I'm very confused...Help!

I'm moving to the UK in May and plan to start working (if I can find a job!) shortly after.  I am working in the US until May. 
Next year (for 2006 taxes) what will I have to do?  Do I have to pay double taxes?  Do you have to pay social security and FICA as well? 

Is there anything I should do before I leave to prepare myself?  Also, I live in Illinois...will I have to pay state taxes?  I'm not planning on moving back here, so I wouldn't think so?!?

Thanks

The good news is that you are asking your questions before you move.  This gives you time to plan your course of action.

Tips for going-to-move:

1)  The year you move, you file a Form 1040 with a Form 2555 Foreign Earned Income Exclusion.  Form 2555 may require that you file in May of 2007 (a year after you move) or even as late as January of 2008 (a full calendar year after you move).
2)  If you work for a UK employer, they will withhold UK National Insurance (NI).  Our US/UK Totalization Agreement means that you won't owe any US SS on top of the UK NI.
3)  If your UK income is in excess of $80,000 annually, you can also file Form 1116 Foreign Tax Credit in the US, which in most cases will reduce any remaining US tax down to zero.
4)  If you move permanently, you usually will no longer be subject to state tax.  There are many exceptions, however, so take the precautions necessary to sever ties with Illinois. 
5)  The UK tax can be reduced if you are NonDomiciled.  You may wish to read up on the definitions of Resident and Domicile at http://www.hmrc.gov.uk/pdfs/ir20.htm

Good luck!

IRS Circular 230 Disclosure:  To ensure compliance with requirements imposed by the U.S. Internal Revenue Service, we inform you that any tax advice contained in this posting (including any attachments) is not intended or written to be used, and cannot be used, by any taxpayer for the purpose of (1) avoiding tax-related penalties under the U.S. Internal Revenue Code or (2) promoting, marketing or recommending to another party any tax-related matters addressed herein.

Lizzit is accurate and correct; don't forget to save receipts for donations to Goodwill etc when you donate stuff before you leave as these can save you taxes too.

However the important thing to note is that Ruggelach are almost impossible to get in Glasgow (it only has a small jewish population and Ruggelach are more American these days than jewish).  Can you survive without or will you make your own? 

Tips for going-to-move:

1)  The year you move, you file a Form 1040 with a Form 2555 Foreign Earned Income Exclusion.  Form 2555 may require that you file in May of 2007 (a year after you move) or even as late as January of 2008 (a full calendar year after you move).
2)  If you work for a UK employer, they will withhold UK National Insurance (NI).  Our US/UK Totalization Agreement means that you won't owe any US SS on top of the UK NI.
3)  If your UK income is in excess of $80,000 annually, you can also file Form 1116 Foreign Tax Credit in the US, which in most cases will reduce any remaining US tax down to zero.
4)  If you move permanently, you usually will no longer be subject to state tax.  There are many exceptions, however, so take the precautions necessary to sever ties with Illinois. 

So, what you are saying is, I possibly won't have to pay any US Federal taxes if I file for an extension? Also, how do I sever ties with the state I live in?  If I'm not living there anymore isn't that good enough?  Or, if I have a bank account there (not with any huge amount in it), but my mother is on the account too, is that bad?
Thank you

However the important thing to note is that Ruggelach are almost impossible to get in Glasgow (it only has a small jewish population and Ruggelach are more American these days than jewish). Can you survive without or will you make your own?

I'll make my own!!  

Spoken like a true mover.  I make my own lasagnas and pizzas, since the UK stuff doesn't hold a candle to the US stuff (or Italian for that matter).

Things to try here:  Pie for Dinner, with Steak & Ale! 

I am curious how you would sever ties with a state.  I still have student loans in the US that are addressed to my parents hous ein Taxachusetts...I mean Massachusetts.      What should I be doing ot avoid paying state taxes.  Thanks!

Massachusetts is one of the ornery states that doesn't want to let go of it's citizens.  You'll need private advice to help you with severing those ties.  Read more here:  http://www.massdor.com/help/guides/abate_amend/personal/issues/resid.htm 

You'll see from that site that in general, you don't meet the definition, but there are lots of exceptions under MGL, including lots of case law.  A more detailed description is here:  http://www.dor.state.ma.us/rul_reg/tir/tir_95_7.htm

Again, even under the detailed version, you can see that case law affects the definition.   Thus, expert Mass advice is required if you wish 100% assurance that you have severed ties with Mass.

