British Expats - Form 2555

British Expats (https://britishexpats.com/forum/)

- USA (https://britishexpats.com/forum/usa-57/)

- - Form 2555 (https://britishexpats.com/forum/usa-57/form-2555-a-754723/)

Hi

My husband (who is British and became a PR of the US in October 2011) is filing his taxes for the first time. We have a quick question: does he need to fill in the 2555 form? I know I do, but although my husband had income in England last year, up until September, he hasn't had any foreign income SINCE he became a PR, so surely he doesn't need to declare his British income as was neither a US citizen or a PR while he was receiving the income, is this correct?

He needs to declare all worldwide income for that year and then wite off the foreign taxes paid on form 1116.

http://www.irs.gov/pub/irs-pdf/f1116.pdf

Hi Michael

My understanding was that the 1116 form was only to be filed in when a person has been taxed by both the foreign (in this case British) government and the U.S. government. This is not the case because when he was getting paid in England he was not a U.S. resident, he had no ties to the U.S. other than me, so does this form still apply to him?

My understanding, and im guessing that its wrong, was that he had to state worldwide income from the moment he becme a PR, not before.

Quote:

Originally Posted by Jane84 (Post 10003244)

Your understanding is wrong. US citizens and LPR's are taxed on worldwide income by the IRS no matter where the money is made. Once a person becomes a LPR, he is then liable for taxes to the IRS on his total worldwide income for that year.

As far as the IRS is concerned, the money he made in the UK before becoming a LPR is taxable by the US government. However the IRS allows foreign tax credits to offset any US taxes owed.

An LPR cannot file as a non resident alien using the substantial presence test.

Thanks Michael, I understand now :)

I think you have a basic misunderstanding of how the tax system works, read IRS publication 519.

If he moved to the US during 2011 he should be filing a dual-status tax return, i.e. a 1040NR for the part of the year he was tax resident in the UK and a 1040 for the rest of the year. The IRS uses the date permanent residency was granted to determine the breakpoint between the two.

If there was no US-source income until he became an LPR then essentially it is a pro-rated 1040 for the part of 2011 he was in the US. There is an example in 519 of how to do this.

LPRs almost never use Form 2555, this is for US persons employed abroad who have moved their tax home there. As an LPR your tax home has to be in the US and when you file an N-400 for citizenship one of the things USCIS looks at is whether you've been filing 1040s as a US resident, as this is legally required.

A declaration of permanent residency is exactly that, you permanently reside in the US.

I don't think Turbotax etc. can do dual-status returns, if you get stuck you need a specialist accountant, think KPMG or PWC rather than H&R Block.

There's also a bunch of other forms commonly used by immigrants, e.g. 8938 and also the FinCEN FBAR form.