Seven important things about taxes in the United States that every immigrant should know
The tax year is ending soon, which means that the Americans and the holders of green cards should start reporting on their income for 2018 a year already in January. The tax system in the United States is quite complicated, and it can be difficult for immigrants to understand its intricacies. At the same time, errors in filing a tax return can turn into undesirable problems with one of the most formidable US departments - the Tax Service (IRS). What is important to know what mistakes should not be made and how to save on taxes? We understand with the company United States Tax Services.
1. What taxes need to be paid in the USA
The US tax system is considered one of the most developed and exemplary in the world. However, at the same time it is rather complicated - the tax sphere is regulated by a multitude of laws, acts and regulations.
Taxes are collected by one of the country's most powerful departments - the Internal Revenue Service (Federal Tax Service) or, as it is called for short, the IRS. The standard tax period coincides with the calendar year (note that there is also a non-standard tax period).
Since the US is a federal state, both tax rates and tax breaks may vary from state to state. All US tax residents pay taxes on a progressive scale, i.e. the more you earn, the more you pay taxes.
Non-Sales Tax States: Alaska, Delaware, Montana, New Hampshire, Oregon.
States that do not have income tax: Alaska, Florida, Nevada, South Dakota, Texas, Washington, Wyoming.
2. What are the taxes
Quality of life in the United States directly depends on the consciousness of taxpayers. The government distributes all collected taxes for necessary needs:
- Taxes from the social security fund go to social benefits and the financing of the pension program;
- The Medicare State Health Insurance Program finances the needs of people who cannot pay for health insurance;
- Sales taxes. They go for municipal needs, for example, improvement of parks, roads, schools, special projects, etc. And yes, be prepared for the price on the price tag - not the one you pay at the box office. For example, in Chicago, goods in $ 40 cost $ 43,7 (9,25% sales tax), and in Alabama, you pay $ 40 for goods in $ 42 (5% sales tax);
- Maintenance and development of local and federal infrastructure;
- Maintaining civil security;
- Maintenance and modernization of the army;
- The development of science, including and scientific discoveries;
- Development of medicine;
- Payment of external debts.
3. Who submits tax returns and when
Taxes in the US must pay:
- US citizens;
- Residents of the United States (holders of green cards (permanent residents), even if they do not live in the United States);
- Foreigners who have been granted tax resident status.
The tax residency status of the United States arises when living in America for at least 183 days for 3 years. There is a special testwhich classifies you as a tax resident.
Starting from 1 January, you can file a tax return for the previous year. The deadline for filing a declaration is April 15 for individuals.
If you work and your employer pays taxes for you (W-2 form), you still have to file a tax return, because there may be circumstances that will allow you to either return part of the money (the so-called tax refund), or you may need to pay extra taxes.
A very important point. If you have a tax liability, i.e. you must pay some tax amountmake it necessary to 15 April!
Even if you decide to do an extension, this does not save you from paying taxes. If you do not know exactly what amount to pay, pay the approximate.
Remember, it is always better to pay at least part of the money than to pay fines for late payment of taxes!
Another important point that newly arrived immigrants often do not know: file your tax return in the first year of life in America. Do not wait for you to work a year. This is not true.
If, for example, you arrived in July, you came to work in September, starting in January of the following year, submit a tax return.
If you arrived in November and managed to earn your first $ 600 as a Uber (Lift) driver - submit a tax return on time. Before January 31, you must receive the appropriate 1099 tax form from the company. The company is obliged to issue this form to you as a contractor (contractor), which she hired. The 1099 form is issued in triplicate: one company remains with you, the second you receive and the third one is sent to the tax office.
Spouses can file taxes both together and separately. It is difficult to orient how correctly. It all depends on the situation in a particular family. For example, if this is a family with children up to 17 years, then it is better for them to file it together (in the declaration all family members are indicated) in order not to lose the so-called child tax credit, which is provided by the American tax system.
Under the new tax law, starting in January 2018, this credit will be $ 2000 per child and $ 1400 for the next. Keep in mind that you must meet certain requirements.
If you raise a child yourself, you have the right to pay taxes at a lower rate. It is necessary to obtain the so-called status of the head of the family. It is given under the condition:
- you were not married at least on the last day of the tax year - i.e. 31 December;
- you pay more than 50% of household expenses;
- the child lives with you for more than 6 months in a year.
4. What are tax deductions and tax refunds
In the tax system, in addition to tax collection, tax deduction is also provided. This amount, which reduces the amount of income from which the tax will be paid.
The American state establishes a so-called. the cost of living is Standard Deductions (see table below), which is the “standard tax deduction”, i.e. the amount with which the tax is not charged.
