Tax on income before green card?

[juninho10 42]

Does anyone know how this works? I work for a US company but am paid into a foreign bank account in the UK, where I reside.

I will receive a green card and move to the US in November.

 

Will I be taxed on 2020 income by the IRS that I earned before becoming a US resident January to November?

[Wuozopo 4,293]

5 hours ago, juninho10 said:

Does anyone know how this works? I work for a US company but am paid into a foreign bank account in the UK, where I reside.

I will receive a green card and move to the US in November.

 

Will I be taxed on 2020 income by the IRS that I earned before becoming a US resident January to November?

You will only be taxed by one country. There’s a tax treaty to prevent double taxation. You will report all earnings for the tax year 2021 (Jan-Dec) to the IRS, but reporting is not the same as being taxed.  Doesn’t matter where earned or if paid in $ or £, you tell the IRS about the value in US dollars, then can exclude your foreign income or take a credit for foreign taxes paid. There are multiple strategies. Any money that goes into your account after you move is US taxable. If you go through this tax forum back to threads from tax season like Jan, Feb 2021, you will find similar questions asked and explained. Or just wait until filing gets in high gear in 3-4 months and check this forum.

 

Meanwhile, bring some kind of record with you of how much gross income you made since Jan 1 of this year. It will help you know what to report when the time comes. Your company can probably  give you a breakdown.  

[juninho10 42]

4 hours ago, Wuozopo said:

You will only be taxed by one country. There’s a tax treaty to prevent double taxation. You will report all earnings for the tax year 2021 (Jan-Dec) to the IRS, but reporting is not the same as being taxed.  Doesn’t matter where earned or if paid in $ or £, you tell the IRS about the value in US dollars, then can exclude your foreign income or take a credit for foreign taxes paid. There are multiple strategies. Any money that goes into your account after you move is US taxable. If you go through this tax forum back to threads from tax season like Jan, Feb 2021, you will find similar questions asked and explained. Or just wait until filing gets in high gear in 3-4 months and check this forum.

 

Meanwhile, bring some kind of record with you of how much gross income you made since Jan 1 of this year. It will help you know what to report when the time comes. Your company can probably  give you a breakdown.  

Thanks! I’ll look out for the threads that pop-up.

 

It’s complicated but I haven’t been paying tax on the UK this year, so I wonder if that will still exclude me from paying US taxes for the first 10 months of the year considering I wasn’t a US resident at that time.

[Redro 4,611]

20 hours ago, juninho10 said:

Thanks! I’ll look out for the threads that pop-up.

 

It’s complicated but I haven’t been paying tax on the UK this year, so I wonder if that will still exclude me from paying US taxes for the first 10 months of the year considering I wasn’t a US resident at that time.

You'll probably be able to file a 2555 (and the first 100K of your income will be exempt).

If your tax situation in the U.K is complicated I would consult with an accountant who is familiar with U.K/ USA tax laws. You don't want to mess things up. 

[Wuozopo 4,293]

On 10/13/2021 at 4:21 AM, juninho10 said:

 

It’s complicated but I haven’t been paying tax on the UK this year, so I wonder if that will still exclude me from paying US taxes for the first 10 months of the year considering I wasn’t a US resident at that time.

Shouldn’t you be doing a self assessment return? https://www.gov.uk/topic/business-tax/self-employed
 

 

[juninho10 42]

30 minutes ago, Wuozopo said:

Shouldn’t you be doing a self assessment return? https://www.gov.uk/topic/business-tax/self-employed
 

 

I'm not sure how it works. I haven't lived in the UK for very long this year, and I don't become a tax resident here until I'm here for 183 days.

[Wuozopo 4,293]

6 minutes ago, juninho10 said:

I don't become a tax resident here until I'm here for 183 days.

“Here” being what country?

[juninho10 42]

2 hours ago, Wuozopo said:

“Here” being what country?

Sorry, I mean the UK. I've been in the country for about 80-90 days. I was under the impression that you had to be in the country for at least 183 days in a calendar year to be considered a tax resident in the UK. I was previously in Colombia for about 7-8 months of the year.

 

To me, it would make perfect sense for the IRS to start taxing me the minute I receive a green card or arrive in the country. I don't understand why anything prior to that would be of interest to them. That's how it works for foreigners coming to the UK to live.

Edited October 14, 2021 by juninho10

[Wuozopo 4,293]

3 hours ago, juninho10 said:

I'm not sure how it works. I haven't lived in the UK for very long this year, and I don't become a tax resident here until I'm here for 183 days.

There’s more to it than 183 days. See the HMRC info on residency. https://www.gov.uk/government/publications/rdr3-statutory-residence-test-srt/guidance-note-for-statutory-residence-test-srt-rdr3
 Another question you need to consider is— did you pay Colombian taxes while you considered yourself non-resident in the UK?  Can you just dodge income tax by moving about? 

 

1 hour ago, juninho10 said:

Sorry, I mean the UK. I've been in the country for about 80-90 days. I was under the impression that you had to be in the country for at least 183 days in a calendar year to be considered a tax resident in the UK. I was previously in Colombia for about 7-8 months of the year.

