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A resident of USA working remotely for uk company tax

Personal Finance & Money Asked by Magdy Hafez on January 30, 2021

If I am a double national (uk and us) .I am a resident of US and work remotely from us to a company locate in UK .The company pay for me income taxes in UK.Should I pay taxes again in US or can i get my tax back (that i paid in UK)according to double tax treaty between uk and us?

One Answer

Probably. I don't know what the UK rate is (or rates are). You can, for all types of income, get a Foreign Tax Credit against your US federal income tax for the amount you paid or accrued for a qualifying tax to a qualifying country (which UK is) OR the portion of your US tax attributable to that foreign income, WHICHEVER IS LESS.* In other words, you can get back your UK tax to the extent it does not exceed your US tax. This involves rather complicated computations on form 1116, although if you use commercial software or a paid preparer they will do this work for you. See Pub 514 for the many details; as with most yearly pubs, 2020 isn't up yet so the website will show you 2019, but I don't recall any recent or pending changes that would matter to you.

* There is a minor exception to the US-tax-pro-rata limit for a limited amount of tax on passive (investment) income that is fully reported on 1099 series forms. Your case does not fall in this exception.

Technically, you also have the option of deducting foreign income tax instead of taking the credit, but this is rarely to your advantage. See https://www.irs.gov/individuals/international-taxpayers/foreign-tax-credit-choosing-to-take-credit-or-deduction or 'Why Choose the Credit' in pub 514.

Answered by dave_thompson_085 on January 30, 2021

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