Taxes are notoriously complicated. Most might know that it has to do with money, keeping records, and filing them on time. But what else should we know? As part of our Special Finance Issue, Sampan interviewed Melody Tsang and Richard Soo Hoo to provide us with some reminders and a brief overview on the significance of filing taxes.
Melody Tsang is Asian American Civic Association’s (AACA) Multi-Services Coordinator and specializes in immigration and tax filings. “Everyone in America has to file tax returns no matter what,” said Tsang. “Even if you are a Green Card holder or a citizen, you don’t live in the United States, you may be subject to file tax returns too. But it all depends on how much you make in the past year.”
Filing taxes requires you to provide a Social Security Number (SSN). According to the Internal Revenue Service, those who are not eligible for an SSN, are required to apply for an Individual Taxpayer Identification Number (ITIN). “This is issued regardless of immigration status because both resident and non-resident aliens may have a U.S. filing or reporting requirement under the Internal Revenue Code,” stated the IRS on their website. It is important to note that “the ITINs do not serve any purpose other than federal tax reporting.”
If you do have an SSN, filing tax returns every year proves to be more beneficial than not. As a reminder, tax season takes place during January and April 15 every year. That time of the year has always been especially busy for Tsang. She said, “Before we start filing taxes, everyone wants to file tax returns on the first day because they get their money back.”
More importantly, for those in the lower income bracket, there are a lot of benefits. “If you have children, if you’re under 17, there’s child tax credit. If your kid goes to college, there’s tuition credit. Some people, after filing their tax returns, have more than $10,000 refunded to them,” said Tsang.
In addition to receiving money back, filing tax returns regularly not only ensures that you maintain good standing, but also can prove that you qualify for affordable health insurance, such as Health Connector. This is for those who may lack employer-subsidized health insurance. This is particularly important for those who might not qualify for MassHealth, which requires applicants to either be under 17 or have resided in Massachusetts for more than five years to qualify for MassHealth.
Though it might not cost much, there is a penalty for not filing taxes on time, and it goes on your record. Tsang said, “If you want to buy a house, or anything, they have to see your tax returns. To file for FAFSA, financial aid, you have to show them everything. This will all be on your records.”
If one has a bad credit report, it may also make it difficult to file for relatives. “They’re proposing that people who file for their relatives, they might submit the credit report of the person that is doing the filing,” said Tsang. “If you have bad credit, you did not file tax returns on time, then you might not be able to file the tax returns for your relatives. It depends on how bad your credit report is.”
This is all on a case by case basis. If you run your own business, for instance, and you receive rental income, you must report all the expenses it takes to upkeep the property. Tsang stresses how important it is to report everything and know what to report.
She said, “You have to show me the papers of how much your tenants pay you, how much you pay for your mortgage, how much you maintain your house. How many times you drive from your home to your property to look at it. So the mileage is a kind of deduction. And how much you pay for the cleaning, maintenance, chop the tree, clean the leaves, you have to tell me. Of course insurance, and also a lot of things.”
This year, due to the pandemic, there are slight differences in our personal finances, thanks to the Coronavirus Aid, Relief, and Economic Security (CARES) Act signed on March 27, 2020. This includes the $1200 stimulus check, leniency in IRA early withdrawals, and relieved burden on student loans, all without a tax penalty, according to Ken Berry’s post on AccountingWeb.com.
For those worried about not having received the $1200 stimulus check, it will be counted towards your tax credits for the year 2020.
“People were worried that if they did not receive it, they might not be eligible for it,” said Tsang. “But don’t worry about it. Next January, when you file your tax return, they will ask if you received the stimulus money. No worries, people don’t worry about this. If you tell them that you did not receive it, you can have it back. Because you always file the previous year’s tax returns.”
According to Tsang, if one has investments, rental income, or more property to manage, they need a professional, or a Certified Public Accountant to file their taxes. Richard Soo Hoo is a CPA and serves mostly Chinese companies and owners of the companies who want to do business in the U.S., primarily in Boston. The most common types of businesses they are involved in are real-estate investment and developments, start-ups, in particular biotech or software companies.
Soo Hoo said, “Most Americans find the U.S. tax system complicated, but I work in international taxes as well, so for these Chinese companies and individuals, it’s even more complex because of the extra layer of international tax.” For this reason, Soo Hoo would try to explain this system to his oftentimes successful clients in order for them to run their finances tax efficiently, and their taxes as manageable as possible.
For these clients who are also interested in working their way towards obtaining a permanent residence in the U.S. or perhaps becoming a citizen, there are investment visas that can be satisfied. By sending their children to a college or university in the U.S., once they graduate, Soo Hoo said, “there’s a subsidiary here in the U.S. for them to operate because they’ve been educated here in the U.S. In particular, it gives them more experience before they go back to China.”
In light of the new presidency, tax policies may change, but it is still to be determined. For the most part, Tsang does not think it will too heavily affect her lower-income clients within the U.S. On the international front, Soo Hoo is keeping track of the trade war between the U.S. and China, and how tariffs will affect the economic growth of both countries.
Regardless, taxes and filing taxes have a significant impact on immigration and legal status. There are resources available everywhere, from CPAs to free filing services at nonprofit organizations or from the city of Boston and affiliated organizations. While the process may be complicated for all filers, there are benefits to completing taxes on time, particularly for individuals with a lower income.
To read this article in Chinese (Traditional), please click here.
