US Tax
Background:
US tax laws are based on residency as well as citizenship. That is, the US taxes both its residents and citizens on their global income irrespective of where they live. A “US person” includes the following:
• US citizen
• Green Card holder
• Person meeting Substantial Presence Test (physical presence in US)

Tax Cuts and Jobs Act:
US Congress approved major tax reforms on December 22, 2017. Such legislative reform, effective from Calendar Year 2018 till 2025, is referred to as ‘Tax Cuts and Jobs Act of 2017’. Major areas impacted:

1. Federal tax slab rates;
2. Change in Standard deduction;
3. Estate Tax Lifetime Exemption Limit;
4. Deemed Repatriation Tax (Accumulated profits of specified foreign corporations are deemed to be repatriated to US and are taxed subject to conditions); and
5. Others.

Taxability in the US:
1. Taxes levied at different levels - Federal, State, Local taxes
2. Based on calendar year
3. US persons are liable to pay tax and file tax returns on global income.
4. The federal tax slab rates as amended by Tax Cut and Jobs Act are as below:

Taxable Income

Ordinary Federal Tax Rate

Single($)

Married Filing Jointly ($)

$ -

$ -

10%

$ 9,525

$ 19,050

12%

$ 38,700

$ 77,400

22%

$ 82,500

$ 165,000

24%

$ 157,500

$ 315,000

32%

$ 2,00,000

$ 400,000

35%

$ 5,00,000

$ 600,000

37%


5. Due date for Federal tax returns:

a. 15th April (without filing extension)
b. 15th October (Extension to be filed before 15th April) 

Exception: US Persons residing outside US can file tax returns by 15th June without filing extension and 15th October if extension is filed by 15th April.

6. Married individuals may file tax returns jointly or separately 
7. US person being tax resident of foreign country, may qualify to exclude certain foreign earned income (being current income such as salary, etc) upto $ 103,900 for 2018. The said amount is adjusted for inflation each year.
8. US persons may also be subject to the following: 

a. Gift Tax: 
• Donor, being US person, liable to pay gift tax
• Annual exemption of $15000 for 2018 per recipient. Gift in excess of $15000 reduces the lifetime exemption of $ 11.18 million for 2018 
• Gift Return to be filed if gift exceeds annual exemption
• Tax rate of approx. 40%
b. Estate tax:
• Payable from estate of deceased US person on worldwide assets 
• Lifetime exemption of $ 11.18 million for 2018 
• Gifts in excess of annual exemption adjusted against lifetime exemption
• Tax rate of approx. 40%
• Estate-tax return to be filed within 9 months of death of US person

Key US Reporting Requirements (amongst others):

Type

Form

Threshold

Due Date

Foreign Bank and Financial Accounts (FBAR)

FinCen Form 114

More than $10,000 in aggregate value of all financial accounts held outside the US

 

April 15th

 

Automatic extension to 15th October 

Foreign Account Tax Compliance Act (FATCA)

 

Form 8938

Total value of specified assets exceeds:

A) $ 50,000 on 31st December; OR

B) $ 75,000 at any time during the calendar year.

(for joint filers, the threshold is double )

April 15th OR

 

October 15th (if extension filed for Tax Return)

 

Gift received from foreign person/ estate

Form 3520

A)     More than $100,000 from foreign person / foreign estate

B)     More than $15,797 (for 2017) from foreign corporations / foreign partnerships

 

April 15th OR

 

October 15th (if extension filed for Tax Return)

 

Financial Interest in Foreign Entities

Form 5471 (Foreign Corporation)

 

Form 8865 (Foreign partnership)

Person having certain level of interest in foreign entity (several conditions stipulated)

April 15th OR

 

October 15th (if extension filed for Tax Return)

 


Any data mentioned above is subject to change as may be regularly updated and notified by US IRS.