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Banking & Tax help needed - Please!

Banking & Tax help needed - Please!

Old Apr 8th 2008, 6:38 pm
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Question Banking & Tax help needed - Please!

Hi there

I have applied, and been successful, for a transfer with my current employer from Hertfordshire, UK to Los Angeles, CA. My employer are sponsoring my L1 Visa application.

I may be jumping the gun a little, however, I have a couple of basic questions that I've been unable to find answers to after a brief Google;

1. Can anyone please give me a rough breakdown of how the taxation system works in the US (or point me to in the right direction for some basic litreture on the matter)?

2. What are people's experiences with opening bank accounts in the US as newcomers to the country? I'm assuming my current UK accounts will be null and void in respect of regular usage (i.e. wages, bills etc).

Any help offered would be greatly appreciated!

Thanks

Vittoria.

Last edited by Vittoria; Apr 8th 2008 at 6:40 pm.
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Old Apr 8th 2008, 7:12 pm
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Default Re: Banking & Tax help needed - Please!

There are lots of taxes in the US. I'll start with income tax, and assume you are a regular employee. Every time you are paid, the employer will withhold money for federal, state, and local taxes as required. Every January the employer issues a W2 form for the previous year detailing how much you were paid, and how much tax was withheld. It's up to you to prepare a tax return document and calculate how much tax you should have paid that year (based on the various deductions and credits that are unique to you). If you overpaid, you will receive a refund. If you underpaid, you must make up the difference. If the underpayment is larger than a certain amount, there may be a penalty. Separate returns are filed with the federal government and the state government (except in the few states with no income tax). If your city assesses an income tax you will have to file a separate return for that as well.

That's a basic version of events. Note that for your first year in the USA your taxes will be complicated by the fact that you will have both US and foreign income (unless you arrange to move on Jan. 1).
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Old Apr 8th 2008, 7:23 pm
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Default Re: Banking & Tax help needed - Please!

Originally Posted by Vittoria View Post
Hi there

I have applied, and been successful, for a transfer with my current employer from Hertfordshire, UK to Los Angeles, CA. My employer are sponsoring my L1 Visa application.

I may be jumping the gun a little, however, I have a couple of basic questions that I've been unable to find answers to after a brief Google;

1. Can anyone please give me a rough breakdown of how the taxation system works in the US (or point me to in the right direction for some basic litreture on the matter)?

2. What are people's experiences with opening bank accounts in the US as newcomers to the country? I'm assuming my current UK accounts will be null and void in respect of regular usage (i.e. wages, bills etc).

Any help offered would be greatly appreciated!

Thanks

Vittoria.
1/ There no such thing as basic literature for US taxation. Imagine the most complicated system in the world, then multiply it by 100 and you may be reaching its outer edges.

A few things you need to consider as an L1 immigrant to get you started:

a/ Do you pay into your company's pension scheme? If you're thinking of living here, it's tax deductible (and there's often a big company match). If you're not, it's stuck here when you leave or subject to a big penalty.

b/ Do you liquidate your des res before you come? If you're planning on staying, you could fall into the capital gains trap if you eventually sell it.

2/ For LA, open a free checking account with Bank of America or Wells Fargo. Banking has scarcely moved out of the stone age here so don't let it surprise you. Do NOT close your UK accounts down -- you'll not be able to reopen them.
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Old Apr 8th 2008, 7:44 pm
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Default Re: Banking & Tax help needed - Please!

It's often wise to ask for your employer to pay for the filing of your first tax return, we just got ours done and expensed it. At the end of the day it was only $250 and in fact turned out to be very simple, but having a pro do it the first time is worth it.
As for banking, check if your employer has a credit union as they will likely open you up an account on the first day, before you have a social security number or anything, which helps for getting a checkbook etc for rent and other bills. They often give better deals on loans etc too.
If your employer gets you one of the AIG relocation packages, that comes with a Citibank account and credit card ready and waiting for you on arrival.

And it's definitely never too early to be asking about taxes. I made that mistake when moving to The Netherlands where I was paying 55% income tax!
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Old Apr 8th 2008, 8:43 pm
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Default Re: Banking & Tax help needed - Please!

yes we are doing our first tax return too. As we are L1A's the company is paying for the first one - BUT its being done by KPMG who are quite conservative - so we could be not getting the absolute tightest return but it will be the safest. They are telling us we owe tax (my husband only had one months salary in the US but all his relocation expenses are accounted for here so it looks like he recieved a load more. The expenses were mostly 'protected' so the firm should make up any tax liability we have on them - we are waiting to hear now how much of the bill (9k) they will be paying.

