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tax in america (and bank accounts!)

Discussion in 'Teaching overseas' started by KJ333, Feb 23, 2011.

  1. I've been sent the details of a package for a job in America and all of the costings are listed before tax. I've tried looking up how much I will actually get after tax but am getting confused between income and federal tax and whether my flight allowance and shipping allowance would be taxed too and if so by how much. Can anyone help clear my confusion up? Also how easy is it to set up a us bank account as I guess this would have to be what I do...do I wait till I'm over there to do it? Thanks!
     
  2. I've been sent the details of a package for a job in America and all of the costings are listed before tax. I've tried looking up how much I will actually get after tax but am getting confused between income and federal tax and whether my flight allowance and shipping allowance would be taxed too and if so by how much. Can anyone help clear my confusion up? Also how easy is it to set up a us bank account as I guess this would have to be what I do...do I wait till I'm over there to do it? Thanks!
     
  3. Bevi1

    Bevi1 New commenter

    I am not an expert but can answer some questions. Firstly, your tax will depend on which state your in. You will pay Federal tax in all states but some don't have income tax. usually any benefits you get will be taxed- housing, flights etc.
    In my experience, opening a bank account is not as easy as you might think! As far as I know, you will need to apply for a social security number (if you are working and eligible) before you can open a bank account. You may find that your employer may be able to help you with this.
    Where are you thinking of going?
     
  4. Arepa

    Arepa New commenter

    In the USA all workers pay Federal Income Taxes, a Social Security Tax (a Federal government retirement plan), and a Medicare Tax (Medical care for persons over 65 years old). In order to collect on the latter two, you need to pay into the system for 10 years (40 Quarters). These monies are withheld from their paycheck. To calculate (approximately) your take home salary, go http://www.paycheckcity.com/netpaycalc/netpaycalculator.asp

    A moving allowance is taxable. For some strange reason the taxes must be paid by Dec. 31st of the calendar year. I am not sure about air fare. In most cases, a foreign hire will have a large portion of their withheld taxes returned to them (from their first August/September to their first December). A foreign hire, employed in August (let us say) will not have to pay taxes on the income earned outside of the USA (unless it is more than $70,000.00. This is called the Foreign Income Exclusion). Thus, a teacher making, let us say $60,000.00 a year on which the withholding would be calculated, would end up actually only earning $25,000.00 (a poverty annual salary) during their first year and thus would receive a refund. You could, probably, with the help of a knowledgeable accountant arrange to have a minimal withholding during your first 5 months (you would get a smaller or no refund then).
    There are also State Taxes. There are 50 states and they take pride in doing things differently. Thus in some states you pay income taxes, in other state you pay sales taxes and in some you pay both.
    Again depending upon the state you might need a Social Security number for a Driver's License, an apartment rental contract and a bank account. However, regarding the latter two, you can often sign a lease and open an account prior to getter your SS no. If your school is well known and willing to assist, this process will be quite easy. They will let you give them the number later.

    You did not ask, but you might be interested in how to compare cost of living between your present location and the USA. There is no one site that I have discovered that does it directly (if anyone know of one, please let me know). The best way is to first compare your location with New York on the following site http://www.expatinch.com/html/intl_cost_of_living.html and then compare New York to your US location by using http://cgi.money.cnn.com/tools/costofliving/costofliving.html

    Many Americans budget 30%-35% of their take home income for housing, 15% for transportation, and 15% for food. In many cities a car is a necessity rather than a luxury.

     
  5. I don't know how long your job is for but as a UK residents (which you can claim as as your job will probably be considered temporary unless you have a green card or similar) we are able to work in the US tax free (federal taxes) for 2 years. If you plan to stay beyond that time though it is better to opt out of the tax treaty benefits.
    Even if you do pay taxes you would be able to claim moving expenses and most other job related expenses back at the end of each tax year(up to 2 years I think as you can live in the US but still claim as a non-resident deending on what type of visa you have). Either way, I ended up getting back a huge percent of the taxes I was paying for the frst 2 years I worked here. Since then I have ended up getting back about half of the taxes I paid as a refund at the end of the tax year.Just something to bear in mind. I like to think of my taxes as a savings account.
     
  6. Thank you all for your replies, the job is in Texas which I think is one of the states which doesn't charge income tax (from what I can figure out from internet searches). I tried looking up the webistes about comparing cost of living but think I am being a bit stupid as I can't work it out!! Any chance of some more step by step instructions for an amateur? Thank you!
     
  7. Arepa

    Arepa New commenter

    Happy to help.
    1. Go to http://www.expatinch.com/html/intl_cost_of_living.html and locate your present city. If it is not there, use one whose cost of living you would be familiar with: e.g. London. You can now compare New York (Cost of Living Index 100. The base) with any other city. Thus, if you are presently working in Nuuk, Greenland (Cost of Living Index 117.14) and making $11,714.00 a month, it would only cost you $10,000.00 a month in New York to maintain the same standard of living and whale blubber consumption (Greenland is 11. 7% more expensive). You can now establish how your present salary would translate into a life style in New York.
    2. Now go to http://cgi.money.cnn.com/tools/costofliving/costofliving.html and enter the salary you are offered. Then select New York State and then New York City as your current location. Finally enter your destination state (Texas) and the city. You will probably find that New York city is between 50%-60% more expensive than Texas. Thus, your cost of living would decrease by about 70% (11% from Nuuk plus 60% from New York), aside from the cost of importing the whale blubber.
    3. Bear in mind that it you live in Texas you will need a car, so factor that in as a cost.

     
  8. Arepa

    Arepa New commenter

    I just discovered that if you are on a J-1 Visa,you are exempt from Social Security and Medicare taxes.

     
  9. Arepa you have been really helpful thank you.
     

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