Question: Just moved to the UK 3 months ago from the US. Have US tax questions.

the_wintry_mizzenmast — Sat, 12 Jan 2013 03:47:26 -0800

Just moved to the UK from the US in mid-October. I haven't paid any income tax in the UK yet due to not earning above the personal allowance, and I have a same-sex partner in the UK who is not a US citizen and never lived in the US, and I did a bit of cross-state moving in the US before relocating overseas, so this may make my state returns from California and my reporting of foreign bank accounts more complicated.

Hey MeFi,

I know you've answered some tax questions before, but I have some extra complications, so I was hoping you'd be able to provide some advice.

Here are the facts:
I moved from the US to the UK in mid-October, and will conceivably be in the UK for the next 3-4 years. In the US, I was employed in California for most of the year (January-September), but moved out of California and back to my parents' house in Utah for the 3 weeks just before the move because my lease had run out and I was still waiting for my Tier 2 visa in the UK to come through. I submitted to the California DMV that I was moving out of the state to Utah and changed my "permanent address" for my employer and all of my relevant accounts to my parents house before moving overseas. I also filed for an overseas/absentee ballot in UT for the 2012 elections before moving.

In the UK, I am living with my domestic/civil same-sex partner. We are registered as partners in California, but she is a Swedish citizen and has never lived or earned any money in the US. We were a long-distance international relationship. In the UK, we have a joint current account. This is my only foreign bank account. As of December 31, 2012, this bank account never had more than $10,000 in it.

I haven't paid any income tax in the UK yet. I only have two months of payslips (I'm on the PAYE system through my employer in the UK) for November and December, and I apparently haven't paid any tax because I haven't reached the income tax personal allowance of £8105 yet.

Here are my questions:

1) I know I don't qualify for the Foreign Earned Income Exclusion (FEIE) yet, because I haven't lived in the UK for more than 330 consecutive days. On my payslip, as of the end of the US tax year, I hadn't paid for any UK income tax yet because of earning less than the income tax allowance. I would prefer not to pay any income tax in the US on my UK earnings, because I will be paying UK taxes on it over the UK tax year, which ends in April. By then I will have earned above the allowance. Should I just calculate 20% of my UK earnings and apply the Foreign Tax Credit since I'll be paying this eventually on my salary (even though there's no 2012 paperwork to back this up), or should I apply for an extension until September when I meet the residency requirements for the FEIE?

I've heard that I still have to estimate what my taxes will be and pay said taxes in April, or be charged a penalty and interest. Even if I'm filing for an extension, should I pay extra with an estimation form even though I've already had taxes withheld when I was employed in CA?

2) How should I file my federal and state taxes, since I am in a registered domestic partnership in California? Since the US federal government does not recognize same-sex partnerships, I file federally as single, correct? Should I also file for my residency for California as domestic partnership filing separately?

3) I would like to consider myself as having officially moved out of California. I know that CA state taxes are pretty strict when it comes to expat income. While living for 3 weeks in Utah, I believe I did still get paid from my employer in CA for my work from home. Do I have to file income taxes on that in both CA and UT? I still hold a driver's license from CA and my US bank account is with a credit union in CA. Will this still make me liable for state taxes in CA in the future, even though I reported to the DMV that I moved back to UT and no longer have any other ties to CA?

4) How do I report my foreign accounts in the UK? I have a joint account with my partner. Its value hasn't gone above $10,000 (USD) yet, but I'm pretty sure in the future that it will. Are there any taxes that I would have to pay on this account? Do I have to keep detailed records on what part of the money is mine, and what part of that money can't be taxed by the US government because my partner is not a US citizen and has never lived or worked in the US?

5) I am contributing to a pension scheme in the UK, mostly because this is pretty default for my employment institution and I have no idea whether or not I will be moving back to the US. How does this factor into reporting my taxes for 2012?

Any guidance would be helpful, MeFi!

By: oliverburkeman

oliverburkeman — Sat, 12 Jan 2013 07:56:22 -0800

It's an annoying kind of answer, but I think you really need an accountant in both jurisdictions. I have a simpler US/UK tax situation than you, and couldn't possibly have managed without them.

This needn't be a long term arrangement; once you're set up, you can switch back to handling this yourself. But in my experience it's almost never correct to say you can't afford this, simply because the penalties you may end up paying by getting it wrong exceed the cost of accountants.

I would suggest getting a friend in each place to recommend one.

By: DarlingBri

DarlingBri — Sat, 12 Jan 2013 08:27:52 -0800

The complexities of US tax payers abroad are so firmly established that you should have zero issues finding a UK tax accountant who is extremely experienced and very well placed to help you file in both places. I do not believe you need two accountants. I do believe, however, that you probably need one accountant, at least for this first year, especially if you are earning over the $95,100 threshold.

Comments on: Just moved to the UK 3 months ago from the US. Have US tax questions.

Question: Just moved to the UK 3 months ago from the US. Have US tax questions.

By: oliverburkeman

By: DarlingBri