- Leadership Training
- Communication Skills
- Project Management Process
- Negotiation Skills
- Estate Planning
- Personal Taxes and Finance
- US Foreign Taxes
- US Business Tax
- Audit Report Usage
- Accounting System
- Financial Planning Process
- Banking Cross Sell
- Timeshare Industry
- Healthcare Clinic Management
- Writing a Business Plan
- Business Evaluation in Merger & Acquisition
- Going Public in U.S.
- Debt Management
- Data Analytics
CINDIE Client Online Education:
- How Section 1411 and 3.8% Medicare Tax could impact your way of doing business ?2
- Why am I treated as resident for tax purpose when I don’t have a Greencard or I’m not a US citizen?
- Five Basic Tax Tips for New Businesses
- Foreign Persons Receiving Rental Income from U.S. Real Property
- Foreign Property Owner’s Tax Return Responsibility during Ownership and Rental of Real Property Interest
- Financial Info Needed on the Road to L1 visa to Green Card
- What is the difference between CPA and Non-Cpa?
- What is a Certified Financial Planner or CFP?
- What Is Financial Planning?
How Section 1411 and 3.8% Medicare Tax could impact your way of doing business ?
Through Accountants’ tax and estate planning workshop, get some good insights on the new 3.8% Medicare Tax on your investment incomes.
First, you need to worry about it if your AGI is over $250,000 and have NII for a joint return. If you are trust or estate, you have income over $12,150 and NII.
Second, what’s in NII
– Income from passive activity or trading in financial instruments or commodities
– Gains on stocks, assets disposition, ownership of partnership or S corporations
– Interests, dividends, annuities, royalties, rent etc..
This is extremely true for the trust and estate. A good way to reduce section 1411 liability would be to shorten the estate year as much as possible. You need to have a good support if you want to avoid section 1411.
Why am I treated as resident for tax purpose when I don’t have a Greencard or I’m not a US citizen?
Some of my clients are very puzzled by the 183 days criteria in determining whether I need to file a resident return or non-resident return. I tried to explain to a client that there are many ways to govern the behavior of people who live in or have relationship with the U.S. You can be treated from immigration law perspective or from tax law perspective. Immigration law governs your legal status in relationship with the US government. Tax law governs how your report and pay your taxes. Filing tax return is governed by the tax laws which has specific on how your legal status is related to tax status and more.
Why Residency Status Is Important
The first thing you must know in order to file your tax return is whether you are a resident or nonresident for U.S. tax purposes. If you find that you are both a resident and nonresident in the same year, you are a dual status alien for which special rules apply. The designation of resident for tax purposes is completely separate from your immigration status. You might qualify as a resident for tax purposes while remaining a nonimmigrant alien for immigration purposes.
A nonresident files a special tax form (Form 1040NR), pays tax only on U.S. source income, is subject to special rates, and might qualify for treaty exemptions. Conversely, if you are a resident for U.S. tax purposes, you are generally under the same rules and file the same forms as a U.S. citizen. That means you report your worldwide income rather than just U.S. source income.
A dual-status alien is both a nonresident alien and a resident alien in the same year. That means your tax return becomes more complicated. Publication 519 explains how to figure the tax beginning on page 25. Here are the most common circumstances of dual status:
- When you enter the U.S. and receive permanent residency status (receive a Green Card) during the year of arrival
- When you enter the U.S. and pass the substantial presence test in the year of arrival
- When you enter the U.S. and do not pass the substantial presence test, but qualify for and make the First Year Choice election (see below)
- When you hold a J, F, M, or Q visa the first part of the year and receive permanent residency status during the year
- When you hold a J, F, M or Q visa during part of the year, but later change to an H visa or other status eligible to use the substantial presence test, and pass the test
- When you leave the United States permanently during a year in which you qualify as a tax resident, but only if certain conditions apply. (See Last Year of Residency on page 8 of Publication 519.)
Year of Departure
You might be a dual-status alien if you permanently left the U.S. during the year. If you left the U.S. to re-establish your residence in your home country after you met the substantial presence test, your residency termination date is generally December 31 of the year you leave. You are therefore considered a U.S. resident for the entire calendar year. However, you can claim to be a dual-status alien for the year you leave if you meet the following conditions:
- You are not a U.S. resident during any part of the following year, and
- You establish that, after you left the U.S., your tax home was a foreign country and you had a closer connection to that country.
