Form 1040 is the standard U.S. individual tax return form that taxpayers use to file their annual income tax returns with the IRS.

Electronic Filing Options for Individuals

IRS Provides Tax Inflation Adjustments for Tax Year 2020

IRS Provides Tax Inflation Adjustments for Tax Year 2021

Tax Reform Affects if and How Taxpayers Itemize Their Deductions

About Schedule B (Form 1040), Interest and Ordinary Dividends

About Schedule A (Form 1040 or 1040-SR), Itemized Deductions

Individuals Living or Working in U.S. Territories/Possessions

About Form 1040-SS, U.S. Self-Employment Tax Return (Including the Additional Child Tax Credit for Bona Fide Residents of Puerto Rico).

Form 1040 is the standard Internal Revenue Service (IRS) form that individual taxpayers use to file their annual income tax returns. A variety of nonresident aliens or their representatives need to file this form:
Those who are engaged in trade or business in the United States
Representatives of a deceased person who would have had to file a Form 1040-NR
Those who represent an estate or trust that had to file a 1040-NR
Note that for tax years 2020 and later filers will no longer use Form 1040NR-EZ and instead will use the Form 1040-NR.
As well, the IRS also produces the 1040-SS and 1040-PR. The 1040-SS is for residents of American Samoa, the CNMI, Guam, Puerto Rico, or the U.S. Virgin Islands who have net self-employment income and do not have to file Form 1040 with the U.S. Form 1040-PR is the Spanish-language equivalent of Form 1040-SS. Form 1040 is the standard Internal Revenue Service (IRS) form that individual taxpayers use to file their annual income tax returns. For 2020, these deductions are as follows:
Single or married filing separately, $12,400
Married filing jointly or a qualifying widow(er), $24,800
Head of household, $18,650
For the tax year 2021, which will be filed in 2022, the numbers have increased and are as follows:
Single or married filing separately, $12,550
Married filing jointly or a qualifying widow(er), $25,100
Head of household, $18,800

Form 1040: U.S. Individual Tax Return

Form 1040-A of the Internal Revenue Service (IRS) was a simplified version of current Form 1040, and used by U.S. taxpayers to file an annual income tax return.

About Form 1040: U.S. Individual Income Tax Return

Questions and Answers about the 2018 Form 1040

Another variant of Form 1040 was Form 1040-EZ, which was even simpler and easier to fill out than Form 1040-A and was also eliminated starting with the 2018 tax filing. Another variant of Form 1040 was Form 1040-EZ, which was even simpler than Form 1040-A and was also eliminated starting with the 2018 tax filing. Form 1040-A of the Internal Revenue Service (IRS) was a simplified version of Form 1040 used by U.S. taxpayers to file an annual income tax return. Once their financial situation became complicated with dependents, special deductions, and credits—such as those associated with post-secondary education tuition—most taxpayers needed to switch from filing with the 1040-EZ to the 1040-A.
The redesigned Form 1040 that debuted with the 2018 tax year is designed to be much simpler to use than its predecessor.

Form 1040-A: U.S. Individual Tax Return

Form 1040EZ: Income Tax Return for Single and Joint Filers with No Dependents was the shortest version of form 1040, designed for taxpayers with basic or simple tax situations.

IRS Form 1040EZ: Income Tax Return for Single and Joint Filers with No Dependents was the shortened version of the Internal Revenue Service (IRS) Form 1040. If the filer received interest income, they could not have been required to file Schedule B, didn’t have amounts in boxes 11, 12, or 13 of Form 1099-INT or boxes 6 and 10 of Form 1099-OID, and didn’t earn any interest as a nominee
Tax credits for retirement savings, health coverage, and education were not allowed
The tax filer could not have received any advance earned income credit (EIC), although they would have been allowed to claim the EIC when filing Form 1040EZ Other requirements for filing the Form 1040EZ included:
The taxpayer and their spouse, if married filing jointly, had to be under age 65 at the end of the relevant filing period
They could not be blind as of the end of the relevant filing period IRS Form 1040EZ: Income Tax Return for Single and Joint Filers with No Dependents was the shortened version of the Internal Revenue Service (IRS) Form 1040. Form 1040EZ was a shortened version of Form 1040 for taxpayers with basic tax situations.

Form 1040EZ: Income Tax Return for Single and Joint Filers with No Dependents

Active income refers to income received from performing a service. Wages, tips, salaries, and commissions are all examples of active income.

Publication 925: Passive Activity and At-Risk Rules

Publication 925, Passive Activity and At-Risk Rules

Table of Contents
What Is Active Income?
Understanding Active Income
Example of Active Income From a Business The taxpayer works more than 100 hours in the business during the year, and no other staff works more hours than the taxpayer.
If someone receives income from a business in which they don’t actively participate, then that is considered passive income.
Portfolio income, meanwhile, is income from investments, such as dividends and capital gains. There are three main categories of income: active income, passive (or unearned) income, and portfolio income. For the self-employed or anyone else with an ownership interest in a business, income from business activities is considered active if it meets the Internal Revenue Service (IRS) definition of material participation. Wages, tips, salaries, commissions, and income from businesses in which there is material participation are examples of active income.

Active Income

An adjusted cost base is the change in book value of an asset due to improvements and other fees before a sale.

