Hi, I'm helping an acquaintance with his tax return, who is a US citizen. I've read a number of posts here and feel confident that I'm on the right track, however... there are a few things which I'd like to ask you.
This is the situation:
- UK earned income less than $ 80k, no earned income in US
- no interest earned in US, some in UK
- he'd pass both bona fide and physical presence tests
- has got student loan back in US
- gets paid in UK and has a savings account as well; balance less than $10k
So, I've got forms 1040 and 2555-EZ. I know he does not need to file TD F-90 22.1 as the balance is less than $ 10k at any one time. However, does he need to file Schedule B at all? The instructions indicate to answer "No" for line 7a (ie indicate whether you have forein accounts etc), because the balance is less than $ 10k. Would I need to file other forms and/or worksheets with 1040 and 2555-EZ?
My other questions are around the detail on 1040. I use indicative amounts for the sake of the story, but the situation is as follows:
Line 7 - Income (all UK earned) $ 30,000
Line 8a - Interest (all in UK) $ 250
Line 21 - foreign earned income exclusion ($30,000)
gives a total income on line 22 of $ 250
Line 33 - student loan $ 1,000
gives a NEGATIVE adjusted gross income on line 37 of ($ 750)
Line 38 (transfer from line 37) ($ 750)
Line 40 asks for deduction. Using Standard deduction of $ 5,350
gives a NEGATIVE amount on line 41 of ($ 6,100)
Line 42 for single exemption: $ 3,400
therefore line 43 taxable income gives $ 0
Is the above situation correct? In other words - am i applying the right amount for Standard Deduction or should I perhaps have altered it? Is it ok to have negative numbers in lines 38 and 41?
As taxable income on line 43 is 0, I'd therefore fill in $ 0 on lines 44 and 45 as well and no further credits would need to be applied (eg foreign tax credit)
Is my approach correct, or where are the flaws if I missed a step?
Many thanks.
