US TAX


AS CHOSEN BY US CREATIVE PROFESSIONALS WORLDWIDE


Bambridge Accountants was set up over 10 years ago with the sole purpose to help creative professionals save money and stay in line with their taxes. We understand and appreciate the dedication it takes to be successful within the creative industry. For this reason, we have formed a tailored service that works around each clients schedule and needs, providing a stress-free service that allows clients to focus on their careers while we manage their taxes.

 

We truly understand and appreciate that every client is unique. Therefore we tailor our service on an individual basis to suit each client. 

Our highly-trained, expert team of chartered US tax accountants are dedicated to delivering an accurate and timely service that minimizes tax owed while keeping clients in line with their tax obligations.

 Styled by Cameron Carswell for Noose and Monkey SS18

Styled by Cameron Carswell for Noose and Monkey SS18

MEET OUR US MANAGEMENT 

Alistair Bambridge

 

Founder

 

An award-winning author and chartered accountant with over 15 years experience. Alistair established Bambridge Accountants in 2010 after realizing the lack of tax support available to creative industry professionals.

With recognition throughout the industry and further; Alistair has been listed in Spears 2018, The Independent, The Financial Times, Forbes and much more.

Callie Marles

 

SENIOR US TAX MANAGER

 

A qualified Tax Technician, Callie is a specialist in both corporate and personal US tax. Callie is an expert in breaking-down the complexities of US tax into an easy-to-understand, friendly service.

Continuously acknowledged by clients for her outstanding level of service, Callie holds developing a tailored service that works to meet your wants and needs as her priority.

 

OUR US TAX SERVICES


OUR CERTIFIED US EXPAT CPA TEAM WORK WITH THOUSANDS OF CREATIVES EVERY YEAR ON THEIR TAX RETURNS. OUR US TAX SERVICES COVER ALL AREAS TAX FOR CREATIVE PROFESSIONALS AND BUSINESSES.

FEDERAL TAX RETURN PREPARATION AND SUBMISSION

 

Our tax team specialize in Federal Tax Returns for creative professionals. Our client list includes people of all professions within the creative industries, from Actors to Web Developers to Illustrators to Authors. 

We work one-to-one with our clients to ensure that we establish which deductions and credits are applicable and what is the best method to minimize tax owed. 

 SIMONE SYLVESTER, FASHION STYLIST

SIMONE SYLVESTER, FASHION STYLIST

CORPORATE TAX PREPARATION AND SUBMISSION

 

A business tax return is required for any business that is considered a separate entity.

We have built and a service that covers all areas of tax for creative industry businesses and business owners. 

 

 

 

 Yarza Twins, Creative Agency 

Yarza Twins, Creative Agency 

US EXPAT TAXATION PREPARATION AND SUBMISSION

OUR CERTIFIED US EXPAT CPA TEAM WORK WITH THOUSANDS OF US EXPATS EVERY YEAR ON THEIR TAX RETURNS. OUR US EXPAT TAX SERVICES COVER ALL AREAS TAX FOR AMERICANS LIVING ABROAD.

 

Our US expat tax team specialize  in Federal Tax Returns for US expatriates, those who have recently repatriated to the US and American businesses abroad. 

We offer a start-to-finish US tax service that will ensure you are 100% compliant and minimize any tax owed. 

WE OFFER A START TO FINISH TAX SERVICE THAT COVERS ALL AREAS OF TAXATION FOR INDIVIDUALS AND BUSINESSES

 

ENQUIRE NOW

 

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US EXPAT TAX


Our certified US expat CPA team work with thousands of US expats every year on their tax returns. We are experienced with all types of the tax circumstances and complexities that often occur with US expatriate tax.

 

when do you need to file a us expat tax retuRn?

 

All U.S. citizens living abroad who earn above the set threshold are required to file an annual U.S. income tax return and report their worldwide income. 

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BORN IN THE USA

If you were born in the US you will be a US citizen and you are required to submit a US tax return every year - even if you are living overseas and paying all your taxes in that country.

