Recording 401K Rollover to Ira on Income Tax Form - PowerPoint by eok30690

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									‫| שרותי חשבות וניהול כספים | הקמת חברה אמריקאית |‬

 ‫| תכנון ויעוץ מס | שרותי ניהול שכר והטבות עובדים |‬
                 Federal Government
              Internal Revenue Service
                         IRS




 State Government                       State Government
Corporation Division                    Taxation Division




                                            Locality
                                          County / City




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   Where to incorporate
    Taxes (State Income Tax, Sales tax, Employment), Presence and Nexus ,
    The Delaware Advantage.

   Which type of entity
    Limited Liability Companies (LLC) Versus C Corporation



   Structure
    U.S entity parent or Subsidiary? Maximize your Tax Advantages in both
    countries.



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   Basic Rule: incorporate in the state in which you are doing business

   Corporations that do business in more than one state, or corporations
    that may eventually "go public", may wish to consider the benefits of
    incorporating in a state with more favorable corporate laws than the
    state in which they are headquartered.

   A corporation that is incorporated in the laws of one state, but does
    business within another state, is considered to be a "foreign
    corporation" in that second state. Corporations must register to do
    business in each state in which they operate, and there are filing
    requirements and fees associated with registration.



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When deciding if it will be beneficial to incorporate in another state, factors to
  consider include:
   Tax Rates - What is the tax rate in your home state, as compared to the tax rate
    in the state in which you might instead opt to incorporate?
   Costs & Fees - What are the costs and annual fees associated with incorporating
    in the other state, as compared to the costs and fees in your home state? If you
    will be doing business in more than one state, including the state in which you
    incorporated, what will be the cost of registering your corporation to do business
    in the other states?
   Insolvency - If your corporation becomes insolvent, how are creditors treated
    under the laws of each state?
   Simplicity - If you conduct business in only one state, it is almost always cheaper
    and easier to incorporate in that state.




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    Delaware is considered to have some of the most favorable corporate laws in the US.
    Delaware is a popular state for the incorporation of businesses which intend to eventually
    go public.
    Delaware is also a good choice for the incorporation of a business that has offices or
    operations in multiple states.
   Businesses do not have to identify or provide addresses for their initial board of directors
    on their articles of incorporation;
   Businesses which incorporate in Delaware but do not conduct business in the state are not
    required to pay Delaware's state corporate income tax;
   For shareholders who are not residents of the State of Delaware, their shares of stock are
    not subject to either Delaware's personal income tax or its state inheritance tax;
   Delaware maintains a separate court system, its "Court of Chancery", for businesses;
   A Delaware corporation must have a registered agent within the State of Delaware, but
    need not have any other offices or operations within the state.



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Limited Liability Companies (LLCs) Versus C Corporations. Similarities:
   Both offer the same limited liability protection for owners, meaning that
    the owners are typically not personally responsible for the debts and
    liabilities of the business.
   Both are separate legal entities created by a state filing.
   Both have very few ownership restrictions. The owners are not required
    to be US residents, and the number of owners is without limitation.
    Additionally, owners are not required to be individuals (as with S
    corporations).
   Ownership (stock with corporations and membership interest with LLCs)
    can be divided into numerous classes.



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Taxation
   C corporations are separately taxable entities. C corporations file a
    corporate tax return reporting profits or losses, and any profits are taxed
    at the corporate level. C corporations face the possibility of double
    taxation when profits are distributed to shareholders in the form of
    dividends, as the shareholders must report dividends as personal income
    and pay tax on them at the individual level.
    Profit: $100,000  Corporate tax (34%) $34,000  Net $66,000
    Dividend: $66,000  Tax (15%) $9,900. Net $56,100.
   LLCs are typically pass-through tax entities. While LLCs do complete a
    business tax return, the profit or loss of the business is passed-through to
    the owners’ personal tax returns, where it is reported and any necessary
    tax paid at the individual level. Profit: $100,000  goes to Individual Tax
    Return (26%)  Net $74,000


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Corporate Income Tax Rates—2008

   Taxable income over                  Not over                   Tax rate$
    $0     -                             $50,000                      15%
    $50,000                               $75,000                    25%
    $75,000                               $100,000                   34%
    $100,000                              $335,000                   39%
    $335,000                              $10,000,000                34%
    $10,000,000                           $15,000,000                 35%
    $15,000,000                          $18,333,333                  38%
    18,333,333   ..........                                           35%

   In addition, if the income is distributed to shareholders in the form of
    dividends, the shareholders pay taxes on the dividends they receive,
    currently 15%.


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Ongoing Formalities
  C corporations face more extensive internal formalities
  bylaws, issuing stock, holding initial and then annual meetings of
  directors and shareholders.

Transferability of Interest
  A shareholder of a C corporation typically is not required to get approval
  from the other shareholders before selling stock. A member of an LLC
  typically must receive the approval of the other members before
  ownership can be sold.

