Discussion:Employment tax for offshore companies with U.S. employees
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Discussion Forum Index --> Tax Questions --> Employment tax for offshore companies with U.S. employees
| 31 August 2007 | |
| The company I work for is based in the British Virgin Islands. In September of this year, I will be sent to Japan for about 3 months for work. I was told by my boss that I should open a bank account in Japan to avoid paying taxes in the U.S. How is this so? Wouldn't I have to pay taxes when I eventually bring my money back into the States? Is he saying this so he can save his company some sort of Employment Tax? Thank you. | |
| 31 August 2007 | |
| You cannot avoid paying U.S. taxes on your earnings from Japan. Assuming you are a U.S. citizen or resident, you are taxed on your worldwide income. You should report the income earned while in Japan on your U.S. tax return, even if your employer does not give you a W-2 for the receipt of the income. If you pay income taxes in Japan, then you could claim those taxes as a credit against your U.S. income tax.
If you open a bank account outside the U.S. and the balance of the account exceeds $10,000 at any point during the year, you must file Form TD F 90-22.1. There is a $10,000 penalty for failing to file this form. If your boss is suggesting that you may avoid tax in this manner, there may be other misconceptions he has about U.S. taxes. If the BVI company is owned by U.S. persons or was created by U.S. persons, but is owned by a foreign trust (or various other scenarios), the company you work for and/or its owners may be taking some very aggressive tax positions. | |
| 1 September 2007 | |
| Thank you so much! I thought it sounded a little fishy. Could you please refer me to the applicable tax codes so I can show them to my boss? Again, thank you for clarifying it in a clear and speedy manner. | |
| 1 September 2007 | |
| Code Sec. 61. ". . . all income from whatever source derived . . ." | |
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