Taxes and Tax Filling: Finance Specialist Answers ForumDaily Readers Questions
The US tax system is quite confusing, and it is sometimes difficult for both Americans and immigrants to understand its intricacies. At the same time, errors in filing a declaration can result in additional costs and problems with one of the most formidable American departments - the Tax Service (IRS), said Ilona Dovidaitienė EA, head of the company TIP Inc United States Tax Services.
The US tax system is considered one of the most developed and exemplary in the world. However, at the same time it is quite complicated - the American tax sphere is regulated by many laws, acts and regulations. One of the additional difficulties for immigrants is the need to file declarations for each resident of the United States, which is not the case in post-Soviet countries, and most new arrivals in the United States have absolutely no experience in this process. A multi-level tax system, as well as a variety of deductions only complicate the already difficult task of understanding the US tax system.
At the request of ForumDaily, Ilona Dovidaitiene EA and specialists of her company TIP Inc United States Tax Services answered questions from our readers about the US tax system.
Question: Hello! Can I get an ITIN so that my husband includes me in his declaration as a dependent to reduce tax? The IRS website says that I can apply, but subject to the submission of an income declaration. Can this be done without her?
Ilona Dovidaityien: ITIN without a declaration can only be obtained by people for business purposes. For example, if a person opens a business account in a bank. You also need to apply for ITIN. Do this until April 15, the tax return for 2019 must be submitted on paper and fill out all the necessary data in the IRS. If you are in Illinois, we will be happy to help you. In this case, you will not need to send your original passport to the IRS.
Question: Hello! There used to be a 1040-EZ form. Now all forms are 1040. Previously, EZ was filled in free by HR Block. Now how?
Ilona Dovidaityien: True, the 1040-EZ form no longer exists. I cannot speak on behalf of HR Block about whether free services will be available. You can try to file your declaration yourself through IRS.gov, if there is simple data. Just keep in mind that you also need to file tax information for the state, and these are completely different documents.
Question: Hello! The employer did not give me the w-2 form for 2018. What can I do?
Ilona Dovidaityien: Unfortunately, this happens. You can file a complaint and your employer will receive a letter from the IRS. Another option is to call the IRS and request a statement of income (transcripts of your earnings) with all the information that your employer has provided to the tax office.
Question: Hello! The husband works as a driver for the company in form 1099. What is better for him to open - LLC or C / S-corp?
Ilona Dovidaityien: The question about LLC or CS Corp is not entirely correct. You cannot compare the types of companies with the tax structure. When you open a business, you must have Inc, Corp or LLC, when you pay taxes, you pay them as LLC, or S-corp or C-corp. LLC also pays taxes like S-corp. In your situation, where there is an operating corporation, I would recommend registering S-Corporation.
Question: Hello! Is it difficult to file an annual tax report on my own? The family consists of three minor children, a father and a mother. Only dad works for 1099. If not, then through what resource do you recommend taking it? Thanks!
Ilona Dovidaityien: Yes, you can do it on the IRS website, however I would not recommend doing it yourself. Especially if you work for 1099. Remember that in the process you will not talk to anyone, no one will explain anything to you, and most importantly, you can overpay (or not overpay) the tax service and not take advantage of all the benefits that are due to you.
Question: Hello! I get a work permit in March before the start of the declaration submission period. Need to file if you have not started working before this period? Or when to serve? Next year?
Ilona Dovidaityien: By April 15, we need to inform the IRS about the income we received in 2019 - for the period from 01.01.2019/31.12.2019/2020 to 2020/15.04.2021/XNUMX. If you receive a work permit in March XNUMX, and will work in XNUMX, you will need to file a tax return before XNUMX.
Question: I started my business now. I take money from my family members for the Botox they used, but at the same time I do not get profit from the provision of services to them. Will I pay taxes for the Botox I bought?
The situation is this: I buy a drug at a certain price. I want to sell the product to certain people and eventually go to zero. I would sell it at cost, but I think I need to add taxes to the price that I will have to pay in the future. Taxes for business, of course. Therefore, I do not know how much to add to the price in order to eventually go to zero. If I just take the cost, I’ll lose money. What percentage do I need to add? I'm in Florida. Thank you!
Ilona Dovidaityien: As I understand it, you mean sales tax, not corporate income tax. Each state has its own rules and rates. Yes, you need to add income tax and sales tax to the price, if applicable to each product you purchase. You need to contact your state tax authorities to find out the percentage of sales tax and reporting rules that are based on your place of residence.
Question: Hello! He made a tax refund for 4 years of study in the USA and returned to his homeland. Will it negatively impact if I suddenly come back to the USA? Will it affect if I, for example, win the green card and come to the USA?
