NRI with Green Card in the US, what not to forget while filing your taxes this year

by Mounica Kota | May 23, 2019 | Blog, Deduction & Credits, Investment & Income, Tax Extension, Tax Planning, Tax Preparation

NRI with Green Card in the US, what not to forget while filing your taxes this year

The income tax system that currently in motion in the United States of America, requires corporation, trusts, estates and individuals to pay taxes. If you are an NRI, you must also pay taxes to Uncle Sam. Irrespective of whether you are filing your taxes for the very first time or have been doing it for years, here are a few things that you must not forget.

Reporting Foreign Assets (Form 8938)

The IRS introduced Form 8938 a few years ago to get additional information regarding foreign assets of their citizens. The Form 8938 or Statement of Specified Foreign Financial Assets should be filed along with their taxes. This form requires taxpayers to disclose additional information regarding their interests and investments in foreign financial assets. With the help of this form, the IRS can identify the non-compliance of its taxpayers. Your financial assets such as pension plans, mutual funds, insurance policies, ULIP plans and bank account balances must be declared as a part of Form 8938. The form is quite exhaustive, to say the least. You can get in touch with the company handling your finances or banker to get these details.

Global Income

The IRS outlines its residents and citizens (PIO, OCI or NRI) to pay taxes on their global income and not only the income generated in the US. Anyone who has stayed in the US for at least 31 days in a fiscal year and 183 days in the previous three years, gets the tag of a US resident. If you qualify, you must declare your global income. Global income includes any salary that you receive in India, either for consultation or freelancing. Income in the form of interests or dividends earned on bank deposits or other securities. Income generated from rent received on a property, agricultural income or capital gain on the selling of assets, all qualify. You will be taxed on all of these in the US. While income from agriculture is tax-free, it will be taxed in the US. However, if you have paid taxes in India for any of these incomes, you can claim for the foreign tax credit as per the DTAA.

Employee Stock Option Plan

Employee Stock Option Plan or ESOP is something that you must not forget in your tax filing. The IRS considers the granted value of ESOPs when a taxpayer opts for the same. The total ESOP compensation must be added to the gross income. If you had exercised a similar option in India and have paid relevant taxes, you can opt for tax credit while filing your tax return.

Form 8621

The IRS requires all its citizens and residents to declare their foreign investments such as mutual funds and private equities in the tax return. These investments come under the purview of the Passive Foreign Investment Company (PFIC). To summarize, according to the PFIC, a taxpayer must declare all such investments and any gains that they earn out of them. These gains must be declared and appropriate taxes paid. In the event that you fail to do so or did not receive any gains from them, the final sale value would be divided for the number of years and calculated. For instance, if you haven’t received any distributions over 5 years and you gain a total of $200, it would be considered as $40 for each year. Being on the top of these will help you from coming under the scrutiny of the IRS. And of course, sets yoo up for a smoother tax filing season.

Taxes for Foreigners Working in Australia

by aotax | Jul 20, 2018 | Australian Taxes, Blog

Taxes for Foreigners Working in Australia

Taxes for Foreigners Working in Australia.Taxation isn’t a new concept. It has been in and around for quite some time now. It works on a simple idea that anyone working in a specific country or state ought to pay a certain amount as taxes. The same is then spent on infrastructure and several other growth-related aspects. When you are working in Australia you are liable to pay taxes. Australian residents must pay taxes and non-residents must also pay taxes on their Australian income.

How does Australia’s taxation work?

If you are an expat in Australia and receive wages, salary, cash compensation, or other allowances, you must pay the applicable taxes. As is the case with most taxation system, you are allowed for deductibles from your assessable income. Depending on your net taxable income and the appropriate tax slab, you are liable to pay taxes.

Should your employer provide you with non-cash benefits or compensations, the same is subject to Fringe Benefits Tax. You do not have to scratch your heads over it, as your employer must pay the same. The Australian Tax year starts on the 1^st of July and ends on the 30^th of June.

What is the tax slab?

The government levies different taxes based on which tax slab you belong to. These are net taxable income, so you must figure out which all deductions are applicable.

Expats earning between 0-18,200 AUD are not liable to pay any taxes at all.
If you earn between 18,201-37,000 AUD, you must pay 19% as income taxes.
For earning between 37,001-87,000 AUD, the income tax rate stands at 32.5%.
If your annual income is within the range of 87,001-180,000 AUD, the income tax rate is 37%.
Individuals taking home more than 180,001 AUD must pay 45% as taxes.

However, if your earnings sum up to 20,542 AUD you are not liable to pay any taxes. Provided you utilize the Low Income Tax Offset or LITO.

Certain Advantages and Disadvantage

If you are an expat earning in Australian Dollars, there are two sides of the coin that you are exposed to. While there are some merits of being an earning Expat, there are certain shortcomings as well. Here are some of the differences.

A resident Australian effectively pays lesser taxes than what a non-resident would. A non-resident pays more taxes per dollar.
An Australian resident is liable to pay taxes on their global income whereas a non-resident must pay taxes only for his Australian income.
Residents have the go green flag for paying medical levy and can claim various medical expenses. On the other hand, a non-resident can neither pay medical levy nor can he/she claim their medical expenses.
Residents have an upper hand when it comes to bank accounts as well, as they can accumulate interests on savings on at a normal rate. Expats on the other hand are taxes at 10% flat on their earnings via interest.
An Australian citizen is liable to pay capital gains tax on almost everything, property, shares, stocks etc. However, an expat must only pay capital gains taxes on real estate or property and not on shares.

Other Benefits

For expats working in Australia, they can claim a certain amount as tax offset and it is applicable to the amount that they have paid foreign taxes on, the assessable income to be more precise. ATO has a tax treaty with more than 45 countries and if you belong to anyone, you can benefit from the same. There are several online calculators which can aid you in understanding your tax liability as an expat.