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Discussion Starter · #1 ·
Hi,

Fairly simple questions (I hope!) on behalf of my wife, a US citizen now long-term resident in UK (over 20 yrs). (I do her IRS filings for her - she always files as "Married, filing separately", as I am a Brit with no US income at all, also resident in UK).
In previous years she was employed, took the foreign earned income exclusion, and had no tax to pay - so it was all pretty simple (1040 & 2555 only).
But she is now self-employed in the UK, so I am getting my head round how exactly to file. Gross SE income amount is well below the FEIE limit, so we will simply put that figure down on the Business Income line (#12) on the 1040 (without bothering detailing business expenses, because why go to the effort anyway), and complete 2555 to show that it can all be excluded, leaving no US income tax payable. She has no other significant income sources.

My specific questions are:

1) In Part I of the 2555, after ticking the "Self" box for Employer, what do we enter for employer's foreign address - home address in UK, or business address in UK?
2) Is it necessary to also fill out a 1040 Schedule C, if all we are going to put on it is the gross receipts/sales on line 1b (no intention of spending time detailing business expenses, as the gross income is far below the FEIE max in any case)?
3) On form 1040, for the "self-employment tax" line, my understanding of this (partly gained from reading great posts on this forum!) is that this should be zero because of the UK-US totalization treaty. Should we just enter 0, or should you write in EXEMPT? And do we actually need to submit a certificate of coverage from the UK NI Office, or is it just wise to hold that certificate should the IRS come asking...?

Thanks for any advice.
 

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Running late due to system problems yesterday but here goes:

1. If your wife works from home, then enter your home address. If she works from another address (say, an entrepreneur center or rented facilities somewhere), then use that.

2. I wouldn't bother with the Schedule C if the gross revenues for her business are under the excludable amount.

3. Either response should do just fine. (I'd tend to enter 0, but that's me.) You don't need to submit the certificate, and in all honesty, most folks never even obtain one and are never asked to produce it. Do be aware of how you can get one - or maybe get one now, just to have it available to to know how to get it and how long it takes to get. But chances are you'll never have to actually produce it.
Cheers,
Bev
 

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I think you do need a certificate of exemption, and it's easy to get. My understanding, and what I've always done, is submit a copy of the certificate attached to the tax return.
 

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Discussion Starter · #4 ·
Running late due to system problems yesterday but here goes:

1. If your wife works from home, then enter your home address. If she works from another address (say, an entrepreneur center or rented facilities somewhere), then use that.
Thanks - I'll do that.

2. I wouldn't bother with the Schedule C if the gross revenues for her business are under the excludable amount.
Well that would certainly make things easier!
On a related issue: I have been (still am!) puzzled over exactly why the Business Income line can be for net profit, yet when reporting amount of foreign income on 2555 (and then excluding under FEIE on 1040) we are supposed to base that on the gross income from a business (ie before expenses).... But I suppose that if we just report gross revenues for Business Income then it all matches. (excuse the digression)

3. Either response should do just fine. (I'd tend to enter 0, but that's me.) You don't need to submit the certificate, and in all honesty, most folks never even obtain one and are never asked to produce it. Do be aware of how you can get one - or maybe get one now, just to have it available to to know how to get it and how long it takes to get. But chances are you'll never have to actually produce it.
Cheers,
Bev
Thanks - I have heard differing views on this. We have requested the Certificate from HMRC, just in case.
 

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Discussion Starter · #5 ·
I think you do need a certificate of exemption, and it's easy to get. My understanding, and what I've always done, is submit a copy of the certificate attached to the tax return.
Thanks - this is also my understanding of the formal rules, as they are set out. So, I have requested a Certificate of Coverage from HMRC to be on the safe side.
On the other hand, it is also clear that many people do not bother with this, and have never had the IRS come asking.
 
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