How To Choose A Good Tax Professional To Ensure The Best Tax Refunds

How To Choose A Good Tax Professional To Ensure The Best Tax Refunds

by | Nov 21, 2019 | global income tax, IRS, tax filing, Tax Planning, Tax Refund, tax savings, taxes

How To Choose A Good Tax Professional To Ensure The Best Tax Refunds

Taxes can be a bit overwhelming for a lot of us. Understanding the different clauses, making the most of the deductions, looking for refunds are just some of the things. In some cases, the tax filing can get quite a bit complicated as well. It is such times that Tax Professionals come to the rescue. Tax professionals or preparers are individuals trained and certified to handle taxes and help you through the entire process. A Good Tax Professional To Ensure The Best Tax Refunds.

Types of Tax Professionals

The first step towards choosing a good tax professional is to understand the different types of tax professionals around. And then make a decision as to whose services would be ideal for your scenario. The two categories of tax professionals that you can choose from are Enrolled Agents and Certified Public Accountants. And both of them have the capability of representing you in front of the IRS, should there be a need for it.

  • Enrolled Agent

An Enrolled Agent or EA is a licensed tax professional. Individuals can earn the designation of EA either through a special exam or by working for the IRS for 5 years or more.An EA can have an area of specialization, thus do not forget to ask your EA about theirs. Another benefit of taking the help of an EA is that they are specially trained for taxes and will mostly cost you less than a CPA.

  • Certified Public Accountant

A Certified Public Accountant or CPA are accountants who have had to undergo an education program and pre-defined requirements to get the title. It is important to note that all CPAs might not have the expertise to work on taxes. One of the biggest advantages of taking the help of a CPA is that you might get ancillary helpfor other financial needs such as financial planning or estate planning.

Apart from EAs and CPAs, you can also choose tax attorneys and chains that offer tax preparation services. Tax attorneys are best known for handling tax related disputes which are complex in nature or corporate matters. You can avail of the services on offer by tax preparation chains such as Jackson Hewitt or H&R Block.

Finding Tax Professionals

Now that you know the different types of tax professionals available, the next step is to find out the right tax professionals. Getting referrals from a friend or someone you know is one of the easiest ways of getting a tax professional. Here are some other sources to get a good tax professional.

  • National Association of Enrolled Agents

You can visit the website of the National Association of Enrolled Agents and look for an EA. The website offers a lot of filters to make your search easy. Filters such as the area of expertise or the ability to speak multiple languages can make your life easier.

  • American Institute of Certified Public Accountants

The AICPA is a good place to look for CPAs who can help you with your taxes. Remember, these financial experts can offer a lot more than merely your taxes.

  • Yelp

You can always refer to Yelp to find a good tax professional in and around you, who has a good rating. The local listings on the website can help you to get in touch with a tax professional.

  • Angie’s List

Though this service is not free, you are more likely to find an authentic tax professional on the website. You get access to a wide range of categories such as financial assistance, tax professionals and reviews from local people to choose from.

Getting tax refunds is an outcome of proper tax filing. Choosing a good professional is essential as they can help one get the best tax refunds and save money.

Is Bonus Taxed For NRI’s In The US

Is Bonus Taxed For NRI’s In The US

by | Nov 18, 2019 | income tax, NRI, Tax Liabilities, Tax Planning, tax savings

Is Bonus Taxed For NRI’s In The US

It is essential for companies to keep their top-performing employees with them for a longer duration. One of the proven techniques for doing the same is to pay a bonus. It not only incentivizes employees but also boosts their motivation levels.

However, as an employee, it is only natural to wonder how you will be taxed on it. Is there a separate tax for the bonus? Is there any way to reduce your tax liability on a bonus?Here is all that you need to know about taxes on bonuses for NRIs in the US.

Are Bonuses categorized as supplemental wages?

It should not come as a surprise that the IRS goes to greater lengths to define different sources of income and tax them accordingly. Bonuses usually are put under the category of supplemental wages. Likewise, they are treated a bit differently from normal salary as far as withholding taxes during payout is concerned. Here are the two standard methods followed to withhold taxes from a bonus.

  • Aggregate Method

The aggregate method comes into the picture when your employer pays the bonus with one of your recent paychecks. Your employer then refers to the withholding tables by the IRS to determine the amount of taxes that must be withheld for both the amount together. Your employer would then take into consideration the amount withheld from your salary and withhold the remaining amount from the bonus.

  • Percentage Method

The percentage method is easier of both the methods. According to the percentage method, the bonus that you receive is subject to a flat supplemental rate of 25%.If you were to receive a bonus of $10,000 you would have to pay $2,500 as taxes to the IRS. Employers usually choose this method, since it is easier to implement and consumes less time as compared to the aggregate method. Also, the percentage method usually results in a smaller tax amount being deducted or withheld.

