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INCOME TAX-NON-RESIDENT ALIENS
corporations upon bonds or other obligations of domestic or resident foreign corporations containing a so-called tax-free covenant clause.
Q. Is any tax required to be withheld from a foreign resident corporation?
Q. Where the owner of securities is unknown to the withholding agent, at what rate is the tax withheld?
A. In all cases where the owner of securities is unknown withholding is required at the highest applicable rate from interest on such bonds or other securities.
Q. What is the rate of tax required to be withheld from income received by a non-resident alien individual from sources within the United States?
A. On fixed or determinable, annual or periodical income such as rents, salaries, interest, etc. (other than dividends from corporations liable to the income tax, and interest upon corporate bonds containing a tax-free covenant clause), a tax of 8% is required to be withheld.
On interest upon corporate bonds containing a tax-free covenant clause, a tax of 2% is required to be withheld.
Q. A non-resident alien employee is entitled under the statute to credit for a personal exemption and for dependents. How may he claim the benefit of such credit against the tax withheld by his employer?
A. By filing a claim for the benefit of such credit with his employer on Form 1115 duly filled out and executed under oath.
Q. If a non-resident alien individual entitled to credit for personal exemption or for dependents or both, does not file the claim referred to in the preceding question and does not file a return of income, will the tax be collected on the basis of his gross income from sources within the United States?
from a domestic corporation for services performed by me for said corporation entirely without the United States. Am I subject to a tax on such salary?
A. No. Salary paid to a non-resident alien for services performed in a foreign country is not subject to tax as income from a source within the United States.
Q. Where foreign banks have two accounts with domestic banks, one a deposit account and the other a borrowing account, must the domestic bank deduct the tax from the entire amount of interest credited to the foreign bank or only from the excess of the amount of interest credited to the deposit account over the amount of interest charged upon the borrowing account?
A. The tax is required to be withheld and deducted from the entire amount of interest credited to foreign banks upon their deposits in domestic banks without subtracting therefrom the interest charged by the domestic banks on money advanced or loaned to the foreign banks. If, however, foreign banks file returns of all their income from sources within the United States, the interest charged by domestic banks on the money advanced to them can be deducted in such returns to the extent of the proportion of such interest which the amount of gross income from sources within the United States bears to the amount of their gross income from all sources within and without the United States. The tax withheld will be credited against the total tax computed in the returns and if the tax withheld is in excess of the total tax liability a claim for refund can be filed for the amount overpaid.
Q. If a non-resident alien owns stock in an American corporation which he disposes of by sale in the United States, is the profit derived from such sale taxable as income from sources within the United States?
Q. Is charter money or freight payments received by a foreign owner in regard to a vessel operated between the United States and foreign ports subject to tax?
A. No, if the non-resident alien receiving the income maintains no regular agency in the United States and is not doing business in the United States.
Q. I am a non-resident alien and own stock and notes of a corporation organized in the United States, but which does no business and owns no property in the United States. Are the dividends received on such stock and the interest on such notes subject to tax? No.
MISCELLANEOUS. Q. Must corporations report to the government the payment of dividends to stockholders?
A. Every corporation subject to the income tax and every personal service corporation must, when required by the Commissioner, render a return under oath of its payments of dividends, stating the name and address of each stockholder, the number of shares owned by him and the amount of dividends paid to him.
Q. Must my broker report to the government concerning my business transactions?
A. Every broker must, when required by the Commissioner file a return showing the names of customers, with such details as to profits, losses or other information as the Commissioner may require.
· PAYMENT OF TAXES. When is the tax payable? The tax is payable in four equal instalments, as follows: 14 at the time fixed by law for filing the return. 14 on the 15th day of the 3rd month. 14 on the 15th day of the 6th month.
14 on the 15th day of the 9th month, after the time fixed by law for filing return.
Where an extension of time for filing a return is granted the time for payment of the first instalment shall be postponed until the date of the expiration of the period of the extension, but the time for payment of the other instalments shall not be postponed unless the Commissioner so provides in granting the extension.
any end of
In any case in which the time for the payment of any instalment is at the request of the taxpayer thus postponed, there shall be added to the instalment, interest thereon at the rate of 12 per cent. per month, from the time it would have been due, if no extension had been granted, until paid.
If any instalment is not paid when due, the whole amount of the tax unpaid shall become due and payable upon notice and demand of the Collector.
If any tax remains unpaid after the date when it is due and for 10 days after notice and demand by the Collector, then, except in certain cases, there will be added as part of the tax 5 per cent. on the amount due but unpaid plus interest at 1 per cent. per month. As to any such amount which is the subject of a “bona fide” claim for abatement, such sum of 5 per cent. will not be added and the interest from the time the amount was due until the claim is decided will be at the rate of 12 per cent. per month.
Q. May the whole tax be paid at once?
A. Yes, in such case the total payment must be made on or before the time fixed by law for filing the return or where an extension of time for filing the return has been granted, on or before the expiration of the period of such extension.
Q. In 1918, I overpaid my income tax due for that year. Can I have such overpayment credited against the amount of my income tax for 1919?
A. Yes. A claim for credit can be filed with the Collector of Internal Revenue and if allowed the amount of the overpayment will be credited against the 1919 tax and only the balance thereof will be assessed.
WAR PROFITS AND EXCESS
(Applies to Corporations Only) Q. Who must file returns?
A. Every corporation having a net income of $3,000 or over unless exempt under the Income Tax Law, i. e., charitable corporations, trade leagues, personal service corporations, etc.
Individuals and partnerships are not subject to war-profits and excess-profits tax.
Q. When must returns be filed?
A. At the same time income tax returns are required to be filed (see page 26). .
Q. What is a “personal service corporation”?
A. The definition of a “personal service corporation" is given on page 25.
Q. Are “personal service corporations” subject to the war-profits and excess profits-tax?
A. No, they are to be treated as partnerships, and the stockholders will be taxable in their individual income tax returns on the amounts distributed to them by the corporation during its taxable year and any portion of the net income remaining undistributed at the close of its taxable year will be taxable to the stockholders of such corporation at the close of its taxable year in proportion to their respective shares.
Q. Only part of the net income of our corporation is derived from the employment of capital. May we arrange to be taxed on the remainder of the income as a “personal service corporation”?
A. If part of the net income of a corporation is derived (1) from a business (or a branch of a business) in which the employment of capital is necessary, and (2) a part(constituting not less than 30% of its total net income) is derived from a separate business (or a distinctly separate branch of a business) which, if constituting the sole business would bring it within the class of "Personal Service Corporations," then the tax upon the first part of such net income will be separately computed