down on their list of folks to pursue. (If, indeed, they ever bother.) Take it slowly and calmly, one step at a time and you'll get it all done and behind you.
Cheers,
Bev


----------



## awkwardpeach

*Cheers*

Thank you everyone so far for all your help. You have made it a lot easier to understand compared to googling around for forms and what not. I am still unsure of what forms to fill out I order to go down the route of Streamlined Filing Compliance Procedures. Or in general which forms I need to fill out in order to sort my delinquent tax from the year 2010-2011, 2011-2012, 2012-2013; I cannot do this years tax as my p60 has not arrived yet which I would assume is the equivalent of an American W-2. Because I left home and had never done a tax return in my life as my mom always sorted it do you think it would be worth it to just pay someone to do all my back tax returns or should I attempt to do it myself. Because I cannot find a clear guideline to complete a back tax return I am just going in circles on the internet and becoming more and more frustrated.


----------



## Bevdeforges

Oops, no. The American tax year is the calendar year. The UK tax year runs April to April. You cannot file US forms on the UK tax year, and vice versa.

Now, the good news - you do NOT need a P60, nor any other document to serve as a W-2. They actually kind of take your word on it. There is also the little matter that in the US you report your gross income (before any payroll or other taxes are taken out), whereas in many countries (don't know about the UK) your "taxable income" is generally already adjusted for at least some of the social insurances.

So, under the Streamlined Compliance, you would file the current year (i.e. calendar year 2014) plus 3 prior years (2013, 2012 and 2011). OK, the other good news is that, as an overseas resident, you get an additional two months to file - so your deadline for a timely filing of 2014 is June 15th 2015, not April 15th.

Go here and play around with the software a bit to see how it works: TaxACT Free Online Tax Filing, File Free Online Tax Returns, Free Taxes Online for Everyone Although you do have to register on the site to get access, if you give up in disgust, you can simply abandon the whole thing - or, you can print off what you've got (for free) and work with that (mail it in, or use it as a basis to fill the forms out by hand).

The one "trick" I'll advise you on is that you should NOT fill out a W-2 form when it asks for your salary. Scroll down the selection until you see a choice for Overseas or Foreign salary income. That should make the other options you need pop up automatically.

On your salary, you'll need to accumulate the calendar year amounts yourself (just the gross salary - none of the deductions are included in the US forms). Either do this from your copy of your payslips - or take your P60, back off your gross salary from January through April 6th 2015 and add back your gross salary paid in January through April 6th 2014. (If you haven't had a raise or other change in your salary amount, just take your monthly salary before deductions and multiply it times 12.)

The software runs from a questionnaire and you can access various definitions and help information when you run into something that stumps you. (Or you can come back here and ask.)

If you prefer, and your income is less than $60,000 for the year (you have to convert from GBP to US$ yourself - Yearly Average Currency Exchange Rates ) go to the IRS e-file site and pick a Free File provider: Free File: Do Your Federal Taxes for Free (Just be aware that not all providers can deal with foreign taxpayers - check the restrictions posted for the provider.)
Cheers,
Bev


----------



## awkwardpeach

*Cheers Bev!*

Thank you so much. It is slowly getting into my head but I think overall it will be frustrating. I don't think I can file anyways until I get my name on my SSN changed as I got my married in 2012 and my SSN still has my maiden name on it. Once that is sorted I will sort my tax returns out. Seems like only the passport office in the US knows that I changed my name... so annoying... x


----------



## BBCWatcher

OK, let's slow this down a bit and take this step by step. Welcome to adulthood. 

1. Unlike the United Kingdom, U.S. tax years are calendar years. So there are no hyphens in U.S. tax years. Your first U.S. tax year that you missed was apparently tax year 2010.

2. I recommend filling out IRS Form 4868 and sending that in to the IRS now. That form means you will have until October 15, 2015, for your 2014 tax return to be received at the IRS. So that will stretch out the time for your 2014 tax return. It does not stretch out the time to pay if you owe any tax, but we've already explained that it's _unlikely_ you owe any U.S. income tax.

