US

U.S. Second Round of Economic Impact Payments The IRS and the Treasury Department began issuing a second round of Economic Impact Payments, often referred to as stimulus payments, late December 2020. This article will give you a summary of the second round of economic impact payments.   How Can I Receive the Second Payments?   According to the IRS, there is no action required by eligible individuals to receive this second payment. The payments are automatically sent to the eligible individuals.   Am I Eligible for the Second Payments?   Generally, U.S. citizens and resident aliens who are not eligible to be claimed as a dependent on someone else’s income tax return are eligible for this second payment. Eligible individuals will automatically receive an Economic Impact Payment of up to $600 for individuals or $1,200 for married couples and up to $600 for each qualifying child. Most people who have […]

 Returning an IRS Erroneous Refund   Sometimes taxpayers may receive the erroneous refund by IRS’s mistake. The “erroneous refund” is the refund you are not entitled to at all or for an amount more than you are entitled to. If you receive the erroneous refund, you have the legal obligation to repay the amount to the IRS. And the sooner the better – holding onto the money for too long could result in the need to pay interest or penalties. For example, millions of stimulus checks were sent out to the unqualified taxpayers (nonresident aliens) by mistake, and the taxpayers are required to return the payments immediately to the IRS.   If your refund was a paper Treasury check and has not been cashed, you should write “Void” in the endorsement section on the back of the check and attach a note stating, “Return of erroneous refund check”. Then you […]

Introduction to U.S. Form 1099-NEC   Beginning with the 2020 tax year, the IRS would require business taxpayers to report nonemployee compensation on the new Form 1099-NEC instead of on Form 1099-MISC. Businesses would need to use this form if they made payments totaling $600 or more to a nonemployee, such as an independent contractor.   Form 1099-MISC, Miscellaneous Income, is an information return that businesses use to report payments (e.g., rents and royalties) to nonemployees. Each payer must complete the Form 1099-MISC and send the copy of the Form by January 31 if during the tax year the payer pays $600 or more to a recipient.  And the recipient should report all earnings on the tax return.   Form 1099-NEC is not a replacement for Form 1099-MISC. Form 1099-NEC, Nonemployee Compensation, is a form that solely reports nonemployee compensation. Form 1099-NEC is only replacing the use of Form 1099-MISC […]

U.S. Gross Receipt Tax Introduction   A gross receipt tax (GRT) is a state tax on the gross revenues of a business. Gross receipts tax is similar with sales tax, but the two are inherently different.   Sales tax is paid by the consumer based on the amount purchased. This is not an expense to the business owner because the amount owed to the taxing authority is no more than what the customer has paid. On the other hand, the gross receipts tax is a percentage of revenue received. Although some states do not charge sales tax on services rendered, you still must pay gross receipts taxes on the amount that you collect for those services.   Gross receipts tax impact firms with low profit margins and high production volumes, as the tax does not account for a business’ costs of production, as a corporate income tax would.   Each […]

U.S. Federal Tax Payment Options   If you are not able to pay the tax you owe by your original filing due date, the balance is subject to interest and a monthly late payment penalty. There is also a penalty for failure to file a tax return, so you should file timely even if you cannot pay your balance in full. It is always in your best interest to pay in full as soon as you can to minimize the additional charges. This article will discuss U.S. federal tax payment options for your reference.   You can choose to pay the tax electronically or by mail. Paying electronically is a convenient way to pay your federal taxes online, by phone for Electronic Federal Tax Payment System (EFTPS) or card payments, or from a mobile device. When paying electronically, you can schedule your payment in advance. You will receive instant confirmation […]

California Fictitious Business Name Naming a business is an important branding strategy for a person or entity involved in a for-profit trade or business in California. California fictitious business name, also known as a California DBA (doing business as), is only used for branding purpose and is not a type of business structure.   An individual or a business entity must file a fictitious business name (FBN) statement with the Registrar-Recorder/County Clerk’s office in the county where the business will be located. If the business is not located in California, the business needs to register with the Clerk of Sacramento County.   Under California law, sole proprietors, partnerships, limited liability companies and corporations must file a DBA if they plan to operate under a different name. Filing a FBN statement makes the identity of the person doing business under the fictitious name available to the public.   To file a […]

Are Employee Fringe Benefits Taxable in U.S.   Employers can offer fringe benefits to employees; common fringe benefits include health insurance, retirement plans, and parking passes. Although most employee fringe benefits are nontaxable and may be excluded from an employee’s income, some benefits must be reported on the employee’s Form W-2 and included in your taxable income. This article will discuss some common fringe benefits for your reference.   Retirement Plans   Employer contributions on behalf of their employees’ qualified retirement plans are not taxable to the employees when they are made. However, when the employee receives the distributions from a retirement plan, the amounts you received are taxable income.   Accident and Health Benefits   If an employer pays the cost of an accident or health insurance plan for an employees, including an employee’s spouse and dependents, the employer’s payments are not wages and are not subject to Social […]

U.S. Child and Dependent Care Credit   How to balance the family and work is a complicated topic for working couples. More and more family choose to send children to day care center to take care of their children during working time. According to IRS publication, you may be able to claim the U.S. child and dependent care credit if you paid expenses for the care of a qualifying individual to enable you (and your spouse, if filing a joint return) to work or actively look for work.   The credit is limited to $3,000 for one qualifying individual or $6,000 for two or more qualifying individuals. Expenses paid for the care of a qualifying individual are eligible expenses if the primary reason for paying the expense is to assure the individual’s well-being and protection. If you received dependent care benefits that you exclude or deduct from your income, you […]

Remote Seller in U.S.: Economic Nexus   Physical presence (employee, warehouse) was previously the only consideration where sales tax nexus is concerned. Over the past several years, many states have enacted economic nexus laws that require remote sellers to collect and remit sales tax if they exceed certain thresholds even if they do not have the physical presence in the state.   The below chart provides you a summary of the economic nexus thresholds for some states as of November 10, 2020. For more states data and details, please consult with our consultants.   State Nexus Effective Date Remote Seller Threshold Alabama 10/1/2018 Sales of TPP of more than $250,000 in prior calendar year; No transaction threshold Arizona 10/1/2019 Annual gross retail sales or income from online sales into Arizona is more than $200,000 in 2019, $150,000 in 2020 and $100,000 in 2021 and thereafter. California 4/1/2019 The total combined […]

U.S. Individual Tax-Itemized Deduction or Standard Deduction?   There are two ways you can take deductions on your federal income tax return: you can itemize deductions or use the standard deduction. Deductions reduce the amount of your taxable income. You should choose the deduction method, which is the most tax advantageous to you.   The standard deduction amount varies depending on your income, age, whether or not you are blind, and filing status and changes each year. For 2020, the standard deduction for married filing jointly is $24,800. For single taxpayers and married individuals filing separately, the standard deduction is $12,400, and for heads of households, the standard deduction will be $18,650 for tax year 2020.   Please note that certain taxpayers cannot use the standard deduction:   A married individual filing as married filing separately whose spouse itemizes deductions. An individual who files a tax return for a period […]