NRI with Green Card in the US, what not to forget while filing your taxes this year

NRI with Green Card in the US, what not to forget while filing your taxes this year

by | May 23, 2019 | Blog, Deduction & Credits, Investment & Income, Tax Extension, Tax Planning, Tax Preparation

NRI with Green Card in the US, what not to forget while filing your taxes this year

The income tax system that currently in motion in the United States of America, requires corporation, trusts, estates and individuals to pay taxes. If you are an NRI, you must also pay taxes to Uncle Sam. Irrespective of whether you are filing your taxes for the very first time or have been doing it for years, here are a few things that you must not forget.

  • Reporting Foreign Assets (Form 8938)

The IRS introduced Form 8938 a few years ago to get additional information regarding foreign assets of their citizens. The Form 8938 or Statement of Specified Foreign Financial Assets should be filed along with their taxes. This form requires taxpayers to disclose additional information regarding their interests and investments in foreign financial assets. With the help of this form, the IRS can identify the non-compliance of its taxpayers. Your financial assets such as pension plans, mutual funds, insurance policies, ULIP plans and bank account balances must be declared as a part of Form 8938. The form is quite exhaustive, to say the least. You can get in touch with the company handling your finances or banker to get these details.

  • Global Income

The IRS outlines its residents and citizens (PIO, OCI or NRI) to pay taxes on their global income and not only the income generated in the US. Anyone who has stayed in the US for at least 31 days in a fiscal year and 183 days in the previous three years, gets the tag of a US resident. If you qualify, you must declare your global income. Global income includes any salary that you receive in India, either for consultation or freelancing. Income in the form of interests or dividends earned on bank deposits or other securities. Income generated from rent received on a property, agricultural income or capital gain on the selling of assets, all qualify. You will be taxed on all of these in the US. While income from agriculture is tax-free, it will be taxed in the US. However, if you have paid taxes in India for any of these incomes, you can claim for the foreign tax credit as per the DTAA.

  • Employee Stock Option Plan

Employee Stock Option Plan or ESOP is something that you must not forget in your tax filing. The IRS considers the granted value of ESOPs when a taxpayer opts for the same. The total ESOP compensation must be added to the gross income. If you had exercised a similar option in India and have paid relevant taxes, you can opt for tax credit while filing your tax return.

  • Form 8621

The IRS requires all its citizens and residents to declare their foreign investments such as mutual funds and private equities in the tax return. These investments come under the purview of the Passive Foreign Investment Company (PFIC). To summarize, according to the PFIC, a taxpayer must declare all such investments and any gains that they earn out of them. These gains must be declared and appropriate taxes paid. In the event that you fail to do so or did not receive any gains from them, the final sale value would be divided for the number of years and calculated. For instance, if you haven’t received any distributions over 5 years and you gain a total of $200, it would be considered as $40 for each year. Being on the top of these will help you from coming under the scrutiny of the IRS. And of course, sets yoo up for a smoother tax filing season.
Things to take care of, when you visit India for your annual vacation this summer

Things to take care of, when you visit India for your annual vacation this summer

by | Apr 2, 2019 | Investment & Income, Tax Extension, Tax Planning, Tax Preparation

NRI’S Things to take care of, when you visit India for your annual vacation this summer

Non-Resident Indians living away from motherland usually plan their trip or vacation to India during winter as they could celebrate some of the popular festivals with family. Many NRIs also plan their annual vacation in summer as spring is the season of marriages and other celebrations to be with family and friends. Are you also a NRI planning your annual vacation to India this summer? Then, there are few more things to take care of apart from celebration and spending quality time with family and friends. Let’s take a look at important things to take care of during your India visit this summer.

Review you finances

As the new financial year has just began, first quarter of the year is the best time to have a look at your financial portfolio in India and act upon existing investments accordingly. India has numerous investment options. Explore investment options available for you in India to diversify your portfolio. Understand tax implications of investments that you are planning for the year. As you make financial plan, take your global income, expenses, investments, assets and loans into consideration to arrive at the better plan in align with your future financial goals. For retirement planning, if you are unsure of your returning back to motherland, have alternative and flexible plans in place.

