Tax system

The USA has a federal tax system as well as a State and City tax system. The income tax is directly taken from salaries and at different rates depending on how much your income is.

A foreigner will be taxable, for a calendar year, in the same way as a person living in the United States, if he is permanent resident, a holder of a title of stay (green card) for any period of time, or if he lives in the United States on average at least 122 days over 3 years .

Federal tax returns need to be filed by April 15. There are many specialists such as H&R Block who will help you file your tax returns for a fee or you can purchase a tax software which will walk you through the steps. You can also read the various publications and instruction booklets to help you fill out the tax forms. If your income is solely your wages (not including investments) then you should be able to fill out the return yourself. Otherwise, it may be helpful to go to a specialist (at least the first time so that you can see what needs to be done).

Generally, the American subsidiaries of foreign companies give their expatriates this service in the US. An agreement between numerous countries and the United States avoids the double taxation on the income. So, some incomes are exempted from any taxation in the country of origin, the others give place to a sharing of imposition between both countries, the others finally, are imposed in both countries at the same moment.

In 2006, the Federal tax brackets for a single (unmarried) person were:

• 10%: from $0 to $7,550
• 15%: from $7,551 to $30,650
• 25%: from $30,651 to $74,200
• 28%: from $74,201 to $154,800
• 33%: from $154,801 to $336,550
• 35%: $336,551 and above

For example, a single (unmarried) taxpayer in the USA who earned $100,000 would owe $22,345.50 in taxes, for an effective tax rate of 22.5%. This is determined as: 10% of 7,550 + 15% of the next 23,100 + 25% of the next 43,550 + 28% of the remaining 25,850 = $22,345.50

You can get the tax declarations of various manners: