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Allocating US tax paid on UK tax form

Allocating US tax paid on UK tax form

Old Aug 5th 2015, 9:35 am
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Default Allocating US tax paid on UK tax form

Can anyone give any advice on how to allocate the US tax paid (Line 63 on Form 1040) among different types of income when you filling the UK tax forms?

For a pension, it tells you on the 1099-R how much tax was withheld, but how do you know if that was the correct amount?

How do you figure out how much of the US tax you paid was because of your interest and dividends?

Any help much appreciated.
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Old Aug 6th 2015, 12:31 pm
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Default Re: Allocating US tax paid on UK tax form

Hello Janelle,

Your circumstances would need to be looked at in more detail to ascertain this.
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Old Aug 7th 2015, 12:18 am
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Default Re: Allocating US tax paid on UK tax form

Perhaps you could explain in a little more detail what you're looking for?

On the 2014 U.S. tax filing form 1040, there are really 2 related tax lines. How much tax you owe for the year (line 63 as you said), and tax already paid or withheld such as from 1099-R (line 64). Lines 75 and 78 are the difference, indicating if you overpaid (you are due a refund) or underpaid (you still owe), respectively.

Form 1099-R is just your pension reporting statement that indicates how much tax was witheld on your pension. If they withheld too little or too much, it'll be corrected later in the tax calculation for your total income.

Interest and dividends should have already been included earlier in calculating your total taxable income from lines 8 and 9.

But I think what you need to know for UK tax purposes in order not to be double taxed (per tax treaty) is that you already paid U.S. taxes on your U.S. income and do not need to pay UK taxes on this income again. You may just need to report your total U.S. income (adjusted gross income from line 37) and U.S. tax paid (including withheld) on that income (line 63).

Last edited by Richard8655; Aug 7th 2015 at 12:44 am.
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Old Aug 8th 2015, 7:09 am
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Default Re: Allocating US tax paid on UK tax form

If you are UK resident, then the UK usually gets the 'first crack' on the taxation side. Typically you file a UK return and then claim tax relief from the US under the treaty, either using the FEIE or tax credits, as applicable. Unless you actually owe US tax after all that (which is not usually the case since UK tax rates are higher) then you get a full refund. Some income (such as SS) is ONLY taxable in the UK if you are UK resident.

But as other have said, to give any (non-professional) advice based on personal experience, more info on your specific situation is needed.
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Old Aug 8th 2015, 7:45 am
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Default Re: Allocating US tax paid on UK tax form

Originally Posted by Vadio View Post
If you are UK resident, then the UK usually gets the 'first crack' on the taxation side. Typically you file a UK return and then claim tax relief from the US under the treaty, either using the FEIE or tax credits, as applicable. Unless you actually owe US tax after all that (which is not usually the case since UK tax rates are higher) then you get a full refund. Some income (such as SS) is ONLY taxable in the UK if you are UK resident.

But as other have said, to give any (non-professional) advice based on personal experience, more info on your specific situation is needed.
Sorry to sidetrack from the OP's concerns, but with US SS, as a UK resident and paying UK tax on the SS, do you then not even enter the SS on the 1040?
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Old Aug 8th 2015, 7:56 am
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Default Re: Allocating US tax paid on UK tax form

Thanks for your responses. I was looking at UK tax form SA106 Foreign income. On page 2 it asks you to list income from foreign sources, interest, dividend, etc. Column C asks for the foreign tax taken off or paid on that income. That's why I was trying to apportion our Total Tax from Line 63 of the US Form 1040.

However, it dawned on me that a better place to put the total US tax (converted to £) we paid is on page 6 of the SA106, Foreign Tax Paid on Employment, Self-Employment and Other Income. Then HMRC can work out the Foreign Tax Credit Relief themselves.

I have already filed our US return for 2014. Sounds like I should have paid the taxes due on April 15, then got an extension to file US taxes until HMCR works out the UK taxes.
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Old Aug 8th 2015, 9:03 am
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Default Re: Allocating US tax paid on UK tax form

Originally Posted by Janelle View Post
Thanks for your responses. I was looking at UK tax form SA106 Foreign income. On page 2 it asks you to list income from foreign sources, interest, dividend, etc. Column C asks for the foreign tax taken off or paid on that income. That's why I was trying to apportion our Total Tax from Line 63 of the US Form 1040.

However, it dawned on me that a better place to put the total US tax (converted to £) we paid is on page 6 of the SA106, Foreign Tax Paid on Employment, Self-Employment and Other Income. Then HMRC can work out the Foreign Tax Credit Relief themselves.

