Forum USA

[greenefingers]

Hi all I'm new to the list. We lived in the US for 18 months, then came home and my husband continued his US contract but based in the UK, being paid dollars into his US bank account. We were told by the Inland Revenue that he had to pay British tax as we were living in the UK, which he did. He has recently started receiving demands for payment of tax from he US TAx Court, amounting to $16,000.
Has anyone else ever been in this situation? If he doesn't go to court to clear his name and a debt collection agency gets in on the act, will he have problems going back to the US?
any advice most appreciated!!

[polskasweetie]

Unfortunately your husband will have to pay taxes in both countries. Being a UK citizen he is by law required to pay taxes off any employment. But since he is also working the a US company that transferred him back here from the US, then he is also set to pay US taxes on the same salary. This should have been explained to him by his employers prior to signing his contract.

[beadvised1]

I have done enough reading and talked to a few people that you may have tax offsets from one country to another. for example, the US may waive much or all of the tax if you were paying taxes in another country for the same amount of salary.

You really need to talk to a tax accountant that specializes in this type of international tax law.

[Edelman]

You may be able to end your US tax residency on the date you left the US ("early termination date"), in which case the US' ability to tax your husband ends on that date. Or, perhaps more likely, your residency would last through the end of the calendar year in which you left the US, in which the US requires that you report all income, worldwide, through the end of the year. However, he could take a credit against the US tax on the foreign income based on having paid UK income tax on the same income (NIC does not count). This is done on IRS Form 1116. Another option for which your husband might be eligible, is to report, but then exclude/deduct the income earned overseas on a Form 2555. I'm an expert in this work, but to be candid, you'd be better served by someone who knows both US and UK taxes, and I can refer you to someone with those skills if you still need assistance.

[JovitaAnnag]

hi,

I'd recommend going with an attorney. Once you start dealing with the Tax Court, you start file state taxes online getting into a complicated set of rules and procedures. If you don't know what you're doing it's very easy to miss a deadline or to not do a filing correctly, and messing up on technicalities can result in your entire case being dismissed.