dlm5774

I'm moving back to the UK after 20 years in USA and have some financial questions. Hope someone can help!

1) What's the best way to move my liquid money from the US to the UK (about $60,000) and not be subjected to any UK taxes (I have already paid US taxes).

2) What do I do about my US 401K and IRA. Can I leave them alone and start drawing funds from them when I hit retirement age in UK. Will I have to pay US, UK or double taxed? Will I have to continue filling taxes in US? Will it impact any UK government pension I could receive?

3) Will I still be eligable for US social security when I retire? I paid into US system for 20 years. I also worked for 4 years in UK prior to moving to the US and plan on working for at least another 20 years when I move back to UK. Hoping I can claim US SS and UK state pension.

Thanks

dunroving

1) XE.com is among the easiest and cheapest fees, best exchange rate. No tax due on moving savings regardless of what method you use.

2) Yes. Yes, but not double-taxed (Google dual taxation treaty). Yes, forever if you are a USC, Yes for a few years if you are an LPR. Maybe - see Windfall Arrangement.

3) Yes. Yes you can also earn and claim UK pension (but again, Search for "Windfall" in the US forum and this forum).

timetogohome

With regard to # 3 above - does anyone know whether it makes any difference whether you are a U.S Citizen or not? Like dunroving I'm moving back to the UK (next year) after 13 years in the USA during which I've paid into the USA Social Security system. They send me statements each year telling me I have enough credits and am eligible to receive benefits. But I'm a UK Citizen not a US Citizen - I'm only a 'Resident Alien' (Green Card holder) in the USA. Does anyone know if it makes any difference i.e. whether I'll be able to receive US Social Security retirement benefits after I return to the UK?

manny1980

After reading a few links on the IRS website, I am now a little confused regarding whether one is required to file US tax returns if living abroad or not.

On this website: http://www.irs.gov/businesses/small/...=97324,00.html it appears that all US citizens and Resident aliens living abroad must file taxes however,
on this other website: http://www.irs.gov/businesses/small/...=97130,00.html it states one can be excluded from paying income tax over a certain figure set at $95,100 for 2012.

If anyone has a clear idea on above, would be helpful if they can share their understanding on this.

Another important information many may not be aware is regarding foreign bank accounts...: If you are a US Citizen and open a bank account in a foreign country and your total savings abroad is over $10,000 then you MUST, by law, report these bank accounts to the IRS. IRS is known to seek US citizens with hidden bank accounts who have stashed a lot of cash overseas in order to circumvent from paying taxes on the income. If they find out about these undeclared banks later, then there are huge penalties and probably criminal charges that individual. Hence, better not take a chance and report all the savings in banks abroad. More information on this can be found on: http://www.irs.gov/businesses/small/...148849,00.html

penguinsix

In short, if you are an American, fill out a US tax form every year.

Now, in a bit more detail, that isn't necessarily the requirement. There is a general rule "if you don't owe, you don't have to file" US income taxes. When you live overseas (after you meet one of two 'tests') you can be eligible for things like the foreign earned income test and the foreign housing exclusion. The effect of these are that the first $92,000+a bit of your income can be excluded from your income taxes. This doesn't exempt US-based income, such as rental income in the US or other stuff that might be 'earned' in the US technically.

For many people, this means they end up owing no US income tax, so you revert back to the old idea of "if you don't owe, you don't have to file". Now just about every accountant you meet knows this rule, but many who handle US expats advise those living abroad to just go ahead and file anyway so you have some 'proof' that you didn't owe anything. This can be helpful later should you get an audit, or should there be a problem with the FBAR, or should you have some immigration-related need for a US tax return (i.e. to sponsor someone).

As for the reporting requirements, these suck. There is a form that has to be filed by June or July (I forget) called FBAR. If, at any time during the year, you have more than $10,000 US in a foreign bank account, you need to tell the Treasury Department that you have this account. It is part of the anti-money laundering laws.

There are soon to be additional requirements if you have more than $50,000, and there are separate requirements if you own a certain percent of a foreign business.

My advice would be to find an accountant in the UK versed in US-UK tax issues (there are a few) and pay them to handle your filing the first year, which is probably the most complicated as you will have part-year in the US, part-year in the UK. You may also have a US state tax filing requirement unless you actively disassociate yourself from the state (send in your drivers license, own no property, no bank accounts going to that address, etc). Varies by each state.

The US expats in the UK website has a special section on dealing with US-UK tax issues for Americans living overseas.

http://talk.uk-yankee.com/

nun

First what is your citizenship and residency status?

Wire transfer or XE is the easiest way to transfer money. If you become resident in the UK you will have to pay tax due in UK and if you intend to stay in the UK your worldwide income will be UK taxable too. If you are just transferring cash though the only tax issue might be a foreign exchange gain.

You can leave your 401k and IRA in the US. You should declare them to HMRC and claim the treaty exemption so that any gains remain tax free in US and UK. You can make distributions from them according to the US regulations. How they are taxed is covered by the tax treaty and will depend on your citizenship, you won't pay "double tax". You will have to file with the IRS and your pension provider to get the correct tax treatment of your distributions.....google W-4P and W-8BEN. Your US pension should not impact your UK pensions.

