USC living in UK, low income, but some self-employed

Hi all, I'm a USC living in the UK with my BC husband. I'm basically posting for confirmation of what I think I've sorted so far and guidance for how to proceed with my US taxes for this year.
I've only worked about 6 weeks since I gained my spouse visa in March 2015. For the year, my income is £1511, but I did some ESL teaching for which I count as self-employed (£928 of my total income). I've gathered that due to the "self-employed" work, I must file a return, as it's more than $400. I think I need to file "married filing separately". Is this all correct so far?
What forms do I need to fill in, where do I get them, and where do I submit them? I've never done my own taxes before...!
Thanks for your help!

Be careful you are thinking about self employment tax, FICA, rather than income tax. As you are self employed in the UK you must pay UK National Insurance and so you don't have to pay FICA. To exempt yourself from FICA you need proof that you are covered by NI. Given your income level there should be no US tax at all, even with the lower Married filing separately personal deduction.


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I haven't moved to the UK yet but I did have to file US taxes with a spouse who is not a US citizen and does not hold a visa that allows work or residence in the US.  I spoke with a tax accountant and was informed that I could file Single.  The reason, my spouse doesn't have a social security number or an ITIN.  If this applies to you (spouse with no SSN or ITIN) then you can file single.  Your income is low enough that it shouldn't matter but I was surprised to learn this.  You won't find it anywhere online (at least not that I could find and I Googled it for hours).  The reason the accountant knows this is because they've gotten it in writing.  I went with H&R Block for my taxes (and will continue to do so once I relocate to the UK) and they guarantee my return and cover up to $6000 in any taxes that may be due if I were to be audited.  Only cost me $150. 

I haven't moved to the UK yet but I did have to file US taxes with a spouse who is not a US citizen and does not hold a visa that allows work or residence in the US.  I spoke with a tax accountant and was informed that I could file Single.  The reason, my spouse doesn't have a social security number or an ITIN.  If this applies to you (spouse with no SSN or ITIN) then you can file single.  Your income is low enough that it shouldn't matter but I was surprised to learn this.  You won't find it anywhere online (at least not that I could find and I Googled it for hours).  The reason the accountant knows this is because they've gotten it in writing.  I went with H&R Block for my taxes (and will continue to do so once I relocate to the UK) and they guarantee my return and cover up to $6000 in any taxes that may be due if I were to be audited.  Only cost me $150.

If you are married to an NRA spouse you have two options.

1) Do taxes "Married Filing Separately". This reduces your standard deduction, but doesn't open up your spouse to US taxation.

2) The NRA spouse elects to be treated as a US resident and you file "Married Jointly". This is usually not recommended.

I spoke with a tax accountant and was informed that I could file Single.  The reason, my spouse doesn't have a social security number or an ITIN.  If this applies to you (spouse with no SSN or ITIN) then you can file single......  You won't find it anywhere online (at least not that I could find and I Googled it for hours).  The reason the accountant knows this is because they've gotten it in writing.

Wow! I'm left speechless.

I'm not suggesting you do this, but it would be most enlightening if one were to ask for confirmation by viewing the "in writing" document.

I take it this was the first year of filing after the marriage and you filed as single the previous year. Theoretically, filing single or married filing separately will have no difference to thresholds since they are generally the same. And, it's a safe bet your spouse won't have any traceable US income.

You won't find this online since a married person cannot file as single, although bless the US tax system, the varying array of tax preparers in the States, and the infinite interpretations, both fact based or convenience based, one can try anything it seems,.... once. The odds of being audited versus the $150, multiplied by a reasonable number of clients, undoubtedly works in the preparers favour.

I did not file single last year.  I was as shocked as you are regarding this single filing status.  As the tax preparer said, the only way they know is because they asked the IRS out right what a tax payer should do when married to a non-resident alien who has no SSN, ITIN or income from the U.S.  I was pleasantly surprised.  The reason I needed to file single and not married-separate is because I have LOADS of student loan interest to claim each and every year.  If you file married-separate you can't claim student loan interest.  I was happy to pay the $150 as my student loan interest deduction more than pays for it.  I should try to get this in writing from the IRS for future use!

I did not file single last year.  I was as shocked as you are regarding this single filing status.  As the tax preparer said, the only way they know is because they asked the IRS out right what a tax payer should do when married to a non-resident alien who has no SSN, ITIN or income from the U.S.  I was pleasantly surprised.  The reason I needed to file single and not married-separate is because I have LOADS of student loan interest to claim each and every year.  If you file married-separate you can't claim student loan interest.  I was happy to pay the $150 as my student loan interest deduction more than pays for it.  I should try to get this in writing from the IRS for future use!

I might suggest that a simple reading of the 1040 instructions would give the answer.
Having student loans has no bearing on your filing status, but being married does. So your options are "Married Jointly" and your NRA spouse chooses to be treated as a US resident for tax purposes or "Married Filing Separately".

The reason I needed to file single and not married-separate is because I have LOADS of student loan interest to claim each and every year.  If you file married-separate you can't claim student loan interest.

I need to make one point clear before I proceed; we don't doubt that you were told you could file as single by the preparer.

The problem is there are any number of married US expats with an NRA spouse living in the UK who also have loads of student loan debt. They are trying to do things in accordance with the regulations, and to avoid their spouses having to become a pawn with tax filing, they chose to file married separate and take the penalty of not being able to deduct for student loans.

