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adventurer1

Recommendation On Tax Advisor Please

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(You did however forget, when you said that no one files taxes on 1 March in SA, that provisional taxpayers have to file and pay in any estimated tax shortfall by 28 Feb. So yes all my CGT-liable transactions have actually already been reported to SARS.)

I was referring to the annual tax return when I said that. If one includes CGT liabilities in ones provisional tax calculation and it turns out that they should not have been included, that can be rectified in the annual tax return, which is usually a few months after 28/2, and get a refund of any overpaid taxes.

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Thanks again Superkruz for the links and threats.

Don't understand why I could find any

Some off the discussions I actually remember reading more than a year ago. That's why it was quite frustrating not to find them

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I was referring to the annual tax return when I said that. If one includes CGT liabilities in ones provisional tax calculation and it turns out that they should not have been included, that can be rectified in the annual tax return, which is usually a few months after 28/2, and get a refund of any overpaid taxes.

Not to be pedantic but you did not say that, you said "no one files" which I corrected...furthermore, I'm no tax expert as is clear, but I believe under the rules which may have changed since you left the country, people liable for CGT need to file as provisional taxpayers (sars page says anyone who received anything other than salary income). And yes you can get a refund of overpaid taxes, but why give SARS months of your cash flow with no compensation if you don't have to? They don't pay you interest as far as I know...

Edited by SJ27

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Thanks again Superkruz for the links and threats.

Don't understand why I could find any

Some off the discussions I actually remember reading more than a year ago. That's why it was quite frustrating not to find them

On the house you may also want to chat to a tax practitioner in SA up to date on everything ...there were a bunch of expenses it never occurred to me that I was able to deduct from my tax liability on the house, so just to make sure you have taken off everything you can, will probably very easily pay you for his/her time!

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They don't pay you interest as far as I know...

They do. See section 89quat

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They do. See section 89quat

Helpful to those who don't need the cash to transfer offshore given the reason people in these forums sell their houses ;)

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Anyone willing or in a position to give me a quick (or long) Taxes 101 on reporting foreign income and what are the tax liabilities? Thanks

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Werner, have a look at the MONEY Section of this forums - there are entire threads there with explanations about the foreign tax income; what to do in your first year; differences between the foreign tax credit and foreign tax deduction etc. Also very useful is the IRS publication 514 (look for it on their website). The attached relates to 2014, but nothing has really changed, except the amounts of the foreign tax deduction etc.

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Werner, have a look at the MONEY Section of this forums - there are entire threads there with explanations about the foreign tax income; what to do in your first year; differences between the foreign tax credit and foreign tax deduction etc. Also very useful is the IRS publication 514 (look for it on their website). The attached relates to 2014, but nothing has really changed, except the amounts of the foreign tax deduction etc.

Thanks Malamute, I appreciate the pointing in the right direction.

Sorry if I'm asking some thing that has been answered before, but I didn't seem to find anything regarding this:

 

I own a Pty Ltd in SA with my brother, which will carry on and continue to pay me a salary and profit shares hopefully well beyond the first year after moving to the U.S.

Does this complicate things or is the filing thereafter the same as in first year, mainly filing the 1040 and the 1040NR? (with the FTC and FBAR and such of course)

Oh, and I should mention I'm planning to have a "split residency" 6 month in the U.S. and 6 months in SA, or roughly around there.

Thanks.

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The salary you receive from the Pty Ltd in SA is subject to USA taxation from the day you become a PR (the day you land and activate your visa). You can do 1 of 2 things to avoid/minimize paying tax on this:

 

1. Foreign Earned Income Exclusion - given that you intend to spend 6 months of the year in SA, you will likely not be able to claim this - as the requirements are that you are one of the following - and none of these will be you if you are spending 6 months in the USA and 6 months in SA.

  • A U.S. citizen who is a bona fide resident of a foreign country or countries for an uninterrupted period that includes an entire tax year,
  • A U.S. resident alien who is a citizen or national of a country with which the United States has an income tax treaty in effect and who is a bona fide resident of a foreign country or countries for an uninterrupted period that includes an entire tax year, or
  • A U.S. citizen or a U.S. resident alien who is physically present in a foreign country or countries for at least 330 full days during any period of 12 consecutive months

2. Foreign Tax Credit in simple terms it means that if you earn ZAR 500 000 (and for simplicity, I am going to say that is equal to $50 000), and SARS deducts R180 000 ($18 000 tax), when you do your USA tax return, you have to declare that entire $50 000 as income. If the IRS assesses the tax on that as $20 000, then you claim a tax credit of $18 000 - as you have already paid that amount to SARS - and the USA has a tax treaty with SA that covers that - but you will still owe the IRS the remaining $2 000, even though the income was earned outside of the USA.

