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avel25 · Nov 29, 2008, 10:55 PM

Hi,

I was here from Jan 5, 2008 to Feb 14, 2008 and was back from April 19 and I am leaving on Dec 6, 2008. The company that sent me here said that I need to file for tax here based on substantial presence test which is >183 days physically present here.

However, I only get paid on my home country which is Philippines. And I don't receive any salary here. Also, in the Philippines my income is deducted with withholding tax for my home country. I don't think I should be paying any more taxes here because I am already paying in my home country.

Please help/advice on what should I do. I've read about foreign income tax credit but I am not sure if it can be applied to me. And should I really pay tax here I am only here on B1/B2 visa.

Thanks!!

MukatA · Dec 1, 2008, 04:28 AM

Normally, income earned while in the U.S. is taxable in the U.S. If you must report this income on your Philippines tax return, you will claim credit for taxes paid in the U.S.

You have spend more than 89 days in the U.S. For more info, you should read IRS Publication 901: Tax Treaties at www.irs.gov

AtlantaTaxExpert · Dec 1, 2008, 10:12 AM

What MukatA says is true, though I am not sure about claiming a credit for U.S. taxes paid on your Philippine tax return.

If this credit is NOT available, you CAN claim a credit for the Philippine taxes paid on the income earned while in the U.S. by filing Form 1116 with your Form 1040NR.

avel25 · Dec 1, 2008, 12:14 PM

Thanks Mukata and ATE for you response. This is my first time to do this and this is really confusing. Specially that I am only talking about USD26000 of annual salary. And that I feel that I don't have to pay taxes because I already paid taxes in the Philippines. I don't have the foreign tax credit either. I don't have an SSN. I don't have ITIN. I feel clueless. I called IRS and they just confused me more. :(

Please help and give more details on the approach I would be doing. As much as I wanted to pay for any of your services but I don't have an extra to pay :(

The Texas Tax Expert · Dec 1, 2008, 01:25 PM

Originally Posted by AtlantaTaxExpert

What MukatA says is true, though I am not sure about claiming a credit for U.S. taxes paid on your Philippine tax return.

If this credit is NOT available, you CAN claim a credit for the Philippine taxes paid on the income earned while in the U.S. by filing Form 1116 with your Form 1040NR.

I disagree with the point about claiming the foreign tax credit on the US return. The income is US source income and the treaty gives the US the right to tax it. Relief from double tax would need to come from the Philippines.

The OP would seem to have a dual status situation but under the treaty might be best off claiming non-residence in the US to prevent taxation of their worldwide income.

avel25 · Dec 1, 2008, 07:41 PM

Originally Posted by The Texas Tax Expert

I disagree with the point about claiming the foreign tax credit on the US return. The income is US source income and the treaty gives the US the right to tax it. Relief from double tax would need to come from the Phillippines.

The OP would seem to have a dual status situation but under the treaty might be best off claiming non-residence in the US to prevent taxation of their worldwide income.

Hi TTE,

I would like to clarify that tha income was not US source income. I am receiving my salary in the Philippines. I don't get any compensation here in the US.

Given that what do you think should I do?

Thanks

IntlTax · Dec 1, 2008, 10:01 PM

Services are sourced based on where they are performed and not based on where payment is made. Since the services are being performed in the U.S. they will be U.S. source income.

avel25 · Dec 3, 2008, 08:38 PM

TTE yeah how I wish HR would help but apparently they said that taxes are something personal...

Five Rings · Feb 12, 2009, 08:33 AM

Under US tax laws (sec 861(a)(3)) and treaty rules (Art. 16) your wages from work in the US are taxable by the US.

Under the treaty between the US and Philippines http://www.irs.gov/pub/irs-trty/philip.pdf Article 23(2) your government is obliged to give you a credit for US taxes paid.

I am sure this will be complicated for you to fill out but if you want to recover the taxes you paid to the Philippines it will have to be done.

You may not file the US foreign tax credit because your income was earned in the US and it is not resourced by treaty.