Filing 2010 Tax Return after April 17, 2011

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

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

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

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

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

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

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

U.S. Tax Treaties for Students and Apprentices

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.

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

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

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.

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

... More Articles

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

Requirements for claiming a dependent

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

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.

Federal Estate Exclusion for 2012 & 2013
In 2011 the federal estate-tax exclusion was set permanently at $5 million and is indexed for inflation. For 2012 the basic federal estate exclusion limit is $5,120,000 and the top estate-tax rate is 35%. In 2013, the basic federal estate exclusion limit is $5,250,000 and the top estate-tax rate is 40%.

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 ReturnMost 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

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Filing Status for Married

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?
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