In this post, I discuss moving to the US on an L-1 visa and the planning you need to do in your first year here. Work visas are not created equal;
The L-1A And The L-1B Visas
The L-1 visa is called the “Foreign Executive Visa.” It is used in connection with the L-1A visa, which is granted to executives and managers of foreign companies being transferred to the US.
It’s important to get very clear on the duties of each position (executive versus manager).
The L-1B visa, on the other hand, is granted to regular employees with specialized knowledge who are transferred to the US by their home office countries.
The two differ in specific ways when applying for the visa, and an immigration lawyer is best suited to handle them and to ensure you meet the criteria for what you are pursuing.
It’s important to become a student of your visa and be clear on the goals you want to achieve, even before you land in the country.
Countries Represented In The L-1 Visa Category
Unlike some of the other visas, an L-1 visa holder can come from any country. Based on the 2024 USCIS data, over 72,000 visas were granted, with all regions of the world represented, with the majority from India and China.
Other countries represented include France, Japan, Brazil, Mexico, Great Britain, etc. The top countries in Africa sending workers to the US on the L-1 visa are Egypt, South Africa, and Nigeria.
The country of origin matters for actual financial planning.
The Intersection Of The L-1 Visa and Finances
7 things to understand: the financial implications and how to make the most of your Financial Situation.
Understand The Start Of Your Tax Residency On The L-1 Visa
Your immigration status isn’t your tax residency, but it does affect it. Your tax residency (counting the days for SPT) starts the day you first land in the US.
So, if you made exploratory trips the year before, that can affect your tax situation and when the IRS expects you to file on your worldwide assets.
Arriving at the end of the year, versus the start of the year, may give you a chance to do some planning, for example, getting rid of PFICs or understanding how the US will tax them.
Depending on your situation, ask yourself whether it makes sense to claim a closer connection exemption.
If so, you may be a candidate for dual-status filing. A cross-border CPA can help.
Understand US Worldwide Tax Filing On Moving To The US On L-1 Visa
Once you become a US tax resident by passing the SPT (Substantial Presence Test) and you are filing as a US tax resident, you must report your worldwide assets on your US return.
International forms like the FBAR, Form 8938, 8621, Form 3520/3520-A, etc, may become a central core of your US tax filings. Missing any of these can trigger steep penalties.
Filing US taxes is very different from what you were doing back home. It’s also likely going to cost you more than simply filing via TurboTax or using a US-centric preparer.
A big part of the move on the L-1 Visa is to be prepared for higher fees.
Based on conversations I have had with newly arrived visa holders, this is an unpleasant surprise.
Overseas Stock Options on L-1 Visa – Get A Handle
When you move to the US on an L-1 visa, it’s technically a transfer visa – you are staying with the same company, but moving to the US entity.
You may already have stock options (RSUs), ESPPs, or other options, which you’ll continue to own.
Keep records of when you got the shares and when they vest. Income sourcing becomes critical in terms of who gets to tax that income first.
IRS will still want a share of this income, regardless of who taxed it first. Foreign tax credits might help.
In one case, we had an employee move to the US and had a ton of RSU’s – given in the home country. His home country’s tax rate is very high, and so they were willing to give him cash to cover some of the taxes.
At tax time, we still have to count this overseas income. Tax credits will mitigate double taxation.
If you ended up just holding the RSUs and ESPPs – it’s important to keep track of your cost basis.
Foreign Retirement Accounts / Pensions
You most likely already have some type of a pension back home. I get questions all the time about rolling foreign pensions into an IRA or 401k.
This is not an option, since we are dealing with two different countries’ rules.
So, you’ll need to keep the foreign pension under your home country’s rules and report it on your US taxes.
Many factors matter, including your home country and how the US views the pension or plan.
The PFIC Treatment And Your Move To The US On An L-1 Visa
For example, New Zealand has a retirement scheme called the KiwiSaver. I have had folks describe it as a pension (not really), describe it as similar to a 401k and expect the US to leave it alone.
The US treats it as a non-qualified plan and views it as a foreign grantor trust. As a result, the US taxes it every year and treats the investments inside it as PFICs.
Some of the pensions are PFIC’s based on the underlying investments, which means the punitive PFIC taxing regime comes into play.
In a few cases, if the home country has a tax treaty with the US and the treaty includes a section on PFICs, you may avoid the reporting requirements.
Other Overseas “Tax-advantaged Accounts”
This is probably one of the most frustrating things you’ll deal with.
Back home, you may have a tax-free account, for example, an ISA (England) or a TFSA (Canada). You plan to keep the account because it’s tax-free and your money can keep growing.