Ilona Dovidaityien: Tax refunds are provided by the U.S. Internal Revenue Service, and the green card is administered by the Immigration Services. They are not connected. You can not worry about this issue. Good luck in the lottery!
Question: Hello! In 2019, one of my income was cooking and selling it to customers for cash. I do not have a cook license. I earned $ 10 for the year. Can I just add $ 000 to Schedule C without paying for a profession and pay the resulting tax? Or should I definitely do two Schedule C. On one point my main profession, and on the second profession a cook? Thanks!
Ilona Dovidaityien: You need to divide your income and, yes, submit two separate schedules C. You had completely different expenses for each business, so you should separate them. If you earned $ 10, my suggestion is to explore the capabilities of S Corporation. This can provide you good savings.
Question: Good afternoon. In 2017, they worked according to form 1099. A tax specialist drafted a family declaration for 2017, without explaining anything. They paid only city taxes at the place of residence. No deductions were made for retirement. Explain how, where and how much you need to pay for 2017 so that there are accruals for pensions for 2017? Or is it too late to do now? In 2018, a similar situation (so far no declaration has been drawn up).
Ilona Dovidaityien: If you worked for 1099, you must file Schedule C, it is calculated in 4 quarters. Yes, you can review your taxes for 2017 to make sure that all 4 quarters are accounted for. In accordance with the rules of social security, you have 3 years, 3 months and 15 days to adjust your declared income. The declaration for 2018 had to be submitted before October 15, 2019 (with an extension), you are already late, so do not wait long. Good luck
Question: Hello! I have an apartment in Kiev, which I bought in 2010. I live in California. If at some point I want to sell it, do I need to pay tax for an apartment here in the USA? And if so, is the tax paid only on profits or on the entire cost of the apartment? Real estate prices in Ukraine have fallen and it is likely that I will sell it either for the same money that I bought, or for less. What happens in this case? And do I need to somehow bring this apartment into the declaration, if I do not receive income from it, and my mother lives in it?
Ilona Dovidaityien: Report income. Since you have not received any income today, you do not need to enter the apartment in the declaration. You must be a permanent resident or citizen of the country in order to report income in the declaration.
Question: Hello! Are there any features of taxation of income received in the form of W2? I once heard that with W2 you need to pay more taxes than if you work at a full-time position in the company. It's true? And you can write off some expenses from such income or not?
Ilona Dovidaityien: W2 income is when you pay all taxes, social security, medical care. Yes, this is a lot of taxes, and you cannot deduct a single expense, because your employer provides you with all your supplies. If you work for 1099 and are a contractor, you can deduct all your operating expenses.
Question: Good afternoon! My husband and I work on W2. The son is 15 years old. Is it possible to deduct from the tax base the amount of interest paid on a mortgage? What benefits can we count on? To reduce the percentage of taxation, can we save money in a pension fund? Thanks!
Ilona Dovidaityien: Today, the standard deduction is 24 thousand dollars per family, this is a kind of poverty line. I call it the "basket." You can take this "basket" with 24 thousand, or you can "detail" your expenses. In your “detailed basket” you can indicate interest on mortgages, property taxes (but only up to 10 thousand), medical expenses with some restrictions, so if you collect more in the “detailed basket” at the end, you can use it. In fact, it is difficult to do after the limit has increased to 24 thousand dollars. Previously, it was about 12 thousand, and all of the above could collect up to 20 thousand, but now it is unprofitable. What you can do is to start your own business, deduct expenses and purchase investment property for rent. Yes, you can put money into your retirement account, but you can’t withdraw it until you turn 65, otherwise you will pay a fine.
Question: Hello! Are there any tax deductions that are most often available to immigrants in the US? If not, what deductions are worth paying attention to? Which are the most common?
Ilona Dovidaityien: Most of our community has S-corporations, and as small business owners, they hire their family members and pay them W2 salaries, as well as write off business expenses. If you have children, you can pay your children a tax-free salary. This is a very good strategy, but few people know about it.
Question: Hello! Are there any important tax innovations that will come into force in 2020?
Ilona Dovidaityien: Compared to last year, there are not many changes. Most of the changes occurred a year ago. We wrote in detail about the changes on our page, you can familiarize yourself with them by link.
Question: Hello! What is the current Obamacare tax and health insurance situation? In the media appears conflicting information about fines for the lack of insurance.
Ilona Dovidaityien: To date, there are no fines for the lack of medical insurance. Some states may still fine you if you have not been insured, but we do not have fines at the federal level.
You can ask your specialist a question by mail: firstname.lastname@example.org sending an SMS to the number: 224-676-3577, or get advice by phone: 800-913-0809
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