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bigduckontax
bigduckontax, Accountant
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I am a US citizen living in the UK on a spousal visa. I am

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Hello! I am a US citizen living in the UK on a spousal visa. I am in the process of starting my own company and wanted to ask whether it is in my interest set up the company in my husband's name and have him hire me as an employee. It is wise to report salary as an employee rather than dividends and/or self employed income in the US? Additionally, will holding shares in the company present difficulties with my US tax reporting obligations?
JA: Are you filing as a sole proprietor or independent contractor?
Customer: I'm not sure yet.
JA: Anything else you want the Accountant to know before I connect you?
Customer: No thank you!

Hello, I am one of the experts on Just Answer and pleased to be able to hlp you with your question.

Unfortunately, US ex pats are liable for US taxes even if they do not live in the Union. Most expats are able to offset all of their foreign earned income with the following:

  • Foreign Tax Credit
  • Foreign Earned Income Exclusion
  • Foreign Housing Exclusion

In view of the complexity that this creates it might be wiser to be an employee and then everything would be straightforward. Having said that, any director of an UK company is an employee per se anyway.

Customer: replied 10 days ago.
Thank you! Is it legal in the USA to have my husband set up the company in his name and have me as the sole employee?

That is irrelevant if it is an UK company.

Customer: replied 10 days ago.
Alright that makes sense. We were just concerned that there may be a law in the US against this and the IRS come after me for tax evasion? Just want to make sure all of our bases are covered and it’s completely legal to set up the company in this way
Customer: replied 10 days ago.
Also, I wanted to ask if it’s wise to report salary as an employee rather than dividends and/or self employed income in the US?

Providing you are declaring any salary or dividend any individual who is an US citizen receives you will not be in any difficulty.

It reslly does not matter.

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Customer: replied 10 days ago.
Thank you will do!

Thank you for your support.