Top #6 IT rules for new NRI’s in the US

Top #6 IT rules for new NRI’s in the US

by | Oct 30, 2019 | federal income tax, income tax, tax deductions, tax filing, Tax Planning, tax return

Top #6 IT rules for new NRI’s in the US

Individuals move to the US with an anticipation of a better life and better pay. It can be quite exciting to move to a new country, with so many things to look forward to. However, amidst all this, there is one factor that IT rules for new NRI’s must not forget, taxation. Shifting to a new country means that one must adhere to new tax laws. Being aware of the laws will help you avoid getting unwanted attention from the taxman.

Here are the top 6 IT rules that you should be aware of, to help you with your first tax filing with Uncle Sam.

1.Residential Status

US residents or US citizens are liable to pay taxes on their global income, in which US citizens include NRIs, PIO, OCI. An individual qualifies to be a US resident if they meet any of the following tests.

  • The Green Card Test

If an individual has been a lawful permanent resident of the USA during anytime of the year.

  • Substantial Presence Test

A person should have stayed in the USA for 31 days in the current financial year and a total of 183 years in the previous three years.

2.Make Use of Deductions

There are several legal ways of reducing your tax liabilities and deductions is one of the smarter ways. The recent Tax Cuts and Jobs Act has increased the standard deductions from $6,500 to $12,000 for individual taxpayers and $9,550 to $18,000 for the head of a household.The limits for married couples filing taxes jointly was enhanced from $13,000 to $24,000. You can make use of retirement plans as well to reduce your tax liabilities.

3.Federal Income Tax

Unlike the general notion, not everyone might be required to file their federal income taxes. There are quite a few factors that impact whether or not one has to file their federal taxes. Factors such as the income for a financial year, your age, your tax filing status, your source of income, etc. play a crucial role in deciding where you should file federal income tax or not. It is essential that you figure out whether you are required to file your federal taxes or not.

4.Knowing The Due Date

Forgetting to pay or file your taxes by the due date can cause considerable damage to your yearly finances. The IRS has due dates for filing of taxes and if you do not adhere to it, you will end up paying penalties and fines. These can at times come with interest, which tends to pile up a lot. It is recommended to file your returns at the earliest, even if it has crossed the due dates.

5.Filing Date Extension

There is a clause in the tax laws, which allows taxpayers to opt for an extension in the tax filing dates. But the important thing to keep in mind is that the date extension is only for filing of taxes and not paying the taxes that you owe. As the deadline comes closer and you feel that you are not ready to file your taxes, you can seek extension in the deadline. At the same time, do not forget to pay any pending taxes that you owe.

6.Charity

Contributions towards charity can help you bring down the taxes that you owe to the government. You can either pay by cash or even gifts, but it is limited to 50 percent of your adjusted gross income. Ensure that you have a receipt that states that the donation was made by you.

Being aware of these tax laws will help you get through your first tax year with relative ease.

NRI Tax Filing in India has come under scrutiny: here’s all you need to know

NRI Tax Filing in India has come under scrutiny: here’s all you need to know

by | Oct 10, 2019 | capital gains, income tax, tax filing, tax savings

NRI Tax Filing in India has come under scrutiny: here’s all you need to know

NRI Tax Filing The Indian Income Tax Department has made strides of improvement over the years when it comes to its processes. Thus, there are higher chances of your tax filing or lack of filing coming under the radar of the Income Tax Department. Here are some prominent reasons why you might receive a notice from the Income Tax Department.

  • Delay in Filing IT Return

If you fail to submit your IT return by the deadline set by the IT Department, you will most likely receive an intimation from the department.

  • Misreporting of Capital Gains

The IT department expects its taxpayers to report all the short term and long term capital gains that they have made. Failing to do so might add extra scrutiny to your returns.

  • Mismatch with Form 26AS

There ideally should not be any mismatch when it comes to Form 26AS, your TDS, Form 16 or Form 16A. Any mismatch between these would warrant notice from the department.

  • Failing to disclose income

Any taxpayer who fails to disclose income to the IT department would also come under the lenses of the department.

All You Need to Know

If you are an NRI, here is all that you need to know when it comes to tax filing in India.

  • Residential Status

India, like most other countries that rely on income taxes, depends heavily on the residential status of an individual to calculate income taxes. Individuals satisfying any of the following conditions would qualify as a  resident Indian, otherwise a Non-resident.

