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Handling UK bank accounts in with US tax filings

Handling UK bank accounts in with US tax filings

Old Mar 8th 2015, 1:32 am
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Default Handling UK bank accounts in with US tax filings

Hi All,

Was hoping someone might be able to point me in the right direction vis-à-vis US tax-filings.

I am a Brit living and working in CA on an L-1B visa. I arrived and began earning in the US in Jan 2014 and have been a resident alien ever since.

I believe my tax filing should be fairly straight forward. I have just one full-time job (and now a W-2), am single, no dependants, no property in any country, no special investments or funds etc...

The only thing I'm concerned about are my UK bank accounts. I have quite a few of these: a number of current accounts, some savings accounts, a group stake-holder pension, and a couple of cash ISAs (no stock ISAs).

Can someone please confirm my current thoughts on these:
* I _do_ need to declare the interest on my ISAs and savings accounts and these will be taxed in the US accordingly. This is just declared as interest income on a 1040.

* When declaring foreign income on the 1040 (in my case just interest from the ISAs/savings) I use the GBP -> US conversion rate from:
Treasury Reporting Rates of Exchange as of December 31, 2014

No need to state this explicitly anywhere on the forms or an addendum.

* My pension does not need to be taken into account on a 1040 (I am well below the age of retirement, no contributions in 2014).

* Same for all the above on the CA state tax filing.

* I will later (before July-ish) need to use the FinCEN site to submit details of all my foreign bank accounts including the pension. I have quite a few across various high-street banks ranging from several that have $0 to some which have 10's of thousands of dollars and the total across all of these is enough that they will probably need to be declared.

I also have one thing I'm not sure about at all: one of my savings accounts received interest in the UK and my bank automatically deducted 20% tax on this. In theory it would be more tax-efficient to get this money back from HMRC and then pay the US tax on it. However, for the small sum of money it is, I think it'd probably be easier to just make sure the IRS don't double tax me on this but I'm not sure how to do this? This was my only income in the UK for all of 2014.

Thoughts and comments much appreciated.

Cheers,
Jakov
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Old Mar 8th 2015, 11:49 am
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Default Re: Handling UK bank accounts in with US tax filings

I am not sure why you would use the 12/31 spot Treasury exchange rate to convert your income, as this is different from the IRS average or any other published exchange rate.

California will not respect the tax treaty, so even if you argue for Federal income tax purposes that income within the group stakeholder pension is not taxable in the United States under the relevant Article in the treaty, you may find yourself owing some State tax on income within the plan.

You can file a Form R40 to reclaim UK tax if you are not within self-assessment. The FBAR must reach FinCEN by midnight Central Standard Time on 30 June. This date is not extendable. You may also need to file Form 8938 with the IRS.
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Old Mar 8th 2015, 6:45 pm
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Default Re: Handling UK bank accounts in with US tax filings

You've got things pretty well covered. You should file a P85 so that no UK tax will be withheld at source.

As already pointed out CA does not respect the federal benefits offered by the tax treaty. Including gains on your UK cash ISAs and bank accounts won'y be difficult, but for CA state taxes and your UK pension you should get some CA specific advice.....
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Old Mar 8th 2015, 7:25 pm
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Default Re: Handling UK bank accounts in with US tax filings

Originally Posted by Cook_County View Post
I am not sure why you would use the 12/31 spot Treasury exchange rate to convert your income, as this is different from the IRS average or any other published exchange rate.
+1

Below is a link to the IRS average rate. (you use the published Treasury Rate for FBAR reporting)

Yearly Average Currency Exchange Rates
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