Tax rules for USC in UK

Thanks Tubaleiter

Regarding FBAR, this has never come up before. I understand that it's for if Tre has money in accounts totalling over $10k during the year?  While he probably has that now due to the LISA top up since April, it's really hard to know if he had it previously due to us having a handful of accounts for our flat, personal accounts, and the LISA.  I would say it may have happened but cross-referencing all the accounts day by day will be a nightmare!  Also, while I understand that there are no penalties for late filing if you have no tax to pay, I think failing to return an FBAR in time can have penalties. So I'm really unsure of the best way to proceed regarding FBAR - any thoughts?
Cheers
Greg

Free file should be a viable option, you're under the threshold where it applies. Not all the free file options will support foreign situations. Two options that get mentioned quite a lot in US expat forums are TaxSlayer and OLT. I've played around with both, both seem entirely usable (both of those you don't even need to go the formal "free file" path - they're just free). Unfortunately, the IRS doesn't have an "official" free option (like HMRC does), beyond either paper forms or free fillable forms. Both of those put a lot of onus on the preparer to read IRS instructions - absolutely possible, not terribly user friendly. But for simple situations, also entirely doable.

As far as income, you've just got earned income (Tre's salary) and the government top-up for the cash LISAs. I imagine you probably also have some interest in bank accounts somewhere? Might be tiny, but don't forget to report it (and do an FBAR, if required).

Is it a cash LISA?  If so, easy peasy.  Yes, he can use Free File or for a small amount, Tax Act is a user friendly online software platform.

If it's a stocks and shares LISA...  well, that was a mistake.

Yes, cash LISA - thanks to consulting this forum, I avoided the stocks and shares ISA trap!

Thanks all, would appreciate some help re our FBAR quandary above. In the meantime, we'll look at TaxAct (workaround noted ), TaxSlayer and OLT and see which seems most straightforward.  I'm hoping once we've got a platform that works for us, future years will be more straightforward.

All help appreciated!
Greg

Thanks Tubaleiter

Regarding FBAR, this has never come up before. I understand that it's for if Tre has money in accounts totalling over $10k during the year?  While he probably has that now due to the LISA top up since April, it's really hard to know if he had it previously due to us having a handful of accounts for our flat, personal accounts, and the LISA.  I would say it may have happened but cross-referencing all the accounts day by day will be a nightmare!  Also, while I understand that there are no penalties for late filing if you have no tax to pay, I think failing to return an FBAR in time can have penalties. So I'm really unsure of the best way to proceed regarding FBAR - any thoughts?
Cheers
Greg

I understand what you mean about cross referencing the accounts but you don't have to do that.

Just take each account, one by one. Go through all the balances for the whole US tax year and note the highest balance for each. (The high balance for different accounts will be on different dates, that's ok.)

Add those high balances together and that total determines if you are required to file Fbar.

I understand what you mean about cross referencing the accounts but you don't have to do that.

Just take each account, one by one. Go through all the balances for the whole US tax year and note the highest balance for each. (The high balance for different accounts will be on different dates, that's ok.)

Add those high balances together and that total determines if you are required to file Fbar.

This is my son’s approach each year, get out all the statements, write down the highest balance for each account and add them up.

What I do is, starting with January statements, make a note of the highest of each balance in my accounts. Then look again each month and if there is a higher balance replace the previous high. End of year add up all the highest balances.

Either method works just as well, just depends on whether you want to spread out the pain.

Thanks all, would appreciate some help re our FBAR quandary above. In the meantime, we'll look at TaxAct (workaround noted ), TaxSlayer and OLT and see which seems most straightforward.  I'm hoping once we've got a platform that works for us, future years will be more straightforward.

All help appreciated!
Greg

As others have mentioned, on the FBAR, it doesn't care about your highest balance on one specific day, the cross-correlation exercise isn't necessary. There are two questions to answer:

1. Do I need to file an FBAR? Answer: If the total value of all non-US accounts exceeded $10k at any point in the year, yes.

2. What value do I report on the FBAR? Answer: FBAR is set up by account, and you report the highest balance in the year for each account.

Example: Account A had $9k on 01Jan, less than that every other day: report $9k
Account B had $5k on 15Apr, less than that on every other day: report $5k
Account C had $7k on 31Dec, less than that on every other day: report $7k
Note that this even applies if it's the same money. If you transferred the $5k from Account A to Account B, so that Account A was $9k on 01Jan, $4k after transferring $5k to Account B, you still report $9k for A and $5k for B. Yes, this means you're double/triple/quadruple/etc. counting the same money, but that's fine. FBAR isn't interested in you reporting the total amount you have in non-US accounts, but the highest amount you had in each account at any point in the year.