There are itemized deductions, i.e. Your expenses (necessarily documented, including expenses for charity) will be charged only if they exceed the minimum subsistence level.
In simple terms, many of the expenses of American residents are taken into account when paying income tax, which helps to ease the tax burden.
The amount that is not taxable depends on many factors: marital status, the presence of children and their number, the presence of other dependents dependent on you (for example, a non-working spouse).
Why is this happening? During the year, many events and life circumstances can occur that will affect your expenses, reducing the taxable base.
For example, you got married, you had a baby, you moved to another state, or worked in another state for several months. There are many different deductions. But it is important to remember that not all life circumstances will affect your taxes by returning money from the state. It happens and vice versa, you will also have to pay extra. For example, if your salary has increased during the year, you may need to pay extra.
How it works (on a simple example):
According to the IRS, for individuals, the expenses charged can be:
- Mortgage (interest rate of the bank);
- Medical expenses;
- Expenses for a dentist;
- Charity (you must have supporting documents or checks);
- Paying babysitters for babies while you are a volunteer (must be supporting documents);
- Student loan;
Since January 2018, the new tax law in the United States came into force, which brought new changes and adjustments. It will affect all, without exception, residents of the United States and the corporation. Therefore, be attentive to your taxes next year, especially with regard to deductions and tax credits.
5. What income indicate
What income to indicate (short list):
- Commissions and tips;
- Interest on deposits;
- Pension payments;
- All sorts of benefits;
- Prizes and winnings;
- Some types of grants (including student grants);
- Revenues from the rental of real estate.
6. How to file a tax return
In the US, a tax return can be filed in several ways:
- In paper form (while you can), filling out by hand;
- In electronic form using accounting services;
- In electronic form, using the tax service;
- Use the help of a tax professional.
Traditional paper view we just will not consider, because This is an obsolete form. In addition, you need to be sufficiently savvy in the US tax system in order for a newcomer to risk doing it.
Easier to use electronic accounting services - There are a lot of them. This is reasonable if you have a very simple situation. The service will help you figure out what numbers to enter in what fields, what to subtract. It will not work out quickly, but the system will calculate the result itself, however, it will not answer the questions if you have them.
Tax Service You can also try if you are confident and have already figured out which forms and how to serve.
Many Americans, despite this, still prefer to use tax professional services. According to a Pew Research Center study, 43% of Americans consider the US tax system to be very complicated and 40% suspect that they pay more taxes than they should. This is because most people incorrectly identify their expenses. Many simply do not know what amounts they can deduct and what benefits to receive. These questions all help find answers tax specialist.
In any case, before making a decision on how to file a tax return, ask yourself two questions.
First. How difficult is your "tax" life?
If you are a single taxpayer who rents an apartment, works on the W-2 tax form (that is, an employee) and invests only in the 401 (k) pension plan, the accounting service will work well.
But, let's say you are an entrepreneur, this year you had a child, you managed to get a divorce, change your insurance plan, resell shares, bought a house, moved to another state, managed to earn some money as a Uber driver ... In this situation, get a tax expert's advice would not be superfluous.
Second. Are you ready and you have the desire and ability to deal with the tax service personally?
By signing your tax return, you are responsible for all the information provided in it. Doing your own taxes, remember that with all the questions the IRS will come to you. It doesn’t matter how many years may pass - you may become the object of investigation by the tax service if you have made a mistake once.
When a tax specialist makes you taxes, he will sign the tax form and is responsible for his work. In addition, a good tax specialist will always tell you how to optimize taxes, answer your questions and, if necessary, take all communication with the Tax Service on you.
Our company United States Tax Services Already over the years 9 has provided accounting and tax calculation services for individuals and businesses. We open companies in the USA, we work all year round and in all states. We support you and your business, we represent your interests before the tax service.
Today we have two offices - in Chicago and New York.
- We do stress free taxes;
- You get professional service for a reasonable price;
- We provide customer support;
- Your personal information is securely protected;
- We count taxes for the last three years for free;
- We help minimize or remove tax penalties;
- We speak English, Russian, Lithuanian and Ukrainian.
7. The tax service does not call taxpayers!
And the last point you should know: The IRS never calls taxpayers!
If they call you, present themselves to a tax service officer, try to find out any of your personal information, or start to intimidate, talk about debts, know - these are fraudsters!
From the tax office you can only receive a letter in an envelope by regular mail!
Every autumn, once a month, our company holds tax seminars for newly arrived immigrants, business owners, and people who want to understand American taxation. These are useful seminars where we share information, explain tax rules and answer questions. This is a good opportunity to feel more confident on the road to the American dream!
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