Thursday, 11 August 2016

Rules and Restriction With Our Taxes

The US-Canada Tax Convention signed in 1980 or more commonly called as the Tax Treaty covers the foreign tax credits where individuals are protected from double taxation. Cross border tax services are essential in providing the guidelines for the rules and regulations of cross-border taxes.

Let’s assume we have, Savers, a Canadian manufacturer, who wants to test the US market and sent down a sales representative. The tax rules and regulations are as follows:

Subject to federal US tax. The Internal Revenue Code (IRC) enforces universal corporate income tax on a foreign corporation which is “engaged in trade or business” within the US Trade. Business generally requires a series of repetitive business engagements. Thus, when the Savers representative starts to gain sales, Savers may well be engaged in a US trade or business and subject to US tax. However, certain domestic US and Canadian tax law are regularly superseded by the US-Canada Treaty. It provides rules to resolve certain conflicts between domestic laws of US and Canada. To avoid any problem to arise, make sure to have a cross border tax specialist that can help you get an approval from the Canadian office.

Subject to state tax. There are different types of state taxes which includes capital/franchise tax, excise taxes, sales and use tax. Whether a Canadian company is subject to these taxes depends on its activity in the US. This is where a cross border tax specialist can assist you.

Does a Canadian company representative have any tax exposure? Under the US-Canada Treaty, the general rule provides the wages derived by a Canadian with respect to his employments is taxable only in Canada unless he is working in the US. If that is the case, the US can tax the employment income. There are two exceptions to this rule. First exception, no US tax is due if the amount received by the Savers employee does not exceed US$10,000.00. The second exception applies when the Savers employee is not present in the US for over 183 days in any calendar year. A cross-border tax specialist may need you to declare the time of your stay in the US so it’s easier to determine your tax exposure.

Other issues that may arise, independent from the rules and regulations, include tax consequences of disposing or unwinding of the business. The key is to get a cross border tax services that can help you review different issues.

Monday, 1 August 2016

How to Identify Your Tax Filing Status

Without knowing the right tax filing status, you could end up paying more tax than you should or worse, you could end up filing for a wrong one. Selecting the right tax filing status can have a great impact on the tax benefits that you receive; the amount of taxes that you pay or the amount of your standard deduction.

Currently, there are five filing statuses for you to choose from. Most people can claim a filing status erroneously but in good faith. The filing status that is mostly filed in error is the “Head of Household” status.

In choosing the right filing status, firms such as AP Tax Group advice that you consider the following:
  • Marital status. In considering the marital status, one must realize that the status of the person on the last day+ of the year represents his or her status for the entire year.
  • Choices/options. At certain times, a person can fit into more than one filing status. In this case, one is free to choose the status that can give an individual the most benefit. It could be a filing status that affords a person of more tax benefits or a filing status that has the lowest taxes.
  • Single Filing Status. If you have not been legally married, separated or divorced, then you can claim the Single Filing Status. Some have erroneous beliefs that being legally separated or divorced can afford them the single filing status.
  • Married Filing Jointly. To some extent, this Married Filing Jointly status has some advantages over Married Filing Separately. Often, however, the differences in the taxes are so small that you might not even consider this. However, for couples who have separate tax brackets and would want to afford the same tax benefit when the other can and the other cannot, this status becomes beneficial.
  • Married Filing Separately. Almost always, married filing jointly is the status that would benefit couples. In special circumstances, however, the status Married Filing Separately becomes more practical. We can consider the case of tax debt. When a partner has a tax debt, filing under the status Married Filing Separately makes the other partner liable for the same debt. This status, however, has some disadvantages over advantages on some couples. For couples filing separately, the deduction or tax exemption can only be applied once. If this takes effect, only one in the couple can list the child as a beneficiary to apply for a tax exemption.
  • Head of Household. This status is considered to be the most filed in error. That is because most people think that this status applies to the breadwinner of the family. What most miss out is that the Head of Household status only applies to unmarried individuals that contribute equal to or more than half of the household expenses. Thus, this status can be filed as an alternative to the Single Filing Status if applicable.
  • Widower with Dependent Child. This status applies to those whose spouse died during the preceding year of filing and those who have a depended child.
There are a number of firms that are willing to help you choose the right filing status and guide you in your taxation decisions. Among those is the AP Tax Group, which is among the most reputable firms there is.

Tax is a crucial part of an economically strong state or country. Though they may seem a burden to people in general, choosing the best filing status allows you to make the taxes work for you rather than against you.

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