UK_TV_CPT

Hi,

I work for a UK company, who have an office in LA.
There is a possibility of a move to LA on a H1 visa, for at least a year.

Assuming I am registered as a non-resident in the UK, then I don't pay tax on my earnings (says HMRC)...

My quesiton is, If I'm paid in Uk, possibly to an offshore account, Gurnsey for instance, would I have to pay tax on my earnings in the US?

Is this state of tax free earning possible?

I know that I should pay NI, but this seems too good to be true.

If anyone can comment on the US perspective, or could point me in the right direction, that would be good.

Thank you.

AdobePinon

It's not clear to me that you could be paid entirely outside of the US on an H1-B, but I'm no expert. H1-Bs usually file in the US as resident for taxes - there are some first year exceptions. Once resident for taxes you are taxed on world-wide income. Look at publication 519 on www.irs.gov

MartinF

1. If you're earning money whilst in the USA then Uncle Sam expects you to pay him taxes on it. Even if that money is paid to you outside of the USA. (That's a quirk of the US tax laws, which some/most other countries don't have).

2. If you are not paid in the USA, you may not qualify for their benefits programme .. the number one benefit over here being health insurance. This ain't your Bupa-supplementing-NHS-coverage type thing. It's vital to have it.

3. Over here, you pay both Federal taxes and, depending on where you live, State taxes also (The 4 States that don't have personal income tax are Florida, Alaska, Texas and Nevada). I'm not sure by "LA" if you mean Lousianna, or Los Angles California.... either way, you will have to pay State taxes.

4. Is your employer having you "work" in LA, but do some sort of dodge so they don't have to get you a work visa? If so, IMHO opinion, it's not worthit (to you)... you are giving up a heap of legal rights, plus if you get caught you could be banned from entering the USA for 10 years. (The company, on the other hand, would only get a $3,000 fine. big yipee!).

5. If you have been working with your company for over a year, and the LA office is truely part of the same company, then they can (probably) get you a L visa (and s you avoid all the quota issues and timelines surrounding H1-B visas).

Disclaimer: I'm not a tax expert. In fact, I'm not really an expert in anything, taxes or otherwise ;-)

UK_TV_CPT

Thank you for the replies...

Assuming now, that I am in Los angeles, being paid $90,000 per year, this works out to be $7500 gross per month.

I'm confused with the US tax system! I understand there are state and Federal taxes, but I'm looking for a general rule of thumb figure on how much I will take home in California?

I am married, but my wife will not be working (would be here on the back of my H1/L1 visa).

I have no savings, so interest isn't an issue.

We're living hand to mouth in UK (with house, bills paying off wedding etc).

Is there an easy answer?

If it makes a difference, I will have a company car, and medical insurance included in my contract.

Bill_S

Didn't think my first post to BE would be about taxes, but here we are. I'm certainly no tax expert, but since it's approaching tax time in the USA I'll have a go. For an income level of 90,000, CA levies a 9.3% state tax. Assuming a worst-case scenario of a TAXABLE income of 90,000 (i.e. no deductions at all), your federal tax would be between 15,000 and 16,000. Your after-tax income would be about 66,000, for a take-home of of about 5,500. Keep in mind this is a VERY ROUGH approximation. Depending on where you are living in CA, there could be an additional city income tax.

A brief word on the US tax system. For most people, the taxes are withheld from each paycheque, and the employer gives the money to the government. Every year the taxpayer calculates his taxes and files a return. If he has overpaid the government he gets a refund. If he hasn't paid enough, he remits the amount owed. The government doesn't like to be owed too much, though, so there are penalties if you underpay too much during the year. It is vital that you find out how your employer will be handling the taxes. If this offshore arrangement means that they do no withholding, it will be up to you to make estimated tax payments directly to the government at regular intervals during the year. If you don't do that you will be faced with a huge tax bill plus penalties.

And no, you can't get away with paying no taxes if your salary is deposited offshore.

Keep in mind that Los Angeles is a very expensive place to live. Try to find some on-line cost of living calculators to estimate how much you will need to spend on rent, food, clothing, etc. per month. And don't forget sales tax (no VAT in USA).

Hope I've been of some help.

penguinsix

Bill_S had a very good reply. I wanted to add one other point:

In the US, the *employer* is required to pay about 6.5% in taxes in ADDITION to what he pays you. So if you made say $100,000, the employer would be taking out about $106,500 from his accounts each year to pay you. You never see this added bit--it is paid directly to the US Social Security system and the (state?) unemployment / workman's compensation department.

So why do I mention it? a) If you are paying US taxes and b) your employer is paying you in the UK (and, more than likely not paying this added bit) then at the end of the year YOU will be liable to pay this added bit as a Self-Employment tax. That can be a pretty mean bite at the end of the year.

As your company has an office in LA, they probably have the mechanism for US payroll. It would probably be in your best interest to get on board this system (especially if you are later looking for a Green Card).

Bill_S

Addendum. I forgot about Medicare and Social Security taxes. Medicare is 1.45 %, Social Security is 6.2%. That reduces monthly take-home to about 4900. I also forgot about the USA-UK tax treaty, but I don't know if that would apply to you.

jumping doris

Don't forget property tax...if it applies in your state.

jumping doris

Also we pay a township tax on earned income, which is about 1% of salary.
So, here in PA, we pay federal, state, property and township tax.


And don't forget sales tax.

MartinF

If you like playing rather than thinking, go to www.turbotax.com and do a "pretend filing" (using your expected salary etc) and you'll get a idea of what to expect. Let the computers do the work!

(Turbotax is free to prepare a tax return, but you only pay when you actually file your return. There are various other sites with similar services, but I'm not too familar with them).

On the other hand, once you see the effort involved in preparing a tax return over here, you may think twice about coming!

MartinF

I'm working in California, have no deductions (kids, house etc) to speak of, and so my pay stub has the following itemized "taxes" (and very rough percentages of gross salary are)
FICA 6%
Medicare 1.5%
Federal Taxes 20%
State taxes 7%

I also have Health Benefits (basically, what I pay for Medical insurance) and Deferrals (what I pay tax free to pension plans, saving plans etc). How much you pay depends on you and your circumstances.

Bob

$90K on household, that's not much money in LA, it's enough to live on, but not to enjoy things out there it ain't, in anything other than a cupboard sized gaff at least.

Don't forget you'll be wanting the company to stump for medical insurance, that's going to be a big chunk too, but that's a deduction from your salary before tax gets calculated, so it helps.

MrScotland

If you are doing an intra-company transfer to the US be sure to ask for tax advice in the deal. You might be able to work out the tax bill ahead of time but filing is a different story and you may need to file in the UK and US for the same tax year. If the US move is a temporary assignment you should also ask for a tax equalization deal. What this basically means is that the company will withhold taxes as though you were still working in the UK and will pay any taxes above that rate that may be due in the US. This is a common arrangement for US assignments.

MrScotland

And make sure health insurance is part of the assignment deal and I would look for some kind of car lease through your company. It can be very difficult to obtain a car if you have no credit history or US licence. Basically with any assignment like this you should never end up worse off. As some other folks on the forum will attest to, make sure you get everything in writing with your company ahead of time.

UK_TV_CPT

This is a very good and currently difficult subject...

Between my wife and I, we earn about £60k... about half each.

The $90k is a basic guide of the equivalent position over here, but the one key fact is the loss of 1/2 our salary!

I would be managing the office out here, not just working in one, although I would not manage people...

I'm trying to find a way to bring the loss of earnings to the table...

Has anyone had issues like this?

CHeers.