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A few questions on taxes

A few questions on taxes

Old Jan 20th 2014, 8:32 pm
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Default A few questions on taxes

I will be moving to the USA to be with my American wife once the long and painful IR-1 process is over and I have a few questions about paying taxes both in the USA and the UK.

1) All my income will be from the USA. Will I have to pay any UK income tax?

2) I have some savings and a pension in the UK. Will this be liable for any tax in the USA? If I transfer it to the USA, will I have to pay tax on the existing savings?

3) I will be keeping some money in a UK current account to finish paying some debts. What is the tax situation with this?

4) I will probably come into some inheritance in the UK in the next few years. The same with my wife in the USA. We will be jointly filing in the USA unless it affects her grad school funding. Will we have to pay tax in the USA on our UK inheritance and vice versa?

5) Is it worth making voluntary NI contributions and are there any implications from this other than being able to keep my state pension (I am 26).

Thanks in advance for your replies
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Old Jan 20th 2014, 9:44 pm
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Default Re: A few questions on taxes

1) No

2) Depending on how much income you have, possibly. It will certainly have to be declared to the IRS.

3) If more than 10k, it needs to be declared.

4) Inheritance tax will apply from the country in which the amount is received, again, it will need to be declared as income to the IRS.

5) No other benefits, but it's worth doing.
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Old Jan 20th 2014, 10:00 pm
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Default Re: A few questions on taxes

Originally Posted by Outlander View Post
I will be moving to the USA to be with my American wife once the long and painful IR-1 process is over and I have a few questions about paying taxes both in the USA and the UK.

1) All my income will be from the USA. Will I have to pay any UK income tax?

2) I have some savings and a pension in the UK. Will this be liable for any tax in the USA? If I transfer it to the USA, will I have to pay tax on the existing savings?

3) I will be keeping some money in a UK current account to finish paying some debts. What is the tax situation with this?

4) I will probably come into some inheritance in the UK in the next few years. The same with my wife in the USA. We will be jointly filing in the USA unless it affects her grad school funding. Will we have to pay tax in the USA on our UK inheritance and vice versa?

5) Is it worth making voluntary NI contributions and are there any implications from this other than being able to keep my state pension (I am 26).

Thanks in advance for your replies
1) No.

2) You pay tax to the IRS on worldwide income so therefore you will pay tax only on income paid and not the principle.

3) if the amount is greater than $10,000, you have to declare it but only income (interest, dividends, etc.) from that amount will be taxable. Any income taxes paid in the UK can be used as tax credits against US taxes owed.

4)There isn't any federal inheritance tax (tax on the recipient) in the US but only an estate tax( tax on the donor). Since the donor is not a US citizen or US LPR, there will not be any federal tax due.
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Old Jan 20th 2014, 11:18 pm
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Default Re: A few questions on taxes

Originally Posted by Michael View Post

4)There isn't any federal inheritance tax (tax on the recipient) in the US but only an estate tax( tax on the donor). Since the donor is not a US citizen or US LPR, there will not be any federal tax due.
But depending on the state, there may or may not be any state tax due.

As for NIC's, it's worth doing as it's only a few squid.
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Old Jan 20th 2014, 11:22 pm
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Default Re: A few questions on taxes

Originally Posted by Michael View Post
3) if the amount is greater than $10,000, you have to declare it but only income (interest, dividends, etc.) from that amount will be taxable. Any income taxes paid in the UK can be used as tax credits against US taxes owed.
How does it work for a person who has moved from the UK to the US half way through the year after their ISA interest was paid in April. Is that income taxable by the IRS?
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Old Jan 20th 2014, 11:26 pm
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Default Re: A few questions on taxes

Thanks for the replies.

So just to confirm I pay tax in the UK on the savings which automatically gets taken off the interest.

However even though this is being taxed in the UK the IRS wants a piece of the pie...but I can claim the tax back off the UK government to pay the IRS?
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Old Jan 20th 2014, 11:37 pm
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Default Re: A few questions on taxes

Originally Posted by hungryhorace View Post
How does it work for a person who has moved from the UK to the US half way through the year after their ISA interest was paid in April. Is that income taxable by the IRS?
Oh yeh what about ISAs? Should I move my money out of them because I won't get any tax credits?
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Old Jan 20th 2014, 11:40 pm
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Default Re: A few questions on taxes

Originally Posted by hungryhorace View Post
How does it work for a person who has moved from the UK to the US half way through the year after their ISA interest was paid in April. Is that income taxable by the IRS?
Since he will be a legal permanent resident upon entry to the US, I believe he will have to file form 1040 (not 1040 NR) and declare all income both foreign and domestic for that year. However, hopefully there should be enough foreign tax credits to offset any US taxes owed.
Originally Posted by Outlander View Post
Thanks for the replies.

