Tax

Have a Tax Question? Ask a Tax Expert

Ask an Expert,
Get an Answer ASAP!

Tax
This answer was rated:

I am an Indian Citizen and US Green Card Holder (Was in US

for 8 yrs). However, I...
I am an Indian Citizen and US Green Card Holder (Was in US for 8 yrs). However, I am now empoloyeed in India (as my US company asked me to go to India) for the past few years.
I file my US taxes regularly (However, no salary income is reported for the past couple years since I am getting paid in India and paying taxes in India).

I was issued stock options from the company (10% when I was in US and 90% after I came to India). Ours is a privately held company and has offered to buy back options this month.
Tax advisers for the company want to withhold full taxes both in US and India.
Here are my 2 Qs.
1. Is it correct for the company to withhold full tax in both countries?(India company is a subsidiary of US company. Money is coming from US company)?
2. Since double taxation treaty between India and US exist, how should this be handled?
3. I feel tax should be withheld in India and file for foreign tax credit in US. Is this correct?

Please advise
Ravi [email protected]
Show More
Show Less
Ask Your Own Tax Question
Answered in 9 minutes by:
11/2/2009
Lev
Lev, Tax Advisor
Category: Tax
Satisfied Customers: 30,142
Experience: Taxes, Immigration, Labor Relations
Verified

As you are a green card holder - you are required to file your tax return based on income level - and are required to report all your income worldwide.

 

In additional - you might be eligible for a foreign earned income exclusion.

As an US person living abroad - you may claim a foreign earned income exclusion.

The person may qualify for the foreign earned income exclusion - he/she should:
-- Work and reside outside the United States for at least 330 days during the year, or
-- Meet either the Bona Fide or Physical Presence tests.
If the person qualifies, he/she may exclude up to $91,400 (2009 in foreign wages -- plus housing allowances (limited to 30% of the earned income exclusion).

To receive that exclusion - the taxpayer should file either form 2555 or 2555EZ.

Here are forms you likely need:

Please be aware that - the exclusion above will not affect self-employment taxes - only income taxes. Only earned income is excludable. For instance dividends, investment income, etc - are not excludable.

Please also be aware that this credit is not granted automatically - you need to file a tax return and claim the credit.

 

If the same income is taxable in the US and in India - you may claim a credit for taxes paid in India on your US tax return.

To determine the amount of credit -the person should use the form 1116 and attach it to his/her tax return. - http://www.irs.gov/pub/irs-pdf/f1116.pdf

Here are instructions - http://www.irs.gov/pub/irs-pdf/i1116.pdf

 

Let me know if you need any help.

 

Ask Your Own Tax Question
Customer reply replied 8 years ago
Thanks for the reply. I need more clarification please.

1. This entire income is in response to my surrendering the stock options to the company. Company is paying the money as a perquisite. Is this income eligible for foreign tax credit?

2. Can the company legally withhold income taxes for the same income in both US and India? What can I do to stop the company from withholding in US (As I am a tax resident in India, it is my understanding that India has the claim for this tax).

3. Shouldn't the company withhold taxes in US (for options vested in US) and taxes in India (for options vested in India)?. Or can they just withhold in India and when I file my taxes in January in US, I will show this income and take appropriate taxe credit using the form 1116?

4. WIll you be able to help me file taxes in January? What would be your fee?

Please advise.

Regards,
Ravi

Hi Ravi,

 

1. This entire income is in response to my surrendering the stock options to the company. Company is paying the money as a perquisite. Is this income eligible for foreign tax credit?

Yes - if the same income is taxable in India - the purpose of a foreign tax credit - to avoid double taxation.

2. Can the company legally withhold income taxes for the same income in both US and India? What can I do to stop the company from withholding in US (As I am a tax resident in India, it is my understanding that India has the claim for this tax).

Yes - the company has to withhold taxes fro both based on your tax liability for both countries and because your company has business activities in both countries.

If withholding is more than your actual tax liability - you may file your tax return and claim a refund.

3. Shouldn't the company withhold taxes in US (for options vested in US) and taxes in India (for options vested in India)?. Or can they just withhold in India and when I file my taxes in January in US, I will show this income and take appropriate tax credit using the form 1116?

