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oversea working income enquiry

Hi Team

 

I have a few urgent questions for my friend Mark and hope someone can give the advice.

 

1. Mark will stay in the State for 60 days this year. He spent some days for tourism this year and later he will come to the state for working for some days. He worked in the US for the last year and the year before. He will spend less than 183 days based on 183 days rule for 3 years. Does Mark need to pay global tax or only US income tax?

 

If Mark stays in the state for longer days and pass the 183 days rules, I believe he needs to pay global tax. His oversea income will be much more than his US tax and he stays in one place with less than tax than the state.

 

2. Does Mark need to compensate social security tax and medicare tax for the oversea income when he is not in the state?

 

3. Is there any way for Mark to pay less tax considering he spent most of days not in the state? I heard for the US citizens not working in the US can enjoy a much higher tax free withholdings.

 

4. When Mark comes to the state, does he need to compesate the tax difference immediately because the tax difference between the two countries is a little bit high? I heard if  people need to compensate more than 10% tax, there will be some penalty. However, based on Mark's previous situation, he didnt realise he may need to come to the state for work.

 

Sorry for lots of questions

 

Helen    

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9 Replies

oversea working income enquiry

 

 

@DaveF1006    @Vanessa A  

@pk

 

any expert can help? many thanks

oversea working income enquiry

@Bsch4477 @Hal_Al @xmasbaby0  hope some top expert can help. Thanks

 

Helen

oversea working income enquiry

@pk

 

We need to know what is Mark's home country, what kind of visa he will have, his dates for entering and leaving the US, what kind of job (wages, official or under the table, or self-employment) and maybe a few other details.

 

In general:

If an alien (not a US citizen or green card holder) is temporarily in the US and does not pass the substantial presence test, they file a form 1040-NR to report and pay US tax on US-sourced income only (such as wages from working inside the US.). Note this is legal or illegal employment -- the IRS does not inform to immigration services but they want their tax money if Mark works, whether or not he works legally.

 

If the person does pass the substantial presence test, they are a US person for tax purposes and they pay US income tax on all their world-wide income.  They may be able to claim a deduction or credit if they pay tax on the same income in their home country.   The substantial presence test is a bit more complicated than just "183 days".  See link.

https://www.irs.gov/individuals/international-taxpayers/substantial-presence-test

 

If the person has US-source income (regardless of whether or not they are a resident alien or non-resident alien), they must generally pay into the social security and medicare system, either via social security and medicare tax withholding on wages, or via self-employment tax on self-employment income.

 

If they work overseas, they do not need to pay into the US social security or medicare system (this is also true of US persons working overseas).

 

If a US person works overseas more than 330 days, they may be able to exclude the foreign income from US tax.  That does not apply to a non-resident or resident alien working IN the US.  They either pay tax on their US  income, or all their income, depending on the substantial presence test.  But they may be able to claim a credit or deduction if they also pay tax on the same income overseas.

 

If a person owes US tax, and does not have withholding (because they are self-employed or working under the table) they need to make estimated tax payments to the IRS.  If they don't make estimated payments, they can be assessed a penalty even if they pay in full when they file their return.  If they overpay the estimate, they get the difference back as a tax refund.  However, the penalty for not making estimated payments is not too bad, it's about 1.5% per month of what was owed.  

pk
Level 15
Level 15

oversea working income enquiry

Dear @Helen123 , I remember interactions with you earlier.  Should I assume that your friend Mark is British citizen ? 

(a)     If that is the case then  he would need to pay FICA/SECA only to one country  ( because US and UK have a totalization agreement in place  -- he needs to show US  Social Security Admin  that he is participating in the British version of Social Security,

 

(b) All your other questions have been  responded to by my colleague  @Opus 17 

(c)  I do not understand  what you mean by  "working" -- was he with a work visa  ( and if so which visa  ) ?

(d)  When did he  enter and leave the US ?   Did his visa expire  or what ?  Or was he working remotely for a non-domestic employer .  I ask because  depending on  the facts and circumstances , he may be liable for  the full 15.3%  ( as self-employed )  SECA.

 

If I am wrong on the domicile / citizenship of Mark  , then there may be other things to consider .

 

Please respond

 

--pk 

oversea working income enquiry

@pk @Opus 17 

Many thanks for your both help. Mark comes from Hong Kong and I know him in the state. He held h1b visa in 2022 and 2023. The company asked him to come back Hong Kong at the beginning of 2024 (Jan 8th left the state and he had no salary for the first 10 days and stops his h1b visa). He stayed in the US for 100 days and 300 days in 2022 and 2023. He doesnt earn any wage from US yet in 2024 yet (may be some US bank interests). He had some toursim in the US for 2024 and have stayed in the US for 20 days in total. Now, the company wants to send him again into US for h1b visa.

 

Based on 183 days rules, he stays 100/6+300/3+20 =137 days. 183- 137 = 46 days.

 

1. Can Mark understand it like that way? If he stays in the state for 46 days or more from now on, he needs to pay global tax. If he stays in the state for less than 46 days, he only pays his US sourced income. 

 

2. All of his Hong Kong income doesnt need to pay social security and medicare system and FICA tax

 

3. If he needs to pay global tax (more than 46 days), his hong kong tax credit can be used to deduct some US tax. When he comes to the US, it is better for him to make estimated tax payments to the IRS in 2024 for 2024 tax (rather than 2025) to avoid the tax penalty? 

 

4. If he needs to pay the estimated tax, where could he pay it?

 

Is the understanding correct? Mark really appreciates the help. 

 

Thanks,

 

Helen

 

 

pk
Level 15
Level 15

oversea working income enquiry

@Helen123 , your statements are generally correct.

1. Why does not Mark  join the thread directly instead of through you ?   I am sure he appreciates your help ( since you have lived here in the USA and then moved to Hong Kong ) but .....

2. How did he file his returns for 2022 and 2023 ?

3.   Note also that unless  his stay in the USA is for a full calendar year and as a resident, he will have to use  itemized deduction and that itself (  depending on exact facts and circumstances ) may be a disadvantage.

 

Is there more I can do for you and/or Mark ?

 

pk

oversea working income enquiry

Many thanks, PK. He has his accountant in the USA. However, the accountant didnt reply to him. He is a little bit anxious and therefore I help him ask the question online. I know there are some many professional and kind hearted top experts like you in the community. Thanks again for the help. It really helps him.

 

Helen 

 

pk
Level 15
Level 15

oversea working income enquiry

@Helen123 , we are here to help.

 

Any more I can do for you ?

 

pk

oversea working income enquiry

That is more than enough. Mark really appreciates your help 🙂 Personally I also want to express the thanks to you for the always support. 

 

Helen

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