Married in 2015, USC non-earner living in UK

Hi folks,

We were married in June 2015 and my USC wife moved permanently to the UK in March 2015. My wife is now wondering about filling out the TurboTax thing online, and we're not sure exactly what to do. As I've always been taxed automatically in the UK by my employer we have more or less no clue what to do now!

She's adjusted her marital status on the tax return site to married, but it is asking all sorts of questions to which we don't really know the answer (e.g. my SSN, which I don't have).

To summarise what we know:

- she moved to the UK in March 2015
- we married June 2015
- she hasn't earned any money in either the US or the UK for either 2015 or 2016
- she is a US citizen
- I am a UK citizen

Can anybody help with what we should do? Do we even need to fill out this TurboTax thing?

Check if she needs to file. https://www.irs.gov/uac/Do-I-Need-to-File-a-Tax-Return%3F

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Hi RW,

Thanks so much for that - we've just gone through the wizard and it tells us we should be as "Married Filing Separately", and as she didn't earn over $4,000 she doesn't need to file.

Is this right? I mean, we answered all the questions to the best of our knowledge, but at no point did it ask about my income.

And does this mean that we simply don't do anything with the TurboTax thing at all - we just leave it for this year? She may decide to start working part-time at some point soon, and I guess it changes then, but so long as her income is $0 per annum then this is likely to stay the same!

Addendum: I was just reading one of the stickies, and it said if she files the tax return even though she may not need to, this won't do any harm. Is it worthwhile doing this to be on the "safe side", as it were?

Yes. I think you have come to the correct conclusion.

Going forward, you will want to be careful about things such as her sharing ownership of principal residence, as that could land her with US capital gains tax when you sell. If she were to have investments that are not UK taxed, such as the first £1,000 interest from a bank account, then those things could also incur US tax, but not so long as her total income remains below whatever is the current US exemption amount - presently $4,000.

I don't see how there could be any advantage in filing a tax return when she doesn't need to.

Yes. I think you have come to the correct conclusion.

Going forward, you will want to be careful about things such as her sharing ownership of principal residence, as that could land her with US capital gains tax when you sell. If she were to have investments that are not UK taxed, such as the first £1,000 interest from a bank account, then those things could also incur US tax, but not so long as her total income remains below whatever is the current US exemption amount - presently $4,000.

I don't see how there could be any advantage in filing a tax return when she doesn't need to.

+1

I would add that she may need to report any Foreign Bank Accounts (FBAR) if she has accounts including any joint accounts that have a value over $10,000 at any time during the year.  It costs nothing to file this report and is done online at FINCEN.gov (this is a separate department to the IRS)

https://www.fincen.gov/

Fantastic. Thanks very much for the advice! RW and durhamlad, we owe you a pint

She has a personal account with HSBC, and we have a joint account; a regular transfer from my account to hers happens monthly. It's not much, but would push her a little over that $4000 threshold. Does this matter at all?

At no point did either account, either individually or combined, have over the $10000. Should we report them anyway?

Fantastic. Thanks very much for the advice! RW and durhamlad, we owe you a pint

She has a personal account with HSBC, and we have a joint account; a regular transfer from my account to hers happens monthly. It's not much, but would push her a little over that $4000 threshold. Does this matter at all?

At no point did either account, either individually or combined, have over the $10000. Should we report them anyway?

The IRS is interested in actual income so only interest earned on that $4,000 is relevant.

If the total of the accounts at any time during the year never exceeded $10,000 then no need to report.  If it is anywhere close then be sure to check you are using the published Treasury Exchange rate for Dec 31st, 2015.

https://www.fiscal.treasury.gov/fsreports/rpt/treasRptRateExch/treasRptRateExch_home.htm

That's great. That's answered absolutely everything we might have needed to know - so we'll leave the IRS and FINCEN reporting for this year - the closest we could possibly come with the sum of all the accounts would be (using the 31st December 2015 rate of $1.00 = £0.6750) about $6000, and the interest accrued by the accounts is in the tens of pennies, so falling a long way short of that.

Thanks so much for all your help.

There is one advantage in filing if she doesn't have to that hasn't been pointed out.  If the two of you were to relocate to the US at some point, she can easily prove tax compliance as part of the visa application.  Otherwise, she'll just need to "prove" she didn't need to file for those missing years.

Hi KFdancer,

That's a good point. Whilst we don't have any plans to do so, who knows what we might do twenty years from now! If she were to file, is it possible to use the TurboTax thing for someone overseas? We were having some difficulty finding what was right to "put in the boxes". Or, is it something we should look at filling out paperwork for and posting them over to the US? (In this case, we're completely lost about where to start! )

Thanks again!

I use TaxAct as it allows you select "NRA" for the spouse.  With TurboTax she cannot electronically file with NRA for the spouse and will have to print off the papers and mail them.

Hi KFdancer,

Sorry, just trying to clear this up in my own head - this makes me (or I am anyway) a non-resident alien for tax purposes? Is this just a convenient notation, or does it mean that somehow I have to submit income information to the IRS as well?

It's just for tax purposes.  Selecting NRA keeps you away from the IRS!

You have got things covered for this year. I think your spouse should file "married separately" just so you can document the no tax status.

I would be careful with joint accounts and would try to keep your finances as separate as possible. I know that being married can male that difficult, but it's easy to forget the limits and prohibitions on foreign accounts for US citizens and the last thing you want is for any of your finances to become reportable because of joint ownership.