In a recent CPA Journal article titled “Global Mobility and U.S. Taxes: Identifying Risks for Foreign Individuals and Entities,” Heather Fincher provides CPAs with a framework to identify potential US tax risks to foreign executives on US assignments, cross-border business owners, and other foreign employees in the US, including remote workers.
Heather notes that US taxation risks can be tricky for foreign individuals who are neither US citizens nor green card holders, but who nevertheless are legally working in the US for a foreign entity. The test for such individuals involves the “substantial presence” test. CPAs assisting clients in making that determination need to understand the rules of the text, as well as other factors, such as the “closer connection exception” and any other applicable treaty tie-breaker rules. Learning the nuances of these tests will assist CPAs in ensuring their foreign clients do not inadvertently fall under US residency requirements, including taxes.
Heather also warns that foreign employees’ presence in the US can affect the foreign entity they work for as well. As Heather explains, “foreign employers with US-based employees risk engaging in conduct of a trade or business within the United States (USTB) because employees’ activities are attributable to the foreign employer. Existence of a USTB triggers US filing obligations, and potentially two layers of tax, for the foreign corporation.”
Heather advises that CPAs who want to protect their global clients – both foreign employees and foreign entities – must understand the rules and guide their clients through US tax residency and related issues to prevent unwanted US taxation issues.
The full article can be found here.
About Heather
Heather focuses her practice on multinational businesses and high-net-worth individuals in need of international tax planning. She counsels both US- and foreign-owned businesses and individuals regarding the US tax consequences of cross-border investments, cryptocurrency issues, mergers and acquisitions, joint ventures, and restructurings. Heather also regularly advises clients on special issues arising in international tax controversies. Heather is the co-founder of the ABA’s Women in Tax Forum.
