Non Resident Aliens and U.S. Rental Property

Arizona is a popular state for NRA's to buy and rental property.  The number is increasing and I have seen this in my own Ahwatukee neighborhood.   

Rental income from real property located in the U.S. will always be U.S. source income (as well as any gain when you sell it).

There are 2 methods that the NRA can choose.  

• If the NRA elects to treat the income as Investment Income, they need complete a W-8BEN and use the Gross Method
• Under this method, 30% of each rent payment needs to withheld by the management company or the tenant and remitted to the IRS.  The NRA will not have to file a 1040NR, if they don't have any other U.S. income.  But, likewise, they will not receive any refund of tax that was withheld.
• If the NRA chooses to treat the property and income as effectively connect to a U.S. trade or businessw, they complete a W-8ECI and use the Net Method. 
• The 30% tax withholding is not required by the property manager or tenant, but the NRA may have to make estimated quarterly payments.  They will file a 1040NR and report the rental income & expense on Schedule E.  Net income would be determined for each property and will be taxed the same as for a U.S. citizen.  
• Once this method is elected, you cannot change it without permission from the IRS

Tax Preparers may not have a NRA client, but they may have real estate agents or property managers that could be subject to withholding tax for their NRA clients.

NSA Annual Convention in Hawaii

I just returned on Monday from the NSA convention in Hawaii.  When family & clients heard where I was going, the first reaction was jealously about my "vacation".  Since I had never been to Hawaii and may never get another opportunity to go there, I did add a couple of days to the itinerary.  But the majority of the days, were spent going to meetings, training, seminars, and networking.  

Networking is fun, networking is beneficial (you learn so much from colleagues), but networking is work!  You have to be what I call "on point."  You want to be candid, but you also have to remember to be politically correct, polite and not argumentative.  

Each day seemed to become a little longer, and more exhausting.  However, if you asked me, would I do it again - you bet.  It is great to see friends and colleagues that live far from Arizona.  Each year I make a few more acquaintances and enrich friendships from past events. Besides the business, education, and voting, there is lots of fun at convention.  The receptions always provide a "taste" of the state hosting it.  

I ate many Hawaiian treats including taro, poi, octopus salad, and lots of fish; but I also relished the Taste of Wisconsin, where I got to enjoy brats and fresh cheese curds! 
 
Before the convention I went snorkeling to Turtle Point on Monday, and took the Road to Hana tour Tuesday.   Loved both excursions.  Weds started the meetings, training and seminars.  We did get to enjoy an optional event - the Old Lahaina Luau Thursday night.  And the last day had a mid afternoon break and got to see lao Valley Needle and Maui Ocean Center.

My seminars included Domestic Tax Issues for Non-Resident Aliens and Foreign Tax Issues for U.S. Citizens, 2 areas that are becoming increasingly prevalent.  Other compliance issues included the New Schedule E and Preparer Due Diligence in the Real World.

Learned alot, enjoyed good food, and had some fun in the sun.  Now its back to taxes and more seminars.

Now is the Time to Join NSA

I have been a member of the National Society of Accountants since 2007.  It is an organization that is for the mainstreet accountant and tax preparer.

Are you a sole proprietor?  If so, the tax help you can get is worth its weight in gold.  Besides being able to write in to the NSA Help Desk to get help on 5 questions per year, Tax Talk is available 24/7.  Then there is CCH Tax Update, and NSA Alerts that keep me informed.

I love networking at my state organizations, but NSA has the new updated Member Connect which allows me to communicate with members throughout the USA.  Since I have clients in multiple states, this is a great way to get help from colleagues that live and practice in those states.

The new tax season will be here before we know it.  I don't know about your organization, but mine does not have monthly meetings during tax season.  Stay connected with you peers through through NSA's great website.

