How JustAnswer Works:

  • Ask an Expert
    Experts are full of valuable knowledge and are ready to help with any question. Credentials confirmed by a Fortune 500 verification firm.
  • Get a Professional Answer
    Via email, text message, or notification as you wait on our site.
    Ask follow up questions if you need to.
  • 100% Satisfaction Guarantee
    Rate the answer you receive.

Ask Lev Your Own Question

Lev
Lev, Tax Advisor
Category: Tax
Satisfied Customers: 22748
Experience:  Taxes, Immigration, Labor Relations
870116
Type Your Tax Question Here...
Lev is online now
A new question is answered every 9 seconds

An employee (US citizen) is moving to Israel and would like

Resolved Question:

An employee (US citizen) is moving to Israel and would like to continue working for us via telecommuting. We are consulting company that does not have branches outside of US. What is the best way for us to compensate her (as an employee or as a contractor) and what tax implications both options will have to our company.
Submitted: 1 year ago.
Category: Tax
Expert:  Megan C replied 1 year ago.

MyVirtualCPA :

Thanks for asking your question! I'm sorry to hear about your tax issue and I'm going to try my best to help you understand or resolve it.

MyVirtualCPA :

Do you expect to direct the actions of the individual? If you expect to direct and control when and how the work she is completing is done, then she is an employee. You would simply continue paying her as you do now. You would be responsible for 1/2 of her payroll taxes, just as you are now and you would be responsible to withhold tax from her payment. Your payments to her and the payments of the taxes you are responsible for would be fully deductible.

MyVirtualCPA :

If you are giving her the control of when and how the work is done, then she is an independent contractor. Under this arrangement there's no taxes that you are responsible for, and you do not have to withhold tax from her payment.

MyVirtualCPA :

Her fee would be fully deductible to you

MyVirtualCPA :

Do you have any further questions?

MyVirtualCPA :

If I have answered your question, then please take a moment to rate my response as "excellent' So that I may receive credit for assisting you today

c1consulting :

Sorry, but this doesn't really answer my question. According to my research, we would be required to pay corporate taxes to Israel is she continues as an employee. Even is she becomes a 1099 contractor, we may be required to pay up to 25% of the taxes.

MyVirtualCPA :

More details on classifying a worker as an independent contractor or employee can be found, here http://www.irs.gov/taxtopics/tc762.html

MyVirtualCPA :

I can only speak to the US tax liability that you may have for the worker.

MyVirtualCPA :

But, typically if you do not do business in another country you will not have a tax obligation to them

c1consulting :

Thank you, XXXXX XXXXX question required an answer from an expert who would be able to let me know all tax implications of this situation.

MyVirtualCPA :

I will open this up for other experts, I do not know of anyone who is an expert in Israeli tax, but if there is someone out there, they will respond.

c1consulting :

Thank you, XXXXX XXXXX it.

MyVirtualCPA :

NO problem. Please do not respond, as it sends the question back to me, since I was the last expert to assist, and lengthens your wait time.

Expert:  Lev replied 1 year ago.
Hi and welcome to Just Answer!
Different expert here...
There are several issues to cover in your situation. Let do one-by-one.
1.
As previous expert already noted - you may not simply classify a worker as an employee or as a contractor - incorrect classification may result in severe tax liability and penalty.
The issue is - who is in control what should be done and how that should be done. If your company is in control - the worker is your employee, however if the worker is in control - she is a self-employed contractor.
While rules are very complex and there are lots of gray areas - that determination is very important and that would you first step.
2.
If the worker is your employee - the second issue is the location of her workplace. If you simply allow the employee to work remotely for convenience of the employee - that doesn't change the workplace. The workplace still would be considered in the US - and in New Jersey - for income tax purposes (federal and state) and for unemployment tax purposes. So your employee will be responsible for NJ state income tax as well.
3.
If you want the workplace to be in Israel - that should be done according to local laws. Having an employee in Israel - means - the company would have a nexus in this country - and as a foreign corporation will need to allocate part of its income to Israel. Employment taxes would be due to the Israel as well. Because of additional tax liability and additional overhead to comply with Israel business and tax laws - most likely - you want to avoid such route.
4.
If the worker is a contractor - she will be treated as running her own business providing services to your company. In this case your company would not have any nexus in Israel - and would not be under jurisdiction of any Israel laws. The company would report compensation to the contractor on form 1099MISC using her SSN - and all tax liability would be on that contractor.

Other issues are related to tax liability of the worker.
5.
If the worker is an employee in the US - wages would not be considered as from foreign sources - and may not be excluded under foreign earned income provision.
However as a resident of Israel - all worldwide income is taxable - so such wages will be taxable in both countries. You might be aware about the tax treaty in effect between these countries to avoid double taxation - so she would be able to claim a foreign tax credit on her Israel tax return.
6.
If the worker is an independent contractor - she will be liable for all Israel taxes as self-employed person. Because services physically will be provided in Israel - the compensation would be classified as foreign earned income - so she may choose to either claim a foreign earned income exclusion or may claim a foreign tax credit for taxes paid to Israel on her US individual tax return. Because Israel taxes are likely higher - most likely the net result in liability would be about the same.
7.
Please be aware that US citizens are required to report all worldwide income. US taxpayer living abroad are subject of laws and regulations of both countries - and may not choose which law to use. So laws of both countries will be in effect.

