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Need some clarity on filing status - US tax returns - help, please ;)

Need some clarity on filing status - US tax returns - help, please ;)

Old Oct 18th 2011, 4:36 pm
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Arrow Need some clarity on filing status - US tax returns - help, please ;)

As part of the immigrant visa process for my wife, I realize that I will have to provide evidence of domicile vis-à-vis tax returns.

Embarrassingly – and I do hope I am not alone – I have belatedly realized that living outside of the U.S. legally via residence in the U.K. does not exempt me from having to file with the IRS.

So now I have the honor of snuggling up with some coffee and several tax return forms for completion ahead of my UKC wife’s interview date.

I was hoping one or some of you kind souls would be willing to provide me with some clarity on whether I am filing under the correct status for each year of back-filing, given certain circumstances.

I think I should be OK in filling the forms out themselves (he hopes!), especially as I read that as US Citizens abroad we may avail of free electronic filing?

Anyway, this is what I have determined to be my correct filing status, and would simply and kindly ask if the more tax-savvy individuals on these boards would be willing to confirm if I have made the correct determinations?

Basic facts:
  • Flew from US to UK in mid-December 2002
  • Married in mid-February 2003 and obtained official legal residence in UK a few days later
  • Child #1 born in Oct 2005
  • Child #2 born in Dec 2008

Based on the above, I have determined my filing status as follows:

MY tax year is: 14 December 2002 to 13 December 2003, so using this as a start point:
  • 14-Dec-2002 to 13-Dec-2003 = Married filing separately
  • 14-Dec-2003 to 13-Dec-2004 = Married filing separately
  • 14-Dec-2004 to 13-Dec-2005 = Married filing jointly (head of household?) 1st child born
  • 14-Dec-2005 to 13-Dec-2006 = Married filing jointly (head of household?)
  • 14-Dec-2006 to 13-Dec-2007 = Married filing jointly (head of household?)
  • 14-Dec-2007 to 13-Dec-2008 = Married filing jointly (head of household?) 2nd child born
  • 14-Dec-2008 to 13-Dec-2009 = Married filing jointly (head of household?)
  • 14-Dec-2009 to 13-Dec-2010 = Married filing jointly (head of household?)

Am I right in determining that I should file as “head of household” from 04/05 onwards? I thought that that was only for those who are NOT married, in which case I do not obviously qualified, but when I phoned the IRS help number, the person I spoke to advised that from the tax year when my first kid was born, I should file as head of household – and he may have said something about in doing so, it may prohibit me from qualifying again for continuing to use the Foreign Earned Income exclusion? Is that correct?

Now, I do realize that each year I have to file under Form 1040, and Form 1116 as a supplement.

I have also determined that for the 2002/03 tax return and onward to the present day, I have to file form 2555-EX, to claim the Foreign Earned Income Exclusion.

Now, here is where I get REALLY confused – is it the case that from tax year 2007-08, I have to file Form 8812 Additional Child Tax Credit, which coincides with my 2nd kid being born in that tax year?

I am thoroughly confused about which filing status to use. I know it is not going to amount to any real detriment because I earned less than the threshold for the foreign income exclusion each of these tax years, but again, I just want to make sure I file under the correct filing status to ensure that our visa process is not tripped up and denied on some silly technicality.

I really hope that my above explanations make more sense than our labyrinthine tax code.

Desperately grateful for any guidance – thank you in advance!
- Sal
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Old Oct 18th 2011, 4:47 pm
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Default Re: Need some clarity on filing status - US tax returns - help, please ;)

These are not really immigration questions, so I'm moving your post to the General US forum, where more tax-related questions are asked and answered.

Since these are actually tax questions, no one here can really tell you what would be best for YOU and your family...it just all depends which way gets you a better tax break / tax refund / whatever else.

For now, for immigration, you only need to file the most recent 3 years, so focus on filing 2010, 2009, and 2008...then go back and do the rest at your leisure. You can try doing them yourself and if you realize you've done something wrong, you can always do an amended return.

The US Consulate in London has an IRS tax department which is there as a resource for someone specifically in your situation...a USC abroad who didn't realize they still need to file a US tax return each year (no, you're not alone). I'd try giving them a call first...if that doesn't work, do your best with the most recent 3 years of returns, and then once in the USA, find a knowledgeable tax consulant and work on getting the rest done.

