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Where Taxpayers and Advisers Meet

Totalization Agreement clarification

Mikethebook
Posts:38
Joined:Wed Aug 06, 2008 4:09 pm
Totalization Agreement clarification

Postby Mikethebook » Mon May 21, 2018 4:56 pm

My wife is an American citizen who has permanently lived and worked (self-employed) in the UK since 2008. Every year she has paid social security taxes to the IRS when, apparently, under the Totalization Agreement with the UK, she should be exempt from them, only liable to the corresponding taxes in the UK. My wife's earnings are low enough that she has not had to pay UK income or social security taxes since 2008. My question is this? Does the exemption depend on her having actually paid UK social security taxes within a given year or merely being self-employed in the UK and therefore liable to such taxes if her earnings reach a certain level?

DavidTreitel
Posts:271
Joined:Thu Aug 16, 2012 4:31 pm

Re: Totalization Agreement clarification

Postby DavidTreitel » Tue May 22, 2018 10:53 pm

Totalisation agreements work on the basis of coverage. It would seem sensible to file amended US returns for each of the past 3 years claiming refunds from the IRS. If there were other mistakes such as omitted FBARs, PFICs, 8938s, 5471s etc she may want to use the IRS `streamlined procedures to minimise possible penalties.

Mikethebook
Posts:38
Joined:Wed Aug 06, 2008 4:09 pm

Re: Totalization Agreement clarification

Postby Mikethebook » Mon May 28, 2018 4:09 pm

Thanks, David. I need to get a certificate of coverage from the Inland Revenue for her years of self-employment in the UK. Since she only filed returns for 2011-2015 in late 2016 don't we have until late 2019 to resubmit the returns with self-employment tax removed?

As far as I'm aware everything else is in order. I've done the FBARs but I need to check out 'streamlined procedures' and the other forms you mention.

If we are able to resubmit returns for 2011- 2017 inclusive with a statement of coverage, I would still be interested to know what you would charge for that work. In other respects, the returns are simple: business income and bank interest.


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