Snoozy

I'm a bit late coming into this but have only just discovered this forum. For over thirty years my late wife and I travelled to the USA for the winter on B2 visas blissfully unaware of the IRS. My wife died five years ago and I met a USC early last year and we got married in December 2016. Being retired, we decided on balance that we would prefer to spend most of our time in the warm Florida weather, rather than the UK, and so a GC (change of status) is in progress for me.

My new wife's accountant advised her that she should now file jointly for her 2016 taxes and admitted that he knew very little about alien taxes or foreign asset reporting beyond handing me a FinCEN 114 form to fill out. It was at this point that everything unravelled and I started to discover the horrors of 8938 et alia, which with their Draconian penalties fill someone like me in my late seventies with absolute terror. To make matters worse, I have now also discovered that, in my naivety, I have transgressed the 183 day rule in a couple of recent years.

A couple of online tax accountants have been mentioned on this forum as being good but does anyone know if they can handle problem cases, such as mine is likely to be, or are they only good for straightforward work? Maybe I need a tax lawyer? My income is relatively modest and comes solely from British pensions and investments, nothing from the USA, but I am still within the 8938 threshold. Any advice on which course I should take would be very much appreciated. I just do not know what to do for the best.

Owen778

I'm afraid I don't have any contacts for you, but I do have a question that you should check: Are you sure you aren't covered by the Closer Connection Exception to the Substantial Presence Test (183-day rule)? Link is here:
https://www.irs.gov/individuals/inte...oreign-country

It doesn't help if you spent more than 183 days in the US in a single calendar year, but it could help if you get over 183 because of having to also add in days from previous years.

Jerseygirl

Welcome to BE.

I have moved your post into a new thread...that way it won't get lost in the old thread.

TXLonghorn

How long have you been a US tax resident? Have you been filing your 1040s during that time?

Cook_County

Your new accountant is not your best friend. He is not familiar with the US/UK tax treaty and UK based investments. You would do better with a dually US/UK qualified adviser located in the UK.

Cook_County

This question was not relevant and you might find to be impolite. The US/UK tax treaty addresses your question exactly. You require advice from someone within the UK familiar with the US/UK tax treaty.

Owen778

I'm not sure irrelevant is the word I would have used, but the answer to your question is obvious all the same. The first post says that he's only just discovered that he counted as tax resident in the US for some (one?) previous years. No-one files a 1040 when they don't realise they count as tax-resident in the US.

TXLonghorn

If you received UK gov't pension while a US citizen or Perm Resident, the income is taxable in the U.S. per the savings clause of Article 1 of the US/UK tax treaty. However you can claim foreign tax credits for any taxes paid in the UK on that income.

If you received a UK gov't pension while you were not a US Citizen or Perm Resident, the pension is taxable only in the UK per Article 19.

You mentioned that you also had income from "investments" which may add another wrinkle to this.

TXLonghorn

Fair enough, but you do realize there's a 1040NR for non-residents right? In this case he doesn't have US sourced income so he wouldn't have an 1040NR requirement.

lansbury

A UK government pension is not taxable in the US if you are only a permanent resident in the US.

Cook_County

The solution is entirely within the US/UK tax treaty. It appears that TXLonghorn is not familiar enough in practice with either 770-1(b) of the United States Internal Revenue Code or the possibility and practice of filing treaty-based returns. I have seen nothing from Snoozy (the OP) suggesting that during the years in question he was either a US citizen or green card holder. I am sorry but the knowledge base for these issues sits squarely within the UK; where the issues are seen and advised on frequently.

TXLonghorn

Actually, this is false. Apparently you're not familiar with the savings clause of the treaty. You may want to refer to the technical explanations of the treaty.

"The benefits referred to are all intended to be granted to temporary residents of a Contracting State (for example, in the case of the United States, holders of non-immigrant visas), but not to citizens or to persons who have acquired permanent residence in that State."

lansbury

Article 19 2(b) such pension, however, shall be taxable only in the other Contracting State if the individual is a resident of, and a national of, that State. The technical explanation for this paragraph makes it very clear as well that you need to be both a resident and a national.

The two conditions have to apply together, resident and national.

I was a permanent resident, living in the US, with a UK government service pension and as confirmed by the IRS, HMRC and the tax professional who does my returns, it was not taxable in the US only in the UK. When I became a US citizen it then became taxable in the US.

Please stop giving incorrect and misleading information on these forums.

Snoozy

I think you are very likely correct about our US accountant but he is the only person so far that we know of to take advice from.

Apart from bank accounts, most of my investments are held in a CREST sponsored Nominee Account and I get additional income from the British state pension and a very small pension from an insurance company.

Our accountant says that I can declare the Nominee Account as a single account, rather than each individual investment within it, which would simplify matters enormously. However, I'm a bit dubious about that in case there are any investments which are problematical, such as PFICs . . . all of which, together with the tax treaty you mention, are way above my head and frighten me to death. I spent a life in engineering, not accountancy/taxation, and just hoped to spend my final years without this stress!

lansbury

There are some very knowledgeable people on BE about tax matters, who can answer questions and guide you. Mostly because they have researched differing parts of the legislation for their own purposes. Certainly if you read what cook_county, owen778, nun and theoap post they will give you sound advice and probably help you understand how to resolve most of your issues.