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1040 Form For 2010

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1040 Form For 2010

1040 form for 2010 4. 1040 form for 2010   Foreign Earned Income and Housing: Exclusion – Deduction Table of Contents Topics - This chapter discusses: Useful Items - You may want to see: Who Qualifies for the Exclusions and the Deduction? RequirementsTax Home in Foreign Country Bona Fide Residence Test Physical Presence Test Waiver of Time Requirements U. 1040 form for 2010 S. 1040 form for 2010 Travel Restrictions Foreign Earned Income Foreign Earned Income ExclusionLimit on Excludable Amount Choosing the Exclusion Foreign Housing Exclusion and DeductionHousing Amount Foreign Housing Exclusion Foreign Housing Deduction Married Couples Form 2555 and Form 2555-EZForm 2555-EZ Form 2555 Topics - This chapter discusses: Who qualifies for the foreign earned income exclusion, the foreign housing exclusion, and the foreign housing deduction, The requirements that must be met to claim either exclusion or the deduction, How to figure the foreign earned income exclusion, and How to figure the foreign housing exclusion and the foreign housing deduction. 1040 form for 2010 Useful Items - You may want to see: Publication 519 U. 1040 form for 2010 S. 1040 form for 2010 Tax Guide for Aliens 570 Tax Guide for Individuals With Income from U. 1040 form for 2010 S. 1040 form for 2010 Possessions 596 Earned Income Credit (EIC) Form (and Instructions) 1040X Amended U. 1040 form for 2010 S. 1040 form for 2010 Individual Income Tax Return 2555 Foreign Earned Income 2555-EZ Foreign Earned Income Exclusion See chapter 7 for information about getting these publications and forms. 1040 form for 2010 Who Qualifies for the Exclusions and the Deduction? If you meet certain requirements, you may qualify for the foreign earned income and foreign housing exclusions and the foreign housing deduction. 1040 form for 2010 If you are a U. 1040 form for 2010 S. 1040 form for 2010 citizen or a resident alien of the United States and you live abroad, you are taxed on your worldwide income. 1040 form for 2010 However, you may qualify to exclude from income up to $97,600 of your foreign earnings. 1040 form for 2010 In addition, you can exclude or deduct certain foreign housing amounts. 1040 form for 2010 See Foreign Earned Income Exclusion and Foreign Housing Exclusion and Deduction, later. 1040 form for 2010 You also may be entitled to exclude from income the value of meals and lodging provided to you by your employer. 1040 form for 2010 See Exclusion of Meals and Lodging, later. 1040 form for 2010 Requirements To claim the foreign earned income exclusion, the foreign housing exclusion, or the foreign housing deduction, you must meet all three of the following requirements. 1040 form for 2010 Your tax home must be in a foreign country. 1040 form for 2010 You must have foreign earned income. 1040 form for 2010 You must be one of the following. 1040 form for 2010 A U. 1040 form for 2010 S. 1040 form for 2010 citizen who is a bona fide resident of a foreign country or countries for an uninterrupted period that includes an entire tax year. 1040 form for 2010 A U. 1040 form for 2010 S. 1040 form for 2010 resident alien who is a citizen or national of a country with which the United States has an income tax treaty in effect and who is a bona fide resident of a foreign country or countries for an uninterrupted period that includes an entire tax year. 1040 form for 2010 A U. 1040 form for 2010 S. 1040 form for 2010 citizen or a U. 1040 form for 2010 S. 1040 form for 2010 resident alien who is physically present in a foreign country or countries for at least 330 full days during any period of 12 consecutive months. 1040 form for 2010 See Publication 519 to find out if you are a U. 1040 form for 2010 S. 1040 form for 2010 resident alien for tax purposes and whether you keep that alien status when you temporarily work abroad. 1040 form for 2010 If you are a nonresident alien married to a U. 1040 form for 2010 S. 1040 form for 2010 citizen or resident alien, and both you and your spouse choose to treat you as a resident alien, you are a resident alien for tax purposes. 1040 form for 2010 For information on making the choice, see the discussion in chapter 1 under Nonresident Alien Spouse Treated as a Resident . 1040 form for 2010 Waiver of minimum time requirements. 1040 form for 2010   The minimum time requirements for bona fide residence and physical presence can be waived if you must leave a foreign country because of war, civil unrest, or similar adverse conditions in that country. 1040 form for 2010 This is fully explained under Waiver of Time Requirements , later. 1040 form for 2010   See Figure 4-A and information in this chapter to determine if you are eligible to claim either exclusion or the deduction. 1040 form for 2010 Tax Home in Foreign Country To qualify for the foreign earned income exclusion, the foreign housing exclusion, or the foreign housing deduction, your tax home must be in a foreign country throughout your period of bona fide residence or physical presence abroad. 1040 form for 2010 Bona fide residence and physical presence are explained later. 1040 form for 2010 Tax Home Your tax home is the general area of your main place of business, employment, or post of duty, regardless of where you maintain your family home. 1040 form for 2010 Your tax home is the place where you are permanently or indefinitely engaged to work as an employee or self-employed individual. 1040 form for 2010 Having a “tax home” in a given location does not necessarily mean that the given location is your residence or domicile for tax purposes. 