Lowdown on Tax Issues
#31
Forum Regular
Thread Starter
Joined: Jun 2020
Posts: 74
Re: Lowdown on Tax Issues
I started doing the accurate estimates when I was 50 to see how much extra SS I would get by working until 55, 56, 57, etc. The increase in SS by continuing to work was remarkably low. This is because of the “bend points” in calculating SS as it is designed to replace a much larger percentage of lower income workers.
Interestingly, I used the official SS calculator you linked to the other day, and, although I will need to revisit it more carefully, the estimate was actually not that different than on My SS site based on continued employment.
The SS calculator, I think, defaulted at 62 years and did not give options to change it to 67 or 70, which is a shame. However, according to my initial trial, at 62, the difference would be about $140 per week if I stop working in two years rather than wait 6 years or so when I’m 62. Not a deal breaker for me.
--Say my SS amounts to less than the UK personal allowance, I won’t be taxed on it. However, if I were to add to the equation withdrawals from a Roth IRA or directly from a 403b which exceeded the personal allowance of 12,500 pounds, then I assume UK tax at 20% would kick in—correct?
--Is UK OAP generally taxed? I won’t get the full UK state pension, but I will get some.
--Would the UK OAP be added to my US SS and Roth to calculate overall tax?
(I do know that there is some kind of algorithm of SS vs UK pension that takes effect, but let’s not go there quite yet!!).
Thanks a lot.
Ed
#32
BE Forum Addict
Joined: Aug 2013
Location: Eee Bah Gum
Posts: 4,131
Re: Lowdown on Tax Issues
Durhamlad:
Interestingly, I used the official SS calculator you linked to the other day, and, although I will need to revisit it more carefully, the estimate was actually not that different than on My SS site based on continued employment.
The SS calculator, I think, defaulted at 62 years and did not give options to change it to 67 or 70, which is a shame. However, according to my initial trial, at 62, the difference would be about $140 per week if I stop working in two years rather than wait 6 years or so when I’m 62. Not a deal breaker for me.
--Say my SS amounts to less than the UK personal allowance, I won’t be taxed on it. However, if I were to add to the equation withdrawals from a Roth IRA or directly from a 403b which exceeded the personal allowance of 12,500 pounds, then I assume UK tax at 20% would kick in—correct?
--Is UK OAP generally taxed? I won’t get the full UK state pension, but I will get some.
--Would the UK OAP be added to my US SS and Roth to calculate overall tax?
(I do know that there is some kind of algorithm of SS vs UK pension that takes effect, but let’s not go there quite yet!!).
Thanks a lot.
Ed
Interestingly, I used the official SS calculator you linked to the other day, and, although I will need to revisit it more carefully, the estimate was actually not that different than on My SS site based on continued employment.
The SS calculator, I think, defaulted at 62 years and did not give options to change it to 67 or 70, which is a shame. However, according to my initial trial, at 62, the difference would be about $140 per week if I stop working in two years rather than wait 6 years or so when I’m 62. Not a deal breaker for me.
--Say my SS amounts to less than the UK personal allowance, I won’t be taxed on it. However, if I were to add to the equation withdrawals from a Roth IRA or directly from a 403b which exceeded the personal allowance of 12,500 pounds, then I assume UK tax at 20% would kick in—correct?
--Is UK OAP generally taxed? I won’t get the full UK state pension, but I will get some.
--Would the UK OAP be added to my US SS and Roth to calculate overall tax?
(I do know that there is some kind of algorithm of SS vs UK pension that takes effect, but let’s not go there quite yet!!).
Thanks a lot.
Ed
Your OAP is 100% fully taxable, counted like regular income, simply added onto SS, and regular 403b withdrawals.
I have not heard of any algorithm of SS v OAP so please do share anything you find on this. Your SS will be reduced depending on your OAP due to WEP rules, if that is what you are thinking of.
#33
Forum Regular
Thread Starter
Joined: Jun 2020
Posts: 74
Re: Lowdown on Tax Issues
This forum has been invaluable in giving me the context I need over the next year or three to sort out my retirement. I am truly grateful. I’m heading for a point where I’ve got sufficient context to leave it for a while.
