The Small Business Tax Help Blog

Archive for December, 2009

Question: Dependent child receiving 1099 tax form?

I am 17 years old and i received a 1099 tax form. There is about 2900 listed in Box 7 of the form and i am listed as dependent under my parents. I was wondering how much tax i would have to pay and which ones. self employment tax? income tax? ss tax? medicare? etc…

Answer: Self employment tax, Schedule SE and Schedule CEZ.

about $435

Community Calendar

Submissions for Community Calendar are required 14 days preceding the date of publication. Send to: Niles Managing Editor, Pioneer Press, 3701 W. Lake Ave., Glenview IL 60026. Information may be faxed to (847) 486-7495 or e-mailed to mbottari@pioneerlocal.com.

Self-Employment Taxes

Raymond Baker: Financial Integrity Meets Human Rights

It is estimated that $1 trillion in illicit money leaves developing countries every year. This outflow reduces tax collection, cripples foreign aid, undermines free trade and worsens poverty for billions of people.

Scientology Goes Country! YEE HAW! It’s All About The Money

The Republic of the Marshall Islands is a popular jurisdiction for offshore company incorporation, given the many tax benefits offered in comparison to other jurisdictions. It is, however, very important for entrepreneurs to be aware of the key characteristics of the jurisdictions they consider for incorporation, in order to clearly assess the advantages and disadvantages in relation to their particular business and activities. Given the multitude of tax evasion cases that have taken the forefront in the news headlines over the past few months, it is important to evaluate whether Marshall Islands is a legally compliant and efficient option for your business objectives. Following is a brief summary of common areas of concern for entrepreneurs, such as location, transport, culture, government’s policy, taxes and business factors.

Location

Located in the middle of the Pacific Ocean, just north of the equator, the Republic of the Marshall Islands is a small nation of only 181km2 land surface, split between 29 atolls and 5 islands. For that reason, entrepreneurs who choose to incorporate their company through the Marshall Islands jurisdiction do not usually choose to live there. Virtual office technologies and legislation make it possible to operate a Marshall Islands business from just about anywhere in the world.

Transport

Given that most entrepreneurs and companies conducting offshore business through the Marshall Islands jurisdiction do not actually operate or live on the islands, the issue of transport is negligible in offshore business decision-making. That being said, the Republic of the Marshall Islands is accessible by plane, as there is an international airport located on the Majuro Atoll (Marshall Islands), an army airfield on Kwajalein Atoll (Marshall Islands) and various other small private airports.

Within the Marshall Islands, there are paved roads on the main atolls (Majuro and Kwajalein), there are no railways, and there is one port on Majuro.

Culture

The people who live on the Marshall Islands are known as Marshallese. There is a total population of about 62,000 people, of which 90% are Marshallese and the remaining 10% are expected to be from U.S., Filipino, Australian and other ethnicities. The culture is centered on a structure of clans and lineages that link to land ownership.

The official language on the Marshall Islands is Marshallese; however, as the education system introduces English in the fourth grade, most Marshallese adults are fluent in English.

Policy and Taxes

It is well known that policy and taxes are the main attraction for foreign entrepreneurs in the Marshall Islands, and as a result the Republic of the Marshall Islands is often perceived to be a tax haven. The Marshall Islands is one of the countries the OECD has listed on a ‘grey list’. This consists of countries that the OECD may see as a tax haven but have committed to implementing the organizations international tax standards.

Legislation concerning foreign companies and partnerships is the most relevant to international entrepreneurs and is relatively simple. Limited liability companies (LLC) are subject to the Limited Liability Company Act, which is based on US corporate law from the state of Delaware. Other business structures and corresponding legislation on the Marshall Islands are Corporations (Business Corporations Act), Partnerships (Revised Partnership Act) and Limited Partnerships (Revised Partnership Act). Director and shareholder information, where applicable, is kept private as there is no public registry of companies in the Republic of the Marshall Islands.

Tax is charged on profits sourced within the Marshall Islands, any offshore profits are tax-exempt. Locally sourced profits are taxed at a rate of US$80 for the first US$10,000 of profits, and 3% on all profits exceeding US$10,000; however most foreign companies do not conduct business in the Marshall Islands and therefore do not have locally sourced profits, i.e. they are 100% tax-exempt.

