Filing US taxes and resident in UK
#31
BE Forum Addict
Joined: Apr 2011
Location: The Shire
Posts: 1,117
Re: Filing US taxes and resident in UK
"The Swiss pension may cause problems (and tax software may be unusable - disbursements issued in Swiss Francs but taxed in £'s under a UK/Swiss treaty (?))."
@kodokan
I had one of those spontaneous thoughts out of no where today while out shopping, and it concerned your Swiss State Pension. It may have been when I passed the cheese shop with the 'raclette' sign in the window.
I believe Pillar II and III pensions are reported on a US return when distributions are made in retirement. But, I'm unsure of Pillar I.
There's a never ending discussion on the UK-Y site about US reporting requirements for a USC, resident in the UK, when receiving a UK State Pension distribution. The wording of the US/UK treaty implies 'yes' but it's obvious the intention was 'no'. The UK/US treaty is riddled with ambiguous statements. Have a look at the US/Swiss treaty (if you're interested). Perhaps it's more clearly written, and a Swiss Pillar I is not reportable on a US return in draw down stage.
@kodokan
I had one of those spontaneous thoughts out of no where today while out shopping, and it concerned your Swiss State Pension. It may have been when I passed the cheese shop with the 'raclette' sign in the window.
I believe Pillar II and III pensions are reported on a US return when distributions are made in retirement. But, I'm unsure of Pillar I.
There's a never ending discussion on the UK-Y site about US reporting requirements for a USC, resident in the UK, when receiving a UK State Pension distribution. The wording of the US/UK treaty implies 'yes' but it's obvious the intention was 'no'. The UK/US treaty is riddled with ambiguous statements. Have a look at the US/Swiss treaty (if you're interested). Perhaps it's more clearly written, and a Swiss Pillar I is not reportable on a US return in draw down stage.
#32
BE Forum Addict
Joined: Apr 2011
Location: Ohio
Posts: 1,834
Re: Filing US taxes and resident in UK
Very helpful as always, theOAP - have printed your full reply and tucked it into my tax folder so it'll generate some more research nearer the time.
We'll stick to solely the US and UK as a country of residence during retirement. Residence in another country during retirement may bring about a different set of circumstances.
*scratches 'ooh, might be fun to live in Canada at some point' off the wish list*
For a UK return, with residence in the UK and given the above, US pensions will likely not be a problem. (I'm now a foreigner - I have no idea what an HSA is.) The Swiss pension will not be a problem. US bank accounts will not be a problem. As for a US based brokerage account - possible problem. Are the funds registered as HMRC reporting? Obviously, the UK pensions are not a problem.
Health Savings Account - like an IRA with an annual allowance for tax-deferred contributions, and the disbursements are tax-free for medical expenses, and taxable once over-65 for any reason.
I understand about HMRC reporting funds; they're currently regular Vanguard mutual funds, but I'd juggle them around into the right sort of ETFs before any move.
*scratches 'ooh, might be fun to live in Canada at some point' off the wish list*
For a UK return, with residence in the UK and given the above, US pensions will likely not be a problem. (I'm now a foreigner - I have no idea what an HSA is.) The Swiss pension will not be a problem. US bank accounts will not be a problem. As for a US based brokerage account - possible problem. Are the funds registered as HMRC reporting? Obviously, the UK pensions are not a problem.
Health Savings Account - like an IRA with an annual allowance for tax-deferred contributions, and the disbursements are tax-free for medical expenses, and taxable once over-65 for any reason.
I understand about HMRC reporting funds; they're currently regular Vanguard mutual funds, but I'd juggle them around into the right sort of ETFs before any move.
#33
BE Forum Addict
Joined: Apr 2011
Location: Ohio
Posts: 1,834
Re: Filing US taxes and resident in UK
"The Swiss pension may cause problems (and tax software may be unusable - disbursements issued in Swiss Francs but taxed in £'s under a UK/Swiss treaty (?))."
@kodokan
I had one of those spontaneous thoughts out of no where today while out shopping, and it concerned your Swiss State Pension. It may have been when I passed the cheese shop with the 'raclette' sign in the window.
I believe Pillar II and III pensions are reported on a US return when distributions are made in retirement. But, I'm unsure of Pillar I.
There's a never ending discussion on the UK-Y site about US reporting requirements for a USC, resident in the UK, when receiving a UK State Pension distribution. The wording of the US/UK treaty implies 'yes' but it's obvious the intention was 'no'. The UK/US treaty is riddled with ambiguous statements. Have a look at the US/Swiss treaty (if you're interested). Perhaps it's more clearly written, and a Swiss Pillar I is not reportable on a US return in draw down stage.
@kodokan
I had one of those spontaneous thoughts out of no where today while out shopping, and it concerned your Swiss State Pension. It may have been when I passed the cheese shop with the 'raclette' sign in the window.
I believe Pillar II and III pensions are reported on a US return when distributions are made in retirement. But, I'm unsure of Pillar I.
There's a never ending discussion on the UK-Y site about US reporting requirements for a USC, resident in the UK, when receiving a UK State Pension distribution. The wording of the US/UK treaty implies 'yes' but it's obvious the intention was 'no'. The UK/US treaty is riddled with ambiguous statements. Have a look at the US/Swiss treaty (if you're interested). Perhaps it's more clearly written, and a Swiss Pillar I is not reportable on a US return in draw down stage.
It'll be about $4k annually, so not a terrible amount of money if it works out that the tax situation is a bit ambiguous, and we decide to take the safe rather than the adventurous filing choice.
Thanks for following up - I appreciate all your thoughts on this.
#34
Re: Filing US taxes and resident in UK
Looking on the internet I read that Boris Johnson is renouncing his US citizenship. He had to pay US tax on the sale of his house in London just because he happened to be born in the US. He's right to think it's unfair. (His renunciation may not be for this reason though).
In any event, the US long-term capital gains tax rate is a lot less than the 28% rate in the UK so it's just a case of claiming a foreign tax credit on 1116. He doth complain too much.
But it does illustrate the point that the IRS will come after you abroad, like they did to my uncle. My uncle was a very wealthy guy and he was on the BoD of a major US corporation at one point so they clearly went out of their way to track him down.
The fee for renunciation is high- $2,350. Before 2010 it was free.
Only one other country is like the US- Eritrea!-in taxing its citizens living abroad on their worldwide income. Reading about this I couldn't find the reason why the US has this policy while almost every other country does not.
The reason for the US doing it this way is because they had a lot more wealthy people a lot earlier on who were trying a lot harder to avoid tax. As I recall the US was the first country to stop tax avoidance by people dumping it in a foreign corporation (subpart F tax). Hence form 5471.
So you can't just move to The Bahamas and route everything through a Bahamian corporation to avoid US taxes. You have to renounce citizenship first.
Yeah I forgot that change, the way the US does it now is how Canada does it, effectively deemed disposition. Or rather, in a similar way because the Canadian method (as per usual) is more straightforward. Principal is the same though.
Last edited by Steve_; May 17th 2016 at 11:07 pm.
#35
Re: Filing US taxes and resident in UK
Whereas with the IRS, everything keeps getting more and more complex and the guidance keeps getting harder and harder. Jesus, they referred me to Rev Proc 2014-39 the other day. Finally I found the information I wanted buried on page 77.
Compare and contrast with the education systems, where in the UK apparently people are supposedly getting smarter and smarter and in the US various public school systems are on the verge of collapse.