us tax questions...

here are 2 unrelated questions. Does anyone know the situation if we are UK residents, my husband is the USC, I am UKc and we file US tax returns jointly (not sure that was the best advice but it's been 6+ years now), he works on PAYE for UK company, but as of mid-2011 I am self-employed. Our US tax accountant says we now have to pay US social security tax. Is this correct? If so why? I have a ITIN I didn't think that was the same as a SSN, do i really have to pay the US government money when I don't live there, barely earn enought to pay taxes here (approx £10k pa), and will now be out of pocket thanks to my husband's fault of birth!
2nd question: last year's tax credit is being witheld by the IRS without explanation. Anyone ever had this? they say they will write to us either requesting info or issuing the credit check, but have had neither it's now over 4 months. Do we have any recourse? I guess I'm more mad becoz all we do with the tax credit is pay off my husband's student loan, now we're scrambling to transfer funds to do that.
many thanks

I would get a new US accountant, though this may not be what you want to hear.  You are asking some pretty basic questions and your accountant's responses show that s/he is not well versed in US taxes for persons abroad.  It would call me to question what is being filed.  In fact, I think s/he is going to cost you.

The joint filing was a bad call.  Because you are not a US citizen or resident, you would have had to file an election in order to file jointly.  The election is binding and has to be officially revoked if you now want to file separately.  The problem with the revocation is it means you can never again file jointly with your husband (even when it may be advantageous to do so).  You can google the 6013g election and election revocation for details.  There will certainly be articles out there on the pitfalls.  

So because you elected to file jointly, your income will now reported and possibly taxed in the US, even though you have no ties there.  Again, unless you revoke (which has its own consequences).  To be clear, your now having to potentially pay US tax is not the fault of your husband's birth but this election.  If your husband had just filed separately, this wouldn't have been a problem and he probably gained nothing by filing jointly with you all these years.  See above, firing your accountant.

Point two for firing the accountant, your obligation to paying SS is in the UK and then you are exempt from paying SS in the US under the US/UK Totalisation Agreement.  You can google US/UK Totalisation Agreement and read which country has the right to tax you on the SSA website.  It is laid out in a nice grid.

Finally, if your last year's refund is being held, you need to call the IRS.  They will be able to give you an explanation over the phone.  Do you normally use your UK address on your tax return because you should have received some sort of notice?  What do you mean when you say they will either request more infor or issue the refund?  The IRS doesn't work this way and if they hold the refund there has to be a set reason for doing so.  You haven't really given enough info for me to properly advise.  Also, why is your accountant not helping here?  It is what you pay them for.  And yes, you do have a lot of recourse but I need more info on the official reason/notice.

I appreciate your response, and take on board the points about the accountant.
About the situation with the IRS, I have no more information. The timeline is like this, return for 2010 submitted in October 2011....without making more points about the acountant he regularly blocked out the auto pay-in boxes so we've had to wait for a check to arrive here in the UK...but it's usually worked out. By January no check had arrived then received a letter saying the amount was adjusted, and that we would receive a check within 6 weeks. End of March got worried the check was lost, so called the IRS international in Phil...got a very helpful man on the phone who couldn't give me any information other than that our refund check was withheld and we would have either a letter or phone call within 30 days with an explanation. He also said there was no point in the accountant getting in touch there was no information to give out. End of April I called again, to be told there was a note on file exactly 30 days from my previous phone call saying please inform client they will receive a letter of explanation within 30 days...its now June received nothing. trying to call the same number as before as it happens I can't get thru. meanwhile the accountant got in touch about 2011's accounts and has offered to contact IRS but says he needs us to sign power of attorney forms first..  Oh and it is the UK address on the returns.
is that any clearer? Any other suggestions at this point? The first time I called the man did suggest it was standard investigation for foreign residents with "lots" of children (4)...but the second person I spoke to refused to give any info at all.
many thanks for your time

It does sound atypical.  On occassion, retuns can be held while the IRS decides whether or not to open an enquiry (which could be as simple as a notice or as annoying as an audit or nothing at all).  However, you would certainly expect to hear by now. If this were me, I would ring everyday until I received a response and I would ring multiple numbers. The Philly number tends to be the best for persons abroad but by no means is the only one.   There is the standard -1040 number.  There is also a number for refund updates.  This link may help.

http://www.irs.gov/contact/index.html

When you ring you need to clearly state that you have been waiting, 8 months for your refund and have received neither the refund or notice for why no refund has been issued. 

If you want to throw some weight around you can tell the IRS that you intend to contact the Taxpayer Advocate/Problem Resolution Program.  Sometimes this gets their attention.  If you still hear nothing, then I would actually contact the Taxpayer Advocate.  Some info on the TAS is below.  However, TAS is slow and they expect that you will have done a lot of leg work (i.e. ringing everyday at the different numbers above).

http://www.irs.gov/advocate/

Another nice link about your rights:

http://www.irs.gov/advocate/article/0,,id=98206,00.html

HTH

really appreciate your help. Not sure why the Philadelphia number is not going thru...tried some other numbers can't get a live person. the -1040 is an automated response that tells me the tax return is being processed and refund should be received within 6 weeks !
the info on 6013g revocation is kind of scary...don't think i want to go that route. amazing what we fall into without proper planning.
guess I will keep calling at diff times of day....many thanks will up date when I know anything

Just a general observation. While I'm sure most people love their US spouse that should not run to "getting into bed" with them for tax purposes. Let them carry on with the IRS entirely on their own. If there is any monetary advantage in filing jointly it is completely offset by the complications and limitations to the non-US spouse's financial life.

Your US accountant seems not be be taking into account your UK status at all which I find worrying. Given your accountant's previous dubious advice I would check that they are dealing with the rest of your taxes correctly particularly if you have UK pensions, investment accounts, ISAs etc. Also watch out for FBAR and FATCA filing.

Given your accountant's previous dubious advice I would check that they are dealing with the rest of your taxes correctly particularly if you have UK pensions, investment accounts, ISAs etc. Also watch out for FBAR and FATCA filing.

Too right.

really appreciate your help. Not sure why the Philadelphia number is not going thru...

You are right against a deadline so the line may just be flooded.  Try after the 15th and see if that helps.

You are right against a deadline so the line may just be flooded.  Try after the 15th and see if that helps.

good to know. thanks!

just an update. finally got thru to a person. same answer as before. It's under "review" or "investigation" whichever word you want to use. We should have had an explanation but they (I assume that means the review dept) are under-staffed and behind and therefore have not responded to our previous requests for explanation. The man on the phone in Philly kept apologising but had no answers and didn't react to the suggestion of TAS at all.  just said that it's a slow process once it goes in for "review" and he's sorry he can't help more.