FAQ - GENERAL

  1. Am I required to file the US income tax return?  

  2. When do I have to file the U.S. Income tax return?

  3. Who can I claim as my dependent?          

  4. Is there a way to get additional time to file U.S. income tax return?          

  5. Does the extension to file the return also extend the time to pay the tax owed?              

  6. Where do I file the my tax return?

  7. What is the filing deadline for U.S. corporation income taxes?  

  8. Am I entitled to make contribution to deductible  Individual Retirement Account (IRA) for 1999?

  9. If I am covered by a retirement plan of my employer can I still make a deductible contribution to IRA of $2,000?              

FAQ- NON -RESIDENTS ALIENS

  1. How do I determine my tax status for U.S. Income-taxes?

  2. As non-resident aliens can we file a joint U.S. income tax return?

  3. If I have to pay income taxes to foreign country do I pay double taxes on the same income?

  4. What is the effect of International Tax Treaties between U.S. and other countries?

  5. I am a non-resident but own a rental real estate in the U.S., do I have to file U.S. income tax?

  6. As a non-resident alien what tax form I file to report U.S. source income?  

  7. I became a resident during last year. How do I report for income taxes?  

  8. I am a non-resident alien, if I sell a real estate I own in the U.S., how is that treated for U.S.?

  9. I am a non-resident alien. I do not have a Social Security Number. What number I use to file?

  10. As a non-resident when do I have to file my U.S. income tax return?  

FAQ- US INCOME TAXES

  1. I am starting a new business. How do I organize my business? What are different business entities?

  2. What are the key considerations in making the choice of the entity?

  3. What are some of the Business considerations in making choice of entity?

  4. What are some of the Tax considerations?  

  5. What entity is best suited for my small business?  

  6. What are the requirements to be able to elect as an S Corporation?  

  7. What are some of the suggestions for a new business?                                        

FAQ - GENERAL

1. Am I required to file the US income tax return?  [top]               

The answer depends on many factors. For most of the U.S. citizens and tax residents the filing requirement is based on three factors - filing status , age and gross income for the year.    Following is the chart indicating the general filing requirements:                                                                       

Filing Status Age Gross Income
Single               under 65 $7,050  
  65 and older  $8,100 
Married filing jointly under 65 (both) $12,700 
  65 & older (one spouse)  $13,550  
  65 & older (both spouses) $14,400  
Married filing separately any age  $2,750  
Head of the Household under 65  $9,100  
  65 and older $10,150  
Qualifying widow(er) under 65  $9,950  
  65 and older $10,800

Other special situations that may require filing the return: 

  • Children and dependants of a taxpayer          

  • Self employment income of $400 or more.           

  • Subject to tax on tips, IRAs or other retirement plans.

  • Received advance earned income credit payment from employer.

  • Non-residents aliens                        

2. When do I have to file the U.S. Income tax return?   [top]          

For U.S. citizen and resident - no later than April 17,2000           
For U.S. citizen and resident living outside U.S. - June 15,2000
For Non-resident alien - June 15,2000        

3. Who can I claim as my dependent?  [top]                              

You can claim a person as a dependent on your taxes if you meet five tests:

  • Relationship test: Person must be either your relative or have lived in a legal relationship in your home as a family member all year.

  • Joint Return Test :If the person is married, he or she did not file a joint return.

  • Citizen or resident Test: The person must be must be a U.S. citizen or a resident alien or a resident of Canada or Mexico

  • Income Test: The person's gross income must be less than $2,750. Your child under age 19 or child under 24 and student can have gross income of $2,750.                                    

  • Support Test: You must have provided over half of the person's total support. Special rules apply to the children of divorced or separated parents.                                   

4. Is there a way to get additional time to file U.S. income tax return?  [top]                          

Yes. You can get an automatic 4-month  extension to file the return by filing a Form 4868 or pay part of all the tax that you expect to owe using credit card by April 17,2000.                                                          

5. Does the extension to file the return also extend the time to pay the tax owed?  [top]

No. The automatic extension to file the return allows additional time to file the tax return but not the time to pay the tax .                 

6. Where do I file the my tax return?  [top]                                     

There are various addresses of The Internal Revenue Services depending on the state of your residence you have to file at a certain center. All non-resident returns are to be filed at Internal Revenue Center, Philadelphia, Pa 19255                                     

7. What is the filing deadline for U.S. corporation income taxes?  [top]

15th day of the third month after the end of the fiscal year of the corporation. For a corporation with December 31 year end the filing deadline would be March 15 of next year.                                    

8. Am I entitled to make contribution to deductible  Individual Retirement Account (IRA) for 1999 ?  [top]                                                    

You have up to April 17,2000 to make contribution for 1999 and deduct on the 1999 income taxes.                                          

9. If I am covered by a retirement plan of my employer can I still make a deductible contribution to IRA of $2,000?  [top]                                   

Yes, if you meet the income test:                           

  • For single , head of the household, married filing separately and lived separately, and modified gross income is $41,000. 