1040 form for 2010 If you do not have a regular or main place of business because of the nature of your work, your tax home may be the place where you regularly live. 1040 form for 2010 If you have neither a regular or main place of business nor a place where you regularly live, you are considered an itinerant and your tax home is wherever you work. 1040 form for 2010 You are not considered to have a tax home in a foreign country for any period in which your abode is in the United States. 1040 form for 2010 However, your abode is not necessarily in the United States while you are temporarily in the United States. 1040 form for 2010 Your abode is also not necessarily in the United States merely because you maintain a dwelling in the United States, whether or not your spouse or dependents use the dwelling. 1040 form for 2010 “Abode” has been variously defined as one's home, habitation, residence, domicile, or place of dwelling. 1040 form for 2010 It does not mean your principal place of business. 1040 form for 2010 “Abode” has a domestic rather than a vocational meaning and does not mean the same as “tax home. 1040 form for 2010 ” The location of your abode often will depend on where you maintain your economic, family, and personal ties. 1040 form for 2010 Example 1. 1040 form for 2010 You are employed on an offshore oil rig in the territorial waters of a foreign country and work a 28-day on/28-day off schedule. 1040 form for 2010 You return to your family residence in the United States during your off periods. 1040 form for 2010 You are considered to have an abode in the United States and do not satisfy the tax home test in the foreign country. 1040 form for 2010 You cannot claim either of the exclusions or the housing deduction. 1040 form for 2010 Example 2. 1040 form for 2010 For several years, you were a marketing executive with a producer of machine tools in Toledo, Ohio. 1040 form for 2010 In November of last year, your employer transferred you to London, England, for a minimum of 18 months to set up a sales operation for Europe. 1040 form for 2010 Before you left, you distributed business cards showing your business and home addresses in London. 1040 form for 2010 You kept ownership of your home in Toledo but rented it to another family. 1040 form for 2010 You placed your car in storage. 1040 form for 2010 In November of last year, you moved your spouse, children, furniture, and family pets to a home your employer rented for you in London. 1040 form for 2010 Shortly after moving, you leased a car and you and your spouse got British driving licenses. 1040 form for 2010 Your entire family got library cards for the local public library. 1040 form for 2010 You and your spouse opened bank accounts with a London bank and secured consumer credit. 1040 form for 2010 You joined a local business league and both you and your spouse became active in the neighborhood civic association and worked with a local charity. 1040 form for 2010 Your abode is in London for the time you live there. 1040 form for 2010 You satisfy the tax home test in the foreign country. 1040 form for 2010 Please click here for the text description of the image. 1040 form for 2010 Figure 4–A Can I Claim the Exclusion or Deduction? Temporary or Indefinite Assignment The location of your tax home often depends on whether your assignment is temporary or indefinite. 1040 form for 2010 If you are temporarily absent from your tax home in the United States on business, you may be able to deduct your away-from-home expenses (for travel, meals, and lodging), but you would not qualify for the foreign earned income exclusion. 1040 form for 2010 If your new work assignment is for an indefinite period, your new place of employment becomes your tax home and you would not be able to deduct any of the related expenses that you have in the general area of this new work assignment. 1040 form for 2010 If your new tax home is in a foreign country and you meet the other requirements, your earnings may qualify for the foreign earned income exclusion. 1040 form for 2010 If you expect your employment away from home in a single location to last, and it does last, for 1 year or less, it is temporary unless facts and circumstances indicate otherwise. 1040 form for 2010 If you expect it to last for more than 1 year, it is indefinite. 1040 form for 2010 If you expect it to last for 1 year or less, but at some later date you expect it to last longer than 1 year, it is temporary (in the absence of facts and circumstances indicating otherwise) until your expectation changes. 1040 form for 2010 Once your expectation changes, it is indefinite. 1040 form for 2010 Foreign Country To meet the bona fide residence test or the physical presence test, you must live in or be present in a foreign country. 1040 form for 2010 A foreign country includes any territory under the sovereignty of a government other than that of the United States. 1040 form for 2010 The term “foreign country” includes the country's airspace and territorial waters, but not international waters and the airspace above them. 1040 form for 2010 It also includes the seabed and subsoil of those submarine areas adjacent to the country's territorial waters over which it has exclusive rights under international law to explore and exploit the natural resources. 1040 form for 2010 The term “foreign country” does not include Antarctica or U. 1040 form for 2010 S. 1040 form for 2010 possessions such as Puerto Rico, Guam, the Commonwealth of the Northern Mariana Islands, the U. 1040 form for 2010 S. 1040 form for 2010 Virgin Islands, and Johnston Island. 1040 form for 2010 For purposes of the foreign earned income exclusion, the foreign housing exclusion, and the foreign housing deduction, the terms “foreign,” “abroad,” and “overseas” refer to areas outside the United States and those areas listed or described in the previous sentence. 