Comment by franciscop | Hacker News Reader

Comment by franciscop | Hacker News Reader

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While it is true, the best you can do is vote with your feet. I have had the situation where I was offered "locally competitive salaries" (not in the USA though), and every time I've rejected it I had a 50%-100% better offer within few weeks . There ARE companies that will pay better and independently of your location, you do need to be good though (as in companies are proactively seeking you out) and keep searching.

A good indicator is the finances of the company. If you are going to be another cog contributing marginal value, for whatever reason that is, then it's going to be difficult to argue for better salary (thought they MIGHT give a higher salary, to everyone, like e.g. Google). If you can however have a big impact and they have good revenue or funding, then it's a lot easier to argue for higher salaries: "so you are making $300k MRR or just raised $5M of VC money with 4 employees? And you have more tickets and bug fixes to improve growth and reduce churn that you can feasibly do? Great, let's talk how I can effectively help to slash those tickets and then we can discuss my compensation*".

Classic: https://www.kalzumeus.com/2012/01/23/salary-negotiation/

* though if the company is crushing it so much, and specially because your marginal tax rate might be already at 50%, evaluate asking for some Stock Options/RSUs/etc.

I’m really surprised that nobody has set up address as a service yet so that you can claim for example to live in New York by virtue of an address auto command “a New York salary”.

There’s plenty of virtual office / forwarding address services, but claiming you live at one when you don’t for a pay gain risks (1) fraud against your employer; and (2) tax fraud (if eg in a different city / state / country).

What’s the definition of where one lives? For example what if you wanted the NYC salary and you rented out a bunk bed for $50/month and traveled around the country while working remote?

Cities definitely don’t have the resources to track you down and I’m not sure employers especially larger ones have any mechanisms in place to keep track. I’m not advocating for this just surprised it’s not more well known. Though I suspect it’s common and just not talked about much for obvious reasons. Certainly there are also jobs that require you to physically work from a given state as well for example.

How do so called digital nomads handle it from a tax perspective? Do they maintain a residence for tax purposes? Is that any different?

> What’s the definition of where one lives?

https://www.annuity.org/personal-finance/taxes/residency-req...

Ultimately it comes down laws, regulations and taxes. Company wants to make it easy for itself to deal with that.

Whether something is illegal is different from whether it's easy to enforce. It's hard to say how likely they are to enforce this, but you're definitely taking a risk by pretending to live somewhere.

What makes it more problematic is that it's not just tax offices that would be interested in finding out. The company you work at may also get in trouble with the tax office as they pay employment taxes too, so they are probably interested in the fact that you're deceiving them. If your manager suspects you're not being truthful and follows up with HR this could easily get you in trouble. As remote work becomes more popular, it becomes more likely that companies will pay attention to this.

Knowing all of that, I'd find it quite hard to justify playing these games. It just seems like asking for trouble, with a pretty good chance of getting it.

Legality is different than enforcement, but the two aren't totally separate.

For example, it's de facto not illegal to drive 5mph over the speed limit on the highway. No police officer will pull you over for that unless they have some other prior reason. So in that sense, lack of enforcement has made the practice legal.

>How do so called digital nomads handle it from a tax perspective? Do they maintain a residence for tax purposes?

They probably have a "permanent address" at a friend's house or through some service. And it's probably technically fraud. That said, the US is not really setup for citizens not to have a permanent address in one state--even if just for things like driver's licenses. You can do things by the books for tax purposes but I suspect a lot of people moving around don't.

Wonder if it's meant to be like it is with professional sports, where players on a visiting team often have to pay taxes in the state of the home team.

In US, it is relatively easy to commit fraud. The question is: what happens if you get caught. Is it a slap on your wrist or a catastrophically failure (termination, prison time)

You can, for example, get employed at 10 companies and then outsource all the work (someone got caught doing it and it was in the news).

If you want to cheat, you can, but you probably should not be discussing it on hacker news.

(1) and (2) are separate. The IRS/state department of revenue won't care, and they won't tell your employer. Say you live in HCOL, actually live in LCOL, and at the year claim a refund from HCOL and file properly with LCOL.

You can just say plans changed and you moved in the case of an audit. You could tell your employer the same thing. Much harder to dock someone's salary once they've started working.

> The IRS/state department of revenue won't care, and they won't tell your employer

California FTB very much cares if you are collecting SV salary but are not paying CA taxes by living in LCOL areas. Unless you are a CPA, please do not spread lies.

The state of California can only tax you for the time you lived in California. Now, they may well throw a fit and try to claim you don't live out of state and use your employer information to substantiate it. But legally, they would not be able to keep you from getting a refund and paying elsewhere.

> The state of California can only tax you for the time you lived in California.

https://www.americanbar.org/groups/business_law/publications...

That article is mostly about business income or investment income like sale of real estate in California. It does not apply to people living outside of California and earning wages from California based companies. Imagine all the Tesla employees in Texas and other states. They would all be paying California income tax, which is of course not the case.

Your employers makes you sign some document about your place of residence in order to determine your salary. If you say California there, then I am sure CA-FTB will have standing when they come after you for unpaid taxes. Or, you might be perjuring yourself in some way. (IANAL so won't commit to the exact legal definition of that word).

My state's DMV is able to identify postal addresses that are not physical residences. My guess is that they get this data from USPS, which requires remailing services to register their business. Wouldn't be surprised if the DMV also checks for how many people at a given address have applied for a government ID and if it exceeds a particular threshold, flag it for investigation.

Yea but you could legally run a bunk house or even just keep a spare bed “available” for someone for $50/month or something and they “live there”. Not saying it would be worth it per-se but definitely ways around that for anyone who is willing. The government can’t regulate something like that very well.

