Welcome to the United States, and welcome to Lynn CPA Group, PA web site.
Are you a non-resident rental property owner?
If so, you will probably want to find a reliable property manager to manage and maintain your property in your absence. Feel free to call us at 321-639-2300 if you would like a referral to a management company operating near your rental property. You can also go to the Central Florida Property Manager's Association on the Internet.
Equally important, as a Non-Resident homeowner of short-term rental property you need to know US Federal and County tax filing requirements. We strongly recommend that you select a qualified Certified Public Accountant (CPA) to prepare the necessary tax returns. Note: A CPA is equivalent to a Certified Chartered Accountant in the U.K.
Feel free to use the information below and the associated links to get started in the fun-filled world of the Internal Revenue Service of the United States of America. Or simply call our offices at 321-639-2300 or e-mail us, and save yourself a lot of headaches.
- FORM W-7: This form allows you to apply for a taxpayer identification number. It is available on the Internet at www.irs.gov. Without this number you cannot file taxes and comply with US tax laws. The form requires certified copies of your passport and driver's license, and if it all seems a bit too complicated, we will be happy to assist you in this crucial step.
- FORM W-8ECI: This form is completed by property owners for their property managers. It allows exemption from withholding, and without this form, the property manager is required by law to withhold 30% of all income related to your property.
- FORM 1042-S: This form comes from your property manager and is sent to you and the IRS. It tells you how much income you received. You should receive it by March 15 every year.
- FORM 1040-NR: This form reports the income and expenses related to your property. It must be filed yearly. It is available on www.irs.gov but most owners hire a CPA to complete this form due to its complexities.
- County Tangible Personal Property Tax Return: This return reports household furnishings to the county where your property is located. This is an additional tax beyond that assessed for the house and land. Your CPA can handle this return for you. It is due on April 1 of every year.
- Sales Tax Issues: Florida State law requires sales tax to be charged on various portions of your rental income. Talk to your property manager, or look for details regarding sales tax on www.dos.state.fl.us
- FORM W-8ECI: This form is completed by property owners for their property managers. It allows exemption from withholding, and without this form, the property manager is required by law to withhold 30% of all income related to your property.
READY TO SELL YOUR PROPERTY?
- FORM 8288B: This form requests an exemption from the automatic 10% withholding on the gross sales price of your home. It must be filed prior to the sale of your property. If the form is not filed, the seller will have to wait until year-end to receive the final 10% of the sale.
INTERESTED IN BUYING OR STARTING A US BUSINESS?
- Lynn CPA Group, PA is a licensed Certified Public Accountancy firm in Florida experienced with helping clients through the business purchase and setup stages.
Before you purchase any business, you are advised to contact a licensed Certified Public Accountant (CPA). We can work with you during your search for a business, assist in your due diligence research, and prepare your proforma statements needed for your Visa application.
That is just the beginning of the services we can assist you with. We will help you set up your new business to meet the tax and regulatory requirements, set up your accounting system, train you on QuickBooks accounting software and provide continued accounting and tax support during the trying times of getting your business going. With the major financial investment you are about to make in buying a US business, you need to have confidence that you are doing things correctly.
Beware: There are business scams going around aimed at the English who desperately want to buy an American business to obtain their Visa. Businesses are being sold that are misrepresented to the buyers. False stories are going around that you will be guaranteed your visa if you buy a business for $100,000. There are no guarantees for a visa. The wise investor will thoroughly investigate the business for sale and engage the services of a licensed Certified Public Accountant to assist in the due diligence search prior to the purchase of the business.
References from previous investors will be provided to those who would like to have us assist in their research of buying a business. Check out our page on New Business Startups.