1040 form for 2010 American Samoa, Guam, and the Commonwealth of the Northern Mariana Islands Residence or presence in a U. 1040 form for 2010 S. 1040 form for 2010 possession does not qualify you for the foreign earned income exclusion. 1040 form for 2010 You may, however, qualify for an exclusion of your possession income on your U. 1040 form for 2010 S. 1040 form for 2010 return. 1040 form for 2010 American Samoa. 1040 form for 2010   There is a possession exclusion available to individuals who are bona fide residents of American Samoa for the entire tax year. 1040 form for 2010 Gross income from sources within American Samoa may be eligible for this exclusion. 1040 form for 2010 Income that is effectively connected with the conduct of a trade or business within American Samoa also may be eligible for this exclusion. 1040 form for 2010 Use Form 4563, Exclusion of Income for Bona Fide Residents of American Samoa, to figure the exclusion. 1040 form for 2010 Guam and the Commonwealth of the Northern Mariana Islands. 1040 form for 2010   An exclusion will be available to residents of Guam and the Commonwealth of the Northern Mariana Islands if, and when, new implementation agreements take effect between the United States and those possessions. 1040 form for 2010   For more information, see Publication 570. 1040 form for 2010 Puerto Rico and U. 1040 form for 2010 S. 1040 form for 2010 Virgin Islands Residents of Puerto Rico and the U. 1040 form for 2010 S. 1040 form for 2010 Virgin Islands cannot claim the foreign earned income exclusion or the foreign housing exclusion. 1040 form for 2010 Puerto Rico. 1040 form for 2010   Generally, if you are a U. 1040 form for 2010 S. 1040 form for 2010 citizen who is a bona fide resident of Puerto Rico for the entire tax year, you are not subject to U. 1040 form for 2010 S. 1040 form for 2010 tax on income from Puerto Rican sources. 1040 form for 2010 This does not include amounts paid for services performed as an employee of the United States. 1040 form for 2010 However, you are subject to U. 1040 form for 2010 S. 1040 form for 2010 tax on your income from sources outside Puerto Rico. 1040 form for 2010 In figuring your U. 1040 form for 2010 S. 1040 form for 2010 tax, you cannot deduct expenses allocable to income not subject to tax. 1040 form for 2010 Bona Fide Residence Test You meet the bona fide residence test if you are a bona fide resident of a foreign country or countries for an uninterrupted period that includes an entire tax year. 1040 form for 2010 You can use the bona fide residence test to qualify for the exclusions and the deduction only if you are either: A U. 1040 form for 2010 S. 1040 form for 2010 citizen, or A U. 1040 form for 2010 S. 1040 form for 2010 resident alien who is a citizen or national of a country with which the United States has an income tax treaty in effect. 1040 form for 2010 You do not automatically acquire bona fide resident status merely by living in a foreign country or countries for 1 year. 1040 form for 2010 If you go to a foreign country to work on a particular job for a specified period of time, you ordinarily will not be regarded as a bona fide resident of that country even though you work there for 1 tax year or longer. 1040 form for 2010 The length of your stay and the nature of your job are only two of the factors to be considered in determining whether you meet the bona fide residence test. 1040 form for 2010 Bona fide residence. 1040 form for 2010   To meet the bona fide residence test, you must have established a bona fide residence in a foreign country. 1040 form for 2010   Your bona fide residence is not necessarily the same as your domicile. 1040 form for 2010 Your domicile is your permanent home, the place to which you always return or intend to return. 1040 form for 2010 Example. 1040 form for 2010 You could have your domicile in Cleveland, Ohio, and a bona fide residence in Edinburgh, Scotland, if you intend to return eventually to Cleveland. 1040 form for 2010 The fact that you go to Scotland does not automatically make Scotland your bona fide residence. 1040 form for 2010 If you go there as a tourist, or on a short business trip, and return to the United States, you have not established bona fide residence in Scotland. 1040 form for 2010 But if you go to Scotland to work for an indefinite or extended period and you set up permanent quarters there for yourself and your family, you probably have established a bona fide residence in a foreign country, even though you intend to return eventually to the United States. 1040 form for 2010 You are clearly not a resident of Scotland in the first instance. 1040 form for 2010 However, in the second, you are a resident because your stay in Scotland appears to be permanent. 1040 form for 2010 If your residency is not as clearly defined as either of these illustrations, it may be more difficult to decide whether you have established a bona fide residence. 1040 form for 2010 Determination. 1040 form for 2010   Questions of bona fide residence are determined according to each individual case, taking into account factors such as your intention, the purpose of your trip, and the nature and length of your stay abroad. 1040 form for 2010   To meet the bona fide residence test, you must show the Internal Revenue Service (IRS) that you have been a bona fide resident of a foreign country or countries for an uninterrupted period that includes an entire tax year. 1040 form for 2010 The IRS decides whether you are a bona fide resident of a foreign country largely on the basis of facts you report on Form 2555. 1040 form for 2010 IRS cannot make this determination until you file Form 2555. 1040 form for 2010 Statement to foreign authorities. 1040 form for 2010   You are not considered a bona fide resident of a foreign country if you make a statement to the authorities of that country that you are not a resident of that country, and the authorities: Hold that you are not subject to their income tax laws as a resident, or Have not made a final decision on your status. 