Umbrella Company in USA

Independent contracting in the US isn’t always straightforward. You’ve got immigration issues, tax difficulties, and mountains of complex admin work. Even worse, missteps can cost you serious money, or even land you in legal trouble.

Before you consider taking a contract in the US, you should be aware of what you’re getting into – and how you can make it simpler

Difficulties of Contracting in USA

Generally, you need to have an employer sponsor in order to secure the appropriate work permit and work visa for the US.

If you’re working independently, it can be difficult to find clients willing to sponsor you. Moreover, even if your client can do this, you’ll need a new sponsor each time you decide to take on a new contract. Of course, every new sponsor will mean more paperwork.

Also, are you familiar with the intricacies of the tax system in the US, as well as your own country’s laws on overseas earnings? If so, good on you!

However, if you’re like the rest of us, figuring out (much less reducing) your tax liability in the US and your home country can seem like full-time work in itself.

How Umbrella Companies Work

Most freelance workers aren’t superheroes who successfully tackle these issues all on their own. There are companies who specialise in helping workers make the most out of their contracts.

They’re called Umbrella Companies (or, contractor management companies).

Basically, an Umbrella Company acts as your full-time employer, even though you maintain your independence as a contractor. They collect and filter payments from your clients, filtering out the necessary social security and fees. You send them your timesheets, and they send you payments.

Because they act as your “employer,’ they can sponsor you and provide a single work permit for multiple contracts in the US. Even better, most are experts in US and expat tax law, meaning they’ll also help you optimise your earnings in the US.

Although the Umbrella Company is technically your “employer,” you’re essentially freeing yourself to work even more independently. You still dictate your contracts, your hours, your schedule. The Umbrella Company simply filters out the time-consuming admin and immigration issues, allowing you to focus on your new contract.

Why Use an Umbrella Company in USA

Most people want to do their work, earn their money and enjoy their spare time without taking on loads of admin in a new country. That is why an umbrella company can help.

When you’re working through an Umbrella Company, you’ll essentially be outsourcing the admin and tax issues to specialists.

While the umbrella company will charge a fee, you’ll likely end up saving more money in the long run: you’ll be able to focus on your work, expertly reduce your tax liability, and comply with all laws and regulations in the US (which means avoiding fees, fines, or even worse penalties).

How We Can Help You

There’s a huge variety of Umbrella Companies with different specialities and advantages in the US. How do you find the right one for your circumstances?

We work closely with Umbrella Companies all throughout the US and match contractors with the right company for them. If you’ve already secured a contract in the US, we can help you find your best match (for free). Or, we can simply give you feedback on your situation (for free).

 

A Contractor’s Guide to Taxes in USA

One of the most consistently challenging aspects of contracting in USA is complying with the country’s tax system. As well as paying tax in the US, you might also still be eligible to pay some tax in your home country, and understanding the legislation behind this can be a challenge.

How do I calculate my taxable income in USA

If you’re working in the USA under a permanent contract, many employers will handle your tax under the PAYE (pay-as-you-earn) system. Your employer is required to withhold federal income tax, social security tax, Medicare tax and other deductions from each payment of wages and/or other compensation. This means that they calculate and process your taxes for you and then send you a net wage. This is the easiest way to handle your income tax in the USA, but contractors may not be offered this service because of their short stay with each employer.

Anybody who can’t pay their tax in the USA through PAYE is left with the prospect doing everything themselves.

Do you know much about US Tax Law? Does the US have a tax treaty with your home country? You will need to find out or find someone who can help! Income tax in the US can range from 10% to 39.6% percent, and you need to be sure you are placed in the correct tax brackets.

Tax Filing in USA

When Do You Need to Lodge Your Tax Return?	April 15
Tax Filing Deadline	April 15 (or the following business day if April 15 falls on a weekend or a public holiday)
Can you file it online?	Yes, https://www.irs.gov/filing/free-file-do-your-federal-taxes-for-free

How to File Taxes in USA

You can file your taxes online or by mail.

Step 1: Gather all relevant documents and information. These may include:

• Your Adjusted Gross Income (from your last year’s tax return or the IRS Get Transcript Online(link is external) tool)
• Social Security numbers for yourself, your spouse and dependents (if applicable)
• W-2s, showing annual wages from your employers
• Any forms showing interest, tax credits and/or dividends paid to you

Click here(link is external) for a comprehensive list.

Step 2: Obtain the relevant tax forms. IRS e-file(link is external) can choose the best form for your situation. In general, use:

• 1040EZ if your taxable income is below $100,000; your filing status is single or married filing jointly; you are not claiming any dependents; and your interest income is $1,500 or less.
• 1040A if your taxable income is below $100,000; you have capital gain distributions; you claim certain tax credits; and you claim adjustments to income for IRA contributions and student loan interest.
• 1040 if your taxable income is $100,000 or more; you claim itemized deductions; you are reporting self-employment income; and you are reporting income from sale of a property.

Step 3: Sign and submit your tax forms. This can be done online or by mail. The postal address for your state can be found on the IRS website here(link is external).

Tax Figures in USA

Currency	US Dollar (USD)
Tax-free Threshold in USA	None
Income Tax Rates	Grossed Income Tax Rate (%) Married Filing Jointly 0-18,650 10% >18,650-75,900 15% >75,900-153,100 25% >153,100-233,350 28% >233,350-416,700 33% >416,700-470,700 35% >470,700 39.6% Married Filing Separately 0-9,325 10% >9,325-37,950 15% >37,950-76,550 25% >76,550-116,675 28% >116,675-208,350 33% >208,350-235,350 35% >235,350 39.6% Head of Household 0-13,350 10% >13,350-50,800 15% >50,800-131,200 25% >131,200-212,500 28% >212,500-416,700 33% >416,700-444,550 35% >444,550 39.6% Single 0-9,325 10% >9,325-37,950 15% >37,950-91,900 25% >91,900-191,650 28% >191,650-416,700 33% >416,700-418,400 35% >418,400 39.6%
Notes	Which Category: The four different categories of taxpayers are subject to different tax rates. Married taxpayers can benefit more from filing jointly than from filing separately. However, they may not be able to, if either spouse is a non-resident at any time during the tax year. Estimated Tax Payments: Your employer (or umbrella company) is required to withhold taxes from each payment of wages and/or other compensation. You may be required to pay estimated tax in quarterly instalments if it is expected that withholding will not cover your annual tax liability. Federal estimated tax payments are due on April 15, June 15, September 15 of the current year, and January 15 of the following year.