Publication 544: Sales and Other Dispositions of Assets,

2019 Instructions for Schedule D: Capital Gains and Losses,

Publication 550: Investment Income and Expenses,

An adjusted cost base (ACB) is an income tax term that refers to the change in an asset's book value resulting from improvements, new purchases, sales, payouts, or other factors. The book value can be adjusted because of a change or improvement made to the asset, such as upgrades to real estate.﻿﻿ For example, if a company purchases an office building, then invests more money towards expanding and updating the building, the combined costs are factored together to find the adjusted cost base. In some jurisdictions, the adjusted cost base must be used as the cost of the asset for capital gains purposes. The calculation is done with a formula where the proceeds from a sale of the asset, after transaction fees are factored and then subtracting the adjusted cost base multiplied by the total shares in the transaction. An adjusted cost base (ACB) is an income tax term that refers to the change in an asset's book value resulting from improvements, new purchases, sales, payouts, or other factors.

Introduction to Adjusted Cost Base (ACB)

After-tax income is the net income after all federal, state, and withholding taxes have been deducted. 

After-tax income is the net income after the deduction of all federal, state, and withholding taxes. Most individual tax filers use some version of the IRS Form 1040 to calculate their taxable income, income tax due, and after-tax income. Continuing with the above example, Abi Sample pays $1,000 in state income tax and $500 in municipal income tax resulting in an after-tax income of $25,500 ($27,000 - $1500 = $25,500). After-tax income is the difference between gross income and the income tax due. The difference between the business's income and the income tax due is the after-tax income.

After-Tax Income

Adjusted gross income (AGI) equals your gross income minus certain adjustments. The IRS uses the AGI to determine how much income tax you owe.

Schedule 1 Additional Income and Adjustments to Income.

RS provides tax inflation adjustments for tax year 2021

Topic No. 502 Medical and Dental Expenses

Amount of Roth IRA Contributions That You Can Make for 2020

Validating Your Electronically Filed Tax Return

Table of Contents
What Is Adjusted Gross Income (AGI)?
Understanding Adjusted Gross Income (AGI)
Calculating Your Adjusted Gross Income (AGI)
An Example of Adjusted Gross Income (AGI) Affecting Deductions
Adjusted Gross Income (AGI) vs. Modified Adjusted Gross Income (MAGI)
Special Considerations
Frequently Asked Questions
Adjusted gross income (AGI) is your annual gross income minus certain adjustments that the Internal Revenue Service uses to determine your income tax liability for the year.
The Internal Revenue Service uses your adjusted gross income (AGI) to determine how much income tax you owe for the year. The items subtracted from your gross income to calculate your AGI are referred to as adjustments to income, and you report them on Schedule 1 of your tax return when you file your annual tax return. Gross income is simply the sum of all the money you earned in a year, which may include wages, dividends, capital gains, interest income, royalties, rental income, alimony, and retirement distributions. That might include job income, as reported to the IRS by your employer on a W-2 form, plus any income, such as dividends and miscellaneous income, reported on 1099 forms.

Adjusted Gross Income (AGI)

An amended return is a form filed in order to make corrections to a tax return from a previous year.

IRM Part 21.5.4. General Math Error Procedures

The Further Consolidated Appropriations Act's Tax Changes or Individuals

IRS announces Form 1040-X electronic filing options coming this summer; major milestone reached for electronic returns

Table of Contents
What Is an Amended Return?
Who Should File an Amended Return? The taxpayer also has to explain what changes they are making and the reasons for making each change in a section provided on the back of Form 1040-X.
![2020 Form 1040-X](data:image/gif;charset=utf-8;base64,R0lGODlhBwAJAPQAABAUJzwQJT0vPTNKR0o+hUZRkct/Ip+fmvvz5Pz95vH0////9fn9////+P//+fz//////xAUJxAUJxAUJxAUJxAUJxAUJxAUJxAUJxAUJxAUJxAUJxAUJxAUJxAUJxAUJywAAAAABwAJAEQIKgAhCBxIUGCDBwQVKBwAIAEBAxAQQGAgUKHFiwoIFjgAIYCABQ4sFhQYEAA7)
The drawback of filing an amended tax return is that Form 1040-X cannot be submitted electronically for every tax year, although the IRS has recently started accepting e-filed amended returns for tax year 2019. If a taxpayer receives additional tax documents for the tax year (say a Form 1099 or a K-1 arrives in the mail after the tax deadline), they may file an amended tax return to report the additional income. An amended tax return can be filed even after the tax filing deadline for the tax year has passed. The IRS manually processes amended returns, and the process can take 16 weeks—or even longer, if the amended return is not signed, is incomplete, has errors, requires additional information, needs clearance by the IRS bankruptcy department, has been routed to another specialized area, or has been affected by identity fraud.
There is, however, a three-year statute of limitations for issuing tax refund checks.

Amended Return

Amount recognized is income or loss you must report on your tax return or on a financial statement.

Publication 544 (2018): Sales and Other Dispositions of Assets,

Section 12. Foreign Investment in Real Property Tax Act.

Section 1031. -- Exchange of Property Held for Productive Use or Investment,

Involuntary Conversions - Real Estate Tax Tips.

