Can You File Your Taxes In The US Without A Social Security Number?

Can You File Your Taxes In The US Without A Social Security Number?

by | Dec 30, 2019 | EITC, global income tax, IRS, ITIN, SSN, Tax Payers, Tax Planning, Tax Refund, taxes, W-7 Form

Can You File Your Taxes In The US Without A Social Security Number?

Citizens of the US use their Social Security Number as identification when it comes to doing their taxes. However, there are a lot of citizens from other places who do not qualify for SSN, yet earn in the country and are liable to pay taxes. If you are one such citizen, you can use the Individual Taxpayer Identification Number or ITIN to file your taxes instead of SSN.

ITIN’s Capabilities

The ITIN is designed only to help citizens without an SSN the capability to file taxes and nothing else. The IRS clarifies that the ITIN cannot be used as:

  • An authorization to work in the US
  • Qualification for SSN or other tax credits such as Earned Income Tax Credit (EITC)
  • A stimulus to impact your immigration status

Who Needs an ITIN?

Anyone who needs to file their taxes and does not have an SSN can apply for ITIN. If you have a dependent and want to claim them in your tax returns and they do not have an SSN, you would need to get an ITIN for them as well.

As per the IRS, resident and non-resident aliens can get ITIN irrespective of what their immigration status is. An easy way to understand is that you would need an ITIN if you need to file your taxes. This is applicable even if you stay in another country.

How To Apply For ITIN?

Getting your ITIN isn’t all that complicated. To apply for ITIN, you need to submit Form W-7 to the IRS. You can either submit the form by mailing it to the IRS or schedule an appointment if you need any helpwith the forms.

To fill the application form, you would need certain basic details such as name, birthdate and mailing address. You would have to mention your US visa number should you have. Also, the form requires you to mention the reason why you want to apply for ITIN.

Expiry of ITIN

An issued ITIN can expire if it has not been used. If you obtain an ITIN and do not use the same for a period of three years, the ITIN will expire on the 31st of December 2019. ITIN that were issued before the year 2013 would also expire on the 31st of December 2019. The middle digits for the ITIN in such cases would be 83 and 84. For example, you ITIN could look like (9XX-83-XXXX).

Renewal of ITIN

In the event your ITIN expires, you do not have to worry about filing your taxes. You can always renew the ITIN using the following measures. You must fill up Form W-7 along with an application form for ITIN. While you are required to submit the required documents, you do not have to submit a tax return in the case of renewal. Unless there is a filing requirement, you do not have to submit your tax returns. If your family members were issued ITINs, you must submit their W-7 forms at the same time.

The renewal process of ITIN is a bit similar to getting a new one. You can use any of the following methods.

  • Mail the forms to the IRS at:

Internal Revenue Service

Austin Service Center

ITIN Operation

P.O. Box 149342

Austin, TX 78714-9342

  • Schedule an appointment with the IRS Taxpayer Assistance Center.
  • Apply for an ITIN in person at any Certifying Acceptance Agent that is authorized by the IRS.

You can file your taxes in the US even if you do not have a Social Security Number. You can apply for ITIN using the methods mentioned above and file your taxes.

Reference:

https://www.taxslayer.com/blog/how-to-file-taxes-without-a-social-security-number/

https://www.irs.gov/credits-deductions/individuals/how-do-i-renew-my-itin

How Much To Save Up For Your Retirement In The US?

How Much To Save Up For Your Retirement In The US?

by | Dec 27, 2019 | income tax, NRI, tax deductions, Tax Extension, tax filing, Tax Planning, Tax Preparation, Tax Refund, tax savings, Taxation

How Much To Save Up For Your Retirement In The US?

A lot of us look up to retirement so that we can hang our boots and finally relax or take a break from all the running around. However, how well your retirement goes depends on a few important factors. The quintessential one being how much you save for your retirement.

Should you plan your retirement well in advance and align your savings and investments accordingly, the chances are high you will have a stress-free retirement phase. To aid you in the entire process of making your retirement a much happier place, here are some tips.

