International question: How do you file your taxes?

[HopeDream]

Just finished filing my person income taxes for 2011 and I was able to netfile them (I'm a Canadian and we can do that).
This got me wondering - do other countries efile their taxes too? How do you submit your taxes in the US, UK, and eslewhere?
Do you usually use tax software, an accountant, or do you complete them by hand?

I usualy use Quicktax/Turbotax because it's easy.

 

[Porridge]

For the most part you don't, unless you're self employed (and some other exceptions) which I will leave for someone else to explain as I don't know much about that.

It's done for you. Your tax is calculated based on income. Any entitlements etc are taken off what you owe. Whatever remains is taken before you get your paycheck. You get a statement with a breakdown every month. If you feel you were overcharged, you log into the Revenue online service, or contact your local tax office, the issue is investigated and a refund is given where applicable.

Simples

 

[HopeDream]

That sounds great Porridge - you live in the UK right?

Here employers do take taxes off of income for us and submit it to the government, then at the end of the year we get a bunch of forms, and then have to complete the paperwork for deductions (for tuition, charitable donations, medical expenses, retirement saving plans, etc.) that will reduce the amount of taxes we have to pay. Then once my taxes are submitted(usually) I get a lump sum refund from the government ($500-2000 ish) - It's like free money! I like that I'm able to claim transit passes as a deduction.

 

[Porridge]

No, I live in Ireland. I'm not sure how it's done in the UK.

We have to fill in some forms too, for medical expenses etc, but I've never found it to be very much and I'm pretty sure now it can all be done online! Actually in the last two years I haven't filled in any forms at all.

ETA - my lack of form-filling probably has more to do with me not taking part in enough tax incentives outside of what my job offers! Others may have a different story.

 

[Enerchi]

That sounds great Porridge - you live in the UK right?

Here employers do take taxes off of income for us and submit it to the government, then at the end of the year we get a bunch of forms, and then have to complete the paperwork for deductions (for tuition, charitable donations, medical expenses, retirement saving plans, etc.) that will reduce the amount of taxes we have to pay. Then once my taxes are submitted(usually) I get a lump sum refund from the government ($500-2000 ish) - It's like free money! I like that I'm able to claim transit passes as a deduction.

But apparently, the overall aim is to break even, since it is actually an overpayment that you are getting back and then there is the school of thought that "you loaned the government your money for free", kind of thing.

I usually get a bit back as well (clearly I'm in the "Yippee" camp, like you are! ) and as much as my goal is to put it back into RSP or mortgage.... gotta say... there's always a little temptation elsewhere that I usually redirect the $$ to. I have zero self control!

 

[elliemay]

In the UK, *most* people don't have to file anything. Taxes are taken out of each cheque and that's that.

If you own a business, are self-employed, paid in cash (or anything else that doesn't amount to a "normal" 9-5 M-F job), you can file a self-assessment form online. It's pretty straightforward in my experience.

 

[Echidna]

If you are employed in Australia, your estimated income tax is taken out of your fortnightly wages. At tax time (June 30), you get a bunch of statements from banks/share holdings/funds etc. and you submit your income tax return for the year by Oct 31 (from memory). If it's not complicated you can file it online (through a program called e-tax- so antiquated you can't download it to Macs). I think tax professionals just have a professional version of e-tax, because I'm pretty sure it all gets filed online too! It's super-easy but we use an accountant because she always makes her wage finding us legitimate deductions.

The one thing I don't really get is that in the US there seem to be tax breaks for filing as a married couple. I *think* there are some income splitting advantages here if one wage earner is making significantly higher amounts than the other, but that's all the advantage I can think of. Is it similar there?

 

[amc80]

The one thing I don't really get is that in the US there seem to be tax breaks for filing as a married couple. I *think* there are some income splitting advantages here if one wage earner is making significantly higher amounts than the other, but that's all the advantage I can think of. Is it similar there?

It really depends on your incomes. My husband and I got less of a refund being married than we would have if we were both single.

 

[Rhea]

I'm in the UK and I don't file UK taxes. They are automatically taken out of my paycheque each month.

I do have to file US taxes every year and will for life (ah, the benefits of being a US citizen - file taxes even if you don't live there). I usually file two Federal tax forms and one State form. I get an automatic extension until July and must submit paper forms. I'm unlucky as the US appears to be the only country where you still file taxes even if you don't reside there, but lucky in that I don't have a county tax or more forms for the state taxes. I know plenty of expats who say they file county, state, and federal taxes each year - such a pain!

 

[Pandora II]

I'm in the UK.

