Tax Residency in first year of green card
#1
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Joined: May 2020
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Tax Residency in first year of green card
Hi all.
My UK citizen spouse got his green card through marriage to me, a US citizen. We came through New York to activate the visa in July and then went back to the UK right away. It took us a long time to wrap things up in the UK and find a job, etc., so we didn't actually move permanently to the US until early this year. (We edged past the 180 day absence thing, but actually spoke to an immigration agent at the airport who was pretty relaxed about it.)
He's trying to file a tax return for 2019. It appears he is classed as a US resident for tax purposes as of the July entry date, even though he was still living and working in the UK the entire tax year. I filed (married filing separately) non-resident on the f2555 through the physical presence test, but it appears he can't, as his green card status means he's automatically a resident.
This is a bit alarming because it sounds like he's liable for the flat 30% tax on his UK income from July to the end of the year.
Have I missed something, or is this the correct state of things? Any help appreciated, although I suspect we should probably find some sort of tax professional who knows about all this.
My UK citizen spouse got his green card through marriage to me, a US citizen. We came through New York to activate the visa in July and then went back to the UK right away. It took us a long time to wrap things up in the UK and find a job, etc., so we didn't actually move permanently to the US until early this year. (We edged past the 180 day absence thing, but actually spoke to an immigration agent at the airport who was pretty relaxed about it.)
He's trying to file a tax return for 2019. It appears he is classed as a US resident for tax purposes as of the July entry date, even though he was still living and working in the UK the entire tax year. I filed (married filing separately) non-resident on the f2555 through the physical presence test, but it appears he can't, as his green card status means he's automatically a resident.
This is a bit alarming because it sounds like he's liable for the flat 30% tax on his UK income from July to the end of the year.
Have I missed something, or is this the correct state of things? Any help appreciated, although I suspect we should probably find some sort of tax professional who knows about all this.
#2
DE-UK-NZ-IE-US... the TYP
Joined: Mar 2010
Posts: 2,855
Re: Tax Residency in first year of green card
Hi all.
My UK citizen spouse got his green card through marriage to me, a US citizen. We came through New York to activate the visa in July and then went back to the UK right away. It took us a long time to wrap things up in the UK and find a job, etc., so we didn't actually move permanently to the US until early this year. (We edged past the 180 day absence thing, but actually spoke to an immigration agent at the airport who was pretty relaxed about it.)
He's trying to file a tax return for 2019. It appears he is classed as a US resident for tax purposes as of the July entry date, even though he was still living and working in the UK the entire tax year. I filed (married filing separately) non-resident on the f2555 through the physical presence test, but it appears he can't, as his green card status means he's automatically a resident.
This is a bit alarming because it sounds like he's liable for the flat 30% tax on his UK income from July to the end of the year.
Have I missed something, or is this the correct state of things? Any help appreciated, although I suspect we should probably find some sort of tax professional who knows about all this.
My UK citizen spouse got his green card through marriage to me, a US citizen. We came through New York to activate the visa in July and then went back to the UK right away. It took us a long time to wrap things up in the UK and find a job, etc., so we didn't actually move permanently to the US until early this year. (We edged past the 180 day absence thing, but actually spoke to an immigration agent at the airport who was pretty relaxed about it.)
He's trying to file a tax return for 2019. It appears he is classed as a US resident for tax purposes as of the July entry date, even though he was still living and working in the UK the entire tax year. I filed (married filing separately) non-resident on the f2555 through the physical presence test, but it appears he can't, as his green card status means he's automatically a resident.
This is a bit alarming because it sounds like he's liable for the flat 30% tax on his UK income from July to the end of the year.
Have I missed something, or is this the correct state of things? Any help appreciated, although I suspect we should probably find some sort of tax professional who knows about all this.
I am not aware of any flat 30% tax. You complete you tax return and it figures out what is owed. What you are probably missing is that double tax agreements exist between many countries to avoid double taxation, so he should get a credit for UK tax’s (not NI) paid against any federal tax he owes.
Depending which state he is a resident in (what address did his green card go to) he may also be liable to state and city taxes, for those he can’t use any remaining UK tax credit.
#3
DE-UK-NZ-IE-US... the TYP
Joined: Mar 2010
Posts: 2,855
Re: Tax Residency in first year of green card
He came and became a PR. As a PR your are taxed on your worldwide income like a USC.
I am not aware of any flat 30% tax. You complete you tax return and it figures out what is owed. What you are probably missing is that double tax agreements exist between many countries to avoid double taxation, so he should get a credit for UK tax’s (not NI) paid against any federal tax he owes.