There might be instances where your bonus might push you to a higher tax bracket. Should you expect to make less in the next year, you can ask your employer to defer the bonus to the next year.

High End Bonuses

Few organizations are known to pay their employees with hefty high-end bonuses. These corporate bonuses can at times exceed the $ 1 million mark. How are taxes handled in such cases? These high-end bonuses attract much higher taxes as well. For NRI’s receiving more than $ 1 million in taxes, your employer will withhold a tax of 39.6% for the amount exceeding $ 1 million, on the top of the flat 25% tax using the percentage calculation method. Thus, for the hefty bonuses, taxpayers end up paying hefty taxes as well.

There are chances that your employer might withhold a higher amount of taxes from your bonus. Yet, you should not panic about the situation. Keep in mind that the taxes withheld are at a higher rate during the payout. But it would change later based on the actual taxes that are applicable to your income. The actual tax rate comes into the picture when you file for your taxes and there are chances that the tax rates can be lower due to lower taxable income after deductions.

Your taxable income plays an important role along with the tax rate, deductions and credits in determining how much taxes you will end up paying from your bonus. Proper tax planning can help you get back some of the taxes in the form of credits once you file your tax returns at the end of a financial year.

Most Important Year-End Tips To Increase Your Tax Refunds

Most Important Year-End Tips To Increase Your Tax Refunds

by | Nov 15, 2019 | income tax, Investment & Income, tax deductions, tax filing, Tax Liabilities, Tax Planning, Tax Refund, tax savings, taxes, Taxtips

Most Important Year-End Tips To Increase Your Tax Refunds

A quick look at the calendar and you will realize, this year has come to an end. And even before you realize, the tax season will be close. Instead of rushing during that time, you can take a few simple steps this holiday season to reduce your tax liabilities and increase your tax refunds. Most Important Year-End Tips To Increase Your Tax Refunds.

1.Retirement Planning

Planning for your retirement is a great way to add funds for your retirement and make handsome savings in the form of taxes for the current financial year. You can take the help of either traditional IRA or 401(k) to contribute to your retirement planning. Self-employed individuals can save up to 25% of their income under SEP IRA up to a maximum of $56,000 for the current year.

2.Upskilling

If you have been planning to take some classes to improve your skillset, this might be the best time to enroll. You can start with enrollment and make the payments for the next quarter by the 31st of December. This will help you get some valuable tax credits of up to $2,000 with the help of Lifetime Learning Credit.

3.FSA

Taxpayers who have FSA or Flexible Spending Account, it might be the right time to give your doctor a visit. While there is no hard and fast rule to use the FSA amount but there might not be a lot of benefits in keeping the amount as well. You can only carry forward $500 to the next year. The FSA plans usually allow subscribers to use these funds for up to 2 and a half months in the next year.

4.Charitable Donations

You can make this holiday season a little bit better for the people who are in need. If there are any unused household items or clothes, you can donate them to the less fortunate. Such donations can help you reduce your tax liability, provided you donate to qualified charitable organizations and if you itemize the items. Alternatively, if you volunteer for charitable organizations, you can claim the miles that you drove at 14 cents for each mile driven.

5.Shuffle your Investments

Some investments in your portfolio might not have performed as you expected them to. Investments that have gone down in their value can help you reduce your tax liabilities. You can use the loss to offset the gains that you have received from other investments. However, you must sell the loss-making investments to offset them with the profit-making ones. Should your losses exceed the profits, you can use up to $3,000 against your income.

6.Defer Any bonuses

Taxpayers expecting a year-end bonus for the hard work that they have put in, might find themselves in a spot. The bonus might push you to another tax bracket or increase your tax liability by a healthy margin. If you can, do speak with your boss to deter the bonus to January of next year. This way, you won’t have to taxes for the bonus in the current year.

7.Other Dependent Credit

Taxpayers supporting their grandparents or parents, or other loved ones can benefit from Other Dependent Credit. If they qualify to be non-child dependents, you can claim the Other Dependent Credit. You can claim up to $500 under this category and receive dollar by dollar reduction in your taxes.This tax credit is relatively new and not many taxpayers use it.

Each dollar that you save is a dollar that you earn. Using the above methods, you can save takes on your income and boost your tax returns as well.

Taxation Norms For The NRI Entrepreneurs In The US

Taxation Norms For The NRI Entrepreneurs In The US

by | Nov 12, 2019 | Double taxation, income tax, NRI, Tax Liabilities, tax reforms, tax savings, Taxation Norms, taxes

Taxation Norms For The NRI Entrepreneurs In The US

Getting your idea into a working model can be strenuous and require a lot of effort. taxation norms for NRI entrepreneurs in the US. If you have to worry about taxes on top of it, things can get a bit out of control. Taxes for individuals and businesses work entirely differently. And not being aware of these might result in Entrepreneurs paying a lot more taxes than they ought to or getting into a lot of unwanted tax-related problems that could have been avoided. Here are a few simple tips that can help you avoid these conundrums.

