Foreign taxation is a complex area of law. Getting it wrong can cost you significantly in extra tax you don't really want to pay or missed items that expose you to back taxes and penalties.
If you want to efile, and do not want to use a paid preparer to help, there is an in-between level of service available at
www.taxlogic.com. They have an online fill-in database, but the work is reviewed by real US tax preparers, licensed and working in the US. They can handle a simple expat case, provided your annualized wages are not in excess of $80,000 and the other caveats mentioned below. You will need to report all of your UK income as well. Please note that they are not proficient in UK tax law and if the treaty applies to your situation, they may not have the appropriate level of experience to assist. If you use Tax Logic, be sure to mention you need 1040 and possibly also some or all of these forms: 2555, 1116, and TD F 90-22.1. Some of these forms may require that you file in March of 2006 (rather than now) or even possibly as late as January 2007.
If your income is in excess of $80,000, you have significant investment income, your income is from pensions, or you have income from the same employer both pre- and post- move, you should seek advice from a firm that handles both US and UK taxation. If you wish to make a treaty claim you should seek out an adviser who regularly makes such claims. You should also seek advice before any event with a major financial impact, such as marriage, house purchase, children, move, retirement, and divorce. Getting the advice before you take action will allow you to make slight (or possibly major) modifications to your plans that can save $1,000's of tax.
