Purpose of the U.S. tax system (Gena)
Tax — a fee charged by the government on a product, your income, or an activity.
The purpose of taxes is to raise money for the government’s expenses. Taxes finance many public services such as schools, street lights and cleaning public areas. Everyone pays a percentage of their income so that we can all benefit. When everyone contributes a small amount of money in the form of taxes, everyone can benefit when the government uses that money to improve things that everyone uses, like roads.
There are different kinds of taxes:
Income tax—a charge on the money you earn through work or large gifts.
Federal income tax—is a portion of your income that is paid to the
federal government.
State income tax—is a portion of your income that is paid to your
state government.
Earned Income Tax Credit—You may qualify for the Earned Income Tax Credit. The Federal government will pay you back some of the money you paid in taxes.
Property Tax —is a tax paid on property owned.
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Income Taxes
One of the main forms of taxes that you will pay is called income tax. This is a tax on the money that you make from employers that are corporations. You will pay income taxes to both the state and federal government, and how much you pay in income tax depends on how much money you make.
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Federal vs State Taxes
In the US, there are federal and state laws regarding taxes. Both go towards the public goods, such as schools, police departments, hospitals. Though there are many goods that are the same throughout the country, each state has its own laws. For example, each state pays a different amount for food stamps and other welfare. Both must be paid by all residents yearly.
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When Federal Income Taxes are Due
In the US, Federal taxes for the previous year are due on April 15th. If you are unable to file your federal income taxes by April 15th, you can request an extension until October 15th, but you must file if you make more than
If you don't file, you can face a failure-to-file penalty. The penalty is 5% of your unpaid taxes for each month your tax return is late, up to 25%.
If you file your taxes but don't pay them, the IRS will charge you a failure-to-pay penalty. The penalty is far less: Generally, the IRS will charge you 0.5 percent of your unpaid taxes for each month you don't pay, up to 25 percent. Interest also accrues on your unpaid taxes
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State Income Taxes
State Income taxes are most often due on the same day as federal income taxes. If you are unable to file your state income taxes by April 15th, you do not need to file a separate extension. Once you have filed with the IRS, you will automatically have an extension to file your state taxes.
Extension to file is not an extension to pay
It’s important to realize that requesting an extension to filing your taxes does not mean that you do not need to pay your taxes. If you owe the government taxes, you will be charged any penalties if they are not paid by April 15th.
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Sales Tax
Sales tax is added to most retail items you purchase. The percentage you pay varies depending on the state in which you live. To understand how to calculate sales tax, take this quiz: https://edpuzzle.com/media/5fd1583dfedd624129e990fc
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Property Tax
Most commonly, property tax is a real estate tax on homes, cars and other property. It is calculated by a local government where the property is located and paid by the owner of the property. These taxes are paid annually and you will be notified by mail each
year. For example, in Virginia property taxes for automobiles are 5% of the value each year. The national average for property taxes of homes is 1% of the value each year
The W-4 form and tax deductions from your paychecks
Income tax
One of the main forms of taxes that you will pay is called income tax. This is a tax on the money that you make from employers that are corporations. You will pay income taxes to both the state and federal government, and how much you pay in income tax depends on how much money you make.
When you first start your job, you will probably be asked to fill out a W-4 form. The W-4 form determines how much money gets taken out of your paycheck in taxes. When you fill out the W-4 form, you choose how much money you want to give the government in taxes now so that you don’t have to pay all at one time once per year. The idea is that it’s easier to pay $50 once per month in federal taxes than
12x$50=$600 once per year because many people would forget to save $600 each year for taxes.
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If you get more money taken out of your paychecks than you actually owed for the year, you will get money back from the government when you file your tax return.
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If you get less money taken out of your paycheck than you actually owed in taxes for the year, you will owe money to the government when you file your tax return.
More information on this is given later in this lesson, but right now the most important thing to realize is that how you fill out the W-4 form determines how much money gets taken out of your paycheck for taxes each month. It’s good to get money taken out of your paychecks for taxes to help you budget throughout the year and avoid being surprised that you owe money when you file your tax return.
