The Small Business Tax Help Blog

Archive for the ‘Tax Withholding’ Category

Question: Need help – How can a tax resident in India claim for double taxation relief?

My company is based in Singapore. We have recently made a royalty payment (for the use of copyright) to an author who is a tax resident in India.

As this royalty income is deemed to be sourced in Singapore, we need to withhold tax on behalf of our local tax authority.
Singapore has a tax treaty with India that will allow this Indian author to claim for tax credit/ tax deduction in India.

However, we are unsure about the procedures.

What documents will this Indian author need to submit to the Indian tax authorities to claim for the tax credit?

Will he require a receipt/statement from the Singapore tax authority to prove that he has already been taxed once in Singapore?

I hope someone who has experience in the procedures can give me some advice. Thanks!

Answer: When someone from the US claims treaty relief, this is done by attaching a statement to the return describing the treaty article, the type of tax relief, and the amount of the relief, as well as an explanation why the taxpayer is eligible for the relief. Showing proof of the Singapore withholding should be sufficient evidence to show that he is being taxed in Singapore.

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Practical Accounting and Taxation in India: Introduction

Question: Does it make sense to file a DBA for myself if Im working as Independent Contractor?

Im working as Independent Contractor and provide service for a company but am not on the payroll – get paid check and no taxes withheld?

Answer: yes, register your company as a Sub S or LLC. You will then be able to deduct business expenses (such as gas or mileage on your vehicle used to get to job sites) prior to paying yourself a salary. You should find out about having their insurance cover you while on their sites (liability, professional and worker's comp), and get your own policies.

You may want to email the state you live in to find out if getting a 1099 is legal...where I work the state made us pay taxes and penalties on 1099's for independent contractors.

State withholding tax idea revived

A state senator has revived a proposal to require companies to withhold 3% of their payments to independent contractors.

Question: If you are retired from a major company receiving a pension do you qualify for the stimulus package?

This came from the Q&A on IRS.ORG..
Q. Are pension and annuity amounts provided by state, federal or private sector employers considered “qualifying income” in determining eligibility for the economic stimulus payment by those who are not otherwise required to file?

A. No, these payments are not included in the legal definition of “qualifying income.” [Updated 5/12/08]

If this true then why do you pay federal withholding taxes on your pension?

Answer: Pension is taxable income, but not qualifying for the $3000 threshold. But you still may qualify.

Here's the IRS wording:
"You're eligible if you have a valid Social Security Number (SSN), can't be claimed as a dependent on a tax return and have either an income tax liability or "qualifying income" of at least $3,000."

If you have enough pension income to generate a tax liability of $1, then you would get the $300 (single; it is $600 for married person) minimum rebate. From there the rules are the same for everyone...$300 - $600 rebate for single taxpayer, $600 - $1200 for married.

So you either qualify for the rebate, or you received all your withheld taxes back in the form of a tax refund.

'Oral sex' definition prompts school district to pull dictionaries

A school district in Riverside County has pulled the Merriam-Webster's 10th edition dictionary from school shelves because it includes the term "oral sex."

Making Work Pay tax credit might lighten checks for some in 2010

Anyone still waiting for their first paycheck of 2010 might be surprised to notice it is smaller than usual.

Employee Forms for Determining Income Tax Withholding

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