Founder at Protax Consulting Services, Marc J Strohl CPA, has just revealed essential information that U.S. expatriates need to consider when seeking a U.S. international assignment specialist…
NEW YORK, NY, May 09, 2021 /24-7PressRelease/ — Founder at Protax Consulting Services, Marc J Strohl CPA, has just revealed essential information that U.S. expatriates need to consider when seeking a U.S. international assignment specialist. For more information please visit Protax Consulting Services, Inc. (“Protax”).
The goal of this article is to provide a comprehensive checklist of information for the foreign national to consider prior to accepting an assignment in the U.S. This article is not designed to teach you the technical competence required to perform self compliance; however it will certainly arm you with the technical knowledge to determine if your U.S. tax preparer knows all that they should know to provide you with technically competent professional services.
All U.S. nonresident aliens are taxable in the U.S., but only on U.S. source income. Internal Revenue Code (IRC) Sec. 861 governs U.S. sourced income, IRC Sec. 862 governs Non-U.S. sourced income and IRC Sec. 865 governs sourcing rules for personal property sales.
However, U.S. negotiated income tax treaties, if elected may override the source of specific items taxed, and therefore the applicable income tax treaties always need to be consulted in tandem with domestic U.S. law treatment.
Additionally, in the case of U.S. persons- citizens and green card holders- the U.S. has conveniently slipped in to most income treaties a provision usually, under Miscellaneous Rules, to enable the U.S. to continue to tax U.S. persons as if the income tax treaty does not exist. This is typically referred to as a “Savings Clause” or “Limitation on Benefits” clause.
Where and How:
Where on the tax return that income is taxed and how it is taxed depends upon whether the income is effectively connected with a U.S. trade or business. Effectively connected income includes compensation income but excludes passive income which is considered non effectively connected income. IRC Sec. 871 governs which U.S. sourced income is effectively connected with a U.S. trade or business and which income is non-U.S. effectively connected income.
Effectively connected income is reported on Form 1040NR page 1 and is taxed at U.S. regular graduated tax rates and non effectively connected income is reported on Form 1040NR page 4- Schedule NEC- and is flat taxed at a rate of 30%, or reduced treaty rates.
However, there is one exception below, in the case of Capital Assets (includes everything you own except business related assets, includes shares held for investment, basically all personal property, but not real property) not effectively connected with a U.S. trade or business. Under this one instance if a nonresident alien taxpayer is present in the U.S. physically for 183 days or less in the tax year, the gain from the Capital Asset is not Effectively Connected.
If a nonresident alien taxpayer is present in the U.S. physically for more than 183 days the gain is considered effectively connected with a U.S. trade or business and is US source income for the entire calendar year, on US stocks only. Regardless of the taxpayers “Tax Home”.
Basically, this is the only instance of the Effectively Connected rules overriding U.S. source rules. IRC Sec 865 overrides IRC Sec. 871
If and Where and How:
We have constructed a table to facilitate these determinations, which can be found on our website.
Marc J Strohl, CPA of Protax Consulting Services has written articles published by Thomson Reuters in their Practical International Tax Strategies, Journal of International Taxation and Practical Tax Strategies publications and that are referenced and used by other U.S. tax C.P.A. and Attorney consultancy firms both in and outside the U.S. – such as the Big Four – to educate their clients and other tax experts in terms of international tax situations.
In addition Strohl conducts webinars and live presentations for CCH Wolters Kluwer, Strafford Publications, the Clear Law Institute and the New York State Society of Certified Public Accountants (NYSSCPA), Furthered Education and Lawline. He has been quoted in the NYSSCPA’s Trusted Professional, New York Post, and The Wall Street Journal.
Name: Marc J Strohl CPA
Email: [email protected]
Organization: Protax Consulting Services
Address: Seven Penn Plaza Suite 416, New York, NY 10001
Phone: (212) 714-1805
For more information, please visit ProtaxConsulting.com
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