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I am working for a software company in Texas since 2011. I

went out of US to...
I am working for a software company in Texas since 2011. I went out of US to get my H-1B visa stamped in a foreign US Consulate. However, my visa application remains under "Admin review" since Jan 2012. I have been working remotely from outside US since Dec 2011 and have been paying my federal and social security taxes in each pay cycle. However, I have NOT spent a single day in US in 2012.

Am I even obliged to pay taxes for 2012? What form(s) do I need to fill out to file taxes and get returns?
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Answered in 5 minutes by:
3/1/2013
Robin D.
Robin D., Senior Tax Advisor 4
Category: Tax
Satisfied Customers: 15,888
Experience: 15years with H & R Block. Divisional leader, Instructor
Verified

Robin D :

Hello and thank you for using Just Answer,
If you have been working outside the US for a US company then you normally would not be subject to US taxes. The US uses sourcing rules and for an employee the income is sourced where the work was performed. You will want to file a US 1040NR return to claim the refund for taxes withheld.

Customer:

Thanks for the quick reply, Robin. So basically even if I am enrolled in the US cost center of the company & have been doing the same work remotely that I was previously doing on US premises, I can just file US 1040NR form and get all the paid taxes in return. Correct? Does that mean 100% of the federal taxes will be returned?

Robin D :

It could mean that you will receive the refund of your federal taxes withheld. I have to advise though that the IRS is getting more and more strict on their definition of where work is performed when employees are "working remotely" by internet connections. The IRS has started looking more closely at the way a remote worker is tied into the everyday processes.
You will not be refunded the Social Security or the Medicare

Customer:

Sure, that would be no problem to prove since my passport is with US consulate outside US and I have not entered US since Dec 2011. All the work has physically been performed remotely outside US premises.

Robin D :

Then you need to file the 1040NR

Customer:

Regarding Form 1040 NR, Row 42 of the Form 1040 NR asks me to compute the taxes. When I refer to tax computation table in Form 1040 NR instructions document, the eligible federal tax comes out to be $20,539. And that is what is confusing me. Could you elaborate on that particular field? Or do I just put in a Zero for Tax field in Row 42?

Robin D :

You need to use the tax treaty provision for the country where you were resident. What country were you physically in.=?

Customer:

I am currently in Pakistan.

Robin D :

One sec

Robin D :

Article 11 of the treaty covers you. You need to complete page 5 of the 1040NR and follow the instructions on how to eneter the income and then exclude it.

Customer:

Robin, thank you for the answer & advice. Great job! I am still a bit confused about how the exempt income in field 22 would cancel out the tax field row 42. Do I need to submit another question for it?

Robin D :

The income listed on Line 22 will be subtracted from the income entered on Line 8, this will then make your income $0 so tax will be $0. Then when you enter the Line 61a amount for withholding the refund will be the same. No income = No tax

Customer:

Now I get it. Line 8 & 22 will have the same total income amount. Therefore 'total effectively connected income' is $0 in line 23. The rest works itself out.

Thank you for the detailed answers and excellent service! It's much appreciated.

Robin D.
Robin D., Senior Tax Advisor 4
Category: Tax
Satisfied Customers: 15,888
Experience: 15years with H & R Block. Divisional leader, Instructor
Verified
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Category: Tax
Satisfied Customers: 15,888
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Experience: 15years with H & R Block. Divisional leader, Instructor

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