If you have answered yes to our poll, you may be required to prepare a US Federal Tax Return with the IRS. US tax law states that a US Citizen must declare worldwide income no matter where he or she lives around the world.
EDA Professional Services is a Scottish based accountancy firm that can assist US Citizens with their filing requirements. We can also help even if you are not based in the UK.
Currently Scotland has different levels of taxation than the rest of the UK. This means that you can end up paying more tax in Scotland (the higher rate threshold did not increase in Scotland meaning that the 40% rate comes at a smaller level). As there is no tax treaty with the US and Scotland it may mean that you cannot claim any additional taxes you pay in Scotland as a Foreign Tax Credit on your US Return.
Depending on the level of taxes that may be due to the IRS, you may be required to prepare up to four years tax returns – even if there is no balance due.
If you are a US citizen living in the UK and would like to discuss this, please do not hesitate to contact us at firstname.lastname@example.org. We look forward to hearing from you.
Please note that though this blog specifies the UK where Americans are living, it can also refer to other countries around the world. The United States has primary taxing rights over (more or less) every country.
What would be the tax effect of Scottish Independence on US Citizens?
In order to claim Foreign Tax Credit on your US Federal Tax Return you must be paying taxes in a country that has a Double Taxation Agreement (DTA) with the United States. Currently, the DTA is with the United Kingdom – not Scotland. This means that should Scotland choose yes on 18th September, a new DTA would have to be agreed with Scotland. It would have to be agreed in the interim period.
If no DTA is established until the actual day of independence, it would be possible that an American citizen living in Scotland could pay tax twice on the same income.
At the moment we can only speculate that may happen should the people of Scotland chose to be independent.
US Citizens are taxed on worldwide income no matter where they live. If you have been living in Scotland and have been receiving income in Scotland (an no income from the USA) you may be required to prepare a US Tax Return. You can claim the tax deducted from your salary as a Foreign Tax Credit to reduce your liabilities to the IRS.
If you are a US citizen living in Scotland and would like to discuss this, please do not hesitate to contact us at email@example.com. We look forward to hearing from you.