2021 U.S. Income Tax Return

(source from https://www.guruin.com/guides/tax-return)

Zhu Limin Texas CPA, Doctor of Business Administration candidate

,2021Pandemic-related tax rebate policy

A. Claims for relief benefits

Taxpayers who have received stimulus payments should keep the Notice 1444 Payment Notice and attach it with other tax return data.

B. Recovery Rebate Credit

For people who are "eligible" but "have not" received assistance; or who received "less than" $1400 individually, "less than" $2800 for married filing jointly, and "less than" per dependant $1400, may be eligible for Recovery Rebate Credit.

C. Advance Child Tax Credit

Beginning in mid-July 2021, tens of millions of eligible households have received the Child Tax Credit early in six months (last payment on December 7, 2021). Child Tax Credit provides $12 per family with children under the age of 15 and $6 per family with eligible children between the ages of 300 and 6.Since these amounts are largely based on 17 or 250 tax returns, some people may have received more or less than they actually were.

D. Tax refund interest is taxable

If you earn interest on your federal tax refund, the interest portion is taxable and needs to be reported.If the taxpayer's 2021 tax refund earned more than $10 in interest, the IRS will send a 1099-INT form to the taxpayer.

E. Charitable Deduction for Charitable Contributions

Taxpayers who are not subject to the itemize deduction, but who made cash donations to certified organizations in 2021, can qualify for a charitable donation deduction of up to $300, or up to $600 for married couples filing jointly.

two, Basic understanding of US tax returns

1. Who needs to file income tax returns? - From the point of view of identity

• citizen of U.S

•Foreign residents with legal residency, including permanent residency (such as green card holders); E-status residents; H-status residents; who have been in the U.S. for three years this year and the last two years combined Under 183 days (non-US immigrant, but with US income)

2. When do I need to file an income tax return?

• The deadline for filing federal tax returns is April 4 each year.

• If the deadline falls on a Saturday, Sunday or statutory holiday, it will be postponed to the next working day. (Federal holiday in 2022,

   Postponed until next Monday 2022 April 4. )

• 若無法準時於4/18前報稅者,可申請延期6個月申報(至10/17)。

3. What income needs to be declared?

• Income earned worldwide must be reported as follows: Salary wages, commissions, gratuities, fringe benefits, tips, interest, dividends, partnership dividends, capital gains dividends, pension income, unemployment compensation income, gaming profits, Income earned abroad

• Federal taxes are taxed worldwide, but not double taxed.

4. How much of the total income in 2021 must be declared?

• The amount below is the standard deduction for that tax filing status, and you must file a tax return if your gross income exceeds the standard deduction

under 65
declare identitytax filing threshold
single$12,550
Married filing jointly$25,100 / $65 if one party is 26,800 years old
Married filing separately$5
Head of the family$18,800
Widow/Widower$25,100
65 years old (inclusive) and above
declare identitytax filing threshold
single$14,250
Married filing jointly$28,500 (if both parties are 65 years old)
Married filing separately$5
Head of the family$20,500
Widow/Widower$26,800

 three 、How to calculate the amount of personal income tax in the United States

The U.S. personal income tax filing is basically divided into the following three steps:

Step 1. First, subtract the personal adjustment items (Adjustments) from the personal gross income (Gross Income), and the remaining amount is the personal adjusted income (Adjusted Gross Income, referred to as AGI).Including student loan interest, early withdrawal penalties on CDs, alimony, deposits placed into traditional IRA accounts, self-employed health insurance costs, Employer retirement plans (Keogh & SEP plan), etc.

Step 2. After subtracting the personal income deduction (Deduction) from AGI, the remaining amount is the taxable income (Taxable Income), and then calculate the amount of income tax payable according to the tax rate bracket.

