# Us taxes self employed



## Andrea92x (Dec 18, 2015)

Hi I am self employed (YouTuber) I didn't realize I need to file for my taxes being abroad. In 2018 I made $56,000. When I file for my taxes it's telling me I owe over $7000. Is this correct? I've paid my taxes here in the U.K and national insurance. Why do I need to pay double? :/ if someone could please help me, thank you!


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## clever-octopus (May 17, 2015)

You probably don't owe taxes due to foreign earned income exclusion... I would highly recommend speaking with a US tax adviser. Even if you don't owe, you still need to file


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## WestCoastCanadianGirl (Mar 17, 2012)

Hi.

I've moved your thread to the Expat Tax branch... you will likely get a concise answer more quickly than on the UK branch.


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## Nononymous (Jul 12, 2011)

The first question is should one be filing? If you're a dual citizen with no interest in returning to the US, just forget about the IRS.

If you have a good reason to file (US income or assets, plans to return, lack of second citizenship, etc.) then you need to figure out how to avoid paying any US tax. Either exclude income up to $108k (or thereabouts) with the FEIE, or claim UK taxes paid with the FTC. You can do it yourself or pay a pro, but shop around because some of them charge appalling sums.


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## Bevdeforges (Nov 16, 2007)

To file, or not to file - that is the question. There are plenty of reasons for either approach.

However, should you decide to file, get yourself a copy (or download) of IRS Publication 54, which explains the Foreign Earned Income Exclusion and the Foreign Tax Credit - either or both of which should eliminate your tax liability. (And yes, the FEIE does apply to self-employment income.)

It is highly unlikely that the IRS will ever bother you about not filing, particularly if you owe nothing. If you are the nervous type, there is always the Streamlined Compliance Program, whereby you file current year plus 3 years back (and, if required, 6 years of back FBARs, declaring your foreign bank accounts) and get "forgiveness" or amnesty or whatever.

If you go to a tax professional, it will cost you an arm and a leg (and possibly a few other vital organs). If you do decide to go the compliance route, try and figure out how to fill out the forms yourself - simply and evidencing "good faith" without trying to master all the tricks and fancy options.


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## underation (Oct 25, 2018)

Andrea92x said:


> Hi I am self employed (YouTuber) I didn't realize I need to file for my taxes being abroad. In 2018 I made $56,000. When I file for my taxes it's telling me I owe over $7000. Is this correct? I've paid my taxes here in the U.K and national insurance. Why do I need to pay double? :/ if someone could please help me, thank you!


Since your income has already been correctly taxed by HMRC, you don’t owe any US tax and are therefore below the threshold and don’t need to file a US tax return 

If you’ve already filed a US tax return for 2018, you can amend your return to claim Foreign Tax Credits for the UK tax you've paid. In future years, as long as you don’t owe US tax and don’t need to claim a refund for US tax already paid, you needn’t file a US tax return.


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## Nononymous (Jul 12, 2011)

underation said:


> If you’ve already filed a US tax return for 2018, you can amend your return to claim Foreign Tax Credits for the UK tax you've paid. In future years, as long as you don’t owe US tax and don’t need to claim a refund for US tax already paid, you needn’t file a US tax return.


To the OP. The above is a somewhat unique interpretation of US tax law. Others, including the IRS apparently, believe that you have an obligation to file if you earn above a relatively low threshold, even though you will owe no US tax. However, they will not come calling if you ignore this obligation and decide not to file, so the ultimate effect is the same. 

In your case it's pretty straightforward. You should owe no US tax on your income. You can either cease filing US tax returns, or you can file them correctly so that the final outcome is a $0 balance.


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## underation (Oct 25, 2018)

Nononymous said:


> To the OP. The above is a somewhat unique interpretation of US tax law. Others, including the IRS apparently, believe that you have an obligation to file if you earn above a relatively low threshold, even though you will owe no US tax.


True if you abandon your entitlement to credit for foreign taxes paid, by filing and claiming the US Foreign Earned Income Exclusion benefit. 

The FEIE is a US benefit and is conditional on filing. The obligation of the US to allow credit for foreign tax paid is a treaty benefit (Article 24) and is not conditional on filing.


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## DavidMcKeegan (Aug 27, 2012)

If you are a US citizen then you do need to file as your income is over the threshold to do so. You likely won't owe anything though thanks to things like the FEIE and the foreign tax credit. Even if you don't owe tax, you still need to file a US return each year to prove that you don't owe. 

From the sounds of your situation you are being charged self-employment tax (the FEIE does not exclude you from SE tax) and that is where the 7K is coming from. Fortunately there is a totalization agreement in place between the US and the UK and so you need to contact HMRC, get a certificate of coverage showing you already paid into their version of social security, and then you include that with your US return and exclude the US self-employment taxes. 

That is a grossly simplified explanation, so if you get stuck I would recommend speaking with an expat accountant. 

Good luck!


