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United States of America (USA) - Income Tax

Income tax, unfortunately, is a fact of life. However, you will have a higher standard of living in the US and on the whole income tax is lower in the dollar than the British income tax banding. Other taxes are hidden and unexpected but income tax is quite straightforward in that there are two lots: one to the state and one to the Government.

Income Tax Rules for Expats

Income tax in the US is paid both to the Federal Government and to the local states. Many Americans do complain about taxes and liabilities in that as an American citizen, you have to submit and file a tax return for the rest of your life.

It is worthwhile knowing that as a permanent resident or citizen of the US, you will have to pay taxes on money you earn anywhere in the world and even if you’re taxed directly from your salary, you will still have to file a tax return. In respects of the UK, this does not have to be done unless you are resident in the country for more than 180 days per year. The IRS demands that citizens file a tax return as a US resident or citizen every year wherever you are in the world.

If you’re earning in the US for a US company then your income tax will be taken at source or directly from your salary. You will still have to file every year on or before April 15th. If you’re on a temporary work visa, you will be taxed at source and you will not be required to file an IRS return. You will report your income to your native country or wherever you’re responsible for filing taxes.

In some states there is no income tax. Florida, for example, does not have a state income tax but you will still have to pay some taxes and a tax advisor will be able to advise you on this. It is advisable not to attempt to file your taxes yourself if you are required to in the US. Most people use a tax accountant for the one-off fee for filing of tax returns. If you’re intending to live in the US for a substantial length of time, then it is worthwhile studying the tax laws and an advisor will guide you through the murky waters of the US tax system.

Double Taxation Remedy Relief

The US has a number of double taxation remedy relief treaties in place with other countries and this is to avoid any person who lives and resides in a foreign country from paying tax on the same income twice. If you’re a citizen in the US and live there on a permanent basis then you will have to pay taxes to the US IRS. If you’re a British expat and you visit the UK for less than 180 days per year, then you’re no longer liable for tax on income received in another country. You will pay the tax to one country. If you earn in two countries separately, then you will have to pay tax to both countries.

Here is the double-taxation relief page of the IRS website. All the information is on there for any remedy relief you may be entitled to:

It’s worthwhile sorting out tax concerns as early as possible. There is little negotiation with the IRS in the US and you could soon find yourself facing penalties if you leave it and miss deadlines. You might be able to have a deferral until October 15th which is on offer but trusting this could lead to trouble. - Her Majesty’s Revenue & Customs, UK - Inland Revenue Service – United States – this website explains taxes in detail.

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