How to read your paycheck and determine tax deductions
Before looking at the W-4 form, let’s look at this example of a paycheck to see how taxes are taken out. The top half of a paycheck is a statement of how much you’ve made and how much has been taking out for taxes. The bottom half is the check itself, which is what you will (carefully) tear off and sign the back of when you deposit or cash your paycheck at the bank or ATM. Here are some examples:
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How much is Carl’s gross pay?
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How much was taken out of Carl’s paycheck this month for federal income tax? How much has been taken out this year to date? Note: in the above example, “income tax” means “federal income tax”
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How much was taken out of Carl’s paycheck for state income tax this month?
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How much was taken out of Carl’s paycheck for Social Security?
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What is Carl’s net pay, meaning the amount that Carl takes home in wages after taxes have been deducted? Note: most people do not get as much taken out of their paychecks total as Carl does
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Filling out and understanding the W-4 form
Now that we’ve seen what paychecks look like when income taxes are and aren’t taken out of them, let’s look at the W-4 form and ways to fill it out so that more or less money for taxes is taken out of your regular paychecks.
First, watch this video on the W-4 form and answer the questions in the
video:
https://edpuzzle.com/media/5fc43ae621a78440a876568b
Here is some general information on the W-4 form:
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Employees fill out a W-4 form to let employers know how much tax to withhold from their paycheck based on filing status, dependents, anticipated tax creditsand deductions, etc.
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If you don't fill it out correctly, you may end up owing taxes when you file your return.
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The IRS revamped the form for 2020 with the aim of making it easier to fill out.
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Employees can change their withholding at any time by submitting a new W-4 to their employer.
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First, let’s take a look at what the W-4 form looks like. We will go through each part of the form and talk about what each line means. Open the following link in a new window to see what the W-4 form looks like. We won’t include it here because it’s too long.
https://www.irs.gov/pub/irs-pdf/fw4.pdf
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Step 1: Step 1 is demographic information. Fill out your name and address. If a job requires you to fill out a W-4, then it will also be a visa-issuing job. Once you have a work visa, you will be able to get a social security number.
Consequences of filling it out in different ways (e.g. more vs less allowances)
How to adjust your deductions and allowances
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Step 2: Check the box to the right of the black arrow (at the end of point c) if you have multiple jobs or if you are married and filing your taxes with your spouse (more information on filing jointly with a spouse is given later)
Step 3: If you make less than $200,000 per year or $400,000 per year, you are
allowed to claim dependents, which means tell the government about any children you have or are legally caring for, and less money will be taken out of your taxes.
On the first line to the right of the arrow, multiply the number of children you have under the age of 17 by $2000. For example, if you have two children age 5 and 6, you would write “$4,000” (2x$2000) on that line.
On the second line to the right of the second arrow, multiply any other dependents by $500. For example, if you are the legal guardian of two elderly family members, you would write “$1,000” (2x$500) on that line.
On the final line on the right in that section, next to the number 3, add the totals from the two previous lines. In our examples, that would be $5,000 ($4,000+$1,000)
Step 4: Step 4 is optional. The most important thing in this section is the line for deductions. Everyone is allowed to use the standard deduction, which you can read more about here:
If you want to use the standard deduction, there is nothing you need to do for step 4.
Using the standard deduction is the easiest thing to do for most people. Unless you are going to pay a tax accountant to help file your return and carefully save receipts or spend a lot more time doing your own taxes, the standard deduction is probably right for you.
If you want to do deductions beside the standard deduction, more information can be found here:
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Step 5: Sign and date
Step 6: Fill out the top half of page 3, the “Step 2(b)—Multiple Jobs Worksheet” part of the form, if you have multiple jobs you want to report.
Step 7: The bottom half of page 3, the “Step 4(b)—Deductions Worksheet” part of the form, if you are using deductions other than the standard deduction. Do not fill this out unless you chose to use deductions other than the standard deduction in step 4.
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Activity: Filling out the W-4 Form
Look at page 1 of the W-4 form and answer the questions after the form for
FloresGarcia, who is filling out her W-4 for the grocery store:
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If Flores lives alone, has no kids, and is not married, which box should she check in Step 1?
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Remember that Flores has two jobs, one at a grocery store and one babysitting. At the grocery store taxes are taken out of her paychecks, but the babysitting job 9 is “unofficial” in the sense that she is paid with cash instead of an official paycheck. What should Flores do for Step 2?