If you meet these conditions, you have the option to determine your residency termination date as the last day in the calendar year that you were physically present in the United States, which means that you will be a dual-status alien for that year.
When filing as a dual-status alien, different rules apply for the part of the year you were a tax resident of the United States and the part of the year you were a nonresident. A dual-status taxpayer cannot use the standard deduction and, if married, cannot file a joint return. You must file Form 1040NR or Form 1040NR-EZ and write “Dual-Status Return” across the top. Include Form 1040 with your return to show the income and deductions for the part of the year you were a resident. Write “Dual-Status Statement” across the top. For detailed instructions see Chapter 6 of IRS Publication 519, U.S. Tax Guide for Aliens.
Before leaving the United States, aliens are generally required to obtain a certificate of compliance, also known as a sailing permit or departure permit, by filing Form 1040-C with a local IRS office. Visiting students and teachers are not required to get a sailing permit, however, as long as their employment income is authorized by the Immigration and Naturalization Service (INS).
The First Year Choice
If you arrive in the U.S. too late during the year to pass the substantial presence test, or if you were an exempt individual during the first part of the year, then changed visas later in the year, you are classified as a nonresident alien for the entire calendar year unless you make a special election. This generally means that you cannot claim your spouse or children as exemptions. However, there is a special election [IRC Sec. 7701(b) (4)] to be treated as a resident alien from your date of arrival if you satisfy the following tests:
- You are not otherwise a resident alien for the year,
- You were not a resident alien at any time in the immediately preceding year,
- You are a resident alien under the substantial presence test for the immediately following year,
- You are present in the United States during the election year for a period of 31 consecutive days,
- Your days of U.S. presence are 75% or more of the total days between the beginning of the earliest 31 consecutive day period and December 31.
If you make this election, you will be a dual-status alien and you can claim an exemption for your spouse, which is a deduction of $3,700 in 2011. Furthermore, the regulations include an extremely liberal rule that permits an alien who makes this election to make the election as well on behalf of dependent children who themselves satisfy the test [Reg. Sec. 301.7701(b)-4(c)(3)(v)]. You must, however, have ITINs for your spouse and children to claim them. Also, to make the election you must pass the substantial presence test in the year following the election year, which means you will need to file an automatic extension for your 2011 return so you can file after you pass the test.
Combining the First Year Choice with a Joint Return Election
A further election is available, when combined with the First Year Choice election, to file a joint resident return with your spouse and be treated as a U.S. resident for the entire year (see The Tax Return). Under this election, you can claim the standard deduction and other tax benefits available to U.S. citizens and residents, but you are subject to tax on your worldwide income for the entire calendar year. In order to eliminate double taxation, the foreign tax credit and possibly the foreign earned income exclusion are available to reduce or eliminate double taxation.
Five Basic Tax Tips for New Businesses
If you start a business, one key to success is to know about your federal tax obligations. You may need to know not only about income taxes but also about payroll taxes. Here are five basic tax tips that can help get your business off to a good start.
- Business Structure. As you start out, you’ll need to choose the structure of your business. Some common types include sole proprietorship, partnership and corporation. You may also choose to be an S corporation or Limited Liability Company. You’ll report your business activity using the IRS forms which are right for your business type.
- Business Taxes. There are four general types of business taxes. They are income tax, self-employment tax, employment tax and excise tax. The type of taxes your business pays usually depends on which type of business you choose to set up. You may need to pay your taxes by making estimated tax payments.
- Employer Identification Number. You may need to get an EIN for federal tax purposes. Search “do you need an EIN” on IRS.gov to find out if you need this number. If you do need one, you can apply for it online.
- Accounting Method. An accounting method is a set of rules that determine when to report income and expenses. Your business must use a consistent method. The two that are most common are the cash method and the accrual method. Under the cash method, you normally report income in the year that you receive it and deduct expenses in the year that you pay them. Under the accrual method, you generally report income in the year that you earn it and deduct expenses in the year that you incur them. This is true even if you receive the income or pay the expenses in a future year.
- Employee Health Care. The Credit helps small businesses and tax-exempt organizations pay for health care coverage they offer their employees. A small employer is eligible for the credit if it has fewer than 25 employees who work full-time, or a combination of full-time and part-time. Beginning in 2014, the maximum credit is 50 percent of premiums paid for small business employers and 35 percent of premiums paid for small tax-exempt employers, such as charities.