GREEN CARD TEST

As a Green Card holder, you are generally required to file a US income tax return and report worldwide income no matter where you live.

SUBSTANTIAL PRESENCE TEST

You will be considered a United States resident for tax purposes if you meet the substantial presence test for the calendar year. 

 

 

How do US taxes work for Expats?

The US taxes all its citizens on their worldwide income- even if you are living overseas and are paying tax in that country. 

However, by claiming credit for foreign taxes, we can stop you having to pay tax twice. We are also able to exclude your employment and self-employment income up to a set threshold every year. 

Unfortunately, not filing your US tax return is a criminal offense, therefore it is essential to get caught up with your US tax returns and file them every year.

Catching up with your US taxes

If you haven't been filing US tax returns and you are a US citizen, or you have a green card, you can use the amnesty that the IRS has in place: the Streamline Filing Procedure.

Under the Streamlined Filing Procedure you will need to:

  • file the last 3 US tax returns that are overdue
  • the last 6 foreign bank account reporting forms that are overdue
  • a disclosure that the filing was non-wilful (not on purpose).

US EXPAT TAX SERVICES

U.S. Expat Federal Tax Return

A basic Expatriate federal income tax return including Forms 1040 and 2555

U.s. Expat state tax return

For some state there are unique tax rules for breaking residency and domicile.

Foreign Tax Credit (Form 1116)

A Form 1116 should be filed to claim foreign tax credit. This applied to individuals, estates, or trusts that have paid certain foreign taxes to a foreign country or U.S. possession. 

Itemized Deductions (Schedule a)

The Schedule A form is used to figure out your itemized deductions. In most instances, federal income tax will be less if you take the larger of you itemized deductions or your standard deductions.

Interest and Dividends (Schedule B)

All taxpayers filing a Form 1040 or 1040A with interest and/or dividend income exceeding $400 must file a Schedule B. 

Self-Employed (Schedule C)

If you are self-employed, you must file a Schedule C form to report your profit/losses.

Capital Gains (Schedule D)

You should use a form Schedule D form to declare any gains and losses.

Rental and Passive Income (Schedule E)

Use a Schedule E to report any income or losses from rental real estate, royalties, partnerships, S corporations, estate, trusts and residual interest in REMICs.

FBAR (Form TDF 90-22. 1)

Those who have a foreign bank account that exceeds a set threshold are required to file a Foreign Bank Account (FBAR), which acts as a disclosure to the U.S. Treasury Department.

FATCA (Form 8938)

Those whose total assets (in aggregate) exceed a set amount must file a Foreign Account Tax Compliance Act Form (FATCA).

Streamline Filing procedure

For those who are behind on filing their tax returns, you can get up to date using the Streamlined Filing Procedure.

enquire now

Tax Implications of moving to and from the US

 

As a US tax accountant, we have worked with thousands of US citizens worldwide on all matters surrounding US tax. Every day we work with clients to help explain, rectify and maximize-on the tax implications related to the expenses incurred when moving to and from the United States.

Many expenses incurred as a result of moving to a new home are deductible against tax. In order for an expense to be deductible, the expense must have been paid or incurred in connection with starting a job at a new location. This should be done through a Form 3903.

Who can Deduct Moving expenses?

Whether you are self-employed or an employee you are able to deduct moving expenses. In some circumstances, retirees, Armed Forces members and survivors can qualify to claim tax deductions on moving expenses- contact us for more details.

You are able to deduct your moving expenses if you meet all of the following requirements:

·      Your move is closely related to the start of work

·      You meet the distance test- must be at least 50 miles away from your former home.

·      You meet the time test- differs depending on whether you are self-employed or an employee

Read more

Deductible Moving Expenses

If you meet the requirements to claim moving expenses, you are able to claim expenses related to:

·      Moving your household goods and personal effects

·      Travelling to your new home

 

Moving to locations outside of the US

In order to deduct expenses for a move outside of the US you must move to the area of a new place of work outside the US and its possessions, as well as meet all other requirements related to claiming deductible moving expenses (as discussed earlier).

