I moved to the US at the end of May 2018 from the UK. Therefore, assuming I qualify for the substantial residence test, I have the following questions:
1. Do I submit a standard tax return for my income/earnings but only include things from my first day in the US? If so, how to I refer to the Jan-May period on my return in TurboTax.
2. Do I mention small dividends received after May from UK shares in a UK-based ISA? If so, how do I refer to this on my tax return in TurboTax?
3. If my savings in a UK bank account and ISA exceed $50K do I have to submit a Report of Foreign Bank and Financial Accounts (FBAR) in addition to my tax return through TurboTax, or can this be included with the software?
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Since you have passed the Substantial Presence Test for the year, you are a resident alien for tax purposes for 2018. (a) even though you had earnings before you entered the USA, and assuming that you were not a resident alien for tax purpose prior to entering the USA in May 2018, your actual tax year starts from the date of admission -- thus any earnings received before entering the USA, is not subject to US taxation nor any foreign tax credit accrued prior to this date. You file a normal resident return i.e. form 1040 covering world earnings ( except for the period 1st Jan through date of admission ); (b) all earnings ( no matter the source or type ) are treated as if earned in the USA and taxed by the USA { obviously any foreign sourced earnings that are taxed by another tax administration is eligible for foreign tax credit--- treaty conditions may apply here ); (c) as a US resident you are subject to FBAR and FATCA regulations --- thus you must file form 114 at FinCen-- it is an online submission and generally due by the due date of form 1040 without regard to extension.
Does this satisfy your query or do you need more help ?
Thank you for your reply. Just a few follow-up questions.
1. If my actual tax year starts from the date of admission (end of May) do I completely ignore any earning before moving to the US? If so, what do I put on the TurboTax boxes for the time period before then? For example, what do I answer to "Did I lived in another state in 2018"? As if I say no, then it is assumed I have been resident in my current state for the whole of 2018.
2. How do I refer to dividends earned from shares held in a UK-based ISA with TurboTax? Is it considered "money earned outside the US", "Received a distribution from a foreign trust", or simply the same as a dividend earned normally in the US?
what I meant by saying your year starts from the time you entered USA is that you are effectively excluding any Non-US sourced earnings till you entered USA -- thus your UK salaries prior to May are left out ( and therefore also not eligible for tax credit). Thus you say NO to if you earned an income in another state ( this for state tax purposes means another US state ); you also answer NO to havng lived in another state -- because you were not a US person / taxpayer till admitted to the USA.
Passive earnings such as interests, dividends etc. are generally allocated to the whole and for simplicity sake assumed to be posted at the end of the year and thus would be taxable / reportable to the USA ( foreign source and therefore any UK taxes on this would be eligible for tax credit ). ISA is similar to IRA here in the sense ( only) that it is tax-advantaged savings account -- but not as well regulated as the IRAs. It is probably safest to report income from these as savings account interest and because of being non-taxed , US will tax this only ( However, suggest perusing the US-UK tax treaty to see if these are covered and if any treaty assertions can be made --- I will also look this up ).
Can you please confirm the exact form and page on TurboTax I have to declare the June-Dec dividend (from the UK ISA) payments on?
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