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Your Guide to Tax Season 2025

January 9, 2025/in Blog/by Victor Westerlund

As we’ve stepped into the new year, tax season is officially upon us. Whether you’re an individual taxpayer or a business owner, preparing for your 2025 tax returns early can help you avoid unnecessary stress, penalties, and missed opportunities for savings. This guide outlines key considerations for tax filing, important deadlines, and crucial details about the FBAR (Foreign Bank Account Report).

1. Who Is Considered a Tax Resident in the U.S.?

Understanding if you are a tax resident is crucial for determining your filing obligations in the United States. You are considered a U.S. tax resident if you meet either of the following criteria:

Green Card Test: You are a lawful permanent resident of the U.S. at any time during the year. Holding a green card means you are subject to U.S. taxation on your worldwide income, regardless of where you live or work.
US Citizens: as a citizen, you are also subject to U.S. taxation on your worldwide income, regardless of where you live or work.
Substantial Presence Test: You are physically present in the U.S. for at least 31 days in the current year and 183 days over the past three years, calculated as:

All the days you were present in the current year,
1/3 of the days you were present in the year before that,
1/6 of the days you were present in the second year before that.

Exceptions apply for certain visa holders, diplomats, and others with specific exemptions. Even if you don’t qualify as a tax resident, non-residents may still have U.S. tax filing obligations on income earned within the country.

Understanding your residency status ensures compliance with U.S. tax laws and helps you avoid unnecessary penalties or missed filing requirements.

2. What to Consider for Your Tax Return

For Individuals

Gather Your Documents: Compile W-2s, 1099s, investment income statements, and any receipts for deductions or credits you plan to claim.
Maximize Deductions and Credits: Look into education credits, child tax credits, retirement contributions, and deductions for mortgage interest or charitable contributions.
Review Your Filing Status: Changes in your family situation – such as marriage, divorce, or having children – could impact your tax bracket or available credits.
Foreign Income Considerations: If you earned income abroad or have financial accounts overseas, you may need to file additional forms such as Form 2555 (Foreign Earned Income Exclusion) or report foreign accounts on the FBAR (see below for details).

For Businesses

Organize Financial Records: Review income, expenses, payroll records, and deductions for business expenses like office supplies, travel, or software subscriptions.
Stay Updated on Tax Changes: 2024 may have introduced new tax laws or adjustments to corporate tax rates and deductions – make sure you’re informed.
Estimated Taxes: Confirm that your quarterly tax payments have been sufficient to avoid penalties.
Employee-Related Compliance: Ensure that proper tax withholding for employees has been done and prepare forms like W-2s and 1099s.

3. Important Dates to Keep in Mind

January 15, 2025: Final estimated tax payment for 2024 (if applicable).
January 15, 2025: IRS starts accepting business tax returns
January 31, 2025: Deadline for employers to distribute W-2s and 1099-NECs to employees and contractors.
Early February, 2025: IRS starts accepting e-filed tax returns
March 17, 2025: S Corporations and partnerships must file their returns or request an extension. (March 15 falls on a weekend, so the deadline shifts to the next business day.)
April 15, 2025: Individual and corporate tax returns due (unless you file for an extension).
June 17, 2025: Deadline for the second quarterly estimated tax payment.
October 15, 2025: Final deadline to file 2024 tax returns if an extension was granted.

4. Understanding the FBAR: Foreign Bank Account Report

The FBAR – or FinCEN Form 114 – is an essential filing requirement for U.S. taxpayers with foreign financial accounts.

Who Needs to File FBAR?

Any U.S. tax resident, including citizens, residents, or entities like corporations and partnerships, must file an FBAR if they have financial interest or signature authority over foreign accounts with a combined value exceeding $10,000 at any point in 2024.
Foreign accounts may include bank accounts, brokerage accounts, and even pension funds or insurance policies with a cash value.

Why Is FBAR Important?

The FBAR helps the U.S. government track offshore assets to prevent tax evasion. It is filed separately from your tax return with the Financial Crimes Enforcement Network (FinCEN) and has strict compliance requirements.

What Are the Penalties for Noncompliance?

Failing to file the FBAR or reporting incomplete information can lead to severe penalties:

Non-Willful Violations: Up to $10,000 per violation.
Willful Violations: Penalties are the greater of $100,000 or 50% of the account balance, and criminal charges may also apply.

Prepare Now for a Stress-Free Filing Season

Proactively organizing your documents and understanding your obligations will make tax season more manageable and help you avoid costly mistakes. Whether you’re navigating personal taxes or managing business filings, preparation is the key to compliance and financial peace of mind.

Have questions about your 2025 tax obligations or FBAR filing? Contact us today for tailored solutions and expert support to make this tax season hassle-free.

What you need to know when expanding your business to the US

September 18, 2024/in Blog/by Victor Westerlund

In the world of business, timing is everything, and for Nordic companies, the stars are aligning when it comes to expanding into the US market. Historically, the US has always been an attractive destination for Nordic businesses looking to scale. With its large consumer base, diverse economy, and access to cutting-edge technology, the potential for growth is significant.

With strengthened diplomatic and economic relationships, the opportunity for Nordic companies to expand to the US is better than ever.

Here’s what to think of when expanding to the US.

