Spring offers a variety of activities, from the proverbial rains to the sound of birds chirping and the arrival of colder temperatures. It also means the tax season has returned. Every year, 140 million Americans waste endless hours collecting receipts and statements, filling out a myriad of schedules and paperwork, and filing their 1040s and other supporting documentation to the IRS. The deadline is April 17 this year.
Per year, around US$ 1.54 trillion, or 8.3 percent of GDP, is diverted from our pockets to the federal Treasury by income taxes, which are the government's primary source of revenue.
People also leave money on the table, according to research into the transaction costs of investing, such as when saving for retirement and claiming government benefits.
Individual tax filers have the option of itemising deductions, such as financial contributions by mortgage interest, or taking the standard deduction. Itemizing takes more time and commitment, so it will save you a lot of money in taxes. Although taking the standard deduction saves time, it could result in a higher tax bill. That is, if compliance costs don’t exist, taxpayers would presumably itemise if the benefit of doing so is greater than zero. If there are costs, then itemising is beneficial only if it reduces the tax bill by more than the cost of itemizing.
Filing taxes for US citizens living in Hong Kong raises a number of new issues and questions: "Is there anything else I need to tell the IRS? What is the effect of my Hong Kong financial statements on my filing? What are my options for lowering my tax bill?" For instance, Americans and Americans with Green Cards who live in Hong Kong can have to file a US tax return per year. Especially if you are only in Hong Kong for a short time, working as an American can have an effect on your taxes. If you make money when on a short-term assignment, for example, you'll have to record it on your US taxes. When your financial ties in Hong Kong get stronger, you'll have to think more about your American tax for US residents.
American tax for US residents living Hong Kong are calculated based on income received within the territory, not on where you live. You are charged as an expat in Hong Kong on all Hong Kong-sourced job benefits, pension income, corporate earnings, and rental income. And under such special situations, it doesn't matter whether you're a non resident.
The personal income tax rate ranges from 2 per cent to 17 per cent. As in taxation in the United States, the amount of tax you pay rises as your revenue rises. However, Hong Kong tax rates are significantly smaller than those in the United States, so many Americans employed in Hong Kong will pay less taxes as US citizen living in Hong Kong there than they would in the United States.
The tax year in Hong Kong begins on April 1 and ends on March 31 the next year. You must file your taxes within one month of receiving your individual tax return from the Inland Revenue Department, which is normally in early May.
Since most tax documentation and filing in the United States is done on a calendar year basis, you will need to merge your pay stubs and other payment documents to complete your tax return.