3. The IRS posts some reasonably clear instructions on their overseas Streamlined Program for compliance, but I'll summarize the headlines for you. If you choose the Streamlined Program you would only be required to file U.S. tax returns for 2013, 2012, and 2011 plus the current tax return (2014) per normal when it's due. You would not be required to file a tax return for 2010, the first year when you might have been required to file from your description. So that's a fairly nice benefit already and one reason to choose that program. The Streamlined Program also requires you to file FinCEN Form 114 ("FBAR") for the past 6 years unless you did not meet the filing threshold for any/all of those years. I think we've already established that you did not have $10,000 or more in non-U.S. financial accounts (total) at any point in time until 2012, so you only have to file FBARs for 2012 and 2013 plus the 2014 report per normal when it's due on June 30, 2015.

So you'd just e-file your two late FBARs (plus the current one), assemble three years of tax returns (2011, 2012, and 2013), and send that package into the IRS as they instruct in the Streamlined Program instructions linked to above. Plus file your 2014 tax return to make sure it gets to the IRS by October 15, 2015, assuming you file that extension request form (Form 4868) now. And _that's that_, you're caught up.

4. It's probably a very good idea to use tax preparation software (online or downloaded) when you're filling out the first tax return in your life. TaxAct.com (basic edition) is free for tax year 2014, so that's not a bad choice, but there are others. You will have to pay a bit of money for the previous tax years. I think TaxAct charges about $15 per year. One possible approach is to take a spin through 2014 with TaxAct then, if you feel comfortable, download the "paper" tax forms (PDFs) for tax years 2011, 2012, and 2013 and fill those out manually based on what you learned from 2014. Or just spend the 45 bucks.

5. To give you a few tips, in tax year 2011 you'd file "Single." In tax years 2012, 2013, and 2014 you'd file "Married Filing Separately" since you got married in 2012. (For the record you and your husband have the option of filing a joint U.S. tax return, but that's more complicated and likely not going to offer any financial benefit in your particular circumstances.) Your husband presumably doesn't have a U.S. Social Security Number (SSN) or ITIN and isn't required to have one, so where it asks for his SSN/ITIN on the tax form you'd write "NRA" as the instructions indicate.

You earned income from work outside the United States, and you live outside the U.S., so you are undoubtedly eligible for the Foreign Earned Income Exclusion (FEIE). You should be able to use IRS Form 2555-EZ to claim that. Let TaxAct (or other tax preparation software) do the work for you, but that's what you should see. Although you're not required to take the FEIE, I think that's probably going to be the best option for you given that you have relatively low levels of income in the U.K.

Please do check the American Opportunity Tax Credit. You may qualify for that. (TaxAct or other tax preparation software should ask you several questions about educational expenses you incurred.)

I disagree with Bev about the interest income. Keep it clean and simple: declare half the interest income on that joint account, but also make sure you report your share (50%) of any U.K. tax paid on that account. It's _extremely_ unlikely you'll owe any tax on that interest anyway, and you really, really don't want to be caught lying to the IRS especially at the same time you're pleading for mercy (Streamlined Program). Bad idea. Do it right. So, starting from tax year 2012 when that joint account was formed, you're half owner of it from the IRS point of view. You'll end up using IRS Form 1040 Schedule B for this account/interest (and any other interest you received, as a share of a joint account or individually).

Make sure you report all worldwide income you received. For example, if somebody paid you $10 for helping them paint a surfboard in Fiji, that's $10 of earned (work-related) income from self-employment. That gets reported.

If you received a scholarship or fellowship then refer to IRS Tax Topic 421 for the basic information on how to treat that income. You have to report only the taxable portion of a scholarship or fellowship, in a particular way. Please note that "taxable" doesn't mean "owe tax." Unless your scholarship/fellowship was REEEEEEAAAALLY generous it's hard to believe you'll owe any U.S. tax on it. TaxAct and other tax preparation software should walk you through all of this.