  • For married filing jointly or qualifying widow(er)  $61,000           

If the modified gross income exceeds above limits, the deductible contribution is phased out over $10,000.        

FAQ- NON -RESIDENTS ALIENS

1. How do I determine my tax status for U.S. Income-taxes? [top]

A foreign person is considered a U.S. tax resident if he (1) is a lawful permanent resident od U.S. at any time during the year and (2) meets the requirements of " substantial presence" test or (3) makes an election in first year to be treated as resident even though he moved to U.S. too late in year to qualify as a resident for that year under substantial presence test.

A U.S. citizen or resident who is married to nonresident alien may elect to have the non-resident spouse treated as a resident for income tax purposes.

2. As non-resident aliens can we file a joint U.S. income tax return? [top]

No.  With some limited exception the privilege of filing of joint return is available for only U.S. citizens and tax residents.

3. If I have to pay income taxes to foreign country do I pay double taxes on the same income? [top]

U.S. tax laws allow a "foreign Tax Credit" for the tax paid on the foreign income. The purpose of this credit is to avoid double taxation.

4. What is the effect of International Tax Treaties between U.S. and other countries? [top]

U.S. has negotiated tax treaties with various countries to avoid international double taxation and to prevent tax evasion. Some times provisions of tax treaty may overrule or modify an internal revenue. Each tax treaty has different provisions. It is important to look in specific tax treaty that applies to the taxpayer.

5. I am a non-resident but own a rental real estate in the U.S., do I have to file U.S. income tax return for that income? [top]

Yes. You need to file a non-resident income tax return only for U.S. source income.

6. As a non-resident alien what tax form I file to report U.S. source income? [top]

You file form 1040NR

7. I became a resident during last year. How do I report for income taxes? [top]

An alien who establishes residence during the tax year is taxable for that year as if it comprised of two separate periods- one as a resident and one as a non-resident.

8. I am a non-resident alien, if I sell a real estate I own in the U.S., how is that treated for U.S. income taxes? [top]

Generally any capital gain on sale of real estate in U.S. by a non-resident alien is taxable at a flat rate of 30%. There is also a requirement of tax withholding at the time of sale of 10% of the sale price. The closing agent has the responsibility of withholding and depositing the 10% tax to the U.S. treasury.

9.  I am a non-resident alien. I do not have a Social Security Number. What number I use to file my non-resident income tax return? [top]

You need to obtain a Taxpayer Identification Number (TIN) by applying for one on Form SS-5.

10. As a non-resident when do I have to file my U.S. income tax return? [top]

On or before the 15th Day of the sixth month after your year-end - generally on June 15 of the year following the calendar year-end.  

FAQ- US INCOME TAXES

1.  I am starting a new business. How do I organize my business? What are different business entities? [top]

  • Sole proprietorship

  • partnership – general / limited liability

  • Regular corporation (C Corp.)

  • S corporation

  • Limited liability company(LLC)

2.  What are the key considerations in making the choice of the entity? [top]

  • Business

  • Tax

3.      What are some of the Business considerations in making choice of entity? [top]

  • State laws

  • Protection of personal assets from liabilities of the business.

  • Need of additional capital

  • Transfer of ownership

4.      What are some of the Tax considerations? [top]

  1. A C corporation is a separate taxpaying entity. It has its own tax rate schedule. The shareholders of a C corporation also pay tax on the dividend distribution from the corporation in effect there is a double taxation of earnings at corporate level and again at shareholder level.

  2. S Corporation is a regular corporation with advantage of limited liability but without the disadvantage of double taxation of a C Corporation earnings. An S corporation’s items of income, gain losses deduction and credits pass through to its stockholders to be reported on their own income tax returns. 

  3. A partnership is an entity that is separate from its individual partners. In a General partnership partners are jointly and severally liable for the partnership debt. In a limited partnership there are general partners and “limited partner”. The limited partner is not personally liable for partnership debts beyond the capital contribution. The partnership itself is not taxable entity but it computes and reports its income, expenses, gains and losses and each partner reports pro rata share of those items on his or her income taxes.

  4. An LLC is generally formed under various state laws of limited liability corporations. Generally the members (partners) of LLC can make an election to be treated as partnership for tax purposes. LLC can in some situation provide certain advantages over the corporate entity.

  5. A Sole Proprietorship is the simplest form of business. It is not separate from the owner of the business. A sole proprietor has unlimited personal liability of the business debt and claims. Income and expenses on the business are reported on the personal income tax return on Schedule C.

5.      What entity is best suited for my small business? [top]

It is difficult to make such a specific selection. In recent years use of an S Corporation as an entity has become favorite entity of small businesses. It must be mentioned that there are certain restrictions as to which corporation can make election to be treated as an S corporation. Main reasons for its popularity is – limited liability protection without double taxation.

6.      What are the requirements to be able to elect as an S Corporation? [top]

  1. The corporation must be a US corporation. (Domestic Corporation)