Taxes filing with the US IRS in London
Taxes: Filing with the IRS While in London
- 1 Disclaimer
- 2 Acronym/abbreviation dictionary
- 3 Overview
- 4 Assumptions
- 5 Which forms do I need?
- 6 Where do I send the forms? How can I get additional help from the IRS?
- 7 Filling in form 1040
- 8 Filling in form 2555
- 9 Filling in form Schedule C
- 10 Double checking the important stuff!
- 11 Sample forms
The information contained in this tax wiki is meant to be used as a guide only and does not constitute legal advice, nor is it claimed to be 100% accurate. If you are in doubt as to how to file your tax returns please consult with a tax professional.
The information in this article was believed to be correct and up to date as of the date of the last revision. Neither BritishExpats.com or BritishGuy36 accepts any liability for any situation arising from the use of information in this guide.
USC = US Citizen
UKC = UK Citizen
LPR = Lawful Permanent Resident (“green card holder”)
IRS = Internal Revenue Service (the US income tax authority)
UKIR = UK Inland Revenue (the UK income tax authority)
GBP = Great British Pounds
USD = US Dollars
SSN = US Social Security Number
ITIN = Individual Taxpayer Identification Number
Filing income tax returns with the IRS is mandatory for USCs and LPRs, regardless of where they live and work. This is because the IRS imposes taxes based on citizenship (see note below), not on residence. As many other territories (including the UK) do not do this, but rather tax on residence only, many USCs do not realise that there is a requirement to file their taxes, and as a result, they often live abroad without filing taxes to the IRS, simply paying income tax to the authority having jurisdiction over the territory where they live and work.
- Note: LPRs are also required to file taxes even while living or working abroad, and not doing so can be construed as strong evidence of abandonment of LPR status. They may also be responsible for filing for several years after abandoning LPR status depending on how long they have been in the US.
While there may appear to be no ill effects to simply paying taxes to the UKIR when living and working in the UK (i.e. the IRS don’t contact you), issues arise when the USC living abroad and their spouse decide they want to move to the USA to live. One of the primary requirements for the granting of a visa to the UKC spouse, is that the USC is up to date as regards filing taxes with the IRS.
This is the whole point of this guide: to assist USCs living in the UK to file taxes with a view to obtaining an immigrant visa for their spouse to enter the US. This guide has therefore been written with this goal in mind, and there are tips in this guide relating to the immigration process in general. Please note that this guide is meant to give you an idea of how to fill in the basics of the forms; the following information may not exactly fit your situation, but hopefully it will help to give you a rudimentary understanding of how to fill in the forms and at least get you started.
Generally speaking, for the purpose of a visa application for an immediate family member, the USC isn’t normally required to file taxes in arrears any further back than the previous three years. There is sometimes also talk on internet forums as regards the possibility of the USC being fined for not complying with the federal requirement to file taxes with the IRS each year. However, the amount of the fine is usually a proportion of the amount of tax owed, and as you will see by reading this article, unless you are earning a significant amount of money, you will likely not have to pay any additional tax to the IRS anyway, so if your tax amount is zero, any fine would also be zero.
There is a tax treaty in place between the US and UK governments. In most cases this avoids “double taxation”, meaning you don’t need to pay tax to both the UK and US income taxation authorities. The IRS allows you to earn a certain amount before you have to pay tax to the IRS in addition to the tax already paid to the UKIR. The actual amounts you are allowed for the last few tax years are as follows:
2015 - $100,800
2014 - $99,200
2013 - $97,600
2012 - $95,100
2011 - $92,900
2010 - $91,500
- Note: This overseas tax credit has a residency requirement overseas, and is generally not available until you have been overseas at least 12 months.
The US tax year runs from January 1st to December 31st, which is different from the UK tax year (April 6th to April 5th).
You need to convert the gross amount you earned in GBP into USD. You can find a chart detailing the conversion rates which are averaged for the whole of the year in question, on this webpage.
The IRS generally accept the amounts entered on your tax returns if they have been worked out using the values on the webpage linked above.
This guide assumes the following of those using this information to file taxes with the IRS:
1. The USC is living/working in the UK and is classed as a “bona-fide resident” of the UK for tax purposes
2. The USC has been earning less than the maximum allowable amounts for exemption from additional taxation (amounts as listed in the “overview” section)
3. The spouse of the USC is not an LPR, nor does he/she have an SSN or ITIN
4. The USC is filing independently, and not claiming any allowances for the UKC spouse (this would be pointless anyway, if assumption 2 is correct)
5. You are a married couple with no children (if you do have children, most of this guide will still apply but you will need to figure out the sections of the form dealing with dependents of the USC)
Which forms do I need?
The two main forms you will use are the 1040 and the 2555. There are variations of the forms used for filing taxes, usually differentiated by the appearance of suffixes to the form numbers, such as “1040ez” etc. The illustrations on this guide are based on the “normal” forms (i.e. no suffix).
The 1040 is the primary tax form. This is where the amount you earn is entered. There are fields on this form which are arrived at by calculations from other forms (such as the Schedule C form for self-employment, for example). Form 2555 is the form you use to apply for an exemption from tax, up to the amount allowed each year by law (amounts as listed in the “overview” section).
