INDY TAX SVC

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Transcript of INDY TAX SVC

  • Filing U.S Federal Taxes: The Basics

    [email protected]

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  • Purpose of PresentationTo give you an understanding of how US taxes work.To help you determine which tax forms you need to file.To provide you with background and understanding to complete your taxes.

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  • IMPORTANT

    The information contained in this presentation can only be used as a guide. Tax laws can be changed throughout the year by congress, even during tax filing times.You are always welcome to send me an email about your questions or concerns on taxes.

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  • Determining Your Federal Tax Residence StatusIf you are in USA for more then 183 days then you should file 1040. Due April 15th.If your stay was less then 183 and you are filing your taxes first time in USA then you should file 1040NR. Due April 15th.If you got married at any time during 2016, your filing status will be Married Filing Jointly for additional tax benefits.

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  • Credits and DeductionsTuition and fees deduction towards exam or training. Qualified tuition expenses also include computer equipment and internet access.American Opportunity (up to 4 years) and Lifetime Learning (unlimited) creditNew energy credit for qualifying home remodeling (energy efficient windows, roof, furnace.)

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  • Social Security Number (SSN) and Individual Taxpayer Identification Number (ITIN)L Visa holders are eligible for SSN, free of charge.If your dependents (spouse, children, parents) do not have an SSN, then you need to apply for an ITIN to claim them on your taxes.

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  • Individual Taxpayer Identification Number (ITIN)ITIN is required to claim a dependent or spouse who does not have an SSNDue to heightened scrutiny to the application process, the IRS now requires either:Original, or certified passport copy of spouse, child or parent dependent.Applicants must have a U.S. entry date on the Form W7.Copy of applicants VISA must be included with the application.

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  • Job Expenses and Miscellaneous DeductionsIT/Consultants holding H1 and L1 visa are allowed to take the following deductions.Travel and lodging, Meal and entertainment, Transportation and vehicle expenses,Medical bills, Vehicle registration fee, Donations, Tax preparation fees, Moving expenses.Home mortgage loan interest and educational loan interest paid in India is deductible on US taxes.

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  • Tax Credit to Avoid Double Taxation

    If you paid taxes in the US and India, then you are allowed to take Foreign Tax Credit. Foreign Tax Credit can carry forward up to ten years.Will need your form 16 from India or your Indian pay stub for proof.

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  • Foreign & Domestic Rental PropertiesIf a client owns a home outside of the US for the purpose of renting, the income derived from this rental property must be reported to the IRSIf the home is available for rent, but is not currently being rented, or was not rented during the tax year, the property should still be reportedIf no rent was received, a loss may help reduce a tax liabilityIf a client has a rental property, we will need the rent received, purchase price, current value, and address of the property

  • Social Security BenefitsForeign resident that have paid social security taxes for minimum of 5 years in U.S., are eligible for partial retirement payments. Full retirement payments require 10 years of social security payments.To view your most recent Statement, please visit www.socialsecurity.gov/signin and sign into your account.

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  • Foreign Bank Account Reporting (F.B.A.R.)Who needs to file?An individual is required to file an F.B.A.R. if the sum total of all account outside of the U.S. exceeds $10,000.Example:Individual has 4 accounts outside of the U.S. Account 1 has $3000, Account 2 has $2000, Account 3 has $4000, and Account 5 has $1000. Individual is required to file F.B.A.R. due to having $10,000 in foreign accounts.

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  • F.B.A.R. ContinuedWho is required to file, continued?Individuals who meet substantial presence in the U.S. during the calendar year are required to file.By meeting substantial presence, the individual is considered a resident alien for tax purposes.If the taxpayer does not meet substantial presence, they are not required to F.B.A.R.What types of foreign accounts qualify?Checking, Saving, Securities, and Fixed Deposits

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  • F.A.T.C.AWho is required to file?Single individuals with $50,000 or more in foreign accountsMarried individuals with $100,000 or more in foreign accounts.What do you need to do?Fill the Foreign Income Section of the Questionnaire. Your Tax Preparer will generate Form 8938 and include with your tax filing.No additional tax will be owed for filing.Types of Accounts that qualifyChecking, Saving, Securities, and Fixed Deposits

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  • Foreign IncomeWhat is Foreign Income?Foreign Income includes wages earned and interest received.When does Foreign Income need to be reported?A taxpayer is required to file Foreign Income on their tax return if they meet substantial presence during the tax year.

