Being paid in the UK tax free

[larnar1309 101]

Hello,

 

I moved and have been living in Boulder, CO since April 2018. Just before I moved here I filed to say that I would no longer be paying tax in the UK and would pay tax in the USA. I am still being paid by a UK company as a consultant and I can't seem to find anyone here who can help me with how I should be filing my tax.

 

I have been to several different places including H and R block and other chain tax services and they say they don't deal with overseas income! 

 

I am getting worried as I've been here several months now not paying any tax on my income. Surely it shouldn't be that hard for me to do it? 

 

Any advice appreciated!!

[SeabreezeUF 31]

Hi,

 

We have same situation that you're in. I'm very surprised you weren't able to get advice on this from any tax advisers! I can't tell from your post if you're getting paid into a UK or US bank account but I'll try to help.

 

First, are you set up to work as a contractor here? You need to establish yourself as a business- most likely an LLC.  I'm not 100% sure how CO deals with that but in our state, we just had to fill out a form and file it, paying a minimal fee to do so.

 

After you're established as an LLC, open a bank account here in the US for that business.  Have your UK company pay you directly into this account. This makes the rest very easy for an accountant (or yourself) to do the taxes. Money coming into this account is all taxable. We then transfer what he needs to live to his personal account. Sum it up the payments into the business at the end of the year, calculate taxes due on it, send check to IRS.  We assumed 40%-50% going to taxes so he never transferred too much out and had the savings to cover taxes.

 

The UK company pays my husband directly into his US company's (he is a business of one- himself) bank account.  For the first year (the year you're in), he waited to pay all his taxes at the end of the tax year. He used each monthly transaction to add up his income to then take taxes out of all of it.  We used that number to do estimated taxes from then on- in other words, we assume he'll pay the same amount of taxes but want to pay it over the course of the year, so each quarter, we send the IRS 1/4 of what we expect him to have to pay for the total year.  If we get it wrong, we either pay a bit more at the end of the year or get some money back.

 

You should have no problems getting a tax adviser to help sort that out for you. Maybe ask someone for advice on setting up and LLC and taxes for a contractor. It's the foreign bit that's throwing them off apparently.

 

I hope that helps some.  

[Wuozopo 4,293]

First of all, you have to establish if you are an employee of the company or a contractor.

 

I have spoken to IRS directly about this after bumping up to a specific department.

What is supposed to be done according to the IRS person:

 

Your UK company must get an Employer Identification Number (EIN) from the IRS. Yes, they do issue them to UK companies. The lady I spoke to issues them.

 

If a contractor you are considered self-employed to the IRS. You file Schedule C and Schedule SE along with whatever other forms your tax return requires. Nothing is held out of your checks by the employing company for tax, Social Security, and Medicare. You are responsible for sending quarterly estimates for those to the IRS. Think of it as doing your own withholding. But instead of each payday, you only are required to send every 3 months. There are certain dates when quarterly payments are due and you pay it online or mail a check. (You can look dates  up on the IRS.GOV website.)  The IRS does not want you to pay it all in at tax filing time. You can owe a penalty for not paying as you go.

 

Your employing company has to issue you a 1099-MISC in January following the end of a tax year showing your total yearly earnings. They send the same information to the IRS. That's why they need an EIN with the IRS. They can submit to the IRS online.

 

If you are an employee, the UK company must withhold tax, Social Security, and Medicare from your paycheck. They must transfer that money to the IRS each time they pay you. Again, that's why they need an EIN. It can be set up to do this online or there are agents that will do it for them for a fee. They can't pass that fee on to you. An employer also has to pay (out of their pocket) half of your Social Security fees. At the end of the tax year, they issue you a W2 wage statement and report the same to the IRS. 

 

Being a contractor seems easier on your company. 

 

Edit to add: After seeing the previous post added while I was typing, I wanted to say I have been a self-employed contractor for a number of years. I did not set up anything to be a contractor. Maybe that depends on your state. I did not set up an LLC.  I report my business earnings to the IRS on Schedule C when I file my own taxes. 

 

 

 

 

Edited July 23, 2018 by Wuozopo

[SeabreezeUF 31]

25 minutes ago, Wuozopo said:

First of all, you have to establish if you are an employee of the company or a contractor.

 

I have spoken to IRS directly about this after bumping up to a specific department.

What is supposed to be done according to the IRS person:

 

Your UK company must get an Employer Identification Number (EIN) from the IRS. Yes, they do issue them to UK companies. The lady I spoke to issues them.

 

If a contractor you are considered self-employed to the IRS. You file Schedule C and Schedule SE along with whatever other forms your tax return requires. Nothing is held out of your checks by the employing company for tax, Social Security, and Medicare. You are responsible for sending quarterly estimates for those to the IRS. Think of it as doing your own withholding. But instead of each payday, you only are required to send every 3 months. There are certain dates when quarterly payments are due and you pay it online or mail a check. (You can look dates  up on the IRS.GOV website.)  The IRS does not want you to pay it all in at tax filing time. You can owe a penalty for not paying as you go.