The company must comply with both countries laws.

In the US - you are treated as a resident (because you are a green card holder) - and payment to you is subject of mandatory withholding from all your income. In India - you are a resident - and all payments to you should be considered.

Because the company operates in both countries - it should comply with laws in both countries.

The reason of your situation is because you are tax resident of both countries.

Withholding - is not your actual tax liability - your tax liability will be determined at the tax mine when you file your tax return.

You need to file your US tax return and claim a refund if your actual tax liability is more than withholding.

 

4. WIll you be able to help me file taxes in January? What would be your fee?
According to Just Answer rules - I may not contact customers outside this site and may not establish a professional-client relationship.

You are welcome to ask any questions you will have on this site.

 

Let me know if you need any help.

 



Edited by LEV on 11/2/2009 at 5:46 AM EST
Ask Your Own Tax Question
Customer reply replied 8 years ago
Thanks LEV..!
Sorry to be a pest. But just 2 more questions.
1. In your last statement (

You need to file your US tax return and claim a refund if your actual tax liability is more than withholding.), is the 'actual tax liability' includes the tax I paid both in India and US?

The reason I am very concened is that between US and India, they will be withholding about 70% as tax. If it is not handled well, it may be a long time before I see some of that money again.! .

2. Is it reasonable to assume that I can get refund in US (for the taxes I paid in India)?

 

3. Can you help prepare my taxes in January 2010?

 

Thanks for the help. As soon as I get your response. I will 'Accept'. Thanks a bunch.!

1. In your last statement (

You need to file your US tax return and claim a refund if your actual tax liability is more than withholding.), is the 'actual tax liability' includes the tax I paid both in India and US?

The reason I am very concerned is that between US and India, they will be withholding about 70% as tax. If it is not handled well, it may be a long time before I see some of that money again.! .

Your actual US tax liability is determined when you file your tax return. It is based on your total income, deductions and credits. Your US tax liability generally doesn't depend on your India tax libility.

If withholding will be more than your total tax liability - you will claim a credit.

 

2. Is it reasonable to assume that I can get refund in US (for the taxes I paid in India)?

Your foreign income tax credit may not be more that your UD tax liability on the same income - so if your tax in India on the same income is more than your US tax on that income - you will not have US tax liability on that income.

But you may not expect the IRS to pay you back taxes paid to India - that should be an issue with India tax authorities.

 

3. Can you help prepare my taxes in January 2010?

Unfortunately - I may not prepare your tax return - according to Just Answer rules - I may not contact customers outside this site and may not establish a professional-client relationship.

You are welcome to ask any questions you will have on this site and I will help you to verify your calculations if needed - but avoid to post any personal information.

 

Let me know if you need any help.

 

Ask Your Own Tax Question
Customer reply replied 8 years ago
Thanks LEV.
It appears that I will be 34% withholding in US (25% Plus FICA/Social Security). In India, it will be 31%.

So, I can claim 31% tax refund in US.. Right?

Does 'JustAnswer' help with the tax filing?

Thanks again for the help.

foreign tax credit will cover only income tax - you may not expect FICA taxes to be refunded to you.

However - if FICA taxes were applied - the payment is treated as wages - thus - earned income - and you may claim a foreign earned income exclusion.

 

JustAnswer doesn't provide income tax return preparation service. The JustAnswer Site is a venue for informational and educational purposes to allow Customers to ask questions and Experts to answer them.

Posts are for general information, and are not intended to substitute for informed professional advice (medical, legal, veterinary, financial, etc.), and do not establish a professional-client relationship.

 

I will be glad to clarify tax issues for you - but may not provide tax preparation service.

 

Lev
Lev, Tax Advisor
Category: Tax
Satisfied Customers: 30,142
Experience: Taxes, Immigration, Labor Relations
Verified
Lev and 87 other Tax Specialists are ready to help you
Ask your own question now
Customer reply replied 8 years ago
Thanks for the help LEV.!
It does clarify to me. This may not be the response I was looking for. but now I understand the situation lot better.

