Your U.S. Tax Return

2011 Filing Requirements for Most Taxpayers

2011-12-22T04:21:00.000-08:00

2011 Filing Requirements
You must file a federal income tax return if you are a citizen or resident of the United States or a resident of Puerto Rico and you meet the filing requirements as given below. However, if you are self employed or independent contractor, you must file tax return if your self employed income is $400 or more.

1. Filing Status Single
If under 65, must file tax return if gross income is at least $9,500.
If 65 or older, must file tax return if gross income is at least $10,950.

2. Filing Status Married Filing Jointly
If under 65 (both spouses), must file tax return if gross income is at least $19,000.
If 65 or older (one spouse), must file tax return if gross income is at least $20,150.
If 65 or older (both spouses), must file tax return if gross income is at least $21,300.
(Read Filing Status: Married Filing Jointly)

3. Filing Status Married Filing Separately
Any age, must file tax return if gross income is at least $3,700.
(Read Filing Status: Married Filing Separately)

4. Filing Status Head of Household
If under 65, must file tax return if gross income is at least $12,200.
If 65 or older, must file tax return if gross income is at least $13,650.
(Read More: Head of Household)

5. Filing Status Qualifying Widow(er) with Dependent Child
If under 65, must file tax return if gross income is at least $15,300.
If 65 or older, must file tax return if gross income is at least $16,450.

Standard Deduction
For the 2011 tax return, the standard deduction amounts are,
*Single (other than head of household and Surviving Spouses) $5,800
*Married Filing Joint Returns and Surviving Spouses $11,600
*Married Filing Separate Returns $5,800
*Head of Households $8,500

The 2011 Exemption Deduction for each exemption is $3,700
If you are a dependent, read: Filing Requirements of a Dependent
For more information read IRS Publication 501 (2008), Exemptions, Standard Deduction, and Filing Information

More Articles:Your Filing Status
1. Filing Status for Married
2. Head of Household
Exemptions for Dependents
1. Requirements for claiming a dependent
2. Child of separated or divorced parents
Filing Requirements
1. Filing Requirement for a Dependent
2. 2009 Filing Requirements
Your Income
1. W2 vs 1099-Misc: Employee vs Independent Contractor
2. Tax Filing by Self Employed Sole Proprietor or Independent Contractor
3. Partnerships
4. Filing W4 Employee’s Withholding Allowance Certificate
5. Missing W2, 1099-Misc, 1099-R, 1099-Int
6. My Tax Refund?
Your Foreign Income
1. U.S. Citizen or Resident with Foreign Income
2. Foreign Bank and Financial Accounts
Income Exemptions and Deductions
1. Moving Expenses
2. Itemized deductions
3. Student Loan Interest Deductions
Income Adjustment
1. Traditional IRA and Roth IRA
2. Elective Deferrals 401(k) Plans
U.S. Gift tax and Inheritance Tax
1. The U.S. Gift Tax
2. Tax on Inheritances
Sale of Your Home
1. Profit from the Sale of Your Home
2. Foreclosure or Repossession of Main Home
3. First-Time Homebuyer Credit
State Tax
1. Working in Two or More States
What's New for 2009
What's New for 2009

Tax for Nonresidents and Foreign Aliens
1. U.S. Tax Filing Requirements for Non-Residents
2. Substantial Presence Test
3. Social Security and Medicare (FICA) Taxes for Non-resident Exempt Individual
4. U.S. Tax Treaties for Professors, Teachers and Researchers
5. U.S. Tax Treaties for Students and Apprentices
6. The U.S. Visas Complete List of Articles

OctroTalk - For iPhone and iPad, Nokia S60 3rd., Window Mobile Smartphone and Pocket PC and Windows Desktop. OctroTalk has instant messaging, P2P file transfer, VoIP, SIP calling, live video chat and video conference. OctroTalk supports Google Talk (GMail) audio and Video calls. Free Download http://www.octro.com/

2010 Filing Requirements for a Dependent

2011-01-31T03:06:00.000-08:00

2010 Filing Requirements for a Dependent
If you are a dependent, then your filing requirements are different from that of a non-dependent. Also, if your parents can claim you as a dependent, then you can't file as a non-dependent even if your parents don't actually claim you. On a tax return, a dependent does not get personal exemption of $3,650. If you are a dependent and are not required to file, you should still file your tax return if you have a refund.

Filing Requirements for a Dependent under 65 and not blind (Single)
If you are a dependent (single), you must file a return if any of the following apply.
1. Your unearned income was more than $950.
2. Your earned income was more than $5,700.
3. Your gross income was more than the larger of:$950, or your earned income up to $5,400 plus $300, or
4. Your self employed income is $400 or more.
Exception: If a dependent is married and the spouse files a separate return and itemizes deduction, then you must file your tax return if your gross income was at least $5 or if you meet any of above requirements.

Filing Requirements for a Dependent under 65 and not blind (Married)
If you are a dependent (married), you must file a return if any of the following apply.
1. Your unearned income was more than $950.
2. Your earned income was more than $5,700.
3. Your gross income was more than the larger of :$950, or your earned income up to $5,400 plus $300.
4. If your gross income was at least $5 and your spouse files a separate return and itemizes deduction, or
5. Your self employed income is $400 or more.

Filing Requirements for a Dependent 65 or older or blind (Single)
If you are a dependent (single), you must file a return if any of the following apply.
1. Your unearned income was more than $2,350 ($3,750 if 50 or older and blind).
2. Your earned income was more than $7,100 ($8,500 if 50 or older and blind).
3. Your gross income was more than larger of :$2,350 ($3,750 if 50 or older and blind), or your earned income up to $5,400 plus $1,700 ($3,100 if 50 or older and blind).
4. Your self employed income is $400 or more.

Filing Requirements for a Dependent 65 or older or blind (Married)
If you are a dependent (single), you must file a return if any of the following apply.
1. Your unearned income was more than $2,350 ($3,750 if 50 or older and blind).
2. Your earned income was more than $7,100 ($8,500 if 50 or older and blind).
3. Your gross income for 2010 was more than larger of :$2,350 ($3,750 if 50 or older and blind), or your earned income up to $5,400 plus $1,400 ($2,500 if 50 or older and blind).
4. If your gross income was at least $5 and your spouse files a separate return and itemizes deduction, or
5. Your self employed income is $400 or more.

2010 Standard Deduction for Dependent Individual
On the 2010 tax return, the standard deduction amount that can be claimed by an Individual who is dependent can not exceed the greater of
(i) $950, or
(ii) the sum of $300 and the earned income up to $5,400.

Child's Taxable Age
There is no minimum age when a child's tax return must be filed. In other words, the day the child has taxable income (income minus deduction), child must pay the taxes. Thus infants also pay income tax. Some infants do have interest and other investment income.

If a child is under 18 and the income in 2010 is more than $950 but less than $9,500, then the parents can elect to include child's interest and dividends income in their own return. However, once a child is 18, child must file his/her own separate return. Also if a child has earned income, capital gain income, self employment income, winnings income, then the child must file his/her separate return.

More Articles
Your Filing Status
1. Filing Status for Married
2. Head of Household
Exemptions for Dependents
1. Requirements for claiming a dependent
2. Child of separated or divorced parents
Filing Requirements
1. 2009 Filing Requirements
2. 2010 Filing Requirements
3. Filing Requirement for a Dependent
Your Income
1. W2 vs 1099-Misc: Employee vs Independent Contractor
2. Tax Filing by Self Employed Sole Proprietor or Independent Contractor
3. Partnerships
4. Filing W4 Employee’s Withholding Allowance Certificate
5. Missing W2, 1099-Misc, 1099-R, 1099-Int
Your Foreign Income
1. U.S. Citizen or Resident with Foreign Income
2. Foreign Bank and Financial Accounts
Income Exemptions and Deductions
1. Moving Expenses
2. Itemized deductions
3. Student Loan Interest Deductions
4. How to Report Income and Deductions
Income Adjustment
1. Traditional IRA and Roth IRA
2. Elective Deferrals 401(k) Plans
U.S. Gift tax and Inheritance Tax
1. The U.S. Gift Tax
2. Tax on Inheritances
Sale of Your Home
1. Profit from the Sale of Your Home
2. Foreclosure or Repossession of Main Home
3. First-Time Homebuyer Credit
State Tax Return
1. Working in Two or More States
Income Tax
1. My Tax Refund?

Complete List of Articles

OctroTalk - instant messaging, P2P file transfer, VoIP, SIP calling, live video chat and video conference for Nokia S60 3rd., Window Mobile and Windows Desktop. Support for Google Talk (GMail) audio and Video calls. OctroTalk is also available for iPhone and iPad and WP7, Free Download http://www.octro.com/

What's New for 2010

2011-01-27T21:39:00.000-08:00

This article contains information that effects your 2010 tax return.

Due date of return.
File individual taxpayers the due date for 2010 tax return is April 18, 2011 instead of April 15, 2011.

Standard Deduction and Personal Exemption
Standard Deduction
Single ... $5,700 (add $1,400 for Blind/Elderly)
Married Filing Jointly ... $11,400 (add $1,100 for Blind/Elderly)
Head of Household ... $8,350 (add $1,400 for Blind/Elderly)
Married Filing Separately ... $5,700 (add $1,100 for Blind/Elderly)
Dependent ... Greater of $950 or sum of $300 and individual's earned income
Personal Exemption
$3,650

Standard mileage rates.
For 2010, the standard mileage rate for the cost of operating your car for business use is 50 cents a mile, for medical reasons is 16½ cents a mile for the cost of operating your car for determining moving expenses is 16½ cents a mile.

Limits on personal exemptions and overall itemized deductions ended.
For 2010, you do not lose part of your deduction for personal exemptions and itemized deductions, regardless of the amount of your adjusted gross income (AGI).

Temporary increase in the earned income tax credit (EITC) for taxpayers with three or more qualifying children
The American Recovery and Reinvestment Act (ARRA) provides a temporary increase in the earned income tax credit (EITC) for taxpayers with three or more qualifying children. The maximum EITC for this new category is $5,657. These changes apply to 2009 and 2010 tax returns.
The EITC credit begins to phase out at $21,420 for married taxpayers filing a joint return with children and completely phases out at $40,463 for one child, $45,295 for two children and $48,279 for three or more children. For married taxpayers filing a joint return with no children, the credit begins to phase out at $12,470 and completely phases out at $18,440.

Additional Child Tax Credit
Under ARRA more families will be eligible for the additional child tax credit, which is a refundable credit.ARRA reduces the minimum earned income amount used to calculate the additional child tax credit to $3,000. Before ARRA, the minimum earned income amount was set to rise to $12,550. This change applies to tax years beginning in 2009 and 2010.

American Opportunity Credit for college education expenses
Under ARRA, the American Opportunity Credit modifies the existing Hope Credit for tax years 2009 and 2010, making the Hope Credit available to a broader range of taxpayers, including many with higher incomes and those who owe no tax. The credit can be claimed for four post-secondary education years instead of two, and it also adds required course materials to the list of qualifying expenses. The maximum annual credit is $2,500 per student. Use Form 8863 Education Credit.

The full credit is available to individuals whose modified adjusted gross income is $80,000 or less, or $160,000 or less for married couples filing a joint return. The credit is phased out for taxpayers with incomes above these levels. These income limits are higher than under the existing Hope and Lifetime Learning Credits.

If you choose to file as married filing separately you cannot take education credits, the deduction for student loan interest, or the tuition and fees deduction.

Self-employed health insurance deduction.
Effective March 30, 2010, if you were self-employed and paid for health insurance, you may be able to include in your self-employed health insurance deduction any premiums you paid to cover your child who was under age 27 at the end of 2010, even if the child was not your dependent.

First-time homebuyer credit.
You generally cannot claim the credit for a home you bought after April 30, 2010. However, you may be able to claim the credit if you entered into a written binding contract before May 1, 2010, to buy the home before July 1, 2010, and actually bought the home before October 1, 2010. Also, certain members of the Armed Forces and certain other taxpayers have additional time to buy a home and take the credit.

Homeowner's Energy Credit & Residential Energy Efficient Property Credit
Homeowner's energy credit is available for 2009 and 2010. The credit is thirty percent with a maximum of $1,500 for windows, doors, furnaces, water boilers, skylights, pellet stoves and insulation. Any credits received in previous years, do not effect this maximum credit amount.
For residential energy efficient property the credit is 30% of your costs of qualified property. Qualified properties include solar electric, solar water heating, fuel cell, small wind energy, and geothermal heat pump.
To take the credit, complete Form 5695 Residential Energy Credits. Enter the credit on line 52 of Form 1040 and check box c.

Making Work Pay Credit
Taxpayers with earned income will get Making Work Pay credit. It is 6.2% of your earned income with a maximum of $400 ($800 if married filing jointly). You must file schedule M (Form 1040 or 1040A) to claim the credit. Include the credit on line 63 of Form 1040 or line 40 of Form 1040A. If you are filing Form 1040-EZ, include the credit on line 8 and do not file schedule M. Those with AGI of more than $95,000 ($190,000 if married filing jointly), nonresidents and dependents do not get this credit.

Roth IRAs
Beginning in 2010, you can make a qualified rollover contribution to a Roth IRA regardless of the amount of your modified AGI.Also, half of any income that results from a rollover or conversion to a Roth IRA from another retirement plan in 2010 is included in income in 2011, and the other half in 2012, unless you elect to include all of it in 2010.

More Articles
Your Filing Status
1. Filing Status for Married
2. Head of Household
Exemptions for Dependents
1. Requirements for claiming a dependent
2. Child of separated or divorced parents
Filing Requirements
1. 2009 Filing Requirements
2. 2008 Filing Requirements
3. Filing Requirement for a Dependent
Your Income
1. W2 vs 1099-Misc: Employee vs Independent Contractor
2. Tax Filing by Self Employed Sole Proprietor or Independent Contractor
3. Partnerships
4. Filing W4 Employee’s Withholding Allowance Certificate
5. Missing W2, 1099-Misc, 1099-R, 1099-Int
Your Foreign Income
1. U.S. Citizen or Resident with Foreign Income
2. Foreign Bank and Financial Accounts
Income Exemptions and Deductions
1. Moving Expenses
2. Itemized deductions
3. Student Loan Interest Deductions
Income Adjustment
1. Traditional IRA and Roth IRA
2. Elective Deferrals 401(k) Plans
U.S. Gift tax and Inheritance Tax
1. The U.S. Gift Tax
2. Tax on Inheritances
Sale of Your Home
1. Profit from the Sale of Your Home
2. Foreclosure or Repossession of Main Home
3. First-Time Homebuyer Credit
State Tax Return
1. Working in Two or More States
Income Tax
1. My Tax Refund?

Complete List of Articles

OctroTalk for Winodws Phone 7. (Free App). Octrotalk version 1.0.3 is a Google Talk client for Windows Phone 7, which allows you to stay logged in to the Google Talk service, and receive incoming messages via push (in case app is not running in the foreground). OctroTalk supports both tile and push notifications. Download http://www.windowsphone.com/en-US/apps/42f332f9-4d13-42d2-8214-e290bbd54cde

2010 Filing Requirements for Most Taxpayers

2011-01-21T15:50:00.000-08:00

2010 Filing Requirements
You must file a federal income tax return if you are a citizen or resident of the United States or a resident of Puerto Rico and you meet the filing requirements as given below. However, if you are self employed or independent contractor, you must file tax return if your self employed income is $400 or more.

1. Filing Status Single
If under 65, must file tax return if gross income is at least $9,350.
If 65 or older, must file tax return if gross income is at least $10,750.

2. Filing Status Married Filing Jointly
If under 65 (both spouses), must file tax return if gross income is at least $18,700.
If 65 or older (one spouse), must file tax return if gross income is at least $19,800.
If 65 or older (both spouses), must file tax return if gross income is at least $20,900.
(Read Filing Status: Married Filing Jointly)

3. Filing Status Married Filing Separately
Any age, must file tax return if gross income is at least $3,650.
(Read Filing Status: Married Filing Separately)

4. Filing Status Head of Household
If under 65, must file tax return if gross income is at least $12,050.
If 65 or older, must file tax return if gross income is at least $13,450.
(Read More: Head of Household)

5. Filing Status Qualifying Widow(er) with Dependent Child
If under 65, must file tax return if gross income is at least $15,050.
If 65 or older, must file tax return if gross income is at least $16,150.2009

Standard Deduction
For the 2010 tax return, the standard deduction amounts are,
*Single (other than head of household and Surviving Spouses) $5,700
*Married Filing Joint Returns and Surviving Spouses $11,400
*Married Filing Separate Returns $5,700
*Head of Households $8,350

The 2010 Exemption Deduction for each exemption is $3,650
If you are a dependent, read: Filing Requirements of a Dependent
For more information read IRS Publication 501 (2008), Exemptions, Standard Deduction, and Filing Information

State Filing Requirements
Each state has its own filing requirements. You need to check the requirements at the state web site.
CA Filing Requirements
1. Single or Head of Household: under 65 $14,622, 65 or older $19,5222.
Married /RDP filing jointly or separately: under 65 $29,245, one spouse 65 or older $34,145, both spouses 65 or older $39,045.3.
Dependent: under 65 $11,698, 65 or older $16,598.
(For CA info http://www.ftb.ca.gov/forms/2009_California_Tax_Rates_and_Exemptions.shtml#ifr)

More Articles:Your Filing Status
1. Filing Status for Married
2. Head of Household
Exemptions for Dependents
1. Requirements for claiming a dependent
2. Child of separated or divorced parents
Filing Requirements
1. Filing Requirement for a Dependent
2. 2009 Filing Requirements
Your Income
1. W2 vs 1099-Misc: Employee vs Independent Contractor
2. Tax Filing by Self Employed Sole Proprietor or Independent Contractor
3. Partnerships
4. Filing W4 Employee’s Withholding Allowance Certificate
5. Missing W2, 1099-Misc, 1099-R, 1099-Int
6. My Tax Refund?
Your Foreign Income
1. U.S. Citizen or Resident with Foreign Income
2. Foreign Bank and Financial Accounts
Income Exemptions and Deductions
1. Moving Expenses
2. Itemized deductions
3. Student Loan Interest Deductions
Income Adjustment
1. Traditional IRA and Roth IRA
2. Elective Deferrals 401(k) Plans
U.S. Gift tax and Inheritance Tax
1. The U.S. Gift Tax
2. Tax on Inheritances
Sale of Your Home
1. Profit from the Sale of Your Home
2. Foreclosure or Repossession of Main Home
3. First-Time Homebuyer Credit
State Tax
1. Working in Two or More States
What's New for 2009
What's New for 2009

Tax for Nonresidents and Foreign Aliens
1. U.S. Tax Filing Requirements for Non-Residents
2. Substantial Presence Test
3. Social Security and Medicare (FICA) Taxes for Non-resident Exempt Individual
4. U.S. Tax Treaties for Professors, Teachers and Researchers
5. U.S. Tax Treaties for Students and Apprentices
6. The U.S. Visas Complete List of Articles

OctroTalk - For iPhone and iPad, Nokia S60 3rd., Window Mobile Smartphone and Pocket PC and Windows Desktop. OctroTalk has instant messaging, P2P file transfer, VoIP, SIP calling, live video chat and video conference. OctroTalk supports Google Talk (GMail) audio and Video calls. Free Download http://www.octro.com/

How to Report Income and Deductions

2010-02-23T01:42:00.000-08:00

Form W-2G. Certain Gambling Winnings. Report amount from box 1 of W-2G on Form 1040, line 21. Professional gamblers must report it on schedule C or C-EZ (Form 1040).
Form 1042-S. Form 1042-S is used to report income paid to a non-resident regardless of whether the payment is taxable. The form has a number of purposes. It can be used to report wages exempt under a tax treaty, wages earned as an independent contractor, royalties, and scholarship or fellowship grants.
Form 1098-C. Contributions of Motor Vehicles, Boats and Airplanes. Report the allowable amount on schedule A, line 17.
Form 1098-E. Student Loan Interest Statement. To claim deduction, enter the allowable amount from box 1 of 1098-E on Form 1040, line 33 or Form 1040A, line 18. If you did not get 1098-E or you paid qualifying interest that is not reported on 1098-E, you can also deduct those amounts.
Form 1098-T. Qualified tuition and related expenses. Box 1--Payments received for qualifying tuition and related expenses. Box 2--Amounts billed for qualifying tuition and related expenses. Box 5- Scholarships and grants. Box 8-- If at least half time student. Box 9--If a graduate student.
For tuition and fee deduction on 2009 tax return (This deduction is not allowed in 2010), complete Form 8917 and take deduction on line 34 of Form 1040. On Form 8917, line 1, enter only the amount you paid in 2009 (for yourself, your spouse or dependent student) for qualified expenses to an eligible postsecondary institution for academic period beginning in 2009 and the first 3 months of 2010.
For education credit, complete Form 8863 and take credit on line 49 of Form 1040.
(If you are a dependent student, you are not eligible for the education credit).

1099-B. Proceeds From Broker Proceeds from Broker and Barter Exchange Transactions.
Use the information provided on the Form 1099-B to complete Schedule D (Form 1040).
1099-C. Cancellation of Debt.
Amount of Debt canceled (box 2). There are many exclusions and exceptions that can make all or part of this amount nontaxable. Read IRS Publication 4681. Canceled Debts, Foreclosures, Repossessions and Abandonments.
Report taxable amount as under:
*Nonbusiness debt, on line 21 of Form 1040 or 1040NR.
* Nonfarm sole proprietorship debt on line 6 of schedule C (Form 1040) or schedule on line 1 of schedule C-EZ (Form 1040).
* Nonfarm rental activity debt on line 3 of schedule E (Form 1040).
* Farm rental activity debt on line 6 of Form 4835.
*Farm debt and you are a farmer on line 10 of schedule F (Form 1040).
Form 1099-G. Certain Government Payments.
Unemployment compensation (box 1), report the payment, which is more than any allowed non-taxable amount, on Form 1040, line 19. In 2009, the non taxable umemployment compensation was $2400. In 2010, the entire umemployment compensation is taxable.
State or local income tax refunds, credits, or offsets (box 2), this amount is reported as income only if you itemized your deduction in 2008 and claimed deduction for these taxes. Use worksheet for Form 1040, line 10 and report on line 10.
ATAA payments (b0x 5), report on Form 1040, line 21.
Taxable grants (box 6), report on Form 1040, line 21, or on schedule C, C-EZ, E, or F or Form 4835.
Agricultural payments (box 7) and Market Gain (box 9) , report on schedule F.

1099-R. Distributions From Pensions, Annuities, Retirement or Profit-Sharing Plans, IRAs, Insurance Contracts, etc.
Distributions from IRA, report on line 15b of Form 1040 except if you have qualified rollover. If you have qualified rollover, report it on line 15a. Then on line 15b enter 0 if entire amount is qualified rollover, or the balance taxable amount.
Distributions from pensions, annuities, 401(k), 403(b) etc., report on line 16b of Form 1040 if the amount is fully taxable. If the amount is not fully taxable, report on line 16a. Then on line 16b report the taxable amount.
(If you owe additional tax on the distributions, you need to file Form 5329. Additional Taxes on Qualified Plans(Including IRAs) and Other Tax-Favored Account.)

More Articles:
Your Filing Status
1. Filing Status for Married
2. Head of Household
Exemptions for Dependents
1. Requirements for claiming a dependent
2. Child of separated or divorced parents
Filing Requirements
1. 2008 Filing Requirements
2. Filing Requirement for a Dependent
3. 2009 Filing Requirements
Your Income
1. W2 vs 1099-Misc: Employee vs Independent Contractor
2. Tax Filing by Self Employed Sole Proprietor or Independent Contractor
3. Partnerships
4. Filing W4 Employee’s Withholding Allowance Certificate
5. Missing W2, 1099-Misc, 1099-R, 1099-Int
6. My Tax Refund?
Your Foreign Income
1. U.S. Citizen or Resident with Foreign Income
2. Foreign Bank and Financial Accounts
Income Exemptions and Deductions
1. Moving Expenses
2. Itemized deductions
3. Student Loan Interest Deductions
Income Adjustment
1. Traditional IRA and Roth IRA
2. Elective Deferrals 401(k) Plans
U.S. Gift tax and Inheritance Tax
1. The U.S. Gift Tax
2. Tax on Inheritances
Sale of Your Home
1. Profit from the Sale of Your Home
2. Foreclosure or Repossession of Main Home
State Tax Return
1. Working in Two or More States
What's New for 2009
What's New for 2009

Complete List of Articles

OctroTalk - for iPhone and iPad, Nokia S60 3rd. phonrd, Window Mobile Smartphone and Pocket PC and Windows Desktop. OctroTalk has instant messaging, P2P file transfer, VoIP, SIP calling, live video chat and video conference. OctroTalk supports Google Talk (GMail) audio and Video calls. Free Download http://www.octro.com/

2009 Filing Requirements for Most Taxpayers

2009-11-01T21:09:00.000-08:00

2009 Filing Requirements (Also for 2010)
You must file a federal income tax return if you are a citizen or resident of the United States or a resident of Puerto Rico and you meet the filing requirements as given below. However, if you are self employed or independent contractor, you must file tax return if your self employed income is $400 or more.

1. Filing Status Single
If under 65, must file tax return if gross income is at least $9,350.
If 65 or older, must file tax return if gross income is at least $10,750.

2. Filing Status Married Filing Jointly
If under 65 (both spouses), must file tax return if gross income is at least $18,700.
If 65 or older (one spouse), must file tax return if gross income is at least $19,800.
If 65 or older (both spouses), must file tax return if gross income is at least $20,900.
(Read Filing Status: Married Filing Jointly)

3. Filing Status Married Filing Separately
Any age, must file tax return if gross income is at least $3,650.
(Read Filing Status: Married Filing Separately)

4. Filing Status Head of Household
If under 65, must file tax return if gross income is at least $12,000.
If 65 or older, must file tax return if gross income is at least $13,400.
(Read More: Head of Household)

5. Filing Status Qualifying Widow(er) with Dependent Child
If under 65, must file tax return if gross income is at least $15,050.
If 65 or older, must file tax return if gross income is at least $16,150.

2009 Standard Deduction
For the 2009 tax return, the standard deduction amounts are,
*Single (other than head of household and Surviving Spouses) $5,700
*Married Filing Joint Returns and Surviving Spouses $11,400
*Married Filing Separate Returns $5,700
*Head of Households $8,350

The 2009 Exemption Deduction for each exemption is $3,650
If you are a dependent, read: Filing Requirements of a Dependent
For more information read IRS Publication 501 (2008), Exemptions, Standard Deduction, and Filing Information

State Filing Requirements
Each state has its own filing requirements. You need to check the requirements at the state web site.

CA Filing Requirements
1. Single or Head of Household: under 65 $14,622, 65 or older $19,522
2. Married /RDP filing jointly or separately: under 65 $29,245, one spouse 65 or older $34,145, both spouses 65 or older $39,045.
3. Dependent: under 65 $11,698, 65 or older $16,598.
(For CA info http://www.ftb.ca.gov/forms/2009_California_Tax_Rates_and_Exemptions.shtml#ifr)

More Articles:
Your Filing Status
1. Filing Status for Married
2. Head of Household
Exemptions for Dependents
1. Requirements for claiming a dependent
2. Child of separated or divorced parents
Filing Requirements
1. Filing Requirement for a Dependent
2. 2009 Filing Requirements
Your Income
1. W2 vs 1099-Misc: Employee vs Independent Contractor
2. Tax Filing by Self Employed Sole Proprietor or Independent Contractor
3. Partnerships
4. Filing W4 Employee’s Withholding Allowance Certificate
5. Missing W2, 1099-Misc, 1099-R, 1099-Int
6. My Tax Refund?
Your Foreign Income
1. U.S. Citizen or Resident with Foreign Income
2. Foreign Bank and Financial Accounts
Income Exemptions and Deductions
1. Moving Expenses
2. Itemized deductions
3. Student Loan Interest Deductions
Income Adjustment
1. Traditional IRA and Roth IRA
2. Elective Deferrals 401(k) Plans
U.S. Gift tax and Inheritance Tax
1. The U.S. Gift Tax
2. Tax on Inheritances
Sale of Your Home
1. Profit from the Sale of Your Home
2. Foreclosure or Repossession of Main Home
3. First-Time Homebuyer Credit
State Tax
1. Working in Two or More States
What's New for 2009
What's New for 2009

Tax for Nonresidents and Foreign Aliens
1. U.S. Tax Filing Requirements for Non-Residents
2. Substantial Presence Test
3. Social Security and Medicare (FICA) Taxes for Non-resident Exempt Individual
4. U.S. Tax Treaties for Professors, Teachers and Researchers
5. U.S. Tax Treaties for Students and Apprentices
6. The U.S. Visas
Complete List of Articles

OctroTalk - World's First without 3G Live Video Chat/Conference & Video Streaming for Mobile Phones -- For Nokia S60 3rd., Window Mobile Smartphone and Pocket PC and Windows Desktop. OctroTalk has instant messaging, P2P file transfer, VoIP, SIP calling, live video chat and video conference. OctroTalk supports Google Talk (GMail) audio and Video calls. Free Trial/Download http://www.octro.com/

S Corporations

2009-09-25T03:25:00.000-07:00

An S corporation or S-corp is a corporation that makes a valid election to be taxed under Subchapter S of Chapter 1 of the Internal Revenue Code. S corporations elect to pass corporate income, losses, deductions and credit through to their shareholders for federal tax purposes. Shareholders of S corporations report the flow-through of income and losses on their personal tax returns and are assessed tax at their individual income tax rates. This allows S corporations to avoid double taxation on the corporate income. S corporations are responsible for tax on certain built-in gains and passive income.

