Best Certified Public Accountants in Bloomington, MN

This must be determined on a case-by-case basis. It will be necessary to take into account all factors affecting the choice, so the lowest combined federal and state tax burden can be achieved. In order to claim the foreign earned income exclusion, you must meet 1) the "tax home test" and 2) either the "bona fide residence test" or the "physical presence test" (see IRS Publication 54). The foreign earned income exclusion is also limited to a statutorily determined amount of earned income, but the foreign credit applies to the excess. Even when you meet the tests, the foreign earned income exclusion might limit the availability of a child tax credit, making the foreign tax credit a better choice. On the other hand, the foreign earned income exclusion will usually reduce any state tax liability, while the foreign tax credit generally does not. We measure all combinations of the foreign earned income exclusion and the foreign tax credit, and present to you the optimized result. However, generally if you choose the exclusion, revoke that choice in a subsequent year, then wish to use the exclusion again within five years, you must ask for IRS approval.

First, if you are a nonresident alien, the education credits are not available to you. Prior to 2018, the costs of obtaining an MBA (or other advanced degree) were deductible as miscellaneous itemized deductions (subject to the 2%-of-AGI floor) if the MBA either 1) maintains or improves skills needed in your present work, as long as you have established a profession, or 2) meets the express requirements of your employer, but is not required to obtain employment. Not only was the tuition deductible, but also books and supplies. The IRS was aggressive in questioning this deduction, and the courts denied the deduction for those who could not demonstrate an established profession. In one case, the taxpayer began employment as a market research analyst after graduation from college. He worked at this for the summer, but in the fall returned to school for his MBA. He was not allowed to deduct the cost of his MBA, since he had not established himself in a trade or business. Ross Lawrence Link (1988) 90 TC 460, aff'd by unpublished order (CA6, 2-1-89). For years after 2017, miscellaneous itemized deductions were all repealed, so this deduction can no longer be claimed. However, there is a sunset provision in the law which currently brings these deductions back to life after 2025.

It appears that you are a prime candidate for Canadian treaty Article XXV. Your days commuting to the U.S. are not counted toward the substantial presence test, so you remain a nonresident for tax purposes and must use Form 1040NR to report your U.S. source income. Article XXV essentially allows you to claim the benefits of filing a joint resident return, through a special formula, on Form 1040NR.

This is a question that often comes up with respect to various treaties. According to the U.S./China treaty, you must come to the United States as a resident of China, for the primary purpose of being a student, not to simply accompany a primary visa holder. Unofficially, the IRS allows you to change your status within about 60 days of arrival to qualify for the exemption. If your change took place later than that your payroll department will probably not cooperate in granting the exemption. You can always claim the exemption on your tax return, even if payroll does not allow it, but there is the danger that the IRS will also disallow it. This might occur up to three years after you file your return, even if you have been granted a refund initially.

Treaty exemptions generally apply only to federal income tax. As an H1-b visa holder, you are required to pay social security and Medicare tax on the income that is not taxable for federal income tax purposes. Only F, J, M and Q visa holders are exempt from social security tax. Regarding state income tax, most states honor federal treaty exemptions, but they are not required to by federal law, and some do not. Those that do not (that we are aware of) are: 1) Alabama, 2) Arkansas, 3) California, 4) Connecticut, 5) Hawaii, 6) Kansas, 7) Kentucky, 8) Louisiana, 9) Maryland, 10) Mississippi, 11) New Jersey, 12) North Dakota, and 13) Pennsylvania. If you live or work in one of these states, you will owe state income tax even though your income is exempt from federal income tax by a treaty.