The last tax return before the new U.S. tax law. How can individuals avoid penalties and save taxes?

The last tax return before the new US tax law. How can individuals avoid penalties and save taxes? China News Service, March 12. According to the American Overseas Chinese News Network, the 2018 personal tax filing season...

China News Service, March 12. According to the American Overseas Chinese News Network, the 2018 personal tax filing season will open on January 29 and will end on April 17. Since April 15th this year falls on a Sunday, and April 16th is a holiday in Washington, the personal tax filing deadline has been pushed back to April 17th. Accountant surnamed Chen from Southern California reminds you that another very important date is March 15, which is the tax filing deadline for small business corporations (S Corporations) and limited liability companies (LLCs) with more than one shareholder. Accountants reminded that new Chinese immigrants must prepare early, otherwise they will be severely fined.

Accountant Chen said that especially new Chinese immigrants who run small companies, if they have problems, they should apply for an extended tax return (Form 7004) as soon as possible. Otherwise, if they are delayed, the penalty will be heavy, up to more than 5,000 US dollars per year. In the United States, taxes are deducted first. Joint stock companies and limited liability companies also need to prepay 2018 state taxes of US$800, which must be paid before April 15. Accountant Chen explained that there are often cases where new Chinese immigrants do not understand the prepayment of taxes, and there are many instances of delays and severe fines.

Accountant Chen said that in terms of personal income tax, whether you are a U.S. citizen, a foreigner or an international student holding a U.S. work visa, as long as you have income in the United States, you have the obligation to pay taxes.

She pointed out that personal income tax reporting information must be complete, including wages, real estate taxes, mortgage interest, etc., and pay special attention to the 1099 tax form used for self-employment income tax reporting, or other income tax reporting such as stocks.

>Accountant Chen gave an example. One of her clients sold stocks. Due to insufficient information collection, he forgot to file a 1099 form for stock income last year. This year, the IRS demanded $10,000 in taxes and fines. Therefore, if the information is incomplete and it is too late to submit the tax in time, you can estimate the tax amount based on previous years' income and submit the advance tax in time before April 15.

>Accountant Chen explained that even if you apply for an extension of tax filing, you still need to pay prepaid tax on time. Applying for an extension to file a tax return does not mean late payment of taxes, but only an extension of time to submit the tax return. Estimate the amount of tax you should pay based on your income and pay it in advance. Otherwise, the IRS will calculate interest based on the date of delay and charge interest on the late tax payment. If delayed, fines are severe.

In addition, taxpayers who run small businesses usually have many expenses, such as home office expenses, gasoline expenses, etc., and must keep corresponding receipts. To claim tax deductions for expenses, you must have proof of receipts or bank statements. You cannot just report expenses without receipts. Moreover, when reporting tax deduction expenses, avoid false reporting of expenses and expenses, submit reasonable tax deduction expenses, and avoid disproportionality between income and expenses.

Situations with low income and high expenses will attract special attention from the IRS. Another part that easily attracts the attention of the IRS is cash income. Chinese small business taxpayers may have a lot of income that only accepts cash. They need to pay attention to reporting it truthfully, otherwise the IRS will trace it and the consequences will be serious.

This year is the last year to file taxes using the old tax law rules. With the implementation of Trump's new tax law next year, taxation will change a lot. This time, property taxes and mortgage interest are all tax deductible for the last time, so as long as they are available, submit the documents to the accountant. Next year will be completely different. For example, because the new tax law stipulates a 20% tax reduction for corporate companies, tax filers who run small businesses and open small companies can save more taxes than salaried taxpayers. For example, if a company employee is a part-time contractor and a W2 tax filer who receives a salary from the company, if he can reasonably transfer part of his salary income to file a tax return on Form 1099, he will save a lot of tax.

If you are eligible to file Form 1099, there will be a 20% tax reduction according to the new tax law. However, it should be noted that the new tax law has certain restrictions on the 20% tax reduction rule for small companies in the service industry. To obtain the full 20% tax reduction, the family income needs to be less than $310,000 (or less than $150,000 for an individual). Therefore, if some company employees and taxpayers who are also contract contractors can change their salary income report from W2 to Form 1099, it will be very cost-effective to save a lot of tax.

In this case, there will also be income restrictions. It is best if the family income is within 400,000 US dollars. If the household income is less than US$310,000, you can enjoy a 25% tax reduction on all income; above US$310,000, the provincial tax benefits will begin to gradually decrease. For every US$1,000 above, the tax reduction will be reduced by less than 20%. If it exceeds US$400,000, you will no longer enjoy the tax reduction benefits.