 

Your employing company has to issue you a 1099-MISC in January following the end of a tax year showing your total yearly earnings. They send the same information to the IRS. That's why they need an EIN with the IRS. They can submit to the IRS online.

 

If you are an employee, the UK company must withhold tax, Social Security, and Medicare from your paycheck. They must transfer that money to the IRS each time they pay you. Again, that's why they need an EIN. It can be set up to do this online or there are agents that will do it for them for a fee. They can't pass that fee on to you. An employer also has to pay (out of their pocket) half of your Social Security fees. At the end of the tax year, they issue you a W2 wage statement and report the same to the IRS. 

 

Being a contractor seems easier on your company. 

 

Edit to add: After seeing the previous post added while I was typing, I wanted to say I have been a self-employed contractor for a number of years. I did not set up anything to be a contractor. Maybe that depends on your state. I did not set up an LLC.  I report my business earnings to the IRS on Schedule C when I file my own taxes. 

 

 

 

 

Just different ways to do different things. Both work and your details probably are more helpful since I forgot the EIN part of it.  I will edit or delete my post since it will cause confusion since that wasn't my intention.

[SeabreezeUF 31]

49 minutes ago, SeabreezeUF said:

Hi,

 

We have same situation that you're in. I'm very surprised you weren't able to get advice on this from any tax advisers! I can't tell from your post if you're getting paid into a UK or US bank account but I'll try to help.

 

First, are you set up to work as a contractor here? You need to establish yourself as a business- most likely an LLC.  I'm not 100% sure how CO deals with that but in our state, we just had to fill out a form and file it, paying a minimal fee to do so.

 

After you're established as an LLC, open a bank account here in the US for that business.  Have your UK company pay you directly into this account. This makes the rest very easy for an accountant (or yourself) to do the taxes. Money coming into this account is all taxable. We then transfer what he needs to live to his personal account. Sum it up the payments into the business at the end of the year, calculate taxes due on it, send check to IRS.  We assumed 40%-50% going to taxes so he never transferred too much out and had the savings to cover taxes.

 

The UK company pays my husband directly into his US company's (he is a business of one- himself) bank account.  For the first year (the year you're in), he waited to pay all his taxes at the end of the tax year. He used each monthly transaction to add up his income to then take taxes out of all of it.  We used that number to do estimated taxes from then on- in other words, we assume he'll pay the same amount of taxes but want to pay it over the course of the year, so each quarter, we send the IRS 1/4 of what we expect him to have to pay for the total year.  If we get it wrong, we either pay a bit more at the end of the year or get some money back.

 

You should have no problems getting a tax adviser to help sort that out for you. Maybe ask someone for advice on setting up and LLC and taxes for a contractor. It's the foreign bit that's throwing them off apparently.

 

I hope that helps some.  

I missed the window to be able to edit my post.  Please note this is just how *we* did this. There are a few different paths to take but my husband wanted his business operations to be totally separate from persona matters for liability reasons, which is a big reason many set up an LLC. But it's not required. You can search online to see if you an LLC makes sense to you.

 

Just trying to help but mods please delete my posts if they're problematic.

 

[larnar1309 101]

59 minutes ago, SeabreezeUF said:

Hi,

 

We have same situation that you're in. I'm very surprised you weren't able to get advice on this from any tax advisers! I can't tell from your post if you're getting paid into a UK or US bank account but I'll try to help.

 

First, are you set up to work as a contractor here? You need to establish yourself as a business- most likely an LLC.  I'm not 100% sure how CO deals with that but in our state, we just had to fill out a form and file it, paying a minimal fee to do so.

 

After you're established as an LLC, open a bank account here in the US for that business.  Have your UK company pay you directly into this account. This makes the rest very easy for an accountant (or yourself) to do the taxes. Money coming into this account is all taxable. We then transfer what he needs to live to his personal account. Sum it up the payments into the business at the end of the year, calculate taxes due on it, send check to IRS.  We assumed 40%-50% going to taxes so he never transferred too much out and had the savings to cover taxes.

 

The UK company pays my husband directly into his US company's (he is a business of one- himself) bank account.  For the first year (the year you're in), he waited to pay all his taxes at the end of the tax year. He used each monthly transaction to add up his income to then take taxes out of all of it.  We used that number to do estimated taxes from then on- in other words, we assume he'll pay the same amount of taxes but want to pay it over the course of the year, so each quarter, we send the IRS 1/4 of what we expect him to have to pay for the total year.  If we get it wrong, we either pay a bit more at the end of the year or get some money back.

