Do we file? Which forms?

Hello everyone,

My wife (USC) has been here since Jan 2010 and has not filed a tax return. She has been a writer/teacher for the most part and is quite sure that she has not made more than $10,000 each year, except this year (2014), when she made around $16,000. All of her work has been in the UK and Spain aside from a few weeks in the US about two years ago.

Which forms do we need to complete and do we need to complete any forms at all for these years when the income was very low?

Thanks,

Mike   

Hi,
I think you are confusing 2 forms. The FBAR (Report of Foreign Bank and Financial Accounts), which is mailed separately from the tax return, is required if at any time during the year the U.S. person (your wife in this case) had bank accounts or investment accounts worth at least $10,000. So that's where the $10,000 figure comes from.

I am not aware of any limit below which a USC does not have to file a tax return, but someone will correct me if I am wrong. All US persons regardless of where they live in the world and regardless of where their income is earned must file a US tax return every year.

If she is behind on filing for those years, she will need to catch up before she is able to renew her US passport, if not before.

Hey Candyann,

Thank you so much for all of the information. With regards to the forms that my wife is required to complete is there a specific form for foreign residents or is it the standard tax form?

Do you have a name of the form that my wife requires?

Thanks so much again,

Mike

I am not aware of any limit below which a USC does not have to file a tax return, but someone will correct me if I am wrong. All US persons regardless of where they live in the world and regardless of where their income is earned must file a US tax return every year.

There are limits below which citizens do not need to file tax returns. The IRS filing limit for 2013 was $10,000 for a single filer and $3,900 for someone married filing separately.

Thanks, geeta. I stand corrected!

Mike, assuming your wife does meet the requirement to file, she fills in the form 1040 tax return as she would if she lived in the U.S. There is an additional form called the Foreign Earned Income Exclusion which USCs who live abroad are usually able to use. She would fill out this form and add it to the 1040--basically, if you declare that you live outside the US all year, you still have to declare your income earned outside the US but it is excluded from tax (up to around 90K; I don't know the exact amount this year). Because the US has tax treaties with countries like the UK so if you pay tax in one, you aren't double taxed in the other.

All the forms are pretty easy to find on irs.gov or you can use those tax websites like H&R Block. It is not onerous tax-wise, for those of us without massive incomes, but unfortunately the paperwork requirement is still there.

Geeta and Candyann,

Thank you both very much indeed.

The information that you have provided is of great value, thank you very much.

Mike

One more thing, sorry!

Is there a specific address to post the foreign resident tax returns?

Is there the option of completing older tax returns from 2011, 2012 etc online?

Thanks,

Mike

Mike,

http://www.irs.gov/Forms-&-Pubs

This site has all the IRS forms and publications including forms from prior years. You can type data into the forms but I'm not sure if it lets you file online or if you have to print and mail them. I myself have always printed and mailed them to a central address, which I believe is in Austin, TX, but it tells you on the instructions where to mail anyway.

Please note that the FBAR (if she is required to file that) is a separate form and can only be done online in a completely different place. I know there are very informative threads here about the FBAR by much more knowledgeable people than I am.

The 2010 threshold for married filing separately was $3,650; if your wife had income from any/all sources above that amount she should have filed a return. As you are married (as were at the end of 2010), filing as "single" is not an option. The thresholds do increase each year, but I suspect returns will have been due for each year since she was here, just as if she were in the USA. This is where to start for 2010; there are publications for each year, and you need to be mindful of any changes in the law.

The alternative to the foreign earned income exclusion is taking a credit for taxes paid in the UK, and you also need to be aware of the specifics which entitle her to use the FEIE based on residence outside the USA.

The FBAR (if required) is filed with the Treasury Department. Completely separate, and nothing to do with your tax return.  Start reading here: http://www.irs.gov/Businesses/Small-Businesses-&-Self-Employed/Report-of-Foreign-Bank-and-Financial-Accounts-FBAR.

Yes, from the sounds of it your wife was over the minimum income threshold, and as such, she should have been filing a return. To get her back on track you should file under the Streamlined program. The Streamlined is the most efficient way to get caught up currently, and that program requires you to file the last three years of tax returns and six years of FBAR (if applicable).

You can get copies of the forms online, and you can also sometimes find online software's that will walk you through the filing. You should focus on filing 2011-2013. The FBAR's must be e-filed, and you can back file past FBAR's via the FINCEN website as well.

This article should help you with the Form 2555EZ which will help your wife exclude her income from US tax: http://www.greenbacktaxservices.com/blog/expat-taxes-explained-form-ez-for-foreign-earned-income-exclusion/

Good luck!