The Tax Questions Blog

Posts Tagged ‘business’

Question: what does underreported of income tax mean?

I put some money to invest with my local bank. After couple of months, they started withholding some of my interest. When I asked them about that, they said that the I am underreported of income tax by the IRS. I am an international student in the US, non-resident allien. When I file for my return, the tax office who does my return submits 1040 form, not the 1040-NR, they said it would not matter. So? what am I in to?

Answer: How long have you been a student on an F-1 visa? More than 5 years? Then you are now a resident alien and interest income is taxable. At this point, your bank would want you to fill out a W-9. And at year 6, the correct form to file is the 1040.

If you have been on an F-1 visa LESS than 6 years, then you are a non-resident alien and the interest income is non-taxable. When you opened the bank account you were to give them a W-8Ben showing your non-resident status. This form expires 3 years later, so you need to give them another one. The correct tax return to file is the 1040NR.

And yes, it DOES matter which form you use. 1040 has a standard deduction that unless you are from India, you have no right to. If you made more than $5000 in income, you could owe tax and penalties for those prior years.

So you did one of three things:

1. Expired W-8Ben, so they started withholding at 30%.
2. Invalid or missing W-9 and they thought you were a resident and started withholding at 28%.
3. You really do file a 1040 and have continuously forgotten to report the interest income, causing the IRS to send a backup withholding letter to the bank, so they are withholding at 28%.

To correct:

1. Find a competent preparer.

2. File the correct return(s). To correct past years, you fill out a 1040X (skip all numbered lines), attach a brand new 1040NR or 1040NR-EZ, form 8843 and a check for the difference in tax (the IRS will bill you later for interest and penalties).

3. For 2008, you file the correct form. If this is a 1040NR, do not show the interest income, but show the withholding and attach a copy of the 1099-INT that shows the withholding to to the tax return.

4. Give the bank the correct form W-8Ben or W-9.

Battle lines drawn over tax measures

BEAVERTON, Ore. -- As Oregon business interests and others band together to fight new taxes in the state, both sides are taking their arguments to voters. In Beaverton, dozens of voters gathered Monday for a debate between the supporters of Measures 66 and 67 and those who would overturn the measures. The tax hikes were passed by the Oregon legislature, then referred to voters, who will decide ...

AMT & Delayed Tax Refunds - What Does It All Mean?

Question: Hey Canadians, Are there any items that are GST exempt but prov. sales. taxable?

Are there any items that are GST exempt but prov. sales. taxable?

ANywhere in Canada but preferably in BC!

Also what are some of the items that are not taxed at all?

Answer: For one, in Ontario, insurance premiums are subject to RST, but they are exempt from GST.

Howard tried for a GST in the 70s

AUSTRALIA would have had a goods and services tax 20 years sooner, had John Howard had his way.

Question: has anyone started a small business to avoid taxes on other income?

just wondering if anyone has started a small business just to get the deductions. i was hit hard by the tax man last year and i would consider myself lower-middle class! i was thinking of starting AVON or something so that i could have some deductions for next year. thanks

Answer: Not a good idea for a couple of reasons.

First, if you start a business without the intention of making a profit then it is a hobby, not a business. Hobby losses are only deductible up to the amount of income... hence, no income = no deductible expenses.

The second reason it is not a good idea is that deductions do not save you taxes dollar for dollar. In other words, if you are in the 15% tax bracket then for every deductible dollar you spend you only save 15 cents in taxes. Doing the math... you end up 85 cents in the hole. It would have been better to pay the 15 cents in taxes and use the 85 cents to do something you enjoy.

Look into other options. Open an IRA or contribute to your employer-sponsored retirement plan. Talk to a tax advisor or financial consultant. There are several better ways to invest in the future while saving on income taxes today.

Best of luck.

Bayport residents to pay slightly less in property taxes

A small jump in the tax levy, combined with a larger drop in property valuations, should result in a drop in taxes for most Bayport property owners.

Small Business Owner Confronts Obama On Raising His Taxes

Question: Is the income received on maturity of LIC policy in India taxable as per Income Tax rules in India?

If the DD for the above item is dated in March 2008 encashed in April 2008, to which year the income is to be accounted?

Answer: It is not taxable as yet. So it is a tax free receipt.

When there is no question of tax, in which year to credit dose not arise.

31.3.2008 Cr. LIC Policy No.123456 maturity amt. Rs. xxx
Dr. LIC maturity amt A/c. to be received Rs. xxx

10.4.2008 Cr. LIC maturity amt A/c. received Rs.xxx
Dr. Bank A/c..LIC maturity amt. DD No.....Rs.xxx

Beacon Hill Roll Call: Dec. 21-25

There were no roll call votes in the House or Senate last week. Beacon Hill Roll Call this week examines the 2009 salaries and other benefits received by the Bay State’s 160 state representatives.

No one owes taxes

Question: If a person doesn't file taxes, but doesn't owe the IRS additional money, what are the chances of a problem?

Yes, she is required to file based on IRS requirements, but if she doesn't owe money will they really come after her?

Answer: They'll probably send a letter....if the IRS computer calculates that she has a refund based on information they have from W2's, they may drop it at that.

Why would she not file? 1) she's required to, from what you said, and 2) the odds are slim that her tax due is exactly zero. She either owes money that she should pay, or she should file to get the refund due to her.

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And there are no penalties for filed returns that have a refund, unless the tax itself was paid after April 15th, and the return filed even later.

Getting Your Financial House in Order

(CBS) With the beginning of the new year, there's no better time to get your financial house in order. But is that huge pile of bills, receipts and bank statements just too daunting to contemplate?

IRS TAX TIPS: e-FILE REQUIRES e-SIGNATURE ( ASL, CAPTIONS & AUDIO))