We are also having a 'discussion' with the accountant because she has prepared the returns for my husband excluding me and the kids. We believe that if he does this then a tax rebate offered by the government in may 2008 wont be available to me or for the kids. We are asking her how much more it would be to file as married - so we get the full 1600 rebate (husband and wife and 2 kids). It may actually pay for us to go the 'worst' tax liability if we more than cover it by the rebate because it will ensure the kids recieve tax numbers and I will be logged as filing even though i have no earnings so that wont sod up any future GC application etc.
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Old Apr 8th 2008, 8:47 pm
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Default Re: Banking & Tax help needed - Please!

Kids who have ITINs and not SSNs will not qualify for the tax rebate and if you are on L1s then you won't be seeing the 300 per child I'm afraid. If that makes a difference...
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Old Apr 8th 2008, 8:49 pm
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Default Re: Banking & Tax help needed - Please!

it might - depends on how much worse the tax liabilty is. So thanks for posting that as we could have made a poor choice without that knowledge!
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Old Apr 8th 2008, 8:51 pm
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Default Re: Banking & Tax help needed - Please!

Actually just remembered that we had an issue with the relocation expenses on ours, we got a taxable cash sum to use as necessary rather than having everything paid for. In the end it turned out to be an advantage as the amount was included in regular salary as a sign on bonus instead of being listed as relocation so we could deduct our moving expenses and brought our $2K bill down to $200.
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Old Apr 8th 2008, 8:54 pm
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Default Re: Banking & Tax help needed - Please!

Originally Posted by MsElui View Post
it might - depends on how much worse the tax liabilty is. So thanks for posting that as we could have made a poor choice without that knowledge!
You should ask them if it is worth you changing your deductions for this year as you may still be paying too little tax.
Another thought - if they are not including your kids on the return then he is not getting the $1000 per child tax credit on the return. Not sure if that's pro-rated or not though. We had to fight our tax guy to get that too.
And if you haven't filed yet your tax rebate probably won't be coming in May, it will take longer.
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Old Apr 8th 2008, 9:05 pm
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Default Re: Banking & Tax help needed - Please!

Originally Posted by MsElui View Post
yes we are doing our first tax return too. As we are L1A's the company is paying for the first one - BUT its being done by KPMG who are quite conservative - so we could be not getting the absolute tightest return but it will be the safest.
KPMG did our tax return the first year we were here and I still have a feeling we missed out on stuff.

The big thing they didn't tell us was that we should have applied for ITIN's for me and the children with that first tax return. That caused all sorts of problems later on in the year when we were trying to open a savings account.

It also meant that OH couldn't (?) claim the right number of exemptions.
I put the question mark because that's what the HR department told him and they wouldn't budge.

We still have someone do our taxes because they seem so complicated. The lady who does them understands UK taxation which is good and she has claimed for stuff I just didn't know about.
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Old Apr 8th 2008, 9:16 pm
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Default Re: Banking & Tax help needed - Please!

HR Block does a 'second look' service where they will go over your old returns prepared elsewhere and see if anything was missed. I believe it's possible to re-file later on. You might want to consider that if it wasn't too long ago.
The taxes seem really simple to me but I think that might be because I have been doing our Dutch taxes for the last 8 years and the system is basically the same. But I don't have a mortgage here which probably changes things.
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Old Apr 8th 2008, 9:25 pm
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Default Re: Banking & Tax help needed - Please!

Originally Posted by chicagojlo View Post
HR Block does a 'second look' service where they will go over your old returns prepared elsewhere and see if anything was missed. I believe it's possible to re-file later on. You might want to consider that if it wasn't too long ago.
The taxes seem really simple to me but I think that might be because I have been doing our Dutch taxes for the last 8 years and the system is basically the same. But I don't have a mortgage here which probably changes things.
A mortgage does change things, as does having a child at college.( We were able to claim a hope and lifetime learning credit this year)

I was self employed in the UK and did my own taxes for many years but I find them harder here.
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Old Apr 8th 2008, 10:00 pm
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Default Re: Banking & Tax help needed - Please!

No house buying for me then! Luckily I'm an accountant and actually used to do tax returns for a job in The Netherlands. But I can definitely see the benefit of using a pro and I probably will again when things get more complicated.
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Old Apr 8th 2008, 10:19 pm
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Default Re: Banking & Tax help needed - Please!

Originally Posted by jumping doris View Post
A mortgage does change things, as does having a child at college.( We were able to claim a hope and lifetime learning credit this year)
tell me about it, the missus going her masters, but not being able to get federal funding has made the taxes a lot more complicated.

Anyway, to the OP, have a look through the wiki, there's plenty of good info on getting set up, from credit history and banks etc as well as recent threads on getting a car and all that fun stuff
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Old Apr 9th 2008, 3:54 am
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Default Re: Banking & Tax help needed - Please!

Jumping Doris ... If KPMG neglected to file W-7s to obtain ITINS for your kids. I can almost guarantee that you have missed out on some tax deductions/credits. It may be beneficial to seek advice from somebody else. Most places will your meet and review your tax situation for free to better gauge the complexity of your return and come up a reasonable price.
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