 

Deductible expenses for those moving outside of the US

If you move to a location outside of the US and its possessions you can deduct the following expenses:

·      The cost of moving household goods and personal affects from your former home to your new home- (This includes pets!- We get asked a lot!)

·      The cost of travelling from your former home to your new home

·      The cost of storing household goods and personal affects while you are at the new location.

 

If you live and work outside of the U.S., you may be able to exclude part from income or all of the income you earn in the foreign country. Alongside this, you may also be able to claim foreign housing exclusion or deduction. However if you do claim this, you are not able to deduct the part of your moving expenses that relates to the excluded income.

 

You are not able to claim any of the following expenses

·      Any part of the purchase price of your new home

·      Car tags

·      Drivers license

·      Expenses of buying or selling a home

·      Expenses of entering into or breaking a lease

·      Home improvements to help sell your home

·      Loss on the sale of your home

·      Losses from disposing of memberships in clubs

·      Mortgage penalties

·      Pre-move house-hunting expenses

·      Real estate taxes

·      Refitting of carpet and draperies

·      Return trips to your former residence

·      Security deposits

 

Enquire now

 

 

 

CORPORATE TAX


Helping Businesses get tax right for over 10 years


Our market-leading approach combines our extensive knowledge surrounding all areas of corporate tax with an extensive understanding of the importance of financial stability and growth to your business to provide clients with an efficient and informed service that minimizes tax while keeping companies in line with their tax obligations.

We offer a broad range of corporate tax services tailored to meet the wants and needs of small-to-medium sized companies.

Corporate tax services

U.S. RETURN OF PARTNERSHIP INCOME (FORM 1065)

A Form 1065 is an information return used to report the income, gains, losses, deductions and credits from the operation of a partnership.

Employers Quarterly Federal Tax Return (Form 941)

A Form 941 is a payroll tax form used by employers to report withholding amounts for federal income taxes and FICA taxes (Social Security and Medicare).

Employer's Annual Federal Unemployment (FUTA) Tax Return(Form 940)

A Form 940 is used to report your annual Federal Unemployment Tax Act (FUTA) tax. 

Corporation Income Tax Return (Form 1120)

A form 1120 is used to report corporations income, gains, losses, deductions and credits; as well as to calculate income tax liability.

Estimated Tax for Corporations (Form 1120-W)

A Form 1120-W is used to estimate corporations tax liability and calculate the the amount of their estimated tax payments.

Income Tax Return for a S Corporation (Form 1120S)

A form 1120S is used to report the income, gains, losses, deductions and credits of a domestic corporation or other entity for any tax year covered by an election to be an S corporation.

WAGE AND TAX STATEMENT (W-2)

A W-2 form must be filed by every employer engaged in a trade or business that pays renumeration for services performed by an employee.

ENQUIRE NOW

 Terry Paul, work for Top Shop

Terry Paul, work for Top Shop

Setting up multiple businesses: What's the best structure?

Entrepreneurs will often reach a point in their business venture where they want to do a spin-off of their present business, or even a completely different venture.

One of the first questions that will be asked in this pursuit is ‘What is the best legal business structure for multiple businesses?’

Legal Business structure for multiple businesses:

 

There are a number of strategies you can use for structuring your business ventures, such as:

·      Individual corporations/LLC

·      DBA under one Corporation/LLC

·      Holding Company

Read more

FORMING MULTIPLE CORPORATION/LLC FOR MULTIPLE BUSINESSES

There are no limits to how many corporations or LLCs one person can form.

A common option for entrepreneurs looking to create a new business is forming a new LLC and corporation for each one of their start-up ventures.

ADVANTAGES TO OPERATING MULTIPLE CORPORATIONS/LLC

·      Isolates risk to individual business. This means that if a client attempts to sue your business, the risk of damage is limited to the relevant company only.

·      Financial risk. If your new company fails to take off and is negatively affected by finances. The potential is limited to the mentioned business only and not any of your other corporations.

