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I'm paid in US funds to bank account in the US. I am not a US citizen. I work and live in the UK and file a US return for US sourced income (11 days worth in 2013) and also a UK return for the remainder of the days. My firm pays me gross amounts, but helps manage taxation by garnishing my wages (they call it hypothetical tax) and remitting on my behalf and then we settle up at the end of the year. I'm getting divorced and am trying to figure out the spousal support for my wife. I will get a US W-2 for the full amount that I am paid and then will have to remit payment to my ex-wife. Normally I would claim just a few days in the US for my work and so my taxable US income would be relatively small (11/36th's of my salary). I presume my wife would have no US source income for my question. I expect that I would pay 25% of my GROSS income, lets say it's $1m US$ per year to my wife, so $250,000 US$. I presume she would need to file her own tax return in the UK for the $250,000 (obviously converted to Sterling) and pay the appropriate tax on that amount and that I would file a UK return based on earning $750,000? First is that generally correct? Is there a line for me to deduct the $250,000 from the total income for spousal support on my UK return? I realize I haven't taken into account the monies for the 11 days I worked in the US in the latter half of this example for simplicity. How would I work that? Although I make x, after I pay her based on 25% of my gross would I pay her a net amount. Would she need to file a return in the UK (no ties with Canada anymore)? She and I would have different tax rates for example so would I have to pay at my tax rate and then give her a net amount.
I didn't omit it, I just wanted to make the example easy. I pay tax in the UK and the US and fill out both forms in compliance to the rules of those tax codes.
So as I understand it I would pay tax on $1,000,000 (£638,909) which would give me a net wage of about £349,263. I would then remit a portion of that to my wife and she would pay no taxes on it...correct?