Income tax filing and tax planning for the year

Being a Non-Resident Indian, you are required to file income tax return on your income earned in India in an applicable form (ITR2 or ITR3 depending on your income type). For the financial year 2018-19, you are required to file income tax in India before 31st July 2019. As you are visiting in the first quarter of the new financial year, you can take care of things related to income tax filing for the year gone by. Learning change in requirements, new rules and requirement of documents can help you out finish the filing process smoothly. You can also take a look at ways to save tax liabilities such as claiming benefits under Double Taxation Avoidance Agreement (DTAA).

According to latest income tax return forms, if you are claiming tax relief under Double Taxation Avoidance Agreement (DTAA), you will need to provide more extensive details such as overseas tax residency certificate, tax identification number of home country and assets held abroad etc.

You can also plan ways to save tax for the current financial year. Beginning of the year is the perfect time for tax planning. You can take help of professionals who expertise in taxes of both geographies so that you can plan your taxes efficiently and file your taxes smoothly in India.

Review your insurance portfolio and seek sufficient coverage

Take a look at your insurance portfolio and ensure you have sufficient insurance coverage. If the existing coverage is not sufficient, plan efficiently to manage future uncertainties. It’s important to understand that insurance planning and risk management is an integral part of your financial planning. Not just the life insurance, you need to pay attention to health coverage also keeping in mind of your plans to return to India in future.

If you are living in US, you would have created health savings account (HSA) for future medical needs as it is a tax-advantaged medical savings account. As per data, HAS investment assets approached 8.3 billion dollars by the end of 2017 with 22% increase in assets year on year. Though, HSA sounds interesting for NRIs build corpus to pay for eligible medical expenses, it’s important to have health cover in India as well for treatments undergone in India as well as for future coverage and tax benefits.

Conclusion

Make your annual vacation to India worthwhile this summer by effectively planning your financials and taxes along with having family fun time. Seek help of certified financial advisors and tax experts to plan ahead in an efficient manner.

5 Things you should know when transferring money from India to USA and USA to India

5 Things you should know when transferring money from India to USA and USA to India

by | Mar 12, 2019 | global income tax, Investment & Income, Tax Planning, Tax Preparation

5 Things you should know when transferring money from India to US and US to India

The chances of you crossing the border relocating to a different place for work or other reasons is much higher than what it was some time back. Be it a vacation, studies, work or travel from work, reasons are plenty. And one of the fundamental things that you would need during these trips is transferring money.

Since two different country and currency is involved, transferring of money is not that straight forward. There are a few things that you should be aware of if you want to transfer money either from India to the USA or vice versa. Here are some of these factors.

  • Exchange Rate

This is one of the leading factors that you should have in mind during transfers between India and the USA.

  • Look for vendors that offer the lowest exchange rates, as it eats into the amount that you wish to transfer.
  • While it is mandatory for transfer companies to mention the exchange rates in the USA, no such rules exist in India.
  • You also would need to look into the hidden charge’s association with the transfer so as to ensure that the maximum amount remains with you.
  • You also have the option to look into live financial charts to know the right time to exchange money.
  • Lastly, there are certain taxes that are applicable to the transactions. So, you need to be conscious of that as well.

  • Transfer Fees

The companies in charge of transferring money charge a small portion as transfer fees. Needless to say, it varies from companies.

  • If you are someone who wants to transfer smaller amounts on a regular basis, opt for a company that charges fees on the total transaction amount.
  • However, for larger transfers, it is recommended to go for companies charging a flat transaction fee.

  • Transfer Limits

When it comes to transferring money, you are bound to come across some limits or the other. The limits can either be imposed by the companies in charge of the transfer or by local laws. Thus, do not forget to look into the limits on offer by different transfer companies.

  • Transfer Duration

Another important factor that might influence your decision to choose a vendor or transfer company is the transfer duration.

  • Wire transfer is one of the oldest and most trusted forms of fund transfer. However, it usually takes about 3-5 working days.
  • Some vendors might offer a quick turnaround time for transfer.
  • The duration to transfer cryptocurrency can be much shorter, in some cases even a few minutes.
  • Depending on the urgency, you can decide which vendor to opt for.