  •           You have spent a minimum of 182 days during the financial year in question.
  •           You have spent a minimum of 60 days during the financial year in question and cumulative of 365 days in the previous four years.
  • Taxable Income

For resident Indians, their global income is taxable in India as per the applicable tax slabs. However, if you are a non-resident Indian, you are liable to pay taxes only on the income generated in India. This could include salary received for consultation, rental property in India, interests earned on fixed deposits, capital gains on shares, selling of capital assets, etc.

  • When to File

NRIs or any individual for that matter, need to file their income tax returns only if their annual income exceeds the minimum threshold of INR 2,50,000 for a fiscal year. For example, if you have only one source of income in India and it is interest earned on your fixed deposits, you would be taxed accordingly. If the interests earned for a year is INR 80,000 you do not have to file your tax returns. On the other hand, if you have one or more sources of income and together, they add up to INR 3,00,000 for a financial year, you will have to pay taxes and file your returns.

  • Tax Filing Timeline

The standard deadline for NRIs for filing their taxes and returns is 31st of July. Should there be any changes in the dates, the IT department would notify everyone of the same.

  • Advance Tax

The concept of Advance taxes come into the picture when the tax liability of an individual exceeds INR 10,000 for a financial year. This is in general to avoid tax evasion. Failing to do so will warrant fines and penalties under Section 234B and 234C.

Staying a step ahead and being aware of the various intricacies of the income tax will help you avoid any notices or fines from the IT department or even coming under their lenses as well.

How to save money from your Employee Benefits offered to NRIs in the US

How to save money from your Employee Benefits offered to NRIs in the US

by | Sep 26, 2019 | 401 Plan, federal income tax, income tax, state tax, tax deductions, tax filing, tax rate, tax savings

How to save money from your Employee Benefits offered to NRIs in the US

ForIf you are an NRI and doing a job in the US, you will have to pay taxes to the US Government according to the tax laws framed by the US Government.  an NRI doing a job in the US, there are numerous taxes to be paid. However, some substantial amounts of money can be saved by an NRI by availing of the various employee benefits offered by the employer in the US.

Let us have a look at the taxes which an NRI doing a job in the US is supposed to pay.

Taxes to be paid by an NRI employee in the US

Social Security taxes

Every individual working in the US has to pay the Social Security Tax. This amount is contributed by you and your employer together. Half of this amount is contributed by your employer and you will contribute the other half for the payment of the Social Security Tax. An amount ranging to 6.2% of your gross salary is deductible from your salary for the payment of social security tax.

Medicare Tax

The Medicare tax would be paid by you for the health care services to be availed after your retirement. Your employer will deduct 1.45% from your gross salary for making the payment of the Medicare Tax. Even if you will not be present in the country to avail the retirement benefits, but you are still liable to pay this tax.

Federal Income Tax

This is a tricky category of taxation for the US residents including NRIs and PIOs as well. You will have to pay taxes on the income earned in the US but you will not be able to claim any deductions which the US citizens will avail. However, if you are willing to avail of these deductions then you will have to pay tax on your income earned outside the US as well.

State Tax

You are liable State Tax for that particular state in which you are working.

Global Income Tax

You will have to pay this tax if you are earning dividends on mutual funds, shares, agricultural income, etc.

Paying all these taxes would definitely reduce your take-home salary by a considerable amount. However, in the US your employers will provide a number of employee benefits which would be very helpful for you in saving money.

Let us check out some of these benefits available to NRI employees in the US which help in saving money.

Health Savings Account (HSA)

In case your employer is providing a good health plan with a high deductible, you can consider the option of opening a Health Savings Account (HSA). The maximum limit on the contribution to be made by families is $6900 and for singles, the maximum limit is $3450. This money is taken from your paycheck and is accumulated in a Savings Account that can be used during medical emergencies. However, your withdrawal from the HSA will be tax-free only when you are doing it for medical expenses.

Flexible Spending Account (FSA)

This is another benefit provided by your employer is giving you an opportunity to set aside the entire amount in this account free from ant taxation. The contribution into this account has to be made by your employer but you will have to use the money in this account within a stipulated time period otherwise you tend to lose the amount.

Medical Insurance

This insurance is a major benefit provided by your employer and it will cover expenses incurred in hospital visits, doctor’s visits, medicines, prescriptions, etc.

401(K)

This is otherwise known as your retirement plan and by this; you are contributing towards your savings for your retirement. The contribution to this corpus for retirement is made by you and your employer as well. The maximum limit on the contribution made by you would be up to $19000. Moreover, if you are above the 50 years you can contribute an additional $6000 into your retirement corpus.

