Does every NRI in the US need to file their Income Tax?

by | Jan 10, 2021 | income tax, income tax credit, NRI, tax filing, Tax Payers, taxes | 0 comments

Does every NRI in the US need to file their Income Tax? Everyone in the US is not required to file their Income Tax return every year. In case, your total income for a year does not exceed a particular threshold then you would need to file a federal tax return. The amount of income which you would be able to earn before you are needed to file a tax return would be based on the type of income, the age of the NRI and the filing status of the NRI. Gross Income Thresholds Most taxpayers are eligible to claim the Standard Deduction. As an NRI, the Standard Deduction amount for which you would be eligible for is mainly determined by your age and your filing status. The Government usually decides this amount before the tax filing season arrives and this amount would increase for inflation each year. By the help of Standard Deduction and other deductions, your income can be reduced to determine your taxable income. In general, if your income is less than your Standard Deduction then you do not need to file a federal tax return. You would not need to file a federal income tax return if the below-mentioned criteria are true.
  1. If you are below the age of 65 years
  2. If you are filing your tax returns with the Single status
  3. If you do not have any other special conditions which would require you to file the tax returns such as income obtained from self-employment
  4. If your income is less than $12,400 i.e. the Standard Deduction in the year 2020 for a taxpayer.
What would happen if you are only receiving Social Security Benefits? In general, cases, if your only source of income is the Social Security Benefits then you would not have to file a tax return. However, Social Security Benefits have another aspect i.e. if you are married and are filing your tax return separately from that of your spouse then some of your Social Security Benefits must have to be included in your taxable income to know if it is greater than the Standard Deduction you are claiming. Taxability of Social Security Benefits In order to find out if the Social Security Benefits which are receiving are taxable or not, the below-mentioned steps can be implemented.
  1. You can add one-half of your Social Security Income to all other types of income which you are receiving including the income which is tax-exempt.
  2. After that, the amount obtained can be compared to the base amount for determination of your filing status.
  3. In case, the total will be more than the base amount then some of your Social Security benefits would be taxable.
When a dependent would need to file a federal tax return? NRI taxpayers who are claimed as dependents on the tax returns of another person have different filing requirements with the IRS. The income of a dependent can be “unearned” when it would be derived from certain sources such as dividends or interest. If the unearned income of a dependent is more than $1,100 in 2020 then tax return must be filed by the dependent. Filing a Tax return to claim a tax refund There might be instances when there would be the need to file a tax return for an NRI such as taxes would have been withheld from a paycheck and a tax refund is due. If too much amount has been withheld from your paycheck, then the only method by which you would be able to obtain your tax refund is by filing their tax return.
  1. For instance, if you are an NRI who is a taxpayer with a single filing status and earns $2500 during a particular year and $300 is being withheld from your paycheck then you can obtain a refund of $300 as your income is less than Standard Deduction.
  2. If you have a refund due then the IRS would not automatically issue the refund. You would have to file a tax return so as to obtain your refund which is due.
Conclusion Hence, if you are an NRI in the US then there are various criteria which are applicable for determining your tax liability. You must be well aware of these criteria and file your tax returns accordingly.

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