Non-resident Alien US tax question
 

Hi all,

I've trying to find information of this and have been really struggling, hopefully a few kind people can help me out with my confusion...

I'm a non-resident alien living in Texas on a L1A visa. I have a few accounts in the UK (a cash ISA and a MoneyFarm general investment account). I haven't contributed to the ISA since moving to the US, but have kept up with the general investment account.

Do I need to report these accounts when I file through a service like TurboTax? They're both just over 50k GBP, but I was wondering whether the tax treaty between the UK and US allows me to ignore the foreign accounts selection. Are they covered by a UK tax return? Obviously the general investment account has grown along with the stock market, but I haven't sold assets and any dividends have been a few hundred pounds per year.

Most information I have found seems to relate to 'resident' aliens, green card holders, or US citizens. So it is as clear as mud.

Re: Non-resident Alien US tax question
 

I think you qualify as a “resident” alien as an L-1 employee.

Furthermore, do you mention these accounts in your HMRC Self Assessment? Or have you told HMRC that you permanently left the UK?

Re: Non-resident Alien US tax question
 

The OP’s tax residency is defined by the IRS rules, not the visa they are on in most cases, there are some corner cases, the best place to go to figure that out is here:
https://www.irs.gov/individuals/inte...-presence-test


Most UK filers don’t do SA, unless they are self employed or are a legal director of a company, so assuming the OP does may be misleading.

For the OP, most DTA are designed to avoid you paying “double” tax on income, not to allow your to not disclose things. Also note these generally only apply at the Federal level not state or city, although Canada may be an exception.

OP look at the HMRC P85:
https://www.gov.uk/tax-right-retire-abroad-return-to-uk
Also search the threads here for Class 2 NIC for National Insurnace and make sure you file an FBAR with the US Fincen.

Re: Non-resident Alien US tax question
 

Thanks for the response. Good point, I got mixed up by the resident status terminology and thought it was linked to a visa that leads to immigration. You're correct, I am a resident as I have been in the country more than 31 days (I live here).

Concerning HMRC, no not as yet. I mistakenly thought I didn't need to. That is the next thing I am planning to rectify :)

Re: Non-resident Alien US tax question
 

You are obliged to declare all foreign bank accounts/investment accounts etc etc when completing a US tax filing.

Re: Non-resident Alien US tax question
 

Thank you. I assume this is done by submitting a W-9 form to the UK institution and then adding the returned 1099-MISC (?) on to Turbo Tax?

Re: Non-resident Alien US tax question
 

see my post below for more info on other things, you are unlikely to get a 1099 from a U.K. institution, and some may want to close your accounts for be a “US person”.

Re: Non-resident Alien US tax question
 

Thanks tht, a good point. Moneyfarm does request a W-9, so I'll see how they respond. Concerning my cash ISA (HSBC), I'll give them a ring during their business day.

I'm hesitant to close my UK accounts until I'm on a path towards a green card (I am currently working towards this).

Re: Non-resident Alien US tax question
 

?? never submitted a W9 to any UK investment company nor a 1099. Just given details on the Foreign Investment section of Turbo Tax

Re: Non-resident Alien US tax question
 

That was the case for us all the time while living in the USA. On return to the UK in 2016 and changing our address was when my wife and I were asked to complete W9s. We never receive 1099s from our UK accounts including my UK private pensions. (We are USCs so are required to file an IRS return as well as an HMRC SA return as we have foreign income)

Re: Non-resident Alien US tax question
 

HSBC is familiar with “expats” and has services for them... but don’t assume it will be your choice to close an account, some institutions may be more proactive in not having “us persons” as customers...

Re: Non-resident Alien US tax question
 

Exactly. We kept our UK HSBC accounts for the 29 years we lived in the USA. They are quite used to having customers with overseas addresses.

