Hi,

I am presently in San Jose, California USA since 13Aug, 2013 for five months till 10Jan,2014. I am travelling on L1 Per Diem mode and getting my Employer Salary in India on which I am paying tax in India.

Prior to this, I have also travelled to Los Angeles, CA for 67 days from March,2013-May2013 this year on L1 per diem.

I just found on internet, that according to US income tax law, if non_immigrant satisfy some Presence Test (of 183 days in last 3 years) then he/she become eligible for income tax.

http://www.irs.gov/Individuals/International_Taxpayers/Substantial_Presence_Test

So if this holds true, then in my case the total number of days of my stay (including ealrier travel and current travel) will be of more than 183 days.

1. Please confirm if this understanding holds true?
2. If yes, do I need to pay tax on per diem allowance I reveived during this two visit?
3. If tax doesn't needs to be paid then do I need to file at least IT return here in US?
4. Lastly, if I don't do any of the above, will it be a illegal and I may get notice from IRS?

Note: I have been paying taxes for complete year in India. Moroever I am not receiving any salary through my US employer.

Regards,
Gagandeep

1) Yes

2) Yes, PLUS you must declare your Indian income earned while inside the United States. That is the BAD NEWS. The GOOD NEWS is you can claim the Foreign Tax Credit for taxes paid in India, AND claim daily living expenses on Form 2106 to offset the tax on the per diem charge.

3) Not sure taxes will be owed (you provided no numbers), but Form 1040NR with Forms 1116 (Foreign Tax Credit) and 2106 WILL need to be filed.

4) Yes, failing to file the return IS illegal. The IRS may never notice because there is no paper trail, but you never know.

Hi Atlanta,

Thanks a lot for detailed reply. However I still have some more doubts:

I am receiving 150$ as per diem (for Lodging, food, transpotation) from my Indian Employer. So you are suggesting me to fill Form 2106 for these expenses and Form 1040NR for claiming income taxed in India. Can you please confirm once I fill these forms:
1. All the income earned in India will not be taxed here in US? If not then what's the procedure, considering I am novice in US income tax laws and procedure.
2. As my employer is saying that the per-diem paid by them is non-taxable, so after filling the Form2106, these per-diem expenses will also become non-taxable in US?
3. If not, then can you suggest how much tax will I have to pay on 150$ per diem for my complete duration :-)

1) The Indian income earned starting on the date you first arrived in the U.S. I n March 2012 needs to be reported, as well as the per diem .

2) The per diem income is considered taxable because it is part of a NON-accountable plan. It is considered non-accountable because you are NOT submitting an expense report to be reimbursed, but rather are being paid a set amount ($150) each day.

3) If you email me your March through December Indian pay, what you paid in Indian income taxes, and your costs (rent, utilities, rental car) while in the U.S. I can do a tax estimate for you.

Hi,

Thanks for replying.

As suggested please find below the Salary breakup

1. Salary in India: 80K INR (around 1400 USD) per month
2. 10 % Tax gets deducted from indian salary each month.
3. Stay in US: Getting Per Diem as 180 USD which includes:
a. Lodging
b. Food
c. Transportation

I will be really helpful, if you can calculate tax based on above figured for my complete stay in US till 10 Jan.

To prepare an accurate tax estimate, I need to know what you paid each month in rent and utilities AND what your local transportation costs were.

Plus, the per diem was $180 per day, correct?

To prepare an accurate tax estimate, I need to know what you paid each month in rent and utilities AND what your local transportation costs were.

Plus, the per diem was $180 per day, correct??

Yes, per diem is 180USD per day.

For my complete stay in US till date, I have spent as following:

60USD per day on Room rent
20USD per day for food and Grocerries
20USD per day for Transport (Taxi, Car rentals etc)

Now please let me know the approx tax for my complete 183 days stay in US. Do let me know if you need any other information.

The combination of your per diem for 208 days plus your salary from 1 March 2013 is about $51,440.

Your personal exemption is $3,900, and your daily living expenses are $23,400.

Your Foreign Tax Credit is $906.

With all this, you OWE the IRS $2,468 and you OWE California $637.