1040 form for 2010 Special agreements and treaties. 1040 form for 2010   An income tax exemption provided in a treaty or other international agreement will not in itself prevent you from being a bona fide resident of a foreign country. 1040 form for 2010 Whether a treaty prevents you from becoming a bona fide resident of a foreign country is determined under all provisions of the treaty, including specific provisions relating to residence or privileges and immunities. 1040 form for 2010 Example 1. 1040 form for 2010 You are a U. 1040 form for 2010 S. 1040 form for 2010 citizen employed in the United Kingdom by a U. 1040 form for 2010 S. 1040 form for 2010 employer under contract with the U. 1040 form for 2010 S. 1040 form for 2010 Armed Forces. 1040 form for 2010 You are not subject to the North Atlantic Treaty Status of Forces Agreement. 1040 form for 2010 You may be a bona fide resident of the United Kingdom. 1040 form for 2010 Example 2. 1040 form for 2010 You are a U. 1040 form for 2010 S. 1040 form for 2010 citizen in the United Kingdom who qualifies as an “employee” of an armed service or as a member of a “civilian component” under the North Atlantic Treaty Status of Forces Agreement. 1040 form for 2010 You are not a bona fide resident of the United Kingdom. 1040 form for 2010 Example 3. 1040 form for 2010 You are a U. 1040 form for 2010 S. 1040 form for 2010 citizen employed in Japan by a U. 1040 form for 2010 S. 1040 form for 2010 employer under contract with the U. 1040 form for 2010 S. 1040 form for 2010 Armed Forces. 1040 form for 2010 You are subject to the agreement of the Treaty of Mutual Cooperation and Security between the United States and Japan. 1040 form for 2010 Being subject to the agreement does not make you a bona fide resident of Japan. 1040 form for 2010 Example 4. 1040 form for 2010 You are a U. 1040 form for 2010 S. 1040 form for 2010 citizen employed as an “official” by the United Nations in Switzerland. 1040 form for 2010 You are exempt from Swiss taxation on the salary or wages paid to you by the United Nations. 1040 form for 2010 This does not prevent you from being a bona fide resident of Switzerland. 1040 form for 2010 Effect of voting by absentee ballot. 1040 form for 2010   If you are a U. 1040 form for 2010 S. 1040 form for 2010 citizen living abroad, you can vote by absentee ballot in any election held in the United States without risking your status as a bona fide resident of a foreign country. 1040 form for 2010   However, if you give information to the local election officials about the nature and length of your stay abroad that does not match the information you give for the bona fide residence test, the information given in connection with absentee voting will be considered in determining your status, but will not necessarily be conclusive. 1040 form for 2010 Uninterrupted period including entire tax year. 1040 form for 2010   To meet the bona fide residence test, you must reside in a foreign country or countries for an uninterrupted period that includes an entire tax year. 1040 form for 2010 An entire tax year is from January 1 through December 31 for taxpayers who file their income tax returns on a calendar year basis. 1040 form for 2010   During the period of bona fide residence in a foreign country, you can leave the country for brief or temporary trips back to the United States or elsewhere for vacation or business. 1040 form for 2010 To keep your status as a bona fide resident of a foreign country, you must have a clear intention of returning from such trips, without unreasonable delay, to your foreign residence or to a new bona fide residence in another foreign country. 1040 form for 2010 Example 1. 1040 form for 2010 You arrived with your family in Lisbon, Portugal, on November 1, 2011. 1040 form for 2010 Your assignment is indefinite, and you intend to live there with your family until your company sends you to a new post. 1040 form for 2010 You immediately established residence there. 1040 form for 2010 You spent April of 2012 at a business conference in the United States. 1040 form for 2010 Your family stayed in Lisbon. 1040 form for 2010 Immediately following the conference, you returned to Lisbon and continued living there. 1040 form for 2010 On January 1, 2013, you completed an uninterrupted period of residence for a full tax year (2012), and you meet the bona fide residence test. 1040 form for 2010 Example 2. 1040 form for 2010 Assume the same facts as in Example 1, except that you transferred back to the United States on December 13, 2012. 1040 form for 2010 You would not meet the bona fide residence test because your bona fide residence in the foreign country, although it lasted more than a year, did not include a full tax year. 1040 form for 2010 You may, however, qualify for the foreign earned income exclusion or the housing exclusion or deduction under the physical presence test (discussed later). 1040 form for 2010 Bona fide resident for part of a year. 1040 form for 2010   Once you have established bona fide residence in a foreign country for an uninterrupted period that includes an entire tax year, you are a bona fide resident of that country for the period starting with the date you actually began the residence and ending with the date you abandon the foreign residence. 1040 form for 2010 Your period of bona fide residence can include an entire tax year plus parts of 2 other tax years. 1040 form for 2010 Example. 1040 form for 2010 You were a bona fide resident of Singapore from March 1, 2011, through September 14, 2013. 1040 form for 2010 On September 15, 2013, you returned to the United States. 