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International Taxation – US Citizen and Green Card Holder (Resident Alien)

With the Tax Season shaking the entire industry, only something valuable should divert your attention. And believe us when we say that our webinar series, which covers a variety of highly engaging topics around U.S Taxation is exactly what you should be focusing on!

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International Taxation – US Citizen and Green Card Holder (Resident Alien)

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  1. International Taxation for U.S. Citizen & Green Card Holder Webinar Series: Episode2 PRESENTEDBY: VivekShah US Tax Expert Managing Partner @SmartAccountants MansiShah US Expat Tax Expert Sr. Tax Manager @SmartAccountants

  2. WebinarOverview: Overview of Individual Definition Foreign Banks & Financial Accounts Overview of Partnership Foreign Tax Credit Overview of Corporation Foreign Earned Income Exclusion Overview of 5472 & 5471 U.S Source Of Income Streamline Package Estate & Gift Taxation and Exit Tax

  3. Definition: Green Card holders and Citizenship are terms that grant foreign nationals the right to live and work in the United States of America. • Green CardHolder: • Green Card holders and Citizenship are terms that grant foreign nationals the right to live and work in the United States of America. • Substantial PresenceTest: • Tomeetthistest,apersonmustbephysicallypresentintheUnitedStatesonatleast: • 31 days during the current year,and‘ • 183daysduringthe3-yearperiodthatincludesthecurrentyearandthe2years immediatelybefore that,considering: • All the days a person was present in the current year, and • One-Third (1/3) of the days a person was present in the first year before the current year, and • One – Sixth (1/6) of the days a person in the second year before the current year.

  4. QUESTION 1. Mr. X is US Green card holder but living permanently in India. As per Indian Income tax rules, he is claiming Indian tax residency. What would be US residency status for him? Non- Resident Resident Resident unless we claim treaty-based position. No filing requirement in US

  5. Pre-Immigration Tax Planning • Tax Planning must be a part of a person’s immigration process in order to avoid adverse tax consequences. • All global income of U.S. residents and citizens is subject to taxation. However, foreign income credits and foreign income tax exclusions can help alleviate a person’s U.S. tax burden.

  6. There are two types of Sources ofIncome: The Source OfIncome:

  7. Foreign Bank & Financial Accounts • A U.S. person, including a citizen, resident, corporation, partnership, limited liability company, trust and estate, must file an FBAR to report: • A financial interest in or signature or other authority over at least one financial account located outside the United States. • In FBAR we have to share Form 8938 copy to IRS departments along with main tax return and FBAR Copy share to Department Of Treasury. • The maximum value of an accountis a reasonable approximation of the greatest value of currency or nonmonetary assets in the account during the calendar year. • The Following are due date and Form to file FBAR: • Form 8938(Statement of Specified Foreign Financial Assets) is a tax form used by some U.S. taxpayers, corporations, partnerships, and trusts that hold foreign assets beyond a certain threshold • Individuals residing in the United States are required to file Form 8938if the market value of their foreign financial assets is greater than $50,000 on the last day of the year or greater than $75,000 at any time during the year.

  8. Form-1116 Foreign Tax Credit

  9. Form 2555-Foreign Earned Income Exclusion • The foreign earned income exclusion, the foreign housing exclusion, and the foreign housing deductionare based on foreign earned income. • For this purpose, foreign earned income is income you receive for services you perform in a foreign country in a period during which your tax home is in a foreign country and you meet either : • A U.S. citizen who is a bona fide residence or the physical presence test. • A U.S. citizen or a U.S. resident alien who is physically present in a foreign country or countries for at least 330 full days during any period of 12 consecutive month.

  10. Continue... • The List Below Classifies Many Types Of Income Into Three Categories.

  11. Comparative of Form 2555 and Form 1116

  12. QUESTION 2. Mr. X is US citizen but living in Dubai. He worked for US employer during 2021 and received Form W-2. What should be Mr. X claim? Form 1116 Foreign Tax Credit Form 2555 Foreign earned income exclusion Since service performed in Dubai, this is foreign source income hence not taxable in USA Form W-2 US income fully taxable in USA and need to offer taxes in USA

  13. There are different types of Forms forResident Individuals and Entities which are as follows: Overview of Green Card Holder & Citizen

  14. Due dates for filing 1040 INDIVIDUAL FORM- 1040 (ForIndividual Income Tax Return) • Most people in the U.S. need to file Form 1040 no matter if they are self-employed, work for someone else as an employee, or live off income from investments. Now, here we explain all above forms indetail: FORM 1040 - SR(U.S Tax Return For Seniors) • Anyone age 65 or older can opt to use Form 1040-SR instead of Form 1040. • There aren't any other caveats that come with using this form. • Other things are same as Form-1040.

  15. ESTATE AND TRUSTS FORM 1041 (U.S Tax Return For Estate & Trusts)

  16. FORM 1065(U.S Return For Partnership) PARTNERSHIP • A partnership must file an annual information return to report the income, deductions, gains, losses, etc., from its operations, but it does not pay income tax. • Instead, it “Passes Through" profits or losses to its partners. • Each partner reports their share of the partnership's income or loss on their personal tax return. • The partnership must furnish copies of Schedule K-1 (Form 1065) to the partner. • Due Dates for Filing Form-1065:

  17. FORM-8865–ReturnofU.SPersonsWithRespecttoCertainForeignPartnershipFORM-8865–ReturnofU.SPersonsWithRespecttoCertainForeignPartnership • Meaning: • U.S. person who controlled the foreign partnership at any time during the partnership's tax year. • There are four major categories of tax filers to complete the form and the requirements are different for each group.