Depending which state he is a resident in (what address did his green card go to) he may also be liable to state and city taxes, for those he can’t use any remaining UK tax credit.
I am not aware of any flat 30% tax. You complete you tax return and it figures out what is owed. What you are probably missing is that double tax agreements exist between many countries to avoid double taxation, so he should get a credit for UK tax’s (not NI) paid against any federal tax he owes.
Depending which state he is a resident in (what address did his green card go to) he may also be liable to state and city taxes, for those he can’t use any remaining UK tax credit.
#4
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Re: Tax Residency in first year of green card
Yes, there is the tax treaty (the general language the Tax Guide for Aliens uses is 30% or tax treaty terms). More importantly, I think what I missed is that you can be a resident alien AND have your tax home elsewhere, so he can still take the foreign earned income deduction, the same way I have been for years while we were in the UK.
Also, while
is of course perfectly correct, it's also such a simplified version of the whole US tax return rigamarole that I am weeping with laughter and pain.
Also, while
You complete you tax return and it figures out what is owed.
#5
DE-UK-NZ-IE-US... the TYP
Joined: Mar 2010
Posts: 2,855
Re: Tax Residency in first year of green card
Yes, there is the tax treaty (the general language the Tax Guide for Aliens uses is 30% or tax treaty terms). More importantly, I think what I missed is that you can be a resident alien AND have your tax home elsewhere, so he can still take the foreign earned income deduction, the same way I have been for years while we were in the UK.
Also, while
is of course perfectly correct, it's also such a simplified version of the whole US tax return rigamarole that I am weeping with laughter and pain.
Also, while
is of course perfectly correct, it's also such a simplified version of the whole US tax return rigamarole that I am weeping with laughter and pain.
https://www.irs.gov/individuals/inte...come-exclusion
And you are right, when you are doing foreign taxes you have to do a bit more than the US alone, the biggest pain being FX and the difference in the tax year, so you have to apportion everything in to the right years.
If your higher rate tax payer in the UK you likely have a big enough credit, the issue is if you live somewhere like NYC, then you can easily be paying a lot more for city and state and end up with a federal credit that you can’t use.
#6
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Re: Tax Residency in first year of green card
For us, it'll be easiest to take the income exclusion. He shoved money into his pension and paid all the nursery fees (employer-provided nursery) pre-tax, so his taxable income, and therefore his tax amount, was fairly low. In fact, we used to joke that we couldn't have any more kids because we'd be paying his employer for the privilege of his working there.
#7
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Joined: Mar 2010
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Re: Tax Residency in first year of green card
For us, it'll be easiest to take the income exclusion. He shoved money into his pension and paid all the nursery fees (employer-provided nursery) pre-tax, so his taxable income, and therefore his tax amount, was fairly low. In fact, we used to joke that we couldn't have any more kids because we'd be paying his employer for the privilege of his working there.
#8
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Re: Tax Residency in first year of green card
I believe this is correct, when reporting UK income on the US tax return the gross income is before any UK pension contributions plus add in any contributions made by the employer to the gross amount. This is what my son, US/UK dual citizen living in England does. Since he has no other foreign income he keeps it simple and excludes his UK wages with form 2555. You can also use foreign tax credits, form 1116 for credits on foreign taxes paid on any foreign income, which is what my wife and I do as we have no earned income, just pensions, interest, dividends etc.
#9
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Re: Tax Residency in first year of green card
Yes, correct. Both the nursery fees and pension are taxable income in the US, but were paid pre-tax in the UK, so the amount of taxable income in the UK- and therefore UK tax and any US tax credit- was small. But the amount of taxable income in the US would be much larger. So we don't want to use foreign tax credits, as that probably wouldn't be enough, given that UK taxes were only paid POST pension and nursery fees.
#10
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Joined: Mar 2010
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Re: Tax Residency in first year of green card
Yes, correct. Both the nursery fees and pension are taxable income in the US, but were paid pre-tax in the UK, so the amount of taxable income in the UK- and therefore UK tax and any US tax credit- was small. But the amount of taxable income in the US would be much larger. So we don't want to use foreign tax credits, as that probably wouldn't be enough, given that UK taxes were only paid POST pension and nursery fees.
https://www.irs.gov/individuals/inte...t-or-deduction
The biggest surprise I had in the years I had to do this was the state and local and also that the NI paid in the UK is not a tax so there was also no credit for that.
#11
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Re: Tax Residency in first year of green card