Archive for Gary Carter

Graduated Tax System: The Marriage Penalty Is Alive And Well

The Marriage Penalty Is Alive And Well

Despite what you may think, the marriage penalty is still alive and well. Whether you’re changing your filing status in 2022 because of marriage, divorce or another event (or even if your filing status staying the same), you should review this information and plan accordingly.

What is the marriage penalty?
The marriage penalty occurs when the dollar ranges for married taxpayers (joint filers) are not exactly double the dollar ranges for single taxpayers. It results from the way the graduated tax rate system works, based on your tax filing status and other tax return items. Married taxpayers are often taxed more than they’d be as two single filers.

Situations Subject To The Marriage Penalty
• Both spouses with high incomes. A disparity for the dollar ranges still exists for the two top tax brackets of 35 percent and 37 percent. That means that the marriage penalty often applies to high-income couples. Wealthy couples may save money by avoiding a marriage certificate! For example, Riley’s taxable income was $400,000 per year, while Avery’s annual taxable income came in at $300,000. Before getting married, Riley’s tax bill using the 2022 tax brackets would be $113,753 using a single filing status, while Avery’s tax bill would be $78,753, for a combined tax liability of $192,506. Once they marry, Riley and Avery would have a tax bill of $193,549 using married filing joint tax brackets.

• Local taxes over $10,000. Legislation also limits the annual deduction for state and local tax (SALT) payments to $10,000. This limit is the same for a married couple as a single taxpayer. For instance, assume that a couple pays $25,000 in property taxes in 2022. As joint filers, their deduction is limited to $10,000, whereas they could write off a total of $20,000 if they were both single filers.

Tax-Planning Opportunity
While no one is saying you should get married or divorced because of the marriage penalty, factoring it into your tax planning can make a big difference. Please call if you wish to review your situation.

have a question? Contact Gary Carter, CW Carter Limited.

Attribution to Gary Carter Newsletter Author

Written by | Posted in Graduated Tax System • Marriage Tax Penalty

FBAR (FinCEN Form 114, Formerly TD F 90-22.1), Report of Foreign Bank And Financial Accounts

FBAR (FinCEN Form 114, Formerly TD F 90-22.1), Report of Foreign Bank And Financial Accounts

The law requires each “United States person” who has a financial interest in or signature authority over any foreign financial account to file an FBAR if the aggregate value of the foreign financial accounts exceeds $10,000 at any time during the calendar year. The form required is FinCEN Form 114.

This is one that should be pretty well known by now. The obligation to file a Report of Foreign Bank and Financial Accounts (FBAR) with the US Treasury was initially imposed by the Bank Secrecy Act in 1970. Here are the Instructions to FinCEN Form 114 (FBAR). You can electronically file Form 114 for free here.

What Is a Financial Interest for the FBAR?

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Written by | Posted in FBAR • FBAR Filing

Learn Your Residency Status For US Tax Purposes

Learn Your Residency Status For US Tax Purposes

Learn Your Residency Status For US Tax Purposes

A very smart TaxConnections Member, Gary Carter, PhD, MT, CPA created this valuable residency test for taxpayers. We want to bring it to your attention as knowing your status for US Residency regarding US tax filings is very important.

You need to learn your residency status for US tax purposes so you know what tax forms to use, right? Well, you have come to precisely the right place! Below is a series of questions designed to tell you exactly what your residency status is for tax purposes in the United States, and what forms you should use to file your tax return. You can determine your status for any calendar year from 2013 to 2021.

Your residency status for tax purposes is different than your immigration status. The correct answer to each question is critical, so be sure to read each question carefully. If you select the wrong answer, simply refresh the page and start again.

Go to this link to take the US Residency Test. Your name and identity is not collected so we love the test!

Another great resource for information for expatriates is go to the TaxConnections Blog Page; Scroll down the page and look on the right side column until you see the Search Feature. Type in Gary Carter and all his content will come up and provide expatriates with highly valuable free advice on a wide range of  tax issues.

