The Top #5 Tax saving tips from your new job as an NRI in the US

by Mounica Kota | Aug 23, 2019 | global income tax, NRI, tax deductions, tax rate, tax return, tax savings tips, taxes

The Top #5 Tax saving tips from your new job as an NRI in the US

If you are an NRI working in the US, you will need to pay taxes in US and you will be considered as a Resident alien with respect to tax purposes in US. You will be liable to pay taxes in US if you are a green card holder or you were present in US for a total period of 183 days i.e. you can count on the actual number of days you were present in US in the current year i.e. it should be at least 31 days , one-third of the number of days you have been in US in the first year preceding the present year and one-sixth of the number of days you were present in US in the second year preceding the present year. This is known as the Substantial Presence Test (SPT) used by the IRS to find out your liability to pay tax in US. Tax saving tips from your new job as an NRI in the US

Types of taxes to be paid by an NRI in US

Let us have a look at the types of taxes NRIs need to pay in the US.

Social Security Tax

Social Security Tax is to be paid by every individual who is working in the US. Half of the amount will be contributed by your employer in US and the other half is given by yourself. 6.2% of your gross salary would be deducted as your contribution to Social Security Tax.

Federal Income Tax

Since you are a non-resident in US you will have to pay tax on all income earned in the US without any deductions that the US citizens can avail. However, if you are availing the deductions which the US citizens are enjoying you will have to pay tax on the income earned outside the US as well.

State Income Tax

You will have to pay State Income Tax based on the state of the US in which you are working

Medicare Tax

This tax is paid by you for the health care services which will be availed by you after your retirement and is irrespective of the fact if you would be in the country then to avail them or not. You and your employer will have to contribute 1.45% of your gross salary for this purpose.

Global Income Tax

Any dividend obtained by you on shares and mutual funds in India are to be taxed in the US. Moreover, this rule of taxation is also applicable to any agricultural income and capital gains obtained in India. A foreign tax credit in your US tax return can be claimed by you, in case of tax payment done for the above-mentioned income sources. Form 8938 (Statement of Specified Foreign Financial Assets) and

Form 8621(Passive Foreign Investment Company) can be filed along with the US Tax return for this purpose.

Tax Saving Tips for NRI in new jobs in the US

Some of the tax-saving tips for NRI working in new jobs in US are mentioned below.

Form W-2 must be present with you

This form is a major document required while filing your US tax returns. You can obtain this form from your employer and it will contain details related to your annual payroll. You should collect your Form W-2 from each employer for whom you have worked in a particular year.

Spousal exemption to be claimed and declaration of dependents

An important tax-saving method is by claiming a spousal exemption. For this, you will have to file Form W-7 and apply for an ITIN i.e. Income Tax Identification Number.

While filing for US tax returns, you can declare your dependents even if they are residing in India. However, there are certain laws by which they will have to qualify as your dependents.

Declaration of all financial interest

You will have to submit Form TD 90-22.1 in case of having financial accounts outside US with a value of the accounts exceeding $10,000 on a yearly basis.

Medical deductions should be claimed

You can claim your medical deductions by filing Form 1040; Schedule A in case of your medical expenses exceeding 7.5% of your Adjusted Gross Income.

Make investments or take mortgage loans

You can make investments into retirement schemes, stocks or fixed deposits to save taxes. Also, you can save taxes by taking mortgage loans or by making donations.

Since you are an NRI and new at your job, your income in the US would be reduced up to a large extent due to the payment of taxes. However, these tax-saving tips will help you in reducing your tax liabilities up to some extent.

Top 7 tips for Self Employed NRIs in the US

by Mounica Kota | 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.