British Expatriate Network

Ick - have been wading through the IRS website for the last three weeks and am not feeling much more enlightened.

Can anyone help - we moved to US in March 2003. Previously we worked in the UK for 6 weeks in 2003 for UK companies that had no connections to the US. Do we still file a dual status return? Do we have to declare our UK pre-move earnings?

Does anyone use a professional preparer? H&R and Jackson Hewitt won't touch our returns, and we can't afford to pay too much...

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Tigs

If worst comes to worst, just buy TurboTax or do your taxes online.

The program interviews you and pretty much asks about every eventuality so it would no doubt be able to guide you in terms of foreign income.

Not missing much with HR Block - bunch of idiot franchises anyway.

I think you have to file returns for both countries and declare foreign income here. I'm fairly certain we did the first year, although ours were done by a pro as part of our relo deal. I'll check with the better half and one of us'll get back to you unless someone more knowledgable in such issues gets here first....

Tigger, contact your British Tax office (If you don't know which one it is, ask your old wages department for the number). this is what we did for our first year because they were the best help we have ever had. They put you in touch with the person who deals with people who have moved abroad in their office. They will give you all the help you need regarding the two tax systems and what you need to know for this time. And they explain it really well so that you understand it all.

Then, if you really are struggling with doing your taxes over here, contact some of the local accountants. They will sometimes do a good deal with you being a first time customer. When we moved over to Long Island, I called around a few accountants because we needed someone who knew how to do tax returns for moving states. The guy we found (bearing in mind we not only moved states but we also bought a house so our tax return was a mess) only charged us $170 for that first one.

There is a thread on the Turbo Tax that Pilgrim mentioned. Quite a few Brits have used this and found it excellent. We think we might use it next time too. )

My wife didn't even bother with her UK income, she just put her taxable US income. I doubt if they would ever check and I don't think its taxable anyway.

Hello tigger, I'm monsters other half, well Ernst and Young were paid to sort out all these sorts of truobles for us so I don't speak form all that good experience.

I think there are two options, but I really am shooting in the dark..
Pay UK tax on earnnings in the UK, I'm not sure if you deduction is pro-rated.You claim a prt year in the US only declare those earnings but your deductions are similarly prorated.

I'm not sure how many days you are allowed, but you claim the whole year in the US ( so get full deductions) but than have to declare your UK earnings, but can claim a credit for the tax you paid in the UK.

We moved in January so did the whole year thing, it got very complicated and we were never sure that they actually did the best by us tax wise.


Thats probably more questions than solutions, if your fairly new here you probably feel that a couple of hundred dollars for someone to do your taxes is an outrage. After a while you get used to the idea that you have to shell out for everything, it may be helpful in the long run, especially if they explain what they did and why they did it.

Good Luck wink

Turbo Tax is a great product, but won't help for your first year's tax return because the situation is complex beyond Turbo Tax's abilities. I went through the whole Turbo Tax interview and was left with far too many unknowns.

Find a local CPA who is prepared to guarantee that they have prepared foreign tax returns before. You can usually find one using Google. Alternatively, I went 50% of the way through the process with Global Tax Network and they were great! They'll interview you over the phone, then you fill in a detailed interview online and they'll prepare your tax return. They're also pretty reasonably priced. I didn't use them! Instead I went through 3 weeks of hell with "H&R Block Premium" where I taught them about my tax rights and got the return prepared for free in the end!

How you deal with your UK taxed income is entirely dependent on the Substantial Presence Test which decides whether you are dual-status, resident for tax purposes or non-resident for tax purposes. Be aware that given the dates you've indicated you will almost certainly be resident for tax purposes and have to declare your UK income. But don't worry! Due to reciprocal tax treaties with the UK, your UK income is not liable for additional taxation.

What this all comes down to is that you won't get the best tax deal unless you hire a CPA of some sort. All the information is on the IRS website, and I taught myself all my tax rights in order to undo the $3000 rebate error H&R Block caused, but at the end of the day you want a tax professional to sign your return so that they will defend it in front of the IRS if it is queried.

Foreign earned income only has to be declared if you resided in the foreign country as a US tax payer for the period of one year. And there is an $80,000 threshold for claiming anyway. So unless you earned more than that in that period, the US Government don't care, and I don't know if there are any other factors that would amend your circumstance.

Hope this helps. )

It's just not that simple. If you meet the Substantial Presence Test (which you will do if you reside in the US for longer than 180 days during the tax year) then you are treated just the same as any other US resident for tax purposes. That includes having to declare any foreign-earned income. Generally it is in your interests to be resident in the US for tax purposes, as that allows you to claim the same tax credits and deductions as a US citizen.

The $80,000 Foreign Earned Income Exemption is pro rated for the year, so if you were only earning money in the UK for two months you can only claim an exemption on $13,333 of your UK income. However, again in most cases this is sufficient (it's per person, not per household). Regardless of whether you earn less than this pro-rated limit, you still have to declare it.

As for having to have been resident in the foreign country for more than a year - if you're emigrating from the UK, but meet the Substantial Presence Test for being treated as a US permanent resident for tax purposes, you are pretty much certain to have lived in the UK for more than 12 months prior to arriving in the US.

You really don't lose out by declaring your UK income you know. By doing so, we were able to deduct our UK mortgage interest from our US tax, our UK childcare costs, our UK early redemption fee on our mortgage, our relocation expenses and many other items which would not have been deductable under the UK tax system. If, however, you choose the "simple" (and not entirely legal) solution of ignoring your UK income in your US return, you can claim for none of this.

I'm an UK expat tax adviser now living in Chicago.

The answers given here are pretty good, but as stated above, IT REALLY ISN'T THAT SIMPLE. The tax treatment will vary from individual to individual and there are many other factors to be aware of, like national insurance/social security, double tax treaties etc.

If anyone needs any help with their US returns, or assistance in getting their UK tax refund for the year of departure as soon as possible, please let me know.

paintballing again Beest?