For 2015 and after, employers employing at least a certain number of employees (generally 50 full-time employees or a combination of full-time and part-time employees that is equivalent to 50 full-time employees) will be subject to the Employer Shared Responsibility provision.
Foreign Persons Receiving Rental Income from U.S. Real Property
U.S. real estate professionals and rental agents/property managers are encountering an increasing number of situations that involve foreign persons’ acquiring U.S. real estate as a part-time residence, for investment or in some cases to conduct a U.S. business. The U.S. tax rules that apply to ownership and dispositions of U.S. real estate by foreign persons are different in some important respects from the rules that apply to U.S. persons.
U.S. real estate professionals must know how to properly deal with foreign investors in U.S. real estate in order to be in compliance with the federal tax laws affecting real estate transactions. They must be familiar with the rules that determine whether an individual or entity is to be treated as a U.S. person or a foreign person. In addition, they must also be familiar with the fundamentals of U.S. federal income taxation of foreign investors with U.S. rental income. Under U.S. tax law, a taxpayer can depreciate the property. There are different depreciation rates for residential and commercial properties. This annual depreciation is deducted from income as an expense on an income tax return. However, it may be recaptured if the property is sold.
Foreign Property Owner’s Tax Return Responsibility during Ownership and Rental of Real Property Interest
Before agreeing to manage U.S. real property for a foreign taxpayer, a real estate professional or rental agent should discuss with the foreign client whether the rental income will be taxed as investment income through withholding, or on a net income basis as “ effectively connected with a U.S. trade or business,” without withholding (although the owner may have to file estimated tax returns). Rental income from real property located in the United States and the gain from its sale will always be U.S. source income subject to tax in the United States regardless of the foreign investor’s personal tax status and regardless of whether the United States has an income treaty with the foreign investor’s home country.
The method by which rental income will be taxed depends on whether or not the foreign person who owns the property is considered “engaged in a U.S. trade or business.” Ownership of real property is not considered a U.S. trade or business if it consists of merely passive activity such as a net lease in which the lessee pays rent, as well as all taxes, operating expenses, repairs, and interest in principal on existing mortgages and insurance in connection with the property. Such passive rental income is subject to a flat 30 percent withholding tax (unless reduced by an applicable income tax) applied to the gross income rather than the “net rent” received. Thus, the real estate taxes, operating expenses, ground rent, repairs, interest and principal on any existing mortgages, and insurance premiums paid by the lessee on behalf of the foreign owner-lessor, must be included in gross income subject to the 30 percent withholding tax. The gross income and withheld taxes must be reported on Form 1042-S, Foreign Persons U.S. Source Income Subject to Withholding (PDF) to the IRS and the payee by March 15 of the following calendar year. The payer must also submit Form 1042, Annual Withholding Tax Return for U.S. Source Income of Foreign Persons (PDF), by March 15.
If, on the other hand, the foreign investor is engaged in a U.S. trade or business such as the developing, managing and operating a major shopping center, the rental income will not be subject to withholding and will be taxed at ordinary progressive rates. Expenses such as mortgage interest, real property taxes, maintenance, repairs and depreciation (accelerated cost recovery) may then be deducted in determining net taxable income. The nonresident must make estimated tax payments for the tax due on the net rental income, if any. The only way these expenses can be deducted, however, is if an income tax return Form 1040NR for nonresident alien individuals and Form 1120-F for foreign corporations is timely filed by the foreign investor.
Foreign individuals and foreign corporations may elect to have their passive rental income taxed as if it were effectively connected with the U.S. trade or business. Once such an election is made by attaching a declaration to a timely filed income tax return, there is no obligation to withhold even in a net-lease situation. Once made, the election may not be revoked without the consent of the IRS. Unless the foreign investor has properly informed the property manager that the rental income is to be treated as “effectively connected income” by submitting to the property manager with a fully completed Internal Revenue Service Forms W-8ECI, Certificate of Foreign Person’s Claim for Exemption From Withholding on Income Effectively Connected With the Conduct of a Trade or Business in the United States (PDF), the property manager should withhold thirty percent (30 percent) of the gross rental receipts so as to avoid personal liability. A fully completed Form W-8ECI must include a valid U.S. tax identification number for the foreign landlord (in other words, the rental agent must withhold and remit the 30 percent tax to the IRS until this requirement is satisfied). A real property manager who collects rent on behalf of a foreign owner of real property is considered a withholding agent and is personally and primarily liable for any tax that must be withheld. The liability of the withholding agent includes amounts that should have been paid plus interest, penalties, and where applicable, criminal sanctions. Property managers who do not comply with these rules will be held liable (either individually or through their company) for 30 percent of gross rents, plus penalties and interest. Also, property managers need to report annual rents collected on behalf of foreign landlords on Forms 1042, Annual Withholding Tax Return for U.S. Source Income of Foreign Persons, and 1042-S, and Foreign Person’s U.S. Source Income Subject to Withholding. These are the equivalent of Forms 1096 and 1099-MISC but are for foreign owners.
