A taxpayer doesn’t have to be a world traveler to benefit from the foreign tax credit. Many individuals find that typical investment accounts extend beyond US borders. This affects tax preparer jobs. The purpose of the foreign tax credit is eliminating a US income tax burden by the amount of tax paid to another country on the same income.
A Registered Tax Return Preparer learns the tests to qualify for the foreign tax credit. These requirements are that the foreign tax must be assessed on income of a taxpayer, who paid or accrued the tax to a legal foreign entity. The essential element in the requirements is that only income taxes paid or accrued qualify for the foreign tax credit.
Qualified foreign taxes cannot be used to qualify a taxpayer for a foreign subsidy or be refundable. In addition, the foreign tax must be compulsory and not something that a taxpayer could have avoided paying to a foreign country. Finally, the tax qualifying for the foreign tax credit cannot be assessed by a country that doesn’t have a diplomatic relationship with the US, has a government not recognized by the US, or is designated by the US Secretary of State as a nation that provides support for acts of international terrorism.
Anyone with investments or business interests overseas is likely to experience foreign taxes. An income tax course for training tax practitioners reveals that all income sources of a US citizen or resident alien are taxable by the IRS. The foreign tax credit therefore avoids double taxation of foreign income. Income tax paid to a foreign country or US possession is a credit toward payment of US tax.
When a RTRP encounters the payment or accrual of a qualified foreign tax, there is a choice of using the amount as an itemized deduction or a foreign tax credit. In almost all cases, the credit is more valuable than the deduction. Form 1116 is used to claim the foreign tax credit. Using this form results in a foreign tax credit calculation that is the lower of the foreign tax figure or the amount of US tax attributable to foreign source income.
The limit is separately computed for passive income and all other income. Taxpayers who cannot claim a credit for the full amount of foreign taxes paid or accrued in the year are eligible to carry back or carryover the unused foreign tax. A carry back can only affect one year but a carryover lasts for ten years.
The tax preparer exam can cover some of the basics about this tax credit. For example, Form 1116 is not required to claim a foreign tax credit on income from foreign sources consisting entirely of passive income, such as interest and dividends, as long as this income is reported to the IRS by the payer on a Form 1099. There is a maximum amount of foreign tax credit that is eligible for exclusion of Form 1116, which varies by filing status. Claiming the credit without filing Form 1116 prohibits carry back or carryover of any unused foreign tax.
Archive for July, 2010
Income Tax Course Basics on the Foreign Tax Credit
July 31st, 2010Important Tax Information for Independent Contractors
July 31st, 2010
Being your own boss is certainly rewarding, but few people think about the extra work of preparing invoices and tax forms. Independent contractors need to be aware that being independent of the client company is a special tax situation, and they will need to file differently with Internal Revenue Service than they might have in the past.
What is an Independent Contractor?
Those who work regularly for the same clients or who only contract under one company might wonder if they are just an employee. Generally, independent contractors do not participate in the same programs and activities as the rest of the employees do and are not subject to the same restrictions. Those who are starting a job should define their obligations with the clients and make sure the client will be listing them as an independent contractor in tax forms. If the company pays the contractor more than $600 over the course of a tax year, they will be required to send him or her a 1099 form.
These lines start to blur when the contractor spends much of their time in the office or conferring with employees on the project. If the employer labels the contractor a common-law employee and sends them a W2 by mistake, the individual can file Form SS-8 to dispute the classification.
The IRS defines an independent contractor using the “20 Questions” test, which looks at a number of factors including the amount of control the hiring company has upon their work. According to them, an employer “has the right to control or direct only the result of the work and not what will be done and how it will be done or method of accomplishing the result.”
For tax purposes, however, an independent contractor is a business. Most will fall under the category of sole proprietorship. However if the contractor employs others or is incorporated, their status may change. Another option might be to run your business through an “umbrella company” or so-called “pass-through agency,” which can give the option of being either a W-2 or a 1099 for tax purposes, and this can be a great option to simplify the back-office administration that independent contracting requires. There are benefits to all of the tax business classifications, but business owners should do research on which one best fits their organization.