Health Reimbursement Account (HRA)

This can be termed as Group Health Plans and are sponsored by you and your employer. The amounts which qualify for your medical expenses in a particular year up to a specific limit are free from taxes. The amount which remains unused can be used in the subsequent years as well.

Accident Insurance

This insurance covers medical examinations, emergency treatments, and ambulance or transportation charges, in-hospitalization expenses.

Hence, in addition to the above-mentioned benefits provided by employers, there are a number of other benefits as well such as Dental Insurance, Vision Insurance, Disability Insurance, Accidental death and, dismemberment insurance, etc. These benefits offered by employers can be a great help to NRIs working in the US in saving money.

Top 7 tips for Self Employed NRIs in the US

Top 7 tips for Self Employed NRIs in the US

by | Aug 9, 2019 | IRS, tax deductions, tax filing, Tax Planning, Tax Refund, tax savings, taxes

Top 7 tips for Self Employed NRIs in the US

The person sitting next to you on your flight could be running a small-scale successful business. Working parents now choose to work from home more often than not. The changes in the landscape of career options have been vast over the past few years. Thus, it is no secret that more and more people are willing to take risks and explore more career options that are not only better paying but fulfilling as well. If you are an individual who wants to explore self-employment or are an NRI who wishes to look for self-employment options, you also need to be aware of how taxes work. Here are the top 7 tips, self-employed NRIs which will help you make the most of taxes.

Proper Research

The first step to successful tax filing begins with proper research. Do you due diligence in finding out the total income for a fiscal year. You would also want to be aware of the list of deductions applicable for you. You must also be aware of the deadlines by which you must file your taxes and start acting accordingly. For instance, if your self-employment income exceeds INR 400 for a fiscal year, you are required to file your taxes.

Status

Self-employment doesn’t necessarily mean that you ought to have a company or firm registered to your name or even the income doesn’t have to be your primary source. Given the vast landscape, you could have a primary job and work on your passion over the weekends and earn some money out of it. It is essential that you report all such incomes in your tax returns.

Proper Documents

While preparing for tax returns, having all the relevant documents will help you save a considerable amount of time as well as confusion. From the beginning of a fiscal year, ensure that you keep all the receipts for expenses that you wish to claim, relevant forms, rent bills or mortgage bills if you work from home etc. in a separate folder. Documents such as Form 1099-K or 1099-Misc might also be needed. Having them at a single place will ensure that you have a smooth tax filing process.

Tax Estimations

If you are work for an organization, they take care of withholding applicable taxes before crediting your salary. However, for self-employed individuals, things are a bit different. Since there aren’t any fixed sources of income, you out to estimate your taxes and pay them on a quarterly basis. For the current year, if your tax bill is more than $1,000 you will have to pay estimated taxes.

Work-Related Expenses

The IRS allows individuals to claim deductions on a number of work-related expenses. For example, if you bought a computer or a laptop for your work, you can claim the amount as deduction. You can even claim expenses for driving down to meet a client for business purpose. Keeping a track of such expenses will help you tackle the tax return process in a better way.

Required Forms

Self-employed individuals usually document their income in Schedule C along with any profit or loss of the business. If you own a business with simple earning structure, you would need to file Schedule C-EZ. Thus, understanding the right form depending on your self-employment type is essential.

Tax-Tools

If the tax filing and return process seems overwhelming, you can take the help of several tax tools available. You would only have to provide the essential information, post which the tools will take care of the rest.

Self-employed individuals can use the above tips to handle taxes or overcome tax phobia in a much better way.

3 tax tips for second homeowners for NRIs in the US

3 tax tips for second homeowners for NRIs in the US

by | Jul 12, 2019 | Tax Extension, tax filing, Tax Planning, Tax Preparation, tax rate, Tax Refund, tax savings, taxes

3 tax tips for second homeowners for NRIs in the US

tax tips for second homeowners ,Buying a second home is a big decision and requires a lot of efforts on your end. It could well be that you already have a home and are planning for a holiday home or a weekend getaway or just for investment.However, amidst all this, do not forget that it comes along with a lot of tax considerations as well. Here are three major tax tips that you must consider before you write down that cheque.

Location

It is no secret, that the tax rates of property or house largely depends on the location that you are buying it at. Few states and municipalities have higher tax rates as compared to others. Thus, a quick check of the location that you want to buy the house in would help you save considerably on taxes.

Places such as Hawaii, Louisiana, Delaware and Alabama have the lowest tax rates for real estate in the country. Ranging between 0.28% to 0.53%, they can be great options to buy your second home. And on the other hand, places such as Illinois, New Jersey, Wisconsin have the highest tax rates in the country.