Thanks again.
Ask Lev Your Own Question
Lev
Lev
Lev, Tax Advisor
Category: Tax
Satisfied Customers: 30,142
30,142 Satisfied Customers
Experience: Taxes, Immigration, Labor Relations

Lev is online now

A new question is answered every 9 seconds

How JustAnswer works:

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

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.WMatteson, 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.

BonnieChesnee, SC

Great service. Answered my complex tax question in detail and provided a lot of additional useful information for my specific situation.

JohnMinneapolis, 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.

OrvilleHesperia, 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!!!!

AlexLos 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.

GPHesperia, CA

< Previous | Next >

Meet the Experts:

Wallstreet Esq.

Wallstreet Esq.

Tax Attorney

586 satisfied customers

10 years experience

Mark D

Mark D

Enrolled Agent

1,300 satisfied customers

MBA, EA, Specializing in Business and Individual Tax Returns and Issues

Richard

Richard

Tax Attorney

4,310 satisfied customers

29 years of experience as a tax, real estate, and business attorney.

Robin D.

Robin D.

Senior Tax Advisor 4

13,695 satisfied customers

15years with H & R Block. Divisional leader, Instructor

Megan C

Megan C

Certified Public Accountant (CPA)

8,651 satisfied customers

Licensed CPA, CFE, CMA, CGMA who teaches accounting courses at Master's Level

jgordosea

jgordosea

Enrolled Agent

2,885 satisfied customers

I've prepared all types of taxes since 1987.