Self-Employment Tax
When someone who is an employee receives a W2, income and social security taxes are already taken out of their paycheck and sent to the IRS by the employer. Those who receive 1099 forms do not have any taxes removed from their wages by an employer. The self-employed individual must file their income and pay self-employment tax.
Any individual who makes more than $400 from freelancing or independent contracting work must file a 1040 Schedule C form with the rest of their taxes. This form will help the individual calculate how much tax they owe. The federal self-employment tax rate is 15.3% but it can vary depending on how much income the person has earned and their deductions. Deductions are business expenses that can be deducted from the gross income. See the IRS website for more information.
The calculated tax must be paid to the IRS. If the tax is likely to be more than $1000, see estimated tax payments below. If the tax is less than $1000, the business owner may pay the owed tax at the end of the year upon completing their tax return.
If the business is a sole proprietorship and the business owner does not have a social security number, they will need to file for an Individual Taxpayer Identification Number or ITIN in order to submit their taxes.
Estimated Tax Payments
Businesses that anticipate owing more than $1000 at the end of the tax year are required to make quarterly estimated tax payments. Using an estimation of their income for the year, the business completes worksheet 1040-ES and sends in one fourth of the amount on each deadline. Payments can be made electronically via credit card or automatic withdraw. The IRS still accepts check and money orders by mail as well.
The payment deadlines generally fall in April, June, September, and January, but can vary by tax year. If the business miscalculates their income, the end of year filing will be adjusted. Unpaid tax will be added, and those that overpaid will receive refunds.
State Tax
Most U. S. states have separate state income tax laws. Filing procedures and rates vary widely from state to state. Those who own a business should investigate their local tax code for more information.
Obligations of the Self-Employed
Independent contractors should keep excellent records to make the process of filing taxes easier. Receipts and invoices should be kept for reference, but also stored for use in case of a future audit or tax dispute.
Tax code is complicated and ever changing, so make sure to look up the new tax rules for each filing year. Those with complicated finances may want to hire a professional advisor to check or prepare the tax forms as they can prevent costly mistakes.
Downtown Accommodation in Boston Hotels
July 31st, 2010
Finding accommodation for Boston Hotels is really very easy. If you are planning a trip to this historic home of Harvard University, there are many Boston hotels that offer luxurious, medium, and budget accommodations. The Boston hotels that you wish to stay in will obviously be dictated by your budget, and as this is a university city, there are hotels that cater for students, professors, parents, and tourists. Boston is the capital city of Massachusetts and is one of the major cultural centers of New England.
Although there are not a huge amount of Boston hotels, there are more than enough hotels in Boston to cater for the needs of the traveler during any season of the year. This city has a rich history and there are several museums, very good restaurants and many other sights to be seen. Travelers are able to reach the Hub in Boston from Philadelphia, Washington DC, and New York by high speed train and low cost bus lines.
Boston Hotels in Downtown Boston
It makes sense if you are travelling to this city that you would want to stay in a Boston hotel. Amongst the popular downtown Boston hotels you will find the Hyatt Regency, which is situated one block away from the Boston Common, a great tourist attraction; the Seaport Hotel, which is situated close to the World Trade Center on the Boston Harbor; the Comfort Inn, close to Logan Airport and the Nine Zero Hotel at the very center of downtown Boston. This list of Boston hotels does not encompass all of the Hotels in Boston, but they do provide great accommodation that allows easy access to the New England Aquarium, a major attraction of this city, in addition to other entertainment and attractions, such as bars and restaurants.
The city of Boston is considered a melting pot of cultures and lifestyles, an intellectual haven, and a very influential American city. It is also known as one of the richest cities in the US. This does not mean that hotels in Boston are the most expensive in the US, if you are on a budget, cheap Boston hotels, hostels and other forms of accommodation are also available.