Buying a property outside the country is a different equation altogether. Unlike normal classifications such real estate taxes, you might have to pay a one-time fee.

Future Taxes

Should you pick a place and property smartly, the payoff can be quite satisfying. A good house in a good locality or upcoming locality will fetch you much better prices during selling. However, in hind sight do not forget the additional cost that they bring along with them.

While buying at lower prices and selling at higher prices means a lot of profit for you, being aware of the tax implication is also important. As the property value increases significantly, the taxes that you are eligible to pay would also increase considerably.

There is also a possibility that the White House decides to revisit the property taxes once every few years. If there is an increase in such prices, it would only increase the tax burden on you.

Interest on Mortgage

If you are planning to use the second property as a second home, there are some additional benefits to have had. However, these are possible only if you use the property as a second home and not rent the place out.

In such cases, the interest that you pay on your mortgage is deductible and behaves pretty much like the interest on the first house or property. Before 2018, taxpayers had the option to write off the entire interest amount that they paid if they had secured debts of up to $1.1 million on both the properties combines together. The amount is also valid if you choose to upgrade or improve the house in different ways.

The rules had been tweaked a bit where earlier the limit was set at $750,000. This can be a good and smart way of saving a substantial amount in taxes. It is quite common to rent out your second place. But you cannot avail the above benefits if you choose to do so. If you are looking to saves taxes, this method fares better results.

Whether it is your first property or second, if you have the option to save money on taxes, there isn’t any reason why you should not. The above tips are not only easy to follow but implement as well. If you are an NRI and are planning to buy your second home, these should help you save some money on taxes.

How AOTAX helps you get the best Tax Refunds in 2019?

How AOTAX helps you get the best Tax Refunds in 2019?

by | Jun 28, 2019 | tax deductions, tax filing, Tax Planning, Tax Refund, taxes

How AOTAX helps you get the best Tax Refunds in 2019?

Hoping to pay minimal taxes is no crime. Afterall, why should you pay more taxes than you owe to Uncle Sam? If due to some reasons you have overpaid your taxes, tax refunds will help you get the amount back. There are several ways by which you can boost your tax refunds. And at AOTax, we ensure that you have access to some of the best ways to achieve the same.

Smarter Tax Deductions

Not many tax payers are aware of the fact that the miles that you put on your car for charitable donations or even medical purposes, you can claim them as deductions. While the miles that you drive for medical purposes is subject to the AGI threshold, it is calculated at 18 cents per mile. Similarly, miles accumulated for charitable donations is calculated at 14 cents per mile. If you drive about 50-60 miles a week for charity, that accumulates to $450-500 additional deductions.

Of course, it is a good habit to keep track and record of such transactions. Simple details such as the date, purpose, donations made, or market value of any goods that you have donated, would help you while filing taxes.

IRA and HSA contributions

While a lot of taxpayers are aware of IRA or even HSA contributions, there are a few tricks that you can try. For example, did you know that you can contribute for traditional IRA for the previous year during the current financial year? This means, you can make contributions towards your IRA for 2019, till 15th April 2020. This allows you to claim for deductions for the tax filing of 2019.

If you aren’t already aware, the IRA will reduce your taxable income and thereby the taxes that you owe to the government. If you are 50 years or older, you can make use of catch-up provision to contribute towards IRA. And even though they both quality for deductions, if you qualify you can receive Saver’s credit as well.

Tax Filing Status

Choosing a filing status is one of the first steps to filing your tax returns. And it can affect your tax refund significantly. This is even more significant if you are married. Statistics show that 96% of married couples file their taxes together. Though that is the norm, it isn’t always the most beneficial route selected. Opting for married and filing separately as a status does require some additional effort on your part. However, you can save a considerable amount of money in the form of taxes or even refunds.

For starters, when you opt to file taxes separately, each spouse gets a lower AGI or Adjusted Gross Income. When you file your taxes separately, the Child Tax credit is available for both spouses to avail. Separately calculating taxes will result in higher refunds when it comes to education. At AOTax, we can help you with different calculations and help you get a higher refund as well.

Taxpayers who are not married, can use the filing status as head of the family rather than unmarried. This will allow taxpayers to avail a higher standard deduction as compared to filing as unmarried individuals. Having a dependent parent or child will allow you to benefit from better deductions.

Timing your tax returns properly will also enhance your chances of getting better tax refunds. The easier way to handle such situation is to take help of the expert services at AO Tax. With various services on offer, you can always find help that you are looking for and be stress free about your tax returns.