Foreign Earned Income Exemption and Qualified Dividends

Posted last week on another thread:

UK born and Domiciled. US citizen through Mother

Just realised I should be filing so when I get my act together will file 6 years FBARs and 4 years tax returns on the streamlined procedure and hope for the best.

Question is:

I 50% own a UK ltd Company.

I will do 5471 and as I own 50% I dont think I have subpart F income so although tedious will be doable!

Pay myself a mix of salary and dividends. For arguments sake lets say $15,000 salary and $50,000 dividends.

Now from looking at the tax bands http://en.wikipedia.org/wiki/Qualified_dividend [nofollow] and  http://www.moneychimp.com/features/tax_brackets.htm [nofollow] it appears that as long as my total joint income with my wife including the (grossed up? or is it the cash value) value of the dividends (also a US citizen in the same situation!) is less than $72,500 there will be no tax due even if there is no foreign income exemption as the dividend rate is 0% and the allowances cover the salary.

What I dont understand is how the Foreign Earned Income Exemption interacts with this? Can I claim the FEIE and then pay dividends up to the $72500 amount and still get the 0% rate?

I also understand that when I file the back tax returns I will not be able to file a 8832 to reclassify income as partnership income historically but could I file this after I file the back returns for the ongoing situation? Would this then cover the salary and dividends under the FEIE?

Lastly I am a UK CTA so know about the UK system. Are there any equivalent US tax qualifications that dont need you to train as an accountant first?? As I am starting to see this problem as an opportunity!!

This is not a DIY job - you have failed to file 5471s, FBARs, 3520s and 3520s (for your SIPP) and many years of tax returns; your company is possibly a PFIC too.

You will find it difficult I suspect to get the IRS to accept that a Chartered Tax Adviser did not know s/he was supposed to file tax returns. The CIOT may also invoke its own disciplinary processes against members who fail to be tax compliant.

You may want legal advice as you sound at high risk so may well want to consider the OVDP.

Guya

Thanks for that and I understand the consequences which is why I am planning to comply. I only recently qualified.

I also would be happy to renounce my citizenship and never visit the Usa again.

You didnt answer my questions though and why would my Company be a pfic?