The amount that you need to put away for your retirement depends on the following factors.

  • Your age when you start investing for your retirement.
  • Your paycheck when you decide to save for your retirement.
  • The age at which you wish to retire.
  • The returns that you are expecting on your investments.

There is a simple correlation when it comes to saving for your retirement. When you start saving for your retirement early, you will end up setting aside a smaller chunk of the salary. And the reserve also holds good. The later you start, you must invest a larger chunk of your paycheck towards your retirement.

How Much Is Enough For Retirement?

Your lifestyle plays a crucial role in deciding the amount of money you would need for your retirement. If you wish to retire at 60 years and expect to live for another 30 years, you will need enough money to support you through that entire duration. You should consider the needs along with wants as well. A simple monthly budget will help you understand the amount. But unexpected medical expenses are something that you must also consider.

Estimating Your Requirements

There are several online calculators that you can use to estimate the amount you must set aside for retirement. As a general rule of thumb, when you are 35 years old, you would need to save about 1 to 4 times your annual income for your retirement. Similarly, when you are 50, the savings must be at 5 to 10 times your annual income. You can reach out to a trusted financial advisor if you need details on specifics.

Optimize Your Income Taxes

There are different ways to fund your retirement. Once you start optimizing your income taxes, you will find additional room for savings for retirement. Here are a couple of ways to do the same.

  • Withholdings

A lot of taxpayers withhold a lower amount from their taxes while declaring their W-4 Form. Eventually, the IRS refunds the amount at the end of the tax season. Should you opt to withhold exactly as much taxes as you owe, you will end up with some savings. You can then invest this additional amount into a tax-deferred retirement plan. Thus, do not forget to update your W-4 if there is any change in your filing status, income, employment, etc.

  • Refunds

And should you decide not to alter your withholdings, you can expect a refund from the IRS at the end of the tax season. You can use this refunded amount to fund your retirement. Depending on the amount that you receive, you can either put the entire amount into a tax-deferred investment account or a portion of it. If the refund is a considerable amount, you can opt to use only a portion of it.

Start saving for your retirement at the earliest and you will have to put away a smaller amount every month. This will give you a head start and the possibility of saving a higher amount as well.

Reference:

https://www.taxslayer.com/blog/how-much-do-i-need-to-save-to-retire/

Is lottery/gambling winnings taxed for an NRI in the US?

Is lottery/gambling winnings taxed for an NRI in the US?

by | Dec 21, 2019 | NRI, tax deductions, tax filing, Tax Liabilities, Tax Planning, Tax Preparation, Tax Refund, taxes

Is lottery/gambling winnings taxed for an NRI in the US?

It is hope that gets us to buy another lottery ticket or head out to a casino. Is Lottery taxes for an NRI in the US The hope that we might win the next lottery or hit the jackpot. If you have won either of them, first of all,congratulations. Before you start planning how to spend the amount, here is something that you must consider, taxes. The winning amount is taxable,but you choose how you wish to get the winning amount.

You can either opt for a lump-sum payout or as an annuity. Taxpayers usually have 60 days to decide the method and it has an impact on the taxes that you must pay to the IRS. If you have not won a lottery or winnings, it still might be a good idea to be aware of the tax implications. Here is all that you need to know.

Lump-Sum or Annuity?

Each method has its pros and cons. Should you opt for the payout as an annuity, you will be placed in a lower tax bracket and a fewer amount of taxes. The only caveat being, the taxes might go up in the future since you do not have any control over it. If the winning is relatively lower, you can opt for the annuity method.

Taxpayers who have won millions, taking the payout as a lump sum is a better option. While it might take a decent chunk of your winnings, you still getthe remaining money at a single shot. If you opt for an annuity, the lottery will pay only 4.5% of the total earnings per year. It will take a long time to recover the entire amount. It is recommended that taxpayers who take the lump sum reach out to a financial advisor to help them with the winnings. Putting the winnings at the right places will ensure you do not spend a lot of it rather earn more from it.

