How to file TAX in the US as Foreign Nationals if you have rental income (not net) this year?
1. We are required by IRS (www.irs.gov) to send you 1042s by Jan 31st, 2012 via physical mail. We will send you the Annual Statement around Feb 1st, 2012 via email after 1042s were mailed out.
2. Using the Statement to put the totals for each category onto the spreadsheet (房屋出租明細SCH-E.xls or in pdf format: 房屋出租明細SCH-E.xls.pdf) and provide your Accountant with 1042s (from Step 1) and the Spreadsheet (from Step 2) of your expense summary. Please ensure you include your personal expenses (e.g. Travel) related to the purchase in the “Other Expense” section.
- Accountant will need the following documents to be signed and sent back to Accountant as well.
For those already has ITIN and Social Sec. all you need to provide are:
1. HUD (First three pages of your closing document in table format).
2. Income/expense sheet (From Step 2)
3. ITIN & DOB for each home owner
For those first-time home buyers who do not have ITIN (your tax ID which will be applied by Accountant)
1. HUD (First three pages of your closing document in table format)
2. Income/expense sheet (From Step 2)
3. Clear Copy of your valid passports.
4. Form w-7 and Power of attorney (Accountant would prefer to fill them out for you and let you sign it
(w-7,2898, February 02, 2012.pdf)
Christine Chew & Associates is an independent CPA firm, they can assist their tax filing, but you already have your preferred accountant, please contact your preferred accountant directly. 407.894.7259 or cchew1@cfl.rr.com.
Basic Information on Foreign Nationals, here are the matters that you should pay attention to:
1. If you own the property under your personal name, you will need to file Form 1040NR (NR is Non Resident). In order to file personal tax return, a Tax ID is needed, and this ID usually be applied when you file your fist 1040 NR. Before you obtain this ID (A.K.A ITIN, Individual Tax ID Number), your property management, required by law, has to withhold 30% of your gross income unless a valid ITIN number is provided to them. Because of this reason, you may want to file the ITIN number earlier instead of waiting until the beginning of next year.
Each Non-resident alien has $3650 tax exemption. In another word, the net rental income above $3650 will be taxed at the rates of 10%, 15%, 28 % (up to $7000, $15000, $40000) depends on your income range. If you have loss, this loss can be carried to next year to offset the income until the loss exhausted. When you sell your investment property, Title agency is required to withhold 10% of your gross proceeds. This withholding will be released after you file the tax return with a valid ITIN number. You can also claim this withholding and IRS (US tax authority) will usually release this withholding after one month.
2. There are benefit of owning the property under LLC. If you would like to own this property under a LLC, you still need a personal tax ID to apply LLC. The advantage is that if you have more than one shareholders, it will be easier, in the future, to sell or change ownership of business without paying the transfer tax when you sell a property. It also has the advantage for Estate purpose in US. If the owner of the property passed away, the Estate tax will be 47% for anything over $65,000. Owning the property under LLC will not impact your tax, the net rental income form LLC will pass to each shareholder by their percentage and than file 1040 NR by each individual shareholder.