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TaxRobin
TaxRobin, Tax Consultant
Category: Tax
Satisfied Customers: 15443
Experience:  International tax
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I am currently working for a UK oil and gas company on a vessel

Customer Question

I am currently working for a UK oil and gas company on a vessel in the Gulf of Mexico. I have just looked at my pay statement for March and noted a considerable amount of US tax has been deducted.
After asking my office what this was about they have come back to me and said they have deducted tax in advance for 3 months, ie for March, April and May. Can they do this and if not what can I do about it?
Submitted: 3 years ago.
Category: Tax
Expert:  TaxRobin replied 3 years ago.
Hello,
When you are an employee in the US, your employer withholds income tax from your pay. Tax may also be withheld from certain other income — including pensions, bonuses, commissions, and gambling winnings. In each case, the amount withheld is paid to the IRS in your name.
The US federal income tax is a pay-as-you-go tax. The withholding is based on the income received in that period.
Regular wages are generally not taxed in advance of payment or time earned. I have not experienced a US withholding requirement that would allow tax to be withheld in advance of wages paid or earned.
US federal and state payroll tax laws generally identify taxable compensation as being an employee's wages when earned or paid.
If there is something in your contract that is related to the company covering your tax filing for your home country then that may be why they have employed this method.
The only other reason I can see is the need to show the tax early because of the difference in the tax year reporting for the US and the UK. The US tax year runs form Jan to Dec 31 of a year. So reporting the tax to end the UK year may have some reason.
I would have to advise in closing that you should ask under what provision allows or requires them to deduct tax on wages that have not yet been earned.
Let me know what they advise please.
In any event you would receive a refund form the US by filing a US return on any amount that is more than your true tax liability.


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