Tax question from someone who just moved from US to UK

OK, i am in a bit overwhelmed with all these posts and IRS.gov site, figured best to make sure i am going in right direction before i investigate further. Quick background, just moved from US to UK on Dec 1, 04 (it was a job transfer within same company), i will be in the UK for 2 years but am an US citizen. The company i work for is pretty small and I am the first person to transfer from US to UK so they like me are sort of learning as we go thru the whole income tax situation for me.  As far as i know my current UK payroll is having payroll deductions taken out of it as if i was a UK citizen.

OK now hopefully easy questions to get me in right direction:
I assume i file US tax return for 2004, for at a minimum earnings from jan 04 thru Dec 1, 2004.

Do i file a UK tax return from period of Dec 1, 04 thru april 05 (think april is UK tax yr end).

If above is true then do i file a US tax return for 2005, and hopefully get to claim some sort of foreign tax credit so my taxes in US will be close to zero?

OK  as you can see i am really new to this, but hopefully if i can figure out the above I can move on with my research. I am actually a CPA, but never ever did taxes, just did financial statement audits.

Thanks in advance and i look forward to checking this site out more (not just tax forum!!)>

Hiya, Gauchos98.

I'm in the say boat.  I moved over on Dec. 1, 04.  I am not sure what I am supposed to do with my filing 2004 taxes.  I know that I will not receive any form for UK for income earned in December. 

I have contacted a company in NYC who specializes in Expat taxes and financials.  The company is Pro Tax Consulting.  If anyone has any feedback on them, it would be greatly appreciated. 

Spencer

I'm a CPA also. I used to do taxes for military personnel and other American citizens living in Germany but am admittedly a bit rusty right now. Have you received your W2 yet? If so, did it cover wages for the entire year of 2004 or only until the date of your transfer?

Hey guys,

I'm probably where you were in the fall of 2004 when you were looking at opportunities to move to the UK.  I'm currently in the process of going through details of a job situation and need some help to make an educated decision.  I'm fortunate in that my significant other is a UK citiizen so I'm expecting that immigration shouldn't be a problem.  But wondering if its better to move over to the UK (when it comes to taxes) as an expat or as a local hire (I seem to have that option because of my spouse).  Also, I would appreciate any thoughts on your moving experiences and lessons learned.

Thanks

Hi Gauchos,

You have to file a US tax return for 2004. And 2005. And every year, in fact (assuming your tax year is Jan 1st to Dec 31st, like most folks). You won't have to file a UK tax return unless requested to by the UK IRS (though you can always opt to if you wish). You should call them & notify them of your current situation and be sure they credit you with the appropriate personal exemption so that they're not taking out too much tax at the moment. If you don't contact them, they'll be sure to contact you at some point, anyway.

I have found it useful to keep track of my own income in the UK on a spreadsheet, including conversion rates at the time, and separating earned income (wages etc.) from passive income (interest). You will be able to take the foreign earned income exclusion (and housing exclusion/deduction) for your UK taxes on your US tax return, up to $80k, and the rest can be mopped up by the foreign tax credit. Forms 2555 & 1116 from the IRS cover these, and you should definitely read Publications 54 and 514 for detailed information (they're actually pretty good). Pub. 54 has a good FAQ at the end, as well. There are strict requirements though on *when* you're allowed to qualify for the exclusion - you'll basically have to apply for an extension to file until you meet the Physical presence test (see Pub. 54).

I've been thru all this already with a rather complex tax situation, so I hope this at least points you in the right direction. Good luck.
/Shannon