The IRS season begins for the newbie expat

Hiya,

been a long while since my last post, but tax season is here and I need some advice yeah.  Moved from the states to the Borders in Scotland June last year, so I won't qualify for bona fide residence this year, but the US can't double tax me, can they?  My W-2's are trickling in from my last job(s) and I'd like to get this done as efficiently and cheaply as possible, if it's possible, so if there are any who have been thru this, don't hesitate to fill me in on the nightmare.

I think since I have grown webbed feet in the past 6 months, that should qualify for bona fide residence.  or the physical presence thingie.

Bye for now

Jeremy


 

We are in the same situation -- moved from the US to the UK mid-year.  We consulted some tax experts, and this is what we know so far.

1) You must file a US tax return.  However, you get an automatic 2 month extension to file because you are abroad at filing time (April 15.)  Then, you can file an extension to file your taxes, thus delaying it further.  The US Embassy's IRS site has some good info

http://www.usembassy.org.uk/irs/irsfaq.htm

2) You must check your former state's regulations about filing taxes from abroad.  Our former home state (MN) allows no extentions, period.  We must file our MN State return by the deadline (April 15) or penalties will be applied.    It varies from state to state, so check with your state.  Again, the Embassy IRS site has links to State tax sites.

I'm not sure at all about the double taxation.  I know there is a certain amount of income you can automatically deduct (somewhere around $80K, I believe.)  Above that, we've been told (not sure if this is true) that with other deductions, tax treaty stuff, etc., that we won't be double taxed.  Our situation is so complicated (sale of a house, some investments, moving money from one country to another, etc.) that we are going to have a professional prepare our return (at least the Federal one.)  There is a firm in Guildford, Expatriate Tax Solutions, which is supposed to be very good.  I think they have links on their website to other tax professionals in the UK, so maybe you can find one near you if you need more info.  The website has lots of info, too.

http://www.expatriatetaxsolutions.com/

HTH, please post to the forum if you learn anything more!

Stephanie

HTH,

Stephanie

Thank you for that info Stephan,  they are definitely some worries before my move there...  these sites will be saved for future use.
shel

um.  er.  I didn't file my taxes last year.    I was so confused by it all and nobody ever answered when I called....ack.  I suck.    Don't even ask me about state taxes....I have NO IDEA!  Iowa rules are...what?  dunno, was only there a year.

wench
(is afraid, is very afraid)

We can't even think about not filing, as we are planning on being here for 3-5 years, then going back to the States (or elsewhere.)  Uncle Sam would surely catch up with us, and I'm sure the penalties would be horrendous!  

I did find some stuff on the IRS link I posted previously about what to do if you haven't filed for past years.  I think there is some sort of tax amnesty.

What I am really confused about are UK taxes.  Bret received a letter from Inland Revenue wanting to know about his previous jobs from April 6 2001-April 5 2002.  He wasn't even in the country during that time, nor working for a UK company!  I'm hoping that it's just a routine letter sent to all taxpayers, and that a phone call will clear it up.  They can't tax us on income earned in the US while we were resident in the US, even though we are resident in the UK now,can they (we are US citizens)?

Oy vey, taxes give me a headache.  We have used a service (H&R Block in the States) to do our taxes every year.  To us, it's totally worth a couple of hundred dollars to make sure that everything is done right, and that we get all our deductions, etc.  We usually end up getting a few thousand back, so the refund offsets the cost.  

Are there any tax services like H&R Block here, and do you think they would be able to do our UK taxes next year?

Stephanie

Thanks steph,

But remember that although you get an auto 2 month extension, you will(and this is nice) pay interest for being late, seriously.  Which is why I want to file asap.

And from what I've read off the IRS site, you don't necessarily get taxed from the US, but you do have to report that income on your US forms, show the taxes, etc., and that's where I get confused.  How do they determine the tax rate then?  hmmph, anyway, after you file they will send you another form which is basically the tax exemption up to $80K which you were talking about.  But until then you are responsible for the unpaid US tax, scary..  

I think the form your hubby received is just a standard to-do, all he has to say is that he wasn't living in the UK at those dates.  I received a similar form when they were figuring my tax rate here.  If he's on PAYE, then you're ok..

thanks for the website addy, I'll check it out

Jeremy

I haven't filed in the last 4 years, although I have all the info. I made a lot less than the 70K though, so I should owe nothing. Will I still be penalized if I do them all this year?

And I never even thought about the California ones, I don't consider myself a resident of California any more, so should that matter?

Do I have to renounce my statehood(only for California, not US citizenship) or something?

From what I've learned so far, the state in which you are considered "domiciled" is the state in which you pay taxes, even if you aren't resident there.  Now, this could vary from state to state, but MN would tax us on our UK income if they considered us domiciled in MN.  I guess how they decide the state you are domiciled in is the state in which you would be living if you lived in the US.    Anyway, we took care of that problem by putting our stuff in storage in WA (at DH's parent's home) and we also own a vehicle in WA.  Thus, if MN decided to come after us for taxes after 2002, we can successfully argue that we are domiciled in WA, which has no income tax (a nice bonus!)  

As I stated before, regulations vary from state to state, so check your states regs.  The IRS links on the American Embassy website give links to state tax depts.

Our former home state (MN) taxes almost everything, and heavily too, so we have been proactive to avoid any tax situations from MN after 2002.  I'm 99% sure that we won't live there again, so no worries there.

JR, thanks for the clarification about the extension and still having to pay interest.  We will be getting a refund, so that shouldn't affect us, but it's good to know anyway.  As far as tax rate, they've been taxing us at the highest rate for the past 5 years, so they can't tax us any higher!!

Stephanie