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Now US Tax Resident - reduction in US tax or rebate of UK tax?

Now US Tax Resident - reduction in US tax or rebate of UK tax?

Old Feb 28th 2018, 2:00 pm
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Default Now US Tax Resident - reduction in US tax or rebate of UK tax?

Hi guys,

As of the end of 2017 I am now treated as a resident for tax purposes (I pass the significant presence test).
I am assuming from this that I need to file a tax return this year (I'm trying to push my company to pay for advice on this), but broadly speaking, does anyone know whether I will likely get a reduction in my US tax due to the fact I've beng paying tax in the UK, or will I need to pay full US tax and claim back my UK tax?


Cheers.
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Old Feb 28th 2018, 3:25 pm
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Default Re: Now US Tax Resident - reduction in US tax or rebate of UK tax?

You will not be double taxed on your income. You can off set tax paid in the UK against tax due in the US. In simple terms doing means if you paid less tax in the UK than you owe in the US, you pay the US the difference.
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Old Feb 28th 2018, 3:33 pm
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Default Re: Now US Tax Resident - reduction in US tax or rebate of UK tax?

Originally Posted by lansbury View Post
You will not be double taxed on your income. You can off set tax paid in the UK against tax due in the US. In simple terms doing means if you paid less tax in the UK than you owe in the US, you pay the US the difference.
But under most circumstances you can't choose where you pay tax, and so if you are tax resident in the US you are required to pay taxes in the US and can't choose to pay some tax in the UK and then just set it against your US tax bill. Uncle Sam doesn't like that!

An exception would be a "government" pension, as they have special rules, but generally if you live in the US you should not be paying taxes in the UK, and should file a return and reclaim taxes paid if you have had taxes deducted in the UK. You should, so far as possible, arrange to have payments/ income/ pensions paid gross in the UK.
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Old Feb 28th 2018, 4:24 pm
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Default Re: Now US Tax Resident - reduction in US tax or rebate of UK tax?

Originally Posted by lansbury View Post
You will not be double taxed on your income. You can off set tax paid in the UK against tax due in the US. In simple terms doing means if you paid less tax in the UK than you owe in the US, you pay the US the difference.
Originally Posted by Pulaski View Post
But under most circumstances you can't choose where you pay tax, and so if you are tax resident in the US you are required to pay taxes in the US and can't choose to pay some tax in the UK and then just set it against your US tax bill. Uncle Sam doesn't like that!

An exception would be a "government" pension, as they have special rules, but generally if you live in the US you should not be paying taxes in the UK, and should file a return and reclaim taxes paid if you have had taxes deducted in the UK. You should, so far as possible, arrange to have payments/ income/ pensions paid gross in the UK.
Thanks guys.

I've just really found out that I am a US tax resident.
I am in discussions with my work on whether they will pay for a tax attorney to deal with this.

I have been paying UK income tax (and NI) up until this point as I have been getting paid through the UK company.
This is going to change in the next month or so.

Is it just a matter of submitting a US tax return with all the relevant supporting documents and letting the IRS work it out or do I need to tell them what tax I need to pay?
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Old Feb 28th 2018, 4:30 pm
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Default Re: Now US Tax Resident - reduction in US tax or rebate of UK tax?

Originally Posted by Aquapanther View Post
..... Is it just a matter of submitting a US tax return with all the relevant supporting documents and letting the IRS work it out or do I need to tell them what tax I need to pay?
The IRS never works anything out - they take your numbers even if they are garbage, once you have someone's number it is ridiculously easy in the US to file a junk tax return in their name, with garbage numbers that create a tax refund that even the owner of the SS number wasn't entitled to. .... But if you are audited and found to have made "errors" they will lift the drain covers and dig into things. If they find evidence of fraud, you are in deep doo-doo!

If you have been living and working in the US but being paid in the UK and paying UK NI, not US SS contributions, state unemployment insurance and workers comp insurance, then I would strongly recommend that you consult as US tax attorney as you have quite possibly, in the eyes of the IRS, been committing tax fraud!

The penalty is, IIRC, three times the tax owed, and the IRS will care not one jot that it was your employer's idea. Income tax is a personal responsibility in the US, not one that you can pass off to your employer.

Last edited by Pulaski; Feb 28th 2018 at 4:37 pm.
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Old Feb 28th 2018, 5:07 pm
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Default Re: Now US Tax Resident - reduction in US tax or rebate of UK tax?

Originally Posted by Pulaski View Post
The IRS never works anything out - they take your numbers even if they are garbage, once you have someone's number it is ridiculously easy in the US to file a junk tax return in their name, with garbage numbers that create a tax refund that even the owner of the SS number wasn't entitled to. .... But if you are audited and found to have made "errors" they will lift the drain covers and dig into things. If they find evidence of fraud, you are in deep doo-doo!

If you have been living and working in the US but being paid in the UK and paying UK NI, not US SS contributions, state unemployment insurance and workers comp insurance, then I would strongly recommend that you consult as US tax attorney as you have quite possibly, in the eyes of the IRS, been committing tax fraud!

