British Expats
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British Expats (https://britishexpats.com/forum/)
-   Moving back or to the UK (https://britishexpats.com/forum/moving-back-uk-61/)
-   -   Is the US/UK tax situation really that complicated?? (https://britishexpats.com/forum/moving-back-uk-61/us-uk-tax-situation-really-complicated-921138/)

theOAP Jan 26th 2019 7:09 pm
Re: Is the US/UK tax situation really that complicated??
 
Originally Posted by morpeth (Post 12627681)
To not pay tax on SS in USA if resident in UK is there any procedure that needs to be followed or form filed?
There are no special forms or procedures. If you want the SS benefit paid into a UK account, just inform the SSA. Exchange rates are the best available on the day of the transfer which is usually the 3rd of every month. If to a US account, it is still taxable only in the UK if a permanent UK resident. 100% of the benefit is declared to HMRC and taxed at UK rates.

For a 1040 tax return, filing an 8833 is an option , although thanks to the Totalisation Agreement, not a necessity. If a paper return is filed with the IRS, a note may be made (in pencil) next to the $0 taxable amount on the SS line. Both are CYA options. There are no specific instructions from the IRS for the non-taxed SS declaration.

For HMRC, declare the SS income on the foreign pages of a self assessment return under Pensions.

theOAP Jan 26th 2019 7:15 pm
Re: Is the US/UK tax situation really that complicated??
 
Originally Posted by durham_lad (Post 12627688)
I would expect that on the line in the 1040 that SS is reported to put it all under non-taxable,....
On part (a) of the appropriate line*, put the amount from the 1099. On part (b) of the appropriate line* (taxable), put $0.

* I'm too lazy to look up what line that will be on the new 1040 form. :o

durham_lad Jan 26th 2019 8:15 pm
Re: Is the US/UK tax situation really that complicated??
 
Originally Posted by theOAP (Post 12627745)
On part (a) of the appropriate line*, put the amount from the 1099. On part (b) of the appropriate line* (taxable), put $0.

* I'm too lazy to look up what line that will be on the new 1040 form. :o
same here, I couldn’t be bothered to look up the line number either :lol:

durham_lad Jan 26th 2019 8:36 pm
Re: Is the US/UK tax situation really that complicated??
 
Originally Posted by Hotscot (Post 12627728)
I don't think you'd owe anything at all to the US unless the funds come from a trade or business, and reportable on Schedule NEC.
Just treat it as income in your country of residence.

(I am not a tax professional.)
From my reading of IRS Pub 519 I think US private pensions and distributions from IRAs are taxable in the USA for non resident aliens which would certainly apply to me unfortunately.

Beraider Jan 26th 2019 9:07 pm
Re: Is the US/UK tax situation really that complicated??
 
Originally Posted by durham_lad (Post 12627787)


From my reading of IRS Pub 519 I think US private pensions and distributions from IRAs are taxable in the USA for non resident aliens which would certainly apply to me unfortunately.
I was under the impression that treaty provisions may apply depending of course on the particular treaty?

durham_lad Jan 26th 2019 10:09 pm
Re: Is the US/UK tax situation really that complicated??
 
Originally Posted by Beraider (Post 12627810)
I was under the impression that treaty provisions may apply depending of course on the particular treaty?
You are almost certainly correct. For non resident USCs the “savings clause“ overrides article 18 which states that pensions are only taxable in the State of residence. I have to pay US taxes on my US pensions then zero them out with foreign tax credits using form 1116 for HMRC taxes paid.

Beraider Jan 27th 2019 7:01 am
Re: Is the US/UK tax situation really that complicated??
 
Originally Posted by durham_lad (Post 12627826)

You are almost certainly correct. For non resident USCs the “savings clause“ overrides article 18 which states that pensions are only taxable in the State of residence. I have to pay US taxes on my US pensions then zero them out with foreign tax credits using form 1116 for HMRC taxes paid.

Ahh, so not being a US citizen does have its advantages in some respects then😀

durham_lad Jan 27th 2019 8:43 am
Re: Is the US/UK tax situation really that complicated??
 
Originally Posted by Beraider (Post 12627930)
Ahh, so not being a US citizen does have its advantages in some respects then😀
Definitely!!

theOAP Jan 27th 2019 9:38 am
Re: Is the US/UK tax situation really that complicated??
 
Originally Posted by Beraider (Post 12627930)
Ahh, so not being a US citizen does have its advantages in some respects then😀
In terms of tax and investment treatment, NRAs definitely have an advantage over USCs resident abroad. US citizens resident abroad have been campaigning for the last 5 years to be treated on equal terms with NRAs. The Tax Fairness for Americans Abroad Act was proposed in the last Congress, but still does not achieve equal advantages to those enjoyed by NRAs.

theOAP Jan 27th 2019 9:52 am
Re: Is the US/UK tax situation really that complicated??
 
