kimt

Hi All,

I currently travel to the US for work around about 80 days a year. I am employed by a UK organisation and travel out for Marketing purposes.

In 2017 I will likely be spending more time in the US as well as Canada with my base in the UK.

I have started investigating the tax implications of this and have already established that I will pass the substantial Presence test if I exceed 140 days from January to December and be liable to pay tax in the US.

I have also read that if the amount of time I am in the US from January to December falls under 183 days I could be classed as a Non Resident Alien as I have a closer connection to the UK and it is still my permanent base.

Further to this I have read a number of resources on the UK/US Tax treaty which effectively means I wont have to pay tax in both countries.

I am likely to spend around 175 days in total from January to December and would appreciate any advice/experiences you could offer.

Best

Kimt

tom169

Does your company have a finance and accounting team whom you can engage? Or a deal with a larger organisation, such as HR Block?

Given that this reporting burden you're possibly facing is because of them.

Owen778

The Closer Connection Exception is called that because it's an exception to the Substantial Presence Test.

This is what it says:
So, yes, you will fulfill the Closer Connection Exception, and not have to pay US taxes.

That said, depending on what visa, or the visa waiver program, you use to enter the US, you do run the risk that a USCIS officer at the port of entry (US airport) could decide you are in the US so much that you're trying to live there, and then bar you from entry. How big that risk is, no-one is too sure, but I'd personally suspect 175 days could easily raise a red flag for them.

If you do end up being liable for US taxes, bear in mind that what's called the "saving clause" means the tax treaty is nowhere near as useful as you might think for avoiding taxes.

kimt

Hi Owen 778,

Thanks for the advice, I have the B1 Visa for Business and Tourist purposes and is valid for 10 year and stays of up to 6 months, so this should be ok, I won't be in the US for a solid 175 days but more over be travelling between the US, Canada and the UK.

Owen778

OK, that makes sense. Though there is some risk even with a B1 rather than using the VWP. I'm sure the immigration experts can comment more, though.

kimt

Hi Owen778,

Understood, though when I applied for the visa and was granted it at the embassy I discussed the possible need to exceed 90 day in one trip and therefore we went for the visa.

We have since also checked this with a visa team and they have said it shouldn't be a problem.

The Tax was flagged as a possible issue.

Cook_County

You will need to apply for an ITIN & file a US tax return to claim the closer connection exception. You may find that any State(s) in which you work require State tax returns to be filed & or tax to be paid.

Steve_

Forget the substantial presence test, it's pretty irrelevant if there is a tax treaty with the other country, read Article 4 of the UK-US tax treaty which is what the IRS actually goes on. It's where your "centre of vital interests" is that matter.

It's a good idea to prophylactically (is that a word?) file a 1040NR and 8840. You write "PROTECTIVE" across the top of the 1040NR, put your name and address on it, fill in schedule OI, attach the 8840 to it and mail it in. This forces the IRS to use the 183-day rule.

Even if you were in the US for more than 183 days, you can still file a 1040NR, an 8833 and claim an Article 4 exemption on it but this is not recommended because you can get into a "competent authority" ruling situation where you have to prove your ties to the other country and they charge thousands for this.

If you're in the US for less than 183 days you can just stay on the UK payroll, not an issue.

Steve_

No you don't. Have a read of Form 8840. Can be filed on it's own, no ITIN required. It's not a bad idea to file a W-7 to get an ITIN so the IRS can follow who you are but it's not required. In fact it's not technically required to file any paperwork at all in the situation he describes but it's better to get ahead of it rather than let the IRS work it out for themselves, imo.

The reason I said above to file a 1040NR is because the IRS is thus forced to make a decision in three years because you've filed a tax return. If you file 8840 on it's own you're just giving them information to use against you and they can use it at any time, no limit on how long they can keep it.

TXLonghorn

See IRC 301.7701(b)-2(d)(1) and Podd v. Commissioner for a list of facts and circumstances to see if you'll meet the closer connection test. Generally closer connection should be a last resort if other exceptions don't apply (e.g., treaty tie-breaker provision).

If you qualify, then file Form 8840 w/ 1040NR as others have mentioned above.

TXLonghorn

And Steve, I'm sorry but you are dead wrong. He still needs to file a 1040NR to report income earned in the US. The closer connection simply means he is not a US resident for tax purposes - i.e., does not report worldwide income. It doesn't change his tax requirements as a nonresident - which is that he still pays US tax on any work performed in the US. It's pretty dangerous to tell people they don't need to pay US taxes when they actually do. It could cause him trouble down the line.

You can only file Form 8840 on its own if you do not have any US sourced income, which is not the case here.