US Expat Form 2555/2555-EZ Broken down

You must attach either a Form 2555 or Form 2555-EZ to your US tax return in order to claim Foreign Earned income Exclusion (FEIE). FEIE allows US taxpayers to exclude up to $101,300 on their tax return.

A Form 2555 is a three-page form that is comprised of nine sections, addressing different aspects of the FEIE. This form can be extremely complex and hard to navigate.  The form 2555-EZ is comparatively simple, however you must fall into the following criteria for to file the form-

·      Be a US citizen or resident alien

·      Earn less that $100,800 for 2015 or $101,300 for 2016 wages in a foreign country.

·      File a US return covering a calendar year

·      Don’t plan to claim Foreign Housing Exclusion or deduction

·      Don’t have business or moving expenses associated with your position of employment

How to prepare to file a Form 2555-EZ/2555?

Keeping detailed and accurate records throughout the tax year can be extremely beneficial when you come to fill in the form. You should know the following information:

·      Employer’s name and address

·      International travel calendar- including date you have worked in the US

·      Prior year From 2555-EZ/2555

·      Foreign income earnings statements

 

The Form

Part 1: Determining if you can claim Foreign Earned Income Exclusion (FEIE)

To claim FEIE you must qualify in either the Bona Fide Residence Test or Physical Presence Test.

Part 2: General Information

The knowledge needed to answer this section is often self-explanatory

Part 3: List days present in the US

Part 4: Calculate your Foreign Earned Income Exclusion

For expert advice a form 2555/2555-EZ contact u 

Pension Tax Advice

25% of your pension savings is tax-free. However, the other 75% is subject to income tax.  The amount of tax your pay is calculated off of your total income each year.

The tax-free amount doesn’t account for your Personal allowance. Therefore, the tax free about is on top of your Personal Allowance

If you take your tax-free amount out of your pension savings, you cannot leave the remaining 25% untouched. Your must either:

·      Buy a guaranteed incomes

·      Get an adjustable income

·      Take the whole savings

If you continue to work while claiming pension your employed will take any tax you owe off of your earnings and state pension (PAYE).

If your income totals £100,000 or more for the tax year or if you’re self employed you will have to fill in a Self-Assessment tax return.

 

Contact us for expert pension tax advice

 

Top 5 US Tax tips for US Expats

1.     File your US tax return each year

 

Millions of US Expats fail to file their tax return every year. If your income exceeds the filing threshold (which is set very low) you are required to file a return.

 

2.     Use the Foreign Earned Income Exclusion to save

 

The FEIE allows you to exclude a set amount of foreign earned income. However, in order to do so you must qualify through one of two residency tests.

 

3.     Reduce taxes with Foreign Tax Credit

 

You can also save on US taxes through Foreign Tax Credit.  This can be extremely useful if you reside in a high-tax country.

 

4.     Offset some of your housing costs

 

Through Foreign housing exclusion you can offset some of your living expenses from abroad.

 

5.     Get caught if you are behind

 

If you have failed to file your file your tax return it is never too late to catch up. The IRS has created a Streamlined Offshore Filing Procedure to help innocent taxpayers get caught up.

What you need to know about income tax

Income tax is the tax you pay on your income. However, you do not have to pay tax on all types of income.

What do you have to pay tax on?

·      Money you earn from employment

·      Profits you make if you’re self-employed –including from services you sell through website or apps

·      Some state benefits

·      Most pensions, including state pension, company and personal pensions and retirement annuities

·      Rental income

·      Benefits you get from your job

·      Income from a trust

 

What don’t you have to pay tax on?

·      Interest on savings under your saving allowance

·      Income from tax-exempt accounts

·      The first £5,000 of dividends from company shares

·      Some state benefits

·      Premium bond or National Lottery wins

·      Rent you get from a lodger in your house that’s below the rent a room limit

 

How to pay your Income tax

PAYE

PAYE is the system an employer or pension provider uses to take Income Tax and National Insurance contributions before they pay your wages.

Self Assessment

If your financial affairs are more complex or if you have a high income you may be required to pay Income Tax and National insurance through a Self Assessment.

 

For expert advice on income tax contact us now

Tax-deductible expenses for doctors

Thousands of UK doctors miss out on income that is rightfully theirs through poor tax advice. Nearly all doctors are required to pay money out from their own pocket to go towards work related expenses. Whether it be travel expenses incurred due to visiting a patient or paying for a medical course to keep your knowledge up to date.

