Taxation
An alien is a person who is neither an American national nor citizen. A non-resident alien is a person who has not qualified after taking the presence examination or the green card evaluation. The American government taxes non-resident aliens only on earnings from U.S. commerce sources. Consideration of income is effective based on commerce or trades within the U.S.A. And is ineffective based on income outside USA sources (Fellows, 2012). For non-resident aliens, taxing of their income is independent of efficiency of connection of the alien's income to U.S. trade or commerce sources. It is succinct that USA tax regime differs for resident and nn-resident aliens.
Income that is properly linked to a USA commerce or trade is subject to a flat legislative tax of 30% on the total amount earned without a deduction executed for related expenses. Decreased tax rates exist depending on the type of income and whether USA levy treaties apply. Income that is inefficiently linked to a USA commerce or trade includes but is unlimited to dividends, FDAP income, royalties, rents and interest. In the event of various types of interest earnings, the size of income is apparently excluded from the U.S.A. taxation regime under the U.S.A. internal revenue statute (Seidman, 2003).
Answer to Question 2
USA has an alternative tax regime dubbed the alternative minimum tax regime or AMT which creates a way through which the taxing agencies ensure that ratepayers remit a least minimum tax amount on their income (Johnson, 2008). AMT has an exclusive set of computation methods than the regular tax. Regular tax calculation requires addition of gross income, subtraction of several deductions and exemptions, or various itemized deductions. For AMT reasons, income which is not subject to normal taxing is inclusive in the AMT regime. Resultant tax in AMT system may be greater tax under regular taxation circumstances (Johnson, 2008). The taxation affiliation has to ensure that all people under its dispensation remit their dues in time.
In computation of the alternative minimum tax, several adjustments are necessary. Addition of some income not taxable under the regular taxation is essential. Various deductions undergo adjustment downwards or entire elimination (Johnson, 2008). Though most alternative minimum ratepayers are normally well off, the tax has been gradually encroaching on solidly middle and upper middle financial stratification. The AMT is almost striking ratepayers with huge families, married people and those who reside within highly taxed states (Johnson, 2008). This clearly depicts that the alternative tax regime affects the U.S.A. inhabitants directly or indirectly.
Answer to Question 3
The contemporary residency stipulations by the American government are available in the international revenue code or IRC. Though tax residency statutes concentrate on the immigration statutes regarding both non-immigrants and immigrants, the stipulations define residency for taxation reasons in an overly dissimilar way from the immigration stipulations. Under the residency statutes of the IRC code, aliens who do not pose as residents in America are non-residents. Any alien can acquire residency alien status in one of the three distinct ways (Fellows, 2012).
The first channel of altering status from non-residency to a permanent residency category under the immigration laws is through various examinations. Under the green card test, a person who is an official and resident under the immigration statutes completes an assortment of tests to examine their eligibility to become legal USA residents after which they can naturalize their stay. The second test is the substantial presence examination that requires the non-resident alien to prove their 183-day stay in U.S. For over three years. The third option is through making a first year choice. Under these statutes, an undocumented alien subject to the immigration statutory who pass the second test pos as resident aliens for taxation reasons.
Answer to Question 4
Treaty income of the non-resident aliens is the total earnings on which a tax treaty limits the tax. Treaty earnings include dividends from USA commerce and trades subjective to taxation at a tax rate that barely exceeds 15% (Seidman, 2003). Non-treaty earnings or income is the total income of a nonresident person on which the resultant tax is unlimited by a tax treaty. For nonresident people, treaties undermine or eliminate USA taxes on several types of individual services and other earnings such as dividends, capital gains and royalties among others. Numerous treaties undermine the tally of years that a person can claim treaty exclusion.
For persons such as trainees, students and apprentices, the limit is normally four to five years. Professionals such as researchers,...
Our semester plans gives you unlimited, unrestricted access to our entire library of resources —writing tools, guides, example essays, tutorials, class notes, and more.
Get Started Now