Green card holder - living abroad and paying us taxes

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Username123

Registered Users (C)
If i have a green card, live and work in the UK for about 2 years, i understand i need to file tax returns as a us resident in order to keep the green card. What taxes, if any, will i have to pay in the US while working in the UK?
 
There is no simple answer.

For US Federal tax, it depends on how much tax you are paying to the UK. You may be able to use the UK tax paid to cancel out some or all of your US Federal income tax. See http://www.irs.gov/taxtopics/tc856.html

For state tax, it depends on the rules of your state where you maintain your US residence.

In addition, there may be tax treaties between your country of citizenship and the US and/or UK.

It can get very complicated. If you are not comfortable with figuring it all out by yourself, there are several tax firms that specialize in multinational taxation, with US+Canada and US+UK being common.
 
I have filed taxes for my dad in the US though he has spent major time abroad. This I have done as a joint return for my father and mother (she lives and works in the US though).

When filling the forms this is what I was told. If within the last tax year [and you have flexibility as to what dates you choose to count as your full year - whichever is more advantageous for you] you spent no more then 35 days in the US, and paid taxes abroad you do not have to report the foreign earned income on a federal income tax. State's tax? I have not idea....

Whatever you do, DO NOT use a 1040NR (Return for a non-resident alien), it will permanently make it harder for you. If you want to apply for naturalization - it will be a problem. If you want to get a RE-entry permit I-131[to enter the US on a green-card after being out of it for longer then 1 year], it might be a problem as they asked for it in the application.

This however is my very non-expert knowledge :eek:
 
gambalung said:
When filling the forms this is what I was told. If within the last tax year [and you have flexibility as to what dates you choose to count as your full year - whichever is more advantageous for you] you spent no more then 35 days in the US, and paid taxes abroad you do not have to report the foreign earned income on a federal income tax. State's tax? I have not idea....
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You got some very wrong information. Green card holders must report all worldwide income on their US tax returns, even if the result is that the foreign income does not end up getting taxed by the US after the calculations for exemptions, deductions, and tax treaties are done.

That rule about spending no more than 35 days in the US is the foreign income exclusion rule, but if using that exclusion the income still needs to be reported on form 2555. And even with that rule, there are dollar limits above which you cannot claim the exclusion to avoid US taxes.
 
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Jackolantern said:
You got some very wrong information. Green card holders must report all worldwide income on their US tax returns, even if the result is that the foreign income does not end up getting taxed by the US after the calculations for exemptions, deductions, and tax treaties are done.

That rule about spending no more than 35 days in the US is the foreign income exclusion rule, but if using that exclusion the income still needs to be reported on form 2555. And even with that rule, there are dollar limits above which you cannot claim the exclusion to avoid US taxes.
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True to the second part, however a tax-prep worker told me I didn't have to report it. But who knows, he might not have been good either... Either way, I used a tax-prep program and I reported the income because it didn't make a difference for our income taxes. The program automatically filled in the 2555 form for me.

But with IRS it is always good to be on the safe side so I would say he should report it.

However, Username123, I have the impression that your biggest obstacle to maintain your geen-card valid might be the lengths of the trips in and out of the US.
 
gambalung said:
True to the second part, however a tax-prep worker told me I didn't have to report it. But who knows, he might not have been good either...
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Most common tax-prep workers don't know anything about how foreign income is to be taxed or exempted. For situations like this, only trust a professional accountant who handles multinational taxation on a regular basis, not common places like H&R Block that aren't good at these non-straightforward cases.
 
As Jacko sez, HR Blockheads are clueless on anything international. And, yes, you do have to report ALL income on your 1040, and then take exemptions, deductions, credits to whittle down your US tax bill.

And remember, filing a 1040 is only one of the conditions for keeping your GC. And prolonged use of the Foreign Earned Income exclusion (Form 2555) could be used against you in any determination of whether you are sufficiently maintaining US ties. Form 2555 strongly implies that you are 'residing' outside US (ie. the bona fide presence test).

GC holders in Canada, for example -- and most other countries that have income tax -- are usually encouraged to use the foreign tax credit (Form 1116) as this does not carry any implication of foreign residence (merely foreign tax) and is sufficient to reduce your US tax bill to nil. Plus, it entitles you to the Child tax credit, which may result in Uncle sam paying YOU to file (but I digress).
 
nelsona said:
As Jacko sez, HR Blockheads are clueless on anything international.
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I wish they have some clues atleast on domestic.
They just recruit and train people before tax season and, at most, what they can do is the most simple stuff. If you do not know what you should be expecting, they'll screw up. if you question anything, they will run to the boss and try to get an answer which will take a long time since other interns are also waiting at boss desk..
 
letsee said:
I wish they have some clues atleast on domestic.
They just recruit and train people before tax season and, at most, what they can do is the most simple stuff. If you do not know what you should be expecting, they'll screw up. if you question anything, they will run to the boss and try to get an answer which will take a long time since other interns are also waiting at boss desk..
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Amen. HRBlockheads are generally clueless.
 
gambalung said:
I used a tax-prep program and I reported the income because it didn't make a difference for our income taxes. The program automatically filled in the 2555 form for me.
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A bit of a long shot but you might still be getting notified of replies here, what tax program was that? Last time I used TurboTax in 2002 it didn't handle anything international.

Now I'm back in the US and will have a mixed year of foreign/US revenue and need to figure W-4 deductions.

Anyone else know which software can handle international situations? Thanks !
 
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