USA Tax Requirement

[Britsabroad]

Firstly I apologise if my question has been dealt with under another Thread.I have read through a number of the threads but haven't been able to find an answer.

My husband's company opened an office in the USA , they still do all of the trade from the UK ( itvis jsut a satelitte office ) and just send money to pay for office rent, car expenses etc. He is paid his salary by the UK company , which is paid into our UK bank account. We pay all our bills with our UK credit card, which we pay off every month from our UK bank account. We also draw cash from our UK bank account from ATM's in the USA for living expenses.

We have been out here for a full tax year so have filed with HMRC for non residence status in the UK so his UK salary is paid tax free but NIC is deducted. My question is, what are his obligations in the USA regarding taxes and returns ? We willbe out here for 2-3 years.

Any advice would be greatly appreciated.

Many Thanks

[Crawford]

Living and working in the US means paying taxes in the US.

You seem to be on an expat sort of deal, but I don't believe that means that you are not expected to submit a US tax form and declare earning etc. Depending on what sort of expat arrangements you are on will determine whether you pay US taxes or not.

Since all your earnings appear to be dealt with in the UK, presume you are not paying US Medicare and Social Security taxes?

What visa are you on? How do you handle health insurance?

I would get some professional financial advise since I believe you do have obligations to the US IRS. (Especially since you mention that you are now non-resident in the UK and don't pay tax there - so you should be paying taxes in the US)

[stednick]

Originally Posted by Britsabroad

Firstly I apologise if my question has been dealt with under another Thread.I have read through a number of the threads but haven't been able to find an answer.

My husband's company opened an office in the USA , they still do all of the trade from the UK ( itvis jsut a satelitte office ) and just send money to pay for office rent, car expenses etc. He is paid his salary by the UK company , which is paid into our UK bank account. We pay all our bills with our UK credit card, which we pay off every month from our UK bank account. We also draw cash from our UK bank account from ATM's in the USA for living expenses.

We have been out here for a full tax year so have filed with HMRC for non residence status in the UK so his UK salary is paid tax free but NIC is deducted. My question is, what are his obligations in the USA regarding taxes and returns ? We willbe out here for 2-3 years.

Any advice would be greatly appreciated.

Many Thanks

Britsabroad:

Link to the United States Department of Internal Revenue Service, our US tax folk.

Internal Revenue Service

Enter website, then hit tabs for "Individuals", then "International Taxpayers", then, "Non resident Aliens".

Hopefully you will find the answers to your question(s). If the website is too confusing and your companies human resources department can't help you then you'll have to pay for professional tax services.

Hope this helps and good luck in your journey.

[Bevdeforges]

The main issue to start with is "what sort of visa are you on?" If it's an immigrant visa of any sort, you will have to file US taxes no matter where your salary is being paid. If it's a non-immigrant visa, your tax status depends on your physical presence over the last couple of years.

On the IRS website, you want to search for the term "international taxpayers" where you'll find a page for non-resident aliens and another for resident aliens. The two pages explain which sort of filing you are supposed to do.
Cheers,
Bev

[jimmyjam]

Originally Posted by Britsabroad

My husband's company opened an office in the USA , they still do all of the trade from the UK ( itvis jsut a satelitte office ) and just send money to pay for office rent, car expenses etc. He is paid his salary by the UK company , which is paid into our UK bank account. We pay all our bills with our UK credit card, which we pay off every month from our UK bank account. We also draw cash from our UK bank account from ATM's in the USA for living expenses.

Dear Britsabroad,

You will have big TAX issues, but also REPORTING PENALTY issues and BANKING SERVICE issues.

(1) Tax issues: if you have been in the US for more than 183 days over the past 3 years (sounds like you have), you are a full fledged US taxpayer and must fill in all your US reporting on EVERYTHING you have in the world (all of your salary income from any companies even those not active in the US, and any other income you may still have in the UK from other ventures, from renting your home, from capital gains on UK investments, UK interest on your bank accounts, etc.) In addition any gifts, inheritances, anything you get from sources outside the US must be reported and if you didn't report them there are hefty penalties.

