Easy Filling Of US Tax Returns For UK Citizens
We help you to prepare your US tax return and common schedules and forms according to where and when you last lived in the US. We look into all the compliance with US tax and financial reporting obligation as per the IRS guidelines.
Filling US ex-pat taxes is complicated – We provide you with an easy solution to
- A non-US citizen living abroad.
- Digital novice
- US entrepreneur with a foreign company
- US executive working outside the US
- An individual required to file a US tax return by IRS
Service We Offer:
Legal Advice And Understanding Of Tax Obligation
- US tax return- On the determination of your US tax obligations, we prepare your US tax return along with the common forms and schedules, and state return if applicable according to your stay in the U.S.
- FBAR & FATCA reporting- We also assist in filling of FBAR if you meet the foreign account reporting thresholds. The FBAR rules are complex, our expert helps you to understand these rules and ensure compliance to the FBAR reporting. We also help you with FATCA reporting.
- Citizenship Consulting– If you are not able to figure out whether a US citizen or not or liable to file a US tax return or state tax return. Gives us a call or drop a mail to get a clear understanding of the status.
Expatriation
- E-filling– While living in a foreign country, it is not viable to send the form and documents through mail and getting the response back via mail. For your secured transfer, we use a secure online document portal for quick, free and secure transfer of files from our office to your office
- Confidentiality– We ensure the confidentiality of your data and ensures the protection of the same.
Why You Need Us?
The filling of US ex-pat tax return is a complicated and tiresome process, so it is very essential to get a professional service provider like us to handle on the key ex-pat tax rules and concepts. We can streamline the whole process by providing you with a basic understanding of your ex-pat tax obligation and benefits.
How can we get started?
Before we get into tax return fillings process, let us understand who is required to file a US tax return for an individual living abroad but must file US tax return-
- Non-resident alien.
- US Citizens living in the UK also known as US ex-pats.
US Tax Compliance For Non-Resident Alien
Who is Non-resident alien?
A non-resident alien is a category used by the International Revenue Service for tax purpose are those individuals who are not a US citizen or a green card holder and does not fall in the category of “resident” in the United States for tax purposes.
When A US Tax Liability Arises For Non-Resident Alien?
The Tax Liability Arises In The Following Cases
A foreign person is subjected to file a US tax return based on FDAP- fixed, determinable, annual or periodic income which also includes passive income from interest, royalties, rent and dividends. Such incomes are taxed at a rate of 30% by way of withholding at source.
A Foreign Person earning income from a trade or business in the US known as – “Effectively Connected Income” are also subjected to tax at graduated rate less deduction if applicable. They must report the ECI in the Form 1040-NR yearly.
How The Return Is Filed?
IRS income tax requires a non-resident alien to file FORM 1040-NR if they engage in business in the US during the tax year or have earned income from other sources in the US. This Form cannot be e-filed, it needs manual filling and signing of the form and is sent by mail to the address given in the form.
Yet, the due date for filing a US return is 15th April if you receive wages as an employee subjected to US tax withholdings. You can file form 4868 if you want an extension of 6 months.
Due Dates For Filing The Form?
What Is Form 1040-NR And 1040-NR-EZ?
Form 1040 NR: It is a tax form of the IRS income tax return filed by the Non-resident alien who is engaged in business in the US during the year or has earned income from US source throughout the year.
Form 1040-NR-EZ: It is tax form of the IRS income tax return filed by the Non-resident alien who has earned US income from salaries, wages and tips. Like Form 1040-NR, it also requires manual filling and signing of the form and is sent via mail to the address on the form.
Protective Return:
A Non-resident alien having limited business in the U.S, who feel that they didn’t have any gross income effectively connected to the trade or business in the US during the year, can file for protective return- Form 1040-NR within the due date.
The Non-Resident alien is not required to report any income connected to trade or business on the protective return, but are required to explain the return filed as a protective return. This return helps a non-resident alien to protect their rights to receive any benefit of credit and deduction in case, some of or all the income are determined as effectively connected income.
Compliance of US ex-pat or US citizen living in the UK for US federal tax filling.
A US citizen tax obligation in the US does not go away with moving out of the country. The IRS tax rules for US ex-pats are complicated. Thus it is very important to get a clear understanding and handling of key ex-pat tax rules from the beginning,
Who Are US Ex-Pats?
