June 15 is a big day. Yes, I know it's "Friends" co-star Courteney Cox's 35th birthday and it's also the day that Vice President Dan Quayle erroneously instructed a Trenton, N.J., elementary school student to spell "potato'' as "potatoe'' during a spelling bee eight years ago. But, more importantly, it's the day U.S. citizens living and working outside the U.S. or Puerto Rico must file their 1999 U.S. income tax return. In addition, if you're a nonresident alien -- a person who isn't a U.S. citizen and doesn't spend more than 183 days in the U.S. -- and you are required to file a
But First, Another June 15 ReminderSecond-quarter individual estimated tax payments are due by midnight June 15 for U.S. citizens regardless of where in the world you live. Nonresident aliens (NRAs) who earn U.S. income that isn't subject to withholding may owe U.S. estimated tax payments as well. For instance, let's say you're a NRA who is an independent consultant for a U.S. company. If the company does not withhold tax on the income you earn, you may need to make estimated tax payments. Unlike U.S. citizens, your first payment is due June 15. You should make estimated tax payments if, after withholding and credits, you still will owe at least $1,000. Then, if your 1999 adjusted gross income was below $150,000, your estimated tax payments must equal either 90% of your 2000 taxes or 100% of the tax you paid in 1999. If your 1999 income was more than $150,000, you must pay either 108.6% of your 1999 tax, or opt for 90% of the current year's tax. Generally, it's safer to use last year's tax bill as your litmus test, because if your estimation for 2000 is off, you'll owe underpayment penalties. U.S. citizens must use
Trading Tips for Nonresident AliensI am a
- If you spend any time in the U.S. during the year, be sure it's not more than 183 days, reminds Afalonis. If you spend more than 183 days, you will be considered a resident alien for tax purposes and will owe tax on everything.
- Remember, it's not always advantageous for nonresident aliens to buy mutual funds. When short-term capital gains and dividends get rolled up into one big dividend distribution, the whole thing becomes subject to ordinary income tax, regardless of citizenship. NRAs may be able to get a refund for the tax withheld on short-term capital gains if they get a
Form 1099 -- the form that reports the mutual fund's dividend distribution and breaks out short-term capital gains and dividends. But then they have to file a U.S. tax return just to get the excess tax back. Check out this previous Tax Forum for more details.
What Do I Do With a Form 1042-S?My brother is not a U.S. citizen and does not reside in the U.S. He has an account with his money manager. All his paperwork gets sent to my address here in the States and I forward to him. He has received a
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