L2 Visa & Remote Work from US: What Are the Tax Implications for Foreign Income?

Does the company actually have to set up a US payroll though? I've heard of people just continuing to get paid as normal and then filing their US taxes independently. Is that not legal?

Thanks for the detailed response! I'm worried about the administrative hassle this might create for my employer. They don't have any US entity, just their UK operation. Would they really need to set up a US payroll for just one employee (me)? And regarding the foreign tax credits - does that mean I'd still pay the higher of the two tax rates between UK and US?

That approach falls into a gray area. Technically, a foreign employer with an employee working in the US may have US tax obligations. While some people do handle it as you described, it can create compliance risks for both the employee and employer. The administrative burden for your employer is a legitimate concern. They wouldn't necessarily need to establish a US entity, but they would need some way to properly handle US tax withholding. Many companies use a Global PEO service for this situation - it's specifically designed for companies with just a few international remote workers. Regarding tax rates, you'll essentially end up paying the higher of the two countries' effective tax rates. If US taxes are higher, you'll pay the full US rate (but can use UK taxes paid as a credit). If UK taxes are higher, you'll pay the full UK rate (with US taxes largely offset by credits).

How complicated is it to use? I'm in a similar situation (Canadian working for Canadian company but moving to US on L2 soon) and I barely understand basic tax forms, let alone international stuff.

Did it actually handle the fact that you were on a visa vs being a citizen? Most tax software I've tried doesn't understand visa situations at all and just assumes everyone is either a citizen or nonresident alien with no nuance.

It's actually really straightforward to use. You just upload your tax documents (doesn't matter which country they're from) and it walks you through some questions about your visa status, time in each country, etc. There's a guided interview process that's much easier than trying to decipher tax forms yourself. Absolutely, that's what impressed me most. When I entered my L2 visa details, it immediately recognized the specific tax implications. It knew about the substantial presence test, treaty provisions specific to visa holders, and even had specific guidance for L2 visa holders with EADs vs those without. It's clearly designed with expatriates and visa holders in mind, unlike regular tax software that mostly focuses on citizens.

How does this even work? The IRS phone system is completely broken - I tried calling for 3 days straight and never got through.

Sounds like marketing BS to me. Nobody can magically get through the IRS phone system. They probably just keep auto-dialing until they get lucky, which you could do yourself for free.

It uses an automated system that navigates the IRS phone tree and holds your place in line. When it finally reaches an agent, it calls you and connects you directly. No need to stay on hold for hours. They use technology that continually redials and navigates the IRS phone system, which is way more efficient than doing it manually yourself. It's not just "auto-dialing" - it's specifically designed to work with the IRS phone system's quirks. I was skeptical too until I tried it and got connected in 17 minutes after failing for days on my own.

That's a great point I hadn't considered at all. We're moving to Massachusetts - any idea how they handle foreign income for visa holders? Is there a resource where I can check this?

Massachusetts is actually one of the better states for this situation, but you'll still need to file. They generally follow the federal treatment of foreign income, so if you qualify for exclusions or credits at the federal level, you'll likely get similar treatment on your MA return. The Massachusetts Department of Revenue website has some info, but it's not very detailed for visa-specific situations. I'd recommend either checking with a tax professional familiar with Massachusetts or calling the MA Department of Revenue directly. Their hotline is usually much easier to get through to than the IRS.

This is such a good point. I'm on an L1 and got hit with a huge tax bill because my company wasn't withholding FICA taxes properly. The totalization agreement paperwork is also really specific - you need a certificate from the UK authorities.

This is really helpful context about the weighted calculation for the substantial presence test! I had no idea it wasn't just a simple 183-day count for the current year. That makes the timing even more complex to figure out. Your point about the Foreign Earned Income Exclusion for the pre-move period is also something I hadn't considered. Since I'm planning to move in about 2 months, that could potentially save me quite a bit on taxes for the first part of the year when I'm still UK-based. Do you know if there are any specific requirements for claiming that exclusion? Like do I need to prove I had a "tax home" in the UK for that period, or is it sufficient that I was physically present there while working? Also, when you mention getting professional advice early - are you thinking of a CPA who specializes in international tax, or is there a specific type of advisor that's best for visa holder situations like ours?

For the Foreign Earned Income Exclusion, you need to meet either the "bona fide residence test" or the "physical presence test." Since you're moving mid-year, the physical presence test is probably more relevant - you need to be physically present in a foreign country for at least 330 full days during any 12-month period. Your "tax home" also needs to be in that foreign country during the qualifying period. The tricky part with L2 visa situations is that once you establish US tax residency (through the substantial presence test), it can affect your ability to claim the exclusion going forward. But for the period before you move, you should definitely be able to claim it if you meet the requirements. For professional advice, I'd specifically look for an Enrolled Agent (EA) or CPA who specializes in expatriate tax issues and has experience with L visa holders. Regular CPAs often don't understand the nuances of visa-based tax residency. The American Institute of CPAs has a directory where you can filter by international tax specialization. Also consider looking for someone who's dealt with remote work situations specifically - it's becoming more common but still requires specialized knowledge.

