Russet

The process of submitting tax returns to two different countries with different tax years and currencies is daunting and I know the first year is going to be the most challenging. We are joint UK/US citizens now resident in the UK. My question is not really about the details and rules of each tax submission but about how to manage the steps involved in getting this done every year and how difficult and or expensive it is. I would love to hear from people in a similar situation who already do this and could provide a rough summary of the process they go through each year to accomplish this.

I am thinking preparation and organisation is key. I plan to maintain UK and US month by month spreadsheets to record transactions and wondered if anyone had any tried and tested templates as a starting point before I try and reinvent the wheel!

Thanks for the help!

durham_lad

As you say, the first year is the trickiest and for us we did a split-year HMRC return, and used a dual qualified tax preparer to do this return.

One thing she did which we have continued to do each year is make a comment on the HMRC return that we are treating our US income as being concurrent with the calendar year, which means that I don’t have to keep track of US income on a spreadsheet to marry it up to the UK April to April tax year. We have income from US pensions, dividends, interest and sale of shares. This means the information from our 1099 and W2 forms works for both the IRS and HMRC returns.

The only exception to the calendar year alignment is capital gains from the sale of shares so I make sure that I only sell shares between April and December (e.g. sale of shares in March 2020 would be reported on the HMRC return for 19/20 but a dividend or pension distribution would be reported on the HMRC return of 20/21).

ETA
the spreadsheet is important for reporting my UK private Pensions and Interest payments on our IRS return because the P60 is reporting income received April to April

Russet

Thank you for your help durham_lad. Do you have any hints on the types of information I need to gather and record for each transaction in the spreadsheet?

durham_lad

I use an Excel or equivalent workbook with a sheet for each pension and interest income stream. The first sheet is the monthly exchange rate as published by HMRC which I update each month. Each month I receive a payment I make an entry with date and payment in £s. The adjacent cell is that payment converted to $s using the exchange rate for that month that I have recorded on the first sheet.

At the bottom of each column is the total income for the year.

minhan

Hi,

I hope you don't mind to advise / share your experience. I lived in the US for couple years and now moved to the UK with my family. We receive dividends from a loan to family member. The amount is under the threshold to pay US taxes but we still file US taxes and report that foreign income in our UK taxes.

Just checking whether I'm doing the correct way. I only file federal tax, not state tax. I have a spreadsheet to calculate what I receive month by month in the US and convert to sterling using average exchange rate (the UK government website let me choose the annual rate). For UK income tax, I add the # from April to April. Does it make sense?

I file US tax via the Turbo tax, it has all my details, i just throw in the numbers. I wonder how long more I have to file US tax if the amount I receive never reach taxable figure.

Please share your thoughts.

durham_lad

What you are doing makes sense to me but I’m not an expert on taxes.

Not sure about State taxes as that will depend on the State your relative lives in as the income may be coming from a State that taxes people who receive income no matter where they live.

You can see from the site below if you have enough income to need to file federal taxes.

https://www.irs.gov/filing/individuals/who-should-file

https://www.irs.gov/publications/p501