Qualification Requirements
To qualify for S corporation status, the corporation must meet the following requirements:
* Be a domestic corporation,
* Have only allowable shareholders including individuals, certain trust, and estates and may not include partnerships, corporations or non-resident alien shareholders,
* Have no more than 100 shareholders,
* Have one class of stock, and
* Not be an ineligible corporation i.e. certain financial institutions, insurance companies, and domestic international sales corporations.

Filing Requirements
1. For income tax return, S Corporation files Form 1120S and schedule K-1 (Form 1120S),
2. For estimate taxes, it files Form 1120-W (corporation only) and 8109 (for depositing taxes), and
3. For employment taxes it files (a) Form 941 for Social security and Medicare taxes and income tax withholding, (b) Form 940 for federal unemployment (FUTA) tax, and Form 8109 for depositing taxes.

Form 1120S generally must be filed by March 15th of the year immediately following the calendar year covered by the return or, if a fiscal year (a year ending on the last day of a month other than December) is used, by the 15th day of the third month immediately following the last day of the fiscal year, and the automatic extension period is six months. The corporation must complete a Schedule K-1 for each person who was a shareholder at any time during the tax year and file it with the IRS along with Form 1120S. The second copy of the Schedule K-1 must be mailed to the shareholder. For 2008, the amount for late fling is $86/month/shareholder with a maximum of 12 months.

Some but not all states recognize a state tax law equivalent to an S corporation, so that the S corporation in certain states may be treated the same way for state income tax purposes as it is treated for Federal purposes. A state taxing authority may require that a copy of the Form 1120S return be submitted to the state with the state income tax return.

California additional taxes
S-corporations pay a franchise tax of 1.5% of net income in the state of California (minimum $800). This is one factor to be taken into consideration when choosing between a limited liability company and an S-corporation in California. On highly profitable enterprises, the LLC franchise tax fees, which are based on gross revenues (minimum $800), may be lower than the 1.5% net income tax. Conversely, on high gross revenue, low profit-margin businesses, the LLC franchise tax fees may exceed the S corp net income tax.

New York City additional taxes
In New York City, S-corporations are subject to the full corporate income tax at a 8.85% rate. However if the S-corporation can demonstrate that a portion of its business was done outside the city, that portion will not be subject to the additional tax.

More Articles:
Your Filing Status
1. Filing Status for Married
2. Head of Household
Exemptions for Dependents
1. Requirements for claiming a dependent
2. Child of separated or divorced parents
Filing Requirements
1. Filing Requirement for a Dependent
2. 2009 Filing Requirements
Your Income
1. W2 vs 1099-Misc: Employee vs Independent Contractor
2. Tax Filing by Self Employed Sole Proprietor or Independent Contractor 3
. Partnerships
4. Filing W4 Employee’s Withholding Allowance Certificate
5. Missing W2, 1099-Misc, 1099-R, 1099-Int
6. My Tax Refund?
Your Foreign Income
1. U.S. Citizen or Resident with Foreign Income
2. Foreign Bank and Financial Accounts
Income Exemptions and Deductions
1. Moving Expenses
2. Itemized deductions
3. Student Loan Interest Deductions
Income Adjustment
1. Traditional IRA and Roth IRA
2. Elective Deferrals 401(k) Plans
U.S. Gift tax and Inheritance Tax
1. The U.S. Gift Tax
2. Tax on Inheritances
Sale of Your Home
1. Profit from the Sale of Your Home
2. Foreclosure or Repossession of Main Home
3. First-Time Homebuyer Credit
State Tax
1. Working in Two or More States
What's New for 2009
What's New for 2009

Complete List of Articles
OctroTalk is now available for iPhone and iPad. OctroTalk supports Google Talk (GMail) audio and Video calls. Free Download from AppStore. http://www.octro.com/download_iphone.php

What's New for 2009

2009-04-17T00:11:00.000-07:00

This article contains information that effects your 2009 tax return.

Tax Break for New Car Purchases in 2009
Taxpayers who buy a new passenger vehicle in 2009 (after Feb. 16, 2009, and before Jan. 1, 2010) may be entitled to deduct state and local sales and excise taxes paid on the purchase on their 2009 tax returns. Thus the taxpayers can buy now get cash back later on their tax returns. The deduction is limited to the state and local sales and excise taxes paid on up to $49,500 of the purchase price of a qualified new car, light truck, motor home or motorcycle which has a gross vehicle weight rating of not more than 8,500 lbs. The special deduction is available regardless of whether a taxpayer itemizes deductions on their return.

The amount of the deduction is phased out for taxpayers whose modified adjusted gross income is between $125,000 and $135,000 for individual filers and between $250,000 and $260,000 for joint filers.

If you are claiming standard deduction, with your tax return complete schedule L (Form 1040). Check box 40b on Form 1040. The sales taxes, local taxes and excise duty paid on the new car appear as increase in the standard deduction. It you are itemizing your deductions, the new car deduction will appear on line 7 of schedule A (Form 1040). Complete the worksheet for line 7 on the back of schedule A (Form 1040).

First $2,400 of Unemployment Benefits Tax Free for 2009
The American Recovery and Reinvestment Act, which includes making every person who receives unemployment benefits during 2009 is eligible to exclude the first $2,400 of these benefits on their 2009 tax return. For a married couple, the exclusion applies to each spouse, separately. Thus, if both spouses receive unemployment benefits during 2009, each may exclude from income the first $2,400 of benefits they receive.

You must subtract $2,400 from the amount in box 1 of 1099-G and report it on line 19 of Form 1040, line 13 of Form 1040A, or line 3 of Form 1040-EZ. If married filing jointly, include any unemployment compensation received by your spouse that is more than $2,400.

Unemployed workers can choose to have income tax withheld from their unemployment benefit payments at a flat 10 percent. Unemployed workers who expect to receive more than $2,400 in benefits this year should consider having tax withheld from their benefit payments in excess of that amount.

First-Time Homebuyers Tax Credit
Under the American Recovery and Reinvestment Act of 2009, qualifying taxpayers who purchase a home in 2009 before Dec. 1, 2009 receive up to $8,000, or $4,000 for married individuals filing separately. People can claim the credit either on their 2008 tax returns or on their 2009 tax returns. Read More...

Standard Deduction and Personal Exemption
Standard Deduction
Single ... $5,700 (add $1,400 for Blind/Elderly)
Married Filing Jointly ... $11,400 (add $1,100 for Blind/Elderly)
Head of Household ... $8,350 (add $1,400 for Blind/Elderly)
Married Filing Separately ... $5,700 (add $1,100 for Blind/Elderly)
Dependent ... Greater of $950 or sum of $300 and individual's earned income
Personal Exemption
$3,650

Temporary increase in the earned income tax credit (EITC) for taxpayers with three or more qualifying children
The American Recovery and Reinvestment Act (ARRA) provides a temporary increase in the earned income tax credit (EITC) for taxpayers with three or more qualifying children. The maximum EITC for this new category is $5,657. These changes apply to 2009 and 2010 tax returns.

The EITC credit begins to phase out at $21,420 for married taxpayers filing a joint return with children and completely phases out at $40,463 for one child, $45,295 for two children and $48,279 for three or more children. For married taxpayers filing a joint return with no children, the credit begins to phase out at $12,470 and completely phases out at $18,440.

Additional Child Tax Credit
Under ARRA more families will be eligible for the additional child tax credit, which is a refundable credit.

ARRA reduces the minimum earned income amount used to calculate the additional child tax credit to $3,000. Before ARRA, the minimum earned income amount was set to rise to $12,550. This change applies to tax years beginning in 2009 and 2010.

American Opportunity Credit for college education expenses
Under ARRA, the American Opportunity Credit modifies the existing Hope Credit for tax years 2009 and 2010, making the Hope Credit available to a broader range of taxpayers, including many with higher incomes and those who owe no tax. The credit can be claimed for four post-secondary education years instead of two, and it also adds required course materials to the list of qualifying expenses. The maximum annual credit is $2,500 per student. If you or your parents get the education credit, you cannot claim any type of education deduction.

The full credit is available to individuals whose modified adjusted gross income is $80,000 or less, or $160,000 or less for married couples filing a joint return. The credit is phased out for taxpayers with incomes above these levels. These income limits are higher than under the existing Hope and Lifetime Learning Credits.

If you choose to file as married filing separately you cannot take education credits, the deduction for student loan interest, or the tuition and fees deduction.

Homeowner's Energy Credit & Residential Energy Efficient Property Credit
Homeowner's energy credit is available for 2009 and 2010. The credit is thirty percent with a maximum of $1,500 for windows, doors, furnaces, water boilers, skylights, pellet stoves and insulation. Any credits received in previous years, do not effect this maximum credit amount.

For residential energy efficient property the credit is 30% of your costs of qualified property. Qualified properties include solar electric, solar water heating, fuel cell, small wind energy, and geothermal heat pump.

To take the credit, complete Form 5695 Residential Energy Credits. Enter the credit on line 52 of Form 1040 and check box c.

Making Work Pay and Government Retiree Credits
Taxpayers with earned income will get Making Work Pay credit. It is 6.2% of your earned income with a maximum of $400 ($800 if married filing jointly). You must file schedule M (Form 1040 or 1040A) to claim the credit. Include the credit on line 63 of Form 1040 or line 40 of Form 1040A. If you are filing Form 1040-EZ, include the credit on line 8 and do not file schedule M. Those with AGI of more than $95,000 ($190,000 if married filing jointly), nonresidents and dependents do not get this credit.

If you received a government pension or annuity in 2009, you may be able to take Government retiree credit. The credit is $250 ($500 if married filing joint return and both spouses received a qualifying pension or annuity). You can not take the credit if you received a $250 economic recovery payment during 2009. You must file schedule M (Form 1040 or 1040A) to claim the credit.

Cash for Clunkers
A $3,500 or $4,500 voucher or payment made for such a voucher under "cash for clunkers" (CARS) program to buy or lease a new fuel-efficient automobile is not taxable.

More Articles
Your Filing Status
1. Filing Status for Married
2. Head of Household
Exemptions for Dependents
1. Requirements for claiming a dependent
2. Child of separated or divorced parents
Filing Requirements
1. 2009 Filing Requirements
2. 2008 Filing Requirements
3. Filing Requirement for a Dependent
Your Income
1. W2 vs 1099-Misc: Employee vs Independent Contractor
2. Tax Filing by Self Employed Sole Proprietor or Independent Contractor
3. Partnerships
4. Filing W4 Employee’s Withholding Allowance Certificate
5. Missing W2, 1099-Misc, 1099-R, 1099-Int
Your Foreign Income
1. U.S. Citizen or Resident with Foreign Income
2. Foreign Bank and Financial Accounts
Income Exemptions and Deductions
1. Moving Expenses
2. Itemized deductions
3. Student Loan Interest Deductions
Income Adjustment
1. Traditional IRA and Roth IRA
2. Elective Deferrals 401(k) Plans
U.S. Gift tax and Inheritance Tax
1. The U.S. Gift Tax
2. Tax on Inheritances
Sale of Your Home
1. Profit from the Sale of Your Home
2. Foreclosure or Repossession of Main Home
3. First-Time Homebuyer Credit
State Tax Return
1. Working in Two or More States
Income Tax
1. My Tax Refund?

Complete List of Articles

OctroTalk - instant messaging, P2P file transfer, VoIP, SIP calling, live video chat and video conference for Nokia S60 3rd., Window Mobile Smartphone and Pocket PC and Windows Desktop. Free Download http://www.octro.com/

Form 4868 Automatic Extension for 6 months

2009-04-08T07:40:00.000-07:00

The regular due date for filing your 2008 tax return is April 15, 2009. Instead of trying to complete your tax return in a rush, it is better to get an extension. Make sure that your return is error free. The due date to file Form 4868 (Application for Automatic Extension of Time to File U.S. Individual Income Tax Return) to get automatic extension is April 15, 2009. If you file Form 4848, your due date is October 15, 2009. You must pay the tax due by the regular due date. If you do not pay the tax due by the regular due date, you will owe interest. You may also be charged penalties.

Individuals Outside the United States If you are a U.S. citizen or resident, and you are outside the U.S. on the regular due date (April 15, 2009), you are allowed an automatic 2-month extension (until June 16, 2009). For this two month's extension, the taxpayer is not required to file Form 4868. The taxpayer may file Form 4868 to get further extension of 4 months.

If you do not pay the tax due by the regular due date of April 15, 2009, interest and penalty is charged until the date the tax is paid. The Form 4868 extends the date to file your tax return to October 15, 2009 but you must still pay all your due taxes on or before the regular due date.

It is possible that the IRS finds some error in the tax return that may result in an additional tax. If this happens after April 15, you will have to pay the due tax amount with interest and penalty. Taxpayers can limit these charges by filing on time and paying sooner.

The current interest rate charged by IRS is 5 percent per year and late payment penalties, normally 0.5 percent (1/2 of 1 percent) per month, apply to any tax paid after the April 15 deadline, taxpayers can limit these charges by paying sooner. For example, a taxpayer who files on May 1, owing $1,000 in tax, would be charged interest plus a $50 penalty. If you can not pay the tax due in full on or before the filing date of April 15, 2009, here is what you should do:

1. Make Partial Payment by April 15, 2009
Make sure to pay what ever maximum you can pay before April 15, 2009. If you are also filing your tax return, make sure to include the payment with your tax return. You will also attach Form 1040-V. If you are applying for extension to file, then send the payment with Form 4868. Various e-pay options offer taxpayers the easiest and fastest way to make a full or partial payment with their return. These options enable taxpayers to make payments either online or by phone using electronic funds withdrawal or a credit card. Alternatively, taxpayers can send the IRS a check made out to “United States Treasury.” If you are not paying the full amount of tax due, make sure to make a short-time payment agreement with IRS or apply for Installment Agreement.

2. Apply for 6-month’s Automatic Extension to File Your Tax Return (Form 4868)
If your tax return is not complete, make sure to file Form 4868 for 6-months extension to file your tax return. Make sure to pay all your tax due or the amount you are in a position to pay with Form 4868. If you apply for extension, then you can file your tax return up to October 15, 2009. You will not pay penalty for not filing your tax return. However, you will still pay interest on the tax due amount.

3. Make a Short-time Payment Arrangement with IRS
Taxpayers who need more time to pay can find out in just a few minutes whether they qualify for a payment agreement with the IRS. Just click on the Online Payment Agreement link and follow the prompts. By entering some basic information about their tax situation, eligible taxpayers can set up in a matter of minutes either a short-term payment extension or a monthly payment plan. A short-term extension gives a taxpayer up to 120 days to pay. No fee is charged, but the late-payment penalty plus interest will apply.

4. Apply for Installment Agreement
A monthly payment plan or installment agreement gives a taxpayer more time to pay. Though interest still applies, the late-payment penalty is cut in half for any month an installment agreement is in effect. This reduced rate of 0.25 percent (1/4 of 1 percent) per month is only available if the tax return was filed on time. A user fee will also be charged if the installment agreement is approved. The fee, normally $105, is reduced to $52, if taxpayers agree to make their monthly payments electronically through electronic funds withdrawal. The fee is $43 for eligible low-and-moderate-income taxpayers. Alternatively, taxpayers can apply for a payment agreement by filling out Form 9465, Installment Agreement Request. This form can be filed along with either an electronically filed return or a paper return. If filing on paper, be sure to attach it to the front of the return.

Extra Time to File
Some taxpayers can wait until after April 15 to file a return, pay any taxes due and make IRA contributions for 2009. As a general rule, those eligible get the extra time without having to ask for it. Eligible taxpayers include:
*Members of the military serving in Iraq, Afghanistan or other combat zone localities. Normally, the postponement is until at least 180 days after the service member leaves the combat zone.
*Victims of severe flooding in Minnesota and North Dakota have an extra 30 days, until May 15, to file their 2008 individual tax returns and pay any taxes due. Similarly, victims of severe storms and tornadoes in three Oklahoma counties have until May 11 to file and pay.

More Articles:
Your Filing Status
1. Filing Status for Married
2. Head of Household
Exemptions for Dependents
1. Requirements for claiming a dependent
2. Child of separated or divorced parents
Filing Requirements
1. 2008 Filing Requirements
2. Filing Requirement for a Dependent
2. 2009 Filing Requirements
Your Income
1. W2 vs 1099-Misc: Employee vs Independent Contractor
2. Tax Filing by Self Employed Sole Proprietor or Independent Contractor
3. Partnerships
4. Filing W4 Employee’s Withholding Allowance Certificate
5. Missing W2, 1099-Misc, 1099-R, 1099-Int
6. My Tax Refund?
Your Foreign Income
1. U.S. Citizen or Resident with Foreign Income
2. Foreign Bank and Financial Accounts
Income Exemptions and Deductions
1. Moving Expenses
2. Itemized deductions
3. Student Loan Interest Deductions
Income Adjustment
1. Traditional IRA and Roth IRA
2. Elective Deferrals 401(k) Plans
U.S. Gift tax and Inheritance Tax
1. The U.S. Gift Tax
2. Tax on Inheritances
Sale of Your Home
1. Profit from the Sale of Your Home
2. Foreclosure or Repossession of Main Home
3. First Time Homebuyers Credit
State Tax Return
1. Working in Two or More States
What's New for 2009
What's New for 2009

Complete List of Articles

OctroTalk - for iPhone and iPad and Mobile Phones Nokia S60 3rd., Window Mobile Smartphone and Pocket PC and Windows Desktop. OctroTalk has instant messaging, P2P file transfer, VoIP, SIP calling, live video chat and video conference. OctroTalk supports Google Talk (GMail) audio and Video calls. Free Download http://www.octro.com/

First-Time Homebuyer Credit

2009-01-17T06:28:00.000-08:00

You can claim the credit if you are a first-time homebuyer and have purchased a home located in the United States after April 8, 2008 and before June 30, 2010. For the purpose of this credit, you are first time homebuyer if you (your spouse if married) did not own any other main home during the 3-year period ending on the date of purchase. Vacation homes and rental property are not eligible. The date of purchase is the date the title closes. If you constructed your main home, the purchase date is the first date you occupy the home. Different credit applies to home located in the United States purchased during
(a) After April 8, 2008, and before January 1, 2009, and
(b) After December 31, 2008 and before December 1, 2009. Under the new law, was signed into law on Nov. 6, 2009, an eligible taxpayer must buy, or enter into a binding contract to buy, a principal residence on or before April 30, 2010 and close on the home by June 30, 2010. For qualifying purchases in 2010, taxpayers have the option of claiming the credit on either their 2009 or 2010 return.

Taxpayers will claim the credit on IRS Form 5405, First-Time Homebuyer Credit. You claim the first-time homebuyer credit on your 2008 tax return or amended 2008 return or on your 2009 return. If you are claiming the credit on the amended tax return Form 1040X, then enter the credit on line 15 of Form 1040-X and enter "Form 5405" in the white space at the end of line 15, and attach the Form 5405.

How much is the credit?
(a) For home purchases after April 8, 2008, and before January 1, 2009
The credit is 10 percent of the purchase price of the home, with a maximum available credit of $7,500 for either a single taxpayer or a married couple filing jointly. The limit is $3,750 for a married person filing a separate return. In most cases, the maximum credit will be available for homes costing $75,000 or more.

The credit is in fact an interest-free loan because it must be repaid in equal installments over a 15-year period starting the second year after the year the credit is claimed. For example, if you properly claim the maximum available credit of $7,500 on your 2008 federal tax return, you must begin repaying the credit by including one-fifteenth of this amount, or $500, as an additional tax on your 2010 federal tax return. Normally, $500 will be due each year from 2010 to 2024.

The amount of the credit begins to phase out for taxpayers whose adjusted gross income is more than $75,000, or $150,000 for joint filers and the credit phases out at $95,000, or $170,000 for joint files. Also no credit is allowed if the taxpayer disposes of the residence, or the residence ceases to be principal residence, before the close of the tax year for which credit is otherwise allowed.

What if you sell your home?
When you sell the home or do not use the home as principal residence, you must pay back the balance of the loan in the year the home is sold or ceases to be the principal residence. However, the repayment of amount may not exceed the amount of gain from the sale of residence to an unrelated person. If there is no gain then repayment is waived.

If on divorce, the home is transferred to a spouse or former spouse, the spouse who receives the home is responsible for any future recapture.

(b) For home purchases closed after December 31, 2008 and before July 1, 2010 (Binding contract for the principal residence must be entered on or before April 30, 2010)
The credit is 10 percent of the purchase price of the home, with a maximum available credit of $8,000 for either a single taxpayer or a married couple filing jointly. The limit is $4,000 for a married person filing a separate return. In most cases, the maximum credit will be available for homes costing $80,000 or more.

They do not have to repay the credit, provided the home remains their main home for 36 months after the purchase date. The amount of the credit begins to phase out for taxpayers whose modified adjusted gross income (MAGI) is more than
(i) $75,000, or $150,000 for joint filers (for purchased before November 6, 2009), and
(ii) $125,000, or $225,000 for joint filers (for purchases on or after November 6, 2010).

Who Cannot Claim the Credit
1. If you are a non-resident, the home is located outside the United States, or you acquired home by gift, inheritance or from a related person. (Resident aliens even with ITIN are eligible).
2. If you own more than 50% outstanding stocks of a corporation or capital interest or profits interest of a partnership.
3. If you are or were eligible for District of Columbia first-time homebuyer credit.
4. You buy your home from a close relative. A related person includes your spouse, ancestors (parents, grandparents, etc), or linear descendants (children, grandchildren, etc.).
5. You stop using your home as your main home. You sell your home before the end of the year.
6. Your home financing comes from tax-exempt mortgage revenue bonds.

(c) Credit for long-time homeowners buying a replacement principal residence.
For the first time, long-time homeowners who buy a replacement principal residence may also claim a homebuyer credit of up to $6,500 (up to $3,250 for a married individual filing separately). They must have lived in the same principal residence for any five-consecutive year period during the eight-year period that ended on the date the replacement home is purchased. Replacement home must be purchased in the period from November 6, 2009 to April 30, 2010. or after April 30, 2010 and before July 1, 2010, and you entered into a binding contract before May 1, 2010 to purchase home before July 1, 2010.

Proof of Purchase
Real estate transfer records are public records. Many states make it available on line and the IRS can verify it easily. Some days do not have all the records online or public and in those cases IRS is asking for the proof of purchase. For example, most records in MO are not available on line and the IRS is asking for a copy of the recorded deed or a copy of the HUD-1 or RESPA settlement sheet as proof.

IRS Warns Taxpayers to Beware of First-Time Homebuyer Credit Fraud
IRS vigorously pursues anyone who falsely tries to claim this or any other tax credit or deduction. The penalties for tax fraud are steep. Taxpayers should be wary of anyone who promises to get them a big refund. So before claiming the credit, make sure that you meet the requirements, and claim the credit only after you actually purchase the home.

More Articles:
Your Filing Status
1. Filing Status for Married
2. Head of Household
Exemptions for Dependents
1. Requirements for claiming a dependent
2. Child of separated or divorced parents
Filing Requirements
1. 2008 Filing Requirements
2. Filing Requirement for a Dependent
3. 2009 Filing Requirements
Your Income
1. W2 vs 1099-Misc: Employee vs Independent Contractor
2. Tax Filing by Self Employed Sole Proprietor or Independent Contractor
3. Partnerships
4. Filing W4 Employee’s Withholding Allowance Certificate
5. Missing W2, 1099-Misc, 1099-R, 1099-Int
6. My Tax Refund?
Your Foreign Income
1. U.S. Citizen or Resident with Foreign Income
2. Foreign Bank and Financial Accounts
Income Exemptions and Deductions
1. Moving Expenses
2. Itemized deductions
3. Student Loan Interest Deductions
Income Adjustment
1. Traditional IRA and Roth IRA
2. Elective Deferrals 401(k) Plans
U.S. Gift tax and Inheritance Tax
1. The U.S. Gift Tax
2. Tax on Inheritances
Sale of Your Home
1. Profit from the Sale of Your Home
2. Foreclosure or Repossession of Main Home
State Tax Return
1. Working in Two or More States
What's New for 2009
What's New for 2009

Complete List of Articles

OctroTalk - -- For iPhone and iPad, Nokia S60 3rd., Window Mobile Smartphone and Pocket PC and Windows Desktop. OctroTalk has instant messaging, P2P file transfer, VoIP, SIP calling, live video chat and video conference. OctroTalk supports Google Talk (GMail) audio and Video calls. Free Download http://www.octro.com/

When will I get my tax refund?

2009-01-07T23:00:00.000-08:00

You can have a refund check mailed to you or you can have your refund direct deposited directly to your account. If you e-filed your tax return, you should get your refund within 15 days if you opted for direct deposit and 21 days if IRS send you a paper check. If you have mailed you return to the IRS, then you should receive your refund check within 6 weeks.

Refund Information from IRS
Refund information does not become available until it has been 6 weeks since you filed your tax return (3 weeks if you filed electronically). After waiting the appropriate number of weeks, the fastest, easiest way to find out about your current year refund is to log onto http://www.irs.gov/. Click on Where's My Refund then go to Get My Refund Status (or
click the link https://sa2.www4.irs.gov/irfof/lang/en/irfofgetstatus.jsp). You can call Refund Hotline at (800) 829-1954. Be sure to have a copy of your current tax return available because you will need to know your social security number shown on your return, the filing status and the exact whole dollar amount of our refund. The IRS updates refund information every seven days.

Refund Information For an Amended Tax Return
You cannot check the status of a refund for an amended return on the automated tax line or by accessing "Where's my Refund." Amended/corrected returns are processed as quickly as possible. However, it may take 8 to 12 weeks or longer to process the return. If 8 weeks have elapsed and you have not received your refund, you may call (800) 829-1040.

Many taxpayers have filed amended tax returns for 2009 to be able to get First Time Homebuyers Credit. For such returns IRS is taking longer time to process the return.

In Case of Overpayment or Underpayment of Refund
If you receive a check for more than the refund you claimed, do not cash the check until you receive a notice explaining the difference. If you receive a check for a refund you are not entitled to, or for an overpayment that should have been credited to estimated tax, do not cash the check. Call the IRS.

If your refund check is for less than you claimed, you will get a notice explaining the difference. Cash the check; this does not stop you from claiming an additional amount of refund. If you did not receive a notice and you have any questions about the amount of your refund, you should wait for 2 weeks before calling the IRS. All or part of any interest you were charged on an erroneous refund generally will be forgiven. Any interest charged for the period before demand for repayment was made will be forgiven unless
1. You, or a person related to you, caused the erroneous refund in any way, or
2. The refund is more than $50,000.

Offset Against Debts
If you owe certain past amounts including federal income tax, other federal debts (such as student loans), state income tax, and child and spousal support payments, all or part of the refund may be used to pay all or part of the past-due amount. You will be notified by IRS if your refund is offset against debts.
(Also you can check in advance if you are flagged for offset or not by calling FMS Autoresponder line at 1-800-304-3107.)

Joint Return and injured spouse. When you file a joint return and only one spouse owes a past-due amount, the other spouse should file Form 8379, Injured Spouse Allocation, so that the other spouse gets his/her share of tax refund.

More Articles:
Your Filing Status
1. Filing Status for Married
2. Head of Household
Exemptions for Dependents
1. Requirements for claiming a dependent
2. Child of separated or divorced parents
Filing Requirements
1. 2008 Filing Requirements
2. Filing Requirement for a Dependent
3. 2009 Filing Requirements
Your Income
1. W2 vs 1099-Misc: Employee vs Independent Contractor
2. Tax Filing by Self Employed Sole Proprietor or Independent Contractor
3. Partnerships
4. Filing W4 Employee’s Withholding Allowance Certificate
5. Missing W2, 1099-Misc, 1099-R, 1099-Int
Your Foreign Income
1. U.S. Citizen or Resident with Foreign Income
2. Foreign Bank and Financial Accounts
Income Exemptions and Deductions
1. Moving Expenses
2. Itemized deductions
3. Student Loan Interest Deductions
Income Adjustment
1. Traditional IRA and Roth IRA
2. Elective Deferrals 401(k) Plans
U.S. Gift tax and Inheritance Tax
1. The U.S. Gift Tax
2. Tax on Inheritances
Sale of Your Home
1. Profit from the Sale of Your Home
2. Foreclosure or Repossession of Main Home
3. First-Time Homebuyer Credit
State Tax Return
1. Working in Two or More States
Income Tax
1. My Tax Refund?
2. What's New for 2009

Complete List of Articles

OctroTalk - For iPhone and iPad, Nokia S60 3rd. phones, Window Mobile Smartphone and Pocket PC and Windows Desktop. OctroTalk has instant messaging, P2P file transfer, VoIP, SIP calling, live video chat and video conference. OctroTalk supports Google Talk (GMail) audio and Video calls. Free Trial/Download http://www.octro.com/

2008 Filing Requirements for Most Taxpayers

2008-10-28T23:55:00.000-07:00

2008 Filing Requirement
You must file a federal income tax return if you are a citizen or resident of the United States or a resident of Puerto Rico and you meet the filing requirements as given below. However, if you are self employed or independent contractor, you must file tax return if your self employed income is $400 or more.