 

DISADVANTAGES TO OPERATING MULTIPLE CORPORATIONS/LLC

·      Additional maintenance fees and paperwork. For instance you will need to incorporate/form an LLC for each business, as well as annual maintenance fees.

There are a number on instance where electing to have your business separated into separate corporations/LLC’s can be beneficial. For instance:

·      High-risk equipment and vehicles: If your business involves high-risk equipment or vehicles, there is likely to be a higher risk of claims against your company. By separating the business into a separate entity it will help protect personal and other corporate assets.

·      Multi-state Activities: Depending on the type of work and the states involved, creating a separate entity for different jurisdictions can be worthwhile when operating in states with high tax rates. However, a number of states require unitary tax filing, which would eliminate the benefits of this separation.

·      Appreciating Assets: Assets should be segregated to provide liability protection and to ensure capital gain at time of disposition.

·      Preparing for future sale: By maintaining separate entities for direct lines of work it can simplify selling a specific division of your business. Trying to bifurcate an on going business is difficult and time consuming.

·      Joint venture- when joining with an outside party on a new project the risks increase. It is important to separate the activity to minimize the risk and monitor performance.

 

FORMING DBAS UNDER ONE CORPORATIONS/LLC

A common option for entrepreneurs wishing to form a new business is setting up one LLC or corporation, and then set up DBAs (Doing business as) for each one of the ventures. From a marketing perspective you run each business as if they are separate companies.

ADVANTAGES TO OPERATING AS A DBA UNDER ONE CORPORATION/LLC

·      Each business venture has the right to use different branding and company name.

·      Simplify annual maintenance. You only need to pay your annual LLC/corporation maintenance fees for the LLC/corporation, (not for each DBA). If you need and/or use an EIN, you’ll only be required to have one across the whole LLC/corporation.

·      When it comes to filing your taxes, you can take income earned from each DBA and report them in a single tax return under the main LLC or corporation.

DISADVANTAGES TO OPERATING AS A DBA UNDER ONE CORPORATION/LLC

·      If one DBA is sued all of the DBA’s under the corporation/LLC are liable.

FORMING A HOLDING COMPANY

Another option an entrepreneur can take when considering how to set up multiple businesses is forming a holding company. Forming a holding company is where you create individual corporation/LLCs for each of your businesses and then put them under one main holding corporation/LLC.

ADVANTAGES TO OPERATING AS AN LLC/CORPORATION UNDER A HOLDING COMPANY

·      Potential to commingle income and losses for multiple C corporations without commingling liability.

·      Opportunity to maximize deductions (E.G. IRC ¢199 domestic production activities deduction)

·      Centralized overhead for all entities

·      Reduces staffing

Contact us for more advice on setting up a business

 Illustration by our client, Ella Jackson

Illustration by our client, Ella Jackson

TAX FOR MARRIED COUPLES IN BUSINESS

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.

Below is a summary of the considerations you should take as a married couple running a business.

HOW YOU MARRIED PARTNER EARNS THEIR SOCIAL SECURITY BENEFITS

A spouse will be considered as an employee for tax purposes where there is an employer/employee relationship. In this instance, the employee spouse is subject to income tax and FICA (Social Security and Medicare) withholding.

I both partners can be regarded as having an equal say and presence in the affairs of the business; a partnership exists and so the business’s income should be reported on a Form 1065, U.S. Return Partnership Income.

Read More

MARRIED COUPLE BOTH CARRYING ON THE TRADE OR BUSINESS

Qualified joint ventures between married couples filing a joint return are not generally treated as a partnership for federal tax purposes. All items of income, gain, loss, deduction and credit are divided between the spouse in accordance with their respective interest in the venture. Each spouse must take into account his or her respective share of these items as a soul proprietor, Therefore, it is anticipated that each spouse would account for his or her respective share on the appropriate form, such as a Schedule C.

For the purpose of determining net earnings from self-employment, each spouse’s share of income or loss from a qualified joint venture is taken into account.

