carrtb

Hi Everyone - Just looking for some advice and to see if anyone has been in a similar situation. I moved to NY on 7th December as a Perm Resident with my wife and 2 sons (they have citizenship). When I told my employer I would be leaving the UK they offered me the opportunity to continue with my current employment which I do through teleworking. I'll be travelling back to the UK for a week every couple of months and have also been tasked with looking for opportunities for the business in the US. As i'm still employed by a UK employer I am currently paying income tax and national insurance in the UK and my employer pays employers NI (but I get none of the benefits - e.g. Child Support). Does anyone know how this would be viewed by US authorities and whether there is anything I need to do to make sure I don't have to pay taxes in both countries. Not sure if this complicates matters but I also have a home in the UK which I rent out because we weren't able to sell it. Any help / advice would be appreciated.

Cook_County

You are a US person and required to report worldwide income under the green card test.

You may jointly elect to file jointly by making 7701(b)(4) nd 6013 elections if this saves you tax.

You will get credit for UK tax by claiming this on Form 1116.

You will also need to report rental income, file FBARs and so on.

penguinsix

You are now a permanent resident in the United States. You have to pay taxes on all WORLDWIDE income, regardless of where it comes from. There are treaties to help avoid double-taxation, but the bigger problem is that you are physically working in the USA and your employer should be paying social security / medicare / withholding taxes to the US government. If your employer is not making these payments, you should be paying it.

Generally (with some exceptions) you "work" where you are physically located, not where you are paid, not where the mainframe is located, not where your employer's headquarters is based. That is the rule most countries follow. To turn it around, imagine if everyone who worked in London was 'paid back in the home country and paid taxes in the home country, not to the UK'. It just wouldn't work and the outcry would be huge as people would be using government services without contributing at all.

To help illustrate let me use the very real but slightly extreme example of professional sports players who play football in different states. NY Jets vs. Chicago in Chicago--the Jets players have to pay taxes to Illinois for the 2-3 days they are 'working' in Illinois. Many professional athletes have to file 20-30 state income tax forms every year. Same general principle--you pay taxes where you are physically working.

Just like the UK, the cost to an employer of hiring someone is not 'just' their salary. There are other taxes and whatnot that has to be paid by the employer, such that if you make £100,000 annually your employer is actually paying £108,000 a year (or so). Your presence on US soil while working will likely mean that your company needs to set up a US presence to handle the withholding and whatnot. This can be rather complicated as it can also open up your UK company to US reporting requirements and the company found to have a "US presence" simply by you being an employee here.

The other option is that you become an 'independent contractor' for your UK company. The only downside is that you, personally, are liable for the employer's share of the taxes (so in the hypothetical, you get paid £100k but have to pay the extra £8k out of your own pocket). What some people do is go as an independent contractor, but their pay is salary+the extra bit that would have been going to PAYE expenses in the UK but now are handled by you in the USA for US FICA/Medicare/Withholding.

This is an often asked question and the general advice we give is "consult a professional". There are other bits you need to become aware of, such as FBAR for foreign bank accounts (and FATCA) along with disclosure requirements if you have a US company owned by UK individuals (as the case would be if you set up a shell company to handle the withholding). I would strongly suggest you discuss with with an accountant familiar with cross-border taxation issues in the US and the UK as it's not a simple task.

Good luck.

Visionxq2

We are in a similar situation;
I am US citizen resident in UK for over 16 years
3 children all born in UK
Wife is British and has been given opportunity for 2+more years secondment in US.

My question is; in regards to tax, does it matter Whether i get my wife a permanent resident green card?

If I get her the PR, will she have to keep paying US tax when/if we come back to UK?

Also, I have been working in UK as a permanent resident and won't be working in the US initially, does that affect my tax in any way?

ian-mstm

No... and to clarify, you can't actually get your wife a green card... that's something for which she must apply herself. All you can do is file a petition to start the process on her behalf.


Yes... pretty much... but also, no. It depends.


Tax for which country... US or UK? You have been filing a US tax return each and every year as required by US law, right?

Ian

Michael

I don't believe that is true. Generally a person pays taxes to the state where they have a permanent residence (in the case of football, their home state) just like long haul truck drivers or someone on a short term temporary assignment.

This is why a lot of golfers have their home in Florida (no state income tax) and why Pil Mckelson complained last week about the taxes he pays since his home is in California (a high income tax state).

penguinsix

It's surprising but many states do impose a 'jock tax' on visiting sports athletes. While the majority of their income is taxed in their home state (and is why they often choose Florida), when they play in different states (or even different countries) they get hit with tax on their 'duty days' in that state.

Here's a great article on the process in case you are interested:

http://finance.yahoo.com/news/profes...071447565.html

Michael

It appears that you are right for jocks. I guess Phil Mickelson was upset primarily about his state capital gains taxes from investments and not his earned income. Also by living in Florida, there may be some loophole to get around royalty state tax payments from commercials.

penguinsix

I had never heard about it until I was on a plane once and ended up talking to an attorney who was actually a 'sports agent' and tax advisor to a couple of MLS stars. It's a really complicated bit of tax law.

It's not for you and me and most folks, but it is a rather extreme example just to sort of illustrate the concept of living in one place and getting paid somewhere else, since that seems to be asked quite a bit here.

Still think the OP should consult some professional legal/tax advice on how best to proceed.

Michael

I agree. It seems that since he is now working in the US, his residence for tax purposes is now the US.

goldenstate31

Hi I have two accountants I was told by accountant 1 that you are still considered a uk resident for tax purposes for 17 months after leaving the uk. During this time any tax paid from uk income will not need to be taxed again as US income. After this time the 17 months you will need to declare your uk income but again you can offset this against any taxes due inthe US as taxes paid. You can like me still claim your uk tax credit rewards etc for a period of 17 months only.
Accountant 2 confirmed the above also.
But do get yourself an accountant/tax advisor if like me you dont want the head ache!

nun

This sounds a bit confused.

Where does the "17 months" come from? If you spend an entire tax year outside the UK you can become non-UK resident for tax purposes.

If you are US resident you will be taxed on your worldwide income. The US will have the primary taxation authority and you will have to use the Treaty and HMRC and IRS regulations to determine how much you pay to the UK (if you have UK source income) or to the US. The exact amounts will depend on the type of the income (dividends, earned income, capital gains etc) and your residency/citizenship status.

Are either of your accountants dual US/UK qualified?

Michael

+1. That didn't make any sense to me either and I never heard of such a regulation. At a minimum, he should be taxed as a non resident alien if he worked at all in the US.

goldenstate31

My accountants are both from one of the biggest accountant organisations in the uk as for the above I seldomly allow myself to get involved in tax affairs for my companies thats what I pay my accountants for

nun

Are these accountants experienced in cross border tax? It might be that their advice is good and it's just your post that is a little confusing, but you state a few worrying things in your post. Phrases like "During this time any tax paid from uk income will not need to be taxed again as US income". This is wrong if you are a US resident as your worldwide income is US taxable......you must pay US income tax on your earnings.