The US citizen who lives abroad is called US ex-pat for tax purpose. They need to report their whole income whether they owe the tax on the income to the US government or not. Due to foreign tax credit or foreign earned income excursion, the US ex-pat still, needs to report their income and file a return with IRS in a case where no tax liability arises,
A US tax ex-pat have to report their worldwide income irrespective of the source of income. They need to disclose the following income-
- Foreign Royalties Income
- Self-employment income abroad.
- Rental Income
- Income from exercise of stock option.
- Foreign Pensions and social security benefits.
- Wages from foreign employment.
- Foreign real estate income, capital gain and losses.
- Dividend and Interest income earned in the foreign nation.
A US tax ex-pat is also subjected to new information reporting obligation. If they hold some assets and accounts overseas, are required to file some specific filings in the form of informational form. Some of them submitted with personal tax FORM 1040 and others submitted directly to different government departments.
Details Of Some Special Forms
Foreign Bank and Financial Account Report(FBAR)
It is not a tax form filed with the IRS. It is an informational form need to submit at the U.S treasury department. A US account holder having a financial interest or signatory authority in one or more foreign bank accounts more than $10,000 in value in the calendar year must file FBAR with US treasury department.
FORM 8938 for Foreign account tax compliance act
US citizen living outside the US having a bank account or investment account in Foreign Financial Institution are required to include the FATCA Form 8939 with their US tax return. The threshold limits for FATCA are:
If filling a return other than a joint return and the total value of specified foreign assets exceeding $200,000 on the last day of the tax year or exceeding $300,000 at any time during the year.
In case of a joint return, the value of the specified foreign asset exceeding $400,000 on the last day of the year or exceeding $600,000 at any time during the year.
FATCA also requires to list the income reported on the tax return from these accounts and also specify the source of income and corresponding form, line or schedule on which it is mentioned.
Noncompliance of the FATCA can attract penalties. The FATCA reporting is done directly to the IRS or through the government jurisdiction in which the Foreign Financial Institution resides.
Due Dates For Filing US Tax Return?
The US ex-pats have to file the US tax return by 15 April of the following year. But if you reside outside the U.S on the 15 April, you get an automatic extension till 15 June and can extend up to 15 October by requesting for an extension.
Foreign Income Earned Exclusion-
A US ex-pat can establish their tax home outside the U.S provided that they don’t have an abode in the U.S and satisfy either the” physical presence “or “bona fide residence test. In such a case they can exclude foreign income from U.S tax. To claim such exclusions, they must file Form 1040 and attach form 2555.
FORM 2555
What is FORM 2555?
It is a US tax form for the exclusion of foreign earned income. The tax laws allow US taxpayers to exclude amount up to $80,000 per year of the earning from taxation if you live and work outside the U.S for a year and a more. Certain limits are also attached to the tax breaks make it quite complicated.
What details are required in Form 2555?
It includes the following details
- Source of employment
- Foreign residence information
- Income-related to foreign employment
- Information about the foreign housing exclusion
What is the due date of Form 2555?
The form must be submitted along with the individual Form 1040.
Where it must be filled?
The form must be sent to the same mail address as the form1040.
Foreign Housing Deduction
Besides to the Foreign Earned Income exclusion, the ex-pat can also avail deduction their housing cost amount in a foreign country from their foreign income if they qualify the “bona fide test” or “physical presence “test. Such deduction applies only in case of an individual is self-employed. The form 2555 is also used to claim this deduction.
Foreign tax credit-
A US tax ex-pat can also claim FTC- a foreign tax credit for the tax paid on the foreign income. The amount of claim of the foreign tax credit is limited to the amount of foreign source taxable income. The claim amount cannot be used to offset U.S source claim.
Yet an FTC is not allowed as a deduction to the U.S net investment income tax, thus still residual US tax remains. The Foreign tax credit rules are complex and need expert analysis to get the maximum benefit from FTC.
To claim the foreign tax credit, an individual need to file Form 1116 with the US federal income tax.
If you are a US ex-pat living in the UK, it is very important to comply with your various US tax obligation. Our expert tax professionals can help you to understand your tax obligation and assist in filling the US tax return.
