Need to file US tax while living in the UK?

[fromdenmark]

Hi. My wife is a US citizen, and lives with me in the UK. She just started working last December, and therefore made around £150 from 1st january to 31st December 2014. I am from Denmark and have around £1000 income a month. Does she need to file taxes?

[cs95tdg]

US citizens, need to pay tax (in the US) on their worldwide income regardless of whether they are actually resident in the US or not, but only those sums in excess of a certain threshold. I'm not aware of what the thresholds are however - this would be something she'd have to find out, if the intention is to work outside the US.

Having worked in the US in the past, I recall there was a concept similar to the tax free allowance/graduated tax rate scale that we have here in the UK, but do not know the latest information to be able to help with your specific question on whether she is required to file a tax return.

You may want to try the US immigration forum here, but as this is a tax question, I feel this forum (immigration) would probably not be the best place to get an answer to your question.

[ouflak1]

Technically she does need to file her tax returns. However the IRS is strapped for resources at the moment. And for international expats the bureaucracy is about to get worse for them (the IRS) as there are loads of complicated forms that are supposed to be filled in with various agencies with all of that information collated by some poor souls working at the Service. That implementation has been put off year after year. So unless you are multimillionaires with stashes of cash laying around Swiss bank accounts, from a practical standpoint it is unlikely the IRS will ever be in a position to do anything about the millions of Americans of modest income living abroad. It is her call, but with that low income, it's likely not worth the bother to her or the IRS.

[fromdenmark]

Thank you much both of you

[obormot]

She does not need to file US taxes if her annual income is less then a few thousand dollars.
Technically, she has to file it if she earns more, but americans abroad do not pay taxes from about first 100 thousand of wage income, so she could only ever be liable for US taxes if she is a very high earner or has capital gains (or other passive income). And even in that case UK taxes count against US ones, and UK ones are higher.

Note though, that there is also obligation to disclose all her foreign bank accounts if she has more then 10 thousand on all of them together (which is not tax but rather security issue)

[DAC000]

“She does not need to file US taxes if her annual income is less then a few thousand dollars.”
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careful there, I’m a US Citizen who has lived in the UK for the past 17 years. US Citizens MUST file tax returns, every year, regardless of income. Same as in the United States, by the way. Yes its a PIA.
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http://www.irs.gov/Individuals/Internat ... ens-Abroad
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She won’t have a liability but they want that return. Will the come after her for not filing? Nope. But if her passport expires the Embassy in London will refuse to renew until the IRS says she has satisfied her obligations. Also some folks have had problems entering / leaving the United States. So better to file.
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Also be careful about the FBAR paperwork; some complications i.e., if she’s got an ISA than regardless of balance she has to report it. Same complications for SIPPs. These are separate documents, they must be filed electronically
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http://www.irs.gov/Businesses/Small-Bus ... ounts-FBAR
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penalties for not filing FBARs can run to 150% of the unreported balance. So not to be trifled with.