Another question...US person and UK pensions
 

Me Again!!!
So - I know some of you already know my situation, so I will try and keep the post brief and concise as I have really been grateful for everyone's kindness plus willingness to share experiences /knowledge.
I have resigned myself to being a dual tax person for at least this US tax year ( UKC with greencard of 10 years). Once I get through this hurdle I may consider giving up the green card but it occurred to me that essentially as a UKC with long term green card I have the same tax obligations as a USC?
Eventually, my only assets in the US will be IRA's and a lifetime survivor benefit from the federal government - both of which I think I would still have tax due even if i successfully come away without being a covered expatriate. How do USC's deal with any UK pensions whilst living in UK? I understand you can shield active income using Foreign earned income deduction but is there a similar exclusion that applies to UK pensions when the recipient is a person who has US tax reporting obligations resides in the UK? Just trying to consider the consequences of remaining a us person for life as opposed to expatriating.

Re: Another question...US person and UK pensions
 

As long as you hold a green card and have not gone through the formal procedures of exiting the US (8854 for long term permanent resident), yes, you are subject to tax by the US exactly as a US Person resident in the US would be (or a USC resident in the UK). All requirements and restrictions apply, including additional reporting required concerning foreign income/assets. Certain types of foreign investing will be severally penalised. UK banks/building societies will require a W-9 to be completed. Unlike some other countries, so far, there has been little denial of banking services in the UK although if the person wishes to invest in any type of mutual funds, accounts should be opened while still resident in the US (your IRA may get you in without US residence but further investing may be restricted). Opening any type of mutual funds in either the UK or US becomes nearly impossible for the UK resident, either USC or UKC. A UK stocks and shares ISA may be opened - but the US taxation (PFIC rules and reporting) make it near impossible to profit from the investment, and could quite possibly result in a loss of some capital invested. Profits on the sale of a home, although tax free in the UK, are subject to US tax rules and a profit over the $250,000 allowance (MFS) will result in US taxation. That's for starters, there's more.

Others may have additional comments on this.

Carrying the green card over into 2019 will probably not have any serious effects regards US taxation, but you'll need to make the decision as to whether you could live with the US tax rules beyond that period.

The IRA may still have US tax withheld, but, theoretically, a Federal (government) pension paid to a UKC resident in the UK, should only be taxed in the UK. I've not checked the US/UK treaty regards a government annuity.

For UK pensions, they are declared and taxed in the UK by HMRC for UK residents. They are also taxed by the US (government pensions have special rules), and the US tax is offset by the UK tax paid via form 1116 (Foreign Tax Credits) when filing the US return for that tax year.

For US pensions and IRAs paid to a USC (or UKC - US Person) resident in the UK, the same applies. Taxed by HMRC (Gov. pension rules apply), taxed by the US but offset by UK tax paid (FTC). US Social Security is only taxed by HMRC for a UK resident, and not by the IRS. There may be periods or circumstances when double taxation may happen (20% of USCs who file from abroad) but, generally, most double taxation is avoided. It's the unique aspects of US taxation that mean additional tax is due on assets where the UK does not tax those same assets (no offset available).

I'll leave it to those with more knowledge on green cards and US immigration to comment on the ability to have a green card for life in your circumstances.

Re: Another question...US person and UK pensions
 

OAP, thank you for your input, I pretty much feel that I need to be done with the green card, but just not yet. This is the one year I can file MJ and benefit from the married deduction as he passed in January, the money side is basically the drawing down of small amounts here and there. Leftover TSP which didnt get moved into IRA, small amount from playing with stocks, that probably isnt going to cost much as it will be capital gains, and selling stuff I couldn't bring with me - essentially a garage sale. If i expatriate this year I wouldn't be able to claim the married allowance as the expatriation requires it to be done as a single person, so sometimes it pays to slow the pace down. I can deal with withholding on the US based products but think i need to protect any pension I will be contributing to now I am back and likely to be back at work at some point. Having a green card beyond 2019 would be like having gym membership and never going to the gym....to get all these deductions, filling in forms and paying for tax preparers would defeat the object when the easiest solution wold be to simply unhook from the obligation altogether. I can value just about everything I have except the survivor annuity - until OPM finalise it I am stuck to know exactly what I am getting, though the next problem will be to value it. I was rather hoping that if they use the gift tax rule on it - i did see someone explain it as "imagine if the person who was expatriating died the day before they left - what would the value of the estate be" in which case the annuity would die when i did - so would that make it zero value? - I jest of course, the IRS is not going to let that one get past them!

Re: Another question...US person and UK pensions
 

I find this thinking very sound and quite sensible.

If you are going to read anything about the Exit Tax, read the following by Phil Hodgen. Hodgen is a tax attorney specialising in this area. His comments are readable and understandable. He would be, in my opinion, the primary source of unofficial information.

https://hodgen.com/exit-tax-book/

Re: Another question...US person and UK pensions
 

Thank you for the link....i will certainly read it. I have also felt calmer since coming to terms with the double residency, and the realisation that, until January everything is in other people's hands! I can do some calculations be it will be forever incomplete until all the tax docs are issued in January! Time to read a book - preferable a light, entertaining book and give my brain a rest!