The penalty is, IIRC, three times the tax owed, and the IRS will care not one jot that it was your employer's idea. Income tax is a personal responsibility in the US, not one that you can pass off to your employer.
Understood, thank you.
Worst case scenario I will consult with my own lawyer, although I'd obviously rather the company agreed to pay for it.

Any advice on how I find a good local lawyer (Memphis TN)?
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Old Feb 28th 2018, 5:11 pm
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Default Re: Now US Tax Resident - reduction in US tax or rebate of UK tax?

Originally Posted by Aquapanther View Post
.... Worst case scenario I will consult with my own lawyer, ....
That is a very good idea, because a lawyer retained by your employer is necessarily required to protect his clients interests, i.e. your employer's, not your interests.
..... Any advice on how I find a good local lawyer (Memphis TN)?
Not really - they're fairly common, so I'd use yellow pages, similar local directory, or do a Google search, then find their web site to research their history and how long they have been in business and find one who I like the look of.

Last edited by Pulaski; Feb 28th 2018 at 5:14 pm.
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Old Feb 28th 2018, 5:46 pm
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Default Re: Now US Tax Resident - reduction in US tax or rebate of UK tax?

Originally Posted by Aquapanther View Post
Any advice on how I find a good local lawyer (Memphis TN)?
Not local but Pete at US - UK Tax Preparation and Advice | BritishExpatsTax.Com has helped people like me and others on this forum on US/UK taxes. [Edit] However, the website says he is already be booked up for this year - not much use, unless you file for an extension maybe.

Last edited by GeoffM; Feb 28th 2018 at 5:48 pm. Reason: Checked the website - oh dear
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Old Feb 28th 2018, 5:53 pm
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Default Re: Now US Tax Resident - reduction in US tax or rebate of UK tax?

Originally Posted by GeoffM View Post
Not local but Pete at US - UK Tax Preparation and Advice | BritishExpatsTax.Com has helped people like me and others on this forum on US/UK taxes. However, he might already be booked up for this year.
Pete is a tax accountant/ preparer, not a lawyer, and Aquapanther needs legal advice, not tax prep services. Well, he might need tax prep services too, but mostly he needs legal advice at the moment.
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Old Feb 28th 2018, 6:49 pm
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Default Re: Now US Tax Resident - reduction in US tax or rebate of UK tax?

Not clear why you have had UK PAYE withheld; but if you are not UK resident you'd want to reclaim this from HMRC.
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Old Feb 28th 2018, 6:59 pm
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Default Re: Now US Tax Resident - reduction in US tax or rebate of UK tax?

Originally Posted by Pulaski View Post
Pete is a tax accountant/ preparer, not a lawyer, and Aquapanther needs legal advice, not tax prep services. Well, he might need tax prep services too, but mostly he needs legal advice at the moment.
While I concede the section I quoted did indeed say lawyer, my suggestion is still of merit given his tax situation.
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Old Feb 28th 2018, 7:09 pm
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Default Re: Now US Tax Resident - reduction in US tax or rebate of UK tax?

Originally Posted by GeoffM View Post
While I concede the section I quoted did indeed say lawyer, my suggestion is still of merit given his tax situation.
If he is at risk of being charged with tax fraud, a potentially severe criminal matter, how do you think an accountant/tax preparer would help?
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Old Feb 28th 2018, 7:39 pm
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Default Re: Now US Tax Resident - reduction in US tax or rebate of UK tax?

Originally Posted by Pulaski View Post
But under most circumstances you can't choose where you pay tax, and so if you are tax resident in the US you are required to pay taxes in the US and can't choose to pay some tax in the UK and then just set it against your US tax bill. Uncle Sam doesn't like that!

An exception would be a "government" pension, as they have special rules, but generally if you live in the US you should not be paying taxes in the UK, and should file a return and reclaim taxes paid if you have had taxes deducted in the UK. You should, so far as possible, arrange to have payments/ income/ pensions paid gross in the UK.
You should be paying tax in the US and not the UK, but if you pay tax in the UK you can claim it on your US tax return. My CPA did that when I first got here until things got sorted out.
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Old Feb 28th 2018, 8:06 pm
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Default Re: Now US Tax Resident - reduction in US tax or rebate of UK tax?

Originally Posted by Pulaski View Post
If he is at risk of being charged with tax fraud, a potentially severe criminal matter, how do you think an accountant/tax preparer would help?
Where was his intent. Unless done on purpose there is no fraud.
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Old Feb 28th 2018, 8:11 pm
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Default Re: Now US Tax Resident - reduction in US tax or rebate of UK tax?

Originally Posted by lansbury View Post
Where was his intent. Unless done on purpose there is no fraud. ....
The IRS can impute it, based on him living and working in the US and neither paying taxes nor filing returns. If charged, he could be acquited of fraud, but on balance I think he should try to avoid being charged!
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