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A million apologies for the length of this post...it probably is an indication of how much of a mess my head is in over this issue.
I am an Australian who is moving to the US mid year (E3 Visa). I am already being asked to fill in forms seemingly committing me to either being a resident or non-resident for tax purposes. Now I know the ultimate answer will be I should get an OZ and US tax agent, but if there are any accounting-minded folks in the forum I would really appreciate you insights so I can fill in these forms. Alternatively, I'm hoping these are basic enough Qs that someone will be able to answer simply from having been there and done that before.
1.Someone has said I should try to stay a non-resident AT ALL COSTS and that means limiting my stay to 182 days in a year. It was even suggested that I go live in Canada and commute to work in the US to stay under the 183 day rule! What exactly is so bad about becoming a resident for tax purposes, and are there actually any upsides? Conversely, what is the advantage of being a non-resident?
2. If I submit forms now saying I will be a non-resident for 2008 and it turns out I can't keep to the 183 days, can I change my status, how do I do it, is it hard to do and are there any penalties/fees for changing one's mind?
3.Is it possible that one may have to be a resident in both the US and Australia for tax purposes. I'm keeping my flat here, and will continue to pay gas/water etc for the house sitters so I guess I am a resident still of Aus, but if I also go over the 183 days I will be a resident of the US at the same time! Is that going to cause me problems with both countries wanting to tax me for the same wages?
4.In the first half of the year I will have Australian income from a short term contract job here before I leave. This job includes lodgings and use of a car.
In Oz the tax year is 1 July to 30 June the next year. I will file a tax return for the OZ financial year ending 6/2008 and presumably pay my usual Oz tax on those earnings. A lot of my problems seem to come from the 2 countries not having the same dates for their tax years.
In the second half of the year I will have wages from my new US job (completely new employer and a US entity). If I have to be a US resident for tax, does that mean I will have to declare the money I earned in the first 6 months in Australia before I came, and be taxed on it in the US as well?
Likewise with my US wages, will I be taxed back in Australia on those even though I might have paid US taxes on that same money.
I imagine this is what I've heard about as "double taxation". I know we have a tax treaty with the US, but I can't seem to get a clear answer from the ATO or IRS web sites mainly because I think I will be a resident of both countries simultaneously. It's pretty reassuring if you are clearly going to be a non-resident for tax, but if you are a resident, this "being taxed on your worldwide income" talk is pretty ugly looking. So how does the treaty work if you are a US RESIDENT for tax purposes?
I had hoped that the treaty would mean that I would only have to declare and be taxed on my Australian earnings in Australia, and my US earnings in the US, but would that just be way too good and logical to be true?
4. Also If I am a US resident and have to declare my OZ earnings from the 1st 6 months, I've heard they call lodgings and use of a car earnings. How are they converted to earnings, and more importantly is there anything I have to do or keep records on now and bring with me to sort this out when I file in the US at the end of the year?
5. The thing that looks more certain I would be double taxed on is my investment income back in australia from interest etc on whatever money I leave behind. Is this right? I don't have much, so the double tax won't be much, but still every bit hurts!
6. Has anyone any experience of trying to stay a non-resident by proving a "closer connection to a foreign country"? Is this hard, and can it even be done if you have a job with a US employer?
7. Lastly (I promise!), is there anyone from Seattle who can suggest a person/s or agency of tax agents who may have experience in Australian/ Expatriate tax, or they have used and been happy with?
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