Contact us for more US business tax advice

 

US CORPORATE TAX INCENTIVES

 

Below is a summary of the major tax incentives that Congress has put in place to encourage certain behaviors by US corporations.

DOMESTIC PRODUCTION ACTIVITIES DEDUCTION (DPAD) 

In an effort to encourage companies to keep their manufacturing processes in the United States, Congress came up with the Domestic Production Activities Deduction (DPAD).  The DPAD allows US corporations to reduce their taxable income by 9% of their income from domestic production.  This provision was created in response to many businesses outsourcing production to cheaper overseas facilities. 

 

FOREIGN TAX INCENTIVES

Multinational companies are not required to pay US taxes on profits earned overseas until they bring the earnings back to the US.  This has created an incentive for US companies to keep cash overseas to pay taxes at a preferential rate.  With the passage of the new US tax law in December 2017, the corporate tax rate was reduced to 21%, which should theoretically reduce some of that incentive to keep profits away from US taxation.  But, the law also allows businesses to keep a portion of overseas profits tax-free, which could continue incentivizing manufacturing in other countries. 

 

READ MORE

STATE AND LOCAL BONDS

In order to encourage investment in state governments and local communities, Congress exempted state and municipal bonds from federal taxation.  This incentivizes corporations (and individuals) to purchase these types of bonds.  The logic in this type of policy is that these funds are frequently invested in programs that benefit local communities, unlike federal or corporate bonds. 

 

ENVIRONMENTAL TAX CREDITS

As part of the United States’ move towards environmental stability, the EPA has introduced a system of tax credits that incentivize US companies to reduce their emissions.  The main type of these incentives is called Emission Reduction Credits or ERCs.  Polluters are given a specified rate of pollution and earn a tax credit by reducing their rate of emissions below the threshold.  Many of these credits are grouped into a ‘General Business Credit’ for tax purposes, including the biodiesel fuels credit, alternative motor vehicle credit, and the renewable electricity production credit. 

 

RESEARCH CREDITS

In order to incentivize research and development, the research credit is available for companies that make qualified research expenditures (QRE).  A QRE must involve developing products, manufacturing processes, or software in the US.  The amount of the credit is usually 20% of all QREs above a certain base amount.  This credit has been a boon for US corporations every since its inception in 1981. 

CREDIT FOR LOW-INCOME HOUSING

Congress wanted to incentivize real estate developers to set aside a portion of the homes they build for low-income people.  So, they offered a sizeable tax credit for developers who engage in this type of practice each year.  The result has been companies setting aside 20%-40% of the certain developments for those whose income is well below the median gross income for the area. 

CONTACT US FOR CORPORATE TAX SUPPORT

PERSONAL TAX


EXPERT IN SAVING YOU MONEY AGAINST TAX


Our highly-trained, expert team of US personal tax accountants are dedicated to delivering an accurate and timely service that minimizes tax owed while keeping clients in line with their tax obligations.

We can assist all personal tax filing obligations and matters for individuals living inside- and outside- of the US.

Personal Tax Services

individual income tax return(form 1040)and any required state tax returns

A Form 1040 is used by U.S. taxpayers to file an annual income tax return.

Profit or loss from business (schedule c)

A Schedule C is used to report the income or losses from a business you operated or a profession you practiced as a sole proprietor.

Net profit from business (schedule c-ez)

A Schedule C-EZ form is used in replacement of a Schedule C if you operated as a business or practiced as a sol proprietor or qualified joint venture and you have met all the requirements listed in the Schedule C-EZ, Part I.

self employment tax (schedule se)

A Schedule SE (Form 1040) can be used to calculate the tax due on net earnings from self-employment. 

estimated tax for individuals (1040-es)

A Form 1040-ES is used to calculate and pay any estimated tax.

EMPLOYER'S QUARTERLY FEDERAL TAX RETURN(941)

A Form 941 is a payroll tax form used by employers to report withholding amounts for federal income taxes and FICA taxes (Social Security and Medicare).

WAGE AND TAX STATEMENT (W-2)

A W-2 form must be filed by every employer engaged in a trade or business that pays renumeration for services performed by an employee.