Unfortunately, the US treats it as another taxable account and starts taxing it right away, with no tax credit benefits.
For most of you, the first time you realize this is an issue is when you talk to a cross-border planner like me, or when you file taxes with a cross-border tax professional and we start asking all kinds of questions about your overseas stuff.
Other overseas accounts to consider include college pensions, insurances, and other financial instruments.
If you have dealt with it or did not deal with it before you moved – it’s not too late, just don’t continue ignoring it, please.
Foreign-Drafted Estate Plans And Your L-1 Visa
This is another area where you may have spent significant time ensuring your “home affairs” are in order.
Unfortunately, like so many things we’ve discussed, much of this may be null and void and could end up costing you money.
Powers of attorney, guardianship, and trusts most likely won’t work as you planned, since much of this is state-specific (on the US side) and country-specific.
This area requires education, updates, and working with an international lawyer to respect your wishes and desires while accommodating both countries.
Understand L-1 Visa Characteristics – Keep Track Of Time
The visa is initially valid for 1 year (new office) or 3 years (established office) and can be extended for 5 or 7 years, depending on the type, in 2-year increments.
When you’re new to a country, time goes by very fast. So start thinking about what you want to do and plan proactively.
For example, you are on an L-1B visa; you want to stay, but you wait too long to start the green card process, and suddenly your 5 years are gone.
There is no L-1B visa extension. Have a good immigration attorney on speed dial.
Along the same lines, understand what happens if you lose your job on an L-1 visa, mitigate it, and, if it happens, how to recover.
I have addressed the two issues
Recovering From A Layoff On A Work Visa: Action Plan
How to Prepare For A Layoff On A Work Visa
In Part 2 of this post, I’ll cover how to think about US finances, how to plan, etc when you’re new to the US on an L-1 visa and how to make the most of your situation.
FAQs On Financial Considerations Of Moving To The US On An L-1 Visa
1: Are all my overseas assets toxic?
Not really – things like Bank accounts are okay; some pensions are fine. To figure out what’s toxic or not, it’s best to work with somebody and not assume anything.
2: I’ve been in the US on the L-1 Visa, since last year, and I realize I have missed a lot of the above. What’s next?
I completely understand; you’ve been busy settling in, and some of the above may have been put aside. It’s never too late to fix cross-border issues. If you have missed filing, for example, there are some processes in place to get you going.
3: Exactly when does my tax residency start and what does that mean?
When your tax residency starts, from that day onwards, you file taxes as a US resident. The key implication is that you must report your worldwide assets, including accounts, interest, etc., left back home.
As an L-1 Visa holder, your tax residency starts when you meet the Substantial Presence Test. This simply counts the number of days you are physically in the US. If you hit 183 days, you must file as a US tax resident that year.
As an L-1 visa holder, the process is counting physical days. For example, if you come to the US for a week to check things out before the big move, those days will count.
4: Why can’t I use my foreign powers of attorney for finances or medical
US institutions refuse to honor foreign documents due to liability concerns. US documents are state-specific, meaning they depend on where you are and where you are trying to use them. It’s so common that some institutions may even reject US documents if they aren’t drafted on their forms and in a format they prefer.
How Elgon Financial Advisors Can Help You Make The Most Of Your US Finances On The L-1 Visa.
Overseas assets, a lack of planning, and a lack of awareness can easily destroy your well-planned US investment strategy.
Ignoring them or assuming your finances will travel seamlessly to the US is the worst thing you can do. We’d love to help you deal with them as you build generational wealth in the US.
As a Fee-Only Fiduciary advisor, our interests align with yours, and everything we do is geared toward your best interests.
Explore our process to evaluate our services and make an informed decision about collaborating with us.
If you’re not ready to start, that’s okay. However, please stay up to date with our regular updates by email or by joining us here. Sign Up Here.
6 Things to Do
When Starting A Job on H-1B Visa
You are starting a new job on a work visa, there are some critical things, that will set up for financial success in the first 3-6 months. Download the free guide below for the detailed list!
We never spam. By signing up you’ll also receive access to future resources right to your inbox.
Disclaimer: This article is provided for general information and illustration purposes only. Nothing contained in the material constitutes tax advice, a recommendation for the purchase or sale of any security, investment advisory services, or legal advice. I encourage you to consult a financial planner, accountant, and/or legal counsel for advice specific to your situation. Reproduction of this material is prohibited without written permission from Jane Mepham and all rights are reserved. Read the full disclaimer here.
