Mummy in the foothills

Dh and I UK/US dual citizens need to do our taxes yet again. Last year our US accountant did them for us as we had state taxes too.
Now we have been in UK long enough that all income is UK based and we are no longer US residents, so only need to file Federal taxes. Anyone know if any of the online tax forms can be done from UK for free with our "foreign" earned income? We used Turbo tax one time 5 or 6 years ago from within the US for my son to do his US taxes.

theOAP

The most popular commercial software mentioned on the US expat sites are TurboTax and Tax Act. It seems to vary year by year as to which is the best, and you may find you have to print off and mail in the final return. There is also the IRS Free File, but if you require software assistance in preparation the maximum yearly income allowable is $60,000.

New for this year is form 8965. If you do not have US medical insurance coverage, you need to file this form to be exempt otherwise the IRS will levy a penalty. I'm not sure how long you've been back in the UK, but if it's less than 330 days (physical presence test), you may have a problem. If you meet the Bona Fide Residence test, then there are no problems. Be sure the software will file 8965 for the exemption.

Here's some info:

E-File Options

http://photos.state.gov/libraries/fr...rs/efiling.pdf

Mummy in the foothills

Thanks OAP I was wondering about using Turbo Tax I hadn't heard or Tax act. I'll have some reading to do.
We've been back since Sept of 13 so are definitely residents now (no US income in 2014 at all). Our US accountant did the 2013 taxes state and fed by email for us, now I'm on my own.

JAJ

Note that this refers to adjusted gross income. Which means that most people taking the Foreign Earned Income Exclusion (FEIE) do qualify for FreeFile, since income excluded for this reason does not count towards Adjusted Gross Income.

TurboTax free file version does not appear to include form 2555, however TaxACT say they do.
https://turbotax.intuit.com/personal...ee-edition.jsp
https://www.taxactonline.com/s_onlin...free-file.asp?

There are other providers. In addition, the returns can be self-prepared through IRS fillable forms.
http://www.irs.gov/uac/Free-File:-Do...Taxes-for-Free


Although it is sometimes better to take a foreign tax credit, the vast majority of people will get to a tax due of zero by taking the FEIE.

Mummy in the foothills

Thank you JAJ I can get myself organized and do it all by april. For some reason I always find other things to do when I have time to do the taxes.

theOAP

If you were resident in the UK for all of 2014, you have until 15 June 2015 to file your return.

U.S. Citizens and Resident Aliens Abroad - Extensions of Time to File

Note however any tax or penalties due will still calculated as due on 15 April 2015.

This may not be of help though since it gives an even longer period for procrastination.

Beware of UK building societies and interest payments. Several have now started making interest payments on 31 December, but you're not made aware until after the 5 April UK tax date, so notification comes sometime in May, if you're lucky.

FBAR's (FinCEN 114) are due on 30 June, and no extension of filing time is allowed.

JAJ

Although can one still e-file if taking advantage of that extension?
There is also the option of form 4868, which gives an extension until October 15 - no questions asked as long as a good faith estimate is made of taxes due.


But you don't have to wait for formal notification ... isn't it possible to look at the statement to get the necessary information? And remember that interest will be net of 20% tax, so you need to add back 25% of the net amount to cover the tax. Declare the gross amount as U.S. income and then take a credit for the tax. As long as foreign tax is less than $300 you do not need to complete form 1116.

Although, in most cases, those who take the foreign earned income exclusion use the standard deduction to cover everyday amounts of interest, etc, and U.S. tax payable still works out at zero.

theOAP

Good point, and not one I can answer since I've never used tax software. Most commercial software vendors offer past years products, so while the software should function beyond 15 April, the return may require posting. The IRS Free File programme may be a different situation regards availability, I don't know.

And that is the reason for the warning!

There are yearly statements for HMRC purposes issued by many banks or building societies, but they can be issued any time between May and October. Current accounts, online accounts, and linked savings accounts may offer monthly statements, but other types of saving accounts with banks do not always have a monthly update. Some have a 3 month statement period, and for other types of cash savings accounts, the statements are only issued every 6 months, usually in May and November. It requires the customer to contact the bank to determine balances at specific dates if a US return is involved.

Building societies are something else entirely. For some, the only statement you may receive is when an addition or with drawl from the account is made. There are no other statements.

Fixed period cash investments can be even more surprising. If you take out the product in March, you expect for there to be no activity on the account until the following March. Surprise, the building society has decided to issue a partial interest payment on 31 December for internal accounting reasons, but they do not send a statement acknowledging the payment until August of the following year. It's not a problem for a UK HMRC return but can create havoc for a US return.

Building society accounts that have a passbook may also not issue any statement, ever.

If this sounds like the voice of experience, yes, I've been caught out on this several times.

