Filing taxes "Married Filing Jointly", how should I deal with my UK bank account?

[Crazy Cat 41,845]

7 hours ago, INF said:

Hi there! Is it possible to get the name of your CPA? I am looking for someone who specializes in cross border taxes! 

I sent you a private message with her information.

[PBabz 137]

This has been a helpful read! 

 

My husband (USC) and I (UK citizen) are doing the same, filing jointly for the first time this year. He filed married but separately last year and we're having some confusion this year.

 

I became a US resident February this year, POE was 28 February 2021, SSN was generated that same month. 

Up until that date, I worked in the UK and had earnings dated until 31 March 2021. We're trying to figure since the UK and US financial years are different, how I would figure out my income for the US financial year given that all I have is my P45/P60 with income for the UK financial year?

 

I'm hoping we're just overthinking! My husband is using Turbo Tax and although he's still working through, we swiftly went from having nice, sizable refund to owing a substantial amount of tax which seems unfair given that all my UK income has already been taxed.. 

It's all a bit confusing to me! 

 

I'd really appreciate any information or advice. Happy to provide more detail if that might help too! 

 

Thanks! 

 

I should possibly also add that as of 1 May 2021, we moved back to the UK, so I was in the US for all of about 2 months. My husband is USAF and we're now stationed 'back' overseas!

 

Edited May 15, 2021 by PBabz

[Wuozopo 4,293]

17 hours ago, PBabz said:

We're trying to figure since the UK and US financial years are different, how I would figure out my income for the US financial year given that all I have is my P45/P60 with income for the UK financial year?

You just figure out what got paid to you between Jan 1 and March 31. I had the same situation first year, and mine was frankly a big ‘ol guess. But I did try to be as accurate as I could figure out. The IRS doesn’t know what you were paid either. 
 

17 hours ago, PBabz said:

My husband is using Turbo Tax and although he's still working through, we swiftly went from having nice, sizable refund to owing a substantial amount of tax which seems unfair given that all my UK income has already been taxed.. 

The one thing I hate about TurboTax is that running total they have at the top. It is fake news until you put in every bit of info. So your sizable refund wasn’t a real refund at all until you deal with the foreign income and the entire tax return.

 

Not sure what he has done so far, but on TurboTax you don’t enter your foreign income until the last Income section called LESS COMMON INCOME.  One of those “less common” situations is foreign income. It asks  you to enter the amount. It will then take you to Form 2555-Foreign Earned Income Exclusion questions. You qualify for the exclusion on the “bonafide resident” choice. You were a bonafide resident of the UK allowed to live and work there. When it asks when your bonafide residence began, use the date of your birth if you were born in the UK. Tell your husband that this section uses wording that is more geared for an American working abroad so it can be confusing. Like it asks what visa allowed you to work abroad. The answer is not IR1/CR1 like some people get confused over. It means what visa to the UK allowed you to work there. Well you didn’t need a work visa to the UK. The answer can be none, not required, or UK citizen...anything to get Turbo to move on. The Form 2555 will subtract the amount of US taxes your reported UK income generated. 
 

You also will qualify for two stimulus payments as credits and the extra standard deduction will reduce your husband’s taxable income. Filing jointly will surely be a better result than him filing Married Filing Separately. 

Edited May 16, 2021 by Wuozopo

[Wuozopo 4,293]

17 hours ago, PBabz said:

 

I should possibly also add that as of 1 May 2021, we moved back to the UK, so I was in the US for all of about 2 months. My husband is USAF and we're now stationed 'back' overseas!

Doesn’t matter. Some spouses filing jointly have never set foot in the US. The “worldwide income” of both spouses is still reported, then the tax on the foreign income is excluded.

[PBabz 137]

2 hours ago, Wuozopo said:

You just figure out what got paid to you between Jan 1 and March 31. I had the same situation first year, and mine was frankly a big ‘ol guess. But I did try to be as accurate as I could figure out. The IRS doesn’t know what you were paid either. 
 

The one thing I think we're still a bit confused about is whether or not we should actually be filing jointly at all, yet.

I know I might seem daft spelling it out, but he's working through his 2020 tax returns, and I didn't have my SSN until February of this year, so are we getting confused and worked up for nothing. 

 

Looking at my income for Jan 1 and March 31 2021, is that what I need to do next year when it's time for his 2021 taxes?

 

3 hours ago, Wuozopo said:

You also will qualify for two stimulus payments as credits and the extra standard deduction will reduce your husband’s taxable income. Filing jointly will surely be a better result than him filing Married Filing Separately. 

Any idea how we would go about doing that, because I know he did get his stimulus payment this year but again, we had no idea how to figure out claiming a second payment for me, if I was eligible. 

 

3 hours ago, Wuozopo said:

The one thing I hate about TurboTax is that running total they have at the top. It is fake news until you put in every bit of info.

I appreciate that!! 🤣

 

3 hours ago, Wuozopo said:

Some spouses filing jointly have never set foot in the US

I'll get my husband to review again today and see exactly where we are. I was confident we did it correctly, but certainly reading that.. I'm confused all over again!! 

 

Big thank you for taking the time @Wuozopo 

 

[Wuozopo 4,293]

1 hour ago, PBabz said:

The one thing I think we're still a bit confused about is whether or not we should actually be filing jointly at all, yet.

I know I might seem daft spelling it out, but he's working through his 2020 tax returns, and I didn't have my SSN until February of this year, so are we getting confused and worked up for nothing. 

 

Looking at my income for Jan 1 and March 31 2021, is that what I need to do next year when it's time for his 2021 taxes?