Publication 538 (2019): Accounting Periods and Methods,

Amount recognized, for tax purposes, is taxable income you receive or deductible loss you incur that must be reported on your tax return and on which you must pay tax. However, in 2017, $80 for the first sale and $0 for the second sale was recognized as taxable income on the company’s 2019 tax return while $0 was recognized for the first sale and $100 was recognized for the second sale on the company’s 2019 financial statements. For cash accounting and tax purposes, the amount recognized is $80 paid in December on the first sale and $100 paid in February on the second sale. The realized gain is added to the basis of the replacement property and is not recognized until you later dispose of the replacement property in a taxable sale. These adjustments are known as inter-period income tax allocations and the temporary differences described are reported on the company’s financial statement as deferred income tax assets or deferred income tax liabilities.

Amount Recognized

Annualized income is an estimate of the amount of money that an individual, business or asset will earn over the course of a year. 

Form 2210: Underpayment of Estimated Tax by Individuals, Estates, and Trusts

Annualized income is an estimate of the sum of money that an individual or a business generates over a year's time. Income from self-employment, interest and dividend income and capital gains are not subject to tax withholdings, along with alimony and some other sources of income that may be reported to a taxpayer on Form 1099.﻿﻿ To avoid a penalty for tax underpayment, the total tax withholdings and estimated tax payments must equal to the lesser of 90% of the tax owed for the current year or the full tax owed the previous year.
Computing estimated tax payments is difficult if the taxpayer’s income sources fluctuate during the year. The higher income in the second quarter indicates a higher total level of income for the year, and the first quarter’s estimated tax payment is based on a lower level of income. To avoid the underpayment penalties due to fluctuating income, the IRS Form 2210 allows the taxpayer to annualize income for a particular quarter and compute the estimated tax payments based on that amount. Annualized income can be calculated by multiplying the earned income figure by the ratio of the number of months in a year divided by the number of months for which income data is available.

Annualized Income  & Example

The annualized income installment method calculates estimated tax payments and helps decrease underpayment penalties due to fluctuating income.

Publication 505 (2019), Tax Withholding and Estimated Tax.

Topic No. 306 Penalty for Underpayment of Estimated Tax.

Taxpayers who are self-employed typically pay quarterly installments of their estimated tax in four even amounts as figured by the regular installment method. The annualized income installment method calculates the taxpayer's estimated tax installment payments and helps to decrease underpayment and corresponding underpayment penalties related to fluctuating income. The annualized income installment method refigures estimated tax payment installments so it correlates to when the taxpayer earned the money in the year. Through the use of the annualized income installment method, taxpayers may estimate their taxes based on known information from the beginning of the tax year through the end of the period paid. Using the regular installment method, if John were to pay less estimated tax in the first two quarters and more in the second two quarters, he would owe an underpayment penalty for the first two quarters.

Annualized Income Installment Method

Alternative tax net operating loss (ATNOL) is the excess of deductions allowed over the income recognized for alternative minimum tax (AMT) purposes.

Publication 536 (2018), Net Operating Losses (NOLs) for Individuals, Estates, and Trusts

Unannotated Title 26. Internal Revenue Code § 56. Adjustments in computing alternative minimum taxable income.

Alternative tax net operating loss (ATNOL) is the excess of deductions allowed over the income recognized for alternative minimum tax (AMT) purposes. While an NOL is the excess of a taxpayer’s deductions over its gross income, an alternative tax net operating loss (ATNOL) is the excess of a taxpayer’s deductions allowed in determining AMT income over the income that is included in calculation of the taxpayer’s alternative minimum taxable income, calculated with the modifications in Code Section 172(d). Section 56 of the Internal Revenue Code (Title 26) permits taxpayers to substitute the net operating loss with ATNOL when calculating alternative minimum tax.﻿﻿ A taxpayer calculating the alternative minimum tax amount must take the alternative tax net operating loss deduction. Alternative tax net operating loss (ATNOL) is a consideration for computing a net operating loss when subject to alternative minimum tax (AMT). Alternative tax net operating loss (ATNOL) is the excess of deductions allowed over the income recognized for alternative minimum tax (AMT) purposes.

Alternative Tax Net Operating Loss (ATNOL)

Back taxes are taxes that have been partially or fully unpaid in the year that they were due. Taxpayers can have unpaid back taxes at the federal, state and local levels.

Private Debt Collection Was Implemented Despite Resource Challenges; However, Internal Support and Taxpayer Protections Are Limited

Back taxes are taxes that have been partially or fully unpaid in the year that they were due. The lien remains in place until the tax liability is paid off or the statute of limitations on the debt expires.
If the taxes remain unpaid, the tax authority can use a tax levy to legally seize the taxpayer's assets (such as bank accounts, investment accounts, automobiles, and real property) in order to collect the money it is owed. In other words, federal and state governments may place tax liens for unpaid income taxes, while local governments may place tax liens for unpaid local income taxes or property taxes. While a lien secures the government’s interest or claims in an individual’s or business’ property when the tax debt remains unpaid, a levy actually permits the government to seize and sell the property in order to pay the tax debt. While a lien secures the government’s interest or claims in an individual’s or business’ property when the tax debt remains unpaid, a levy actually permits the government to seize and sell the property in order to pay the tax debt.

Back Taxes

A backup withholding is a type of tax levied on investment income when the investor withdraws those funds.

