SparkyNYC

Hi everyone,

Tax season is upon us and it is doing my head in! maybe someone here has some advice?

Here is the situation. I am USC and husband (as of April 2003) us UKC. He arrived in the US in March, but we never bothered to apply for Social Security number as he works from home for a small UK company. He invoices them through his one-man limited company (which he initiated a few years back in the UK) and is paid in pounds into his british bank accound. So, he is physically here doing the work, but everything else is in London. Does he still have to pay US taxes? How would he go about doing this as he has no SS#? (Also, would he say that he is self-employed?)

My tax situation is very straightforward (jut the stadard W2 really). Do we have to file together in order to prove that we are really married to INS whenever we finally get our interview? (To add more complication, we plan to move back to London in the next 4 months and abandon our application for his permanent residency. :S)

ANY help or advice would be appreciated!!! The super frusterating thing about this is that we both earn PEANUTS -- seems like way too much effort to go through considering the amount of taxes the US govt will be getting. sigh.

thanks!!!

rainbow

You can file "married filing separately" assuming he'll pay taxes in the UK and you don't have to report any of his income since he doesn't have any W-2's for 2003. Plus you can check him off as an exemption. If you file jointly I think you need to put down his UK income....not too sure about this.

Either way you need to get your hubby a Tax Identification Number. Go on www.google.com and look up the form you send in with your tax return (they just changed the process.)

I don't really know all that much but you can call 800-829-1040 and they can help you. I had to wait a little bit but that lady helped me out with mine.

Goodluck.
-rainbow

Mtravelkay

SparkyNYC wrote:
    > Hi everyone,
    >
    > Tax season is upon us and it is doing my head in! maybe
    > someone here has some advice?
    >
    > Here is the situation. I am USC and
    > husband (as of April 2003) us UKC. He arrived in the US in March, but we
    > never bothered to apply for Social Security number as he works from home
    > for a small UK company. He invoices them through his one-man limited
    > company (which he initiated a few years back in the UK) and is paid in
    > pounds into his british bank accound. So, he is physically here doing
    > the work, but everything else is in London. Does he still have to pay
    > US taxes?

The IRS says yes....... The location of the work is what matters.
If he is sitting in the US, the work is being performed in the US.


How would he go about doing this as he has no SS#? (Also,
    > would he say that he is self-employed?)

Yes. He needs to get an SSN
BTW, being self employed, he must pay much more in SS taxes, since he
has to cover both the employee and the employer share.

    >
    > My tax situation is very
    > straightforward (jut the stadard W2 really). Do we have to file
    > together in order to prove that we are really married to INS whenever we
    > finally get our interview? (To add more complication, we plan to move
    > back to London in the next 4 months and abandon our application for his
    > permanent residency. :S)

Joint filing is not a requirement for USCIS approval.

Exile

"mtravelkay"
    > BTW, being self employed, he must pay much more in SS taxes, since he
    > has to cover both the employee and the employer share.


I'm interested in this too as working for myself is a possibility.

Out of curiosity - and possibly playing devil's advocate a little - what
happens if I start a UK company and employ myself in the US? Surely I only
have to pay SS tax once then?


Cheers,

Andy

Mtravelkay

Exile wrote:

    > "mtravelkay"
    >
    >>BTW, being self employed, he must pay much more in SS taxes, since he
    >>has to cover both the employee and the employer share.
    >
    >
    >
    > I'm interested in this too as working for myself is a possibility.
    >
    > Out of curiosity - and possibly playing devil's advocate a little - what
    > happens if I start a UK company and employ myself in the US? Surely I only
    > have to pay SS tax once then?

No...... If you are an employee, then the employer must pay the employer
share of the US SS tax for the employee, and the employee must also pay
his share of the SS tax. So, in the above case, the self employed is
paying both the employer and the employee "contribution" (FICA=Federal
Insurance Contribution Act) and in the other, the UK company is the
employer part and the employee is paying the employee part, generally
via withholding from their paycheck.

Mtravelkay

rainbow wrote:

    > You can file "married filing separately" assuming he'll pay taxes in the
    > UK and you don't have to report any of his income since he doesn't have
    > any W-2's for 2003. Plus you can check him off as an exemption. If you
    > file jointly I think you need to put down his UK income....not too sure
    > about this.

