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To begin with, the deadline for filing Individual returns would be April 15th 2014. However, IRS would start processing returns from January 30 2014. The following is an excellent reference for you.http://taxes.about.com/od/Federal-Income-Taxes/qt/tax-deadlines.htm
1. You would include your interest income in 2014 returns. Because, it would be in 2014 that you would actually receive interest. In 2013, it would have just accrued.
However, if the interest is paid out by the bank QUARTERLY, then you would show two quarters interest in 2013 and the another two in 2014
Yes, assuming that there is no other income, unearned income below $1000, neither YOU or the KID is required to report the same.
Yes, that will be no tax payment on it as such and thus it is tax free as $1000 would be the standard deduction given to a kid in the given year 2013
Now, if the unearned income is above 1000 but below $2000 -- For 2013, the first $1,000 of unearned income a child or college student earns will be offset by the $1,000 standard deduction (assuming the child has no earned income), and the next $1,000 of such unearned income will be taxed at the child’s tax rate., i.e. 10%
EARNED income is taxable
The limit of $1000 is not likely to decrease.
I would not call it manipulate. You can certainly call that "Tax Planning". YES, parents can plan investments of kids / each child in such a way that the income remains below $1000 limit.
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Thanks , please clarify :
(1) So when we actually receive any interest or unearned income , we need to report it in the Income Tax Return of that year only and it does not matter when was this interest accrued or earned like if i open a saving account on 1st Feb., 2013 and its interest is being earned or accrued from Feb. to Dec. month of 2013 but because i get only annual interest at the end of one year and actually i received the interest on 31st Jan., 2014 ............ so it will not be shown or taxed in the Income Tax Return of 2013 but will be shown in the Return of 2014 , ...................... am i right ?
(2) As you told above that EARNED income is taxable , so has interest not been earned in 2013 in my above example but we will tax or show it in the return of 2014 when it is actually received in our hands ? .............. i hope Earned or Accrued are the same thing but we show or tax it only when actually Received - There are two things - a) Interest / income earned or accrued and b) Interest / income actually received , which one is taxable and in which year ?
(3) What is called Kiddi Tax (is 10% rate of tax ) and is it always 10% ?
(4) If i buy some Insurance Plan for my kid in India in which i will need to pay annually around Rs.20,000 a year for 10 yrs and after that my kid will get around Rs.30,000 each year till his life , ............. what will be my tax liability in such situation ?
Thanks , going to accept your answer .
(1) Is income Accrued or Earned the same thing , but it is taxed only when it is actually received irrespective of the time of its accrual or earning ?
(2) In respect of my 4th Question Point above , please clarify what does it mean You will be able to claim them on your taxes because as per the policy terms i will have to pay annual premium of Rs.20,000 for coming 10 yrs and from coming 8th year insurance company will give Rs.30,000 each year till the life of kid . So in the coming 8 yrs i will only pay premium for my kid and 9th year onwards unearned income will start for my kid . Is FBAR filing required for this policy taking ?
In respect of your above 2nd answer , i have 0 income in India now and if i have any insurance policy on which i pay regular yearly premium , do i need to file Income Tax Return in India too ?
two years back when i was shifted to USA , my CA there in New Delhi clearly told that as you dont have any income in India , you dont need to file any return in India and moreover indians having less than Rs.1,80,000 income in a year , dont need to file tax return as Rs.1,80,000 is exempted income limit . What is that ?
I find it difficult to agree because you would not file any return in India if you do not do any financial transaction. If you would be buying a insurance policy, to the best of my knowledge, you would be required to file nil returns as your income would be below threshold limits. These are threshold limits are of taxable income, not the threshold limits for filing returns.
Otherwise, any PAN holder is required to file returns, even if they are nil returns. I am sure this would help.
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