Canada Revenue Agency Income Tax: IRS US Tax
by admin
Comments Off on Income Tax on World Series of Poker Winner
Income Tax on World Series of Poker Winner
You probably heard from any of your favourite Canadian news sources that Jonathan Duhamel, 23 year old from Canada has won the World Series of Poker in Las Vegas. The winning awards him US$8.9 million in prize money.
Unlike the Vancouver Lotto Jackpot winners, who don’t have to pay any income tax on their $50 million winning, Duhamel, will have to pay tax in USA, Canada and his province of residence. There have been interesting developments in tax on Poker winnings in Canada for last few years.
An increasing number of Canadians are playing online poker regularly and winning. To begin with, lottery and gambling winnings in Canada are not subject to income tax, as I mentioned in my previous post, since these income are not from an “income from a source” of employment, business or investment income.
This all changes when Poker or Gambling winning becomes a source of income from a running a business. If you spend a significant amount of time, playing poker, spend a substantial amount of money for playing poker and pay for your living expenses from your poker winning you are in a business and you must report your income from playing poke to Canada Revenue Agency. Canada Revenue Agency can decide if your poker winnings are taxable or not by reviewing taxpayer’s poker playing habit.
Regarding Jonathan Duhamel’s winning, he won in a professional poker tournament that makes his winning taxable both in Canada and USA. Since he won the prize money in USA, he will get the prize money after tax. If he has a Social Security number, he can get all the winning but he will have to report the winning in his USA tax filing and pay tax on the winning.
Since he is a Canadian citizen, and assuming he does not have a US Social Security no., he will get his prize money after 30% tax deduction by IRS. He will have to request for a US non resident Tax Payer Identification (TIN) no. and file a US tax return and could get some of the tax deduction back from IRS.
In Canada, he will have to report his winning in his Income Tax Return and also the taxes that he has paid in USA. Since Canada and USA have income tax treaty, he will get credit for taxes paid on his winning in USA and will pay a smaller amount of Tax to the Federal Government. Then the Province of his residence will come after him for their share of Dhuamel’s winning.
After doing a rough calculation, he is expected to net $4.6 million after tax from his $8.9 million prize winning.
I am assuming that he will claim that he is not a professional poker player, to avoid reporting his income in Canada. So far, all the news I have reviewed about Jonathan Duhamel, I don’t think his claim is going to fly over CRA. His Tax Advisors will have a hard time to prove that he is not a professional poker player.
Bloomberg news reported that there is an evilcpa, and Las Vegas poker players bring her to keep their poker winnings from IRS’s tax grab. Jonathan Duhamel should seek her help too.
Income Tax: Canada IRS US Tax
by admin
Comments Off on U.S. Tax Revenue To Take A Dive With This Election Result
U.S. Tax Revenue To Take A Dive With This Election Result
After largely getting rejected by the US voters on midterm election, the U.S. President came out with the first compromise on Income Tax for middle class families.
In his after election defeat press conference, He said that he will work with the Republican controlled Congress to keep the tax increase at a minimum for middle class families. There is still the issue of Tax Increase of upper-income families.
The President was ready to let expire the Bush tax cut on Upper-income families
With the Congress now under the republican control, it will be next to impossible without some major compromise on other issues for the Democrat President to expire the Bush tax cut.
What it mean on the macro level for U.S. economy?
It is already being called scary. The current U.S. deficit is on a rising trend and is at US$200 trillion. If U.S. was a corporation, it would have been declared bankrupt.
Since the Tax increase is going to be rejected and blocked by the Congress, there is no way U.S. will be able to reduce the deficit to a more manageable level. Instead it will keep ballooning.
As soon as other countries will realize the dire situation the U.S. economy is in, they will refuse to do business with U.S.
Would you like to give credit to a Bankrupt company? Do the Banks give credit to a Bankrupt person?
How would you like to do business with a Bankrupt U.S.?
U.S. will bear the burden of this midterm election for a long long time.
Income Tax Tax Fraud: IRS Tax Fraud Tax Rate US Tax
by admin
Comments Off on Google’s Tangled Weave of Tax Strategy
Google’s Tangled Weave of Tax Strategy
Fantastic reporting by Bloomberg on Google’s income tax strategy.
New words to learn,
Income Shifting
Transfer Pricing
Double Irish
Dutch Sandwich
Advanced Price Agreement
US corporate income tax rate is 35%. Google’s foreign income tax rate is 2.4%. By shifting earning source from US to Ireland Google’s effective income tax rate is 2.4% on the foreign earnings portion of it revenue.
Is it Legal?
It is absolutely legal. It is approved and heartedly supported by US Congress. Any change to this tax strategy is opposed by US congress. In February, the Obama administration proposed measures to curb shifting profits offshore, part of a package intended to raise $12 billion a year over the coming decade. The Proposals haven’t advanced in Congress at all.
US treasury officials estimate the current policy change in Income Shifting and Transfer Pricing would raise $86.5 billion in new revenue over the next decade. But the policy change was opposed by Congress as they were lobbied by companies, i.e. General Electric Co., Johnson & Johnson, Starbucks Corp., according to federal disclosures compiled by Center for Responsive Politics.
From 2006 to 2009, US treasury lost about $60 billion in tax revenue due to this practice of Income Shifting by leading US companies.
Transfer Pricing Strategy is approved by IRS (Internal Revenue Service). IRS approved Google’s transfer pricing strategy for tax savings in 2006 after three years of negotiation. IRS gave its consent in a secret pact known as advanced pricing agreement. Under the agreement IRS approved the price of licensing of Google’s search and advertising technology and other intangible property for Europe, the Middle East and Africa.
Companies work for shareholders. It is management’s job, to give shareholder’s interest a priority. Larger profit and boosting share price is what shareholders prefer. The no. 1 way to boost earning is income tax strategy to pay less tax. Just by bringing down the effective tax rate from 35% to 2.4% Google boosted its earnings by $3.1 billion. It’s money in the pocket of shareholders. Google’s share price is $607. If Google had paid the $3.1 billion in tax, it share price would have been $100 less.
Simple, but Not so Simple Solution to this Tax Avoidance Strategy:
There is a very simple solution to make companies liable to pay fair share of their tax, like all American do.
Companies report earnings in their quarterly earnings report. All IRS need to do is make sure that the companies pay 35% tax on their pretax earning.
For Example, say Google reported $1.5 billion in pre tax earnings in the quarter. IRS needs to check, how much Google paid taxes on the pre tax earnings. At 35% corporate tax rate, Google should pay $525 million in corporate tax. If they paid any less than $525 million in tax, IRS just need to send them a bill for the difference and enforce the same kind of collection tactic they use on average American people for a tax avoidance and maybe put some of the executives in jail for tax avoidance strategy.
Google is doing nothing illegal. So, the Congress should first decide, if they will stand up to corporations and account them for their due share of income tax. Now that is not simple.
Canada Revenue Agency Income Tax: Canada Income Tax IRS Tax Payer
by admin
Comments Off on Pre Filled Income Tax Form for Canada
Pre Filled Income Tax Form for Canada
Income Tax
Income Tax: Green Card IRS US Tax
by admin
Comments Off on Want to Avoid Tax? Denounce your Citizenship!
Want to Avoid Tax? Denounce your Citizenship!
An increasing number of US citizens and green card holders want to give up their green cards or US citizenship after the country’s heavy budgetary deficit and a drive to trace unreported income through tighter tax laws and disclosure norms.
Tax laws in the US empower the Internal Revenue Service (IRS), to tax global incomes of those holding US citizenships or the green card. According to reports published internationally, more »