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Some basic tax information about moving to the US please

Some basic tax information about moving to the US please

Old Mar 24th 2011, 7:45 am
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Default Some basic tax information about moving to the US please

Hi all,

My girlfriend and I have been thinking about getting married soon and going down the CR-1 visa route. We have started to think about the tax implications of this and were wondering if any of you guys could give us an introduction as to what we need to take into account, both she as a US citizen and me as a UK citizen.

Obviously we will need to file a joint tax return at some point. Will we need to do so while the case is processing?

I want to transfer her some money for filing fees, gifts and such. Will she need to declare this money at all?

I have heard of a reciprocal tax treaty between the UK and the US. What does this entail?

Any information about all this to get us started and looking in the right direction would be greatly appreciated. Apologies if this has been covered elsewhere but i have had a search and can't find anything yet.
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Old Mar 24th 2011, 8:27 am
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Default Re: Some basic tax information about moving to the US please

Originally Posted by tintagel74 View Post
Obviously we will need to file a joint tax return at some point. Will we need to do so while the case is processing?
I she living in the US or the UK? If she is living in the US, she just files taxes as normal. If she is living in the UK, she needs to file US taxes. It is unlikely that she will owe any taxes due to a $91,000 foreign earned income exclusion as well as being able to offet US taxes owed by foreign taxes paid. However, US citizens and permanent residents are required to file tax returns yearly on worldwide income (unless her income is very low). If she hasn't filed tax returns for the past 3 years, she should now file those returns since that will be needed for the CR1.

I want to transfer her some money for filing fees, gifts and such. Will she need to declare this money at all?
No. The recipient of gifts are never taxed in the US. The donor can be taxed if the gift to anyone person is greater than $13,000 per year but since you are not a permanent resident or a US citizen, the US government doesn't have the right to tax you.

When you become a permanent resident, you will be taxed on your worldwide income but if you paid foreign taxes, you can offset US taxes owed by the foreign taxes paid. Generally US federal income taxes are lower than most European countries. I believe the UK has 2 marginal tax brackets now (20% and 40%) where the US has 5 (10%, 15%, 25%, 33%,and 35%).
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Old Mar 24th 2011, 2:07 pm
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Default Re: Some basic tax information about moving to the US please

Originally Posted by tintagel74 View Post
Will we need to do so while the case is processing?
Not likely, as you won't yet be resident for tax purposes in the US until you enter with your immigrant visa. And, once you enter the US, your case is no longer being processed... if you see what I mean.


I have heard of a reciprocal tax treaty between the UK and the US. What does this entail?
It's a massive document that basically says that you won't be taxed twice on money that has already been taxed.


Any information about all this to get us started and looking in the right direction would be greatly appreciated.
Unless one or both of you are extremely high wage earners, the tax implications are negligible.

Ian
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Old Mar 24th 2011, 3:48 pm
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Default Re: Some basic tax information about moving to the US please

Originally Posted by tintagel74 View Post
Obviously we will need to file a joint tax return at some point. Will we need to do so while the case is processing?
Originally Posted by ian-mstm View Post
Not likely, as you won't yet be resident for tax purposes in the US until you enter with your immigrant visa. And, once you enter the US, your case is no longer being processed... if you see what I mean.
tintagel,

As soon as you are married, your USC wife can include you in her tax return, even if you are still overseas. There are some things she needs to do for this, such as apply for an ITIN for you (kind of like a substitute Social Security Number). Then she can do a joint return (married filing jointly). The benefit of this is that there is a tax benefit to married couples filing jointly, and might help her get a tax refund.

The other option is just for her to file in the "married filing separately" category after you get married (but before you immigrate to the USA). Probably no tax breaks for her, but might be easier for her to file. Depends how complicated her own tax return is.

The one thing she MUST do after you get married, is file her taxes in the "married" category. Either "married jointly" or "married filing separately". She can no longer choose the "single" category once you guys are married. That's also very important for your future immigration needs...as tax returns are required at the future steps (removal of conditions, naturalization) and you want to make sure all the taxes are filed in the correct category to begin with.

As for whether to include you on the next return after you're married but still living overseas, it's best to have her work it out both ways and then just go with the one that is more beneficial financially.

Rene
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Old Mar 24th 2011, 4:19 pm
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Default Re: Some basic tax information about moving to the US please

Originally Posted by tintagel74 View Post
Hi all,

My girlfriend and I have been thinking about getting married soon and going down the CR-1 visa route. We have started to think about the tax implications of this and were wondering if any of you guys could give us an introduction as to what we need to take into account, both she as a US citizen and me as a UK citizen.

Obviously we will need to file a joint tax return at some point. Will we need to do so while the case is processing?

I want to transfer her some money for filing fees, gifts and such. Will she need to declare this money at all?

I have heard of a reciprocal tax treaty between the UK and the US. What does this entail?

Any information about all this to get us started and looking in the right direction would be greatly appreciated. Apologies if this has been covered elsewhere but i have had a search and can't find anything yet.
I am going to move your thread to the USA forum, where there are a ton of tax threads to help you get to the right "publications" on irs.gov
You're going to need to do a little bit of homework.

