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Hi all,

I moved to the UK last August for a new job, but moved back to the States a few days ago to take a new job. I started doing my tax return, but have been quite confused. I have a few questions:

(1). Since I don't fulfill the bonafide requirement or the physical presence test, does that mean I should use Form 1116 instead of Form 2555?

(2). Before I moved to the UK, I worked part-time while in school. Before I included my UK income in my tax return, I was able to actually get over $1100 federal tax refund and $140 state refund. But after I entered my UK income**, I now owe money: $300 federal tax and $300 state tax, approximately. So it seems that despite the tax I paid in the UK, my UK income still incurs quite a bit of federal tax ($1100+$300) and state tax ($140+$300). I used Form 1116. I wonder if this is normal? Or did I do something wrong

**Between September and December 2014, I made $19,280 (£12103) in the UK and paid a total of $1,194.2 (£761.8). Strangely, my salaries in the first two months were not taxed.


Thanks!
 

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It really depends. If your salary in the UK wasn't taxed those first two months simply because they were just getting you set up in the payroll system, that could explain why you were apparently "underwithheld" and thus your UK taxes don't cover your US taxes.

The other thing is that, in the UK you were being taxed on only your earnings in the UK. But for the full tax year, you had those earnings plus your student job earnings. Student jobs normally don't pay all that well - and you mention that it was only part-time. It's really no surprise that your total US tax bill should surpass your UK tax bill. (Plus, most state income tax systems start with your taxable 1040 income, not just what you earned in-state.)

The UK tax year ends at the beginning of April, so if you worked in 2015, you may have a similar situation when your UK earnings and taxes are taken into account. Not sure if you'll have to file a UK return for the time you worked there - but it's possible you may wind up having to pay up the difference if the taxes taken out of your UK earnings didn't cover your whole tax obligation. Then again, anything you pay in 2015 will be deductible on your US 2015 return.
Cheers,
Bev
 

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Note also you can apply a Foreign Tax Credit to the same category of income in another tax year -- the previous tax year, the same tax year, or any tax year(s) up to 10 years into the future. To apply a tax year 2015 FTC to tax year 2014, for example, you'd file a 2015 tax return and an amended 2014 tax return (IRS Form 1040X).
 
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