If you are or have been self-employed, you are also required to file a Schedule C form, which gives more detail about the profit, loss, expenses etc relating to your self-employment business activity.
It’s possible you may need other forms, but if your circumstances fit the assumptions listed earlier in this guide, the two or three mentioned above should be the only ones you need.
You can download the forms for the previous few tax years using the following links.
Where do I send the forms? How can I get additional help from the IRS?
NB: The IRS office in the US Embassy closed in 2015 (see )
If you live and work in the UK, you do not need to send the forms to the US for processing. There is an IRS office located in the US Embassy in London, who can process the forms for you. The address to send the forms to is listed on the page linked below.
You can also telephone the IRS for assistance – the phone number and links to general information are on this webpage.
The phone number for the IRS office is a standard London (020) number and so is able to be called using minutes bundled with your UK landline or cellphone package.
Visa application tip - When sending your forms, also include an additional copy of page one only of each year's 1040 form (in other words send the fully completed, two page 1040, and an additional copy of page one of the completed 1040), along with a stamped, addressed envelope, and in your covering letter, ask that these copies be sent back to you stamped 'received'. For visa application purposes, such stamped copies of these forms are generally accepted by the visa unit in London as 'proof of filing' of your taxes.
Filling in form 1040
Let’s start at the top. Bear in mind that this form is being filled in from the point of view of the USC. On the first line enter the USC’s name and SSN where indicated.
The line below, with spaces for your spouse’s name and SSN, should remain blank. There is no need to write “N/A” or “Not Applicable”. Enter your UK street address as indicated.
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.
Under “Exemptions”, tick box 6a only. For the field where it says “boxes checked on 6a and 6b, enter “1”. For the field where it says “Add numbers on lines above”, enter “1”.
Now some notes on the “Income” section.
It can appear confusing as to where to put your income in this section, as there are two lines (item 7, “wages” and item 12, “business income or loss”) where the income could go. As a general rule of thumb, if you are employed by someone else, your income is listed under item 7, and you leave item 12 blank – and if you are self employed, you list your income under item 12, and leave item 7 blank. Of course if you switched jobs part way through a year from being employed to self employed or vice versa, then you may need to put the relevant figures from those time periods in both lines.
Item 7: You are asked to submit W2 forms here. The W2 is a pay statement given to employees in the US by an employer, either at the end of the year or the end of their employment. It’s roughly equivalent to the UK P60 form. As you won’t have any W2 forms, you obviously can’t send them to the IRS. This is one of the occasions where the terminology in the form is specific to employees in the US and this can be confusing.
Most of the rest of the lines in the “Income” section deal with interest from investments/dividends/alimony etc. – if this applies to you, you may need to do further research to find out on which lines the income from these sources should be entered.
Item 21: This is an important one! This is where you claim your income allowance, so that you don’t have to pay tax. In the space for “other income” (on the dotted line) enter “Form 2555”. In the space at the end of line 21 where you type the figures in, type in the USD value that you have arrived at, but put it in brackets. Do NOT use the minus ( - ) sign before the number. The correct notation for filing taxes for the IRS for negative numbers, is to use brackets. See the sample forms if you are still unsure as to how this figure should be entered.
Item 22: Now, as you have your positive figure in either item 7 or 12, and the exact same negative figure in item 21, your income amount for entry into item 22 is zero (0.00). Enter this amount on the form.
The next section is for “adjusted gross income”. It’s quite likely nothing in this section applies to you. In any case, as your taxable income (as listed in item 22) is already zero, there’s no need to try and claim back any deductions. In this case, both of items 36 and 37 can be entered as zero (0.00).
Now onto the “tax and credits” section.
Item 38 is just bringing forward the amount from item 37, so this should be zero.
Item 40 is your allowable deduction. You get this amount by checking the figures in the left margin (this figure will depend on which year’s form you are completing, for example, the 2007 allowance was $5,350). For the purpose of this example, we will use the 2007 figure. In this case 5350.00 would be entered into item 40.
Item 41 asks you to subtract line 40 from line 38 – this gives you a negative figure (e.g. -5350.00). Enter this figure into line 41.
Item 42 gives you a certain figure to multiply by the number of exemptions in item 6d. You entered “1” here, so enter the figure given into line 42 (for the 2007 form this figure is $3400.00).
Items 44, 45 and 46 will all be zero (0.00) if everything has been as described above so far.
The credits described in items 47 to 55 are pointless dealing with as your tax is already zero, so no point in complicating things by putting anything in these lines. This means that items 56 and 57 are also zero.
Have a look at the “other taxes” section to see if any of these items are applicable to you. If so, you may be liable for some tax.
The “payments” section isn’t relevant as you haven’t paid any tax to the IRS while living abroad during the tax year. Enter zero in item 72.
Unless you entered any amounts other than zero in the “other taxes” section, items 73, 74a and 76 are all zero.
That’s the figures all done for this form. Complete the remaining sections as indicated then it’s ready for filing.