IANAL. Let's say you do that trick of renting a bunk in state X and actually go live in another state Y. Now what if your employers does not want any ties with the state Y and hence avoids establishing a nexus there? By your actions, state Y has a reason to come after your employer since their employee lives in Y (by how Y decides its residency requirements). Pretty sure a legal battle will ensue with you branded as a liar and a deceiver. Depending on how pissed your employer is, it might even go on your personal records which can haunt you next time someone runs a background check while hiring you.

Why bother? If somebody wants to pay you less because you live in upstate NY rather than Manhattan just reject them and move on.

If the reason is bullshit, there's no need to bullshit back.

If the reason isn't bullshit (e.g. coz they want you in their Manhattan office on a moment's notice) then having a virtual address won't help.

Or, for a different perspective, someone won't pay you a premium because you want to live in Manhattan because they don't actually care where in the country you live.

I'm not a lawyer, but this seems illegal on its face. Just from a tax perspective for the government, I feel like people would immediately start trying to game it for taxes.

I don't know if it matters but I have a limited company and am an employee of said company, which means I deal with taxes on my own and can perform work for (almost) any company in the world - I just invoice them like any supplier. Maybe this is the future? Though some companies would rather you were their employee I suppose.

> I have a limited company and am an employee of said company, which means I deal with taxes on my own and can perform work for (almost) any company in the world

which means you're a contractor, rather than an employee. I do think this is a better way tbh, as you can potentially own all of your healthcare costs, and optimize your taxes properly. And you can probably charge a lot more as a contractor, to make up for the lack of job security etc.

It might be a better idea for high income people. But it is often used to take advantage of regular employees.

It is a poor reflection of our tax system that running your own entity that you then pay yourself out of can have lower taxes than simply earning money as an employee.

I don't get a lot of tax optimisation (my home country makes it really hard to do anything useful) but I DO have a much easier time getting better-paid work from the US. Otherwise I'd need to go through something like oysterhr.com, boundlesshq, etc.

I think an awful lot of employers would prefer you were a contractor; in the USA at least, it is the IRS/government that prevents this from happening more by putting the fear into said employers that they will be fined and forced to pay back taxes for anyone improperly classifying people as contractors when they are in fact employees.

Are contractors taxed less than companies in the US?

In France, companies also like to contract out a lot, either to "freelance" or regular outsourcing shops.

The reason I put freelance in quotes is that there's no such thing here, legally. You have to have some form of company, through which you invoice the client.

But then, whenever you want to get the money out of the company to pay rent and eat, you'll be hit by, more or less, the same taxes the employer would pay. For a given unit of work, it's not cheaper to contract out, there's no real tax loophole.

As far as I know, the state doesn't really care. It may even prefer it, since contractor rates are usually higher than salaries, so they get to get more tax.

The only situation where it would crack down on this is if the would-be employee complained. Since this is considered a "precarious" arrangement, if the contractor can prove that they're basically an outsourced employee, they can ask to be converted to an actual employee and the state will back them up.

Contractors are taxed at a higher rate, or really, the same rate, but in an employee situation, the employer must pay half of the tax.

However, depending on what you do, people can end up paying less in taxes overall as a contractor because you have more flexibility for deductions. There are very little options for an employee to deduct any expenses in the US, whereas, a contractor could potentially deduct the cost to commute to an office, their cellphone and home internet (if used for work) and even a portion of their rent/mortgage for a home office.

It was the tax reform act of 1986 that removed the "safe harbor" provision for engineers and computer professionals.

In the city where I currently live, lots of small businesses try to claim that their employees are contractors. Those businesses depend on the ignorance of their workers.

Incidentally I like this because it makes it easy for American companies to give me money (I do not live in the US). Though I also have to give an accountant more money to deal with SS/public pension contributions and US/Irish totalization agreements.

Sounds like a good way to complicate your taxes. Especially if you’re claiming to live in California or New York.

You know the old saying, noting is certain except death, and the will of the department of taxation for the state of (California|New York).

Seattle would be a better choice—still a relatively high cost of living but no state income tax yet.

I know someone that lived in Mexico but listed a friend's address in NYC on all work paperwork.

How did that go come tax time?

Having done this with VA and WA -- went fine w/ VA, went ugly w/ WA.

WA has no state income tax, but a beefier payroll tax, so it's cheaper for me but more expensive for the company.

Pretty sure he pays NY taxes like normal. Not sure about Mexican taxes.

And then pay New York taxes? And possibly NYC too?

You don't actually live there. Filing NY taxes could be tax fraud if you don't live there,although the rules may allow you to if you work there.

great - and then you have to pay NYC taxes. Probably something you want to avoid, unless you actually live there.

> specially because your marginal tax rate might be already at 50%, evaluate asking for some Stock Options/RSUs/etc.

.. where are those tax exempt? In the UK they're treated as income at the time of vesting, which is not unreasonable https://frazerjames.co.uk/rsus-a-tech-employees-guide/

There's a way to make RSUs behave more like Stock Options for tax purposes for private companies in this particular example [1]. It's not exactly the same, but for the sake of delaying paying taxes on a risky on unsellable stock, they are virtually the same (at a liquidity event they DO behave totally different, but they are basically the same at vesting events).

So yeah, you do need to learn about the different examples. It's something people just talk about in the valley and ultimately/generally is where the "high compensation" from tech comes from. In other countries/cities people don't even know what any of these things are.

[1] https://zajacgrp.com/insights/what-you-need-to-know-about-do...

RSUs are US taxable at vesting as ordinary income, so that doesn't really help, no. Stock Options are complicated, but if you follow the right procedures and timelines, can end up taxed as capital gains, which is roughly half the tax rate, although there's a lot more risk there.

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