If you had student loan interest then you should be able to deduct that (IRS Form 1040 Line 33).

I'm assuming you paid U.K. national insurance contributions on all your earned income -- you mentioned that upthread -- so you don't have to worry about the U.S. self-employment tax at all.

Starting in tax year 2014 there's a new question about healthcare coverage (IRS Form 1040 Line 61). You would not check the box on Line 61 and you would fill out IRS Form 8965, choosing reason C as your healthcare coverage exception since you live overseas. Again, tax preparation software should handle all of this for you by asking you questions, interview style, but I'm giving you some tips on how it all works in the forms themselves.

As I mentioned, you'll have to answer a question about whether anyone claimed you as a dependent on their tax return (such as a parent). Check with family members if you think that could have happened.

That's about it, really. Take it one step at a time, starting with pushing your 2014 tax return due date out to October 15th, now. That's a simple form that you can pop in the mail tomorrow. In any event you have to make sure that extension request gets to the IRS by April 15, 2015. If you don't file that extension request, your 2014 tax return will be due at the IRS on June 15, 2015 (assuming you attach a simple letter indicating you're entitled to that deadline because you're an overseas resident). So...I'd push that clock out, giving you plenty of time to get 2011, 2012, and 2013 straightened out through the Streamlined Program (plus your FBARs).

The 2014 FBAR deadline cannot be extended, so make sure that you file that by June 30, 2015. You file that electronically, online, using Adobe Acrobat Reader for Windows or for Mac.


----------



## BBCWatcher

awkwardpeach said:


> I don't think I can file anyways until I get my name on my SSN changed as I got my married in 2012 and my SSN still has my maiden name on it.


No, you're OK. Sure, do take care of that, but you can still file before, after, or the same day you take care of that update. As long as you're using the correct SSN, you're fine.


----------



## awkwardpeach

Thank you for laying out for me BBC Watcher... definitely a life lesson but now I know I feel more confident with it and will stay on top of it... glad I am sorting it now as I finally have my career in the prison service over here I need to sort out my past life in the US


----------



## BBCWatcher

Yes, that makes perfect sense. Also, if you ever wish to sponsor your husband for immigration to the U.S., you'll need to submit some past tax returns. You never quite know what curveballs life throws at you, so getting caught up and staying caught up is one less thing to worry about if/when you need to be a visa sponsor.

Looking ahead a bit, here are a couple things you'll want to watch out for as a U.S. person:

1. To the extent you can save (e.g. for retirement), it's a good idea for U.S. persons like you to do that in the United States. To keep things simple it's a good idea to stick to ordinary, plain vanilla bank accounts overseas and do anything fancier (like a low cost Vanguard index fund) in the U.S. Given that you're likely to want to save for a U.K. lifestyle, you can choose U.K.-oriented investments available in the U.S. like U.K. and European index funds, though I wouldn't recommend putting _all_ your savings in "Europe." Mix it up at least a little bit. There are some U.S. investment firms that have offices in the U.K. that should be able to open a genuine U.S. account for you. Maybe you're not in a position to do that yet, but hopefully you can start saving in the near future, even if it's a few pounds per week.

2. If/when you and your husband ever buy a home, be aware that the U.S. could tax your share of the gains on the home when you turn around and sell it and if you've been very lucky and had big gains. (The U.S. does exempt a lot of gains from tax.)

3. Assuming your husband loves you (!), let your husband buy the lottery tickets.  Not that I'm necessarily recommending lottery tickets, but lottery winnings are U.S. taxable. They may not be U.K. taxable.

4. Again, if you become extraordinarily lucky and in a position to give your husband a big gift, bear in mind there's a limit: $147,000 in tax year 2015. (The limit increases each year for inflation.) If you give something bigger than that there are potential U.S. tax consequences. Note that if you directly pay household expenses that's not considered a gift to your spouse. I wish I could afford to give my wife that much money or more every year, but sadly no, not yet. I just mention it for the record.

