Upon employing foreign nationals, U.S. tax planning early on can help better manage tax costs, surprises and potential penalties. Houston international tax accountant Bill Leary, CPA, was part of a panel providing insight on tax planning when hiring foreign nationals to the 300 attendees at FosterQuanâ€™s Spring Immigration Update.
Lack of proper pre-immigration planning can result in problems both for your business and your foreign national employees. Before employees relocate to the United States and become subject to tax, ask yourself these key questions:
Avoid the costly â€śwould have, could have, should haveâ€ť traps and appreciate just how different tax rules are from country to country.
Taxation of your foreign national workers will depend on whether they are resident aliens or nonresident aliens and whether tax treaties apply. Employees are resident aliens of the United States for tax purposes if they meet either the â€śgreen cardâ€ť test or the substantial presence test:
Otherwise, a foreign individual is a nonresident alien and may be subject to federal tax withholding and only taxed on the U.S.-source income. State and local taxes, Social Security and estate taxes also need to be considered because different rules apply. The health care act may also come into play.
Few foreign nationals appreciate just how complex U.S. tax rules and compliance are. While it is important to plan for every year the employee is working in the United States, the international tax professionals at Doeren Mayhew recommend placing extra emphasis on arrival and departure years. These are the years that offer more tax planning opportunities and options.
Doeren Mayhewâ€™s Houston international tax accountants help businesses and individuals navigate the complexities of cross border activities and focuses on global tax management Â For more information, contact us.
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