I'm in a unique situation with my US based employer. I'm an Indian citizen and after a year of working in the US, have had to move back to India. My employer would like me to continue working for them remotely. I have 2 choices in how I get paid and have been trying to figure out the best option for me.
- Option (1): US employer treats me as a contractor and pays me every month into my US bank account.
- Option (2): Same as above but they send the money to my Indian bank account
I would prefer option 1 since I have to make student loan payments every month in USD and this way I don't lose any money in currency conversions. Otherwise, option 2 would mean I lose a little money by the time the money hits my Indian account in INR and lose some again when I wire it to my US student loan provider.
Can anyone with similar experience or expertise in this confirm that Option 1 is feasible and doesn't present any significant hurdles? I am also open to recommendations to CA/CPA services that have such dual country expertise and am happy to engage them professionally. The CAs I've found so far are all Indian firms and don't inspire expertise when I asked them questions about the US taxation system. Are there any such dual experienced firms/professionals at all?
Here are a few additional thoughts and questions.
1) From a few articles online, it seems I don't need to pay taxes in the US since I'm not a resident. Does this happen by default or will I have to file specific forms to request that the government/IRS not withhold federal/state taxes?
2) Will I have to ask my employer not to withhold any taxes on my behalf or since I'm a contractor they will not anyways withhold any taxes?
3) Since the US and India have a Double Taxation Avoidance Treaty and since I currently qualify for residency tests in India, I believe I will have to file my income tax in India. Is it ok if I keep the money in my US bank account and simply pay the tax to the Indian tax department? I hope I'm not expected to move all my money to India.
4) In the future, if I want to move part or all of my money in the US to India, will I need to pay any additional taxes?
5) Will either of options 1 or 2 above require my employer to engage in any compliance measures (Ex: pay taxes in India or hire an appropriate compliance agency) to be able to pay me? I presume since I'm a consultant/contractor, they do not have any such obligations. I ask since such requirements may discourage them to pursue such an option.