HikerMark

44 minutes ago, noname1234 said:

expedited or Routine?

Expedited and 2 day delivery.

32 minutes ago, EternalForeigner said:

And which locator number did you have?

 

Applied on the 17th too, expedited, but still in process. 

Locator number starts with 74

Passport Application submitted 8/17/2021

Passport Received  8/31/2021

I have been very impressed with processing times.

I submitted my passport application day after the oath ceremony on August 17th at the local city office.
Passport received today August 31st. So two weeks!!! 🙂

I paid the $60 for the expedited processing and $17.56 for 2 day delivery.

I was also impressed with the speed of the citizenship process. Applied on July 5th and approved and oath ceremony on August 16th.

Once you move to the States you will become non-resident for UK tax purposes. That means you only need to report your UK rental income on the UK tax return and complete the non-resident pages. The self-employment income (if it continues) will only be reported on the UK tax return if you keep a permament establishment such as an office in the UK. Otherwise the self-employment will only be reported on your US tax return.

The UK rental income will also be reported on your US tax return with some changes in some of the expenses you can claim and how the income is reported. For example the income will be reported on a cash basis and you can claim a depreciation expense for the cost of the building spread over a 40 year period. If you pay any tax in the UK on the rental income you can claim a credit for this against your US tax on the rental income.

As I mentioned in one of my earlier posts you will need to submit online form NRL1 to HMRC so that your tenant can pay the rent to you gross without any tax deduction.

Hope that gives an outline of what to expect. Basically you will continue with your UK tax return under self-assessment and also have the joy of starting in the US tax system. :-)

Plinkabob,

I'm still here occasionally :-)

What do you want help with? Rental income or PFICs?

I've been here since late 2008 and it took me a couple of years to feel settled. I too felt a bit like an alien, getting used to the different ways of doing things compared to the UK. However for the last three years since starting up my own accountancy business I have felt much more at home. Meeting lots of new clients, mostly American, has made me a lot more comfortable. Also the overall climate here in Phoenix is too good to pass up. Waking up to sunshine and blue sky almost every day is wonderful.

I used Walgreens and the photo was rejected as not being of acceptable quality even though it was the right size. For $34 I got another set done by a quy here in Phoenix who specializes in foreign passport photos. Way better quality than Walgreens and far superior service than I got at Walgreens. For peace of mind I would recommend finding a local photographer who specializes in foreign passport photos. For a modest extra cost you will get a product that will pass the quality standards.

The guy in Phoenix is Nabil Williams of Williams Passport Photos. http://www.passportphotoaz.com/

The basic rule is:-

1. If you have a green card you go through the same US immigration line as your US citizen spouse. In simple terms as a green card holder you are treated as a US citizen.

2. If you do not have a green card then you have to go through the visitors/non immigrant line and your spouse goes though the citizen line or can go through the non citizen line with you.

You are required to report defined contribution pensions on the FBAR, not defined benefit pensions or Social Security pensions.

So, for the UK that means reporting personal pensions, RAPs etc. If your pension is based on your final salary then you do not need to report it on the FBAR.

However, both types of pension need to be reported on Form 8938.

Thanks for the replies.. This is the sort of thing I'm worried about, that there's something I need to file because of my pension and I'll miss it offand get in trouble. So I need to file that FBAR thing because of my pension? It won't be a huge amount. Will I need to do this every year?

Edit: It says on the FBAR link on the IRS that certain things are exempt from FBAR, inc.

1. "Participants in and beneficiaries of tax-qualified retirement plans;"

Does that mean I don't have to do FBAR? :S

The FBAR is required every year if in a calendar year the total value of all your foreign financial accounts exceeds $10,000 at any time in the year. Financial accounts includes the obvious ones such as bank accounts, unit trust savings accounts, investment trust savings accounts, brokerage accounts, ISAs etc plus defined contribution pension plans. In the UK this would mean personal pension plans and some company pension plans where the pension you get is based on the fund value rather than your final salary. UK final salary schemes are not reported on the FBAR but are reportable assets for the form 8938.

The exception for "Participants in and beneficiaries of tax-qualified retirement plans;" is for US pension funds such as 401Ks.

The form 8938 needs to be attached to your US tax return for a married couple living in the US if the total value of their foreign financial assets exceeds $100,000 at the year end or $150,000 at any time in the year. Foreign financial assets for this form is a much wider range of assets than for the FBAR. It also includes defined benefit pension schemes (ie UK final salary schemes) as well as direct holdings of foreign corporations or partnerships.

