The legalities of being an American in Britain

LisaE, I don't know whether to laugh or cry at your story!

As I said in a prior post, my US accountant who my Mom and I have used for years, recommended that before I start working in the UK, I estabblish residency in a non-income tax state. This guy's no idiot so I hope it's not incorrect into or a huge effort. I was born in FL so might be able to get residency there, but I suspect it will have to be in TX as I have some family there who might be able to help with the logistics. As Stephanie points out, some states will tax you within an inch of your life. MN is one, and I think Maryland, my current state, is the other! Argh!

Balmerhon, what you said doesn't coincide with what I understood about state taxes, so I looked into it.  It seems that you can stop paying MD taxes only if your domicile is established elsewhere.

Here's a link to a document about residency and domicile for MD: http://www.marylandtaxes.com/publications/bulletins/it/ar_it37.pdf

Important points: to establish domicile, you must be living in the place in which you intend to establish domicile and you must be intending to live there permenently.

This means that if you want to establish domicile in another state, you will have to move there with the intent to make that your permanent home.

The document also says that if you move to another country, you cannot make that your domicile if you have a limit on the amount of time you are allowed to stay there.  I don't know if that would include any time- or situation- limited visa, or only those that would require that you return to the US at the end of the time period (i.e., excluding visas that can be extended while you are still staying in the UK, such as spouse/partner visas).  

Edited to add: the document says "An individual who is required to leave a foreign country after a certain period of time, or upon the happening of a certain event, cannot establish a domicile in that country and, therefore, cannot effectuate a change of domicile."

I would take the "required to leave a foreign country" as the key.  If you are on a spouse/partner visa, you are not required to leave the country at the end of the initial time period, as you can get an extension without having to leave.  On the other hand, with a work permit, you do have to leave the country once the job is ended; you cannot apply for any other kind of visa from within the UK.  But that's just me giving it a strict interpretation in my favor!

Formica, thanks for this. I find the State web site totally confusing so have emailed my Mom to get in touch with our accountant and find out what exactly he meant. I think that 'living' in the state and 'living there permanently' are what are subject to interpretation. Technically, according to MD law, I live, well, in Maryland. But of course, I don't really, I live in the UK and will have a FLR visa. So, if I want to set up a bank account, get a drivers license, and register to vote in Texas (and get rid of all the MD stuff), do I now 'live' there?

Oh, it's all a muddle! I'll let you know what our accountant says!

Am now exhausted just thinking about it.  :'(

Well, once you have the FLR visa, I'd look more into the possibility of making the UK your domicile.  I personally think it's easier to interpret the rules as allowing UK domicile on an FLR visa (which will not force you to leave the UK at the end of the period) than it is to interpret the rules as allowing you to establish domicile in TX without physically living there.

Good luck and let us know how it goes!  I'll have to worry about this for my girlfriend.

Edited to add: the document is very clear that you must be actually physically present and living in a place to make it your domicile.  You cannot make a place your domicile before you move there, no matter what paper ties you establish.

Part of the problem is that I'm not sure it's necessarily the best idea to give up US residency totally. I want to continue voting for one thing, and there's always a good chance we'll move to the States at some point. Maybe not permanently, but we're both in academia so could conceivably move back and forth over the years!

Will keep all posted!

Ah ha!  Well, perhaps if you go stay with your family for a little bit while you take care of all that paperwork, that will suffice.  Really, none of this will matter unless MD comes after you and asks you to explain why you are not filing taxes.

So does that mean you have been paying MD taxes so far?  What visa are you on?

Edited to add: Unfortunately, I don't think it makes much sense for me to switch my domicile to another state (my parents are in NY, so that's the only state I could reasonably use).  And my girlfriend's family is in MD, so that doesn't help!  I may have to give up my right to vote here to avoid paying the state taxes.  That sucks.

I've been on a student visa that expires Oct 30. By that point I will be married and (hopefully) have the FLR (been living with DF for 2 years this May).

I haven't had to pay taxes while I've been a student and our accountant has been good about letting the IRS know that!

I'm going to give him a week or 2 to recover from Tax Day (just realized it's today!) and find out what he suggests. May also contact the woman (Helen?) who is on this site.

Another thought... the way the foreign income exclusion works, if you make all your income in the UK and it's less than $80,000 you will be claiming an adjusted gross income on your 1040 of $0.  (Your UK income gets subtracted out of your total income to get your adjusted income).

Because the MD tax form asks for your adjusted gross income from your 1040, you will be claiming an income of $0 on there as well.  You will need to put your total wages on line 1a., but all the computations are done using the *adjusted* income you claimed on your 1040.

Therefore, even if you continue to file with MD, as long as you made no money in the US and less than $80K in the UK, you won't actually have to pay any MD taxes.

That's how it seems to me anyway.

Thanks for this info, Lisa- shows I still have lots to do!
Ahhh the sweet complexities of life! 

Wouldn't have it any other way, though!

Jen
(Who is in the process of doing her taxes)

Thanks for all the great info Lisa, brilliant as always!
But I have a headache now from reading this thread!

Ok, maybe I'm just completely dense, but I don't really understand the whole "domicile" concept.  What is the difference between domicile and residency?  Also, how are all of you establishing residency in other states before moving over?  Don't you have to live there for usually at least 6 months before getting residency?

I'm not really all that familiar with taxes because I make next to nothing as a student just now.  I always thought I would get away with not paying taxes to the US as long as I made less than $80,000 or at least I read that in some newspaper story somewhere.  I know I still have to file, but I shouldn't have to pay taxes, well at least not federal ones, if that applies to me.  I don't want to renounce my US citizenship (just wouldn't ever), but will I have to continue paying taxes to the state forever?

Also, a little off topic but does anyone know where I can get some good, reliable info on what happens regarding my student loans from the US gov't?  Thanks.

I was confused about the difference in 'domicile' and 'residency' too. I thought I had it sussed as residency being where you now physically live and domicile being where your established roots are. BUT, then I started to see people interchanging the two and I looked them up online.

Or at least I tried.
I couldn't find the definitive distinction. So, for me at least, I'll keep thinking what I've always thought.

As for filing vs paying taxes: Always file, but you will probably almost never have to pay. This may change if you have other investments and own businesses and/or property and all that sort of stuff. When your life begins to get complicated, so will your taxes.

Dunno about the loan, sorry.

Also, a little off topic but does anyone know where I can get some good, reliable info on what happens regarding my student loans from the US gov't?  Thanks.

What about them Kirssybelle? They don't go away! LOL! As far as I'm aware nothing changes, you get a 6 month deferral period once you're finished with school and then you start paying them off. There are loads of good consolidation/low interest rate offers going on now. I need to speak to them about the best way to pay as by the time I'm paying them off, all my money will be in pounds.

With the student loans, I meant is there forms I need to fill out for living out of the country?  Can I pay them from the UK, or will I have to keep maintaining a US bank account?  I'm hoping I might get a little longer than a 6 month deferment, but I'm sure they'll come looking for my money ASAP. lol.

I'm going to inform my company that I'm moving but I'm also keeping a US bank account for my US bills that I have (student loans/credit cards).