This is incredibly valuable insight, thank you for sharing your real-world experience! The strategic timing aspect is something I hadn't fully considered - moving in July to maximize the Foreign Earned Income Exclusion for the first half of the year is brilliant. Your point about UK tax residency is particularly important. I was naively assuming that once I move to the US and become a US tax resident, the UK side would automatically sort itself out. The fact that HMRC has their own separate tests for tax residency and I might need to actively establish non-resident status with the RDR1 form is definitely something I need to research further. The PAYE situation is also concerning - I hadn't thought about how my employer would handle the transition from UK PAYE to paying me gross. That sounds like it could create a significant administrative burden for both me and my employer, especially in terms of cash flow since I'd need to handle quarterly estimated tax payments to the US rather than having taxes withheld automatically. When you mention getting advice from someone familiar with both tax systems, did you find someone who was actually qualified in both countries, or did you end up working with separate advisors in the UK and US who could coordinate with each other? I'm wondering what the most practical approach is for getting comprehensive advice that covers both sides properly.

I found someone who was actually qualified to practice in both jurisdictions - they were a US CPA with additional UK tax qualifications. It was more expensive than working with separate advisors, but the coordination was seamless and they caught several issues that could have easily been missed if I'd been working with two different people who weren't communicating effectively. One thing I'd add to your excellent points - don't forget about the potential impact on your UK pension contributions if you have any workplace or personal pensions running. Once you become non-UK resident, you may lose UK tax relief on pension contributions, which can significantly affect the math on whether it's worth continuing to contribute. Also, if you have any UK ISAs, you won't be able to make new contributions once you're non-resident, though existing ISAs will continue to grow tax-free. It's worth maximizing your ISA contributions before you leave if you haven't already done so for this tax year. The quarterly estimated tax payments in the US are definitely a cash flow consideration, especially since UK employers typically don't understand the US system well enough to help you calculate what you should be setting aside. I ended up opening a separate US bank account specifically for tax savings to avoid any nasty surprises at filing time.

This is exactly the kind of professional insight I was hoping to find! The first year election under IRC Section 7701(b)(4) is something I'd never heard of before - that could potentially simplify things significantly if I can elect US residency from my arrival date rather than having to track the substantial presence test calculation. The employee vs independent contractor distinction you mention is particularly concerning. My UK employer is quite small and definitely doesn't have any US presence or understanding of US payroll requirements. If continuing as their employee could inadvertently classify me as self-employed for US purposes and trigger that 15.3% self-employment tax on top of everything else, that would completely change the financial equation. Would you happen to know what specific factors the IRS uses to determine this classification? Is it primarily about whether the employer handles US tax withholdings, or are there other control/relationship factors they consider? Also, regarding your point about state taxes - we're actually planning to move to Massachusetts. I know you mentioned it's better than states like California, but do you have any specific insights into how MA treats foreign income for L2 visa holders? I'd love to get a professional perspective on this since the state guidance is pretty limited for our specific situation. Thank you for sharing your expertise - it's incredibly valuable to get guidance from someone who actually specializes in L visa tax issues!

As someone who went through a similar situation, I can add some practical insights to Amina's excellent technical points. Regarding the employee vs independent contractor issue - the IRS looks at several factors including degree of control, financial aspects, and the relationship type. The key red flags that could trigger self-employment treatment are: 1) No US tax withholdings by your employer, 2) You control your own work schedule/methods, 3) You use your own equipment, and 4) You can work for other clients. Even if you're technically an employee in the UK, the lack of US payroll compliance often tips the scales toward contractor treatment. For Massachusetts specifically, they generally conform to federal tax treatment of foreign income, but they don't recognize the Foreign Earned Income Exclusion. So if you exclude income federally, you'll likely still owe MA state tax on it. The good news is MA's top rate is only 5%, versus states like California at 13.3%. One practical tip: if your UK employer balks at setting up US compliance, consider negotiating a gross-up in your compensation to cover the additional self-employment taxes. Many employers find this easier than dealing with US payroll requirements. The first year election Amina mentioned can be really valuable - it often allows you to file jointly with your spouse immediately rather than using married filing separately status, which usually results in lower overall taxes.

This is such an important point that I hadn't considered at all! The connection between tax compliance and future green card applications makes getting this right from the beginning even more critical. It's sobering to think that even small tax mistakes could potentially delay or complicate the adjustment of status process later. Your advice about keeping detailed records resonates with me - I can already see how complex the documentation trail will be with days spent in each country, multiple tax filings, foreign tax credits, and potentially different treatment between federal and state levels. Having everything organized from day one will definitely be worth the effort. The automatic tax savings account is brilliant advice. Based on what others have shared here, it sounds like the cash flow timing can be tricky since you might owe substantial amounts to both countries initially, even if credits ultimately reduce the final liability. I'm thinking of setting up automatic transfers for maybe 35-40% of gross income to be safe - does that sound reasonable based on the experiences people have shared? One follow-up question: when you mention USCIS scrutinizing tax compliance history, do you know if they focus more on the accuracy of filings or the timeliness of payments? For example, if someone filed correctly but was late on a quarterly estimated payment, would that be viewed as seriously as someone who failed to report income entirely? Thank you for bringing up this immigration angle - it adds another layer of importance to getting all of this sorted out properly from the start!