The most frequently asked questions about US tax filing

20 May 2016 • Tax Videos, US Tax returns

 

Whilst many Americans living in the UK may be focused on the race for the White House, a more important date for them is looming – 15 June. This is the deadline for any US citizens living abroad when they must file their individual tax returns.

Head of tax at Warrener Stewart, Damian Talbot, who is both an EA (Enrolled Agent) and an Authorised Acceptance Agent has noted that recently they have been advising several new clients about their American tax liabilities.

“The number of enquiries about filing US tax returns has increased quite considerably in the past two months, ahead of the final deadline,” notes Damian. “We are qualified to advise on both US and UK tax affairs and find that many of our enquiries are based around these most frequently asked questions.”

A review of the most common questions we are asked about American tax liabilities

1. Do I need to file a 1040 if my income is below the Foreign Earned Income Exemption (FEIE)?

Yes. A US citizen is required to file a US tax return every year that their total income exceeds the standard deduction and exemption (for 2015 this is $10,300/£7,015). If the total income is from foreign earnings below the FEIE limit then it is likely there will be no tax to pay, however a tax return needs to be filed so that the income is reported and the exemption can be claimed as this is not an automatic relief.

2. Do I need to file an FBAR if all accounts individually are below the $10,000 threshold?

Potentially, Yes. The FBAR (Foreign Bank Account Reporting) is required if the maximum balance during the year of all your non US bank accounts COMBINED are over the $10,000 threshold. So if you hold 3 accounts, with maximum balances during the year of $4,000 year, you will need to file. It doesn’t matter if this figure relates to the same funds which have been moved around you accounts. The FBAR report must include all foreign bank accounts, not just those exceeding the $10,000 threshold.

3. Does my non US citizen spouse need to file?

Not necessarily. Like any other person a ‘non-resident alien’ spouse would need to file a US tax return if they received US source income. However being married to a US citizen does not impose any US filing compliance. The US spouse will simply need to file a ‘married filing separate’ tax return indicating that their spouse is a non-resident alien who is not required to file.

4. Is it too late to complete a US return for years I’ve missed?

No. You can still file for years that you’ve missed, it’s never too late. If you owe US tax then interest and penalties will continue to apply until submission/payment so the sooner your affairs are in order the better.

5. What is FATCA?

Many US citizens living in the UK are finding that their UK (and other non US) banks are sending them rather intimidating FACTA compliance packs asking them to disclose any connection to the US. This has come about due to the new FATCA regulations.

FATCA (the Foreign Accounts Tax Compliance Act) has been introduced in the US and requires all banks and other foreign financial institutes to report information about the foreign bank accounts of their clients who are US citizens and/or residents. This is aimed to prevent tax evasion through the use of offshore accounts.

For a US citizen who has fallen behind on their US tax filing and foreign bank account reporting this can be very concerning. Not only is the compliance packs sent by the bank a long and confusing form, but it is also getting reported to the IRS who will be informed about accounts that have potentially not been disclosed.

This legislation has been brought in to catch the ‘big fish’ tax evaders not your average delinquent filer but it is another reason to get caught up with your US tax compliance sooner rather than later.

6. How much will it cost to get up to date with my US taxes?

It may not be as much as you think. Warrener Stewart provide a free initial consultation to discuss your position with you to help get your affairs in order (whether you decide to use our services or not). From this we will be able to provide you with a quote for the completion of you US tax return, FBAR reports and any streamlined procedures as applicable.

An evening of conversions for Warrener Stewart at The Rosslyn Park Floodlit 7’s

13 May 2016 • Warrener Stewart News

On a balmy evening, last Thursday, 5th May, Warrener Stewart treated guests to a spectacular evening of sevens rugby hosted at Rosslyn Park FC. Winners of the past five years, Harlequins were keen to try and retain the cup and faced strong opposition from sides including London Irish, Worcester Warriors and Rosslyn Park.

The hosts of the night, Rosslyn Park, fielded a strong team including one of the Warrener Stewart sponsored players, Harry Broadbent, to reach the final against Ramblin Jesters. Despite a valiant effort from the home side, the Jesters were crowned winners by 26-14.

“It was a perfect night,” noted Nick Morgan from Warrener Stewart who co-ordinated the event, “One which combined a great atmosphere at Rosslyn Park with plenty of lively chat, some amazing tries and some light refreshments!”

Pictures clockwise: l-r

  1. It’s a full house of Rebecca Ferguson of Gordon Dadds LLP, with Colin Edney from Warrener Stewart, joined by David Measures from Carla International, Francis Kershaw, Warrener Stewart, Alex Coote, David Collins Studio and Stephen Fuller also Gordon Dadds LLP.
  2. Damian Talbot from Warrener Stewart flanks Geoff Eden of Eden Architects, Jon Last, Warrener Stewart and Nick Smith, Maddox Homes.
  3. Keeping on side are Stuart Barbour, Warrener Stewart, with Lee Watts from Kinleigh Folkard & Hayward and Chris Sarsfield, Meaby & Co.
  4. Lining up are Rupert Bruce from MinMax Limited with Mark Radford, Templar Financial Planning and Ryan Lane, Warrener Stewart.
  5. Backs in waiting, Nick Morgan, Warrener Stewart lines up with Paul Marples, Stockbridge Estates and David Collins, Warrener Stewart.

“we were so impressed at their quick response times and ability to resolve even the most complicated financial problem”
Pen Hadow