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2021 Indian Budget Impact By Sanjiv Gupta CPA

  Sanjiv Gupta CPA  Published 
2021 Indian Budget Impact By Sanjiv Gupta CPA

Welcome to today's (Feb 3rd, 2021) information-packed dollar and cents show. We will talk about the show's crucial topic, which is about the Indian budget related to the non-resident Indians. 

We will talk about proposition 19, which people have been looking forward to getting, which will significantly impact if we don't do something before February 16. 

If the time permits, we will talk about President Biden's stimulus plan. We are looking forward to a $1400 stimulus check. Now it's not going to come to everybody; it will go to the single taxpayers with an income level of less than 50k. 

Previous stimulus check we received was meant for individuals making  less than 75,000. This time it will be more restrictive, less than $50,000.

And for married filing joint, they are saying that the income level will be less than $100,000. 

Earlier we got one payment of up to $2400 in first stimulus and second payment of up to  $1200 for married filing jointly. Income limit was less than $150,000.   But this time income limit is reduced to $100,000.

Many people might not be getting this benefit due to income limits. But of course, the goal is to help low and middle-income level families to get those stimulus payments. So hopefully, this will be coming shortly. It might take some time to pass the bill. May be couple of weeks.

This might create problems in the current tax season. 

As you know, the February 12 onwards IRS was going to accept the Individual tax filing. 

Corporate taxes can filed right now. However, California Franchise Tax Board has not clear their position about the use of PPP loans. So, we have to wait to see if we can double dipping of expenses.  We will let you know once we know more about this.

Let's take your tax questions:

A lot of people do ask about returning foreign income reporting. Any questions on business taxes, LLCs, 1099,  partnership?

Any questions on w2? Please don't just keep that w2 in an envelope. Open that envelope and see what is inside. If you find something's not right, connect with your employer or with your boss and get it corrected.

Question From Sandy:

I have a question about the investment property. So basically, if you take the investment property on an LLC, then, in that case, you know that taxes and we have to do it. So our taxes will not be impacted by that. Is that an accurate statement?

If you have a property in an LLC and the property is making income, you have to show that income, and you have to show your expenses and there will be depreciation. Now it can be net income or net loss, which will come on your K1. This is a share of a member from the LLC.

If you have more than one member, if there's only one member, one single person owning that LLC will not impact it because it will come under Schedule E. But remember, it's an LLC, so definitely you have to file for California form 568, and you to pay $800, or people miss that. So you have to file that form 568 for California and pay $800. 

 I think your LLC is a single-member LLC, not a multi-member LLC?

Yeah, so basically, the thing is that if we buy a house for flipping, the individual will be better, or should we go for the LLC.

It would help if you went for LLC because that provides better protection than an individual owning it because you want to limit your liability. That's why LLC is are important, and you should look into that provision of LLC then individualy owning those properties okay.

Makes sense? Thank You.

I have a quick question. I have used Rob to buy a business, and I created a C Corp. Do I need to keep the taxation from the taxation point of view keep the C Corp separate from my personal income taxes.

Generally, when you use a self-directed IRA to do a business okay, you have to create a C corporation. So that you keep that distinction between ownership and in the individual running that business so that you meet that discriminating law rules regulations of the of the IRA distributions. So generally we see that you have a C Corp where the the subject IRA becomes the owner of the stock worth 100%. And you can run, you can take a salary as a person running that operation, but you cannot take any dividend or interest from that Corporation. Whatever profit will make you the corporation will pay it taxes at the federal level federal is 21%. As of now, it can change with President Biden saying he wants to increase the taxes to 28%. Let's see when he's going to do it. But right now it's federal 21%, California is 8.84% on that profit. Now, you can use that money, keep investing and grow it. But you should always think about returning that money back over a period of time. But definitely you cannot test that money, you can use it you can run the payroll, and how much payroll you can run will depend upon reasonableness, you cannot just take too high payroll 200k, 250k, 300k,  you have regular payroll, which which is based on the salary so you can look at all the online calculators and see what is this number payroll for you and take it from there.

OK but I don't want to take any payroll.

No, I will recommend that you take some payroll. Instead of taking high payroll, you can take minimum payroll like 60K because you are a C Corp.

Caller About Stimulus Payment -

I am 80 yr old and my wife is 75 year old.  We didn't receive the stimulus payment.

 What should I do?

You should file the tax return and request a refund.

But I don't file the return...

That's fine, file it any way to get the refund or call IRS 1800-829-1040

Let's talk about proposition 19 :

Proposition 19 is going to impact beginning February 16. 

So if you have a property, it has two rules. 

One is it has the rule of aged people owning people aged 55 and over owning properties. 

And the second rule is people wanting to transfer the property to the kids. 

Okay, so it's going to impact one word first one is people aged 55. And over, if they want, they can carry over their tax rate by buying a new property anywhere in the California area; earlier, one could only buy in 10 counties.  But now, you can purchase a property anywhere in the great State of California. 

Let me give you an example. Let's say if a senior couple sold a home with an assessed value of $250,000 for $2 million and brought a new home for $3 million. The new home's assessed value would be dollar 1.25 million. 

How we arrived at valuation?

The difference between the selling price of 2 Million and the purchase price of 3 million is 1 Million plus the $250K basis of the old property.

That is a total of $1.25 Million.   Without proposition 19, you would be paying taxes on $3 Million.