Streamline procedures and advice to claim additional child tax credit

Hi,

I'm really hoping you can help as tryng to navigate the US UK tax procedures is giving me a bit of a headache. My husband (US citizen) has lived with me (non US citizen) in the U.K. for four years now, and we travelled extensively before this. We didn't realize that he was supposed to file a tax return if he wasn't earning in the US. However, we now have and I'm trying to work out our best options and how to go about it. We have a nearly three year old who does have a SSN.

1. Does he need to file the delinquent tax returns before this one is due, or can we do this one then do the delinquent ones after (or all at the same time?)

2. We are trying to decide between 2555. (Foreign income exclusion) and foreign tax credits 1116. I think we need 1116 as we have a child and this would allow us to claim for up to $1000 a year for past three years. Is this right? Would he file on for each year missed? He earns around £25000 a year.

3. If he files under foreign tax credit and has only earned it the U.K. Am I right in thinking there is no way he can owe the IRS?

4. Is there a pro forma to claim non willful conduct for non filing?

5. To claim additional child tax credit, will we only be eligible for this year because we will be on time or can we claim for missed two years as well? Do you need a foreign bank account for this?

6. How do you break down taxes for 1116? It seems easy enough to figure on the delinquents as we can use P60s. Is it best to wait for this again for this April's P60 before filing?

7. We haven't met requirement for FBAR so we can ignore this, along with 3520, 5471, 8938 which it doesn't seem we need to either. Are there any forms I might have missed? I Have surmised the following from my research: 8812 for child tax credit for each, 1040 for each tax return, 1116 for each return, one copy of 14653 statement.

8. I contacted a lawyer (just via a message board, we really can't afford to pay) who advised me to do a quiet disclosure rather than streamlining but when I googled this it seemed dishonest and that felt unnecessary and wrong. Anyone feel this in fact good advice I have misinterpreted?

Thanks so much all - any help to any of these hugely appreciated. 

1. Does he need to file the delinquent tax returns before this one is due, or can we do this one then do the delinquent ones after (or all at the same time?)

It's already too late for timely 2016 filing, so you might wait until you file for 2017. File it first, and then follow up later with the 3 delinquent forms. That way, you only do 2014, 15, and 16 for streamlined. The delinquent forms have special markings ("Streamlined" in red at top and cannot be E-filed, I believe.)

I understand you may not be above the threshold for FBAR (FinCEN 114), but if he has signature authority over any foreign bank account, it might be wise to file (online only) the last 6 years to verify you are complying with the Streamlined rules.

2. We are trying to decide between 2555. (Foreign income exclusion) and foreign tax credits 1116. I think we need 1116 as we have a child and this would allow us to claim for up to $1000 a year for past three years. Is this right?

Yes, you would have to use 1116 to claim the child credit.

Would he file on for each year missed? He earns around £25000 a year.

Yes, 2014, 15, and 16.

3. If he files under foreign tax credit and has only earned it the U.K. Am I right in thinking there is no way he can owe the IRS?

It's unlikely he would owe any US tax, but it all depends on your particular situation and assets. It's a myth that no one ever owes the IRS tax due. Sometimes people do have to pay. We can't guarantee no tax due without knowing completely all of your details (and we don't want to know!).

4. Is there a pro forma to claim non willful conduct for non filing?

As you mention below, 14653. That's the only statement required, but it must be included.

5. To claim additional child tax credit, will we only be eligible for this year because we will be on time or can we claim for missed two years as well?

Why not claim for all years. I believe it is allowed on delinquent returns. If the IRS disagree, they will simply refuse payment and it should not compromise the remdinder of your filing.

Do you need a foreign bank account for this?

No. The IRS only deals in $US.

6. How do you break down taxes for 1116? It seems easy enough to figure on the delinquents as we can use P60s.

No, you cannot use a P60 (unless you are using the 'accrued' method for tax paid, which only a few of us would use). A P60 is for 6 April to 5 April. The US tax year is 01Jan. to 31 Dec. All income and reporting is on income, etc. for the US tax year. The 'cash method' of determining credits for UK tax paid is also the US tax year.

Is it best to wait for this again for this April's P60 before filing?

See above.

7. We haven't met requirement for FBAR so we can ignore this,

See above.

....... along with 3520, 5471, 8938 which it doesn't seem we need to either. Are there any forms I might have missed? I Have surmised the following from my research: 8812 for child tax credit for each, 1040 for each tax return, 1116 for each return, one copy of 14653 statement.?

Yes. You must definitely file a Schedule B (especially Part 3 if he had signature authority over any foreign account). You also need to file form 8965 to be free of the ObamaCare penalty.

....... 8. I contacted a lawyer (just via a message board, we really can't afford to pay) who advised me to do a quiet disclosure rather than streamlining but when I googled this it seemed dishonest and that felt unnecessary and wrong. Anyone feel this in fact good advice I have misinterpreted?

I can't comment on this, although some do use that method. It could be risky as long as the Streamlined programme is available. (The non-wilful statement is important.)

All IMHO! I am not a professional tax person.

https://www.irs.gov/individuals/international-taxpayers/u-s-taxpayers-residing-outside-the-united-states
 

Thanks so much for this theOAP - it's invaluable!

I'm going to sit down and start tomorrow.

Just to check then -

1040 for each return
1116 for each return
Schedule B for each return
8812 for each return
8965 for each return
14653 Just one with supporting statement

Is this the lot? Thanks so much for your support and Happy New Year x

Also - can I file the old tax returns on 1040s on 2017 forms and just change the year at the top, or do I need to locate 2014, 2015 and 2016 1040s from somewhere?

Also - can I file the old tax returns on 1040s on 2017 forms and just change the year at the top, or do I need to locate 2014, 2015 and 2016 1040s from somewhere?

You should use the form for the correct year. You can get them here:

https://www.irs.gov/forms-pubs/prior-year

Thanks so much  Anchor - especially the link! Is this just for the 1040, or for all the forms? I really appreciate the response - everybody's help is getting me through this without a lawyer I can't afford so again, thanks and Happy New Year PS - Anybody know the exact date the next tax season 2018 to file 2017 opens? 

This is for all forms for all years. The deductions, thresholds, and exemption amounts change yearly.

It's rumoured the earliest 2017 forms might be available will be end of January 2018. If anyone knows of a more accurate date, please let us know.

Streamlined years are 2014, 2015 & 2016. Most IRS forms for 2017 are already published; but as the return is not due until 15 June and can be extended until 15 December there is no rush.

I am not sure why you think you might even possibly need a lawyer? Are there indications of possible criminal tax evasion in your facts?

No, just simply didn't realise we had to file until now. We certainly haven't done anything criminal (except not know we had to file a exactly the reason for streamline existing)  the when I've googled, a lot of websites have suggested using their tax attorneys to file these streamlined procedures at a huge fee. It scared me at first as didn't know where to begin but I now think possible scare tactics! I certainly feel much better equipped with everybody's help on here so thanks again. I hope I still feel the same once they are all printed and I start filling in tomorrow! 

When you say all forms, that's really helpful to know. In having to file just one certificate 14653, do I do the most recent I can find or should I try and locate one for each year?

If you are googling you will find lawyers who scare their clients. This is true. It has no bearing on reality.  The reality is that the IRS is not interested in you at all, but eventually will find you. It is sensible to catch up soon.  Do indeed try and complete the paperwork yourself.