August, 2022 | Taxleaf

Real Estate Agents Win Again!

Real Estate Agents are uniquely placed to take advantage of the solutions offered to their clients when faced with the consequences of FIRPTA.

FIRPTA is short for the Foreign Investment in Real Property Tax Act. It affects property sold with a value greater than $300 000 or if the purchaser is not living in the home as their primary residence.

If a foreign national sells a property that meets these requirements, then 15% of the sales price is retained to cover any taxes due. If the property is held in a trust, then the retention increases to 35%.

What Can You Do to Avoid This?

There are various legal structures that one can use to avoid being liable under FIRPTA.

You can:

Purchasing the property in an LLC with more than one partner.
Make use of a trust structure set up by an accountant before the sale
Utilize a 1031 exchange.
Use the property as the buyers’ primary residence for more than 6 months each year.

Why Would the Seller and Buyer Want to Avoid FIRPTA?

FIRPTA is not a tax, it is rather a retention of funds, set off against one’s tax liability. The IRS uses the retention to cover any taxes due by the foreign seller. Should the taxes be less than the tax due, then the seller receives a refund.

The seller is therefore prevented from accessing their funds until the tax return is finalized, which may take many months or years. During this time, they lose the opportunity cost of the funds held by the IRS.

The buyer is placed at risk because they are ultimately liable under the statute. It is their responsibility to establish whether the transaction falls under FIRPTA and if it is, then a lien is executed over the property until the funds are paid over to the IRS.

The buyer has to make sure that the funds are paid over to the IRS.

But the risk doesn’t end there.

Both the escrow agent and the realtor are also possibly liable for the retention. It is thus in everybody’s interest to establish the non-foreign status of the parties to the transaction.

The benefits of Buying Property in a Company

As an investor, there are numerous benefits to purchasing your property in a company.

There is a separation of your investment assets from your personal assets, thus reducing the risk of personal liability should a problem occur.

There are various tax incentives available to property investors that make the cost of acquisition very attractive.

The use of companies and trusts is a well-established mechanism to structure one’s financial affairs to avoid onerous inheritance taxes and provide estate planning flexibility.

And it is also possible to avoid liability for retentions under FIRPTA.

Introducing TaxLeaf

Moses Nae, CEO of TaxLeaf, Contador Miami, and the founder of Contador America is passionate about helping foreign investors and business owners buy an existing business, open a new business, or invest in franchise businesses.

To avoid unnecessary costs and to reduce taxes, it is crucial that you consult with a knowledgeable and experienced tax accountant to help guide you through the process.

Here’s what one successful business owner has to say about the service and support they receive from being partnered with TaxLeaf:

Cesar Buenavista, Doral, Fl

“I am an Account Manager with TaxLeaf and have been working with clients for more than 6 years. The technology they provide is incredible. I have access to everything from my phone if I need it. They are very professional and provide excellent support for me and my employees.”

To help you learn more about how TaxLeaf can assist you in investing in property the right way, stop what you’re doing right now and call us now to secure a FREE 30-Minute Consultation with one of our tax experts.

888-Y-TAXLEAF

The Tax Guide to Independent 1099 Professionals

1099 contractors are responsible for their own taxes, not just at the end of the tax year but also quarterly. If you make over $600, then the company that paid you for your services will issue you with a 1099-MISC form indicating the amount of your earnings.

However, even if you don’t receive the 1099-MISC, the IRS is still informed of your earnings. That’s when you need to declare your earnings on your annual income tax return on Schedule C along with all your business earnings and expenses.

As an independent contractor, keeping a record of your earnings and expenses can potentially save you thousands of dollars in taxes. It also provides you with a detailed record that you can use to calculate the tax that you are liable for quarterly.

Unlike being an employee, where the employer deducts tax from your weekly or monthly earnings and pays it over to the Internal Revenue Service (IRS). You are responsible for paying your own taxes every three months on the 15^th of the following month.

So, you will calculate your tax liability for the period from 1 January to 31 March and then pay the amount due over to the IRS on or before the 15^th of April.

However, if you don’t pay your tax and fall into arrears, then ignoring the problem will only make it worse with the IRS potentially penalizing you by adding another 6% to whatever you owe.

That is where a CPA can assist you in making arrangements with the IRS to pay the liability off and ensure that you pay the minimum tax that you are legally obligated to pay.

It is also an opportunity for you to register an S-Corp and enjoy the many tax advantages that receiving your income via a company will give you.

