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Top Five Things You Need to Know About Managing Your Taxes in the US

Contributed by 1st Move International Ltd
July 27, 2021

Moving to a new country brings an abundance of exciting changes and opportunities. It can be a valuable learning experience, as you navigate new social customs, languages and adapt to a different lifestyle.

If you're a British citizen moving to the US, you shouldn't experience too much of a culture shock, with much of daily life similar to that in the UK. With the exception of some 'Americanisms', it should be easy to understand your fellow residents too.

With this in mind, before you up sticks, it's important to familiarise yourself with some key differences between the UK and the US, in particular legal procedures, Visa applications and taxes.

Top Five Things You Need to Know About Managing Your Taxes in the US

This article will focus on taxes, what you should pay and how to do it. Read on to discover our helpful guide for UK citizens and how they can manage their taxes in the US.

Check Your UK Residency Status

To determine where you are liable to pay taxes, you must first consider your residency status. The length of time you spend in each country will indicate whether you are considered a resident there or not.

If you're a non-resident of the UK, you shouldn't have to pay taxes there. If you have moved abroad permanently, or you have been absent from full-time work for longer than an entire tax year, this makes you exempt from paying taxes in the UK. You will also fall into this category if you visit the UK less than 183 days in a full tax year.

However, some forms of employment are still obligated to pay tax in the UK, so it's always recommended to refer to the latest HMRC guidance.

Check Your US Residency Status

If you have a green card or a visa with a work permit, you'll be seen as a US citizen, which means that you'll have to pay taxes like a US citizen. One way to find out if you are considered liable to pay taxes in the US is to take the Substantial Presence Test.

In summary, if you have stayed in the states for 31 days within the current year and 183 days over the last three years, you have to pay tax. To find out whether you meet the US residency and tax requirements, you should refer to the IRS website for more information.

Know Your US Income Tax Types

There are four main types of personal income tax in the US. Checking out which categories you fall into will tell you what taxes you should be paying.

Federal income tax

Payable by everyone, federal income tax accounts for 10 per cent to 39.6 per cent of income. The top rate applies from around USD 418,400, and should be filed each tax year.

Social security tax

If your income is salary or remuneration-based, you will have to pay social security tax. It equates to 6.2 per cent on the first USD 127,000 and 1.45 per cent on all earnings.

State income tax

Depending on the state you live in, you may have to pay state income tax. This can vary between states, with tax rates as high as 12 per cent and other states with none at all. Generally speaking, you will have to pay around 5 per cent.

Local income tax

Whether you pay local income tax comes down to the locality of your new residence and workplace. It is between 1-2 per cent on average, unless you're moving to New York, where rates often inflate yearly.

Keep an Eye on Tax Deadlines

If you've ever fallen culprit to missing a tax deadline in the UK, you'll know that the penalties aren't pleasant. But, a GBP 100 fine in the UK is a light ticking-off compared to the consequences for filing a late tax return in the US.

The calendar tax year in the US runs from January 1st to December 31st, with all returns due no later than April 15th of the following year. Fortunately for UK citizens, HMRC may cut you some slack for missing the deadline, whereas the IRS isn't quite so forgiving. If you miss your cut-off date to file your tax return in the US, you will be hit with a penalty of up to 25 per cent of the unpaid tax. Much more than just a slap on the wrist.

If you want to learn more about how to file taxes in the USA, find out information on tax deadlines and what you can do to stay on top of your finances, it's best to get the latest info from the IRS official site. There are also lots of useful articles to help guide expats through their tax journey.

When in Doubt - Seek Advice

If you're unsure of how to file taxes in the USA, this could add pressure to your move. When you're settling in a new place, the last thing you need is to run into trouble with the authorities. Clear up concerns and queries about tax-related issues by seeking professional advice from a legal expert who can guide you through the process and ensure everything is kept in check. When it comes to money, investing in the pros is a smart move.

Trust the Professionals

There's a lot to take into account when moving abroad, and it's important not to let the likes of taxes fall down the priority list. Ensure that you're on top of things to avoid potential problems once you touch down in the US.

Whether it's for assistance with taxes or shipping your belongings to your new home, trust the professionals.

For help moving from the UK to the US, 1st Move International offer fast, efficient and affordable services to make sure your belongings arrive with you safely. So, let's share the load and make your move as smooth as possible.


Tags: tax | Expats | United States



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