Originally Posted by durham_lad (Post 12627779)
same here, I couldn’t be bothered to look up the line number either :lol:
In an above post, I said "For HMRC, declare the SS income on the foreign pages of a self assessment return under Pensions."

I'm just relieved you didn't ask about the 'amount' to declare. ;)

I don't have any deductions for Medicare plans ('A' is free) and therefore list the gross amount from the 1099. I don't know what amount one would list on the HMRC self assessment if someone has additional deductions for additional Medicare programmes; the gross or net amount. If net, it would certainly complicate the apportionment calculations to void the UK tax paid on 1116.

Albert_dock Jan 27th 2019 9:59 am
Re: Is the US/UK tax situation really that complicated??
 
So in our situation, having ALL my (and spouse) money tied up in the US. (Pension/401/457/SS) Would renouncing US citizenship be in anyway beneficial financially? Or are we too involved?

durham_lad Jan 27th 2019 10:15 am
Re: Is the US/UK tax situation really that complicated??
 
Originally Posted by Albert_dock (Post 12628004)
So in our situation, having ALL my (and spouse) money tied up in the US. (Pension/401/457/SS) Would renouncing US citizenship be in anyway beneficial financially? Or are we too involved?
Probably yes but would like to hear from others more knowledge than myself

Albert_dock Jan 27th 2019 10:30 am
Re: Is the US/UK tax situation really that complicated??
 
Originally Posted by durham_lad (Post 12628018)

Probably yes but would like to hear from others more knowledge than myself
Interesting 🤔 Fortunately I have a little time on my side to plan this all out favorably.

theOAP Jan 27th 2019 10:44 am
Re: Is the US/UK tax situation really that complicated??
 
Originally Posted by Albert_dock (Post 12628004)
So in our situation, having ALL my (and spouse) money tied up in the US. (Pension/401/457/SS) Would renouncing US citizenship be in anyway beneficial financially? Or are we too involved?
IMO, given your circumstances and your declared intention to have only US sources of income with no investments abroad other than a current bank account, renunciation would not yield an advantage, although owning a home abroad does present potential consequences. In this case as a USC, there are only the yearly tax and information (8938, FBAR which carry penalties for non-reporting) US filings along with determining how to report those US sources to HMRC. Given your circumstances, and as an NRA, you could still have substantial US yearly 1040NR reporting.

Renunciation is a very, very personal decision based on individual circumstances. Most who renounce are long term residents abroad with no intention of returning to the US, and have no personal close ties to the US such as immediate family or a desire to return at some date in the future. Most who renounce have sources of income from abroad and wish to partake in the normal investment opportunities of their resident country. Also, the foreign country will have established ways for a resident to prosper under specific programmes (tax free income, social benefits, etc.) which conflict with US established ways. Some USCs abroad are unable to renounce without suffering substantial financial hardships thanks to the Section 877A rules (as found on form 8854).

You've not mentioned family in the US or a desire to return in the future; renunciation is very dependent on those considerations.

Albert_dock Jan 27th 2019 11:05 am
Re: Is the US/UK tax situation really that complicated??
 
Originally Posted by theOAP (Post 12628027)
IMO, given your circumstances and your declared intention to have only US sources of income with no investments abroad other than a current bank account, renunciation would not yield an advantage, although owning a home abroad does present potential consequences. In this case as a USC, there are only the yearly tax and information (8938, FBAR which carry penalties for non-reporting) US filings along with determining how to report those US sources to HMRC. Given your circumstances, and as an NRA, you could still have substantial US yearly 1040NR reporting.

Renunciation is a very, very personal decision based on individual circumstances. Most who renounce are long term residents abroad with no intention of returning to the US, and have no personal close ties to the US such as immediate family or a desire to return at some date in the future. Most who renounce have sources of income from abroad and wish to partake in the normal investment opportunities of their resident country. Also, the foreign country will have established ways for a resident to prosper under specific programmes (tax free income, social benefits, etc.) which conflict with US established ways. Some USCs abroad are unable to renounce without suffering substantial financial hardships thanks to the Section 877A rules (as found on form 8854).

You've not mentioned family in the US or a desire to return in the future; renunciation is very dependent on those considerations.
We don’t have any real family ties here in the US and never thought we would want to move back to the UK, when we left 30 years ago. I seriously doubt that if we make the move back to the UK we would want move back to the US. Saying that, giving up our US citizenship is something I wouldn’t do without some serious consideration. If though long term it would be financially beneficial and not harm us in anyway, I think I would consider it in the future.


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