US tax accountant

my mother is offering to pay for her tax accountant to do my taxes in the US.  im worried though as to how qualified this guy will be on US/UK tax.  ive been trying to read some tax posts on this forum but find them really confusing, so i know i cant do them myself.  but, should i not get someone in the UK to do them? or do you think it will be ok for a US accountant to handle it? i feel like i have to tell him what to do though, cause why would he know?

If you don't have any special circumstances, you'll be able to do them yourself.  Unless you made over $80k last year, you won't pay anything. 

ehhhh

i dont know about that. ive never done my own taxes EVER! let alone when ive had income from two different countries in one year.  yikes.

i have no idea what to do or where to send stuff or what the tax year is even!

I'd never done mine either until last year. Lola's right - if you didn't earn 80K it's easy peasy.

hmmm well this didnt really help much guys! haha

if your saying its easy, do it on my own... what do i do? where do i go to find out what to do?

A UK accoutant will likely be less qualified.  Ask if the US accountant knows what to do under your circumstances.  Specifically, does he know how the foreign earned income exclusion (form 2555) and possible the foreign tax credit (form 1116) work?  Likely he has software that does it for him, so you are probably ok, but it doesn't hurt to ask.

If you do have a relatively easy situation, you could probably be fine using one of the relatively cheap online programs or buy the software like TurboTax.  I have done my taxes both by hand and using the software and the software is pretty straightforward.  I have NOT done them yet since I moved though so I don' t know how well they deal with people living outside of the US. 

Turbotax for overseas filers...

I've been hearing that the e-filing componant is difficult to use, to the point that you have to print the return and send in a paper signed return rather than e-filing. 

Other than that, I haven't heard any complaints about the programme as used by persons with incomes under the $80,000 Foreign Earned Income Exclusion limit.

Lizzit,

Would you be able to comment on what complaints people above the $80k mark have had?  I'm lucky enough to be in above it but my initial TurboTax calculations have left me with a bill of around $5000, and I'm trying to pick apart how it has arrived at such a number.

(More detail follows for those who may care...)

I suppose my main question is whether, given my situation, this number sounds realistic or if I need to call in a pro.  Main info:

All my non-interest/dividend income is from the UK, and my US 1099-type income is very small.  If I make up some numbers like:

UK salary: $150000
UK tax paid: $40000

How much AGI should I have (150000-80000=70000?) and, based on that, can I claim a foreign tax credit of the full $40000?  And if that's the case, shouldn't paying $40000 in tax on $70000 of income mean I don't owe any federal tax?

I'm pretty sure I'm either missing something basic or overanalysing here, but any help/guidance is greatly appreciated.  Thanks!

 -A

I am kind of in the same boat as Asher, but unfortunately, not that much over the 80K limit.  I really don't think I can (nor have the inclination) to do my own taxes this first year abroad.  I would be keen to hear any referrals for dual qualified accountants.  Please don't be afraid to self promote, if you are qualified and lurking out there.   

Asher,

You should have a zero balance due if 100% of the wages were earned in the UK. 

Your AGI should be $70,000.  The foreign tax credit is on $40,000.  On box 12 of the 1116, subtract $40,000 x $80,000 exclusion / 150,000 total salary, as you can't take the foreign tax paid on the $80,000 you excluded.  You can also exclude housing costs, which should further reduce your tax.

I've heard no complaints about <$80,000 incomes; incomes over $80,000 can be tricky to enter all the data correctly so that you don't get conked with tax you don't actually owe.  I can't be specific other than to say I've seen them done wrong more often than right; and the end user alas usually doesn't have the knowledge base in international taxation to alert them of that fact.

I am kind of in the same boat as Asher, but unfortunately, not that much over the 80K limit.  I really don't think I can (nor have the inclination) to do my own taxes this first year abroad.  I would be keen to hear any referrals for dual qualified accountants.  Please don't be afraid to self promote, if you are qualified and lurking out there.   

I'll PM you an accountant that I use for my US/UK taxes.

Thanks for the lightning-fast responses.

Lizzit, I think you've confirmed my suspicion that something's not quite right in my calculations, i.e. I thought I needed to earn a lot more than I do to get to the point where my US federal tax liability exceeds my foreign tax credit.  I'll revisit my numbers.

(This also means I think I shortchanged myself last year as well, but I actually got a refund last year so that may have hidden it from me.  After I do 2005 I'll revisit 2004 and file a 1040X if need be.  Then I can search the forums for info on that  )

Thanks again.
 -A

I forgot to revisit Lizzit's mention of housing costs -- I was factoring these in, but I didn't realise until earlier today that I could include basic utilities, household insurance etc in my calculations.  Don't make the same mistake!  These seemingly small costs actually have a large effect since the housnig exclusion reduces dollar-for-dollar your US income, the tune of saving a few hundred dollars in tax!

Asher - in theory and based on the numbers you give you should owe zero US taxes because of foreign tax credits.

There may however be items that Turbotax does not do correctly such as giving foreign tax credits for UK employer pension contributions (which are taxable for US tax purposes) or resourcing of US workday income as foreign income under the treaty.

Consequently claiming a few thousand dollars of UK utilities does not normally result in any less US tax (just because UK tax rates are higher than US ones). I think you should double check the forms 1116 and 2555 again before filing...