UK/USA Dual Citizen moving to California
#1
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Joined: Oct 2011
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UK/USA Dual Citizen moving to California
Hi,
I am a 25 year old UK/US dual citizen. I was born in the US and from birth I have held both a British and American passport. I lived in the US from the age of 0-1 then moved back to the UK and have lived here since. Both my parents are British.
I applied and received a US social security number in June 2012. I have never filed tax returns to the IRS (because I did not have an SSN until now).
I plan to move to San Francisco in May 2013 with my current British employer. I will be the sole representative for my company in the US and initially I will work from home rather than open an office.
My current salary is £40,000 ($63,000).
My questions are:
1. If my employer continues to pay me through the UK bankroll - will I still need to file tax returns to the IRS?
2. If I am already paying taxes in UK will I actually have to pay any taxes to the IRS on my current salary? I hear the US and UK have some kind of salary limit when you have to pay taxes in both countries - anyone know of documentation on this?
3. Would it be better to get my employer to setup a US bankroll and pay me through that?
4. What's the best way to transfer money from UK account to US account - best rates without paying fees etc?
Many thanks in advance!
I am a 25 year old UK/US dual citizen. I was born in the US and from birth I have held both a British and American passport. I lived in the US from the age of 0-1 then moved back to the UK and have lived here since. Both my parents are British.
I applied and received a US social security number in June 2012. I have never filed tax returns to the IRS (because I did not have an SSN until now).
I plan to move to San Francisco in May 2013 with my current British employer. I will be the sole representative for my company in the US and initially I will work from home rather than open an office.
My current salary is £40,000 ($63,000).
My questions are:
1. If my employer continues to pay me through the UK bankroll - will I still need to file tax returns to the IRS?
2. If I am already paying taxes in UK will I actually have to pay any taxes to the IRS on my current salary? I hear the US and UK have some kind of salary limit when you have to pay taxes in both countries - anyone know of documentation on this?
3. Would it be better to get my employer to setup a US bankroll and pay me through that?
4. What's the best way to transfer money from UK account to US account - best rates without paying fees etc?
Many thanks in advance!
#2
Forum Regular
Joined: Sep 2008
Location: Avondale, Arizona USA
Posts: 113
Re: UK/USA Dual Citizen moving to California
I know that more qualified people than me will give you answers, but a couple of things I had to deal with are not disimilar to your queries.
I dont think you have to declare anything to the IRS that was accounted for taxwise in the UK. My wife and I get our british pensions paid directly into our US bank. We didnt have to declare anything that was arrived at by way of money that was already taxed in the UK, and we dont declare that annually when time comes to pay tax's.
Regarding transferring money from the UK, we had a largish lump sum paid directly into our US bank account. I think the US bank (Chase in our case) has to advise the IRS of any sum over $10,000, but that should be a formality.
There are cleverer people than me who'll know doubt fill in the blanks.
Pete
I dont think you have to declare anything to the IRS that was accounted for taxwise in the UK. My wife and I get our british pensions paid directly into our US bank. We didnt have to declare anything that was arrived at by way of money that was already taxed in the UK, and we dont declare that annually when time comes to pay tax's.
Regarding transferring money from the UK, we had a largish lump sum paid directly into our US bank account. I think the US bank (Chase in our case) has to advise the IRS of any sum over $10,000, but that should be a formality.
There are cleverer people than me who'll know doubt fill in the blanks.
Pete
#3
Forum Regular
Joined: Jan 2011
Location: North Charleston, SC
Posts: 194
Re: UK/USA Dual Citizen moving to California
Lacking a SSN doesn't prohibit you from filing your US taxes. Many aliens apply for ITIN numbers just for this reason. Because you are a US citizen you are required to file a US tax return (this is not to say that you will owe heaps of tax). Citizens are required to report world-wide income whether it continues to be paid in another country or not. HTH!
#4
Account Closed
Joined: Aug 2002
Location: Kentucky
Posts: 38,865
Re: UK/USA Dual Citizen moving to California
1. If my employer continues to pay me through the UK bankroll - will I still need to file tax returns to the IRS?
2. If I am already paying taxes in UK will I actually have to pay any taxes to the IRS on my current salary?
I hear the US and UK have some kind of salary limit when you have to pay taxes in both countries - anyone know of documentation on this?
3. Would it be better to get my employer to setup a US bankroll and pay me through that?
4. What's the best way to transfer money from UK account to US account - best rates without paying fees etc?
Ian
#5
DE-UK-NZ-IE-US... the TYP
Joined: Mar 2010
Posts: 2,848
Re: UK/USA Dual Citizen moving to California
[QUOTE=
Probably not. The US/UK tax treaty usually means that you avoid double taxation.