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What should Flores do for Step 3?
​Paying yearly taxes and the 1040 form (Sarah)
​Yearly taxes must be filed before or on April 15th each year (unless otherwise stated). In the United States, this is known as Tax Day. It is best to submit your taxes before this date so that you are not penalized for filing late. If you need an extension for filing, a request must be submitted to the IRS before tax day. An extension only applies to filing tax returns, it does not grant you more time to pay the taxdue. You will be charged interest if you pay late.
The IRS website can be used to help you file your taxes. It tells you all of the information you will need before beginning, and will walk you through the steps for filing. You can also use software programs to help you, such as TurboTax.
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How To Know If You Need to File a Tax Return
The chart below should help most people determine if they need to file a tax return.
You may be required to file for other reasons as well. See the IRS instructions page for more details. https://www.irs.gov/pub/irs-pdf/i1040gi.pdf
Keep in mind that you may want to file a tax return even if you are not required to do sofor a couple of reasons. For one, it will allow you to get a refund on any withheld federalincome tax. Also, you should file a tax return if you are eligible for certain tax credits. (Earned Income Credit, Health Coverage, etc.)
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How to File a Tax Return
To file tax returns as an individual, you will need to fill out a document referred to as Form 1040, unless certain other circumstances apply (discussed below). To view this form for 2019, click here.
Most people only need to complete the 1040 form. However, if your tax return is more complicated because of additional income or certain deductions to claim, you may be required to also fill out a numbered schedule in addition to the 1040 form. The chart below can help you determine which schedule, if any, you should also complete.
1. Use the charts above to determine if you need to file a tax return. What forms (ifany) will you need to fill out?
Information for Noncitizens [Citizens of a foreign country]
If you are not a citizen of the United States, you may have different requirements for completing your taxes. The IRS has issued a guide for noncitizens, Publication 519, to help determine how you should file your taxes. The way that you file your tax return willbe determined by whether or not you are classified as a resident or nonresident.
To determine if you are a resident of the United States for tax purposes, there are twotests: the green card test and the substantial presence test. The green card test asks whether or not you were a Lawful Permanent Resident (LPR) at any time during the 2019 calendar year (in other words, whether you had a green card during this time). Ifthe answer is yes, and your status was not subsequently removed by an order of deportation, then you can file your taxes as a resident. You may proceed to the next section on the 1040 Form and follow the rules for U.S. citizens.
If you did not have a green card during this time, you will need to go through the substantial presence test. The substantial presence test requires you to be physically present in the United States on at least:
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31 days during 2019, and
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183 days during the 3-year period including 2019, 2018, and 2017, counting
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All the days that you were present in 2019, and
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â…“ of the days that you were present in 2018, and
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â…™ of the days that you were present in 2017.
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For example, if you were present in the United States for 120 days during each year, then your total presence would be 180, since 120 days count in 2019 + 40 days in 2018(â…“ of 120) and 20 days in 2017 (â…™ of 120). Since your presence does not add up to 183days for the 3-year period, you would not meet the requirements of the substantial presence test.
If you do meet the requirements of the substantial presence test, you can file your taxes as a resident, although there is one exception - if you have a closer connection to a foreign country, you can still be treated as a nonresident of the United States for tax purposes. For more information on this, see page 6 of Publication 519. Otherwise, you will fill out the Form 1040, and the same rules for filing will apply to you as they do to citizens of the United States.
If you do not meet the requirements of either the green card test or the substantial presence test, you will file your taxes as a nonresident. This means that you will not fill out the Form 1040 - you will instead complete the Form 1040-NR for Nonresidents, available here. Skip the next section, entitled “The 1040 Form” and proceed to the section, “How to File a Tax Return as a Nonresident.”
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The 1040 Form
Review the 1040 form at the following link:
https://www.irs.gov/pub/irs-pdf/ f1040.pdf
You can use the method below to begin to fill out the form.
Step One: Determine your filing status. The different statuses are summarized below.
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Single - you were either: never married; legally separated under state law at the end of the year; or widowed before the first of the year and did not remarry before the end of the year.
