# Does my wife need to pay US taxes? **URL:** \ **Category:** In My Humble Opinion\ **Created:** [March 21, 2017, 9:03pm UTC](https://boards.straightdope.com/t/does-my-wife-need-to-pay-us-taxes/782715 "2017-03-21T21:03:29Z")\ **Posts on this page:** 20\ **Page:** 1
**Author:** ![Malden\_Capell](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/malden_capell/32/5274_2.png) [@Malden\_Capell](https://boards.straightdope.com/u/Malden_Capell)\ **Post date:** [March 21, 2017, 9:03pm UTC](https://boards.straightdope.com/t/does-my-wife-need-to-pay-us-taxes/782715/1 "2017-03-21T21:03:29Z")
My wife, for all I admire her for, is American. However she’s unnerved by a sudden discovery that apparently the IRS wants expats to file tax returns too. She’s not done this, like, ever. Last time she worked in the US, she was a student, well over a decade ago. So I think she’d need to go back, what, four years? She’s earned every penny in the UK, about £32,000/$40,000 roughly, which is taxed in the UK. So broadly: 1. would she be taxed on this fairly middling, strictly UK income by the US tax system? 2. how much trouble is she in, if she’s not filed her taxes for years? I understand there’s a penalty fee of 5% of what taxes she owes, but if she owes nothing (right?), then they’ll fine her nothing, right? It’s not as if they’ll arrest her on the next flight over to the US she takes, right? ---
**Author:** ![PastTense](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/pasttense/32/14550_2.png) [@PastTense](https://boards.straightdope.com/u/PastTense)\ **Post date:** [March 21, 2017, 9:08pm UTC](https://boards.straightdope.com/t/does-my-wife-need-to-pay-us-taxes/782715/2 "2017-03-21T21:08:25Z")
It doesn’t look like she would owe money because of the foreign earned income exclusion: > **[Foreign earned income exclusion](https://en.wikipedia.org/wiki/Foreign_earned_income_exclusion)** > > The United States taxes citizens and residents on their worldwide income. Citizens and residents living and working outside the U.S. may be entitled to a foreign earned income exclusion that reduces taxable income. For 2023, the maximum exclusion is $120,000 per taxpayer (future years indexed for inflation). Taxpayers filing a joint return are entitled to up to two exclusions if both have earned income. In addition, the taxpayer may exclude housing expenses in excess of 16% of this maxi The excl... ---
**Author:** ![Baron\_Greenback](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/baron_greenback/32/48_2.png) [@Baron\_Greenback](https://boards.straightdope.com/u/Baron_Greenback)\ **Post date:** [March 21, 2017, 9:12pm UTC](https://boards.straightdope.com/t/does-my-wife-need-to-pay-us-taxes/782715/3 "2017-03-21T21:12:57Z")
You need to look at [Foreign Earned Income Exclusion](https://www.irs.gov/individuals/international-taxpayers/foreign-earned-income-exclusion). The current exclusion is over $100,000, which suggests she should be OK for owing anything. She still needs to file her returns though. ---
**Author:** ![Iggy](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/iggy/32/3364_2.png) [@Iggy](https://boards.straightdope.com/u/Iggy)\ **Post date:** [March 21, 2017, 10:29pm UTC](https://boards.straightdope.com/t/does-my-wife-need-to-pay-us-taxes/782715/4 "2017-03-21T22:29:03Z")
I’m no tax lawyer, but have heard in seminars here in Cayman that no tax owed means no financial penalty for failure to file. However there is one limited circumstance where that could present a slight blip. Should you as a couple decide to relocate to the US then the easiest way she could sponsor your immigration (I assume you hold UK citizenship, right?) would involve her submitting copies of her recent tax filing. For peace of mind it is probably best that she start submitting the filings annually. If income is simply wages then it should take maybe 30 minutes to complete the paperwork she needs. I’m sure she is familiar with the 1040 standard form. Add Form 2555 for the previously mentioned Foreign Earned Income Exclusion. She can use Form 8965 to show that she was exempt from Obamacare mandate as she resided outside the US. ---