1040 form for 2010 Since you were a bona fide resident of a foreign country for all of 2012, you were also a bona fide resident of a foreign country from March 1, 2011, through the end of 2011 and from January 1, 2013, through September 14, 2013. 1040 form for 2010 Reassignment. 1040 form for 2010   If you are assigned from one foreign post to another, you may or may not have a break in foreign residence between your assignments, depending on the circumstances. 1040 form for 2010 Example 1. 1040 form for 2010 You were a resident of Pakistan from October 1, 2012, through November 30, 2013. 1040 form for 2010 On December 1, 2013, you and your family returned to the United States to wait for an assignment to another foreign country. 1040 form for 2010 Your household goods also were returned to the United States. 1040 form for 2010 Your foreign residence ended on November 30, 2013, and did not begin again until after you were assigned to another foreign country and physically entered that country. 1040 form for 2010 Since you were not a bona fide resident of a foreign country for the entire tax year of 2012 or 2013 you do not meet the bona fide residence test in either year. 1040 form for 2010 You may, however, qualify for the foreign earned income exclusion or the housing exclusion or deduction under the physical presence test, discussed later. 1040 form for 2010 Example 2. 1040 form for 2010 Assume the same facts as in Example 1, except that upon completion of your assignment in Pakistan you were given a new assignment to Turkey. 1040 form for 2010 On December 1, 2013, you and your family returned to the United States for a month's vacation. 1040 form for 2010 On January 2, 2014, you arrived in Turkey for your new assignment. 1040 form for 2010 Because you did not interrupt your bona fide residence abroad, you meet the bona fide residence test. 1040 form for 2010 Physical Presence Test You meet the physical presence test if you are physically present in a foreign country or countries 330 full days during a period of 12 consecutive months. 1040 form for 2010 The 330 days do not have to be consecutive. 1040 form for 2010 Any U. 1040 form for 2010 S. 1040 form for 2010 citizen or resident alien can use the physical presence test to qualify for the exclusions and the deduction. 1040 form for 2010 The physical presence test is based only on how long you stay in a foreign country or countries. 1040 form for 2010 This test does not depend on the kind of residence you establish, your intentions about returning, or the nature and purpose of your stay abroad. 1040 form for 2010 330 full days. 1040 form for 2010   Generally, to meet the physical presence test, you must be physically present in a foreign country or countries for at least 330 full days during a 12-month period. 1040 form for 2010 You can count days you spent abroad for any reason. 1040 form for 2010 You do not have to be in a foreign country only for employment purposes. 1040 form for 2010 You can be on vacation. 1040 form for 2010   You do not meet the physical presence test if illness, family problems, a vacation, or your employer's orders cause you to be present for less than the required amount of time. 1040 form for 2010 Exception. 1040 form for 2010   You can be physically present in a foreign country or countries for less than 330 full days and still meet the physical presence test if you are required to leave a country because of war or civil unrest. 1040 form for 2010 See Waiver of Time Requirements, later. 1040 form for 2010 Full day. 1040 form for 2010   A full day is a period of 24 consecutive hours, beginning at midnight. 1040 form for 2010 Travel. 1040 form for 2010    When you leave the United States to go directly to a foreign country or when you return directly to the United States from a foreign country, the time you spend on or over international waters does not count toward the 330-day total. 1040 form for 2010 Example. 1040 form for 2010 You leave the United States for France by air on June 10. 1040 form for 2010 You arrive in France at 9:00 a. 1040 form for 2010 m. 1040 form for 2010 on June 11. 1040 form for 2010 Your first full day of physical presence in France is June 12. 1040 form for 2010 Passing over foreign country. 1040 form for 2010   If, in traveling from the United States to a foreign country, you pass over a foreign country before midnight of the day you leave, the first day you can count toward the 330-day total is the day following the day you leave the United States. 1040 form for 2010 Example. 1040 form for 2010 You leave the United States by air at 9:30 a. 1040 form for 2010 m. 1040 form for 2010 on June 10 to travel to Kenya. 1040 form for 2010 You pass over western Africa at 11:00 p. 1040 form for 2010 m. 1040 form for 2010 on June 10 and arrive in Kenya at 12:30 a. 1040 form for 2010 m. 1040 form for 2010 on June 11. 1040 form for 2010 Your first full day in a foreign country is June 11. 1040 form for 2010 Change of location. 1040 form for 2010   You can move about from one place to another in a foreign country or to another foreign country without losing full days. 1040 form for 2010 If any part of your travel is not within any foreign country and takes less than 24 hours, you are considered to be in a foreign country during that part of travel. 1040 form for 2010 Example 1. 1040 form for 2010 You leave Ireland by air at 11:00 p. 1040 form for 2010 m. 1040 form for 2010 on July 6 and arrive in Sweden at 5:00 a. 1040 form for 2010 m. 1040 form for 2010 on July 7. 1040 form for 2010 Your trip takes less than 24 hours and you lose no full days. 1040 form for 2010 Example 2. 1040 form for 2010 You leave Norway by ship at 10:00 p. 1040 form for 2010 m. 1040 form for 2010 on July 6 and arrive in Portugal at 6:00 a. 1040 form for 2010 m. 1040 form for 2010 on July 8. 