bobbedford

Hi

My wife and I are likely to move over in January. My company is about to apply for an L1B visa for me, and thus and L2 visa for my wife.

My wife currently has a business in the Uk, which she plans to keep going (self employed over here), as she has some work planned in for next year. She also intends to launch the same business over in US (she is a wedding planner).

She therefore plans to spend some of here time in the UK, although the majority will be in the US.

So I had a few questions:
- Is there any minimum amount of time she has to remain in the US for her L2 to remain valid?
- From taxation purposes is there any issue with her declaring US income in the US, and UK income in the UK?
- Are there any other things you can think of that we should be worried about.

Thanks

Flabound oneday

she will also have to declare her UK earnings in the US

Michael

She'll need to declare worldwide income on US tax forms for any year she is a resident alien for tax purposes (substantial presence test). However, she will be able to deduct taxes paid in the UK to offset US taxes owed.

http://www.irs.gov/taxtopics/tc851.html
http://www.irs.gov/businesses/small/...=96493,00.html

Jerseygirl

If she joins you in the US she will not be able to work (even remotely for her UK business) until she receives work authorisation...which could take several months.

ian-mstm

No. Her L2 is valid as long as your L-1 is valid.


She will need to declare both her UK and US earnings on her US tax return. The US/UK tax treaty will (usually) prevent double taxation, but the income must be declared. Her UK earnings are added in at the beginning of the return, and subtracted out later as having already been taxed.

However, Jerseygirl is correct. She will not be able to work immediately - she must apply for employment authorization first, and that'll take about 3 months to get. In the interim, she is not allowed to work... either for the UK business or for herself. Once she's authorized, then she can work.

Ian

bobbedford

Thanks for this.

If she is in the UK I presume she can work on UK business?

Can she apply for employment authorisation, then go back to the UK and work on her UK business then come back to the US once the authorisation has been granted?

ian-mstm

Yes, of course.


Yes, but she'll need to be in the US for biometrics - she can't do that from the UK. Whether she stays long enough first or flies back when the notice is received, is up to her. It could take a couple of weeks or a month.

Ian

bobbedford

Thanks mate. This is all really helpful.

I don't suppose you know if there are issues with her being Self Employed in the US (this is what she is in the UK), i.e. she doesn't need to be working for a US Company under the EAD - she can be self employed?

S Folinsky

OP asks good questions. I often scratch my head when many of the posters in this forum given quite definite answers to questions to which the answers are, often at best, quite fuzzy. In fact, the answers are in the "gray" intricacies of the law which are the topics of heated debate among knowledgeable lawyers.

There is one definite answer -- there is no minimum time for an L-2 to be here. In fact, it is common for both L-1's and L-2 to be in the US for short times consistent with the status. [For example, the regulations on the time limits for L-1 status excuses or extends them if the person really doesn't spend all that much time here].

There has been a debate going on for decades on what is "unauthorized employment." Also, on top of that, one may want to look at what are the penalties, if any, for the "work."

A consultation with competent legal counsel might be in order. For various reasons, a private consultation might be a better idea that a very public discussion on the internet.

ian-mstm

Once she has employment authorization she's free to work for whomever she wants... including herself.

Ian

ian-mstm

We answer because we can... and often choose to give definite answers. You choose to give indefinite answers (indefinite at best, cryptic at worst) because you're an attorney and can't give the appearance of creating an attorney-client relationship.

Quite simply, we do it because you can't. Further, when we get it wrong, you often say so... which helps us give even better definite answers!

Ian

bobbedford

Thanks for all the advice guys.

I am just looking for indications, and am not holding up anyone if hey are wrong...

S Folinsky

Ian -- I know that there are times that I want to avoid the appearance of creation of the attorney-client relationship. However, that was not my point here -- OP asked some very good legal questions for which there is no definitive "bright line" answer.

I participate in three discussion lists for attorneys and there are issues which keep recurring and sometimes are the subject of legal catfights.

The term "employment" has become particularly fuzzy in this day of on-line out-of-office work.

Michael

You should contract a tax attorney to determine if she will be required to pay self employment tax (employer and employee portion of social security and medicare tax) on her income in the UK. I suspect that normally she would but I believe that as non US citizens and not a permanent resident, she can opt to pay the equivalent UK tax on all of her income instead of the US tax for up to 5 years. This is handled differently than income tax since this tax does not allow tax write offs against the other countries tax.

Michael

Also, even though there are double taxation treaties, that does not mean that she will not have to pay additional tax on her UK income since the UK income is cumulative on top of her US income to calculate the tax owed possibly pushing her into a high marginal tax bracket and the UK tax credits may not be enough to reduce her US tax burden down to what it would be if she did not have UK income.

As an example, if her income was totally from the US for $100,000 income filing married filing separately claiming only herself and no others and using the standard deduction, her federal income tax burden would be $19,375 but if she only made $50,000 filing the same way, her tax burden would normally be $6,250.

If she made $50,000 in the UK in addition to her $50,000 in the US ($100,000 total), the US government assumes that her total tax burden from all countries should be $19,375. Therefore if she didn't pay at least $13,125 in income tax in the UK, she would owe the difference to the US government.

http://www.dinkytown.net/java/Tax1040.html