Question 1

I want to start a business, how do I decide on the type of the company?"

Accepted Answer

Read the article in Chinese on this website listed as "The type of company and its taxation”. If it is still unclear or you cannot read Chinese, you may contact us for consultation.

Question 2

Can foreigners register a company in the United States?

Accepted Answer

Yes, but there are some restrictions on the type of company foreigners (people who don’t have a green card or US citizenship) can apply for. Generally, they can apply for C Corporation or LLC but not S Corporation.

Question 3

Which type of company is better, LLC or S Corporation?"

Accepted Answer

LLC has unlimited number of partners, while S Corporation's shareholders cannot exceed 100 and must be green card holders or U.S. citizens. There are a few options with LLCs. You may choose to file Schedule C with the individual tax return (Form1040); or choose to file as C Corporation (Form 1120), S Corporation(Form 1120S); or partnership (Form 1065) if the IRS approves it.

Question 4

How does an employer determine whether an employee is legally eligible to work in the United States?

Accepted Answer

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Question 5

How do I manage tips?

Accepted Answer

Employees need to do three things: Record tips daily, report tips to the employer unless less than $20 and declare all tips on their individual income tax returns.
 
It is the employer’s duty to keep records of tip information and reports, collect taxes on tips, declare tips in certain forms, and pay or deposit taxes.

Question 6

Is the filing of the tip related to employer’s tax return?

Accepted Answer

Yes. IRS levy social security tax by 12.4% and medicare tax by 2.9%. Both the employee and employer pay equally on them. When the employer files an annual tax return such as 1065 and 1120S, the IRS allows partners or shareholders to get non-refundable Credit equal to what the employer paid during the tax year. For details on how to use this tax law, please contact us for consultation.

Question 7

Given the same wage, why does one person get paid more and another less?"

Accepted Answer

There are various deductions in wages: 1) Social Security Tax; 2) Medicare tax; 3) Federal income tax; 4) state income tax (some states has no income tax); 5) county income tax (some counties don't).
 
The first two, social security tax and medicare tax, add up to 7.65%. These apply equally to everyone. The difference is in the withholding of the last few income taxes. The more withheld, the smaller the net amount on the payroll check. Another key factor is the number of dependents. A family with more elderly or children will usually get less withholding since they pay less income tax.

Question 8

Why can some families get tax deductions on home loan interest and some cannot?

Accepted Answer

First, understand the difference between the standard deduction and itemized deduction in the individual tax return (Form 1040). These two deductions are used to calculate taxable income, and only one can be selected. The main items of itemized deduction are on the Schedule A, which include: the portion of medical expenses that exceeds 7.5% of adjusted gross income (AGI), the eligible interest on home loans, eligible contributions, state and local taxes, and casualty and theft, etc. However, if the total of these items in Schedule A is less than the standard deduction (e.g. $12,200 for single in 2019 and $24,400 for couples), the taxpayer can only use a standard deduction. As a result, all items in Schedule A, including interest on loans, cannot be used to reduce your tax bill.
 
Conversely, if the total number of schedule A (itemized deduction) is greater than the standard deduction, itemized deduction is used in this case and the interest on the home loans can be partially or all tax deductible. Since Trump took office, the federal government has made tax reform making the majority of families’ itemized deduction less than the standard deduction. Therefore, most families can't deduct their home loan interest. Additionally, property tax on homes is no longer part of the itemized deduction, regardless of how large the amount is.

Question 9

I have a house for rent. How to prepare tax return for it?

Accepted Answer

You need to use Schedule E. Rental income is easy to calculate, but the expense is sporadic and needs to be recorded year around. There is a Summary of Rent Income and Expenses form on our website to help you get numbers. Download this form, and fill in the annual rental income and associated expenses for your CPA. Please note that the auto expenses are calculated by mileage and government standards, and the actual cost of gas, car repairs and car depreciation can no longer be included in auto expenses.

Question 10

What is the difference between an employee and a subcontractor?

Accepted Answer

If a company has control over when and how a person works, the person is an employee of the company, and the company pays in the form of W-2. If the company has no control over these, the person is then a subcontractor, and the company issues 1099-Misc. For W-2 compensation, both company and employees are subject to a 7.65% federal payroll taxes (Social Security Tax and Medicare Tax). The company also pays state unemployment (or reemployment) tax. For 1099-Misc compensation, the employee can deduct related cost and expenses, and pay self-employment tax on the net income. Half of self-employment tax can be the adjustment to taxpayer’s gross income. Companies do not bear the employee's self-employment tax nor the state unemployment (or reemployment) tax.

Question 11

How do 1099-Misc receivers prepare tax returns?

Accepted Answer

We found that many people who receive 1099-Misc don’t have their cost
and expense information ready when coming to file their tax return. Some also aren't aware that the reasonable costs and expenses incurred can be used as deductions. Whenever there is a figure in item 7 of 1099-Misc, it indicates the self-employed income of the taxpayer and the related costs and expenses are deductible on the Schedule C. Cost and Expenses related to the 1099-Misc include: (1) vehicle mileage for the business; (2), office expenses; (3) equipment rent; office rent (if any), utilities, telephone, etc.
 
If income is large and there are numerous fees, we recommend you hire an accountant for bookkeeping. If income is small, you may do your own bookkeeping and retain all original documents and receipts.

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