What is meant by income tax returns? why one has to file his returns every year?

For federal income tax purposes, assuming you file a joint return and assuming all of your income is from wages, you have a standard deduction of $11,400 and personal exemptions totaling $7,300. This means no more than $1,300 of that $20,000 would be subject to income tax. As students, you may be eligible for education credits which could reduce your tax liability to zero.

If you have children you may be eligible for refundable credits which would give you a tax refund greater than any amount of federal income tax withheld.

The taxable income depends on your residential status and the source of income among other factors. If you are a US Citizen or a resident(present for more than 183 days in US) of US for the tax year you are filing, you shall be eligible to claim the Standard Deduction for that year (for the tax year 2009, it was $11,400 for Married Filing Jointly) and Personal Exemption on your name and your spouse name. (for the tax year 2009, it was $3,500 per person).

If you are a Non-Resident, you are not eligible to claim the Standard Deduction instead are eligible to claim Itemized Deduction (provided you have any eligible expenses) along with personal exemption. In determining your Residential status, even your visa type shall have its role. Secondly, you shall be required to file two separate Returns - one for you and one for your spouse.

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