So just to confirm I pay tax in the UK on the savings which automatically gets taken off the interest.

However even though this is being taxed in the UK the IRS wants a piece of the pie...but I can claim the tax back off the UK government to pay the IRS?
Since the income is coming from a foreign source, that foreign government gets first dibs on taxes but the taxes paid are used as a tax credit against US taxes owed. This is a tax credit that is applied against US taxes owed after total taxes are calculated. This often occurs for Americans that hold foreign equities such as mutual funds where dividends are sometimes taxed at the source such as in the Netherlands.
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Old Jan 20th 2014, 11:49 pm
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Default Re: A few questions on taxes

Originally Posted by Bob View Post
But depending on the state, there may or may not be any state tax due.

As for NIC's, it's worth doing as it's only a few squid.
There are 7 states that have inheritance tax. If he will be residing in one of those states, click on the state in the following link to get determine the tax laws for that state.

http://wills.about.com/od/stateestat...cetaxchart.htm
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Old Jan 21st 2014, 1:01 am
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Default Re: A few questions on taxes

Originally Posted by Michael View Post
Since he will be a legal permanent resident upon entry to the US, I believe he will have to file form 1040 (not 1040 NR) and declare all income both foreign and domestic for that year.
A new arrival with an Immigrant Visa only has to declare worldwide income arising after first entry to the United States. However there are a number of restrictions on what exemptions/deductions can be claimed and in particular, you can't file married/joint (unless you elect to include all income for the entire calendar year).

If someone arrives on an Immigrant Visa, and then goes back to home country for a few months, U.S. federal tax liability still applies from the date of first entry.
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Old Jan 21st 2014, 1:10 am
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Default Re: A few questions on taxes

Originally Posted by JAJ View Post
A new arrival with an Immigrant Visa only has to declare worldwide income arising after first entry to the United States. However there are a number of restrictions on what exemptions/deductions can be claimed and in particular, you can't file married/joint (unless you elect to include all income for the entire calendar year).

If someone arrives on an Immigrant Visa, and then goes back to home country for a few months, U.S. federal tax liability still applies from the date of first entry.
My bad. Even with a green card, it appears that "Dual-Status" reporting is normally used.

http://www.irs.gov/publications/p519/ch01.html
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Old Jan 27th 2014, 1:10 pm
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Question Re: A few questions on taxes

Originally Posted by Outlander View Post
Oh yeh what about ISAs? Should I move my money out of them because I won't get any tax credits?
I'm curious about the ISA situation as well. Of course, I don't get taxed on it in the UK, but when H&R Block do my US return, they never include it as income. I do tell them about it, and I mention it is tax-free in the UK, and they don't put it on my 1040A Schedule B form. This may because the interest has always been below $1500, but I'm not certain.

I always filed a TD F 90-22.1 (FBAR this year) and that was shown on Schedule B Part III as a ;yes' to items 7a & b.
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Old Jan 27th 2014, 1:30 pm
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Default Re: A few questions on taxes

Originally Posted by stephend- View Post
I'm curious about the ISA situation as well. Of course, I don't get taxed on it in the UK, but when H&R Block do my US return, they never include it as income. I do tell them about it, and I mention it is tax-free in the UK, and they don't put it on my 1040A Schedule B form. This may because the interest has always been below $1500, but I'm not certain.

I always filed a TD F 90-22.1 (FBAR this year) and that was shown on Schedule B Part III as a ;yes' to items 7a & b.
My understanding is that it should be declared and if tax is owed, should be paid. This sucks for us expats who have built tidy sums in ISAs (and their predecessor) but it's just one of those things we have to accept as resident in America.
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Old Jan 27th 2014, 1:56 pm
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Default Re: A few questions on taxes

Originally Posted by hungryhorace View Post
My understanding is that it should be declared and if tax is owed, should be paid. This sucks for us expats who have built tidy sums in ISAs (and their predecessor) but it's just one of those things we have to accept as resident in America.
I'm inclined to agree now that I've rad a bit more about it. I notice from looking at old US returns that it is just the 2012 return she didn't include the ISA interest. Not sure how they will resolve that.
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