Not a member? Go to my State Director newsletter at:
http://myemail.constantcontact.com/Now-is-The-Time-to-Join-NSA.html?soid=1102801646544&aid=blIYLj84pnU

ASPA 35th Annual Meeting & Summer Seminar

Arizona Society of Practicing Accountants (ASPA) celebrates its 35th Anniversary this year.  We had a great kick off at our Annual Meeting and Summer Seminar June 24-25 at Little America in Flagstaff. 

Celebrations started with an outdoor  receptions Thursday and Friday on the beautiful, pine laden grounds at the hotel.  Gentle breezes allowed the visitors from the southern part of the state a welcome respite from the triple digit heat. 

At the Friday night banquet, NSA president, Donny Woods installed the new state officers and recognized the great NSA volunteers from Arizona.  Jack Schabow, one of the first 12 (dubbed the Daring Dozen in the history booklet we received), shared some highlights of the past 35 years.

The food was great.  Ask anyone who was there.  And the hotel staff was considerate and made you not only feel welcome, but special too. 

There was a Friday afternoon get-away for member guests at the Lowell Observatory.  Reports are that it was fun and a great place to bring family.   A few attendees walked away with some raffle and game prizes, but it was not all fun and games. 

Steve Siegel, a well known speaker, was the presenter for 12 cpe hours on 1041s, 706s and 709s.  Many of us are facing the preparation of more 1041 estate returns as well as simple 1041 trusts.   Most came away with some new knowledge and many of us could say we learned a lot.  The handouts will be a valuable resource that I will be using this summer. 

Donny Woods presented Cash Flow Statements.  While not required for non Gaap financials, he explained why they are an important addition to the financial reports as well as providing us with practical and simplified ways to prepare them.

The seminar was finished with our own Walter Dudley and Jeffrey Hill, presenting information on being a Campaign Treasurer.  Not only were they informative, but there was lots of interaction between them and the attendees with lively discussion.

For those of you who did not attend, you missed a great seminar, good company, good food, and fun.  The picture albums brought smiles and laughs to our faces as we looked members pictures from past events - remember bell bottoms, long hair & sideburns, just to mention a few.   I hope you will get the opportunity to read the ASPA story and memories that Jack Schabow and Joan Parker put together. 

Thanks to all who worked on this event.

2011 Tax Planning for Individuals

As I complete tax returns on extension, I am reminded that it is time to think about 2011 taxes.  The 2nd estimated payment is due June 15th. 

Summer time spawns garage sales and leftover donations to Goodwill and other organizations. Start your record keeping now for those non cash donations. Put money in your pocket by good record keeping. Get a donation tracker from you tax preparer or go online and get the Salvation Army guide to a fair market guide for donated items. Make a list and for big items take pictures. Individuals who keep good records usually get a higher deduction.

The Tax Relief Act of 2010 extended many benefits including:
Above-the-line deductions for some classroom expenses
Above-the-line high education tuition deduction
Mortgage insurance premium deduction
Marriage penalty relief
Another patch for the Alternative Minimum Tax (AMT)
Repealed the phaseouts for itemized deductions and personal exemptions.

Some items are gone in 2011, such as the extra deduction for vehicle sales tax and the deduction for property taxes even if you didn't itemize.

1099 reporting is expanded and some has been repealed:
Ebay users may be surprised when they get a 1099 next year for payments received through Pay Pal for items they sold.  The Housing Tax Assistance Act of 2008 requires the reporting of various payment card transaction starting in 2011! 

Help is on the way for those who sell stocks and mutual funds.  1099-B reporting will expand and  have to include the cost or other basis for shares sold or exchanged during the yearl.  This starts in 2011 for most stock acquisitions and in 2012 for most mutual fund transactions.

Small Landlords also got relief from expanded 1099 reporting that was passed in 2010.  Prior to the repeal this April, landlords were going to be required to issue 1099s for payments to another person for services that aggregated more than $600 in any tax year.  The current instructions for the 2011 1099-Misc do say that if you receive real estate rental income you must report and file the 1099-Misc by Jan. 31, 2012.  Watch for an amended version of the 1099-Misc.

Have a great summer.