Introducing Taxleaf

Moses Nae, CEO of TaxLeaf, Contador Miami, and the founder of Contador America is passionate about helping independent contractors minimize their tax liabilities and never miss a quarterly tax deadline.

As there are many complexities associated with filing taxes as an independent contractor, it pays to consult a professional accountant.

Here’s what one of our successful business owners has to say about the service and support they receive from being partnered with Taxleaf:

Cesar Buenavista, Doral, Fl

To help you learn more about how Taxleaf can assist you with your 1099 taxes or consult on registering a company, stop what you’re doing right now and call us now to secure a FREE 30-Minute Consultation with one of our business experts.

888-Y-TAXLEAF

Trusts and Succession in the USA

Estate planning is not only for very wealthy people. Even those of modest means should create a will and an estate plan which will determine what happens to their asset after their death.

This is not only a good idea from an inheritance tax perspective but it also removes a lot of uncertainty and worries amongst family members at a time when emotions are usually running high.

Your estate consists of everything you own. Your assets and liabilities are all taken into account at the time of your death and the ownership of each asset must be transferred to a beneficiary.

The process of transferring your assets after your death is referred to as probate. This process is made considerably easier if you have a valid will. In your will, you nominate an executor who is responsible for ensuring that your will is executed according to your wishes and that the assets are transferred to the beneficiaries of your choosing.

Wills

Should you die without a will then the state will determine what happens to your assets. Each state has a different set of rules to determine who gets what.

It is therefore a very good idea to have a will drawn up and to structure your affairs in such a manner that your family is not inconvenienced in any way. This is particularly important when considering properties that may still be encumbered with mortgage loans.

Trusts

A way to avoid many of the problems associated with probate, when there are personally held assets, is to establish a trust.

Trusts are a tool used in estate planning that takes advantage of tax law, to minimize or avoid taxes and to ensure that the use or distribution of assets can take place outside of the probate process.

One or more trustees are appointed and they are responsible for preserving the assets within the trust for the benefit of the beneficiaries of the trust.

A living trust is created during your lifetime and your assets are transferred to it to preserve and maintain control over them.

Introducing Taxleaf

Moses Nae, CEO of TaxLeaf, Contador Miami, and the founder of Contador America is passionate about helping foreign investors and business owners navigate the complexities of trusts and succession as it relates to their assets located in the USA.

As many legal requirements must be met when establishing a trust, it is crucial that you have a professional company helping and guiding you each step of the way.

Here’s what one of our successful business owners has to say about the service and support they receive from being partnered with Taxleaf:

Cesar Buenavista, Doral, Fl

To help you learn more about how Taxleaf can assist you with trusts and succession planning in the USA, call us now to secure a FREE 30-Minute Consultation with one of our business experts.

888-Y-TAXLEAF

The way to the USA through an E2 Visa

There are many ways to obtain residency and citizenship in the USA. One of the popular options is via an E2 Visa.

The E2 visa is available to citizens of countries that have a treaty with the USA. It is s a non-immigrant visa for investors, entrepreneurs, or people wanting to run a business in the United States.

With an E2 visa, you are permitted to start a US business or alternatively, you can invest in an existing US business and then work for that business.

Making an E-2 visa investment allows you to enter the U.S. as the business benefits from your capital injection into the economy.

How Much Must I Invest?

Once you have established that you wish to invest in the United States economy, the next question is to decide on how much of an investment you need to make.

A minimum investment of approximately $150,000 is required to qualify for the E2 visa. Together with the minimum investment, you must have a business plan. The business plan is used to prove to the government that the business is viable and will be around for a reasonable time.

Along with the business plan, provision must be made for 1 or 2 employees. If you can show that there are clients and a cash flow for the business then you are almost over the first hurdle of receiving your E2 visa.

The Benefits of an E2 Visa

The application process is quite quick and a visa can be issued very soon after applying. However, the process can become more complicated. You can plan on the application process taking approximately 3-4 months if there are no problems.

This visa is also very popular as it is one of the cheapest ways of obtaining one.

The downside is that you need to renew the visa regularly and you will never be eligible for citizenship. You will need to change the status of your visa if you wish to become a citizen.

Introducing TaxLeaf

As many legal requirements must be met when trying to qualify for an E2 visa, it is crucial that you consult with a knowledgeable and experienced tax accountant to help guide you through the process.

Here’s what one of our successful business owners has to say about the service and support they receive from being partnered with TaxLeaf:

Cesar Buenavista, Doral, Fl

To help you learn more about how TaxLeaf can assist you to obtain your E2 visa for the USA, stop what you’re doing right now and call us so that we can help you.

888-Y-TAXLEAF