L1 visa less than 6 months and wife on l2 visa being paid from Hong Kong - advice needed!

[chrisbeef]

Hi,

I was wondering if you could help me. We spoke to a local tax consultant and they weren't too sure on how to proceed. We moved to the US on 28th September and my contract switched to a US contract from HK on October 1st 2022. I have never worked in the US before so I guess I don't meet the substantial Presence test. So does that mean I only report my earning from October 2022 to December 2022 in the US and nowhere else? I don't have any income from abroad and have no income from investments anywhere yet (although I do have an old UK pension that is just sitting there which I can't touch yet). Do I need to declare how much income I made in Hong Kong from January 2022 to October 2022 or is it not relevant at the moment?

For my wife it's a bit more complicated. She works remotely for an American company but in Hong Kong. Before she left they got a remote contract which they said was for the US. It was paid in USD but from the company's Hong Kong Bank account. Does she owe tax in US as its been less than six months? It was a US contract but the money came from Asia so a bit confused? I guess she does but just want to check! Is this US income is being paid form Asia?

As it is a freelance contract which forms does she need? Does she have to pay full medicare/social security as the company paid nothing towards it? They also didn't pay any tax on her behalf as was a freelance contract. We had no idea it would be so involved for freelance taxes in the US.

We're very confused to what we should be doing as this is our first filing in the US!

Thanks in advance for any help you might be able to give!

[ErnieS0]

TurboTax does not support non-resident returns. Contact TurboTax partner Sprintax.com. They are specialists in non-resident returns.

Nonresidents are only required to report income effectively connected to the U.S. Your U.S. earnings are taxable to the U.S.

In one part of your post you say “I don't have any income from abroad,” but then say “Do I need to declare how much income I made in Hong Kong from January 2022 to October 2022,” so it’s unclear to me whether or not you made any money in Hong Kong.

I would have to know more about your wife’s exact arrangement, but it appears she would only be taxed on self-employed earnings while present in the U.S.

Read what the Tax Champs say in Overseas independent contractor.

As a non-resident, she would not pay Social Security or Medicare tax.

The IRs says:

Individuals who are neither citizens nor residents of the United States are not subject to self-employment tax.

Learn more at Self-Employment Tax for Businesses Abroad.

Contact Sprintax.com for additional questions.

[chrisbeef]

Hi @ErnieS0 

Thanks for your reply.

I will take a look at Sprint Tax.

Sorry for the confusing post. I'm still a bit confused from earlier!

So from January 2022 to September 27th 2022 I lived in Hong Kong and worked for a US company and paid taxes in Hong Kong. Before I left I cleared all my taxes in Hong Kong so I didn't owe anything when I left.

As the US tax year is from January 2022 to December 2022 do i even mention the time I spent in Hong Kong as I've already paid taxes in Hong Kong and it's not US Earnings? As the tax consultant today was saying they might need to send my tax forms off for Hong Kong but I thought it might not be relevant?

Regarding my wife - thanks very much! Will look into those links.

[ErnieS0]

The IRS rule is that income that is effectively connected with the U.S. is taxable to the U.S. Without knowing the specifics of your arrangement, I would say if you lived and worked in Hong Kong and paid taxes to Hong Kong, your income is probably not effectively connected to the U.S.

It would be the same as a U.S. citizen working in the U.S. for a subsidy for a Hong Kong company. That person would not owe Hong Kong tax.

The following categories of income are usually considered to be connected with a trade or business in the United States.

• You are considered to be engaged in a trade or business in the United States if you are temporarily present in the United States as a nonimmigrant on an "F," "J," "M," or "Q" visa. 
   
• If you are a member of a partnership that at any time during the tax year is engaged in a trade or business in the United States, you are considered to be engaged in a trade or business in the United States.
   
• You usually are engaged in a U.S. trade or business when you perform personal services in the United States.
   
• If you own and operate a business in the United States selling services, products, or merchandise, you are, with certain exceptions, engaged in a trade or business in the United States. For example, profit from the sale in the United States of inventory property purchased either in this country or in a foreign country is effectively connected trade or business income.
   
• Gains and losses from the sale or exchange of U.S. real property interests (whether or not they are capital assets) are taxed as if you are engaged in a trade or business in the United States. You must treat the gain or loss as effectively connected with that trade or business.
   
• Income from the rental of real property may be treated as ECI if the taxpayer elects to do so.

Effectively Connected Income (ECI)

[chrisbeef]

Thanks very much!

[chrisbeef]

@ErnieS0 For my wife - we both live in Virginia, she works from home on an L2 visa, but is paid from Hong Kong in USD - does that make any difference in terms of how she files here?

[ErnieS0]

No. Residency matters, not how she is paid. She would be a part-year Virginia resident as soon as you move and begin working in the state. Worldwide income is taxed by Virginia if you live in the state.

If she were paid in Hong Kong dollars, you would have to do a conversion, but since she is paid in USD, reporting is easy.