# So very very confused



## KindaAmerican (Aug 22, 2016)

Hi there fellow expats/aliens et al.

I'm a UK citizen - born and bred. I live and work in the UK, but my parents - both American - bestowed upon me this great gift of US citizenship. I spent some time over there in my youth and have since been diligently filing my US taxes each year, just in case I should ever return.

It's been a relatively painless journey. My income is well below the Foreign Earned Income exclusion and I have no real savings to speak of to worry about FBARs - but I've recently started working for myself. I'm still employed full time, I pay my taxes via PAYE, but I've started a small business with an even smaller profit (I pretty much broke even). I've just started preparing my first years self assessment for my UK taxes and I don't know what I now need to do for my US taxes. I've always just filled in the 1040EZ or whatever it's called via one piece of software or another. 

I'm still well below the threshold, but I simply can't wrap my head around which forms I need to fill out in order to include my self employed income on top of my PAYE salary. Should I just add it all up or is there a separate form? Do I really need to go through revenue vs expenses and all the complicated stuff - simply to arrive at $0.00?

Any advice would be appreciated.


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## Bevdeforges (Nov 16, 2007)

If you're taking the FEIE, then you should be filing a "long-form" 1040 (which I suspect you are doing). 

The official way to report your small business may depend on exactly how you have it set up, but assuming you're paying in whatever social insurances you need to on the business (possibly none, given that you have no profit), you can probably just not bother reporting the small business income for this year. In subsequent years, you could just add the income to your salary and then apply the FEIE to the lump sum. List both employers on the 2555 and leave it at that (as long as you still fall under the FEIE limit). 

Some folks insist that you must include your turnover on line 7 (with your salary income), and then submit a Schedule C (I think it is - for a small business), but given that the income is fully excludable anyhow, that seems serious overkill. It is highly unlikely that they will audit (or even question) a return where there is no potential for additional tax, so keep it simple and straightforward. 
Cheers,
Bev


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## KindaAmerican (Aug 22, 2016)

Great advice. I like keeping things simple  Thank you. Another forum said the same thing, but only if my profit was less that $400 (it was more). Otherwise they said I should be looking at Schedule C. Is this an arbitrary figure? If I go the simple way - what's the worst case scenario? They ask me for more information?


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## Bevdeforges (Nov 16, 2007)

Not sure what they were referring to, but $400 is the threshold for filing if you're "self-employed" - however you're already filing as it is, and you won't have to worry about US Social Security (or rather, "self employment" tax) because you're clearly enrolled in the UK system as it is.

In your situation, I would just add your net income from your side business to your salary and go with that. When and if the income from your side line becomes significant, you can decide from there how to proceed. That way, you have declared all of your income from employment (and then excluded it under the FEIE). If the IRS has any questions, they can get back to you.
Cheers,
Bev


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