FBAR is a bit of a faff to set up the first year, but after that it's pretty straightforward. I keep an Excel file of all my non-US accounts, with the basic information they need every year (account #, address, etc.), and just fill in the highest value in GBP and use a simple Excel formula to convert to USD. Exchange rate is simple for FBAR too, no need to look it up for each date, just use the "Treasury's Financial Management Service" rate for all the values (https://www.fincen.gov/reporting-maximum-account-value). Takes maybe 15 minutes each January, nothing to stress about - far easier to just file it and include any account you think might be applicable, people spend too much time worrying about "do I need to report this funky kind of account?" and "my total balance might have been $9,999.99 or $10,000 depending how you round it, should I file an FBAR?" If in doubt, just report it and sleep well.

Lastly, remember FBAR has NOTHING to do with your taxes. Doesn't go to the same US government agency, nothing on the FBAR causes you to pay or not pay any taxes. It is purely reporting (and in some cases, duplicate reporting with your tax return - that's life outside the US...).

Once you have submitted the first FBAR, then subsequent submissions are simple. I copy the previous years pdf to the new folder on my computer, (so 2021 fabar to 2022 folder). Rename that FBAR file, and simply change the maximum values of each account and alter the form date. If you have no new or closed accounts and the FFI address remains the same, then it's that easy. FinCEN still use the same version of many years past, it really is that easy. Upload and be sure to keep safe and back up the submission and acknowledgements.

Thanks so much for all the FBAR guidance

My main question now is - how to submit? Can it be done easily online? Do we need to download and submit a paper form? etc

I'm sure I've read that there's an October 15 deadline for FBAR to avoid penalties so just looking for the best way to proceed to avoid penalties.

Actual tax return penalties only relate to if we owe anything which I'm pretty sure we don't so can sort that after.

Next year we can hopefully use our experience to file FBAR and tax return much more promptly

Thanks so much for all the FBAR guidance

My main question now is - how to submit? Can it be done easily online? Do we need to download and submit a paper form? etc

I'm sure I've read that there's an October 15 deadline for FBAR to avoid penalties so just looking for the best way to proceed to avoid penalties.

Actual tax return penalties only relate to if we owe anything which I'm pretty sure we don't so can sort that after.

Next year we can hopefully use our experience to file FBAR and tax return much more promptly

You've not been able to file on paper for around 10 years.

Here's the link for efile:

https://bsaefiling.fincen.treas.gov/NoRegFBARFiler.html

Thank you!

So Tre's name is on more accounts than the form has room for...do we just submit the accounts that had the highest balances? 

An alternative would be to submit two forms but I wouldn't want to risk confusing them!

Thanks
Greg

Thank you!

So Tre's name is on more accounts than the form has room for...do we just submit the accounts that had the highest balances? 

An alternative would be to submit two forms but I wouldn't want to risk confusing them!

Thanks
Greg

Unless he has interest in 25 or more accounts they must all be listed.  There's a way to add space for more.

Thank you!

So Tre's name is on more accounts than the form has room for...do we just submit the accounts that had the highest balances? 

An alternative would be to submit two forms but I wouldn't want to risk confusing them!

Thanks
Greg

There is a '+' to add a dropdown for additional accounts.

Unless he has interest in 25 or more accounts they must all be listed.

What's always perplexed me is, if you have 25 or more accounts to report, why does the FBAR ask you not to complete Parts II and III, but to retain records of this information? 

Is this just to accommodate an electronic form that can't handle 25+ accounts, or does it raise an automatic flag with the Treasury that your personal finances may warrant investigation?

For 2021, I had 19 such accounts and reported them, and I make a point of not not having 25 or more to avoid raising suspicion.   

What's always perplexed me is, if you have 25 or more accounts to report, why does the FBAR ask you not to complete Parts II and III, but to retain records of this information? 

Is this just to accommodate an electronic form that can't handle 25+ accounts, or does it raise an automatic flag with the Treasury that your personal finances may warrant investigation?

For 2021, I had 19 such accounts and reported them, and I make a point of not not having 25 or more to avoid raising suspicion.   

This existed when the form was on paper too. I think a lot of people keep below 25 accounts for that very reason but I don't know if there is any merit to it.

Hi all - getting on with this now...would we need to include his credit card? It's more of a loan instrument rather than monies held so not sure.