Tax Return software
 

I worked in UK for first half of 2004, moved to US and worked here for last 4 months of 2004. My wife did the same.

I am UK citizen, married to US citizen.

My wife continued to complete her US tax returns while we lived in UK, so we are up to date.

For the 2004 year we need (I assume) to declare our UK and US income, which I think may get complicated.

Has anyone who has been through this provide any tips?

Also, are the software packages - such as Turbo Tax - capable of taking this type of situation into account?

We thought about getting one of the software packages, but weren't sure which was best or even if they could accommodate our situation.

If the software can't handle it, any recommendations re. a professional we could pay to file for us? we are in Houston area.

Re: Tax Return software
 

HR Block

Re: Tax Return software
 

I had much the same situation last year (although my wife is British and we had never filed US taxes before).

I bought TurboTax, and read up about my tax situation. It was complex, but certainly not beyond my understanding. I put together a spreadsheet and calculated that I was owed a VERY large refund.

However, once I started using TurboTax I found that it wasn't quite up to the job. Nearly, but not quite. If you were 100% confident of your tax rights in a complex international tax situation then it would probably calculate the right numbers and submit a valid tax return... but I can't imagine you're 100% confident of all the details of your tax liability any more than I was.

Having no experience of tax professionals over here, I first approached H&R Block. At least they were honest enough to say that their standard service wouldn't be able to deal with a complex situation like mine. They advised me to use H&R Block Premium, for approximately 2x the cost.

The resulting saga is something I wrote about here last year. H&R Block Premium knew less than I did about international tax status, and calculated refunds twice that differed from my calculations by over $5000. But because they guarantee to "get it right, or it's free" I demanded that they keep working until I was happy with the calculation. Then I invoked the guarantee and told them I wouldn't pay. They agreed. I won. They told me that if they had charged me for their time and the complexity of the work, it would have come to $1300.

The outcome was great - I got a tax professional's signature on my tax return, H&R Block's guarantee and financial cover should the IRS audit me, and I didn't pay a penny. But the time and stress it caused me mean I wouldn't recommend them to anyone else. Ever!

So, use a tax professional... but make sure they guarantee that they have previous experience of filing tax returns for people in your situation. Also make sure that you read as much as you can about your tax status, and if you can, do the calculations yourself to at least know if the CPA is in the right ballpark with their numbers.

PM me if you need more information. I may be able to send you a blank version of the spreadsheet I used for my calculations, which could help get you started.

Re: Tax Return software
 

D'oh!

Re: Tax Return software
 

Thanks for your reply DBJ,

I'll search your old posts for the thread you mention.

Re: Tax Return software
 

You must have a different H & R Block. We used them the first year we moved to FL - never again. Went back to our Manhattan Accountant.

Re: Tax Return software
 

Our tax situation is pretty simple though too, both earners, 2 kids, not much in the way of deductions apart from mortgage interest.

I should really do turbo tax ourselves.

Re: Tax Return software
 

We used HR block and they were OK but we did move at the start of a new tax year which helped an awful lot.

But when we bought out new house and moved states in the same tax year, we hired an accountant and it was the best thing we could have done. We enquired about going back to HR block to save money and they were charging more than the accountant :eek:

Definitely agree with what has been said so far, get yourself a qualified accountant that will guarantee their work. It is definitely worth it:)

Re: Tax Return software
 

I have 3 of my own companies and still use Turbo Tax online. I think it is very simple to use. Last year I used it and it told me I had a tax refund of $4000 but I thought that had to be wrong so I spent another $470 on an accountant who came out with exactly the same refund amount. I am using Turbo Tax this year and saving myself over $470

Re: Tax Return software
 

Check out TurboTax Deluxe or Premiere, which is what we used last year to file our joint return and include Form 2555, Foreign-Earned Income Exclusion. I also used TurboTax when half my 1997 income was earned in Chile, and the other half earned in the US. It might not be as complicated as you think. :)

Here are some other links to look at:

US Marriage-Based Visas Forum -- There are a few new threads from today on tax filing (including one started by me!) which you might find helpful.

First Year - Taxes - Help? -- An older thread which goes over some of your concerns.

IRS website : International Taxpayer - Which Form to File -- This gives info on the foreign-earned income exclusion.

Also, it never hurts to call the IRS at 1-800-829-1040 and ask them for guidance. I've called them a few times over the past couple of years, and they've always been very helpful and friendly.

Hope that helps a bit

~ Jenney

Re: Tax Return software
 

For those of you who have filed a US tax return that included UK earnings (or expenses, for that matter), how do you figure the exchange rate?

Do you have to use the exchange rate at the time you incurred the expense/earned the money? Or can you use some kind of average for the tax year? Also, would you use the mid-rate? Or the rate for exchanging GBP for $$?

Re: Tax Return software
 

It seems to be a pretty grey area. Looks like the tax laws were written in a time when there were only small changes in exchange rate in a year, rather than the huge fluctuations we've seen recently.

My CPA used the exchange rate on the day of certain major transactions in my case. Historic prices are available on xe.com here (even the IRS site links to xe.com as an available exchange rate resource):

Xe.com historical rate tables

However, in the usual IRS conflicting-information style, another section of their site tells you to use the average 2004 rate, as given by the Federal Reserve here:

Federal Reserve 2004 Exchange Rates

...which was 1.83300 average for last year.

Personally, it makes little difference to me this year. Last year, when I had just sold a house, the difference between the 2003 average (1.6347) and the rate on the day of the transaction (1.8320) meant a difference of some thousands of dollars for my tax rebate.

Hope this helps!

Re: Tax Return software
 

I've used TurboTax for years. Last year hubby decided to get a second opinion (not that he doesn't trust me, of course LOL), he'd been on for years we should get our taxes done professionally..so I told him to go ahead and waste money...and yep, the overpriced accountant came back with exactly the same figures as mine... I didn't say a word :). Turbo Tax is idiot proof, it throws up audit alert flags if there's anything iffy in your return, finds errors, and has plenty of help options and links for anything complicated...even live online help available for a small fee. Approx $39 for Turbotax (which you can claim on your return) usually with a voucher to electronically file free, compared to $200 + for an accountant..no brainer.

Re: Tax Return software
 

That's very helpful - thanks! As most of the expenses I'm talking about are related to buying and owning a house in the latter part of 2004 (when exchange rates were at their worst), I'll probably go with the rate for each month.

I have another historic exchange rate site bookmarked already (http://research.stlouisfed.org/fred2/data/EXUSUK.txt - it makes for interesting reading. Looking at some of the fluctuations over the past 30 years (from $1.10 to $2.60), it's a bit scary for anyone considering retiring in the UK on a US dollar pension.