Elvira

When we moved to the US 3 years ago, we consulted a CPA who told us that we should file our UK income (rental property) in the UK, and that we do not need to declare this income to the IRS until we become Permanent Residents.

This CPA has been filing our US taxes ever since. Each year we asked him whether he needed to see our UK tax returns, and every time he said no.

We are about to file our I-485s and have just come across information that suggests that what our CPA has told us may be a load of *#$%@!!

What can we do to rectify this? TIA for any suggestions or advice.

scrubbedexpat099

Get a new Accountant sounds the first step.

I have just completed my tax calculation, I am adjusting status but the IRS site is quite specific as to what their tentacles wrap around as are the guide books. Pretty basic error.

The IRS allow more deductions, allthough the rate here is higher for us, the UK tax is more than the US tax because of the deductions.

So I would work through the US way for the mising years and then fess up.

You could try ringing the helpline for what to do next.

franc111s

I would not worry too much. Firstly, if you have been paying taxes in the UK then there is a Dual Tax treaty between the USA and UK which means you won't pay tax twice. *IF* (unlikely) you owe US taxes then you can claim them back from the UK.

If you file US tax returns it is always best to put on all your world-wide income etc, it's just easier to deal with later so your accountant was probably half correct.

I filed taxes in the UK and USA for many years but on the USA stuff I often included only the major bits. However, for minor stuff where UK taxes were paid (tax on interest at source etc.,), we just didn't bother. If you are paying taxes in the UK and USA and are not avoiding taxes then you are OK but I would start soon to include the UK stuff on US forms just to cover the formalities of doing so. Your accountant actually probably knows more than the IRS though.

http://www.inlandrevenue.gov.uk/cnr/app_dtt.htm

I can't find the US side description but as a treaty - it should be similar

scrubbedexpat099

I am not an expert, but:

Double taxation treaty does not apply to rental proceeds, covers income dividends etc.

Under double taxation you claim back the tax you have paid to Inland Revenue BUT then pay tax to IRS.

You fill in this form:

http://www.inlandrevenue.gov.uk/cnr/...al_an_2002.pdf

With regards to Rent, Inland Revenue gets first bite, you then have the option of taking a credit or deduction on the UK tax accrued/ paid. Usually a credit is the way to go. Usually, but not always the US tax due would be less than the Inland Revenue tax due.

My understanding is that you have to declare to the IRS all your worldwide income, and show if you are eligible to a credit, there is I believe a 'simple' declaration for very small amounts, a few hundred dollars.

I was rather hoping that someone might have produced a good summary, but I could not find one.

No_one

i am neither accountant nor lawyer... however FWIW... usually you file all
w'wide income and the IRS takes into account the UK tax paid and subtracts
that from the US liability.


"DonnaElvira" <member35233@british_expats.com> wrote in message
news:[email protected] m...
    > When we moved to the US 3 years ago, we consulted a CPA who told us that
    > we should file our UK income (rental property) in the UK, and that we do
    > not need to declare this income to the IRS until we become Permanent
    > Residents.
    > This CPA has been filing our US taxes ever since. Each year we asked him
    > whether he needed to see our UK tax returns, and every time he said no.
    > We are about to file our I-485s and have just come across information
    > that suggests that what our CPA has told us may be a load of *#$%@!!
    > What can we do to rectify this? TIA for any suggestions or advice.
    > --
    > Posted via http://britishexpats.com

Elvira

I am getting more confused by the minute:

- our immigration lawyer 'is not sure' whether we should have declared out UK income to IRS;

- our accountant 'thinks' that 'we' (I hope he's including himself in this 'we' as HE was advising us and filing our returns!) did nothing wrong by only declaring said income in the UK (as long as we have the statements from the Inland Revenue to prove it - which we do).

Could it be that this is another one of those 'gray (sic.) areas' we hear so much about, I wonder?

I have asked the accountant to point me to the IRS rules that support his statement. Watch this space... In the meantime, I would welcome any additional comments on this subject!

scrubbedexpat099

Not a grey area

UK does not require you to tell them about your world wide income.

US does

There are a couple of tax guides that may help, the one by Ernst and Young is the one that I have.

Actually they did my Wife's taxes when she was in the UK, she needed to declare her UK income to the US authorities. This ofetn comes up as an issue on the Marriage board.

There is a tax treaty whereby certain UK income (not rent) is only subject to US taxes.

I asked a friend of mine who has been here 20 years what he did about his UK income, no real answer, I think Uncle Sam does not know.....

USCIS do know about mine, probably a stretch that IRS does as well but I am not risking it for 30 quid this year and nothing next.

JAJ

Most British people overseas can use the UK personal allowance to set against UK taxable income.

That doesn't affect liability to US tax (I'm pretty sure that US residents are liable to tax on worldwide income), but does mean that the UK side of the equation usually reduces to zero unless the amounts concerned run into many thousands of pounds.


Jeremy