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Basics (FAQs) of Federal (U.S.) Individual Income Tax Return

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Question / Topic

Broad Helpful General Tax Information

1

Do I have to file a Return?

Depends on your (a) Gross Income (b) Filing Status (c) Age.

2

Even if I do not have to file, should I file?

In certain situations, file to get refund of tax paid and/or claim eligible tax credits and/or obtain Tax ID (ITIN).

3

Definition of Resident/Non-Resident

Income Tax Rules definitions are not necessarily the same as US Immigration Rules e.g., even without Green Card and/or US Citizenship, a Tax Payer may be required to file a “Resident” Tax Return.

4

Resident Tax Return

1040 Form (Note: Obligation to report “all” Global Income, Any Foreign Banks A/cs, and FBAR report of Foreign Financial Assets in excess of $10,000 and report, if applicable, under FATCA).

5

Non-Resident Tax Return

1040-NR Form (Exception: Substantial Presence Test)

6

F 1 and J 1 Visa

Generally, file 1040-NR (and may be eligible for FICA refund).

7

Tax Filing Deadline

Usually April 15, and if extension is requested then Oct. 15

8

Tax Amendments

File within 3 years from the date of the original tax return or 2 years from tax paid for that year, whichever is later.

9

Filing Status

Five Choices: (1) Single (2) Married Filing Jointly – MFJ (3) Married Filing Separately – MFS (4) Head of Household (5) Qualifying Widow/er with Dependent Child.

10

MFJ v/s MFS (Joint v/s Separate)

Evaluate “every year” and choose the most beneficial filing status for that year. MFS for a given year can later be amended as MFJ but MFJ cannot be amended as MFS for that given year.

11

Personal Exemption (Reduces Taxable Income)

Available for Tax Payer and, if MFJ, also for Spouse – Amount per each exemption may vary (normally increases) every year. Currently Suspended.

12

Dependent Exemption (Reduces Taxable Income)

Available for Each Dependent- Amount per each exemption may vary (normally increases) every year. Currently Suspended.

13

Standard Deduction v/s Itemized Deductions (Reduces Taxable Income)

Standard deduction amount depends on the filing status. Choose Itemized Deductions instead, if you qualify for higher amount. Charitable contributions may be deductible only if you itemize.

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Total Income

Sum Total of all your taxable income components e.g., Salary, Dividend, Interest, Capital Gains, Rent Income, Business Income etc.

15

Adjusted Gross Income (AGI)

Total Income after Adjustments. e.g., Student Loan Interest

16

Taxable Income

AGI minus Exemptions & Standard / Itemized Deductions.

17

Tax

Calculated Tax on Taxable Income. (+ AMT, if applicable)

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Tax Credits (Refundable v/s Non- Refundable)

Reduces Calculated Tax. FTX credit (FTC) may be available for tax paid in a foreign country.

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Other Taxes

Self-Employment Tax, etc.

20

TOTAL TAX

Final Tax Obligation.

21

Tax Payments

Tax Paid on W-2, 1099 etc. + Paid as Estimate/with Extension.

22

Total Tax Payments

Sum Total of Tax Paid on W-2, 1099 etc. + Paid as Estimate / with Extension + Refundable Credits.

23

TAX REFUND/Tax Due

Tax Refund = Total Tax Paid > Total Tax (otherwise, Tax Due).

24

Tax Deduction v/s Tax Credit

Tax Deduction reduces Taxable Income; Tax Credit reduces Tax Due.

25

401 (k) / 403 (b)

Employer sponsored Retirement Savings Contribution (Pre/Post Tax).

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IRAs

Private (Self) Retirement Savings Contribution

(May or may not be deductible).

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Commonly claimed Deductions

Where applicable and eligible: Tuition & Fees, IRA, HSA etc.

28

Commonly claimed Tax Credits

Where eligible, Child Tax, Dependent Care, and Education Credits, etc.

Disclaimer: The above “general” tax information is for illustrative purposes only and should not be construed as tax advice. Please consult your Tax Advisor for your specific situation.

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