USA legal and accounting and tax considerations in 2024

Since 2003, Healy Consultants Group assists our multinational Clients with timely compliance of their annual legal, accounting and tax obligations in the USA.

• Tax rates

  • While the nominal federal corporate tax rate in the United States is 21%, numerous tax deductions and credits are available for business which lower the effective rate to below 15%.
  • Taxable corporate income above US$335,000 is subject to a tax rate of 33%. Below this threshold, tax is imposed ranging between 15% and 33%.
  • State and local taxes range from 0% to 12%. These sub-federal taxes are tax deductible on federal tax filing.
  • A business owner i) who is neither a US citizen, permanent resident or tax-resident) ii) who lives outside the USA iii) who only has a company number in the USA iv) whose staff and directors are based outside the US and v) whose company provides services or manufactures goods outside the USA, is legally exempt from USA corporate and personal income tax. However, while this above applies in the majority of cases, it should be confirmed on case-by-case basis.
  • Foreign corporate shareholders must register for Employer Identification Number (EIN) tax at all times. The Inland Revenue Service (IRS) will not share tax information with the Client’s home country.
  • The majority of US states do not tax companies incorporated in another state. Therefore, jurisdictions like Delaware and Nevada are optimal states for conducting country-wide business tax-free at state level.
  • The majority of (qualified) dividends in the United States are taxed at 15%.
  • Withholding taxes on transfers to non-US companies is nominally 30%, but is reduced by double taxation agreements on dividends, capital gains, and royalties.
  • Capital gains tax is complex in the United States and varies by income bracket and type of capital gain. It is generally 15%, but can be deferred or reduced on items such as property and interest deductions.
  • Municipal and state income taxes vary by state and are imposed if the corporation has a substantial connection (‘nexus’) to that state. Nevada, Texas, Washington, Wyoming and South Dakota have no state corporate tax even if a nexus exists. If a nexus does not exist, e g for foreign businesses, then no state and municipal taxes are incurred.
  • Personal income is taxed on a graduated system ranging from 10% to 39.6%. All income above US$400,000 is taxed at 39.6%. On average, available deductions typically lower the effective rates to roughly two-thirds that of nominal rates.
  • Before an American company can legally employ staff, the company will first need to register for state tax and submit registration forms (Requirements will vary from state to state).

• Sales tax

  • The US levies uses a sales tax, rather than value added tax (VAT). This means that instead of being imposed at all stages of production and distribution, tax is only imposed at the point of commercial sale. Consequently, manufacturers and wholesalers retain a higher profit. Sales tax in the United States ranges from 0% in New Hampshire to 16% in Illinois.

• Tax exemptions and rebates

  • Tax deferrals on foreign-sourced income can be indefinite. Profits of foreign subsidiaries of a United States company will only incur US taxes when money is brought back into the country.
  • Tax deductions are available for numerous expenses, the largest being the federal foreign tax credit. This credit is allowed for income taxes paid to foreign countries. It effectively serves as a sweeping international double tax agreement.
  • The United States also has Double Taxation Agreements (DTA) with 66 countries including: Australia, Canada, China, France, Germany, India, Israel, Italy, Japan, South Korea, South Africa and UK.
  • Other credits include credits for wage payments, investments in motor vehicles, alternative fuels and off-highway vehicle use, depreciation of equipment, natural resource and others.
  • The Alternative Minimum Tax (AMT) is an alternative method for calculating personal and corporate taxes. It uses a separate set of rules to calculate taxable income after allowed deductions.

• Tax reporting, accounting and auditing considerations

  • Corporations in the United States may choose their tax year. Generally, a tax year must be 12 months and need not conform to the financial reporting year, provided books are kept for the selected tax year. The tax year may be changed provided authorization from the IRS.
  • Companies must file federal tax returns and state tax returns. Such returns are self-assessed and tax is payable in advance instalments or estimated payments.
  • USA company incorporation laws mandate all resident businesses to file annual details to update public registers on company status, members names and addresses.

• Healy Consultants Group fees for accounting & tax support

  USA accounting & tax task	US$
  Tax and sales tax registration	750
  Annual tax and accounting fees (active trading company)	2,700
  Annual tax and accounting fees (dormant company)	1,200

  
  These accounting and tax fees are an estimate of Healy Consultants Group fees to efficiently discharge your annual company accounting and tax obligations. Following receipt of a set of draft accounting numbers from your company, Healy Consultants Group will more accurately advise accounting and tax fees.

