US/UK Income Tax
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mx stu

Original Poster:

837 posts

253 months

Monday 8th July 2013
quotequote all
We had friends over for a BBQ yesterday, one of whom is American but came to the UK with the US Air Force quite a few years ago. He met his (now) wife here so when he left the USAF they decided to stay here and now have a daughter. It is expected they will stay in the UK for the long term however they do always keep the US as an option, given cheaper house prices.

Since he left the USAF he's basically self taught himself website design and internet marketing etc and has a few clients that he works for, looking after that side of their business. He's set himself up as self employed in the UK, completes his return and pays tax in the UK.

He's heading back to the US for a holiday later in the year and a few of his old friends over there have expressed an interest in him looking after their internet marketing, which he could do quite easily from here in the UK.

The question he had though was even though he regards the UK as his home, should he have any income arising in the US (which he would obviously declare in the UK) would the US want to know about it and take their slice of tax?

If the US work comes off he will obviously seek someone appropriately qualified to confirm the position but before he commits to being able to do the work he's looking for a general steer.

Any thoughts?

User33678888

1,147 posts

167 months

Monday 8th July 2013
quotequote all
I could be wrong, but doesn't the US tax on worldwide income?

Eric Mc

125,770 posts

295 months

Monday 8th July 2013
quotequote all
He certainly would need to declare the US generated income in his UK tax return return as he is a resident in the UK for UK tax purposes.

He would also be required to declare his US income to the US tax authorities.

However, there is a US/UK Double Taxation Agreement (DTA) which should prevent him from paying both UK and US tax and the same bit of income.

mx stu

Original Poster:

837 posts

253 months

Monday 8th July 2013
quotequote all
Thanks for the replies, similar to what I suggested to him.

It looks as though there is a c. $100,000 limit for US citizens who are bona-fide residents in other countries before they have to declare foreign income, however if arises in the US it's obviously not foreign. They don't really cover that point in their guidance.

jeff m2

2,060 posts

181 months

Monday 8th July 2013
quotequote all
mx stu said:
Thanks for the replies, similar to what I suggested to him.

It looks as though there is a c. $100,000 limit for US citizens who are bona-fide residents in other countries before they have to declare foreign income, however if arises in the US it's obviously not foreign. They don't really cover that point in their guidance.
They will (should) issue him a 1099 stating gross payment, as a UK tax payer they do not and should not have to apply any withholding. He may have to send them a form that they keep on file.
Can't give you the form number as I have the opposite situation (UK to US).

Even if they eff up, and people do, any withhold tax will be stated on the 1099 and can be used as a tax credit in the country of filing.

However the US 1099 will cover the US tax year of Jan to Dec, not too bad as he will file in April.
For US tax payer any UK withholding has to wait till the following yearfurious Which is why it's best to get it right.smile

mx stu

Original Poster:

837 posts

253 months

Monday 8th July 2013
quotequote all
jeff m2 said:
They will (should) issue him a 1099 stating gross payment, as a UK tax payer they do not and should not have to apply any withholding. He may have to send them a form that they keep on file.
Can't give you the form number as I have the opposite situation (UK to US).

Even if they eff up, and people do, any withhold tax will be stated on the 1099 and can be used as a tax credit in the country of filing.

However the US 1099 will cover the US tax year of Jan to Dec, not too bad as he will file in April.
For US tax payer any UK withholding has to wait till the following yearfurious Which is why it's best to get it right.smile
Thanks Jeff, much appreciated.

GCH

4,141 posts

232 months

Monday 8th July 2013
quotequote all
mx stu said:


It looks as though there is a c. $100,000 limit for US citizens who are bona-fide residents in other countries before they have to declare foreign income,
No, you are incorrect- there is a foreign earned income exemption amount (currently $95,100) before you PAY tax, if it has been taxed in the foreign country of residence.
All US citizens/lawful permanent residents(green card holders) must file a tax return- including if residing overseas. There are exceptions if you earn below the threshold to file- current thresholds above which you must file a return are: $9750 for a single person, $9500 for married filing jointly, $3800 married filing separately, or $12,500 head of household. If you earn above this amount you must file a return - even if residing overseas.

Suggest he reads IRS pub 54 which is available here (along with the 1040 and 2555/2555ez forms): http://www.irs.gov/Individuals/International-Taxpa...




Edited by GCH on Monday 8th July 16:03