Paying taxes

Hi Helen,

I'm sure someone has asked this before but I'm too lazy to look (plus I'm at work and kind of in a hurry)

I've been living in the UK for little over a year now and have only had a job here. I've not had any income coming in from the US. Do I still have to pay US taxes? What about state taxes? I was living in Arizona before moving here.

I'm still a US citizen and I don't have any land or possessions back home that I would claim except maybe for a savings and checking account.

Much appreciated!

Hi Ashley

Hi Ashley

You will certainly have a US Federal filing requirement each year that you income (in the US or UK) are over and above your standard deduction.  Whether you will actually pay tax to the IRS depends on the level of your income .  As you know the first $80,000 of your foreign source income is excluded from US taxation. and the remaining is subject to foreign tax credit. Therefore you may not have to pay any tax, but you need to file a return.

As far as the State is concerned, you will probably break residency with Arizona on the first year that you moved to the UK and file a part-year return.  For the years following this, you do not have to file a state return unless you have Arizona source income (such as rental income, etc...).

I hope this has answered your question.  Let me know if you have any other.......

Helen

since we are on this subject.  i have a question please.

i am a shareholder in my husbands business and receive dividends.  it is to my understanding that this is totally seperate from the £80,000 foreign income deduction and I have to list it differently.  this past year i didnt have to pay US taxes on it but heard that i might be require to in the future.....any news yet?

Hi there

Yes. Dividend income you will receive from your husband's company is reportable on your US return.  in 2003 dividend income is taxed at 15% in the US rather than the normal ordinary income rate.  Do you do anything for the company to receive this. Another words do you hold any position within the company? I am sure you are aware that dividend income is taxed at alower rate in the UK also.

Also you may have to file a form 5471 (foreign corporation return) if you are more than 10% shareholder and have voting powers within the company.I need to know more about the whole situation before I advise further on this.

Also I don't understand why you would not have needed to report this last year!!!!

Also I assume your husband is NOT a US citizen or green card holder.  Because if he is, he needs to do the same thing on his US return.

Does this answer your questions?

bkz it was my first FULL tax year in the UK , I went to the Embassy (IRS) for assistance.  I had to make two seperate trips and got two different people to help me.  Both gave me different advise.  So I def walked out of there totally confused and worried if I even done the right thing.  geez!   So thats why I'm trying to research the info for next years tax return and be a little bit more prepared.  BTW, when do I submit my 2003 tax return (I heard I had until June, is that correct?)

I def have no income from the States
Husband is English
I dont hold a position in the company (so no voting rights) Although,  I do all the bookkeeping for the business and dont receive any wages for it.  

So, although I pay UK taxes on my dividends I will still have to pay US taxes on it also?.  Would that be before or after the UK have taken their piece?  

Why would my husband need to file a US return?

The more and more I think about this, it might be best if I just give my shares back to my husband and say "Thanks for the gift hunny BUT its gonna cost me too much", LOL

BTW Thank so much for the help Helen

Your 2003 US return is due 15 April 2004. However as you live outside of US , you get automatic extension to 15 June 2004.  Note that this is extention of time to "file" and NOT to "pay". ANother words, if you end up owing on your return, interest is calculated from 15 April 2004.

You will have to report the dividend income on your US return. The amount reportable is Gross dividend income less taxes withheld.

Your husband will need to file only if he is a US citizen or greencard holder.  Is he?