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Where Taxpayers and Advisers Meet

Foreign income internship

Dukray
Posts: 6
Joined: Thu Dec 26, 2019 4:45 am

Foreign income internship

Postby Dukray » Thu Dec 26, 2019 5:30 am

Hello everyone,

I am a Spanish student who has been living in the UK since 2016.

Between May and October 2018 I did an internship in the US where I was paid more than my personal allowance that year. That money paid the corresponding US taxes and it has been sitting in an American bank account since then. I assumed that because I spent less than 183 days in the UK that tax year, I was not a resident and therefore I didn't have to declare this income.

I realized just recently that technically I may have been a resident as I met the "sufficient ties" test from the SRT. If this is the case, I should probably have filed a tax return, declare this foreign income, sort out the tax relief to avoid double taxation, etc. Is that right?

Could I be in trouble now? Would I be facing big penalties if I come clean now, since this was one year ago already?

Thanks in advance!
Isaac

darthblingbling
Posts: 319
Joined: Wed Aug 02, 2017 9:09 pm

Re: Foreign income internship

Postby darthblingbling » Thu Dec 26, 2019 1:09 pm

You're also very very close to being classed as US resident. How many days did you spend in the US during that calendar year?

While in the US, did you keep a home available in the UK?

Dukray
Posts: 6
Joined: Thu Dec 26, 2019 4:45 am

Re: Foreign income internship

Postby Dukray » Fri Dec 27, 2019 7:42 am

You're also very very close to being classed as US resident. How many days did you spend in the US during that calendar year?

While in the US, did you keep a home available in the UK?
172 days in the US, and I didn't keep a home in the UK.

darthblingbling
Posts: 319
Joined: Wed Aug 02, 2017 9:09 pm

Re: Foreign income internship

Postby darthblingbling » Fri Dec 27, 2019 11:41 am

Did you spend any time in the US in 2017 or 2016? If so, how many days in each year?

Ultimately I'm trying to figure out if you're resident in the US as the during this period of US residency the income from this work could be exempt in the UK under treaty.

If not you'd likely get a foreign tax credit for the federal and in some cases, state tax that was due on this income (from the US and state tax returns, not your W2)

Dukray
Posts: 6
Joined: Thu Dec 26, 2019 4:45 am

Re: Foreign income internship

Postby Dukray » Sat Dec 28, 2019 2:46 am

Did you spend any time in the US in 2017 or 2016? If so, how many days in each year?
Unfortunately no, I didn't...
Ultimately I'm trying to figure out if you're resident in the US as the during this period of US residency the income from this work could be exempt in the UK under treaty.
This is useful to know because I am now doing a similar internship from September 2019 to March 2020. But I guess I still wouldn't qualify for US residency because it works in calendar years, is that right? (I didn't stay in the US between both internships)
If not you'd likely get a foreign tax credit for the federal and in some cases, state tax that was due on this income (from the US and state tax returns, not your W2)
That makes sense! I am guessing I should just file a (late) Self Assessment tax return for this?

As a general question, would you bring this kind of questions to HMRC directly? For example, about interpreting an ambiguous residency if I meet the criteria of both countries.

Thanks again!

DavidTreitel
Posts: 215
Joined: Thu Aug 16, 2012 4:31 pm

Re: Foreign income internship

Postby DavidTreitel » Sun Dec 29, 2019 9:50 am

Based on the data provided it is almost certain you had a J-1 or F-1 visa and as a consequence were not US resident. You would have file Form 1040NR for 2018 reporting the numbers from your W-2. Whatever tax was due on that US return is creditable in the UK.

Dukray
Posts: 6
Joined: Thu Dec 26, 2019 4:45 am

Re: Foreign income internship

Postby Dukray » Sun Dec 29, 2019 9:58 am

Based on the data provided it is almost certain you had a J-1 or F-1 visa and as a consequence were not US resident. You would have file Form 1040NR for 2018 reporting the numbers from your W-2. Whatever tax was due on that US return is creditable in the UK.
Yes, it was a J-1 visa.

DavidTreitel
Posts: 215
Joined: Thu Aug 16, 2012 4:31 pm

Re: Foreign income internship

Postby DavidTreitel » Sun Dec 29, 2019 10:52 am

Did you file a Form 1040NR for 2018?

Dukray
Posts: 6
Joined: Thu Dec 26, 2019 4:45 am

Re: Foreign income internship

Postby Dukray » Mon Dec 30, 2019 11:13 am

Did you file a Form 1040NR for 2018?
I filed a Form 1040NR-EZ for 2018.

DavidTreitel
Posts: 215
Joined: Thu Aug 16, 2012 4:31 pm

Re: Foreign income internship

Postby DavidTreitel » Mon Dec 30, 2019 2:40 pm

Whatever tax was calculated on that return can be claimed as double tax relief in the UK.


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