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Married Filing Jointly - you and your spouse will report your combined income together and will take any deductions together. You will both be responsible for paying the tax. The return must be signed by both people. This can be used if:
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You were still married at the end of the year (even if you were not living 13 with your spouse)
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Your spouse died during 2019 and you did not remarry before the end of the year (2019)
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You were married in 2019 and your spouse died in 2020 before filing a 2019 return. note: There are certain rules for filing jointly if one spouse is a nonresident foreign citizen. More information on this is given in the next section.
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Married Filing Separately - you are married but will report only your own income, deductions, and credits, and are only responsible for the tax on your own income (not your spouse’s).
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Head of household - you are unmarried (including legally separated, married but living apart for over 6 months, or married to a nonresident foreign citizen who elects to be treated as such for tax purposes) AND you provide a home for certain other persons. (For a list of qualifying dependents, see 1040 Instructions at page 14.)
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Qualifying Widow(er) - ALL of the following criteria must apply for you to file as a qualifying widow(er):
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Your spouse died in 2017 or 2018 and you didn't remarry before the end of2019
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You have a child or stepchild (not a foster child) whom you can claim as a dependent or could claim as a dependent except that, for 2019:
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a. The child had gross income of $4,200 or more,
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b. The child filed a joint return, or
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c. You could be claimed as a dependent on someone else’s return.
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This child lived in your home for all of 2019. If the child didn't live with you for the required time, see Exception to time lived with you, later
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You paid over half the cost of keeping up your home
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You could have filed a joint return with your spouse the year he or she died, even if you didn't actually do so.
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Note: You can choose to file a certain way even if another category applies to you; for instance, you can file separately even if you are married, or may be able to file as a single person rather than a widow if you lost your spouse during the prior year and did not remarry. There are other situations where you may fit into one or more categories.
Make sure that you carefully read the Form 1040 instructions so you choose the correct filing status and to determine which option is best for you.
*Review Activity: Follow this link to take a quiz on the different filing statuses.
https://www.proprofs.com/quiz-school/story.php?title=filing-statusquiz
Step Two: Enter your name and address.
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Step Three: Enter your Social Security Number (SSN). Make sure that the information on your social security card matches what you have written on the 1040. If your filing status is “Married Filing Jointly,” you will also need your spouse’s SSN.
What to do if you don’t have a SSN
If you don’t have a SSN, but have an Individual Taxpayer Identification Number (ITIN).you should use this number anywhere on the form where the SSN is required. Be advised that some ITINs expire and will need to be renewed prior to filing your tax return. For more information, click here.
If you do not possess an ITIN, you should apply for one as soon as possible. If you are required to file taxes, you will need this number.
Step Four: Determine if you have any dependents. Having dependents may qualify you for certain tax credits. If you determine that you have more than four dependents, check the appropriate box on the right hand side of the 1040 Form.
To determine if you have a relative that qualifies as a dependent, use the infographic below.
Note: Any dependent that you wish to claim must be a U.S. citizen or lawful resident, or a resident of Mexico or Canada. The child or qualifying relative can not file as “Married Filing Jointly” themself if you wish to claim them as a dependent.
If you can claim anyone as a dependent, list their name, social security number or ITIN, and relationship to you in the ”Dependents” section of the Form 1040. The next step will help you decide if you should check the box next to the dependent’s name.
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Activity: Questions on Claiming Dependents
1. Mr. and Mrs. Estevar have two children, Carla, age 15, and Juan, age 12. Abouteight months ago, Mr. Estevar’s nephew, who is 14, moved into their home after 16 his parents passed away. (He is a lawful permanent resident of the U.S.) How many dependents can the Estevars claim?
2. Mrs. Abboud has an older sister who lives in a group home and does not work (she has little income from social services.) Mrs. Abboud sends money for her sister’s residence and food.
a.) Can Mrs. Abboud claim her sister as a dependent if her sister lives in Egypt?
b.) What about if her sister lived in Canada?
3. Recall that Flores lives alone, is single, and has no children. Flores will file her tax return as a single person, but since Flores is only 19 this year, she is wondering if her parents can still claim her as a dependent on their tax return. Can her parents do this? Why or why not?
