[Lee1]

Hi, I am from the u.k over here on a business b1 visitor visa.My company has given me a lump sum to help in this period and paid it to a bank account in u.s.a .I did not realise that this could be classed as income and that I am not allowed to work on a b1.Since then I have been offered work here and will have visa changed to a a2 visa which should mean I am exempt from income tax.However there will still be a paper trail of income over the last two months that I have been here on a b1. I am happy to declare this in a personal tax return and pay the tax but will this be a problem ? Secondly do I have to declare it in the first place as I was here on a temporary basis, can I write it off as expenses ?

Thanks for your time

[MukatA]

This is from tax treaty:
Income that residents of the United Kingdom receive for services performed in the United States as employees (dependent personal services) is exempt from U.S. income tax if the residents meet the following requirements.

*They are in the United States for no more than 183 days in any 12-month period beginning or ending in the tax year.

*Their income is paid by, or on behalf of, an employer who is not a U.S. resident.

*Their income is not borne by a permanent establishment that the employer has in the United States.
Read IRS Publication 901. Tax Treaties.

[Lee1]

Hi, Thanks so much for your response.The last two requirements I meet.The first is I need clarification.I was over here from August 27th 2009 and will probably be on this b1 visa for two/three months.Then I will change to an A2 diplomatic visa.This will mean exemption from income tax.I will however, be here in the us for 183 days this fiscal year( October -september '10 I understand) but obviously the large majority of that time will be covered by the a2 visa and I am hoping that as soon as that kicks in then those days do not count as I will be here officially on the a2.I will have spent say 60-70 days here on b1 so therefore will not have to worry about the 183 number.Is this the case and thank you again,
Lee

[Five Rings]

These are the conditions of a B1 visa:

Foreign visitors present in the U.S. on a B-1 visa may not be paid any salary, wage, honorarium, stipend, or other form of compensation for services rendered from a U.S. source.

Only "reasonable" reimbursement for incidental expenses-including accommodations, meals, travel expenses-may be paid. May not engage in any employment in the U.S. including salaried work or services performed on an independent basis.

From what you have stated Article 14(2) of the US/UK treaty applies, to wit:
2. Notwithstanding the provisions of paragraph 1 of this Article, remuneration derived
By a resident of a Contracting State in respect of an employment exercised in the other
Contracting State shall be taxable only in the first-mentioned State if:
a) the recipient is present in the other State for a period or periods not exceeding
In the aggregate 183 days in any twelve-month period commencing or ending in the
Taxable year or year of assessment concerned;
b) the remuneration is paid by, or on behalf of, an employer who is not a
Resident of the other State; and
c) the remuneration is not borne by a permanent establishment which the
Employer has in the other State.

Therefore, since you were present less than 183 days in 2009 and all your income derived from sources without the US (your UK employer) that income is not liable to tax in the US.