FAQs-US Taxation
1 .Who needs to file tax return in U.S.?
2. What is the various filing status?
3. What are the authorities to whom I have to pay taxes?
4. Does a foreign national have to file a tax return in U.S.?
5. What income needs to be reported for tax purposes?
6. What are the items that are qualified to be deducted as Itemized Deductions?
7. What are the credits available from Taxes?
8. What is SSN/ITIIN?
9. How to apply for ITIN?
10. What is the due date for filing the tax return?
11. What are the other important dates to remember?
12. Can filing separate returns by advantageous?
1 .Who needs to file tax return in U.S.?
Resident aliens should file Form 1040EZ, 1040A, or 1040 at the address shown in the instructions for that form.
Under U.S. immigration law, a lawful permanent resident who is required to file a tax return as a resident and fails to do so may be regarded as having abandoned status and may lose permanent resident status.
Nonresident aliens who are required to file an income tax return should use Form 1040NR or, if qualified, Form 1040NR-EZ.
If you are any of the following, you must file a return
1.A nonresident alien individual engaged or considered to be engaged in a trade or business in the United States during 2009.
You must file even if: a.Your income did not come from a trade or business conducted in the United States,
b.You have no income from U.S. sources, or
c.Your income is exempt from income tax.
2.A nonresident alien individual not engaged in a trade or business in the United States with U.S. income on which the tax liability was not satisfied by the withholding of tax at the source.
3.A representative or agent responsible for filing the return of an individual described in (1) or (2).
4.A fiduciary for a nonresident alien estate or trust.
You must also file if you want to:
Claim a refund of over-withheld or overpaid tax, or
Claim the benefit of any deductions or credits. For example, if you have no U.S. business activities but have income from real property that you choose to treat as effectively connected income, you must timely file a true and accurate return to take any allowable deductions against that income.
3. What are the authorities to whom I have to pay taxes?
A taxpayer may have to file tax return to Federal, State and Local tax authorities depending on the state in which he is a resident.
4. Does a foreign national have to file a tax return in U.S.?
Yes. A Foreign national often referred to as an “Alien” has to file a tax return in U.S. and report his incomes.
5. What income needs to be reported for tax purposes?
Depending on the fact whether he is a Resident or Non-resident of U.S. the income required to be reported will change. A resident needs to report his world-wide income, while the Aliens are required to report all U.S. sourced incomes.
6. What are the items that are qualified to be deducted as Itemized Deductions?
The following expenses incurred by a taxpayer are qualified for deduction as Itemized deductions:-
Medical and Dental Expenses
State and Local Income taxes
Real Estate Taxes
Personal Property Taxes
Home mortgage interest or Points paid
Charitable Contributions
Unreimbursed employee expenses
Tax Preparation Fees
Investment Expenses
Safe deposit boxes
7. What are the credits available from Taxes?
The following are few of the credits available from Taxes:-
Foreign Tax Credits
Credit for Child and Dependent Care Expenses
Credit for the elderly or disabled
Education Credits
Retirement Savings contribution Credit
Child Tax Credit
Lifetime Learning Credit
AMT credit
8. What is SSN/ITIIN?
Social Security number (SSN) is a nine-digit number issued to U.S. citizens, permanent residents, and temporary (working) residents under section 205(c) (2) of the Social Security Act. The number is issued to an individual by the Social Security Administration, an independent agency of the United States government.
Its primary purpose is to track individuals for taxation purposes. In recent years the SSN has become a de facto national identification number. A social security number may be obtained by applying on Form SS–5, “Application for A Social Security Number Card”
Individual Taxpayer Identification Number (ITIN) is a tax processing number issued by the Internal Revenue Service. It is a nine-digit number that always begins with the number 9 and has a 7 or 8 in the fourth digit, example 9XX-7X-XXXX.
IRS issues ITIN’s to individuals who are required to have a U.S. taxpayer identification number but who do not have, and are not eligible to obtain a Social Security Number (SSN) from the Social Security Administration (SSA).
ITIN’s are issued regardless of immigration status because both resident and nonresident aliens may have U.S. tax return and payment responsibilities under the Internal Revenue Code.
Individuals must have a filing requirement and file a valid federal income tax return to receive an ITIN, unless they meet an exception.
9. How to apply for ITIN?
Use the latest revision of Form W-7, Application for IRS Individual Taxpayer Identification Number to apply. Attach a valid federal income tax return unless you qualify for an exception, and include your original or certified proof of identity documents.
Because you are filing your tax return as an attachment to your ITIN application, you should not mail your return to the address listed in the Form 1040, 1040A or 1040EZ instructions. Instead, send your return, Form W-7 and proof of identity documents to:
Internal Revenue Service
Austin Service Center
ITIN Operation
P.O. Box 149342
Austin, TX 78714-9342
You may also apply using the services of an IRS-authorized Acceptance Agent or visit an IRS Taxpayer Assistance Center in lieu of mailing your information to the IRS in Austin. TACs in the United States provide in-person help with ITIN applications on a walk-in or appointment basis. Applicants outside the United States should contact an overseas IRS office to find out if that office accepts Form W-7 applications. The IRS’s ITIN Unit in Austin issues all numbers by mail
10. What is the due date for filing the tax return?
April 15th 2010 is the deadline to file your 2009 tax return and pay the balance of your tax. If you cannot meet the April 15 deadline, you may obtain an automatic six-month filing extension by filing Form 4868 (on paper or electronically). However, even if you get an extension, interest will still be charged for taxes not paid by April 15, and late payment penalties will be imposed unless at least 90% of your tax liability is paid by this date or you otherwise show reasonable cause. If you cannot pay the full amount of tax you owe when you file your return, you can file Form 9465 to request an installment payment arrangement.
If on this date you are a U.S. citizen or resident living and working abroad or in military service outside the U.S. or Puerto Rico, you have an automatic two-month filing extension until June 15, 2010.
11. What are the other important dates to remember?
December 31,2009:- If self-employed, this is the last day to set up a Keogh Plan for 2009.
January 15, 2010:- Pay the balance of your 2009 estimated tax.
15th day of the 4th month after the fiscal year ends: – File your fiscal year return and pay the balance of the tax due. If you cannot meet the filing deadline, apply for an automatic four-month filing extension on Form 4868.
12. Can filing separate returns by advantageous?
Filing a separate tax return can be advantageous instead of the joint return in the following situations:-
•One spouse has large medical expenses, miscellaneous itemized deductions, or casualty losses.
•The spouses’ incomes are about equal.
Separate filing may benefit such couples because the adjusted gross income “floors” for taking the listed deductions will be computed separately