Form W-9: Request for Taxpayer Identification Number and Certification

Backup withholding is a tax that is levied on investment income, at an established tax rate, as the investor withdraws it. Backup withholding is the method used by the IRS to make sure it collects taxes on income that an investor may have already spent before his or her tax bill comes due**.**
Backup withholding may be applied when an investor has not met rules regarding taxpayer identification numbers (TIN).﻿﻿ At the time the investor withdraws his or her investment income, the amount mandated by the backup withholding tax is remitted to the government, immediately providing the tax-collecting body with the required funds but leaving the investor with less short-term cash flow. Backup withholding helps to ensure that government tax-collecting agencies, such as the Internal Revenue Service (IRS) or Canada Revenue Agency, will be able to receive income taxes owed to them from investors’ earnings. Backup withholding is a tax that is levied on investment income, at an established tax rate, as the investor withdraws it. If a tax filer’s 1099 indicates backup withholding, that amount can be applied as a credit against any income tax filing for that year.

Backup Withholding

The Benefits Received Rule actually has two related definitions, one as a tax theory and one as a tax provision.

Publication 526: Charitable Contributions

The Benefits Received Rule, or benefits received principle, may take one of two related definitions: one as a tax theory; and one as a tax provision. The two definitions are:
1.  The Benefits Received Principle, which is a theory of income tax fairness that says people should pay taxes based on the benefits they receive from the government.
2.  A tax provision that says a donor who receives a tangible benefit from making a charitable contribution must subtract the value of that benefit from the amount claimed as an income tax deduction. An alternative taxation system is a flat tax system in which everyone pays the same tax irrespective of income, which again, is not how the US tax system works, as the US system is income-based, meaning not everyone pays the same amount of taxes. The Benefits Received Rule, or benefits received principle, may take one of two related definitions: one as a tax theory; and one as a tax provision. The Benefits Received Rule is thought to be appealing for its apparent fairness in that those who benefit from a service should be the ones who pay for it.﻿﻿ However, this is not how the tax system works in the United States.

Benefits Received Rule

A blind taxpayer is an individual who qualifies for the additional standard deduction accorded to blind persons in the U.S.

Tips for Seniors in Preparing their Taxes

1040EZ (2016): Income Tax Return for Single and Joint Filers With No Dependents

Publication 501 (2019): Dependents, Standard Deduction, and Filing Information

A blind taxpayer is any individual in the U.S. whose lack of vision qualifies them for a special tax deduction accorded to blind persons. Filers should check the appropriate box for blind taxpayers, to the left of the Standard Deduction- Age Blindness header.﻿﻿﻿ Because a blind taxpayer gets an additional deduction in excess of the standard deduction, they must file using form 1040 or 1040 SR. A blind taxpayer is any individual in the U.S. whose lack of vision qualifies them for a special tax deduction accorded to blind persons. A blind taxpayer is any individual in the U.S. whose lack of vision qualifies them for a special tax deduction accorded to blind persons. For 2020, $1,650 is the additional amount of the blind taxpayer deduction for individuals filing as single.

Blind Taxpayer

A Bona Fide Foreign Resident is a resident of a foreign country for an entire tax year, who the IRS deems eligible for the foreign earned income exclusion.

Foreign Earned Income Exclusion - Bona Fide Residence Test

Any resident of a foreign country who meets the Internal Revenue Service (IRS) criteria for the bona fide residence test. Bona Fide Foreign Residence status is thus not automatically extended to an individual simply because they have lived in a foreign country for a year or more. This test classifies any person who lives in any foreign country for an uninterrupted period that includes an entire tax year—defined as the period from January 1 through December 31, as a Bona Fide Foreign Resident. But an individual who purchases a home abroad and relocates their entire family to live overseas for the long haul would likely be granted Foreign Residence status—even if they leave the country for temporary trips back to the United States and other countries, for vacation or business purposes. For example, someone who travels to London to open an art exhibit at a museum, who is loaned a crash pad as temporary housing quarters, would not be granted Bona Fide Foreign Residence status.

Bona Fide Foreign Resident

If inflation incrementally escalates an individual's salary to a higher tier of taxation, it is called bracket creep.

Bracket creep is a situation where inflation pushes income into higher tax brackets. There is some debate over how bracket creep affects taxpayers in the higher-earnings brackets, because of the higher tax rates they may already be charged, the push to an even pricier bracket can drastically reduce their net income. As bracket creep affects personal wealth, there is often debate regarding tax cuts and how adjustments are made to tax brackets to better account for the increases. Bracket creep is a situation where inflation pushes income into higher tax brackets. Salaries may see nominal increases where the take-home pay shows no real change; however, if the Internal Revenue Service has not made adjustments to the brackets, it can force taxpayers into paying higher rates.

Bracket Creep

A breadwinner is the primary or sole income earner in a household.

Publication 501: Dependents, Standard Deduction, and Filing Information

IRS provides tax inflation adjustments for tax year 2020

A breadwinner is a colloquial term for the primary or sole income earner in a household. A married taxpayer who is the breadwinner of the household may choose to file taxes jointly with their spouse, rather than separately, to reduce the tax liability.﻿﻿ Breadwinners may find that they are in a higher tax bracket if they file taxes separately—the higher the tax bracket, the higher the tax bill.
As you can see in the table below, a breadwinner who earns $78,000 in annual income and files jointly with a stay-at-home spouse will pay 12%. The term breadwinner is sometimes used to refer to single-income families in which one of the members works to generate income and the other stays at home to care for dependents. The Internal Revenue Service (IRS) defines a breadwinner as a single or unmarried taxpayer who pays at least 50% of the costs of supporting a household and provides support to other qualifying family members living under the same roof for more than half of the year. In other words, an individual that earns $50,000 will pay 12% income tax as a head of household and 22% if filing as a single individual.