 

You should have no problems getting a tax adviser to help sort that out for you. Maybe ask someone for advice on setting up and LLC and taxes for a contractor. It's the foreign bit that's throwing them off apparently.

 

I hope that helps some.  

Thanks for your suggestion. My main issue is that I am not my own business so I don't want to set up an LLP etc. I work for a British company and they pay in GBP to my British Bank account. They will not pay into a US bank account.  So I need to find someone who can help me with this particular setting.

[SeabreezeUF 31]

19 minutes ago, larnar1309 said:

Thanks for your suggestion. My main issue is that I am not my own business so I don't want to set up an LLP etc. I work for a British company and they pay in GBP to my British Bank account. They will not pay into a US bank account.  So I need to find someone who can help me with this particular setting.

I'm  hoping  @Wuozopo will be able to help you! My husband's company refused to deal with US payroll and moved him into a contractor's role to avoid the headache so I'm not sure what to do   It's probably  worth calling a few of the international tax accountancy firms in Denver to explain your situation, make an appointment with whoever seems more useful and see what they advise.

[larnar1309 101]

12 minutes ago, SeabreezeUF said:

I'm  hoping  @Wuozopo will be able to help you! My husband's company refused to deal with US payroll and moved him into a contractor's role to avoid the headache so I'm not sure what to do   It's probably  worth calling a few of the international tax accountancy firms in Denver to explain your situation, make an appointment with whoever seems more useful and see what they advise.

Yea - it’s just tough because I can’t drive yet and my husband works full time so to get into Denver isn’t exactly easy for me! There doesn’t seem to be anything available in boulder  I am so surprised that there is not really any government support with this kind of issue that must happen to so many people! Why are they making it so complicated 😭 wish someone would just tell me a percentage and I would just pay that to the IRS every quarter 🙈🙈

[SeabreezeUF 31]

2 minutes ago, larnar1309 said:

Yea - it’s just tough because I can’t drive yet and my husband works full time so to get into Denver isn’t exactly easy for me! There doesn’t seem to be anything available in boulder  I am so surprised that there is not really any government support with this kind of issue that must happen to so many people! Why are they making it so complicated 😭 wish someone would just tell me a percentage and I would just pay that to the IRS every quarter 🙈🙈

They may be able to help you remotely so perhaps call and ask? I used to do my taxes with my accountant remotely when I was in the UK so it's worth a shot. You could also try calling the IRS directly and see what they tell you.  And if you ever get an answer, please let us know!

[Umka36 781]

How to Report Wage Income Paid by Foreign Governments or International Organizations

 

Green Card Holders (Lawful Permanent Resident) Working in the United States

If you are a green card holder employed by a foreign government or international organization, you are not subject to self-employment taxes and may not voluntarily participate in the U.S. social security system.

If you expect to have tax due at the end of the year, you must file estimated tax payments because your compensation is not subject to withholding. The estimated payments ensure that you have paid your proper amount of tax throughout the year. Estimated payments are made using Form 1040ES, Estimated Tax for Individuals. Forms are filed quarterly: April 15th, June 15th, September 15th, and January 15th. There is a penalty for failure to make estimated tax payments.

 

https://www.irs.gov/individuals/international-taxpayers/how-to-report-wage-income-paid-by-foreign-governments-or-international-organizations-for-work-performed-in-the-united-states

[larnar1309 101]

5 hours ago, SeabreezeUF said:

They may be able to help you remotely so perhaps call and ask? I used to do my taxes with my accountant remotely when I was in the UK so it's worth a shot. You could also try calling the IRS directly and see what they tell you.  And if you ever get an answer, please let us know!

Will do! Your friend just PMd me and it looks like I am in the same situation that her husband went through  so hopefully will get it all sorted soon! Thanks for all your support and suggestions

[larnar1309 101]

5 hours ago, Umka36 said:

How to Report Wage Income Paid by Foreign Governments or International Organizations

 

Green Card Holders (Lawful Permanent Resident) Working in the United States

If you are a green card holder employed by a foreign government or international organization, you are not subject to self-employment taxes and may not voluntarily participate in the U.S. social security system.

If you expect to have tax due at the end of the year, you must file estimated tax payments because your compensation is not subject to withholding. The estimated payments ensure that you have paid your proper amount of tax throughout the year. Estimated payments are made using Form 1040ES, Estimated Tax for Individuals. Forms are filed quarterly: April 15th, June 15th, September 15th, and January 15th. There is a penalty for failure to make estimated tax payments.

 

https://www.irs.gov/individuals/international-taxpayers/how-to-report-wage-income-paid-by-foreign-governments-or-international-organizations-for-work-performed-in-the-united-states

Thanks! I've been told about the forms and stuff but I think I have to use different ones due to being paid in Pounds and into a British account!