CarlWain74

Hi all,

I'm just getting round to filing my US taxes (have filed an extension which gives me a little breathing space).

My situation is that I moved from the UK on 1st Dec 2009. In 2009 I earned £34K for which the tax has already been paid, HMRC decided it would make me pay in advance before I submitted my 2009/2010 taxes due to some circumstances. So I feel that I'm not expected to be taxed on this income as I was considered a resident of the UK for 2009.

Anyway, what I'm trying to work out is how to fill out the forms for the UK income. I called HR Block and they started rambling on about credits etc. I've been reading through forms 1040NR and 1116 instructions but it's not clear to me. Would hate to fill out these forms and have them come back to haunt me with penalties and interest fee's

I've not past the substantial presence test for 2009 so I am a non-resident, but I believe I read somewhere that the UK/US Tax Treaty does not take the presense test into account, it just reats you as a Resident.

Is it worth letting HR Block handle this case or should I look up a local accountant here in Washington state. I'm keen to get this sorted but at a reasonable cost.

From the US income I am ok as this part was reletively easy to fill out and it would seem that I am due a refund :-)

Anybody been in or is in the same position, once I get over this ordeal I'm going to write it up for others.

Cheers,
Carl

jamestravis

You'll have to file a Dual Status return.
http://www.irs.gov/businesses/small/...=96433,00.html

CarlWain74

As I earned my UK income as a non-resident I won't be taxed on it, I only became a resident last month as I passed the presence test. The only income they may be interested in is my UK rental income which was received without tax taken off, but that is only £800 for Decemeber (and not including deductions etc).

I've found a few CPA's in my area which specialise in international setups so will be contacting them.

I'll be sure to detail my findings afterwards....staying up late reading UK/US tax treaties is not good for my mind or health

rew1000

I'd just add that I'm not sure the US/UK tax treaty comes into it: generally the tax treaty only matters when you're trying to override the normal tax system.

For your purposes, a standard nonresident filing would probably be fine. I doubt that UK rental income is US-taxable as a nonresident.

Sometimes dual status is worth doing because the tax rates/deductions are better for resident than for nonresident aliens. For 1 month it might not be worth the complication though...

Peter Newton

Sounds like you simply need to file 1040-NR and report the US income earned in December. In this case you won't need to report your UK income (employment nor rental).

CarlWain74

Sounds like I've been getting all stressed out over nothing. I've filled out the 1040NR to the best of my knowledge thanks to express1040.com, though I never hit the filing button so I could print out a prepared form

Could someone explain what these foreign tax credits mean?

I do appreciate all of your comments

Michael

The foreign tax credits asked for on the 1040NR refer to the foreign taxes that were charged to you through issuance of a 1099 form while you were in the US from passive investments (eg. stock dividends, bond interest, mutual funds distributions, etc.). Therefore all 1099 income would be required to be reported on the 1040NR but you can offset any taxes owed to the US by taxes collected in another country.

This is common with any 1040 form. If your investment is foreign, US taxes owed from the 1099 income can be offset by the foreign taxes paid on the 1099 income.

AdobePinon

Note that if you file as a non-resident, you are only taxed on US-source income. However, you are entitled to fewer deductions.

CarlWain74

For 2009 that suits me fine. However, for 2010 I will file as a resident and have recently been informed that I file using 1040-EZ instead of the 1040-NR.

Michael

Yes, 1040 if you have deductions or passive income (stock redemptions, etc.) or else 1040-EZ if you have a simple return.

For 2010 if you don't have foreign income, you may want to use something like Turbo Tax or Tax Cut to do your taxes and it will figure out which forms to use.

CarlWain74

Well life in the tax world is pretty simple for me as I am single with no dependents..

Looking at a prepared 1040 as if I was a resident using a free e-file company there were only a dozen entries to fill in.

However, the thought of buying a new software package each year seems really unnecessary. Though how much more effort and money will be spent with using an online e-file company like express1040 etc

EDIT: I live in Washington so only have to pay Federal taxes so looks like using TurboTax won't cost me a $

Michael

If you have a simple return, it should take you about 10 minutes to fill it out a 1040EZ form manually or via an e-file company and probably no need for any tax package.

CarlWain74

I'm trying to fill out this 1040NR and I'm stuck on the Schedule A where it states Local Income Tax?

What taxes are these exactly? I've gone through the form and cannot see where I could enter Social Security and Medicare Taxes.

My assumption would be that these two added together are the "Local Taxes"

Does this make sense?

I don't have state tax as I'm in Washington State :-)

penguinbar

Social Security and Medicare are not local tax.

CarlWain74

So what is meant by Local Tax? I can see that I have mentioned already the Income Tax on 58a (Under Payments). I would therefore assume that Social Security and Medicare needs to be included as a Payment somewhere?

It's then not clear where Social Security and Medicare is taken into account on the 1040NR form :-(