Ian[/QUOTE]
Not sure about CA, but in NY that only works for federal tax, but not state and city, only income from other american states and Canadian provinces can be used as credit against those taxes.
tht
Probably not. The US/UK tax treaty usually means that you avoid double taxation.
Ian[/QUOTE]
Not sure about CA, but in NY that only works for federal tax, but not state and city, only income from other american states and Canadian provinces can be used as credit against those taxes.
tht
#6
Lost in BE Cyberspace
Joined: May 2010
Location: San Diego, California
Posts: 9,620
Re: UK/USA Dual Citizen moving to California
I know that more qualified people than me will give you answers, but a couple of things I had to deal with are not disimilar to your queries.
I dont think you have to declare anything to the IRS that was accounted for taxwise in the UK. My wife and I get our british pensions paid directly into our US bank. We didnt have to declare anything that was arrived at by way of money that was already taxed in the UK, and we dont declare that annually when time comes to pay tax's.
Regarding transferring money from the UK, we had a largish lump sum paid directly into our US bank account. I think the US bank (Chase in our case) has to advise the IRS of any sum over $10,000, but that should be a formality.
There are cleverer people than me who'll know doubt fill in the blanks.
Pete
I dont think you have to declare anything to the IRS that was accounted for taxwise in the UK. My wife and I get our british pensions paid directly into our US bank. We didnt have to declare anything that was arrived at by way of money that was already taxed in the UK, and we dont declare that annually when time comes to pay tax's.
Regarding transferring money from the UK, we had a largish lump sum paid directly into our US bank account. I think the US bank (Chase in our case) has to advise the IRS of any sum over $10,000, but that should be a formality.
There are cleverer people than me who'll know doubt fill in the blanks.
Pete
If you are resident in the UK why would you be paying UK income tax on your pension if you have declared yourself non resident in the UK?
Or, even if you pay income tax in the UK why does this mean that you don't declare the income on your US tax return?
Have I missed something here?
#7
Re: UK/USA Dual Citizen moving to California
As a US citizen or resident you have to declare your worldwide income to the IRS.
Before the OP moves to the US they should get their US back taxes sorted out. All US citizens must file annual tax returns with the IRS. So look into filing back taxes. If you have things like UK stock ISAs, investment funds or pensions it will probably be best to get a professional to handle things.
As you are a US citizen it doesn't matter to the IRS where you get paid, you still have to declare your income to the IRS. You need to talk you your UK company to figure out your payroll situation regarding things like FICA and social security tax and also health insurance, how do you/they plan to deal with that?
Before the OP moves to the US they should get their US back taxes sorted out. All US citizens must file annual tax returns with the IRS. So look into filing back taxes. If you have things like UK stock ISAs, investment funds or pensions it will probably be best to get a professional to handle things.
As you are a US citizen it doesn't matter to the IRS where you get paid, you still have to declare your income to the IRS. You need to talk you your UK company to figure out your payroll situation regarding things like FICA and social security tax and also health insurance, how do you/they plan to deal with that?
Last edited by nun; Jul 1st 2012 at 1:36 am.
#8
Re: UK/USA Dual Citizen moving to California
I dont think you have to declare anything to the IRS that was accounted for taxwise in the UK. My wife and I get our british pensions paid directly into our US bank. We didnt have to declare anything that was arrived at by way of money that was already taxed in the UK, and we dont declare that annually when time comes to pay tax's.
If you didn't do that and are having tax withheld in the UK you still have to include UK pensions on you 1040 and claim a tax credit for aUK tax paid.
#9
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Joined: Mar 2008
Location: Santa Cruz, CA
Posts: 4,913
Re: UK/USA Dual Citizen moving to California
Also, if you move to the US before your 26th birthday you should register for Selective Service.
Failure to do so won't have any immediate consequences but it could disqualify you from receiving certain government benefits later.
Failure to do so won't have any immediate consequences but it could disqualify you from receiving certain government benefits later.
#10
Account Closed
Joined: Aug 2002
Location: Kentucky
Posts: 38,865
Re: UK/USA Dual Citizen moving to California
In fact, I'm not even sure why you're bringing state/city tax into the conversation.
Ian
#12
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Joined: Jun 2011
Posts: 19
Re: UK/USA Dual Citizen moving to California
Could've been a different tfc3000.
#13
Re: UK/USA Dual Citizen moving to California
I plan to move to San Francisco in May 2013 with my current British employer. I will be the sole representative for my company in the US and initially I will work from home rather than open an office.
My current salary is £40,000 ($63,000).
My questions are:
1. If my employer continues to pay me through the UK bankroll - will I still need to file tax returns to the IRS?
2. If I am already paying taxes in UK will I actually have to pay any taxes to the IRS on my current salary? I hear the US and UK have some kind of salary limit when you have to pay taxes in both countries - anyone know of documentation on this?
