Cash flow is very important in the US culture. You would require showing a sufficient bank balance if you want to live in the country. In the US, you will find the world’s best banks that are very accommodating and offer the best bank account options whether you are a local or a non-resident living in the country. But you will have to be in the country while opening your account.

About taxes, it would be helpful to remember that prices mentioned on the products do not include the tax charge so ultimately you will be paying a price higher than what you accounted for.

READ THE COMPLETE GUIDE ON BANK ACCOUNTS AND TAXES

The financial sector is saturated with small local banks while the US has some of the largest banks in the world too. Therefore, there are plenty of options of bank accounts and financial assistance in the country.

It is recommended to hire a financial advisor in order to understand the complex US tax system. You would be required to pay taxes at state as well as the federal level. City and district taxes are also paid in some states of the US.

In this segment, we cover:
– Opening a Bank Account
– US Tax System

OPENING A BANK ACCOUNT

Opening a bank account is pretty direct, though the process could get slightly complicated if you are a non-resident. If all your documentation is in order, your account can be set up in no time.

Common banks across the US are:
– Savings and Loans Banks – offer home loans to the public.
– Credit Unions – non-profit cooperatives – offer their members loans on low interest rates.
– Commercial Banks – offer services for corporations and the general public.
– Retail Banks – offer services for individuals and small businesses.
It is recommended to check if your financial institutions are listed as insured by the Federal Deposit Insurance Corporation or the National Credit Union Administration so that in case of a financial crisis, the funds in your account will be insured for up to USD 200,000.

Bank Account: Foreigner
As mentioned above, opening a bank account is pretty direct even if you are a foreigner living in the country. But not all banks are lenient about this and, in most cases, may require you to submit additional documents.

Bank Account: Non-resident
Though there are options for opening a bank account online, the banks prefer if it was done in person; reason being that they would require specific identification and immigration information which is difficult to process through an online application, hence slowing down or denying the approval altogether. Therefore, it is best for you to be present while opening your first bank account in the US.

Bank Account as a Non-Resident: Documentation
These are the documents to set up a bank account in the US:
– Social Security Number or Taxpayer Identification Number
– Employment contract or income statement
– Proof of ID (passport)
– Proof of address (rental contract, a bill in your name, etc.)
When selecting a bank, do check on the bank’s regulations, documentation required and processes involved.

The biggest banks in the US are:
– Citibank
– Bank of America
– Goldman Sachs
– JPMorgan Chase
– Wells Fargo

Best personal finance banks by Forbes Magazine:
– Axos Bank (online-only bank)
– Centennial Bank (Home BancShares)
– Community Bank
– Citizens Business Bank (CVB Financial)
– First Merchants

Best online banks:
– Simple (online-only bank)
– Ally (online-only bank)
– Capital One
– Discover

Best international banks operating in the US:
– HSBC
– Santander
– Deutsche Bank
– ING

US Bank Accounts
Maintenance fees for low balance in your account can cost you anywhere between USD 5 to USD 30 per month depending on the type of account you choose.

No-fee checking account options:
– Cashback Debit (Discover)
– Interest Checking (Ally)
– 360 Checking (Capital One)
– Essential Checking (Axos)
– High Yield Investor Checking (Charles Schwab)

Savings accounts with best interest rate options:
– Plus Savings Account (Popular Direct): 2.36%
– Online Savings (PurePoint Financial): 2.35%
– Online Savings Account (Citizens Access): 2.35%
– Direct Savings (HSBC): 2.30%
– High-Yield Online Savings Account (Marcus: by Goldman Sachs): 2.25%

US TAX SYSTEM

The IRS (Internal Revenue Service) is the US government agency that regulates the federal tax in the country though state taxes are administered by each state individually. US Taxes: Types and imposition The US taxes its non-residents on their worldwide income. And, if you are working in the country, you will be taxed at the federal as well as state level. Different types of taxes: – Progressive federal tax – imposed on federal income – Progressive or fixed state tax – imposed on personal Income – Federal tax – imposed on income received from stock and bond transactions (Capital Gains) and employee’s salary, usually withheld by the employer (Payroll) – State tax – imposed on real estate property (land, buildings, factories, etc.) and, in some states, valuable goods (car, computers, equipment, jewelry, furniture, etc.) as well as on goods and services US Taxes: Rates You need to have a Social Security Number or a Taxpayer Identification Number when filing your tax returns which will depend on how long you have stayed in the US, i.e., your fiscal resident status (resident alien, non-resident alien or dual-status taxpayer). The fiscal year is usually identical to the calendar year and your tax filing deadline would be 15 April every year. To calculate your taxable income, first subtract the standard or alternative deductions from your overall income. A deduction is the part of your income that the government does not tax you on. Standard deduction is a set amount that is adjusted every year. Alternative deduction allows you to identify all the expenses that are not taxable (medical expenses, state and local income tax, charitable contributions, etc.). The tax brackets are adjusted every year due to inflation.

Example of tax calculation for average income USD 50,000 per person in 2020: 50,000 – 12,200 (standard deduction) = 37,800 USD of taxable income. 9,700 x 0,1 (10%) = 970 USD 28,100 x 0,12 (12%) = 3,372 USD 970 + 3,372 = 4,342 USD payable taxes You can deduct child tax credit, education credit, foreign tax credit, etc., if any, from your total payable taxes. State and Local Taxes Many states require their residents to pay taxes to the state they reside in. The payments depend on the state you live in, duration of stay and your income. Alaska, Florida, Nevada, South Dakota, Texas, Washington, and Wyoming are some of the states that do not impose additional state taxes. Some cities and districts also impose local taxes on their residents. Alternative Minimum Tax You may be subject to Alternative Minimum Tax (AMT) or pay normal income tax, whichever is higher, if you have a high income. If your adjusted gross income surpasses the established threshold (known as exemption that changes every year), you are required to pay AMT failing which the IRS has the right to collect it from you after processing your annual tax returns. Self-Employed Taxes The self-employed are required to pay Self-Employed (SE) taxes every quarter, if their net profit is USD 400 and above. The SE tax contributions go to Social Security and Medicare. The rate for SE tax is 15.3% of your net profit and is divided: – 12.4% for Social Security (old-age, survivors, and disability insurance) – 2.9% for Medicare (hospital insurance) For more specific details on your tax returns, visit the IRS website.