British/ US dual national - US tax return ?

[jamesbrown]

Yes, you must file an annual tax return as a US citizen. If you were under regular PAYE employment, this might not be a massive issue because you'd have access to the Foreign Earned Income Exclusion to cover most or all of your earned income with a minimal filing (but only if stated on your return, i.e. it is not assumed).

I don't want to worry you unnecessarily, but you could face a number of difficulties here and I would highly recommend that you talk to a US-UK tax expert. Along with your tax return, you should be filing an FBAR and FACTA annually and the financial penalties for non-compliance are potentially quite severe, in theory (i.e. a significant fraction of the total money in each non-declared foreign account).

While a regular PAYE employee might ordinarily avoid double taxation, with a small residual on accounts that are treated as taxable in the US but not the UK (e.g. ISA, SIPP), taxation of unearned income, such as dividends, is a minefield and there are some complex filing requirements for so-called subpart F income, which is income from a foreign controlled corporation.

Bottom line, you need to speak to a dual taxation expert. There will be many people in your situation, and I would hope and expect that the IRS would take a lenient view. As I say, I don't want to worry you unnecessarily, but if you're following the rules by the book, you actually have a significant filing requirement, and many people in your situation have indeed renounced their US citizenship due to the annual filing costs and the presence of a significant double taxation liability (avoidance of double taxation is not always possible, especially for unearned income).

[BlasterBates]

Found this

http://www.expatnetwork.com/Money/Ex...can-Expats.cfm

Reading it, I would get advice from a US accountant.

Looks like if you file and there is a lot of tax owing they'll be lenient, i.e. tax plus interest but no penalties.

Probably worth getting an estimate and then make a decision before Uncle Sam finds you.

[BlasterBates]

I knew an American who didn't fill out a return for several years, and then returned to the US. I don't know exactly what happened but he hasn't mentioned it so it obviously wasn't a problem.

I know another US ex-pat who gave up doing it after a few years. He got fed up with the bureacracy to determine he had nothing to pay.

From what I understand you don't have a lot to fear, presumably because the tax owing is so little.

I would take advice from a US accountant about how to get your taxes up to date, but I wouldn't be unduly worried.

I did know an American in Switzerland, his bill was quite hefty but tax rates are low there, and I presume this is probably not the case in the UK.

[Andrew@Wisteria]

Hi folks
Putting a message out to see if theres anyone out there in the same position.
As per title, I have lived all my life in the UK but also hold a US passport/ nationality through my father.
I have only just realised that as a US national, as well as my UK tax return I should also be apparently filing an annual tax return with the IRS every calendar year, despite having never worked in the states & only been there a handful of times on holiday. Admittedly its naive on my part perhaps, but if no ones ever asked me to fill something in....
Anyway things would be complex enough if I was a staffie on PAYE, but as a Ltd Co contractor, taking a relatively small salary and larger dividends then it just complicates things further. I have a nagging worry that as well as an annual higher rate tax bill here in UK, whether dividends are treated differently in the states or not and that I might end up being hammered for extra tax.
I have tried to research this & it appears in practice many US expats do not do a tax return, but there is always that nagging doubt that one day the IRS comes knocking & I would rather just find out where I stand now.
I know you can renounce your US nationality, which may be my only option if it might cost me £1000s a year in extra tax or even just to find an accountant specialising in US tax returns...
Anyway any of you guys or girls out there in the same position that can advise...?

Yep unfortunately if you are considered as required to file US returns, you can very rarely get out of it!

[DirtyDog]

I know you can renounce your US nationality, which may be my only option if it might cost me £1000s a year in extra tax or even just to find an accountant specialising in US tax returns...
Anyway any of you guys or girls out there in the same position that can advise...?

There were some articles on the BBC News website last year about it - you are unlikely to have any tax to pay, but it's still going to cost you £1000+ to get someone knowledgeable to do the tax return for you.

The magazine articles were fairly evenly split between "I'm not paying that, they can have the passport back" to "I'm 'mercn, till they prise that passport from my cold dead hands, no matter what I have to pay in tax".

[Jessica@WhiteFieldTax]

Oh, and BTW, although you have a US obligation to file, I suspect you'll find you owe little or nothing due to UK residence and double taxation rules. Just a fag to do the filing for the benefit of an American passport.

[Jessica@WhiteFieldTax]

Yep, you need to complete a US return and, from memory, bank account declaration each year, as well as your UK one, even if you are non resident. Uncle Sams tentacles stretch far.

No connection with the firm, but I always suggest:

http://www.linkedin.com/pub/david-treitel/17/807/aa7

He writes coherently in the accounting trade press from time to time.

Frustratingly I did a post about the US/UK obligations on a facebook group for yoga teachers a few months ago, but can I do a group specific search in FB - no....

http://www.taxation.co.uk/taxation/A...nk-them-filing
http://www.taxation.co.uk/taxation/A.../no-escape-irs

[northernladuk]

Doesn't having a dual nationality like this means it doesn't matter which side of the pond you are on, everyone will hate you?

[redboy]

Hi folks
Putting a message out to see if theres anyone out there in the same position.
As per title, I have lived all my life in the UK but also hold a US passport/ nationality through my father.
I have only just realised that as a US national, as well as my UK tax return I should also be apparently filing an annual tax return with the IRS every calendar year, despite having never worked in the states & only been there a handful of times on holiday. Admittedly its naive on my part perhaps, but if no ones ever asked me to fill something in....
Anyway things would be complex enough if I was a staffie on PAYE, but as a Ltd Co contractor, taking a relatively small salary and larger dividends then it just complicates things further. I have a nagging worry that as well as an annual higher rate tax bill here in UK, whether dividends are treated differently in the states or not and that I might end up being hammered for extra tax.
I have tried to research this & it appears in practice many US expats do not do a tax return, but there is always that nagging doubt that one day the IRS comes knocking & I would rather just find out where I stand now.
I know you can renounce your US nationality, which may be my only option if it might cost me £1000s a year in extra tax or even just to find an accountant specialising in US tax returns...
Anyway any of you guys or girls out there in the same position that can advise...?