If he is physically sitting at a computer in the US, then the work is
being done in the US, and US taxes would be paid according to IRS. It
doesn't matter where the money is coming from.

CalgaryAMC

This is an interesting one. I was contracting for a while and whilst sitting in Canada had different projects from clients in the US and the UK.

First of all it's a shame your husband cannot declare non-residency status from the UK because your husband is a Director of a company still trading there, and is receiving remuneration from it. I was able to do this because I wound up my UK company and simply maintained a personal bank account in the UK. This eliminated my UK tax liabilities so I was able to simply declare everything in Canada in the "foreign income" section of the tax return.

In this case, however your husband is subject to taxation in the UK on his income arising in the UK. I am sure he is minimizing this liability by appropriately using his company.

At the same time your husband may very well (I am reluctant to declare anything as fact if I am not qualified to do so) be liable for US taxes, because the work is performed in the US. However, this does not need to frighten you too much because both countries have regulations about double taxation, so you should not be taxed twice on the same income (you will still be taxed a little bit, but not as much as you would otherwise).

Tax regulations are complex at the best of times and his situation is not entirely simple, so either one of you needs to spend several hours researching the ins and outs of non-residency and UK/USA double taxation, or you can hire an accountant.

Squire

In article <[email protected]> , mtravelkay
<[email protected]> writes
    >Exile wrote:
    >> "mtravelkay"
    >>
    >>>BTW, being self employed, he must pay much more in SS taxes, since he
    >>>has to cover both the employee and the employer share.
    >>
    >>
    >>
    >> I'm interested in this too as working for myself is a possibility.
    >>
    >> Out of curiosity - and possibly playing devil's advocate a little - what
    >> happens if I start a UK company and employ myself in the US? Surely I only
    >> have to pay SS tax once then?
    >No...... If you are an employee, then the employer must pay the employer
    >share of the US SS tax for the employee, and the employee must also pay
    >his share of the SS tax. So, in the above case, the self employed is
    >paying both the employer and the employee "contribution" (FICA=Federal
    >Insurance Contribution Act) and in the other, the UK company is the
    >employer part and the employee is paying the employee part, generally
    >via withholding from their paycheck.

I have some doubts about this. A UK company, assuming it is
incorporated, would remain resident within the United Kingdom,
particularly if its customers are UK based. Owner(s) of the UK limited
company would normally be Directors (and most likely shareholders) of
said company under UK law. They could be employees but the most
efficient UK taxwise situation would be if they paid themselves salary
(up to the tax exempt threshold or the upper limit of the lower rate
band of taxation) and award themselves any further income by means of
share dividends (which avoids UK National Insurance Contributions).
Corporation Tax on the company would also likely benefit from using the
first £10k of profit under the zero rate band. Assuming the UK limited
company doesn't complicate matters by selling to USA customers it
remains a separate legal entity under UK law. I would expect USA
taxation to apply only to any salary and/or share dividend income of the
individual, subject to the provisions of the double-taxation treaties
and any annual foreign earnings exemption.

Having said the above, I have no idea if USA taxation would treat this
any differently and peer beyond the veil of corporate liability where
the company is owned by a sole individual. I have seen various postings
on this newsgroup where people refer to themselves as self-employed even
when they are employees of a self-owned incorporated company. Does USA
taxation blur these differences? In the UK you are self-employed if you
are a sole trader or partnership and not self-employed if your work is
performed via the medium of a limited liability company.

(there are exceptions to the above but I've tried to keep it simple)


--
squire
Those are my principles. If you don't like them I have others. (Groucho)

Mtravelkay

squire wrote:

    > Having said the above, I have no idea if USA taxation would treat this
    > any differently and peer beyond the veil of corporate liability where
    > the company is owned by a sole individual. I have seen various postings
    > on this newsgroup where people refer to themselves as self-employed even
    > when they are employees of a self-owned incorporated company. Does USA
    > taxation blur these differences?

Not really. You can incorporate and operate as a corporation, or you
could be a sole proprietorship and file Schedule C. When filing Schedule
C, the income will be transferred to your 1040 and taxed with normal wages.