Step Five: If you have any dependents, determine if they qualify you for corresponding tax credits. Follow the steps below. Check the box next to the dependent’s name on theForm 1040 if they qualify you for the credit listed.
If your dependent is a child…
If your dependent is a parent or adult relative…
Step Six: Report Your Income, beginning with line 1 on the Form 1040 (see the image below). Use your W2 form provided by your employer to answer these questions. If youneed to fill out a schedule in addition to the form, you should begin to do that here.
How to File a Tax Return as a Nonresident
Form 1040-NR
Recall the definition of resident and nonresident given in the “Information for Noncitizens” section above. As noted above, if you are considered a nonresident of the United States, you will fill out the Form 1040-NR for your tax return. The rules for filling out this form differ from the Form 1040. This section focuses on those differences.
U.S. citizens and residents pay taxes in the United States on their worldwide income, from both sources inside and outside the United States. In contrast, nonresidents will only be subject to U.S. income tax on income from a U.S. source.
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How to Determine your Income Source
There are many rules for determining the source of income, dependent on the form of the income, such as rent payments or compensation for services performed. The rules for determining the more common forms of income are summarized below. Publication 519 contains a complete table on page 10, which summarizes the rules for additional forms of income.
Activity: Determining the Source of Income
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Toni worked as a midwife in Latvia this year until she moved to the United States. The source of income for the salary that she received would be ___.
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If Maria has a home in Italy that she is renting out while she lives and works in the United States, the source of income for the rent that she receives would be ___.
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Alex grows his own vegetables at his home in upstate New York, which he sells at a local farmer’s market. The source of the income from the sale of vegetables would be ___.
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How the Income is Taxed
For nonresidents, the income that has the United States as its source is subject to U.S. income tax. To determine how to tax that income, it is classified as either income that is “effectively connected to a trade or business in the United States” or income that is “not effectively connected.” The “effectively connected” income is taxed on graded rates according to a tax table, whereas the income that is not effectively connected is taxed at a flat rate of 30 percent. For more information, see Publication 519 at page 17.
To complete the Form 1040-NR, you will need to use “effectively connected to a U.S.trade or business” income when filling out lines 8-23, and use income that is not effectively connected when filling out lines 54-61.
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Dependents
Only certain nonresidents can claim dependents on their tax return. You may be able to claim dependents if you are a resident of Canada, Mexico or South Korea, or resident of India and are a student or business apprentice. To determine if a dependent may be claimed, you would follow the same steps as citizens or residents, except that if you area resident of South Korea, the dependent child must meet all the requirements and must have lived with you in the U.S. at some point during the tax year.
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Nonresident spouse treated as a resident
A U.S. citizen or resident spouse who is married to a nonresident can choose to have their spouse be treated as a resident for tax purposes. To do this, both spouses must agree to it, and you MUST file your taxes jointly for the year. Since both spouses will be treated as residents for the entire year, neither spouse can claim to be a nonresident under a tax treaty. The choice will apply to future years unless you choose to suspend itor the qualifying spouse is no longer a U.S. citizen or resident. For more information, see Publication 519 at page 9.
Receiving a Tax Refund
If you paid more than you should have in federal or state taxes, you will be issued a refund (usually via check or direct deposit) for the amount that you overpaid. The amount of time that it takes to receive the refund generally depends on how you filedyour tax return. If you filed your tax return online, you will usually receive your refundwithin 3 weeks. If you filed your return by mail, it will likely take more than a month longer. For nonresidents, it can take up to six months to verify the tax returns, so it tends to be a lot longer before refunds are issued.
Other forms of taxes (later date)
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Sales tax (everyday goods as well as things like cars, homes)
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Property tax (cars, homes, varies from state to state)
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EITC (later date)
​Yearly taxes must be filed before or on April 15th each year (unless otherwise stated). In the United States, this is known as Tax Day. It is best to submit your taxes before this date so that you are not penalized for filing late. If you need an extension for filing, a request must be submitted to the IRS before tax day. An extension only applies to filing tax returns, it does not grant you more time to pay the taxdue. You will be charged interest if you pay late.
The IRS website can be used to help you file your taxes. It tells you all of the information you will need before beginning, and will walk you through the steps for filing. You can also use software programs to help you, such as TurboTax.
