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Frequently Asked Questions

General Questions

Who should file a US tax return?

US Citizens, green card holders earning in excess of 10000 US Dollars, or a non-resident alien with sources of income in the US

Social Security no. or an ITIN (individual tax identification number) for yourself and those claimed as dependents in your filing

To claim your child as your dependent, your child must meet the qualifying child test or the qualifying relative test. To meet the qualifying child test, your child must be younger than you and as of the end of the calendar year, either be younger than 19 years old or be a student and younger than 24 years old. There is no age limit on claiming your child as a dependent if the child meets the qualifying relative test.

As long as you meet all of the following tests, you may claim a dependency exemption for your child:

a) Qualifying child or qualifying relative test

b) Dependent taxpayer test

c) Citizen or resident test, and

d) Joint return test

As a prospective adoptive parent in the process of adopting a US citizen or resident, you will need a taxpayer identifying number (TIN) to claim a dependency exemption and if eligible, a child tax credit for the child who is being adopted. If as the prospective adoptive parent you do not have and are unable to obtain the child's Social Security number (SSN), you should request an adoption taxpayer identification number (ATIN) or individual taxpayer identification number (ITIN).

An ATIN is available if an authorized placement agency placed the child, who is a US citizen or resident, in your household as a prospective adoptive parent for legal adoption. To obtain an ATIN, use Form W-7A (.pdf), Application for Taxpayer Identification Number for Pending US Adoptions. For more information, refer to the Form W-7A and to Adoption Taxpayer Identification Number therein.

If the child is not a US citizen or resident, and if the child qualifies as a dependent, a TIN is still required. To obtain an ITIN, use Form W-7 (.pdf), Application for IRS Individual Taxpayer Identification Number. For more information, refer to Individual Taxpayer Identification Number (ITIN).

A loss on the sale or exchange of personal use property, including a loss on the sale of your home used by you as your personal residence at the time of sale, is not deductible. Only losses associated on property used in a trade or business and investment property (for example, stocks) are deductible

The approved exchange rate is IRS yearly average exchange rate or OANDA yearly average exchange rate

No; for purposes of calculating earned income credit, child support is not considered earned income.

Examples of items that are not earned income include Interest and Dividends, Pensions and Annuities, Social Security and Railroad Retirement Benefits (including Disability Benefits), Alimony and Child Support, Welfare Benefits, Workers’ Compensation Benefits, Unemployment Compensation (Insurance), nontaxable Foster Care Payments, and Veterans Benefits, including VA Rehabilitation Payments. Do not include any of these items in your earned income

No. After you moved out from USA and your earned income is not in the US (and you have not paid taxes in the US), you are not eligible for a refund via additional child tax credit. Even if you claim it, there is every possibility that IRS refuses the refund. It has become a contentious issue with the IRS when people who don’t have a US source of income seek to claim a refund via additional child tax credit

More often than not you will file more taxes when you file separately. However, when filing jointly your liability is higher than when you were single

In India, the income earned by children is clubbed with the parent making the higher income. In the US, IRS allows you to earn approx. 1000 USD per annum tax free per child

You can amend your return within the first three years of original filing date as applicable to you

You can still amend, but will not get any refunds associated with correcting the mistake

You can amend your return within the first three years of original filing date as applicable to you

Most states allow you up to 4 years from your date of filing to amend the return as opposed to the IRS giving you 3 years for federal returns

No. A dependency exemption for a child may only be claimed on one return in a tax year

You may be eligible for some provision but remember the provision in the US are tighter allowing shorter periods of time to satisfy the replacement clauses. It is important that you speak to a consultant before the event.