The U.S. Income Tax Topics 1

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
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Foreclosure or Repossession of Main Home

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
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Elective Deferrals 401(k) Plans

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

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The U.S. Visas

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 or you can file dual status tax return after you meet SPT in the next year. If you meet SPT during the first year of H1-B, 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
(i) non-resident tax return, or
(ii) dual status tax return after you meet SPT in the next year, or
(iii) file joint return as residents after you meet SPT in the next year.
If you meet SPT, then you can file
(i) dual status tax return, or
(ii) 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 Aliens1. 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

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