1. Filing Status Single
If under 65, must file tax return if gross income is at least $8,950.
If 65 or older, must file tax return if gross income is at least $10,300.

2. Filing Status Married Filing Jointly
If under 65 (both spouses), must file tax return if gross income is at least $17,900.
If 65 or older (one spouse), must file tax return if gross income is at least $18,950.
If 65 or older (both spouses), must file tax return if gross income is at least $20,000.
(Read Filing Status: Married Filing Jointly)

3. Filing Status Married Filing Separately
Any age, must file tax return if gross income is at least $3,500.
(Read Filing Status: Married Filing Separately)

4. Filing Status Head of Household
If under 65, must file tax return if gross income is at least $11,500.
If 65 or older, must file tax return if gross income is at least $12,850.
(Read More: Head of Household)

5. Filing Status Qualifying Widow(er) with Dependent Child
If under 65, must file tax return if gross income is at least $14,400.
If 65 or older, must file tax return if gross income is at least $15,450.

2008 Standard Deduction
For the 2008 tax return, the standard deduction amounts are,
*Single (other than head of household and Surviving Spouses) $5,450
*Married Filing Joint Returns and Surviving Spouses $10,900
*Married Filing Separate Returns $5,450
*Head of Households $8,000
The 2008 Exemption Deduction for each deduction is $3,500
If you are a dependent, read: Filing Requirements of a Dependent

More Articles:
Your Filing Status
1. Filing Status for Married
2. Head of Household
Exemptions for Dependents
1. Requirements for claiming a dependent
2. Child of separated or divorced parents
Filing Requirements
1. Filing Requirement for a Dependent
2. 2008 Filing Requirements
Your Income
1. W2 vs 1099-Misc: Employee vs Independent Contractor
2. Tax Filing by Self Employed Sole Proprietor or Independent Contractor
3. Partnerships
4. Filing W4 Employee’s Withholding Allowance Certificate
5. Missing W2, 1099-Misc, 1099-R, 1099-Int
Your Foreign Income
1. U.S. Citizen or Resident with Foreign Income
2. Foreign Bank and Financial Accounts
Income Exemptions and Deductions
1. Moving Expenses
2. Itemized deductions
3. Student Loan Interest Deductions
Income Adjustment
1. Traditional IRA and Roth IRA
2. Elective Deferrals 401(k) Plans
U.S. Gift tax and Inheritance Tax
1. The U.S. Gift Tax
2. Tax on Inheritances
Sale of Your Home
1. Profit from the Sale of Your Home
2. Foreclosure or Repossession of Main Home
3. First-Time Homebuyer Credit
State Tax
1. Working in Two or More States
What's New for 2009
What's New for 2009

Complete List of Articles

OctroTalk - World's First without 3G Live Video Chat/Conference & Video Streaming for Mobile Phones -- For Nokia S60 3rd., Window Mobile Smartphone and Pocket PC and Windows Desktop. OctroTalk has instant messaging, P2P file transfer, VoIP, SIP calling, live video chat and video conference. Free Trial/Download http://www.octro.com/

Partnerships

2008-09-11T14:02:00.000-07:00

Generally a partnership is a business organization with two or more members for carrying on a trade, business, financial operation, or venture and divides its profits. An incorporated organization is not partnership. An LLC having two or more owners is a partnership for federal tax purpose unless the LLC elects to be treated as a corporation and files Form 8832. The conversion of a partnership into an LLC classified as a partnership for federal tax purposes or conversion of an LLC classified as a partnership into a partnership does not terminate the partnership.

A partner can be an individual person, corporation, trust, estate, or another partnership. All general partners are personally liable for partnership liabilities. There can be no limited partners in a general partnership.

Partnership Tax Return (Form 1065)
A partnership must file an information return Form 1065 showing its income, deductions, and other required information. It must show the names and addresses of each partner and each partner's distributive share of taxable income. The return must be signed by a general partner. If a limited liability company is treated as a partnership, it must file Form 1065 and one of its members must sign the return.

A partnership is not considered to engage in a trade or business, and is not required to file a Form 1065, for any tax year in which it neither receives income nor pays or incurs any expenses treated as deductions or credits for federal income tax purposes.

A partnership files Income Tax Return Form 1065 and does not pay any taxes. The profit of a partnership is distributed among the partners. For this the partnership issues Form K-1 to the partners. Partners must include this profit in their own income income tax return and on this income pay 15.3% employment taxes. Form K-1 (Form 1065) income is reported on part II of schedule E (Form 1040).

Late Filing of Partnership Return
You the year 2007, the penalty is $85/month/partner, with a maximum of twelve months. The base penalty for 2008 is $86/month/partner with a maximum of twelve months.

Filing Extension Period
For the partnership returns (Form 1065 series) that have unextended due dates on or after January 1, 2009, the filing extension period is only five months (previously six months).

Partnership Termination
A partnership terminates when one of the following events take place
1. All its operations are discontinued and no part of any business, financial operation, or venture is continued by any of its partners in a partnership
2. At least 50% of the total interest in partnership capital and profits is sold or exchanged within a 12-month period, including sale or exchange to another partner (except in case an electing large partnership).
3. For special rules that apply to merger, consolidation, or division of partnership.

More Articles:
Your Filing Status
1. Filing Status for Married
2. Head of Household
Exemptions for Dependents
1. Requirements for claiming a dependent
2. Child of separated or divorced parents
Filing Requirements
1. Filing Requirement for a Dependent
2. 2009 Filing Requirements
Your Income
1. W2 vs 1099-Misc: Employee vs Independent Contractor
2. Tax Filing by Self Employed Sole Proprietor or Independent Contractor
3. Partnerships
4. Filing W4 Employee’s Withholding Allowance Certificate
5. Missing W2, 1099-Misc, 1099-R, 1099-Int
6. My Tax Refund?
Your Foreign Income
1. U.S. Citizen or Resident with Foreign Income
2. Foreign Bank and Financial Accounts
Income Exemptions and Deductions
1. Moving Expenses
2. Itemized deductions
3. Student Loan Interest Deductions
Income Adjustment
1. Traditional IRA and Roth IRA
2. Elective Deferrals 401(k) Plans
U.S. Gift tax and Inheritance Tax
1. The U.S. Gift Tax
2. Tax on Inheritances
Sale of Your Home
1. Profit from the Sale of Your Home
2. Foreclosure or Repossession of Main Home
3. First-Time Homebuyer Credit
State Tax Return
1. Working in Two or More States
What's New for 2009
What's New for 2009

Complete List of Articles

OctroTalk - for iPhone and iPad, Nokia S60 3rd., Window Mobile Smartphone and Pocket PC and Windows Desktop. OctroTalk has instant messaging, P2P file transfer, VoIP, SIP calling, live video chat and video conference. OctroTalk supports Google Talk (GMail) audio and Video calls. Free Download http://www.octro.com/

The U.S. Income Tax Topics 2

2008-09-09T16:44:00.000-07:00

Reporting Tips
All tips you receive directly, through your employer and under a tip-splitting or tip-pooling are income. If you have tips income, you must keep a proper record of tips, report tips to your employer and report tips income on your tax return.

1. Keep a daily tip record. You can either maintain your personal tip diary, or keep copies of documents that show your tips, such as restaurant bills and credit card charge slips.

2. Report tips to your employer. You must report tips (amounting to $20 or more in a month) to your employer each month by the 10th of the next month so that your employer can withhold FICA taxes. If your employer does not give you any other way to report tips, you can use Form 4070. Fill in the information and give it to your employer. To get a 1-year supply of the form, ask your employer for Publication 1244 or contact IRS.

3. Report all your tips on your income tax return. Report your tips with your wages on line 1 of Form 1040EZ or line 7 of Form 1040A or Form 1040. You must report all tips you received in 2008 on your tax return, including both cash tips and non cash tips. Any tips you reported to your employer for 2008 are included in the wages shown in box 1 of your Form W-2. Add to the amount in box 1 only the tips you did not report to your employer.

Record Keeping
You must keep all the records as per the federal law.
1. For assessment of tax you owe, this generally is 3 years from the date you filed the return or the due date of the return, which ever is later.
2. For filing a claim for credit or refund, this generally is 3 years from the date you filed the original return, or 2 years from the date you paid the tax, whichever is later. Returns filed before the due date are treated as filed on the due date.
3. If you did not report income that you should have reported on your return, and it is more than 25% of the income shown on the return, the period of limitations does not run out until 6 years after you filed the return.
4. If a return is false or fraudulent with intent to evade tax, or if no return is filed, an action can generally be brought at any time
5. You may need to keep records relating to the basis of property longer than the period of limitations. Keep those records as long as they are important in figuring the basis of the original or replacement property. Generally, this means for as long as you own the property and, after you dispose of it, for the period of limitations that applies to you.

The clause "if the return is false or fraudulent...," may mean that you should keep record for all your life.
Read http://www.irs.gov/businesses/small/article/0,,id=98513,00.html

What If I Have Incomplete Records?
If you do not have complete records to prove an element of an expense, then you must prove the element with:
*Your own written or oral statement, containing specific information about the element, and
*Other supporting evidence that is sufficient to establish the element.

Destroyed records. If you cannot produce a receipt because of reasons beyond your control, you can prove a deduction by reconstructing your records or expenses. Reasons beyond your control include fire, flood, and other casualty. Go through your bank statements, canceled checks, credit card statements and other records to collect as much information as you can. Get a copy of police report with you.

Excess Social Security Taxes Withheld
The Federal Insurance Contributions Act (FICA) provides for a federal system of old-age, survivors, disability, and hospital insurance. The FICA requires that the employer withhold social security tax at 6.2% and Medicare tax at 1.45% from the wages of the employees. For the year 2008 the social security tax is deducted from the first $102,000 of the wages while Medicare tax is deducted from the entire wages.If you, or your spouse if filing joint return, had more than one employer for 2008 and total wages of more than $102,000 (or $97,500 for 2007), too much social security tax may have been withheld. You can take a credit on this line for refund on line 67 of Form 1040 for the amount withheld in excess of $6324 for 2008 (or $6045 for 2007). But if any one employer withheld more than $6324, you cannot claim the excess on your return. The employer should adjust the tax for you. If the employer does not adjust the over collection amount, you can file a claim for refund using Form 843. The Form 843 is filed separate from the tax return.

1. U.S. Citizen or Resident with Foreign Income
2. Foreign Bank and Financial Accounts
Income Exemptions and Deductions
1. Moving Expenses
2. Itemized deductions
3. Student Loan Interest Deductions
Income Adjustment
1. Traditional IRA and Roth IRA
2. Elective Deferrals 401(k) Plans
U.S. Gift tax and Inheritance Tax
1. The U.S. Gift Tax
2. Tax on Inheritances
Sale of Your Home
1. Profit from the Sale of Your Home
2. Foreclosure or Repossession of Main Home
3. First-Time Homebuyer Credit
State Tax Return
1. Working in Two or More States
What's New for 2009

What's New for 2009

Complete List of Articles

OctroTalk - for iPhone and iPad, Nokia S60 3rd. phones, Window Mobile Smartphone and Pocket PC and Windows Desktop. OctroTalk has instant messaging, P2P file transfer, VoIP, SIP calling, live video chat and video conference. OctroTalk supports Google Talk (GMail) audio and Video calls. Free Download http://www.octro.com/

The U.S. Income Tax Topics 1

2008-08-22T22:43:00.000-07:00

Copy of Tax Return and Transcripts
If you did not keep a copy of your tax return, you can get it from IRS. You can also get transcripts of the tax return. Transcripts serve most of your requirements. There is no fee for the transcripts. Transcripts have most of the information from your tax return including information from W2, 1099. Transcripts are normally available for 3-years. You can order a transcript by calling 1-800-829-1040, or using Form 4506-T, Request for Transcript of Tax Return. If you have a fax number, you can get it faxed.

To request for Copy of Tax Return you must use Form 4506. You will get copy of tax return filed by you along with all the attachments (like W2, 1099..). For each return the charges are $57 and IRS takes about 60 days to complete your request. In the Form 4506 you can also authorize a third party to receive the return.

Debt Cancellation
Generally, if a debt you owe is canceled or forgiven, other than as a gift or bequest, you must include the canceled amount in your income. If canceled is intended as a gift to you, then it is not income. A debt includes any indebtedness for which you are personally liable. However, in case of bankruptcy, insolvency or no-recourse loans, the debt cancellation is not treated as income. A non-recourse loan is a loan for which the lender’s only remedy in case of default is to repossess the property being financed or used as collateral. The lender cannot pursue you personally in case of default.

If the debt is a nonbusiness debt, report the canceled amount on Form 1040, line 21 (Other Income). If it is a business debt, report the amount on Schedule C or Schedule C-EZ (Form 1040) (or on Schedule F, Profit or Loss From Farming (Form 1040), if the debt is farm debt and you are a farmer).
Also read about debt cancellation in case of foreclosure or repossession.

Settlement - Taxability
Court awards and damages.
You must consider the items that the settlement replaces. Part of settlement may be taxable depending upon:
1. Physical injuries or physical sickness settlements are generally non-taxable if you did not take an itemized deduction for medical expenses related to this injury in prior years. If you did deduct medical expenses related to the injury, the amount is taxable and is reported as "Other Income" on line 21 of Form 1040.

2 Interest, punitive damages, emotional distress or mental anguish, and employment discrimination or injury to reputation settlements are generally taxable. Interest is taxable as "Interest Income" and is reported on line 8a of Form 1040). Punitive damages, emotional distress or mental anguish, and employment discrimination or injury to reputation settlements are reported as "Other Income" on line 21 of Form 1040.

Punitive Damages are taxable even if is related to a physical injury or physical sickness). Emotional distress or mental anguish amounts are taxable to the extent that they exceed medical costs, not previously deducted, for treatment of emotional distress or mental anguish.

3. Compensation for lost wages or lost profits in most cases is taxable income. Amounts received in settlement of pension rights (if you did not contribute to the plan) is taxable.

4. Loss-of-use or loss-in-value of property settlements may be taxable if the settlement exceeds your basis in the property; the excess is gain. Gains on personal capital assets are reported on Form 1040’s Schedule D, Capital Gains and Losses. Gains on business capital assets are reported on Form 4797, Sale of Business Property.

5. Attorneys fees are deductible if they are an attempt to get you taxable income otherwise they are not deductible. You can usually deduct legal expenses that you pay or incur to produce or collect taxable income or in connection with the determination, collection, or refund of any tax.

Scholarship and Fellowship Grants
If you are a degree candidate and if the financial aid (includes scholarship and fellowship grants) is for tuition fee, other fees, books, supplies and equipment, and are not a payment for your services, then it is not taxable. For a degree candidate aid for boarding and travel are taxable. If you are not a degree candidate, then all the financial aid is taxable. You must use Worksheet 1-1 in Chapter 1 of Publication 970 to figure out the taxable amount.

If you receive a scholarship award under the National Health Service Corps Scholarship Program or the Armed Forces Health Professions Scholarship and Financial Assistance Program, the amount received is tax free without regard to any services you are obligated to perform.

Scholarship and fellowship grants not reported on Form W-2 are included in your wages income. Also, enter “SCH” and the amount on the dotted line next to line 7 of Form 1040 (or line 1 of 1040EZ or line 7 of 1040A). However, if you were a degree candidate, include on line 7 only the amounts you used for expenses other than tuition and course-related expenses. For example, amounts used for room, board, and travel must be reported on line 7.

Any "SCH" amount that you put on line 7 of Form 1040 is subject to employment taxes at 15.3%. Include amounts you receive under a scholarship as pay for your services as an independent contractor in determining your net earnings from self-employment. If your net earnings are $400 or more, you will have to pay self-employment tax. Use Schedule SE, Self-Employment Tax, to figure this tax.
Read IRS Publication 970 - Tax Benefits for Education - Tax Benefits for Education; Chapter 1--Scholarships, Fellowships, Grants, and Tuition Reductions.

Social Security Income & Disability Benefits
Your social security benefits including social security disability benefits (excluding SSI payments) may be taxable, if the total of one-half of your benefits, plus all your other income including tax-exempt interest is more than the base amount for your filing status. The SSI benefits are not taxable.

Your base amount (without any exclusions) is:
$25,000 if you are single, head of household, or qualifying widow(er),
$25,000 if you are married filing separately and lived apart from your spouse for all of 2007,
$32,000 if you are married filing jointly, or
$-0- if you are married filing separately and lived with your spouse at any time during 2007.

Generally, up to 50% of your benefits will be taxable. However, up to 85 percent of your benefits could be taxed if
* you are a single and the total of all your other income plus half of your Social Security checks exceed $34,000,
* you are married filing jointly and the total of all your other income plus half of your Social Security checks exceed $44,000, or
* you are married filing separately and lived with your spouse at any time during 2008.
To find out your taxable benefits, you must complete the work sheet found in your Form 1040 or 1040A instruction book.

Your social security benefits or rail road benefits are reported in box 5 of Form SSA-1099 or RRB-1099. Enter is amount on Form 1040 line 20a or on Form 1040A line 14a. The taxable part of the benefits will appear on Form 1040 line 20b or on Form 1040A line 14b.

More Articles:
Your Filing Status
1. Filing Status for Married
2. Head of Household
Exemptions for Dependents
1. Requirements for claiming a dependent
2. Child of separated or divorced parents
Filing Requirements
1. Filing Requirement for a Dependent
2. 2009 Filing Requirements
Your Income
1. W2 vs 1099-Misc: Employee vs Independent Contractor
2. Tax Filing by Self Employed Sole Proprietor or Independent Contractor
3. Filing W4 Employee’s Withholding Allowance Certificate
4. Missing W2, 1099-Misc, 1099-R, 1099-Int
Your Foreign Income
1. U.S. Citizen or Resident with Foreign Income
2. Foreign Bank and Financial Accounts
Income Exemptions and Deductions
1. Moving Expenses
2. Itemized deductions
3. Student Loan Interest Deductions
Income Adjustment
1. Traditional IRA and Roth IRA
2. Elective Deferrals 401(k) Plans
U.S. Gift tax and Inheritance Tax
1. The U.S. Gift Tax
2. Tax on Inheritances
Sale of Your Home
1. Profit from the Sale of Your Home
2. Foreclosure or Repossession of Main Home
3. First-Time Homebuyer Credit
State Tax Return
1. Working in Two or More States
What's New for 2009
What's New for 2009

Complete List of Articles

OctroTalk - - For iPhone and iPad, Nokia S60 3rd. phones, Window Mobile Smartphone and Pocket PC and Windows Desktop. OctroTalk has instant messaging, P2P file transfer, VoIP, SIP calling, live video chat and video conference. OctroTalk supports Google Talk (GMail) audio and Video calls. Free Trial/Download http://www.octro.com/

Foreclosure or Repossession of Main Home

2008-08-22T02:33:00.000-07:00

The current economic crisis is causing record number of foreclosures, short sales and debt cancellations. If you do not make payments you owe on a loan secured by property, the lender may foreclose on the loan or repossess the property. In the foreclosure, the homeowner relinquishes title of property generally to the bank that holds the first mortgage or deed of trust on the property. Homeowners associations, taxing agencies, and other interested parties will sometimes also foreclose on a property. In case of foreclosures and short sales, when mortgages are not paid in full upon the transfer of real estate, it may be complicated to calculated the tax implications.

If you do not make payments you owe on a loan secured by property, the lender may foreclose on the loan or repossess the property. If your home was foreclosed on or repossessed, you may have two tax situations:
1. You have a sale. The sale may generate capital gain or loss. You figure the gain or loss from the sale in generally the same way as gain or loss from any sale. But the selling price of your home used to figure the amount of your gain or loss depends, in part, on whether you were personally liable for repaying the debt secured by the home and and whether the debt is qualified principal residence indebtness.
2. You have forgiveness of debt. Debt forgiveness may generate taxable ordinary income.

Form 1099-A and Form 1099-C.
Generally, you will receive Form 1099-A, Acquisition or Abandonment of Secured Property, from your lender. This form will have the information you need to determine the amount of your gain or loss and any ordinary income from cancellation of debt that is not a discharge of qualifying principal residence indebtness.
If your debt is canceled, you may receive Form 1099-C, Cancellation of Debt. You may need to report the cancellation of debt as income. When you borrowed the money you had an obligation to repay the lender. When that obligation is subsequently forgiven, the amount you received as loan proceeds is reportable as income because you no longer have an obligation to repay the lender. However, in case of bankruptcy, insolvency or no-recourse loans, the debt cancellation is not treated as income.

Qualified Principal Residence Indebtness. This indebtness is a mortgage you took out to buy, build or substantially improve your principal residence and the mortgage is secured by your principal residence.

Abandonment. If you abandon your home and have a home debt for which you are personally liable (recourse loan) and the debt is canceled, this is your ordinary income that you must report on your tax return.

Non-Recourse Loan. A non-recourse loan is a loan for which the lender’s only remedy in case of default is to repossess the property being financed or used as collateral. The lender cannot pursue you personally in case of default.

Mortgage Forgiveness Debt Relief Act of 2007.
The Mortgage Forgiveness Debt Relief Act of 2007 generally allows taxpayers to exclude income from the discharge of debt of recourse loan on their principal residence. The provision is to exclude cancelled mortgage debt from income applies only to the portion of the debt that was used to buy, build or improve the residence. Debt forgiven in connection with a foreclosure or debt reduced through mortgage restructuring, qualify for this relief.

The act applies to qualified debt forgiven in the years 2007, 2008 or 2009, and the taxpayer may be able to claim special tax relief up to $ 2 million (The limit is $1 million for a married person filing a separate return) by filling out newly-revised Form 982 (Reduction of Tax Attributes Due to Discharge of Indebtedness (and Section 1082 Basis Adjustment)) and attaching it to their federal income tax return.

For more information: IRS Publication 523 Selling Your Home

More Articles:
Your Filing Status
1. Filing Status for Married
2. Head of Household
Exemptions for Dependents
1. Requirements for claiming a dependent
2. Child of separated or divorced parents
Filing Requirements
1. Filing Requirement for a Dependent
2. 2009 Filing Requirements
Your Income
1. W2 vs 1099-Misc: Employee vs Independent Contractor
2. Tax Filing by Self Employed Sole Proprietor or Independent Contractor
3. Filing W4 Employee’s Withholding Allowance Certificate
4. Missing W2, 1099-Misc, 1099-R, 1099-Int
Your Foreign Income
1. U.S. Citizen or Resident with Foreign Income
2. Foreign Bank and Financial Accounts
Income Exemptions and Deductions
1. Moving Expenses
2. Itemized deductions
3. Student Loan Interest Deductions
Income Adjustment
1. Traditional IRA and Roth IRA
2. Elective Deferrals 401(k) Plans
U.S. Gift tax and Inheritance Tax
1. The U.S. Gift Tax
2. Tax on Inheritances
Sale of Your Home
1. Profit from the Sale of Your Home
2. Foreclosure or Repossession of Main Home
State Tax Return
1. Working in Two or More States
What's New for 2009
What's New for 2009

Complete List of Articles

OctroTalk - - For iPhone and iPad, Nokia S60 3rd. phones, Window Mobile Smartphone and Pocket PC and Windows Desktop. OctroTalk has instant messaging, P2P file transfer, VoIP, SIP calling, live video chat and video conference. OctroTalk supports Google Talk (GMail) audio and Video calls. Free Download http://www.octro.com/

Elective Deferrals 401(k) Plans

2008-08-09T00:18:00.000-07:00

Retirement Plan
A section 401(k) plan allows an employee can elect to have the employer contribute a portion of his or her cash wages to the plan on a pre–tax basis. These deferred wages (commonly referred to as elective deferrals) are not subject to income tax withholding at the time of deferral, and they are not reflected on your Form 1040 since they were not included in the taxable wages on your Form W-2. However, they are included as wages subject to social security, Medicare, and federal unemployment taxes.

A 401(k) plan can have an automatic enrollment feature. The employer can automatically reduce your pay by a fixed percentage and contribute that amount to the 401(k) plan unless you (the employee) affirmatively chooses not to invest 401(k) or reduce your investment percentage. These contributions qualify as elective deferrals.

Eligible Plans
In general, a qualified plan can include a cash or deferred arrangement only if the qualified plan is one of the following plans.
1. A profit-sharing plan, or
2. A money purchase pension plan in existence on June 27, 1974, that included a salary reduction arrangement on that date.
For tax years beginning after December 31, 2005, a 401(k) plan may allow employees to contribute to a qualified Roth contribution program.

Matching Contributions
In many 401(k) plans, the employer may also choose to make matching contributions to your 401(k) plan. For example, an employer contributes 50 cents for each dollar you choose to defer under your 401(k) plan.

Contribution Dollar Limit
The amount that an employee may elect to defer to a 401(k) plan is limited. This limit applies without regard to community property laws. For 2007 and 2008, the basic limit on elective deferrals is $15,500 per year. If the deferral limit is exceeded, the difference is included in the employee's gross income.

Catch-up contributions. A 401(k) plan can permit participants over the age of 50 to make catch-up contributions. The catch-up contribution limit for 2007 and 2008 is $5,000 per year. Elective deferrals are not treated as catch-up contributions for 2007 until they exceed the $15,500 limit. However, the catch-up contribution a participant can make for a year cannot exceed the excess of the participant's compensation over the elective deferrals that are not catch-up contributions.

Reporting on Form W-2
The employer must report the total amount deferred in boxes 3, 5, and 12 of an employee's Form W-2.

Early Withdrawal
In most cases, if you withdraw funds from your 401(k) plan before you are 59 1/2, you must pay the 10 percent additional tax on early distributions on any amounts that are not rolled into an IRA. However, this additional tax will not apply if the payments are made after your separation from service in or after the year you reached age 55, or if the payments are part of a series of substantially equal payments that are paid over your life.

Hardship Distribution
Many 401(k) plans allow employees to make a hardship withdrawal because of immediate and heavy financial needs. Generally, hardship distributions from a 401(k) plan are limited to the amount of the employee's elective deferrals only, and do not include any income earned on the deferred amounts. Hardship distributions are not treated as eligible rollover distributions.

Exceptions to Early Withdrawal
The tax does not apply to distributions that are
1. If you are totally and permanently disabled,
2. After the death of the plan participant or contract holder,
3. After your separation from service in or after the year you reached age 55 (age 50 for qualified public safety employees),
4. Made to an alternate payee under a qualified domestic relations order,
5. You have deductible medical expenses (medical expenses that exceed 7.5% of your adjusted gross income), whether or not you itemize your deductions for the year,
6. From an employee stock ownership plan for dividends on employer securities held by the plan,
7. Made due to an IRS levy of the plan, or
8. Made from elective deferral accounts under 401(k) or 403(b) plans, or similar arrangements that are qualified reservist distributions.

Early Withdrawal for Home Purchase
If you are under the age of 59 1/2, any withdraw from your 401(k) plan to purchase your first home, the withdrawal is subject to a 10 percent early distribution tax. However, depending on the rules for your 401(k) plan, you may be able to borrow money from your 401(k) plan to purchase your first home. Check with your 401(k) plan administrator.

Change of Job
When you leave your job, your old employer may send you a check for your 401(k) and withhold 20% tax. You have 60 days to roll over the entire distribution (including 20% withholding tax) to your current employer's 401(k) plan without at tax implications. However, if the amount rolled over was the net amount, that is, the amount of the distribution less the tax withheld, then the 20% withholding amount not rolled over is included in gross taxable income and may be subject to a 10 percent additional tax on early distribution.

Lump Sum Distribution After retirement
A lump-sum distribution is the distribution or payment, within a single tax year, of an employee's entire balance from all of the employer's qualified pension, profit-sharing, or stock bonus plans.

If the lump-sum distribution qualifies, you can elect to treat the portion of the payment attributable to your active participation in the plan before 1974 as long-term capital gain taxed at a 20% rate. If you are born before January 2, 1936, you can also elect to figure the tax on the rest of the distribution using the 10–year tax option (Form 4972). You should receive a Form 1099-R from the payer of the lump-sum distribution showing your taxable distribution and the amount eligible for capital gain treatment.

The Retirement Benefits – Pension and Annuities
If you receive retirement benefits in the form of pension or annuity payments from a qualified employer retirement plan, the amounts you receive may be fully taxable, or partially taxable. If you contributed after–tax dollars to your pension or annuity, your pension payments are partially taxable. You will not pay tax on the part of the payment that represents a return of the after–tax amount you paid. If the starting date of your pension or annuity payments is after November 18, 1996, you generally must use the Simplified Method to determine how much of your annuity payments is taxable and how much is tax free.

Required Beginning Date
A participant in the 401(k) plan must begin to receive required minimum distributions (RMDs) from his or her qualified retirement plan by April 1 of the first year after the later of the following years.
*Calendar year in which he or she reaches age 70½.
*Calendar year in which he or she retires from employment with the employer maintaining the plan.

However, the plan may require the participant to begin receiving distributions by April 1 of the year after the participant reaches age 701/ even if the participant has not retired. If no distribution is made in your starting year, the minimum required distributions for 2 years must be made the following year (one by April 1 and one by December 31). If you do not take the distribution, the excess accumulation is subject to 50% excise tax.

To calculate the RMD, divide the amount in the account at year end by the number of years left in the owner’s life expectancy and take out that amount. Normally from the distribution, the plan administrator must withhold federal income tax at 20%.

