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Discussion Starter · #1 ·
Hi,

I've been living in the UK since February 2014 and have held various jobs since then. Only today, my Dad asked me whether I have been paying taxes to the U.S. Of course I haven't! I've been paying taxes in the UK because I live and work here...

Now I find out that I was supposed to be paying taxes in the US?? Is this true? How is this right? I would get taxed twice by two different countries!

Please help because I'm panicking now, not sure what to do or if this is true!?

Danielle
 

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As a US citizen you must complete a US tax form for the US every year.

As you pay tax in the UK then, unless there are unusual circumstances, you won't pay taxes to the US due to the tax agreement between the two countries.

However, as said above, as a US citizen, you are obliged to complete a US tax return every year.

I'd start doing your back tax returns if I was you.
 

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Hi,

I've been living in the UK since February 2014 and have held various jobs since then. Only today, my Dad asked me whether I have been paying taxes to the U.S. Of course I haven't! I've been paying taxes in the UK because I live and work here...

Now I find out that I was supposed to be paying taxes in the US?? Is this true? How is this right? I would get taxed twice by two different countries!

Please help because I'm panicking now, not sure what to do or if this is true!?

Danielle

As a US citizen you are required to pay taxes no matter where you live and work, but there are agreements in place to prevent double taxation. Despite that, you still have to file returns.

As for it being right - Boris Johnson was born in the US but only lived there for about eight seconds and he recently had to come to an agreement with the IRS because the US government claimed he owed taxes for all of his earnings.
 

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Discussion Starter · #4 ·
Hi both,

Thank you so much for your help! Do any of you know how I can go about providing the correct information to the US from the UK?

Thanks again,
Danielle
 

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Hi,

I've been living in the UK since February 2014 and have held various jobs since then. Only today, my Dad asked me whether I have been paying taxes to the U.S. Of course I haven't! I've been paying taxes in the UK because I live and work here...

Now I find out that I was supposed to be paying taxes in the US?? Is this true? How is this right? I would get taxed twice by two different countries!
Don't panic. A lot of people don't realize that under US law, US citizens living abroad are required to file US tax returns. The US is the only country that does this to their citizens (apart from Eritrea). But never mind - it is what it is.

You probably won't end up actually having to pay much (if anything) in tax, so take a few deep breaths and relax before you do anything. Basically, you'll probably need to file returns for the missing years, and file information reports for your UK bank accounts. Pain in the neck, but not a catastrophe.

When you're ready, you can start finding out what you should do at https://www.irs.gov/individuals/international-taxpayers/taxpayers-living-abroad
 

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As already said, you're hardly the only person in this situation. Fortunately, there's a fairly straightforward process for remedying this - called the Streamlined Filing Compliance Procedures. There is a link on the right side of the page that iota linked you to.

Basically, you just have to file the current tax year (i.e. 2016) and three years back, plus any FBAR reports of foreign bank accounts (assuming the cumulative total in your non-US accounts is at least $10,000) for the past 6 years. If you wait until after the end of 2017, you should file for 2017 and three years back from there. (If they haven't found you out by now, waiting a few months won't make any difference.)

As far as finding the "right" information, your best bet is to "read the fine instructions" - IRS publication 54 is a good start. The IRS will generally only be aware of any income you receive 1099s or W-2s for - i.e. US source income. Reporting UK or other sourced income is more or less on the honor system. (At this point, all the FATCA disclosures you may have heard about are still limited to the year-end balance in your bank accounts, with nothing about interest or other income). You may have to add up your calendar year income (since the UK is on a different tax year), using your gross pay rather than what the UK considers "taxable income." But you can then apply either the FEIE or the Foreign Tax Credit against your foreign source income (see Pub 54 for details) and chances are you'll owe little or nothing in taxes to the US.
Cheers,
Bev
 

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As already said, you're hardly the only person in this situation. Fortunately, there's a fairly straightforward process for remedying this - called the Streamlined Filing Compliance Procedures. There is a link on the right side of the page that iota linked you to.

Basically, you just have to file the current tax year (i.e. 2016) and three years back, plus any FBAR reports of foreign bank accounts (assuming the cumulative total in your non-US accounts is at least $10,000) for the past 6 years. If you wait until after the end of 2017, you should file for 2017 and three years back from there. (If they haven't found you out by now, waiting a few months won't make any difference.)
Indeedy.

The alternative to entering the Streamlined Procedures, if you find you'll owe no tax, is simply to submit the returns and informations reports (FBARs) for the missing years.

See https://www.irs.gov/individuals/international-taxpayers/delinquent-fbar-submission-procedures for instructions on submitting late FBARs.
 

