It might be a whole lot of fun to chat about where you can go and what you can do after your relocation to London, but the truth is, you need to handle a number of complicated financial issues before you consider moving to London.
All Americans moving here will have to file two sets of tax returns and there are several challenges in preparing an expat tax return which means that you need to hire a professional to do it for you:
- There are different federal tax laws governing the filing of a tax return for the foreign income that you have earned during the year. You cannot just pop along to your family accountant and expect him to know about the different credits and exclusions regarding foreign income and how to file a tax return in the US while living in a foreign country. Your best bet is to choose a specialty tax attorney that has practical experience in handling the finances of Americans moving to London.
- Your planning may be more important than your actual filing work. This is so important for anyone moving to London to bear in mind. If you do the groundwork you won’t have to do anything more than send a couple of emails and attach your bank statements for your tax attorney to submit your return. Make sure that you give your tax expert all of the information that they require before you leave, so you’re not running around after your relocation to London trying to find someone to notarize your birth certificate to courier back home in a hurry.
- If you have already been living here and have not really paid attention to the fact that you need to file a tax return back home, you will have to find a better excuse than “I didn’t know I had to”, when facing the wrath of the IRS. And they will catch up with you eventually. The best thing you can do is ‘fess up immediately and pay a non-compliance penalty and file your missing tax returns. If you have earned in excess of the foreign income earned exclusion amounts, it gets a little more complicated, and you will have to get a tax attorney to help you out.
Remember you have two years to apply for a tax refund, and a good tax expert can sort it all out for you and save you the possibility of civil charges for not paying tax in the US or criminal charges which you may be liable for if you have not filed a tax return after your relocation.