Form 5329
Use Form 5329, Additional Taxes on Other Qualified Plans (including IRA's), and Other Tax-Favored Accounts, to report any 401(k) tax penalty.
When you withdraw from 401(k), the plan administrator will send you Form 1099-R Distributions From Pensions, Annuities, Retirement or Profit-Sharing Plans, IRAs, Insurance Contracts, etc. On your tax return, report the amount in box 1 of 1099-R as income, and the amount in box 4 of 1099-R as federal income tax withholding.

Reference: IRS Publication 4222 401(k) Plans for Small Business; http://www.irs.gov/

More Articles:
Your Filing Status
1. Filing Status for Married
2. Head of Household
Exemptions for Dependents
1. Requirements for claiming a dependent
2. Child of separated or divorced parents
Filing Requirements
1. Filing Requirement for a Dependent
2. 2009 Filing Requirements
Your Income
1. W2 vs 1099-Misc: Employee vs Independent Contractor
2. Tax Filing by Self Employed Sole Proprietor or Independent Contractor
3. Filing W4 Employee’s Withholding Allowance Certificate
4. Missing W2, 1099-Misc, 1099-R, 1099-Int
Your Foreign Income
1. U.S. Citizen or Resident with Foreign Income
2. Foreign Bank and Financial Accounts
Income Exemptions and Deductions
1. Moving Expenses
2. Itemized deductions
3. Student Loan Interest Deductions
Income Adjustment
1. Traditional IRA and Roth IRA
2. Elective Deferrals 401(k) Plans
U.S. Gift tax and Inheritance Tax
1. The U.S. Gift Tax
2. Tax on Inheritances
Sale of Your Home
1. Profit from the Sale of Your Home
2. Foreclosure or Repossession of Main Home
State Tax Return
1. Working in Two or More States
What's New for 2009
What's New for 2009

Complete List of Articles

OctroTalk - World's First without 3G Live Video Chat/Conference & Video Streaming for Mobile Phones -- For Nokia S60 3rd., Window Mobile Smartphone and Pocket PC and Windows Desktop. OctroTalk has instant messaging, P2P file transfer, VoIP, SIP calling, live video chat and video conference. Free Trial/Download http://www.octro.com/

The U.S. Visas

2008-08-05T20:26:00.000-07:00

Here is a list of some common visas for the U.S.

Visa A. The A-1 nonimmigrant visa is given to diplomats representing a foreign government inside the United States of America. Spouses and dependents are also eligible for this visa.

Your days in the U.S. are exempt from residency so you are non-resident. Employees of foreign governments, their families, and their servants are exempt on salaries paid to them in their official capacities as foreign government employees.

Visitor Visa B1/B2. The "B" Visitor Visa is a non-immigrant visa for persons desiring to enter the United States temporarily for business (B-1) or temporarily for pleasure (B-2).

Normally, B-1 visa holders cannot take up work in the U.S. Under a few circumstances, B-1 visitors may perform work like missionaries, volunteer workers for non-profit entities, certain domestic servants whose employers are not U.S. residents, certain airline employees.

For federal income tax purpose, your days on presence in the U.S. on B-1 visa count towards substantial presence test.

Visa G. The G-4 visa is nonimmigrant visa which allows foreign officers or employees of international organizations of any rank to enter into the U.S. to engage in business activities and not for personal business and pleasure. The staff and immediate family members of principal G-4 visa holders also qualify for G-4 visa.

Your dependents may work only after receiving permission from the USCIS. Working without prior permission is considered a violation of the visa status. They may apply for permission to work if there is a reciprocal work arrangement between the U.S. and your nation.

As a full time employee of an international organisation, you are exempt from income tax and will file Form 1040NR or 1040NR-EZ and Form. Employees of international organizations are exempt from Social Security/Medicare taxes on wages paid to them for services performed within the United States in their official capacity as employees of such organizations.

The exemption does not automatically apply to servants of employees of such international organizations. The exemption does not apply to spouses and children of nonimmigrants in G status who are employed in the United States by anyone other than an international organization.

Non-immigrant Work Visa E3. The E-3 are non-immigrant visas that allow Australians to work in the U.S. without restrictions. E-3 is issued for 2 years but is renewable indefinitely. Visas issued to spouses and children are not included in the E3 quota and spouses and children do not need to be Australian citizens.

The income in the U.S. is subject to FICA taxes and income taxes, and the days in the U.S. count towards the Substantial Presence Test (SPT). However, under the totalization agreement with Australia, your tax payments will be credited to the equivalent program in Australia.

During the first year on E3, if you do not meet SPT, you will file non-resident tax return Form 1040NR or 1040NR-EZ. If you meet SPT, then you are dual status resident, and file dual status tax return. A dual status resident who is married and meets SPT in the next year can choose to file joint tax return as residents under "First Year Choice." On the joint return as residents, you must report your worldwide income.

Student Visa F1. There are two nonimmigrant visa categories for persons wishing to study in the United States. The "F" visa is for academic studies, and the "M" visa is for nonacademic or vocational studies.

An F1 student (including OPT or CPT period) is exempt from residency for 5-years and must file non-resident tax return Form 1040NR or 1040NR-EZ and 8843. During this period your income is not subject to FICA (Social Security and Medicare) taxes. Normally, on the nonresident tax return, you get your personal exemption and itemized deductions, and you do not get exemption deductions for your spouse and dependents except if you are from Canada, Mexico or South Korea or if allowed by the tax treaty. You may get some deduction based on the tax treaty with your country of citizenship, which you can claim on your tax return.

After you have completed 5-years on F1 or OPT, your days in the U.S. count towards the Substantial Presence Test (SPT). If you meet the SPT, you are resident for tax purpose, and must file resident tax return. Your income is subject to FICA taxes. On your tax return, you will get standard deduction unless you wish to itemize your deductions. If you are married, then you will file as Married Filing Jointly or Married Filing Separately. You can also claim exemption for dependents. On the resident tax return, just like the U.S. citizens and residents, you must report your worldwide income for the year.

In some cases, even after spending more than five years as student in the U.S., you can still claim exemption from residency (and not pay FICA taxes) and file non-resident tax return if you must provide sufficient facts on an attached statement to establish that you do not intend to reside permanently in the United States. You must prove that you maintained closer connection to your country of citizenship than to the U.S.

Exchange Visitor Visa J1 and J2. A J-1 Visa is issued for an Exchange Visitor who is participating in an established J Exchange program pre-approved by the State Department. Exchange Visitors under J-1 visas include secondary school and college students, business trainees, trainees in flight aviation programs, primary and secondary school teachers, college professors, research scholars, medical residents or interns receiving medical training in the U.S., certain specialists, international visitors, and Government visitors. This rule requires some J visa holders to reside in their home country for at least two years before they may obtain an H, L or other immigrant visa to enter the U.S. or adjust their status within the U.S. A J-2 Visa is issued to a child (under age 21) or spouse of a J-1 principal. Once the minor child reaches his/her 21st birthday, he/she no longer qualifies for a J-2 visa or J-2 status. Also, if the J-2 spouse divorces the J-1 status holder, he/she no longer qualifies for J-2 status.

Everyone on J1 visa is exempt from residency for 2 years. J1 students, just like F1 visa holders, are exempt for 5 years. During the exempt period, your income is not subject to FICA taxes and you must file non-resident tax return Form 1040NR or 1040NR-EZ. Normally, on the nonresident tax return, you get your personal exemption and itemized deductions, and you do not get exemption deductions for your spouse and children (unless allowed by the tax treaty). You will also get deduction is based on the tax treaty.

Based on the tax for many countries the J1 Researchers, Professors and Teachers are exempt from federal income tax for two year, and for many countries the exemption is lost if the visa holder over stays.

After the exempt period, the days in the U.S. count towards the Substantial Presence Test (SPT). If you meet the SPT, you are resident for tax purpose, and must file resident tax return.

Non-immigrant Work Visa H1-B and H4. The H-1B is a non-immigrant visa category that allows U.S. employers to seek temporary help from skilled foreigners who have the equivalent U.S. Bachelor's Degree education. H-1B employees are employed temporarily in a job category that is considered by the U.S. Citizenship & Immigration Services to be a "specialty occupation." An H1B visa is typically valid for up to six (6) years and entitles your spouse (husband/wife) and children to accompany you and 'live' in America. H1-B visa holders can apply for a Green Card (Legal Permanent Residency).

The income in the U.S. is subject to FICA (Social Security and Medicare) taxes and income taxes, and the days in the U.S. count towards the Substantial Presence Test SPT. If you are single, then during the first year of H1-B, if you do not meet SPT, you will file non-resident tax return. If you meet SPT, and you were non-resident in the beginning of the year, then you will file dual status tax return.

If you are married, then during the first year of H1-B, if you do not meet SPT, you can file non-resident tax return or you can file joint return as residents after you meet SPT in the next year. If you meet SPT, then you can file joint return as residents. On the resident tax return, you can also claim exemption for dependents. On the resident tax return, just like the U.S. citizens and residents, you must report your worldwide income for the year.

On the joint return, it is not required that your spouse must be in the U.S. or must be resident of the U.S. If your spouse can not get SSN, then you will attach W7 (ITIN application) with your tax return. Also for a dependent, who can not get SSN, you will attach W7 (ITIN application).

Non-immigrant Inter-company Transferee Visa L1 and L2. The United States L1 is non-immigrant visa classification that applies to an intra-company transferee. It allows companies operating both in the US and abroad to transfer certain classes of employee from its foreign operations to the USA operations for up to seven years. The employee must be in in a managerial, executive, or specialized knowledge capacity and must have worked for a subsidiary, parent, affiliate or branch office of your US company outside of the US for at least one year out of the last three years.

Spouses of L-1 visa holders get L2 visa and are allowed to work after obtaining work authorization, without restriction, in the US, and the L-1 visa may legally be used as a steppingstone to the Green Card under the doctrine of dual intent. An L2 visa holder may engage in full or part time study. Children of L1 visa holder also get L2 visa.

The income in the U.S. is subject to FICA (Social Security and Medicare) taxes and income taxes, and the days in the U.S. count towards the Substantial Presence Test SPT.

If you are single, then during the first year of L1, if you do not meet SPT, you will file non-resident tax return. If you meet SPT, and you were non-resident in the beginning of the year, then you will file dual status tax return.

If you are married, then during the first year of L1, if you do not meet SPT, you can file non-resident tax return or you can file joint return as residents after you meet SPT in the next year. If you meet SPT, then you can file joint return as residents. On the resident tax return, you can also claim exemption for dependents. On the resident tax return, just like the U.S. citizens and residents, you must report your worldwide income for the year.

On the joint return, it is not required that your spouse must be in the U.S. or must be resident of the U.S. If your spouse can not get SSN, then you will attach W7 (ITIN application) with your tax return. Also for a dependent, who can not get SSN, you will attach W7 (ITIN application).

Useful Articles for Aliens
1. U.S. Tax Filing Requirements for Non-Residents
2. Substantial Presence Test
3. Social Security and Medicare (FICA) Taxes for Non-resident Exempt Individual
4. U.S. Tax Treaties for Professors, Teachers and Researchers
5. U.S. Tax Treaties for Students and Apprentices
6. Mandatory Reporting of Foreign Bank and Financial Accounts
7. The U.S. Visas

Working or Living in Two or More states

2008-06-19T22:54:00.000-07:00

If you work in two different states, you will file tax return in both the states. One state is your tax home white the other state is where you are part year resident. In some cases, you may be part year resident of two or more states.

In the state that is not your tax home, where you are part year resident, report income you earned while in that state. If you have received only one W2 from your employer, then use simple arithmetic based on number of days spent in the state to figure our the income that you should report to this state.

In the state that is your tax home, report your worldwide income for full year. Also in this state claim credit for the taxes paid to the other state.

State with no income tax. The states that do not have individual income taxes are Florida, Alaska, Nevada, South Dakota, Washington, Texas and Wyoming. In New Hampshire you only pay income tax on Dividend and Interest income at flat rate of 5%. Tennessee does have tax on income (at a 6% rate) received from stocks and bonds not taxed ad valorem.

Florida, Alaska and South Dakota have corporate income tax. Washington has a corporate tax called the "Business and Occupation Tax (B&O)", which is a gross receipts tax. Texas in May 2006, passed a franchise tax on businesses (sole proprietorships and some partnerships are exempt).

States with a flat rate personal income tax. Most states (34) have a progressive income tax, where the rate rises as an income gets larger. Following states have flat rate income tax: Colorado 4.63%, Illinois 3%, Indiana 3.4%, Massachusetts 5.3%, Michigan 4.35%, Pennsylvania 3.07% and Utah 5%.

Moving After Retirement. If you are getting retirement benefits and you moved from a state with no income tax to a state with income tax, then you must pay state income tax even on your retirment benefits.

Nonresident Aliens and Exempt Individuals. States define tax residence differently than the IRS does at the federal level. At the state level, there are generally three types of people: residents, part-year residents and nonresidents. The determination of residence tends to be based on the time of year an individual moved into or out of a state, or if they lived there all year. It is entirely possible that an nonresident alien is considered a resident for tax purposes at the state level several years before they are considered a resident for federal tax purposes.

Some states honor the federal tax treaty benefits. States the do not honor federal treaty benefits are Alabama, Arkansas, California, Connecticut, Hawaii, Kansas, Kentucky, Mississippi, New Jersey, North Dakota and Pennsylvania.

Members of Armed Forces. The service pay of members of the armed forces is taxable only by the state of their legal residence, regardless of where they may be stationed in the line of duty.

Situation 1: Living in one state while commuting daily to work in another state.
It may happen that you live in one state while you go to work in a different state. A common example is you live in New Jersey and work in New York. You commute daily from NJ to NY. For NY you are nonresident and NJ is your tax home. You must file NY tax return as nonresident and report income earned while in NY. You must file NJ return as full year resident and report your world wide income for the year including NY income. On the NJ return, claim credit for taxes paid to NY.

Situation 2: Working and living in a state while the employer is in a different state For example, you live and work in California while the employer is in New Jersey. You must file CA tax return and report all your income including the income received from the NJ employer. Your income is not subject to NJ state taxes. If the employer is withholding NJ state taxes, tell them not to withhold NJ taxes. In case, on your W2, NJ taxes are withheld, then you will file NJ return to get the refund of taxes withheld. File nonresident tax return (Form NJ-1040NR), and list the NJ income as zero , which results in zero NJ tax and the return will show the refund. With your NJ tax return you will attach a statement that you were never present in NJ for this employment. If possible get a statement from the employer that you worked from California.

Situation 3: Moving out of a state to another state
For example, you were living and working in CA, and then in the same year you moved to NJ and started working from NJ.

Now during the period you are in NJ, you will report income on the NJ tax return. You may need to report this income on the CA tax return also if your moving out of CA is considered temporary or transitory. This is especially true if you are domiciled in CA or were resident of CA. If you must report the NJ income on the CA tax return, then on the CA tax return you will also claim credit for taxes paid to NJ.

If you moved out of CA permanently (and did not leave any links with CA), you will not report your NJ income on CA tax return. If you moved out of CA permanently but you returned back to CA after one or two years, then CA will certainly like to tax you for the period you were out of CA. Now it is for you to prove that stay outside was not temporary or transitory.

Situation 4. Moving out the U.S. to a foreign country
If you are a U.S. citizen or permanent resident, you must file the U.S. tax return and report your worldwide income. If you paid any taxes in the foreign country, then you get foreign tax credit by filing Form 1116 or you can use earned income exclusion Form 2555 if you meet the requirements.

Your foreign income may be taxable in the state you are domiciled or were resident when you left the country. And on the state tax return, you do not get foreign tax credit or foreign earned income exclusion. If your foreign income is taxable in a state depends upon your situation. For this you must read the state’s residency requirements. If your stay out of state is considered temporary or transitory, then many states in the U.S. will certainly tax you.

Situation 5. Married Working and Living in Different States
If you are married, then normally it is better tax wise to file joint return. And if you file joint for the federal return, then most states require that you file state in the same way. If both the spouses work and live in the same state, then the state return is simple. In many cases, both the spouses live and work in different states.

For example, one spouse lives and works in MN and other spouse lives and works in NJ and they are filing a joint return. For the MN tax return, one spouse is resident of MN and must declare his/her worldwide income to MN while the other spouse is nonresident of MN and does not have any MN income. Similarly, for the NJ tax return, one spouse is resident of NJ and must declare his/her worldwide income to NJ while the other spouse is nonresident of NJ and does not have any NJ income.

State Tax Forms
Tax Administrator has a map that has links to all the state's tax information web sites.

Where is My Refund?
California. Please wait 7 days after you e-file. If you filed on paper, please allow 8 weeks for processing of your return. Before you begin, make sure you have: Your social security number, your complete mailing address, and the refund amount shown on your tax return. Check here http://www.ftb.ca.gov/online/refund/index.asp

North Carolina. To determine the status of your refund for the current tax year 2007, you will need: The first social security number shown on the return and the exact amount of refund shown on your return (D-400 Line 28). Click the link: https://eservices.dor.nc.gov/wheresmyrefund/selection.jsp

More Articles:
Your Filing Status
1. Filing Status for Married
2. Head of Household
Exemptions for Dependents
1. Requirements for claiming a dependent
2. Child of separated or divorced parents
Filing Requirements
1. Filing Requirement for a Dependent
2. 2009 Filing Requirements
Your Income
1. W2 vs 1099-Misc: Employee vs Independent Contractor
2. Tax Filing by Self Employed Sole Proprietor or Independent Contractor
3. Filing W4 Employee’s Withholding Allowance Certificate
4. Missing W2, 1099-Misc, 1099-R, 1099-Int
Your Foreign Income
1. U.S. Citizen or Resident with Foreign Income
2. Foreign Bank and Financial Accounts
Income Exemptions and Deductions
1. Moving Expenses
2. Itemized deductions
3. Student Loan Interest Deductions
Income Adjustment
1. Traditional IRA and Roth IRA
2. Elective Deferrals 401(k) Plans
U.S. Gift tax and Inheritance Tax
1. The U.S. Gift Tax
2. Tax on Inheritances
Sale of Your Home
1. Profit from the Sale of Your Home
2. Foreclosure or Repossession of Main Home
3. First-Time Homebuyer Credit
State Tax Return
1. Working in Two or More States
What's New for 2009
What's New for 2009

Complete List of Articles

OctroTalk - - For iPhone and iPad, Nokia S60 3rd. phones, Window Mobile Smartphone and Pocket PC and Windows Desktop. OctroTalk has instant messaging, P2P file transfer, VoIP, SIP calling, live video chat and video conference. OctroTalk supports Google Talk (GMail) audio and Video calls. Free Download http://www.octro.com/

How to Get Missing Forms W-2 and 1099

2008-05-24T21:43:00.000-07:00

Documents like Forms W2, 1099-Int, 1099-Misc, 1099-R are needed to complete your tax return. They contain information about your income that you may be required to report on your tax return.

Some of these forms may even be available online. It depends upon the policy of your employer or the who issues the form. So find out from them if you can view it or download it online. If your employer does not have your W2 information online, then you can not get it online from any other source.

If you are an employee you will get Form W-2, Wage and Tax Statement, from each of your employers each year. For example, your employer has until January 31, 2011 to give you 2010 form. You should allow two more weeks to receive your W-2 from employers who send them by mail. If you do not receive your Form W-2, contact your employer to inquire if and when the W-2 was mailed. If it was mailed, it may have been returned to your employer because of an incorrect or incomplete address. After contacting your employer, allow a reasonable amount of time for your employer to resend or to issue the W-2.

If you misplaced your W-2, contact your employer. Your employer can replace the lost form with a “reissued statement.” Be aware that your employer is allowed to charge you a fee for providing you with a new W-2. When you do receive your W2, first thing you should do is to check all the information on it to make sure that it is correct. Check your social security number and income and taxes reported on it.

Contact IRS
You should try to get W2 from your employer, as this will save your from some future problems that may arise. If you still do not receive your missing or corrected form by February 15th, contact the IRS for assistance at 800-829-1040. When you call, have the following information:
*Employer's name, address, city, and state, including zip code and phone number,
*Your name, address, city and state, including zip code, and Social Security number, and
*Dates of your employer and an estimate of the wages you earned, the federal income tax withheld, and the period you worked for that employer. The estimate should be based on year-to-date information from your final pay stub or leave-and-earnings statement, if possible.

With your information, the IRS will contact the employer/payer for you and request the missing form. IRS will also send you a Form 4852 (Substitute for Form W-2 or Form 1099-R).

Use Form 4852 for Tax Filing
It is always better to get W2 from your employer. If you do not receive the missing information in time to file, you may use Form 4852, Substitute for Form W-2, Wage and Tax Statement. Attach Form 4852 to the return, estimating income and withholding taxes as accurately as possible. There may be a delay in any refund due while the information is verified.

Amending Your Tax Return
On occasion you may get back conflicting documents. You may receive a Form W-2 or W-2C (corrected form) after you filed your return using Form 4852, and the information differs from what you reported on your return. If this happens, you must amend your return by filing a Form 1040X, Amended U.S. Individual Income Tax Return.

W2 and Other Forms for Past Years
The IRS does not retain actual copies of Form W-2. However, the IRS maintains (and will provide free of charge) Form W-2 information for any purpose for the past ten processing years. Call 1–800–829–3676, or visit the IRS web site at www.irs.gov to Form 4506-T, Request for Transcript of Tax Return, to order the information from the IRS.

The only way to get a copy of your Form W-2 from IRS is to order a copy of the entire return on Form 4506, Request for Copy of Tax Return, and pay a fee of $39.00 per tax year.

The Social Security Administration will provide copies of Forms W-2 for retirement purposes at no charge and for other than retirement purposes for a fee. Call 1–800–772–1213, or visit the SSA web site at www.ssa.gov for instructions on how to obtain wage information from the SSA.

OctroTalk for iPhone and iPad. Instant messaging, VoIP, SIP audio call, video chat/conference. OctroTalk is an Jabber/Gtalk client with support for Google Talk (GMail) audio and Video calls. Free download from AppStore http://www.octro.com/download_iphone.php

Traditional IRA and Roth IRA

2008-05-19T06:03:00.000-07:00

This article covers two types of individual retirement arrangements (IRA) that you can use to save money for your retirement: Traditional IRA and Roth IRA. You can contribute to Trad IRA and Roth IRA if you have taxable compensation during the year.

What is compensation? The compensation includes wages, salaries, tips, professional fees, bonus and income for personal services. If you are self-employed or a partner, then the compensation your net earning from your trade or business reduced by total of deductions for retirement plans and one half of your self-employment taxes. The compensation does not include rental income, interest, dividend, pension, annuity, capital gains, deferred compensation, investment income (where you did not provide services) and foreign earned income and housing costs that you exclude from income.

Traditional IRA
A traditional IRA is also known as ordinary or regular IRA and is not a Roth IRA or a SIMPLE IRA. The contributions to traditional IRA can be deductible and the amounts in the IRA, including earnings and gains, are not taxed until they are distributed.

For 2009 and 2010, the limit of the contribution to traditional IRA is your taxable compensation for the year and the maximum is $5,000 ($6,000 if you are 50 or older in 2010). On a joint return for 2010 the total combined contributions made for the year to your IRA and your spouse's IRA can be as much as $10,000 ($11,000 if only one of you is 50 or older, or $12,000 if both of you are 50 or older). Contributions cannot be made to your traditional IRA for the year in which you reach age 70½ or for any later year.

Contributions can be made to your traditional IRA for a year at any time during the year or by the due date for filing your return for that year, not including extensions. Thus for the year 2008, the contribution can be made between January 1, 2008 to April 15, 2009. For the contributed amount to your traditional IRA between January 1 and April 15, you should tell the sponsor which year (the current year or the previous year) the contribution is for. You can file your return claiming a traditional IRA contribution before the contribution is actually made, but the contribution must be made by the regular due date of your return.

The deductible IRA contributions are reported on Form 1040, line 32 or Form 1040A, line 17.

Retirement Plan at Work
If you are covered by a retirement plan at work or on a joint return, if you or your spouse or both are covered by a retirement plan at work, your deductions to traditional IRA may reduce (phase out) if your modified adjusted gross income (AGI) is above a certain amount.

Nondeductible Contributions
You may have nondeductible contribution if the total contributions to your IRA are more than your total permitted contributions. To designate contributions as nondeductible, you must file Form 8606 even if you do not have to file a tax return for the year. When you file, you can even designate otherwise deductible contributions as nondeductible.

Early Withdrawal
If you withdraw from the IRA before the age of 59½, it is early withdrawal. Early Withdrawal is subject to 10% penalty, and is reported on Form 5329, Additional Taxes on Qualified Plans (Including IRAs) and Other Tax-Favored Accounts. Also the withdrawal will be taxed at your normal income tax rate. However, in some case there is no penalty on early withdrawals.
*If distributions are not more than your qualified higher education expenses related to enrollment or attendance at an eligible post secondary school. It includes tuition and fees, books, supplies and equipment.
*You have unreimbursed medical expenses that are more than 7.5% of your adjusted gross income. The distributions are not more than the cost of your medical insurance.
*You are disabled.
*You are the beneficiary of a deceased IRA owner.
*You are receiving distributions in the form of an annuity.
*You use the distributions to buy, build, or rebuild a first home for yourself, your spouse, your or your spouse’s child, grandchild, parent or ancestor. The distribution up to $10,000 is not subject to 10% additional tax. (If both you and your spouse are first-time home buyers, each of you can
receive distributions up to $10,000 for a first home without having to pay the 10% additional tax.)
*The distribution is due to an IRS levy of the qualified plan.
*The distribution is a qualified reservist distribution.

Care When You Must Withdraw from IRA
When withdrawing from IRA, you should plan in such a way that you pay minimum income tax. Withdraw in the year you have minimum income. If you must withdraw the entire amount, do it in two or more years.

Excess Contributions
If the excess contributions for a year are not withdrawn by the date your return for the year is due (including extensions), you are subject to a 6% tax. You must pay the 6% tax each year on excess amounts that remain in your traditional IRA at the end of your tax year. The tax cannot be more than 6% of the value of your IRA as of the end of your tax year.

You can withdraw an excess contribution made during a tax year and you also withdraw interest or other income earned on the excess contribution by the date your tax return for that year is due, including extensions. In that case you will not pay any excess contribution tax.

Insufficient Distributions (Excess Accumulations)
You must begin receiving distributions by April 1 of the year following the year in which you reach age 70½. The required minimum distribution for any year after the year in which you reach age 70½ must be made by December 31 of that later year. If distributions are less than the required minimum distribution for the year, you may have to pay a 50% excise tax for that year on the amount not distributed as required.

If you are unable to take required distributions because you have a traditional IRA invested in a contract issued by an insurance company that is in state insurer delinquency proceedings, and you meet the requirement, then the 50% excise tax does not apply. If the excess accumulation is due to reasonable error, and you have taken, or are taking, steps to remedy the insufficient distribution, you can request that the tax be excused on Form 5329.

Withdrawals from IRA
You will get Form 1099-R from the IRA administrator. You will report this as income on line 15 of Form 1040. If any taxes are withheld, report on line 64 of Form 1040. You may also need to file Form 5329 to report tax on early withdrawals, excess contributions, and insufficient distributions. The additional tax is reported on Form 1040, line 60.

Inherited IRAs
If you inherit a trad. IRA, you are called a beneficiary. If you inherit someone other than your deceased spouse, you can not treat the inherited IRA as your own. Any taxable distributions your receive must be reported as ordinary income on your tax return. However, you can make a trustee-to-trustee transfer as long as the IRA into which amounts are being moved is set up and maintained in the name of deceased IRA owner for the benefit of you as beneficiary.

Inherited from spouse. If you inherit trad. IRA from you spouse, you have the choices:
1. Treat it as your own by designating yourself as the account owner,
2. Treat it as your own by rolling over to your trad. IRA, or some eligible retirement plans, and
3. Treat yourself as the beneficiary. You must report the distribution as ordinary income on your tax return. The distribution is not subject to early withdrawal penalty of 10%.

Roth IRA
You can set up Roth IRA at any age and you can leave amount in your Roth IRA as long as you live. You can not deduct the contributions to a Roth IRA. Also the qualified distributions from Roth IRA are tax free. For 2008, the limit of the contribution to IRA (Roth IRA and/or Trad IRA) is your taxable compensation for the year and the maximum is $5,000 ($6,000 if you are 50 or older in 2008).

Contribution to Roth IRA are not reported on Form 1040. Keep track of your annual contributions and make sure you don't exceed the limit. You may qualify for the "Retirement Savings Credit" (Form 8880). For your Roth contribution IRS will get information from your plan administrator.

For 2007, your contributions to Roth IRA begin to phase out if your modified AGI is more than
$156,000 for married filing jointly or qualifying widower (contribution limit is nil at $166,000),
$99,000 for single, head of household, or married filing separately and you did not like with your spouse at any time during the year (contribution limit is nil at $114,000), or
$0 for married filing separately (contribution limit is nil at 10,000).

For 2008, your contributions to Roth IRA begin to phase out if your modified AGI is more than $159,000 for married filing jointly or qualifying widower (contribution limit is nil at $169,000), $101,000 for single, head of household, or married filing separately and you did not like with your spouse at any time during the year (contribution limit is nil at $116,000), or $0 for married filing separately (contribution limit is nil at 10,000).

