Accepting Bonus from former US employer while on AOS

[David & Kezia 25]

Hi!

I just have a question that I'm not sure if anyone can answer.

My former company has just been sold, and I am about to receive a big bonus from my former employers (as I was a manager before), but I'm still on AOS and legally not able to work here.

I did not really work while in the US, but I worked for an american company from the Phils for the past 3 years until I came here, and I've been very important to the company and contributed a lot to the final sale, so they wanted to give me that bonus (which I'm also very excited about).

I wanted to have that bonus sent to my Philippine USD bank account because it was earned in the Phils and I also need it for my expenses there (like the development of my properties there and for our big wedding next year).

However, my employers are worried that it might be misinterpreted as me still working for them, especially because it is a big amount and I would also be potentially working for the new company that bought our old company (and that's the interview that I'm expecting very soon).

Any ideas on this and the legality of it? My accountant friend says that there is no issue, since it was earned while I was in the Phils and I want to spend it there, and I am not yet a legal resident here.

I hope I can get some feedback on this.

:-)

Kezia

[Jojo92122 1,924]

You are not working in the US so you will be fine. The bonus is for your past performance and earned while you were employed in the Philippines.

However, you will be taxed on the money in the US. As an LPR, your worldwide income is subject to US taxation. It's the cost of being an LPR. US citizens are treated the exact same way; US citizens are taxed on their income even if all of it is earned outside the US.

[newlyweds2010 208]

please instruct your former employer to send the money to me, I will accept it

joking aside, I don't think there will be any problems with that, since it's a bonus that was earned before you moved here. I guess they will write it in their books as such, too. are you still their employee?

[Jojo92122 1,924]

You've already filed for your AOS, so you will likely be an LPR by the end of the year, so you will meet the "green card" test and you will be here for more than 183 days this year so you will meet the "substantial presence" test. You entered the US on 12/30/2011. This means that your 2011 tax year started on 1/1/2011. This means that any income you earned or receive starting on 1/1/2011 is subject to US taxation.

http://www.irs.gov/publications/p519/ch01.html#en_US_publink1000222128

Edited July 6, 2011 by Jojo92122

[newlyweds2010 208]

Just an addition to the post above: if you file your tax returns as married filing separately, then you will only be taxed on income earned in the US; if you file jointly, you will have to file for the whole year, regardless of where you earned that money.

[Jojo92122 1,924]

Just an addition to the post above: if you file your tax returns as married filing separately, then you will only be taxed on income earned in the US; if you file jointly, you will have to file for the whole year, regardless of where you earned that money.

Absolutely wrong. Please read IRS publication 591.

[Jojo92122 1,924]

IRS Publication 519

http://www.irs.gov/publications/p519/ch01.html#en_US_publink1000222118

Residency starting date under green card test. If you meet the green card test at any time during a calendar year, but do not meet the substantial presence test for that year, your residency starting date is the first day in the calendar year on which you are present in the United States as a lawful permanent resident.

If you meet both the substantial presence test and the green card test, your residency starting date is the earlier of the first day during the year you are present in the United States under the substantial presence test or as a lawful permanent resident.

--------------------

Since the OP will be an LPR this year - she meets the green card test for tax year 2011. Since she will be here in the US for more than 183 days in 2011, her tax year starts on the first day of the year she is present in the US under the substantial presence test. Since the OP was here on 1/1/2011 - that is the start of her US tax year. Therefore, any income she receives this year is subject to US taxation.

There is no exception that LPRs are not taxed on non-US income. LPRs' worldwide income are subject to US taxation if they meet the green card test and the substantial presence test.

Edited July 6, 2011 by Jojo92122

[newlyweds2010 208]

WOW, absolutely nice, Jojo. this is what my CPA told me. I can give you his phone number, go talk to him and express your concern. in any event, is it 591 or 519? I'm getting dizzy.

please read the whole page:

Choosing Resident Alien Status

If you are a dual-status alien, you can choose to be treated as a U.S. resident for the entire year if all of the following apply.

You were a nonresident alien at the beginning of the year.

You are a resident alien or U.S. citizen at the end of the year.

You are married to a U.S. citizen or resident alien at the end of the year.

Your spouse joins you in making the choice.

This includes situations in which both you and your spouse were nonresident aliens at the beginning of the tax year and both of you are resident aliens at the end of the tax year.

to the OP: in any event, I would suggest that you do not base your choice on what you read in this forum but refer to a CPA to solve your doubts.

Edited July 6, 2011 by newlyweds2010

[Jojo92122 1,924]

WOW, absolutely nice, Jojo. this is what my CPA told me. I can give you his phone number, go talk to him and express your concern. in any event, is it 591 or 519? I'm getting dizzy.

please read the whole page:

Choosing Resident Alien Status

If you are a dual-status alien, you can choose to be treated as a U.S. resident for the entire year if all of the following apply.

You were a nonresident alien at the beginning of the year.

You are a resident alien or U.S. citizen at the end of the year.

You are married to a U.S. citizen or resident alien at the end of the year.

