Tax & Accounting Blog

NRA Withholding and Reporting on Payments to Foreign Nationals – Part 11: What if the Payment Includes Both U.S. Source and Foreign Source Income?

NRA Withholding and Reporting on Payments to Foreign Nationals – Part 11: What if the Payment Includes Both U.S. Source and Foreign Source Income?

If you know that the payment includes both U.S. source and foreign source income and you do not have a reasonable allocation of the U.S. source amount, you must treat the entire amount as U.S. source income. The recipient of the income can submit a U.S. tax return with an allocation of the income between … Read More

Medicare Surtax on Net Investment Income Goes into Effect on January 1, 2013

Medicare Surtax on Net Investment Income Goes into Effect on January 1, 2013

Under the 2010 Health Care reform legislation, a Medicare tax will, for the first time, be applied to investment income beginning in 2013. A new 3.8% tax will be imposed on net investment income of single taxpayers with AGI above $200,000 and joint filers over $250,000. Net investment income is interest, dividends, royalties, rents, gross … Read More

NRA Withholding and Reporting on Payments to Foreign Nationals – Part 10: Do I Have to Withhold on Payments for Services Performed Abroad?

NRA Withholding and Reporting on Payments to Foreign Nationals – Part 10: Do I Have to Withhold on Payments for Services Performed Abroad?

Compensation for services performed abroad is foreign source income. For audit purposes, the place where the services are performed should be indicated in the agreement with the individual. It is not sufficient that the location where the services performed is indicated on the invoice since this is considered by the IRS to be a self-serving … Read More

Open Transaction Doctrine does not apply in insurance company demutualization case.

Open Transaction Doctrine does not apply in insurance company demutualization case.

On July 9, 2012, a federal district court in Arizona ruled that the taxpayer could not apply the “open transaction” doctrine in a case involving stock received from an insurance company that demutualized. Background. A mutual insurance company has no shareholders.  Instead, the policyholders have an ownership interest in the company, in addition to having … Read More

NRA Withholding and Reporting on Payments to Foreign Nationals – Part 9: How Do I Find Out if the Payment Is U.S. Source Income?

NRA Withholding and Reporting on Payments to Foreign Nationals – Part 9: How Do I Find Out if the Payment Is U.S. Source Income?

The source of income is determined under U.S. tax rules based on the type of income. Compensation for personal services, whether employment or self-employment, is generally sourced where the services are performed, not where the income is paid. Therefore: Income for services performed outside the U.S. is foreign source income and is not subject to … Read More

Final Regs Clarify Economic Effect Requirement for Estate and Trust Donations

Final Regs Clarify Economic Effect Requirement for Estate and Trust Donations

On April 13, 2012, the IRS issued final regs providing guidance under Code Sec. 642(c) with regard to the federal tax consequences of an ordering provision in a trust, will or local law that attempts to determine the tax character of the amounts paid to a charitable beneficiary. Specifically, the regs confirm that a provision in a … Read More