Question

Prepare a five page report for the following.

Please type the answer instead of writting it.

1) Discuss the various Income, Deductions, Exemptions,Exclusions and their associated attached forms that are prominently featured in the preparation of the form 1040- Individual tax Return.

Answer 1

Income:

For a U S citizen or a resident alien, the US tax authorities are happy to get them paid the taxes even on their income earned abroad. The case goes back to 1930s when US companies started earning exports in France and UK particularly raising queries on adopting transfer pricing policies. The tax payers living abroad are subject to the same tax filing requirements as those apply to U.S. citizens living in the United States. A resident alien is an individual who is not a citizen of United States and who meets the green card test or substantial presence test for the calendar year:

• Green Card Test: A tax payer is a U.S. resident if he or she was a lawful permanent resident of the United States at any time.
• Substantial Presence Test: A tax payer is considered to be substantially present in U.S. if she lived 31 days in a current calendar year or a total of 183 days during the current calendar year and preceding two calendar years. This 193 days is divided as the whole presence in the current year, with .33% in the preceding year while 1/6th of the days in the second preceding year.

Deductions:

The amount of the standard deduction you’re entitled to depends on your filing status. As of 2018, the deduction amounts are $12,000 for single taxpayers and married taxpayers filing separate returns, $24,000 if you're married and filing a joint return or a qualifying widow(er), and $18,000 for those who qualify as head of household.

If you and your spouse file separately, you must both take the standard deduction or you must both itemize.

Form 1040 provided by the IRS to calculate your standard deduction if someone else can claim you as a dependent. The deduction for a dependent is the larger of $1,050 or your earned income plus $350 as of 2018. It cannot exceed the deduction of $12,000 for a single filer.

Exemptions & Exclusions:

• The pension and other retirement income exclusion for taxpayers age 62 or older or disabled has been doubled. The exclusion, which is still available only to taxpayers whose NJ gross income is less than $100,000, is now up to $40,000 for joint filers, $20,000 for married filing separate filers, and $30,000 for all other filers.
• Starting in 2017, New Jersey residents who are military veterans that were honorably discharged can claim a $3,000 exemption. For the first year that the veteran claims the exemption, they must first obtain U.S. Dept. of Defense Form DD-214.

Assemble any schedules and forms behind Form 1040 in order of the “Attachment Sequence No.” shown in the upper right corner of the schedule or form. If you have supporting statements, arrange them in the same order as the schedules or forms they support and attach them last. Do not attach correspondence or other items unless required to do so. Attach Forms W-2 and 2439 to the front of Form 1040. If you received a Form W-2c (a corrected Form W-2), attach your original Forms W-2 and any Forms W-2c. Attach Forms W-2G and 1099-R to the front of Form 1040 if tax was withheld.