TheKingOfHearts

Hey all,

I'm after some tax advise please, naturally I'll seek professional advise later but I'm curious as to wether someone else has been in a similar situation.

So I'm in Houston on a L1-B, I'm currently paid in GBP on UK payroll, paying UK taxes. I came out here in March.

Now I'm aware in an ideal situation, I'd be moved to US payroll, paid in $ and just pay US taxes, but unfortunately whilst it's easily possible, for various internal political reasons, work are unwilling to go down that route

Anyhoo, my initial assignment here was for 6 months, but as my L1-B is valid until 2021 I'm pushing them to let me work "remote" which in turn I'll do somewhere in the US (Houston or Chicago, likely)

Can anyone advise where I stand on taxes? I know I'll need a SSN and probably to file yearly returns, but should it be the case that I'm not double taxed, or that I am, but one country will issue credits to the value paid elsewhere?

Of course I'm okay with paying the taxes necessary, but if I have to pay affectively double, I obviously can't afford that.

Any advise is appreciated

Bermudashorts

I have no specific knowledge of US tax law. But I would take a punt that the US, like most countries in the world, expects people working in the US to be paying tax in the US.

I do not think your company's internal politics or inconvenience really come into this and I suspect you will be in a lot of trouble when discovered.

The UK and USA have a dual tax treaty so there is no need to pay tax twice. Yes perhaps you could sort this out at tax time, but you should get yourself off UK payroll both you and the employer will be paying unnecessary expense (eg employee amd employer NI) by remaining on it.

Owen778

Bear in mind that the issue isn't just about the employer withholding your income tax and social security payments, it's just as much about the employer paying their share of employment taxes, both federal and state.

TheKingOfHearts

Thanks for the reply for what it's worth - I cannot transfer onto US payroll, work are simply unwilling and I've been point blank told it's not an option, so sadly that isn't available.

Also I totally expect to pay tax in the US and have no objection to that at all - I do work/live here afterall. However obviously I don't want to pay tax in the UK if I'm not living there.

I can't see any reason why I'd be "in a lot of trouble". Afterall I still work for the entity specified on my visa terms and I fully intend to pay the necessary taxes. I'm just trying to ascertain where those may reside

The research I've done suggests that after 30 days consecutively in the US I need to pay taxes on my WORLDWIDE earnings, and that I will technically pay tax in both countries, but depending on various factors one country will be deemed to be my resident country and that would be the one I will pay the taxes in and not be issued credits for.

Bermudashorts

With respect to "ascertaining" where you should pay taxes I would stick with my gut and first response that I expect the US like every other country in the world expects you to pay tax on US employment income to them.

Being deemed resident is only one factor in determining where tax is paid, where the income is sourced from is another factor and in the case of employment income, it is normally taxed in the physical location where the employee performs the work.

I did not say you *would* be in trouble just that I suspect you (and company) could be as many tax authorities do expect employers to administer payroll and deduct and pay over related taxes throughout the year, not just at the end of the year.

yellowroom

I have seen it done with a colleague on a temporary secondment for 12 months, also an L-1 - they were employed on a UK contract on UK t&c and paid in the UK. The company paid for an accountant to file a US tax return for them, and said they would pick up the bill for any extra US taxes that were due. The company lawyers and tax people were perfectly fine with the arrangement.

the colleague in question was in corporate housing with a rental car, so apart from food and entertainment had very little outgoings or need to interact with US officialdom. Once you start controlling to your own world and paying your own rent & utilities, buying a car etc, you would find it harder if paid remotely, particularly juggling currency and bank accounts but it's not impossible..

TheKingOfHearts

This is basically my exact situation! Glad to see someone else made it work.

penguinsix

If your company is unwilling to adjust, you may have to look at becoming an independent contractor and billing the company for your services. You'll pay your self-employment & withholding tax here in the USA but your company will probably compensate (as they will no longer be paying PAYE in the UK). You will need to run the numbers to make sure you aren't paying more out of pocket than you are now.

Have you approached them about being an independent contractor?

yellowroom

How can you be an independent contractor on an L1 visa which is dependent on your employment with the transferring company?

TheKingOfHearts

Sadly also not an option - and as mentioned my L1 ties me to their employment, thanks for the thought though!

MidAtlantic

I think you would be well advised to seek professional advice, which your employer should reasonably pay for. In that way you will have protection from anything the IRS chooses to throw at you.

The attached relates to your situation, but don't ask me what it means!

https://www.irs.gov/Individuals/Inte...Foreign-Person

tbm

I cannot answer your questions, but I can provide some information and links for some of the questions.

First of all, you have to figure out your residence status for the UK. If you go to the US only for 6 months, you'll remain a UK resident. This means your world-wide income remains taxable in the UK. However, it sounds like you want to stay away longer. If this is the case, you may become non-resident in the UK. If this is the case, you should stop paying income tax in the UK. You could file a P85 form and apply for an NT tax code which would result in no income tax being withheld in the UK.

There's an agreement between the UK and USA for social security: if a UK employer send you to the US for 5 years or less, you can continue to pay National Insurance in the UK. See https://www.ssa.gov/international/Ag...phlets/uk.html

Regarding your UK residence status: if you hope to become non-resident, you have to read about the Statutory Residence Test now and start doing the required record keeping immediately (write down how many hours you work each day and roughly what you work on). See https://www.gov.uk/government/public...dence-test-srt for more information, in particular case 1 (working overseas) for the split year and the third automatic overseas test (working overseas).

Your situation is very complex. I suggest you contact a professional as soon as possible. Maybe you can get your employer to pay for it.

tbm

That was probably a tax equalisation scheme. I guess this raises a big question for me for the OP: what agreement do you have with your employer? I cannot believe they'd send you to another country for 6 months without some agreement in place about how tax is going to be handled. Didn't they pay for a tax consultant or something?

(Of course, you wanting to stay more than 6 months may change things, but that's another matter again.)

nun

The OP is living and working in the US then in normal circumstances their earnings are subject to Federal and State taxation and also payroll taxes ie FICA. It looks like the OP has simply moved to the US and continued payroll and deductions as if they were in the UK......this is bad!

There is a SS Totalization Agreement between the US and the UK so it is possible to avoid paying US Medicare and SS and keep paying UK NI as long as that has been arranged.....has it?

The OP should be paying Federal and State income tax, In fact they should be making US tax payments right now and are probably behind if they are paying estimated taxes. The UK tax withheld should be claimed back and used to pay the US income tax bill.

TheKingOfHearts

Thank you! Your advice has been very helpful. My employer likely will pay for it, I just need to convince them it's needed, unfortunately my manager has little concern as in the past they traditionally bring people out on ESTA's for a 2 month stay (total, 28 days in, out, and back in again) and never change their employment or anything and thus avoid the tax issues.

Unfortunately as I've already passed my 30 days and have legal right to work - they have to deal, I just need them to accept that fact. You have been very helpful though, thanks