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  • Foreign Income, ContinuedWhat if you have already paid taxes in your home country?If you have already paid taxes on the income received in your home country, the taxes paid can be included on the return as a credit.This credit will help avoid double taxation for the amount of tax that has already been paid in your home country.If your tax rate in the US is higher in the US than in your home country, you will pay the difference on your return.

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  • Foreign Income, ContinuedWhat if I have a capital gain from selling stocks or from my property in my home country?This question is become more and more popular as more VISA holders shift to Green Card and U.S. Citizen status.Taxpayers are selling their foreign assets and forgetting that any gains on the sell need to be reported to the U.S. on the tax return. A sell is considered to be a capital gain if the asset sells form more than it was purchased for.This gain is subject to either short-term or long-term capital gain tax rates in the U.S.Any taxes paid in home country can be used to offset the taxes owed in the U.S.

  • Foreign Income, ContinuedWhat to remember about Foreign Income.Just because it was not earned in the U.S. does not mean that it is not subject to U.S. tax.Selling assets could lead to a capital gain which needs to be reported on the return and taxes paid on the gain.With any income earned in a foreign country, any taxes paid to foreign country can be used to offset taxes owed on the same income to the U.S.By reporting your income and taxes paid, you will avoid being double taxed.U.S. Resident Aliens, taxpayer who meet substantial presence in the U.S., are required to file worldwide income.Easy test: If you file on a 1040 tax return form, you are required to file worldwide income.ALWAYS DISCLOSE ALL RELEVENT TAX INFORMATION TO YOUR TAX PREPARER

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  • Retirement PlansTraditional IRATraditional IRA contributions are made with post-tax income and deductible if income falls within IRS requirements.Earnings cannot withdrawn until age 59 otherwise tax and penalty will be imposed.Earnings are taxed when they are withdrawn.Roth IRARoth IRA contributions are made with post-tax income and are not tax deductible.Earnings are not taxed if withdrawn after age 59 . The maximum contribution for both types of IRAs is $5,500 per year.

  • Retirement Plans, Continued401KContributions to 401Ks are made with pre-tax income, meaning no taxes have been paid on the income that is contributed to the account.No tax deduction is eligible on the tax return for 401K contributions.Maximum contribution of $18000 for 401K and $12,500 for SIMPLE 401K.

  • Health Savings Account and Flex Spending AccountsHealth Savings AccountPost-tax contributionMaximum contribution of $6,500 per year and unused contributions roll-over to future years.Used to pay for medical expenses.If the account is used for qualified medical expenses, the distribution from the account is non-taxable.The distribution needs to be reported on the tax return in order to avoid paying the tax on the amount.Flex Spending AccountPre-tax contributionContributions are lost if they are not used during the tax year.There are 2 types of FSA, Health and Dependent Care.Maximum Health Contribution is $2600 and $5000 for Dependent Care.

  • Texas 529 PlanTexas 529 Plans are used to save and pay for college expenses.While most states have a 529 plan that is eligible to be claimed on the state return as a deduction, Texas does not have a state tax return so no benefit is available during the tax year for contributions made to the 529 plan.There are 2 types of 529 plans in Texas, the Texas College Savings Plan and the LoneStar 529 Plan.

  • Tax Filing Notes

    Remember Not filing tax forms can create future immigration problems.If you forgot to file on time, send the forms in anyway. Although you might be subject to penalties.Try to work with someone who is open year around.Differences between Indy Tax Service and our competitors.

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  • Questions and ConcernsYou can email your tax preparer or [email protected]

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