Income Tax issue

S

shriram

Registered Users (C)
Dear CP Gurus,

This is a really long one - but please bear with me.

I think I am caught up in an income tax defaulter type of situation – for no reason.

When I was working for my x-company in Chennai, I was sent to Minnesota on an assignment with L1-Visa. At that time, the policy for compensation was as stated below:

1) If sent on B1-visa, you continue to be on India-payroll and will receive Indian salary and you get a daily allowance of $ xx/day.
2) If sent on L1-visa, you resign from the Indian-Company; the US Company enrolls you on their payroll. You are liable to pay taxes. When you return to India, you resign from the US-Company and are re-enrolled on the India- payroll.

In my case, I was sent for 3 months, but the offer read "1 year - compensation xxxxx/year - liable to pay taxes in US and so on".
Reached US and got my SSN done in Minnesota. Everything was perfect until the day I was supposed to be enrolled on the US-payroll.

To my surprise, I was told that the Indian-Company is revising their policy. They revised the 2nd type of compensation to below:

2) If sent on L1 for less than 6 months, then it will be treated like B1.
3) If sent on L1 for more than 6 months, then it is same as before for L1.

So as a result, I entered US in Sept 2000, with a offer letter that read "compensation xxxxx/year - liable to pay taxes in US".
But in reality, I was paid daily allowance of xx/day and I continued to be on India-payroll.
All this happened with oral communication and we didn't receive a single document from the Indian-Company. I returned to India in Dec 2000, left the x-company in Jan 2001, and returned to US with a different company on H1 in Feb 2001.

Now during the interview if I am asked, when did you come to US? What should I say? Sept2000 or Feb2001?
Because I was not on US payroll and did not receive W2-Form, I haven't paid the taxes for 2000. Was I supposed to pay taxes?

I am trying to get a document from my x-company (Indian) that supports the facts.

My X-company is quite cooperative and has asked me to send the draft of the document I need.

What do you think I should mention on this document so that it will contain all the minute details that the Consular would look for?

Also, if anyone can send me a draft (or template if anyone ran in to the same situation), I would really appreciate it.

Thanks for your patience and time.

Shriram
 
This is indeed a complex issue.

I think the crux of the matter rests on whether your U.S. company issued a W-2 form in your name or not. The W-2 form is the official notification that an employer generates informing the IRS that taxable income has been paid to an individual.

Now technically, just because you did not receive a W-2 does not mean that your income was not taxable. But the IRS will not be on the lookout for you if a W-2 was not issued. And if there is no W-2 documenting your income while on the L-1, you are not branded as a "tax-defaulter" in the records of the IRS.

If this issue comes up during your consular interview (which is unlikely in my opinion), you can explain the relevant policy at that time, i.e. that since you were only in the U.S. on a 3 month deputation, you were paid salary as if an Indian employee and therefore paid your taxes in India. Do you have a copy of your tax records from India and do they show your income during L-1 stay in the U.S.? I am sure that India and the U.S. must have a tax treaty that allows for prevention of double taxation.

Consult your immigration attorney for further clarification. It may also be prudent to check with a tax attorney.

In the worst case scenario, if you DO owe taxes, you can always pay the IRS (with an added on penalty) and then your record will be clear.

In summary, I do not think this is a major problem. Best of luck.
 
Thank you Zaye.

I do have the pay-stubs of the Indian company while I was in US.

But I want to get a document from my x-company that explains the fact. I need to prepare a draft and sent it to my x-company. What do you think I should mention on it?

Thanks for the prompt reply and your time.

Regards,

Shriram
 
If you have the pay slips that should be enough. Contact H&R Block immediately and file the taxes, its never late!
 
if you are paid $$ perday and $$ is like $30 odd then it may be perdiem. you dont pay taxes on perdiem. check the irs table for perdiem rates in the area you worked for and if it matches there is no need to pay taxes.

what is the form of payment of this $$? Do you have receipts for this $$ payment - if yes you can show that to consular officer.

u can tell the C.O that you entered on the first date on L1 and worked in US briefly for three months. if they ask W2s show the $$ payment receipts

also did u stay in a hotel during that period and if yes who paid the hotel charges - are u reimbursed for hotel charges by your indian company?
 
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Raghudop, I was paid $55/day towards Food and Travel. But there is no document that states it. The payments were made via wire transfer from India to my US bank account here. I don’t have the US Bank statements and I can’t get it because it is taken over by a different Bank.

I did stay in a hotel for the 1st month and the company paid the hotel directly.
Later on, they moved me to the corporate apartment.

rvalla, I have the pay slips of my Indian company in rupees while I was on the assignment in USA.

It is quite complex to explain my case to the Consular. That's why I am trying to get a document from my x-company. I am preparing a draft of this document and I need your inputs about the little details that the consular could look for.

Thank you for your prompt reply and your time.

Shriram
 
Whether for immigration or not you should get straight with IRS. Talk to H&R block about the issue.
 
I think this is more of a IRS issue than INS issue. But as always IRS issue if big enough can result into INS issue.

Best bet as many suggested...contact a good Tax adviser.

And personal recommendation talk about this with also your attorney!

and most of all when you go for CP interview,....if questions are asked be ready to explain with documents and you should be fine! But definitely consualt a tax advisor and immigration lawyer asap.
 
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I think the compensation can be regarded as PERDIEM. however check with a Tax consultant.
 
I think the purpose of tax transcript for interview in addition to W2 is to verify if you indeed worked for the company and salary etc are as should be.

the immigration officer is not a CPA, not sure how much time he has to research into the details........ Any comments.
 
Thank you very much everyone.

A Tax Associate from H&R Block confirmed to me that I don't have to pay taxes for the year 2000.

Following are the reasons he provided:

1) Even though I had come to US on a work permit, it was temporary assignment.
2) I was on India payroll and not on US payroll.
3) Since the assignment was for only 3 months I would be considered a non-resident.
4) The total allowance which is $55 * 90 = $4950 is less then the minimum wage.

So the tax issue is clear and resolved.

Thanks everyone again.

Shriram
 
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