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Tax.appeal.168
Tax.appeal.168, Accountant
Category: US Tax
Satisfied Customers: 4796
Experience:  3+ decades of various tax experience, including ex-pat, tax prep and accounting as a business owner.
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Hi my girlfriend has been speaking to you about us moving to

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Hi my girlfriend has been speaking to you about us moving to the us, my girlfriend soon to be wife will be the one who has the work visa. I work for a uk company, pay uk tax and I am going to keep a Uk home aswell so ill still be a uk citizen, I will still be working for a uk company and will only be present in the us for maybe 140 days of the year, I don't want to become a us resident, but im trying to get my head round the substantial presence test, will I be applicable to this, I usually work 38 days away and then 33 at home just depending, it can change time to time but I always work/ be away for more than 220 days from the us? Any information would be appreciated. Also it's California tax I need to know about so state and federal, will I be applicable being a uk citizen and paying my tax in the uk, also if we are married does that matter, can I be a non resident and my girlfriend a resident under her work visa.

Kind regards,

Luke summers
Hello, sorry for the delayed response, I was away from the computer the majority of the day. Also, thank you for using our Q&A service today and requesting my assistance. Now let me see if I understand you correctly.

1) You are only planning to be in the U.S. for 140 days of the year, but you will not have any U.S. source income, and you want to know if the substantial presence test will be applicable in your case? Is my understanding correct?

A1: The following applies as it relates to the substantial presence test. SEE BELOW:

You will be considered a U.S. resident for tax purposes if you meet the substantial presence test for the calendar year. To meet this test, you must be physically present in the United States on at least:

31 days during the current year, and
183 days during the 3-year period that includes the current year and the 2 years immediately before that, counting:
All the days you were present in the current year, and
1/3 of the days you were present in the first year before the current year, and
1/6 of the days you were present in the second year before the current year.

If ALL of the above DOES NOT apply to you, the substantial presence test will not apply to you. Even if you are in the U.S. 31 days in the current year that you arrive, if you have not been in the U.S. 183 days during the 3-year period that includes the current year and the 2 years immediately before that, the substantial presence will not apply to you, and for tax purposes you will be considered a non resident alien. As you will continue to work for a UK company, even when you do start meeting the requirements of the substantial presence test, you may be eligible to still be considered a non resident by claiming the Closer Connection exemption.

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Q: Also it's California tax I need to know about so state and federal, will I be applicable being a uk citizen and paying my tax in the uk,

A: As you will remain a citizen of the U.K., and I am assuming will only have U.K. sourced income, you will still be required to pay tax on the applicable income in the U.K. As a non resident alien of the U.S., IF you do not have the following types of income, in the U.S., you will not be taxed on your U.K. income;


Income that is Effectively Connected with a trade or business in the United States

U.S. source income that is Fixed, Determinable, Annual, or Periodical (FDAP)

REFERENCE SOURCE:

http://www.irs.gov/Individuals/International-Taxpayers/Taxation-of-Nonresident-Aliens

You can refer to the reference source for more detailed information on the breakdown of those two types of income.

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Q: Also it's California tax I need to know about so state and federal, will I be applicable being a uk citizen and paying my tax in the uk,

A: Please let me know what type of visa your soon to be wife will be working under.

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Q: also if we are married does that matter, can I be a non resident and my girlfriend a resident under her work visa.

A: The answer is yes. SEE THE FOLLOWING REFERENCE for more details;

http://www.irs.gov/Individuals/International-Taxpayers/Nonresident-Spouse-Treated-as-a-Resident

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I know this is a lot to take in, so take your time, sip over a cup of coffee or two, and read over the info more than once if you need to. So that I can research the specifics relating to the work visa, again, please provide me with the work visa type.

As you have choices, we thank you for using this Q&A service today.
Customer: replied 4 years ago.
I'm slightly confused now when my girlfriend asked the question before u have answered Thank you for your patience. As I mentioned earlier, I was going to be away from the computer for a few hours. I'm back, so which original question would that be?1) Do I have to pay tax in California? You wrote that you are considering moving to California, which after 9 mos., you will be considered a resident for tax purposes. As a resident of California you will be taxed on your worldwide income. SEE BELOW:(1) California residents pays California tax on all their income.(2) California generally taxes California-source income, regardless of a person’s place of residency. A non-Californian will therefore still be taxed on all services performed within California, on rental income from California property, on proceeds from sales of California real estate, and on other types of California source income.So, who is a resident? In determining residency, California law provides two presumptions. The first presumption is that a taxpayer who, in the aggregate, spends more than 9 months of a taxable year in California will be presumed to be a California resident. The second presumption is that an individual whose presence in California does not exceed 6 months within a taxable year and who maintains a permanent home outside California is not considered a California resident provided the taxpayer does not engage in any activity or conduct within the State other than as a seasonal visitor, tourist, or guest.The substantial presence test seems to conflict with this answer, unless I'm getting confused? If I kept on coming in on an esta or my girlfriends E2 investors Visa would I have to do the presence test? We would also have a home in the uk but also buy one in the us ( the house/ buisness would be in my wifes name)and our two children would be in the us. But I would be in the us for less than 6 months.How would they pick up on the presence test? I assumed I would be at work from the uk then when I'm off work I would be able to travel to the USA as long as I didn't spend longer than 6 months in the USA( no longer than 6 months a year, always like one month on one month off, i will actually spend longer out of the usa) not work and stay for a month purely as a guest? Holiday in the USA? I would be paying tax in the uk and as I have read the treaty by paying tax in the uk I wouldn't be required to pay in USA also. Thank you
Hello again,

Yes, when I responded to your previous questions with the information, I responded based off of you being considered a resident of the state of California for tax purposes, and what I wrote in my original response as it relates to the state California applies.

