L1 Visa tax question

[2011L1visa]

I have come to US on L1 visa. My company is asking to return any tax refund that I receive from IRS to the company. Here is what my company says:
**** **** **** *
As an employee on an international assignment with ZZZ, Company will fully fund your US income tax liabilities. You are only responsible for India income taxes. YYYY will also subsidise your income tax preparation fees via our Company provided authorised tax service provider. Once your US federal and state income tax returns are completed and filed, any US tax balances due will be made by ZZZ.

In the event that your US federal and/or state tax return indicates a refund of taxes paid, these funds will be due back to the Company, since they made the tax payment on your behalf.
. **** **** **** **** **** **** **

Is it a valid statement made by company ? How can they ask me to give them back any tax refund that I get. Please advise

[mickey_mouse]

Taxes (federal, state), SS, Medicare, are withheld from your paycheck. Come the end of year, you may be in one of two situations:

1) you owe money (federal taxes, state taxes, both) because your deductions didn't actually cover your taxes
2) "they" owe you money (federal government, state government) because your deductions were above what you were supposed to pay

In the first case, as you owe money to (federal, state), you will need to mail them a check. In the second, as they owe you money, they will mail you a check.

In either case, it's a matter between you and the federal or state government.

It is confusing to me why your company would offset your debt in case (1) above - after all, it is YOUR income and YOUR taxes.

The second case is also confusing - why would they want to turn your refund over to them.

I can only think of two scenarios here:

a) you're given a paystub for X dollars, taxes deducted from X, but you're actually being paid Y (X being, say, 5,000 while Y is actually 2,000) - which is illegal

b) your company, on purpose, has withheld way more than they should from your paycheck - they know that, so they know you won't owe money (so they would never need to pony up the amount owed) but you will actually be owed money - and hence they want those refund checks back. Basically, they've reduced your salary.

I would recommend for you to buy some tax software (Turbo Tax, other) - do your own taxes and see what comes out.

Bottom line is: something fishy is going on - either you're not telling us the whole story, or your company is trying to screw you. Which is usually the case, it is my understanding, with indian IT companies.

[kabkaba]

Yes, since the company is paying your US taxes, any refund should go to them.

[appuchan]

Technically speaking, your company cannot pay your income tax. It has to be borne by you. Your employer cannot legally pay you a tax-free salary when you have work authorization in US.

Effectively what might be happening is that you have agreed to take some specific amount as take home salary (ex. $4000 pm) and company is paying the tax on top of this to you and it shows on your payslip(ex. $5000). Usually this is done for short trips when your India salary is paid in full. If your stay in US is less than 6 months in a calendar year, you can claim refund from IRS for the entire tax amount. Company can ask this amount back from you, however I don't think they have any legal standing as the tax is supposed to be deducted on your income and hence refunded to you.

[kabkaba]

I don't think there is any such law.

[thysvt]

Interesting L1 Visa question

For the sake of the question my company will be A and the company I work with on projects is B. Company A and company B have been working on projects together to supply solutions to a third party.We have been working together on projects for more than 1 year successfully. Company B wants to buy company A and send me, the 'previous' owner as a senior manager and executive , to the US to start the US office under a L1 Visa. I was not employed previously by company B but can prove that we've been working together on projects for more than 1 year. Will this stand under the 1 year Rule to receive a L1 Visa?