Re: Non-resident Alien US tax question
 

The short answer is that the tax treaty does not remove your obligation to fully comply with all US tax laws including declaring foreign accounts and income. Nor does the fact that you may have submitted a UK tax return for the same accounts and income. You will need to submit an FBAR for your accounts since they are in excess of $10K, and declare and pay tax on all income and dividends. If you have paid UK tax on the same interest and dividends you will get a tax credit for that which will reduce or perhaps eliminate your US tax on that income. But whether there is any net tax due you must still declare the accounts and income. The penalties for not doing so can be severe.

Re: Non-resident Alien US tax question
 

31 days of a year does not qualify you as a tax resident (resident alien) if that is all you have been here this year (2021), you do not need to report foreign accounts for 2020 (Fbar submission through Fincen), this is separate to normal taxes filing. normal taxes = turbo tax or tax preparer. for the record turbo tax does not file a fbar for you they just advise if you need to by you having checked the 'i had/have more than 10kusd foreign account box in 20** ' you will get a message / prompt advising you to file Fbar.

if by the end of this U.S tax year 2021 you had been here more than half the year (according to presence)= 'resident alien', then you would file Fbar for that year as has been mentioned, its easiest so file Fbar on Jan 1st or soon after after that year,

resdient alien = gc OR tax resident.

A nonresident alien is not obligated to file either an FBAR or a Form 8938

Re: Non-resident Alien US tax question
 

The MoneyFarm investments will all be PFICs requiring numerous IRS Forms 8621 to be prepared and filed each year. I suspect that TurboTax does NOT include or prepare Form 8621 at all.

Re: Non-resident Alien US tax question
 

Once you realize you will be paying the highest published tax rate (regardless of your own marginal tax rate) which for 2021 is 37%, plus state tax, plus interest for the number of years that you held the investments at IRS published rates, you will want to get rid of your investment funds pronto. Most people lose well in excess of 50% of the profit at sale time. Best to sell asap and reinvest in mutual funds here, unless you can guarantee that you will not to sell while subject to US taxes.

Re: Non-resident Alien US tax question
 

Same but different. I ‘had’ a UK ISA. Once the broker became aware I was living in the US, they told me they could no longer manage my account. Some shares I have liquidated and will just keep the cash in the UK. Some shares I do not want to sell. They have increased a lot in value over the 10 years I’ve owned them. I’ve been in the US for a year. I want to move those shares to a US broker but I am wary of any capital gains tax, or what the basis cost would be for those shares? TIA.

Re: Non-resident Alien US tax question
 

If these are shares originally purchased from one of the US stock exchanges in USD (albeit through a foreign broker) then you should not have any problems other than the time required to do the transfer from your current foreign broker to a new US broker. If these are shares originally purchased through a foreign exchange (almost certainly priced in the exchanges local currency versus USD) then you may find a US broker willing to accept the transfer as what they call a "pink sheet”. Trading in “pink sheets” involves more risk than trading in the regular stock mainly because of liquidity issues and mark ups. If you really want to keep the shares you may be better off selling the foreign version of the stock and buying the US version if there is one. Of course then you incur the immediate capital gain.

If these shares are some kind of mutual fund (like a UK OEIC, Unit Trust or Investment Trust) then it is extremely unlikely that you will find a US broker who is able and/or willing to accept them. if that is the case, and your current broker will no longer manage the investment then you probably have no choice but to sell as you will find it very hard to find a broker in any country who will accept the transfer.

Regardless, the cost basis is what you paid for them translated into USD at the exchange rate in force on the date of purchase, which you can estimate by looking at historical charts. If they are straightforward shares versus mutual funds then they are taxed like any other US based share at standard capital gains rates. If they are a mutual fund of some kind then they are taxed as a PFIC which has draconian tax rates. If they are PFICs my best advice is to swallow the tax hit and move on with your life. The longer you hold the shares the worse the tax situation becomes, not to mention the very extensive and complex paperwork, and record keeping that is required for these type of investments. The tax hit spirals rapidly with each year that passes because as well as paying tax on the gain at the maximum published tax rate for each year that you held the stock (regardless of your own personal marginal rate) you have to add compound interest at IRS published interest rates. State tax then adds insult to injury. The maximum personal tax rate under the Biden administration will likely increase in the future further increasing your tax bill.