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Scenario: My tax questions relate to two international

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Scenario:My tax questions relate to...
Scenario:My tax questions relate to two international freelance contracts payed in US dollars and deposited to US bank accounts.I am a Mexican citizen who will move to NYC and start working for a US company (company A) on August 1 2016 on a TN Visa. Currently I am living in Mexico City.While my visa gets issued I am contracting for that same company (company A) based in New York City through a freelance agreement that ends on July 31 2016. I will be payed $3,750 for the freelancing contract.Additionally, I have done a second freelance contract for another company (company B) based in Los Angeles through a freelance agreement that also ends on July 31, 2016. For that contract the company will pay me with a mix of stock options and cash.The work for both contracts will be performed while I am physically in Mexico and not the US. The cash payments for both contracts will be in US dollars and into a US bank account I hold.Questions:1. Are any US taxes owed for the income of these two contracts? If so, is it only federal, or also state? If not, which government entity are taxes owed to?
2. When it comes time for my 2016 Tax Return declaration, do I have to mention these two sources of income?
Submitted: 1 year ago.Category: Tax
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7/23/2016
Tax Professional: Barbara, Enrolled Agent replied 1 year ago
Barbara
Barbara, Enrolled Agent
Category: Tax
Satisfied Customers: 4,074
Experience: 20+ years of experience in tax preparation; 30+ years of experience as a real estate/corporate paralegal.
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Welcome to Just Answer. My name is ***** ***** I will be happy to assist you.

Regarding your specific questions,

1. No U.S. taxes are owed for the income from these two contracts. It will be earned outside of the U.S. You will report the income and pay taxes on this income to Mexico.

2. When you file your 2016 tax returns, you will file a U.S. federal non-resident tax return and part-year resident New York State and New York City tax returns for any income you earn while in the U.S.

Please see Article V of the U.S. Tax Treaty between the U.S. and Mexico:

https://www.irs.gov/pub/irs-trty/mexico.pdf

Please also see the following links which contain excellent information:

http://www.howlandtax.com/articles/tnvisa.htm

https://ttlc.intuit.com/questions/2980047-do-i-need-to-report-foreign-income-before-i-came-to-usa-in-current-year

Please let me know if you require further information or clarification.

Thank you and best regards,

Barb

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Customer reply replied 1 year ago
Hi Barbara,Thank you for your response? I forgot to mention I am a resident for tax purposes in the US (before this brief period living in Mexico lived 8 years in the US so I pass the substantial presence test)Does this fact change your response? If so, how?
Tax Professional: Barbara, Enrolled Agent replied 1 year ago

Thank you for the additional information.

If you are a resident for tax purposes, then you report and pay tax on your worldwide income.

As to NY state and NY City, you would still be considered a part-year resident.

Best regards,

Barb

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Customer reply replied 1 year ago
this means I will pay taxes to the US government for this income? What will be the tax rates for such income?
Tax Professional: Barbara, Enrolled Agent replied 1 year ago

You will pay tax in accordance with your filing status and number of exemptions. The 2016 tax rates can be found at the following link:

http://www.forbes.com/sites/kellyphillipserb/2015/10/21/irs-announces-2016-tax-rates-standard-deductions-exemption-amounts-and-more/#631afc20792e

The freelance income is considered self employment income, and you will pay tax on your net income (gross income minus any expenses you may have).

Best regards,

Barb

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Barbara
Barbara
Barbara, Enrolled Agent
Category: Tax
Satisfied Customers: 4,074
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Experience: 20+ years of experience in tax preparation; 30+ years of experience as a real estate/corporate paralegal.

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