**Author:** ![Duckster](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/duckster/32/1244_2.png) [@Duckster](https://boards.straightdope.com/u/Duckster)\ **Post date:** [March 21, 2017, 10:40pm UTC](https://boards.straightdope.com/t/does-my-wife-need-to-pay-us-taxes/782715/5 "2017-03-21T22:40:43Z")
As an American citizen, your wife is subject to _ **tax reporting** _ worldwide. However, as already stated she may be eligible the foreign income exclusion, providing she meets the requirements. If she meets the requirements, her federal tax liability may be limited, or even non-existent. As for potential trouble, all I can offer is anecdotal. I lived overseas for years. I regularly filed my federal income tax forms. But under the foreign earned income exclusion, I owed no US federal taxes because my adjusted income was below the trigger threshold. I’ve been back in the US for a while. I still have foreign assets. Under law I am required to account and report those assets. If I fail to do so, or deliberately attempt to minimize those assets, one of the “penalties” I can suffer is a permanent IRS audit. As in forever, until I die. I also risk confiscation of those foreign assets by the IRS. You need to find a really good tax attorney who specializes in foreign income and foreign assets, and is especially familiar with the tax treaties (if any) between the US and the country you reside. While your wife may have merely been mistaken about filing US federal tax forms because she lives overseas, the risk of a tax penalty is one thing. The greater risk is a permanent tax audit and potential confiscation of assets. The IRS is not really forgiving with overseas income and overseas assets. The “Oopsie, I didn’t know,” won’t cut it. ---
**Author:** ![galen\_ubal](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/galen_ubal/32/4440_2.png) [@galen\_ubal](https://boards.straightdope.com/u/galen_ubal)\ **Post date:** [March 21, 2017, 10:54pm UTC](https://boards.straightdope.com/t/does-my-wife-need-to-pay-us-taxes/782715/6 "2017-03-21T22:54:46Z")
'Ello. I’m a US citizen residing full-time in Australia, and have been for about ten years. Yep, she has to file. The above-mentioned Foreign Earned Income Exclusion (Form 2555 or Form 2555-EZ) will need to be attached, and will probably wipe out her income. She needs to remember that amounts on the tax form need to be in US dollars; I look up the official conversion rate as of the last day of the year and use that. I file Married Filing Separately, as my wife has no “tax presence” in the US - she’s not a citizen, permanent resident, or anything like that. I just fill in my (converted) income, and on line 21 fill in the amount from Form 2555-EZ as a negative amount, wiping out all of my earned income. As she has no US-specific income, I don’t see any reason to muddy the water with her information. She did need to get a Taxpayer Identification Number (TIN) so I could fill it in on the appropriate spot. I don’t recall the exact procedure on that, but you can find it on the IRS website. Now, I’d worked for H&R Block for a few years, so I was fairly comfortable working out all of this on my own. If neither of you have any tax prep experience, I’d also suggest speaking to an expert - in other words, I was a tax preparer; I am not _your_ tax preparer. Ignorance is not an excuse; but the worst I’d expect is that she has to file forms for all of the past years. The IRS is picky, but not usually vindictive. ---
**Author:** ![jasg](https://avatars.discourse-cdn.com/v4/letter/j/f0a364/32.png) [@jasg](https://boards.straightdope.com/u/jasg)\ **Post date:** [March 21, 2017, 11:16pm UTC](https://boards.straightdope.com/t/does-my-wife-need-to-pay-us-taxes/782715/7 "2017-03-21T23:16:51Z")
I would also check out the options for filing online, possibly for free. If not you should be able to download PDF forms. Try these sites: > **[Free File: Do your Federal Taxes for Free | Internal Revenue Service](https://www.irs.gov/filing/free-file-do-your-federal-taxes-for-free)** > > Need to file an extension? > > If you need additional time to file beyond the April 18 deadline, you can > **[Taxes Done Smarter With TurboTax #1 Best-Selling Tax Software](https://turbotax.intuit.com)** > > TurboTax® is the #1 best-selling tax preparation software to file taxes online. Easily file federal and state income tax returns with 100% accuracy to get your maximum tax refund guaranteed. Join the millions who file with TurboTax. > **[H&R Block® Tax Filing Made Easy | File Taxes Online or In Person](https://www.hrblock.com)** > > Need help with tax preparation? Check out H&R Block’s website for a wide range of tax preparation services to help you get your maximum refund. ---
