Working or Living in Two or More states

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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



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

Complete List of Articles

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How to Get Missing Forms W-2 and 1099

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

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

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

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

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

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

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

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

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

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

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

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
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

Complete List of Articles

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Traditional IRA and Roth IRA

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

Complete List of Articles

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Itemized Deductions

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

...Complete List of Articles

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

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Filing Status: Head of Household

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

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

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

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

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

Complete List of Articles

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

Tax Filing by Self Employed Sole Proprietor or Independent Contractor

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

Complete List of Articles

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

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

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

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

Forum for India Taxes for Individuals and Business

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

Complete List of Articles

Substantial Presence Test

***
If you are not a U.S. person, you will be considered a U.S. resident for tax purposes if you meet the substantial presence test for the calendar year 2011. In this test you can not include the days that are "Exempt" from residency, the days in transit or the days of stay in the U.S. because of medical condition. To meet this test, you must be physically present in the United States on at least:
1. 31 days during 2011, and
2. 183 days during the 3-year period that includes 2011, 2010, and 2009, counting:
(a) All the days you were present in 2011, and
(b) 1/3 of the days you were present in 2010, and
(c) 1/6 of the days you were present in 2009.

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

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

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

First-Year Choice
If you do not meet either the green card test or the substantial presence test for 2010 or 2011 and you did not choose to be treated as a resident for part of 2010, but you meet the substantial presence test for 2012, you can choose to be treated as a U.S. resident for part of 2011. To make this choice, you must:
*Be present in the United States for at least 31 days in a row in 2011, and
*Be present in the United States for at least 75% of the number of days beginning with the first day of the 31-day period and ending with the last day of 2011. For purposes of this 75% requirement, you can treat up to 5 days of absence from the United States as days of presence in the United States.
Thus if you choose to be treated as resident for part of 2011, you are dual status for 2011. If you do not choose to be treated as resident for part of 2011, you are nonresident for 2011.

If you are married and under First Year Choice you choose to be treated as resident for part of 2011, you have two choices:
1. File dual status tax return, or
2. File joint return as residents even when your spouse is nonresident.
(Note: A U.S. citizen or resident can file joint return as residents even when the spouse is nonresident and has never been to the U.S. On the joint resident return, both spouses must report worldwide income for the year.)

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

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

More Articles: Complete List of Articles

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

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

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

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

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

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

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

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

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

Complete List of Articles

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

Filing 2010 Tax Return after April 17, 2011

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/