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## underation (Oct 25, 2018)

DavidMcKeegan said:


> If you are a US citizen then you do need to file as your income is over the threshold to do so. You likely won't owe anything though thanks to things like the FEIE and the foreign tax credit. Even if you don't owe tax, you still need to file a US return each year to prove that you don't owe.


Actually, in the UK, you don’t need to prove that you don’t owe money. It’s up to the person or company or organisation that claims you do, to prove their assertion.

Take for instance Mr Cook, of Cook v. Tait. Mr Cook was a US citizen living in Mexico, many years ago. He sold his house, which was located in Mexico. The IRS wrote to him and _asked him to file a US tax return._

He did, under protest, and was then assessed for US tax on his gain from the sale of the property. He paid the first instalment, and sued - unsuccessfully, you won’t be surprised to hear - for a refund of his money.

Mr Cook had shifted the burden of proof from the IRS to himself, by complying when asked to report his gain as US-taxable.


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## DavidMcKeegan (Aug 27, 2012)

It is true that the IRS will often send letters asking you to file a return if they have not received one on your behalf. However if you don't respond, the IRS will just generate a return for you based on the details they have and it often is a worse tax liability than if you would just file a return with your correct details (as the IRS often won't consider things like tax credits, etc). So ignoring letters like that often won't prevent any IRS scrutiny and could even make things worse.


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## underation (Oct 25, 2018)

DavidMcKeegan said:


> It is true that the IRS will often send letters asking you to file a return if they have not received one on your behalf. However if you don't respond, the IRS will just generate a return for you based on the details they have and it often is a worse tax liability than if you would just file a return with your correct details (as the IRS often won't consider things like tax credits, etc). So ignoring letters like that often won't prevent any IRS scrutiny and could even make things worse.


Substitute returns. In the US, yes. In the US, as I understand it, it’s up to the taxpayer to prove innocence. But how would a substitute return work in the UK, where US tax law is a citizenship obligation rather than the law of the land?

A UK resident with a US birthplace isn’t breaking any UK law or offending against UK social mores if s/he doesn’t file a US tax return. It’s wrong, IMO, for law-abiding members of UK society to be scared into thinking the IRS might “come after them.”


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## DavidMcKeegan (Aug 27, 2012)

underation said:


> Substitute returns. In the US, yes. In the US, as I understand it, it’s up to the taxpayer to prove innocence. But how would a substitute return work in the UK, where US tax law is a citizenship obligation rather than the law of the land?
> 
> A UK resident with a US birthplace isn’t breaking any UK law or offending against UK social mores if s/he doesn’t file a US tax return. It’s wrong, IMO, for law-abiding members of UK society to be scared into thinking the IRS might “come after them.”




If they are a US citizen then US tax law would apply to them as well regardless of whether they have dual citizenship or live outside the USA. How the IRS might "come after" someone if they are non compliant would depend on the individual circumstances and if the individual has US accounts, etc. 





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## underation (Oct 25, 2018)

DavidMcKeegan said:


> If they are a US citizen then US tax law would apply to them as well regardless of whether they have dual citizenship or live outside the USA.


Yes, when they’re in the US they can be required to file US tax returns if they’re over a certain threshold.

UK law does not require this.




> How the IRS might "come after" someone if they are non compliant would depend on the individual circumstances and if the individual has US accounts, etc.


If UK residents with US citizenship have US income or assets I agree it would be sensible file US tax returns, if required to do so under US law. And I imagine they generally do.

If they don’t have US income or assets, and their income is entirely UK-source, it’s HMRC that taxes that income, according to UK law.


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## Nononymous (Jul 12, 2011)

DavidMcKeegan said:


> It is true that the IRS will often send letters asking you to file a return if they have not received one on your behalf. However if you don't respond, the IRS will just generate a return for you based on the details they have and it often is a worse tax liability than if you would just file a return with your correct details (as the IRS often won't consider things like tax credits, etc). So ignoring letters like that often won't prevent any IRS scrutiny and could even make things worse.


Bit hard to generate a substitute return for someone with no US assets or income. The IRS will have no information with which to work. 

Only exception here could be interest or investment income from a foreign account that is reported under FATCA. But certainly not employment income, or earnings from various registered accounts (e.g. Canadian RRSP, TFSA etc.) that are specifically excluded from FATCA reporting.


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## underation (Oct 25, 2018)

Nononymous said:


> Bit hard to generate a substitute return for someone with no US assets or income. The IRS will have no information with which to work.
> 
> Only exception here could be interest or investment income from a foreign account that is reported under FATCA. But certainly not employment income, or earnings from various registered accounts (e.g. Canadian RRSP, TFSA etc.) that are specifically excluded from FATCA reporting.


In the UK, a resident’s interest / investment income is taxed by HMRC - allowing credit for foreign tax paid if the treaty gives taxing rights to the US.

HMRC doesn’t allow credit for US tax which is voluntarily paid by a US citizen UK resident.


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