What to do BEFORE we move?

Hi all,

I'm anxiously counting down the days til I join my hubby in Scotland. And I'm doing some research into the tax implications of living overseas. Quite frankly, it's more than a little intimidating and I'm scared we'll somehow be double taxed.

I am a USC, & my husband is a dual USC/UKC, so does that mean we are jointly allowed up to ~ $180k before we need to be concerned about paying taxes to the US?

My OH left the US on 6/19/11 and started his new job on 6/27/11. Does that mean he will be considered non-resident for the 2010 tax year since he left before the middle of the year? Or is it based on whether he spent 183 days in the US? I'm assuming I will be considered resident since I'm still here in the US. So how will that screw things up that we each have different statuses?

And to throw additional complications in, we have both taken out our 401ks, so I know we are going to wind up being screwed by the penalties.

I guess I need to know if there's anything we can do now, to prevent any additional complications, before I officially move in a few weeks? We had planned on moving over some of our savings, which may mean we'll have more than $10k in an account. Should we do that? Are we better off leaving it here for now?

I assume we can't use TurboTax to do our return, which we've always done, and should use a tax professional. How much can we expect it to cost for someone to prepare our taxes?

Hello,

Since your husband will be earning in the UK, and hence paying tax, it is highly likely that Foreign Tax Credits will cover all US tax obligations. The Foreign Earned Income Exclusion you were referring to is unlikely to benefit you (and you may not even qualify).

Having $10000 in a foreign account isn't a problem at all tax wise, but there are extra reporting requirements (FBAR).

Be careful, though, of UK ISAs and SIPPs (pensions) which can cause problems for USCs.

Cost of a professional to prepare the return can vary - the big 4 charge thousands, but smaller firms are cheaper. If you only have employment income and nothing too complicated, shouldn't cost more than a couple of hundred pounds.

Well, eventually we do plan on setting up some kind of retirement savings accounts. Are there financial professionals that would be educated on the best way for us to do this, and avoid complicating our taxes?

I've just read further to understand the differences between FEI and FTC. I didn't realize there was a difference, so very glad to read that.

Can anyone recommend a professional in the Glasgow area? I'll be honest with you tiekey, I don't even know the names of the Big 4. I've heard that term before, but couldn't tell you what companies they refer to. 

Well, eventually we do plan on setting up some kind of retirement savings accounts. Are there financial professionals that would be educated on the best way for us to do this, and avoid complicating our taxes?

I've just read further to understand the differences between FEI and FTC. I didn't realize there was a difference, so very glad to read that.

Can anyone recommend a professional in the Glasgow area? I'll be honest with you tiekey, I don't even know the names of the Big 4. I've heard that term before, but couldn't tell you what companies they refer to.  

An employer sponsored retirement plan would be good to get, but personal pension plans are complicated as it's not certain how the IRS taxes them. As a US citizen you should avoid any UK based mutual funds and stocks and shares ISAs as these fall under IRS PFIC rules.

It's a shame you cashed out the 401k as there'll be a 10% penalty on top of the tax and US retirement accounts are good ways to invest in mutual funds as the retirement wrapper lets them grow free of tax from the US and the UK.