IRS Circular 230 Disclosure:  To ensure compliance with requirements imposed by the U.S. Internal Revenue Service, we inform you that any tax advice contained in this communication (including any attachments) was not intended or written to be used, and cannot be used, by any taxpayer for the purpose of (1) avoiding tax-related penalties under the U.S. Internal Revenue Code or (2) promoting, marketing or recommending to another party any tax-related matters addressed herein.

Glad that I found this post....my question is sort of along the same lines. Not sure if any of you know the answer but I'll moving to the UK in July, when I file my taxes for 2006, do i do it online or can i appoint a power of attorney in California to file them for me?
 
Thanks in advance,
Alz

You can have your CA accountant do it without having to give them Power of Attorney (although it does make things easier for him/her).  If your UK income will be in excess of $80,000 annually, they may not know all the software/tax tricks necessary to reduce your Federal income tax to the lowest sum.  You can do it online too.  Your company may pay for your tax returns to be prepared.  This is the best option, as the accounting firm they hire will be dual-qualified and highly expert in international moves.  And free!  Check that option out.

IRS Circular 230 Disclosure:  To ensure compliance with requirements imposed by the U.S. Internal Revenue Service, we inform you that any tax advice contained in this communication (including any attachments) was not intended or written to be used, and cannot be used, by any taxpayer for the purpose of (1) avoiding tax-related penalties under the U.S. Internal Revenue Code or (2) promoting, marketing or recommending to another party any tax-related matters addressed herein.

Thanks Lizzit!

I am curious how you would sever ties with a state.  I still have student loans in the US that are addressed to my parents hous ein Taxachusetts...I mean Massachusetts.      What should I be doing ot avoid paying state taxes.  Thanks!

MA doesn't require you to file MA tax forms if you have no MA income.

Nun,

No, MA can still require you to file as a resident on your worldwide income even if you have no MA source income under certain convoluted circumstances.  Read my bit in the middle of this particular forum topic starting with "Massachusetts is one of the ornery states that doesn't want to let go of it's citizens.".

IRS Circular 230 Disclosure:  To ensure compliance with requirements imposed by the U.S. Internal Revenue Service, we inform you that any tax advice contained in this posting (including any attachments) is not intended or written to be used, and cannot be used, by any taxpayer for the purpose of (1) avoiding tax-related penalties under the U.S. Internal Revenue Code or (2) promoting, marketing or recommending to another party any tax-related matters addressed herein.

How does one find out if their state will require a resident to file even if they reside in the UK for the majority of the year?
I live in Illinois and will work here until May, so I know I'll have to file for that time, but I can't see having to file IL taxes for the rest of the year.  Its crazy!

Nun,

No, MA can still require you to file as a resident on your worldwide income even if you have no MA source income under certain convoluted circumstances.  Read my bit in the middle of this particular forum topic starting with "Massachusetts is one of the ornery states that doesn't want to let go of it's citizens.".

Lizzit,
I was assuming that the person met the NR criteria. I got a very nice email form Mass DOR that expalins in clear language their NR taxation.

If you are leaving Mass. with no intentions of returning, your domicile would no longer be that of Mass. and therefore you would not be liable to pay taxes to Mass. after your departure unless you have Mass. source income from the following sources: Any trade of business, including any employment carried on by the taxpayer in Massachusetts, whether or not the nonresident is actively engaged in a trade or business or employment in Massachusetts in the year in which the income is received;

The participation in any lottery or wagering transaction in Massachusetts;

The ownership of (or any interest in) real or tangible personal property located in Massachusetts; or
interest and gains from trade or business conducted in Massachusetts. Etc. etc.


Additional information pertaining to taxable income for nonresidents is available on our website at: 

http://www.dor.state.ma.us/help/guides/abate_amend/personal/issues/tradeBuss.htm

http://www.dor.state.ma.us/help/guides/abate_amend/personal/issues/MSI_Included.htm

Please be advised that Mass. does not have a specific form to file for a change in domicile. However, it is strongly recommended that you change your address with the DOR upon your departure. This may be accomplished by calling our Customer Service Bureau at 617-887-6367 (option 1).


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