BASIC UNDERSTANDING OF IRS TAX RETURNS IN THE UNITED STATES

All taxpayers who meet U.S. tax obligations must declare “Federal Tax” and “State Tax.”

Federal taxation is the responsibility of the IRS.

State tax is the responsibility of the state government where you live.

Before filing the deadline, two different tax forms must be filled out and submitted to the IRS and the state tax authorities together with the tax payable.

There are no state taxes on income from certain states in the United States. They include Texas, Florida, Nevada, South Dakota, Alaska, Washington, and Wyoming.

PEOPLE WHO NEED TO DECLARE INCOME TAX

U.S. citizens

Foreign residents with legal residency, including those with permanent residency (such as green card holders); residents with E status; residents with H status; those who stay in the US for more than 183 days within a year US income).

WHEN PEOPLE NEED TO DECLARE INCOME TAX

April 15 of each year is the deadline for filing federal and state tax returns but for this current year, 2020, the deadline was moved from April 15th, 2020 to July 15th, 2020.

If the deadline falls on Saturday, Sunday or legal holiday, it will be postponed to the next working day

If the correspondence address of the envelope is correct and the postmark date is before the deadline, the tax return will be deemed to be filed on time.

People may wonder what to do if they have no time to declare. They can declare at a later date. Normally, if you are unable to file your taxes before April 15th of a particular year, you can apply for a 6-month extension to file your taxes on October 15th of that year but for this year, as the deadline was moved from April 15th to July 15th, The deadline for the extension still remains October 15th. It has not changed. To obtain an automatic extension of the tax filing period, you must submit Form 4868 (Form 4868) before the tax filing deadline July 15th. However, the taxpayer must still report the tax paid to the IRS on time before July 15th, otherwise the interest on late tax will be charged and a late fee will be added. In other words, the late declaration will not extend the deadline for tax payment. Deadline for the extension is not the deadline to pay taxes. They are two different actions and taxpayers should pay their taxes before July 15th.

According to the IRS, if you are a U.S. citizen or foreign resident and meet the following conditions before the normal tax filing deadline (April 15th), you are allowed to postpone two months to June 15thof tax filing and tax payment without additional special application to extend the tax filing time limit. For 2020, the postponement of the two months means those that meet the criteria can pay taxes on or before September 15th.

People who live in a country other than the United States and Puerto Rico, and the principal places of business or work are not in the United States and Puerto Rico.

People serving in the military or navy outside the United States and Puerto Rico

 

INCOME THAT NEEDS TO BE DECLARED

All income earned worldwide must be declared as follows:

Salary – This is your fixed regular payment usually paid on a monthly or yearly basis.

Commission – This is a sum usually a percentage of the money involved, paid to an agent in a commercial transaction.

Remuneration – This is money paid for a work or service rendered.

Fringe benefits – These are extra benefits supplementing an employee’s money wage or salary. For example, it can be a company car or private healthcare.

Tip – A sum of money given to a person as a reward for a service rendered.

Stock purchase option – Option that gives an investor the right to buy or sell stock at an agreed price and date. There are two types of options. The puts (a bet that a stock will fall) and calls (a bet that a stock will rise).

interest

Dividends – A sum of money paid regularly by a company to its shareholders out of its profits.

Partnership distribution – Partnerships share profits in the form of distribution, not dividends.

Capital dividends – This is also called the return of capital. It is a payment a company makes to its investors that is drawn from the shareholder’s equity.

Pension income – Money paid to you, usually as a monthly check after you reach a specific retirement age.

Unemployment compensation income – Money paid by the state to unemployed workers who have lost their jobs due to layoffs or retrenchment.

Game profit – Revenue made by international video games

Earned income abroad – This is the income you receive for services performed in a foreign country during the period your tax home is in a foreign country.

 

Notes

Federal taxes are levied globally, but they are not double taxed. Therefore, if part of the income has been paid in another country, the tax paid can be directly deducted from the tax payable in the income tax statement (foreign tax credit Foreign Currency Credit).

The United States has a certain amount of tax allowance for overseas income per person per year. In 2018 it was $104,100. It may be higher depending on individual circumstances. For tax year 2019 (also filing in 2020), the exclusion amount is $105,900.

AMOUNT OF TOTAL INCOME THAT MUST BE DECLARED

You can refer to the chart below. For more explanation, please refer to the source of the IRS source.

Tax declaration threshold for people under the age of 65

Single declaration – The amount is $12,000

Married combined declaration – The amount is $24,000. If one party is 65 years old then it is $25,300.

Married separate declaration If there is income, you must declare the head of the household $18,000, Amount for widow/widower is $24,000.

What if both parties are 65 years and above?

For the 2019 tax year, if you are 65 years and above and married and you file a joint Tax Return with your spouse who is also 65 years or older, you must file a return if your combined gross income is $27,000 or more. If your spouse is under 65 years old, then the threshold amount decreases to $25,700.

Married separate declaration – If you have income, you must declare the head of the family $19,600 regardless of the amount. Amount for the widow/widower is $25,300.