Written by | Posted in Learn Your Residency Status For US Tax Purposes • US Residency Test For Expatriates

FBAR (FinCEN Form 114, Formerly TD F 90-22.1), Report of Foreign Bank And Financial Accounts

Report of Foreign Bank And Financial Accounts

The law requires each “United States person” who has a financial interest in or signature authority over any foreign financial account to file an FBAR if the aggregate value of the foreign financial accounts exceeds $10,000 at any time during the calendar year. The form required is FinCEN Form 114.

This is one that should be pretty well known by now. The obligation to file a Report of Foreign Bank and Financial Accounts (FBAR) with the US Treasury was initially imposed by the Bank Secrecy Act in 1970. Here are the Instructions to FinCEN Form 114 (FBAR). You can electronically file Form 114 for free here.

What Is a Financial Interest for the FBAR?

According to the FBAR instructions:

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Written by | Posted in Reporting Foreign Bank Accounts

Expatriates: U.S. Tax Guide And Forms You Need To Know

Expatriates: U.S. Tax Guide And Forms You Need To Know

Generally, if you are a United States citizen or permanent resident (Green Card Holder) living outside the United States for more than one year, you are called an expatriate or “expat.”* Rather than adding to the long list of tax guides that explain the general concepts of expat taxation,** we will focus on the specific requirements to file several US international tax forms, not well known. These are forms not well known, but they carry huge penalties for excluding or screwing up.

We will give you a general understanding of the following United States IRS Tax Forms:

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Written by | Posted in Expatriate Taxes

2021 Year End Tax Planning Tips

2021 Year End Tax Planning Tips

It’s that time again! The final chance to reduce your annual tax bill is here. Spend a few minutes considering the following ideas:

1. Make last minute charitable donations.

2. Review and maximize use of the $15,000 annual gift giving limit.

3. Review your investment portfolio for capital gain and loss planning.

4. Use your annual $3,000 net capital loss limit to lower ordinary income if appropriate.

5. Maximize the kiddie tax threshold rules ($2,200 of unearned income taxed at your child’s lower tax rate).

6. Make last minute contributions to your retirement account to take advantage of the annual contribution limits.

7. Identify any potential tax forms required for household employees.

8. Consider donating appreciated stock owned one year or longer.

9. Review retirement accounts. Make any required minimum distributions.

10. Review medical and dependent care funding accounts to ensure you do not lose contributions that do not rollover into the new year.

11. Consider retirement plan rollover options into Roth IRAs.

12. Estimate your tax liability and make any final estimated tax payments.

13. Create a list of expected 1099 and other tax forms you will be receiving.

14. Review your W-2 withholdings and file any changes with your employer for the upcoming year.

15. Begin organizing your tax records.

Should you have any questions on these ideas, ask for help prior to taking action. In many cases, the requirements and documentation needed are important to ensure you receive the full tax savings benefit.

From Newsfeed Of Gary Carter

Written by | Posted in 2021 Year End Tax Planning Tips

Form 8938, Statement of Specified Foreign Financial Assets

Form 8938, Statement of Specified Foreign Financial Assets

Filing Requirements

If you are a “specified person,” Form 8938 is required to be filed with your tax return to report your interest in “specified foreign financial accounts” if the total value of all of your specified foreign financial assets exceeds a threshold. Okay, if you’re really interested, here are the Instructions.

Specified foreign financial assets include cash amounts in foreign accounts, foreign securities, financial interests in foreign entities and retirement accounts. This form requires details about each individual foreign asset, beyond just the total account balance that is included in Treasury Form 114 (FBAR). This does not include foreign rental property or foreign financial assets (currency or securities) that are held in a US financial institution. Here is a Comparison Chart of FBAR and 8938 requirements.

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Written by | Posted in Form 8938

US Tax Guide For Foreign Nationals Working Or Investing In The United States

US Tax Guide For Foreign Nationals Working Or Investing In The United States

This guide is dedicated to helping you comply with US tax laws if you are a foreign national (resident or nonresident alien) working or investing in the US.  We take you through the substantial presence test and show you how to determine your US tax resident status. Regardless of your visa status, you will learn about the US resident tests for tax purposes, which are different than for immigration purposes.

If you are a nonresident alien, investing in US real estate or other US business activities from your home country, we give you an overview of deductions and credits available on Form 1040NR. We explain your tax filing options. For example, in the year of arrival, you might qualifiy for a dual status, resident or nonresident tax return.

You will also learn the more complex tax rules that apply if you are an F1 or J1 visa holder. Then we give you an overview of tax treaty benefits, which are particularly useful for F1 and J1 visa holders. Finally, you will learn about ITIN requirements, state tax requirements and social security and Medicare tax withholding rules.

For most Americans, completing their tax return is a confusing and frustrating exercise. We can only imagine how ominous the task must seem for you, a foreign visitor. Hopefully the information you find here will make the job easier.

Form 1040NR Filing Requirements

Who Needs to File a US Tax Return?

 

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Written by | Posted in TaxConnections

Even Non-Income Tax States Have Taxes – What Are They?

Even Non-Income Tax States Have Taxes

With the increased popularity of working-at-home, you may consider moving to one of the nine states that don’t impose an individual income tax. Before doing so, you should understand how each of these states raises its revenue. And then consider how you can reduce your tax obligation in your current home state.

Here’s some help.

According to Kiplinger and the Tax Foundation, here is how the nine states that collect no individual income taxes collect money from their residents.

Alaska

  • Alaska is one of five states with no sales tax, but local jurisdictions may impose sales taxes, with rates reaching 7.5%. The average is 1.76%.
  • The median property tax rate is $1,182 per $100,000 of assessed home value, slightly above the national average.

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Written by | Posted in States With No Individual Income Tax

United States Tax Guide And Forms For Expatriates (2020)

United States Tax Guide And Forms For Expatriates (2020)

Generally, if you are a United States citizen or permanent resident (Green Card Holder) living outside the United States for more than one year, you are called an expatriate or “expat.”* Rather than adding to the long list of tax guides that explain the general concepts of expat taxation,** we will focus on the specific requirements to file several US international tax forms, not well known. These are forms not well known, but they carry huge penalties for excluding or screwing up.

We will give you a general understanding of the following United States IRS Tax Forms:

Read More

Written by | Posted in Expatriate

United States Tax Guide For Foreign Nationals

United States Tax Guide For Foreign Nationals

This guide is dedicated to helping you comply with US tax laws if you are a foreign national (resident or nonresident alien) working or investing in the US.  We take you through the substantial presence test and show you how to determine your US tax resident status. Whether you are an H1b, L1, O1, or other non-immigrant visa holder, you will learn about the US resident tests for tax purposes, which are different than for immigration purposes.

If you are a nonresident alien, investing in US real estate or other US business activities from your home country, we give you an overview of deductions and credits available on Form 1040NR, with plenty of additional resources provided. We explain your tax filing options on a dual status or resident tax return if you have obtained permanent resident (green card) status.

You will also learn the more complex tax rules that apply if you are an F1 or J1 visa holder. Then we give you an overview of tax treaty benefits, which are particularly useful for F1 and J1 visa holders. Finally, you will learn about ITIN requirements, state tax requirements and social security and Medicare tax withholding rules. For most Americans, completing their tax return is a confusing and frustrating exercise. We can only imagine how ominous the task must seem for you, a foreign visitor. Hopefully the information you find here will make the job easier.

Read More

Written by | Posted in United States Tax Guide For Foreign Nationals

Social Security Tax And Employer Withholding

Social Security Tax And Employer Withholding

Must You Pay Social Security and Medicare Tax?

Nonresident aliens who are F-1, J-1, M-1 or Q-1 visa holders are not subject to social security and Medicare taxes (FICA) on services are performed to carry out the purpose for which they are admitted to the United States [IRC sec. 3121(b)(19)]. This generally includes on-campus work for which authorization is granted on Form I-94, Arrival and Departure Record, or Form I-20, Certificate of Eligibility for Nonimmigrant Student Status.

A nonresident alien admitted to the US as a student is not permitted to work off campus for a wage or to engage in business unless given approval by the U.S. Citizenship and Immigration Services (CIS). This should be noted on the student’s copy of Immigration Form I-20, or Form I-688B, Employment Authorization Document.

Off-campus work due to severe economic necessity or for optional practical training is considered by the IRS to qualify for the exemption. The IRS does not consider other off-campus work performed by a nonresident alien student to be performed to carry out the purpose of a student visa.

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Written by | Posted in Expatriate Taxes • Social Security Income
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