ENQUIRE NOW

 Work by Clementine Carrier 

Work by Clementine Carrier 

Sales Nexus for an Amazon FBA seller

As a seller on Amazon, Ebay or any e-commerce platform there are a number of tax obligations, reliefs and exemptions it is important to be aware of in order to avoid penalties and paying unnecessary tax.

45 U.S. states and D.C. levy a sales tax. Merchants within these states are required to charge sales tax to buyers.

As an e-commerce seller, you are not directly paying the sales tax but are a ‘pass-through’ point between your buyers and the state and local tax authorities.

Read More

Sales tax can vary a lot from state to state.

States set a rate and then localities can add a percentage on top of those rates. For instance, in the 90210 zip code, the tax rate is the 6.5% California state-wide rate, a 1% Los Angeles Country rate and then an additional 1.5% local rate for a total of 9.0% sales tax rate.

One of example of state-to-state variation of tax for ecommerce sellers is that that some state requires you to charge sales tax on shipping charges, while others do not.

It is essential to be aware of the tax obligations within your state.

SALES TAX NEXUS

Sales tax nexus refers to the sufficient physical presence that legally deems in necessary for businesses in a state to collect and pay tax on sales in that state.

The rise of online retail platforms such as Amazon has lead to states having to search for new ways to collect sales and income taxes from companies that conduct business virtually.

 

DETERMINING SALES TAX NEXUS

Presence can include- but is not limited to- an office, an employee or a warehouse.

If you have sales tax nexus in a state that requires sales tax collection, then you must collect sales tax from all buyers in that state regardless of where the item is shipped. If you do not have sales tax nexus in a state, then you’re not required to collect sales tax when you sell online to buyers in that state.

 

TYPES OF SALES TAX NEXUS

There are a number of examples that can be used for sales nexus. For example:

·      Home state nexus

·      Employee nexus

·      Inventory nexus

 

REMITTING SALES TAX TO NEXUS STATES

When you apply for your sales tax permit, your state’s tax authority will assign you ta frequency at which to file and remit sales tax. Generally, this is monthly, quarterly or annually, and often depends on your sales volume or the volume of sales tax you collect.

 

SALES TAX DUE DATES

While sales tax due dates usually fall on the 20th of each month, states due dates can vary massively.

 

Contact us for expert tax advice for Amazon Sellers in the US

US CREATIVE INDUSTRY TAX EXPERTS


Over 10 years ago, Bambridge Accountants set out with the mission to simplify and optimize accounting services available to creative industry professionals. 

Creative professionals are unique when it comes to the world of taxes. With unique tax obligations and incentives, we created a team of accountants that have a focused and specialist knowledge in the US creative industry tax niche. 

Our US tax teams extensive knowledge in creative industry tax provides our clients with advice and support that cannot be beaten.

Our Talented Clients

 

We keep our client's taxes in order so they can focus on doing what they love. Here is a small selection of our talented client's work.

Who Do We Help?

We have worked with a wide range of professionals in and outside of the creative industry that includes- but are not limited to:

Actors and Directors

Set Designers and Make-up Artists

Photographers

Graphic Designers and Media Professionals

Web-Developers and Software Engineers

Finance Professionals

Real Estate and Property

 
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TAX INCENTIVES AN EXEMPTIONS FOR US TECH BUSINESSES

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.

 

CAPITAL EXPENSES

Businesses may deduct all ordinary and necessary business expenses.  Capital expenses do not qualify as such.  Start-up costs, purchase of business assets, and improvements all must be capitalized as assets.  However, the company may elect to recover and subsequently deduct more depreciation for tax purposes than is reported for book purposes.  This method, called MACRS, allows businesses to deduct the costs of investments more quickly to reduce current tax liability.  Read more about how to claim this additional depreciation here.