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How To Know If You Need to File a Tax Return
The chart below should help most people determine if they need to file a tax return.
1. Use the charts above to determine if you need to file a tax return. What forms (ifany) will you need to fill out?
Information for Noncitizens [Citizens of a foreign country]
If you are not a citizen of the United States, you may have different requirements for completing your taxes. The IRS has issued a guide for noncitizens, Publication 519, to help determine how you should file your taxes. The way that you file your tax return willbe determined by whether or not you are classified as a resident or nonresident.
To determine if you are a resident of the United States for tax purposes, there are twotests: the green card test and the substantial presence test. The green card test asks whether or not you were a Lawful Permanent Resident (LPR) at any time during the 2019 calendar year (in other words, whether you had a green card during this time). Ifthe answer is yes, and your status was not subsequently removed by an order of deportation, then you can file your taxes as a resident. You may proceed to the next section on the 1040 Form and follow the rules for U.S. citizens.
If you did not have a green card during this time, you will need to go through the substantial presence test. The substantial presence test requires you to be physically present in the United States on at least:
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31 days during 2019, and
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183 days during the 3-year period including 2019, 2018, and 2017, counting
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All the days that you were present in 2019, and
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â…“ of the days that you were present in 2018, and
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â…™ of the days that you were present in 2017.
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For example, if you were present in the United States for 120 days during each year, then your total presence would be 180, since 120 days count in 2019 + 40 days in 2018(â…“ of 120) and 20 days in 2017 (â…™ of 120). Since your presence does not add up to 183days for the 3-year period, you would not meet the requirements of the substantial presence test.
If you do meet the requirements of the substantial presence test, you can file your taxes as a resident, although there is one exception - if you have a closer connection to a foreign country, you can still be treated as a nonresident of the United States for tax purposes. For more information on this, see page 6 of Publication 519. Otherwise, you will fill out the Form 1040, and the same rules for filing will apply to you as they do to citizens of the United States.
If you do not meet the requirements of either the green card test or the substantial presence test, you will file your taxes as a nonresident. This means that you will not fill out the Form 1040 - you will instead complete the Form 1040-NR for Nonresidents, available here. Skip the next section, entitled “The 1040 Form” and proceed to the section, “How to File a Tax Return as a Nonresident.”
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The 1040 Form
Review the 1040 form at the following link:
https://www.irs.gov/pub/irs-pdf/ f1040.pdf
You can use the method below to begin to fill out the form.
Step One: Determine your filing status. The different statuses are summarized below.
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Single - you were either: never married; legally separated under state law at the end of the year; or widowed before the first of the year and did not remarry before the end of the year.
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Married Filing Jointly - you and your spouse will report your combined income together and will take any deductions together. You will both be responsible for paying the tax. The return must be signed by both people. This can be used if:
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You were still married at the end of the year (even if you were not living 13 with your spouse)
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Your spouse died during 2019 and you did not remarry before the end of the year (2019)
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You were married in 2019 and your spouse died in 2020 before filing a 2019 return. note: There are certain rules for filing jointly if one spouse is a nonresident foreign citizen. More information on this is given in the next section.
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Married Filing Separately - you are married but will report only your own income, deductions, and credits, and are only responsible for the tax on your own income (not your spouse’s).
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Head of household - you are unmarried (including legally separated, married but living apart for over 6 months, or married to a nonresident foreign citizen who elects to be treated as such for tax purposes) AND you provide a home for certain other persons. (For a list of qualifying dependents, see 1040 Instructions at page 14.)
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Qualifying Widow(er) - ALL of the following criteria must apply for you to file as a qualifying widow(er):
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Your spouse died in 2017 or 2018 and you didn't remarry before the end of2019
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You have a child or stepchild (not a foster child) whom you can claim as a dependent or could claim as a dependent except that, for 2019:
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a. The child had gross income of $4,200 or more,
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b. The child filed a joint return, or
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c. You could be claimed as a dependent on someone else’s return.
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This child lived in your home for all of 2019. If the child didn't live with you for the required time, see Exception to time lived with you, later
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You paid over half the cost of keeping up your home
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You could have filed a joint return with your spouse the year he or she died, even if you didn't actually do so.
