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confusing tax situation - help?!

confusing tax situation - help?!

Old Jan 24th 2006, 11:11 am
  #1  
WayneA
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Default confusing tax situation - help?!

Hi:

My wife (UKC) and I (USC) have just emmigrated to the US from Wales. She is pregnant and still receiving maternity pay back in the UK, which is going into a UK bank. The UK taxmen will obviously be taking out the standard UK tax and NI from her pay each month.

We're confused about how to manage this tax situation between the UK and US collectors, as we've been advised that we may have to pay both US and UK tax. Can we remove the NI? etc etc...

We realise that professional advice is always best, but can anyone give us some tips??

Wayne
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Old Jan 24th 2006, 12:14 pm
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Default Re: confusing tax situation - help?!

Originally Posted by WayneA
Hi:

My wife (UKC) and I (USC) have just emmigrated to the US from Wales. She is pregnant and still receiving maternity pay back in the UK, which is going into a UK bank. The UK taxmen will obviously be taking out the standard UK tax and NI from her pay each month.

We're confused about how to manage this tax situation between the UK and US collectors, as we've been advised that we may have to pay both US and UK tax. Can we remove the NI? etc etc...

We realise that professional advice is always best, but can anyone give us some tips??

Wayne
I know that there is an agreement between the US and UK that you can only be taxed once i.e. you can't be double taxed on the same income. When you come to file your US taxes, you would list your wifes maternity pay as foreign income. You only pay taxes in the States on your US earned income up to a certain level. I'm sure that the IRS can clarify this for you - I don't think that it is anything to worry about. I'm pretty sure that you can't remove the National Insurance contributions from your wifes payments. Has she notified her tax office that she has now left the country?

In the case of her tax depending on how much she has aleady earned during this UK tax year 5 April - 6 April, she may be entitled to a tax rebate at the end of the tax year because the tax that is deducted is based on her receiving income for the whole year. She will need to apply for this herself to her tax office. Hope this helps.
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Old Jan 24th 2006, 12:17 pm
  #3  
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Default Re: confusing tax situation - help?!

I'm certainly no tax expert -- I always use Turbo Tax to do my returns -- but "maternity pay" is still income nonetheless. And in this case, it's foreign-earned income. So with that in mind, you might be able to simply fill out the 2555 Foreign-Earned Income Exclusion with her UK job and income information. There are certain requirements that must be met in order to qualify for it, but that is at least a starting out point.

Bottom line is, if you're making less than $80k in foreign-earned income, you shouldn't have to pay taxes twice on it.

Instructions for Form 2555 (PDF)

Choosing The Foreign Earned Income Exclusion

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