PERSONAL INCOME TAX

US RESIDENT INCOME TAX

If you are a U.S. citizen or resident alien, the rules for filing income, estate, and gift tax returns and paying estimated tax are generally the same whether you are in the United States or abroad. There are filing status below

1. Single Taxpayers:
Single Taxpayers who are unmarried and who do not qualify to use the head of household or qualifying window(er) filing status must usa the single filing status.

2. Married Filing Jointly
If you are married, then you and your spouse can filing a joint tax return. You are considered married if you are legally married on the last day of the year. In order to file jointly, both you and your spouse must agree to file a joint tax return, and both must sign the return.

3. Married Filing Separately
Married taxpayers can choose between filing a joint tax return or a separate tax return. The Married Filing Separately filing status provides fewer tax benefits than filing joint returns, but taxpayers will need to weigh the pros and cons and decide for themselves which is the best filing status.

4.Head of Household
You can claim the Head of Household (HOH) filing status on your tax return if you are unmarried, have cared for a dependent for over half the year, and paid more than half the cost of maintaining a home.

5.Qualifying Widow(er) filing status
If your spouse died in 2010, you can use married filing jointly as your filing status for 2010 if you otherwise qualify to use that status. The year of death is the last year for which you can file jointly with your deceased spouse. You may be eligible to use qualifying widow(er) with dependent child as your filing status for two years following the year of death of your spouse. For example, if your spouse died in 2010, and you have not remarried, you may be able to use this filing status for 2010 and 2011. This filing status entitles you to use joint return tax rates and the highest standard deduction amount (if you do not itemize deductions). This status does not entitle you to file a joint return.

US NON-RESIDENT TAX

If you were a nonresident alien student, teacher, or trainee who was temporarily present in the United States on an "F,""J,","H” visa, you are considered engaged in a trade or business in the United States. You must file your tax return, only if you have income that is subject to tax, such as wages, tips, scholarship and fellowship grants, dividends, etc.

1.F-1 and J1 Status Tax Return
International Students or Foreign Students in F1, J1 visas are considered Non Residents for Tax purposes and their taxation laws are different than US citizens. Another important thing to understand about international student taxation is that the International Students pay only Federal and State Taxes.

2. H1B Status Tax Reutrn
The taxation of income for H1B employees depends on whether they are categorized for tax purposes as either non-resident aliens or resident aliens. A non-resident alien for tax purposes is only taxed on income from the United States, while a resident alien for tax purposes is taxed on income from both inside and outside the United States. H1B employees have to pay Social Security and Medicare taxes as part of their payroll. Like US citizens, they also pay state and federal taxes.

FOREIGN EARNED INCOME TAX

If you are a United States citizen or resident alien, you have to report all income to the IRS each year, including income earned in a foreign country. In most cases, you will not have to pay taxes on the foreign earned income. However, you may qualify to exclude from income up to an amount of your foreign earnings that is now adjusted for inflation ($91,400 for 2009, $91,500 for 2010, $92,900 for 2011). In addition, you can exclude or deduct certain foreign housing amounts.

GIFT TAX

The gift tax is a tax on the transfer of property by one individual to another while receiving nothing, or less than full value, in return. The tax applies whether the donor intends the transfer to be a gift or not.

When a taxable gift in the form of cash, stocks, real estate, or other tangible or intangible property is made the tax is usually imposed on the donor (the giver) unless there is retention of an interest which delays completion of the gift. A transfer is completely gratuitous where the donor receives nothing of value in exchange for the gifted property. A transfer is gratuitous in part where the donor receives some value but the value of the property received by the donor is substantially less than the value of the property given by the donor.

ESTATES TAX

The estate tax is a tax on your right to transfer property at your death. It consists of an accounting of everything you own or have certain interests in at the date of death.

RETIRMENT INCOME

Reitrment income inculding social security, retirment accounts, pensions, savings accounts, stocks or stock mutual funds, and annuities. Social security benefit become taxable after excess certain amount.

BUSINESS TAXES

There are many business taxes, you as a business owner or an officer must be awarded of and filed on time.

PAYROLL TAXES

As an employer, you are required to withhold federal and state income tax, social security and Medicare tax from your employees’ paychecks. You also required to pay partial social security tax and Medicare tax for your employees. In addition, you need to pay federal and state unemployment taxes for your employees.

SALES TAX

Many states impose sales and use taxes on retail sales of certain goods and services. As a business owner, you are required to registered your business first and collect the sales and use taxes from customers and submit to state government. Remember, some local government may have imposed sales tax too, so please double check with your local government before you start to collect them.

INCOME TAX

As a business owner, you are required to file an annual income tax return for your corporation in order to show your profit or loss. You may choose to file an income tax either on fiscal year or calendar year based on the requirements of the entity that you chosen. Usually, a corporation tax is due by the 15th day of the 3rd month after end of its tax year.

NOT-FOR-PROFIT ORGANIZATION TAX

Not-for- profit organization usually is a tax exempted. However, you still need to file tax return and pay tax for any income that is not related to its exempt purpose, a payroll tax is still required to file if you have any employees.

ESTABLISH / INCORPORATE
YOUR BUSINESS

WHY INCORPORATE YOUR BUSINESS?

As an employer, you are required to withhold federal and state income tax, social security and Medicare tax from your employees’ paychecks. You also required to pay partial social security tax and Medicare tax for your employees. In addition, you need to pay federal and state unemployment taxes for your employees.

Reason to incorporate your business –protect your personal assets from corporate debts and liabilities, get tax benefits and raise capital.

TYPES OF BUSINESS ENTITIES

SOLE PROPRIETORSHIP
Business do not separate from the owner; individual has to include business profits on his/her personal tax return; and individual is liable for businesses’ debts and liabilities.

PARTNERSHIP
Must have two or more individuals, parties, groups. They can contribute money, property even their labor, and expect to share profit, loss, and management right of the business. Partnership does not need to pay income tax itself, but each partner has to include their profit or loss on their tax return.

C-CORPORATION
A legal entity that usually files with the state. It protects personal assets from business’ debt and liabilities. indefinite lifespan until dissolved, can have unlimited shareholders, dividend tax on shareholder level, and tax at corporate level.

S- CORPORATION
In order to form a s-corporation in the United States, you must be either resident or citizen of the United States. Usually it’s taxed under each shareholder’s tax return, which avoids double tax. However, taxes like payroll tax, sales tax is still required to file and pay on the corporation itself.

LIMITED LIABILITY COMPANY
Must be approved by state. Owners of an LLC are called members; there is no limitation on the number of members. Tax of an LLC is similar to sole proprietor or a partnership depends on number of members.

PROFESSIONAL LIMITED LIABILITY COMPANY
The purpose of an PLLC is providing professional services. The former must be licensed, because PLLC has to be approved by department of education before it submitted to secretary of state. PLLC is taxed as partnership if multiple members or sole proprietor if one single member.

NOT-FOR-PROFIT ORGANIZATION
Usually is exempt from income and property tax, but still need to file income tax return and payroll tax return. Any surplus of a not-for-profit cannot be returned to its owner or distribute to its shareholders.

OBTAIN AN EIN

Generally, a person’s social security number is his or her taxpayer identification number. However, every partnership, corporation (including S corporation), and certain sole proprietorship must have an employer identification number (EIN), Sole proprietorship must have an EIN if they pay wages to employees, establish a qualified retirement plan or file any pension or excise tax return.

Reference: www.irs.gov