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Taxation question

Taxation question

Old Mar 9th 2017, 8:22 am
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Default Taxation question

Hey guys,

So I have a quick question regarding taxation in the United States. After I move and once my EAD or Green Card comes through, I'll be taking a monthly salary from a United Kingdom based company with no US payroll. I was wondering how this would work in the way of taxes? My research indicates that I would need to apply for a No Tax code from HMRC, which would allow my salary to be paid untaxed from the UK, into a UK bank account (then I could just transfer using TransferWise or something to a US bank account). But where do I stand with the IRS? When I come to file my yearly tax return, how would I approach this? Because technically speaking I'm an employee of a company, but that company is not US based nor has a US presence so I'm not sure how that would work with things like Social Security Tax, Medicaid Tax and so forth? Anyone got any insight?

Thanks
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Old Mar 9th 2017, 10:00 am
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Default Re: Taxation question

The UK company has US legal obligations to withhold US income tax, SUTA, FUTA, State tax (probably) and comply with local labor law.
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Old Mar 9th 2017, 10:01 am
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Default Re: Taxation question

Originally Posted by Cook_County
The UK company has US legal obligations to withhold US income tax, SUTA, FUTA, State tax (probably) and comply with local labor law.
Is there no way that I could just pay those taxes directly to the IRS at the end of the tax year?
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Old Mar 9th 2017, 11:31 am
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Default Re: Taxation question

The likely easiest solution is that you should be self employed here in the US and simply invoice your time and expenses to the UK company in dollars and get paid that way.

If you do this you can make estimated payments throughout the year for your withholdings.

When you work for a company in the US there are taxes that the company pays that the employee doesn't see.

When you're self employed the government still expects that money.

You'll declare all of this on your end of year tax return. However, if you made payments throughout the year then things should be about right at the end. If you don't make payments then there may be fines.

If you're on a K-1 then you can work incident to status and should be able to do this as it wouldn't require an I-9. At least that's my unqualified interpretation.

Last edited by tom169; Mar 9th 2017 at 11:34 am.
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Old Mar 9th 2017, 12:15 pm
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Default Re: Taxation question

Originally Posted by tom169
The likely easiest solution is that you should be self employed here in the US and simply invoice your time and expenses to the UK company in dollars and get paid that way.

If you do this you can make estimated payments throughout the year for your withholdings.

When you work for a company in the US there are taxes that the company pays that the employee doesn't see.

When you're self employed the government still expects that money.

You'll declare all of this on your end of year tax return. However, if you made payments throughout the year then things should be about right at the end. If you don't make payments then there may be fines.

If you're on a K-1 then you can work incident to status and should be able to do this as it wouldn't require an I-9. At least that's my unqualified interpretation.
Yeah that's correct regarding the K-1 being work authorised incident to status, I'm more thinking of the period between the K-1 expiration and however long it takes for the EAD/GC to come through.

It sounds like it's gonna be easier on both me and my employer to just go down the route of contracting.

Thanks guys
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Old Mar 9th 2017, 12:45 pm
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Default Re: Taxation question

Make sure you include enough overhead to pay US self employment tax, income tax, holidays, healthcare and other employment expenses on top of your actual salary. You might have 30, 40 or even 50% overhead depending on costs and salary.

Also educate yourself about solo401k retirement accounts.
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Old Mar 9th 2017, 12:46 pm
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Default Re: Taxation question

Originally Posted by nun
Make sure you include enough overhead to pay US self employment tax, income tax, holidays, healthcare and other employment expenses on top of your actual salary. You might have 30, 40 or even 50% overhead depending on costs and salary.

Also educate yourself about solo401k retirement accounts.
Yeah I've worked out a budget and what not, and been through mock tax returns with someone who knows the ins and outs of the US tax system for both self employment and if I'd be a salaried employee

The 401k account is a good idea though, that will be next on my list
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Old Mar 9th 2017, 12:48 pm
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Default Re: Taxation question

Originally Posted by Cook_County
The UK company has US legal obligations to withhold US income tax, SUTA, FUTA, State tax (probably) and comply with local labor law.
Unfortunately the UK company is legally and unavoidably required to withhold UK income and payroll taxes too, for anyone on the payroll. The income tax can be reclaimed by completing a tax return, but I don't believe the NI can be.

