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Old Dec 22nd 2012, 2:41 am   #1
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Default Tax on an L1 visa

Hi All,

I moved to TX on an L1 Visa in June 2012. As its coming up on time to file Taxes I am tying to find out where my Non-Immigrant status places me?
I travel abroad very regularly and have been in the country for less than 100days since getting here. I visited an accountant locally, buy he was unsure of the dealings with ex-pats.
Seems that the US have a similar thing to the UK 183 day rule. Not paying tax in this tax year would be a bonus, but I do want to be squeaky clean.
Having spent my entire life on PAYE, this is extra difficult.
Just about to get a copy of Turbo Tax....however any advice would be greatly appreciated.

g
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Old Dec 22nd 2012, 3:14 am   #2
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Default Re: Tax on an L1 visa

Quote:
Originally Posted by Graham_H View Post
Hi All,

I moved to TX on an L1 Visa in June 2012. As its coming up on time to file Taxes I am tying to find out where my Non-Immigrant status places me?
I travel abroad very regularly and have been in the country for less than 100days since getting here. I visited an accountant locally, buy he was unsure of the dealings with ex-pats.
Seems that the US have a similar thing to the UK 183 day rule. Not paying tax in this tax year would be a bonus, but I do want to be squeaky clean.
Having spent my entire life on PAYE, this is extra difficult.
Just about to get a copy of Turbo Tax....however any advice would be greatly appreciated.

g
http://www.britishexpatstax.com/
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Old Dec 22nd 2012, 4:08 am   #3
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Default Re: Tax on an L1 visa

Quote:
Originally Posted by Graham_H View Post
Hi All,

I moved to TX on an L1 Visa in June 2012. As its coming up on time to file Taxes I am tying to find out where my Non-Immigrant status places me?
I travel abroad very regularly and have been in the country for less than 100days since getting here. I visited an accountant locally, buy he was unsure of the dealings with ex-pats.
Seems that the US have a similar thing to the UK 183 day rule. Not paying tax in this tax year would be a bonus, but I do want to be squeaky clean.
Having spent my entire life on PAYE, this is extra difficult.
Just about to get a copy of Turbo Tax....however any advice would be greatly appreciated.

g
How is your company dealing with your taxes at the moment? and where does your salary come from? Do you pay FICA and Medicare tax? What is your UK tax status? Did you file a P85?

It sounds as if you'll be a US non-resident alien for 2012 tax purposes, but if you have US source income you'll have to pay US taxes.
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Old Dec 22nd 2012, 6:52 am   #4
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Default Re: Tax on an L1 visa

What nun says.

A few additions.... Know that resident for taxes is not the same as resident for immigration. Sometimes you can choose between resident and non-resident status for taxes. You'll always be taxed on US-sourced income. As resident for taxes, you'll be taxed on worldwide income (unlike any other country I can think of), but you may be able to claim credits for tax payments to other countries, and you will benefit from more in the way of tax deductions and exemptions to reduce your US taxable income. As non-resident, you'll get fewer deductions, but be able to avoid US taxes on more non-US-sourced income. Put another way, if all of your income is US-based, it'll *probably* be advantageous to be treated as resident for tax purposes. If you have substantial non-US income, you'll have to do the math. And know this: Most accountant types, or tax preparers, or tax software, have no idea what to do with these situations. Get yourself a copy of Publication 519 from irs.gov and start educating yourself.
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Old Dec 22nd 2012, 11:23 pm   #5
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Default Re: Tax on an L1 visa

Thanks for the replies. I am not entirely sure if my status is resident or non-resident on an L1 visa. Basically this is now home (for the time being). I have effectively checked out of the UK I do travel extensively abroad, but my appartment is here. The 519 looks like the right place to start then guide a local accountant. Our main office is in Toronto but we have set up a US entity. I am paid everything into my US checking account (salary, car allowance, 401k, medical) and I have to take care of my own tax affairs,
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Old Dec 22nd 2012, 11:38 pm   #6
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Default Re: Tax on an L1 visa

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I am not entirely sure if my status is resident or non-resident on an L1 visa.
Don't confuse immigration and taxes. While you may be a "non-immigrant" for immigration purposes, you are "resident" for tax purposes. This is perfectly normal.


Quote:
Basically this is now home (for the time being). I have effectively checked out of the UK I do travel extensively abroad, but my appartment is here.
It sounds as though you are, in fact, resident for tax purposes.

Ian
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Old Dec 23rd 2012, 12:45 am   #7
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Default Re: Tax on an L1 visa

Quote:
Originally Posted by Graham_H View Post
Thanks for the replies. I am not entirely sure if my status is resident or non-resident on an L1 visa. Basically this is now home (for the time being). I have effectively checked out of the UK I do travel extensively abroad, but my appartment is here. The 519 looks like the right place to start then guide a local accountant. Our main office is in Toronto but we have set up a US entity. I am paid everything into my US checking account (salary, car allowance, 401k, medical) and I have to take care of my own tax affairs,
What are you doing about Medicare and FICA?

You are a non-resident for immigration purposes and will remain so with an L1, however, it's important that you determine your tax residency correctly so that you pay the correct amounts to either HMRC or IRS. It sounds as if for your first year in the US you can claim to be non-resident for US tax purposes, but you'll have to pay tax on any US sourced income and that would be your salary and gains from any money you have in the US. You'll still have to pay UK tax on any UK sourced income and gains. Once you become US tax resident, probably in your second year you will be liable to US tax on your worldwide income and also still liable to UK tax on any UK source income and gains and you'll have to look at the treaty and foreign tax credits to avoid double taxation.

If you are not having tax deducted from your paychecks right now you should talk to your payroll department about starting as having too big of a tax bill outstanding can lead to fines.
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Last edited by nun; Dec 23rd 2012 at 12:53 am.
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Old Dec 23rd 2012, 12:51 am   #8
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Default Re: Tax on an L1 visa

Yes Nun, I have spent the day looking at this. I just did the 'presence' test on http://www.form1040nr.com/nonresident.php. I checked out of the UK with the inland revenue at the end of May (filled in the P85, everything is settled with HMRC). I arrived in the US on the 1st June, but due to travel abroad I have been here much less than the 183days to make me 'resident'. Therefore, for this tax year I am non-resident. That will obviously change next year.

I do appreciate you taking the time.

Cheers,

Graham
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Old Dec 23rd 2012, 5:02 am   #9
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Default Re: Tax on an L1 visa

Quote:
Originally Posted by Graham_H View Post
Yes Nun, I have spent the day looking at this. I just did the 'presence' test on http://www.form1040nr.com/nonresident.php. I checked out of the UK with the inland revenue at the end of May (filled in the P85, everything is settled with HMRC). I arrived in the US on the 1st June, but due to travel abroad I have been here much less than the 183days to make me 'resident'. Therefore, for this tax year I am non-resident. That will obviously change next year.

I do appreciate you taking the time.

Cheers,

Graham
So I'd plan to pay some tax now if you haven't already rather than waiting until next April. Also what are you doing about FICA and Medicare. If those are not being taken out of your paycheck it will be a big issue.
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Old Dec 26th 2012, 11:35 pm   #10
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Default Re: Tax on an L1 visa

If you are remotely considering a Green Card, file your tax return in the US. When you file they'll ideally want 3 years of W-2 (like a P60) to see that you've paid US taxes etc.
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