Q. One client received legal status in US last year (2012) in April. This will be the first tax return to file. He will be filing married filing jointly. The spouse does not have any income. He never received W2 or 1099. I assume, regardless of the fact that he has neither one of these forms, he will file and pay tax as freelancer even thou he absolutely falls under category of employee, correct? Since he received his legal status in April 2012, can he count his income as of April or it absolutely has to be January 2012?
A.
#1:is his legal status under the INS rule or IRS rule??
#2:Then he can file his US return as either MFJ or MFS(even if his spouse is a non resident alien) since her spouse has no taxable income that she earned in US whether or not his spouse is in US or in her native country. If he or his spouse is a resident for tax purposes at the end of the year of 2012, and the other spouse is a nonresident, he can elect to treat both he and his spouse as residents for the entire year. This rule applies even if the spouse who is a resident at the end of the year is a dual-status alien (a nonresident at the beginning of the year). However, if he and his spouse makes this election, they are both required to report their worldwide income for the entire year on their joint return, MFJ, NOT MFS.
#3:I do not think a freelancer falls under category of EE, I guess it depends on the situation; A freelancer is a person who is self employed; as an ER, trying to get a freelancer to handle a project within certain hours, say 9 to 5, or at a specific location, such as your office, can actually open you up to some trouble. If you’re based in the U.S, for instance, such requests can lead the IRS to consider the freelancer to be your EE, rather than an independent business. That can make you liable for payroll taxes and other expenses associated with hiring an EE. Luckily, for most projects, there’s no need to have a freelancer work any way other than the way he would typically handle a project. Freelancers operate their own businesses. That means working with a freelancer is more like working with a vendor than an EE. On the surface, freelancers don’t look so different from employees: you assign them projects and pay them for their work. But if you consider how freelancers will interact with you, how they complete projects and even how they are paid, freelancers are a lot different than EEs. It can require a shift to start working with freelancers, rather than trying to manage them like EEs.
As long as he is an indepednenst contractor, UNLESS he is an EE, he needs to file return as long as the amount on Sch C on line 29/ 31 is $400 or exceeds $400 during the year of 2012 and also as long as the amount on Sch SE line 2/ 3 is also $400 or exceeds $400, he needs to pay self employment tax.If he is are filing as a sole proprietor and/or a self-employed individual,he generally has to make estimated tax payments if he expects to owe tax of $1,000 or more when he files his 2012 return;however, he does not have to pay estimated tax for the current year if he had no tax liability for the prior year of 2011;he was a U.S. citizen or resident for the whole year 2012; his prior tax year of 2011 covered a 12 month period………………………
#4:Is he a US resident under the US INS rule( I mean is he a US permanent resident, i.e., a green card holder)??? OR Is he a US resident for tax purposes ?? OR in general, You are a dual status alien when you have been both a resident alien and a nonresident alien in the same tax year; so is he a dual status alien becoming a resident alien at end of year of 2012??? As long as he became a US resident alien, a green card holder, (or a US resident for tax purposes UNDER the IRS rule) under the INS rule, then, he is generally taxed in the same way as U.S. citizens. This means that his worldwide income and US source income that he earned before Apr 2012 is subject to U.S. tax and must be reported on his U.S. tax return. Income of resident aliens is subject to the graduated tax rates that apply to U.S. citizens.
#1:is his legal status under the INS rule or IRS rule??
#2:Then he can file his US return as either MFJ or MFS(even if his spouse is a non resident alien) since her spouse has no taxable income that she earned in US whether or not his spouse is in US or in her native country. If he or his spouse is a resident for tax purposes at the end of the year of 2012, and the other spouse is a nonresident, he can elect to treat both he and his spouse as residents for the entire year. This rule applies even if the spouse who is a resident at the end of the year is a dual-status alien (a nonresident at the beginning of the year). However, if he and his spouse makes this election, they are both required to report their worldwide income for the entire year on their joint return, MFJ, NOT MFS.
#3:I do not think a freelancer falls under category of EE, I guess it depends on the situation; A freelancer is a person who is self employed; as an ER, trying to get a freelancer to handle a project within certain hours, say 9 to 5, or at a specific location, such as your office, can actually open you up to some trouble. If you’re based in the U.S, for instance, such requests can lead the IRS to consider the freelancer to be your EE, rather than an independent business. That can make you liable for payroll taxes and other expenses associated with hiring an EE. Luckily, for most projects, there’s no need to have a freelancer work any way other than the way he would typically handle a project. Freelancers operate their own businesses. That means working with a freelancer is more like working with a vendor than an EE. On the surface, freelancers don’t look so different from employees: you assign them projects and pay them for their work. But if you consider how freelancers will interact with you, how they complete projects and even how they are paid, freelancers are a lot different than EEs. It can require a shift to start working with freelancers, rather than trying to manage them like EEs.
As long as he is an indepednenst contractor, UNLESS he is an EE, he needs to file return as long as the amount on Sch C on line 29/ 31 is $400 or exceeds $400 during the year of 2012 and also as long as the amount on Sch SE line 2/ 3 is also $400 or exceeds $400, he needs to pay self employment tax.If he is are filing as a sole proprietor and/or a self-employed individual,he generally has to make estimated tax payments if he expects to owe tax of $1,000 or more when he files his 2012 return;however, he does not have to pay estimated tax for the current year if he had no tax liability for the prior year of 2011;he was a U.S. citizen or resident for the whole year 2012; his prior tax year of 2011 covered a 12 month period………………………
#4:Is he a US resident under the US INS rule( I mean is he a US permanent resident, i.e., a green card holder)??? OR Is he a US resident for tax purposes ?? OR in general, You are a dual status alien when you have been both a resident alien and a nonresident alien in the same tax year; so is he a dual status alien becoming a resident alien at end of year of 2012??? As long as he became a US resident alien, a green card holder, (or a US resident for tax purposes UNDER the IRS rule) under the INS rule, then, he is generally taxed in the same way as U.S. citizens. This means that his worldwide income and US source income that he earned before Apr 2012 is subject to U.S. tax and must be reported on his U.S. tax return. Income of resident aliens is subject to the graduated tax rates that apply to U.S. citizens.
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