In the United States, taxation represents a fundamental responsibility for every citizen and resident. This obligation not only impacts personal finances but also serves as the foundation for maintaining essential public services. For immigrants navigating the U.S. tax system, understanding proper filing procedures is crucial.
Fundamentals of Taxation
Taxes represent government-collected funds that support public services including social security, healthcare, education, and infrastructure. The primary tax categories include income tax, sales tax, and property tax. Nearly all residents must contribute through these taxation channels.
Income Tax Explained
Income tax is calculated annually based on earnings, typically withheld directly by employers during payroll processing. Both the federal government and most state governments impose income taxes, with exceptions including Alaska, Florida, Nevada, and six other states.
Taxpayers must annually calculate their income and tax liability by completing tax returns. This process remains mandatory even when employers report earnings, as it ensures accuracy and enables access to deductions and credits that can reduce tax burdens. Key tax forms include the W-4 for employees and W-9 for independent contractors.
Employees completing W-4 forms experience automatic payroll deductions. At year's end, they receive W-2 forms detailing annual earnings and tax payments. While most fulfill obligations through payroll deductions, some may owe additional taxes or qualify for refunds if overpayment occurred.
Self-employed individuals follow different procedures. Those submitting W-9 forms receive 1099-MISC documentation for earnings exceeding $600. Many freelancers and small business owners pay self-employment tax calculated from net profits.
Cash-based compensation not reported to authorities constitutes "under-the-table" work and carries no tax documentation requirements.
Tax Rates and Deductions
Federal income tax rates range from 10% to 37% based on earnings and filing status, with annual adjustments possible. Filing status options include single or married categories, with joint filing typically offering lower rates.
Tax credits directly reduce liabilities, with common examples including the Child Tax Credit and Earned Income Credit (for low-income filers). Deductions lower taxable income through either standard amounts or itemized approaches. While standard deductions simplify filing, itemized deductions require documenting qualified expenses like mortgage interest and charitable contributions.
Filing Procedures
The Internal Revenue Service (IRS) administers federal taxes while state revenue departments handle local income taxes. The filing process involves:
- Determining filing requirements
- Gathering necessary documentation
- Choosing submission method (paper or digital)
- Completing federal and state returns
- Remitting any outstanding payments
Taxation for Non-Citizens
The IRS categorizes non-citizens as either "resident aliens" or "nonresident aliens," with the former following identical procedures to citizens. Those lacking Social Security numbers may obtain Individual Taxpayer Identification Numbers (ITINs) via Form W-7. These identifiers facilitate tax credit claims and can support immigration applications.
Undocumented immigrants must still file taxes using ITINs, with compliance potentially demonstrating good moral character for future immigration processes. Nonimmigrant visa holders' requirements vary by residency status.
Numerous organizations offer free or low-cost tax assistance, including the Volunteer Income Tax Assistance (VITA) program—a valuable seasonal resource for eligible filers.