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Old Oct 18th 2011, 5:05 pm
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Default Re: Need some clarity on filing status - US tax returns - help, please ;)

You should read the Wiki entry on this topic. Read it carefully and follow through the instructions and you should be fine - you might want to print out several copies of the forms and do a couple of test runs.

You probably will only need to file the last three years, as required for the I-864. That's what my USC wife did and we've not had the IRS after us yet, and if they did the penalty for failure to file is a percentage of the tax owed which for most US ex-pats is zero.

As to what status you should file under, the Wiki article specifically says

Under “Filing Status”, tick box 3 (Married Filing Separately). In the space for your spouse’s name in this section, enter “Non-Resident Alien”. Do not tick any other boxes in this section."
This makes sense - until your spouse enters the US to take up their LPR status, they don't exist as far as the IRS is concerned.

I think you already stated in another post that your income was below the foreign earned income allowance (currently around $90k) so I don't see why you should care about claiming for your kids etc as the foreign earned credit should be all you need.
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Old Oct 18th 2011, 7:50 pm
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Default Re: Need some clarity on filing status - US tax returns - help, please ;)

Your tax years are 1 January to 31 December, not as you have listed them.
Your first tax year is 1 January 2002 to 31 December 2002.
Your second tax year is 1 January 2003 to 31 December 2003.
And so on (as the wiki states).

Follow rpjs's advice about consulting the wiki. I agree with Noorah that you should eventually complete beyond the last 3 years to satisfy the IRS, and it may be wise to talk to someone if you are perplexed about any of this. A further example of Form 2555 completion can be found on the IRS site under instructions for Form 2555. You would only consider completing Form 1116 if your deductions, exemptions, and Form 2555 leave you still owing tax on 1040.

If you file as 'married filing jointly', you would have to include all your wife's income as well. If you file 'married filing separate', it's just your income. As is stated, it's usually better to file as MFS, although that's not 'always' true.

Caution! You must include ALL income on 1040, not just your salary. So, interest from savings, benefits from the UK (child credits, etc., if in your name), and so on. But, only your salary can be excluded on 2555, not the others. Be sure to file Schedule B if you have any interest or dividends, and PLEASE, be sure to complete part III of Sch. B if your name is on ANY UK bank or building society accounts. Does your employer contribute to your pension?

I hate bringing this up, but it's essential: do you understand FBAR (Foreign Bank Account Report), and do you know your position on this?

In your case (not filing), your US tax situation (/FBAR situation, if any) is a separate issue to the visa application, although part of it. Understand the implications of this. And, as Noorah said, you are not alone.
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Old Oct 19th 2011, 2:30 am
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Default Re: Need some clarity on filing status - US tax returns - help, please ;)

I can't address the other issues (not enough experience) but you cannot file as head of household unless you are unmarried or considered unmarried.

Considered unmarried is when you are either legally separated or technically married but you have lived apart for the last six months of the year.

So as you are living with your wife you cannot file as head of household. The reason the IRS person may have assumed you qualify is because quite often when dealing with people who are married to a foreigner the couple, though married, physically have to live apart due to visa issues - this isn't the case for you.

I would double or triple check that, but I can't see how you can file HOH.

You'd have to make a decision, depending on how much you earn, whether you are then better off filing MFS and just including your income, or filing MFJ and including both your incomes but getting better deductions/credits, etc.

If you haven't already, read the IRs publication 54:
http://www.irs.gov/pub/irs-pdf/p54.pdf
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Old Oct 25th 2011, 9:23 pm
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Default Re: Need some clarity on filing status - US tax returns - help, please ;)

Hi Rene, Roy, OAP and Jscl,

Great advice, much much appreciated - especially the signpost to the Wiki entry and OAP's attention to technical points when filing. Your explanations are noted, and I will have a pencil and eraser handy to amend as necessary on a practice form before completing the real things.

I am particularly glad to read the clarification about my perceived tax return years - again, I was going on what the IRS person told me over the phone. I believe my 2002 tax return was already submitted electronically (from what I can recall), but can now continue on with the next years'.

Again, thanks very much for your collective advice, and hope you don't mind my keeping this thread alive, as necessary, if I have any other questions.

Best wishes,
Sal
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Old Oct 25th 2011, 11:52 pm
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Default Re: Need some clarity on filing status - US tax returns - help, please ;)

As I said at the end of the Wiki, if you want sample tax forms to look at, PM me your email address.

