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Topic: Looking for Tax expert who understands UK and US tax implications  (Read 1378 times)

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Looking for Tax expert who understands UK and US tax implications
« on: September 11, 2019, 02:23:26 PM »
Hello,
We've been here in the UK for 3.5 years now and my husband and I both retired in the last year.  We have a UK accountant who does our self assessment and a US accountant that does our US tax returns, but now that we face decisions on taking 401k/IRA distributions we really need someone who can advise us taking both tax systems into account.  Also, up to this point my DH, who is US citizen only, has paid taxes here on the arising basis, but now if we start pulling substantial amounts from his 401ks  (to avoid high mandatory distributions at 70 when he plans to start taking SS), i'm wondering if he should be looking at non-dom status instead?  Our US accountant says we should be moving large amounts out of 401ks and IRAs in what he calls the 'donut-hole' between stopping working and beginning to collect SS to minimize US taxes, but since the uk gets the first crack at taxing us i'm not sure this is really valid ?? (unless we go the non-dom route and leave the money stateside?)  Anyway, if anyone has a recommendation on an advisor please PM me, we're in the southeast.  I could just pick someone online, but would prefer not to.  Also, if anyone else has gone through a similar situation i'd be interested to hear the choices you made and why.
Ta.


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Re: Looking for Tax expert who understands UK and US tax implications
« Reply #1 on: September 11, 2019, 04:39:13 PM »
In the years after retiring at 55 we have been doing IRA to Roth conversions to avoid the tax torpedo at age 70.5 when RMDs start. We still had some to convert after we moved back to the UK but lump sum conversions/withdrawals from retirement accounts are taxable only in the USA for US citizens who are UK resident. Roth withdrawals are tax free in both UK and US.

https://www.taxationweb.co.uk/forum/is-lump-sum-withdrawl-of-401k-plan-taxable-in-uk-t39608.html

https://www.gov.uk/hmrc-internal-manuals/double-taxation-relief/dt19876a

Quote
Lump Sums

Under the old Agreement, a lump-sum payment from a pension scheme was taxable only in the country of residence. So if an individual moved from the US to the UK before receiving a lump sum from a US pension scheme, they would be taxable on the lump sum neither in the US (because of the treaty) nor in the UK (which does not tax lump sums anyway).

The new provision prevents this occurring by providing that a lump-sum payment derived by a resident of one State from a pension scheme established in the other State shall be taxable only in that other State.

Dual USC/UKC living in the UK since May 2016


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Re: Looking for Tax expert who understands UK and US tax implications
« Reply #2 on: September 14, 2019, 08:18:45 AM »
thanks DurhamLad, I had stumbled on the tax treaty info myself after posting my original question, so good to have you confirm what i thought i understood from it.  We had thought about Roth conversions for some or all of the distributions we take over the next 3 years, a couple of questions for you, after conversion, am i right in thinking you can take distributions from the Roth(s) at any time after 5 years from the establishment of one's first Roth account ?  we both have long established Roth accounts but may want to open new ones (if we can).

Also, here's another question, do you know if contributions to UK company pensions are reportable or not reportable as US income?  For 2017 we reported them, thinking they weren't to a US recognized plan, but then I read something in the tax treaty that now I'm thinking we shouldn't have and need to do an amended return.
Ta.


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Re: Looking for Tax expert who understands UK and US tax implications
« Reply #3 on: September 14, 2019, 09:18:20 AM »
thanks DurhamLad, I had stumbled on the tax treaty info myself after posting my original question, so good to have you confirm what i thought i understood from it.  We had thought about Roth conversions for some or all of the distributions we take over the next 3 years, a couple of questions for you, after conversion, am i right in thinking you can take distributions from the Roth(s) at any time after 5 years from the establishment of one's first Roth account ?  we both have long established Roth accounts but may want to open new ones (if we can).

Also, here's another question, do you know if contributions to UK company pensions are reportable or not reportable as US income?  For 2017 we reported them, thinking they weren't to a US recognized plan, but then I read something in the tax treaty that now I'm thinking we shouldn't have and need to do an amended return.
Ta.
Your understanding of the 5 year rule is correct, so no problem in opening new Roth accounts. If you are under 59.5 then the contributions you made over the years are tax free withdrawals and the earnings are taxable as regular income. After age 59.5 all withdrawal money is tax free.

I never had UK income from a salary while living in the USA or after I became a USC so never had to think about pension contributions but I believe you are correct in reporting employer contributions to your UK pension plan as income.
Dual USC/UKC living in the UK since May 2016


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