Buying a home in the USA

Aprilmay

I know some of you guys may have some experience of this!

Moved to the US in Oct 2011 on the DV Green card. The position that my husband had in Ireland allows him to work anywhere in the world, So when we relocated he kept the same job. The company he works for in the meantime buys a US company and gives him the option to stay as a contractor or go W2.

We talk to our CPA and she says stay as a contractor! We pay our 2011 taxes and declare the income from Ireland etc.In 2012 we put down a deposit on a home to be built. The home is now ready and due for signing, they have our 2011 and 2012 taxes. We hear back that the mortgage won't accept "foreign income " to work out the mortgage even though we have great credit, substantial income too. In fact our mortgage will be less than the rent we currently are paying and that includes taxes too!



I told the finance place about the tax treaty between the USA and Ireland and we had our green card during 2011. In theory should our money be still classed as foreign it was declared and taxes paid on it. They are refusing to accept it and want my husband to go W2 for his employer but our CPA says financially its a bad move.


We sent the financial company the link of the treaty from the IRS website and I personally think they didn't read it! I know there are issues with US citizens working abroad and coming home trying to buy houses but not all countries have this treaty, surely with the tax treaty between the US and Ireland which is signed by President Clinton and Madeline Albright it shouldn't be the case.

He can get the W2 but we feel like we are being forced?
Anyone any advice or experience of this?

ProudDUB

What rate of tax would you pay if you declared your income on a US W2 tax return? What rate do you pay now to the Irish government? The US traditionally has much, much lower rates of income tax than Ireland does, so my initial reaction would be to declare his income and pay tax on it in the US.

He can also qualify for 401k contributions from a US based employers if he is on their books as an employee living and working in the US. I don't think he can if he is an independent contractor or a "foreign" employee. As the US does not have the same generous pensions system in place that Ireland does, that is something that you should be thinking about now, even you are both quite young.

I know that it is not just about the rates of income tax. There are other factors to consider too such as mortgage relief and what not. but I'd be curious to know on what basis your CPA is telling you to keep on filing in Ireland and not the US.

The tax treaty between the US and other countries just protects citizens if they are working in each others countries. It doesn't have anything to do with the lending criteria that banks and mortgage companies may have in place before they will lend to you. If they mandate that to get a loan from them, you have to be living and working in the US, and have a job in the US that you pay taxes on in the US, as a business, they are perfectly entitled to do so.

If they decide that, there's not much you can do about it really. You could try to get as high up the food chain as possible, and get talking to someone in authority who has the power to green light your application. Don't just take the word of some front office minion who couldn't be bothered listening to you. But if it still turns out to be a carved in stone rule for them, there isn't really a whole lot you can do.

Aprilmay

Sorry for the mix up!

We are paying US taxes the problem is the finance company will only account for our income from Oct 2011 -2012 tax returns for our mortgage they won't include the previous 9 months earned in Ireland when calculating even though the mortgage payment will be less than 20% of his monthly earnings. ( he working for the same company now as a contractor not a employee)

The Finance company want him to do W2 with his company so they feel better about lending the money. It will cost us more as we pay all our own Health insurance etc now but we can offset it as a contractor.

mikewest

Are you tied to this finance company or do you have the option to use a different one? Based on my dealings so far with American financial instutions I would stick with the advice you are getting from your CPA far before anything they are saying. Have a look on britishexpats american forum as many more on there will have been in this situation than on boards and they may well have advice on mortgage sources which are used to dealing with slightly more complicated arrangements than yours seems to be.

belcampprisoner

they don't like giving contractors loans,


they will only look at American income,

try a credit union


you will get your deposit back if you cant get the loan,


you can get a hard loan you pay 6 percent rather than 3 percent from private source




they are not worried about w2 they want to see American income,

income from non American company not paid in America will not count unless it was reported on your usa tax returns


if the foreign income is not reported on your American Tax Returns, the income can not be used

Aprilmay

belcampprisoner wrote: »

they don't like giving contractors loans,


they will only look at American income,

try a credit union


you will get your deposit back if you cant get the loan,


you can get a hard loan you pay 6 percent rather than 3 percent from private source




they are not worried about w2 they want to see American income,

income from non American company not paid in America will not count unless it was reported on your usa tax returns


if the foreign income is not reported on your American Tax Returns, the income can not be used

It is an American company (his company bought out a US company when we moved here. He was working as a contractor while the LLC was being done, The company is now incorporated. My husband was given the option to do W2 when it became an LLC but decided against it on the CPA advice.Its the same company.

We reported everything on our tax returns they got both our Federal and State tax returns. We reported the money he earned outside the US on the tax return. We gave the P60 to finance also to show how much we earned and tax paid too!

We are now paying everything in the US. They just won't add those earnings to qualify the Mortgage.

dave2pvd

Go find a good mortgage broker - not a mortgage company. You are NOT tied to the one you are dealing with.

Unless 2 years of W2s is a Fannie/Freddie requirement, I can't see the reasoning here. Your 1040s should be all you need.

belcampprisoner

they look at usa tax return for 2 years did he fill one out

Aprilmay

belcampprisoner wrote: »

they look at usa tax return for 2 years did he fill one out

Yes he did

rockonollie

It's the same at the bank I work for, and it is a requirment set out by Freddie.

It's nothing to do with where you paid taxes, Freddie rules require 2 years of tax statements as proof of income, but foreign income cannot be included. If you can't show 2 years of US income, you'll find it hard to get a traditonal loan from many banks.

Credit unions may be more lenient.