Boston Hotels for reasonable costs
Bearing in mind all the attractions that the city of Boston has to offer, staying in a Boston hotel does not have to be a bank breaking experience. Reasonably priced hotels in Boston may be found close to the center of its nightlife, and these afford the traveler the opportunity to discover many exciting things to do for next to nothing. It is not surprising that this city is known as the “Athens of America”. Taking a stroll down the cobbled streets of Quincy Market is free of cost, and there are fabulous bakeries, restaurants, and boutiques in the market. This attraction can keep the traveler entertained for an entire day. Visiting historic buildings is another attraction that is cheap and entertaining; as Boston is not a very large city, it is easy to get around using their convenient and efficient public transport system.
Boston hotels are readily available to visitors traveling to the city. There are a great deal of attractions to be seen in this city, and budget hotels in Boston are easily found.
Pregnancy Sleeplessness
July 31st, 2010
Many expecting mothers ask this question very often.
“As soon as I got pregnant I have been observing that I am not able to get enough sleep. The most frustrating thing has been the inability to return back to sleep if disturbed. Is it normal?”
Thankfully, the answer is yes! During the course of pregnancy, it’s difficult to get sleep. Let’s see as to why it happens.
What are the most common causes of insomnia or sleeplessness during pregnancy?
1. Empty the bladder- Yes, a frequent cause of less or no sleep during pregnancy is the feeling of emptying the bladder. This happens because your kidneys are working overtime thereby supplying an extra amount of blood to the body due to the fetus development. When you lie down to sleep, some blood is retained and needs to be filtered by the kidneys, forcing your kidneys to work harder and make you feel uncomfortable. A tendency of frequent urination is felt during pregnancy day and night because of the mentioned activity and is the most common cause of sleeplessness
2. Being uncomfortable- Another reason for not getting enough sleep during pregnancy is being uncomfortable. As the baby grows, kicks and the heartbeat sounds so loud that you feel it’s sound would cause problems to the neighbors by waking them up (In reality, blood flows to the baby), you would find sleeping uncomfortable. In order to get sleep, you would need to try new positions. Your body temperature might be too hot or too cold. You could have cramps and legs sore making you feel uncomfortable to no end. Thus, being uncomfortable due to various cues also causes insomnia during pregnancy
3. Dreams and fantasy- Some of the expecting mothers might experience various situations like feeling an extra dose of excitement, fear of delivery, and these could destroy the efforts to get comfortable and eventually sleep. Pregnant woman can also experience vivid dreams of vivid nature to make them uncomfortable due to progesterone hormones
4. Heartburn and indigestion- Sometimes later during the tenure of pregnancy, heartburn and indigestion can trigger some unpleasant situations and make you feel insomniac. Heartburn could be due to a spicy diet and could be easily controlled. Indigestion occurs because of changes in the stomach pattern due to the baby. Thus, even these situations can disturb the sleeping pattern
How to overcome these situations to get proper sleep?
By adhering to some simple tips, you could just help yourself get back to the regime of proper sleep. If you are not getting sleep at all, stop staring at the clock that irritates you by making you realize that it’s late. Another way to get sleep would be stop sleeping during the day time.
You could also take a hot bath, a hot cup of milk and listen to some soft music to make you relax so that you can sleep. Try to eat less spicy food so that you are comfortable. Read a book that you don’t like and it shall also help you. Keep the atmosphere of bedroom relaxing by keeping it warm or cool, dark and the bed cozy. Also keep the tensions away.
By following these, you could just help yourself get back to some sound sleeping routines during the course of pregnancy. Good Luck!
Chase +1 Student MasterCard Credit Card Review
July 31st, 2010
Building a credit history is not a one-night process. It often takes a lot of time and patience. People with excellent credit have proven themselves to be risk worthy for creditors. Nobody starts with excellent credit rating. That means that most people don’t get the best credit cards with the best rates as their first credit card. The goal at first should be to build a great credit history and not necessarily receive the best APR in the market.