However, in this case, he indicated he was being paid by a UK employer
for work done in the US. This sounds like self employment for which
Schedule C would be completed and both US income and SS taxes would be
paid. He would also file form SE to determine the SS taxes due. This
would be 15.3 percent of the first $87000 (2003). Then 2.9 percent for
the amount about $87000, since you are just paying for medicare above
that amount. Many years ago you got a break on this, but now the
payments equal the amount an employee and employer would pay together
for W-2 (Wage) income.

Michael D. Young

CalgaryAMC wrote:

    > Originally posted by SparkyNYC
    > Here is the situation. I am USC and husband (as of
    > April 2003) us UKC. He arrived in the US in March, but we never bothered
    > to apply for Social Security number as he works from home for a small UK
    > company. He invoices them through his one-man limited company (which he
    > initiated a few years back in the UK) and is paid in pounds into his
    > british bank accound. So, he is physically here doing the work, but
    > everything else is in London. Does he still have to pay US taxes? How
    > would he go about doing this as he has no SS#?

To file taxes without an SSN he can apply for an ITIN from the IRS.

I would say the first thing to look at would be IRS pub 519, "U.S. Tax Guide
for Aliens"

http://www.irs.gov/pub/irs-pdf/p519.pdf

Publication 334 (2003), Tax Guide for Small Business (For Individuals Who
Use Schedule C or C–EZ)

http://www.irs.gov/publications/p334/index.html

Publication 533 (2003), Self- Employment Tax

http://www.irs.gov/publications/p533/index.html

The U.S. has a Social Security agreement with the U.K. so he might want to
look at that.

http://www.ssa.gov/international/Agr...phlets/uk.html

If you have questions about international Social Security agreements, call
the Social Security Administration's Office of International Programs at
(410) 965-4538 or (410) 965-0377.

For Self-Employment info you might want to look at these sections of the SSA
POMS:

http://policy.ssa.gov/poms.nsf/lnx/0301801000
http://policy.ssa.gov/poms.nsf/lnx/0301802000
http://policy.ssa.gov/poms.nsf/lnx/0301803000
http://policy.ssa.gov/poms.nsf/lnx/0301804000


RS 01803.001 Net Earnings From SE — General Rule

The earnings of self-employed individuals are called net earnings from
self-employment (NESE) and self-employment income (SEI). Entitlement is
based on SEI and deductions are based on NESE.

RS 01803.050 Citizenship, Residence, and Geographical Source of Income

A. POLICY

1. U.S. Citizen or Resident

Income from a trade or business carried on by a U.S. citizen or resident is
always NESE (and SEI if over $400) regardless of the residence of the
operator of the business or the geographical source of the income.

2. Nonresident Alien

Income from a trade or business operated within the U.S. by a nonresident
alien is NESE, but no SEI is derived regardless of the amount of NESE.

SparkyNYC

Rgh, this is all too much! Does anyone know a good (Reasonable!) accountant in the NYC area who can help me with this?

Mtravelkay

SparkyNYC wrote:

    >
    >
    > Rgh, this is all too much! Does anyone know a good (Reasonable!)
    > :accountant in the NYC area who can help me with this?
    >

Unless your husband has some really odd accounting procedures, an
accountant shouldn't be needed, a competent tax person should do.
Your husband might even be able to do it himself. It shouldn't matter
that the source of the income was in the Uk, except that he probably
doesn't have a 1099 reporting this. If he is self employed, then even
tax software might be the only thing needed.

NC Penguin

Despite not receiving a W-2, surely the husband needs to declare his income on a tax return since he is resident in the US and will be included in at least his spouse's US tax return?

I'm pretty sure my income was included in my US spouse's tax return when we were both resident at the time in the UK. A little different but similar in that I never received a W-2 whilst living and working in the UK.

SparkyNYC

Here's another follow-up questions then - if the US gov only cares where the worker is, and not where he is getting paid, or who the employer is, is my husband breaking the law by working (from our little mini study in NYC) without an EAD?

Mtravelkay

SparkyNYC wrote:

    > Here's another follow-up questions then - if the US gov only cares where
    > the worker is, and not where he is getting paid, or who the employer is,
    > is my husband breaking the law by working (from our little mini study in
    > NYC) without an EAD?
    >

Yes, he might be violating immigration law. If he isn't paying US taxes
on the income, then he would be violating tax laws.