You will be eligible for US SS as you have 40 quarters of contributions, but your SS amount will be reduce if you have any pension paid for from non-SS wages......ie UK state or private pensions.

nun

You are eligible to get SS if you have more than 40 quarters, citizenship or residency don't matter.

Squirrel

I would get US citizenship if possible before you leave. Not only would it leave you free to return without going through any kind of immigration procedure again, but if in future they decide to cut costs by restricting SS payments for people outside the US to citzens only, you woouldn't lose out.

nun

Becoming a US citizen will also mean that the US can tax your worldwide income, open you up to FBAR and FATCA reporting and make it very difficult to invest in things like UK unit trusts.....also say good bye to your tax free ISA as the IRS will tax those if they are owned by a US citizen.

manny1980

Not necessarily taxed as the IRS webpage (http://www.irs.gov/businesses/small/...=97130,00.html) Foreign Earned Income Exclusion, which states "If you are a U.S. citizen or a resident alien of the United States and you live abroad, you are taxed on your worldwide income. However, you may qualify to exclude from income up to an amount of your foreign earnings that is now adjusted for inflation ($91,400 for 2009, $91,500 for 2010, $92,900 for 2011, $95,100 for 2012). In addition, you can exclude or deduct certain foreign housing amounts."

Beside, taxes in the UK are much higher than the US so if a US citizen or a former US resident is living in the UK lawfully (paying taxes there) then its unlikely they will be taxed twice as there is some dual-tax treaty that a US individual living in the UK can look into.

But..I totally agree with you with the hassles of FBAR and FATCA (wasn't aware of FATCA until you mentioned, thanks).

nun

The US will tax your worldwide income, but there may well be no tax due. As a US/UK dual citizen living in the UK you'll have to account for your income and gains on both sides of the Atlantic to the UK and the US tax man. But crucially you'll be an American and have to deal with all the financial obstacles that go along with that.

Here's an example. Let's assume you find a bank that is FATCA compliant that will take you as a customer, they may charge you higher fees than their UK customers. Even so you decide to open a stocks and shares ISA.....oops that ISA isn't tax free as you are a US citizen and the IRS does not recognize them. But even worse the ISA will be taxed using PFIC rules....and if you can understand those you are one of the few folks that can.

If you organize things carefully and are aware of how the tax treaty works you won't end up paying much more tax than you would in the most expensive tax country, things like loosing the ISA and tax free pension lump sum distributions are nasty, but mostly your financial life will be complicated and your investment options will be limited

J.JsOH

Ah, it pays to revisit this forum.

We are both dual UKC/USC resident in UK

I wasn't aware of FATCA (although need-to-report levels are pretty high at $600k within year or $400k at end of year)

I wasn't aware that ISA cannot be tax free to USC, although now inspired to quick search more, on the face of it I perceive that reporting this as taxable interest to US may not result in a tax due because my total tax paid in the UK will exceed my US tax liability.
Or am I being naive?

All the other stuff, FBAR, Unit Trusts are familiar to me.

(With all these acronym's I have to ask does FUBAR apply (as in Saving Private Ryan) ?)

Thanks to those that expose these issues.

nun

True, but you'd have to take foreign tax credits rather than the FEIE. Either way the gains or interest form the ISA have to be included on your 1040. Be aware that a stocks and shares ISA invests in foreign pooled investments (unit trusts) so PFIC applies so I'd stick with a cash ISA. If you go the foreign tax credit route you may well be able to have the cash ISA, pay zero US tax on the gain and you'll also be able to contribute to a ROTH IRA.

Brigette

I would say a definite YES!

timetogohome

I believe this question may have already been partly addressed on this thread but I'm now really looking for specific advice on what to do with my IRAs (before or after I leave the USA).

I am not a U.S Citizen only a 'Resident Alien' (Green Card holder) and when I leave the USA for good and return to the UK (hopefully this year) after 13 years in the USA I will be relinquishing my status as a permanent resident in the USA - never planning to return.

So this question is specifically seeking advice on what to do with my USA IRAs. I bet a boat load of folks on this forum have already gone through this scenario and so would be very interested in hearing what others have done and / or recommend based on their specific experiences.

It seems to me that I have two choices:

1) Cash in all of my IRAs and pay the IRS whatever taxes are due (am not liable for the 10% early withdrawal tax as I'm over 60). But I hear rumors that the IRS imposes an 'Exit' tax and will tax me at my marginal US tax rate (32%) on the entire value of the IRAs? I also hear that there may be an HMRC 'Entry' tax for moving the funds back to the UK - does anyone know about or have experienced such an thing?

2) I can leave my IRA accounts in place in the USA and just draw down on them during my retirement in the UK - just as I would if I were remaining in the USA.

I want to move as many of my investments back to the UK so I have better control over them so my immediate thought and preference is for # 1 i.e. to cash in my IRAs, let Uncle Sam takes what he's entitled to take and then take what's left back to the UK with me and be done with it all.

So my ask is simply - what have others done in this situation - and any advice much appreciated.

Thanks in anticipation of some sound advice based on other folk's experiences.