Taxes on Both the Methods

Should you go ahead with a lump sum payout, 25% of the total earning is withheld before making the payment to you. This amount is not the actual taxes that you owe to the government. Once you file Form W-2G, your total liable taxes will be calculated. And you will get to know the total taxes that you owe to the government in April.

And for the annuity method, each installment is taxed as they are handed over to you. Similar to lump sum payout, this is not the actual amount of taxes. Only when you file your Form W-2G, you will get to know the total amount of taxes that you owe to the government.

Depending on the state that you live in, you might have to pay state taxes as well. You must only pay federal taxes and no state taxes if you live in Florida, South Dakota, Texas, Tennessee, Alaska, New Hampshire, California, Nevada, Wyoming, Pennsylvania or Washington.

Minimize Your Tax liabilities

There are a couple of steps that you can take to reduce your tax liability when it comes to earnings from a lottery or gambling. For starters, you can donate some of your earnings to charity. You can then itemize your deductions and reduce your liability.

Alternatively, you can gift a portion of the earning to friends and family. As per the law, you can gift up to $15,000 per person before the gift taxes come into the picture. And lastly, you can create a trust and put your money in it, which will reduce estate taxes should anything happen to you.

Knowing the tax liability for lottery or gambling will ensure that you do not get a surprise in April during the filing of taxes. Being aware will help you better plan your taxes.

Reference:

https://www.taxslayer.com/blog/winning-lottery-taxes/

https://blog.turbotax.intuit.com/income-and-investments/how-are-gambling-winnings-taxed-8891/

Step by Step process to pay off your Income Tax Bill

Step by Step process to pay off your Income Tax Bill

by | Dec 18, 2019 | income tax, IRS, Tax Exception, tax filing, Tax Liabilities, Tax Payers, Tax Refund, taxes

Step by Step process to pay off your Income Tax Bill

Discovering that you owe a lot more taxes to the IRS than you can afford can be a very concerning situation. To find out that you do not have any tax refunds is bad enough and if you must pay additional taxes to the IRS, it is pretty much the worst nightmare.However, such a predicament is not the end of the road or the world. You can pay off your income tax bill by following a few simple steps, without taking a lot of stress.

  • Your Tax Liability

Knowing the amount of taxes that you are liable to pay to the IRS is the very first step. Before you submit your tax returns during the tax season, it is essential that you go through your returns more than once. A little bit of scrutiny here can save you from a lot of pain. It is quite common to forget a deduction or accidentally add the same item twice.

Forgetting a checkbox or a question can at times turn out to be expensive in this matter. Thus, cross-check your return thoroughly before clicking on the submit button. You can compare your current return with that of the previous year to see if there are any major changes. This holds good if there hasn’t been a dramatic change in your tax situation.

And if the IRS sends you a letter for tax dues, do not jump to any conclusions immediately. There is a probability that it might be wrong. If you feel so, you can ask them for clarification.

  • Minimize any penalties or interest

Penalties and interest can worsen the already grim situation. If you have a large tax bill to pay off, interest or penalties can bloat this number. Fortunately, you can minimize them using any of the following methods.

  • Underpayment Exception

There might be a situation where you underpaid your taxes this year but had paid your taxes accurately the previous year. If the taxes of the previous year were considerably lower and you paid your current taxes by the due date, you don’t have to pay penalty on your underpayment of taxes.

  • Pay ASAP

Should you owe any taxes to the government and you do not see a way out, paying it off at the earliest is your best bet. Even if you do not pay the entire amount, pay off as much as you can.

  • Abatement of Penalties

The IRS is known to reduce or even remove the penalties on a taxpayer if they write a letter to the IRS and make them aware of the situation. Do not forget to ask for an abatement in your letter to the IRS.