1040 form for 2010 Since your travel is not within a foreign country or countries and the trip takes more than 24 hours, you lose as full days July 6, 7, and 8. 1040 form for 2010 If you remain in Portugal, your next full day in a foreign country is July 9. 1040 form for 2010 In United States while in transit. 1040 form for 2010   If you are in transit between two points outside the United States and are physically present in the United States for less than 24 hours, you are not treated as present in the United States during the transit. 1040 form for 2010 You are treated as traveling over areas not within any foreign country. 1040 form for 2010    Please click here for the text description of the image. 1040 form for 2010 Figure 4-B How to figure the 12-month period. 1040 form for 2010   There are four rules you should know when figuring the 12-month period. 1040 form for 2010 Your 12-month period can begin with any day of the month. 1040 form for 2010 It ends the day before the same calendar day, 12 months later. 1040 form for 2010 Your 12-month period must be made up of consecutive months. 1040 form for 2010 Any 12-month period can be used if the 330 days in a foreign country fall within that period. 1040 form for 2010 You do not have to begin your 12-month period with your first full day in a foreign country or end it with the day you leave. 1040 form for 2010 You can choose the 12-month period that gives you the greatest exclusion. 1040 form for 2010 In determining whether the 12-month period falls within a longer stay in the foreign country, 12-month periods can overlap one another. 1040 form for 2010 Example 1. 1040 form for 2010 You are a construction worker who works on and off in a foreign country over a 20-month period. 1040 form for 2010 You might pick up the 330 full days in a 12-month period only during the middle months of the time you work in the foreign country because the first few and last few months of the 20-month period are broken up by long visits to the United States. 1040 form for 2010 Example 2. 1040 form for 2010 You work in New Zealand for a 20-month period from January 1, 2012, through August 31, 2013, except that you spend 28 days in February 2012 and 28 days in February 2013 on vacation in the United States. 1040 form for 2010 You are present in New Zealand for at least 330 full days during each of the following two 12-month periods: January 1, 2012 – December 31, 2012 and September 1, 2012 – August 31, 2013. 1040 form for 2010 By overlapping the 12-month periods in this way, you meet the physical presence test for the whole 20-month period. 1040 form for 2010 See Figure 4-B, on the previous page. 1040 form for 2010 Waiver of Time Requirements Both the bona fide residence test and the physical presence test contain minimum time requirements. 1040 form for 2010 The minimum time requirements can be waived, however, if you must leave a foreign country because of war, civil unrest, or similar adverse conditions in that country. 1040 form for 2010 You must be able to show that you reasonably could have expected to meet the minimum time requirements if not for the adverse conditions. 1040 form for 2010 To qualify for the waiver, you must actually have your tax home in the foreign country and be a bona fide resident of, or be physically present in, the foreign country on or before the beginning date of the waiver. 1040 form for 2010 Early in 2014, the IRS will publish in the Internal Revenue Bulletin a list of the only countries that qualify for the waiver for 2013 and the effective dates. 1040 form for 2010 If you left one of the countries on or after the date listed for each country, you can meet the bona fide residence test or physical presence test for 2013 without meeting the minimum time requirement. 1040 form for 2010 However, in figuring your exclusion, the number of your qualifying days of bona fide residence or physical presence includes only days of actual residence or presence within the country. 1040 form for 2010 U. 1040 form for 2010 S. 1040 form for 2010 Travel Restrictions If you are present in a foreign country in violation of U. 1040 form for 2010 S. 1040 form for 2010 law, you will not be treated as a bona fide resident of a foreign country or as physically present in a foreign country while you are in violation of the law. 1040 form for 2010 Income that you earn from sources within such a country for services performed during a period of violation does not qualify as foreign earned income. 1040 form for 2010 Your housing expenses within that country (or outside that country for housing your spouse or dependents) while you are in violation of the law cannot be included in figuring your foreign housing amount. 1040 form for 2010 For 2013, the only country to which travel restrictions applied was Cuba. 1040 form for 2010 The restrictions applied for the entire year. 1040 form for 2010 However, individuals working at the U. 1040 form for 2010 S. 1040 form for 2010 Naval Base at Guantanamo Bay in Cuba are not in violation of U. 1040 form for 2010 S. 1040 form for 2010 law. 1040 form for 2010 Personal service income earned by individuals at the base is eligible for the foreign earned income exclusion provided the other requirements are met. 1040 form for 2010 Foreign Earned Income To claim the foreign earned income exclusion, the foreign housing exclusion, or the foreign housing deduction, you must have foreign earned income. 1040 form for 2010 Foreign earned income generally is income you receive for services you perform during a period in which you meet both of the following requirements. 1040 form for 2010 Your tax home is in a foreign country. 1040 form for 2010 You meet either the bona fide residence test or the physical presence test. 1040 form for 2010 To determine whether your tax home is in a foreign country, see Tax Home in Foreign Country, earlier. 