Federal income tax: the tax that applies no matter which state you live in
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Key takeaways
Federal income tax applies to income earned in the U.S., regardless of which state someone lives in, and is separate from any state income tax.
The U.S. uses a progressive bracket system, where different portions of income are taxed at different rates.
Whether someone is taxed on worldwide income or only U.S.-source income depends on their specific residency status for tax purposes.
Filing requirements apply based on income level and filing status, generally due by mid-April each year.
Foreign income reporting is a genuinely complex area worth professional guidance if it applies to a specific situation.
Federal income tax applies to income earned in the U.S., no matter which state you live in. Here’s how it works, especially when filing for the first time.
How federal income tax works
Federal income tax is collected by the IRS on income earned within the U.S. and, depending on specific tax residency status, potentially on income earned elsewhere too. The U.S. uses a progressive bracket system, meaning different portions of income are taxed at increasing rates as income rises, rather than the entire income being taxed at a single flat rate. Most employees have federal income tax withheld directly from each paycheck, based on the information provided on Form W-4, with any difference between what was withheld and what’s actually owed reconciled when filing an annual return.
How to file federal income tax step by step
Determine tax residency status. According to IRS Publication 519(opens in new window), whether someone is taxed as a resident alien or nonresident alien affects both which form to file and whether worldwide or only U.S.-source income is taxed.
Gather income documents. This typically includes a W-2 from an employer, and potentially a 1099 form for other income like self-employment or investment earnings.
Choose the correct filing status and form. A resident alien generally files Form 1040, while a nonresident alien generally files Form 1040-NR.
File by the deadline. Most individual returns are due in mid-April, though the specific date and any extension options can shift slightly year to year.
What’s different for immigrants filing for the first time
Determining residency status for tax purposes, distinct from immigration status, is often the first genuinely confusing step for a newcomer, since the two systems use overlapping but different concepts. The green card test and the substantial presence test, both explained in detail in IRS Publication 519, determine whether someone is treated as a resident alien, generally taxed like a U.S. citizen on worldwide income, or a nonresident alien, generally taxed only on U.S.-source income.
What federal income tax means for people sending money internationally
Sending money to family abroad doesn’t create a federal income tax obligation on the transfer itself, since sending one’s own already-taxed income to support family is generally not a taxable event for the sender. What does matter is accurately reporting the income that funded the transfer in the first place, and, separately, understanding whether any foreign income personally received needs to be reported on a U.S. return based on specific residency status.
When to consult a tax professional
Consult a tax professional when unsure about qualifying as a resident or nonresident alien for a specific tax year, since this determination affects the entire filing approach and can be genuinely nuanced for someone who arrived or departed partway through the year. It’s also worth professional guidance for anyone with income from outside the U.S., since foreign income reporting rules and any applicable tax treaty provisions add real complexity beyond a standard domestic return. Finally, seek help if immigration status changed during the tax year, since a change in status can affect residency determination for that specific year.
Why estimated tax payments matter for self-employment income
Significant self-employment or other income without regular withholding may require quarterly estimated tax payments throughout the year rather than paying everything at filing time, and failing to do so can result in a penalty even if the full amount owed is eventually paid by the filing deadline.
Amended returns exist for a reason
Discovering an error after filing, whether income was missed or a deduction claimed incorrectly, means filing an amended return corrects the record and is a normal, expected part of the tax system, not something to avoid out of concern about drawing unwanted attention to the original filing.
Why a tax extension doesn’t extend your payment deadline
Filing for an extension provides more time to submit the return itself, but it doesn’t extend the deadline to actually pay any tax owed, meaning interest and penalties can still accrue on an unpaid balance even after properly filing for a filing extension.
Why a change in marital status mid-year affects your filing options
Getting married or divorced during the tax year affects which filing status is available for that entire year, based generally on marital status as of December 31st, regardless of when during the year the change actually occurred.
For families managing both tax filing and a major purchase like a home, this guide to buying your first home(opens in new window) covers a related financial milestone that often coincides with a first U.S. tax filing.
Common questions about federal income tax
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Do I owe federal income tax on money I send to family internationally?
Generally, sending one’s own money to support family abroad is not itself a taxable event for the sender, though confirming the specific situation with a tax professional is always worthwhile, since individual circumstances and any related foreign reporting requirements can vary.
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How do I know if I’m a resident or nonresident alien for tax purposes?
This depends on specific tests described in IRS Publication 519, primarily the green card test and the substantial presence test, both based on immigration status and the amount of time spent in the U.S. over a defined period.
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What happens if I don’t file federal income tax and I should have?
Failing to file when required can result in penalties and interest on any unpaid tax, and the situation generally doesn’t improve by waiting, making it worth addressing promptly, ideally with professional guidance if the situation is complex or more than one filing year has been missed.
In Summary
Federal income tax applies uniformly across the U.S., but determining specific filing obligations as an immigrant requires understanding tax residency status first, a genuinely different question from immigration status.
This publication is provided for general information purposes only and is not intended to cover all aspects of the topics discussed herein. This publication is not a substitute for seeking advice from an applicable specialist or professional. The content in this publication does not constitute legal, tax, or other professional advice from Remitly or any of its affiliates and should not be relied upon as such. While we strive to keep our posts up to date and accurate, we cannot represent, warrant, or otherwise guarantee that the content is accurate, complete, or up to date.