The Tariffs introduced on imported goods, by President Trump back in March, have shaken the fashion world.Read More
US expats are required to file a US federal tax return in order to disclose their worldwide income. If you’re a US expat who lives in a low-tax country and earns above the Foreign Earned Income Exclusion threshold, you are likely to owe US tax.Read More
The “Tax Cuts and Jobs Act” of 2017 introduced several major federal tax reforms affecting offshore income. One of the most noted tax reforms enacted was the incorporation of Reparation Tax. The provision was introduced with the intention to force large U.S. companies, like Apple and Google, to pay a sizeable tax on profits held in foreign subsidiaries (controlled foreign corporations). Under the reform, all profits of CFC’s that were accumulated post-1986 will be treated as income of their U.S. parent company and taxed a 15.5% for profits held in cash form, and 8% for profit held in non-cash form.
As a result many U.S. expatriates have fallen further into the IRS’s long arm. U.S. citizens living outside of the U.S. who own or have interest in companies incorporated outside of the USA will also be subject to paying the Reparation Tax. This is because the U.S. tax reform regards such individuals in the same light as the large U.S. corporations. Therefore, American expatriates owning more than 10% of a Controlled Foreign Corporation (CFC) will have to pay repatriation tax within eight years.
Contact us for expert tax advice for U.S. expatriates
Donald Trump's 2017 tax reform has had and will continue to have huge implications for US expats who have an investment in non-US businesses. The two main new laws in place relating to Controlled Foreign Corporations (CFCs): any non-US business that is at least half owned by US shareholders, each of whom owns at least 10%.
Many actors are considered self-employed when it comes to filing their taxes. When filing your regular year-end 1040 income tax file, you will also be required to file a 'Schedule C' and state all the 1099s you received throughout the year. There are many unique deductions actors are allowed to take advantage of - these should be reported on the 8829 form for home office deduction. Further to this, you will liable to self-employment tax in addition to federal income tax. Paying estimated quarterly taxes may be necessary on Form 1040-ES for some, but even if this isn't mandatory (your tax liability does not exceed $1,000), it can be a great way to budget throughout the year.Read More
As said by the late, great Benjamin Franklin "In this world nothing can be said to be certain, except death and taxes." The tax system is a long-standing, ever-changing obligation for the majority of people. Understanding why you're being taxed and what you're being taxed on will help you see the bigger picture when it comes to your finances. Think of it like going to a football match and not understanding why everyone boos a red card. Better to be in the know so you can make well-informed decisions.Read More
Gambling winnings obtained by casual gamblers are fully taxable and must be reported as income on your tax return. Whether your success is in lotteries, casinos, horse racing, raffles or other bets, the cash winnings or value of prizes won must be declared.Read More
Cryptocurrencies such as Bitcoin became extremely valuable and popular investments during 2017. This raised a multitude of questions about how cryptocurrency transactions should be taxed in the US. Thankfully, the IRS has offered some guidance and accountants have quickly come up to speed on the treatment of Bitcoin from a tax perspective.Read More
With US taxes done for another year, we thought it was a good opportunity to let you know about a few changes the Internal Revenue Service (IRS) are implementing as of 2018. The new figures released are what you'll need to prepare your 2018 tax returns in 2019.Read More
Film and television producers in New York State (NYS) are able to claim back money on their projects in the form of a refundable tax credit. The tax credit hopes to encourage creative professionals to create film and television content in NYS to help the industry thrive and keep the State's economy healthy. The incentive is available to qualified production companies that produce a variety of media outputs such as feature films, television series or television pilots. They may also be able to claim credit on post-production costs that link back with the original project.Read More
Pensions are a popular way of supporting yourself financially within your retirement. Whether you opt for a Social Security pension, Employer Pension or a Private Pension plan, there are many things to consider when navigating potential US Tax Challenges if you are an American living in the UK.Read More
Even though you are a UK citizen and live in the UK, the US still will attempt to tax your US pension. However, the US/UK tax treaty states that most pensions are only taxable in the country where the beneficiary is a resident. Therefore, living in the UK gets you exempt from US tax on your pension. In order to claim an exemption from this tax, there are several steps that must be taken. First, you must contact the IRS and obtain a US Taxpayer Identification Number (TIN). Once you have this, you should fill out Form W-8BEN and send it to the institution paying your pension benefits. This will allow them to send you your pension payments in full without withholding US tax. Be sure to specify the article and paragraph of the treaty that allows the taxpayer to claim this exemption (Article 18, paragraph 1).Read More
The Offshore Voluntary Disclosure Program is a program designed specifically for taxpayers with exposure to potential criminal liability and/or civil penalties due to a willful failure to report foreign financial assets and pay all tax due in respect to those assets.