5. When/if you decide to have children they'll be born U.S. citizens since you evidently lived in the U.S. for more than the minimum required time to qualify to pass citizenship to them. You can register their births through the U.S. Embassy and get them their CRBAs, U.S. passports, and U.S. Social Security numbers. They will also presumably be born U.K. citizens as well. That's a great pair of passports to have.

There's at least one really great reason to make sure your children are promptly documented as U.S. citizens: they can make excellent little tax reducers for mommy. 

In my view when they're 18 they can decide for themselves whether they want to retain their U.S. citizenships and the rights, privileges, and obligations (including tax and financial filing, and Selective Service registration) associated with that citizenship. In the meantime, the U.S. tax code grows kinder to parents who have little ones, so I'd take that deal. (The President just proposed a big bump in child-related tax benefits, so the tax code might get even kinder than it is now, especially after the next U.S. election.)

6. If you're not yet voting in U.S. elections, you might as well start. Visit FVAP.gov for more information. It's dead simple to register, and you'd register in the state where you last lived in the U.S. Many states also allow U.S. citizen-children born overseas to register in the same place when they turn 18. If you're subject to U.S. laws you might as well try to influence them in the most basic way: democratic voting. Otherwise you won't have the moral right to complain. 

Optionally you can also join a U.S. political party's overseas group. Both the Democratic Party and the Republican Party have overseas organizations ("Democrats Abroad" and "Republicans Abroad"), though the Democrats are frankly better organized overseas and even have a "Global Primary" every four years that elects voting delegates to their party convention to select the Democratic nominees for President and Vice President. (Good idea!)

7. You're at least near satisfying the minimum required residence time to acquire U.K. citizenship if you wish. In my view that would be a good idea.

8. Some rainy day I'd recommend checking your U.S. Social Security earnings history at ssa.gov. Believe it or not if you have non-trivial earnings recorded for at least two calendar years then you'll likely qualify for a very modest U.S. Social Security retirement benefit in the future (since you've also paid in to the U.K. system, and since the U.S. and U.K. have a social security treaty), even if you never step foot in the U.S. again. Wouldn't that be nice! Maybe 2010 and 2009 were those two magic years for you depending on the summer jobs and part-time work you did, if any.

Welcome back to Club U.S.A.


----------



## Bevdeforges

For the time being, don't worry about all the tax planning strategies suggested. For right now, you need to look into getting your 2014 filing done - then use that to guide you through the prior years' (just the 3 years - 2011, 2012 and 2013). 

Don't get hung up on trying to report every time someone paid you $10 to help them out or babysit their kids. You want to focus on getting the main sources of income straight: salary, any interest income from bank accounts or other investments - and that's usually it for most "normal" folks.

As long as the non-salary income doesn't exceed about $10,000 in a year, the chances are you'll owe precisely $0 in taxes. You still are supposed to file, but the $10,000 represents the combined total of the personal exemption and then the standard deduction that you get no matter what. (Varies a bit by filing status.)

For most folks, without fancy or complicated investments or complex income sources, filing from overseas comes down to about 20 minutes of filling out the forms each year (and that's if you do it manually). Probably best in your first year to mail in all the forms together (in paper form) rather than to try to e-file, but see how it goes. (I don't believe you can do the backfilings via e-file in any event - so this way you mail everything in together.)

After you mail the package off, you can think about how you want to handle your finances going forward. But feel free to ask questions as they come up. We're open around the clock!
Cheers,
Bev


----------



## BBCWatcher

Streamlined requires mailing anyway if that program is chosen.


----------



## awkwardpeach

Everything seems to be making sense now and I'm going to make a start with it... Hopefully I do it right.. Thank you again for all your in depth knowledge and I will tell you of my progress x


----------

