The Foreign Service Journal, January-February 2022

THE FOREIGN SERVICE JOURNAL | JANUARY-FEBRUARY 2022 57 2021 Individual Income Tax Rates & Brackets 2022 Form W-4 Withholding Certificate Taxpayers usually do not think to revise their FormW-4 with- holdings until April or until they have paid their final 2021 taxes. Delaying a FormW-4 update may result in taxpayers withholding taxes on their wages based on an old calculation for several months of 2022. Don’t wait. AFSA recommends readers revise their FormW-4 (using the 2021 form) via their human resources office or through their employer’s online portal (e.g., Employee Express for State Department employ- ees) as soon as possible. Promptly doing so will help you avoid over-withholding or playing catch-up due to under-withhold- ing for several months. Form 1040 Has Been Revised for 2021 As has been the case for decades, U.S. taxpayers must report “all income from whatever source derived” on IRS Form 1040, which has been slightly revised again this year. Note that this article discusses the most recent draft as of Dec. 12, 2021; the form may change before the final 2021 Form 1040 and accompanying schedules are approved. Adjustments, deduc- tions and credits remain matters of “legislative grace,” so it is important to understand those statutes, regulations, forms and instructions when you claim a credit or deduction. Schedule 1: Report additional income and adjustments, such as tax refunds or credits; alimony received for certain divorces (discussed on page 63); unincorporated or single- member LLC business income or loss (see Schedule C); rental real estate, royalties or other pass-through business income (see Schedule E); unemployment compensation; FEIE income, student loan interest deduction, one-half deduction for self-employment taxes and educator expenses. Schedule 2: Report additional taxes such as the alter- native minimum tax, self-employment tax and household employment taxes. Schedule 3: Claim credits such as the foreign tax credit, credit for child and dependent care, and education credits. The lettered schedules, commonly A through E, remain as follows: (A) Itemized deductions, e.g., medical and dental expenses, deductible taxes and interest paid, gifts to charity, casualty losses from a federally declared disaster, and others. Taxpayers should file Schedule A only if their itemized deduc- tions are higher than the standard deduction for the tax year. (B) Interest, dividends, and foreign trusts and accounts. (C) Profit or loss from business (sole proprietors and single-member LLCs). (D) Capital gains and losses, e.g., investment sales and certain capital gains from the sale of certain realty and virtual currency investments. (E) Supplemental income and loss from rental real estate, royalties, partnerships, S corporations, estates and trusts. Many other lettered schedules and incentive-specific forms (e.g., Form 8283 Noncash Charitable Contributions, Form 8889 Health Savings Accounts, Form 8938 Specified Foreign Financial Assets) and corresponding worksheets may be necessary. All are available from the IRS, most with cor- responding product pages and instructions. AFSA recommends that members review the IRS Form 1040 information webpage, “About Form 1040, U.S. Individual Income Tax Return”; the Form 1040 Instructions; Publication 17, “Your Federal Income Tax”; and this year’s IRS Nationwide Income Tax Forums Online.