Employed, self employed, and the bloody IRS - please help

Hi there fellow expats/aliens et al.

I'm a UK citizen - born and bred. I live and work in the UK, but my parents - both American - bestowed upon me this great gift of US citizenship. I spent some time over there in my youth and have since been diligently filing my US taxes each year, just in case I should ever return.

It's been a relatively painless journey. My income is well below the Foreign Earned Income exclusion and I have no real savings to speak of to worry about FBARs - but I've recently started working for myself. I'm still employed full time, I pay my taxes via PAYE, but I've started a small business with an even smaller profit (I pretty much broke even). I've just started preparing my first years self assessment for my UK taxes and I don't know what I now need to do for my US taxes. I've always just filled in the 1040EZ or whatever it's called via one piece of software or another.

I'm still well below the threshold, but I simply can't wrap my head around which forms I need to fill out in order to include my self employed income on top of my PAYE salary. Should I just add it all up or is there a separate form? Do I really need to go through revenue vs expenses and all the complicated stuff - simply to arrive at $0.00?

Any advice would be appreciated.

If you have self employment income under $400 (that's after expenses) then there's no need to file the self-employed Schedule C. For future reference if you do have over that threshold you'd just file a 1040 and Schedule C or C-EZ, but you must make sure that you don'y pay US self employment tax as you are covered by National Insurance.

Because the UK will let you choose any accounting period you wish, you may find it easier for the business to select a 31 December year end, so that you can handle both sets of tax returns most easily in the future.

Just a thread lurker here-Nun, could you explain the Self Employment tax thing?

My husband is working as an independent contractor for a US company. I think we found the form that says we should send his info to a certain address to avoid owing lots of money, but I'm not sure if that's all we have to do?

US self employment tax is the equivalent of National Insurance. If you are self employed in the US you must pay both the employee and employer parts of this tax which comes to 15.3% of your net earnings....this is on top of any income tax.

If you are a US citizen and self employed in the UK you still need to declare your self employment income on a Schedule C, but you do not pay US self employment tax as you are working in the UK and will be paying National Insurance.

Ah, got it. Thank you!

Do remember that simply because he called a contractor he is more likely an employee under English law. The recent Uber case in England brings to the fore the question of employment status. If he is an employee he is entitled to paid holidays, sick leave, paternity pay and all other local employment law benefits. The engagers of his work will hopefully have some legal advice on their position, which they can share with him.

I'm no expert, but I don't think the Uber case means that every contractor is now an employee.  I'd be sure to get professional advice regarding that.

I also don't think the husband's client is best placed to provide this advice.  If he doesn't have an accountant, sounds like he might need one.

I guess we might need to look into one then. He's registered as self employed with HM RC, so I'm not sure what that all means if he's contracting for a company at home.

I'll ask around. Thanks y'all for the help!

If you have any other advice, I'd be very grateful. I know it's only November but I'm trying to anticipate any problems

If he is employed his employer would be withholding UK tax & NIC. He may want to look at HMRCs status check tool to see what this indicates.

Thanks Guya. He's having to pay it himself (employer is not witholding anything, since he's freelancing). We will have to pay NI and such through the online tool I think (which currently isn't recognizing him, so he calls, they tell him it works, and it still doesn't. We're sorting that out)

Thanks Guya. He's having to pay it himself (employer is not witholding anything, since he's freelancing). We will have to pay NI and such through the online tool I think (which currently isn't recognizing him, so he calls, they tell him it works, and it still doesn't. We're sorting that out)

HMRCs status indicator does not require registration It is here: http://tools.hmrc.gov.uk/esi/screen/ESI/en-GB/summary?user=guest

The tool indicated self employed