Negative tax refunds in the United States, similarly to negative tax refunds in Israel, is available to different demographics in the United States subject to compliance with some eligibility criteria.
In this breakdown, we will discuss the common cases where there is the possibility of eligibility for tax refunds in the United States and explain how negative tax refunds work in the United States.
How is eligibility for negative tax refunds in the United States created?
Similar to the calculation of the taxes owed in Israel, the calculation in the United States is also done on a yearly basis. As the salary of hired workers in the United States is paid on a two week or monthly basis, the employer makes an estimates appraisal of the employee’s yearly income, and according to that estimate, they deduct tax from the employee’s salary.
Although the employers estimate usually doesn’t take into account the entitlement of the employee to deductions or tax deductions that are a result of their family status and their compliance to different criteria that allow them to receive tax breaks.
In this way, the eligibility for negative tax refunds is created in the United States, at the expense of tax benefits that were not used during the fiscal year.
How Can Negative Tax Refunds Be Received in the United States?
In order to receive negative tax refunds in the United States, the tax – payer is required to submit a tax report to the American tax authority at the end of the fiscal year, declaring their active yearly income.
In order to minimize the amount of taxes owed, the employee is allowed to report on different types of essential expenses that have to be spent throughout the reported fiscal year, that the American tax laws recognize as expenses that are eligible for deduction when calculating the yearly income for which taxes need to be paid.
The common cases possibly eligible for negative income tax refunds in the United States
In general, there are a variety of cases that allow for negative income tax refunds to be received in the United States, but the classic cases where an American citizen becomes eligible for a negative tax refund in the United States, are those for employed workers who have paid a higher amount of taxes than they owed, tax refunds for children under the age of 17 in the United States, as well as tax refunds in the United States in the form of grants for students with an American citizenship who are eligible to receive certain benefits.
As mentioned, these are just a few of the cases where a tax – payer is eligible to the right of receiving refunds from the IRS which is why it is important for every person to check their eligibility using a company that specializes in American tax consulting and submitting requests for tax refunds in the United States.
Eligibility for negative tax refunds for salaried employees in the United States
Hired workers who have had too much taxes deducted from their salary in the United States may be, as previously mentioned, eligible for a negative tax refund in the United States.
As we have discussed, receiving a negative tax refund could be possible as a result of recognized deductible expenses for tax purposes and lowering the amount of taxes owed to the IRS. Following is a small list of personal specifications and actions that could potentially lower the amount of taxes owed per year by the tax – payer:
- Tax reductions depending on marital status.
- Tax reductions depending on the number of children that the tax – payer has registered as financial dependents.
- Tax breaks on insurance expenses spent on health insurance policies purchased in the United States.
- Tax benefits on allocated funds to an American pension fund.
- Tax reductions on interest when taking out student loans.
- Tax reductions on expenses for moving houses for work purposes.
Tax refunds in the United States for hired workers who did not receive income for a portion of the fiscal year
Much like tax refunds in Israel, hired workers who have only worked a part of the fiscal year in the United States could be eligible to receive refunds from the IRS, at a significant rate.
This is because their taxes are deducted from their pay check at a yearly calculated rate, done by the employer they had while they were working, while is actuality, they received income from that employer for only a portion of the fiscal year.
This way, when the time comes to submit the yearly tax return the employee can spread their income across 12 months and according to that amount pay less income tax for the entire year.
Although there are also cases where the employee will not have the option to spread their taxes across an entire year but rather, they will have to adjust their income in their tax return for a yearly estimate that their employer supplied originally, according to the relative amount out of the fiscal year when they were employed by the same employer in the United States.
This is why it is important to consult with experts on American taxation in order to maximize the eligibility for negative tax refunds in the United States.
The eligibility for negative tax refunds in the United States for children below the age of 17
The United States government allows working parents who have children with American citizenships and are below the age of 17, to enjoy tax breaks. This is in order to incentivize parents to join the work force.
Usually, this tax break works as tax credit that allows the tax – payer to owe lower taxes to the IRS. Alternatively, it could also be received as a tax refund, when the tax – payer does no owe taxes. This tax benefit, offered to parents of children who fulfill the criteria, is limited to a yearly sum of 1,000 dollars.
The basic condition to receive tax refund for dependents, is that the tax – payer must be paying income tax form the salary they receive. In this matter it is important to know that after uncovering cases of tax fraud committed lately by American citizens living outside of the United States, the IRS is more vigilant in enforcement when it comes to tax refund requests for underaged children in the United States.
In this framework, the IRS demands that tax – payers who request negative tax refunds for their children, must submit a translated 106 form from their employer in the country they are residing in, along with their tax return.
In any case, the amount of the refund is based off of the amount of income owing taxes that is made by the parent, so that the bigger the income is, the lower the refund is.
The eligibility for a tax refund in the United States in the form of a student loan for students who have an American citizenship.
The American tax authority offers a tax benefit to students in the United States, that can also be received in part as a tax refund, deposited directly into the student’s bank account.
Students in Israel who have an American citizenship and study in one of the Israeli academic institutes that are recognized by the American education ministry, might be eligible to receive the tax benefit from the IRS as well, with some more conditions applying.
These tax refunds are paid for the tuition of the tax return submitter’s bachelors degree, their spouse’s or one of their children who are considered dependents – as long as they are registered as United States citizens.
This comes out to a tax refund amounting to 2,500 dollars a year, out of which 1,000 dollars can be returned to the tax – payer directly into their bank account, on the condition that they do not owe any amount of taxes.
Are Israelis entitled to receive negative tax return in the United States?
When it comes to negative tax return in the United States, there is a significance to the type of tax return being submitted. Tax – payers who submit tax returns as American citizens must do so using a 1040 form, as opposed to foreign citizens, who are required to submit tax returns using an NR1040 form.
In the latter case, that applies to Israelis who have financial activities in the United States, different requirements apply when submitting the tax refund request to the IRS.
While an American citizen can enjoy tax benefits in the form of deductions and refunds according their income, foreign citizens, including Israelis, can demand tax breaks in accordance to the tax treaty between Israel and the United States. In the manner Israeli too can reduce their tax debts and receive a tax refund for the overflow tax that they have paid in the United States.
This is how you can receive a negative tax refund in the United States quickly and easily
Need further assistance in receiving negative tax refunds in the United States? The expert team at the MasAmerica site will be happy to check the status of your eligibility to receive refunds and help you along the process of submitting the request, until you receive the funds you are entitled to.