J.JsOH

Although I used Turbo Tax in USA, when back in UK some unsupported aspect (I don't recall exactly what, possibly foreign earned income) caused me to not bother. I tried Tax Act for the first time when in UK and had some brickwall there too. I have been using the IRS free file forms ever since.

To list all the various sources of interest etc I created an excel table which I use every year to remind me all the sources that potentially give income. It has not been entirely foolproof and I had to re file a couple times over past 4 yr but I feel comfortable that I am getting it right (I tend to be apprehensive of doing the right thing and revisit and review often before sending.

I do apply for the extension to Oct using the free file forms, just in case but often don't need it. Never get an acknowledgement but at least I have a record of applying.

JAJ

The software always continues to function, and the IRS make e-file available up to October 15 of the current year. Any return filed later than that must be mailed.

In order to take advantage of the automatic extension to June 15 for Americans outside the United States, a statement must be attached to the return. Any good tax software package should support this - but that doesn't guarantee they actually do. I see nothing to be lost by filing a form 4868 anyway.

Mummy in the foothills

Luckily for me (or not) we are poor enough to not go over the amounts to pay US taxes here, even adding interest from the bank accounts I have all the monthly statements so can add up the measly interest we earn.
It should be pretty straightforward I will need to file the form for having a large amount in savings, due to the US house sale, we'll spend it all on this house eventually I'm sure but for now it is over the amount need to be reported.
I was about to start but haven't received my US bank interest amounts, they usually send that by the end of Jan, so I can put it off again till then

J.JsOH

Other thoughts from the day about filing US tax from UK;

Even though foreign earned income is excused US tax up to a limit, whatever foreign income is, it must be reported and the exclusion from tax claimed on the 1040. Filers cannot just not report foreign income that is below taxable limit.

One time I had to send a cheque to IRS and they lost it and never cashed it. Trying to get sense out of them about it was impossible. I had to send a replacement cheque and the buggars charged me extra for late payment even though it was them that didn't cash the original which had been sent on time.

kevinmayor

Help on IRS Tax Filing

Having returned from US years ago but having taken citizenship whilst in the US, I now find myself with the trauma of having to file taxes and disclosing my paltry wealth.

Can anyone advise. Having visited the embassy, the IRS official made it all sound so easy. However when you starting reading the tax forms and relevant publications it just gets more and more overwhelming.

So to start with.


1. Which tax year should I use, Jan-Dec (US) or Apr-Apr(UK)

2. If it's US tax year I have to follow. Should I pro-rata everything I have to report. x days of UK year (Jan-Apr) and y days of UK+1 (Apr-Dec)

3. Having applied this logic, I would then assume I would apply this to all the information such as interest etc.




On to FATCA
We have 3 accounts (2 single, 1 joint) with around £60,000 (money mostly from an endowment policy) plus £17,000 from an investment policy (which I have not cashed in although fully paid). Non of which I have ever reported because when I return, I assumed the US where not concerned with me....(laughing insanely).



Pensions..... what's that all about

Surely a pension being paid into has not real value yet? Its unrealized until we taken distributions from it. A pension today of x value, could be x-y tomorrow.


Sorry I rambled on. Just getting frustrations of my chest. Any guidance will be great.

theOAP

Since the return is for the US, you use the US tax year (1 Jan. to 31 Dec.)


It's preferable to use actual figures from bank statements, pay slips, etc., for the US tax years. That means a lot of searching through records. IF these are not available, the last method of resort is to pro-rate UK tax years as you describe.

Yes. It applies to any source of income.

If the above does not total $200,000, was never more than $300,000 during the year, and you are not resident in the US, you do not have to file form 8938 (FATCA).

For the above, you would have to file FBAR (FinCEN 114).

Please, please tell me the "investment policy" was not in unit trusts. If so, you may have some work to do. See PFIC.

Pensions not yet in drawdown are reportable on FinCEN 114. As for reporting yearly pension gains on a 1040, it's generally accepted you may elect into the US/UK tax treaty, BUT, it can depend on the type of pension.

I assume you will be filing under the Streamlined Foreign Offshore Procedures. If so, you need three years of back 1040's (2011, 2012, 2013) plus a return for 2014. You will also need to file (on-line) FinCEN 114 for the past 6 years.

U.S. Taxpayers Residing Outside the United States

kevinmayor

Thanks theOAP. Its settling to find knowledgeable people willing to help.

That policy that I spoke about, is termed an OEIC (Open Ended Investment Company). Do you have any take on this?

I was interested to see and read information on the streamlined process. I know the IRS agent at the embassy said I should file delinquent taxes. But the process again was somewhat of a mystery. Do I only have to submit 3 years even though I have been back for more, or should I go ahead and try fulfil 10 years......yikes.