Filling in form 2555
At the top, enter your full name, SSN, foreign address and occupation as indicated.
Put your employer’s name in the relevant line here. If you are self-employed, put your own name, rather than “self-employed”.
Item 4a can be left blank, put the employer’s foreign address in item 4b. If self employed, you can put your home address if you have no office address registered for your business. Tick the relevant box for item 5.
Item 6a can be confusing. This question is asking you if you have ever filed this form (form 2555) before. If you are filing the last three years worth of forms all at once, you can put the previous year in the space for this item for the last two years, and the form for three years ago leave blank.
For example, let’s say you are filing forms for tax years 2007, 2006 and 2005. On the form for 2007, you enter “2006” in item 6a. On the form for 2006, you enter “2005”. On the form for 2005, you leave this space blank – as this is as far back as you are filing, so won’t have claimed an exclusion before the 2005 form.
It may seem odd to do this, as you are actually filing all the forms at the same time, but I filed three years worth of taxes this way, and it was accepted with no issues.
Do not tick box 6b. For item 6c tick the “no” box. Leave item 6d blank. For item 7a, enter “USA”.
Most likely your answer to 8a will be “no”, in which case items 8b and 9 can be left blank.
Now onto “Part II”. As you are a bona-fide resident of the UK, you can fill in part II and leave part III blank.
Item 10: Enter the date you first became a UK resident in the first space. As you are still a UK resident at the time of filing taxes, enter “continue” in the second space, as there is no end date to your residency at this time.
Answer item 11 as appropriate.
Item 12: As your spouse lived outside the USA with you during the tax year, tick “yes” under item 12a, and enter “spouse, for the entire period” under item 12b.
If you are indeed a bona-fide resident of the UK, the answer to item 13a is “no” and 13b is “yes”.
Item 14: If you vacationed in the US or its territories during the tax year in question, put the dates here (don’t forget to use the US date format! Month first!). Presuming that you weren’t in the US on business, enter “N/A” in the third column and zero (0.00) in the fourth column, for each line you include an entry, and leave item 15a blank.
For item 15b, enter the type of visa you are resident in the UK on, for example “Indefinite Leave to Remain”. Items 15c and 15d should be “no”. In this case item 15d can be left blank.
You can now move down to “Part IV”.
Which of the items you put your income in will depend on how it was earned. If you were employed, you would put your wages in line 19. If you were self-employed, you would put your earnings in either line 20a or 20b, as appropriate.
See if any of the items in sections 21 and 22 apply to you, and put the amounts in as applicable.
Perform the addition requested for item 24. Most likely item 25 will be zero, in which case items 24 and 26 will be identical.
Note on item 26: The amount here should be equal to the amount you are submitting on form 1040, item 7 or 12. As this is the amount you are applying to have excluded as taxable income on form 1040, these two amounts must be identical.
Item 27 is merely carrying over the figure from item 26. Tick “no” in the box here and move down to “Part VII”.
For item 38, it is presumed that for tax purposes, you were resident in the UK for the whole year, that is to say, 365 days. Enter “365” in the space here. This means that item 39 will be “1.000”.
This means that you can bring the amount down from line 37 to line 40. For 2007, this amount was $85700.00.
Line 36 should be empty so line 41 should equal the amount on line 27. Line 42 should also be the same amount, as it’s less than the amount on line 37.
On to “Part VIII”.
Line 43 will be equal to line 42.
Unless you had deductions for gross adjusted income (in other words form 1040 line 37 is not zero) then item 44 will be zero, meaning that item 45 will be the same as item 43.
As you aren’t claiming the housing deduction, you can leave “Part IX” blank.
You’re done with this form.
Filling in form Schedule C
Note that you only need to submit form Schedule C if you are self-employed.
Enter the demographic information at the top of this form. To find the code to enter in item B in this section, you need to download the instructions and look up the appropriate code. The instructions document can be downloaded here.
The items in Parts I and II should be reasonably self-explanatory. It’s not really within the scope of this guide to get into specifics here; each person’s business will differ with respect to whether stock items are bought and sold, expenses, or perhaps it’s purely provision of a service – there are so many variations that it’s impossible to attempt to go into them here. Fill these sections in as appropriate.
Items 28 to 31 should be your final figures for your business.
Note that item 31 should be equal to the amount you are claiming back as a tax exemption, so this figure should be identical to form 1040 item 12, and form 2555 item 45.
If you have any other information about your expenses as detailed in parts III to V on page 2, enter them as appropriate.
That should be it for this form.
Double checking the important stuff!
Presuming you are claiming an exemption of the entire amount of your foreign earnings, the following items should contain identical figures:
Form 1040 – item 7 or 12
Form 2555 – item 45
Schedule C – item 31 (only file this form if you are self-employed)
If you would like to see sample completed forms, send a private message to 'BritishGuy36' and INCLUDE YOUR EMAIL ADDRESS, and you will be emailed the sample forms. If you don't include your email address, I can't send you the forms ..... yes it's obvious but about half of those asking for the forms forget to include it!
Guide initially created by 'BritishGuy36'.