Qualified Distributions
Qualified distributions from Roth IRA are not taxable. It must meet the following requirements.
1. Distribution is made after the 5-year period beginning with the first taxable year for which contribution was made to a Roth IRA set up for your benefit, and
2. Made on or after the date you reach 59 1/2, made because you are disabled, made to a beneficiary or to your estate after your death, or pay up to $10,000 (lifetime limit) of certain qualified first-time homebuyer amount.

Distributions to Beneficiaries. A beneficiary of Roth IRA, other than spouse, must distribute all interest with in five calender years after the owner's death unless the interest is payable to a designated beneficiary as an annuity over the life or life expectancy of the designated beneficiary. If paid as an annuity, the distributions must begin before the end of the calendar year following the year of death.

If the sole beneficiary is the spouse, he or she can either delay distributions until the decedent would have reached age 70½, or treat the Roth IRA as his or her own.

(For any clarification and more information, refer IRS Publication 590 Individual Retirement Arrangements (IRAs)(Including Roth IRAs and Education IRAs)

More Articles:
Your Filing Status
1. Filing Status for Married
2. Head of Household
Exemptions for Dependents
1. Requirements for claiming a dependent
2. Child of separated or divorced parents
Filing Requirements
1. Filing Requirement for a Dependent
2. 2009 Filing Requirements
Your Income
1. W2 vs 1099-Misc: Employee vs Independent Contractor
2. Tax Filing by Self Employed Sole Proprietor or Independent Contractor
3. Filing W4 Employee’s Withholding Allowance Certificate
4. Missing W2, 1099-Misc, 1099-R, 1099-Int
Your Foreign Income
1. U.S. Citizen or Resident with Foreign Income
2. Foreign Bank and Financial Accounts
Income Exemptions and Deductions
1. Moving Expenses
2. Itemized deductions
3. Student Loan Interest Deductions
Retirement Plans
1. Elective Deferrals 401(k) Plans
U.S. Gift tax and Inheritance Tax
1. The U.S. Gift Tax
2. Tax on Inheritances
Sale of Your Home
1. Profit from the Sale of Your Home
2. Foreclosure or Repossession of Main Home
3. First-Time Homebuyer Credit
State Tax
1. Working in Two or More States
What's New for 2009
What's New for 2009

Complete List of Articles

OctroTalk - World's First without 3G Live Video Chat/Conference & Video Streaming for Mobile Phones -- For Nokia S60 3rd., Window Mobile Smartphone and Pocket PC and Windows Desktop. OctroTalk has instant messaging, P2P file transfer, VoIP, SIP calling, live video chat and video conference. Free Trial/Download http://www.octro.com/

Itemized Deductions

2008-05-12T22:48:00.000-07:00

Normally you will itemize your deductions only if your total deductions are more than the standard deduction amount. Also, you will itemize if you do not qualify for the standard deduction, for example in case of nonresidents. In 2009 or 2010 the standard deduction for a single or married filing separately is $5,700, and on the joint return the standard deduction is $11,400. Thus if you are a single and are eligible for standard deduction, you will itemize only if your itemized deductions are more than $5,700.

Standard Deduction vs Itemized Deductions.
A 2002 study by the Government Accountability Office found that more than 2 million taxpayers who claimed standard deduction could have lowered their tax bills by itemizing. So before rushing to file your tax without itemizing, you should figure out your total itemized deductions.

If you itemize, you can deduct a part of your medical and dental expenses and un-reimbursed employee business expenses, and amounts you paid for certain taxes, mortgage, charitable contributions, and miscellaneous expenses. You can also deduct certain casualty and theft losses.
Limitations
If you are married and are filing a separate return, then you can itemize only if your spouse also itemizes the deductions. Also your itemized deductions may be limited if your income in 2009 on Form 1040, line 38 is over $166,800 (over $83,400 if married filing separately). The medical and dental expenses (on line 4), investment interest expense (on line 14), casualty and theft losses (lines 20 and 28) and gambling losses (line 28) are not subject to this overall limit on itemized deductions. You will use Itemized Deductions Worksheet to figure your limit.

Schedule A (Form 1040)
You report your itemized deductions on schedule A (Form 1040) and it is attached to the Form 1040. Then the amount from Schedule A, line 28, is reported on Form 1040, line 40. For a non-resident the schedule A is part of the Form 1040NR.

1. Medical and Dental Expenses
Your medical and dental expenses that you pay for yourself, your spouse and dependents are entered on line 1 of schedule A (Form 1040). The amount on line 1 is your medical expenses after you reduce it by any payments received from insurance or other sources. You can include insurance premiums you paid for medical and dental care. But if you claimed the self-employed health insurance deduction on Form 1040, line 29, you do not include this amount on line 1 of schedule A.

You can deduct the amount of your medical and dental expenses that is more than 7.5% of your adjusted gross income (Form 1040, line 38). That is you must subtract 7.5% (.075) of your adjusted gross income from your medical expenses to figure your medical expense deduction. Your deductible medical expenses are on line 4 of schedule A (Form 1040). Nonresidents do not get medical deduction.

2. Taxes You Paid
You can deduct:
(a) Either state and local income taxes or state and local general sales taxes (on line 5 of Schedule A)*,
*(on your 2010 return you can not take deduct state and local general sales taxes.)
(b) State, local or foreign taxes you paid on real estate that you own (on line 6 of Schedule A), and
(c) State and local personal property taxes you paid, but only it the taxes were on value alone and were imposed on a yearly basis (line 7 of Schedule A).

If you take itemized deduction for the state income tax on line 5 of schedule A, and later on you receive a refund the state, then this refund must be reported as income. For example on your 2008 tax return you claimed itemized deduction for state income tax, and in 2009 you received a refund, then the refund amount must be reported as income on your 2009 tax return. The state will send your Form 1099-G for this refund.

3. Interest You Paid
You can deduct mortgage interest and points reported on Form 1098 on line 10 and if it is not reported on Form 1098 on line 11 of Schedule A.

Generally, home mortgage interest is any interest you pay on a loan secured by your home (main home or a second home). The loan may be a mortgage to buy your home, a second mortgage, a line of credit, or a home equity loan. You can deduct mortgage interest only if you must be legally liable for the loan. You cannot deduct payments you make for someone else if you are not legally liable to make them. Both you and the lender must intend that the loan be repaid. In addition, there must be a true debtor-creditor relationship between you and the lender.

The mortgage must be a secured debt on a qualified home. Your mortgage is a secured debt if you put your home up as collateral to protect the interests of the lender. If you cannot pay the debt, your home can then serve as payment to the lender to satisfy (pay) the debt.

You can also deduct Mortgage insurance premiums with respect to mortgage insurance contracts on line 13 of schedule A. This deduction is available from year 2007 through year 2010. Box 4 of Form 1098 may show the amount of premium you paid in 2008.

4. Unreimbursed Employee Expenses (Job Expenses)
If you have job related expenses that were not reimbursed, it is reported on Form 2106. If your employer reported any amount in box 1 of W2, then it is not reimbursement. (The employee business expense reimbursement under accountable plan are reported in box 12 of W2 with code "L".) The job related expenses appear on line 21. The job related expenses are certain miscellaneous deductions are subject to 2% AGI limit. That is you can deduct only the part of these expenses that exceeds 2% amount on Form 1040, line 38.

The expense must be ordinary and necessary job expense. An expense that is common and accepted in your field of trade is ordinary expense and an expense that is helpful and appropriate for your business is necessary expense. You can deduct your travel, transportation, and entertainment expenses.

Job Search Expenses: You can deduct certain expenses you incurred in looking for a new job in your present occupation (not in a new occupation), even if you do not get a new job. There must not be a substantial break between the ending of your last job and your looking for a new one, or you must not be looking for a job for the first time.

Reimbursement of Per Diem Allowance. You employer may reimburse you a fixed daily amount for your lodging, meal, and incidental expenses when you are away from home on business. Under the accountable plan, you must give proper account for these expenses and you must return any excess reimbursement within a reasonable time.

Car mileage deduction. For your business mileage, you can use standard mileage rate (50.5c per mile form January 1 to June 30, 2008 and 58.5c per mile from July 1 to December 31, 2008) or you can use actual costs (for gas, oil, repairs, maintenance, insurance, etc.) based on business mileage and personal use mileage. You can not deduct commuting miles or miles for personal use.

If the allowances given to you by your employer are properly accounted for and are less than or equal to the federal rate, the allowances will not be included in box 1 of your W2. You do not need to report the allowances you received and the related expenses on your return. However, if your actual expenses are more than your allowance, you can report this on Form 2106 as your job expenses.

If you are self employed, you do not use Form 2106 or 2106-EZ. If you are a sole proprietor, then you use schedule C or C-EZ (Form 1040).

5. Casualty and Theft Losses
A casualty is the damage, destruction, or loss of property resulting from an identifiable event that is sudden, unexpected, or unusual. Examples of casualty are car accidents, earthquakes, floods, Government-ordered demolition or relocation of a home that is unsafe to use because of a disaster, storms, including hurricanes and tornadoes, terrorist attacks, vandalism. A theft is the taking and removing of money or property with criminal intent and by means that are illegal under the laws of the state where it occurred. Examples of theft are blackmail, burglary, embezzlement, extortion, kidnapping for ransom, larceny, robbery.

The theft and casualty losses are figured on Form 4684 and reported on line 20 of Schedule A (Form 1040). You may also be required to file Schedule D (Form 1040), Capital Gains and Losses. The theft and casualty losses are subject to deductions,
1. You must reduce each casualty or theft loss by $500 ($500 rule) (This is for 2009 tax return. In 2008, this amount was $100).
2. You must further reduce the total of all your casualty or theft losses by 10% of your adjusted gross income (10% rule).

For a theft loss proof, you need following records
*When you discovered that your property was missing,
*That your property was stolen,
*That you were the owner of the property,
*Whether a claim for reimbursement exists for which there is a reasonable expectation of recovery.

Insurance and Other Reimbursements. You must subtract the reimbursement when you figure your loss. You do not have a casualty or theft loss to the extent you are reimbursed.

6. Gift to Charity
Only the contributions to qualified organizations or registered 501(c)3 charities are deductible. Your deduction is limited to 50% of your adjusted gross income, and may be limited to 30% or 20% of your adjusted gross income, depending on the type of organization you give it to.

Noncash Contiributions. If you make a noncash contribution and the amount of your deduction is more than $500, you must complete and attach to your tax return Form 8283, Noncash Charitable Contributions. If you deduct more than $500 for a contribution of a motor vehicle, boat, or airplane, you must also attach a statement from the charitable organization to your return. If your total deduction is over $5,000, you also may have to get appraisals of the values of the property. If the donated property is valued at more than $5,000, you must obtain a qualified appraisal. You generally must attach to your tax return an appraisal of any property if your deduction for the property is more than $500,000. See Form 8283 and its instructions for details.

Contributions From Which You Benefit. From the contribution to a qualified organisation, you must deduct the value of benefit your receive.

Foreign Charitable Organizations. If you have income from Canada, Israel or Mexico, as per tax treaties with these countries, you can deduct contribution you make to certain Canadian, Israeli or Mexican charitable organizations.

Personal Expenses or Services. You can not deduct value of time or services and personal, living or family expenses, such as cost of meal you eat while doing services of a qualified organization unless it is necessary for you to stay away from home overnight.

If you are donating any property or household goods, you must read IRS Publication 561, Determining the Value of Donated Property.

7. Gambling Losses
You must include all your gambling winnings in income on Form 1040, line 21. If you itemize your deductions on Schedule A (Form 1040), you can deduct gambling losses you had during the year, but only up to the amount of your winnings. These are shown as Other Miscellaneous Deductions on line 28 of Schedule A (Form 1040).

More Articles:
Your Filing Status
1. Filing Status for Married
2. Head of Household
Exemptions for Dependents
1. Requirements for claiming a dependent
2. Child of separated or divorced parents
Filing Requirements
1. Filing Requirement for a Dependent
2. 2009 Filing Requirements
Your Income
1. W2 vs 1099-Misc: Employee vs Independent Contractor
2. Tax Filing by Self Employed Sole Proprietor or Independent Contractor
3. Filing W4 Employee's Withholding Allowance Certificate
Your Foreign Income
1. U.S. Citizen or Resident with Foreign Income
2. Foreign Bank and Financial Accounts
Income Adjustment
1. Traditional IRA and Roth IRA
2. Elective Deferrals 401(k) Plans
Income Exemptions and Deductions
1. Moving Expenses
2. Itemized deductions
3. Student Loan Interest Deductions
U.S. Gift tax and Inheritance Tax
1. The U.S. Gift Tax
2. Tax on Inheritances
Sale of Your Home
1. Profit from the Sale of Your Home
2. Foreclosure or Repossession of Main Home
What's New for 2009
What's New for 2009

...Complete List of Articles

Any Question?
Email to: ustaxfiling@gmail.com
Forum for India Taxes http://www.mytaxes.in/

OctroTalk - World's First without 3G Live Video Chat/Conference & Video Streaming for Mobile Phones -- For Nokia S60 3rd., Window Mobile Smartphone and Pocket PC and Windows Desktop. OctroTalk has instant messaging, P2P file transfer, VoIP, SIP calling, live video chat and video conference. Free Trial/Download http://www.octro.com/

Filing Status: Head of Household

2008-05-01T03:55:00.000-07:00

If you qualify to file your tax return as head of household, your tax rate usually will be lower than the rates for single or married filing separately. You will also receive a higher standard deduction than if you file as single or married filing separately. For 2008, the standard deduction for taxpayer who files as single is $5,450, while for the Head of Household it is $8,000.

To file as head of household, you must meet all the following requirements.
1. You are unmarried or "considered unmarried" on the last day of the year. To be considered unmarried, you must have lived separate from your spouse during the last six months of the tax year,
2. You paid more than half the cost of keeping up a home for the year.
3. A "qualifying person" lived with you in the home for more than half the year (except for temporary absences, such as school). However, if the "qualifying person" is your father or mother, he or she does not have to live with you but you must be eligible to claim the parent as dependent.

Nonresident alien spouse
You are considered unmarried for head of household purposes if your spouse was a nonresident alien at any time during the year and you do not choose to treat your nonresident spouse as a resident alien. However, your spouse is not a qualifying person for head of household purposes. You must have another qualifying person and meet the other tests to be eligible to file as a head of household.
You are considered married if you choose to treat your spouse as a resident alien.

Qualifying Person
A Qualifying person is any one who is one of the following:
1. A qualifying child (such as a son, daughter, or grandchild) who lived with you more than half the year and is not married. It is not required that you must claim exemption for the child.
2. A qualifying relative who is your mother or father for whom you can claim an exemption.
3. A qualifying relative (such as a grandparent, brother, or sister) who lived with you for more than half the year and you can claim as exemption for him or her.

More Articles:
Your Filing Status
1. Filing Status for Married
Exemptions for Dependents
1. Requirements for claiming a dependent
2. Child of separated or divorced parents
Filing Requirements
1. Filing Requirement for a Dependent
2. 2009 Filing Requirements
Your Income
1. W2 vs 1099-Misc: Employee vs Independent Contractor
2. Tax Filing by Self Employed Sole Proprietor or Independent Contractor
2. Filing W4 Employee’s Withholding Allowance Certificate
Your Foreign Income
1. U.S. Citizen or Resident with Foreign Income
2. Foreign Bank and Financial Accounts
Income Adjustment
1. Traditional IRA and Roth IRA
2. Elective Deferrals 401(k) Plans
Your Deductions
1. Itemized Deductions
2. Moving Expenses
3. Student Loan Interest Deduction
U.S. Gift tax and Inheritance Tax
1. The U.S. Gift Tax
2. Tax on Inheritances
Sale of Your Home
1. Profit from the Sale of Your Home
2. Foreclosure or Repossession of Main Home
What's New for 2009
What's New for 2009

Complete List of Articles

For India Taxes visit http://www.mytaxes.in/

Tax Filing by Self Employed Sole Proprietor or Independent Contractor

2008-04-23T02:39:00.000-07:00

If you are an employee, then your employer will issue you Form W-2, which will show your total income from the year and various taxes withheld from your paycheck. If you are an independent contractor or a self-employed person, you must figure about your net income from self employment and must take care of paying the estimated taxes. A self employed person can be a one-owner business, a babysitter, a gardener, a painter, a person with Google Adsense income, a person who sells at e-Bay, a professional consultant or any one who earns income by providing personal services but is not a regular employee.

Schedule C or C-EZ (Form 1040)
If you are a sole proprietor of a business or an independent contractor (one-owner business), and have business related expenses, then you must file schedule C or C-EZ (Form 1040). Schedule C or C-EZ is filed as an attachment to their Form 1040 individual income tax return. Self-employed individuals with business expenses of less than $5,000, no net losses and no employees may be able to file Schedule C-EZ, Net Profit for Business.

On your net income on schedule C or C-EZ, you will pay SE taxes at 15.3% (12.4% social security tax plus 2.9% Medicare tax). Social Security tax is applicable on earnings up to $106,800 in 2009. For for this you will complete schedule SE (Form 1040). If you are an exempt individual, for example nonresidents on F1 and J1, your do not pay SE tax and need not do schedule SE.

Business Expenses
You can deduct the costs of running your business. These costs are known as business expenses. These are costs you do not have to capitalize or include in the cost of goods sold. To be deductible, a business expense must be both ordinary and necessary. An ordinary expense is one that is common and accepted in your field of business. A necessary expense is one that is helpful and appropriate for your business. An expense does not have to be indispensable to be considered necessary.

Capital Expenses. Capital expenses, your normally depreciate. You can deduct capital expenses under section 179 deduction. For 2008 and 2009 the maximum section 179 expense deduction is $250,000 (it was $125,000 for 2007). This limit is reduced by the amount by which the cost of section 179 property placed in service during the tax year exceeds $800,000. Section 179 is not allowed for purchases related to rental property.

Start-up Costs. The start-up costs of going into business is amortized. Amortization is a method of recovering (deducting) certain capital costs over a fixed period of time. You can elect to currently deduct up to $5,000 of business start-up costs paid or incurred during the tax year. For start-up costs paid or incurred after October 22, 2004, the amortization period is 180 months. The period starts with the month your active trade or business begins.

Car mileage deduction. For your business mileage, you can use standard mileage rate of 55c per mile for 2009 (50.5c per mile form January 1 to June 30, 2008 and 58.5c per mile from July 1 to December 31, 2008) or you can use actual costs (for gas, oil, repairs, maintenance, insurance, etc.) based on business mileage and personal use mileage. You can not deduct commuting miles or miles for personal use.

Home Office deduction. You can deduct expenses for business use of your home only if you have an exclusive part of home for business use and you use it regularly. Also the business part of your home must be one of the following:
*Your principal place of business,
*A place where you meet or deal with patients, clients, or customers in the normal course of your business, or
*A separate structure (not attached to your home) you use in connection with your business.

To take rent deduction, you must figure out the percentage use of your home for your office. Also you can deduct a percentage use of the Internet expenses, water and electricity expenses for home office.

Bank Account. It is always better to have a separate account (and even credit card) for your business. So you keep your personal and business expenses separate. Then if you ever buy or pay a business expense by your personal check then when you get time write a business check to yourself or transfer money from business account to personal account.

Further Reading. 1. IRS Publication 535, Business Expenses
2. IRS Publication 587, Business Use of Your Home

Filing Requirement
A self employed person must file the tax return if the self employed income is $400 or more.

Making Estimated Taxes Payments
You may be required to make estimated tax payments. The due dates are April 15, June 15, September 15 and Jan 15 (of next year). You must pay estimated tax for 2010 if both of the following apply.
1. You expect to owe at least $1,000 in tax for 2010 after subtracting your withholding and credits.
2. You expect your withholding and credits to be less than the smaller of:
*90% of the tax to be shown on your 2010 tax return, or
*100% of the tax shown on your 2009 tax return. (110% if your AGI is more than $150,000 or $75,000 for married filing separately). Your 2009 tax return must cover all 12 months.

Most of the self employed people, the easiest option is to make quarterly payments equal to one fourth of the tax for the previous year. For making estimated tax payments for the year 2010, divide your total tax for 2009 (or it may be 110% of your tax for 2009) by four and send the quarterly payments of the estimated tax using Form 1040-ES. If you use a tax software for your 2009 return, the software will automatically generate estimated tax payment vouchers with the amount filled in.

More Articles
Your Filing Status
1. Filing Status for Married
2. Filing Status: Head of Household
Exemptions for Dependents
1. Requirements for claiming a dependent
2. Child of separated or divorced parents
Filing Requirements
1. Filing Requirement for a Dependent
2. 2009 Filing Requirements
Your Income
1. W2 vs 1099-Misc: Employee vs Independent Contractor
2. Tax Filing by Self Employed Sole Proprietor or Independent Contractor
3. Filing W4 Employee’s Withholding Allowance Certificate
Your Foreign Income
1. U.S. Citizen or Resident with Foreign Income
2. Foreign Bank and Financial Accounts
Income Adjustment and deductions
1. Traditional IRA and Roth IRA
2. Elective Deferrals 401(k) Plans
2. Moving Expenses
3. Itemized deductions
4. Student Loan Interest Deductions
What's New for 2009
What's New for 2009

Complete List of Articles

Forum on India Taxes: http://www.mytaxes.in/

OctroTalk - World's First without 3G Live Video Chat/Conference & Video Streaming for Mobile Phones -- For Nokia S60 3rd., Window Mobile Smartphone and Pocket PC and Windows Desktop. OctroTalk has instant messaging, P2P file transfer, VoIP, SIP calling, live video chat and video conference. Free Trial/Download http://www.octro.com/

List of Articles

2008-04-19T02:28:00.000-07:00

Your Filing Status
1. Filing Status for Married
2. Filing Status: Head of Household
Exemptions for Dependents
1. Requirements for claiming a dependent
2. Child of separated or divorced parents
Filing Requirements
1. 2008 Filing Requirement
2. Filing Requirement for a Dependent
3. 2009 Filing Requirements
Your Income (Wages and Self Employed)
1. W2 vs 1099-Misc: Employee vs Independent Contractor
2. Tax Filing by Self Employed Sole Proprietor or Independent
3. Filing W4 Employee’s Withholding Allowance Certificate
Your Foreign Income
1. U.S. Citizen or Resident with Foreign Income
2. Foreign Bank and Financial Accounts
Income Adjustment
1. Traditional IRA and Roth IRA
2. Elective Deferrals 401(k) Plans
Income Exemptions and Deductions
1. Moving Expenses
2. Itemized Deductions
3. Student Loan Interest Deduction
Status of Your Tax Refund
1. When will I get my tax refund?
U.S. Gift tax and Inheritance Tax
1. The U.S. Gift Tax
2. Tax on Inheritances
Sale of Your Home
1. Profit from the Sale of Your Home
2. Foreclosure or Repossession of Main Home
3. First-Time Homebuyer Credit
Sole Propreitor, Partnership & Corporations
1. Self Employed Sole Proprietor or Independent Contractor
2. Partnerships
3. S. Corporations
State Tax Return
1. Working in Two or More States
What's New for 2009
What's New for 2009

Tax for Aliens
1. U.S. Tax Filing Requirements for Non-Residents
2. Substantial Presence Test
3. Social Security and Medicare (FICA) Taxes for Non-resident Exempt Individual
4. U.S. Tax Treaties for Professors, Teachers and Researchers
5. U.S. Tax Treaties for Students and Apprentices
6. Mandatory Reporting of Foreign Bank and Financial Accounts
7. The U.S. Visas

OctroTalk - World's First without 3G Live Video Chat/Conference & Video Streaming for Mobile Phones -- For Nokia S60 3rd., Window Mobile Smartphone and Pocket PC and Windows Desktop. OctroTalk has instant messaging, P2P file transfer, VoIP, SIP calling, live video chat and video conference. Free Trial/Download http://www.octro.com/

For any question on the U.S. ustaxfiling@gmail.com

Forum for India Taxes for Individuals and Business

2008-04-15T02:41:00.000-07:00

If you have any question on India income tax for individuals or companies, here is the forum where you can post your question. http://www.mytaxes.in/

We have a team of experts -- CAs and tax professionals to answer your questions. You can post questions about PAN application and enquiry, TDS and Fringe Benefit tax, Individual income tax for male, female and senior citizens, and filing company returns.

Articles/Topics on India Taxes
1. Income Tax Rates Financial Year 2007-2008 (Assessment Year 2008-2009)
2. Home Loan Deduction
3. Rent Income
4. PAN Application and Enquiry
5. Fringe Benefit Tax
6. Current TDS Rates
7. Income Tax Rates for the Accounting Year April 1, 2008 to March 31, 2009

For Those Who Can’t Pay the Tax Due in Full

2008-04-08T01:17:00.001-07:00

IRS will charge you interest and penalties if you don’t file your tax return and pay the taxes on time. But taxpayers can limit these charges by filing on time and paying sooner.

The current interest rate charged by IRS is 6 percent per year and late payment penalties, normally 0.5 percent (1/2 of 1 percent) per month, apply to any tax paid after the April 15 deadline, taxpayers can limit these charges by paying sooner. For example, a taxpayer who files on May 1, owing $1,000 in tax, would be charged interest plus a $50 penalty.

If you can not pay the tax due in full on or before the filing date of April 15, 2008, here is what you should do:
1. Make Partial Payment by April 15, 2008
Make sure to pay what ever maximum you can pay before April 15, 2008. If you are also filing your tax return, make sure to include the payment with your tax return. You will also attach Form 1040-V. If you are applying for extension to file, then send the payment with Form 4868.

Various e-pay options offer taxpayers the easiest and fastest way to make a full or partial payment with their return. These options enable taxpayers to make payments either online or by phone using electronic funds withdrawal or a credit card. Alternatively, taxpayers can send the IRS a check made out to “United States Treasury.”

If you are not paying the full amount of tax due, make sure to make a short-time payment agreement with IRS or apply for Installment Agreement.

2. Apply for 6-month’s Automatic Extension to File Your Tax Return (Form 4868)
If your tax return is not complete, make sure to file Form 4868 for 6-months extension to file your tax return. Make sure to pay all your tax due or the amount you are in a position to pay with Form 4868. If you apply for extension, then you can file your tax return up to October 15, 2008. You will not pay penalty for not filing your tax return. However, you will still pay interest on the tax due amount.

3. Make a Short-time Payment Arrangement with IRS
Taxpayers who need more time to pay can find out in just a few minutes whether they qualify for a payment agreement with the IRS. Just click on the Online Payment Agreement link and follow the prompts. By entering some basic information about their tax situation, eligible taxpayers can set up in a matter of minutes either a short-term payment extension or a monthly payment plan.

A short-term extension gives a taxpayer up to 120 days to pay. No fee is charged, but the late-payment penalty plus interest will apply.

4. Apply for Installment Agreement
A monthly payment plan or installment agreement gives a taxpayer more time to pay. Though interest still applies, the late-payment penalty is cut in half for any month an installment agreement is in effect. This reduced rate of 0.25 percent (1/4 of 1 percent) per month is only available if the tax return was filed on time.

A user fee will also be charged if the installment agreement is approved. The fee, normally $105, is reduced to $52, if taxpayers agree to make their monthly payments electronically through electronic funds withdrawal. The fee is $43 for eligible low-and-moderate-income taxpayers.

Alternatively, taxpayers can apply for a payment agreement by filling out Form 9465, Installment Agreement Request. This form can be filed along with either an electronically filed return or a paper return. If filing on paper, be sure to attach it to the front of the return.

Special Treatment for Eligible Taxpayers
Some taxpayers can wait until after April 15 to file and pay. As a general rule, those eligible get the extra time penalty-free and interest-free without having to ask for it. Eligible taxpayers include:

(a) Members of the military serving in Iraq, Afghanistan or other combat-zone localities. Normally, the filing and payment deadline is postponed until 180 days after the service member leaves the combat zone.
(b) Disaster-area taxpayers in four states affected by recent floods, storms and tornadoes. The filing and payment deadline is postponed until May 6 in parts of Illinois, May 19 in parts of Georgia and Missouri and May 27 in parts of Arkansas.

More Articles:
Your Filing Status
1. Filing Status for Married
2. Filing Status: Head of Household
Exemptions for Dependents
1. Requirements for claiming a dependent
2. Child of separated or divorced parents
Filing Requirements
1. Filing Requirement for a Dependent
Your Income
1. W2 vs 1099-Misc: Employee vs Independent Contractor
2. Tax Filing by Self Employed Sole Proprietor or Independent Contractor
3. Filing W4 Employee’s Withholding Allowance Certificate
Income Adjustments -- Retirement Plans
1. Trad IRA and Roth IRA
2. Elective Deferrals 401(k) Plans
What's New for 2009
What's New for 2009

Complete List of Articles

Substantial Presence Test

2008-04-05T02:23:00.000-07:00

***
If you are not a U.S. person, you will be considered a U.S. resident for tax purposes if you meet the substantial presence test for the calendar year 2009. In this test you can not include the days that are "Exempt" from residency, the days in transit or the days of stay in the U.S. because of medical condition. To meet this test, you must be physically present in the United States on at least:
1. 31 days during 2009, and
2. 183 days during the 3-year period that includes 2009, 2008, and 2007, counting:
(a) All the days you were present in 2009, and
(b) 1/3 of the days you were present in 2008, and
(c) 1/6 of the days you were present in 2007.