To confirm my understanding at this point, when retired:
Ed
To confirm my understanding at this point, when retired:
- My total UK tax burden = SS + my 403b + UK OAP (but excluding state pension and Roth IRA)
- My total USA tax burden = my state pension + 403b (but federal tax only since I will be out of state) + UK OAP (excludes Roth IRA)
- To both UK and USA, I should add any potential earned or unearned income.
- When I draw UK OAP at 67, WEP rules come into effect.
- It makes sense to roll over 403b into a Roth IRA as this avoids any tax on withdrawals (or at least after 5 years or something--I need to research this
- Somehow tax credits come into play, but I’m not sure how this works—does one country’s tax burden take precedent over the other?
Ed
#34
BE Forum Addict
Joined: Aug 2013
Location: Eee Bah Gum
Posts: 4,131
Re: Lowdown on Tax Issues
This forum has been invaluable in giving me the context I need over the next year or three to sort out my retirement. I am truly grateful. I’m heading for a point where I’ve got sufficient context to leave it for a while.
To confirm my understanding at this point, when retired:
Ed
To confirm my understanding at this point, when retired:
- My total UK tax burden = SS + my 403b + UK OAP (but excluding state pension and Roth IRA)
- My total USA tax burden = my state pension + 403b (but federal tax only since I will be out of state) + UK OAP (excludes Roth IRA)
- To both UK and USA, I should add any potential earned or unearned income.
- When I draw UK OAP at 67, WEP rules come into effect.
- It makes sense to roll over 403b into a Roth IRA as this avoids any tax on withdrawals (or at least after 5 years or something--I need to research this
- Somehow tax credits come into play, but I’m not sure how this works—does one country’s tax burden take precedent over the other?
Ed
When you come to making Roth withdrawals you will be asked about the 5 year rule but basically, if you are over age 59.5 and you opened your very first Roth 5 years earlier then no problem, the withdrawal is all tax free.
#35
Forum Regular
Thread Starter
Joined: Jun 2020
Posts: 74
Re: Lowdown on Tax Issues
Thanks, durhamlad.
To make sure I understand this correctly, say that for a time my sole earnings will be US pension (15 K pounds) and SS (10 K pounds). Only the SS is subject to British tax. In such a scenario, would only the 10K be taxed? And how would the tax rate be calculated--some combination of the personal allowance and the basic rate?
Cheers
Ed
To make sure I understand this correctly, say that for a time my sole earnings will be US pension (15 K pounds) and SS (10 K pounds). Only the SS is subject to British tax. In such a scenario, would only the 10K be taxed? And how would the tax rate be calculated--some combination of the personal allowance and the basic rate?
Cheers
Ed
#36
BE Forum Addict
Joined: Aug 2013
Location: Eee Bah Gum
Posts: 4,131
Re: Lowdown on Tax Issues
Thanks, durhamlad.
To make sure I understand this correctly, say that for a time my sole earnings will be US pension (15 K pounds) and SS (10 K pounds). Only the SS is subject to British tax. In such a scenario, would only the 10K be taxed? And how would the tax rate be calculated--some combination of the personal allowance and the basic rate?
Cheers
Ed
To make sure I understand this correctly, say that for a time my sole earnings will be US pension (15 K pounds) and SS (10 K pounds). Only the SS is subject to British tax. In such a scenario, would only the 10K be taxed? And how would the tax rate be calculated--some combination of the personal allowance and the basic rate?
Cheers
Ed
https://www.moneysavingexpert.com/tax-calculator/
#37
Forum Regular
Thread Starter
Joined: Jun 2020
Posts: 74
Re: Lowdown on Tax Issues
That's super helpful, and good news, durhamlad.
So is it safe to conclude that any income deemed untaxable (eg my USA state pension in the UK, Roth withdrawals in UK) are not included in that country's overall tax calculation and have no impact on tax?
Cheers,
Ed
So is it safe to conclude that any income deemed untaxable (eg my USA state pension in the UK, Roth withdrawals in UK) are not included in that country's overall tax calculation and have no impact on tax?
Cheers,
Ed
#38
BE Forum Addict
Joined: Aug 2013
Location: Eee Bah Gum
Posts: 4,131
Re: Lowdown on Tax Issues
Yes.
