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Double taxation question

Double taxation question

Old Feb 19th 2012, 3:45 am
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Default Double taxation question

Hi

I moved to the US in Sept 2010. In 2011, I was paid a bonus by my employer for 2010 - part was paid in the UK, in GBP, and part was paid in the US, in USD.

I already paid UK tax on the UK / GBP part, but the entire amount is also showing up on my W-2. Can I avoid double taxation? And if I can, does anyone know how to use the Turbotax website to avoid the double taxation?

Thanks for any help
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Old Feb 19th 2012, 2:14 pm
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Default Re: Double taxation question

Originally Posted by el_tango View Post
Can I avoid double taxation?
Yes. Near the end of your return, you should be able to subtract out the amount that has already been taxed in the UK.

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Old Feb 19th 2012, 2:28 pm
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Default Re: Double taxation question

Originally Posted by ian-mstm View Post
Yes. Near the end of your return, you should be able to subtract out the amount that has already been taxed in the UK.

Ian
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As a US resident, you must declare worldwide income on your tax return but you can use foreign taxes paid to offset US taxes owed.

http://www.irs.gov/publications/p54/...blink100047585

http://www.irs.gov/pub/irs-pdf/f1116.pdf
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Old Feb 19th 2012, 9:50 pm
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Default Re: Double taxation question

Sorry to piggy-back the thread:

I am a USC who has never lived/worked in the US before. I am planning on taking my family to live in NY and they will need IR Immigrant Visas.

I notice people on threads in here talking about tax filing as part of the spousal visa process - being that the UK tax system is higher than the US, can I assume that I will simply need to demonstrate that I do not owe any tax to the US? Will I also be hit with a SS bill??
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Old Feb 19th 2012, 10:50 pm
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Default Re: Double taxation question

Originally Posted by ryanayr View Post
Sorry to piggy-back the thread:

I am a USC who has never lived/worked in the US before. I am planning on taking my family to live in NY and they will need IR Immigrant Visas.

I notice people on threads in here talking about tax filing as part of the spousal visa process - being that the UK tax system is higher than the US, can I assume that I will simply need to demonstrate that I do not owe any tax to the US? Will I also be hit with a SS bill??
As a USC, you were supposed to file US tax returns yearly on worldwide income. However normally most European countries have a higher tax rate than the US so therefore foreign income tax credits will offset any US taxes due.

Besides foreign income tax credits, there are also two exclusions for a USC living abroad, the foreign earned income exclusion and the foreign housing exclusion. However if you take these exclusions, you can only use foreign income tax credits above the exclusion amount and not the taxes accumulated up to the exclusion amount. It can get a little complex if you do both.

http://www.irs.gov/businesses/small/...=97130,00.html

You will need to file back IRS tax forms for the past three years to apply for for the spousal visa.

I don't think you have to worry about back FICA taxes (social security and medicare). I believe that the only USCs that pay FICA are USCs that were transferred abroad. Also there is an agreement between the UK and US on social security benefits.
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Old Feb 20th 2012, 3:15 pm
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Default Re: Double taxation question

THANKS!
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Old Feb 20th 2012, 4:02 pm
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Default Re: Double taxation question

Thanks Ian and Michael - that's very helpful, your advice helped me figure it out.

Happy Presidents' Day!
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Old Feb 21st 2012, 9:35 am
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Default Re: Double taxation question

Originally Posted by Michael View Post
I don't think you have to worry about back FICA taxes (social security and medicare). I believe that the only USCs that pay FICA are USCs that were transferred abroad. Also there is an agreement between the UK and US on social security benefits.
A USC who is self-employed outside the United States may have to pay FICA unless covered by a social security treaty. There may also be other situations where a USC outside the United States has to pay.
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Old Feb 22nd 2012, 3:36 am
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Default Re: Double taxation question

Originally Posted by JAJ View Post
A USC who is self-employed outside the United States may have to pay FICA unless covered by a social security treaty. There may also be other situations where a USC outside the United States has to pay.
I agree but I believe as long as the OP lives in the UK and pays UK equivalent of social security, I don't believe there is any problem with US social security. For other countries that don't have social security agreements with the US or the person does not pay into that countries social security system, then there could be some issues with US social security.
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