 

Remember that depending on which state is your tax residency, you may pay taxes on your SA income to that state as well. Some states have no state income tax, but the majority do, but rules differ dramatically.

 

As for filing - ONLY in your first year will you file a 1040NR - and then only for the period of the year BEFORE you landed on your Green Card (e.g. if you land on 01 October 2015, you will submit the 1040NR for the period 01 Jan 2015 to 30 September 2015 - and you won't pay tax on the income earned outside of the USA - but if you did earn income in the USA - even as a NR - you would pay tax on that). For the period 01 October to 31 December, you submit the 1040 and all that income is taxable no matter where it is earned - with the provision of the 2 exclusions mentioned above.

 

Each year after that, it is the 1040. Do NOT submit a 1040NR - one of the statements you have to attest to when you naturalize is that at no time have you represented yourself as a non resident of the USA to avoid taxes - and in fact you have to state if you have ever submitted a return as a non-resident.

 

Also, remember that SA taxes you on a RESIDENCY basis - and if you are a resident for 180 days or more - then SARS will come after you for your USA earned income too, as you will be deemed a resident of SA. There are entire documents out there about this situation - and how to determine your residency for tax purposes.

 

....but, for the USA, no matter where you live, or where your money is earned, you submit an IRS return, and most likely a State tax return too. If this dual residency is going to be long term, strongly suggest you get a tax expert to handle things for you.

 

Also, being even 1 day over 6 months outside of the USA resets the clock to zero when it comes to the 5 year wait time to become a citizen. It may also mess with your physical presence requirement to be actually present in the USA for at least 30 of the prior 60 months when you apply for citizenship - not to mention having to explain such long absences from the USA - it could well jeapordize your citizenship application in due course.

Edited by Malamute

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Wow! Thanks for the helpful insight on the citizenship part, I haven't even researched things that far. Then I'll just have to make sure that I spend well over 6 months in the U.S. and then for tax purposes less than 6 months here in SA.

 

If we're landing in the U.S. the first week of Jan 2016, will I file the 1040NR just for the first few days, will that even make a difference? Of course it's best to represent everything truthfully and exactly, I was just thinking if I should just file as a resident for the full year.

 

We're gonna settle in South Carolina and I know there's State tax there, I'll have to look at how will that impact things.

 

Thank you once again for your help.

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Has anyone successfully (from this group) filed their own first tax? Without going to an agent? We will use an agent but want to prepare for worst case scenario if we are stuck and need to do it ourselves.

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Yes, I did. I landed Dec 2008, so I had to do it in 2009 for the 2008 tax year while still resident in England. I spent a LOT of time downloading the guides applicable on the IRS site - which really do lay out - with many examples - of what to do. I printed quite a few out, spent time sitting down, reading, going through with a highlighter etc. Very time consuming, but ultimately great for understanding. When I did go to someone here, I figured out pretty quickly, that they didn't know what they were talking about (e.g. insisting that I produce my W2 for the Jan-Dec period from my employer in England - and when I said that the tax period is different, and that they don't produce W-2 forms, the person didn't really know what to do).

 

I continue to do it myself, but that first year I did it manually - i.e. filled in the forms by hand - as the online standard software like TurboTax and H&R Block that people use here don't really cater for the first year immigrant scenario. I have subsequently used those - and filed myself - every year.

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Yes, I did. I landed Dec 2008, so I had to do it in 2009 for the 2008 tax year while still resident in England. I spent a LOT of time downloading the guides applicable on the IRS site - which really do lay out - with many examples - of what to do. I printed quite a few out, spent time sitting down, reading, going through with a highlighter etc. Very time consuming, but ultimately great for understanding. When I did go to someone here, I figured out pretty quickly, that they didn't know what they were talking about (e.g. insisting that I produce my W2 for the Jan-Dec period from my employer in England - and when I said that the tax period is different, and that they don't produce W-2 forms, the person didn't really know what to do).

 

I continue to do it myself, but that first year I did it manually - i.e. filled in the forms by hand - as the online standard software like TurboTax and H&R Block that people use here don't really cater for the first year immigrant scenario. I have subsequently used those - and filed myself - every year.

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Lol malamute that made me giggle. The part about the guy not knowing what to do regarding how our tax year runs from April to April. :D

 

Unless I can be sure to find someone that knows whats going on i'd probably do it myself to save myself any problems. ;)

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