1040 form for 2010 To determine whether you meet either the bona fide residence test or the physical presence test, see Bona Fide Residence Test and Physical Presence Test, earlier. 1040 form for 2010 Foreign earned income does not include the following amounts. 1040 form for 2010 The value of meals and lodging that you exclude from your income because the meals and lodging were furnished for the convenience of your employer. 1040 form for 2010 Pension or annuity payments you receive, including social security benefits (see Pensions and annuities, later). 1040 form for 2010 Pay you receive as an employee of the U. 1040 form for 2010 S. 1040 form for 2010 Government. 1040 form for 2010 (See U. 1040 form for 2010 S. 1040 form for 2010 Government Employees, later. 1040 form for 2010 ) Amounts you include in your income because of your employer's contributions to a nonexempt employee trust or to a nonqualified annuity contract. 1040 form for 2010 Any unallowable moving expense deduction that you choose to recapture as explained under Moving Expense Attributable to Foreign Earnings in 2 Years in chapter 5. 1040 form for 2010 Payments you receive after the end of the tax year following the tax year in which you performed the services that earned the income. 1040 form for 2010 Earned income. 1040 form for 2010   This is pay for personal services performed, such as wages, salaries, or professional fees. 1040 form for 2010 The list that follows classifies many types of income into three categories. 1040 form for 2010 The column headed Variable Income lists income that may fall into either the earned income category, the unearned income category, or partly into both. 1040 form for 2010 For more information on earned and unearned income, see Earned and Unearned Income, later. 1040 form for 2010 Earned Income Unearned Income Variable Income Salaries and wages Dividends Business profits Commissions Interest Royalties Bonuses Capital gains Rents Professional fees Gambling winnings Scholarships and fellowships Tips Alimony     Social security benefits     Pensions     Annuities     In addition to the types of earned income listed, certain noncash income and allowances or reimbursements are considered earned income. 1040 form for 2010 Noncash income. 1040 form for 2010   The fair market value of property or facilities provided to you by your employer in the form of lodging, meals, or use of a car is earned income. 1040 form for 2010 Allowances or reimbursements. 1040 form for 2010   Earned income includes allowances or reimbursements you receive, such as the following amounts. 1040 form for 2010    Cost-of-living allowances. 1040 form for 2010 Overseas differential. 1040 form for 2010 Family allowance. 1040 form for 2010 Reimbursement for education or education allowance. 1040 form for 2010 Home leave allowance. 1040 form for 2010 Quarters allowance. 1040 form for 2010 Reimbursement for moving or moving allowance (unless excluded from income as discussed later in Reimbursement of employee expenses under Earned and Unearned Income). 1040 form for 2010 Source of Earned Income The source of your earned income is the place where you perform the services for which you received the income. 1040 form for 2010 Foreign earned income is income you receive for working in a foreign country. 1040 form for 2010 Where or how you are paid has no effect on the source of the income. 1040 form for 2010 For example, income you receive for work done in Austria is income from a foreign source even if the income is paid directly to your bank account in the United States and your employer is located in New York City. 1040 form for 2010 Example. 1040 form for 2010 You are a U. 1040 form for 2010 S. 1040 form for 2010 citizen, a bona fide resident of Canada, and working as a mining engineer. 1040 form for 2010 Your salary is $76,800 per year. 1040 form for 2010 You also receive a $6,000 cost-of-living allowance, and a $6,000 education allowance. 1040 form for 2010 Your employment contract did not indicate that you were entitled to these allowances only while outside the United States. 1040 form for 2010 Your total income is $88,800. 1040 form for 2010 You work a 5-day week, Monday through Friday. 1040 form for 2010 After subtracting your vacation, you have a total of 240 workdays in the year. 1040 form for 2010 You worked in the United States during the year for 6 weeks (30 workdays). 1040 form for 2010 The following shows how to figure the part of your income that is for work done in Canada during the year. 1040 form for 2010   Number of days worked in Canada during the year (210) × Total income ($88,800) = $77,700     Number of days of work during the year for which payment was made (240)   Your foreign source earned income is $77,700. 1040 form for 2010 Earned and Unearned Income Earned income was defined earlier as pay for personal services performed. 1040 form for 2010 Some types of income are not easily identified as earned or unearned income. 1040 form for 2010 Some of these types of income are further explained here. 1040 form for 2010 Income from a sole proprietorship or partnership. 1040 form for 2010   Income from a business in which capital investment is an important part of producing the income may be unearned income. 1040 form for 2010 If you are a sole proprietor or partner and your personal services are also an important part of producing the income, the part of the income that represents the value of your personal services will be treated as earned income. 1040 form for 2010 Capital a factor. 1040 form for 2010   If capital investment is an important part of producing income, no more than 30% of your share of the net profits of the business is earned income. 1040 form for 2010   If you have no net profits, the part of your gross profit that represents a reasonable allowance for personal services actually performed is considered earned income. 