  • Wire Transfer

One of the easiest ways to transfer funds between India and the USA is via wire transfer. Here are some things to consider in a wire transfer.

  • It is a slightly more expensive option compared to other options available.
  • Wire transfer is more convenient when you compare them with bank drafts.
  • On average they take any time between 1 to 5 working days to transfer the fund.

The options are a bit limited when it comes to transferring funds between India and the USA. However, depending on your need and amount, you can choose from either utilizing your existing bank or forex companies for the transfer.

As a general rule of thumb, the transfer fees and charges related to forex companies is lower when pitched against banks. The above should help you handle money transfers between India and the USA in a much more organized way.

3 Tax Investments that I can make AFTER 12/31?

3 Tax Investments that I can make AFTER 12/31?

by | Feb 18, 2019 | Investment & Income, Tax Planning

3 Tax Investments that I can make AFTER 12/31? 

Tax Investements,Let us consider that you have some idle cash lying in your bank account. Where would you invest them, so as to get tax benefits and make the most of the money? With so many options out there, it can be a bit overwhelming.

Of course, you can go on a trip or buy something new for the house. But would it be the ideal way to utilize your funds? Certainly not. To make matters easier for you, we have come up with a list of smart tax investments that you can make post 31st of December.

HSA

The HSA or Health Savings Account is a good way to park any additional cash that you might have in your possession. Here are some of the crucial details.

  • The IRA allows you to park about $10,000 per year in HSA.
  • The HSA account is available for families that have health plans with high deductibles.
  • Your investment amount sits in the HSA account and grows until you decide to withdraw the money.
  • You can withdraw the HSA found once you reach the age of 65 without any penalties, thus allowing you to even use the funds for retirement.
  • The contributions that you make towards HSA can be deducted for taxes.
  • The money in the account grows tax-free and so is the withdrawal.

Roth IRA

A lot of individuals qualify for Roth IRA but do not utilize the available option. Roth IRA is a great investment option for the following reasons.

  • You can contribute as much as $6,000 per year or $7,000 if you are above 50 years old.
  • The investments in Roth IRA are post-tax dollars.
  • The money grows tax-free in Roth IRA.
  • When you withdraw the money in retirement, it is tax-free since you would have already paid taxes on the contributions made.
  • There are certain earning thresholds which bar individuals to invest in Roth IRA directly. For example, the phaseout for Roth IRA for 2019 begins at $122,000 for single taxpayers and $193,000 for married filing jointly.
  • Importantly, you can continue investing in both Roth IRA and 401(k).

Traditional IRA

Investments in traditional IRA is similar to that of Roth IRA baring some differences. In the end, it is your personal preference when it comes to choosing which IRA is better. The following details should help you choose better.

  • You can contribute $5,000 per year into the traditional IRA.
  • Claiming traditional IRA will bring down your adjusted gross income and thus your tax liability.
  • The contributions can grow tax-deferred and you can even withdraw the funds without paying any taxes if they are done a bit late.
  • You can set up a traditional IRA, even if you have another retirement plan in place.
  • You have the option to pass on the assets to beneficiaries after death.
  • The age limit for contributing to the traditional IRA is 70 1/2 years.
  • While everyone can open a traditional IRA, the tax deductions vary. Single taxpayers who already have an employer-based retirement plan and earn $56,000 or less are eligible for a full deduction. Married filing jointly status individuals have a similar threshold of $89,000.

These investment options let you save money in the form of taxes and yet allow your assets to grow over time. In the year 2017, HSA grew by $8.3 Billion. In numbers perspective that is about 22% year on year growth. You can also invest and let your corpus grow.

4 Tax Benefits that you should not miss if YOU ARE PARENT

4 Tax Benefits that you should not miss if YOU ARE PARENT

by | Feb 11, 2019 | Investment & Income, Tax Planning, Tax Refund

4 Tax Benefits that you should not miss if YOU ARE PARENT?

4 Tax Benefits ,Being a parent is not easy and not is it cost-effective.  Tax creditRight from the moment of birth, you must endure expenses such as diapers, baby food, toys and other essentials. It is possible that one might get a bit exhausted and hope for a quick break.

