Ten Facts about Capital Gains and Losses

Posted by Sanket Shah | General | Friday 19 May 2017 2:27 pm

When you sell a ‘capital asset’, the sale usually results in a capital gain or loss. A ‘capital asset’ includes most property you own and use for personal or investment purposes. Here are 10 facts from the IRS on capital gains and losses:

1. Capital assets include property such as your home or car. They also include investment property such as stocks and bonds.

2. A capital gain or loss is the difference between your basis and the amount you get when you sell an asset. Your basis is usually what you paid for the asset.

3. You must include all capital gains in your income. Beginning in 2013, you may be subject to the Net Investment Income Tax. The NIIT applies at a rate of 3.8% to certain net investment income of individuals, estates, and trusts that have income above statutory threshold amounts.

4. You can deduct capital losses on the sale of investment property. You can’t deduct losses on the sale of personal-­use property.

5. Capital gains and losses are either long-­term or short­-term, depending on how long you held the property. If you held the property for more than one year, your gain or loss is long­-term. If you held it one year or less, the gain or loss is short-­term.

6. If your long­-term gains are more than your long­-term losses, the difference between the two is a net long­-term capital gain. If your net long-­term capital gain is more than your net short­-term capital loss, you have a ‘net capital gain.’

7. The tax rates that apply to net capital gains will usually depend on your income. For lower-­income individuals, the rate may be zero percent on some or all of their net capital gains. In 2013, the maximum net capital gain tax rate increased from 15 to 20 percent. A 25 or 28 percent tax rate can also apply to special types of net capital gains.

8. If your capital losses are more than your capital gains, you can deduct the difference as a loss on your tax return. This loss is limited to $3,000 per year, or $1,500 if you are married and file a separate return.

9. If your total net capital loss is more than the limit you can deduct, you can carry over the losses you are not able to deduct to next year’s tax return. You will treat those losses as if they happened that year.

10. You must file Form 8949, Sales and Other Dispositions of Capital Assets, with your federal tax return to report your gains and losses. You also need to file Schedule D, Capital Gains and Losses with your return.

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India – 391 FFI’s Now Registered For FATCA

Posted by Sanket Shah | General | Friday 19 May 2017 2:19 pm

You can find a full list of the Indian foreign financial institutions (FFI’s) that have registered for FATCA compliance and are in approved status as of August 25 2014 over here:

http://apps.irs.gov/app/fatcaFfiList/flu.jsf

The FFI List is updated the first day of each month. It includes all foreign financial institutions and branches that are in approved status at the time the list is compiled.

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Surrendering Green Card – New Form I­-407

Posted by Sanket Shah | General | Friday 19 May 2017 12:57 pm

In February 2015, the Department of Homeland Security, U.S. Citizenship and Immigration Services issued a new Form I­-407 for the abandonment of an individual’s United States green card (technically, “lawful permanent resident” status).

The new Form I­-407 now provides a separate section to obtain the consent of parents of minors who relinquish the green card. As in the old form, the new form asks for reasons for abandonment of the green card, but this question now appears to be more formally presented and appears to require a more detailed statement.

Giving It Up: No Fee — Yet!

Green card holders are taxed in the same manner as US citizens: they are both subject to US income tax on their worldwide income regardless of the source of that income and regardless of where the green card holder or citizen is living at the time it is earned. However, they are not treated exactly the same when it comes to relinquishing their US status. The US citizen who renounces his US citizenship, must now pay a fee of $2,350 for the privilege of doing so. On the other hand, there is still no fee for relinquishing one’s green card.

Internal Revenue Service is Notified When You Give Up the Green Card

Interestingly, the instructions to the new Form I-­407 specifically advise applicants that: “The Department of Homeland Security is required to provide the Internal Revenue Service (IRS) with the names of individuals who choose to abandon their LPR status. If you file this form with us, we will provide only your name and the filing date to the IRS. (Internal Revenue Code section 6039G(d)(3))”.

Dire consequences can result if an individual does not properly relinquish his green card and file all required paperwork with the IRS.

Please note, that simply because the green card has expired for immigration law purposes, it does not likewise “expired” for US income tax purposes thereby relieving them of the duty to pay US taxes.

Your Name May Appear On the “Name and Shame” List

Code Section 6039G implements the so­-called “Name and Shame” list. This is a quarterly publication in the Federal Register by the IRS listing the names of individuals about whom the IRS has received information of a loss of citizenship during the preceding quarter. This list is required to include the names not only of former U.S. citizens but of certain former green card holders. Under 26 U.S.C. § 6039G(d) (3), “the Federal agency primarily responsible for administering the immigration laws shall provide to the Secretary the name of each lawful permanent resident of the United States (within the meaning of section 7701 (b)(6)) whose status as such has been revoked or has been administratively or judicially determined to have been abandoned.”

The Federal Register provides that “for purposes of this listing, long­term residents, as defined in section 877(e)(2), are treated as if they were citizens of the United States who lost citizenship”. So, if you’ve held your green card for at least 8 of the preceding 15 tax years, your name will appear on the “Name and Shame” list when you return the card.

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US persons living abroad and renewing their passport

Posted by Sanket Shah | Newsletters | Tuesday 6 August 2013 12:10 pm
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How to Get a Transcript or Copy of a Prior Year Tax Return

Posted by Sanket Shah | General | Thursday 25 July 2013 2:09 pm

There are many reasons why you should keep a copy of your federal tax return. For example, you may need it to answer an IRS inquiry. You may also need it to apply for a student loan or a home mortgage. If you can’t find your tax return, the IRS can provide a copy or give you a transcript of the tax information you need.