Your spouse joins you in making the choice.

This includes situations in which both you and your spouse were nonresident aliens at the beginning of the tax year and both of you are resident aliens at the end of the tax year.

to the OP: in any event, I would suggest that you do not base your choice on what you read in this forum but refer to a CPA to solve your doubts.

It's IRS Publication 519. I mistyped 591 and the system would not let me edit it.

What you have posted is about a person who is not a resident alien choosing to be treated as a resident alien. A person may choose this for various tax reasons including the ability to establish a tax history, take a tax deduction for funding a retirement account, etc. It doesn't apply when a person is already treated as a resident alien for tax purposes.

I have no desire to talk to your CPA. I have a graduate tax degree and spend way too many hours advising people on their tax matters as well as preparing tax returns.

[David & Kezia 25]

I'm still confused.

I am still a Filipino citizen and will continue to be (dual), and the earliest I could get my greencard would be on the first week of August (God-willing).

My sister took over my job days BEFORE I even left for the US. I arrived here on Dec 30, and my sister got the job right after Christmas. Technically, I earned the money for the past 3 years I've been working for them, although the final sale of the company wasn't completed until this April.

Also, I plan to use that income for our big wedding in the Philippines next year, and for our expenses of my inherited properties at home (which would need a lot since they are still in my late mother's and late grandfather's names.)

They already sent my sister's bonus (who only worked about 6 months so far with them), but I still haven't got mine. I am just worried that the longer they delay sending that bonus to me, it will make things more complicated for me. It would mean being taxed more, and I'd get less. My boss kept saying that he's still waiting for his lawyer's response because he also doesn't want to get in trouble, because he's afraid to get misinterpreted that I'm still working from here.

:-(

Kezia

[Jojo92122 1,924]

I'm still confused.

I am still a Filipino citizen and will continue to be (dual), and the earliest I could get my greencard would be on the first week of August (God-willing).

My sister took over my job days BEFORE I even left for the US. I arrived here on Dec 30, and my sister got the job right after Christmas. Technically, I earned the money for the past 3 years I've been working for them, although the final sale of the company wasn't completed until this April.

Also, I plan to use that income for our big wedding in the Philippines next year, and for our expenses of my inherited properties at home (which would need a lot since they are still in my late mother's and late grandfather's names.)

They already sent my sister's bonus (who only worked about 6 months so far with them), but I still haven't got mine. I am just worried that the longer they delay sending that bonus to me, it will make things more complicated for me. It would mean being taxed more, and I'd get less. My boss kept saying that he's still waiting for his lawyer's response because he also doesn't want to get in trouble, because he's afraid to get misinterpreted that I'm still working from here.

:-(

Kezia

Yes, I understand that you are a Filipino citizen, and you will remain so as a legal permanent resident. However, a person who isn't even a resident or citizen of the US can be taxed as a US taxpayer and be treated like any other US taxpayer.

Immigration laws and tax laws are completely different matters. Even illegal aliens are required to file tax returns.

-------------------------------

Follow this link; http://www.irs.gov/publications/p519/ch01.html#en_US_publink1000222164

First Year of Residency

If you are a U.S. resident for the calendar year, but you were not a U.S. resident at any time during the preceding calendar year, you are a U.S. resident only for the part of the calendar year that begins on the residency starting date. You are a nonresident alien for the part of the year before that date.

Residency starting date under substantial presence test. If you meet the substantial presence test for a calendar year, your residency starting date is generally the first day you are present in the United States during that calendar year.

--------------------------------

Substantial Presence Test

You will be considered a U.S. resident for tax purposes if you meet the substantial presence test for calendar year 2010. To meet this test, you must be physically present in the United States on at least:

31 days during 2010, and

183 days during the 3-year period that includes 2010, 2009, and 2008, counting:

All the days you were present in 2010, and

1/3 of the days you were present in 2009, and

1/6 of the days you were present in 2008.

[Jojo - this is for calendar year 2010. For calendar year 2011, just move all years up by one.]

---------------------------

You are a first year resident. You are a U.S. resident only for the part of the calendar year that begins on the residency starting date. Under the substantial presence test, your first day of residency will be 1/11/2011 (there's a 10 days exemption) because you will be in the US for more than 183 days this year.

Ask a legitimate tax expert (not H&R Block or other low budget tax preparers) if you doubt what I have posted.

Edited July 6, 2011 by Jojo92122

[Darnell 8,478]

I say declare it on yer IRS forms, and use the foreign income exclusion, it won't get taxed as USA income.

[Jojo92122 1,924]

I say declare it on yer IRS forms, and use the foreign income exclusion, it won't get taxed as USA income.

She can't use the foreign income exclusion because she's in the US. One requirement for the foreign income exclusion is to live and earned the income abroad. The OP lives here in the US. She arrived in the US on 12/30/2010.

Edited July 6, 2011 by Jojo92122

[Darnell 8,478]

She can still use it, however.

[Jojo92122 1,924]

She can still use it, however.

Please explain how she can use it if she does not meet the basic requirements?