First Year of Residency
If you are a U.S. resident for the calendar year, but you were not a U.S. resident at any time during the preceding calendar year, you are a U.S. resident only for the part of the calendar year that begins on the residency starting date. You are a nonresident alien for the part of the year before that date.

Residency starting date under substantial presence test. If you meet the substantial presence test for a calendar year, your residency starting date is generally the first day you are present in the United States during that calendar year. However, you do not have to count up to 10 days of actual presence in the United States if on those days you establish that:
*You had a closer connection to a foreign country than to the United States, and
*Your tax home was in that foreign country.

In determining whether you can exclude up to 10 days, the following rules apply.
*You can exclude days from more than one period of presence as long as the total days in all periods are not more than 10.
*You cannot exclude any days in a period of consecutive days of presence if all the days in that period cannot be excluded.
*Although you can exclude up to 10 days of presence in determining your residency starting date, you must include those days when determining whether you meet the substantial presence test.

First-Year Choice
If you do not meet either the green card test or the substantial presence test for 2008 or 2009 and you did not choose to be treated as a resident for part of 2008, but you meet the substantial presence test for 2010, you can choose to be treated as a U.S. resident for part of 2009. To make this choice, you must:
*Be present in the United States for at least 31 days in a row in 2009, and
*Be present in the United States for at least 75% of the number of days beginning with the first day of the 31-day period and ending with the last day of 2009. For purposes of this 75% requirement, you can treat up to 5 days of absence from the United States as days of presence in the United States.

Exempt Individual
The term “exempt individual” does not refer to someone exempt from U.S. tax, but to anyone in the following categories.
(a) An individual temporarily present in the United States as a foreign government-related individual.
(b) A teacher or trainee temporarily present in the United States under a “J” or “Q” visa, who substantially complies with the requirements of the visa.
(c) A student temporarily present in the United States under an “F,” “J,” “M,” or “Q” visa, who substantially complies with the requirements of the visa.
(d) A professional athlete temporarily in the United States to compete in a charitable sports event.
For all these 4 categories of Exempt Individual, there are different rules for the period you are considered exempt and requirement to remain exempt.

More Articles: Tax for Aliens
1. The U.S. Visas
2. U.S. Tax Filing Requirements for Non-Residents
3. Substantial Presence Test
4. Social Security and Medicare (FICA) Taxes for Non-resident Exempt Individual
5. U.S. Tax Treaties for Professors, Teachers and Researchers
6. U.S. Tax Treaties for Students and Apprentices
7. Mandatory Reporting of Foreign Bank and Financial Accounts
8. The U.S. Visas

More Articles: Complete List of Articles

OctroTalk - World's First without 3G Live Video Chat/Conference & Video Streaming for Mobile Phones -- For Nokia S60 3rd., Window Mobile Smartphone and Pocket PC and Windows Desktop. OctroTalk has instant messaging, P2P file transfer, VoIP, SIP calling, live video chat and video conference. Free Trial/Download http://www.octro.com/

Forum for India Taxes: http://www.mytaxes.in/

U.S. Tax Treaties for Professors, Teachers and Researchers

2008-04-02T20:38:00.000-07:00

China, People's Republic of *
An individual who is a resident of the People's Republic of China and who is temporarily in the United States primarily to teach, lecture, or conduct research at a university or other accredited educational institution or scientific research institution is exempt from U.S. income tax on income for the teaching, lecturing, or research for a total of not more than 3 years.
This exemption does not apply to income from research carried on mainly for the private benefit of any person rather than in the public interest.

Germany*
A professor or teacher who is a resident of Germany and who is in the United States for not more than 2 years to engage in advanced study or research or teaching at an accredited educational institution or institution engaged in research for the public benefit is exempt from U.S. tax on income received for such study, research, or teaching. If the individual's visit to the United States exceeds 2 years, the exemption is lost for the entire visit unless the competent authorities of Germany and the United States agree otherwise.
The exemption does not apply to income from research carried on mainly for the private benefit of any person rather than in the public interest.

India*
An individual is exempt from U.S. tax on income received for teaching or research if he or she:
*Is a resident of India immediately before visiting the United States, and
*Is in the United States to teach or engage in research at an accredited university or other recognized educational institution in the United States for a period not longer than 2 years.
If the individual's visit to the United States exceeds 2 years, the exemption is lost for the entire visit.
This exemption does not apply to income from research carried on mainly for the private benefit of any person rather than in the public interest.

Italy*
A professor or teacher who is a resident of Italy on the date of arrival in the United States and who temporarily visits the United States to teach or conduct research at a university, college, school, or other educational institution, or at a medical facility primarily funded from government sources, is exempt from U.S. income tax for up to 2 years on pay from this teaching or research.
This exemption does not apply to income from research carried on mainly for the private benefit of any person rather than in the public interest.

United Kingdom*
A professor or teacher who is a resident of the United Kingdom on the date of arrival in the United States and who is in the United States for not longer than 2 years primarily to teach or engage in research at a university, college, or other recognized educational institution is exempt from U.S. income tax on income for the teaching or research. If the individual's 2-year period is exceeded, the exemption is lost for the entire visit, including the 2-year period.
The exemption does not apply to income from research carried on mainly for the private benefit of any person rather than in the public interest.

Thailand*
An individual who is a resident of Thailand on the date of arrival in the United States and who is in the United States for not longer than 2 years primarily to teach or engage in research at a university, college, school, or other recognized educational institution is exempt from U.S. income tax on income for the teaching or research. The exemption from tax applies only if the visit does not exceed 2 years from the date the individual first visits the United States for the purpose of engaging in teaching or research.
This exemption does not apply to income from research carried on mainly for the private benefit of any person rather than in the public interest. This exemption does not apply if, during the immediately preceding period, the benefits described in treaty Article 22(1), pertaining to students, were claimed.

*This information is from: IRS Publication 901: The Tax Treaties

More Articles on Tax for Aliens
1. The U.S. Visas
2. U.S. Tax Filing Requirements for Non-Residents
3. Substantial Presence Test
4. Social Security and Medicare (FICA) Taxes for Non-resident Exempt Individual
5. U.S. Tax Treaties for Professors, Teachers and Researchers
6. U.S. Tax Treaties for Students and Apprentices

Complete List of Articles

OctroTalk - World's First without 3G Live Video Chat/Conference & Video Streaming for Mobile Phones -- For Nokia S60 3rd., Window Mobile Smartphone and Pocket PC and Windows Desktop. OctroTalk has instant messaging, P2P file transfer, VoIP, SIP calling, live video chat and video conference. Free Trial/Download http://www.octro.com/

Any Question?
If you have a question, send me an email: ustaxfiling@gmail.com
Forum for India Taxes: http:///www.mytaxes.in

Filing 2010 Tax Return after April 17, 2011

2008-03-30T23:35:00.000-07:00

The due date to file Form 4868 (Application for Automatic Extension of Time to File U.S. Individual Income Tax Return) to get automatic extension for 6 months has passed. Now most of the tax payers can not file for extension. They must file the tax returns without further delay so that the late filing penalty is minimum. If you have filed Form 4848, your due date was October 15, 2011.

Individuals Outside the United States
If you are a U.S. citizen or resident, and you are outside the U.S. on the regular due date (April 17, 2011), you are allowed an automatic 2-month extension (until June 16, 2011). For this two month's extension, the taxpayer is not required to file Form 4868. The taxpayer may file Form 4868 to get further extension of 4 months. However, if you pay the tax due after the regular due date, interest and penalty is charged until the date the tax is paid.

Those who Filed Form 4868
For you the due date to file your tax return is October 15, 2011. This is not the due date to pay the tax due. You were expected to pay all your due taxes on or before the regular due date. Even if you have paid the due taxes, it is better to file soon. It is possible that the IRS finds some error in the tax return and you have a tax due. In that case, you will have to pay the due tax amount with interest and penalty.

You Must File the Tax ReturnIf you are required to file your tax return, you must file your tax return even it it is many years old. If you don't file your tax return, and are required to file, you can get in to a problem and it can be even after 10 or more years. Then for you to locate your tax records will become difficult and you will end up paying a huge amount of taxes, interest and penalty. So you must file your tax return. There are a large number of taxpayers who did not file their tax returns, got a big tax due bill after more than 10 years.

If you are expecting a refund, you must still file your tax return. To get a refund you must file your tax return within three years of the due date. If you file your 2010 tax return, later than April 15, 2014, you will not get your tax return. Also, there are always some chances that the IRS may find an error in your tax return, and you end up owing taxes instead of getting a rebate.

More Articles on Your Tax Return
Filing Status
1. Filing Status for Married
2. Filing Status: Head of Household
Exemptions for Dependents
1. Requirements for claiming a dependent
2. Child of separated or divorced parents
Filing Requirements
1. Filing Requirement for a Dependent
Your Income
1. W2 vs 1099-Misc: Employee vs Independent Contractor
2. Tax Filing by Self Employed Sole Proprietor or Independent Contractor
3. Filing W4 Employee’s Withholding Allowance Certificate
Income Adjustments -- Retirement Plans
1. Trad IRA and Roth IRA
2. Elective Deferrals 401(k) Plans
Any Question?If you have a question, send me an email: ustaxfiling@gmail.com
Forum on India Taxes, visit http://www.mytaxes.in/

The U.S. Gift Tax

2008-03-29T10:15:00.000-07:00

If you give someone money or property during your life, you may be subject to federal gift tax. If you sell something at less than its full value or if you make an interest-free or reduced-interest loan, you may be making a gift.

A person can give any number of gifts of less than $13,000 in 2010 (this amount is also for 2011 and 2012) to any number of persons in a year. No tax is payable on gifts of up to the annual exclusion limit of $13,000. The person who receives a gift of any amount does not pay or report the gift. The donor may have to pay the gift tax or file gift tax return if the gift amount exceeds the annual exclusion limit.

The maximum gift tax rate for 2007, 2008 and 2009 is 45%. The maximum gift tax rate for 2010, 2011 and 2012 is 35%.

If you are married, both you and your spouse can separately give up to $13,000 to the same person in 2010 without making a taxable gift. If any gift exceeds $13,000 in a year, you must file gift tax return. However, there is a life time exclusion amount. The exclusion amount for gifts made in 2010 is $1,000,000, for gifts made in 2011 is $5,000,000, and for gifts made is 2012 is $5,120,000.

When You Receive a Gift
Any gift or estate received by you is not treated as income. You, the receiver of the gift, do not file any gift tax return or pay any gift tax. Any property you receive as a gift is not included in your income. However, if the property you received this way later produces income such as interest, dividends, or rents, that income is taxable to you. A receiver of the gift may be required to file Form 3520 to report the gift if the gift is from foreign sources and the amount exceeds a certain limit.

Gift to Spouse
For calendar year 2010, the first $134,000 of gifts to a spouse who is not a citizen of the United States (other than gifts of future interests in property) are not included in the total amount of taxable gifts under §§ 2503 and 2523(i)(2) made during that year. This amount is $136,000 for year 2011 and $ 139,000 for year 2012. If your spouse is a U.S. citizen, then there is no limit to the amount of gift you can give to your spouse.

Some States do collect tax on gifts from the person who received the gift. So for the state tax you must check at your state web site.

Unified Credit (Gift Exclusion Limit)The unified credit against taxable gifts during your lift time is $345,800 (exempting $1 million of gifts amount from tax). Any unified credit you use against your gift tax in one year reduces the amount of credit that you can use against your gift tax in a later year. The total amount used during life against your gift tax reduces the credit available to use against your estate tax.

Your Basis of Property Received as a Gift
To figure the basis of property you receive as a gift, you must know its adjusted basis to the donor just before it was given to you, its fair market value (FMV) at the time it was given to you and any gift tax paid on it.

1. FMV less than donor's adjusted basis. If the FMV of the property at the time of the gift is less than the donor's adjusted basis, your basis depends on whether you have a gain or a loss when you dispose of the property. Your basis for figuring gain is the same as the donor's adjusted basis plus or minus any required adjustments to basis while you held the property. Your basis for figuring loss is its FMV when you received the gift plus or minus any required adjustments to basis while you held the property.

2. Business property. If you hold the gift as business property, your basis for figuring any depreciation, depletion, or amortization deductions is the same as the donor's adjusted basis plus or minus any required adjustments to basis while you hold the property.

2. FMV equal to or greater than donor's adjusted basis. If the FMV of the property is equal to or greater than the donor's adjusted basis, your basis is the donor's adjusted basis at the time you received the gift. Increase your basis by all or part of any gift tax paid, depending on the date of the gift.

Form 709: United States Gift (and Generation-Skipping Transfer) Tax Return
All gifts of more than annual exclusion amount ($13000 for 2010) must be reported by the donor. There is a lifetime exclusion of $1 million. A person making a gift in excess of $13K must include the gift in the lifetime exclusion and file Form 709 to document the gift. This exclusion will reduce your Estate Tax exclusion amount.

Gift form Foreign Sources
In the U.S., the person who receives a gift does not pay the tax of the gift received. This is true even if the gift is coming from a foreign country. In case of a gift from a foreign country, if the donor is a foreign person (no SSN or ITIN), they need not worry about the U.S. tax on donor of the gift since they do not have any obligation to file the U.S. tax return. However, since it is coming from a foreign country, the IRS wants to make sure that it is a actually a gift. So the receiver of the gift from foreign sources must file File 3520 Annual Return To Report Transactions With Foreign Trusts and Receipt of Certain Foreign Gifts if the amount if the total gifts received in 2007 is more than $100,000.

For more information read, Publication 950-- Introduction to Estate and Gift Taxes. http://www.irs.gov/

List of Articles on U.S. TaxesYour Filing Status
1. Filing Status for Married
2. Filing Status: Head of Household
Exemptions for Dependents
1. Requirements for claiming a dependent
2. Child of separated or divorced parents
Filing Requirements
1. Filing Requirement for a Dependent
Your Income
1. W2 vs 1099-Misc: Employee vs Independent Contractor
2. Tax Filing by Self Employed Sole Proprietor or Independent
3. Filing W4 Employee’s Withholding Allowance Certificate
Your Foreign Income
1. U.S. Citizen or Resident with Foreign Income
2. Foreign Bank and Financial Accounts
Income Adjustments -- Retirement Plans
1. Trad IRA and Roth IRA
2. Elective Deferrals 401(k) Plans
2. Moving Expenses
3. Itemized deductions
4. Student Loan Interest Deductions
Status of Your Tax Refund
1. When will I get my tax refund?
U.S. Gift tax and Inheritance Tax
1. The U.S. Gift Tax
2. Tax on Inheritances
Sale of Your Home
1. Profit from the Sale of Your Home
2. Foreclosure or Repossession of Main Home
2008 Economics Stimulus Act
1. Are You Eligible for 2008 Stimulus Tax Rebate Payment?
2. 2008 Economics Stimulus Act -- Benefits to Businesses

Tax for Aliens
1. U.S. Tax Filing Requirements for Non-Residents
2. Substantial Presence Test
3. Social Security and Medicare (FICA) Taxes for Non-resident Exempt Individual
4. U.S. Tax Treaties for Professors, Teachers and Researchers
5. U.S. Tax Treaties for Students and Apprentices
6. Mandatory Reporting of Foreign Bank and Financial Accounts

Any Question?If you have a question, send me an email: ustaxfiling@gmail.com
Forum for India Taxes http://www.mytaxes.in/

Student Loan Interest Deduction

2008-03-26T02:38:00.000-07:00

On your 2011 tax return, you may be able to deduct up to $2,500 of the interest you paid on a qualified student loan for yourself, your spouse or your dependent. Generally, you can claim the deduction if all of the following requirements are met.
1. Your filing status is any filing status except married filing separately.
2. Your modified adjusted gross income is less than $61,000 for single, head of household and qualifying window (er) ($122,000 for married filing joint return).
3. No one else is claiming an exemption for you on their 2011 tax return.

You paid interest on a loan taken out only to pay tuition and other qualified higher education expenses for yourself, your spouse, or your dependent when the loan was taken out. The term dependent includes someone you could have claimed as a dependent for the year the loan was taken out except that:
1. The person filed a joint return,
2. The person had gross income that was equal to or more than the exemption amount for that year ($3,700 for 2011), or
3. You could be claimed as a dependent on someone else's return.

Qualified Loan
The loan is not from a related person or borrowed under a qualified employer plan or a contract purchased under such a plan. The education expenses were paid or incurred within a reasonable period of time before or after the loan was taken out. The person for whom the expenses were paid or incurred was an eligible student. However, a loan is not a qualified student loan if any of the proceeds were used for other purposes.

Qualified Education Expenses
Qualified higher education expenses generally include tuition, fees, room and board, and related expenses such as books and supplies. The expenses must be for education in a degree, certificate, or similar program at an eligible educational institution. An eligible educational institution includes most colleges, universities, and certain vocational schools.

You must reduce the expenses by the following benefits
1. Employer provided educational assistance benefits that are not included in Forms W-2, box 1.
2. Excludable U.S, series EE and I saving bond interest from Form 8815.
3. Any nontaxable distribution of qualified tuition program earnings.
4. Any nontaxable distribution of Coverdell education saving account earnings.
5. Any scholarship, educational assistance allowance, or other payment (but not gifts or inheritances, etc.) excluded from income.

Eligible Student
An eligible student is a person who:
1. Was enrolled in a degree, certificate or other program (including program of study aboard that was approved for credit by the institution at which the student was entrolled) leading to a recognized educational credential at an eligible educational institution, and
2. Carried at least half of the normal full-time workload cod for the course of study he or she was pursuing.

Claiming Deduction of the Tax Forms
Use the worksheet in the Form 1040NR or Form 1040NR-EZ instructions to figure the deduction. The student loan adjustment is on line 32 of 1040NR and line 9 of 1040NR-EZ. Line 33 of Form 1040.

List of Articles
Your Filing Status
1. Filing Status for Married
2. Filing Status: Head of Household
Exemptions for Dependents
1. Requirements for claiming a dependent
2. Child of separated or divorced parents
Filing Requirements
1. Filing Requirement for a Dependent
Your Income
1. W2 vs 1099-Misc: Employee vs Independent Contractor
2. Tax Filing by Self Employed Sole Proprietor or Independent
3. Filing W4 Employee’s Withholding Allowance Certificate
Your Foreign Income
1. U.S. Citizen or Resident with Foreign Income
2. Foreign Bank and Financial Accounts
Income Exemptions and Deductions
1. Moving Expenses
2. Itemized Deductions
3. Student Loan Interest Deduction
Income Adjustments -- Retirement Plans
1. Trad IRA and Roth IRA
2. Elective Deferrals 401(k) Plans
Status of Your Tax Refund
1. When will I get my tax refund?
U.S. Gift tax and Inheritance Tax
1. The U.S. Gift Tax
2. Tax on Inheritances
Sale of Your Home
1. Profit from the Sale of Your Home
2008 Economics Stimulus Act
1. Are You Eligible for 2008 Stimulus Tax Rebate Payment?
2. 2008 Economics Stimulus Act -- Benefits to Businesses

Tax for Aliens
1. U.S. Tax Filing Requirements for Non-Residents
2. Substantial Presence Test
3. Social Security and Medicare (FICA) Taxes for Non-resident Exempt Individual
4. U.S. Tax Treaties for Professors, Teachers and Researchers
5. U.S. Tax Treaties for Students and Apprentices
6. Mandatory Reporting of Foreign Bank and Financial Accounts

Any Question?If you have a question, send me an email: ustaxfiling@gmail.com
Forum for India Taxes: http://www.mytaxes.in/

U.S. Citizen or Resident with Foreign Income

2008-03-23T06:04:00.000-07:00

Question: I am a U.S. citizen. If I leave the U.S. for good and start working abroad and pay the local taxes, do I still need to file my US tax return even if I don’t have US income? What happens if I don't?
Answer. A U.S. citizen or resident, you must file the U.S. tax return if you meet the filing requirements. You must report your world-wide income (even the income on which you paid the taxes in the foreign country). This applies to earned income (such as wages and tips and self employment income) and unearned income (such as interest, dividends, capital gains, pensions, rents, and royalties).

On your U.S. tax return, you will get your usual standard deduction and exemption deductions depending upon your filing status. Also, the U.S. has tax treaty with most of the countries, which means that on the income in other countries, you will get credit for the taxes paid in other countries.

Foreign Earned Income Exclusion Form 2555If you reside outside the United States, you may be able to exclude all or a part of your foreign source earned income by filing Form 2555-EZ/2555 (Foreign Earned Income). You can also get housing exclusion and/or deduction. The foreign earned income exclusion amount for 2009 is $91,400 (for 2007 is $85,700 and for 2008 is $87,600).

To be eligible to file Form 2555, you must meet Bona fide Resident Test or Physical Presence Test. Normally you meet the Bona fide Resident Test if you are a U.S. citizen who is a bona fide resident of a foreign country, or countries for an uninterrupted period that includes an entire tax year. You meet the Physical Presence Test if you are U.S. citizen or resident alien who is physically present in a foreign country or countries for at least 330 full days during any period of 12 months in a row. A full day means the 24-hour period that starts at midnight.

Foreign Tax Credit Form 1116
You can get credit for the taxes paid in the foreign country; you file Form 1116. Foreign Tax Credit (Individual, Estate, or Trust).

Social Security and Medicare Taxes
In general, U.S. social security and Medicare taxes do not apply to wages for services you perform as an employee outside of the United States unless one of the following exceptions applies.
*You perform the services on or in connection with an American vessel or aircraft and either: You entered into your employment contract within the United States, or
The vessel or aircraft touches at a U.S. port while you are employed on it.
*You are working in one of the countries with which the United States has entered into a binational social security agreement.
*You are working for an American employer.
*You are working for a foreign affiliate of an American employer under a voluntary agreement entered into between the American employer and the U.S. Treasury Department.

Your Self-Employed IncomeGenerally, on your income as Independent Contractor or self-employed person you must also pay SE taxes, however this may not apply for the countries where U.S. has totalization agreement. For this you file schedule SE (Form 1040). For more information on income as Independent Contractor or Self employed income, read http://taxipay.blogspot.com/2008/03/w2-or-1099-employee-or-independent.html

Binational Social Security (Totalization) AgreementsThe United States has entered into totalization agreements with several foreign countries including Australia, Greece, Republic of Austria, Ireland, Korea (South Korea), Belgium, Italy, Canada, Japan, Spain, Chile, Luxembourg, Sweden, Denmark, Netherlands, Switzerland, Finland, Norway, United Kingdom, France, Portugal, Germany. Generally, under these agreements, you will only be subject to social security taxes in the country where you are working. However, if you are temporarily sent to work in a foreign country and your pay would otherwise be subject to social security taxes in both the United States and that country, you generally can remain covered only by U.S. social security.

You Must File U.S. Tax Return
If you don't file your return, you must ultimately pay the taxes along with interest and penalty. If you don't return back, you may be declared expatriate. Also expatriation tax provisions apply to U.S. citizens who have renounced their citizenship and long-term residents who have ended their residency. If you are subject to the expatriation tax, you must file Form 1040NR for each year of the 10-year period following expatriation.

Your foreign income may be taxable in the state you are domiciled or were resident when you left the country. And on the state tax return, you do not get foreign tax credit or foreign earned income exclusion. If your foreign income is taxable in a state depends upon your situation. If your stay out of state is considered temporary or transitory, then many states in the U.S. will tax you. For this you must read the state’s residency requirements, and the definition of temporary or transitory stay.

Foreign Bank and Financial Accounts & Form FBAR
Every U.S. person who had any financial interest in, or signature authority or other authority over one or more financial accounts in a foreign country, may have to complete Treasury Department Form TD F 90-22.1 (also known as FBAR), Report of Foreign Bank and Financial Accounts, and file it with the Department of the Treasury. You must file this form if the combined assets in the account(s) are $10,000 or more at any time during the entire year. Disclosure of this information is mandatory. Read more at: http://mytaxes.in/index.php?topic=1.0

Specified foreign financial assets (SFFA) Form 8938
A specified U.S. person must file Form 8939 if foreign assets increase the threshold amount ($50,000). A specified person includes (1) a U.S. citizen, (2) a resident alien, (3) a nonresident alien who elects to be treated as a resident alien for purposes of filing a joint income tax return, and 4) a nonresident alien who’s a bona fide resident of American Samoa or Puerto Rico. Non filing penalties are as harsh as for Form TD F 90-22.1.

For more information, IRS Publication 54, Tax Guide for U.S. Citizens and Resident Aliens Abroad.
Any Question? Email ustaxfiling@gmail.com

More Articles on Tax for Aliens
1. U.S. Tax Filing Requirements for Non-Residents
2. Substantial Presence Test
3. Social Security and Medicare (FICA) Taxes for Non-resident Exempt Individual
4. U.S. Tax Treaties for Professors, Teachers and Researchers
5. U.S. Tax Treaties for Students and Apprentices
6. The U.S. Visas
What's New for 2009
What's New for 2009

Complete List of Articles

OctroTalk - World's First without 3G Live Video Chat/Conference & Video Streaming for Mobile Phones -- For Nokia S60 3rd., Window Mobile Smartphone and Pocket PC and Windows Desktop. OctroTalk has instant messaging, P2P file transfer, VoIP, SIP calling, live video chat and video conference. Free Trial/Download http://www.octro.com/

Forum on Taxes http://www.mytaxes.com/

Social Security and Medicare (FICA) Taxes for Non-resident Exempt Individual

2008-03-22T21:42:00.000-07:00

Exempt from FICA taxes
Generally, services performed by you as a nonresident alien temporarily in the United States as a non-immigrant under (F), (J), (M), or (Q) of section 101(a)(15) of the Immigration and Nationality Act are not covered under the social security program if the services are performed to carry out the purpose for which you were admitted to the United States. This means that there will be no withholding of social security or Medicare taxes from the pay you receive for these services. These types of services are very limited, and generally include only on-campus work, practical training, and economic hardship employment.

If you are a nonresident alien temporarily admitted to the United States as a student, you generally are not permitted to work for a wage or salary or to engage in business while you are in the United States. In some cases, a student admitted to the United States in “F-1,” “M-1,” or “J-1” status is granted permission to work. Social security and Medicare taxes are not withheld from pay for the work unless the student is considered a resident alien.

Resident Aliens must pay FICA taxes
Social security and Medicare taxes will be withheld from your pay for these services if you are considered a resident alien, even though your non-immigrant classification (“F,” “J,” “M,” or “Q”) remains the same. Services performed by a spouse or minor child of nonimmigrant aliens with the classification of “F-2,” “J-2,” “M-2,” and “Q-3” are covered under social security.

File Form 843 to Get the Refund of FICA taxes withheld
In case an employer deducted FICA taxes from the wages of an F1 student, the student should write to the employer for the refund of the taxes. If the employer is unable to refund the taxes, then you must complete Form 843--Claim for Refund and Request for Abatement and file with Internal Revenue Service Center.
Where to File? This form is not filed with the tax return. It is filed separately with the Internal Revenue Service Center at the address where your employer's returns were filed. If you do not know where your employer's returns were filed, file Form 843 with the Internal Revenue Service Center, 11601 Roosevelt Blvd, DPE 351, Philadelphia, PA 19255.

The attachments to Forms 843 and 8316
Attach the following items to your Form 843:
1. A copy of your Form W-2 to prove the amount of social security and Medicare taxes withheld,
2. A copy of the page from your passport showing the visa stamp,
3. INS Form I-94,
4. If applicable INS Form I-538, Certification by Designated School Official,
5. A statement from your employer indicating the amount of the reimbursement your employer provided and the amount of the credit or refund your employer claimed or you authorized your employer to claim. If you cannot obtain this statement from your employer, you must provide this information on your own statement and explain why you are not attaching a statement from your employer, and if applicable
6. Form 8316, Information Regarding Request for Refund of Social Security Tax Erroneously Withheld on Wages Received by a Nonresident Alien on an F, J, or M Type Visa

Calculating Income and FICA taxes During the OPT (or exempt) Period
In many cases a student on F1/OPT gets the visa status changed to H1-B. He is working for the same employer during H1-B for whom he/she was working during OPT. The employer withholds FICA taxes during OPT as well as during H1-B. And for the total wages paid during OPT and H1-B, employer issues only one W2.

Now to get refund of FICA taxes during OPT, on the Form 843, the taxpayer must use simple arithmetic to figure out his/her wages during OPT and FICA taxes paid on the OPT wages.

More Articles on Tax for Aliens
1. U.S. Tax Filing Requirements for Non-Residents
2. Substantial Presence Test
3. Social Security and Medicare (FICA) Taxes for Non-resident Exempt Individual
4. U.S. Tax Treaties for Professors, Teachers and Researchers
5. U.S. Tax Treaties for Students and Apprentices
6. The U.S. Visas
More... List of Articles

Any Question? Send me an email: ustaxfiling@gmail.com
Forum for India Taxes: http://www.mytaxes.in/

U.S. Tax Filing Requirements for Non-Residents

2008-03-20T23:54:00.000-07:00

You are a nonresident if you are an exempt individual or you did not complete Substantial Presence Test for number of days in the U.S. and you did not choose under "First-year Choice" to be treated as dual-status or resident for the year.