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Old Oct 26th 2011, 10:00 am
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Default Re: Need some clarity on filing status - US tax returns - help, please ;)

I am also filing US taxes for the past few years as part of the immigration process for my husband. I have followed the instructions on the wiki entry and am ready to print and post the forms to the embassy. I did not see on there whether or not I need to send a copy of each year's P60 form along with the other forms. Can you please let me know if this is required?
Many Thanks
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Old Oct 26th 2011, 10:32 am
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Default Re: Need some clarity on filing status - US tax returns - help, please ;)

Originally Posted by TaraD View Post
I am also filing US taxes for the past few years as part of the immigration process for my husband. I have followed the instructions on the wiki entry and am ready to print and post the forms to the embassy. I did not see on there whether or not I need to send a copy of each year's P60 form along with the other forms. Can you please let me know if this is required?
Many Thanks
We didn't and it wasn't an issue.
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Old Oct 26th 2011, 12:56 pm
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Default Re: Need some clarity on filing status - US tax returns - help, please ;)

Originally Posted by rpjs View Post
We didn't and it wasn't an issue.
Thank you
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Old Oct 28th 2011, 5:28 pm
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Default Re: Need some clarity on filing status - US tax returns - help, please ;)

Originally Posted by TaraD View Post
I am also filing US taxes for the past few years as part of the immigration process for my husband. I have followed the instructions on the wiki entry and am ready to print and post the forms to the embassy. I did not see on there whether or not I need to send a copy of each year's P60 form along with the other forms. Can you please let me know if this is required?
Many Thanks
They are only interested in the W2, which is the US equivalent of the P60. Since you don't have those, you can't send them. This is where the form falls down a little and it becomes unclear what to do, because you are using the same form as everyone else inside the US also uses for taxes. They are designed with US residents in mind.

If they want any more info from you, don't worry, they'll ask for it.
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Old Oct 28th 2011, 10:39 pm
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Default Re: Need some clarity on filing status - US tax returns - help, please ;)

Originally Posted by theOAP View Post

Be sure to file Schedule B if you have any interest or dividends, and PLEASE, be sure to complete part III of Sch. B if your name is on ANY UK bank or building society accounts. Does your employer contribute to your pension?

I hate bringing this up, but it's essential: do you understand FBAR (Foreign Bank Account Report), and do you know your position on this?

In your case (not filing), your US tax situation (/FBAR situation, if any) is a separate issue to the visa application, although part of it. Understand the implications of this.
If my name is on UK bank accounts and I haven't reported this in the US, what happens? I mean, really - what happens? Will/can they tarck you down?I do have UK accounts but no interest/income to mention from them (at most it's 1 or 2 pounds a year, maybe not that)

Also, a friend of mine told me today that anyone living in the US who has property outside of the US must report it to the IRS, according to a new law, and that there was a deadline for doing this without penalty which passed a while ago. I was searching thru the forum for this purpose actually.

This scares me too! I do have an apartment in the UK but after the mortgage and maintenance fees it leaves not much to speak of. And I don't want to be bothered with additional tax paperwork if I can avoid it.

I have no idea about FBAR.

Please can those in the know help!
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Old Oct 29th 2011, 11:26 am
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Default Re: Need some clarity on filing status - US tax returns - help, please ;)

Originally Posted by jmood View Post
If my name is on UK bank accounts and I haven't reported this in the US, what happens?
If the aggregate amount of the accounts is under $10,000, nothing (you are not required to file an FBAR). If it is over $10,000, then nothing if the IRS never discover it. The world (your world) implodes, and you may be left penniless, if they do discover it.
*aggregate amount is the maximum amount in each foreign account during the year (even if for less than 1 day), calculated for each foreign account your name is on, and then all added together. If the sum is larger than $10,000, you must file Sch. B and the FBAR. (You must file Sch. B, even if you fall under the threshold for filing a 1040.)

Originally Posted by jmood View Post
I mean, really - what happens?
If it's discovered/declared, you may have to pay penalties, and you may be required to prove you knew nothing about FBAR requirements to avoid criminal penalties (jail time). You've just possed the question on a public forum.

Originally Posted by jmood View Post
Will/can they tarck you down?
Yes. The IRS has various agreements in force with foreign tax authorities and banks (UBS, HSBC, etc.). Search for threads on FATCA. Their powers of discovery will be massively improving over the next few years. If you are resident in the US, they won't have far to look.

