Self-Employment Taxes in CA Waiting for Green Card

[ScorpioSun 0]

Hi guys, hopefully someone with experience can give me some pointers here: I am based in Cali and applied for AOS based on a K-1 at the end of 2019 & have been waiting for a green card interview date since early last year.

 

In the meantime, to make ends meet I've been registered as self-employed in the UK and remotely earning money from UK-based companies into my UK bank account, and keeping up with UK taxes.

 

However I'm unclear about where I stand with the IRS - it seems I've been here long enough to be classed as a resident alien for tax purposes, and as I understand it, that means I should have registered as self-employed over here too at some point and started paying quarterly tax estimates? Also I've read that US tax can be offset by the UK tax I'll be paying?

 

I've been googling everywhere, including the IRS website, but can't seem to find clear, consistent answers about the specifics of this, or even how to start, or from what date I should have started (I'm presuming I'm a little late at this point & will face some fees - self-employment has gone on longer than anticipated as I'd hoped to find a US job by now).

 

Any ideas or insights are welcome.

[ScorpioSun 0]

10 minutes ago, ScorpioSun said:

Hi guys, hopefully someone with experience can give me some pointers here: I am based in Cali and applied for AOS based on a K-1 at the end of 2019 & have been waiting for a green card interview date since early last year.

 

In the meantime, to make ends meet I've been registered as self-employed in the UK and remotely earning money from UK-based companies into my UK bank account, and keeping up with UK taxes.

 

However I'm unclear about where I stand with the IRS - it seems I've been here long enough to be classed as a resident alien for tax purposes, and as I understand it, that means I should have registered as self-employed over here too at some point and started paying quarterly tax estimates? Also I've read that US tax can be offset by the UK tax I'll be paying?

 

I've been googling everywhere, including the IRS website, but can't seem to find clear, consistent answers about the specifics of this, or even how to start, or from what date I should have started (I'm presuming I'm a little late at this point & will face some fees - self-employment has gone on longer than anticipated as I'd hoped to find a US job by now).

 

Any ideas or insights are welcome.

EDIT: Forgot to mention, I have a SSN & work permit.

[Boiler 45,670]

Something to discuss with your CPA

[JeanneAdil 6,560]

The rules for filing a United States, U.S. tax return generally apply to you if you are a U.S. citizen or a resident alien - Green Card Holder - and you live and/or work in a foreign country

https://www.efile.com/foreign-earned-income-and-income-exclusion/

 

Since you pay UK taxes on income and the USA has a tax treaty,  you use form 2555 to exclude anything under $107,600

 For tax year 2020, the maximum exclusion is $107,600 per person.

Edited February 19, 2021 by JeanneAdil

[Wuozopo 4,293]

15 hours ago, ScorpioSun said:

In the meantime, to make ends meet I've been registered as self-employed in the UK and remotely earning money from UK-based companies into my UK bank account, and keeping up with UK taxes.

 

That does not exclude you from needing to file a US return. The tax treaty says you pay taxes to the place where you live.  You actually should have made a break from UK taxes when you moved to the US. I don’t know how that works. If you have an employer, they can code your earnings as non-taxable. I was never self employed in the UK so can’t help with how to quit paying taxes to the UK.

 

Yes you have been in the US long enough to be a resident alien for tax filing. You can file a joint return with your spouse and it will most likely be your best choice.  You cannot take the Foreign Income Exclusion (Form 2555) for 2020 taxes because you did not work in a foreign country any days in 2020. You worked in the US and all of your income is taxable by the US. 

You are eligible for the Foreign Tax Credit (Form 514). They haven’t formalized the 2020 version, but read this 2019 version (latest on IRS website)  because it will be much the same. https://www.irs.gov/publications/p514. The tax credit will subtract what you paid to the UK from your US taxes owed. 
 

Your tax return will include Schedule C (your profit loss from self employment)  and Schedule SE (calculating your Social Security and Medicare contributions). You may be able to deduct your health insurance premiums as self employed. 

Estimated tax payments

Yes the IRS wants you to pay as you go, so to speak, rather than pay your owed income taxes all at the end when you file. That is done by making quarterly estimated payments. The first year is hard to know how it all works. Payments are “estimates” and not exact. Anything you pay in (going forward) helps. When you file a joint return, anything a spouse had deducted in 2020 for taxes by an employer may help you. If the spouse had too much held out, that extra covers taxes your income generated. On a joint return it’s all in one pot...total income earned and total paid in for taxes, no matter which individual earned it or paid it in. 

 

Edited February 19, 2021 by Wuozopo

[ScorpioSun 0]

On 2/19/2021 at 6:46 AM, Wuozopo said:

That does not exclude you from needing to file a US return. The tax treaty says you pay taxes to the place where you live.  You actually should have made a break from UK taxes when you moved to the US. I don’t know how that works. If you have an employer, they can code your earnings as non-taxable. I was never self employed in the UK so can’t help with how to quit paying taxes to the UK.

 

Yes you have been in the US long enough to be a resident alien for tax filing. You can file a joint return with your spouse and it will most likely be your best choice.  You cannot take the Foreign Income Exclusion (Form 2555) for 2020 taxes because you did not work in a foreign country any days in 2020. You worked in the US and all of your income is taxable by the US. 

You are eligible for the Foreign Tax Credit (Form 514). They haven’t formalized the 2020 version, but read this 2019 version (latest on IRS website)  because it will be much the same. https://www.irs.gov/publications/p514. The tax credit will subtract what you paid to the UK from your US taxes owed. 
 