Comparison of the two deductions:

• Standard Deductions

  1. Varies with taxpayer income, age, tax filing status, blindness, and inflation, and standard deductions vary from year to year
  2. Not everyone can take advantage of the standard allowance

• Itemized Deductions

i. Taxes You Paid: Income tax or sales tax, property tax, personal property tax, etc. paid by the state and local government

ii. Gifts to Charity: Charitable donations to eligible charities

iii. Medical and Dental Expenses: Partial amount of medical and dental expenses

iv. Interest You Paid: such as mortgage interest, etc.

v. Casualty and Theft Losses: the disaster-affected households in the disaster area identified by the President, their uninsured disaster theft losses, etc.

Step 3. After obtaining the amount according to the above Step 2. method, the following can be deducted:

• Various Tax Credits, such as Child and Family Tax Credits and Education Credits.Taking the Child Tax Credit in 2021 as an example, the maximum credit limit for children under the age of 18 is $3,000, and the maximum credit limit for children under the age of 6 is $3,600, and they can be fully refunded.In other words, if there is a child under the age of 6, the $3,600 Tax Credit that can get more than the taxable amount of $2,000, the IRS will reduce the taxable amount to zero, and the taxpayer can get back the difference tax refund of $1,600.

• Taxes paid (eg W2 payroll withholding)

• Figure out that the final amount is the tax owed, or the amount to be refunded by the IRS. (Refer to Form 1040)

four, Forms to be filled in (federal tax)

• The relevant form for US citizens to file federal taxes is Form 1040 (redesigned after tax reform).

• Generally speaking, people only need to fill in Form 1040 to declare personal income tax. If the income from property is more complicated, additional forms (Schedules) need to be filled out.

Preliminary description of each schedule

Briefly  Detailsform
Additional Income and Income Adjustments  Those who have additional income, including capital gains, unemployment compensation, bonuses or bonuses, gambling winnings; those who want to claim deductions, such as student loan interest deductions, self-employment taxes, educator expenses, etc.Need to fill in Schedule 1 again
tax  If you owe the Alternative Minimum Tax (AMT) or need to repay the excess prepaid health insurance tax credit, as well as other taxes owed on the original Schedule XNUMX, such as self-employment tax (self-employment tax), household employment tax (household employment tax) employment tax), retirement accounts such as IRA-related taxesNeed to fill in Schedule 2 again
non-refundable non-refundable tax credit  Additional tax credits can be claimed, such as the child tax credit, foreign tax credits, education tax credits, general business credits, and refundable tax credits on the original Schedule 5.  Need to fill in Schedule 3 again

Fives, Frequently used enumeration deduction items(Deductions) with tax credits (Credits)

1. real estate

• Mortgage Interest Deductions

 In addition to real estate tax deductions, mortgage interest and points can be deducted through enumeration deductions, up to a maximum of $750,000.

• Selling a Home

There is a deduction of $5 for individuals ($2 for married couples filing jointly) if a house that has been held for 250,000 years and lived in it for more than 500,000 years is sold for profit.Any excess over the deduction must be reported on Schedule 1 as investment gains.

2. Life-related

• State tax deduction

In 2021, the state tax and local tax deduction will be capped at 1 yuan, including real estate tax, consumption tax, etc., which is more disadvantageous for people living in high-tax states.If married filing separately, the limit is $5,000.

• Cash and non-cash donations

Cash donations are eligible for deductions as long as they are IRS-compliant.As for those non-cash donations, you can use the market price to do an enumeration deduction.If you are a volunteer, you can also deduct tax. **New Covid-300 policy: Taxpayers who reported using the standard deduction this year can also receive up to $XNUMX in relief if they have qualified charitable donations.

• Expenses related to performing charitable acts

Examples include the cost of assessing charitable donations or damage to injury, or the cost of cars, gas, uniforms, parking, etc., for charitable causes.

• Gambling Losses

Gambling income is taxable and includes (but is not limited to) lottery tickets, lottery tickets, horse racing, and casinos, including cash winnings and fair market value prizes such as cars and travel.If there is a game loss, you can deduct it through enumeration deduction, and the deduction limit is the total amount of your gambling profit.