3. Would it be better to get my employer to setup a US bankroll and pay me through that?
Many thanks in advance!
1) You have to file a US tax return every year, and should have been filing in the past regardless of whether you had an SSN.
2) If you are working in the US, you pay taxes in the US regardless of where your actual payroll check gets deposited.
3) You need to file a FBAR report, or should have been reporting, any bank account that you have overseas if you have > $10,000 USD in that bank account AT ANY TIME (or $10,000 in aggregate across multiple accounts at any time). You also need to file a FATCA report if you have > $250k USD overseas (it's a sliding scale, but about that much).
4) You need to file a form 5471 if you own > 10% of a foreign company (more or less).
5) You need to register for US military service if you are over 18
6) You need to enter the US on your US passport and not your UK passport.
Now, let's try to qualify some of those things.
You are required to file US taxes every year until you renounce your US citizenship (and then possibly a few years after that). However, there are certain exemptions and exclusions if you live overseas, such that the practical effect is that if you make < $92,000 USD you basically don't owe any US taxes. There are also credits for taxes paid to the UK that offset your US taxes owed. And with the general rule is 'if you don't owe, you don't have to file' it results, basically, in that you probably aren't in any trouble for a lack of filing over the past few years. NOTE: Any income from the US such as interest income or rental income from US properties is NOT part of this exclusion and there might be taxed owed on this.
In your case, you have probably not crossed over the threshold of having to file US taxes. Most accountants would **strongly recommend** filing even if you don't owe anything, but whether you do a back-filing for the last few years would probably be a judgement call after talking to a professional or the US embassy tax office in London. If you want you can grab a US 1040 form and fill it out, and then see if you actually owe anything for last year. Might give you an idea of whether you had any problems in the past.
Now, generally speaking, as you will be physically present in the US working, you will be "working" in the US, regardless of where you actual paycheck is deposited. This may be a problem. People working in the US need to have a visa or work authorization (which you have) but they also need to obey US employment laws and tax withholding, unemployment and retirement payment (social security) deductions, which you won't be if you are being paid in the UK. As your employer is in the UK, it is highly likely they a) aren't going to do the US withholdings necessary and b) do not want to even get involved in any way shape or form with withholdings required for a US employee as it would require them to 'open their books' to the US government basically. There might be some ways around this but I think they are generally for temporary workers or those who do not have a physical presence in the US over a certain number of days. Someone else might speak better as to how this bit works.
The issue of how to deal with this will vary depending on your circumstances. In some cases setting up a US 'shell' company that handles all the payroll matters is a possibility. In others you being treated as an 'consultant' will work (though you will have to pay a greater share of employment taxes yourself unless you work out a deal with your company).
For example, you are going to be paid $60,000 USD. If a USA company was paying you $60,000 USD, it would actually cost them about $66,000 USD a year. That extra $6,000 would be for social security and Medicare payments and unemployment insurance payments (I think the UK term of art is PAYE deductions). If you do not have a US company making these payments, guess who gets to do it? YOU. So you would make $60,000, then pay $6,000 for the company's share of the taxes (the so called self-employment taxes). Then you pay your taxes. Basically, this setup costs you a bit
This sort of thing is really best done by professional accountants with understanding of US/UK border transactions. Whether you set up a US shell or work as a consultant will probably be based on the long term plans of your company and your own financial situation. Personally, my recommendation would be to bill as a consultant to the UK company, but have them pay the extra bit to cover your self-employment taxes if you are the only employee, but if you anticipate hiring up and renting an office and establishing your company here in the US, you'll probably want a shell or some entity here.
As for the FBAR and FATCA filings, you may or may not have crossed this threshold, and whether you decide to report is probably best done with the consultations of a professional.
If you check out Talk Yankee (US expats living in the UK) they have a special section dealing with taxes and working. Some of them can recommend UK-based accountants with extensive experience in US tax issues affecting US citizens abroad. http://talk.uk-yankee.com
Last edited by penguinsix; Jul 1st 2012 at 6:01 am.
#14
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Location: Santa Cruz, CA
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Re: UK/USA Dual Citizen moving to California
However, since the penalty for not filing is a percentage of the amount of tax owed, there is effectively no penalty for not filing if you don't owe anything.
#15
Re: UK/USA Dual Citizen moving to California
When I worked in NYC and resided in NJ, I had to file 4 tax returns. Federal, NJ, NY and NYC. Taxes paid to NY/NYC would offset my tax obligation to NJ. NJ does the same thing, if you reside in NY and work in NJ, you need to file both a NJ and a NY return. I suspect other areas where it is common to reside in one state and work in another has similar rules.
And yes, I agree that this is a tangent to the initial discussion, but may be of general interest for anyone contemplating a move to the NY tri-state area.