Exempt Individual
The term "exempt individual" refers to anyone in the following categories.
* An individual temporarily present in the United States as a foreign government-related individual.
* A teacher or trainee temporarily present in the United States under a “J” or “Q” visa, who substantially complies with the requirements of the visa, is normally exempt for 2-years.
* A student temporarily present in the United States under an “F,” “J,” “M,” or “Q” visa, who substantially complies with the requirements of the visa, is normally exempt for 5-years.
* A professional athlete temporarily in the United States to compete in a charitable sports event.
Note: As an "Exempt Individual" you are not exempt for state residency purpose. That is you are part year resident or full year resident of the state in which you live.

A nonresident must file the 2009 and 2010 tax return:
1. If the income in the U.S. and from the U.S. sources is $3,650 or more, or
2. The self employed income is $400 or more.
Even if your income is below $3,650, you should file tax return to get refund of all the income taxes withheld from your paycheck.

Normally a non-resident exempt individual's income is not subject to Social Security and Medicare taxes. Read More.

Bank Interest on Checking or Saving Account
Bank interest and interest on CDs are not considered taxable income for non-resident aliens, and are not reported on the tax returns. But if you file taxes as a resident alien, bank interest is a taxable income.

Hope Credit or Education Credit
Non-resident aliens can't claim tuition fee deduction or Hope credit or education credit. Non-residents are not eligible for Earned Income Credit. However, they can get Student Loan deduction just as resident aliens. Student loan deduction is shown on Form 1040NR-EZ line 9 and Form 1040NR line 32.

Filing Form 1040NR or 1040NR-EZ
For the federal tax return, a nonresident must file Form 1040NR or 1040NR-EZ and Form 8843. On the nonresident return, you will only get your personal exemption, itemized deductions and other deductions as per tax treaty. Most common itemized deduction is state income tax withheld from your paycheck. (Note: For some countries, the tax treaties allow them to claim exemption deduction for spouse (if spouse did not have any income in the year) and for children. One such example is India.)

File the Form 1040NR or 1040NR-EZ with check for tax due or without any check is filed with: Department of Treasury, Internal Revenue Service Center, Austin, TX 73301-0215 USA. If you are enclosing check for the tax due payment, make sure to attach Payment Voucher 1040-V. Also on the check, write Form 1040NR (or Form 1040NR-EZ) and your SSN.

A nonresident tax return can not be e-filed, and most of the available software do not do nonresident tax returns.

Form 8843
If you are an exempt individual, and you are not required to file the tax return, you must file Form 8843 alone. Normally you attach Form 8843 to your 2008 income tax return. If you do not have to file a return, send Form 8843 to the Internal Revenue Service Center, Austin TX 73301-0215, by the due date for filing Form 1040NR or Form 1040NR-EZ.

If you do not timely file Form 8843, you cannot exclude the days you were present in the United States as a student. This does not apply if you can show by clear and convincing evidence that you took reasonable actions to become aware of the filing requirements and significant steps to comply with those requirements.

Students from India. Students from India can claim benefits of US India Tax Treaty Article 21(2). You can claim standard deduction instead of itemized deductions. You can also claim exemption for your spouse if your spouse did not have any gross income in 2010 and can not be claimed dependent on another US taxpayer's 2010 tax return. You can claim exemption for each of your dependents if they meet the requirements.

Filed Resident Tax Return Instead of Non-Resident Tax Return
Many "Exempt Individuals" file residents return by mistake. A large number of tax preparer have limited knowledge about non-resident tax returns and they also make this mistake. Residents pay FICA taxes on their earned income while nonresidents do not pay FICA taxes. By filing resident tax return you claimed standard deduction and deductions allowed only to the residents but your employer did not withhold FICA taxes.

You may file amended tax return Form 1040X along with properly done non-resident tax return Form 1040NR or 1040NR-EZ and Form 8843. Pay the tax due. Attach a letter for Waiver of Penalty giving your reasons why this happened.

Your Visa Type
If you are on work visa, for example H1-B or L1, and you are filing a non-resident tax return, you will only get personal exemption and itemized deductions. Even if you are married and your are filing a nonresident tax return, you won't get exemption for your spouse or child. A L1 or H1-B visa holder may be eligible to file resident tax return after he/she meets the Substantial Presence Test and other requirements. Read more...

If you have F1/OPT, you will get personal exemption, itemized deductions and deduction as per tax treaty. And, if you are nonresident and have F1/OPT as well as H1-B income in the same year, you will get personal exemption, itemized deductions, and treaty deduction for OPT income only.

More Articles on Tax for Aliens
1. U.S. Tax Filing Requirements for Non-Residents
2. Substantial Presence Test
3. Social Security and Medicare (FICA) Taxes for Non-resident Exempt Individual
4. U.S. Tax Treaties for Professors, Teachers and Researchers
5. U.S. Tax Treaties for Students and Apprentices
6. Mandatory Reporting of Foreign Bank and Financial
7. The U.S. Visas
More... List of Articles

OctroTalk - World's First without 3G Live Video Chat/Conference & Video Streaming for Mobile Phones -- For Nokia S60 3rd., Window Mobile Smartphone and Pocket PC and Windows Desktop. OctroTalk has instant messaging, P2P file transfer, VoIP, SIP calling, live video chat and video conference. Free Trial/Download http://www.octro.com/

Forum for India Taxes: http://www.mytaxes.in/

U.S. Tax Treaties for Students and Apprentices

2008-03-20T03:37:00.000-07:00

Canada
A full-time student, trainee, or business apprentice who is or was a Canadian resident immediately before visiting the United States is exempt from U.S. income tax on amounts received from sources outside the United States for maintenance, education, or training.
Also see Publication 597, Information on the United States-Canada Income Tax Treaty.

China, People's Republic of
A student, business apprentice, or trainee who is a resident of the People's Republic of China on the date of arrival in the United States and who is present in the United States solely to obtain training, education, or special technical experience is exempt from U.S. income tax on the following amounts.

Payments received from abroad for maintenance, education, study, research, or training.
Grants or awards from a government, scientific, educational, or other tax-exempt organization.
Income from personal services performed in the United States of up to $5,000 for each tax year.
An individual is entitled to this exemption only for the time reasonably necessary to complete the education or training.

India
An individual who is a resident of India immediately before visiting the United States and who is temporarily in the United States primarily for studying or training is exempt from U.S. income tax on payments from abroad for maintenance, study, or training. The exemption does not apply to payments borne by a permanent establishment in the United States or paid by a U.S. citizen or resident, the U.S. Government, or any of its agencies, instrumentalities, political subdivisions, or local authorities.

Under the treaty, if the payments are not exempt under the rule described above, an individual described in the previous paragraph may be eligible to deduct exemptions for his or her spouse and dependents and the standard deduction. The individual must file Form 1040NR or Form 1040NR-EZ to claim these amounts. The individual is entitled to these benefits only for a period of time considered reasonable or customarily required to complete studying or training.

Indonesia
An individual who is a resident of Indonesia immediately before visiting the United States and who is temporarily in the United States is exempt from U.S. income tax on certain amounts for a period of up to 5 years. To be entitled to the exemption, the individual must be temporarily in the United States for full-time study at a U.S. university, school, or other recognized educational institution, or for full-time study, research, or training as a recipient of a grant, allowance, or award from either the U.S. or Indonesian Government, a scientific, educational, religious, or charitable organization, or under a technical assistance program entered into by either the U.S. or Indonesian Government. If the individual meets any of these requirements, the following amounts are exempt from tax.

* All payments from abroad for maintenance, education, study, research, or training.
* The grant, allowance, or award.
* Income from personal services performed in the United States of up to $2,000 each tax year.

An individual who is a resident of Indonesia immediately before visiting the United States and is temporarily in the United States only as a business or technical apprentice is exempt from U.S. income tax for a period of 12 consecutive months on up to $7,500 received for personal services.
IRS Publication 901: Tax Treaties

More Articles on Tax for Aliens
1. U.S. Tax Filing Requirements for Non-Residents
2. Substantial Presence Test
3. Social Security and Medicare (FICA) Taxes for Non-resident Exempt Individual
4. U.S. Tax Treaties for Professors, Teachers and Researchers
5. U.S. Tax Treaties for Students and Apprentices
6. The U.S. Visas
More... List of Articles

Any Question?
If you have a question, send me an email: ustaxfiling@gmail.com
Forum for India Taxes: http://www.mytaxes.in/

W2 vs 1099-Misc: Employee vs Independent Contractor.

2008-03-19T01:47:00.000-07:00

If you are an employee, then your employer will issue you Form W-2, which will show your total income from the year and various taxes withheld from your paycheck.

If you are an independent contractor or a self-employed person, the company or the employer whom you provided your services will issue you Form 1099-Misc, which will show the total payment made to you in the year. Sometimes, even when you are a regular employee, for some extra payments to you (like bonus, car mileage expenses or per Diem expenses), your employer may issue you Form 1099-misc. Normally on the 1099-misc payments, the employer/company will not withhold any taxes from your payments. This 1099-misc income is treated as self-employed income (even if you are a regular employee). A self employed person must file the tax return if the self employed income is $400 or more.

W2 -- You are an employee
From your income Social Security and Medicare taxes are withheld at 7.65%. The Social Security tax is withheld at 6.2% of first $97,500 of wages for 2007 ($102,000 of wages for 2008) and the Medicare tax is withheld at 1.45% of your entire wages. The employer must also pays his part of employment taxes at 7.65%.

You normally can't claim expenses associated with the job unless you itemize your deductions. Also your business related (job related) expenses are subject to 2% AGI limit, which means that if your AGI is $50,000, then $1,000 of your employee business expenses are not deductible.

An employee can deduct business related expenses only if he/she itemizes the deductions on schedule A (Form 1040). You will normally itemize your deductions only when your itemized deductions are more than the standard deduction. All for all the unreimbursed employee expenses, you must complete Form 2106 or 2106-EZ.

1099 -- You are independent contractor
If you have expenses associated with your 1099-Misc income, you must file Schedule C (Form 1040) on which you record your income and expenses. The net income from schedule C (Form 1040) is reported on line 13 of Form 1040 or 1040NR. If you do not have any expenses associated with your 1099-Misc income, then you can directly report this income on line 13 of Form 1040 or 1040NR.

On your net income on schedule C that you report on the line 13 of Form 1040 or 1040NR, you will pay SE (self employment) taxes at 15.3% (12.4% social security tax plus 2.9% Medicare tax). For SE taxes you will complete schedule SE (Form 1040). If you are an "exempt" (nonresident exempt form residency) individual, then your income is not subject to SE tax. The SE tax amount from schedule SE (Form 1040) is reported on line 58 of Form 1040. One-half of the self-employment taxes is deducted from your total income as adjustment to your income on line 27 of Form 1040.

With 1099-Misc, the employer does not have to pay their part of employment taxes of 7.65% and some other taxes. They save headache of keeping another person on their payroll.

For you the advantage of being an independent contractor is that you can deduct your expenses directly on schedule C (Form 1040) and you can still claim the standard deduction. An employee can claim expenses only when he/she itemizes the deductions, and then they don't get standard deduction.

W2 & 1099-Misc From the Same Employer
Many time your employer will issue you a W2 for the wages paid in the year and 1099-Misc for other payments. If an employer makes a payment to an employee other than the wages, and the employer does not ask the employee to account for the expenses (the unaccountable plan), then they issue 1099-Misc. Such income is reported on schedule C (Form 1040)-- Profit or Loss from Business (Sole Proprietorship). This is the proper IRS form to report income reported on 1099-Misc. And, on this form the employee can directly deduct his expenses to earn the 1099-Misc income.

Form SS-8. Determination of Worker Status for Purposes of Federal Employment Taxes and Income Tax Withholding.
A firm or a worker can file Form SS-8 to request determination of status of worker for purpose of federal employment taxes and income tax withholding.
For more information read
1. Tax Topics - Topic 762 Independent Contractor vs. Employee
2. http://www.irs.gov/businesses/small/article/0,,id=99921,00.html

List of Articles
Your Filing Status
1. Filing Status for Married
2. Filing Status: Head of Household
Exemptions for Dependents
1. Requirements for claiming a dependent
2. Child of separated or divorced parents
Filing Requirements
1. Filing Requirement for a Dependent
Your Income
1. W2 vs 1099-Misc: Employee vs Independent Contractor
2. Tax Filing by Self Employed Sole Proprietor or Independent
3. Filing W4 Employee’s Withholding Allowance Certificate
Your Foreign Income
1. U.S. Citizen or Resident with Foreign Income
2. Foreign Bank and Financial Accounts
Income Adjustment and deductions
1. Moving Expenses
2. Itemized deductions
3. Student Loan Interest Deductions
Income Adjustments -- Retirement Plans
1. Trad IRA and Roth IRA
2. Elective Deferrals 401(k) Plans
Status of Your Tax Refund
1. When will I get my tax refund?
U.S. Gift tax and Inheritance Tax
1. The U.S. Gift Tax
2. Tax on Inheritances
Sale of Your Home
1. Profit from the Sale of Your Home
2008 Economics Stimulus Act
1. Are You Eligible for 2008 Stimulus Tax Rebate Payment?
2. 2008 Economics Stimulus Act -- Benefits to Businesses

Tax for Aliens
1. U.S. Tax Filing Requirements for Non-Residents
2. Substantial Presence Test
3. Social Security and Medicare (FICA) Taxes for Non-resident Exempt Individual
4. U.S. Tax Treaties for Professors, Teachers and Researchers
5. U.S. Tax Treaties for Students and Apprentices
6. Mandatory Reporting of Foreign Bank and Financial Accounts

Any Question?
If you have a question, send me an email: ustaxfiling@gmail.com
Forum on India Taxes, visit http://www.mytaxes.in/

Profit From the Sale of Your Home

2008-03-19T01:14:00.001-07:00

You can exclude up to $250,000 of the gain on the sale of your main home if all of the following are true.
* You meet the ownership test.
* You meet the use test.
* During the 2-year period ending on the date of the sale, you did not exclude gain from the sale of another home.

If you are married and file joint return, then you can together exclude profit up to $500,000 if you meet the requirements. Any loss on the sale of your main home cannot be deducted.

Ownership and Use Tests
During the 5-year period ending on the date of the sale, you must have: Owned the home for at least 2 years (the ownership test), and lived in the home as your main home for at least 2 years (the use test)."
If you can exclude the profit, then you don't need to report the sale. However, if you do not qualify to exclude all of the gain or you choose not to exclude the gain, then you must report the entire gain realized on Schedule D (Form 1040). If you qualify for an exclusion, show it on the line directly below the line on which you report the gain. Write on the line "Section 121 exclusion."

Ownership and use tests met at different times
You can meet the ownership and use tests during different 2-year periods. However, you must meet both tests during the 5-year period ending on the date of the sale.

Special rules for joint returns
You can exclude up to $500,000 of the gain on the sale of your main home if all of the following are true.
*You are married and file a joint return for the year.
* Either you or your spouse meets the ownership test.
* Both you and your spouse meet the use test.
* During the 2-year period ending on the date of the sale, neither you nor your spouse excluded gain from the sale of another home.

Business Use or Rental of Home
If you meet the ownership and use tests, you can exclude the gain from the sale of a home that you have used to produce rental income. However, you cannot exclude the part of gain equal to the depreciation claimed or could have claimed for renting the house. That is if you never claimed any depreciated on the rental property, you will still need to calculate the depreciation amount and you will report the amount as profit from the sale.

Reduced Maximum Exclusion
In certain situations you can still claim an exclusion, but the maximum amount of gain that you can exclude is reduced if you did not meet ownership or use test because of following reasons:
1. A change of place of employment,
2. Health, or
3. Unforeseen circumstances.

List of Articles
Filing Status
1. Filing Status for Married
2. Filing Status: Head of Household
Exemptions for Dependents
1. Requirements for claiming a dependent
2. Child of separated or divorced parents
Filing Requirements
1. Filing Requirement for a Dependent
Your Income
1. W2 vs 1099-Misc: Employee vs Independent Contractor
2. Tax Filing by Self Employed Sole Proprietor or Independent
3. Filing W4 Employee’s Withholding Allowance Certificate
Your Foreign Income
1. U.S. Citizen or Resident with Foreign Income
2. Foreign Bank and Financial Accounts
Income Adjustment and deductions
1. Moving Expenses
2. Itemized deductions
3. Student Loan Interest Deductions
Income Adjustments -- Retirement Plans
1. Trad IRA and Roth IRA
2. Elective Deferrals 401(k) Plans
Status of Your Tax Refund
1. When will I get my tax refund?
U.S. Gift tax and Inheritance Tax
1. The U.S. Gift Tax
2. Tax on Inheritances

Any Question?
If you have a question, send me an email: ustaxfiling@gmail.com

Child of separated or divorced parents

2008-03-08T07:47:00.000-08:00

For a separated or divorced parent to claim a child it is required that the child did not provide more than half of his or her own support, child lived for more than half of the year with either of the parents, and the child is not a qualifying child for anyone else.

Who can claim the child?
In most cases, because of the residency test, a child of divorced or separated parents is the qualifying child of the custodial parent. The custodial parent is the parent with whom the child lived for the longer period of time. The other parent is the non-custodial parent.

As per tax law changes for the year 2008, the "custodial parent" is now defined as "the parent with whom the child resides for the greater number of nights during the calender year." It is no longer determined based on number of days, but now it is based on number of nights. Further, a child is not considered residing with either parent starting with the date the child is emancipated under state law reaches age of majority. A child who reaches age of majority on or before the day after the half way point (normally July 3) will not be in the custody of parents for more than half the year.

There is an exemption to the number of nights rule. If a child resides with one parent for a greater number of days, but not greater number of nights due to parent's nighttime schedule, this parent is the custodial parent. For this purpose, on school days, the child is deemed to be residing during the day with the primary residence registered with the school.

Even if the non-custodial parent is paying the child support or provides more than half of the support of the child, the custodial parent is the one you can generally claim the child.

If the parents divorced or separated during the year and the child lived with both parents before the separation, the custodial parent is the one with whom the child lived for the greater part of the rest of the year.

If the child lived with each parent the same amount of time in a year, then the parent with the higher adjusted gross income (AGI) can claim the child.

Requirements for noncustodial parent to claim the child
Noncustodial parent can claim the child if
1. The custodial parent signs a written declaration/release (Form 8332) that he or she will not claim the child as a dependent for the year, and the non-custodial parent attaches this written declaration to her or his return, or
2. The noncustodial parent attaches certain pages from the decree. The decree or agreement must state all three of the following.
a. The noncustodial parent can claim the child as a dependent without regard to any condition, such as payment of support.
b. The custodial parent will not claim the child as a dependent for the year.
c. The years for which the non-custodial parent, rather than the custodial parent, can claim the child as a dependent.

Unmarried Parents
If unmarried parents are unable to decide who can claim the child, they must follow the rules applicable in case of separated or divorced parents.

Requirements for claiming a dependent

2008-03-07T00:23:00.000-08:00

You get one exemption for each person you can claim as a dependent. A dependent can be your Qualifying Child or Qualifying Relative. But you can claim exemption for a qualifying child or qualifying relative only if these three tests are met.

Dependent taxpayer test. You can’t claim a dependent if you are a dependent or can be claimed a dependent by another person. On a joint return, even if your spouse can be claimed as a dependent, you can’t claim a dependent.

Joint return test. You can’t claim a married person as dependent if he or she files a joint return except that the joint return is only a claim for refund and no tax liability would exist for either spouse on separate returns.

Citizen or resident test. A dependent must be a U.S. citizen, U.S. resident alien, U.S. national or a resident of Canada or Mexico, for some part of the year.

Qualifying Child
You can claim a child as dependent only if the following requirements are met
1. Relationship. The child must be your son, daughter, stepchild, eligible foster child, brother, sister, half brother, half sister, stepbrother, stepsister, or a descendant of any of them.
2. Age. The child must be (a) under age 19 at the end of the year, (b) under age 24 at the end of the year and a full-time student minimum for during any 5 months in the tax year, or (c) any age if permanently and totally disabled.
3. Residency Test. The child must have lived with you for more than half of the year except for temporary absences.
4. Support Test. The child must not have provided more than half of his or her own support for the year. A scholarship received by a child who is full time student is not considered.
5. Special Test for Qualifying Child of More than One Person. If the child meets the rules to be a qualifying child of more than one person,
(a) you all must agree on who claims the child, or
(b) you must be the person entitled to claim the child as a qualifying child using tie-breaker rule.

Qualifying Relative
You can claim a relative as dependent only if the following requirements are met:
1. Not a Qualifying Child Test. (a) A child cannot be your qualifying relative if the child is your qualifying child or qualifying child of any other taxpayer. (b) You cannot claim a child as dependent who lives in a foreign country other than Canada or Mexico, unless the child is a U.S. citizen, resident or U.S. national for some part of the year.
2. Member of Household/Relationship Test. The person either (a) must be related to you (read who is related to you?), or (b) must live with you all year as a member of your household (and your relationship must not violate local law).
3. Gross Income Test. The person's gross income for the year must be less than $3,650 (for 2009 or 2010).
4. Support Test. You must provide more than half of the person's total support for the year.

Who is a related person? A related person can be your child, stepchild, eligible foster child, your grandchild, your brother, sister, half brother, half sister, stepbrother, or stepsister, your father, mother, grandparent, or other direct ancestor, but not foster parent, your stepfather or stepmother, A son or daughter of your brother or sister, A brother or sister of your father or mother, Your son-in-law, daughter-in-law, father-in-law, mother-in-law, brother-in-law, or sister-in-law.)

Claiming dependent not related to you. Even a non-related person can be your Qualifying Relative. However, this does not make you head of household and you do not get earned income credit benefit for this dependent. For example, even if you are eligible to claim your girlfriend or boyfriends kid, you do not get head of household status and earned income credit.

Which relationship violates the local law? Your relationship must not be illegal under local law against cohabitation, even if it's not enforced. Today, just seven states (North Carolina, Mississippi, Virginia, West Virginia, Florida, Idaho and Michigan) still criminalize cohabitation by opposite-sex couples, although anti-cohabitation laws are generally not enforced).

How many qualifying children you can claim? There is no limit on the number of qualifying children you can claim on your tax return. For every qualifying child you will get an extra exemption deduction ($3,650 for 2009 or 2010). Each each qualifying child for Child Tax Credit you will get a tax credit of $1,000. However, the earned income credit is same if you have three in 2009 qualifying children or more than three qualifying children.

Child born alive. You may be able to claim an exemption for a child who was born alive during the year even if the child lived only for a moment. There must be proof of a live birth shown by an official document such as a birth certificate.

More Articles:
Your Filing Status
1. Filing Status for Married
2. Head of Household
Exemptions for Dependents
1. Requirements for claiming a dependent
2. Child of separated or divorced parents
Filing Requirements
1. Filing Requirement for a Dependent
Your Income
1. W2 vs 1099-Misc: Employee vs Independent Contractor
2. Tax Filing by Self Employed Sole Proprietor or Independent Contractor
3. Filing W4 Employee’s Withholding Allowance Certificate
Income Adjustment and deductions
1. Moving Expenses
2. Itemized deductions
3. Student Loan Interest Deductions
Income Adjustments -- Retirement Plans
1. Trad IRA and Roth IRA
2. Elective Deferrals 401(k) Plans
What's New for 2009
What's New for 2009

Any Question?
If you have a question, send me an email: ustaxfiling@gmail.com
Forum for India Taxes http://www.mytaxes.in/

Tax on Inheritances

2008-02-29T16:40:00.000-08:00

Any money and property you receive as inheritance, you (the receiver) do pay any federal tax except if you inherit a traditional IRA. This is true even for properties inherited in foreign countries or from a foreign person. There may be state tax on the inheritances so you should check at the state web site. For most of the States there is no inheritance tax. PA state has tax on inheritances.

Inherited Property
If you inherit a property in a year other than 2010, your cost basis is the valuation (Fair Market Value) of the property at the date of the decedent's death or the FMV (Fair Market Value) on the alternate valuation date if the personal representative for the estate elects to use alternate valuation. That is your cost basis is the "step-up" basis. If you sell the inherited property at a price up to your cost basis, you don't have any profit. However, if you sell the property at price more than the cost basis to you, then you must pay the taxes on the profit (sale price minus your cost basis). You must report the sale on schedule D of Form 1040. Profit from an inherited property is always a long term capital regardless of when you inherited it.

Choices for 2010
For 2010, estates have two choices. Either pay no estate tax or pay 35% estate tax on assets over 5 million.
1. If you inherit property in 2010 from a estate that chose to avail unlimited estate tax exemption, the basis of inherited property remains the same as it was for the deceased owner. Your cost basis is not "step-up" but it is the "carry-over". However, you can choose to take your cost basis as "step-up" for only $1.3 million of the property. For any amount inherited over $1.3 million, your cost basis will be the smaller of the deceased owner's basis or the FMV on the date of the death. the surviving spouse will receive an additional $3 million basis "step-up".
2. If you inherit property in 2010 from a estate that is over 5 million and that paid 35% estate tax on assets over 5 million, you can claim stepped-up basis.

Inherited Traditional IRA or Retirement Fund
If you inherit a traditional IRA, you are called a beneficiary. Beneficiaries of a traditional IRA must include in their gross income any taxable distributions they receive. All income in a traditional IRA is taxed as ordinary income. Any capital gains within the IRA receive no special treatment that is it is treated as an ordinary gain.

You can withdraw money from inherited IRA without early withdrawal penalty even before you are 59 1/2. You should receive a Form 1099R from the trustee for the IRA. Get a copy of it from the trustee if you no longer have it. Usually there is federal withholding on the distribution, most often 20%.

Inheritance from Foreign Sources & Form 3520
Any inheritance is not a taxable income. However, since it is coming from a foreign country, the IRS wants to make sure that it is a actually a gift or inheritance. The receiver must file File 3520 Annual Return to Report Transactions with Foreign Trusts and Receipt of Certain Foreign Gifts. The form 3520 is due on the date of your return including extensions.

You file Form 3520 if you are a U.S. person who, during the current tax year, received either
a. More than $100,000 from a nonresident alien individual or a foreign estate (including foreign persons related to that nonresident alien individual or foreign estate) that you treated as gifts or bequests; or
b. More than $13,561 (for 2008) from foreign corporations or foreign partnerships (including foreign persons related to such foreign corporations or foreign partnerships) that you treated as gifts.
Note: You may also be required to file Form TD F 90-22.1. Report of Foreign and Bank and Financial Accounts. http://taxipay.blogspot.com/2008/03/us-citizen-or-resident-with-foreign.html

Estate Tax and Estate Tax Return
Most estates are not subject to the estate tax. An estate tax return generally will not be needed unless the estate is worth more than the applicable exclusion amount for the year of death. For 2006, 2007 and 2008 the exclusion amount is 2 million and for 2009 the amount is 3.5 million. For 2010, estates have two choices. Either pay no estate tax that is exclusion amount is unlimited or pay 35% estate tax on assets over 5 million. In 2011 and 2012 and estate tax exclusion amount is 5 million and the estate tax rate is 35%.

The personal representative must file an estate tax return, Form 706, if the gross estate, plus any adjusted taxable gifts and specific gift tax exemption, is more than the filing requirement for the year of death. The personal representative must also file the previous years income tax returns (if not already filed) and the final income tax return if required.

The personal representative is an executor, administrator or anyone who is in charge of the decedent’s property. Generally the executor is named in a decedent’s will to administer the estate and to distribute properties as the decedent has directed. The duties of personal representative are to collect all the decedent's assets, pay the creditors, and distribute the remaining assets to the heirs or other beneficiaries.

Schedule K-1 (Form 1041)
As a beneficiary of a estate you may get Schedule K-1 from the personal representative of the estate. The amount shown in boxes 1 through 14 of Schedule K-1 show your share of estate's or trust's income, credits, deductions, etc. Generally, you must report items shown on Schedule K-1 the same way that the estate or trust treated the items on the return. For Form 1040 filers, page 2 of Schedule K-1 provides summarized reporting information.

Community property. In community property states (Arizona, California, Idaho, Louisiana, Nevada, New Mexico, Texas, Washington, and Wisconsin), husband and wife are each usually considered to own half the community property. When either spouse dies, the total value of the community property, even the part belonging to the surviving spouse, generally becomes the basis of the entire property. For this rule to apply, at least half the value of the community property interest must be included in the decedent's gross estate, whether or not the estate must file a return.

List of Articles on the U.S. Taxes
Your Filing Status
1. Filing Status for Married
2. Filing Status: Head of Household
Exemptions for Dependents
1. Requirements for claiming a dependent
2. Child of separated or divorced parents
Filing Requirements
1. Filing Requirement for a Dependent
Your Income
1. W2 vs 1099-Misc: Employee vs Independent Contractor
2. Tax Filing by Self Employed Sole Proprietor or Independent
3. Filing W4 Employee’s Withholding Allowance Certificate
Your Foreign Income
1. U.S. Citizen or Resident with Foreign Income
2. Foreign Bank and Financial Accounts
Income Adjustment and deductions
1. Moving Expenses
2. Itemized deductions
3. Student Loan Interest Deductions
Income Adjustments -- Retirement Plans
1. Trad IRA and Roth IRA
2. Elective Deferrals 401(k) Plans
Status of Your Tax Refund
1. When will I get my tax refund?
U.S. Gift tax and Inheritance Tax
1. The U.S. Gift Tax
2. Tax on Inheritances
Sale of Your Home
1. Profit from the Sale of Your Home
2008 Economics Stimulus Act
1. Are You Eligible for 2008 Stimulus Tax Rebate Payment?
2. 2008 Economics Stimulus Act -- Benefits to Businesses

Tax for Aliens
1. U.S. Tax Filing Requirements for Non-Residents
2. Substantial Presence Test
3. Social Security and Medicare (FICA) Taxes for Non-resident Exempt Individual
4. U.S. Tax Treaties for Professors, Teachers and Researchers
5. U.S. Tax Treaties for Students and Apprentices
6. Mandatory Reporting of Foreign Bank and Financial Accounts

Any Question?
If you have a question, send me an email: ustaxfiling@gmail.com
Forum for India Taxes http://www.mytaxes.in/

Filing Status for Married

2008-02-27T14:18:00.000-08:00

If you are married or considered married, your filing status can only be Married Filing Jointly or Married Filing Separately unless you did not live with your spouse for last 6 months and meet certain conditions.

