Withholding tax = $0, how much should I pay?
I'm a UK resident and passport holder, first job in the USA, working as an engineering contractor, earning good money. BUT... my employer is not withholding any tax. Stories go around the office saying that you should figure out how much withholding tax to pay yourself, and pay it Quarterly or be in big trouble with the IRS. I'm single with no dependents.
Does anyone have any advice or experiences they can share? I've tried searching the IRS sites, can't find anything about this, is it an unusual situation? cheers |
Re: Withholding tax = $0, how much should I pay?
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Re: Withholding tax = $0, how much should I pay?
now with less sarcasm.
http://www.moneychimp.com/features/tax_brackets.htm This is a good web site, rememer that you need to pat both federal and state income tax - each state has it's own rules. You'll produce your tax return between 1st Feb - 15th April next year, and need to pay all your tax by 15th April to avoid getting interest charges etc. If you want to start paying your tax now... Fill in this form and give it to your employer to start having tax withheld. http://www.irs.ustreas.gov/pub/irs-pdf/fw4.pdf |
Re: Withholding tax = $0, how much should I pay?
Thanks, but the employer doesn't want to handle the tax, says it's up to the contractors. Calculating the amount isn't the problem, it's more about whether the IRS gets shirty if you wait too long. Supposedly if you earn above x then you should get your withholding tax in quarterly, if it's above y then monthly. But I can't find anything about it on the web (yes, I do know how to Google!)
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Re: Withholding tax = $0, how much should I pay?
I work in a CPA office, but there's only one guy who's here this afternoon to ask and he's busy right now.
I'' try and find out for you. you could always phone the IRS... |
Re: Withholding tax = $0, how much should I pay?
Originally Posted by paulw99
(Post 8808447)
Thanks, but the employer doesn't want to handle the tax, says it's up to the contractors. Calculating the amount isn't the problem, it's more about whether the IRS gets shirty if you wait too long. Supposedly if you earn above x then you should get your withholding tax in quarterly, if it's above y then monthly. But I can't find anything about it on the web (yes, I do know how to Google!)
This may or may not be legitimate. There are lots of cases of employers who try to do this for people who really should be treated as employees precisely because it means that the employer doesn't have to pay any taxes or provide any benefits for the person in question. The employer can get into big trouble if they do this when they should have been treating you as an employee. Similarly you can get into big trouble if you really are an independent contractor and don't pay all of the employment related taxes (not just income tax) that you are supposed to. As far as the income tax part of it goes, if you aren't paying anything by withholding then you definitely need to be making quarterly estimated tax payments to the IRS and (probably) your state. ... but you also need to worry about medicare and social security taxes ... |
Re: Withholding tax = $0, how much should I pay?
If you're self-employed, then you could read up on "Schedule C" and "Estimated Taxes".
Two things come to mind: 1. Just like HMRC, the IRS are sensitive to the distinction of "independent contractor" versus "employee" - you're not necessarily free to decide that you're one or the other. 2. Depending on your immigration status, you could be on shaky ground. For example, on an H-1B visa, you are expected to be an employee. There have been attempts to get round this with what are basically front companies to make independent contractors appear like employees during the H-1B application process, but there's much more auditing of people in H-1B status these days. (Edit: based on http://britishexpats.com/forum/showthread.php?t=676922 it sounds highly likely you're on shaky ground). |
Re: Withholding tax = $0, how much should I pay?
Yes - what exactly is your immigration status?
A year ago you were talking about coming to the US for a couple of years on an F1 visa. A month ago you were planning a trip to visit your Canadian girlfriend in the US, and ... I'm not looking for a job and I don't intend to stay past my 3 months. a UK resident and passport holder, first job in the USA, working as an engineering contractor, earning good money |
Re: Withholding tax = $0, how much should I pay?
Don't forget state as well as federal tax (and also city if you are in NYC).
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Re: Withholding tax = $0, how much should I pay?
>How did you manage that?
I'm like Dr Who, I constantly regenerate! No, actually I am indeed visiting my Canadian girlfriend in the US and I posed the question on her behalf. She is a UK resident and does have a UK passport but she's here on TN status but I didn't think that would make a difference - I just didn't want to complicate things too much! The employer is quite big and they have quite a few expats working there, I hope (and assume) they know what they're doing. |
Re: Withholding tax = $0, how much should I pay?
Originally Posted by paulw99
(Post 8808578)
>
The employer is quite big and they have quite a few expats working there, I hope (and assume) they know what they're doing. Whether what they are doing is legal or not is another question. Anyway, if your girlfriend really is "self-employed" she had better start read up on what that means - and it means more than just income tax ... |
Re: Withholding tax = $0, how much should I pay?
Originally Posted by paulw99
(Post 8808578)
>How did you manage that?
I'm like Dr Who, I constantly regenerate! No, actually I am indeed visiting my Canadian girlfriend in the US and I posed the question on her behalf. She is a UK resident and does have a UK passport but she's here on TN status but I didn't think that would make a difference - I just didn't want to complicate things too much! The employer is quite big and they have quite a few expats working there, I hope (and assume) they know what they're doing. If it is illegal, it won't be the employer that is punished but the person on the visa. Although Indian outsourcing companies farm out their H1-Bs as contractors, that person is an employee of the outsourcing company. |
Re: Withholding tax = $0, how much should I pay?
Originally Posted by paulw99
(Post 8808361)
I've tried searching the IRS sites, can't find anything about this, is it an unusual situation? cheers http://www.wisegeek.com/what-is-a-1099-contractor.htm |
Re: Withholding tax = $0, how much should I pay?
Originally Posted by paulw99
(Post 8808578)
She is a UK resident and does have a UK passport but she's here on TN status
Does she set her own schedule/hours? She'll want to make sure that if she is a contractor to her employer that that's allowed. I was under the impression that it is NOT for TN holders. Yes, the IRS gets shirty. |
Re: Withholding tax = $0, how much should I pay?
Yes, TN status. The company has lots of Canadian contractors so I assume/hope they've sorted out that out.
Thanks so much for all the info, we shall investigate. |
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