The document provides an overview of filing US federal taxes, including determining tax residence status, available credits and deductions, social security numbers, foreign income reporting, retirement plans, and health savings accounts. It notes important details like tax law changes, eligibility for the foreign tax credit, and reporting capital gains from foreign property sales. Filers are advised to disclose all relevant tax information to their preparer and try to work with someone available year-round.

1. Filing U.S Federal Taxes:
The Basics
317-248-0770
www.indytaxservice.com
indytax@indytaxservice.com

2. Purpose of Presentation
• To give you an understanding of how US taxes
work.
• To help you determine which tax forms you need
to file.
• To provide you with background and
understanding to complete your taxes.

3. IMPORTANT
• The information contained in this presentation
can only be used as a guide.
• Tax laws can be changed throughout the year by
congress, even during tax filing times.
• You are always welcome to send me an email
about your questions or concerns on taxes.

4. Determining Your Federal Tax
Residence Status
• If you are in USA for more then 183 days then
you should file 1040. Due April 15th
.
• If your stay was less then 183 and you are filing
your taxes first time in USA then you should file
1040NR. Due April 15th
.
• If you got married at any time during 2016, your
filing status will be Married Filing Jointly for
additional tax benefits.

5. Credits and Deductions
• Tuition and fees deduction towards exam or training.
• Qualified tuition expenses also include computer
equipment and internet access.
• American Opportunity (up to 4 years) and Lifetime
Learning (unlimited) credit
• New energy credit for qualifying home remodeling
(energy efficient windows, roof, furnace.)

6. Social Security Number (SSN) and
Individual Taxpayer Identification
Number (ITIN)
• L Visa holders are eligible for SSN, free of
charge.
• If your dependents (spouse, children, parents)
do not have an SSN, then you need to apply for
an ITIN to claim them on your taxes.

7. Individual Taxpayer Identification
Number (ITIN)
• ITIN is required to claim a dependent or spouse
who does not have an SSN
• Due to heightened scrutiny to the application
process, the IRS now requires either:
 Original, or certified passport copy of spouse, child
or parent dependent.
 Applicants must have a U.S. entry date on the Form
W7.
 Copy of applicants VISA must be included with the
application.

8. Job Expenses and Miscellaneous
Deductions
• IT/Consultants holding H1 and L1 visa are
allowed to take the following deductions.
• Travel and lodging, Meal and entertainment,
Transportation and vehicle expenses,
• Medical bills, Vehicle registration fee,
Donations, Tax preparation fees, Moving
expenses.
• Home mortgage loan interest and educational
loan interest paid in India is deductible on US
taxes.

9. Tax Credit to Avoid Double Taxation
• If you paid taxes in the US and India, then you
are allowed to take Foreign Tax Credit.
• Foreign Tax Credit can carry forward up to ten
years.
• Will need your form 16 from India or your
Indian pay stub for proof.

10. Foreign & Domestic Rental
Properties
• If a client owns a home outside of the US for the purpose
of renting, the income derived from this rental property
must be reported to the IRS
• If the home is available for rent, but is not currently
being rented, or was not rented during the tax year, the
property should still be reported
• If no rent was received, a loss may help reduce a tax
liability
• If a client has a rental property, we will need the rent
received, purchase price, current value, and address of
the property

11. Social Security Benefits
• Foreign resident that have paid social security
taxes for minimum of 5 years in U.S., are eligible
for partial retirement payments. Full retirement
payments require 10 years of social security
payments.
• To view your most recent Statement, please visit
www.socialsecurity.gov/signin and sign into
your account.

12. Foreign Bank Account Reporting (F.B.A.R.)
• Who needs to file?
▫ An individual is required to file an F.B.A.R. if the
sum total of all account outside of the U.S. exceeds
$10,000.
 Example:
 Individual has 4 accounts outside of the U.S. Account 1
has $3000, Account 2 has $2000, Account 3 has
$4000, and Account 5 has $1000.
 Individual is required to file F.B.A.R. due to having
$10,000 in foreign accounts.