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YOU WROTE:

"The substantial presence test seems to conflict with this answer, unless I'm getting confused? If I kept on coming in on an esta or my girlfriends E2 investors Visa would I have to do the presence test? We would also have a home in the uk but also buy one in the us ( the house/ buisness would be in my wifes name)and our two children would be in the us. But I would be in the us for less than 6 months.How would they pick up on the presence test? I assumed I would be at work from the uk then when I'm off work I would be able to travel to the USA as long as I didn't spend longer than 6 months in the USA( no longer than 6 months a year, always like one month on one month off, i will actually spend longer out of the usa) not work and stay for a month purely as a guest? Holiday in the USA? I would be paying tax in the uk and as I have read the treaty by paying tax in the uk I wouldn't be required to pay in USA also."

------------------------------------------

Let's see if I can simplify this matter for you. First, my understanding is that for 6 mos., a year, off and on, you will be in the U.S., and you may be purchasing a home here (in California), which by the way, you may want to rethink. The taxes in the state of California are very high and quite honestly a number of people, especially those who have substantial wealth are selling their properties and moving to other states. You will have no U.S. sourced income and no effectively connected income, etc. Is my understanding correct? As for the E2 investors visa, I will research this to see what rules apply and get back with you on this, and the substantial presence test. So in general, based on you traveling back and forth to the U.S., for a month here and there, (sort of like a vacationer), you will have NO U.S. sourced income whatsoever, and you want to know if you are going to have tax obligations to either California or the IRS under this situation? Is this correct?

Hello again,

Relating to the substantial presence test, as I wrote previously, the following applies;

You will be considered a U.S. resident for tax purposes if you meet the substantial presence test for the calendar year. To meet this test, you must be physically present in the United States on at least:
31 days during the current year, and
183 days during the 3-year period that includes the current year and the 2 years immediately before that, counting:
All the days you were present in the current year, and
1/3 of the days you were present in the first year before the current year, and
1/6 of the days you were present in the second year before the current year.

*Note that the 183 days does not have to be consecutive.*

REFERENCE SOURCE:

http://www.irs.gov/Individuals/International-Taxpayers/Substantial-Presence-Test

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TRANSLATION: unless you meet an exception, which, based on what you have written, it does not appear that you do, after you have been in the U.S. for 183 days during a 3 year period, for tax purposes, you will be considered a resident alien. The following applies to the taxation of resident aliens;

A resident alien's income is generally subject to tax in the same manner as a U.S. citizen. If you are a resident alien, you must report all interest, dividends, wages, or other compensation for services, income from rental property or royalties, and other types of income on your U.S. tax return. You must report these amounts whether from sources within or outside the United States.

REFERENCE SOURCE:

http://www.irs.gov/Individuals/International-Taxpayers/Taxation-of-Resident-Aliens

--------------------------------

As for the E2 investor visa, the following applies;



1. They have to meet the substantial Presence Test, and will have to file Form 1040NR or Form 1040, depending on the Substantial Presence Test.

2. They will have to declare their world wide income in the United States Tax Filing.

3. They have the option to choose First Year Choice or file as Dual Status alien, depending upon their non resident tax situation.

4. They have to pay Federal, State, Social Security and Medicare Taxes.

5. If their spouse or children do not have ITIN, they have to get an ITIN by Filing Form W-7 for their tax filing.

6. E1 and E2 visa tax holders can also claim treaty based benefits, based on the tax treaties between their foreign country and the United States.

REFERENCE SOURCE:

http://www.visataxes.com/E2-visa-taxes-E1-visa-taxes.php

Let me know if I have clarified matters for you.


Customer: replied 4 years ago.
Hi thank you for reply, I understand under California state law I can be here for six months and not pay tax but under federal law the substantial presence test applys no matter what state. Your in. If I exceed 183 days over a 3 year period I would pay federal tax ( how much is federal tax), also how would I qualify for the closer ties test so this could mean I still pay uk tax, also how does the tax treaty work as I would of payed tax in the uk already.

Kind regards,

Luke summers
Hello again,

From my experience, information tends to get lost in translation when communicating over any wireless form, internet, text, etc. So I will make a last ditch effort to try to summarize matters for you.

-----------------------------------

1) You are correct, if the substantial presence applies, it is regardless of the state that a person is living in.

Q: how much is federal tax?

A: This will depend on the tax bracket that you fall under, which is determined by a person's filing status, and the amount of income. SEE 2013 TAX BRACKETS at the following;

http://www.bankrate.com/finance/taxes/tax-brackets.aspx

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Q: how would I qualify for the closer ties test so this could mean I still pay uk tax

A: You will find all the information relating to how to qualify for the closer connection exception in the instructions of the Form 8840 found at the following link:

http://www.irs.gov/pub/irs-pdf/f8840.pdf

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Q: how does the tax treaty work as I would of payed tax in the uk already.

A: There is an Article in the tax treaty that refers to the elimination of double taxation, which means that for any tax that you pay here in the states, if you meet the requirements, you will be credited that amount back on your UK return. Note that paying taxes here in the states will not eliminate you having to pay the applicable taxes to the U.K. You are a citizen of the U.K., so you will have to adhere to their tax rules no matter where you live. You can refer to the full tax treaty at the following link;

http://www.irs.gov/pub/irs-trty/uk.pdf

Article 23 is the article that refers to the elimination of double taxation.

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The above is the best summarized version of the information that you are requesting that I can provide to you. Again, trying to relay information via wireless means is not always easy, as information tends to get lost in translation.

I hope that this summarized version is sufficient for you, as there is nothing else that I can write to you that I have not already provided.

Thank you again for using this Q&A service today. A positive rating would greatly be appreciated.

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