On the 28th September 2018 the IRS will be closing the 2014 OVDP. This is due to a significant decline in the number of taxpayers participating as well as an increase in awareness of offshore tax and reporting obligations.
It should be notes, that the closing of the 2014 OVDP does not end nor lessen the IRS’s priorities towards offshore tax compliance. The IRS enforce offshore compliance with tax and FBAR requirements using information received under the Foreign Account Tax Compliance Act (FATCA) and so on.
Deadline for submitting a 2014 OVDP
All offshore voluntary disclosures conforming to the requirements of the 2014 OVDP filing procedure must be received or post marked by the 28th September 2018.
After the passage of the Tax Cuts and Jobs Act in December 2017, the US corporate tax rate will be 21% for all corporations. This is a significant reduction from the previous top rate of 35% that the most profitable corporations had to pay. This applies to US-based companies as well as foreign corporations that do business in the US.
Capital Gains Tax
Corporations are responsible to pay tax on capital gains at a rate of 30%. Capital gains are a result of the sale of a capital asset. A capital asset is basically anything owned by a corporation for investment purposes. The gain is calculated by subtracting the adjusted basis (original cost minus accumulated depreciation) from the amount received in the sale. Also, it is important to distinguish between long-term and short-term capital gains. Long-term gains are taxed as capital gains while short-term are taxed as ordinary income.
During the same tax year, capital losses can be deducted against capital gains in order to reduce taxable income. However, net capital losses in excess of $3000 may not be deducted from taxable income.
Dividends and Interest
Passive income like dividends, interest, rents and royalties are all taxed at the same rate as ordinary income. However, to avoid triple taxation of dividends, corporations are allowed to deduct a portion of dividends received from taxable income. For most corporations, they may deduct 70% of all dividends received. The rest of the dividend income will be included in taxable income.
Employers are required to pay various taxes in the form of matched employee contributions. On wages up to $113,700, employees and employers are each required to pay 6.2% of the employee’s salary to the government to fund social security benefits. Similarly, each party pays 1.45% of the employee’s salary for Medicare. Additionally, corporations are on the hook for 6% of the first $7000 of each employee’s wages for federal unemployment insurance.
Below is a summary of the major tax incentives that Congress has put in place to encourage certain behaviours by US corporations.Read More
US corporations and individuals are allowed a multitude of different deductions for cash outlays they make throughout the tax year. However, for technology companies and individuals with tech-based hobbies, it can be confusing as to what expenses can be deducted. Below is a brief summary of what can and cannot be deducted for US tech companies and tech-interested individuals.Read More
Our latest contributions to the Daily Mail have now been released! The story covering the US tax filing responsibilities of Megan Markle now that she is a US Expat.
Estimated tax is the method used to pay Social Security and Medicare taxes and income tax, because you do not have an employer withholding these taxes for you.
A form 1040-ES, Estimated Tax for Individuals is used to figure these taxes. You will need your prior year’s annual tax return in order to fill out Form 1040-ES.
The form 1040-ES contains blank vouchers you can use when you mil your estimated tax payments or you can make the payment electronically using the EFTPS.
For those in their first year of self-employment, you will need to estimate the amount of income you expect to earn for the year. If your estimated earnings are too high, you can simply refigure your estimated tax on second 1040-ES form.
Self-employed workers in the US generally are required to file an annual return and pay an estimated quarterly tax.
Freelancers and other self-employed professionals must generally pay self-employed (SE Tax) as well as income tax. SE tax a primarily a social security and Medicare tax for individuals who work for themselves.
Medicare and Social Security for Self-Employed
The majority of people who pay into social security work for an employer- their employer deducts the amount from their paycheck. Self-employed people must independently report their earnings and pay their taxes directly to the US.
The IRS regard you as self-employed if you operate a trade, business or profession either by yourself or as a partner. Your earnings for Social Security should be reported when you file your federal income tax return.
For employed workers, 6.2% of up to $128,400 of earnings and a 1.45% Medicare tax on all earnings
For self-employed workers, 12.4% social security tax is paid on earnings up to $128,000 of net earnings and 2.9% Medicare tax on entire net earnings. The higher rate is due to the tax being taken as a combination of employer and employee tax.
For self-employed workers who have earned more than $200,000 ($250,000 as a married couple filing jointly), 0.9% more tax must be paid in Medicare.
Determining if you are subject to Self employed and income tax
Before you can determine if you are subject to self-employment tax and income tax you must figure your net profit or net loss from your business. This can be done by subtracting your business expenses from your business income; if your expenses are less than your income the difference is judged as a net profit and should be included on page 1 of form 1040. If your expenses are more than your income, the difference is judged as a net loss, and should deducted from your gross income on page 1 of your 1040 return.
As a company owner it is common to employ family members, such as a spouse. The employment tax requirements family members can vary to those that apply to general employees.Read More