lgabriel73

Hi
I need help figuring out what tax forms I need to file for the US and am hoping some of the tax experts on this forum can help.
Returned to UK May 17 2014 and surrendered my permanent residence card effective that date. Was living in massachusetts and earning income which i was taxed on between January 1 - April 20th 2014.

Do I need to file a 1040 or would it be a 1040NR? Confused because when I was paying taxes in the US I was a resident but not a resident for the entire tax year. Is there a part year resident form and would I file that?

Also after I left the US I did some consulting work for my former employer in the US until October. This income was not taxed in the US. Do I include this on my US tax return and pay US taxes on it or would it be liable for UK taxes since I was a UK resident when earning the money and have to file a UK self assessment?

Confused right now so any help would be appreciated.
Thanks.

durham_lad

I think you will still be resident for tax purposes in the US for tax year 2014.

Substantial Presence Test

nun

It sounds like you had a green card, therefore you would be liable to US tax on your worldwide income up to the point you gave up the green card.

When you say you gave up the green card, what exactly did you do? Did you file an 8854 with the IRS and an I-407 with the state department?

lgabriel73

I filed the form with INS to the 407 to abandon my green card. That was effective May 17th. Didn't have to file the 8854 because I had not had my green card long enough to meet those requirements. Prior to May 17th only income was in the US. After May 17th had non taxed income from the US as a consultant until October, then in October only income has been UK wages taxed in the UK.

nun

So from May 17th you became an NRA. You would file a dual status return. After May 17th there will only be US tax on US sorce income. As you were working in the UK your consulting income is only UK taxable.

lgabriel73

Thanks Nun. So is that the 1040NR and I write dual status at the top?

nun

Yes

TopNik

Hi Igabriel73,

You will be classed as UK resident for tax purposes for the 2014/15 tax year.

Therefore, as you have received foreign income whilst UK resident you will be liable for UK tax on this income.

If you have not done so already you will need to register for self assessment with HMRC and file a self assessment tax return for the above tax year.

nun

Just an observation. For 2014 US taxes, that I assume are being done now, the OP will have a dual status return being US resident from Jan 1st to May 17th and an NRA for the rest of the year. Also don't forget the MA part year resident form

http://www.mass.gov/dor/docs/dor/for...pdfs/nr-py.pdf

The UK tax year goes from 6th April 2014 to 5th April 2015 and the OP will have a split year being UK non-resident from April 6th to May 17th and UK resident after that. The work performed in MA was taxed in MA and the US and there would be no UK tax on that. The consulting work for a US company is not foreign income as it was performed in the UK. Also as the work was performed while a UK resident and a US NRA there is no US tax due, but there is UK income tax and National Insurance to be paid.

So the OP will only need to include the US earned income on the 1040NR and MA part year resident form.....and of course any other US source income from investments, rentals etc. The UK earnings will only appear on the HMRC Self Assessment. If the OP is taxed on an arising basis in the UK then UK tax will be due on the non-earned US income generated after returning to the UK and then credit for that UK tax would be taken on the 1040NR using a a Foreign Tax Credit form 1116 using the "Income resourced by treaty" basket.

lgabriel73

Thanks Nun you've really helped :-)

TopNik

For UK tax purposes you are either UK resident or UK non-resident for the tax year in question.

The OP states Also after I left the US I did some consulting work for my former employer in the US until October. This income was not taxed in the US

As the OP has received foreign employment income (assuming the OP is treated as still being employed which is likely as it would be difficult to justify being self employed to HMRC under these circumstances) and would be UK resident the OP is subject to UK taxation on their earnings received from their foreign employer.

When the employer has no UK presence they have no obligation to take the necessary tax from their pay so in this situation the employee is considered as being paid gross of tax and will have to complete a UK tax return and pay the tax themselves through the self assessment process.

nun

Sorry to disagree, but I believe that the OP will qualify for split year treatment. They should at least investigate their residency treatment using HMRC's online calculator and reading the rules for split year residency

HM Revenue & Customs: Service unavailable

The OP's exact employment status will depend on the terms of the contract they have with the US organization, there are many factors that determine whether someone is self employed. As no US income tax of FICA was withheld the OP seems to have the status of a contractor billing at an hourly rate and will be responsible for their own taxes. I expect they would be classes as a "sole proprietor" in the US and the US company is working with them on that basis. This is important as it relates to US taxes as if FICA and US income taxes had been withheld there would be extra US tax filing to get the money back as the OP is not liable to either US tax because they are not US resident any more.

So now HMRC needs to be considered, they might consider the OP to be employed by the US company or they might see the OP as self employed and billing a foreign client for work performed in the UK....in either case UK income tax and NI must be paid by the OP. I imagine being classed as employed vs self employed will change the NI tax paid so it's important to get that right. If the OP shares how they were paid (did they bill at an hourly rate?) and the terms of the contract maybe it will become clearer, personally I would register as self-employed with HMRC and pay NI and income tax on that basis until they said otherwise.

lgabriel73

I was a self employed contractor and I billed the company an hourly rate. No tax of any kind was taken out and I received a 1099 from them at the end of the tax year. All the contracting work I did was in the UK and after I anandoned my US resident status so I was a resident of the UK at that point. From what I know of the UK part I will have to file a self assessment for my consulting earnings and pay the UK tax.

nun

That sounds sensible to me. HMRC does have some rules to determine if you are self employed or not, it's best to have more than one client, but I think all the other factors you've described indicate that you are self employed. Have you registered as self employed with HMRC? and know how to calculate Class 4 and Class 2 NI contributions?

lgabriel73

yes I did register as self employed however I am now employed full time by a UK company and my NI is paid directly.