 

Any idea how we would go about doing that, because I know he did get his stimulus payment this year but again, we had no idea how to figure out claiming a second payment for me, if I was eligible. 

 

I appreciate that!! 🤣

 

I'll get my husband to review again today and see exactly where we are. I was confident we did it correctly, but certainly reading that.. I'm confused all over again!! 

 

Big thank you for taking the time @Wuozopo 

 

 
I got lost on your descriptions. I re-read your post and need to correct some of my post.

2020 tax year is what is being filed right now. That covers income from Jan 1- Dec 31 of 2020.

You may file jointly with your husband for that year just because you were a married couple in that year. (You could have file jointly for tax year 2019 because you were a married couple in 2019.)  

 

If you file a joint return 2020, you will report all your UK income, Jan-Dec 2020, because in 2020 you weren’t here yet and got UK income all year. (That’s where my brain got off and I mentioned Jan to March UK income which is for 2021 tax year and not due until next year). It shouldn’t make any difference when deciding if you want to file jointly. You still get to exclude your foreign earned income, even a whole year’s worth.  Next year when you file a 2021 tax return, you will report that UK income earned Jan to Mar 2021 and exclude it with Form 2555.

 

 

1 hour ago, PBabz said:

The one thing I think we're still a bit confused about is whether or not we should actually be filing jointly at all, yet.

You are allowed to file a Joint return because in 2020 you were married. You would need a taxpayer number for a joint return (ITIN or SSN) You have a SSN and are allowed to identify yourself on the return with that number. What you were not in 2020 was a resident alien. BUT you get a perk for being married to a US citizen. You both just say you want her to be a resident for tax purposes on a written, signed statement...and you are one. Poof! Easy peasy!! The IRS treats you like a resident so you can file a joint return. ( For official reference, see How to Make the Choice on this page https://www.irs.gov/individuals/international-taxpayers/nonresident-alien-spouse  )

Recovery rebate credit and economic stimulus.

If your joint income in 2020 (his and your UK converted to $$$) does not exceed $150,000 then a joint return will collect your share of the stimulus packages—$1200 for the first stimulus and $600 for the second one. You have to be a resident alien. Check! because you are going to write that statement choosing to be a resident alien for tax purposes for 2020.  You have to have a SSN issued before the filing deadline for a 2020 return. Check! you got yours already and the filing deadline is tomorrow. That’s $1800 coming your way as a credit if you file jointly.

 

Standard deduction.  
if your husband adds you for a joint return, then there is a standard deduction of $24,800 to take off total income. Filing by himself only allows $12,400. Since your income can be excluded from taxation, it is going to reduce his taxable income by twice as much. Reducing his income lowers his taxes. 

The only way to know the best way to file is do two returns on TurboTax. Start a new one from scratch as married filing separately. Then print out and check both.  
MFJ Line 1 has your income added to his

MFS Line 1 your income will not be included.

 

MFJ Line 8 will have your income subtracted out like.....  -$20,000

MFS Line 12 may be blank unless he is self employed, owns a farm, got unemployment, etc. 

MFJ Line 12 is $24,000 deduction

MFS Line 12 is $12,400.
 

MFJ Line 30 will have your $1800 credit (unless disqualified on height income)

MFS will have $0 credit.because he likely already got his earlier (unless disqualified on height income)

 

 Anyway see which comes  out to your advantage. Those are your only 2 choices. 

 

[Wuozopo 4,293]

2 hours ago, PBabz said:

Any idea how we would go about doing that, because I know he did get his stimulus payment this year but again, we had no idea how to figure out claiming a second payment for me, if I was eligible. 

Sorry I missed this question above. It will be TurboTax  questions that you go through to fill in Line 30 on the form 1040.

It goes kinda like showing both qualify so $2400 + $1200 as a couple for the two packages. Then asking if you already got any of it. Yes for him. He should have gotten $1800 total. So $3600 allowed as a couple minus $1800 (he already got) equals $1800 due (your part). 

[Wuozopo 4,293]

Just noticed typos above. 
 

MFJ Line 12 is $24,000 deduction $24,800

MFS Line 12 is $12,400.

 

“unless disqualified on height income”. *high income.  😜

[PBabz 137]

On 5/16/2021 at 7:44 PM, Wuozopo said:

Next year when you file a 2021 tax return, you will report that UK income earned Jan to Mar 2021 and exclude it with Form 2555.

Based on your advice about this year, that seems right - the only complication to that will likely be since we are back in the UK, might it be the same case again that all of my income from this year Jan - Dec 2021 has to be excluded on the returns too?! 

 

On 5/17/2021 at 7:17 PM, Wuozopo said:

“unless disqualified on height income”. *high income.  😜

Fortunately or unfortunately, we won't be disqualified based on that, but it seems you're absolutely right. According to what my husband filed yesterday 🙄 we should be getting my part of $1800 to include the last $600 that was issued along with the previous $1200. There's apparently a military exception that we fall under too which also indicates that we're entitled to stimulus payments for the both of us. 

 

It seemed very much that MFJ was our better option so that's what we did. 

I really appreciate you taking so much time to explain things in such detail for me. It really is a lot for me to try and get my head around and of course because it's such a novel situation for my husband too, he's not exactly versed in tax law! 😆

 

Until next year I guess 😁

[Wuozopo 4,293]

2 hours ago, PBabz said:

Until next year I guess 😁

Next year you file a US tax return as you did yesterday. You will have a little UK Income to report from before you arrived in 2021. If you take a job in the UK, now that you are back, then that too. Your husband is employed by the US government and his pay doesn’t count as foreign earned income to take the exclusion. Your tax return will be pretty much the same as 2020 with some foreign income to report (that you earned before arrival and possibly other UK income).