Breadwinner

The amount of time that a stock is owned before being sold determines its capital gains treatment for tax purposes.

Experience the Next Generation of Tax Loss Harvesting

Publication 559: Survivors, Executors, and Administrators

Publication 525: Taxable and Nontaxable Income

Publication 544: Sales and Other Dispositions of Assets

Capital gains treatments are specific taxes assessed on investment capital gains as determined by the tax code. In many instances, the stock must be held at least one year and a day in order to receive the preferred long-term capital gains treatment.﻿﻿ There are times, however, such as if the stock is expected to decline deeply, where it can be more advantageous to investors to sell those shares and pay the higher capital gains tax rate rather than face even deeper losses.
These days calculating the difference in your tax burden at different prices is quick and often automated, and if the stock price falls very far, you may not have to pay _gains_ at all because you're already selling at a loss! Short-term investments are taxed at ordinary income rates, while long-term investments receive a lower capital gains rate of 0%, 15% or 20%, depending on your income level. Stocks held less than one year are considered short-term capital gains and are taxed at ordinary income rates, which range from 10% to 37% depending on the investor's tax bracket. Stocks held longer than one year are considered as long-term for the treatment of any capital gains, and are taxed at rates of 0%, 15% or 20% depending on the investor's taxable income.

Capital Gains Treatment

Capital Cost Allowance (CCA) is a yearly deduction in the Canadian income tax code that can be claimed on depreciable assets. The CCA is typically allowed for purchases that are expected to last for several years

Descriptions of the Tax Provisions List in Transparency in Taxation, 2017

Basic information about capital cost allowance (CCA)

As assets that rapidly depreciate, computers, systems software, and motor vehicles have high CCA rates, of between 30% and 50%.
A few categories of tools, work uniforms, and computer software are claimable at 100%—that is, the full value may be claimed in the first eligible year for CCA. Businesses can claim from zero to the maximum amount of CCA in any given year, and carry over any amount less than the maximum to claim for the next year. Capital Cost Allowance (CCA) is an annual deduction in the Canadian income tax code that can be claimed on depreciable assets when figuring taxable income under the umbrella of the Income Tax Act. A business needn't claim the maximum allowable amount of CCA in any given year, but may instead claim any amount from zero to the maximum.

Capital Cost Allowance (CCA)

Comparable to capital gain, a chargeable gain represents the increased value in an asset when it is sold.

Corporation Tax When You Sell Business Assets

Capital Allowances When You Sell an Asset

"Chargeable gain" is a British term for the increase in an asset's value between the time it is purchased and the time it is sold, which becomes subject to capital gains tax. Items not counted as chargeable gains include any gains that stem from proceeds that fall under income taxation, the gains from exempt assets, as well as other types of exemptions, such as personal exemptions on capital gains tax. If the asset was not purchased because it was received as a gift or by other means, its market value at the time it was received is used in place of the purchase price to calculate the chargeable gain. If the asset was a gift or acquired by other means than a purchase, its market value at the time it was received is used in place of the purchase price to calculate the chargeable gain. In the U.K., the capital gains tax for basic income is 10% (18% on residential property) or 20% (28% on residential property) for those individuals above the basic tax bracket.

Chargeable Gain

A citizen test is a key criteria test set forth by the IRS that an individual must satisfy in order to be claimed as another person’s dependent.

Publication 501: Dependents, Standard Deduction, and Filing Information: Citizen or Resident Test

26 U.S. Code Sec. 152 - Dependent defined

Chapter 5 - Child Residing Outside of the United States (INA 322)

Frequently Asked Questions (FAQs) About International Individual Tax Matters: Filing Status and Dependents

A citizen test, also called a resident test, determines whether a taxpayer can claim a dependent under rules set by the Internal Revenue Service (IRS). If you were a U.S. citizen when your child was born, but your spouse was not, and your child was born in a foreign country, the child may be a U.S. citizen, in which case you can take the exemption—even if the child lives abroad with the nonresident parent. If you are a U.S. citizen living abroad who has legally adopted a child who is not a U.S. citizen or resident, and the other dependency tests are met, the child is deemed your dependent. If you were a U.S. citizen when your child was born, the child may be a U.S citizen even if the other parent was a nonresident and the child was born in a foreign country. The claimed dependent must be a U.S. citizen, a U.S. resident, a resident of Mexico or Canada, or an adopted child who has lived with the taxpayer for the entire year.

Citizen Test

Deadweight loss of taxation is a measurement of the economic loss that can be caused by a tax due to its damaging effects on supply and demand.

Marshallian Cross Diagrams and Their Uses before Alfred Marshall: The Origins of Supply and Demand Geometry

The term deadweight loss of taxation refers to the measurement of loss caused by the imposition of a new tax. The term deadweight loss of taxation refers to the measurement of loss caused by the imposition of a new tax. In this case, the deadweight loss is $800 billion—the $2 trillion total output less $1.2 trillion consumer spending or investing equals a deadweight loss of $800 billion. Deadweight loss of taxation measures the overall economic loss caused by a new tax on a product or service. This is called a deadweight loss of taxation or, simply, a deadweight loss.

Deadweight Loss Of Taxation

A dependent is a person who entitles a taxpayer to claim dependent-related tax benefits that reduce the amount of tax that the taxpayer owes.