• Accident, disaster and theft losses

For the disaster-stricken households declared by the President, their homes, household objects, vehicle accidents, and theft losses that are not covered by insurance claims can be deducted.

3.  tax law

• Make good use of Estate Tax Exemption & Gift Tax Exclusion

In 2021, the inheritance tax exemption amount plus inflation and other factors will be increased from 1158 million to 1170 million, and the annual gift tax exemption will be 1.5 per person (Annual Gift Tax Exclusion).US states also have their own estate tax regulations, so don't forget to refer to the state regulations as well.

• Tax rebates for low-income families

Earned Income Tax Credit (EITC) is an American poverty alleviation program designed to reward low- and middle-income workers, especially working families with children.The tax credit is based on the taxpayer's income, marital status and number of dependent children to calculate the amount of tax credit available. The 2021 EITC deduction ranges from $1,502 to $6,728, and for some taxpayers, if the tax due is less than the tax credit, they can get a refund.

• Health Savings Account Deduction HSA

A Health Saving Account (HSA) is a tax-efficient account where money deposited into the account is tax-free, and money withdrawn from the account to pay for medical expenses is tax-free. . The 2021 health savings account is limited to $3,600 for individuals and $7,200 for families, with an additional $55 deduction available for those over 1,000.

4.  medical and insurance

• Medical and dental expenses

You can enumerate and deduct medical expenses that have not been reimbursed by insurance companies for yourself, your spouse, and dependents.The portion of medical expenses above 7.5% of your AGI is deductible.

• Housing renovations for medical purposes

If the home is being renovated for medical purposes, such as adding wheelchair-friendly entrances and exits, stair lifts, etc., these home expenses can be deducted as medical expenses in the enumeration deduction.

• Self-employed health insurance deduction

If there is a profit in the year, the health insurance premium of the self-employed person can be deducted, but this premium is to be treated as an adjustment item of income (Adjustments), rather than an enumeration deduction.

5. Education

• Lifetime Learning Credit

Even with a degree, the IRS still offers a lifetime learning credit of up to $2000 per year. Credit, activity, books, supplies, and equipment are all tax deductible as long as there is additional education in the tax year.There is no class hour requirement for this credit, and any advanced study is acceptable, including university, graduate, or even courses that do not give credit or diplomas. , AGI higher than 6.9 yuan for singles ($13.8 for married couples filing jointly) will not apply.In addition, those who apply this tax credit cannot also apply for the American Opportunity Tax Credit AOTC.

• student loan interest

In line with the IRS regulations, the student loan interest deduction limit in 2021 is $2,500, and this deduction limit will decrease year by year.This does not apply if you are filing separate taxes for a married couple, or if you or your spouse are listed as dependents by someone else.

• AOTC Education Fee Credit

Since 2009, the U.S. federal government has provided a more generous tax credit program, the American Opportunity Tax Credit (AOTC), which can be deducted up to $2,500 per year for the first four years of higher education.

• Teacher expenses

K12 primary and secondary school teachers sometimes need to pay for textbooks for teaching or other related expenses, and can enjoy a personal tax deduction of $250 ($500 if both husband and wife are teachers and file a joint tax return).To be eligible, you must work at least 900 hours during the academic year.

6. work class

The tax reform plan removes work-related expenses that used to be enumerable and deductible.

• Military expenses

If you need to travel more than 100 miles from your home because you are in the military, you can deduct related travel expenses, such as transportation, room and board, etc.

• Jury income

Your jury income is tax deductible if you give it to your employer (because your employer still pays you the day you appear in court).

7. financial investment

• Capital gain loss on sale

Investments can be earned or lost. If you have a losing investment, you can claim a capital gains loss deduction of up to $3,000 (married separately $1,500).

• Take advantage of pension plan deductions (401K & IRA)

401K and IRA are deductible for the current year’s income tax (Tax Deductible). The annual tax-free limit for 2021K accounts in 401 will be increased to 1.95 yuan, and those over the age of 50 will increase to 2.6 yuan; the maximum deposit amount of IRA will be increased to $6,000, and the age of 50 Above $7,000, you can legally save tax by opening an IRA account before the tax filing deadline.

