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.

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.

Very often we are asked, why a person who is residing in U.S and is on an H1 or L1 visa, required to disclose his world wide income in his U.S Tax return.

Our first suggestion, please do not confuse your Immigration status with your Tax status. They are two independent bodies and have different set of rules. Having said that, let us brief you the U.S Tax requirement.

A resident alien’s income is generally subject to tax in the same manner as a U.S citizen. If you are a resident alien, you must report all interest, dividends, wages or other compensation for services, income from rental property or royalties and other types of income on your U.S tax return. You must report these amounts whether from sources within or outside  the United States.

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