The Right Entity

The type of legal entity that you choose for your business plays an instrumental role in deciding the applicable taxes. For example, the taxes for a corporation differ from that of a partnership and it differs from a sole proprietorship. Needless to say, each entity has its advantages and disadvantages. And you must pick an entity that best serves your interest and helps you save on the taxes as well. For instance, startups usually stay away from C corporation due to double-taxation. Since the company pays taxes and the individual owners must also pay taxes. LLC (Limited Liability Corporation) and S Corporations manage to avoid double taxation.

Segregate the Finances

It is recommended that you get into the habit of bookkeeping as early in the company’s lifecycle as possible. Here are some easy ways of ensuring the same.

  • Getting a corporate checking account.
  • Creating a balance sheet and income statements.
  • Getting a corporate savings account.

Failing to separate personal and business finances can have severe consequences. In case of a lawsuit, the opposition lawyer can sue you from the organization’s point of view and personally also. In extreme cases, the Secretary of State can strip your company’s corporate status as well.

Total Tax Compliance

Another crucial step is determining the significance of full tax compliance. While a lot of it has to do with the legal entities, the city and state also play an important role in the same. Some of the larger cities levy Business Privilege taxes on the companies that operate within the city. Usual taxes are on the net profits of an organization, but the business privilege taxes are on the gross income. A simple example would be, if you sold products worth $500,000 in the previous year, you would owe a percentage of the income to the city.

Deductible Expenses

One of the advantages of being an entrepreneur or a startup is that you can claim most of the business related expenses. As long as the expenses are necessary and are ordinary in nature, you can claim the amount as business expenses. Here are some common examples of business expenses.

  • Any magazines or books related to your field of work.
  • Training materials or programs for your industry.
  • Any sort of travel for your work.
  • Certain expenses related to client entertainment.
  • Utilities for the office or home offices such as rent and other bills.

The only thing to keep in mind for such expenses is to have proper receipts and documentation to back your claims. It is recommended that you keep all such receipts and documents at a single place as you keep getting them.

Paying Quarterly Taxes

Paying your taxes every quarter is a habit that one must inculcate as an entrepreneur. This will help you plan for your taxes in a more efficient manner. Also, you will not be surprised by a huge tax bill at the end of the year. A little bit of trouble every quarter will save you from a lot of headaches down the line.

A proper knowledge of taxes and the norms is very essential for everyone planning taxes and their liabilities. For all NRI entrepreneurs it is no exception and thus, they should also know the basics of taxation laws.

Top #5 Tax Tips For NRI’s Working As Personal Trainers In The US

Top #5 Tax Tips For NRI’s Working As Personal Trainers In The US

by | Nov 9, 2019 | Tax Planning, Tax Preparation, Tax Refund, tax savings, taxes, Taxtips

Top #5 Tax Tips For NRI’s Working As Personal Trainers In The US

Being self-employed brings a lot to the table. From having the freedom to choose your work timings to create a business on your own. Though there are a few challenges, the positives far outweigh the negatives. And it gets even better if you happen to be a personal trainer as you get a chance to help people stay fit. However, being self-employed also means that you have to handle your taxes on your own. Here are top 5 tax tips for NRIs working as Personal Trainers.

  • Setting Up Costs

If you just started as a personal trainer in the country, the chances are high you would have spent a considerable amount of money on creating a website, advertisements, marketing, figuring out business location, etc. You can deduct these expenses from your taxes.

  • Cost of Procuring Equipment

The IRS allows deductions for work related equipment. For any fitness equipment that you have purchased or any training related tools, you can get a healthy tax break on the same. For instance, if you buy any equipment that your clients will be using, you can claim the expenses for a tax break. And the location of the equipment used doesn’t matter much. Meaning, clients can use the equipment or tools in your place, their place, your studio, etc. The only verifying parameter is that the equipment must be used for business.

  • Educational and Training Materials

Educational and training materials offer dual benefits. For starters, you can claim for any educational or training expenses for your clients as well as for yourself. One of the prime examples is that if you undergo any training or educational courses to enhance your skillset, you can claim the amount as deductions. Similarly, if you have any apps or training videos that your clients use, you can claim those as deductions as well.

  • Travel Expenses

There is a very good possibility that you must travel to meet with your clients. As a self-employed individual, you can claim these expenses as well. You can claim a deduction of 58 cents per mile that you drive. If you drive to your client’s place for a training session, you can claim this amount. Though it might not seem a lot at first, if you keep driving to the client’s place regularly, it can add up to be a considerable expense. The IRS even allows deductions under the pretext of depreciation of the vehicle, if you use your vehicle to drive to client’s place.

