# Advice - USA citizen living in UK - tax return help!



## GG_USA (Jul 6, 2020)

Hello all,

I'm a US citizen, living in the UK. Married to a UK citizen. I haven't filled my tax returns for the past 3 years so am catching up now! I needed some advice if possible. I earn £22.5k from salary per year and £7.5k from dividends on all of which UK tax has been paid. If I use the Foreign Earned Income Exclusion will I still have to pay tax on the dividends, even though I have already paid tax on these in the UK? Will there be a penalty for filling late?

Thanks for all your help!


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## Bevdeforges (Nov 16, 2007)

The Foreign Earned Income Exclusion applies only to earned income (i.e. salary). If you do wind up paying UK tax on the dividends, you can use the Foreign Tax Credit next year on your US taxes.


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## GG_USA (Jul 6, 2020)

Thanks for your help. So pay this time around and get it back next year. That makes sense. Is there any implication if I have shares in my husbands company which the dividends are paid through? I'm an employee in the company and he is the director but some shares are in my name hence the dividend payment.


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## Moulard (Feb 3, 2017)

Assuming that the business is incorporated, If you hold more than 10% of the voting power of the stock in your spouse's business, then you are likely to have Form 5471 filing requirements.

As Bev states... even if you use the FEIE for wages, you can still use a passive category Form 1116 to claim a foreign tax credit on those dividends.

Of course, you can also use a foreign tax credit on your wages instead of the FEIE. 

One gotcha you should bear in mind with the FEIE. Officially, you can only use FEIE on a timely return and the returns in question are not timely.

Treasury regulations allow you to use the FEIE so long as you file before they figure out you haven't filed. On any late return you will need to write “Filed Pursuant to Section 1.911-7(a)(2)(i)(D)” on top of the 1040.


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## GG_USA (Jul 6, 2020)

Thanks Mould, would there be any penalties for late filling of 1040 along with the 5471 you mention? Thanks.


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## GG_USA (Jul 6, 2020)

Thanks Moulard, would there be any penalties for late filling of 1040 along with the 5471 you mention? Thanks.


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## Bevdeforges (Nov 16, 2007)

Late filing penalties are normally a %age of the amount due - so if you're late filing a return showing no taxes due, the penalty is, by definition, $0.


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## GG_USA (Jul 6, 2020)

I read somewhere there was automatic $10k for late filing of form 5471. Is this true?


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## Moulard (Feb 3, 2017)

If you are going via streamlined process then fines are waived I believe. If just going down the silent back-filing route then potentially yes.

These sorts of information returns are a minefield of arbitrary $10k penalties.


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