Residence Tax Status In The UK and US

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When are you tax resident in the US to pay taxes to the IRS?

You will be considered US resident and have to file US tax returns to the IRS when you are based in America for a set number of days. The deemed resident status for US tax purposes is currently 183 days. This is not a consecutive 183 days. The 183 day ruling is based on the number of days that you have spent in the US over the last three tax years.

The 183 days allocation is as follows:

  • 100% of the time spent in the current tax year
  • 33.33% of the time spent in the previous tax year
  • 16.67% of the time spent in the second previous tax year

Purser tax: Deemed resident in the US and UK for tax purposes

US – Example of someone being a US resident for tax purposes.

In 2018 Sarah goes on holiday to the US and spends time with her friends touring the west. Sarah spent 80 days in that year. In 2019 she meets a man of her dreams and spends time visiting his family and friends. She decided to spend longer at that time and stays in the US for 120 days.

In 2020 she sets out to meet with John her boyfriend from mid-September 2020 for the rest of the year, which equates to 118 days.

The initial look of things Sarah is not deemed resident as she only spent 118 days in 2020. We have to take the previous years into account to judge whether or not Sarah is deemed to be US resident for IRS tax purposes.

118 days – 100% X 188 days spent in 2020 add

36 days – 33.33% X 120 days spent in 2019

14 days – 16.67% X 80 days spent in 2018

168 days in total

As we can see that Sarah would not be a tax resident in the US in 2020. Given that she intends to work in America in 2021 she will be deemed US resident and will need to file a tax return to the IRS.

UK Persons being deemed resident in the US – Tax in worldwide income

You need to consider the tax effects of living in the United States of America. You would need to declare your worldwide income to the IRS if you are deemed resident in the US

 

Purser tax: Deemed resident in the US and UK for tax purposes

When are you tax resident in the UK to pay taxes to the HMRC?

You are deemed to be UK resident and potentially file tax returns to the HMRC if you spend 183 days or more in the country. There is an exception to the rule. You will be deemed resident if you have a UK home for more than 90 days in the tax year; Additionally, if you spend more than 30 days in that home in the tax year.

  • You are automatically a non-UK resident if you a) spend less than 16 days in the UK
  • b) not a UK resident in the UK for the past three tax years and spend less than 46 days in the UK in that three year period

You are most likely have to submit US tax returns to the IRS if you are an American and wish to reside in the UK. This is because the IRS wishes tax you on worldwide income.

Plan when you arrive

It is essential that you plan when you leave one country and reside in another.

Individual Tax Identification Number (ITIN)

In order for you to submit a 1040 tax return to the IRS, you will need to obtain an Individual Tax Identification Number (ITIN). You can obtain an ITIN number by completing a W7 form, which with some ID may be taken to the IRS.

Within a few months, you will then be provided with an ITIN number. Couples need to be made aware that each person that needs to submit a tax return will require their very own ITIN.

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