 

To me, it would make perfect sense for the IRS to start taxing me the minute I receive a green card or arrive in the country. I don't understand why anything prior to that would be of interest to them. That's how it works for foreigners coming to the UK to live.

The IRS is NOT interested in what you earned prior to your residence in the US except …

if you file a joint return with your American  spouse. The tax rules for a joint return are worldwide income is reported. As I told you before, reporting is not the same as being taxed.
 

 If you want to file Married Filing Separately for 2020, then you only have to report and be taxed on money paid to you after your date of arrival, no matter if it came from Colombia or the UK or the US. But I would be willing to put 100 quid on it that you and wife would pay more in tax if you each file separately rather than Married Filing Jointly. You would have to   do three tax returns to see which scenario is best… her MFS, your MFS, and a MFJ. Then actually file the way that has less tax. 

Edited October 14, 2021 by Wuozopo

[Redro 4,611]

7 hours ago, Wuozopo said:

There’s more to it than 183 days. See the HMRC info on residency. https://www.gov.uk/government/publications/rdr3-statutory-residence-test-srt/guidance-note-for-statutory-residence-test-srt-rdr3
 Another question you need to consider is— did you pay Colombian taxes while you considered yourself non-resident in the UK?  Can you just dodge income tax by moving about? 

 

The IRS is NOT interested in what you earned prior to your residence in the US except …

if you file a joint return with your American  spouse. The tax rules for a joint return are worldwide income is reported. As I told you before, reporting is not the same as being taxed.
 

 If you want to file Married Filing Separately for 2020, then you only have to report and be taxed on money paid to you after your date of arrival, no matter if it came from Colombia or the UK or the US. But I would be willing to put 100 quid on it that you and wife would pay more in tax if you each file separately rather than Married Filing Jointly. You would have to   do three tax returns to see which scenario is best… her MFS, your MFS, and a MFJ. Then actually file the way that has less tax. 

OP works for a US company though... 

@juninho10 do you have an ITIN number?

Are you paying taxes in any country?

Which country are you from?

[juninho10 42]

8 hours ago, Kor2USA said:

OP works for a US company though... 

@juninho10 do you have an ITIN number?

Are you paying taxes in any country?

Which country are you from?

I’m from the UK. I don’t have an ITIN.

I previously filed taxes in Colombia but haven’t this year as I left a few months ago before any of that came in to play.

[Wuozopo 4,293]

10 hours ago, Kor2USA said:

 

OP works for a US company though... 

 

The tax treaty between the US and UK says you pay income tax to the country where you live no matter if it is an American company paying the wages. While he is resident in the UK, his earnings from an American company are subject to HMRC tax rules. Once his residence changes to to the US, he deals with IRS tax rules, even if he was getting paid by a British company. 

[Redro 4,611]

2 hours ago, Wuozopo said:

The tax treaty between the US and UK says you pay income tax to the country where you live no matter if it is an American company paying the wages. While he is resident in the UK, his earnings from an American company are subject to HMRC tax rules. Once his residence changes to to the US, he deals with IRS tax rules, even if he was getting paid by a British company. 

Either way @juninho10 will have to pay taxes on the income he is earning right now, correct?

Would he have the option of paying US taxes (and not file a 2555 if he files MFJ) or would it be better to get the UK taxes squared away?

[juninho10 42]

48 minutes ago, Kor2USA said:

Either way @juninho10 will have to pay taxes on the income he is earning right now, correct?

Would he have the option of paying US taxes (and not file a 2555 if he files MFJ) or would it be better to get the UK taxes squared away?

Correct. As that's an issue for HMRC/UK, would there be any relevance in getting UK taxes squared away for the IRS and US system?

 

It would be truly mind-boggling to me if the US took any interest in where I was or wasn't paying tax before becoming a US resident.

Edited October 15, 2021 by juninho10

[Wuozopo 4,293]

1 hour ago, Kor2USA said:

Either way @juninho10 will have to pay taxes on the income he is earning right now, correct?

 

Well that was my thought that his income isn’t tax free, but that’s between him, the UK, and Colombia right now.

 

1 hour ago, Kor2USA said:

Would he have the option of paying US taxes (and not file a 2555 if he files MFJ) or would it be better to get the UK taxes squared away?

That would be like owing money to the cable company, but paying Macy’s that money instead. His earnings thus far in 2021 are not taxable by the IRS. Why would he pay the IRS what he owes Colombia or Uk?

 

IF he chooses to file 2021 Married Filing Jointly with his wife, he will report all his earnings then can use Form 2555 to deduct the tax his earnings (while resident abroad) generates.  
 

Some additional info you might not know based on your first comment earlier. Form 2555 doesn’t completely erase one’s foreign income  up to $108,700.  FIrst of all, the maximum is only if you lived/worked in another country 365 days of the tax year. If you only resided abroad half the year, then your limit is only half of the $108,700 or $54,350. The form calculates your exclusion based on number of days lived abroad. Secondly, on a joint return, the tax is calculated on all the income..his, hers, foreign. Then the tax is calculated on just the foreign income. Whatever  tax that foreign income would have generated gets deducted from the tax all of it would have generated. TurboTax does all that calculating for you in the background so it’s not that difficult if you’re a DIY person. 
 

 

Edited October 15, 2021 by Wuozopo