Paying Tax when working abroad

murfie

Hi, form a search on this I could not find the answers I was looking for. But I am working in the US for the next 16 months, i am on a J1 working visa and I have a Social Security number. I am setting up my tax but I have read on the revenue site and also the IRS site that with a double taxation treaty I am allowed to either not pay tax here and pay in Ireland OR pay tax here and not in Ireland when I return.
I'm unsure on what to do, is it possible to claim this tax back from the US anyway seen as i am on a J1 visa. I am a graduate and not a student.

Any guidance to my situation would be greatly appreciated.

Tom Dunne

I worked in the US and paid tax in Ireland. My wages were paid into my Irish account, so as far as the taxman was concerned, I never left. I would imagine the reverse is probably true in your case - so it may make sense for you to pay US tax instead of Irish tax.

I don't think you will be able to claim any tax back as either way, you will have to pay some tax. I had to do a tax return both here (Ireland) and the US for the same tax year.

You should probably get proper advice, everyone's situation is different.

ircoha

murfie wrote:

Hi, form a search on this I could not find the answers I was looking for. But I am working in the US for the next 16 months, i am on a J1 working visa and I have a Social Security number. I am setting up my tax but I have read on the revenue site and also the IRS site that with a double taxation treaty I am allowed to either not pay tax here and pay in Ireland OR pay tax here and not in Ireland when I return.
I'm unsure on what to do, is it possible to claim this tax back from the US anyway seen as i am on a J1 visa. I am a graduate and not a student.

Any guidance to my situation would be greatly appreciated.

Dont know what u mean by this. Once u come back u will normally be subject to Irish tax.

As noted above u need to get advice or crunch the numbers to see which is better.

Can u change from one basis to the other during the 16 months?

The reason I ask is that if you have no income thus far in Ireland in the 2006 tax year, you may be better off being taxed in Ireland for 06 and the US for 07

murfie

well as from what i read on it, ireland has a double tax treaty with USA and 40 other countries so you dont get taxed twice, I think i am just going to pay the US tax as its probably going to work out better for me and just hope the irish tax man is happy with that! I dont have to pay medicare or the social security tax over here either which makes it cheaper.

simonshortt

murfie wrote:

well as from what i read on it, ireland has a double tax treaty with USA and 40 other countries so you dont get taxed twice, I think i am just going to pay the US tax as its probably going to work out better for me and just hope the irish tax man is happy with that! I dont have to pay medicare or the social security tax over here either which makes it cheaper.

Hello.
Sorry to be the bearer of bad news, but you still have a tax liability in Ireland. The reason I know this is from (bitter!) experience.

Regardless of tax rates in the US and Ireland, you will always end up paying the higher of the two rates (at least for a couple of years while you are still in two tax systems). The double tax treaty simply means that rather than paying tax twice (US+IRL tax) you pay tax where you are earning are PLUS the difference between the higher of the two rates. Obviously if the tax rates are the same there should be little or no liability.

So if you go to the USA on 1 Jan 2007 and work there for 16 months (end April 2008) AND return to Ireland (employed or not) you are still liable for Irish income tax.

As an example, if your total tax in the USA is 20% and the rate in Ireland is 42%, you pay 20% to the US revenue AND another 22% (to bring you up to 42%) to the Irish revenue.

BUT you will still have to complete an Irish and US tax return. Also, there may be additional taxes in the US on any Irish income (deposit interest, dividends, and inheritances). There is no 'option' to choose where you pay tax for your situation. If you were working in the US for less than 183 days your tax liability would remain in Ireland so tax is paid there (you may have to pay the tax up front in the US and claim it back). As you are away for 16 months, this option is not open to you.

Normally, you are tax resident in Ireland if you spend more than 183 days in any one tax year or 260 days over two consecutive tax years (this one catches a lot of people). There are other aspects to the situation, but for simplicity sake, I'll just stick with this for the time being. Still with me?

The whole international tax issue can be full of pitfalls. I have been working in The Netherlands since March 2004 and even within the EU the whole taxation issue can be complex.

I would really advise you to talk to an international tax practitioner before you go, if for nothing else than peace of mind. While you might 'get away with it', for want of a better term, in the short term, these issues have a nasty habit of sneaking up with you when you least expect it.

If you have any other questions, I'll try to help. The revenue website is actually quite good and there is a lot of information there.