FREQUENTLY ASKED QUESTIONS
| Question: | What is the US tax return filing year? |
| Answer: | The US tax year for non-resident taxpayers is January 1 through December 31 |
| Question: | What returns need to be filed each year? |
| Answer: |
You are required to file two forms each year:
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| Question: | What is a Tangible Personal Property Return? |
| Answer: | Florida law allows each County to assess a tax on business property. Your rental home is considered business property and you must pay a separate tax on the value of your possessions in the home. This tax is in addition to your annual Real Estate Property Tax. The return is due by April 1 of each year. Penalties are assessed monthly on the value of your property and can result in a 25% increased value being added to your personal property values. NOTE: It is advisable to file a final return for the year following the sale of your rental home so that the County can remove your name from their records. |
| Question: | Why do we have to sign two Power of Attorney (POA) Forms? |
| Answer: | The Power of Attorney forms allow us to sign your returns in your absence and also allow us to contact the tax agencies to clarify any problems on a timely basis. The Tangible POA is only related to the County returns; the IRS POA (form 2848) is for the U.S. Government tax returns. They are separate reporting agencies and require separate forms. |
| Question: | How does the County know that I have business rental property? |
| Answer: | The licensure that is required for short-term rental is a dead giveaway. Also, property that does not have a homestead exemption filed on it is subject to scrutiny as to whether it is taxable for tangible purposes. |
| Question: | How does the U.S. Government (IRS) know that I have rental property? |
| Answer: | Your property management company is required to send both you and the IRS a copy of form 1042-S to report the amount of rent that was collected on your behalf. If you receive this form and do not file a 1040NR, the IRS will be chasing you down in about two years (it usually takes that long to realize you have not filed a return.) |
| Question: | I'm not making any profit, why do I have to file a tax return? |
| Answer: | You are required by US law to file a return, even if you owe no money. Also, it really is to your benefit when the time comes to sell your property. For most nonresident taxpayers, yearly losses are rolled over to future years. When you sell your home, these accumulated losses offset the capital gain, and reduce any tax liability. |
| Question: | What's this 10% withholding requirement when I sell my house? |
| Answer: | The law requires that 10% of the sales price of your home be retained by the closing company and transmitted to the IRS to cover any potential income tax that you owe as a result of the sale. A form 8288B can be filed with the IRS, which allows the funds to be released to you before the tax filing time. It is important that you notify your accountant when you think you are going to sell your home so that the paperwork for the 8288B can be started. The closing Title Company will want to see that the 8288B is being filed before the closing on the home. This allows the Title Company to withhold 10% of your selling price and keep it in their escrow account until the IRS gives permission to release it. The other option is to let the Title Company withhold the 10% and have them send it to the IRS and you can request your refund directly from the IRS. |
| Question: | I've sold my home and received my 10% back from the title company, so I guess I don't have to file anything else? |
| Answer: | Not exactly. You are still required to file your final year 1040NR for the year that you sell your property. And, as noted previously, it is a good idea to file a Tangible Return for the following year to inform the County that you sold your personal property. NOTE: Taxpayers mistakenly think that filing the 8288B will end their tax filing requirements; that is false. You may get your money back, but if you do not file a final 1040NR, you will be hearing from the IRS several years down the road and it will cost you more in accounting fees to straighten out your delinquent filing problems them. |
| Question: | Why do you want to see the closing statement from the purchase of my home? |
| Answer: | It is very important that the names of the owners listed on the return each file a 1040NR. We like to see documentation for the ownership, we also need this form to determine the taxable basis of your property, and finally, we need the closing statement on file for filing the form 8288B when you sell your home. It is surprising how many people tell their management company and their accountant that either they own the property alone or they own it with their spouse and the closing statement will show something different. |
| Question: | Does each owner have to file a return? |
| Answer: | Each owner of a property has to file a 1040NR each year. If a married couple owns a home together they must each file a separate return. If you own more than one property, your return will include income and expenses for each of them. The Tangible returns are different; the requirement is one return per property with no regard to how many owners there are. |
| Question: | When are the tax returns due? |
| Answer: | Tangible return is due April 1 of each year. The1040NR has several deadlines depending on your tax situation. The first deadlines are either April 15 or June 15; both of these deadlines are easily extended until August 15 and a second extension is available until October 15. |
| Question: | Why are the returns that you prepare in the same year given different year designations? |
| Answer: | The Tangible returns are assessed a value as of January 1 of each year and are given the year assignment for the current year. Thus, the return that we file on your behalf in 2003 is referred to as the 2003 Tangible Return. The 1040NR return is based on the business income and expenses of the prior year and hence are referred to as your 2002 1040NR returns. |
| Question: | Why is this tax stuff all so confusing? |
| Answer: | It provides job security for accountants. |
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