Top #6 IT rules for new NRI’s in the US
Individuals move to the US with an anticipation of a better life and better pay. It can be quite exciting to move to a new country, with so many things to look forward to. However, amidst all this, there is one factor that IT rules for new NRI’s must not forget, taxation. Shifting to a new country means that one must adhere to new tax laws. Being aware of the laws will help you avoid getting unwanted attention from the taxman.
Here are the top 6 IT rules that you should be aware of, to help you with your first tax filing with Uncle Sam.
US residents or US citizens are liable to pay taxes on their global income, in which US citizens include NRIs, PIO, OCI. An individual qualifies to be a US resident if they meet any of the following tests.
- The Green Card Test
If an individual has been a lawful permanent resident of the USA during anytime of the year.
- Substantial Presence Test
A person should have stayed in the USA for 31 days in the current financial year and a total of 183 years in the previous three years.
2.Make Use of Deductions
There are several legal ways of reducing your tax liabilities and deductions is one of the smarter ways. The recent Tax Cuts and Jobs Act has increased the standard deductions from $6,500 to $12,000 for individual taxpayers and $9,550 to $18,000 for the head of a household.The limits for married couples filing taxes jointly was enhanced from $13,000 to $24,000. You can make use of retirement plans as well to reduce your tax liabilities.
3.Federal Income Tax
Unlike the general notion, not everyone might be required to file their federal income taxes. There are quite a few factors that impact whether or not one has to file their federal taxes. Factors such as the income for a financial year, your age, your tax filing status, your source of income, etc. play a crucial role in deciding where you should file federal income tax or not. It is essential that you figure out whether you are required to file your federal taxes or not.
4.Knowing The Due Date
Forgetting to pay or file your taxes by the due date can cause considerable damage to your yearly finances. The IRS has due dates for filing of taxes and if you do not adhere to it, you will end up paying penalties and fines. These can at times come with interest, which tends to pile up a lot. It is recommended to file your returns at the earliest, even if it has crossed the due dates.
5.Filing Date Extension
There is a clause in the tax laws, which allows taxpayers to opt for an extension in the tax filing dates. But the important thing to keep in mind is that the date extension is only for filing of taxes and not paying the taxes that you owe. As the deadline comes closer and you feel that you are not ready to file your taxes, you can seek extension in the deadline. At the same time, do not forget to pay any pending taxes that you owe.
Contributions towards charity can help you bring down the taxes that you owe to the government. You can either pay by cash or even gifts, but it is limited to 50 percent of your adjusted gross income. Ensure that you have a receipt that states that the donation was made by you.
Being aware of these tax laws will help you get through your first tax year with relative ease.