Management
  C corporations have directors and officers. The management of an LLC
  can be by members, in which case the management is much like that of a
  partnership. If the management of an LLC is by managers, then the management
  structure more closely resembles that of a corporation, since the members will not be
  involved in the daily business decisions of the company.



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ENTITY NAME
 Your entity's name should contain a valid corporate indicator for the state in which you are
  incorporating (most state accept one of the following identifiers or a suitable abbreviation:
  Incorporated, Corporation, Company, or Limited), and must not match or be too similar to
  the name of an existing company registered in your desired state.
   I’m making millions, Inc. Microsoft Just Bought Me, LLC.
D.B.A. – Doing Business As
 Corporations and Limited Liability Companies (LLCs) may register alternate names for
   specific lines of business. For example, Helen's Food Service, Inc. might register the DBA
   name, "Helen's Catering."

TAX ID NUMBER
 Federal Tax ID Number also known as Employer Identification Number (EIN) is a number
   given to your entity by the federal government for taxation purposes. You can not hire
   employees or open a bank account in your company's name without obtaining an Employer
   Identification Number.




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BANK ACCOUNT
   **Checking account: this is an operating account which allows you to deposit funds and
   then distribute these funds via checks and wire transfers. In most instances checking
   accounts do not carry interest. Some checking accounts could be designated to a special
   purpose such as payroll.
   ** Savings account: in this account the entity deposits excessive funds from the checking
   account. This account normally carries interest.
  ** Merchant Account: relationship between a retailer and a merchant bank that enables
   retailers to accept web-based credit card payments from their customers. This is the
   account into which a Merchant Account Provider deposits payments into your business
   checking account from the transactions made online.

National VS Local Banks:




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    The following is a sample list of documents you may be asked when opening a
     bank account:
     Remember: The Patriot Act…, “The System” – don’t fight it work by it.
1.   Corporate Papers (Certificate of formation or incorporation).
2.   Copy of EIN (SS-4) and the number.
3.   Minutes of the most recent board meeting showing the identities of the board
     members.
4.   Copies of official identification such as passport or drivers license.
5.   Copy of individuals utility bill at same address.
6.   A letter on company letterhead requesting account opening and specifying
     authorized signers.
7.   A letter from the company attorney confirming the state of incorporation and
     authorized individuals who can act on the corporation's behalf.




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   Employees or subcontractors?

   Benefits to attract talents: 401K, Medical Ins,
    FSA and more

   Payroll management - timely, simple, and
    friendly


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   Businesses may receive significant economic benefits by working with
    independent contractors instead of hiring employees.
    1. No employer contribution to Federal & State taxes,
    2. no need to provide benefits,
    3. no need to keep paying someone when a job is completed
    4. pay out against unemployment claims.

   Company FICA, FUTA and SUTA payments
   Workers' Compensation insurance cost
   Liability insurance cost
   Benefits coverage, such as paid time off and health insurance
   Quarterly and/or year-end filing with the state and IRS
   What kind of records you must keep



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If you are working with an independent contractor:
   Ask for a written contract.

   Get a completed I-9 form from the subcontractor

   Ask for a certificate of insurance.
   Ask for business cards or other materials which help establish that the
    worker markets to the general public.
   Get invoices for all work, especially if there isn't a contract.

   Make all payments to the company name.


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                                 Employee                   Employer         Max Wages
Social Security                  6.20%                      6.20%            $97,500.00
Medicare                         1.45%                      1.45%
Federal Unemployment                                        0.80%            $7,000.00
State Unemployment               (varies by state)          2.30%            $8,000.00
Worker Compensation                                         4.00% - 15.00%




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Annual Taxable Income ($)

More than - Not more than             Federal Tax Rate
$0 - $37,885                              15%
$37,885.01 - $75,769                      22%
$75,769.01 - $123,184                     26%
$123,184.01 - and over                    29%




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   How 401K works?
                                               What are 401(K) plans?
                                               401(K) plans are tax-deferred
                                               retirement savings plans for
                                               employees. The employer sets
                                               them up and each company has a
                                               slightly different 401(K). They are
                                               part of a family of retirement plans
                                               known as "defined contribution"
                                               plans - the amount contributed is
                                               defined by the employer or the
                                               employee. 401(K) gets its name
                                               from the section and paragraph of
                                               the Internal Revenue Code -
                                               section 401, paragraph K.


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Why should you invest in a 401(K) plan?
   The money you contribute is free from Federal and State taxes.
   Your employer receives tax benefits for contributing to your 401(K) - this is extra
    money for you.
   There is a range of investment options and an expert does the actual investing
    according to your directions.
   Any gains and earnings through this investment are also tax deferred.
   You can take loans and hardship withdrawals from your 401(K) under certain
    circumstances.
   The money is deducted even before you receive your salary, thus making it easy
    to stick with regular saving and investing




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What happens to your 401(K) if you leave the USA country?
   Your status (Resident/H-1B or other visa/Citizen etc.) in the US at the time of contribution
    to the 401(K) and at the time of withdrawal is considered. It is best to consult a competent
    accountant or immigration lawyer about this matter. You have a few options:
   At the time of leaving, if the amount vested in your account is more than $5,000, you can
    leave your 401(K) money in your former employer's plan.
   You can take the lump-sum payment of the money in your account. You will have to pay the
    taxes and penalties associated with early withdrawal.
   You can directly rollover the amount in your 401(K) account into an Individual Retirement
    Account or IRA. Please remember, your Social Security Number is always valid (whether
    you live in the US or abroad), however, your finances and investments here are affected by
    various factors including your status in the US and how often you visit or live in the US
    among other things. It is best to consult experts in the field before making these important
    decisions.




