When do you need to file a tax return in the US and UK?
You can see how to file a tax return using the decision tree
US Tax – Who should you file a tax return?
There are different ways that you can file a US tax return and it very much depends on the tax status of the individual according to the IRS
- Single (not married, legally separated/divorced, widowed at the start of the
- Married filing jointly
- Married filing separately
- Head of household
- Qualifying widower (widowed in the tax year or entitled to file married file jointly, have dependent children, paid more than 50% of the household costs)
If a widower remarries before the end of the tax year they cannot their previous spouse must have a tax return as Married Single.
Per the Sec. 6013(a)(1) a joint return is not allowed if one spouse was a nonresident alien (NRA) at any time during the tax year, unless the U.S. citizen and the Non-Resident Alien spouse so elect and agree to be taxed on their worldwide income.
Generally, if one spouse files separately, so must the other. An exception to this is if the other spouse qualifies for head of household while married. Then one spouse may file separately and the other may file as head of household.
Two individuals are treated as legally married for the entire tax year if, on the last day of the tax year, they are:
- Legally married and cohabiting as spouses
- Legally married and living apart but not separated pursuant to a valid divorce decree or separate maintenance agreement
- Separated under a valid divorce decree that is not yet final
There are many tax considerations to be taken into account for each especially if you are married or have dependents / are a dependent. Choosing the incorrect filing method could result in more US tax being paid to the IRS.
It would be beneficial to review the “Determination of filing status – Decision tree” to see how you should file your US tax return.
US – Taxes are higher for married filing separately
Special rules apply to Married Filing Separately taxpayers, which generally result in a higher tax. For example, when filing separately:
- The tax rate is generally higher than on a joint return.
- Taxpayers cannot take the child and dependent care credit, earned income credit, education credits, and certain other benefits and credits.
- Some credits and deductions, such as the child tax credit and the retirement savings contributions credit, are reduced at income levels that are half those for a joint return.
- If a taxpayer is Married Filing Separately and the spouse itemizes deductions on their return, the taxpayer must itemize and cannot take the standard deduction.
Married taxpayers sometimes choose to file separate returns when one spouse does not want to be responsible for the other spouse’s tax obligations, or because filing separately may result in a lower total tax.
For example, if one spouse has high medical or miscellaneous expenses, or large casualty losses, separate returns may result in lower total taxes because a lower adjusted gross income allows more expenses or losses to be deducted.
Another common reason taxpayers file as Married Filing Separately is to avoid an offset of their refund against their spouse’s outstanding debts.
US – Head of household
A qualifying person for Head of Household is defined as:
- A qualifying child who is single (whether or not the child can be claimed as a dependent)
- A married child who can be claimed as a dependent
- A dependent parent
- A qualifying relative who lived with the taxpayer more than half the year, and is one of the relatives listed
The Head of Household filing status provides a higher standard deduction and, generally, a lower tax rate than Single or Married Filing Separately
US – Injured spouse
An injured spouse can get a refund for his or her share of the joint overpayment that would otherwise be used to pay the past-due amount.
- File a joint return,
- Have reported income (such as wages, interest, etc.),
- Have made and reported tax payments (such as federal income tax withheld from wages or estimated tax payments) or claimed the Earned Income Credit or other refundable credit,
- Not be required to pay a past-due amount, and
- File Form 8379
UK Tax – Who should you file a tax return?
Any individual that receives taxable income will be required to file a UK tax return to HMRC.
There are times when UK Resident and non-resident are exempt from filing a UK tax return to HMRC.
- £2,500 property ty profits or £10,000 gross rental income
- £1,000 self-employment profits are made
- £1,000 tax free interest for basic rate tax payers, which reduces to £500 for high rate tax payers
Individuals do receive a personal allowance of £12,500 before any UK tax is paid to HMRC. These personal allowances are only provided for domiciled individuals. This being UK citizens and people that are deemed domiciled and declare their works wide income.
UK – Tax in the hands of a parent
You need to be careful that you do not provide your dependent child assets that derive an income. This is because the said assets that generate the income will be taxed in the hands of the parent, not the child
Individual Tax Identification Number (ITIN)
In order for you to submit a 1040 tax return to the IRS, you will need to obtain an Individual Tax Identification Number (ITIN). You can obtain an ITIN number by completing a W7 form, which with some ID may be taken to the IRS.
Within a few months, you will then be provided with an ITIN number. Couples need to be made aware that each person that needs to submit a tax return will require their very own ITIN.