MrsMacIver

Hello,

I've looked through past posts and couldn't find the answers to my questions, so hopefully I'm not bothering you all with questions that have been asked before...if I am, kindly point me in the right direction!

I am a USC currently residing in the US. My husband is a UKC currently residing in the UK (hopefully this will change soon!) My question has to do with US taxes (oh, what fun!)

Today I visited my local HR Block and was surprised to find that they had no idea what to do with my taxes! Currently, I am trying trying to complete them as married-filing-jointly. I have the completed W-7 ready to go, which will provide us with an ITIN for my hubby, and I understand that I need to enter his income in the part called "World-Wide-Income." Is this right so far?

I'm confused about what amount I should enter as his income. Should I enter the amount on his P60 End of Year Certificate that goes until April 2011? Or do I need to have him to give me his pay stubs for the year, and use the total amount for 2011? If so, what paperwork/supporting documents do I need to submit in conjunction with this? Also, is there a particular way I am supposed to convert the amount from pounds to dollars? A particular conversion date or anything?

These are my main concerns. My taxes are extremely simple otherwise, with only two W-2s and no assets or dependents. Very basic (thank god!)

Is there anything I am missing that I should be made aware of? Help!

md95065

Wouldn't it be a lot simpler for you to file separately (and for him not to file a US return at all for 2011)?

MrsMacIver

The tax adviser at HR Block said we should file jointly. Perhaps she is just as confused by this as I am!

md95065

Well, you certainly don't have to file jointly - married coupled can, I believe, always opt to file separately.

Filing jointly *might* result in your overall tax being less, but if you end up having to pay hundreds of dollars to a tax adviser to figure out what you have to do it may not be worth it.

theOAP

No surprises there. The HR Block advisor may have slept through the 10 minute discussion on the fact that there may be Americans who live abroad or have spouses that live abroad.

As has been mentioned, it is usually best to file as married-filing-separately (MFS). Are there other circumstances where YOU feel it may best to file MFJ? Preparers such as those at HR Block are trained in the 'plain vanilla', standard US couple who don't even have a passport. For these, married-filing-jointly (MFJ) is usually the best way to file. The advisor may be on autopilot.

There is no particular 'Worldwide income' area. His income would be listed in all the appropriate places. Wages in wages, interest on Schedule B, etc., just as yours is broken down. If the HR Block person intends to file Form 1116 to offset the UK tax paid on his earnings, they may want to enter his income as 'Foreign wages' on line 21 for some obscure reason. If he is not a 'US Person', he cannot use Form 2555.

It's by far best to use the actual amounts he received from 1 Jan. to 31 Dec. in 2011 from payslips, bank accounts, or whatever.

No paperwork is required to be submitted to substantiate the amounts. But, if there were ever questions, it's essential that he retain all information he used to arrive at the amounts to verify accuraccy.

The unofficial exchange rate is here:
http://london.usembassy.gov/irs/irsxchng.html
The $1.54 to £1.00 is the yearly average rate that you use.

There may be some particular reason you or the advisor feels it may be better if filed MFJ (you have a high income, his potential visa application, etc.). We can't know this. Perhaps you could see another advisor, or ask to speak to a supervisor.

If he files, he would have to use Form 1116 to offset UK taxes paid; if he has a UK bank account, he would automatically check Part III of Schedule B (HR Block software may automattically disregard this, which would be a major problem); if he has Stocks and Shares ISAs, the reporting requirements are a nightmare; he may have other investments or pensions that could require reporting; and the amount of his aggregate bank accounts may require an FBAR, or Form 8938.

As has been mentioned, unless there is a specific reason for filing MFJ, and not because that's the way HR Block normally do it, it would be best to file MFS. Since the thresholds for tax, Standard Deductions, AMT, etc., are much lower, the 'plain vanilla' advisor in the US will feel a programmed-in reluctance to your filing MFS.

Warning: I am not a professional advisor. I could be very wrong on all of this. I'll admit, I could be wrong about HR Block!

MrsMacIver

Currently, I am preparing our taxes myself. The adviser at HR Block suggested I do so, since she would simply be doing the same research on the topic that I am now, and would simply be paying her to do so! She was very nice to me about it all, but she seemed to be more clueless than I!

I didn't realize it was better to file as MFS. I've always done my own taxes as they have always been simple and easy...until now that is! There are no circumstances that I know of that would give me reason to file as MFJ aside from the fact that I was told we might get more money back.