All I can say, is welcome to US tax reporting for Green Card holders who keep any of their foreign assets.

Mark,

I'm happy to agree with your second paragraph, but the first is controversial.

When I searched for "Uk US pension tax", or similar, the first thing to come up were two threads on britishexpats.com that stated most but not tax specialists believe that the lump sum is not free from US tax.

Owen, thank you for pointing that out.

When looking at the US/UK tax treaty I always forget about the "savings clause" Article 1(4). Subject to the exceptions in Article 1(5) this allows the US to tax its citizens and residents as if the tax treaty did not exist. In otherwords on worldwide income. Unfortunately lump sum pensions are not included in Article 1(5). I also found a 2008 letter from the IRS which confirms their interpretation of the treaty and that UK lump sum pensions are taxable in the US. :-(

Another thing to add to the list of tax issues that people moving from the UK to the US need to be aware of.

i.e. Pension lump sums, FBAR, Form 8938, PFICs, ISAs, VCTs, Form 5471.

Under the UK/US tax treaty any UK pensions will only be taxed in the US if you are a US resident at the time of drawing the pension. In addition, if you take advantage of the UK rule allowing you to take out 25% tax free when you first start drawing the pension, the US is required to follow that rule even though there is not a similar provision in the US tax code.

In the meantime the only US tax reporting you need to worry about for UK pensions is the FBAR (due on June 30) and form 8938 for the US tax return. If you have UK defined contribution pension schemes you may need to report them on these forms if their values are high enough. The pension is not taxed by these forms as they are information returns to enable the US Government to track your overseas investments.

Yes you are right, that after a certain time period all of the gain on the sale of the property will be taxed by the IRS. Basically you have to have owned and lived in the property as your main residence for at least 2 years out of the last 5 years up to the date of disposal. That means that after you move out and start renting, most of any gain from a sale in the next 3 years will be tax free up to $250,000 (maybe $500,000 if you satisfy the married conditions).

Some of the gain will be taxed because the US allows a depreciation deduction for the cost of the property and that will be clawed back on the sale.

If you sell after 3 years all of the gain would be taxable in the US. This contrasts with the UK where the time period that you lived in the property is used to exempt part if not all of the gain even for rental properties.

Note that you would also be reporting the rental income to both the IRS and HMRC with a tax credit available to you on the US tax return for any UK tax paid.

You have to run the calculations for the at least three different scenarios that apply in your case. The default married filing separately/dual status, married filing joint with no foreign earned income exemption and married filing joint with foreign earned income exemption.

Which one works best will depend on your personal circumstances. You have to run the numbers to see which one is best.

Provided you satisfy the IRS regulations for disposal of a main residence most if not all of the gain on the sale of your UK home will be exempt from US tax. It won't matter how you get the proceeds to the US the disposal happened on the date of disposal. Whether it will even impact your US tax return will depend on how you file for your first US tax year. There are at least three different scenarios to calculate for the first filing to see which one is best for your circumstances.

In this situation it is married filing separate unless the couple elect for the non-resident spouse to be treated as a US resident for the whole tax year. That means reporting all of their income on the US tax return for the whole year. They may qualify for the foreign earned income exemption on that income but it still needs to be reported. Any non earned income such as investment income will not be exempt and will be subject to US tax with credit for any foreign tax paid on that income.

If you do not make the election then it will be married filing separate with the US spouse being unable to take the standard deduction because the non-resident spouse cannot. That leaves the US spouse only being able to itemize deductions and also may lose tax credits because of the married filing status.

They only way to work out which is the best option in your circumstances is to crunch the numbers both ways. If necessary get professional tax advice as it can get complicated. This will also apply to the year in which the non US spouse arrives in the US.

I second xe.com. I have been using them since late 2008 transferring money from and to the UK each month. Easy to set up after a few questions and uploading ID and easy to use.

Thanks for raising that point Trompe le Monde.

It was one of the solutions that crossed my mind. Provided it is set up as true self-employment that should work well for the UK business and for the US sub-contractor. i.e the UK business does not have to pay any UK NI contributions or be subject to employment laws/tax in the UK or the US. For the US sub-contractor they get the benefit of self-employment deductions plus they will get a US social security credit based on the US self-employment tax they will pay.