  • Installment Agreement Request

If there is no other way for you to pay the taxes, you can file Form 9465, which is Installment Agreement Request. You are essentially setting up an installment of your tax liabilities. And filing the form online will prevent you from paying the payment user fee. The installment is applicable if:

  1. The taxes you owe are less than $10,000.
  2. A taxpayer can prove that they are unable to pay the dues.
  3. A taxpayer can pay the taxes within 3 years.
  • Compromise

You can negotiate with the IRS for Offer In Compromise (OIC). In this method, you must offer as much as your net worth is. An OIC resembles bankruptcy in a lot of ways and must only be considered if there is absolutely no other way.

The above steps will help you pay off your income tax bill to the IRS. It is important not to panic and look for a solution if you owe taxes to the IRS.

Reference:          

https://blog.taxact.com/steps-pay-off-tax-bill/

 

 

Top 10 Tax Refund Takeaways From 2019

Top 10 Tax Refund Takeaways From 2019

by | Dec 15, 2019 | 401(k), capital gains, IRA, Tax Extension, Tax Liabilities, Tax Payers, Tax Planning, tax return, Taxation, taxes

Top 10 Tax Refund Takeaways From 2019

As winters approach, Tax Refund Takeaways 2019, taxpayers across the country have even less time to plan for their taxes. In no time Spring will be looming and you do not want to be caught in the crosswinds. This festival season, you can set aside some of your time and plan for your taxes, if you haven’t already done this. It is to ensure that your tax liability is low and that you have a better chance at a higher tax refund. Here are the top 10 takeaways considering the proposed changes in taxes in 2019.

1.401(k) and HSA

You can contribute towards traditional IRAs up to the 15th of April of next year. However, you will miss out on the provisions for 401(k) and Health Savings Account if you do not make any contributions till the 31st of December. Taxpayers can deductions up to $7,000 for contributions towards health insurance plans.

2.Delay Your Mutual Fund Purchase

If you wish to buy mutual funds during this time of the year, you might want to rethink the decision. Especially if you want to hold them in a taxable account. The problem with buying at this time is that you would have to pay taxes on the year end dividends. This is applicable even if you just purchased the shares.

3.Capital Loss Harvesting

Should you own any stocks that are at a loss, you can sell them and deduct up to $3,000 on the federal taxes that you owe. The only thing that you need to be careful about is that you do not violate the wash-sale rule. According to the rule, you cannot purchase the exact same stock or something substantially similar within 30 days of selling the stocks.

4.Opportunity Funds

You have the option to defer paying capital gains tax if you choose to reinvest in Qualified Opportunity Funds. The Tax Cuts and Jobs Act of 2017 brought the Opportunity Funds into existence. The fund aims at creating jobs and opportunities in communities that are distressed.

5.Charity

On reaching the age of 70 ½ years, senior citizens must take minimum distribution if they have 401(k) or IRA. If you do not need the amount for living, you can send it to a charity. Essentially it is a check issued by the IRA to the charity.

6.Traditional To Roth IRA

Any amount that you withdraw on retirement from a traditional IRAs taxable but any distribution from Roth IRA is fax-free. Roth IRAs also do not have minimum requirements, which can be beneficial to reduce your taxes. You can convert your traditional IRA to Roth IRA, but you need to be cognizant of the fact that the converted amount can be taxed.

7.Opt For Capital Gains Tax

If you belong to the 10% or 12% tax bracket, you can consider selling your stocks that are in green. You can sell stocks that have seen significant appreciation as you do not have to pay any capital gain taxes for the mentioned brackets.

8.Charity

You can club your charitable contributions together for more effective tax planning. You can club your contributions for two years and file in a single year. This will allow you to claim itemized deductions for alternate years.

9.Flexible Spending Account

You cannot carry forward any balance that is in a flexible spending account. It might be a good idea to put the amount to use before it expires.

10.Tax Advisor Services

To maximize your tax refunds, reaching out to tax advisor might be a good idea. And the earlier you meet, the better chances you have of getting a good advisor and good refunds.

Knowing the basics of taxation and ways to reduce liability is helpful in the long run and something that all tax payers must be aware of.

Reference:

https://money.usnews.com/money/personal-finance/taxes/articles/10-year-end-tax-tips