Author Topic: Tax help  (Read 481 times)

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Offline leanne1989

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Tax help
« on: January 30, 2018, 09:09:07 AM »
We are currently trying to file our taxes. We moved out of the us on 2nd July. So half the year there and half in UK. Filing taxes in the us shows us getting a return on what we mDe there. However when we fill in the form to show overseas income here in the uk.. it shows that we then owe 1000 in taxes. It's jumping from 6000 return to owing 1000. Is this right? Should we owe tax just because we moved to another country? Any input would be helpful.

Offline leanne1989

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Re: Tax help
« Reply #1 on: January 30, 2018, 09:17:33 AM »
Sorry. I hope that even made sense. Can we even qualify for a tax return if we moved out of the country?

Offline guya

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Re: Tax help
« Reply #2 on: January 30, 2018, 09:23:05 AM »
Leanne - since you only moved to the UK in July 2017 you are several months too early to file for 2017. Have you calculated your numbers claiming the foreign tax credit?

Offline leanne1989

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Re: Tax help
« Reply #3 on: January 30, 2018, 09:26:32 AM »
Why are we too early to file? I thought US taxes were due before April? Are we not able to file now?

We have filled out our taxes like normal, our US taxes like we usually would. Then we filled out  form 1116 forgein tax credit.

I just wasn't sure why it would jump from getting a larger tax return to suddenly owing 1000.

Haha I guess we don't know what we are doing.

Offline vadio

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Re: Tax help
« Reply #4 on: January 30, 2018, 10:45:12 AM »
Basic misunderstanding of a ridiculous US requirement - you must report your worldwide income from all sources on a US return. It's not just the $$ you earned while resident in the US.

Have you read this: https://www.irs.gov/publications/p54. It's only one of many publications that you will likely need to slog through.

All tax DUE for 2017 must be paid by April 15th; however, as an expat you get an automatic filing extension which will allow you to qualify for the Foreign Earned Income Exclusion - see https://www.irs.gov/individuals/international-taxpayers/foreign-earned-income-exclusion-requirements. This is an alternative to the Form 1116 credit for tax paid to the UK.

This first filing year is typically the most difficult. Ask questions, and someone here will likely come along and provide an answer (opinion). Alternatively, you can use TurboTax or similar software, which should work unless you have an extremely complicated situation.
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Offline durhamlad

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Re: Tax help
« Reply #5 on: January 30, 2018, 11:59:11 AM »
Our son moved to England in September last year so he will actually file for an extension to October for 2 reasons. First to qualify for the FEIE to exclude his UK salary and 2nd to not have to pay the penalty for not having ACA compliant health insurance for all of 2017. (NHS does not count)
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Offline guya

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Re: Tax help
« Reply #6 on: January 30, 2018, 08:25:07 PM »
Why are we too early to file? I thought US taxes were due before April? Are we not able to file now?

We have filled out our taxes like normal, our US taxes like we usually would. Then we filled out  form 1116 forgein tax credit.

I just wasn't sure why it would jump from getting a larger tax return to suddenly owing 1000.

Haha I guess we don't know what we are doing.
US tax returns are due by 15 June but you can easily extend the filing date until 15 December each year. You don't qualify yet to avoid the healthcare penalty; or the FEIE if you decide to elect to claim this.

Offline MunichLondonExpat

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Re: Tax help
« Reply #7 on: February 07, 2018, 07:28:21 PM »
My family moved to the UK mid-year and have lived abroad for sometime. As mentioned in previous posts, as an expat you can file with an extension but make sure you pay any potential tax that maybe due when you file for that extension. Otherwise, you will be charged interest.  We just filed our 2016 US tax return in Dec 2017.  Filing late allows us to know how much taxes we paid to the govt in the countries we lived in and get a US credit (Tax Treaty). 

For the partial year, you need to figure out how many days you worked that year and how many days were in each country you worked in.  This determines how much of your income should be allocated to each country. 

Offline guya

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Re: Tax help
« Reply #8 on: February 08, 2018, 01:48:54 PM »
My family moved to the UK mid-year and have lived abroad for sometime. As mentioned in previous posts, as an expat you can file with an extension but make sure you pay any potential tax that maybe due when you file for that extension. Otherwise, you will be charged interest.  We just filed our 2016 US tax return in Dec 2017.  Filing late allows us to know how much taxes we paid to the govt in the countries we lived in and get a US credit (Tax Treaty). 

For the partial year, you need to figure out how many days you worked that year and how many days were in each country you worked in.  This determines how much of your income should be allocated to each country.
Foreign tax credit is generally claimed based on US domestic law; rather than under Article 24(6) of the US/UK tax treaty.  Because of the UK 5 April year-end, for someone moving to the UK from a calendar year tax jurisdiction there can be a significant US tax problem if he or she elected to claim foreign tax credits on the irrevocable accrued method on a prior year US tax return.

Offline theOAP

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Re: Tax help
« Reply #9 on: February 09, 2018, 10:41:46 AM »
.....Because of the UK 5 April year-end, for someone moving to the UK from a calendar year tax jurisdiction there can be a significant US tax problem if he or she elected to claim foreign tax credits on the irrevocable accrued method on a prior year US tax return.
A prime example of when a large bank of prior year excess foreign tax credits may be invaluable?

Offline MunichLondonExpat

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Re: Tax help
« Reply #10 on: February 09, 2018, 12:59:30 PM »
Our professional, international tax consultant files our US taxes on extension.  Foreign county taxes are filed and paid before US.  Our US tax return claims foreign tax credit for prior years. This is an individual tax return.

Offline guya

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Re: Tax help
« Reply #11 on: February 09, 2018, 05:26:11 PM »
Our professional, international tax consultant files our US taxes on extension.  Foreign county taxes are filed and paid before US.  Our US tax return claims foreign tax credit for prior years. This is an individual tax return.
That's not how it works for US persons in the UK because the UK tax return is due by 31 January; roughly 6 weeks after the latest date a US individual return is due. Most folks in the UK will have filed their US returns long before filing their UK returns.

Offline MunichLondonExpat

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Re: Tax help
« Reply #12 on: February 09, 2018, 06:44:53 PM »
It does work.  Our well-known international tax consulting firm has done this for years. Shouldn't you know what amount of taxes were paid in a calendar year to a foreign government? Assume your only income is wages - you should know how much was deducted from your pay.  You take that credit.  Eventually, over time, as taxes are filed, values determined can be adjusted to see the actual balance.  My tax return shows for the past 10 years the amount of foreign taxes I paid, claimed, and my balance.  I have a positive balance because in the past I have claimed less than paid. 

Offline guya

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Re: Tax help
« Reply #13 on: February 10, 2018, 10:12:54 AM »
It does work.  Our well-known international tax consulting firm has done this for years. Shouldn't you know what amount of taxes were paid in a calendar year to a foreign government? Assume your only income is wages - you should know how much was deducted from your pay.  You take that credit.  Eventually, over time, as taxes are filed, values determined can be adjusted to see the actual balance.  My tax return shows for the past 10 years the amount of foreign taxes I paid, claimed, and my balance.  I have a positive balance because in the past I have claimed less than paid.
Correct, many folks in high tax countries have a bank of excess foreign tax credits.  In Germany, though, one would always file the German return before the US one and typically have elected (irrevocably) to claim foreign tax credits on the accrued basis. This is less efficient in the UK; so you may want to discuss timing again with your own tax adviser in case this might cause you any issues.