Well, the quick break is there for your taking in the form of tax benefits.You can claim your parenting related expenses, which will in turn lower your liable taxes via deductions and tax credits. Here is a list of few tax benefits that you as a Parent should not miss or ignore.

  • Child Tax Credit

Tax credits essentially lower your taxes dollar for every dollar spent. If you have a few kids, you can use these tax credits to lower your taxes by a considerable margin. However, you can claim the credits for only qualifying children. Here are a few conditions.

  • You children must be below 18 years of age.
  • Your children must be a citizen of the USA, or a resident alien or a national.
  • You must declare your children as dependent on your tax claims.
  • Your children must be living with you for at least half of a financial year.
  • You can declare your own children, step children, foster children, half brother or sister, or a dependent such as grandchildren as your dependents.

You can claim the credits for several children, as long as you declare them as dependent and they are not listed as dependenton anyone else’s tax filing.

  • Adoption Tax Credit

With the help of adoption tax credit, you can easily offset some of the expenses related to adopting a child. Of course, there are few limitations when it comes to income and amount that you can claim per child. Here are a few expenses that you can claim under this clause.

  • Travel expenses related to court.
  • Food expenses related to court.
  • Attorney and court related fees.

In the event that you adopt a child with special needs, you can claim the entire Adoption tax credit. Irrespective of whether or not it surpasses your actual expenses. Since it is non-refundable, you must ensure that it doesn’t exceed your actual tax liability.

  • Higher Education Credits

Sending your kid for higher education is not cheap these days. Here are two credits that you can avail.

  • Lifetime Learning Credit (LLC)
  • American Opportunity Tax Credit (AOTC)

You can use the AOTC for up to four years, whereas the LLC can be carried forward as long as your kid pursues education.

The following expenses qualify for the above credits.

  • Tuition fees
  • Enrollment related fees
  • Expenses related to school materials

There are certain clauses in AOTC, which allows you for tax credit even if that results in zero tax liabilities.

  • Student Loan Deduction

You can avail deductions in your tax filing based on the payments that you have made for student loans. Since it is a deduction, you can reduce your net taxable income and thus lower the taxes.Here are a couple of conditions that are applicable.

  • A student loan should come from a qualified institution.
  • The loan should not be from any relative.
  • There are certain income limits that apply to deductions.
  • Your child’s enrollment for the degree should be more than half of the duration.

For the fiscal year 2016, as many as 19,273,883 taxpayers had opted for child tax credit. You can be one of them and save your hard earned money.

Maximize Business Expenses

Maximize Business Expenses

by | Jan 19, 2019 | Investment & Income, New Business, Taxtips

Maximize Business Expenses

Maximize Business Expenses: Beginning in 2018, business owners are able to write off most business purchases using the very liberal 100% bonus depreciation and the Sec. 179 expensing allowance. The property must be placed in service during the tax year for which the deduction is being claimed.

Changing jobs is a part and parcel of life. One can either look for better job opportunities or could be unfortunately part of corporate downsizing. In either case, there could be quite a few tax implications and impacts on your Tax  benefits.

Being aware of them will help you overcome such situations gracefully. Here are the top tax benefits that you should not forget while switching jobs or businesses.

Withholding Tax

A vast majority of employees have a lot of taxes deducted from their paycheck. In fact, the number stands at about 100 million people receiving a fat refund cheque. With a new job, you have the option to set it right.

  • With your new employer, it is time to revisit your W4 form.
  • Allowances section in the form determines the amount of taxes that you will have to pay or the amount that is withheld from your income.
  • Do you choose the right structure for your business? How your business is structured can have a significant impact on the taxes that you pay. For example LLC’s, S-corporations are Pass-through entities which means your profit will be taxed at the ordinary tax rate, while shareholders of C Corp are taxed at corporate tax rate and then again when they report the distribution on their tax return, as a result, the income is “Taxed Twice”