Hillsforest.

Hi,

Im currently contracting to a usa company during the h1b visa application (the company that will be my employer in usa all being well with the visa). being paid into uk account.

Once I make the move in October will the IRS be interested in my UK income up to the point I move or is that nothing to do with IRS?

thanks.

ian-mstm

The US will tax you on your worldwide income for the entire year (Jan-Dec). However, if you have already paid taxes on the money deposited in the UK, the US/UK tax treaty will usually see to it that you avoid double taxation. That said, you must still declare the UK income for the entire tax year.

Ian

Hillsforest.

Hi Ian,

So I declare my taxes in the uk properly then file a tax return in usa at correct time detailing any money earned in uk. Then the tax treaty should mean i am not re-taxed on the uk income, and just pay normal taxes in usa for the couple of months i will have been there?

The company are paying for my tax advice for the first year, any pointers on a good person to use? I'll be in Atlanta area. My situation should be fairly easy compared to some.

No property owned here, no investments etc other than pension. No uk income once ive moved.

ian-mstm

Yes. In a nutshell, you include your UK income at the beginning of the US tax return, and subtract it out later as having already been taxed.


Indeed... Pete Newton.

Ian

Hillsforest.

Thanks mate i'll give him a shout when my visa is approved

nun

I don't agree with this. The IRS will tax you on your US source income, but will only tax you on your worldwide income from the date that you become US resident. The UK will tax you on your worldwide income until you become US resident when HMRC will only tax your UK source income.

md95065

But, as you know, it is more complicated than that because it depends on whether the OP will be considered by the IRS to be resident or non-resident (for tax purposes) for the US tax year in question. While it is likely that if the OP moves in October 2012 they will be considered non-resident for US tax purposes it still depends on other factors such has how much time they have spent in the US over the last 3 years.

The first year is always complicated which is why the OP should take advantage of his new employer's offer to pay for professional tax advice.

Michael

It depends on whether he choses to be taxed as a resident or non resident alien for the first year (since he won't meet the substantial physical presence test, he can chose either). His taxes should be calculated both ways to determine the best status for tax purposes since a resident has more deductions.

Jscl

Ditto on Michael's last post.

If you come to the US early in the year then you should figure on having your UK income taxed by the US (and you'll get the credit for it), but if you're coming late in the year you'll have to decide what's best for you financially, either you can chose to be taxed on worldwide income all year (and get the associated credits and (usually better) tax rates that are then available to you if you file that way), or you can chose to be taxed on US income before you arrive, and worldwide income after you arrive (which means there are credits and tax rates no longer available to you, but might work out the best overall).

You really have to wait and see, depending in your income over the year and when you arrive. Sorry, the answer to most of these type of questions are "it depends."

nun

IMHO I'd just keep things as simple as possible, that's what I did in my first year. I met the "substantial presence test" and so filed as a US resident, but I did not include any UK income that I received before moving to the US.

Jscl

That would be simple but wrong, Nun! You are taxed on all your worldwide income all year, if you file as resident all year. Luckily for you the IRS don't know any person's circumstances, so unless you get audited, things like this often slip by.

Michael

If you filed as a resident, then you must claim worldwide income for that year. Just hope the IRS is not looking at this site.

sunnysideup

Isn't there another way: file as dual status. That's what I did (it was a long time ago, but I see the IRS still publishes rules for dual status returns so I guess it's still valid). This means you are only resident for tax purposes from the moment you arrive in the USA.

Michael

Apparently you correct for the first year.

http://www.irs.gov/businesses/small/...=96433,00.html

Jscl

Dual status is the same as we have described, you are non-resident before you arrive and resident after you arrive. You have to make a choice (i.e. make a short statement with your return) to choose this option, but it is sometimes financially beneficial over filing resident (and including worldwide income) for the entire year.

(And just noticed I shouldn't have said "Ditto on Michael's post" above, I didn't read it carefully enough.)

To clarify, your options are:
a) file as resident all year, and be taxed on worldwide income all year
b) choose to be treated as a non-resident before you arrive (only US income) and a resident (worldwide income) after you arrive (dual-status)