Tax advice for 2010 return
 

Hi all, I have a tax question which I hope is ok to share below:

We are UK citizens who relocated to the USA last July (2010). However, before relocating to the US, we were living in the Netherlands from Jul 2007. Therefore for the past 3 years have been filing dutch tax returns.

As a married couple with only 1 income (I work, my husband has not since our relocation) I am not sure whether I need to file a 2010 Tax return form? To be honest I am not sure where to start full stop

I am having tax withheld from my salary and completed the W4 form when I arrived in the best way I could with the limited information I had at the time. We have also had medical expensed in 2010 which we part paid for (health ins covered the rest) which I dont even know if its a factor or not.

To add to the pot my husband continues to own and receive rent for our house in the UK, whilst we didnt declare this in the Netherlands I am wondering if we should here in the USA.

Any help appreciated

Re: Tax advice for 2010 return
 

You will need to file a return I think. Even if you didn't earn anything that you have to declare, they like you to do one (I did one just after I settled in, despite arriving in October of the previous year). Look up the instructions on the 1040 form and it should give details on it. ou could probably fill in the EZ form which is a lot simpler (but again, read the instructions)

Re: Tax advice for 2010 return
 

emiwar, you probably need a tax professional for your first year. I looked, you are on an L-1 visa, but your time in the US indicates that you are probably a tax resident here.

I suspect the rental house income has to be included (but you can write off expenses against it too). Your medical costs have to be a quite-high percentage for you to write those off (7.5%?). I never even come close, and I'm already itemizing my deductions (oh your head is gonna explode).

Definitely file. If you have overpaid in 2010 by having too much withheld, you'll be wanting that back.

Re: Tax advice for 2010 return
 

we have a uk house rented out too and declare that on our uk and US tax returns, along with mortgage paid, repairs, managment fees etc. We ended up with a zero UK tax return as the profit after expenses was in our UK tax allowance.

in the US you are able to deduct mortgage interest off your tax owings for your MAIN home only(so if you rent here in the US you can declare the UK mortgage interest and basically knock that off the US tax bill). If you own in the US then you would declare that mortgage interest from your deductions. We rented for a year when we arrived here - so we actually changed the UK mortgage to 'interest only' to maximize the tax claim here.

Ask around other ex pats you are aware off who does their tax - as it will help a lot if the acct is familiar with foreign tax treaty's to get the best deal for you. It costs us around $500 for a married joint return (and only my husband works) and with the mortgage stuff we usually get a return of many thousands of dollars back from the tax people. I picked my accountant here by asking local friends on face book for recommendations and then discussing with him foreign tax.

Re: Tax advice for 2010 return
 

First year filing can be complicated. In your case it appears that you will likely be able to file as a non resident (less tax advantages but worldwide income is not reported) but you may want to elect to file as a resident for tax purposes (more tax advantages but worldwide income is included).

It is likely that you will get a refund when filing taxes. That is because taxes are withheld from your income assuming that you will be working at that salary for the full year. Even filing as a resident will likely create a refund since normally foreign taxes paid can be used to offset US taxes.

Re: Tax advice for 2010 return
 

Thanks for the reply so far.

Reading the replies here and info in other discussions it appears that some of you continue to file tax returns in the UK. This is something we have not been doing :o We rent our property directly without a management company and their associated fees. The rent covers the mortgage and the small amount remaining certainly falls under the tax exempt threshold (which I think is about 7.5k). We have not had any maintenence issues so far.

In your opinions should we being filing in the UK too?

Re: Tax advice for 2010 return
 

we were specifically told if we earnt rental income in the UK we had to file a UK return. Doesnt matter that 'profit' is under the threshold. We found a company online that let us download an excel spreadsheet- stick in the details (which showed we owed zero tax) and file online with the inland revenue for about £12.
http://www.sa2000.co.uk/
nb- we had to register first online with the inland revenue to get an online account (see my previous posts for details)

Re: Tax advice for 2010 return
 

It's a legal requirement, so yes.

You will need to complete an NRL1 form so the UK government doesn't make your tenants withhold 20% from their rent to you. You will then do a self-assessment each year and provided the "profit" (i.e. rent after mortgage interest, insurance, gas safety cert and wear and tear allowance etc) is less than your UK tax-free allowance then you will not pay any tax.

Note that it is the mortgage interest and not the repayment part that is deductible.

I assume you completed a P85 when you left the UK?

They may try chasing you for back-tax if any is owed.

You will, however, add the "profit" onto your US income and pay at your marginal rate, there are some extra deductions you can make in the US such as a depreciation allowance etc.

Re: Tax advice for 2010 return
 

If you need an accountant that is knowledgeable in both UK and US taxes I recommend Pete Newton. He is a member here on BE and he does my taxes.
www.doug-tax.com. Tell him I recommended him. He's a really nice guy, very patient and really know his stuff!

We have had to file a UK self assesment for the past two years since my husband still has a house in the UK.

Ditto to what Cape Blue said

Re: Tax advice for 2010 return
 

Thanks all for the advice - looks like we have some UK tax backtracking to do :unsure:

Will PM Pete and see if he can help.

Just have my dutch tax form to look forward to now, thats always a fun one to complete, form on one screen and google translate on the other:D