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Types of Health Insurance Plans
   Private Health Plans are the most common. These are health plans
    offered by employers to their employees. They can also be purchased
    by an individual.
    Typically, a health benefit plan is a contract between your employer
    and a third party (an insurance company). These contracts vary widely
    depending on the benefits and coverage levels negotiated by your
    employer.
    Medicaid is government funded health care, typically provided for
    low-income individuals and families.
    Medicare is government funded health care, typically provided for
    individuals ages 65 and over.


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   A flexible spending arrangement (FSA), or Flexible Spending Account, as they
    are commonly called, is one of a number of tax-advantaged financial accounts
    that can be set up through a cafeteria plan of an employer in the United
    States.
    An FSA allows an employee to set aside a portion of his or her earnings to pay
    for qualified expenses as established in the cafeteria plan, most commonly for
    medical expenses but often for dependent care or other expenses. Money
    deducted from an employee's pay into an FSA is not subject to payroll taxes,
    resulting in a substantial payroll tax savings.
   The most common FSA, the medical expense FSA (also medical FSA or health
    FSA), is similar to a health savings account (HSA) or a health reimbursement
    account (HRA). However, while HSAs and HRAs are almost exclusively used
    as components of a consumer driven health care plan, medical FSAs are
    commonly offered with more traditional health plans as well. An FSA may be
    utilized by paper claims or an FSA debit card also known as a Flexcard.




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Payroll Management generally includes activities in two major areas, Payroll Accounting and Payroll
   Administration.
    1) calculating the earnings of employees and the related withholding for taxes and other deductions,
    2) recording the results of payroll activities, and
    3) preparing required tax returns. The definition includes the task of reporting the results of payroll
    activities to the federal, state and local tax agencies.
    Payroll Administration deals with the managerial aspects of maintaining a payroll, many of which are
    distinct from the accounting aspect of payroll. Payroll administration includes:

       Managing employee personnel and payroll information
       Compliance with federal, state and local employment laws


    Internal Revenue Service (IRS) Requirements and Penalties
     Computing an employee's taxable wages.
     Calculating the amount of employment taxes to be withheld and paid by the employer.
     Depositing the correct amount of employment taxes with the government.
     Filing employment tax returns.




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1. A/P, A/R / Employees management

2. Management reporting: Budget, Cash Flow
   Try to use similar formats for consolidation reports

3. Shareholders reporting:
   Income Statement, Balance Sheet

4. Tax Planning and Reporting:
   Transfer pricing (Marketing Company, Services between parent and
  subsidiary), Employment tax, Income Tax, Sales Tax


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               Preparing for Due Diligence




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A due diligence review will usually include a detailed look at these main elements:
   Legal review — your corporation's legal documents, contracts and other legal issues;
   Financial Review — your company's financial status;
   Management Review — your management team's capabilities;
   Marketing Review — your marketing plan and activities; and
   Operations and Technical Review — your equipment, plant and processes.

   The information the investor wants is usually drawn from two sources:
    interviews and documents. Interviews may be conducted with any or all of the following:
    your management team; your banker, lawyer and accountant; major clients or suppliers.
    Give these people advance notice that they may be called on to talk with the investor.




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Financial Review
published financial statements for the last four or five years
company-prepared interim financial reports and analyses
recent business income tax returns and payment schedules
auditors' working papers and all pertinent correspondence with the auditors
recent appraisals of tangible assets


Management Review
a strategic plan that focusses on the big picture for the next 5 to 10 years and incorporates your vision of the company
historical and future forecasts, along with actual figures, to assess management's ability to produce accurate forecasts and to
       determine future expectations
all key management biographies and résumés
an organization chart and copies of any employment, consulting and confidentiality agreements with key employees
a list of primary and backup suppliers (especially if you buy a speciality product or service )




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Legal Review
corporate minute books and documents (e.g. articles of incorporation, by-laws). summary (and copies) of the main contracts in
    place (e.g. shareholders agreements, employment contracts, leases, patents, insurance policies, mortgage documents,
    and sales or supply contracts). a summary of all outstanding or pending litigation with an accompanying opinion letter
    from your lawyer explaining the expected outcome of each lawsuit



 Marketing Review
press releases, speeches by management and marketing materials released in the past few years. a list of key customers with
     historical and projected sales data and order backlog, if available market due diligence.




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The End 

Questions, Anyone?
    Pinny@Tax-USA.net




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