Complicated Situation

Ok...

My wife (currently in the US) telecommutes for a company in Germany... they don't sort out the tax stuff and don't supply her with pay slips :/

How can this be dealt with tax wise? What forms are needed etc?

She will be able to keep this job when she moves over since it is telecommuted.

This particularly needs doing since the intention is for her to move to the UK soon...

Hi Chris

As your wife provide the services to her employer in the US and she is a resident of the US, she need to pay tax to the US government.  Are you saying that they do not withhold any Federal and State taxes from her? Which State is she at? How long has she been working there? WHen is she planning to move to the UK?

If they are not withholding any tax, it is possible that that they are taking a position that she is self employed. Does this make sense?

Anyway, please provide me with the answers to the above, and I will provide you with an answer to your questions.

Helen

No money is taken for tax... she gets paid without any deductions taken off it. She is currently in Pennsylvania, she's been working for the company for nearly a year... but has lived there all her life. Payment is given by bank transfer from Germany to the US.

I'm worried that there will be problems

I am hoping that she will be able to move to the UK within the next few months.

Seems like she's self-employed and should have been paying in her own taxes.  She should still be getting some sort of payment slip - does she invoice them in any way?  She must keep some sort of records as to her income for tax purposes?!

I thought she might be.  How does the employer know how much to pay her? Has there been agreed hourly / weekly / monthly amount? She should invoice them for here hours and they should pay her then.  How has this been dealt with to date?

Very badly it would seem...

She is salaried a set amount every month... they gave NO instructions... or anything, just that they would send her the money every month... and somehow expected her to know what to do and sort it out herself...

She had never worked in this situation before until she got this job... she worked for an american company before and was given W2's and her taxes were deducted automatically...

There are no payslips... the only record she has of how much she has been paid is her bank statements...

She has asked for payslips on a few occasions but they have not been given...

I am so worried about this

Is she in trouble?

Does she have any sort of employment contract with them?

Really does sound like she's self-employed and since the money is deposited into her US account she needs to file her taxes as self-employed in 2004 for the 2003 tax year.  Even if she's self-employed, the employer SHOULD give her some sort of document she can use to show IRS how much they've paid her.  She's going to have to pay her own taxes on whatever she's earned.

Helen - in a case like this where the employer is not US-based and probably doesn't have to supply a 'year-end' form in January for tax purposes, would the IRS be satisfied with copies of her bank statements showing the deposits directly from the 'employer'?

I'm interested as I used to be self-employed myself and always wondered how really global the marketplace is!

I want to stress that the fact that she is not receiving payslips from her employer does not automatically make her self-employed. To be self employed, you would be in control of what you do, when you do it, where and how you do it. You need to be able to hire or fire people on the same project etc.....

If none of the above is true, then she is an employee who did not receive any paylips from her employer. Therefore when filing a return, she would just look at her bank statments and report the amount she received on her return.

She does not need to attach any proof of the income until when /if the return is audited by the IRS and State authorities. Therefore the back up / bank statments should be kept with a copy of the return in a safe place for 6 years. The only documents required to be attached to the US returns are W-2s and 1099s or any other documents showing Federal / State withholdings.

Helen

What about the amount of tax she owes? Since no tax has been paid during the year, how does the outstanding tax get calculated and paid?

You say about attaching W-2's but those are also not supplied...

Chris

Feel free to call me on 0208 466 9297 to discuss. We seem to be going over the same points over and over again.....

Helen