Here’s how to get your federal tax return information from the IRS:

1. Transcripts are free and you can get them for the current year and the past three years. In most cases, a transcript includes all the information you need.

2. A tax return transcript shows most line items from the tax return you originally filed. It also includes items from any accompanying forms and schedules you filed. It does not reflect any changes made after you filed your original return.

3. A tax account transcript shows any changes either you or the IRS made to your tax return after you filed it. This transcript includes your marital status, the type of return you filed, your adjusted gross income and taxable income.

4. You can get transcripts on the web, by phone or by mail. To request transcripts online, go to IRS.gov and use the Order a Transcript tool.

5. To request a 1040, 1040A or 1040EZ tax return transcript by mail or fax, complete Form 4506T-EZ, Short Form Request for Individual Tax Return Transcript. Businesses and individuals who need a tax account transcript should use Form 4506-T, Request for Transcript of Tax Return.

6. If you order online or by phone, you should receive your tax return transcript within five to 10 calendar days. You should allow 30 calendar days for delivery of a tax account transcript if you order by mail.

7. If you need an actual copy of a filed and processed tax return, it will cost $57 for each tax year. Complete Form 4506, Request for Copy of Tax Return, and mail it to the IRS address listed on the form for your area. Copies are generally available for the current year and past six years. Please allow 60 days for delivery.

8. If you live in a Presidentially declared disaster area, the IRS may waive the fee to obtain copies of your tax returns. Visit IRS.gov and select the ‘Disaster Relief’ link in the lower left corner of the page for more about IRS disaster assistance.

9. Forms 4506, 4506-T and 4506T-EZ are available at IRS.gov

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Job Search Expenses May Lower Your Taxes

Posted by Sanket Shah | General | Monday 8 July 2013 7:07 pm

Summer is often a time when people make major life decisions. Common events include buying a home, getting married or changing jobs. If you’re looking for a new job in your same line of work, you may be able to claim a tax deduction for some of your job hunting expenses.

Here are seven things the IRS wants you to know about deducting these costs:

1. Your expenses must be for a job search in your current occupation. You may not deduct expenses related to a search for a job in a new occupation. If your employer or another party reimburses you for an expense, you may not deduct it.

2. You can deduct employment and job placement agency fees you pay while looking for a job.

3. You can deduct the cost of preparing and mailing copies of your résumé to prospective employers.

4. If you travel to look for a new job, you may be able to deduct your travel expenses. However, you can only deduct them if the trip is primarily to look for a new job.

5. You can’t deduct job search expenses if there was a substantial break between the end of your last job and the time you began looking for a new one.

6. You can’t deduct job search expenses if you’re looking for a job for the first time.

7. You usually will claim job search expenses as a miscellaneous itemized deduction. You can deduct only the amount of your total miscellaneous deductions that exceed two percent of your adjusted gross income.

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Tax consequences of transfer of Property Between Spouses

Posted by Sanket Shah | Newsletters | Monday 8 July 2013 1:43 pm
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US Persons living in India – the due date for filing your 2012 US taxes is June 15th 2013

Posted by Sanket Shah | Newsletters | Thursday 6 June 2013 9:29 am
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IRS, Australia and United Kingdom Engaged in Cooperative Effort to Combat Offshore Tax Evasion

Posted by Sanket Shah | General | Friday 10 May 2013 1:00 pm

The tax administrations from the United States, Australia and the United Kingdom announced on May 9th, 2013  a plan to share tax information involving a multitude of trusts and companies holding assets on behalf of residents in jurisdictions throughout the world.

The three nations have each acquired a substantial amount of data revealing extensive use of such entities organized in a number of jurisdictions including Singapore, the British Virgin Islands, Cayman Islands and the Cook Islands. The data contains both the identities of the individual owners of these entities, as well as the advisors who assisted in establishing the entity structure.

The IRS, Australian Tax Office and HM Revenue & Customs have been working together to analyze this data and have uncovered information that may be relevant to tax administrations of other jurisdictions. Thus, they have developed a plan for sharing the data, as well as their preliminary analysis, if requested by those other tax administrations.

“This is part of a wider effort by the IRS and other tax administrations to pursue international tax evasion,” said IRS Acting Commissioner Steven T. Miller. “Our cooperative work with the United Kingdom and Australia reflects a bigger goal of leaving no safe haven for people trying to illegally evade taxes.”

There is nothing illegal about holding assets through offshore entities; however, such offshore arrangements are often used to avoid or evade tax liabilities on income represented by the principal or on the income generated by the underlying assets. In addition, advisors may be subject to civil penalties or criminal prosecution for promoting such arrangements as a means to avoid or evade tax liability or circumvent information reporting requirements.

It is expected that this multilateral cooperation and coordinated effort will allow many countries to efficiently process this information and effectively enforce any laws that may have been broken. Increasingly, tax administrations are working together in this way to assist one another in identifying non-compliance with the tax laws.

U.S. taxpayers holding assets through offshore entities are encouraged to review their tax obligations with respect to these holdings, seek professional advice if necessary, and to participate in the IRS Offshore Voluntary Disclosure Program where appropriate. Failure to do so may result in significant penalties and possibly criminal prosecution.

 

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Imputed interest rules on interest free loans in US

Posted by Sanket Shah | Newsletters | Thursday 9 May 2013 1:35 pm
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