A Review Of The Most Common Questions We Are Asked About US Tax Liabilities

Is it necessary to file a 1040 if my income is below the Foreign Earned Income Exemption (FEIE)?

If the total income of a US citizen exceeds the standard deduction and exemption, you are required to file a US tax return. It is likely that there will be no tax due if the total income from foreign earnings falls under the FEIE limit, but a tax return needs to be filed in order to report the income and claim the exemption, since the relief is not automatic.

Even if all of my accounts are under the threshold of $10,000 (£7962.20), do I need to file an FBAR?

Possibly. If the total balance of all your non-US bank accounts combined is over $10,000 (£7962.20), an FBAR (Foreign Bank Account Reporting) is required. For example, if you have three accounts, each with a maximum balance of $4,000 (£3184.88), you must file. Whether or not this figure relates to the same funds that have been transferred between your accounts does not matter. All foreign bank accounts must be included in the FBAR, not just those that exceed the $10,000 (£7962.20) threshold.

My spouse is not a citizen of the United States, so does she need to file?

Not always. If they receive income from a US source, a spouse who is not a US resident has to file a US tax return. Being married to a US citizen does not obligate you to file US tax returns. A spouse in the US will simply need to file a ‘married filing separate’ tax return stating that their spouse is a non-resident alien who is not required to file taxes

What if I have missed years of filing my US tax return?

It’s never too late to file for past years. If US taxes are due, interest and penalties will continue to accrue until payment/submission, so it is best to resolve your affairs as soon as possible.

Exactly what is FATCA?

In the UK, many US citizens are being sent rather intimidating FACTA compliance packs from their UK (and other non-US) banks inquiring whether they have any connection to the US. FATCA regulations have brought about this.

In the US, a law called FATCA requires all banks and financial institutions to report to the IRS information about overseas bank accounts of customers who are US citizens or residents. The goal is to prevent tax evasion through offshore accounts.

US citizens who are behind on their US tax filing and foreign bank account reporting may find this very concerning. In addition to being a confusing and long form, the compliance packs sent by banks are also reported to the IRS who will be notified about accounts that are allegedly not disclosed.

The law is meant to go after very rich tax evaders rather than the average US taxpayer, but you should get caught up with US tax compliance sooner rather than later.

What is the cost to get my US taxes up to date?

We are very transparent about our costs and packages. Click here to view our current prices.

Xerxes Associates LLP work closely with US and UK expats from all different backgrounds, circumstances and occupations as well as high-net worth individuals in order to help them through the complexities of US and UK tax compliance requirements (tax imposed on expatriates). If you have a query or would like a friendly no obligation chat about your requirements then please get in touch and we shall be happy to assist you.