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Topic: Renouncing US Citizenship - US & UK Taxes Due (Pensions)  (Read 1280 times)

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Renouncing US Citizenship - US & UK Taxes Due (Pensions)
« on: October 27, 2016, 02:07:16 AM »
I'm trying to estimate taxes due on/after my future US Citizenship renunciation approval date ("ex-USC").

I am UK resident & domiciled.
UK Citizen & currently a US Citizen.
I am up-to-date with US & UK Tax Forms/Payments/FBARs etc.
When I renounce US Citizenship I will qualify as "non-covered".

I'm most concerned about minimising the worldwide taxes due as a result of (and in the future years after) my ex-USC renunciation on my US & UK Pension accounts. After I'm "ex-USC" and I've filed US Form 8854 will the following be correct:

1) USA Roth IRA with my holdings in Cash -- Zero taxes due at "ex-USC" time (and ever) in UK and USA.  No more taxes on this ever in UK or US?

2) UK SIPP Pension with my holdings in Cash (US Tax has been paid annually on this - it's marked to market and I've filed 3520 forms annually etc.) -- Zero USA Taxes due.  Will be taxed in UK later using normal UK-only rules (after I'm ex-USC).  Tax sheltered until then in UK.  No more US taxes on this except on the final 1040 & 3520?

3) UK Company Pension (No US or UK Taxes paid on this to date) -- Will I be due to pay USA tax of this on renunciation as a non-covered person.  I think the answer is "no" ?  In the future will I get a 25% tax free lump sum and then pay normal UK income tax as a UK resident on other withdrawals?  No US taxes on this?

4) USA Regular IRA in Cash -- Will I be due to pay USA tax of this on renunciation as a non-covered person.  I think the answer is "no" ?

My understanding on future taxes due on this Regular IRA is:

-- if I withdraw the IRA as 1 lump sum in my sixties then I am taxed in USA only?  Not taxed in UK even though I'm UK-resident?  If so, how much will the US taxes be?  Will my brokerage withhold 30% if at that time if I have a W8-BEN on file with them? (or will they withhold 15% or 0%?)   I can't get a "tax-free 25% lump sum" on this can I (like on a UK pension) as it's taxed in the USA - is this correct?

on the other hand:
-- if I withdraw the IRA with periodic payments (over a period of greater than 1 year) then I will be taxed ONLY by the UK as a UK-resident and NOT by the USA?  Is this correct?

If I withdraw from the IRA (as an "ex-USC") before age 59-1/2 will I still get a 10% penalty from the US?  I think the answer is "yes" ?
« Last Edit: October 27, 2016, 02:51:39 PM by cvc8445 »


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Re: Renouncing US Citizenship - US & UK Taxes Due (Pensions)
« Reply #1 on: October 27, 2016, 08:32:58 AM »
I would hope you have had professional advice as your situation is fairly complex.
1. OK if you elect to use the treaty on your UK self-assessment returns.
2. I do not understand mark-to-market on cash.
3. If you are not covered this question does not make sense. Have you elected to use the treaty on your US returns?
4.a Why would you/anyone file an 8854 annually? Have you elected to use the treaty on your UK self-assessment returns.
4. b. Have you elected to use the treaty on your UK self-assessment returns.
4. c. Have you elected to use the treaty on your UK self-assessment returns.


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Re: Renouncing US Citizenship - US & UK Taxes Due (Pensions)
« Reply #2 on: October 27, 2016, 12:22:25 PM »
@guya:

After rereading it, I think I had misunderstood the 8854 form and mixed up how a non-covered renouncer is treated. Seems quite a bit simpler than I had concluded and that no extra taxes are due as a result of the renouncement if you are non-covered.  Just normal US taxes for the final 1040/tax year.  I have reworded/corrected my question.  Are my assumptions now correct?

[ P.S. #2 -- My UK SIPP has been MTM through its life.  Its now in cash.  Previously held securities (PFIC is not an issue). I've filed US 3520's in recognition of it being a grantor trust (?) and paid annual US taxes on past gains so its MTM from a US point of view. ]
« Last Edit: October 27, 2016, 02:36:27 PM by cvc8445 »


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Re: Renouncing US Citizenship - US & UK Taxes Due (Pensions)
« Reply #3 on: October 28, 2016, 11:13:32 PM »
Any feedback from anyone on my original post?


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