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Boiler Feb 23rd 2005 6:31 pm

Declaring UK Taxed Income to IRS
 
Well we have my Wife's taxes sorted but I also have a small income from the UK, Unfortunately not a lot, small amount of dividends, interest and rent.

All taxed by the Inland Revenue.

Now the logic of the double taxation agreement should mean that I have nothing to pay in the US, but I assume that I still need to declare what I have received.

But having spend the last hour searching through the IRS site and also BritishExpats I can not find out what form if any I have to complete.

We use taxactonline to submit, but that does not seem to have any facility for this situation. I would rather not have to use an Accountant, our affairs are straightforward otherwise. And the amount is not a lot.

Could someone help please, what IRS form do I need to fill in. Or give me a link!

Thanks

Lion in Winter Feb 23rd 2005 6:37 pm

Re: Declaring UK Taxed Income to IRS
 

Originally Posted by Boiler
Well we have my Wife's taxes sorted but I also have a small income from the UK, Unfortunately not a lot, small amount of dividends, interest and rent.

All taxed by the Inland Revenue.

Now the logic of the double taxation agreement should mean that I have nothing to pay in the US, but I assume that I still need to declare what I have received.

But having spend the last hour searching through the IRS site and also BritishExpats I can not find out what form if any I have to complete.

We use taxactonline to submit, but that does not seem to have any facility for this situation. I would rather not have to use an Accountant, our affairs are straightforward otherwise. And the amount is not a lot.

Could someone help please, what IRS form do I need to fill in. Or give me a link!

Thanks


How about this?

http://www.irs.gov/pub/irs-pdf/f1116.pdf


Also, the IRS has a helpline which is surprisingly helpful. Call them really early am to avoid a wait. I'll have a look for the number

Forgot, there may be a difference depending on whether you have a Green Card here, or a certain type of visa. Don't know. Better ask them.

Lion in Winter Feb 23rd 2005 6:40 pm

Re: Declaring UK Taxed Income to IRS
 
Here we go. Phone numbers.

http://www.phila.gov/revenue/pdfs/IRS_phone_numbers.pdf

Boiler Feb 23rd 2005 6:56 pm

Re: Declaring UK Taxed Income to IRS
 
Thanks, I am printing out the forms and the guidance notes.

It appears that I can not transcribe my UK numbers, differant tax years mean that I have to pro rata to tray and come up with numbers that compare with the US tax year.

Would not be so bad if they actually added up to something.

Lion in Winter Feb 23rd 2005 6:59 pm

Re: Declaring UK Taxed Income to IRS
 

Originally Posted by Boiler
Thanks, I am printing out the forms and the guidance notes.

It appears that I can not transcribe my UK numbers, differant tax years mean that I have to pro rata to tray and come up with numbers that compare with the US tax year.

Would not be so bad if they actually added up to something.

Well, that's the IRS for you. Lots of forms, little point. I use the TaxAct thing too. Worked fine, I have a simple life too (financially speaking only).

Just Jenney Feb 23rd 2005 7:07 pm

Re: Declaring UK Taxed Income to IRS
 

Originally Posted by Boiler
Well we have my Wife's taxes sorted but I also have a small income from the UK, Unfortunately not a lot, small amount of dividends, interest and rent.

All taxed by the Inland Revenue.

Now the logic of the double taxation agreement should mean that I have nothing to pay in the US, but I assume that I still need to declare what I have received.

Here's some more info and links on the Foreign Tax Credit:

Foreign Tax Credit -- If you paid or accrued foreign taxes to a foreign country on foreign source income and are subject to U.S. tax on the same income, you may be able to take either a credit or an itemized deduction for those taxes. Taken as a deduction, foreign income taxes reduce your U.S. taxable income. Taken as a credit, foreign income taxes reduce your U.S. tax liability.

Form 1116 - 2004 Foreign Tax Credit

Instructions - 2004 Form 1116

Publication 54 - Tax Guide for U.S. Citizens and Resident Aliens Abroad

Although we did not file for a Foreign Tax Credit, we did use 2004 TurboTax Deluxe to do our taxes, and it DOES have information on how to file Form 1116 as well.

~ Jenney

Gross50 Feb 23rd 2005 10:22 pm

Re: Declaring UK Taxed Income to IRS
 

Originally Posted by Boiler
Well we have my Wife's taxes sorted but I also have a small income from the UK, Unfortunately not a lot, small amount of dividends, interest and rent.

All taxed by the Inland Revenue.

You are definitely in a complex situation. For the rental income, get a Inland revenue non-residents landlord waiver, that way you dont pay UK tax on the rent. File in the US the rental income. You can deduct your mortgage interest and expenses. You can even include a trip to the UK to 'check' your property as a deduction. The US allows you to deduct the depletion/depreciation of your UK rental property, equipment, furniture and fixtures.

For dividends I cant remember the US form I sent to my UK broker to prevent double/higher taxation.

if you have a foreign bank account make sure you send TD F 90-22.1 to the treasury.