If you must fly to any client’s place, you can claim the flight expenses along with any hotel accommodation. The IRS even allows you to deduct up to 50% of the meals that you consume on such trips.

  • Business Expenses

There are some generic business-related expenses that are common to everyone. If you have a dedicated phone line to interact with clients or take calls from potential clients, you can claim the bills. If you have to acquire a state license for your personal training classes, you can claim them as deductions as well. Similarly, you can utilize any expenses related to the bookkeeping of your business or tax preparation for a tax break.

If you are using your primary bank account for business, any changes that you pay to the bank for the account is also tax-deductible.

  • Health Insurance

Any contributions that you make towards health insurance plans or retirement plans for your future are also tax deductible. One of the benefits of being self-employed is that you can even deduct your premiums paid for health insurance.

Knowing everything about taxes and especially the ones pertaining to your occupation is important to be able to plan taxes and reduce liability.

TDS implication on an NRI of the US for sale of property in India

TDS implication on an NRI of the US for sale of property in India

by | Oct 24, 2019 | income tax, tax savings, taxes, TDS

TDS implication on an NRI of the US for sale of property in India

What is TDS?

TDS implication on an NRI of the US , TDS is referred to as Tax deducted at Source. It is the income tax that is reduced from the money paid at a specific time such as payment of rent, salary, commission, interest, etc.  The Income Tax Department ensures that income tax is deducted in advance from the payments that are made by taxpayers and this is made feasible by TDS.

According to the provisions of the Income Tax Act, 1961 if an individual is purchasing a property in India then he would have to deduct the appropriate TDS from the sale value and pay it to the Government. In the case of a seller who is a resident of India and the value of the property is Rs. 50 lakhs or more, a TDS at the rate of 1% is deducted by the buyer and deposited with the Government.

However, there are certain different provisions related to TDS in case of the seller being an NRI.

Tax implications of sale of property by NRI in India

The selling of property in India by an NRI residing in the US is taxable under Section 195 of the Income Tax Act, 1961. When the seller of the property in India is an NRI, TDS at the rate of 1% is not applicable under Section 194/A of the Income Tax Act, 1961.

When an NRI is selling a property in India, there are three major points affecting taxation. Let us have a look at these 3 major factors.

  • Capital Gain Tax

 When an NRI is selling a property in India after a period of 3 years of holding, then long term capital gain tax at the rate of 22.6% is applicable on the amount earned. In case of holding the property for less than 3 years before selling it, the short term capital gain tax is levied as per the rates of the Income Tax slab.  In the case of short term capital gain, a TDS at the rate of 33.9% is applicable even if the seller is an NRI. The capital gain taxation proceeds remain the same in the case of both resident sellers and an NRI as well. The difference lies in the calculation and deduction of TDS. The Income Tax Department of India directs the buyer to deduct the TDS under Section 195 before making payment to the NRI buyer.

  • TDS

In case of an NRI selling a property in India, the buyer must deduct TDS at the rate of 20.66% on the price of the property. This is applicable in case of Long term capital gains. In the case of short term capital gains, the TDS would be deducted at the rate of 33.9%. NRIs who are selling property in India are liable for making payment of Capital Gain Tax on the capital gain obtained but TDS is levied on the property’s total sale value. So, usually, NRIs have to incur a loss if they do not claim their TDS refund on time.

  • Re-investment of the capital gain obtained

Many NRIs re-invest their capital gains to be safe from the payment of capital gain tax. An NRI who has incurred a long term capital gain can re-invest the gain into property or other tax-exempted bonds for saving long term capital gain tax.  The Income Tax Department can issue a Tax Exemption Certificate to NRIs under Section 195 of the Income Tax Act, 1961.

Claim of TDS refund by NRIs

1.DTAA

NRIs in the US can avail the benefit of lower TDS by the provisions of DTAA (Double Tax Avoidance Agreements).  NRIs in the US can obtain a tax residency certificate i.e. ‘Form 6166′ from Revenue and Customs Department. Then an application for a TDS refund can be submitted with the IRS by ‘Form 8802′.

2.Re-investment proofs

NRIs can submit their proofs of re-investment proofs in India to claim a TDS refund.  NRIs will have to submit an affidavit which states the investment of the capital gains in the purchase of capital gain bonds. Moreover, if an NRI is purchasing a new property by the capital gain obtained then an allotment letter can be submitted.

3.TDS Waiver

In case of an NRI’s total income in India is less than Rs. 2, 50,000; an application for TDS waiver can be submitted with Income Tax Officer.

Hence, NRIs selling property in India will have to pay TDS on the entire sale value of the property. But, they should claim the TDS refund by making appropriate tax planning in advance.