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Question for the Money Doctors

Question submitted on Oct 22, 2012.

Question

I live in the UK and own a beauty salon, but am an American citizen from Florida. How do I file as a small business owner? What form will I use this year? I also file jointly with my husband who is active duty military.

Answer

Congratulations on owning your own beauty salon.  Generally, as a U.S. citizen, your worldwide income is subject to U.S. income taxation, regardless of where you are living.  In other words, you will continue to file Form 1040 as married filing jointly or separately.  With respect to your business, assuming that your small business is not incorporated, your business income and expenses will be reported on Schedule C with a possible supporting Form 4562 to report your depreciation and amortization expense.

IRS Publication 54 is always a good reference tool for US citizens working abroad.  The publication discusses special tax rules for U.S. citizens who work abroad or who have income earned in foreign countries, including the foreign earned income exclusion, foreign tax credits, foreign treaty benefits, etc.

That being said, please note that the income tax rules applicable to expatriates are very complex and that you would be well served by contacting a CPA/PFS who will be able to help you analyze the tax rules and whether or not you are eligible for treaty benefits.  Please visit www.findacpapfs.com to find a CPA/PFS in your area. 


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