In the US income and payroll taxes (social security, unemployment etc.) are due throughout the year, and the payroll taxes are surprisingly high as you will have to pay the employer's share assuming your employer is unable to do so. So throughout the year you will be paying double income tax and double payroll taxes, and then you should be able to get UK income tax back after the tax year end. Honestly, the cost will be so high, and the amount of paperwork so great that I sincerely doubt that it is something that you will want to do.
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Old Mar 9th 2017, 12:52 pm
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Default Re: Taxation question

Originally Posted by Pulaski
Unfortunately the UK company is legally and unavoidably required to withhold UK income and payroll taxes too, for anyone on the payroll. The income tax can be reclaimed by completing a tax return, but I don't believe the NI can be.

In the US income and payroll taxes (social security, unemployment etc.) are due throughout the year, and the payroll taxes are surprisingly high as you will have to pay the employer's share assuming your employer is unable to do so. So throughout the year you will be paying double income tax and double payroll taxes, and then you should be able to get UK income tax back after the tax year end. Honestly, the cost will be so high, and the amount of paperwork so great that I sincerely doubt that it is something that you will want to do.
It's my understanding that although going down the self employment route makes you liable for the employers share of various taxes, there is a section on the 1040 (line 27 under Adjusted Gross Income) that allows you to claim deduct employers share of the self employment tax.

In the above instance I'd be contracting for the UK company, and thus wouldn't be an employee and therefore wouldn't be on the payroll. Do you think this is a better option?
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Old Mar 9th 2017, 1:10 pm
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Default Re: Taxation question

Originally Posted by BigBoss1984
..... In the above instance I'd be contracting for the UK company, and thus wouldn't be an employee and therefore wouldn't be on the payroll. Do you think this is a better option?
You said, post #1, "taking a monthly salary", which means payroll, hence the confusion of Cook_County (post #2) and me. .... Yes contracting is the way to go, and quite manageable.

Last edited by Pulaski; Mar 9th 2017 at 1:13 pm.
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Old Mar 9th 2017, 1:10 pm
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Default Re: Taxation question

Originally Posted by Pulaski
You said, post #1, "taking a monthly salary", which means payroll, hence the confusion of CookCounty (post #2) and me. : .... Yes contracting is the way to go, and quite manageable.
Sorry, my mistake! Yeah contracting appears to, for sure, be the better option!
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Old Mar 9th 2017, 1:15 pm
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Default Re: Taxation question

Regarding the grey zone between the I-94 admit until date and an EAD then this time will likely be forgiven, but you should still be ready to file I-485 & I-765 ASAP after arriving.

EADs right now are taking longer than 90 days.
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Old Mar 9th 2017, 1:17 pm
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Default Re: Taxation question

Originally Posted by tom169
Regarding the grey zone between the I-94 admit until date and an EAD then this time will likely be forgiven, but you should still be ready to file I-485 & I-765 ASAP after arriving.

EADs right now are taking longer than 90 days.
Aye that's the plan, to get married and get the AOS package off ASAP
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Old Mar 9th 2017, 1:19 pm
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Default Re: Taxation question

Sorry for the double post - but whilst we're on the topic of taxes, PA has a state income tax of 3.07%, how is this paid? From my understanding you don't pay this on the federal tax returns, is that correct?

And the 3.07% - is that 3.07% of all earnings for the tax year?
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Old Mar 9th 2017, 1:22 pm
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Default Re: Taxation question

Originally Posted by BigBoss1984
Sorry for the double post - but whilst we're on the topic of taxes, PA has a state income tax of 3.07%, how is this paid? From my understanding you don't pay this on the federal tax returns, is that correct?

And the 3.07% - is that 3.07% of all earnings for the tax year?
I'm not a tax wizard or know the intricacies of PA's code (I do what TurboTax tells me to do), but you will file a both federal and state tax return.

If you owe money to the state then you will send a check for the amount plus interest.
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