[tcd]

Hi there

I have been offered to work 1 year (1. Mar 2009 - 28. Feb 2010) for my current employer located in Switzerland at our New Jersey subsidiary. The Visa will be a L1B for specialized employees and I will receive my salary through the Swiss company. Do I have to pay any taxes, medicare or social security things in the US?

Thanks in advance
Michael

[Animals123]

I'm not sure about the taxes but PLEASE make sure you have LOTS of medical insurance. If anything should happen, ANYTHING medical, it will cost you hundreds of dollars just to see the doctor. Treatment is extra. I hope you enjoy your time in North America.

[tcd]

Hi Animal123

I already thought about that before my last holiday in the US and added an extra medical insurance which covers up to 200% of the usual local (Swiss) costs. Hope this will be enough...

[Animals123]

Good to know. You can never be over insured, especially when traveling. Good Luck in the US.

[MukatA]

Hi there
I have been offered to work 1 year (1. Mar 2009 - 28. Feb 2010) for my current employer located in Switzerland at our New Jersey subsidiary. The Visa will be a L1B for specialized employees and I will receive my salary through the Swiss company. Do I have to pay any taxes, medicare or social security things in the US?
Thanks in advance
Michael

Once you are present in the U.S. to work, it is U.S. source income irrespective of who paid it. Your income is subject to SS tax, Medicare tax and income taxes.
Check with your employer. The New Jersey subsidiary will be holding all these taxes.
For 2009, you will file dual status tax return if you are single. If you are married, you can choose to file joint return as residents.

[tcd]

Hi MukatA

You might be right, but I just found the following under the US-Swiss Income Tax Treaty §4:

<quote>
3. Where by reason of the provisions of paragraph 1 an individual is a resident of both
Contracting States, then his status shall be determined as follows:

a) he shall be deemed to be a resident of the State in which he has a permanent
Home available to him; if he has a permanent home available to him in both States, he
Shall be deemed to be a resident of the State with which his personal and economic
Relations are closer (center of vital interests);

b) if the State in which he has his center of vital interests cannot be determined, or
If he has no permanent home available to him in either State, he shall be deemed to be a
Resident of the State in which he has an habitual abode;

c) if he has an habitual abode in both States or in neither of them, he shall be
Deemed to be a resident of the State of which he is a national;

d) if he is a national of both States or of neither of them, the competent authorities
Of the Contracting States shall settle the question by mutual agreement.
</quote>

I would comply with a) because I will have a permanent home in both states but I will definitely go back after 1 year and my family lives in Switzerland too. Could this work?

Thanks
Michael

[AtlantaTaxExpert]

Michael:

Sorry. Even though you are maintaining a closer connection to your home in Switzerland, you STILL must pay federal and state income taxes to the U.S. and NY state for 2009 because the money was earned within U.S. borders and because your stay in the U.S. for 2009 will exceed 183 days.

The wording in the tax treaty MAY allow you to avoid federal income tax for 2010, but the state income taxes will still be due.

FICA (Social Security and Medicare) taxes are due because the "L" visa is a work visa, and FICA taxes are due on income earned within the U.S. while on a work visa, even though you will NOT qualify for benefits under the U.S. Social Security and Medicare systems.

However, due to a totalization agreement between the U.S. and Switzerland, credit for these FICA taxes will be transferred to the equivalent programs in Switzerland.

[tcd]

Hi

This is really bad news! So this 183 days rule seems to be my problem...
Is there some sort of tax calculator to estimate it? We do pay really low taxes here (approx. 10-15% with my income) and I would like to "tune" it to a minimum while in the U.S. Are there some suggestions to lower my taxable income in a legal way?
I saw that the U.S. is withholding money directly from paychecks but they wouldn't even see mine because it would be paid to a swiss bank account. How does that work?

Sorry for the bunch of questions I just want to be prepaired as good as possible.

[AtlantaTaxExpert]

TCD:

The fact that the money is NOT withheld does not relieve of the requirement to file the tax return and pay the taxes. Further, give that you know that you must pay these taxes, your employer probably has the legal obligation to withhold and pay the federal and state income taxes and the FICA taxes on your pay checks. Failure to do so will cause them to incur same rather nasty fines.

What is your annual salary in U.S. dollars? I can then do estimates of your tax liability.

[tcd]

Don't get me wrong, I'll pay my taxes for sure! ;-)

With today's exchange rate it would be approx. 57k.

[AtlantaTaxExpert]

Okay, then, for 2009, you will eqarn 5/6ths of $57K, or $47,500.

Social Security @ 6.2% = $2,945
Medicare @ 1.45% = $689

The income tax works on a progressive scale, so I will not be able to quote exact percentages. That said, here are your approximate tax liabilities:

NY State tax = $2,300
NY City tax = $600
Federal tax = $5,600