The HMRC classify tax-deductible expenses as ‘travelling you had to do in your job’ or ‘other expenses you had to pay in doing your job- and which related ONLY to doing your job’.

There is not a definitive list, it is key you understand what would be an acceptable claim so not to face penalties.

Popular claimable items:

·      Professionals fees and subscriptions

·      Business mileage or fuel

·      Tools and specialist equipment

If your claimable expenses amount to less than £1,000 then you can send a letter to the HMRC with a summary of the details and the total tax for the year. If your claim is over £1,000 but under £2,500 you will be required to complete a short form called a P87. Anything over £2,500 must be claimed via a self-assessment

For expert tax advice for doctors contact us now

UK eBay sellers to pay 20% VAT on earnings

Tens of thousands of UK eBay sellers will face a 20% VAT charge on their earnings.

Sellers have been told that if they earn £85,000 or more, they will face the increased VAT charge from August 2017.

The increased VAT charge is said to be as a result of a legal restructuring following the 2015 Paypal tax changes.

In 2016 the UK generated over $1.3 billion of the company’s revenue. However, despite the large revenue, the UK’s profit is relatively small due to its limitation to providing to eBay’s Swiss parent company.

 The tax changes come alongside the UK governments drive to get more ecommerce companies to register for VAT in order to tackle overseas tax evasion. The National Audit Office has estimated that VAT evasion is costing the Treasury up to £1.5 billion a year.

 

For specialist UK tax advice contact us now

Why millions will have to file FIVE tax returns every year

An introduction of more deadlines mean that from next April, Millions will be required to file as many as nine VAT and tax returns per year in addition to meeting six payment deadlines.

The Government has said that the cost to individuals will not be substantial and that the process will increase orderly record keeping. The extra filing requirements were introduced with the intention to lower the large percentage of self-employed filers and small businesses that make errors on their tax returns, which leads to billions of pounds in tax to go uncollected.

As an expert in tax, we have identified that it could actually cut tax revenues by encouraging increased claiming on expenses.

How reporting will work

If we use a case study of a business that has a year-end on 5th April. The business will enter into the new system from the beginning of the tax year 2018-19. Listed below are the tax events for the first year in the new system (not including 4 VAT tax dates).

 

July 5 2018: your first quarter (2018-19) ends

July 31 2018: your second payment for the 2017-18 tax year is due

August 5 2018: your first quarterly return (2018-19) is due

October 5 2018: your second quarter (2018-19) ends 

November 5 2018: your second quarterly return (2018-19) is due

January 5 2019: your third quarter (2018-19) ends

January 31 2019: your return and outstanding payments for the 2017-18 tax year are due

January 31 2019: your first payment for the 2018-19 year is due

February 5 2019: your third quarterly return (2018-19) is due

April 5 2019: your fourth quarter (2018-19) ends 

April 6 2019: the 2019-20 tax year begins, setting off the next four returns for that year

May 5 2019: your fourth quarterly return (2018-19) is due

July 31 2019: your second payment for the 2018-19 tax year is due

January 31 2020: the fifth, “finalising” return for 2018-19 is due, along with final payment.

Contact us now for more information 

How the General Election affects pensions, small businesses and expats

Partner Alistair Bambridge explains how the General Election affects small businesses and expats | The Independent

Essential US Tax tips for Americans Living Abroad

As specialist US tax accountants to US Expats we are all too familiar with the issues that occur when US Expats overlook their tax filing obligations. Below are our top 10 tax tips for Americans living abroad.

1.     File your US tax return

It may seem obvious, but with millions of US Expats failing to file their tax return every year it has to be mentioned. You must file a US tax return if your income exceeds the filing threshold, which is set extremely low.

2.     Foreign Earned Income Exclusion (FEIE) will save you money!

Foreign Earned Income Exclusion can be used to exclude up to $100,800 of foreign income on your US tax return. In order to claim FEIE you must pass a residency test, as well as the physical presence test.

3.     Use Foreign Tax Credit (FTC) to reduce taxes

Foreign Tax Credit allows you to offset US taxes that you have already paid tax on in another country.

4.     File your FBAR

The FBAR deadline falls on Tax Day, 18th April 2017. US Expats receive an automatic extension to the 15th June, which can be extended further to 17th October. You are required to file an FBAR if you have $10,000 or more in your foreign accounts at any point during the year.

