USA taxation on UK earnings

USA taxation on UK earnings

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I have acquired a new client who is an American working in the UK. I understand that he must make a declaration to the IRS if his income exceeds acertain amount. Any pointers to taxation issues and sources of guidance. Many thanks
Gus Donnelly

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By AnonymousUser
13th May 2006 11:07

Thresholds for US filing
The thresholds for filing are much lower than the thresholds for paying tax.

The average American won't pay tax on his or her UK income, since the UK tax rate is higher than the US.

But the threshold for filing is very small. For self-employed, it's a mere $400 of net income - computed under US means, natch. For kids under 14 (2006 onwards kids under 18) it's $1,600. For all others it's $8,300.

Even if the income is under these thresholds, there are information returns that must be filed if they:
- Have bank or securities accounts or access to bank & securities accounts which had a value of $10,000+ at any point during the year
- own 10% or more of a corporation or partnership
- are the beneficiaries, grantors, or settlors of a trust, even if they receive no income from said trust

Lastly, if any income is arising from unit trust, investment trusts, or other wrapper investments; be wary that the US method to determine the income generated in that asset may be substantially different than the UK method, so that for US tax purposes the income may be well in excess of the UK method.

In other words, David is right, seek counsel.

IRS Circular 230 Disclosure: To ensure compliance with requirements imposed by the U.S. Internal Revenue Service, we inform you that any tax advice contained in this communication (including any attachments) was not intended or written to be used, and cannot be used, by any taxpayer for the purpose of (1) avoiding tax-related penalties under the U.S. Internal Revenue Code or (2) promoting, marketing or recommending to another party any tax-related matters addressed herein.

www.BritishAmericanTax.com

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