Moved halfway through year

Hello, I'm sure this is an easy question but I've been searching for answers and am confused about tax forms for 2014.

I moved with family to the UK on 9 June 2014. My husband worked to 1 June 2014 in the US and I worked from 12 June 2014 in the UK.

I am assuming that I can claim bona fide residency in UK as we are over 6 months & plan to stay, but in that case would you recommend using the 1116 and foreign tax paid credit or the 2555? Or can they all be used at once? If we are MFJ can we include my (foreign) income and his (domestic) income on one 1040? Has anyone been in a similar position? Any advice very much appreciated.

You haven't quite met the bona fide residence or the physical presence test. see: http://www.irs.gov/Individuals/International-Taxpayers/Foreign-Earned-Income-Exclusion---Bona-Fide-Residence-Test and http://www.irs.gov/Individuals/International-Taxpayers/Foreign-Earned-Income-Exclusion---Physical-Presence-Test

But - pay any tax due by April 15 and use your automatic extension, and you will meet the physical presence test if my math is correct for filing before the return is due.

Yes, all income goes on one 1040 for MFJ. Given that each of you worked only 1/2 of the year, you should do the math for MFS. There's an outside chance you might be better off.

Once you qualify as a bona fide resident or meet the physical presence test, it's best to compute your tax liability using the earned income exclusion and by taking the FTC. File your US tax return using the method that works best for you.

Be aware of the "stacking rule" that applies when using the foreign earned income exclusion. This can really nail you if you move into or out of the US mid-year since your non-excluded US income is taxed at higher rates than you may have anticipated. Obviously the numbers work out differently in every case, but you may find you are much better off using the foreign tax credit than the exclusion in the year of your move, so make sure you run both sets of numbers carefully. Plus there is no bona fide residence/physical presence test, so you do not have to delay filing until you meet those requirements.

Thank you both. I was worried about the "stacking" issue as well as the residency issue from what I had read already... If I file with the extension I should meet the physical residency requirement. I guess I will have to run a bunch of numbers.

Even if you do not plan on claiming the foreign earned income exclusion you cannot file Form 8965 for 2014 claiming an exemption from insurance on the basis that you are overseas until the earliest date after you qualify under either the physical presence test or bona fide residence test.  This is a new obligation from the 2014 return.

Naturally, there is a potential penalty for failure to include this shiny new form!

The form 8965 allows you to break down exemptions month by month.  If you move mid year to the UK (and are immediately eligible for NHS care) are you allowed to immediately stop paying US health insurance premiums and claim an exemption for your first full month in the UK ?

Or do you have to wait for Jan 1 of the following year to be able to claim an exemption  ?

The form 8965 allows you to break down exemptions month by month.  If you move mid year to the UK (and are immediately eligible for NHS care) are you allowed to immediately stop paying US health insurance premiums and claim an exemption for your first full month in the UK ?

Or do you have to wait for Jan 1 of the following year to be able to claim an exemption  ?

The problem arises for the mid-year mover since in order to list the last 4 or 5 months as resident abroad on 8965, you have to qualify for the section 911 exemption which will require at least 330 days.

EDIT: To fully answer your question, NHS coverage does not qualify as MEC (minimum essential coverage) for the US, although certain 'work related foreign insurance coverage' may qualify, but that may only be for employees in the US. I don't know the answer to the latter.

This is sounding like if you move mid year you will just have to "suck it up" and pay the ACA fine for the balance of the moving year if you drop your insurance.

Since my insurance costs well over $1000 per month I think the fine is a lot less expensive, but still very annoying - US healthcare takes it's final bite out of me.

This is sounding like if you move mid year you will just have to "suck it up" and pay the ACA fine for the balance of the moving year if you drop your insurance.

The "penalty" will not come about until one files a tax return.

If an election is made to use form 1116 for the first partial year, and not form 2555, then the penalty may well come into force.

On the other hand, if the election to file a Section 911 exclusion is used (form 2555) and the taxpayer applies for an extension to the filing date until they will qualify for the exclusion, then there will be no penalty due. At the time of filing, they will qualify. If the taxpayer moved to the UK in, say, May (Year 1), by 15 June (the automatic extension date for those resident outside the US) of the following year (Year 2) they will have easily met the 911 requirements. An extension may be requested to delay filing until October without difficulty. For those who move after October, I believe there is an allowance of 3 months for non-coverage available. I may be well wrong on the last point. The only problem arises if the taxpayer owes tax for the partial year (Year 1). In that case, a payment for projected tax due should be made before 15 April (of Year 2) to avoid "late payment" penalties for Year 1. Fun and games.   

Thanks.   I see what you mean: pay up by 15th April what you think you'll owe, but then  extend the filing until you have been out of the US for at least 330 days.