Originally Posted by jmood View Post
I do have UK accounts but no interest/income to mention from them (at most it's 1 or 2 pounds a year, maybe not that)
Interest relates to tax declaration. FBAR relates to reporting foreign bank accounts. They are 2 separate things. If you are subject to US tax on your worldwide income, the £1 or £2 is reportable on your 1040.

Originally Posted by jmood View Post
Also, a friend of mine told me today that anyone living in the US who has property outside of the US must report it to the IRS, according to a new law, and that there was a deadline for doing this without penalty which passed a while ago. I was searching thru the forum for this purpose actually.

This scares me too! I do have an apartment in the UK but after the mortgage and maintenance fees it leaves not much to speak of. And I don't want to be bothered with additional tax paperwork if I can avoid it.

I have no idea about FBAR.

Please can those in the know help!
Generally, you do not have to report a foreign property you own on FBAR. If you are renting out the property, and have a foreign bank/building society account to cover the rent payments/maintainance costs, then that account becomes part of your FBAR calculations. A mortgage itself could also require calculating in some instances. If the property constitutes a 'gift' made to you, or for your use, that is reportable on separate IRS forms.

If you discover you are subject to FBAR, and haven't been reporting it, seek professional advice from a qualified accountant/tax advisor. Since, at present, this is an all too common situation, he may be well aware of the action to take.

I am not a professional tax advisor, and any or all of the above comments may be incorrect.
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Old Oct 29th 2011, 2:12 pm
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Default Re: Need some clarity on filing status - US tax returns - help, please ;)

Originally Posted by jmood View Post
If my name is on UK bank accounts and I haven't reported this in the US, what happens? I mean, really - what happens? Will/can they tarck you down?I do have UK accounts but no interest/income to mention from them (at most it's 1 or 2 pounds a year, maybe not that)
There is another question here which may not be as obvious, but may be what you are really asking:
If I have less than $1,500 in reportable interest/dividends, and I have less than $10,000 aggregate in my foreign bank accounts, why do I need to file Schedule B?.

Answer: there is no answer. It's one of those grey areas, and was central to several UBS court cases.

Q.7a in Part III asks "did you have an interest or signature authority over a financial account in a foreign country?" If it's over $10,000, you answer "yes", file an FBAR, and indicate the country on Q.7b. If the answer is "no" it appears the IRS would prefer you to mark "no". You are indicating you understand the FBAR requirement, and you are not required to file FBAR. As silly as this may sound to some, it is the safest way to complete Sch. B. The instructions say there are questions relating to foreign bank accounts which you must answer.

Last edited by theOAP; Oct 29th 2011 at 2:35 pm.
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Old Oct 29th 2011, 6:04 pm
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Default Re: Need some clarity on filing status - US tax returns - help, please ;)

I am devastated. What a pain in the a.., what a pain, what a pain. Aaaaaaaaah... I can just imagine the endless paperwork this can generate.
And I can be considered relatively poor too - but still may be implicated as per what you write. Not there's any considerable money just pennies most of the time, it's just that my life is messy.

So may I please ask some more clarifying questions - perhaps dumb ones:

1)Your last post, where you write "There is another question here which may not be as obvious". I don't understand why that Q becomes a Q if the requirements to report are as per what you write in the post one above.

2)You wrote if the aggregate is over $10, 000 even if for one day. I know you wrote it - but - really? Even if the balance was much lower but for a day or two was above?

3)Are there some banks or locations which the IRS is likely to get info from sooner or easier?

4)My name is on a non EU country bank account together with my mum. This is the bank account which her lessees pay rent. (My mum is renting out her apartment) Since she is internet and telephone banking illiterate illiterate and elderly she put my name on the account so I can track whether the rent has been paid etc. I do not use/do not take out any of that money. Should I not be worried since this is non EU or should I get my name removed pronto?

5)I think this is an unfair question but : What do you think the likelihood is that the my world imploding scenario would happen?

6)Aren't the authorities likely to go after the big fish first and leave folks like me alone?

7) Regardless if the aggregate was under or over $10,000 and was not reported, but the money did not earn any interest, and let's say theoretically does not raise US tax implications, are there still any fees/penalties that the IRS can claim?

8)The $10,000 amount. Is there some background or context for the $10,000 figure?

9)How many years is one supposed to go back when reporting?

10)What about property in the UK? If one has a property with a mortgage on it, that raises no income and that no UK income tax is due. What the US reporting requirements?

THANKS!!!

Last edited by jmood; Oct 29th 2011 at 6:58 pm.
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