SadInStates

We moved back to the UK in the summer, after 17 years in the States. The whole tax thing coinfuses me as we didn't have to submit UK taxes while we were in the US so it seems ridiculous that we have to submit US taxes now we're back in the UK! But that's by the way.

My question is, will the IRS want to see our UK tax return? Would we have to submit a copy of our UK return when we file our US taxes, or provide a way for the IRS to look it up themselves, or are the two taxes totally separate and nothing to do with the other country?


Thanks.

nun

There's no need for the IRS to see your UK return, but you will need to enter information on your UK income and taxes onto your US return to claim FTC of FEIE etc.

The two tax systems are totally separate but how you pay tax to each country is governed by the tax treaty and the two tax codes.

As an aside what is your citizenship and the location of you financial accounts that makes you think you have to pay US tax. If you are not a US citizen you can arrange things so that you have zero US tax liability.

SadInStates

Thanks Nun.
We have dual citizenship, but have moved back to the UK permanently and have no financial accounts or assets in the US at all.

What is FTC and FEIE?

nun

Foreign Tax Credit and Foreign Earned Income Exclusion.....so you have no IRA or retirement accounts in the US? If all you money is in the UK.......where is it? generally I mean, in the bank, UK pension funds or in other investments?

SadInStates

I guess my husband will eventually get a SS pension, but otherwise no, we cashed everything and brought it back to buy a house.

Pretty much all we have is in the bank, though we do get a small rent from the flat we had before we moved to the US.

You mentioned earleir that we need to put the information from our UK tax form onto the US one, but surely the US forms need to be filed long before we have to complete the UK ones?

Mallory

Don't forget that you will get a SS pension too. If your spouse gets a pension, and you have been married over 10 years, you will get 50% of his pension at your retirement age.

dunroving

That's a major PIA with filing US and UK tax returns - the tax years are different in each country.

Bud the Wiser

Another tax question leading on from the OP's original one.

If you are on a non immigrant visa and have investments in the US such as a) rental property income, b) Social security pension c) simple IRA and d) consultancy income and you leave the US where do you pay your taxes? and/or are any of the above taxed at source.

My understanding is that only US citizens and permanent residents need to continue filing US tax returns.

Taxation could be so much simpler if it wasn't created to disguise how much is taken from you.

nun

You can definitely be on a non-immigrant visa and have to pay US taxes. You will be resident in the US for tax purposes if you meet the substantial presence test.

http://www.irs.gov/taxtopics/tc851.html

If your visa comes to an end and you leave the US you can become a non resident alien, NRA, for tax purposes,. However, US source income is still US taxable and if you have any of that you might well have to file a 1040NR.

The type of income and tax treaties will determine exactly whether and how your US income will be taxed as an NRE. So taking the examples you gave and assuming you are a UK citizen living in the UK here's how they'd be taxed.

a) rental property income,
US Federal and state income tax due.

b) Social security pension
No US tax due because of the tax treaty

c) simple IRA
No US tax due because of the treaty, file a W-8BEN to stop witholding

d) consultancy income
depends on where you're doing the work. If it's in the UK and you just get an invoice from US clients there's no US tax due.

How and when UK tax is due will depend on whether you are taxed on an arising or remittance basis. but assuming it's the arising basis UK tax would be due on a), b), c) and d)

Bud the Wiser

I'd forgotten about the substantial prescence test.

Thanks once more, very much appreciated.

I've also looked at Panama as a retirement option once I'm eligble for the pensionado visa. Panama has no tax on foreign earned income.

SadInStates

Oooh! I didn't know that! Thanks Mallory!
Seeing as I'd only worked 7 years before leaving to raise my family (in America, at that) I didin't think I was likely to get any pension anywhere!

nun

+1 on don't forget that you'll get a spousal US SS benefit if you are married longer than 10 years.

If you have everything in a UK bank watch out for FBAR and 8398 filing. Also as US citizens. by moving all your money out of the US you have limited your investment options as you should avoid any UK pooled investments like stocks and shares ISAs and UK mutual funds/unit trusts.

Obviously the rent is both US and UK taxable as will be any other income you get....apart from SS...that's only UK taxable in your current situation.

The issue of the different US and UK tax years is a real pain and you have to keep good records so you can enter the right amount of income on each form.

nun

If those 7 years of employment were in the UK you will probably qualify for 7/30ths of the UK state pension. You can pay 6 years NI in arrears and now that you are back in the UK both you and your husband will start to build up your NI record again. So it looks like you and your husband will get some state pension from both the US and the UK.

J.JsOH

The date to file US tax can be extended out up to 6 months beyond the April 15 Tax Filing deadline.

This then gives you time to file your UK tax before you have to file the US return.
Sure, you have to scramble a bit to get the UK filing in quite early and you don't get to use the full period (that a non-US person would get) to file a UK return but there is sufficient overlap to achieve both within the US (extended) deadline.

By living (as an American) overseas there is a two months automatic extension of filing US return. This can then be extended (probably necessarily) a further 4 months by sending in Form 4868. http://www.irs.gov/pub/irs-pdf/f4868.pdf
There is a box to tick if you live overseas.
There is other useful info on the form about filing and paying.

But Note.....You must pay any US tax by the April due date or incur penalties.
There is no extension on the US pay-by April date.

SadInStates

Thanks J.JsOH. That helps indeed.