Background

The information contained in this publication is provided for general informational purposes only and is based on U.S. income tax law applicable to taxable years ending on or before December 31, 2016.  It is not intended to be and should not be construed as “written advice concerning one or more federal tax matters” subject to the requirements of Section 10.37(a)(2) of Treasury Department Circular 230.

Since tax laws change frequently, the application of the information contained within this publication to specific situations should only be determined through consultation with your tax advisor.  You are strongly encouraged to consult with your tax advisor prior to undertaking any significant financial transactions.

Zander Sterling, LLC is a CPA firm focused exclusively on global mobility tax matters impacting employers and employees.  Accordingly, it does not provide legal services.

Introduction

As currently written, everyone in the world is technically subject to the U.S. Internal Revenue Code.  The degree to which a foreign citizen or national is actually taxed, however, depends on his or her U.S. resident status.

The United States has adopted a highly-complex, self-assessing system of taxation.  Under this system each individual is responsible for preparing his or her own personal income tax return, computing tax owed and the timely remittance of tax.  This means taxpayers do not receive annual tax assessments from tax authorities as is the case in many countries.

In general, the U.S. tax year is the calendar year, January 1 through December 31.

There are, in general, three jurisdictions of income taxation within the U.S.:  federal, state and local.  Each of these tax jurisdictions are administered separately and has their own governing tax laws.  In addition to income taxes, the U.S. also imposes a federal-level social tax commonly known as FICA.

The federal income tax is administered by the Internal Revenue Service (IRS), an agency within the U.S. Department of Treasury.  State and local income taxes are administered by each respective state or local jurisdiction where applicable.  U.S. social tax is co-administered by the U.S. Social Security Administration (SSA) and the Internal Revenue Service where the IRS’s role is largely limited to the collection of the social tax.

Due to the complexity of the U.S. income and social tax laws – and the number of exceptions within them – the primary scope of information provided within this publication has been limited to those areas of federal-level taxation most frequently of interest to individuals relocating to the United States.

Note:  If you are participating in a corporate-sponsored international assignment program, you may be covered by either a “tax equalization” or “tax protection” policy.  While these types of policies are conceptually similar from one company to the next, the details surrounding tax computations, payment of taxes, and administrative responsibilities can vary a great deal.  Accordingly, you should obtain and review the details of any such policy with your employer, if applicable, to ensure you have a complete understanding of how your personal tax obligations will be computed and managed.

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