**Author:** ![Hari\_Seldon](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/hari_seldon/32/5173_2.png) [@Hari\_Seldon](https://boards.straightdope.com/u/Hari_Seldon)\ **Post date:** [March 21, 2017, 11:24pm UTC](https://boards.straightdope.com/t/does-my-wife-need-to-pay-us-taxes/782715/8 "2017-03-21T23:24:09Z")
At least when I used the foreign income exclusion, one of the requirements was that the return be be filed on time (although you could get an extension and there was an automatic 2 month extension), so that would work only for 2016. There is no such limitation, however, for the foreign tax paid credit and that ought to wipe out any tax owed. Since I have retired, my pension cannot be excluded, but the foreign tax credit has wiped out any tax owed. ---
**Author:** ![galen\_ubal](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/galen_ubal/32/4440_2.png) [@galen\_ubal](https://boards.straightdope.com/u/galen_ubal)\ **Post date:** [March 21, 2017, 11:37pm UTC](https://boards.straightdope.com/t/does-my-wife-need-to-pay-us-taxes/782715/9 "2017-03-21T23:37:24Z")
> [@jasg](#): > > I would also check out the options for filing online, possibly for free. If not you should be able to download PDF forms. > > Try these sites: > [File your taxes for free | Internal Revenue Service](https://www.irs.gov/uac/free-file-do-your-federal-taxes-for-free) > [https://turbotax.intuit.com](https://turbotax.intuit.com) > [https://www.hrblock.com](https://www.hrblock.com) I haven’t investigated that; it cost me 2.95AUD to mail in my last set of forms. The forms are available as downloadable PDFs on the [irs.gov](http://irs.gov) website - [here.](https://www.irs.gov/forms-pubs) Download what you need, fill them out in Adobe, save and print. I’ll save both the blanks and the filled-in forms, but I’ve got plenty of storage space. I’ll note that for the first few years I resided in Australia, I had no income and filed no returns. Nobody’s said boo since then. Overall, my non-professional advice would be to speak to a tax professional soon (to make this year’s filing deadline), but unless she made over about 100,000 USD during any time since she’s moved, she’s unlikely to face any penalties. No longer a professional, not your advisor, etc. ---
**Author:** ![Malden\_Capell](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/malden_capell/32/5274_2.png) [@Malden\_Capell](https://boards.straightdope.com/u/Malden_Capell)\ **Post date:** [March 22, 2017, 12:36am UTC](https://boards.straightdope.com/t/does-my-wife-need-to-pay-us-taxes/782715/10 "2017-03-22T00:36:37Z")
Thank everyone! I forgot to mention something. She wants to get her Right to Remain in the UK at the end of the year. Would this put a barrier on that? ---
**Author:** ![jtur88](https://avatars.discourse-cdn.com/v4/letter/j/e9c0ed/32.png) [@jtur88](https://boards.straightdope.com/u/jtur88)\ **Post date:** [March 22, 2017, 12:45am UTC](https://boards.straightdope.com/t/does-my-wife-need-to-pay-us-taxes/782715/11 "2017-03-22T00:45:35Z")
But she does need to file an annual FinCen FBAR declaration of any assets over $10,000 that she owns or has control over outside the USA. She now falls in the magical category of “a US person” (a uniquely American concept), and is subject to US tax law, even if she never sets foot in the USA. Those reported assets are not taxable, and it is unlikely anyone will lever look at them, unless she is audited for some other reason in the future. But the fines can be heavy for merely failing to file FBAR annually. If she has funds in an overseas financial institution, most countries (including Switzerland) have a treaty in which their banks are compelled to report “US person’s” assets to the US Treasury Department. ---
**Author:** ![UDS](https://avatars.discourse-cdn.com/v4/letter/u/ecae2f/32.png) [@UDS](https://boards.straightdope.com/u/UDS)\ **Post date:** [March 22, 2017, 1:06am UTC](https://boards.straightdope.com/t/does-my-wife-need-to-pay-us-taxes/782715/12 "2017-03-22T01:06:00Z")
> [@Malden\_Capell](#): > > Thank everyone! I forgot to mention something. She wants to get her Right to Remain in the UK at the end of the year. Would this put a barrier on that? No. The UK neither knows nor cares whether she has tax reporting obligations in other countries, or whether she complies with them. ---
