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Tax advice - working for UK company while living in California

Tax advice - working for UK company while living in California

Old Dec 30th 2023, 12:42 pm
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Question Tax advice - working for UK company while living in California

Moving to California (CR1 visa) and working remotely for a UK company

Hi there. I'm moving to Los Angeles in January with my wife who is an American and British Citizen. I have a CR1 visa. I am seeking advice on tax requirements and what my legal requirements are as a US resident.

My company want to keep me as a full time employee and are happy with me working remotely. They told me that I can remain on the UK payroll and continue getting my salary (£90k) into my UK account. It is then up to me to transfer money to my US account as I need. They said that because of the US/UK tax treaty I won't be liable for income taxes in the US, however after reading posts on here it seems that this could be incorrect. I want to make sure that I'm not breaking any laws and that this is a sensible way to continue working with them. For more context I have a permanent address in the UK but will be living full time in the US.

My questions are:
1. Is it legal to be paid into my UK account while living in the US?
2. Will I need to pay UK and US taxes at the same time?
3. Would it be advisable to be paid into a US account instead?

If anyone has been in this situation and can offer advice, or recommend a tax expert to contact, that would be greatly appreciated!


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Old Dec 30th 2023, 4:00 pm
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Default Re: Tax advice - working for UK company while living in California

With a CR1 visa I believe you are authorized to work in the US immediately.

Income tax will be paid to the IRS and state, not HMRC. Your UK employer will legally need to pay US payroll taxes (withholding tax, social security and Medicare) which means them setting up an arrangement with someone who provides US payroll services. If they do not do so, the responsibility becomes yours and you would be breaking laws if you do not do so. Either way, earnings are reported directly to the IRS, and 12.4% social security and 2.9% Medicare taxes will be paid directly to the appropriate agencies. Federal and state taxes will be due and without appropriate withholding tax, estimated taxes need to be paid on a quarterly basis to avoid penalties.

Your employer may face consequences by not making US payroll taxes directly (even if you do it yourself) and if they are not willing to contract with a US payroll servicer, the best solution may be for you to become an independent contractor, effectively terminating your employment. You can invoice in the UK in pounds and use a UK bank account (or use USD and a US bank account if they are willing to do that). That removes them from the consequences of not making US payroll taxes and saves them the hassle and expense. Most people would gross up their hourly rate to cover the payroll expenses but that is a tough sell to your current employer when these expenses are not of their doing. In any case they are not much more than the NI rate so perhaps you just take that as a wash. I would gross up the hourly rate to take into account any benefits you may lose, primarily paid holidays that would no longer be available to you.

The US payroll taxes won’t be hard to figure out, a learning curve but straightforward after that. If you operate as a sole proprietor I don’t think you need to set up any entity, just report your income annually using the normal (US) 1040 form. You will need to work with HMRC to ensure that no UK tax and NI is deducted by your UK employer, I think that is fairly straightforward and might be as simple as submitting a P85.
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Old Dec 30th 2023, 4:10 pm
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Default Re: Tax advice - working for UK company while living in California

You will have to report the highest balances held in your foreign bank accounts each year if their aggregate total exceeds $10k at any point during the year. Also be aware that the IRS will also tax any income from investments including that generated inside cash-ISAs Stocks and shares ISAs are a nightmare regards taxation by the IRS.

Last edited by durham_lad; Dec 30th 2023 at 4:18 pm.
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Old Dec 30th 2023, 5:34 pm
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Default Re: Tax advice - working for UK company while living in California

GG above has covered the details already, but to recap, you need to pay US (state and federal) income taxes, and US (state and federal) social charges (workers comp and unemployment ins, plus SS), and reclaim taxes paid in the UK, as they will be deducted because you are on the UK payroll. You cannot get UK NI repaid, so that is immediately going to cut your net pay by about 10% (depending on exactly how much you are paid), and reclaiming UK tax is going to leave you out of pocket for the first 12 months (thereafter you'd get a refund evey year, just upto about 14 months after you paid the tax). So this is going to be messy and time consuming, and in the first year, very expensive as you'll pay both double income tax and you'll be paying double social charges permanently.

In short, what you are proposing is almost certainly untenable for you - severely disadvantageous.. ..... The best work-around is for you to become an independent contractor for your UK employer, and for you to be paid gross (you are working outside the UK) for your time, and for your "employer" to top up your payments with the employer's NNI that they would be paying if you were on the payroll, to offset the self-employment SS charges that you will have to pay in the US. This approach will require the cooperation of your employer, and not all emplotyers are willing to do so.
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Old Dec 30th 2023, 8:16 pm
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Default Re: Tax advice - working for UK company while living in California

I think that a US resident working for a U.K. employer can avoid paying NI because they are paying Social Security, and that deduction of U.K. taxes can be eliminated if an NT code is granted after completing form P85. The key is that the employee must be considered to be a tax resident in the USA.https://www.gov.uk/guidance/paying-e...working-abroad.

Also, I don’t believe unemployment taxes and workmans compensation are required if self employed.
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Old Dec 30th 2023, 9:36 pm
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Default Re: Tax advice - working for UK company while living in California

One more note about becoming an independent contractor, you will be able to take deductions on your tax return for your business expenses (computer, office supplies, internet, etc., accountant), plus a calculation for a percentage of space and relevant utilities if you use a room in your home as a dedicated office.
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