Selection of entity

When expanding a business to the US, selecting the right business entity is crucial as it determines tax obligations, liability protection, and operational flexibility. There are several entities to choose from, depending on your businesses activities, size, and needs:

LLC (Limited Liability Company) is a popular choice that provides personal liability protection while offering flexibility in taxation.
a Sole Proprietorship or a Single-Member LLC may be appropriate, with income reported on Schedule C of your individual tax return (Form 1040).
For businesses with multiple partners, a Partnership is a common structure, where income flows through to the owners via Form 1065 and K-1 schedules.
If your goal is to maintain pass-through taxation while achieving a more formal structure, an S-Corporation might be beneficial, with income reported on Form 1120-S and passed to shareholders through K-1. Note that S-Corporation is possible only for individuals who have greencard or are US citizens.
For larger operations or companies seeking to attract investors, a C-Corporation provides unlimited growth potential but is subject to double taxation (corporate tax on profits and individual tax on dividends) with income reported on Form 1120. C-Corporation is in most cases the best option for US subsidiaries.
Understanding the implications of each entity will help ensure the right balance between liability protection and tax efficiency in your US expansion strategy.

Setting up taxes & payroll

When expanding a business into the US, proper tax registrations and payroll management are critical to staying compliant with federal and state regulations and to avoid any penalties. Proper registration and payroll compliance set the foundation for a successful business expansion in the US.

The first step is obtaining a Federal Tax ID (Employer Identification Number), which is essential for tax filings and hiring employees.
Next, you’ll need to complete state registration through a foreign qualification, securing a Certificate of Authority in each state where you intend to do business
Additionally, a Registered Agent is required in every state, serving as the point of contact for receiving tax and legal documents.
For payroll, it’s crucial to ensure that all employees are eligible to work in the US, whether they hold a visa, green card, or are US citizens. Employers must also manage the shared responsibility for Social Security (6.2%) and Medicare taxes (1.45%) for both the employer and employees. However, employees on J-visas are exempt from these payroll tax contributions.

Navigating the US tax jungle

When expanding a business into the US, understanding the various tax obligations is essential for proper financial planning. Understanding the different layers of taxation—federal, state, and franchise—ensures that your business remains compliant and avoids unexpected financial burdens.

At the federal level, corporations are subject to a flat tax rate of 21%, which applies to all taxable income.
In addition to federal taxes, businesses may also face state income taxes, which vary by state. For example, New York and New York City have progressive state and local income tax rates, meaning the tax rate increases as income rises, adding a layer of complexity to your tax liability.
Beyond federal and state income taxes, many states also impose a Franchise Tax or Privilege Tax, an annual fee required for the right to operate within a particular state. This tax is often based on the business’s revenue, capital, or net worth and must be paid on top of regular income taxes.

By setting up a strong operational foundation and understanding the differences and complexities of the US taxation is key to success. We at Westmusa are your partner in navigating the US tax jungle – contact us here!

U.S. Sales tax – What you need to know if you are selling into the United States!

January 10, 2023/in Blog/by Benjamin Olsson

Nowadays, it’s easy for online businesses to sell their products to customers all over the world. E-commerce has made it convenient to grow your business by reaching a large number of customers online. While it’s easier to reach customers online, selling into a new country can lead to added complexity.

The U.S. market is considered the world’s most lucrative consumer market so it’s not a surprise that everybody wants a piece of the pie. But with this delicious piece of pie comes a side of complexity, Sales tax! If you sell to customers in the United States, you need to comply with sales tax laws in the states where you meet the economic nexus thresholds. These threshold limits, sales tax rates & laws vary by state and by product so it’s important to do your sales tax homework or ask a tax advisor to stay tax compliant.

Why do I need to collect sales tax when I sell online?

As of June 21, 2018, when the Supreme Court of the United States overruled the physical presence rule in South Dakota versus Wayfair, Inc. They decided that businesses could create sufficient nexus through their “economic and virtual contacts” with a state and they found that having the physical nexus rule as “incorrect & unsound” as the only nexus criteria. Therefore, although having a physical presence in a state still establishes nexus, a sales tax collection obligation can now be based solely on a remote seller’s economic activity in the state. Due to this ruling, almost all states that impose sales tax, have now implemented Economic nexus laws as well.

5 Steps to eCommerce Sales Tax Compliance

1. Determine where you have sales tax nexus.

Economic nexus regulations are often based on the volume of sales or transactions made by a remote seller over a particular time period, usually the current or previous calendar year. (or the last 12 months)

In California, for example, economic nexus is triggered when a remote seller has more than $500,000 in combined sales of tangible personal property for delivery into the state in the current or preceding calendar year.

In Maryland, for example, the economic nexus is triggered by $100,000 in sales or 200 transactions. It is important to check the current rules for each state you are selling to, to determine if you have reached the economic nexus threshold for that state.

2. Check if your products are subject to sales tax.

You will need to know if your products are taxable or nontaxable in the state. It’s important to remember that every state may have different rules on how they tax items and if the nontaxable sales also count towards the economic nexus threshold.

3. Registering for a sales tax permit

You must register with the tax authority and get a sales tax permit once you determined that you have nexus with a certain state. This must be done before collecting sales tax from anyone in the state. Therefore, it’s important to track your sales to every state to be aware of when you reached the economic threshold.

4. Set up sales tax collection on your online webshop.

Managing sales tax manually is time-consuming and it’s very easy to make errors due to the different tax rates in each locality. We recommend a cloud-based sales tax solution that integrates with your webshop to lower the workload & errors.

5. Charge, Collect, Report, File & Pay.

Once everything is registered & set up. You will begin charging sales tax on your products and collect sales tax. The state tax authority decides the filing frequency depending on your sales volume to the state. (Filing frequency is often monthly or quarterly)

It’s important to stay sales tax compliant by filing & paying your sales tax returns on time. Ignoring or forgetting to file sales tax returns can lead to high late filing penalties & interest fees.

If you are selling into the United States and you have questions about sales tax or if you have any other tax-related questions, do not hesitate to contact us at Westmusa, Inc.

e-mail: westmusa@aol.com

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