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-   -   Foreign tax credit in the UK or the US? (https://britishexpats.com/forum/usa-57/foreign-tax-credit-uk-us-922852/)

pauldunlop Mar 3rd 2019 7:35 pm

Foreign tax credit in the UK or the US?
 
Super quick question re: US and UK tax returns and foreign tax credits.

Long story short, first year doing US return myself, put everything from W2 into TurboTax and boom, told I owe a huge amount of money. After some digging around I realised it's mostly due to shares I have vesting being taxed at the flat 22% rate, which has resulted in a fairly big under withholding.
Then I realised these shares have also been taxed as income in the UK, so there is potential to claim back foreign tax credit on them, and reduce the overall amount I owe the IRS. However, the amount I have been double taxed on exceeds my foreign tax credit limit for this year. I can obviously carry forward if I want, though I'm worried I'll never be able to fully reclaim the excess within the 10 year period, as my UK income shrinks to 0.

So the question was - is it possible to claim a refund for the full amount in the UK instead of the US, and whether people have any advice on what the best approach is re: dealing with US/UK double taxation of share vestings in general.

Hotscot Mar 3rd 2019 9:15 pm

Re: Foreign tax credit in the UK or the US?
 
Why 22%
Is that Fed and State?

This may help.
https://www.greenbacktaxservices.com...dit-carryover/

pauldunlop Mar 3rd 2019 9:32 pm

Re: Foreign tax credit in the UK or the US?
 
My understanding is the 22% is mandated - either way, the end result is the same.
Thanks for the link - this confirms my understanding of the US side of the equation. My broader question is whether or not there is a way to claim the remainder back in the UK, where the shares actually vested, despite not being resident there currently?

Update re: 22% - "RSUs are treated as supplemental income. Many companies withhold federal income taxes on RSUs at a flat rate of 22% (37% for amount over $1 million). If your marginal tax bracket is higher than 22% excluding RSUs, you are most likely not withholding enough." - Source

Hotscot Mar 3rd 2019 9:35 pm

Re: Foreign tax credit in the UK or the US?
 
Since you're tax resident in the US and not the UK I don't think so.
However someone else may have more knowledge of this.

'My understanding is the 22% is mandated'
I don't see where this comes from though...:unsure:

Giantaxe Mar 4th 2019 1:22 am

Re: Foreign tax credit in the UK or the US?
 

Originally Posted by pauldunlop (Post 12647329)
My understanding is the 22% is mandated - either way, the end result is the same.
Thanks for the link - this confirms my understanding of the US side of the equation. My broader question is whether or not there is a way to claim the remainder back in the UK, where the shares actually vested, despite not being resident there currently?

Update re: 22% - "RSUs are treated as supplemental income. Many companies withhold federal income taxes on RSUs at a flat rate of 22% (37% for amount over $1 million). If your marginal tax bracket is higher than 22% excluding RSUs, you are most likely not withholding enough." - Source

What is withheld is not necessarily what your tax liability on the RSUs will be.

pauldunlop Mar 4th 2019 1:33 am

Re: Foreign tax credit in the UK or the US?
 

Originally Posted by Giantaxe (Post 12647412)
What is withheld is not necessarily what your tax liability on the RSUs will be.

Oh, I know that :) That's why I have a fairly hefty under withholding this year. But part of that can be offset because I've been taxed on the full 100% value of the RSU's in the US, and then also been taxed on a partial value of the RSUs in the UK, so in theory I'm entitled to claim back the portion that's been double taxed. The thing I'm trying to work out is whether I can do that from the UK side, instead of the US. Given I'm not resident in the UK for the 2018 tax year, it seems unlikely, but wanted to understand if other people here have had similar issues.


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