chuckles67

I had 30 mins with one of big tax consulting firms yesterday discussing tax. Here's something I learnt that might be useful to you.

In the year of your move, IRS want to know how many days you visited USA prior to the actual date of your move. If the days exceed ten, then your federal taxable start date will actually be set at that 10th day you were in USA, not your final arrival date. You will be taxed on worldwide income from that 10th day date, according to IRS rules.

If you coming from a high tax regime, such as Scandinavia, then this is probably not important.

But if you come from low tax place like Singapore, HK etc then this could be a real problem, as your nice new hefty tax rate in USA will be applied on prior income to your USA arrival...

Luckily I was only in USA for 7 days for interviews in my year of moving . But if I had taken the preview trip or a prior holiday, I would now have to pay US tax on prior income.


One other thing: California state tax. The start date is your final arrival date. But... they will take your worldwide income, calculate the pro-rata amount from your start date to end of year (e.g.: if you arrive 1st Dec, the 1/12 of your prior income in that year will be deemed taxable according to state rules).

Reminds me of that gallows humour phrase - only two things in life are certain: death and taxes. The latter particularly so in US!

IPM

This is interesting and also quite concerning. Could I ask two clarifications:

1. When is the IRS tax year (calendar, April or other)?
2. What constitutes "actual date of move". I will be arriving with my family on a L-1A visa later in the year, but will have made various trips prior to that.

I will also raise this with my tax people.

Kind regards

chuckles67

We are on an H1B visa. The tax advisor, who is retained to provide me tax advice about relocation and file my 2009 tax return, told

1. tax year runs from 1 Jan - 31 Dec. Same as Singapore where I have relocated from. I am not sure how they would match this with UK tax year.

2. "actual date of move" is the day when you land in the USA and pass through customs and immigration on your new visa. Same as "final arrival date". I am not sure this is consistent terminology with tax people's language.

In a follow-up email, tax advisor has asked me to provide my Singapore tax return for calendar 2009, in order for California state tax to be applied pro-rata on income earned in Singapore. Not happy!

IPM

We will arrive on a L-1A (L-1B) visa, but will probably make a number of prior visits to find a house; hence the IRS position seems onerous.

kwilson

Eeek! That's scary! I can only imagine that most people moving here will have visited for research/preparation at least once in the year of their move, and I doubt it would be for less than 10 days! Wow!

Thanks for sharing that!

Hellopaul

I noticed you mentioned that you previously went to USA for a job (presumably) interview - I too did this, and mentioned to the passport border official when asked "what is the purpose of your trip?" that I was going for a job interview. He responded "that is the WRONG answer!" I explained that it was for a future job, I was in the process of getting my visa etc etc, but he had to send me for "secondary screening" which basically involves being put into a roomful of Mexican pig farmers (this was the exact week when Swine Flu had broken out) waiting to be "interviewed" by an officious official. Most of the other "visitors" in the room explained to the guy that they "would definitely leave USA when their visitor's visa waiver runs out". And in they went. I can't believe I'm going through so much hassle/expense/time to do it properly when I could just say "oh yeah, I'll be leaving in a week or so" and disappear into the system like hundreds/thousands do every day!

So...if you're going for a job interview, DON'T TELL ANYONE!

ajcmals

That sucks! I had Her Majesty Customs & Revenue send me a reminder to complete a self assesment... I owe them almost 500GBP for 08/09 taxes due 31st January! They even sent me a refund in May 2009 and now they want it back! ARGH!

So I moved here May 2009, I worked January-Feb 2009. Came to USA from Feb-Apr then went back to UK, didn't work in April then my K1 Visa was approved in May and I moved May 10th... so the IRS would want me to pay tax on my UK income even though I already paid tax?!

I BL**DY HOPE NOT!!!

chuckles67

I am not tax expert, but I believe IRS want to tax you at US rates on worldwide income. They decide the start date, based on how many days you visited in your first year of arrival (I was advised it is the 10th day as above)

If you already have paid tax in UK, then IRS would offset their tax demand with that amount paid in foreign jurisdiction - I think and hope .

US citizens in Singapore often mentioned this "double taxation". Now I feel their pain!

ajcmals

Well when we file our taxes, I will let my tax advisor do the work... I will play ignorant. If they don't bring it up then I won't say anything! Besides if they wantd to tax me from Jan-Feb for my work in the UK it would probably only end up being about $50 based on a 20% UK tax rate, an additional 10% for US?!

Oh well. Good luck for you all. I have found that being 'honest' doesn't always do the best thing for you?! I have read about people (recent graduates) who have left the UK on a permanent basis and have not told their Student Loan Company and have quit paying on their loans and CC's, hoping they won't find them. I told my student loan company, I advised HM Revenue and Customs and my CC companies I moved and I have had nothing but hassle EVEN THOUGH I have paid on them! Student Loan Company wanting updates on my income etc. etc. makes me think whether I should have been so honest in the first place! ...Also a suprising 500GBP tax owed to UK was not nice, even though I thought that was all clear having completed the 'Leaving the UK' form that HM Revenue and Customs request if you are to be gone for more than 2-3 months (mine's permanent!).

TheCynick

I just consulted IRS publication 519, and believe that this is case if and only if you meet the substantial presence test in your first year of being in the USA (that is, if you were present in the USA for 183 days or more in the calendar year). Otherwise you will be considered a non-resident for tax purposes and will only be taxed on US-source income.

"If you meet the substantial presence test for a calendar year, your residency starting date is generally the first day you are present in the United States during that calendar year. However, you do not have to count up to 10 days of actual presence in the United States if on those days you establish that:

* You had a closer connection to a foreign country than to the United States, and
* Your tax home was in that foreign country."

In pub. 519 there is a flowchart to help you determine if you are a resident or non-resident alien.