Overview of the Rules for Claiming a Dependent

Publication 501 (2019), Dependents, Standard Deduction, and Filing Information

Internal Revenue Code, Section 26, Title 152

A dependent is a person who relies on someone else for financial support, and can include children or other relatives. A child cannot be a taxpayer’s qualifying relative if the child is the taxpayer’s qualifying child (or is the qualifying child of any other taxpayer). To meet the IRC relationship test—and be considered a qualifying child—the child must be:
The taxpayer’s son, daughter, stepchild, foster child (placed by an authorized placement agency), or a descendant (for example, a grandchild) of any of them
The taxpayer’s brother, sister, half brother, half sister, stepbrother, stepsister, or a descendant (for example, niece or nephew) of any of them To meet the IRC age test, the child must be:
Under age 19 at the end of the tax year and younger than the taxpayer (or the taxpayer’s spouse, if filing jointly)
A full-time student under the age of 24 at the end of the year and younger than the taxpayer (or spouse, if filing jointly) A qualifying relative must meet the “not a qualifying child” test, the member of household or relationship test, the gross income test, and the support test.

Dependent

Disqualifying income is a type of income that can disqualify an otherwise eligible taxpayer from receiving the earned income credit. 

Publication 596: Earned Income Credit (EIC)

Earned Income Tax Credit Income Limits and Maximum Credit Amounts

American Rescue Plan Expanding Tax Relief for Working Families

Disqualifying income is a type of income that can prevent an otherwise eligible low- or moderate-income taxpayer from receiving the earned income credit (EIC) when filing their annual income taxes. In order to qualify for the EIC, taxpayers must have a valid Social Security number by the tax return due date, be a United States citizen or resident alien for the entire year, and the filing status cannot be married filing separately.﻿﻿ Children must meet the relationship, age, residency, and joint return tests, and can’t be claimed by more than one person.
If a taxpayer does not have a qualifying child, they must be at least age 25 but under age 65, cannot be the dependent of another person, and must have lived in the United States for at least half of the year.﻿﻿ Income earned for work performed while an inmate in a penal institution is also disqualifying income when calculating the EIC.
Taxpayers are disqualified from receiving the EIC if they receive more than a certain amount of income, which is adjusted annually for inflation.﻿﻿ For unmarried taxpayers filing individually in 2020, adjusted gross income was required to be less than $50,954 with three or more qualifying children, $47,440 with two qualifying children, $41,756 with one qualifying child, or $15,820 without qualifying children. For the tax year 2020, income derived from investments cannot exceed $3,650.
Disqualifying income consists of investment income, such as taxable and tax-exempt interest, dividends, pensions and annuities, net income from rents and royalties, net capital gains, and net passive income (not received as a result of self-employment).
The American Rescue Plan, signed by President Biden on March 11, 2021, made changes to the Earned Income Credit for 2021. Disqualifying income is a type of income that can prevent an otherwise eligible low- or moderate-income taxpayer from receiving the earned income credit (EIC) when filing their annual income taxes. Disqualifying income is a type of income that can prevent an otherwise eligible low- or moderate-income taxpayer from receiving the earned income credit (EIC) when filing their annual income taxes.

Disqualifying Income

A domicile is a home acquired with the intent to remain indefinitely. Learn how your domicile impacts many legal issues, including the taxes you pay.

Publication 54, Tax Guide for U.S. Citizens and Resident Aliens Abroad

Form 3799, Statement to Determine Statement of Domicile

Publication 1031, 2018 Guidelines for Determining Resident Status

25.18.1 Basic Principles of Community Property Law

Individual Income Tax: Determining Tax Residency

Table of Contents
What Is a Domicile?
Understanding Domicile
Residence vs. Domicile
Special Considerations
How to Establish a New Domicile This domicile of choice remains your domicile until you abandon it by relocating to a new domicile with the bona fide intent to make the new domicile your fixed and permanent home. Upper-income taxpayers will often domicile in a state that has the lowest tax liability for them.
The imposition of death taxes is by the domicile country or state. It is possible to relocate to a new domicile, but it takes time and effort to establish a legal intent to make your new domicile your permanent home. A domicile is your legal address, and your domicile is located in the state where you pay taxes.

Domicile

Double taxing, or double taxation, is a tax law that subjects the same earnings to taxation twice.

2017 Instructions for Form 1120, U.S. Corporation Income Tax Return

Double-Taxing Capital Income: How Bad Is the Problem?

H.R.1 - An Act to provide for reconciliation pursuant to titles II and V of the concurrent resolution on the budget for fiscal year 2018

Double taxing is the practice of taxing the same income stream twice. It is not the number of tax layers that matters, but the total effective tax rate—that is, the percentage of each income stream taken as tax.”
It goes on to argue that, at least in 2006, the double taxing of a 35% corporate tax rate followed by a 20% tax rate on dividends was so high as to distort the decision making of business leaders, who were shunning organizing as corporations in order to take advantage of lower personal income tax rates that other forms of corporate organization pay. For many years before the passage of the Tax Cuts and Jobs Act of 2017, corporations in the United States paid a tax rate of 35% at the federal level, various corporate tax rates at the state level, while top earners paid a 20% tax rate on dividend income. Progressives argue that complaints about double taxing are insincere and that opponents of double taxing are simply trying to find excuses to lower the tax burden on business owners, a class of people who own much of the wealth in America. Progressive politicians argue that complaints about double taxing are insincere and that opponents of the tax code find any excuse to lower taxes on corporations and ownership, who hold most of the wealth in America.