Both you and your UK employer need to get tax advice on this situation.

By employing you in the US your UK employer might be establishing a US presence and could then become subject to US taxes. Similarly your wages maybe subject to US withholding. This employment needs to be structured correctly to minimize the taxes due.

As for you, as a Green Card holder you will be treated as a US resident for tax purposes. That means you file a US tax return every year and you report and are taxed on your world wide income. So by default any UK income gets taxed on the US tax return with credit for any UK tax that is paid on that income.

However, if you are non-resident for UK tax purposes (because you no longer live there)some of the UK income will not be taxed by HMRC, plus there is a double tax treaty between the US and UK which will affect which country taxes your income.

Several people have mentioned the US foreign earned income deduction. Note that is only available to US residents with foreign wages who were working outside the US. That probably won't apply to you as you will be living and working in the US albeit for a UK employer.

As you can see there are quite a few issues to consider which is why professional advice would make sense before you commit to the employment.

Whether you need to amend your US tax return will depend on why the Canadian tax authorities have amended your Canadian tax return. Have they reduced your income, increased allowances etc?

Take your Canadian tax assessment to your US tax adviser and they will be able to work out if you need to amend your US tax return.

Yes this is very good advice. I just worked out my taxes filing as MFJ with the election assuming this would give me the best refund, but I was shocked when I saw the results from turbotax!

My Canadian spouse made over 70k while living in Canada in 2011 and made no income in the states. Even though the 70k+ was 100% excluded, the stupid way the IRS wants you to calculate your tax is based on the total of the U.S. citizen taxable income plus the excluded foreign income then you subtract the tax of the foreign income from that. So in reality the exclusion is not really an exclusion in the way you would think. See the 1040 Foreign Earned Income Tax Worksheet.

If your foreign spouse made a lot of money it will put you in a much higher tax bracket and you will be paying a lot more tax than you thought.

Good point Paul. I had forgotten about that.

The foreign earned income is treated as the bottom slice of income not the top slice as you would expect.

Just to add my 2 cents worth.

Don't always assume that the election to be treated as a US resident for the whole of the year is the best thing to do. It will depend on several factors such as how much and what type of foreign income you have, when you arrived in the US during the tax year and the tax position of the US Citizen such as whether they itemize or not. The earned income exclusion only excludes foreign earned income. Other foreign income will always be taxed in full subject to any double tax treaty and credit for foreign tax paid.

As a double check work out the taxes both ways, one with the election and one without to see which is the best.

The first US return is a pain but it does get a little easier after that.

Would my apartment in Russia be considered an investment or financial asset? I'm guessing yes.

Some tax advisors have been suggesting that to be on the safe side you should report foreign real estate on the 8938.

The guidance notes for the 8938 don't explicitly refer to real estate and mainly concentrate on assets such as bank accounts, stocks, trusts and pension funds. However, you are supposed to report interests in any business you run so I guess if foreign real estate is being rented then it could be argued that it should be disclosed.

My own reading of the guidance notes is that real estate does not need to be disclosed but ultimately it is your choice if you want to report the real estate and play it safe.

Just to add my 2c worth.

Your worldwide income, in your case UK income gets reported in each relevant line on the US tax return. So UK wages get reported on line 7 for wages, interest received on line 8 etc. Then, if you qualify to file form 2555 the entry for that form will be shown as a negative figure on line 21.

Note that the 2555 only reduces your foreign earned income. Foreign investment income will still be taxable on the US return subject to relief for any tax you paid in the foreign country on that income.

A heads up for those of us filing our taxes at the moment.

There is a new form 8938 Statement of Specified Foreign Financial Assets that you may need to file with your tax return. The penalty for not filing the form is $10,000 so you will want to check if the form applies to you.

In summary the form supplies information about your overseas foreign assets such as bank accounts, investments, pension funds and business interests. It is fairly wide reaching.

The basic rule is that if you are married filing joint and the value of the foreign financial assets is more than $100,000 at the end of the year or more than $150,000 at any time in the year you need to file the form 8938. For married filing separate the limits are $50,000 and $75,000.

Those limits may sound high but the foreign assets include foreign pensions. So, if you have left your foreign pensions in your home country the value of those could easily take you over the filing limits.

Make sure that your tax preparer is up to speed with the new form and that you check if you need to file it. A $10,000 penalty for not filing is a lot to pay.