To enforce the system of withholding, the Internal Revenue Code defines a “withholding agent” to be any person in whatever capacity (including lessees and managers of U.S. real property) having the control, receipt, custody, disposal or payment of income that is subject to withholding. Thus, a real property manager who collects rent on behalf of a foreign owner of real property is clearly considered a withholding agent. A withholding agent is personally and primarily liable for any tax that must be withheld. The liability of the withholding agent includes amounts that should have been paid plus interest, penalties and, where applicable, criminal sanctions. The statute of limitations does not start until a withholding return is filed by the withholding agent. Once the return has been filed, the statute of limitations begins to run at the later of two dates: the date of actual filing of the correct return or April 15 of the calendar year in which the return should have been filed. The withholding agent will remain liable if he actually knows that the foreign owner’s statements are false. The withholding agent’s duty of inquiry seems to be a “reasonably prudent test,” measured by all facts and circumstances.
A nonresident who fails to submit a timely filed income tax return loses the ability to claim deductions against the rental income, causing the gross rents to be subject to the 30 percent tax. Generally, the nonresident will need to retroactively file at least six years of delinquent income tax returns, or all prior year tax returns, if they have held the rental property for less than six years. However, the ability to elect to treat the rental income as effectively connected with a U.S. trade or business will be lost after 16 months from the original due date of the return, and the remaining back years may be subject to tax under the gross income method. Rental income from real property located in the United States and the gain from its sale will always be U.S. source income subject to tax in the United States regardless of the foreign investor’s status and regardless of whether the United States has an income treaty with the foreign investor’s home country.
Financial Info Needed on the Road to L1 visa to Green Card
A lot of my clients asked me how to get an L-1 VISA. How do they make sure they’ll get one? Also, how do they apply for Greencard afterwards?
First of all, you need to have a knowledgeable and professional attorney to help you. I happened to work with some excellent attorneys. This is what I learned from them.
Who can get L1 VISA? The Executives of the business who intend to stay in USA.
Two key words here: Business and Executive.
You need to have a legitimate business in your country and a business in USA. Both businesses need to be related. The USA Company could be either a subsidiary of or affiliated with the company in foreign country which send the executive to do business in the USA.
First you need to register a business in USA, better owned or related to the foreign company legality.
Second, you need have a business plan of the USA business. In addition to the regular business plan, the plan should at least contain
- Employment information: How many people you plan to hire, what are the job title and functions of the people etc. As an executive, you need to have at least a few managers
- Revenue: There should be sufficient sales or revenue to support the business as an ongoing concern.
- Long-term plan: What are the five your plan for the business.
Third, the executive needs to be qualified, have experience and an education background. He/she should have at least one year of experience in the foreign company before being sent to the USA as a senior management role. He/she should have relevant education degrees etc.
Now, you meet all the conditions. The chance to get L1 VISA approved is much higher if you the business have at least one year of tax return filed and payroll information. Our firm prepared for our clients of the business plan in English, all the financial, payroll and tax information.
L1 VISA usually have 5 years of duration. 1st phase is one year, 2nd phase is two years and 3rd phase is also two year.
Now you get L1 visa, how you start your Greencard application. It’s similar but the requirement is much more scrutinized.
What is the difference between CPA and Non-Cpa?
Many people do not know how a CPA is different from a bookkeeper or tax preparer. The CPA designation is one of the most widely recognized and highly trusted professional designations in the business world. CPAs are distinguished from other finance professionals by stringent qualification and licensing requirements.