When I worked for a company everything was done by them, occasionally I'd get a nice cheque from the Tax Man to say I'd paid too much. The finance office at work also sorted out pension contributions and childcare vouchers which are paid before tax

Now I run my own business I pay my accountant to do all my taxes for me. I just send him a spread-sheet, bank statements and a pile of receipts.

Very simple.

ETA: Yes you can file online.

 

[mayerling]

I'm in the UK and I don't file UK taxes. They are automatically taken out of my paycheque each month.

I do have to file US taxes every year and will for life (ah, the benefits of being a US citizen - file taxes even if you don't live there). I usually file two Federal tax forms and one State form. I get an automatic extension until July and must submit paper forms. I'm unlucky as the US appears to be the only country where you still file taxes even if you don't reside there, but lucky in that I don't have a county tax or more forms for the state taxes. I know plenty of expats who say they file county, state, and federal taxes each year - such a pain!

Abby, this is really helpful. DH and I are baffled by this situation and have no clue how to go about filing his US taxes. Could you give some more detail? For instance, what happens when you don't even make enough to be taxed in the US after you've been taxed in the UK?

 

[Rhea]

I'm in the UK and I don't file UK taxes. They are automatically taken out of my paycheque each month.

I do have to file US taxes every year and will for life (ah, the benefits of being a US citizen - file taxes even if you don't live there). I usually file two Federal tax forms and one State form. I get an automatic extension until July and must submit paper forms. I'm unlucky as the US appears to be the only country where you still file taxes even if you don't reside there, but lucky in that I don't have a county tax or more forms for the state taxes. I know plenty of expats who say they file county, state, and federal taxes each year - such a pain!

Abby, this is really helpful. DH and I are baffled by this situation and have no clue how to go about filing his US taxes. Could you give some more detail? For instance, what happens when you don't even make enough to be taxed in the US after you've been taxed in the UK?

I don't actually pay US taxes, I don't make enough money. But I still must file every year. If you have any US bank accounts, you must get the end of tax year information for each of your accounts from the banks and companies. I have a bank account which has about 12 cents in it and I have to make sure I haven't earned interested, if I have, even if it's a penny, it goes on the tax forms.

The filing is for the US tax year, Jan - Dec, so will be different to the UK tax year. I can't remember which forms I need, but the US embassy website is somewhat helpful. I don't know to find out if you need to file local or state taxes.

You'll find advice everywhere on how to file: Married filing separately, single, or married filing jointly. You'll need to make a decision about how you want to file and read up on what each of those mean for you and your partner. I tried married filing separately one year and had it come back to me twice because they wanted a spouse's SSN, which he doesn't have.

Basically, whoever is the US citizen will still need to do everything tax-wise as though they still live in the US even if they haven't lived there for years. We don't get a break for being non-resident. Keep track of the dates of the US citizen's visits as well as that is asked on the exemption form. I always start the year off right, remembering all this stuff, but come April it's a rush to get things ready for July!

ETA: There are no terrible consequences if the US citizen doesn't file if they don't earn enough to pay taxes in both countries. If you get audited then you just submit all the information requested from what I've heard. The problem mostly comes if the US citizen chooses to move back and take a non-US partner back with them. To get a visa for the non-US partner you will have provide evidence that you've filed, and paid if you're required to, your taxes.

 

[diamondseeker2006]

The US tax system could not be more complicated if they tried. It is really CRAZY. I have always done our taxes and am extremely thankful for the day I first used TurboTax because it made life SO much easier (and electronically file)!!! I got our federal refund back within a week!!! I could do a commercial for TurboTax I am so pleased with it!

 

[mayerling]

Rhea, I'm so sorry! I don't know why I called you 'Abby'.

 

[smitcompton]

Hi,

I am retired but have other income than just Social Security. What is so funny about my taxes is that they regard me as a small business. I must file an estimated tax declaration each quarter, which includes a quarterly check to the IRS, and at the end of the yr, I file my taxes by hand. I tried turbo tax but it doesn't work for me. Oh if I don't get the amt that I own within 10%, I am fined a penalty, I own more.

One year I was fined and so i wrote a protest letter. It was when interest rates in the country were changing so much. Some of my income depends on the interest rate. So I wrote to the IRS explaining that Congress didn't know what interest rates woud be, Ben Bernacke didn't know what interest rates would be, so how could I. They cancelled the penalty. I felt so clever on that one.