  18. CORPORATION

  19. Form1120–S(U.S Income Tax Return For An S Corporation) • In S Corporation Requirements give a corporation with 100 shareholders or less the benefit of incorporation while being taxed as a partnership. • The Schedule K-1form identifies the percentage of company shares owned by each individual shareholder for the tax year and must be prepared for every shareholder. Form1120(U.S Corporation Income Tax Return) • A corporation pays income tax by filing a corporate tax return on Form 1120 and paying the taxes as indicated by this return. • Its owners don't pay the taxes for the corporation, unlike "pass-through" business entities that trickle income and deductions down to their owners and shareholders to be reported on their personal tax returns. • Due Dates for Filing Form-1120S and Form 1120:

  20. FROM 5472- Information Return of a 25% Foreign-Owned U.S. Corporation Or A Foreign Corporation Engaged in a U.S. Trade or Business) • A reporting corporation must file Form 5472 if it had a reportable transaction with a foreign or domestic related party. • The 5472 form is an international tax form that is used by foreign persons to report an interest in or ownership over a U.S. company or subsidiary.When reportable transactions occur during the tax year of a reporting corporation with a foreign or domestic related party.

  21. FORM- 5471 Information Return of U.S. Persons With Respect to Certain Foreign Corporations • The U.S. person (individual or entity i.e. Corporation, partnership, trust, estate) has more than 10% ownership (in voting power or value) • There may be other circumstances that lead to filing as well, such as being an officer/director of a controlled foreign corporation (CFC), with over 50% of the total value or voting power owned by U.S. shareholders. • Failure to File Form 5471, Penaltyis imposed for each annual accounting period of each foreign corporation is $10,000.

  22. In Form 5471 there are 5 different categories of filers:

  23. QUESTION 3. What is Form 5471? Whether foreign corporation engaged in a U.S trade or U.S. Corporation Whether U.S. Person or U.S. Corporation shares in a foreign corporation during that year Both a & b None of the above

  24. Form 3520 A - Annual Information return of foreign trust with U.S Owner • Form 3520-Ais a form filed annually by the trustee of foreign trust to provide information to the IRS about the trust. • Not all trust owners need to file 3520-A. The IRS recently made a change excluding certain foreign trusts used exclusively for retirement funds/pension, educational purposes, medical purposes. • Form 3520-A is due on 15th day of the 3rd month after the end of the trust’s tax year. A calendar year trust is due March 15.

  25. Streamline Package • The IRS Streamlined Procedures are designed for those taxpayers who are late or have never filed,who can certify that their failure to previously report all income, pay all tax , and submit all required tax information returns, including FBARs, resulted from non-willful conduct. • Taxpayers will be required to file only 3 years of back tax returns(Original Copy of Return) and 6 years of FBARs. • There are 2 types of Streamline Procedure:

  26. QUESTION 4. 5% Penalty is applicable in which Streamline Procedure? Domestic Streamline Offshore Procedure Foreign Streamline Offshore Procedure Both a & b None of the above

  27. United States Tax Treaties With Various Countries • The United States has tax treaties with a number of foreign countries. Under these treaties, residents (not necessarily citizens) of foreign countries are taxed at a reducedrateorareexemptfromU.S.taxesoncertainitemsofincometheyreceive fromsourceswithintheUnitedStates. • US provides a tax credit up to a certain amount of income taxed by a foreign country.

  28. Estate & Gift Taxation • If you give someone a large gift, or if you leave property to someone when you die, the value of those transfers of property may be subject to the U.S. gift and estate tax. In addition, some U.S. states also impose an estate or inheritance tax. • Which Form is Required to be filed?

  29. Exit Tax For U.S. Citizens & Green Card Holder • Exit Tax is a tax paid on a percentage of the assets that someone who is renouncing their US citizenship holds at the time that they renounce them. • Exit tax is calculated using the form 8854(Initial & Annual Expatriation Statement),which is the expatriation statement that is attached on your final dual status return. • If Person become an expatriate with assets worth $2 million or more, had an average annual net tax liability of more than $168,000 over the last five years, or have not filed the form 8854 for the year of expatriation.

  30. QUESTION 5. Mr. Tom is recently Engaged with Miss Jerry in Dec-2021.And after two months married in Feb 2022.He gifted beautiful Engagement ring valued USD 50,000 to her on Engagement ceremony in Dec 2021. Mr. Tom is subject to : Gift Tax and needs to file form 709 No Gift tax since it is gifted to spouse No Gift Tax since it is social occasion gift Anything given in natural love & affections is exempt from Gift Tax.

  31. Do You Have Any Questions? An Informative SessionOn: "International Taxation for U.S. Citizen and Green Card Holder" DO LET US KNOWYOUR QUERIES:)

  32. NEXTSTEPS: For those interested in learning more, asking questions or signing up for one of ourgroups ortrainings, Stayinthemeetingaftertheend ORschedulesometimetotalk: Email:info@smartaccts.com Phone: 9033032571 Website: www.smartaccts.com

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