Your tax return will include Schedule C (your profit loss from self employment)  and Schedule SE (calculating your Social Security and Medicare contributions). You may be able to deduct your health insurance premiums as self employed. 

Estimated tax payments

Yes the IRS wants you to pay as you go, so to speak, rather than pay your owed income taxes all at the end when you file. That is done by making quarterly estimated payments. The first year is hard to know how it all works. Payments are “estimates” and not exact. Anything you pay in (going forward) helps. When you file a joint return, anything a spouse had deducted in 2020 for taxes by an employer may help you. If the spouse had too much held out, that extra covers taxes your income generated. On a joint return it’s all in one pot...total income earned and total paid in for taxes, no matter which individual earned it or paid it in. 

 

Thanks a bunch, this has been a great help. With this plus some more digging I'm armed with a much clearer idea of how it all works now - should be up & running in no time.

[rubanitka 15]

On 2/19/2021 at 6:46 AM, Wuozopo said:

That does not exclude you from needing to file a US return. The tax treaty says you pay taxes to the place where you live.  You actually should have made a break from UK taxes when you moved to the US. I don’t know how that works. If you have an employer, they can code your earnings as non-taxable. I was never self employed in the UK so can’t help with how to quit paying taxes to the UK.

 

Yes you have been in the US long enough to be a resident alien for tax filing. You can file a joint return with your spouse and it will most likely be your best choice.  You cannot take the Foreign Income Exclusion (Form 2555) for 2020 taxes because you did not work in a foreign country any days in 2020. You worked in the US and all of your income is taxable by the US. 

You are eligible for the Foreign Tax Credit (Form 514). They haven’t formalized the 2020 version, but read this 2019 version (latest on IRS website)  because it will be much the same. https://www.irs.gov/publications/p514. The tax credit will subtract what you paid to the UK from your US taxes owed. 
 

Your tax return will include Schedule C (your profit loss from self employment)  and Schedule SE (calculating your Social Security and Medicare contributions). You may be able to deduct your health insurance premiums as self employed. 

Estimated tax payments

Yes the IRS wants you to pay as you go, so to speak, rather than pay your owed income taxes all at the end when you file. That is done by making quarterly estimated payments. The first year is hard to know how it all works. Payments are “estimates” and not exact. Anything you pay in (going forward) helps. When you file a joint return, anything a spouse had deducted in 2020 for taxes by an employer may help you. If the spouse had too much held out, that extra covers taxes your income generated. On a joint return it’s all in one pot...total income earned and total paid in for taxes, no matter which individual earned it or paid it in. 

 

Hi Wouzopo, you seem like the person who might know the info I'm looking for. This quarter I need to pay my first estimate taxes as an independent contractor. The IRS offers to pay via IRS app or EFTPS system and it does seem very easy. They pull up my info from 2019 tax forms and charge my credit card with as much money as I authorize them to. My question is: in this case do I still need to file 1040ES separately or no? And if so, what is the easiest/cheapest way to file the form? I would really appreciate any knowledgeable input on the matter.

[Wuozopo 4,293]

6 hours ago, rubanitka said:

Hi Wouzopo, you seem like the person who might know the info I'm looking for. This quarter I need to pay my first estimate taxes as an independent contractor. The IRS offers to pay via IRS app or EFTPS system and it does seem very easy. They pull up my info from 2019 tax forms and charge my credit card with as much money as I authorize them to. My question is: in this case do I still need to file 1040ES separately or no? And if so, what is the easiest/cheapest way to file the form? I would really appreciate any knowledgeable input on the matter.

I haven’t personally used the system so I looked it up on the IRS website. I don’t see why you would need to mail the paper 1040ES. I have done that form before when I was making estimated payments. It’s just a paper to accompany a check to the IRS so they get your payment credited to the correct account (SSN).There is nothing special about the paper form.  Basically you want money stashed away at the IRS to cover what you think you might owe at filing time. They do it electronically by credit card  or take your info by phone, both of which are the fancier version of mailing a form and a paper check. I think you’re good with only EFTPS.

[rubanitka 15]

On 3/19/2021 at 10:45 PM, Wuozopo said:

I haven’t personally used the system so I looked it up on the IRS website. I don’t see why you would need to mail the paper 1040ES. I have done that form before when I was making estimated payments. It’s just a paper to accompany a check to the IRS so they get your payment credited to the correct account (SSN).There is nothing special about the paper form.  Basically you want money stashed away at the IRS to cover what you think you might owe at filing time. They do it electronically by credit card  or take your info by phone, both of which are the fancier version of mailing a form and a paper check. I think you’re good with only EFTPS.

Thank you so much for taking your time to answer me! I assumed as much, just wanted a second more experienced opinion!

[Locito 85]

I used EFTPS to pay estimated taxes during 2020, although it was an adjustment to go to paying them quarterly (in the US) rather than annually (outside US).. The alternatives to pay using a debit or a credit card also exist, but with the additional service fees tacked on by respective service providers, I felt like ACH debit (no additional costs) through EFTPS using our joint account worked well.

[Wuozopo 4,293]

2 hours ago, Locito said:

I felt like ACH debit (no additional costs) through EFTPS using our joint account worked well.

Yes, for sure. I do that on accounts like HOA annual fees and water bills that use a service that charges extra for a credit card, often a percentage of the total. Debiting your bank account is a good, fee-free option. Good suggestion.

Edited March 24, 2021 by Wuozopo