**Author:** ![Malden\_Capell](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/malden_capell/32/5274_2.png) [@Malden\_Capell](https://boards.straightdope.com/u/Malden_Capell)\ **Post date:** [March 22, 2017, 7:01am UTC](https://boards.straightdope.com/t/does-my-wife-need-to-pay-us-taxes/782715/13 "2017-03-22T07:01:51Z")
> [@jtur88](#): > > But she does need to file an annual FinCen FBAR declaration of any assets over $10,000 that she owns or has control over outside the USA. She now falls in the magical category of “a US person” (a uniquely American concept), and is subject to US tax law, even if she never sets foot in the USA. Those reported assets are not taxable, and it is unlikely anyone will lever look at them, unless she is audited for some other reason in the future. But the fines can be heavy for merely failing to file FBAR annually. If she has funds in an overseas financial institution, most countries (including Switzerland) have a treaty in which their banks are compelled to report “US person’s” assets to the US Treasury Department. Would a house count as an asset? ---
**Author:** ![jtur88](https://avatars.discourse-cdn.com/v4/letter/j/e9c0ed/32.png) [@jtur88](https://boards.straightdope.com/u/jtur88)\ **Post date:** [March 22, 2017, 3:33pm UTC](https://boards.straightdope.com/t/does-my-wife-need-to-pay-us-taxes/782715/14 "2017-03-22T15:33:14Z")
> [@Malden\_Capell](#): > > Would a house count as an asset? I’m not sure. I don’t think so, I think just liquid assets that can be denominated in cash value, held in a financial institution. Said institution required to identity any US Persons as clients, and report their holdings to the US Treasury Department. Increasingly, overseas banks are now refusing to accept depositors who are identifiable as US Persons. Swiss banks are kindly asking US depositors to close their accounts and take their business elsewhere, rather than to comply with US Treasury snooping and record-keeping. I understand that a Swiss bank, if the amount on deposit is in the millions of dollars, will undertake to do the necessary creative accounting to preserve secrecy without undue complications. (No cite, this based on personal account by a friend whose Swiss account has been closed.) ---
**Author:** ![Iggy](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/iggy/32/3364_2.png) [@Iggy](https://boards.straightdope.com/u/Iggy)\ **Post date:** [March 22, 2017, 3:37pm UTC](https://boards.straightdope.com/t/does-my-wife-need-to-pay-us-taxes/782715/15 "2017-03-22T15:37:27Z")
> [@Malden\_Capell](#): > > Would a house count as an asset? With the heavy disclaimer that I am not a lawyer, accountant, etc… If the house is her primary residence, then her interest in the asset probably does not count as a reportable asset under FBAR or FATCA regulations. Those regulations generally speak to “accounts” of various sorts. If she owns a house as a part of rental property that she owns then how that ownership is structured may come into play. If, for example, such ownership is as a part of a corporation or trust in which she holds a significant ownership interest then her financial interest in that corporation/trust (and thus the real estate) probably is subject to mandatory reporting. Another area of potential liability for reporting for Americans residing abroad is their pension or other retirement investment account. What must be reported and what is exempt is not particularly clear. Getting advice from a real lawyer and/or accountant is highly recommended, particularly for those Americans with complicated overseas financial lives. ---