Double Taxing

A dual-rate income tax is a proposal for reducing the number of tax brackets to two.

A dual rate income tax is an income tax rate structure in which two different tax rates are charged depending on income levels. Proponents of the dual rate income tax argue that is both simpler and more fair than the current federal tax code, which has seven different tax brackets following the tax reform of 2017.﻿﻿ Proponents of the system have argued that along with moving from seven brackets to just two, Congress should eliminate most deductions and credits, further simplifying the tax code and freeing economic actors from spending so much time and energy preparing their taxes each year. A dual rate income tax is an income tax rate structure in which two different tax rates are charged depending on income levels. With dual rate income tax, all income will be taxed at the lower rate up to the cutoff income level, and all income above the cutoff point is taxed at the higher rate. A dual rate income tax is often proposed in combination with ideas for simplifying the overall tax system by eliminating most tax deductions and loopholes.

Dual Rate Income Tax

A dual-status taxpayer is a foreign national who spends a substantial portion of the year, but not the entire year, in the U.S.

Publication 519: U.S. Tax Guide for Aliens

A dual-status taxpayer is a citizen of another nation who, in a single calendar year, lives in the U.S. long enough to qualify as a resident alien and lives outside the U.S. for long enough to qualify as a non-resident alien. The dual-status taxpayer is taxed on income from all sources received during residence in the U.S. and only U.S. income received while outside the U.S.
Most dual-status taxpayers come to the U.S. to work and have obtained green cards permitting them to work legally. A dual-status taxpayer is a citizen of another nation who, in a single calendar year, lives in the U.S. long enough to qualify as a resident alien and lives outside the U.S. for long enough to qualify as a non-resident alien. Because she was in the U.S. for more than 183 days, she meets the requirements of the substantial presence test.
Brigitta is a dual-status alien because she was both a non-resident alien and a resident alien in the same year. The dual-status taxpayer is taxed on income from all sources received during residence in the U.S. and only U.S. income received while outside the U.S.

Dual-Status Taxpayer

Earned income includes wages, salaries, bonuses, commissions, tips, and net earnings from self-employment.

Publication 17 (2018), Your Federal Income Tax

Publication 915: Social Security and Equivalent Railroad Retirement Benefits

Publication 505: Tax Withholding and Estimated Tax

Table of Contents
What Is Earned Income?
Understanding Earned Income For tax purposes, earned income is any income you receive for work you have done, either for an employer or a business of your own.
Examples of income that isn’t considered “earned” include government benefits, such as payments from the Temporary Assistance for Needy Families program (often referred to as welfare), unemployment, workers’ compensation, and Social Security. For tax year 2020, for example, the federal government taxes earned income at seven separate rates (or brackets), ranging from 10% on the first $19,750 ($19,900 in 2021) in income for married couples filing jointly to 37% for any income over $622,050 ($628,300 in 2021), again for married couples filing jointly. If you are receiving Social Security benefits, for example, you may have to pay income tax on a portion of those benefits if you have earned income (or other income) over a certain threshold. If you have a relatively low earned income—and meet other qualifications—you may be eligible for the federal earned income tax credit (EIC or EITC), which can reduce your tax bill or result in a refund.

Earned Income

The educator expense deduction is a tax break for teachers and other education professionals for up to $250 in out-of-pocket expenses.

Educators Can Now Deduct Out-of-Pocket Expenses for COVID-19 Protective Items

Public School Teacher Spending on Classroom Supplies

H.R.8 — American Taxpayer Relief Act of 2012

Protecting Americans from Tax Hikes Act of 2015

Publication 5307: Tax Reform Basics for Individuals and Families

Publication 529: Miscellaneous Deductions

Tax Reform Brought Significant Changes to Itemized Deductions

The educator expense deduction is an adjusted gross income (AGI) deduction for teachers and other education professionals for up to $250 in out-of-pocket expenses. Qualified educator expenses that can be deducted include those for:
Participation in professional development courses
Supplies, books, and supplementary materials used in the classroom
The cost of computer equipment (including software and services) used in the classroom to teach students
Health courses and physical education, provided that the expenses are for athletic supplies
However, if you used a Coverdell education savings account (ESA) or other tax-advantaged funding sources to pay for your professional development courses, then you must subtract that amount from your deduction. Any teacher, instructor, counselor, principal, or aide who worked at least 900 hours during the school year in a kindergarten through grade 12 classroom can qualify for the educator expense deduction, for up to $250 in out-of-pocket expenses purchased on an annual basis. The educator expense deduction is an adjusted gross income (AGI) deduction for teachers and other education professionals for up to $250 in out-of-pocket expenses. The educator expense deduction allows eligible educators who teach in kindergarten through grade 12 classrooms to deduct up to $250 a year in qualified out-of-pocket expenses.

Educator Expense Deduction

Electronic Federal Tax Payment System (EFTPS), offered by the U.S. Treasury Department, allows tax payments either online or via telephone. 