Annette

My brother lives in England and is a US citizen. He explained once that he could choose to pay either UK taxes or US taxes. He chose to pay UK taxes. Sorry, I don't know if he filed a US return along with that choice

 

[Rhea]

My brother lives in England and is a US citizen. He explained once that he could choose to pay either UK taxes or US taxes. He chose to pay UK taxes. Sorry, I don't know if he filed a US return along with that choice

Sadly, it's not actually a choice if he's over a threshold, which is about $9K (£5,500). As a US citizen he's supposed to file taxes every year on his foreign earned income, and pay taxes if he's over the exemption. In the UK, citizen or not, we just pay taxes directly from our paycheques, so no choice there either.

http://www.irs.gov/faqs/faq/0,,id=199677,00.html

http://london.usembassy.gov/irs/irswho.html

 

[smitcompton]

Hi Rhea,

At the time he was working for a UK company. His wife is a British citizen . His Uk tax rate was 40%, and the family qualified for the UK Health Scheme and University fees. His children have all gone to university there, which is a pittence of US costs. He told me it was worth it to him to pay the UK taxes. He is an economist and does know what he is talking about. This was 1989. Perhaps things have changed since then. The subject has not come up again. I do know he has kept his US citizenship. His children 2 of them were citizens of both countries until a certain age. They carried passports from both countries. After all is said and done, I may be wrong.

Annette

 

[Pandora II]

Until last year, university was free in the UK whether you went to Oxford or Backendofbeyond University. The only thing that counts is getting the grades/passing the interviews. The year before I went they also had free maintenance grants if your parents didn't earn much... mind you, only 12% of the population went then rather than the almost 50% now...


UK taxes do have a tax-free bit... around £8k, then you pay 20% on all income on the next £35k and then 40% on all income over that. So someone earning £45k will pay £8k in Income Tax.

We also have National Insurance payments on top (12% of earnings between £146 and £817 a week and 2% of anything above that) which contribute towards state pensions, unemployment benefit, maternity leave etc. So the person on £45k will pay £4.3k in NI per year. Total overall bill - £12.3k

If you are taxed as an employee there is very little you can claim back - however things like private health insurance, company car etc are taxable benefits and so a portion of these will be included in your overall gross salary and you will pay the appropriate rate. Charitable donations for example are not tax deductables.

If you are self-employed then there are a gazillion things that you can potentially claim against tax - hence the need for a good accountant!

 

[diamondringlover]

I live in the US and I hate taxes, I have to file federal income tax, state income tax, my local income tax and we have a school district tax, I usually use Turbo Tax for federal, state and school district, but I have to file the local tax separate....I usually get money back but its a pain having to file all those forms if you have them done somewhere like H&R Block they usually charge some between $200-$300

 

[Enerchi]

I'm another positive vote for the ease of using Turbo Tax. I get sooooo stressed out about doing them but between myself and DH, I'm the calm and in control one! He keeps the wine glass topped up while I plug in the numbers (do not judge ... we all do taxes differently! hahaha ) We do not run an empire - just 2 incomes + a small business I have on the side and the beauty of this program, it calculates both spouses at the same time and which deductions are better on what income.

Once it is all over, I netfile to CRA (Canadian Revenue Agency) and in about 2 - 3 weeks, we get our refunds back. It really is smooth and simple that way. We used to have a friend do it for us professionally, and even then, not even being involved in any aspect of it at all, it was still very anxiety provoking. Ugh at least they are done for another year... phew!

 

[labellavita81]

That sounds great Porridge - you live in the UK right?

Here employers do take taxes off of income for us and submit it to the government, then at the end of the year we get a bunch of forms, and then have to complete the paperwork for deductions (for tuition, charitable donations, medical expenses, retirement saving plans, etc.) that will reduce the amount of taxes we have to pay. Then once my taxes are submitted(usually) I get a lump sum refund from the government ($500-2000 ish) - It's like free money! I like that I'm able to claim transit passes as a deduction.

Its actually nothing like free money.... it was your money that you lent the government for a year.. intrest free! lol

 

[amc80]

I live in a state with no income tax, so for me it's just one federal return. I also use turbo tax and it's so easy.

 

[mayerling]

Does anyone know whether expats are exempt from other taxes and only have to file federal?

 

[MichelleCarmen]

I live in a state with no income tax, so for me it's just one federal return. I also use turbo tax and it's so easy.

I'm also in a state w/no state income tax and use Turbo Tax because it's easy. I have an accounting degree but I graduated many years ago and can't keep up with the little details so I just plug in a few numbers and voila, it does the work for me!

 

[Rhea]

Does anyone know whether expats are exempt from other taxes and only have to file federal?

It depends. I can't remember the details, but it's a bit odd. I believe it's something about the laws of the last state where you were last resident or state where you are registered to vote. There are several states, and cities, where you have to file through based on what other expats have told me. I really wish I could remember the details of how I first found out I didn't need to file for my state, but I'm sure it's something like that. The US embassy (I linked it above) or an expat group could probably direct you. There are tons in London!