# Independent contractor/taxes/ltd/etc.



## Shipresa (Dec 9, 2008)

Situation:

My husband is an independent contractor in a limited company and billing 'employer'. Taxes, etc. done here in UK, where we presently reside.

Moving to USA - He prefers to remain the same system, but should we enter into a partnership as I'm a citizen (he'll be a resident) - or are there other alternatives via US tax code?

Thanks


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## twostep (Apr 3, 2008)

Will he bill with 1099?


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## Shipresa (Dec 9, 2008)

That is our wondering - should he continue with the same system (meaning in US he'll be 1099 ing) - or should he attempt direct hire?

In other words, should he stay as self-employed (filing as such) or becoming a simple employee?

Does citizenship matter in self-employment or only right to work (he's a permanent resident via marriage.)


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## Fatbrit (May 8, 2008)

Shipresa said:


> Does citizenship matter in self-employment or only right to work (he's a permanent resident via marriage.)


He can be self-employed with permanent residency.


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## Bevdeforges (Nov 16, 2007)

Shipresa said:


> Situation:
> 
> My husband is an independent contractor in a limited company and billing 'employer'. Taxes, etc. done here in UK, where we presently reside.
> 
> ...


Self employed is no problem for a green card holder, and you can still file jointly with him without setting up any sort of partnership. The trick is how he bills his "employer" back in the UK.

In the US, as an independent contractor, he is responsible for all his own withholdings - taxes, social security and any medical or retirement benefits. Normally, when a US "employee" goes out on his own and becomes a "contractor" their billing rate rises (rule of thumb is that it should double) to cover the additional taxes and benefits costs that the employer was paying before. (Assuming the "employer" in the UK was carrying him like an employee and paying in for health coverage and retirement.)

As an independent, your husband will be paying the full social security charge (usually split between employer and employee), plus will be responsible for making quarterly estimated tax payments, plus any insurance plans (health and/or retirement). Be sure he negotiates an appropriate billing rate with the company he is contracting for before you move if the company has been covering social insurances for him up to now. (He'll also be able to deduct all legitimate business expenses - which can include things like phone calls back to the UK, accounting services, stationery items he provides for his work, etc.)
Cheers,
Bev


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## Yaz (Jun 25, 2009)

Why not use a management company in the USA? There are plenty of them and they can make it so much easier for you.


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## Xman (Jun 29, 2009)

Shipresa said:


> Situation:
> 
> My husband is an independent contractor in a limited company and billing 'employer'. Taxes, etc. done here in UK, where we presently reside.
> 
> ...


Any citizen of one country who wants to be self-employed/independent contractor in another country first needs to check that their country has a social tax agreement with the country they want to work in.If they don't, you'll be obligated to pay social tax to two countries at the same time for the same work.
Because such a possibility never occurred to me (it is completely unimaginable from any logical point of view),I didn't discover it until too late.I couldn't afford to pay double social tax and still meet the financial conditions for extending my visa,so it destroyed everything I had worked years for.


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## Xman (Jun 29, 2009)

for info on what countries have agreements w the US,go to International Programs


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## twostep (Apr 3, 2008)

Have you looked at the health coverage side of 1099 versus permanent hire?


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## appy (Jan 12, 2010)

Is there any specific reason - that you wish to be an independent contractor - like another person mentioned there is a lot of things to consider - making estimated tax payments, ofcourse half of ur self employed Social security contribution etc - you can take that as dedcution on ur return - still there are a lot of paper work, tax etc to deal with. Plus if your self employed the issue of self employed insurance - coverage etc comes to play. 
If he has PR then there is nothing between him and strarting his own business (Seting up an entity - partnership, LLC etc) or working for any one he wants to. 
May be listing the Pros and cons will help you !


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## Shipresa (Dec 9, 2008)

*Direct Hire appears most cost effective*



appy said:


> Is there any specific reason - that you wish to be an independent contractor - like another person mentioned there is a lot of things to consider - making estimated tax payments, ofcourse half of ur self employed Social security contribution etc - you can take that as dedcution on ur return - still there are a lot of paper work, tax etc to deal with. Plus if your self employed the issue of self employed insurance - coverage etc comes to play.
> If he has PR then there is nothing between him and strarting his own business (Seting up an entity - partnership, LLC etc) or working for any one he wants to.
> May be listing the Pros and cons will help you !


After much research and discussions, the situation in the US for folks in the oil industry appears to be more efficient toward direct hire. In fact, of the companies providing offers, only one asked if he wanted to continue (as he did here) being a consultant (self-employed.) Here in the UK, it is more financially astute to do so.

1. Health insurance. This was a big biggie for us, as we are starting a family. Texas is not as liberal with their health insurance laws as say parts of New England (remember in USA, state law is normally what sets the standard, not federal.) Major Medical is about all we could get coverage for, but then set in the multitude of caveats - pre-existing conditions, one year wait for treating conditions, no maternity or pre-natal riders. Etc. It was a nightmare to find coverage options, then being sold the earth, sun and moon by salespeople. Direct hire eliminates this entire stress. Including vision and dental to boot! 

2. Management companies - this was suggested here and we'd long already scratched them off the list. Why? Because of their pushing and the cost. It isn't cheap to have a management company 'manage' your consulting. The pushing was all the promises of pie in the sky, then crickets. The only reason why we thought to go through them was for the medical benefits, which in the end were quite expensive and not very comprehensive.

3. Consultant in USA is a bit different than in UK. Here in UK, my husband has been a 'consultant' for over 12 years in the same company. No one even knows who is a consultant and who is direct hire. Slight downturn last year - the people culled were not let go due to status of hire, but by performance. In USA, companies are clear - consultants go first. Then its not considered a lay off. Additionally, projects may end and the consultant has less leg to stand on. Overall, it seems USA (not even for the oil and gas industry, I found this as a consultant to the US government) is not geared toward this. A consultant in USA is truly on their own in all things, whereas the climate in UK makes it more easy to be a registered entity and a consultant.

The final negotiated salary was quite admirable with all benefits thrown in, including a surprise relocation package which we did not ask (as we'd already decided to move to USA.)

In final, direct hire appeared to be more practical, safer and more reliable way to enter the USA. Who knows about future, when we've settled and have some years in the industry.


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## Bevdeforges (Nov 16, 2007)

Actually, this is a very timely issue. They have just announced (yet another) crackdown on "independent contractors" in the US, due to the increasingly rampant abuse of this category by unscrupulous "employers."

In short, in the US, the IRS (tax authority) is far more likely to audit "contractor" returns than those of regular employees. The main problem is that, by working as a "contractor" the customer/employer is no longer responsible for the employers' share of withholdings (mainly taxes and social security) and payment of unemployment insurance. Also, being paid as a contractor means that you are on the hook for your general costs of working (supplies, tools, travel, etc.) and basically you should be getting significantly higher pay to cover these costs.

As a contractor, you have to pay both halves of social security - i.e. twice as much as you'd pay as an employee - and you are expected to file quarterly tax estimates (i.e. prepayments of your income tax).

Working conditions for contractors in the UK are apparently a bit less fraught. But if you're resident in the US and working as a contractor, you need to be very careful you're not being taken advantage of.
Cheers,
Bev


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