Tuesday, June 12, 2007

Tax Returns.

The discussion of tax under the June 5 'New Illusion' entry reminded me that I hadn't filed my taxes in either Denmark, UK or US. Despite having a filling requirement in three countries I wasn't bothered. Since I'm a trained tax specialist I thought it would be fun...

The Danish Tax return, due the 1st of July, took 2 1/2 minutes to complete.

The UK tax return is not due before January 31 2008, so I let that one lie.

Finally, the US tax return. By far the most complicated, but also the one that usually doesn't leave me with any tax payable.

The US taxes its citizens on their world wide income whether or not they are resident in the US. The US tax code therefore assumes that US writ extends to the whole world.

While the filing deadline in the US is April 15, as a foreign resident I have an automatic 2-month extension. However, this extension does not extend to payment of tax due, which this year will come back to haunt me!

It turns out that I have tax payable of $ 34 (assuming I've completed the form correctly). The reason is that while my student maintenance grant is taxable in Denmark and my interest income is taxable in the UK, the personal exemption in the UK wipes out any tax liability giving me no possibility of claiming a foreign tax credit on US taxes for the interest income.

So there you have it. I'm both ordinarily resident and domiciled in the UK, but it is Denmark and the US that is taking my money in tax!


At 12 June, 2007 04:15, Anonymous Charles said...


Us Republicans are trying to lower your taxes, so VOTE REPUBLICAN!!!! Then you may actually get a refund from the U.S.

But be wary of those sneaky Democrats. They want to increase your taxes so you can pay for the health-care of illegals!!!!

With a few giggles from across the pond!!! ;-)

At 12 June, 2007 10:01, Blogger karlund said...

And I thought Denmark had a "harsh" taxation policy!! Going after you abroad is just plain bul......

So are you actually financially responsible for the Bush wars? ;-)

At 12 June, 2007 10:24, Blogger Torsten Pedersen said...

Charles, yes now that I'm actually a tax-payer I really need to start reevaluating my political views ;-).

Karlund, I agreed that its kind of absurd that I'm going to pay tax in the US simply because the UK is nice enough to exempt me from tax liability. While I'd prefer not to pay any tax, I actually find the $34 kind of amusing.

p.s. In fairness to the US tax system I should point out that the US tax return is really only complicated because I need to claim Foreign Tax Credit and Foreign Earned Income Exclusion. Otherwise the form is straight forward and could be filled out in a few minutes.


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