Some basics include:
Once married, your wife will be required to file her tax return as 'married' for that calendar year in which you got married.
There are two sub-categories: Married Filing Joint and Married Filing Single. There may be different tax advantages one way or the other; run them both and choose the one that is best for you. There is no immigration implication for choosing one or the other.

The day you enter the US with an Immigrant Visa (CR-1) you become a Permanent Resident. All your worldwide income in that calendar year has to be reported to the US/IRS. If you have already paid taxes on that money in the UK, you don't pay tax on it again in the US but you have to report it.

This is not a 'one thread one day' topic; welcome to the fun of US tax returns.
I suggest you not worry about it too much beforehand, and hire a professional to do your first year's return after moving.
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Old Mar 24th 2011, 6:29 pm
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Default Re: Some basic tax information about moving to the US please

Originally Posted by Michael View Post
I she living in the US or the UK? If she is living in the US, she just files taxes as normal. If she is living in the UK, she needs to file US taxes. It is unlikely that she will owe any taxes due to a $91,000 foreign earned income exclusion as well as being able to offet US taxes owed by foreign taxes paid. However, US citizens and permanent residents are required to file tax returns yearly on worldwide income (unless her income is very low). If she hasn't filed tax returns for the past 3 years, she should now file those returns since that will be needed for the CR1.


No. The recipient of gifts are never taxed in the US. The donor can be taxed if the gift to anyone person is greater than $13,000 per year but since you are not a permanent resident or a US citizen, the US government doesn't have the right to tax you.

When you become a permanent resident, you will be taxed on your worldwide income but if you paid foreign taxes, you can offset US taxes owed by the foreign taxes paid. Generally US federal income taxes are lower than most European countries. I believe the UK has 2 marginal tax brackets now (20% and 40%) where the US has 5 (10%, 15%, 25%, 33%,and 35%).
Yes, she lives in the states and has 3 years tax returns. Ah, that's great, she was worried that she would get taxed on any money i sent to her, as income. And i hope i won't have to send her more than $13,000.
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Old Mar 24th 2011, 6:36 pm
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Default Re: Some basic tax information about moving to the US please

Terrific! Thanks to you all for your insights. I will certainly do my research regarding the points you have raised. I am guessing that dealing with all the tax forms and documentation might be comparable to, if not more difficult than, applying for the visa!
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Old Mar 24th 2011, 6:40 pm
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Default Re: Some basic tax information about moving to the US please

ISA's, mutual funds and any assets that might fall into PFIC tax calculation might be land mines if not resolved/closed in the tax year BEFORE you become permanent resident...if you have assets like that, you might want to seek advice before becoming a permanent resident.

Also may be worth cashing in any premium bonds before heading west...

US tax laws are very different, and you should make no layman assumptions as to how any remaining UK assets might be treated under IRS jurisdiction.
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Old Mar 24th 2011, 8:44 pm
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Default Re: Some basic tax information about moving to the US please

Originally Posted by tintagel74 View Post
Terrific! Thanks to you all for your insights. I will certainly do my research regarding the points you have raised. I am guessing that dealing with all the tax forms and documentation might be comparable to, if not more difficult than, applying for the visa!
I've been through both & had the advantage of knowing more than the average USC about taxes.. trust me, the taxes are worse than the visa app.
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Old Mar 24th 2011, 9:37 pm
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Default Re: Some basic tax information about moving to the US please

Originally Posted by tintagel74 View Post
Yes, she lives in the states and has 3 years tax returns. Ah, that's great, she was worried that she would get taxed on any money i sent to her, as income. And i hope i won't have to send her more than $13,000.
Give her all you want . The 13000. does not apply yet!!!
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Old Mar 24th 2011, 11:31 pm
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Default Re: Some basic tax information about moving to the US please

Originally Posted by JimmyMacTheFirst View Post
ISA's, mutual funds and any assets that might fall into PFIC tax calculation might be land mines if not resolved/closed in the tax year BEFORE you become permanent resident...if you have assets like that, you might want to seek advice before becoming a permanent resident.

Also may be worth cashing in any premium bonds before heading west...

US tax laws are very different, and you should make no layman assumptions as to how any remaining UK assets might be treated under IRS jurisdiction.
Thanks for that, that's a great point. I have ISAs and am now extremely intrigued as to what will happen to these with regards US taxation.
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Old Mar 25th 2011, 6:31 pm
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Default Re: Some basic tax information about moving to the US please

yes, i am intrigued too. Can anyon shed light on what the tax treatment of UK ISAs is in the US?
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Old Mar 25th 2011, 6:58 pm
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Default Re: Some basic tax information about moving to the US please

Originally Posted by Swisstony View Post
yes, i am intrigued too. Can anyon shed light on what the tax treatment of UK ISAs is in the US?
In the top right of the USA forum page there is a 'search this forum' box... put ISA in there and quite a few threads come up.
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