Individuals have worked hard to obtain the CPA designation, and they are committed to working even harder to deliver the value that it conveys. Most people use the terms “accountant” and “CPA” interchangeably, but there is a big difference. The CPA credential carries enormous weight in business and financial circles. CPAs are considered some of the business world’s most trusted advisers, according to a recent survey conducted by the AICPA. Specifically, when small business owners were asked how often they rely on outside business counsel, half said that they rely on their CPA “always” or “often,” ranking slightly behind one’s spouse or family member.
This trust is not surprising considering the strict requirements to enter and stay in the profession. Achieving CPA status takes intelligence, ethics, integrity and lifelong commitment. First, candidates must make it through 150 hours of college course work, including some of some of the toughest business classes offered. After graduation and three years of corporate experience under the supervision of a CPA, candidates must pass a grueling test of business, auditing and general accounting skills.
The CPA exam is not the only requirement to be a CPA. CPAs are also required to follow a strict code of ethics and perform within the high standards of the profession. CPAs are also required to complete continuing professional education (CPE) courses to keep up with the new rules and regulations in the financial, accounting and business world.
As the profession has evolved, so have the services CPAs provide. These services include business and financial strategists who help chart the paths of individuals and businesses. People turn to their CPAs for tax and financial planning services, investment advice, estate planning and more. Businesses are tapping CPAs to not only manage finances and taxes, but also to determine profitable new product lines, seek creative financing opportunities, help diversify investments and provide a variety of other consulting and business services. As technology advances, globalization, new laws and regulations and marketplace competition continue to complicate financial and business decisions, CPAs will be called upon to analyze information, determine effective financial and business strategies and help individuals and businesses achieve profitability.
What is a Certified Financial Planner or CFP?
The CFP certification is awarded to individuals who have successfully completed the certification requirements of the Certified Financial Planner Board of Standards, Inc. To obtain the CFP certification, the following qualifications must be met:
- Examination. An individual must successfully complete the CFP Board’s Comprehensive Certification Examination, which tests the individual’s knowledge on a multitude of key financial planning topics. This is an intense test taken over two days and is considered the ‘Bar Exam’ of our industry.
- Experience. An individual must have three to five years of practical, hands on financial planning experience prior to receiving the right to use the CFP designation.
- Ethics. An individual must voluntarily ascribe to the CFP Board’s Code of Ethics and Professional Responsibility. This voluntary decision empowers the CFP Board to take action if a CFP professional should violate the code of ethics. Such violations could lead to disciplinary action, including the permanent revocation of the right to use the CFP marks.
- Education. A CFP professional must obtain 30 hours of continuing education every two years in the body of knowledge pertaining to financial planning areas such as estate planning, retirement planning, investment management, tax planning, employee benefits, and insurance.
What Is Financial Planning?
Financial planning is the process of meeting your life goals through the proper management of your finances. Life goals can include buying a home, saving for your child’s education or planning for retirement.
The financial planning process consists of six steps that help you take a “big picture” look at where you are financially. Using these six steps, you can work out where you are now, what you may need in the future and what you must do to reach your goals.
The six steps consists of the following:
- Establishing and defining the client-planner relationship.
The financial planner should clearly explain or document the services to be provided to you and define both his and your responsibilities. The planner should explain fully how he will be paid and by whom. You and the planner should agree on how long the professional relationship should last and on how decisions will be made.
- Gathering client data, including goals.
The financial planner should ask for information about your financial situation. You and the planner should mutually define your personal and financial goals, understand your time frame for results and discuss, if relevant, how you feel about risk. The financial planner should gather all the necessary documents before giving you the advice you need.
- Analyzing and evaluating your financial status.
The financial planner should analyze your information to assess your current situation and determine what you must do to meet your goals. Depending on what services you have asked for, this could include analyzing your assets, liabilities and cash flow, current insurance coverage, investments or tax strategies.
- Developing and presenting financial planning recommendations and/or alternatives.
The financial planner should offer financial planning recommendations that address your goals, based on the information you provide. The planner should go over the recommendations with you to help you understand them so that you can make informed decisions. The planner should also listen to your concerns and revise the recommendations as appropriate.
- Implementing the financial planning recommendations.
You and the planner should agree on how the recommendations will be carried out. The planner may carry out the recommendations or serve as your “coach,” coordinating the whole process with you and other professionals such as attorneys or stockbrokers.
- Monitoring the financial planning recommendations.
You and the planner should agree on who will monitor your progress towards your goals. If the planner is in charge of the process, she should report to you periodically to review your situation and adjust the recommendations, if needed, as your life changes.