13. F.B.A.R. Continued
• Who is required to file, continued?
▫ Individuals who meet substantial presence in the
U.S. during the calendar year are required to file.
▫ By meeting substantial presence, the individual is
considered a resident alien for tax purposes.
▫ If the taxpayer does not meet substantial
presence, they are not required to F.B.A.R.
• What types of foreign accounts qualify?
▫ Checking, Saving, Securities, and Fixed Deposits

14. F.A.T.C.A
• Who is required to file?
▫ Single individuals with $50,000 or more in foreign
accounts
▫ Married individuals with $100,000 or more in foreign
accounts.
• What do you need to do?
▫ Fill the Foreign Income Section of the Questionnaire.
▫ Your Tax Preparer will generate Form 8938 and include
with your tax filing.
▫ No additional tax will be owed for filing.
• Types of Accounts that qualify
▫ Checking, Saving, Securities, and Fixed Deposits

15. Foreign Income
• What is Foreign Income?
▫ Foreign Income includes wages earned and
interest received.
• When does Foreign Income need to be reported?
▫ A taxpayer is required to file Foreign Income on
their tax return if they meet substantial presence
during the tax year.

16. Foreign Income, Continued
• What if you have already paid taxes in your home
country?
▫ If you have already paid taxes on the income received
in your home country, the taxes paid can be included
on the return as a credit.
▫ This credit will help avoid double taxation for the
amount of tax that has already been paid in your home
country.
▫ If your tax rate in the US is higher in the US than in
your home country, you will pay the difference on your
return.

17. Foreign Income, Continued
• What if I have a capital gain from selling stocks or from
my property in my home country?
▫ This question is become more and more popular as more
VISA holders shift to Green Card and U.S. Citizen status.
 Taxpayers are selling their foreign assets and forgetting that
any gains on the sell need to be reported to the U.S. on the tax
return.
 A sell is considered to be a capital gain if the asset sells form
more than it was purchased for.
 This gain is subject to either short-term or long-term capital
gain tax rates in the U.S.
 Any taxes paid in home country can be used to offset the taxes
owed in the U.S.

18. Foreign Income, Continued
• What to remember about Foreign Income.
▫ Just because it was not earned in the U.S. does not mean that it is not
subject to U.S. tax.
▫ Selling assets could lead to a capital gain which needs to be reported on
the return and taxes paid on the gain.
▫ With any income earned in a foreign country, any taxes paid to foreign
country can be used to offset taxes owed on the same income to the U.S.
▫ By reporting your income and taxes paid, you will avoid being double
taxed.
▫ U.S. Resident Aliens, taxpayer who meet substantial presence in the U.S.,
are required to file worldwide income.
 Easy test: If you file on a 1040 tax return form, you are required to file
worldwide income.
▫ ALWAYS DISCLOSE ALL RELEVENT TAX INFORMATION TO YOUR
TAX PREPARER

19. Retirement Plans
• Traditional IRA
▫ Traditional IRA contributions are made with post-tax income and
deductible if income falls within IRS requirements.
▫ Earnings cannot withdrawn until age 59 ½ otherwise tax and
penalty will be imposed.
▫ Earnings are taxed when they are withdrawn.
• Roth IRA
▫ Roth IRA contributions are made with post-tax income and are
not tax deductible.
▫ Earnings are not taxed if withdrawn after age 59 ½.
• The maximum contribution for both types of IRA’s is $5,500 per
year.

20. Retirement Plans, Continued
• 401K
▫ Contributions to 401K’s are made with pre-tax income,
meaning no taxes have been paid on the income that is
contributed to the account.
▫ No tax deduction is eligible on the tax return for 401K
contributions.
▫ Maximum contribution of $18000 for 401K and $12,500
for SIMPLE 401K.

21. Health Savings Account and Flex
Spending Accounts
• Health Savings Account
▫ Post-tax contribution
▫ Maximum contribution of $6,500 per year and unused contributions
roll-over to future years.
▫ Used to pay for medical expenses.
▫ If the account is used for qualified medical expenses, the distribution
from the account is non-taxable.
 The distribution needs to be reported on the tax return in order to avoid paying
the tax on the amount.
• Flex Spending Account
▫ Pre-tax contribution
▫ Contributions are lost if they are not used during the tax year.
▫ There are 2 types of FSA, Health and Dependent Care.
▫ Maximum Health Contribution is $2600 and $5000 for Dependent Care.

22. Texas 529 Plan
• Texas 529 Plans are used to save and pay for
college expenses.
• While most states have a 529 plan that is eligible
to be claimed on the state return as a deduction,
Texas does not have a state tax return so no
benefit is available during the tax year for
contributions made to the 529 plan.
• There are 2 types of 529 plans in Texas, the
Texas College Savings Plan and the LoneStar 529
Plan.

23. Tax Filing Notes
• Remember – Not filing tax forms can create
future immigration problems.
• If you forgot to file on time, send the forms in
anyway. Although you might be subject to
penalties.
• Try to work with someone who is open year
around.
• Differences between Indy Tax Service and our
competitors.

24. Questions and Concerns
You can email your tax preparer
or indytax@indytaxservice.com