I have already filed our US return for 2014. Sounds like I should have paid the taxes due on April 15, then got an extension to file US taxes until HMCR works out the UK taxes.
But, are your a resident of US or UK? That will make a difference in the tax due to each..
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Old Aug 9th 2015, 7:12 am
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Default Re: Allocating US tax paid on UK tax form

Originally Posted by robin1234 View Post
Sorry to sidetrack from the OP's concerns, but with US SS, as a UK resident and paying UK tax on the SS, do you then not even enter the SS on the 1040?
If you are UK resident, you enter the amount in US$ (from your 1099) on line 20a, then "0" (the taxable amount) on line 20b.
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Old Aug 9th 2015, 7:16 am
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Default Re: Allocating US tax paid on UK tax form

Originally Posted by Vadio View Post
If you are UK resident, you enter the amount in US$ (from your 1099) on line 20a, then "0" (the taxable amount) on line 20b.
OK, thanks.
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Old Aug 9th 2015, 10:38 am
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Default Re: Allocating US tax paid on UK tax form

Originally Posted by Janelle View Post
Thanks for your responses. I was looking at UK tax form SA106 Foreign income. On page 2 it asks you to list income from foreign sources, interest, dividend, etc. Column C asks for the foreign tax taken off or paid on that income. That's why I was trying to apportion our Total Tax from Line 63 of the US Form 1040.

However, it dawned on me that a better place to put the total US tax (converted to £) we paid is on page 6 of the SA106, Foreign Tax Paid on Employment, Self-Employment and Other Income. Then HMRC can work out the Foreign Tax Credit Relief themselves.

I have already filed our US return for 2014. Sounds like I should have paid the taxes due on April 15, then got an extension to file US taxes until HMCR works out the UK taxes.
It's not common for a UK resident to have to claim a US tax credit, in fact there is a procedure where you resource US income so that it looks like UK income to the IRS and you get a tax credit in the US for the UK tax you have to pay on what is in actual fact US income.

Please describe the types of income you have, your citizenship and residence status and then there is a chance someone can tell you how your taxes should be divided between the US and the UK and where to claim credits.
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Old Aug 9th 2015, 10:51 am
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Default Re: Allocating US tax paid on UK tax form

This is a few years old, but the basic explanation of how it works is still applicable: https://americansabroad.org/files/39...reditadams.pdf
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Old Aug 10th 2015, 7:21 am
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Default Re: Allocating US tax paid on UK tax form

Background info: we are UK residents, US citizens, we file MFJ, we have pension, interest, dividend, rental (although it makes a loss) and CG (less than the UK allowance) income all from the US.

In the UK, my husband has a small casual job.

Thanks for the link Vadio - I need to study that closely when I have more time.
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Old Aug 10th 2015, 11:23 am
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Default Re: Allocating US tax paid on UK tax form

Originally Posted by Janelle View Post
Background info: we are UK residents, US citizens, we file MFJ, we have pension, interest, dividend, rental (although it makes a loss) and CG (less than the UK allowance) income all from the US.

In the UK, my husband has a small casual job.

Thanks for the link Vadio - I need to study that closely when I have more time.
Do you pay UK tax on a remittance or arising basis? Are you UK non-domiciled, but tax resident? As claiming the remittance basis is expensive and only for those that have substantial assets let's assume you are non-doms that pay UK tax on an arising basis. You only have to report foreign income and gains over 2000 GBPs so in addition well assume you have more than that.

Pension.
Where it is taxable depends on the type of pension. Is it Government or private? is any of it US tax free like a ROTH? Do you get US SS payments?
Your pension might be UK tax free, or it might be fully taxable in the UK and you will have to pay the UK first and then resource the income by treaty so you can take a US tax credit for the UK tax paid and also claim back any US withholding when you file your 1040. This scheme is how things generally work; pay the UK first, taking not of any special cases in the treaty and then claim foreign tax and withholding tax credits on your US taxes.


Interest. This will be UK taxable and would be entered on SA106 in the section for interest.

Dividends.
These are a bit more complicated as by treaty you must pay the US 15% dividend tax, so you will get a credit for that on your UK tax.

Rental
This income will be taxable in the UK and you will have to claim a tax credit in the US.

Capital Gains.
The UK has quite generous capital gains allowance so I'd arrange things to stay below that....then you just have to deal with US capital gains.
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Old Aug 12th 2015, 8:50 am
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Default Re: Allocating US tax paid on UK tax form

Thank you Nun, your assumptions are correct. My husband is retired from USMC, so only his military pension from the US, no SS yet for either of us.

I am going to file a UK SA and let HMRC work out the tax. Then I will file an amended 1040 and claim the tax credit.

Next year I will know to hold off on filing the US return until I know what the tax will be in UK.

What do you mean by the phrase "resources your income"?
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Old Aug 12th 2015, 9:03 am
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Default Re: Allocating US tax paid on UK tax form

Here's the full IRS explanation:

Foreign Tax Credit - Special Issues
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