Dear rpfc,
In a nut shell, the tax treaty between the U.S. and the UK allows the U.S. first opportunity to tax this income according to the U.S. tax law.
The exact language says the iterest will only be taxed in the contracting state where it is earned.
(article 11 of the tax treaty)
.
Ed
Thanks for your prompt answer. What I'm really trying to find out is how much tax I need to pay to the IRS, and if I'm correct to use Form 1040(NR). I earned $4700 in interest income from my certificate of deposit for 2008.
Thanks again
Mike
Dear Mike,
If you have interest income you must use 1040NR. You can not use 1040NR-EZ.
If line 40 from the 1040NR is 4700 dollars, your tax will be about 473 dollars. see the tax table on pages 33 and 34 of this publication: http://www.irs.gov/pub/irs-pdf/i1040nr.pdf
The UK tax treaty does not provide for a more favorable rate.
Hi Ed
That's great - thank you. One last question - should I request form 1040NR through the mail or is it possible to pay this tax online?
Thanks again for your advice
You can not file a 1040-nr on line. You have to file it by mailing it in. The IRS has an electronic pay program where you can register to pay, but then you have to add the receipt to your return when you submit it.
You have to have a U.S. checking account or credit card in order to make the payment.
http://www.irs.gov/efile/article/0,,id=97400,00.html
You can download a copy of the 1040NR from this link: http://www.irs.gov/pub/irs-pdf/f1040nr.pdf
Tax Preparer
GPHR Cert; U.S. Treasury Tax Advocacy Panel appointee