**Author:** ![Alley\_Dweller](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/alley_dweller/32/430_2.png) [@Alley\_Dweller](https://boards.straightdope.com/u/Alley_Dweller)\ **Post date:** [March 22, 2017, 9:34pm UTC](https://boards.straightdope.com/t/does-my-wife-need-to-pay-us-taxes/782715/16 "2017-03-22T21:34:11Z")
> [@](#): > > Who Must File an FBAR > > United States persons are required to file an FBAR if: > > ``` > the United States person had a financial interest in or signature authority over at least one financial account located outside of the United States; and > the aggregate value of all foreign financial accounts exceeded $10,000 at any time during the calendar year reported. > > ``` Source: [Report of Foreign Bank and Financial Accounts (FBAR) | Internal Revenue Service](https://www.irs.gov/businesses/small-businesses-self-employed/report-of-foreign-bank-and-financial-accounts-fbar) > [@](#): > > A person with “signature authority” is a person who can control the disbursement of money or other property in the account using his or her signature. > > A person with “other authority over an account” is a person who can exercise power over an account by communicating directly, orally or otherwise, to the financial institution or other person maintaining the account. > > A U.S. person has a financial interest in an account for which the U.S. person is the owner of record or has legal title, whether the account is maintained for his or her own benefit or the benefit of others, including non-U.S. persons. - See more at: [FBAR compliance](http://www.journalofaccountancy.com/issues/2016/apr/fbar-compliance.html#sthash.rSqRrQDm.dpuf) NOTE: YOU DO NOT HAVE TO BE THE OWNER OF THE ACCOUNT. If your elderly grandmother made you an authorized signer on the account so that you could run errands to the bank for her, it counts. If you are the bookkeeper for a small foreign company and you get to sign paychecks or expense checks (or authorize electronic transfers from the company account at a foreign bank), it counts. You may want to read: [Journal of Accountancy: FBAR compliance](http://www.journalofaccountancy.com/issues/2016/apr/fbar-compliance.html) ---
**Author:** ![Colibri](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/colibri/32/1841_2.png) [@Colibri](https://boards.straightdope.com/u/Colibri)\ **Post date:** [March 22, 2017, 10:34pm UTC](https://boards.straightdope.com/t/does-my-wife-need-to-pay-us-taxes/782715/17 "2017-03-22T22:34:34Z")
> [@PastTense](#): > > It doesn’t look like she would owe money because of the foreign earned income exclusion: > [Foreign earned income exclusion - Wikipedia](https://en.wikipedia.org/wiki/Foreign_earned_income_exclusion) I am a US citizen who is a resident of Panama. Since I can take the Foreign Earned Income Exclusion, I don’t pay income tax. However, I do have to pay payroll taxes (Social Security and Medicare). Since I am self-employed, I pay both the employer’s and employee’s halves, which amounts to 15%. The UK has a Social Security Agreement with the US, however, so OP’s wife may be exempt from this. ---
**Author:** ![Colibri](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/colibri/32/1841_2.png) [@Colibri](https://boards.straightdope.com/u/Colibri)\ **Post date:** [March 22, 2017, 10:38pm UTC](https://boards.straightdope.com/t/does-my-wife-need-to-pay-us-taxes/782715/18 "2017-03-22T22:38:07Z")
Legal and financial advice is best suited to IMHO. Colibri General Questions Moderator ---
**Author:** ![bardos](https://sea3.discourse-cdn.com/straightdope/user_avatar/boards.straightdope.com/bardos/32/1069_2.png) [@bardos](https://boards.straightdope.com/u/bardos)\ **Post date:** [March 23, 2017, 6:08pm UTC](https://boards.straightdope.com/t/does-my-wife-need-to-pay-us-taxes/782715/19 "2017-03-23T18:08:50Z")
> [@Colibri](#): > > Legal and financial advice is best suited to IMHO. > > Colibri > General Questions Moderator Strange that US tax law is a matter of opinion. ---
**Author:** ![gnoitall](https://avatars.discourse-cdn.com/v4/letter/g/bb73d2/32.png) [@gnoitall](https://boards.straightdope.com/u/gnoitall)\ **Post date:** [March 23, 2017, 6:17pm UTC](https://boards.straightdope.com/t/does-my-wife-need-to-pay-us-taxes/782715/20 "2017-03-23T18:17:11Z")
> [@bardos](#): > > Strange that US tax law is a matter of opinion. All law is a matter of opinion. It’s just that some opinions count more than others. Case in point: when a judge or justice releases a ruling, it’s supported by his or her opinion. The opinion matters. OTOH: When a sovereign citizen nutbag spouts off in court, it’s his or her opinion. This opinion matters not at all. [Next page](https://boards.straightdope.com/t/does-my-wife-need-to-pay-us-taxes/782715.md?page=2)