EFTPS: The Electronic Federal Tax Payment System

Beware of E-Mail Scams about Electronic Federal Tax Payments

The Electronic Federal Tax Payment System (EFTPS) is a service provided by the U.S. Department of the Treasury. The primary function is the convenience of allowing secure payments around personal schedules and avoiding the need to make payments in person or through the mail.
The Electronic Federal Tax Payment System (EFTPS) is a 24-7 service provided by the U.S. Department of the Treasury that allows taxpayers to make tax payments either by telephone or online.
The system allows taxpayers to file directly with the IRS using a filer's social security number and personalized PIN number. In the past, fraudulent emails were sent that targeted EFTPS users, indicating that identification numbers were rejected or prompting users to follow an embedded link to change personal information. In the past, fraudulent emails were sent that targeted EFTPS users, indicating that identification numbers were rejected or prompting users to follow an embedded link to change personal information. The EFTPS website uses a secure server, complete with internal security policies and firewalls, to prevent unwanted and unintended parties from gaining access to users’ financial information.

Electronic Federal Tax Payment System (EFTPS)

An Employer Identification Number (EIN) is a unique number assigned to a business for easy IRS identification for tax reporting purposes.

Publication 1635, Employer Identification Number: Understanding your EIN

Form SS-4: Application for Employer Identification Number

Publication 1635, Employer Identification Number: Understanding Your EIN

About Form SS-4, Application for Employer Identification Number (EIN)

Apply for an Employer Identification Number (EIN) Online

Table of Contents
What Is an EIN?
Understanding EINs
Special Considerations
How to Get an EIN
Benefits of an EIN
Lost or Misplaced EIN
Does My Business Need an EIN? Every business entity needs an employer identification number, including those that have employees, operate as corporations or partnerships, file certain tax returns (Employment, Excise, or Alcohol, Tobacco and Firearms), withhold income taxes on income other than wages.
You can find an employer identification number using a tax return, applications for bank accounts or credit, on any state licenses or permits, or on forms used to report work done as an independent contractor or payments made by your business. Table of Contents
What Is an EIN?
Understanding EINs
Special Considerations
How to Get an EIN
Benefits of an EIN
Lost or Misplaced EIN
Does My Business Need an EIN? Some of the information that must be included on the form includes:
the type of entity
the reasons for applying (new business, change of organization, IRS withholding requirement compliance)
the start or acquisition date
the principal industry of business
A business must be located in the U.S. or U.S. territories to apply for an EIN online. The IRS requires the following information to be included on the application in order to issue an EIN, such as the name of the company's principal officer, partner, trustor, owner, or any other title, along with their personal taxpayer identification number (SSN, ITIN, EIN).

Employer Identification Number (EIN)

An enrolled agent is a tax professional authorized by the U.S. government to represent taxpayers in matters regarding the Internal Revenue Service.

Enrolled Agent Information for Former IRS Employees

Code of Ethics & Rules of Professional Conduct

Treasury Department Circular No. 230: Regulations Governing Practice Before the Internal Revenue Service

Tax Examiners and Collectors, and Revenue Agents

An enrolled agent (EA) is a tax professional authorized by the United States government to represent taxpayers in matters regarding the Internal Revenue Service (IRS). EAs must pass an examination or have sufficient experience as an IRS employee and pass a background check.﻿﻿ ﻿﻿ Enrolled agents first appeared in 1884 due to issues arising with Civil War loss claims.
An enrolled agent is a federally licensed tax practitioner who has unlimited rights to represent taxpayers before the IRS for any issues relating to collections, audits, or tax appeals. They cannot use the term certified as part of a title or infer an employee relationship with the IRS.
The hiring of tax examiners is projected to decline 2% from 2018 to 2028 as the growth of the tax examiner industry is closely tied to changes in federal, state, and local government budgets.﻿﻿ The growth of the enrolled agent industry depends on industry rule changes and the demand for tax services. According to the National Association of Enrolled Agents (NAEA)—the organization that represents licensed EAs—they are allowed to advise, represent, and prepare tax returns for people, corporations, partnerships, estates, trusts, and anything else that is required to report to the IRS. CPAs and attorneys may serve as enrolled agents without taking the exam.
Enrolled agents are the only tax professionals who do not require a state license.

Enrolled Agent (EA)

Estimated tax is a quarterly payment that is required of self-employed people and business owners who do not have taxes automatically withheld.

Benefits Planner: Income Taxes and Your Social Security Benefit

Publication 505, Tax Withholding and Estimated Tax

The Basics of Estimated Taxes for Individuals

Questions and Answers on the Net Investment Income Tax

Estimated tax is a quarterly payment of taxes for the year based on the filer’s reported income for the period. Individuals, including sole proprietors, partners, and shareholders of S corporations, must make estimated tax payments on business ownership earnings if the total tax on built-in gains, excess net passive income tax, and investment credit recapture tax is $1,000 or more.
Corporations must pay estimated tax if the business is expected to have at least $500 in tax liability.
In addition, employees who had too little tax withheld and thus owed taxes to the government at the end of the previous year are responsible for making estimated tax payments. A taxpayer who had no tax liability for the prior year, was a U.S. citizen or resident for the whole year, and had the prior tax year cover a 12-month period, does not have to file Form 1040-ES. If the estimated taxes that are paid do not equal at least 90% of the taxpayer’s actual tax liability (or 100% or 110% of the taxpayer’s prior-year liability, depending on the level of adjusted gross income), interest and penalties are assessed against the delinquent amount. A business owner who reports income on Schedule C and, at the same time, works for an employer who has withheld tax may be able to increase the employer’s withholding so that it equals the person's tax liability for the entire year.

Income Tax

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