Filing taxes correctly is always a difficult task. It involves a lot of minute details to be kept in mind. The whole process is extremely time-consuming and often frustrating. Now if you are an expat and need to deal with tax payments in some other country, the difficulty of the whole situation increases manifold. Living in UK as an expatriate, it is extremely advisable that you get the advice of some expat tax consultant in UK to make your task simpler. You can also contact HMRC agents if you run a business from outside the UK.
Why do you need a tax consultant as an expat from US?
- Different from most countries – Most countries charge their taxes on the basis of tax residency. However, United States of America is not like most countries. They charge taxes on the basis of their citizenship. That is, all American citizens and those holding United States green card have to pay their taxes on their worldwide income until they choose to expatriate completely. It would be very difficult for you to understand the nuances of the whole system and find out the most profitable way for you. This is exactly why you need to have some tax consultant guide you in this matter.
- Double payment of taxes – US is unique in charging taxes on the basis of citizenship and not residency. This becomes a troubling situation for most expats because the country they reside in in most cases charge taxes on tax residency. As a result, they need to pay taxes in the country they reside in and also in United States. This is no different for the expats from US in UK. However, an expat tax consultant in UK would be able to guide you in the most efficient way of filing your taxes so that you not only save money but also not gain unwanted attention from the Internal Revenue Service. There are three ways that an US can expat can avoid the payment of double taxes. Those are Foreign Earned Income Exclusion (FEIE); the Foreign Housing Exclusion (HE)- (if employed) or/ and the Foreign Housing Deduction (HD)- (if self-employed); and the Foreign Tax Credit (FTC). A competent tax consultant would easily use these allowances to the best of your advantage and relieve you out of the burden of paying taxes twice.
- Issues regarding state residency – In US the residency tests vary from one state to another. There are objective statutory residency tests besides the facts and circumstance tests which are specific to each state. There are Domicile Safe Harbour tests in some of the states. To understand the intricacy of your domicile state would be very difficult. It would be a wise decision to have some tax consultant to analyse what your situation is and how much you need to pay as taxes to US.
Conclusion:
A competent expat tax consultant in UK would be beneficial in numerous ways. You would not only be advised on your current situation but also educated and trained on the good tax filing behaviours so that you are always aware of all the small but significant details.