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There are actually a couple of alternatives. Yes, you can just late file, starting either with the current year or doing a few years in arrears. If you owe nothing, there's no penalty and unless you're a 1% er or something, the IRS isn't going to bother going back to see if you should have been filing before. Or you can continue on flying below the radar - unless you have some "need" for showing that you are up to date on your filings (like petitioning to sponsor a spouse or other family member for a visa).
Cheers,
Bev
 

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There are actually a couple of alternatives. Yes, you can just late file, starting either with the current year or doing a few years in arrears. If you owe nothing, there's no penalty and unless you're a 1% er or something, the IRS isn't going to bother going back to see if you should have been filing before. Or you can continue on flying below the radar - unless you have some "need" for showing that you are up to date on your filings (like petitioning to sponsor a spouse or other family member for a visa).
Cheers,
Bev
 

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Discussion Starter · #12 ·
Hi Iota/Bev,

Thanks for your help! I'll have to figure out how to do all of this.

Would it work for now if I had my family in the US sort out my taxes if I pass them the info? Or do I have to do it from the UK?

Thanks again,
Danielle
 

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Hi Iota/Bev,

Thanks for your help! I'll have to figure out how to do all of this.

Would it work for now if I had my family in the US sort out my taxes if I pass them the info? Or do I have to do it from the UK?
What's the point? Since you're the one who has to gather the information, and you're the one who has to sign the forms and take responsibility for the content (under penalty of perjury), involving your family seems pretty pointless unless someone in your family happens to be a dual-qualified US-UK tax accountant.

If you put your data into one of the tax software packages (Taxact, Turbotax, etc), you can use what it produces as a model to show you where to enter the various items.

It's probably not going to be that complicated as long as you don't have a lot of investment income.
 

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As iota says, you probably don't need to get your family involved - and in point of fact, they may not understand enough about how things work in the UK (e.g. the different tax year) to be of much help.

Unless you are somehow pressed to get this sorted, I'd be tempted to wait until the end of the year, and then take a look at one of the free online e-filing services - whether one available through the IRS free-file program or not. To file the back years, you wind up having to pay (the least expensive one I know of is $15 for each prior year) so it's normally best to start with the current year. Most of the online services, however, will end access to their free version round about October or November (I suppose to get the next year's ready).

But once you've gotten the current year done, it may be just as easy for you to just follow the model for the prior years - and that you can do for free by just downloading the forms from the IRS website.
Cheers,
Bev
 

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Discussion Starter · #16 ·
Yes, I see what you're saying. I suppose it's because I never did my taxes in the US and they are done for me in the UK so I don't have to worry about it. Not sure how to figure out the different tax year when I don't have any payslips - I only have annual tax summaries.

I'm just worried about messing up the form I suppose, whereas my Dad uses H&R Block for taxes! haha
 

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Yes, I see what you're saying. I suppose it's because I never did my taxes in the US and they are done for me in the UK so I don't have to worry about it. Not sure how to figure out the different tax year when I don't have any payslips - I only have annual tax summaries.

I'm just worried about messing up the form I suppose, whereas my Dad uses H&R Block for taxes! haha
Divide the annual pay for the UK tax year ending April 2016 by 12. Multiply the result by 4.

Divide the annual pay for the UK tax year ending April 2017 by 12. Multiply the result by 8.

Add the two results together, and convert to USD.

Believe me, it's worth the hassle to learn how to manage your own tax affairs. You then know where you stand and can feel happy. :)

PS Don't worry about messing up the form. Use a pencil and a rubber, and expect to have to make corrections. You can download a fresh form to fill in eventually, when you've worked your way through everything.
 

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Discussion Starter · #18 ·
Indeedy.

The alternative to entering the Streamlined Procedures, if you find you'll owe no tax, is simply to submit the returns and informations reports (FBARs) for the missing years.

See https://www.irs.gov/individuals/international-taxpayers/delinquent-fbar-submission-procedures for instructions on submitting late FBARs.
Can you explain to me more about Streamlined Procedures? I've read the page 3 times but still not sure what it means! (Sorry!)

My understanding so far was that this is the route to use if you have not filed tax returns every year. Just trying to understand the "non-residency requirement". I have lived in the UK since Feb 2014 so does that mean I would qualify for this? I don't live at my parents' house anymore and rent a house in the UK. In the past 3 years I have definitely been out of the US for 330 days!
 

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Can you explain to me more about Streamlined Procedures? I've read the page 3 times but still not sure what it means! (Sorry!)

My understanding so far was that this is the route to use if you have not filed tax returns every year. Just trying to understand the "non-residency requirement". I have lived in the UK since Feb 2014 so does that mean I would qualify for this? I don't live at my parents' house anymore and rent a house in the UK. In the past 3 years I have definitely been out of the US for 330 days!
You meet the non-residency requirement. You can use Streamlined if you wish.
 
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