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I have an offer from my employer to move to New York, but I am concerned about what happens when I choose to return home to the UK. I understand that there is a double taxation treaty between the UK and the USA, but what's not clear is what happens I return home.

It seems I will have to continue filing US Tax returns for a couple of years after I return to the UK, but there seems to be no indication of what, if any, US tax I will have to pay even though I will not be earning in the USA.

Will the IRS try to tax me on my UK income after I return? What's the point of asking me to file a tax return when I will not be working in the US?

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I would add to those who say "talk to an accountant" and say that if your employer is sending you abroad "talk to an accountant at your employer's expense". It is normal in these circumstances that your employer recompense you for any expenses you would not have incurred if you had not been sent abroad, and tax planning certainly falls into that.

In general I believe that even the US (notorious for its extraterritoriality) can't expect tax returns from a non-citizen non-resident who hasn't lived or worked or had income in the US for that tax year. You will probably have to file returns in both countries for any tax year in which you lived and worked in the US.

As an aside, talk to a tax accountant early. I made a similar move to Canada, and by taking advantage of the different laws on residency for tax purposes, and carefully arranging my move date, I was able to avoid paying tax in either country for a year.

Some companies offer a scheme in which they guarantee you a net income rather than a gross - typically the same net income you would be getting without the move - and will essentially pay whatever tax bill arises for you, using their own accountants to minimize it.

  • Good luck finding an accountant in the UK that can do this! - I would suggest looking for a specialist. I'm my experience most UK accountants have very basic knowledge of such things (even within the EU) and it's impossible to get a straight answer. – UpTheCreek Mar 14 '11 at 8:45
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I'd talk to an accountant in the UK who's got experience with expat experiences.

That said, the visa you mentioned in the other question is a non-immigrant visa (as would be the L-1 I mentioned) and my understanding is that only legal permanent residents and especially US citizens have to file US tax returns if they live abroad. That's a little simplified (there's the whole issue with being an LPR, living abroad and abandonment of the LPR status) but the intricacies of that shouldn't apply to you anyway because you're not an LPR due to the non-immigrant status. Things change if the L-1 employer would sponsor you for a green card but that's unlikely if you want to go back to the UK after two years...

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As far as income tax, you only pay if you have an income :) You might end up paying US tax in the year after you've returned which makes sense because if, for example, you return in June 2012, you still need to pay taxes for January-June 2012, but you probably won't do that until Spring 2013. So you're paying next year, but it's still for 2012.

Depending on the conditions under which you work, you may or may not pay other taxes. If you are a non-resident alien you will not pay Social security and Medicare, but if you are a resident alien, you will. Anyway, this is also deducted from your paycheck, so once you stop getting paid in the US, you won't pay these taxes either.

Finally, if you end up investing in the US or something like that, you will probably pay some taxes for that which you may indeed end up paying even after you're gone as long as you hold on to the investment.

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I'm not a US tax accountant, but I've never heard of any system whereby somebody who once resided in the US and no longer does has to still file US returns. US Citizens certainly do, but unless you take that up it should not be an issue.

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