(2) Reporting Issues: There are some very nasty reports that need to be filled in by people who have financial holdings outside the US, even if NO taxes are owed; These reports carry penalties far higher than any tax imaginable. If you have professional help doing your taxes you will probably know about and have filed these. The FBAR report has a penalty of 10,000$ per account per year if you forget or didn't know to file it, up to 50% of the highest balance in the account every year for each account if the IRS thinks you were "hiding" something. New reports included in the tax return also have confiscatory, life-changing penalties.

(3) Access to financial services: it seems you are still using the UK as a home base for your finances; this might be difficult come end- 2012 and 2013 as many, many major European banks will refuse to hold accounts for "US Persons" (that means you). You will not be allowed to hold UK mutual funds, retirement accounts, or many other investments you may have if you have already built a small nest egg for yourself. You should be able to find a bank that will let you have a simple checking and savings account, but any UK financial investments (including life insurance and mortgages) will probably be prohibited to you.

If you have UK retirement accounts, mutual funds, etc. you should consult an international tax lawyer about your stay in the US.


Some people on this website may contest what I am saying so here is some proof :

ING France and RBS: Overseas Exile: ING France turning away US customers

Reaction to US Tax Law: European Banks Stop Serving American Customers - SPIEGEL ONLINE

U.S. Millionaires Told Go Away as Tax Evasion Rule Looms - Bloomberg

Benelux bank account opening documentation, see paragraph "2 Declaration" bullet point 3 stating you are not a US person: https://www.keytradebank.com/pdf/doc...eSubscr_en.pdf


Other good starting point for learning more about this is the www.aca.ch website. You will be "US persons" (in the eyes of the IRS) with international ties so all of this pertains to you.

If y

[Bevdeforges]

I won't disagree (entirely) but I will draw your attention to the fact that at least two of the articles you cite specifically mention that banks are NOT tossing out their US customers for ordinary checking accounts and such. It's the investment accounts that are causing problems.

But the OP's problems start with the employer. Even if it's "just a satellite office" it's the employer's US presence, and the employer had to have sponsored or applied for the OP's visas, and it's ultimately the employer's responsibility to set up proper payroll accounting for their US representative - which means tax withholding, social security and the whole bit.

The employer is on the hook here as much as the OP and family are.
Cheers,
Bev

[jimmyjam]

Originally Posted by Bevdeforges

I won't disagree (entirely) but I will draw your attention to the fact that at least two of the articles you cite specifically mention that banks are NOT tossing out their US customers for ordinary checking accounts and such. It's the investment accounts that are causing problems.

Thanks for not disagreeing...

From what Britsabroad has said, their finances are fully established in the UK and it sounds like they are not fresh out of school so perhaps they have made some investments or opened some pension plans.

As I mentioned IF they have a retirement nest egg, a British pension plan, a British mortgage that might come up for renewal, a British investment in mutual funds, British life insurance (which is highly possible given the way they describe their situation!), they will likely be refused these services by their British bank since they have become "US persons".

And in any case, as a US person you would not want to hold any British mutual funds and such since the US taxes on any income (capital gains etc) from "offshore trusts" and "offshore funds" are confiscatory, reaching sometimes 80% depending on exchange rates and interest rates. If you have to sell any of your funds while in the US you can count on the capital gains basically going into the pocket of the IRS.

Am I alone in finding it unacceptable, that people on medium term assignment in the US should be limited to a checking and a savings account abroad if, for legitimate reasons, they might need to keep their UK investments (if they plan to go back and retire there for example).

[Bevdeforges]

Jimmyjam, I don't think anyone disagrees with you that it's unreasonable, even outrageous - but that's the way it is. We, the little people, have to find a way to get over, under or around the rules as they stand while the governments fight things out amongst themselves.

The question as asked was whether or not the OP has a US tax obligation - and by God and everything that's holy, they do. And if they're asking the question now, they've possibly blown through one filing deadline, which could be a problem for them.

Whether or not their UK bank will reject their accounts is a matter between them and their banks. But their employer seems to be guilty of leaving them high and dry in the US tax area - and that is a far more immediate concern.
Cheers,
Bev