• Monthly book keeping service

  Healy Consultants Group will be happy to provide a monthly book keeping service for your USA company. Typically, our Accounting & Tax Department (ATD) team will receive a Dropbox of data from our Client and will immediately thereafter timely supply our Client with i) a general ledger ii) trial balance iii) monthly and quarterly management accounts and iv) monthly and quarterly government reporting, including sales tax and payroll.

  For further details of our book keeping service and our fees, visit this page.

• Legal and compliance

  Every state imposes its own laws and these do not always have to coincide with federal law. However, there are certain common requirements which are as follows:

  • All 50 states have adopted the Uniformed Commercial Code which establishes general guidelines for interstate commerce. We recommend our Clients be aware of this code.
  • USA company formation typically requires only one shareholder and one director who can be of any age and can reside anywhere. Healy Consultants will guide our clients through all the necessary requirements and incorporation steps.
  • The company directors are appointed, replaced and dismissed by the shareholders. Only the directors have the power to manage the day-to-day operations of the company. The identities of shareholders and directors may or may not be only public registers depending on the state of incorporation.
  • The Memorandum of Association or Articles of Organization (depending on state) is a contract between the shareholders and comprises i) company activities ii) registered office address iii) shareholder and director details iv) share capital and v) profit distribution method.
  • Most states require companies to lodge an annual financial accounts or reports confirming relevant details of the company for the public register including names and addresses of all directors, address of principal place of business, details of shareholders and their shareholdings and an estimate of annual taxable profits.
  • Some business activities, under USA company registration require government approvals, permits and licenses. There is an obligation to register particular products with the government, including food, medical equipment, cosmetics, medicine.
  • Government tariffs vary by product and country of origin. Some examples include a 20% tariff on most vegetables and fruits, 25% on motor parts, 32% on synthetic fabric clothes, 35% on Chinese tires, 48% on sneakers, 100% tariff on French chocolates, 350% on tobacco.
  • Labor laws in the United States are quite strict and must abide by federal and state regulations. The three main labor laws are the Fair Labor Standards Act, National Labor Relations Act, the Occupational Safety and Health Act (OSHA). It is important to check all the necessary requirements prior to signing employee contracts.
  • When employing local or foreign workers, USA company incorporation requires compliance with the Immigration and Nationality Act, the main set of laws governing labor in the United States, including filling I-9 forms to ensure foreign workers are legal.
  • Employees on H1-B visas must be paid similar wages as Americans based on anti-discrimination laws. A USA company setup often has to pay thousands of dollars when hiring these skilled H1-B workers and sponsoring their visas.
  • There are technically no hiring quotas for companies, however there is a fixed number of H1-B visas granted by the government each year. Companies with more than 15% of employees on H1-B visas are deemed “H1-B” dependent and must begin to hire US citizens “in good faith”.
  • When hiring foreigners, USA company incorporation requires employers to provide ‘labor certification’ to prove US citizens were not denied the opportunity. This certification can be done electronically through Program Electronic Review Management (PERM). One way to circumvent this difficult requirement is to write the job description for the desired foreigner’s specific qualifications and render potential US candidates virtually unqualifiable.
  • A USA company is required to contribute towards their employees social security contributions (6.2%), medicare (1.2%), federal unemployment taxes and state unemployment taxes.
  • By 2015, employers with 50 or more employees are required to provide full-time workers with (tax deductible) health insurance. Companies with less than 50 employees, may get a tax credit/subsidy for providing health insurance through the Affordable Health Care exchange website.
  • Healy Consultants’ Compliance Department assists our Clients to efficiently and completely discharge the annual accounting and auditing obligations in the following ways:
    • Documenting and implementing accounting procedures;
    • Implementing financial accounting software;
    • Preparation of financial accounting records;
    • Preparing forecasts, budgets and sensitivity analysis to better manage financial obligations and ease the process of reporting to the authorities.

• Conclusion

  It is important our Clients are aware of their personal and corporate tax obligations in their country of residence and domicile, and they will fulfil those obligations annually. Let us know if you need Healy Consultants’ help to clarify your annual reporting obligations.