Do I need to file a US Tax Return?

There have been lots and lots of questions about whether or not to file a tax return, with lots of people on the outside of the forum giving lots of bad advice.  This thread should help answer that question.

Generally speaking, if you are a US Citizen and filed tax returns before leaving the States, you must continue to file a tax return, even when you are living abroad.  Though, generally, if you do not earn in excess the equivilant of 80,000 USD you will not owe any taxes.  To actually figure out if you must file is rather complicated and you should check out the table at: http://london.usembassy.org.uk/irs/irswho.htm.

So you just realized you haven't filed but you were supposed to and are worried you are in trouble.  The official answer is:

This is a common misunderstanding among Americans abroad, and should not create anxiety for those who find themselves in this situation. Generally, you should file returns for the past three years, taking the foreign earned income exclusion, the foreign tax credit, or both. It would be extremely unlikely that there would be any late penalties assessed, since penalties are computed as a percentage of tax owed, and only the rare taxpayer would actually owe tax in this situation.

You may contact us for prior year tax forms, or download them from the IRS web site. To find older forms, enter the year required in the Search for... box on the top-left of the page. The search typically returns Forms and Publications for the year on which you will have seached.

and can be found here: http://london.usembassy.org.uk/irs/irsfaq.htm.

If you were a green card holder (resident alien) of the US, you may also need to continue to file tax returns for a period of time.

In all cases, it is always good to seek out good tax advice from a professional, which is often a tough question.  The UK Tax Accountants can be a rather complex subject.  Stealing from a post in another section here:

The UK has several qualifications - an adviser can be a Chartered Tax Adviser (CTA) by passing a series of exams and holding practical experience (the Which? report calls this an ATII qualification, but the name changed 3 years ago to CTA).  An adviser can also be a Fellow of the Chartered Institute of Taxation (FCTA - awarded by a body of work); a member of the Association on Tax Technicians (ATT) by passing a series of exams and holding practical experience; a member of the Federation of Tax Advisers (FTA - again by passing a series of exams and holding practical experience); a Fellow of the Federation of Tax Advisers (FFTA - awarded to the more senior members) and a member of the Tax Faculty of the Institute of Chartered Accountants in England & Wales.

The problem is there is no professional organization that monitors or reports on accountants that are certified in both US and UK taxes, which is then complicated more by the situation that even if someone knows both US and UK taxes they may not have a good understanding of how they interact.  In complex cases (lots of money), you would really need a firm that has specialists in several areas.

I read the embassy's information on tax for expatriates. I have not worked for the entire year of 2006 and have not earned the min amount for filing tax. I just got married though to my brit DH, his income is entirely England based. Therefore, I don't have to file for 2006 right? they're not going to come after me?

While you may not be required to file, it is in your best interests to file.  But if you did not earn, meaning from all sources, including interest income, etc, more then $3,300 in 2006 you are not required to file providing you aren't required to file because:

• You owe special taxes, like AMT or tax on an IRA or MSA.
• Your were self employed and earned greater then $400.
• And lots of other small specialized situations...

There is no harm in filing if you don't have to and especially if your income is below the threshold, you will not end up owing any taxes at all.

Even though you may not have to file a tax return, you may still have to report your foreign bank accounts, credit cards, etc to the government.  Form TDF 90-22.1  is required to be filed by U.S. citizens and permanent  residents who have financial interest in or signature or other authority over any financial accounts, including bank, securities, or other types of financial accounts in a foreign country, if the aggregate value of these financial accounts exceeded $10,000 at any time during the tax year. The form is due on June 30th of each year following the year reported on.  Again this isn't a form you would ever owe any tax on, but the US government wants to keep tabs on any and all foreign bank accounts.

Just to add :

1. Even though you are not required to file, if you do the IRS will give you a $30 telephone tax refund (assuming you file a Married Filing Separate tax return for 2006).  So while $30 will not buy you a great deal, it will not harm to have a little extra money.

2. Even though this may not apply to you right now; folks on low wages who have children can claim refundable child tax credits from the IRS on their US tax returns (in addition to UK child benefit and UK tax credits), so if you are in these circumstances you will find it pays yu to file.

I did not work in USA year 2006 but worked a couple of months in uk.  I wonder if I need to file .  I do have interest paid on student loans that I usually put on my US tax return would be nice to get something back on that.  Not sure if I would get anything for it since I didn't have an income in USA or what form I would fill out.  Any suggestions?

You probably need to file Form 1040, 2555, and TDF 90-22.1 but will just get the $30 phone tax refund.

You should also review your State filing position too if you came from a State with an income tax.

Though, generally, if you do not earn in excess the equivilant of 80,000 USD you will not owe any taxes. 

kitsonk, I thought I read somewhere that the amount was going up to $82,400?

I just found it on this site.

http://www.irs.gov/businesses/small/international/article/0,,id=97130,00.html

kitsonk, I thought I read somewhere that the amount was going up to $82,400?

I am getting old... I remember the days when it was only $70K...  *SIGH*  Yes for 2006 it is $82,400.  80K was such a nice round number!

I am getting old... I remember the days when it was only $70K...  *SIGH*  Yes for 2006 it is $82,400.  80K was such a nice round number!

I guess it going up a bit helps but then again...when you multiply your UK salary with the official exchange rate of 1.84...wow does it overinflate the figure. No way do I feel I am making the equivalent in US dollars. I wish! 

This is was on my "to-do" list.  Thanks for doing the research guys....you've been very helpful!!  And you saved me a lot of time 

OK, so if I read this correctly, Having worked all of 2006 in London and making a WHOPPING £34K as a nurse (please excuse the sarcasm), I must file an income tax using the forms listed above......very well, next question; my contract ended and I'm back in the states, some of the nurses stated that I'm entitled to get a refund from the UK, truth or urban legend?

How long was your contract?

If it was for less then 2 years or less then 3 years, there are some tax advantages that can be claimed back, though Guya and Lizzit are much better at knowing what these are.

the contract was only for one year, all of 2006, January through December

I only moved over here in March '06. So I know I have to file in the States, but I recently heard that when filing, I have to include my earnings that I made over here in the UK. Is that true? That totally sucks if it is, cos that means I probably won't get anything back. boo hoo!