Preparing your United States Income Tax Return
In the same way as in Brazil, an Income Tax declaration is made annually in the United States, which is proof of everything you earned and spent throughout the year. Despite being a very recurring service for individuals and companies who need to declare their income tax, there are still questions that we will answer in our article.
There are three different types of taxes in the US: income tax, inheritance tax and gift tax. Income tax is applied to net annual income and its rate varies from 10% to 37%.
Inheritance tax on a nonresident foreign individual who leaves U.S. real estate or shares in entities that own real estate (the tax can reach 40% of the equity value of their assets).
Finally, there is also the gift tax, which reflects when a non-citizen foreign individual donates US real estate to another person. The value of this tax can be as high as the tax on inheritances, depending on the value of the donation.
We recently recorded a video with one of our beloved partners, Leão Group, where we discussed the importance of declaring income tax here in the United States. Watch below.
Importance of declaring income tax in the United States
Fisical and legal persons
Physical person
Income tax in the USA has several particularities, especially when it comes to foreign income being declared in the country, which is why it is necessary to have help from a specialized company to do it in accordance with the standards of American laws.
The deadline for submitting Income Tax in the country is April 15th of the year following the reference year. Taxpayers who are unable to file their declaration by the due date may fill out a form requesting a ‘request for extension’ of the tax submission deadline, but not payment of the same if it is due.
Legal person
Income tax happens once a year, at the end of the fiscal year, which generally happens on December 31st or depending on the company’s tax regime and its option to have the fiscal closure in a given quarter.
The company’s tax model in the US will dictate how the company will be taxed.
The value will vary according to the company’s profit. Organizations that qualify as an LLC – Partnership (here in Brazil called a Limited Liability Society – “LTDA”) do not need to pay this tax. In this case, the charge is made to the individual, after the tax profit is divided among its members (with a rate varying between 10% and 37%).
However, if the company is a C-CORPORATION (similar to a Public Limited Company in Brazil, known as “S/A”), it will have to pay 21% in federal income tax, and its shareholders will also pay 10% and 37% if they receive dividends from it. It is important to remember that each state has its specific legislation and can also tax its companies at state level.
What do I need to file a United States Income Tax Return?
You must have your ITIN or Tax ID Taxpayer Identification Number on all tax documents. If you are not eligible for a Social Security Number (SSN), you must have an ITIN.
Having an ITIN does not mean the following:
That you are permitted to work in the US;
That you are eligible to receive social security benefits;
What are the tax differences in different company models?
LLC (Limited Liability Company)
An LLC (Limited Liability Company) means a Limited Liability Company, it has the separation and protection of private assets from the organization’s assets, much like C-CORPORATIONS.
An LLC is a non-tax paying entity. However, losses and profits are passed on to members, who pay US personal income tax every year if they live and are US citizens. Foreigners who do not live in the USA are also subject to paying taxes in the country.
It is important to remember that there are some states that do not have state taxes on the income generated, such as: Florida, Alaska, Nevada, South, Texas, Dakota, Wyoming and Washington, reducing the partners’ tax obligations every year.
S-CORP (type S corporation or S corporation)
S-CORPs are a very common type of company in the United States. The company’s partners are called shareholders, only American citizens or tax residents in the country can be part of S-CORP, in addition, this type of company can only have 100 shareholders.
Just like LLC’s Partnerships, the tax profit generated is transferred to the shareholder who will pay taxes on the individual’s progressive table.
C-CORP (type C corporation or C corporation)
A C-Corp is a well-known standard commercial institution