Then, we find the IRS has made a nod nod wink wink deal with one of its largest US accountancy firms that goes around those very same regulations which benefits those living in the States. I would imagine on discovering this there are some very annoyed US expats in the UK. I would be curious if there are any 'stores' of this preparer in the UK with tax advisors who would be willing to make the same 'alterations'.

https://www.irs.gov/taxtopics/tc456.html
 

And this is exactly why I was shocked when I was told I could file this way.  After learning of it I searched far and wide to find something that would back this claim up.  I still have yet to find it.  I figured, if their willing to guarantee their work and protect me against audit up to $6k...I'd gladly pay the $150.  I actually used the H&R Block online site and did the "Best of Both" filing plan.  The taxpayers puts their info in, uploads the supporting documents and picks someone state side to review the work.  Not sure that it'll be this easy next year when I have UK wages.  But I'm keeping my fingers crossed.

Be careful you are thinking about self employment tax, FICA, rather than income tax.

Nun, I used an IRS tool to determine if I need to file a tax return found at https://www.irs.gov/uac/Do-I-Need-to-File-a-Tax-Return%3F
That tool said that I must file because my income from self-employment exceeded $400. Is that tool mixing in FICA?

Another question: Am I going to be made to pay an Affordable Care Act penalty since I don't have a health plan as such, or does being able to use the NHS exempt me from that?

Where do I get the forms to fill in? On the IRS website, when I clicked on "Explore your electronic filing options", it ultimately took me to a page where it seems I'm meant to choose one of several companies' version of a "free file" software offers. Is this right? Is there nowhere to get a PDF or something? (Again, this is my first time doing my taxes, so if I'm asking silly questions, do forgive me.)

Nun, I used an IRS tool to determine if I need to file a tax return found at https://www.irs.gov/uac/Do-I-Need-to-File-a-Tax-Return%3F
That tool said that I must file because my income from self-employment exceeded $400. Is that tool mixing in FICA?

Another question: Am I going to be made to pay an Affordable Care Act penalty since I don't have a health plan as such, or does being able to use the NHS exempt me from that?

Where do I get the forms to fill in? On the IRS website, when I clicked on "Explore your electronic filing options", it ultimately took me to a page where it seems I'm meant to choose one of several companies' version of a "free file" software offers. Is this right? Is there nowhere to get a PDF or something? (Again, this is my first time doing my taxes, so if I'm asking silly questions, do forgive me.)

You must file if your earnings from self employment are over $400. The self-employment and income tax you pay are calculated when you do the 1040 with the required schedules (Schedule C....probably C-EZ for you and Schedule SE). Remember, you need to exempt yourself from US self-employment tax if you are paying NICs. In all this you should also be aware of Medicare and make sure that if you ever return to the US you will have enough Medicare contributions to be eligible when you retire.

If you live overseas then you are exempted from the ACA, you can file an extension so that you meet the overseas tests.

https://www.irs.gov/pub/irs-pdf/f2350.pdf

The forms are all available on the IRS site or you can just use software like TaxACT or Turbotax.....also google "Freefile".

I haven't moved to the UK yet but I did have to file US taxes with a spouse who is not a US citizen and does not hold a visa that allows work or residence in the US.  I spoke with a tax accountant and was informed that I could file Single.  The reason, my spouse doesn't have a social security number or an ITIN.  If this applies to you (spouse with no SSN or ITIN) then you can file single.  Your income is low enough that it shouldn't matter but I was surprised to learn this.  You won't find it anywhere online (at least not that I could find and I Googled it for hours).  The reason the accountant knows this is because they've gotten it in writing.  I went with H&R Block for my taxes (and will continue to do so once I relocate to the UK) and they guarantee my return and cover up to $6000 in any taxes that may be due if I were to be audited.  Only cost me $150.

Have you thought of reporting this dodgy accountant to the IRS and claiming a large whistleblower reward when the accountant is penalised and goes to jail?

Hahaha!  Ummm, no.  Because I have a history of tax accounting knowledge and working with and for the tax agencies (state and federal) I understand that this happens.  My guess is that this particular tax accountant at some point sent an email inquiry to the IRS because she had a client in my situation (married to a non resident alien but having student loan interest not able to file married separate) and asked for advice.  At which time the customer service rep answering the email, whether they were correct in their answer or not, responded that the person can file single.  Because they have it in writing from the IRS, it's binding.  It's quite interesting how it works.  As a side note, I have been penalized in so many ways when it comes to the repayment of my student loans and their interest by not getting answers to questions I've asked that I am very happy I can file this way.  I'm glad I have someone who will protect me against audit.

Hahaha!  Ummm, no.  Because I have a history of tax accounting knowledge and working with and for the tax agencies (state and federal) I understand that this happens.  My guess is that this particular tax accountant at some point sent an email inquiry to the IRS because she had a client in my situation (married to a non resident alien but having student loan interest not able to file married separate) and asked for advice.  At which time the customer service rep answering the email, whether they were correct in their answer or not, responded that the person can file single.  Because they have it in writing from the IRS, it's binding.  It's quite interesting how it works.  As a side note, I have been penalized in so many ways when it comes to the repayment of my student loans and their interest by not getting answers to questions I've asked that I am very happy I can file this way.  I'm glad I have someone who will protect me against audit.

It does not sound binding to me as an email does not have substantial authority. A court might accept this as evidence to reduce penalties, but as that statement is opposite to the law it has no standing beyond that.