How to file US tax return

This is the information I found useful when filing US tax returns as a resident alien on a work visa.

• Both federal and state tax returns have to be filed.
• The tax year is from 1-Jan to 31-Dec. For example, the 2019 tax year is from 1-Jan-2019 to 31-Dec-2019 and you file tax for it in 2020 before 30-Apr-2020.

Tools to file

The popular choices seem to be:

• Turbo Tax: This online is the most popular choice. I found it to be the easiest to use, since it has lots of help to guide you during the process. However, you cannot use it if your spouse or child does not have an ITIN number.
• Tax Preparer: Humans who can file taxes for you. I had to use a tax preparer my first year since they turned out to be the easiest option to file ITIN application for my spouse and child. I was also surprised to find that their fees were comparable to Turbo Tax fees. The prepaper I used was Diwakar Taxes. You should probably choose someone located close to you, since you need to drop by their office.

Other choices seem to be:

• CreditKarma Tax: A free Online service. It is not as friendly as Turbo Tax.
• 1040 Excel spreadsheet tax calculator: For folks who want to enter the tax return themselves.

Interest

Use the form 1099-INT provided by your checking bank account, savings bank account and the cash accounts in your brokerage firm or your mutual fund firm.

Note there will be a separate entry or form for each account, even if the firm might send a single consolidated form to you.

Dividends

Use the form 1099-DIV provided by your brokerage firm or your mutual fund firm.

Foreign bank accounts

If there are foreign bank accounts in your name, you need to report:

• Form 1099-OID: To indicate you have foreign bank accounts. If you do not have deposits that are higher than a certain big amount (in 2019 tax year this was $100,000), you just need to indicate that.
• Form 1099-INT (see above): For the interest earned in these bank accounts during the tax year. My Indian banks do not issue 1099-INT, though my accounts are NRE. So I had to enter the interest amount in USD by converting them using the IRS currency exchange rate.

More info here.

RSU and ESPP sales

If you sold any of the RSU or ESPP shares you got from your company during the tax year, you will need to declare that. I found that I needed these documents from my brokerage firm (Charles Schwab): 1099-B and the year-end statement.

Turbo Tax has separate sections for RSU and ESPP. I had to enter each of the sales listed in 1099-B (X shares of Y) individually in Turbo Tax. You will need to choose if the sale was short-term or long-term and if the basis was reported to IRS or not: this is mentioned above the listing of sales in 1099-B. For my case, ESPP basis was reported, but RSU basis was not reported. The other details needed are the acquired and sold dates (Box 1b and 1c), proceeds (Box 1d) and the cost basis (Box 1e) for each sale. For ESPP, you might need to also additionally enter the adjusted cost basis, which I found listed in the year-end statement.

Self income

Small incomes from selling stuff or online ad revenue can be reported in Turbo Tax as independent income.

Spouse

My spouse was on the H4 dependent visa for my first income tax filing. The income tax application requires the spouse to have either a SSN or a ITIN number. For a H4 dependent who does not have EAD, obtaining an ITIN number is the only choice. The process to obtain this is complicated - so the easiest way is to use a tax consultant to file the taxes the first time and let them apply for ITIN along with the application.

If the spouse upgrades to EAD later, they get a SSN number. In the consequent income tax filing, if the SSN is used, the application will be rejected with the reject code IND-032-04. The solution is to enter 0 as the prior Adjusted Gross Income (AGI). More info on this particular error can be found here at IRS and here at Intuit.