Additionally, businesses can sometimes deduct most or all of the cost of equipment purchased in the first year it is owned.  Many tech companies who frequently purchase new equipment take advantage of this rule, called the section 179 deduction

READ MORE

 

RESEARCH AND DEVELOPMENT (R&D)

Research and development expenses are deductible as ordinary and necessary business expenses.  The IRS states “R&D expenditures generally include all expenditures incident to the development or improvement of a product”.  A product can refer to formulas, patents, processes, or inventions.  Expenses that do not qualify as R&D include quality control testing, consumer surveys, and advertising.  Businesses can choose to capitalize R&D costs and amortize them over 10 years or deduct the costs in the current year.

 

PERSONAL EXPENSES

You cannot deduct personal, living, or family expenses for business purposes.  For example, a person who tests video games for their business but also enjoys playing them for fun cannot deduct the whole cost of the games.  They may only deduct the bit that is proportional to how often the games are used for business.  If they spend 80% of their time testing the games and the other 20% just playing them, they can only deduct 80% of the cost. 

 

BUSINESS USE OF CAR AND HOME

Those who use part of their home for business may take advantage of the home office deduction.  The business owner may deduct some of the costs of owning a home like mortgage interest, utilities, and insurance based on the proportion of the home used for work (calculated by square feet).   Similarly, you can deduct the cost of using your car for work.  Again, you may only deduct mileage costs for time spent driving for business purposes. 

 

BUSINESS VS. HOBBY

Some taxpayers might not know if their hobby qualifies as a business or not and if the losses from that business are deductible for tax purposes.  For example, someone who plays a lot of video games for fun but also competes in tournaments to win cash may try to deduct any net loss they had from gaming during the year.  In order to do this, you must prove to the IRS that you are trying to make a profit.  If your activity made a profit in 3 of the last 5 years, it is considered a business and any loss is deductible.  If not, the IRS will see it as a hobby and not allow losses to be deducted.    

CONTACT US FOR EXPERT TAX ADVICE FOR TECH COMPANIES

 Hannah Thomlison for Adidas X Rita Ora

Hannah Thomlison for Adidas X Rita Ora

Setting up a US creative industry business in the UK 

If your small business is moving to the UK or you are a US citizen looking to set up a new company, there are several tax implications that you should consider.  Specifically, creative industry businesses have favourable tax treatment in the UK, with advantages that most US citizens are probably unfamiliar with. 

CREATIVE INDUSTRY TAX RELIEFS FOR US BUSINESSES IN THE UK

The UK has a tax law known as the creative industry tax reliefs, which allows certain small businesses to deduct additional expenditures from their taxable income.  In order to qualify, the business must be directly involved in the production of one of the following: film, animated TV, children’s TV, video games, theatre, orchestra, or museums.  If the company qualifies, they may claim an additional deduction of 100% of “enhanced expenditure”.  Enhanced expenditure is calculated as the lesser of the company’s UK expenses or 80% of expenses across Europe.  The point of all this is that the HMRC is providing a massive tax incentive for people to start creative industry businesses, and anyone who does so should take advantage.  Visit the HMRC website to see if your business qualifies for this type of relief. 

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DIFFERENCES IN CORPORATE TAX LAWS BETWEEN US AND UK

Additionally, companies moving from the US to the UK must consider differences in the corporate tax laws between the two countries.  Before 2018, the US corporate tax rate was nearly double that of the UK, with stateside businesses paying a top rate of 39% compared to 20% in the UK.  After the passage of the new US tax cuts in December 2017, the corporate rate has been reduced to 21%.  Therefore, the tax advantage of moving a business to the UK is much less significant.  On top of that, the UK has fewer allowable deductions than the US.  For example, they do not allow for the cost recovery of buildings while the US does, which causes taxable income to be must higher. 

Be sure to consider all of the possible tax implications if you are looking to set up a business in the UK.  If you are a company that qualifies for the creative industry relief, you may end up paying far less tax than you would in the US.  However, if your business does not qualify, fewer allowable deductions may result in the company paying slightly more tax.  Talk to an accountant or conduct your own research to figure out the best tax planning for your business. 

Contact us for expert tax advice for US creative Businesses