#40
Forum Regular
Joined: Mar 2016
Posts: 65
Re: Lowdown on Tax Issues
I do use an individual based in London but she is not taking new clients.
Two companies I have on my “reserve” list are below but I’m sure there are more out there. I have not used either company myself.
https://www.taxesforexpats.com/
https://www.greenbacktaxservices.com/
Two companies I have on my “reserve” list are below but I’m sure there are more out there. I have not used either company myself.
https://www.taxesforexpats.com/
https://www.greenbacktaxservices.com/
I've always done my own taxes here in the states, using Turbo Tax so was wondering if that would still be worth considering if we return?
#41
BE Forum Addict
Joined: Aug 2013
Location: Eee Bah Gum
Posts: 4,131
Re: Lowdown on Tax Issues
You seem as if you have a really good handle on the tax requirements, do you mind if I ask why you don't do the returns yourself? Is it something that one could (or should) do themselves, maybe have a pro do it once and then use that as a template? Or is it a case of money well spent on the time and effort required and probably some protection/peace of mind?
I've always done my own taxes here in the states, using Turbo Tax so was wondering if that would still be worth considering if we return?
I've always done my own taxes here in the states, using Turbo Tax so was wondering if that would still be worth considering if we return?
If your situation is stable from year to year I don’t see any reason why you can’t follow a template and do them them yourself. I still do them myself as well to check my understanding plus I help my son do his taxes. He is also a USC living in England, and I also help my wife’s sister, a widow of 3 years do her self assessment each year. (No foreign tax return just complicated enough to require a SA).
#42
Forum Regular
Joined: Mar 2016
Posts: 65
Re: Lowdown on Tax Issues
I have a heart condition and there is no way that my wife can do the taxes when I’m gone, she has zero interest and just gets upset when I’ve tried to show her, so it is simply a bit of insurance for her peace of mind. She can’t even manage the online FBAR filings.
If your situation is stable from year to year I don’t see any reason why you can’t follow a template and do them them yourself. I still do them myself as well to check my understanding plus I help my son do his taxes. He is also a USC living in England, and I also help my wife’s sister, a widow of 3 years do her self assessment each year. (No foreign tax return just complicated enough to require a SA).
If your situation is stable from year to year I don’t see any reason why you can’t follow a template and do them them yourself. I still do them myself as well to check my understanding plus I help my son do his taxes. He is also a USC living in England, and I also help my wife’s sister, a widow of 3 years do her self assessment each year. (No foreign tax return just complicated enough to require a SA).
Would you mind giving a quick rundown of how the mechanics work with respect to the US and UK having different tax 'periods' (calendar year vs. April 6th - March 5th)? Do you have to amortize everything?
#43
BE Forum Addict
Joined: Aug 2013
Location: Eee Bah Gum
Posts: 4,131
Re: Lowdown on Tax Issues
Yes, I'll be in a similar situation with my wife also as she has little to no interest in the mechanics of the money so to speak!
Would you mind giving a quick rundown of how the mechanics work with respect to the US and UK having different tax 'periods' (calendar year vs. April 6th - March 5th)? Do you have to amortize everything?
Would you mind giving a quick rundown of how the mechanics work with respect to the US and UK having different tax 'periods' (calendar year vs. April 6th - March 5th)? Do you have to amortize everything?
In this return, the 2018 calendar year has been regarded as co-terminus with the 2018/2019 UK tax year since all income will be declared year on year and this method makes the foreign tax credit computation more accurate with UK taxes credited on the US Return in respect of doubly taxed income only
#44
Forum Regular
Joined: Mar 2016
Posts: 65
Re: Lowdown on Tax Issues
From the very first tax return you can use the US tax year for US income when filing the HMRC return. Just simply make a comment in the white space similar to below. That way the 1099’s and W2s are easy, as are the P60s
With the US return however I have to keep a spreadsheet tracking my U.K. pensions and interest on a month by month calendar year. P60s are no use when doing the US return.
With the US return however I have to keep a spreadsheet tracking my U.K. pensions and interest on a month by month calendar year. P60s are no use when doing the US return.
#45
Re: Lowdown on Tax Issues
https://www.immi-usa.com/green-card-...d%20correctly.