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Topic: Another US/UK tax question and being self employed  (Read 2971 times)

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Another US/UK tax question and being self employed
« on: February 08, 2011, 02:16:45 PM »
Ok here it goes since I have gotten multiple answers from CPA's...

1. I have lived in the UK since Jan 2010
2. I have 1 US W-2
3. I went self employed in the UK March 2010
4. I have a 1099 from the states
5. I pay UK National Insurance ect...
6. I have a certificate of liabilty from the HMRC showing I am liable to the UK
it stated: In accordance with the provisions of the social security agreement between the UK and the USA, employment or self employemnt of the person named overleaf in the UK is subject to UK laws on social security from 28/3/10.
http://www.ssa.gov/international/agreements_overview.html
this states: Workers who are exempt from U.S. or foreign Social Security taxes under an agreement must document their exemption by obtaining a certificate of coverage from the country that will continue to cover them. For example, a U.S. worker sent on temporary assignment to the United Kingdom would need a certificate of coverage issued by SSA to prove his or her exemption from U.K. Social Security contributions. Conversely, a U.K.-based employee working temporarily in the United States would need a certificate from the U.K. authorities as evidence of the exemption from U.S. Social Security tax.

When SSA issues a certificate certifying U.S. coverage, a copy of the certificate usually must be presented to the appropriate foreign authorities as proof of entitlement to the foreign exemption for the U.S. employee and the employer. When the other country issues a certificate certifying that the employee is covered by the foreign system, the employer can immediately stop withholding and paying U.S. Social Security taxes on the employee's earnings. The certificate should just be retained in the employer's files so it can be produced in the event the Internal Revenue Service ever questions why no taxes are being paid for the employee. A self-employed U.S. citizen or resident must attach a photocopy of the foreign certificate to his U.S. tax return each year as proof of the U.S. exemption from self-employment taxes. In accordance with Revenue Procedure 84-54, the foreign certificate serves as proof of the exemption from U.S. Social Security taxes for the period shown on the certificate.

So I am utterly confused.
What do I file?
2055 - yes
1040 and list only income from Jan - March?


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Re: Another US/UK tax question and being self employed
« Reply #1 on: February 10, 2011, 11:17:49 AM »
I got my answers elsewhere and thought I would share:
1) File FBAR.
2) File 1040, showing ALL income earned worldwide, including your self-employment on Sch C. All UK income goes on this return.
3) File 2555 and/or 1116 to claim reductions for foreign aspects of your return. To get the maths to work right, you should consider a tax programme like Turbotax or hiring a tax accountant. The maths on a self-employed 2555 and 1116 are trickier than that of an employee.
4) in your arrival year, US workdays are taxed in the US and UK workdays are taxed in the UK. You'll need to first do an allocation of US/UK workdays for your employee period, and then do a second allocation of US/UK workdays for your self-employment period. No definition of which is which. Enjoy doing the maths, or buy a programme or hire somebody.
5) Social security taxes are separate from income taxes. Thus, you don't file Form SE, since you are covered under the US/UK Totalization Agreement. If whatever method you choose results in US Social Security taxes being computed on Form SE, it's wrong; fix it before you finalize.
6) The UK year is 6 Apr 2010 to 5 Apr 2011, and your first tax return is due 31 Jan 2012. Prepare your UK SA for 2010/11 and PAY THE BALANCE DUE by 31 Dec 2011, so you can optimize your 2011 US 1040 filing choices.
7) Also prepay your first half of UK 2011/12 tax by 31 Dec 2011.
8) This is one month BEFORE the REAL due date of 31 Jan 2012. Do it one month early anyway.


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Re: Another US/UK tax question and being self employed
« Reply #2 on: February 10, 2011, 04:02:39 PM »
Since everyone is looking for tax advisers, it might be a nice jester to acknowledge that the response (on a public forum) came from britishamericantax (Liz Zitzow in the UK, Peter Newton in the US). Those more familiar with the firm, please correct me if I'm wrong on the principals.
« Last Edit: February 10, 2011, 04:08:44 PM by theOAP »


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Re: Another US/UK tax question and being self employed
« Reply #3 on: February 11, 2011, 12:29:32 PM »
You are correct  as I did post their link elsewhere as I didnt know who replied it was a basic email address of the site..

http://www.taxationweb.co.uk/forum/us-citizen-residesin-uk-as-self-employed-t33802.html?sid=4342f84a7ad7111c413e3eac04f4f5e6


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