Tax questions, Working Abroad

Hello old friends (and new),

It’s been a while since I’ve been on here. Lots of the same faces, many new…

What can anyone tell me about working abroad, specifically India, and the tax situation?

I have been told (if I accept this position), taxes will be paid to India on my behalf while I will pay
the typical monies to the Fed. They … (this mysterious corporation)… will pay all required taxes to India and at the end of the calendar year, give me a form stating what was paid on my behalf.

My questions are…

How will the monies paid to India (by the company) impact what I am required to pay to the Fed in April? More specifically will I get a tax credit for what is paid on my behalf? (If I owe 55,000 in Fed taxes and 30,000 was paid to India, will my responsibility to the Fed be 25,000?)

Is there anything someone can share that will help put a perspective on what position I will find myself in next April if I decide to accept this position? Good and bad please.

I have researched the totalization agreements (which does not exist between India and the US) and understand there are foreign tax lawyers who can answer these questions, I figure there is someone out here who has worked this situation or one very similar and knows what I should know to make an informed decision.

Thanks in advance.

[QUOTE=Cheng;112970]Hello old friends (and new),

It’s been a while since I’ve been on here. Lots of the same faces, many new…

What can anyone tell me about working abroad, specifically India, and the tax situation?

I have been told (if I accept this position), taxes will be paid to India on my behalf while I will pay
the typical monies to the Fed. They … (this mysterious corporation)… will pay all required taxes to India and at the end of the calendar year, give me a form stating what was paid on my behalf.

My questions are…

How will the monies paid to India (by the company) impact what I am required to pay to the Fed in April? More specifically will I get a tax credit for what is paid on my behalf? (If I owe 55,000 in Fed taxes and 30,000 was paid to India, will my responsibility to the Fed be 25,000?)

Is there anything someone can share that will help put a perspective on what position I will find myself in next April if I decide to accept this position? Good and bad please.

I have researched the totalization agreements (which does not exist between India and the US) and understand there are foreign tax lawyers who can answer these questions, I figure there is someone out here who has worked this situation or one very similar and knows what I should know to make an informed decision.

Thanks in advance.[/QUOTE]

So, lets say you made $200,000, and paid $55,000 to Federal. Your company pays $30,000 to India. This now has to be added into your total income on your W2, which becomes $230,000. This now becomes the amount that is going to be taxed by the US. So before you paid $55k on $200K, you now are resposnible for a greater percentage on the $230K, so you will owe a little more, maybe $5,000 lets say, you now will use your statement from India to offset your federeal taxes, and instead of receiving the whole $30,000 back from the federal, you have to deduct what you will owe on your total compensation, thus receiving $25,000 back from the federal government.

Depending on what your company does and if they take out taxes or not, the above is the simplest way to do it. If your company has payroll in the US, they more than likely will deduct the federal taxes automatically.

[QUOTE=PDCMATE;112974]Depending on what your company does and if they take out taxes or not, the above is the simplest way to do it. If your company has payroll in the US, they more than likely will deduct the federal taxes automatically.[/QUOTE]

Thanks for the reply PDCMATE. Yes, They will deduct US Taxes from my pay.

So hypotheticals for clarification.

I make 200K. Fed tax is at 28% so I pay 56K to Obama’s henchmen. Indian tax is 35% so the company pays 70K to India.

My earned income is 200K; plus 70K to India for a total of 270K.

The adjusted taxable income is 270K X’s 0.28% for a total payment of 75,600 due to the Fed.

Humor me.

200,000 

x 0.28
= 56,000 Fed WH

200,000 Earned income
  • 70,000 Indian Taxes paid
    = 270,000 Adjusted earned income

    270,000
    x 0.28
    = 75,600 Adjusted Fed Tax owed

    75,600 Owed

  • 70,000 Indian Credit
    = 5,600 Due to Fed

56,000 Fed Withheld

  • 5,600 Owed to Fed
    = 50,400 Returned

Does this seem right?

What is your experience with this? Did you actually do this for a tax year or is it conjecture?

[QUOTE=Cheng;112979]Thanks for the reply PDCMATE. Yes, They will deduct US Taxes from my pay.

So hypotheticals for clarification.

I make 200K. Fed tax is at 28% so I pay 56K to Obama’s henchmen. Indian tax is 35% so the company pays 70K to India.

My earned income is 200K; plus 70K to India for a total of 270K.

The adjusted taxable income is 270K X’s 0.28% for a total payment of 75,600 due to the Fed.

Humor me.

200,000 

x 0.28
= 56,000 Fed WH

200,000 Earned income
  • 70,000 Indian Taxes paid
    = 270,000 Adjusted earned income

    270,000
    x 0.28
    = 75,600 Adjusted Fed Tax owed

    75,600 Owed

  • 70,000 Indian Credit
    = 5,600 Due to Fed

56,000 Fed Withheld

  • 5,600 Owed to Fed
    = 50,400 Returned

Does this seem right?

What is your experience with this? Did you actually do this for a tax year or is it conjecture?[/QUOTE]

Yes this is correct. I have been doing this for numerous years, working overseas in Asia and West Africa.

[QUOTE=PDCMATE;112985]Yes this is correct. I have been doing this for numerous years, working overseas in Asia and West Africa.[/QUOTE]

Thanks PDC. Always good to hear from someone who is in the know