Please let me know if you need any clarification or need details for any of mentioned aspects.
Lev, Tax Advisor
Category: Tax
Satisfied Customers: 22748
Experience: Taxes, Immigration, Labor Relations
Lev and 2 other Tax Specialists are ready to help you

JustAnswer in the News:

 
 
 
Ask-a-doc Web sites: If you've got a quick question, you can try to get an answer from sites that say they have various specialists on hand to give quick answers... Justanswer.com.
JustAnswer.com...has seen a spike since October in legal questions from readers about layoffs, unemployment and severance.
Web sites like justanswer.com/legal
...leave nothing to chance.
Traffic on JustAnswer rose 14 percent...and had nearly 400,000 page views in 30 days...inquiries related to stress, high blood pressure, drinking and heart pain jumped 33 percent.
Tory Johnson, GMA Workplace Contributor, discusses work-from-home jobs, such as JustAnswer in which verified Experts answer people’s questions.
I will tell you that...the things you have to go through to be an Expert are quite rigorous.
 
 
 

What Customers are Saying:

 
 
 
  • I really was impressed with the prompt response. Your expert was not only a tax expert, but a people expert!!! Her genuine and caring attitude came across in her response... T.G.W Matteson, IL
< Last | Next >
  • I really was impressed with the prompt response. Your expert was not only a tax expert, but a people expert!!! Her genuine and caring attitude came across in her response... T.G.W Matteson, IL
  • I WON!!! I just wanted you to know that your original answer gave me the courage and confidence to go into yesterday's audit ready to fight. Bonnie Chesnee, SC
  • Great service. Answered my complex tax question in detail and provided a lot of additional useful information for my specific situation. John Minneapolis, MN
  • Excellent information, very quick reply. The experts really take the time to address your questions, it is well worth the fee, for the peace of mind they can provide you with. Orville Hesperia, California
  • Wonderful service, prompt, efficient, and accurate. Couldn't have asked for more. I cannot thank you enough for your help. Mary C. Freshfield, Liverpool, UK
  • This expert is wonderful. They truly know what they are talking about, and they actually care about you. They really helped put my nerves at ease. Thank you so much!!!! Alex Los Angeles, CA
  • Thank you for all your help. It is nice to know that this service is here for people like myself, who need answers fast and are not sure who to consult. GP Hesperia, CA
 
 
 

Meet The Experts:

 
 
 
  • Wallstreet Esq.

    Tax Attorney

    Satisfied Customers:

    570
    10 years experience
< Last | Next >
  • http://ww2.justanswer.com/uploads/KU/KUMI95/2013-9-30_195031_kumar.64x64.jpg Wallstreet Esq.'s Avatar

    Wallstreet Esq.

    Tax Attorney

    Satisfied Customers:

    570
    10 years experience
  • http://ww2.justanswer.com/uploads/CU/Cuttinggirl/2011-10-29_03719_wcrop2.64x64.jpg Wendy Reed's Avatar

    Wendy Reed

    Enrolled Agent

    Satisfied Customers:

    3052
    15+ years tax preparation and tax advice.
  • http://ww2.justanswer.com/uploads/CATax/2009-08-04_204548_Mark.jpg Mark D's Avatar

    Mark D

    Enrolled Agent

    Satisfied Customers:

    985
    MBA, EA, Specializing in Business and Individual Tax Returns and Issues
  • http://ww2.justanswer.com/uploads/IN/insearchoftheanswer/2013-8-16_0233_attorney.64x64.jpg Richard's Avatar

    Richard

    Tax Attorney

    Satisfied Customers:

    3229
    29 years of experience as a tax, real estate, and business attorney.
  • http://ww2.justanswer.com/uploads/MY/MyVirtualCPA/2012-7-5_44024_cookmegan1.64x64.jpg Megan C's Avatar

    Megan C

    Certified Public Accountant (CPA)

    Satisfied Customers:

    6121
    Licensed CPA, CFE, CMA who teaches accounting courses at Master's Level
  • http://ww2.justanswer.com/uploads/JG/jgordosea/2012-6-7_43138_GordosVeritas.64x64.jpg jgordosea's Avatar

    jgordosea

    Enrolled Agent

    Satisfied Customers:

    2783
    I've prepared all types of taxes since 1987.
  • http://ww2.justanswer.com/uploads/OZ/ozaukeecpa/2012-6-7_193219_Picture1croppedandshrunk.64x64.jpg MequonCPA's Avatar

    MequonCPA

    Certified Public Accountant (CPA)

    Satisfied Customers:

    2231
    CPA, Over 30 yrs experience w/individuals and small businesses. Masters in Tax.