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US citizen resident in UK - IRA distributions

Can US citizen resident in UK (for last 6 years) reclaim tax witheld in US from IRA distribution

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Client has lived in UK for a number of years (previously lived and worked in US for many years); widowed aged 80.

Has withdrawn around $5,000 a year from his IRA in US; has around $100,000 left in his IRA and wants to withdraw the balance in 2 lumps one this year and one next year. In the past $500 tax has been witheld in the US. If he withdraws around $50,000 a year this will be taxed in the UK (he has around £10,000 of other income).

Is more than 10% likely to be witheld in US and will he be able to reclaim US tax witheld against UK tax?

Previous tax returns in UK have been pretty straightforward but bigger sums involved this (19/20) and next year.

Replies (4)

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By lionofludesch
17th Sep 2019 17:30

I must admit that I misunderstood the general thrust of this query.

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Hallerud at Easter
17th Sep 2019 17:44

So did I- very unfortunate set of initials, at first I thought the OP might be referring to Boston.

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By David Treitel
17th Sep 2019 18:44

What kind of US visa did the client have when he worked in the US? Did the client ever have a US greencard? If so, when was it abandoned?

From a UK income tax perspective, the distributions were/are/will be UK taxable. The US tax answer will depend on US visa status.

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By Openhouse
18th Sep 2019 11:02

Yes unfortunately IRA doesn't headline up very well; we know it stands for Individual Retirement Account but easy to get the wrong end of the stick.

Not sure about the green card or visa situation I will ask.

The client lived in the US I believe for over 30 years and still completes a US tax return. Moved back to UK about 6 years ago.

We include all their world wide income on the UK tax return. 10% has historically been with-held from the IRA payments in the US.

If the client decides to cash in with the 2 large distributions over the next 2 years I assume they will attract with - held tax again in the US (I'll pick that up from the 1042 - S form).

Do HMRC allow the US with holding tax to be offset against UK tax? If not then the client would suffer double taxation on the distribution.

His total income (excluding the IRA distributions) is about £10,000 a year.

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