Tax Questions Answered by Your San Francisco Tax accountant

May 2017

UNJSPF Benefits | Incorporate in Nevada

Incorporate in Nevada

Question: Do I need to pay CA tax even if I have a Nevada company?



Answer: Nevada has no state income tax on either individuals or corporations. Therefore, many websites claim that you can save taxes by incorporating in Nevada. This is simply not true unless the corporation only "does business" in Nevada. 

"Doing business" means "you are actively engaging in any transaction for the purpose of financial or pecuniary gain or profit". Even the Company is organized in Nevada, you are still doing business in California, therefore, liable for California taxes.
Well, what about a company which only sells online to customers outside of California? No business in California, therefore, no taxes?


Maybe you can get away before 2011.  Since 2011, California amended the definition of "doing business" and closed near all the loopholes. The new definition states if you "commercially domiciled in California", you are doing business in California.(R&TC § 23101)
In fact, out of state company are not allowed to do business in California until you register with the California Secretary of State.  By doing so, you will then do business in California as a "foreign entity" and file taxes accordingly.
Overall, tax-wise, there is no benefit at all to organize your business out of state. Some claim there are legal reasons since Nevada corporation law is more business friendly. You will need to consult a lawyer if that's the case. 


For information on State taxes of California compared to the State of Texas, read here.


UN Pension Fund(UNJSPF) Benefits

Question: United nations Joint Pension Fund(UNJSPF) is a fund established to provide retirement, death, disability and related benefits for staff of the UNs. Is the benefit from the fund taxable?



Answer: In some countries, UNJSPF benefits may be tax-exempt or partially tax-exempt. However,  for US citizens and resident aliens, even living overseas at the time of distribution, their UNJSPF periodic benefit payments are subject to United States income taxation.   In addition, You can not claim the foreign earned income exclusion for any UNJSPF pension benefits.


The UN joint pension fund is a "qualified" retirement plan under IRC section 401(a). Therefore, UNJSPF Benefits are taxed exact same fashion as other 401K retirement plans. Generally, the participant's own contributions, along with the employer's contributions, typically at twice the amount of the employee's own contribution( which are regarded either tax-paid or tax-exempt ) are the "investment" portion and it's tax-free, rest of the benefits are treated as ordinary income.


The tax-free part of a periodic retirement payment is calculated as the total investment divided by the numbers of the months of life expectancy determined under the IRC.


The taxpayer also needs to keep track, year by year, the total amount of the tax-free part of the benefits claimed until that total equals the participant's investment in the pension. Following that, the total portion of the distribution is taxed as ordinary income.


Lump-sum or partial lump sum distribution is taxed differently. 

What's your question?

Circular 230:The articles are for general information only. In accordance with IRS Circular 230 they are not considered tax opinions for purposes of relying on such statements in any challenge of the reporting of the above transaction by the IRS. If a full tax opinion is required certain procedures must be met . Also there is a significant cost for a full tax opinion to meet the requirements of Circular 230.

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