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Note: You can choose to file a certain way even if another category applies to you; for instance, you can file separately even if you are married, or may be able to file as a single person rather than a widow if you lost your spouse during the prior year and did not remarry. There are other situations where you may fit into one or more categories.
Make sure that you carefully read the Form 1040 instructions so you choose the correct filing status and to determine which option is best for you.
*Review Activity: Follow this link to take a quiz on the different filing statuses.
https://www.proprofs.com/quiz-school/story.php?title=filing-statusquiz
Step Two: Enter your name and address.
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Step Three: Enter your Social Security Number (SSN). Make sure that the information on your social security card matches what you have written on the 1040. If your filing status is “Married Filing Jointly,” you will also need your spouse’s SSN.
What to do if you don’t have a SSN
If you don’t have a SSN, but have an Individual Taxpayer Identification Number (ITIN).you should use this number anywhere on the form where the SSN is required. Be advised that some ITINs expire and will need to be renewed prior to filing your tax return. For more information, click here.
If you do not possess an ITIN, you should apply for one as soon as possible. If you are required to file taxes, you will need this number.
Step Four: Determine if you have any dependents. Having dependents may qualify you for certain tax credits. If you determine that you have more than four dependents, check the appropriate box on the right hand side of the 1040 Form.
To determine if you have a relative that qualifies as a dependent, use the infographic below.
Note: Any dependent that you wish to claim must be a U.S. citizen or lawful resident, or a resident of Mexico or Canada. The child or qualifying relative can not file as “Married Filing Jointly” themself if you wish to claim them as a dependent.
If you can claim anyone as a dependent, list their name, social security number or ITIN, and relationship to you in the ”Dependents” section of the Form 1040. The next step will help you decide if you should check the box next to the dependent’s name.
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Activity: Questions on Claiming Dependents
1. Mr. and Mrs. Estevar have two children, Carla, age 15, and Juan, age 12. Abouteight months ago, Mr. Estevar’s nephew, who is 14, moved into their home after 16 his parents passed away. (He is a lawful permanent resident of the U.S.) How many dependents can the Estevars claim?
2. Mrs. Abboud has an older sister who lives in a group home and does not work (she has little income from social services.) Mrs. Abboud sends money for her sister’s residence and food.
a.) Can Mrs. Abboud claim her sister as a dependent if her sister lives in Egypt?
b.) What about if her sister lived in Canada?
3. Recall that Flores lives alone, is single, and has no children. Flores will file her tax return as a single person, but since Flores is only 19 this year, she is wondering if her parents can still claim her as a dependent on their tax return. Can her parents do this? Why or why not?
Step Five: If you have any dependents, determine if they qualify you for corresponding tax credits. Follow the steps below. Check the box next to the dependent’s name on theForm 1040 if they qualify you for the credit listed.
If your dependent is a child…
If your dependent is a parent or adult relative…
Step Six: Report Your Income, beginning with line 1 on the Form 1040 (see the image below). Use your W2 form provided by your employer to answer these questions. If youneed to fill out a schedule in addition to the form, you should begin to do that here.
Answers
Activity: Reading a Paycheck
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$1200
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$162.12 and $2538.90
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$51
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$75.40
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$549.49
Activity: Filling out the W-4 Form
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“Single or Married Filing Separately”
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Flores should check the box in Step 2 because she has another job.
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Flores has no dependents, so she should write 0 on every line.
Questions on claiming dependents
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3 (Carla, Juan and Mr. Estevar’s nephew)
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a.) no b.) yes
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No. Since Flores lives on her own and works two jobs, her parents probably do not provide for half of her support. Flores is also 19 right now and would have tobe younger - the age exception would not apply to her even though she was taking classes, because she has not been going to school full-time.
Determining the source of income
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Latvia
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Italy
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United States
References
CNBC.com (2019) Here’s what happens if you don’t file your taxes before April 15
https://www.cnbc.com/2019/04/12/heres-what-happens-if-you-dont-file-your-taxes-befor eapril-15.html#:~:text=If%20you%20don't%20file%2C%20you%20can%20face%20a% 20failure,late%2C%20up%20to%2025%25.&text=If%20you%20file%20more%20than, owe%20(whichever%20is%20less).