Stuck outside USA due to pandemic

[yk6]

I moved to USA/California for a Job in mid 2019. In March 2020, I went for trip to my home country, however, due to lockdowns and travel restrictions, I was stuck in my home country for rest of 2020. I continued my job remotely and received USA salary. I have W2. I return to USA in 2021.

How should I file my 2020 taxes (federal and state)? Do I become non-resident for 2020? Please advise. 

Thank you.

[pk]

@yk6  what visa did you come in with ?  When did you enter the USA and how many days/time did you spend in the USA during the years 2018, 2019 and 2020 ?  Are you still working for the same employer as in 2020?  Which country are you from ?  Did your employer withhold federal, State  and FICA taxes the whole of 2020 ( even when you were  working remotely ) ?  Did you have to pay any taxes  to your home country  for the period  that you were away from the USA ( i.e.  during the year 2020 ) ?  Are you married and if so was your family in the USA all through  2020 ? 

[yk6]

@pk : Thank you for your response.

I entered USA on h-1b visa in mid 2019 and spent about six months in 2019. In 2020, I was in USA in January and February and a week of March, so about 70 days. I never worked or lived in USA before 2019. I am still working for same employer. Home country is India. My employer did withhold federal, state tax and FICA whole of 2020, same amount as if had I been physically present in USA. Tax year cycle of my home country is different and I may possibly have to pay taxes based on my global income in my home country, but it will happen later after March 2021, when I file returns in home country - but this is unclear to me at the moment. I am not married.

Thank you.

[pk]

@yk6  first Namaste ji

second, based on your note it appears that by the end of the year 2019, you had met the  substantial presence test and therefore  for 2020 you would have been a  Resident Alien for Tax Purposes and be taxed on your world income.

Third,  because  your actual work was done in India ( remotely )  the income  for that period  , even though  by an US entity, is foreign income for US  purposes. India would probably treat this  income as  in-country sourced and tax the income . It also means that  your employer probably should not have  collected  State  and FICA taxes .  

Fourth, give the situation,  you should get  a corrected  W-2  showing ONLY the US sourced income and the actual withholding.  This would mean that  (a) you file  and  finalize the Indian  Return and  then (b) prepare the US return wherein you recognize  your world income ( US sourced  and the Indian sourced ) and  taxes paid to India  ( on the  India sourced income).  This way you can indeed get foreign tax credit for the   taxes imposed by India on the   India sourced income.  The ratio of  foreign income to world income should allow you get  essentially the full credit for foreign taxes ( depending on the tax rate imposed by India ).  Also there would be  no State tax  on the foreign  income ( because you were  not in the state---- this depends on the State in question, though.

Is there more I can do for you ?

[yk6]

@pk Namaste to you too and thank you for your response. 

Actually, you confuse me more. Please forgive my ignorance, as per this page when calculating substantial presence for 2020, it is said to consider only one-third of days of 2019.  Hence, as per my calculation, for 2020 I was present 70 days, in 2019 I was present for 6 months so one-third is approximately 60 days and I was not present in 2018 at all. So, 70 + 60 + 0 = 130 which is much short of 183 required. Hence I am confused whether I should file 2020 taxes as non-resident.

Thank you. 

[pk]

@yk6 , you are correct in your position that for 2020 you may not be a resident for tax purposes.  And this would imply that your employer would have to withdraw the FICA taxes (  7.65% contribution by you and another 7.65% by the employer ) from  IRS -- refund to you and correct its books.  And you will file a 1040-NR, not supported by  TurboTax.  Also it would mean that  your employer has made an error in counting you as an employee  during  the "abroad" period of 2020.  Also  the question may arise as to  whether the employer was justified in  asking  for a H-1B visa  because if the work can be performed  remotely , then why an H-1B -- this is only my view without any actual data.

Note that your employer by his actions  has treated  you as an employee ,  that it had intention to continue employing you in the USA and once the  temporary travel restrictions were  lifted  brought you back and continues to employ  you here in the USA ( not remotely).  Also you ( I suppose  ) went back to India  for a short trip and had all the intentions of coming back  and continuing with your H-1B  employment.  Therefore , my suggestion would be  that let the sleeping dog sleep ---  see if your employer is willing to issue you a corrected  W-2 for the  portion you were present and  you then use self-employment ( foreign location ) for the rest of the year and  recoup the  Indian taxes to the extent  allowable.  Else  just file as normal ( with the current  W-2), pay the  Indian taxes  for the portion earned in India and ignore  trying to ameliorate the  Indian tax bite by claiming foreign tax credit

It really is a question  whether you were temporarily absent ( more than the 10 float days  usually allowed ) or really had left the USA and have re-entered.  Perhaps you should consult with your employer tax people / HR and see what they suggest.  It goes beyond just a tax  or form issue.  There are implications  into  the  work visa, I suspect.

Is there more I can do for you ?  If you wish to go more into  these "personal" situation, perhaps ,and if need be, you can PM 

pk