Chase +1 Student Mastercard is specifically designed for people with little or no credit history. If you are a college student with no credit history, you will need a card that will allow you to build your credit fast. Chase +1 allows you to do that by providing a generous credit line and no annual fee. Chase +1 Mastercard comes with an introductory rate of 0% for 3 month on purchases. But after the introductory period, the rate increases to 14.99% and could go as high as 19.99%. So the card is not designed to park large balances. Chase +1 card is a great credit-building tool if you pay your balances in full.
Chase +1 is unique in providing tips and tools to help cardholders master the art of building a great credit history. You earn Karma for paying on time and taking quizzes and you can apply your Karma point towards gifts or a great cause. Unlike many other no-credit credit cards, Chase +1 comes with standard features such as account management, Chase mobile, and no annual fee. In addition, you can transfer your high interest rate balances to this card. However, Chase +1 does come with relatively high transfer rates, which means you shouldn’t use this card as a balance transfer card.
Chase +1 student credit card provides students with the perfect opportunity to build a great credit history. Everyone has to start from somewhere, but Chase +1 does not come with any notable fees. In addition, you can learn from the training tools provided by Chase to learn the art of building a good credit. Overall, Chase +1 student card is a great credit card that people with no credit can use as a stepping-stone towards getting better more reward rich credit cards in the future.
Tax benefits on Housing Loan
July 31st, 2010
Loans are very important for all of us to realize some of our major dreams in time. We all look forward different kinds of benefits from loans we take. Of course it may be less interest rate, low processing fee, easy documentation, time taken to release the loan and finally, the very important thing we expect from a loan is Tax Benefit.
Tax benefits from loans are in different types and even it depends on the nature of loan taken. We take loan for personal use or to fund for our children’s education or construction of our house. We don’t get any tax benefit from the loan taken for our personal use. But of course we can claim tax exemption on the loan taken for education and house construction. As I have posted an article on Tax Benefits on Educational Loan, now I am giving you the complete details of tax benefits which can be availed on Home loan or the loan taken to construct a house.
Nowadays, it is very difficult to fund the entire amount for your house construction, because of skyrocketing real estate prices and construction costs. Therefore, we all take home loans from different banks at different rate of interest. It is again very difficult to repay the loan, but if you do your financial planning and tax planning properly, you can save a huge amount legally by considering the prevailing tax laws.
According to the income tax laws applicable, the interest paid on the capital borrowed for the acquisition or construction of house property is eligible for deduction up to the maximum limit of Rs 150000 per annum. You also get a 20% rebate on repayment of principal of the housing loan per annum. While this was earlier subject to a maximum of Rs 10,000, it is now Rs 1,00,000 and people can avail this benefit under section 80c of the income tax Act.
Points to be considered:
You should be residing in the home for which the loan is taken. If you are residing in a city but buying property in your home town to prepare for retirement, this will not be applicable. The property has to be acquired or constructed before April 1, 2003. The money should have been borrowed to construct or acquire property on or after April 1, 1999. If it was prior to this date, the deduction is only valid up to Rs 30,000.
You may find it more convenient and cheaper to finance the property out of your own resources. But do remember, you would be losing the tax shelter on account of the deduction available as well as the tax rebate. You can claim a rebate for housing loan only on producing the interest certificate from the lending institution. Taking a loan from a family member or a friend, who may get you a loan at cheaper rate of interest, or no interest at all, but will not qualify for such deductions. Only loans taken and interest paid thereon, to specified financial institutions which offer housing loans, qualify for deduction under the Income Tax Act, 1961.
If the loan is jointly taken by you and your spouse, you both are entitled to tax benefits. Since both will be claiming the deductions and rebate, you will have to approach the financial institution and ask for a certificate. This certificate will state how much of the loan is your responsibility and how much you are contributing towards the repayment. Your tax deduction and rebate can be calculated based on this amount.
