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The little practical guide for the savvy and serene taxpayer

The principle

No one escapes it. Indeed, those who are subject to withholding tax and those who pay all of their tax at once must declare, each year and at the federal and state level, all income received during the financial year. previous tax.

This declaration must be filed no later than April 15 of the year following the income concerned. In practice, if you are declaring your 2018 income, you will have to file your declaration on April 15, 2019, at the latest.

You will therefore have to fill in the 1040 form, used in most cases, but there are other forms, simplified (1040 EZ) or adapted to specific situations (1040 À if you earn less than $100,000 per year). If in doubt about which one to use, 1040 is the form considered standard.

The exception

The obligation to declare applies to a certain amount of income. Of course, this amount is different depending on the family situation, the age of the taxpayer, and the source of his income. In 2018, if you are single under the age of 65, with an annual gross income greater than $12,000, you are required to declare. The same is true if you are a married couple, and you earn at least $24,000 gross per year.

The amount of your tax

Residence of taxpayer

The state of residence will greatly influence the amount of your tax each state applies different tax rates and collects or not taxes of a different nature (federal, federated, local).

For example, Florida, Washington, and Texas have rather lenient taxation as they do not levy an income tax. In contrast, a resident of the Big Apple pays US tax (federal), New York State tax (federal), and NYC city tax. It gets complicated when you know that each state applies a different rate… California is one of the states that tax its taxpayers the most.

Taxpayer status

The amount of the tax varies significantly depending on the status of the taxpayer at the time of the declaration of his income. Thus, in the United States, if the number of children does not significantly influence the amount of your tax, the fact of being married, and of declaring jointly, yes, especially if the spouse does not work. In this case, the household has an additional share and sees the amount of tax greatly reduced.

Adjusted gross income

Calculating the adjusted gross income ( AGI ) is the first step in calculating your tax. To do this, simply add the income of any kind that you have received (salaries, interest, dividends, capital gains on movable and immovable property, property income, etc.) then subtract adjustments such as health insurance contributions.

Deductions

The taxpayer has the choice between deducting a lump sum of deductions ($12,600 for a married couple) or several actual expenses (professional expenses or interest on your house loan). Other possible deductions are tax credits ( non-refundable credits) for dependents and personal exemptions.

In short, there are a lot of them, so the US tax administration has foreseen the blow by preventing the abusive use of deductions with the Alternative Minimum Tax. Through this system, it ensures that you receive a minimum amount of tax from you in case you are tempted to deduct, deduct and deduct again…

How is the amount of tax calculated in the United States?

As in France, we use here a progressive scale ranging from 10 to 39.6% with a system of tranches: the first tranche benefits from the lowest rate (10%) and so on.

When to pay your tax?

There are 2 scenarios:

Withholding tax

For certain incomes such as wages, and often pensions and annuities, it is compulsory. In this case, your employer will give you each year before January 31, the W2 form which summarizes the amount of taxes already paid according to the salary received.

Installment payments

If you are a sole proprietor, you will need to complete Form 1040ES and pay federal income tax for the current year quarterly, typically on April 15, June 15, September 15, and January 15 of Next year.

Phew, it’s over for this year! Not quite

It is recommended that you keep your declarations and all supporting documents for 6 years, even if the IRS has 3 years to carry out an audit. Indeed, in case of suspicion of error or fraud, this period can be doubled. You can never be too careful…

It’s not us who said it: “Bullshit is like taxes, we always end up paying them” Michel Audiard.

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