The adviser never got into the paperwork enough to really have any reason to suggest that we file as MFJ other than the fact that she was probably on autopilot. Neither of us have a high income (jointly we make around $60k), and his visa application has been provisionally approved pending medical clearance, and a missing W-2. In terms of the visa application, this tax filing has no bearing.

So, for my husbands taxes, would I simply fill out the same form as I would for myself, and submit Form 1116 with it in order to offset the taxes he's already paid in Scotland?

He has a UK bank account. However, when I checked both the instructions for Form 1116 and the form itself, I found no section referred to as Part III of Schedule B. I only found references to Schedules A and D. Am I missing something?

I do not believe we have any Stocks and Shares ISAs, but rather a Cash ISA. I will need to check on this though. He does not have any investments, and does not receive a pension. I do not believe we need to file an FBAR or Form 8938 since his aggregate bank accounts did not total over $10k during the calendar year. Does this sound right?



From the sounds of it, I believe we should file as MFS. I will do my taxes as I normally would, then prepare his taxes just as I would my own, with the exception of also filing the completed Form 1116. Sound good?

Thank you SOOOOOOOO much for this advice. I really appreciate all your help!

Noorah101

Your husband does not need to do a US tax return for 2011. He will do his own in the UK at the appropriate time.

Rene

MrsMacIver

I thought he had to file a US tax return? When is this appropriate time, and are you referring to "his own" in the UK or the US.


I'm sorry for all these questions, but I'm really confused by this!!

BritishGuy36

I don't see how it's possible for him to file a US tax return, since he does not have an SSN or ITIN.

Only US Citizens / US Residents have to file a US tax return.

He appears to be neither at this time.

Until he enters the US and becomes an LPR (presuming that is what is soon to happen), the US government has no jurisdiction over his financials or tax matters whatsoever.

Michael

I don't see anywhere were it states that a non US resident cannot not use form 2555. Can you point to where is states that. Personally I would use form 2555 and 1116 for his income. That should be fairly simple and would likely save you on taxes. However he may not be able to use the earned income and housing exclusion if he was not outside the US for 330 days during the last year and therefore foreign paid taxes would be used to offset US taxes owed.

MrsMacIver

So, I don't even have to file for him!?!?!


I assumed I had to because my mum said I had to!

How is it, that I always manage to get myself overly worked up and confused about NOTHING!

md95065

Yes, assuming that your husband was not (yet) either a US citizen or a permanent resident on December 31, 2011 and he does not meet the substantial presence test then he is regarded by the IRS as a "non resident alien".

Non resident aliens are only taxed on their income within the US.

So, assuming that your husband had no US income in 2011 (or that it fell below the threshold that would require him to file a return) he does not need to file a US tax return for 2011. Practically speaking, if he *tried* to file a US tax return he would just be filling it in with a whole lot of zeros ...

As his US citizen spouse, you can choose to treat him as resident for tax purposes for 2011 but you absolutely do not have to and it will be much simpler if you don't.

theOAP

To MrsMacIver first, I agree with the latest post from md95065!

Now, please excuse us while Michael and I discuss the messy part!


From the OP, I had the impression that the husband was a non resident alien, not a USC, lived in the UK, and has never had any prior association with the US.

You may be right. A USC living abroad and married to an NRA can certainly file jointly. In this situation, I believe the NRA can use a 2555. It's a question of whether the rule applies when the USC side of the marriage does not live abroad. The fact that he would be declaring himself subject to US tax (as an NRA with an ITIN) by filing jointly with a USC resident could theoretically allow the use of 2555.

It's interesting that the general instructions for 2555 only speaks of a USC or a US resident alien living abroad (green card). Can an NRA, filing a non resident alien return on their own, file a 2555 under normal circumstances (I don't know)? Or, why would they since they're not a US Person subject to tax on their worldwide income? Obviously, filing jointly changes that.

After thinking about it, I wouldn't be willing to wage a years salary either way.

To be honest, it would have to be a substantial additional refund to warrant the hassel of getting all his details correct for the filing (by Monday! I'm not sure the return would qualify for the automatic extension.). But, everyone has their own priorities.

theOAP

Just bear in mind that you DO have to file as married (Married Filing Separately), and not as a single person. Sorry if that's obvious to you, but I just want to make sure.

Michael

She could file her taxes by Monday as married filing separately and later amend it to married filing jointly if there is a substantial tax savings.