FEDERAL TAXATION SYSTEM

Federal Taxation System

Federal Taxation System

Introduction

The tax regime of the United States focuses on taxation at the federal, state and local levels. To Federal taxes are then added to the state taxes and those of some municipalities such as, for example, that of the city of New York. In general, it is subject to the taxing jurisdiction of the United States, each person or legal person who produces, sells goods or services or who is a member of a Limited Liability Partnership or Company (Robert & Richard, 2007).

Discussion

The Tax on Personal Income

Individuals who are tax resident in the United States are subject to taxation on their any income from any source and in any part of the world. The non-resident individuals are taxed only on U.S. source income as remuneration for services rendered United States, interest on bank accounts opened in the United States, etc. It is also important to note that tax residents are taxed on capital gains, while non-residents are also exempt as regards capital gains derived from the sale of shares of a U.S. company.

Tax Residence

An individual is considered to be tax resident in the United States if it satisfies the following conditions: If you have U.S. citizenship, If you have taken up residence in the United States (so-called Green Card), If you are physically present on national territory for at least 183 days during a calendar year, If it exceeds the so-called "Cumulative Presence Test" which consists of the sum of the total day that the person is present in the United States in the reference, and a third of days when it was present during the preceding year, and a sixth day of the year even earlier. If the sum is equal to or greater than 183 days, the subject alien shall be regarded as a tax resident in the United States. The only exception to the Cumulative Presence Test, for those who fall, is to demonstrate that his principal place of business is not in the U.S. and that their family and social ties are closer with another country than with the United States. There is ample evidence that the person has tax residence in another country.

Non-resident Aliens - Taxation

Non-resident aliens are considered citizens of all countries outside the U.S., who are not "Residents in the United States" for tax purposes. The general rule is that a foreign taxpayer is not considered a U.S. resident for income tax, if (1) is not in possession of "Green Card", the document that proves residency in the United States or (2) does not have a "substantial presence" in the United States as described below (Robert & Richard, 2007). This document also considered exceptions to this general rule. An alien is considered to have a "substantial presence" in the United States in a calendar year if it is physically presenting in the United States for at least 31 days, and if in the same calendar year (called "combined calendar year"), can be considered domiciled in the ...