Under the threshold...

Hi all,

After many hours' research, I've determined that my US Citizen wife's income for 2009 was low enough to fall under the threshold needed to file a federal tax return.

(I'm a UK citizen, non-resident alien.)

However, I had a quick question: if I want to apply for a green card at some point in the future, I know it helps if the USC can show that they've been filing tax returns every year.

I was therefore wondering whether it would be advisable for her to write to the IRS in London, stating that her income was below the threshold in 2009 and therefore she's not filing a tax return? Alternatively, can she 'voluntarily' file a tax return despite being under the threshold? I've done so much work on this that it wouldn't take much longer to fill in the return.

She still needs to do the FBAR in any case.

Thanks for any help.

I don't know your exact circumstances, but it might be worth filing for her anyway because of the making work pay program the IRS have this year.  Basically, if you make between the minimum and the maximum amounts (can't say what they are off the top of my head), you qualify for $400.  I was sceptical at first, but your post reminded me about my tax filing.  I just checked my US account, and the $400 from Uncle Sam has been in there since the end of April.  It doesn't matter where the income was earned, as mine was all earned in the UK. 

Personally, I think the IRS should stop making me file every year as I don't live in the U.S. anymore, and probably never will.  So, they could have saved themselves $400 plus administrative costs by behaving like every other civilized country and tax on where you were resident for the year rather than what country you are a citizen of, but I digress.

Sorry, that doesn't really answer your question, but I've never turned down $400 for nothing in my life and I'm not about to start now!

-Sam

Ummm... I'm pretty sure that you can't claim the Making Work Pay Credit based only on foreign earned income.

Were you using Turbo Tax to fill out your tax return? Apparently, there were some issues with it calculating Foreign Earned Income incorrectly in regards to the MWPC.

http://turbotax.intuit.com/support/kb/deductions-and-credits/deductions-and-credits/7883.html

If you use the foreign earned income exclusion you can't take the making work pay credit.

If you revoke the foreign earned income exclusion you can't claim it for the next 5 years.

This is moot as the lady concerned has to file Schedule B because she has FBAR filing obligations.

I see nowhere in the instructions about not being able to claim the MWP credit if you use the foreign earned income exclusion. Where does it say that?

Oh, and I didn't use turbo tax, just the free file pdfs.

Sorry, I should clarify: Foreign Earned Income itself is not excluded from the MWPC, just any foreign income that has been excluded.

Did you carefully follow the form instructions? Especially Section 5?
http://www.irs.gov/pub/irs-pdf/i1040sm.pdf

Thanks for the replies.

guya: So my wife can only file FBAR once Schedule B has also been filed? So I presume she files a 1040 etc, despite her income being under the threshold?

Thanks

She can file a tax return even though its below the threshold. The rule is that you dont HAVE to but can if you want. I would recommend filing to take advantage of any tax credits available (dont know specific circumstances so I cant advise here) and to have a copy for you to have for immigration purposes. She wont owe any money and might get some back so its always worth filing.

Silly me. I didn't do the worksheet because I foolishly assummed that because the IRS thinks my foreign wages are earned income when trying take my money, it would also see it as earned when giving it back. How stupid of me. Also because the last stimulus money was for everybody, I just again assumed. Oh well, mother of all f-ups I guess. Lesson learned.

Related question, how do I give it back? 1040x with a check? Will there be a penalty? 

I did the worksheet and still qualified for the $400, so go through it and see if you might still qualify.

You may want to revoke the exclusion and claim foreign tax credits instead.  Of course over the next 5 years that choice could could cost more than $400 (less say 20% UK tax on the $400); but that is just a risk you'll have to think about.

DrSupperL99, I've done the worksheet several times in a vein attempt to make myself eligible, but each time I come out with -0- for my earned income, because obviously I didn't earn the money. In my circumstances, I've got my wages that were listed on my 2555EZ, $4 in bank interest and some UK Working Tax Credit, so all my income is either excluded on 2555EZ or not earned.  Oh well, thanks for the suggestion. Always worth a fourth shot 

Guya, thanks for the suggestion on foreign tax credits, but I think I'll not bother. I'm not a tax expert, and I looked at the FTC forms a while back and thought, not worth it.  I managed to bungle this up, and am not trusting myself at the moment.  If, and that's a big if, I ever start earning enough from work to be over the FEI exclusion or my pension contributions become too large to be covered by my personal allowances, I'll look into FTC.  However, if that ever comes true, I'll be making enough to pay somebody else to deal with this crap.