Seven Facts about Dependents and Exemptions

Posted by Sanket Shah | General | Friday 19 May 2017 2:46 pm

There are a few tax rules that affect everyone who files a federal income tax return. This includes the rules for dependents and exemptions. The IRS has seven facts on these rules to help you file your taxes.

1. Exemptions cut income. There are two types of exemptions: personal exemptions and exemptions for dependents. You can usually deduct $3,900 for each exemption you claim on your 2013 tax return.

2. Personal exemptions. You can usually claim an exemption for yourself. If you’re married and file a joint return you can also claim one for your spouse. If you file a separate return, you can claim an exemption for your spouse only if your spouse had no gross income, is not filing a return, and was not the dependent of another taxpayer.

3. Exemptions for dependents. You can usually claim an exemption for each of your dependents. A dependent is either your child or a relative that meets certain tests. You can’t claim your spouse as a dependent. You must list the Social Security number of each dependent you claim. See IRS Publication 501, Exemptions, Standard Deduction, and Filing Information, for rules that apply to people who don’t have an SSN.

4. Some people don’t qualify. You generally may not claim married persons as dependents if they file a joint return with their spouse. There are some exceptions to this rule.

5. Dependents may have to file. People that you can claim as your dependent may have to file their own federal tax return. This depends on many things, including the amount of their income, their marital status and if they owe certain taxes.

6. No exemption on dependent’s return. If you can claim a person as a dependent, that person can’t claim a personal exemption on his or her own tax return. This is true even if you don’t actually claim that person as a dependent on your tax return. The rule applies because you have to right to claim that person.

7. Exemption phase-­out. The $3,900 per exemption is subject to income limits. This rule may reduce or eliminate the amount depending on your income. See Publication 501 for details.

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Who must file a US Individual Tax return?

Posted by Sanket Shah | General | Wednesday 14 December 2011 6:51 pm

We are often asked as to who must file an Individual Tax Return in US.

Generally, all US Citizens and resident aliens (refer to our blog in October 2011 as to who is regarded as resident alien) are liable for federal income tax on their world wide income, without regard to whether the income arose from sources within or outside of United States. For each tax year, a return must be filed by them who has at least a specified minimum amount of gross income.

The filing threshold for most individuals is the sum of the applicable exemption amount plus the applicable standard deduction amount for the tax year.

 

Generally, the gross income levels at which individuals must file income tax returns for 2011 are:

If the applicable gross income test is met, then a return must be filed even though the individuals exemptions and deductions are such that no tax is due.

If the applicable gross income test is not met, then a return is required to filed whenever a refund of tax or refundable credit such as earned income credit is available.

A return is also required to be filed if:

  1. Net earnings from self-employment are at least $400.
  2. Liability for Alternative Minimum tax is incurred, etc.
  3. You received advance earned income credit payments from your employer. These payments are shown in Form W-2, box 9
  4. Recapture of first time home buyers tax credit.
  5. Social security and Medicare tax on tips you did not report to your employer or on wages you received from an employer who did not withhold these taxes. etc.
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Individual Tax Return, Due Date and Forms

Posted by Sanket Shah | General | Wednesday 7 December 2011 5:22 pm

Income tax returns for individual calendar year taxpayers are due by April 15 of the next year. Should April 15 fall on a Saturday, Sunday, or a legal holiday in Washington D.C. or in the state to which the return is required to be filed, the returns are due on the next business day. For example, in 2012, April 15 is on a Sunday. April 16 is a legal holiday, Emancipation Day, in Washington D.C. Because Monday, April 16, 2012 is a legal holiday in Washington D.C., Form 1040 income tax returns filed on Tuesday, April 17, 2012, will be treated as timely filed on Sunday, April 15, 2012.

Regular Form

The Form 1040 – U.S. Individual Income Tax Return:

It is the starting form for individual federal income tax returns filed with the IRS. It consists of two full pages not counting attachments. It has 11 attachments, called “schedules”, which may need to be filed depending on the taxpayer. The most commonly used schedules are:

  • Schedule A – It is used to claim itemizes deductions which are allowable against income. Taxpayers may choose to take a standard deduction instead of an itemize deduction. Basic standard deductions range between $5,800 and $11,600 (for tax year 2011), depending on filing status.
  • Schedule B – Enumerates interest and/or dividend income. It is required if either interest or dividends received during the tax year exceed $1,500 from all sources or if the filer had certain foreign accounts.
  • Schedule C – Lists income and expenses related to self-employment, and is used by sole proprietors.
  • Schedule D – It is used to compute capital gains and losses incurred during the tax year.
  • Schedule E  - It is used to report income and expenses arising from the rental of real property, royalties, or from pass-through entities (like trusts, estates, partnerships, or S corporations).
  • Schedule SE – It is used to calculate the self-employment tax owed on income from self-employment (such as on a Schedule C, etc.).

There are other, specialized forms that may need to be completed along with Schedules and the Form 1040.

Short forms

The Form 1040A called “short form” – U.S. individual income tax return, is a shorter version of the Form 1040. Use of Form 1040A is limited to taxpayers with taxable income below $100,000 and who take the standard deduction instead of itemizing deductions.

The Form 1040EZ called “easy form” – Income Tax Return for Single and Joint Filers With No Dependents, is the simplest, six-section Federal income tax return. It is used by taxpayers with taxable income below $100,000 (as of tax year 2011) and who take the standard deduction instead of itemizing deductions.

Other

The Form 1040NR – U.S. Nonresident Alien Income Tax Return.

The Form 1040NR-EZ called “easy” – U.S. Income Tax Return for Certain Nonresident Aliens With No Dependents. It is used by nonresident aliens who have U.S. source income and therefore have to file a U.S. tax return. Joint returns are not permitted, so that husband and wife must each file a separate return.

The Form 1040X – Amended U.S. Individual Tax Return. It is used to make corrections to Form 1040, Form 1040A, and Form 1040EZ tax returns that have been previously filed.

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