Your spouse is never your dependent. Your spouse is never your dependent but you can file as Married Filing Jointly even if one spouse did not have any income. If you file Married Filing Separately, you can claim exemption for your spouse if the spouse did not have any income.

Married Filing JointlyIf you have income and your spouse does not have income or has a very little income, then it is better to file as Married Filing Jointly. On your tax return for 2011, you will get standard deduction of $11,600 and two exemptions of $3,700 each. If both of you have almost equal income, then it won't make much difference. Also many credits and deductions are not available if you file Married Filing Separately. So normally you should file as Married Filing Jointly, unless there is a compelling reason to file otherwise. Once you filed a joint return, you cannot choose to file separate returns for that year after the due date of the return.
Filing Joint Return with Foreign Alien Spouse. Read U.S. citizen or resident married to non-resident discussed later on.
Married Filing SeparatelyYou can also choose to file as Married Filing Separately. The filing status may benefit you if you want to be responsible only for your own tax or if it results in less tax than filing a joint return. If you file your 2011 tax return as married filing separately, you will get standard deduction of $5,800 and your exemption of $3,700. For 2010 tax return, the standard deduction is $5,700 and exemption is $3,650.

If you are your spouse do not agree to file a joint return, you may have to file as Married Filing Separately unless you qualify for head of household status. If you are filing as Married Filing Separately, if one spouse itemizes the deductions, the other spouse can't claim standard deduction. Also many tax credits and deductions are not available if you file as married filing separately.

Special Rules. If you choose married filing separately as your filing status, the following special rules apply:
1. Your tax rate generally will be higher than it would be on a joint return.
2. You cannot take the earned income credit.
3. You cannot take the exclusion or credit for adoption expenses in most cases.
4. You cannot take the education credits (the Hope credit and the lifetime learning credit), the deduction for student loan interest, or the tuition and fees deduction.
5. Your exemption amount for figuring the alternative minimum tax will be half that allowed to a joint return filer.
6. You cannot take the credit for child and dependent care expenses in most cases, and the amount that you can exclude from income under an employer's dependent care assistance program is limited to $2,500 (instead of $5,000 if you filed a joint return).
7. You cannot exclude any interest income from qualified U.S. savings bonds that you used for higher education expenses.
8. If you lived with your spouse at any time during the tax year then (a) you cannot claim the credit for the elderly or the disabled, (b) you will have to include in income more (up to 85%) of any social security or equivalent railroad retirement benefits you received, and (c) you cannot roll over amounts from a traditional IRA into a Roth IRA.
9. The following deductions and credits are reduced at income levels that are half those for a joint return: (a) The child tax credit, (b) The retirement savings contributions credit, (c) itemized deductions, and (d) The deduction for personal exemptions.
10. Your capital loss deduction limit is $1,500 (instead of $3,000 if you filed a joint return).
11. If your spouse itemizes deductions, you cannot claim the standard deduction. If you can claim the standard deduction, your basic standard deduction is half the amount allowed on a joint return.

If you have filed a separate return, then you can change your filing status by filing an amended return using Form 1040X. You and your spouse can generally change to a joint return any time within 3 years from the due date of the separate return or returns.

Choosing between Married Filing Jointly and Married Filing Separately
You may want to figure your tax both on a joint return and on separate returns (using the filing status of married filing separately). Choose the method that gives the two of you the lower combined tax unless you have your own reasons.
On the joint return, both the spouses are jointly and severally liable for the tax on the return, and interest and penalties. Even when only one spouse owes the tax, both spouses are liable for the full amount. Before the due date (including extensions) either spouse may revoke the election to file a joint return. After the due date (including extensions), the joint return can not be revoked.

Head of Household
You may be able to file as head of household. If you qualify to file as head of household, your tax rate usually will be lower than the rates for single or married filing separately. You will also receive a higher standard deduction than if you file as single or married filing separately. For 2011, the standard deduction for taxpayer who files as single is $5800, while for the Head of Household it is $8,500 ($8,350 for 2010).

To file as head of household, you must meet all the following requirements.
1. You are unmarried or "considered unmarried" on the last day of the year. To be considered unmarried, you must have lived separate from your spouse during the last six months of the tax year. Your spouse is considered to live in your home even if he or she is temporarily absent due to special circumstances.
2. You paid more than half the cost of keeping up a home for the year.
3. A "qualifying person" lived with you in the home for more than half the year (except for temporary absences, such as school). However, if the "qualifying person" is your dependent parent, he or she does not have to live with you.
4. You must be able to claim an exemption for the child. However, you meet this test if you cannot claim the exemption only because the noncustodial parent can claim the child.

Spouse died during the year.   If your spouse died during the year, you are considered married for the whole year for filing status purposes.

  If you did not remarry before the end of the tax year, you can file a joint return for yourself and your deceased spouse. For the next 2 years, you may be entitled to the filing status Qualifying Window(er) With Dependent Child.
  If you remarried before the end of the tax year, you can file a joint return with your new spouse. Your deceased spouse's filing status is married filing separately for that year.

Nonresident alien spouse. You are considered unmarried for head of household purposes if your spouse was a nonresident alien at any time during the year and you do not choose to treat your nonresident spouse as a resident alien. However, your spouse is not a qualifying person for head of household purposes. Even if you are considered unmarried for head of household purposes because you are married to a nonresident alien, you are still considered married for purposes of the earned income credit (unless you meet the requirements).

Nonresident tax return. Even if you are married you can not file a non-resident tax return as married filing jointly. Your filing status is single non-resident alien or married non-resident alien. You can not claim exemption for your spouse even if the spouse's income was $0 in the year. Also you can not take exemption for a dependent. There are exceptions for the residents of Mexico, Canada and South Korea.
If you are married, you have a qualifying dependent and did not live with your spouse for last six months, you can choose to file as single non-resident alien.

U.S. citizen or resident married to non-resident. If you are a U.S. citizen or resident who is married to a non-resident alien or a foreign person, you can only file as married filing jointly or married filing separately. You can file joint return even when your spouse has never been to the U.S. If you file joint return, you must both declare your worldwide income for the year. If you or your spouse paid taxes in a foreign country, you can file Form 1116 Foreign Tax Credit or/and Form 2555 Foreign Earned Income Exclusion. (Read U.S. Citizens or Residents with Foreign Income.)

If you are filing as married filing separately, you must enter your spouse's full name in the space provided and must enter your spouse's SSN or ITIN in the space provided unless your spouse does not have and is not required to have an SSN or ITIN. In that case, write nonresident or N R A in the space for SSN.

A Qualifying person is any one who is one of the following
1. A qualifying child (such as a son, daughter, or grandchild) who lived with you more than half the year and is not married. It is not required that you must claim exemption for the child.
2. A qualifying relative who is your mother or father for whom you can claim an exemption.
3. A qualifying relative (such as a grandparent, brother, or sister) who lived with you for more than half the year and you can claim as exemption for him or her.
(Your fiance, your girl friend or your boy friend, even if you can claim them dependent, do not make you head of household.)

Common law marriage. You are considered married for the whole year if you are living together in a common law marriage that is recognized in the state where you now live or in the state where the common law marriage began. Once the common law marriage is recognized, the divorce is not common law divorce. It must be regular divorce just like in case of married persons.

More Articles:
Your Filing Status
1. Filing Status for Married
2. Head of Household
Exemptions for Dependents
1. Requirements for claiming a dependent
2. Child of separated or divorced parents
Filing Requirements
1. Filing Requirement for a Dependent
2. 2009 Filing Requirements
Your Income
1. W2 vs 1099-Misc: Employee vs Independent Contractor
2. Tax Filing by Self Employed Sole Proprietor or Independent Contractor
3. Filing W4 Employee’s Withholding Allowance Certificate
Your Foreign Income
1. U.S. Citizen or Resident with Foreign Income
2. Foreign Bank and Financial Accounts
Income Exemptions and deductions
1. Moving Expenses
2. Itemized deductions
3. Student Loan Interest Deductions
Income Adjustments -- Retirement Plans
. Trad IRA and Roth IRA
2. Elective Deferrals 401(k) Plans
Status of Your Tax Refund
1. When will I get my tax refund?
U.S. Gift tax and Inheritance Tax
1. The U.S. Gift Tax
2. Tax on Inheritances
Sale of Your Home
1. Profit from the Sale of Your Home
2. Foreclosure or Repossession of Main Home
3. First-Time Homebuyer Credit
Sole Propreitor, Partnership & Corporations
1. Self Employed Sole Proprietor or Independent Contractor
2. Partnerships
3. S. Corporations
State Tax Return
1. Working in Two or More States
What's New for 2009
What's New for 2009

...Complete List of Articles
Any Question?
If you have a question, send me an email: ustaxfiling@gmail.com
Forum for India Taxes: http://www.mytaxes.in/

Moving Expenses

2008-02-27T00:02:00.000-08:00

If you move to your new home to join a new job or start a business, you can deduct the Moving Expenses as an adjustment to the income. It means that you will get this deduction even if you don’t itemize your expenses. To be deductible, you must meet the distance and time tests. Your move must be closely related to the start of work. (Exception: Different rules may apply if you are a member of the Armed Forces or a retiree or survivor moving to the United States.)

The Time & Distance Tests
The Time Test. As an employee, you must work full time in the general area of your new workplace for at least 39 weeks during the 12 months right after your move. If you are self-employed, you must work at least 39 weeks during the 12 months right after your move AND a total of at least 78 weeks during the 24 months right after your move.

The Distance Test. The new principal workplace must be at least 50 miles farther from your old home than your old workplace was. For example, if your old workplace was 3 miles from your old home, your new workplace must be at least 53 miles from that home. If you did not have an old workplace, your new workplace must be at least 50 miles from your old home.

Form 3903 Moving Expenses
Moving expenses are figured on Form 3903 line 5 and deducted as an adjustment to income on line 26 of Form 1040 or line 26 of 1040NR. You cannot deduct any moving expenses that were reimbursed by your employer.

On the Form 3903 line 1 you enter your total expenses for transportation and storage of household goods. and personal effects. On line 2 you enter your expenses for travel including lodging from your old home to your new home. On line 4, you enter the total amount your employer paid you for the expenses on lines 1 and 2 of Form 3903 that is not included in box 1 of your Form W-2 (wages). This amount should be shown in box 12 of your Form W-2 with code P.
If you incurred or paid the moving expenses in 2009 and were not reimbursed, you must claim them in 2009 even when you expect to meet 39 weeks test in 2009. If later you are unable to meet 39 weeks test, then you must file an amended tax return.

If you were reimbursed for your expenses and you use cash method of accounting, you can deduct your expenses either in the year you paid them or in the year you received the reimbursement.

If the new workplace is outside the United States or its possessions, you must be a U.S. citizen or resident alien to deduct your expenses. Also if you qualify to deduct expenses for more than one move, use a separate Form 3903 for each move.

Standard Mileage Rate
For 2007, the standard mileage rate for using your vehicle to move to new home is 20 cents a mile. For 2008 this rate is 19 cents (Jan 1 to June 30) and 27 cents (for July 1 to Dec 31) per mile driven for moving purposes.

Moving expenses that you can deduct
You can deduct the reasonable expenses of moving your household goods and personal effects (including in-transit or foreign-move storage expenses), and traveling (including lodging but not meals) to your new home. You cannot deduct any expenses for meals. Also the cost of traveling from your former home to your new one should be by the shortest, most direct route available by conventional transportation. You can deduct moving expenses you pay for yourself and members of your household.

You can deduct any costs of connecting or disconnecting utilities required because you are moving your household goods, appliances, or personal effects. You can deduct the cost of shipping your car and your household pets to your new home. You can deduct the cost of moving your household goods and personal effects from a place other than your former home including the cost of storing and insuring household goods and personal effects within any period of 30 consecutive days after the day your things are moved from your former home and before they are delivered to your new home.
For more information, read IRS publication 521. Moving Expenses.

List of Articles
Your Filing Status
1. Filing Status for Married
2. Filing Status: Head of Household
Exemptions for Dependents
1. Requirements for claiming a dependent
2. Child of separated or divorced parents
Filing Requirements1
1. Filing Requirement for a Dependent
Your Income
1. W2 vs 1099-Misc: Employee vs Independent Contractor
2. Tax Filing by Self Employed Sole Proprietor or Independent
3. Filing W4 Employee’s Withholding Allowance Certificate
Your Foreign Income
1. U.S. Citizen or Resident with Foreign Income
2. Foreign Bank and Financial Accounts
Income Adjustment and deductions
1. Moving Expenses
2. Itemized deductions
3. Student Loan Interest Deductions
Income Adjustments -- Retirement Plans
1. Trad IRA and Roth IRA
2. Elective Deferrals 401(k) Plans
Status of Your Tax Refund
1. When will I get my tax refund?
U.S. Gift tax and Inheritance Tax
1. The U.S. Gift Tax
2. Tax on Inheritances
Sale of Your Home
1. Profit from the Sale of Your Home
2008 Economics Stimulus Act
1. Are You Eligible for 2008 Stimulus Tax Rebate Payment?
2. 2008 Economics Stimulus Act -- Benefits to Businesses

Tax for Aliens
1. U.S. Tax Filing Requirements for Non-Residents
2. Substantial Presence Test
3. Social Security and Medicare (FICA) Taxes for Non-resident Exempt Individual
4. U.S. Tax Treaties for Professors, Teachers and Researchers
5. U.S. Tax Treaties for Students and Apprentices
6. Mandatory Reporting of Foreign Bank and Financial Accounts

OctroTalk - World's First without 3G Live Video Chat/Conference & Video Streaming for Mobile Phones -- For Nokia S60 3rd., Window Mobile Smartphone and Pocket PC and Windows Desktop. OctroTalk has instant messaging, P2P file transfer, VoIP, SIP calling, live video chat and video conference. Free Trial/Download http://www.octro.com/

Any Question?
If you have a question, send me an email: ustaxfiling@gmail.com
Forum for India Taxes http://www.mytaxes.in/

Filing Requirement for a Dependent

2008-02-23T18:22:00.000-08:00

2009 Filing Requirements for a Dependent
If you are a dependent, then your filing requirements are different from that of a non-dependent. Also, if your parents can claim you as a dependent, then you can't file as a non-dependent even if your parents don't actually claim you. On a tax return, a dependent does not get personal exemption of $3,650. If you are a dependent and are not required to file, you should still file your tax return if you have a refund.

Filing Requirements for a Dependent under 65 and not blind (Single or Married)
If you are a dependent (single or married), you must file a return if any of the following apply.
1. Your unearned income was more than $950.
2. Your earned income was more than $5,700.
3. Your gross income was more than the larger of:
$950, or your earned income up to $5,400 plus $300, or
4. Your self employed income is $400 or more.
Exception: If a dependent is married and the spouse files a separate return and itemizes deduction, then you must file your tax return if your gross income was at least $5 or if you meet any of above requirements.

Filing Requirements for a Dependent 65 or older or blind (Married)
If you are a dependent (single or married), you must file a return if any of the following apply.
1. Your unearned income was more than $2,350.
2. Your earned income was more than $7,100.
3. Your gross income for 2009 was more than larger of:
$2,350, or your earned income up to $5,400 plus $1,400.
4. Your self employed income is $400 or more.
Exception: If a dependent is married and the spouse files a separate return and itemizes deduction, then you must file your tax return if your gross income was at least $5 or if you meet any of above requirements.

2009 Standard Deduction for Dependent Individual
On the 2009 tax return, the standard deduction amount that can be claimed by an Individual who is dependent can not exceed the greater of
(i) $950, or
(ii) the sum of $300 and the earned income up to $5,400.

Child's Taxable Age
There is no minimum age when a child's tax return must be filed. In other words, the day the child has taxable income (income minus deduction), child must pay the taxes. Thus infants also pay income tax. Some infants do have interest and other investment income.

If a child is under 18 and the income in 2009 is more than $950 but less than $9,500, then the parents can elect to include child's interest and dividends income in their own return. However, once a child is 18, child must file his/her own separate return. Also if a child has earned income, capital gain income, self employment income, winnings income, then the child must file his/her separate return.

More Articles
Your Filing Status
1. Filing Status for Married
2. Head of Household
Exemptions for Dependents
1. Requirements for claiming a dependent
2. Child of separated or divorced parents
Filing Requirements
1. Filing Requirement for a Dependent
Your Income
1. W2 vs 1099-Misc: Employee vs Independent Contractor
2. Tax Filing by Self Employed Sole Proprietor or Independent Contractor
3. Filing W4 Employee’s Withholding Allowance Certificate
Income Adjustment and deductions
1. Moving Expenses
2. Itemized deductions
3. Student Loan Interest Deductions
Income Adjustments -- Retirement Plans
1. Trad IRA and Roth IRA
2. Elective Deferrals 401(k) Plans
What's New for 2009
What's New for 2009

Complete List of Articles

Any Question?
If you have a question, send me an email: ustaxfiling@gmail.com
Forum on India Taxes, where you can ask question on India Taxes: http://www.mytaxes.in/

Filing W4 Employee’s Withholding Allowance Certificate

2008-02-23T11:13:00.000-08:00

When you start a new job, your employer will ask you to fill out Form W4. You must give completed Form W4 to your employer. You may get Form W4 from your employer or download this form from the IRS site.

The purpose of the form is to tell your employer how much tax they should withhold from your pay check. The amount of income tax your employer withholds from your regular pay depends on the amount you earn and the information you give your employer on Form W4. If you claim more allowances on your W4, your employer will withhold less federal and state taxes from your pay check. And if you put less allowances on your W4 the employer will withhold more federal and state taxes from your pay check. However, the Social Security and Medicare taxes (or FICA taxes) don't depend upon the allowance on your W4; they are deducted at a fixed percentage rate. The Social Security tax is 6.2% of the first $102,000 in wages for 2008 (or $97,500 of wages in 2007) and the Medicare tax is 1.45% of all wages.

If during the year there is a change in your marital status or the exemptions, adjustments, deductions or credits you expect to claim on your tax return, you may need to give your employer a new Form W-4 to change your withholding status or number of allowances.
Information of W-4.

Form W-4 includes three types of information that your employer will use to figure your withholding.
1. Whether to withhold at the single rate or at the lower married rate. (line 3 of W-4).
2. How many withholding allowances you claim. Each allowance reduces the amount withheld. (line 5 of W-4).
3. Whether you want an additional amount withheld. (line 6 of W-4).

Claiming Exemption from Withholding
You can claim exemption from withholding (line 7 of W-4) if
1. Last year you had a right to a refund of all federal income tax withheld because you had no tax liability and
2. This year you expect a refund of all federal income tax withheld because you expect to have no tax liability.

If some one can claim you as a dependent, then you can’t claim the Exempt status if your income exceeds $900 in 2008 and includes more than $300 of unearned income.

When you write Exempt on line 7 of Form W-4 and sign the form, your employer will not withhold federal and state income tax from your pay check. They will still withhold Social Security and Medicare Taxes and other State taxes. Claiming exempt on your W-4 does not mean that you are exempt from federal tax or state tax if you have taxable income. It only means that employer will not withhold any income taxes from your paycheck.

Personal Allowances Worksheet
Form W-4 has a Personal Allowances Worksheet to help figure out the number of allowance you should claim on your W-4. The worksheet has lines A to H. The worksheet is self explanatory and easy to complete. Once you complete this worksheet as per your own information, you will get reasonably accurate figure for the allowances you should claim.

Withholding Tax and Your Tax Return
Withholding tax is not the same as paying tax as per your tax return. Normally on or before January 31st of the next year, your employer will send you a form W-2 Wages and Tax Statement. The form shows your total income and the amounts of various taxes withheld from your wages. The information includes Social Security tax, Medicare tax, Federal Income Tax, State Income Tax, other State taxes.

Every year, if your income exceeds the filing requirements, you must file your federal and state income tax returns on or before the due date. The due date to file 2007 income tax return is April 15, 2008. On the return you must report all your income for the year. The income includes your total wages as reported on from W2. Based on your incomes and deductions you will compute your taxable income and the federal income tax and state income tax on the income.

Now you will also figure out how much tax you have already paid, which is equal to withholdings as reported on W2 and 1099 forms, your estimated tax payments and all other tax payments. If you have paid more federal taxes than your federal tax liability as per your return, then you will get a refund. If you paid less federal taxes than your federal tax liability as per your return, then you must pay it, and you may even have to pay interest and penalty.

Penalties for False Information
You may have to pay a penalty of $500 if both of the following apply.
1. You make statements or claim withholding allowances on your Form W-4 that reduce the amount of tax withheld.
2. You have no reasonable basis for those statements or allowances at the time you prepare your Form W-4.

There is also a criminal penalty for willfully supplying false or fraudulent information on your Form W-4 or for willfully failing to supply information that would increase the amount withheld. The penalty upon conviction can be either a fine of up to $1,000 or imprisonment for up to 1 year, or both.

These penalties will apply if you deliberately and knowingly falsify your Form W-4 in an attempt to reduce or eliminate the proper withholding of taxes. A simple error, an honest mistake, will not result in one of these penalties. For example, a person who has tried to figure the number of withholding allowances correctly, but claims seven when the proper number is six, will not be charged a W-4 penalty.
More info : http://www.irs.gov/individuals/article/0,,id=139412,00.html

More Articles:
Your Filing Status
1. Filing Status for Married
Exemptions for Dependents
1. Requirements for claiming a dependent
2. Child of separated or divorced parents
Filing Requirements
1. Filing Requirement for a Dependent
Your Income
1. W2 vs 1099-Misc: Employee vs Independent Contractor
2. Tax Filing by Self Employed Sole Proprietor or Independent Contractor
3. Filing W4 Employee’s Withholding Allowance Certificate
Income Adjustments -- Retirement Plans
1. Trad IRA and Roth IRA
2. Elective Deferrals 401(k) Plans
Your Deductions
1. Itemized Deductions
2. Moving Expenses
3. Student Loan Interest Deduction
Complete List of Articles

Any Question?
If you have a question, send me an email: ustaxfiling@gmail.com
Forum on India Taxes: http://www.mytaxes.in/
Ask, Answer & Discuss.

Are You Eligible for 2008 Stimulus Tax Rebate Payment?

2008-02-22T17:32:00.000-08:00

IRS began the transfer of economic stimulus payments from April 28, 2008. The IRS will use the 2007 tax return to determine eligibility and calculate the basic amount of the payment. The rebate payment will equal the amount of tax liability on the return (tax liability on the return Form 1040 line 46 or Form 1040A line 28) with a minimum amount of $300 and a maximum amount of $600 for individuals. The taxpayers who file a joint return and are found eligible for rebate will get a minimum amount of $600 and maximum amount of $1,200.

You must file their 2007 individual income tax return even if their income is below the filing requirement. It means that millions of people in this group who normally don’t file a tax return will need to do so this year in order to receive a stimulus payment. If you have missed the April 15, 2008 due date for filing thetax return, you must file your 2007 tax return on or before October 15, 2008 to get your stimulus rebate.

Stimulus payments will be direct deposited for taxpayers selecting that option when filing their 2007 tax returns. Those you did not opt for direct deposit will get check in mail. However, taxpayers who use Refund Anticipation Loans (RALs) or enter into any other loan or financial agreement with their tax professional cannot receive their stimulus payments by direct deposit and instead will get a paper check.

Payment Schedule
IRS has begun to transfer of economic stimulus payments from April 28, 2008, so some of you will already see payments in their bank accounts. Early filers, who opted for direct deposit will be the first to get the rebate. Mailing of paper check will begin from May 16.

If the IRS finishes processing your return by April 15, you will most likely get your payment based on this schedule. For this initial batch of stimulus payments, the payment date will be based on the last two digits of your Social Security Number.

Basic Eligibility
To be eligible, the taxpayer must have $3,000 or more in qualifying income. Individuals who have less than $3,000 of qualifying income are not eligible for the stimulus payment. For the purpose of the stimulus payments, qualifying income consists of earned income such as wages and net self-employment income as well as Social Security or certain Railroad Retirement benefits and veterans’ disability compensation, pension or survivors’ benefits received from the Department of Veterans Affairs in 2007.

However, dividends, interest and capital gains income and Supplemental Security Income (SSI) does not count as qualifying income for the stimulus payment. Also not included in qualifying income are non-veterans or non-Social Security pension income (such as those from Individual Retirement Accounts).

Additional Payments for Parents and Others with Qualifying Children
Parents and anyone else eligible for a stimulus payment will also receive an additional $300 for each qualifying child. To qualify, a child must be eligible under the Child Tax Credit and have a valid Social Security number. For child tax credit, the child must be under age 17 at the end on the year.

Limitation
To be eligible for a stimulus payment, taxpayers must have valid Social Security numbers. Both individuals listed on a married filing jointly return must have valid Social Security numbers. The taxpayer without a valid Social Security number or with an ITIN, ATIN or any other identification number issued by the IRS is not eligible for this payment.

Eligibility for the stimulus payment is subject to maximum income limits. The payment, including the basic amount and the amount for qualifying children, will be reduced by 5 percent of the amount of income in excess of $75,000 for individuals and $150,000 for those with a Married Filing Jointly filing status.
Also ineligible are individuals who can be claimed as dependents on someone else’s return.

Special Circumstances for Recipients of Social Security, Railroad Retirement and Certain Veterans Benefits
Individuals who receive Social Security benefits, Railroad Retirement benefits and certain veterans’ benefits may have to follow special filing requirements in order to receive the basic amount. The IRS has released a special version of a Form 1040A that highlights the simple, specific sections of the return that can be filled out by people in these categories to qualify for a stimulus payment.

Those who have already filed a 2007 return reflecting qualifying income of $3,000 or more do not have any additional filing requirements. Those who have already filed a 2007 return showing less than $3,000 in qualifying income and did not list their Social Security, Railroad Retirement or certain veterans benefits should file a Form 1040X to list those non-taxable benefits and qualify for a payment.

Those who are not required to file a 2007 return but whose total qualifying income including Social Security, certain Railroad Retirement and certain Veterans benefits would equal or exceed $3,000 should file a return reporting these benefits on Line 14a of Form 1040A or Line 20a of Form 1040 to establish their eligibility. The form lines just mention Social Security, but use these lines even if your only benefits were Railroad Retirement or veterans’ benefits.

Filing Form 1040A
1. Write the words “Stimulus Payment” across the top of the form.
2. On Form 1040A line 7, include the self-employed or a partner income amount you would enter on Schedule SE, line 3.
3. On Form 1040A line 14a (Social security benefits) include social security, tier 1 railroad retirement, and veterans disability and death benefits.

Is my stimulus payment taxable or refundable?
No it is non-taxable income and you don’t have to refund it back. But you will report the amount you received in your 2008 tax return. If you did not receive full amount of $600 now, then you may get the balance amount when you file your 2008 return, and you become eligible for the tax rebate.

The 2008 tax instructions will include a worksheet to help those who did not qualify for a payment or those who received a reduced amount determine if they can obtain a benefit when they file their 2008 tax returns next year.
For more information on Stimulus Tax Rebate, read Frequently Asked Questions

List of Articles
Your Filing Status
1. Filing Status for Married
2. Filing Status: Head of Household
Exemptions for Dependents
1. Requirements for claiming a dependent
2. Child of separated or divorced parents
Filing Requirements
1. Filing Requirement for a Dependent
Your Income
1. W2 vs 1099-Misc: Employee vs Independent Contractor
2. Tax Filing by Self Employed
3. Filing W4 Employee’s Withholding Allowance Certificate
Your Foreign Income
1. U.S. Citizen or Resident with Foreign Income
2. Mandatory Reporting of Foreign Bank and Financial Accounts
Income Exemptions and Deductions
1. Moving Expenses
2. Student Loan Interest Deduction
3. Itemized Deductions
Income Adjustments -- Retirement Plans
1. Trad IRA and Roth IRA
2. Elective Deferrals 401(k) Plans
Status of Your Tax Refund
1. When will I get my tax refund?
U.S. Gift tax and Inheritance Tax
1. The U.S. Gift Tax
2. Tax on Inheritances
Sale of Your Home
1. Profit from the Sale of Your Home
2008 Economics Stimulus Act
1. Are You Eligible for 2008 Stimulus Tax Rebate Payment?
2. 2008 Economics Stimulus Act -- Benefits to Businesses

Tax for Aliens
1. U.S. Tax Filing Requirements for Non-Residents
2. Substantial Presence Test
3. Social Security and Medicare (FICA) Taxes for Non-resident Exempt Individual
4. U.S. Tax Treaties for Professors, Teachers and Researchers
5. U.S. Tax Treaties for Students and Apprentices
6. The U.S. Visas

Visit forum on India Taxes: http://www.mytaxes.in/ and
ask a question on India Taxes