Current Business

Marshall Islands is a major center for offshore business activities, specifically in the maritime industry, but is also useful for other business activities as there are few restrictions on what types of activities businesses can engage in. Companies have the possibility of conducting limited third party trading of securities, act as a fund advisor and/or manager, as well as any other legal business activity except online gaming, banking, trust and insurance.

Given that business activities in the Marshall Islands are conducted with the US dollar currency, business in the Marshall Islands is stable, and minimizes foreign exchange fluctuations.

Company Incorporation

Setting up a business in the Marshall Islands is relatively simple and can be done through a professional services firm specialized in offshore incorporation in order to ensure a smooth process and compliance with the law.

A company incorporated in the Marshall Islands as an offshore business is typically structured as an IBC (international business company). Under this structure, a minimum of one director is required, which can be a person or company, resident anywhere in the world and of any nationality. The IBC is also required to have one secretary, foreign or local, and a minimum of one shareholder.

Annual general meetings are also required but can be hosted anywhere in the world. The IBC must keep records of financial accounts but there is no requirement for annual audits.

Overall, Marshall Islands is a highly attractive choice for company incorporation. With zero-tax benefits and no need to move to the location of the business’ jurisdiction, incorporating in the Marshall Islands is a convenient way of setting up a tax-efficient business without having to alter an entrepreneur’s existing daily life. For these reasons it is clear why the Marshall Islands Companies and Maritime Registry is the 5th busiest in the world.

Melissa Glotzer is a marketing assistant at Healy Consultants. She is a graduate of the University of Manchester Business School, with a BSc in Management with Accounting and Finance.

Editorial : Illusions, reality, and business

That there is an agricultural aura surrounding Morning Glory Farm and a bedrock, founding fathers, even 19th century ethos attached to the preaching of Jim Athearn in his community planner role should have no bearing on the Martha’s Vineyard Commission (MVC) decision on the Morning Glory expansion plan.

Small Business Tax Advice – Children as Employees

Posing The Top 10 Political Questions For 2010

The more you look at the political questions for 2010 the more they all look like one question: Will President Obama and the Democrats continue to lose altitude from their 2006-08 highs and pay a price in the midterms? History and current circumstan…

OC Treasurer Chriss Street discusses CA withholding billions from workers

Question: Can I file head of household & claim my fiance as dependent on 2007 tax return ?

in 2007, He has bought and sold some stock & made $1700 in his traditional ira, earn $1007 interest on certificate deposit in his traditional ira, he cashed in US saving bonds & earn $1245.60 interest. He lives with me all year long. I claim federal Tax Withholding as 2, same as state on my paid check. Can I file as head of household and claim him as dependent on my tax return this year 2007 ?

Answer: You can't file as head of household. To file as head of household, you have to have a dependent who is closely related by blood or marriage, and your fiance doesn't qualify there.

You might be able to claim him as a dependent though. To qualify, he has to had lived with you all year, his gross income has to have been under $3400 for 2007, he can't have been anyone else's qualifying child or filed a joint return with anyone else, and you have to have provided over half of his support.

The money he made in his traditional IRA's doesn't count unless he took it out, so if your question lists all of his income for the year, and he didn't take out any of his IRA money, his income would just be the savings bond interest and would be well under the $3400 limit.

As for providing half of his support, you'd have to calculate that. There is a form on page 32 of the 2006 publication 17 for figuring support. It will likely come down to how much the bonds were that he cashed, and what other money he might have had that he used for his own support. If you didn't provide over half of his own support you can't claim him.

There's one other requirement that could keep you from claiming him, and it depends on where you live. If there is a law or ordinance where you live that makes your relationship illegal, you can't claim him. Believe it or not, some areas still have laws prohibiting cohabitation by unmarried couples. Even if they are no longer enforced, but are still on the books, you couldn't claim him.

So whether or not you can claim him depends on the above issues.

New Laws Effective January 1, 2010

The following legislation will take effect beginning Jan. 1, 2010.

The Other Donald Duck Tax Propaganda Film