• Early withdrawal penalty

If you incur a penalty due to an early withdrawal from a fixed deposit or retirement account, the penalty can be deducted whether it is a standard deduction or an enumerated deduction, as long as the rules are met.

• Bad Debt Deduction

If you borrow other people's money and you can't get it back and it becomes a bad debt, it can be deducted if you can provide sufficient and legal evidence.

8. green environmental protection

• Residential Energy Tax Credits

A certain percentage of tax deductions can be made for the purchase/replacement of solar-related electricity or water equipment.Filing is required using Form 5695.

• Plug-in Electric-Drive Motor Vehicle Credit

只要是2009/12/31後購買至少有4個車輪的電動新車,且電池電能至少4千瓦時則可使用此抵稅項目,抵稅金額最低從2,500元至7,500元不等,根據電池容量而異。需使用8936 表進行申報。

 six, How to file personal income tax in the US

1. Download and fill out the tax return form from the IRS

• Step 1. Download a hard copy or complete the tax return online.

• Step 2. According to the instructions for filling in the form, fill in all the personal income of the previous year and the income deduction items that meet the tax exemption clauses, and the form will automatically calculate the amount of personal income tax payable.

• Step 3. Submit the form and money to the tax department by post or online filing (e-filling) before the tax filing deadline.

2. Purchase tax preparation software

• It is very popular in the United States to purchase tax declaration software by yourself, that is, to digitize tax declaration forms, supplemented with detailed explanations, and guide tax preparers to answer tax declaration questions step by step, and finally organize them into an officially recognized tax declaration form.The software can also immediately calculate the amount of tax refund or tax payment, and send the form to the IRS and state tax departments on behalf of the tax preparer.

• Intuit Turbo Tax

The interface is very easy to use!It is the tax preparation software that many people choose to buy when they try to file their own taxes for the first time.It can declare federal and state taxes, and there are also a variety of versions to choose from, including simple version, real estate investment version, self-owned business version, etc., optimize the calculation of various deductions, reduce personal income tax, increase tax refund amount, online agency Submit declaration and tax refund services, and provide online consulting services.In addition to purchasing the software CD-ROM, you can also purchase the electronic download version

• Taxslayer

One of the cheapest online tax preparation software services, you can file federal and state taxes, and there are multiple versions to choose from, the cheapest version covers various tax forms, Tax Credit deductions.The standard version is available free of charge from military personnel/military dependents entering the EIN.The top-level comprehensive version also provides professional audit assistance, and can solve problems in a timely manner by phone, email or even online chat.A self-employed version is also available, at an affordable price in its class.The student tax return version is free.

• TaxAct

There are various versions, ranging from free version, simple version, high-end version, and deluxe version, which can be completed online. There are also relatively complex tax declaration versions for self-employed persons.There is also a download version, which does not have to be completed online, but is optional depending on personal needs.Taxpayers with property income abroad can also declare foreign income.However, due to its complex and powerful functions, it is suitable for taxpayers who have several years of tax filing experience, or who have a good understanding of their own tax filing situation.

• E-file.com

There are only three versions to choose from, the free version, the simple version, and the high-end version. It is the cheapest of all tax declaration software. Taxpayers with relatively simple income structure can use the free version. There is also a Promo with up to XNUMX% off when delivering the declaration. Code can be enjoyed, which greatly reduces the cost of tax filing.Since everything is mainly online, the tools and cloud services are designed to be easy to understand.

3. Consult a professional accountant (CPA) to assist in the declaration

If the property or income situation is more complicated, many people will consult a professional accountant to assist in the declaration for insurance purposes.After making an appointment with the accountant for an interview, the accountant will ask the public about property information and ask for necessary supporting data.After completing the tax return form, it will conduct a one-on-one review with the public, and send it out after confirming that there is no problem.