Foreign Earned Income

[Wolfiemia 2]

I've gone through the posts in the forum but cannot seem to quite get my head around US taxes.  I understand that the US is one of few countries that tax on residency and not citizenship.  I am a British citizen who is filing an I-130 to join my husband in the States.  Once over there I will not be working for a US company, instead I will keep working for a UK based company which allows me to work remotely.  My salary will be taxed in accordance with the UK and paid into my British bank account.  I understood that there was a tax treaty between the US and the UK.  Therefore, because I am a British citizen being taxed on my income in the UK will my husband need to file taxes for me in the US?  I do not want to be taxed twice, what is the way around this? Thanks

[millefleur 5,046]

@Wuozopo should be able to chime in with some advice.

[Wuozopo 4,293]

1 hour ago, Wolfiemia said:

I've gone through the posts in the forum but cannot seem to quite get my head around US taxes.  I understand that the US is one of few countries that tax on residency and not citizenship.  I am a British citizen who is filing an I-130 to join my husband in the States.  Once over there I will not be working for a US company, instead I will keep working for a UK based company which allows me to work remotely.  My salary will be taxed in accordance with the UK and paid into my British bank account.  I understood that there was a tax treaty between the US and the UK.  Therefore, because I am a British citizen being taxed on my income in the UK will my husband need to file taxes for me in the US?  I do not want to be taxed twice, what is the way around this? Thanks

 The tax treaty says you pay taxes to the country where you are residing. Once you move to the US, your UK based income will be taxable by the IRS. You should be taken off the UK tax roles. Work with your HR or Payroll person to figure out how. There is some way they can code your account to not have tax, NHS, and the like taken out of your paycheck. I don’’t really know the specifics of payroll and HMRS,  

 

The year that you move, if filing a joint return with spouse,  you will report all your income received from 1-Jan to 31-Dec on your tax return. Then for the portion of the year that you were resident (living in) the UK, you can claim the Foreign Earned Income Exclusion. Form 2555. It keeps you from being taxed on the same wages by both countries.
Foreign…meaning it was earned while residing in a foreign country (UK)

Earned Income…an IRS term for money earned as wages as opposed to Unearned income ie interest, dividends
Exclusion…meaning the IRS will exclude the tax that the reported foreign income would generate, but only for the portion of the year that you physically resided in the foreign country (UK).

 

There’s more decisions to make about being considered an “employee” or “contractor” at the UK company but since the move won’t be happening this filing season I won’t go into detail. It will be far easier on the business to pay you as a contractor. Otherwise they have to hold out US tax, plus Scial Security and Medicare contributions from your paycheck and submit that money to the IRS  every payday. 

Edited February 9, 2022 by Wuozopo