Boiler Feb 23rd 2005 10:36 pm

Re: Declaring UK Taxed Income to IRS
 

Originally Posted by Gross50
You are definitely in a complex situation. For the rental income, get a Inland revenue non-residents landlord waiver, that way you dont pay UK tax on the rent. File in the US the rental income. You can deduct your mortgage interest and expenses. You can even include a trip to the UK to 'check' your property as a deduction. The US allows you to deduct the depletion/depreciation of your UK rental property, equipment, furniture and fixtures.

For dividends I cant remember the US form I sent to my UK broker to prevent double/higher taxation.

if you have a foreign bank account make sure you send TD F 90-22.1 to the treasury.

Thanks,

I sorted the non-residents waiver before I moved, so thats OK. I thought I was fairly clear on my UK liabilities, to be fair to the Inland Revenue their booklets are pretty good on what you can and can not allow for.

My understanding was that i would need to pay UK tax on the rent, filling the form in just stopped it being deducted by the agent. Something to read again, tomorrow.

The Treasury form I will need to investigate, I saw no need to close my accounts in the UK, in fact I am sure my USC wife has her current account and my step son has a Building Soc account, not that there is more than a fiver in it. It was such a hassle getting it in the first place, I am sure he kept it going.

Just wondering, but there could be many who do not know this.

Boiler Feb 23rd 2005 10:48 pm

Re: Declaring UK Taxed Income to IRS
 

Originally Posted by Gross50
if you have a foreign bank account make sure you send TD F 90-22.1 to the treasury.

There is an aggregate limit of $10,000 at any time in the year before this kicks in, so that may let many off the hook.

You have until the 30th June to send it in for the previous year btw.

You also have to be a Resident, no definition:

http://www.irs.gov/pub/irs-pdf/f9022-1.pdf

Boiler Feb 24th 2005 12:50 am

Re: Declaring UK Taxed Income to IRS
 
Another question,

I have gone through the IRS site for calculating Rental Tax, the biggest deduction is due to being able to take depreciation on the property value (not land).

I have a flat on a leasehold, which I do not think is a concept that translates to the US. So can you just take the Market value or do you have to make up a number to exclude the land value of the remaing lease? This would have to be a guess at best.

Boiler Feb 24th 2005 3:02 am

Re: Declaring UK Taxed Income to IRS
 
I seem to be answering my own questions but Rent is subject primarily to UK tax with relief been given on the tax paid in the US. Rent reliefs in the US are more generous, so the net tax due under the US calculation is likely to be lowerr.

http://www.inlandrevenue.gov.uk/pdfs/ir140.pdf

Interest is dealt with differantly, by the look of it this also includes Dividends, you need to complete and submit this form:

http://www.inlandrevenue.gov.uk/cnr/...idual_2002.pdf

Essentially it seems you get the UK tax back, but have to pay US tax.

sibsie Feb 24th 2005 3:48 am

Re: Declaring UK Taxed Income to IRS
 
I could well be talking out of my arse here but when I lived in Spain and had to pay tax, my understanding was that you can't "elect" where you pay tax, it's dependant on where you're living.

This brings my own question... In the UK my income is tax free but would I be taxed on it here? Arsecakes, now I have to see an accountant and I can never understand a thing they say.

Boiler Feb 24th 2005 3:52 am

Re: Declaring UK Taxed Income to IRS
 

Originally Posted by sibsie
I could well be talking out of my arse here but when I lived in Spain and had to pay tax, my understanding was that you can't "elect" where you pay tax, it's dependant on where you're living.

This brings my own question... In the UK my income is tax free but would I be taxed on it here? Arsecakes, now I have to see an accountant and I can never understand a thing they say.

Quite right, you can not elect, they tell you.

It depends on the Income I think, maybe OK, see the link to the Inland Revenue double taxation form.

Just Jenney Feb 24th 2005 3:45 pm

Re: Declaring UK Taxed Income to IRS
 

Originally Posted by sibsie
I could well be talking out of my arse here but when I lived in Spain and had to pay tax, my understanding was that you can't "elect" where you pay tax, it's dependant on where you're living.

This brings my own question... In the UK my income is tax free but would I be taxed on it here? Arsecakes, now I have to see an accountant and I can never understand a thing they say.


The US taxes the worldwide income of US permanent residents/citizens. (That's my general understanding, anyway). Obviously one pays US taxes on US-earned income, but you'd probably also have to pay it on UK-earned income as well.

Unless you qualify for Foreign-Earned Income Exclusion -- see Form 2555 and Publication 54 for more details.

~ Jenney

dbj1000 Feb 24th 2005 5:57 pm

Re: Declaring UK Taxed Income to IRS
 

Originally Posted by Jenney & Mark
The US taxes the worldwide income of US permanent residents/citizens. (That's my general understanding, anyway). Obviously one pays US taxes on US-earned income, but you'd probably also have to pay it on UK-earned income as well.

Unless you qualify for Foreign-Earned Income Exclusion -- see Form 2555 and Publication 54 for more details.

~ Jenney

Residency for tax purposes is unrelated to Permanent Residency or Citizenship. If you are in the US for more than 180 days in one calendar year then you are resident for tax purposes. Full details can be found on the IRS website.

Foreign-Earned Income Exclusion is the obvious way to approach the issue, but given that there is a tax treaty between the US and the UK there are multiple ways to ensure that you are not double taxed on anything.


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