5.     You can offset your housing costs

Foreign Housing Exclusion means that US Expats are able to offset some living expenses incurred abroad.

6.     Be aware of FATCA

The Foreign Account Tax Compliance Act means individuals must report their foreign financial assets if they exceed a set level.

Contact us now for more US Expat tax advice

How to register for and file your Self Assessment tax return

If you’ve been earning any income at all off of self-employed work you must register for a self-assessment and Class 2 National Insurance. You must do this even if you have completed tax returns previously.

If you do not register by the 5th October of your business’s second year you are at risk of being fined.

If you have sent a tax return before you and register online (form CWF1). You will need to know your UTR number that was used when you registered for a Self Assessment previously.

If you haven’t previously sent a return before you can register online and get your UTR number as well as be enrolled for Self Assessment.

For help registering contact us now.

US COMPANY TAX ADVICE: How to get an EIN Number for an LLC

 

Background information

 

An Limited Liability Company (LLC) is a business structure that involves the combination of the pass-through taxation of a partnership or a sole proprietorship and the limited liability protection of a corporation. 

 

How to get an EIN Number for an LLC?

 

Getting a EIN Number for an LLC can be done relatively easy if the correct steps are taken. Up until recently, businesses had to apply for an EIN through fax or by mail, however you can now apply online.

 

1.     Prepare Your Information

There can be some complex questions that need answering in order to apply for an EIN. Having good general knowledge of your business and it’s owners will be important at this stage.

2.     Name a Responsible Party

No matter how many members are in your LLC, the IRC will only recognise one responsible party for each Tax ID. Therefore you will have to establish you the responsible party is going to be for your company.

3.     Apply got EIN Online, or by Mail or Fax

·      Online

o   If you would like to apply for you EIN online you can use the Online IRS EIN Application. The online application process take on average 30 minutes and is open 7:00 am to 10:00 pm PST.

·      Mail

o   An EIN number can also be applied for via mail. This option takes between 4 and 5 weeks.

·      Fax

o   The IRS also accepts EIN number applications via fax. This takes up to 4 days to process.

4.     Receive Tax ID Documents

You will receive an email containing your LLC’s EIN, as well as a tradition mailed letter containing your official Tax ID document from the IRS

 

Contact us now for more advice

 

Essential US Tax tips for Americans Living Abroad

As specialist US tax accountants to US Expats we are all too familiar with the issues that occur when US Expats overlook their tax filing obligations. Below are our top 10 tax tips for Americans living abroad.

 

1.     File your US tax return

It may seem obvious, but with millions of US Expats failing to file their tax return every year it has to be mentioned. You must file a US tax return if your income exceeds the filing threshold, which is set extremely low.

 

2.     Foreign Earned Income Exclusion (FEIE) will save you money!

Foreign Earned Income Exclusion can be used to exclude up to $100,800 of foreign income on your US tax return. In order to claim FEIE you must pass a residency test, as well as the physical presence test.

 

3.     Use Foreign Tax Credit (FTC) to reduce taxes

Foreign Tax Credit allows you to offset US taxes that you have already paid tax on in another country.

 

4.     File your FBAR

The FBAR deadline falls on Tax Day, 18th April 2017. US Expats receive an automatic extension to the 15th June, which can be extended further to 17th October. You are required to file an FBAR if you have $10,000 or more in your foreign accounts at any point during the year.

 

5.     You can offset your housing costs

Foreign Housing Exclusion means that US Expats are able to offset some living expenses incurred abroad.

 

6.     Be aware of FATCA

The Foreign Account Tax Compliance Act means individuals must report their foreign financial assets if they exceed a set level.

 

Contact us now for more US Expat tax advice

US Expatriate Tax Help- FBAR, FATCA, FEIE and FTC advice

The US ‘Tax Day’ is only a few weeks away. US Expats may have an automatic filing extension, but that doesn’t mean you should sit back and leave everything to the last minute. There are a number of different forms you may need to file and a wide variety of deductions and exclusions you must be aware of.

 Do you need to file an Foreign Bank Account Report (FBAR) or a Foreign Account Tax Compliance Act (FATCA)?

If you’re a US Expat you may have already heard of an ‘FBAR’ or/and an ‘FATCA’. However, you may be confused about what exactly they are and whether you have to file one.

