CPA Groups Ask for Clarification on Net Investment Income Tax Rules
In a conversation with Congress, the American Institute of Certified Public Accountants(AICPA), Virgin Islands Society of Certified Public Accountants(VISCPA) and Guam Society of Public Accountants (GSCPA)asked for explanation concerning the implication of taxation rules for the residents of US Virgin Islands, Guam and the Commonwealth of the Northern Mariana Islands. The letter containing this conversation requests the clarification about whether the Net Investment Income Tax (NIIT) would be collected as the other income taxes are collected. Under the “mirror code” system of taxation, the basic requirements of Internal Revenue Code are the same as the Income Tax laws in these US territories.
The three groups of CPAs wrote in the letter that the implication of NIIT on the residents of US territories creates confusion among taxpayers and practitioners, leading to the need of some clarification. A clear discussion on the application of NIIT to the residents is much required so that the practitioners and taxpayers might be able to file their tax returns in time.
The letter went on to state that the AICPA, VISCPA and GSCPA believed that the Congress should demand explanation from Treasury on whether the NIIT applies to the residents of US territories. Additionally, if the residents of US territories are relieved and being exempted from NIIT, then the estates and trusts of US territories are also to be clarified concerning this NIIT tax rules.
The NIIT is considered a significant tax provision under the Affordable Care Act, imposed by the section 1441 of Internal Revenue Code. The NIIT is applied at a rate of 3.8% to the lower of the two: a taxpayer’s net investment income or the exceeded amount beyond the amended gross income thresholds of $250,000 for combined filers, $125,000 for married filing independently, and $200,000 for single filers.
For estates and trusts, the rate is equal to 3.8% of lower of the undistributed net investment income or the excess above the gross income over the threshold. For 2013, this amount was $11,950 and for 2014 this threshold is $12,150.
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