R. Klein, EA

R. Klein, EA

Enrolled Agent

1,839 satisfied customers

Over 20 Years experience

< Previous | Next >

Related Tax Questions
I am preparing a form 8802 for an LLC that will be filing as
Good morning. I am preparing a form 8802 for an LLC that will be filing as a Partnership on Form 1065. For 2016 this entity was a Single Member LLC and two Partners were admitted October 1, 2017. … read more
Barbara
Barbara
Enrolled Agent, Paralegal
3,473 satisfied customers
This is a question on a UK resident's personal income tax on
This is a question on a UK resident's personal income tax on lump withdrawals of funds in a Canadian RRSP using an example with funds expressed in $CAN. Value of lump sum payment from the RRSP is $100… read more
Barbara
Barbara
Enrolled Agent, Paralegal
3,473 satisfied customers
Dose mean can not deduct state income taxes only or dose it
dose mean can not deduct state income taxes only or dose it includes property taxes too … read more
NPVAdvisor
NPVAdvisor
CFP Licensee and Practitioner
Master's Degree
180 satisfied customers
Filed W1040 for self-employment. Should I file amended return for HSH?
I was self-employed last year and I filed a W1040 tax form. Everything went through well. I did it through an H&R computer program. Currently I am in need of financial aid as I am going to college. I … read more
Robin D.
Robin D.
Senior Tax Advisor 4
Vocational, Technical or Trade School
13,695 satisfied customers
Filling out form 1116. Need explanation for a carryover.
I am filling out form 1116 and I am unclear on how to calculate my carryover amount for line 10. Can you please explain how my last year's carryover was 126,426. Thank you… read more
Dr Arthur Rubin
Dr Arthur Rubin
Doctoral Degree
24 satisfied customers
Is a tax return less likely to be audited if it's prepared
Is a tax return less likely to be audited if it's prepared by a CPA or simply a tax person? Secondly, our Rotary Club is a 401 C for we have a 401 c 3 Foundation the question is can individual members… read more
socrateaser
socrateaser
1,031 satisfied customers
RE: FOREIGN TAX CREDIT We're filing a married joint filing
RE: FOREIGN TAX CREDIT We're filing a married joint filing tax return and have come up against some problems on form 1116. 1) Do we add both our names on the form? 2) On line 3a, it asks for certain i… read more
Barbara
Barbara
Enrolled Agent, Paralegal
3,473 satisfied customers
I need to prepare a non- withholding or reduce withholding
I need to prepare a non- withholding or reduce withholding certificate so my client can sign before transferring the tax to the IRS under FIRPA.My client and his brother owns an apartment for 500k 50%… read more
Barbara
Barbara
Enrolled Agent, Paralegal
3,473 satisfied customers
My tax preparer is with Liberty Tax, and filed incorrect
Hi. My tax preparer is with Liberty Tax, and filed incorrect returns without my knowledge or significantly … read more
Chad CFP ®
Chad CFP ®
Certified Financial Planner(R), Pro
Master\u0027s Degree
734 satisfied customers
What tax form is filed to report dividends paid by US Corp?
What tax form is filed to report dividends paid by a US Corp which is owned by a Canadian Corp? I think it might be 1042S. I want to know the rate of WH.… read more
abci168
abci168
Principal
27 satisfied customers
Us citizen living and working in colombia SA earned income
us citizen living and working in colombia SA earned income and unearned how do i report the interest and dividends are these tax at he same rate or can you also exclude them like the earned income … read more
Chad CFP ®
Chad CFP ®
Certified Financial Planner(R), Pro
Master\u0027s Degree
734 satisfied customers
International attorney that can help with double Taxation
International attorney that can help with double Taxation treaty between US and Germany. A US Green card holder in the year 2014 worked in Germany more than 183 days as a doctor, but less than 330 day… read more
taxmanrog
taxmanrog
Master\u0027s Degree
698 satisfied customers
Can franking credit on an Australian income tax return be
Can franking credit on an Australian income tax return be used on Form 1116 as tax paid on the franked distributions? … read more
Robin D.
Robin D.
Senior Tax Advisor 4
Vocational, Technical or Trade School
13,695 satisfied customers
Foreign earned income tax exemptions. My husband started
foreign earned income tax exemptions. My husband started working in the UAE in February 4, 2017. How many days is he allowed to physically visit the USA in a 12 month period to be qualified for the ex… read more
Robin D.
Robin D.
Senior Tax Advisor 4
Vocational, Technical or Trade School
13,695 satisfied customers
I need help preparing Form 2555 having multiple employers,
I need help preparing Form 2555 having multiple employers, different countries … read more
Matthew Breecher
Matthew Breecher
President
MBA (Graduate Legal Studies)
285 satisfied customers
I am looking at the form 1116 (foreign tax credit). I have
I am looking at the form 1116 (foreign tax credit). I have paid $30,000 in taxes in the UK (I live all year here), the US tax says line 22 on the form can only be 21,000. Where do I report the carry o… read more
NPVAdvisor
NPVAdvisor
CFP Licensee and Practitioner
Master's Degree
180 satisfied customers
When utilizing the foreign earned income exclusion and
When utilizing the foreign earned income exclusion and housing deduction on Form 2555 and coordinating with the Form 1116, the foreign tax credit must be reduced a formula for prorating tax credit ava… read more
Robin D.
Robin D.
Senior Tax Advisor 4
Vocational, Technical or Trade School
13,695 satisfied customers
I have to use form 1116 for a foreign tax credit line 14
I have to use form 1116 for a foreign tax credit line 14 code B the amount is 108, I got to putting in the country which is various, where do I put the 108 … read more
Anne
Anne
Master Tax Preparer
1,328 satisfied customers
Disclaimer: Information in questions, answers, and other posts on this site ("Posts") comes from individual users, not JustAnswer; JustAnswer is not responsible for Posts. Posts are for general information, are not intended to substitute for informed professional advice (medical, legal, veterinary, financial, etc.), or to establish a professional-client relationship. The site and services are provided "as is" with no warranty or representations by JustAnswer regarding the qualifications of Experts. To see what credentials have been verified by a third-party service, please click on the "Verified" symbol in some Experts' profiles. JustAnswer is not intended or designed for EMERGENCY questions which should be directed immediately by telephone or in-person to qualified professionals.

Disclaimer: Information in questions, answers, and other posts on this site ("Posts") comes from individual users, not JustAnswer; JustAnswer is not responsible for Posts. Posts are for general information, are not intended to substitute for informed professional advice (medical, legal, veterinary, financial, etc.), or to establish a professional-client relationship. The site and services are provided "as is" with no warranty or representations by JustAnswer regarding the qualifications of Experts. To see what credentials have been verified by a third-party service, please click on the "Verified" symbol in some Experts' profiles. JustAnswer is not intended or designed for EMERGENCY questions which should be directed immediately by telephone or in-person to qualified professionals.

Show MoreShow Less

Ask Your Question

x