 Foreign Bank Account Report (FBAR)

The FBAR form is used to report any foreign bank account information you may have to the US Treasury Department> The form must be filed annually by US individuals and businesses who own or have an interest in foreign bank or financial accounts that exceed $10,000 at any point during the calendar year. The FBAR deadline will be due on the 18th April this year. For US expats the automatic deadline extension until the 15th July 2017.

Foreign Account Tax Compliance (FATCA)

 The FATCA (8938) form is used to report any foreign financial accounts that you may have. You must file the form if your foreign assets are greater than $200,000 on the last day of the tax year or over $300,000 at any point during the year for single or married filing separately taxpayers. For married filing jointly taxpayers, you must file the FATCA form if the value of your foreign assets are greater than $400,000 on the last day of the year or more than $600,000 at any point during the year.

 

Foreign Earned Income Exclusion (FEIE) and Foreign Tax Credit (FTC)

Another area many US Expatriates struggle to understand is FEIE and FTC. Luckily for US Expats, there are a number of tax credits, deductions and exclusions these are classed under either FEIE or FTC.

 Foreign Earned Income Exclusion (FEIE)

 FEIE can be used to reduce or eliminate the risk of being taxed by both your host country and the US. FEIE can exclude up to $101,300 of your foreign earned income on your US tax return. To do so you must pass either the Physical Presence Test or the Bona Fide Residence Test.

Contact us now for more information on FEIE

Foreign Tax Credit (FTC)

 FTC can be used to reduce your US tax liability on your foreign earned income. You cannot claim FTC against income you have already excluded through FEIE.

Contact us now for more advice on FTC

UK families to see tax-bills cut as date announced for the launch of Tax-Free Childcare

UK parents can now pre-register for the governments new childcare offers. (Available at https://www.childcarechoices.gov.uk/).

From the 28th April Tax-Free Childcare will be available to parents of young children. Childcare costs for working families across the UK should be cut by as much as £4,000 per child each year.

Approximately 2 million working families are eligible for the Tax-Free childcare.

The scheme will be gradually rolled out, with the parents of children under two being the first eligible to enter the scheme.

Parents of three and four year old children living in England will have access to 30 hours of free childcare from September 2017.

By December 2017 eligible parents will be entitles to government top-ups of £2 for every £8 the parent pays for their Tax-Free Childcare account. This will be open to all working parents across the UK with children under 12, or 17 if disabled.

 

Contact us now for more tax advice.

2017 US Expat tax Changes. FBAR Deadline has moved.

The Foreign Bank Account Report (FBAR) is a tax document, commonly used by US Expats, which is used to report foreign financial account balances. The FBAR tax deadline has been moved up this year to fall in line with Tax Day. The change should help US expats to remain compliant with their reporting requirements.

Contact us now for details on your reporting requirements.

Previously, FBAR forms had their own separate filing deadline and were due at the end of June. Starting this year, FBAR’s will be due on 18th April, (otherwise known as Tax Day). As a US Expat living abroad, you are entitled to an automatic extension for filing your FBAR and tax return- making the deadline for both 15th June.

There can be series penalties and interest for those who fail to file their FBAR. For those who were not aware they had to file the fine could be as high as $10,000 per violation. On the other hand, those who know their filing obligations and still fail to do so could face a fine of $100,000 or 50% of the balance of the account at the time of violation (whichever is greater).

Contact us now for help filing for FBAR or US taxes.

Conservative Party revolt threatens rises in NIC for the self-employed

The announcement, in the 2017 Budget, of increased National Insurance Contributions (NIC) for the self-employed has triggered a growing rebellion amongst Conservative MP’s.

According to figures expressed in The Guardian, there are at least 18 potential conservatives that oppose the NIC increase decision. Therefore this could determine the governments working majority vote: 17. 

The general concerns expressed from the Conservative MP’s about the NIC rise ranges from the perception that the rise unfairly targets the self-employed and entrepreneurs; as well as the fact that the 2015 Conservative manifesto promised no income tax, VAT or NIC rises before 2020.

While it is not certain what percentage of MP’s oppose the 2017 NIC changes, the numbers are likely to apply pressure on to Chancellor Hammond and the prime minster to reconsider the policy.

Chancellor Hammond has argued that higher NIC charges for the self-employed in fact narrows the gap between the self-employed and workers to promote fairness.

Contact us now for expert advice on tax as a self-employed worker