meauxna

This is normal btw, and not shameful. I'm an American with more than average tax filing experience and I hired help the first year we were over here with him as a PR.
It's complicated. People make careers out of it for a good reason.

Don't cheap out.. it might cost a few hundred but it will be worth it.

hmm, not exactly. US tax returns are nothing like the UK ones. They are their own special hell and it changes every year. But you don't have to plan that far ahead now.


A couple of things:

There are no nice simple US standard office type permanent contracts. Most jobs here do not use contracts.

The US tax year is January -December, and we don't care what it is in the UK. Your income tax return is due April 15, for the previous Jan-Dec period.

I agree that the UK tax-free status for part of 2011 is going to make the US tax return even more complicated.


It's OK, you are right.. can't be explained quickly or easily!

mattw89

Thanks meauxna,

For hiring help, what is it they are called in USA for this. i.e. Google 'Seattle Tax Advisors', or is it something more specific? I guess I'll hire them in January then to explain all my circumstance from January-December of this year.

But I figure my jan-dec will only actually start from July, the month at which I am activated as an immigrant. (so no tax owed for months prior to that).

So i guess the only research now is.

Aviva Pension
Hiring a tax person
Finding best way to move the big lump sum over
And deciding whether to use post office or XE.com for monthly transfers!

meauxna

You want a CPA, Certified Public Accountant. You want to start looking for one as soon as you arrive, really. If you start working with a CPA before the close of the tax year, you may find there are activities you can do that will be to your advantage. The hardest, but most important part, is finding someone with direct experience of US/UK filings.

What I made mention of, that you NEED to learn, is that no matter when in the year you become a Permanent Resident, the IRS considers you a PR for the ENTIRE calendar year. So your year does not start in July, it still starts in January. You may not owe tax, but you have to report the income.

When it came to the lump sum, we just did a plain old bank transfer. It cost $25 to receive, and we got a decent enough exchange rate.

Steve_

If you're moving your tax home to the US, then you should definitely do it if your bank offers you the choice of doing it, the reason being that most people aren't aware that the UK does income tax deductions on bank interest, so if you live abroad you can file an HMRC R105 with the bank and they will cease withholding the interest. You have to pay US income taxes on it of course (i.e. you declare the income on your 1040). The US doesn't recognize ISAs under the tax treaty, so as soon as you become resident in the US for tax purposes you have to pay capital gains tax on that too (assuming there is any), ISAs are useless for non-residents.

Frankly if you plan on living in the US permanently I'd just move the lot over, save the hassle of paying tax on the interest. I still have a UK bank account with a tiny bit of money in it to buy people I know in the UK Christmas presents, but that's it.

If you move to the US you have to file a dual-status tax return for the year that you moved, unless you moved on January 1st. Have a read of IRS publication 519. You become resident for tax purposes in the US on the day you land with an immigrant visa, if that's how you're doing it. As soon as you get the I-551 stamp in your passport.

OldJuddian

How about if you are not sure if you will be in UK or US in 5 years?

If I sold my self-select ISAs before coming to the US, and then return back to the UK I would have lost a significant amount of money that is sheltered from UK tax. The hassle of paying tax on the interest, and any capital gains (if I sold any) seems worthwhile as long as there is a chance that I would return to the UK.

If there comes a time when I settle for good I could start transferring it over.

nun

If you keep the ISA you'll have to track all the interest and gains and the balance in the account so you can pay tax to the IRS and file an FBAR if the balance goes above $10k. If you have a stocks and shares ISA you will have to comply with PFIC rules. You really don't want to get involved with this bit of US tax code, tax rates can be high and you really need a professional advisor to fill in the forms. However, if you sell the ISA you can bring that money to the US and keep it growing tax free so you end up paying less tax on it.

If you put the ISA money into a US ROTH account it will continue to grow tax free and qualified withdrawals will also be tax free. But as a ROTH is a retirement account there are some withdrawal restrictions...although you can get at the principal after 5 years. One nice thing is that ROTH withdrawals are tax free in the UK too.

Steve_

But it's not sheltered from US tax, so what's the point? Whether it's in the UK or the US you've got to pay US capital gains (US CGT is usually 15% on long-term investments) as soon as you become resident for tax purposes (which does not necessarily mean LPR status).

The only reason not to do it is because you're aren't staying for more than a year or two so you don't want the hassle, but in that case you might not become resident in the US for tax purposes anyway so it's academic.

Just seems like a load of hassle to keep UK investments to me, unless you're a serious investor and you've got some good reason to focus on UK investments I wouldn't bother.

There may be exchange rate issues, but bear in mind once you become resident for tax purposes in the US if you then move the money over at a more advantageous exchange rate, capital gains tax is also liable on that transaction.

In fact I've just thought of another reason to do it, unless someone knows otherwise there is no specified break point in the UK-US tax treaty on capital gains I think, which means you are subject to US capital gains tax on the full amount of the capital gain on disposal of an ISA, not from the date you immigrated, but from the date you invested in it. Check on that one, but if I'm right, there really is no good reason to hold onto an ISA. If that's right then really you should get rid of an ISA as soon as you intend to move your tax home to the US.

nun

Exactly! You don't get any tax advantages by keeping the ISA and if you have capital gains that means you are probably invested in a PFIC at which point you will face draconian taxation from the IRS.

I also can't think of a good reason to keep money in the UK for anything other than paying bills.