1040 form for 2010 Because you do not have a net profit, the 30% limit does not apply. 1040 form for 2010 Example 1. 1040 form for 2010 You are a U. 1040 form for 2010 S. 1040 form for 2010 citizen and meet the bona fide residence test. 1040 form for 2010 You invest in a partnership based in Cameroon that is engaged solely in selling merchandise outside the United States. 1040 form for 2010 You perform no services for the partnership. 1040 form for 2010 At the end of the tax year, your share of the net profits is $80,000. 1040 form for 2010 The entire $80,000 is unearned income. 1040 form for 2010 Example 2. 1040 form for 2010 Assume that in Example 1 you spend time operating the business. 1040 form for 2010 Your share of the net profits is $80,000; 30% of your share of the profits is $24,000. 1040 form for 2010 If the value of your services for the year is $15,000, your earned income is limited to the value of your services, $15,000. 1040 form for 2010 Capital not a factor. 1040 form for 2010   If capital is not an income-producing factor and personal services produce the business income, the 30% rule does not apply. 1040 form for 2010 The entire amount of business income is earned income. 1040 form for 2010 Example. 1040 form for 2010 You and Lou Green are management consultants and operate as equal partners in performing services outside the United States. 1040 form for 2010 Because capital is not an income- producing factor, all the income from the partnership is considered earned income. 1040 form for 2010 Income from a corporation. 1040 form for 2010   The salary you receive from a corporation is earned income only if it represents a reasonable allowance as compensation for work you do for the corporation. 1040 form for 2010 Any amount over what is considered a reasonable salary is unearned income. 1040 form for 2010 Example 1. 1040 form for 2010 You are a U. 1040 form for 2010 S. 1040 form for 2010 citizen and an officer and stockholder of a corporation in Honduras. 1040 form for 2010 You perform no work or service of any kind for the corporation. 1040 form for 2010 During the tax year you receive a $10,000 “salary” from the corporation. 1040 form for 2010 The $10,000 clearly is not for personal services and is unearned income. 1040 form for 2010 Example 2. 1040 form for 2010 You are a U. 1040 form for 2010 S. 1040 form for 2010 citizen and work full time as secretary-treasurer of your corporation. 1040 form for 2010 During the tax year you receive $100,000 as salary from the corporation. 1040 form for 2010 If $80,000 is a reasonable allowance as pay for the work you did, then $80,000 is earned income. 1040 form for 2010 Stock options. 1040 form for 2010   You may have earned income if you disposed of stock that you got by exercising a stock option granted to you under an employee stock purchase plan. 1040 form for 2010   If your gain on the disposition of stock you got by exercising an option is treated as capital gain, your gain is unearned income. 1040 form for 2010   However, if you disposed of the stock less than 2 years after you were granted the option or less than 1 year after you got the stock, part of the gain on the disposition may be earned income. 1040 form for 2010 It is considered received in the year you disposed of the stock and earned in the year you performed the services for which you were granted the option. 1040 form for 2010 Any part of the earned income that is due to work you did outside the United States is foreign earned income. 1040 form for 2010   See Publication 525, Taxable and Nontaxable Income, for a discussion of the treatment of stock options. 1040 form for 2010 Pensions and annuities. 1040 form for 2010    For purposes of the foreign earned income exclusion, the foreign housing exclusion, and the foreign housing deduction, amounts received as pensions or annuities are unearned income. 1040 form for 2010 Royalties. 1040 form for 2010   Royalties from the leasing of oil and mineral lands and patents generally are a form of rent or dividends and are unearned income. 1040 form for 2010   Royalties received by a writer are earned income if they are received: For the transfer of property rights of the writer in the writer's product, or Under a contract to write a book or series of articles. 1040 form for 2010 Rental income. 1040 form for 2010   Generally, rental income is unearned income. 1040 form for 2010 If you perform personal services in connection with the production of rent, up to 30% of your net rental income can be considered earned income. 1040 form for 2010 Example. 1040 form for 2010 Larry Smith, a U. 1040 form for 2010 S. 1040 form for 2010 citizen living in Australia, owns and operates a rooming house in Sydney. 1040 form for 2010 If he is operating the rooming house as a business that requires capital and personal services, he can consider up to 30% of net rental income as earned income. 1040 form for 2010 On the other hand, if he just owns the rooming house and performs no personal services connected with its operation, except perhaps making minor repairs and collecting rents, none of his net income from the house is considered earned income. 1040 form for 2010 It is all unearned income. 1040 form for 2010 Professional fees. 1040 form for 2010   If you are engaged in a professional occupation (such as a doctor or lawyer), all fees received in the performance of these services are earned income. 1040 form for 2010 Income of an artist. 1040 form for 2010   Income you receive from the sale of paintings you created is earned income. 1040 form for 2010 Scholarships and fellowships. 1040 form for 2010   Any portion of a scholarship or fellowship grant that is paid to you for teaching, research or other services is considered earned income if you must include it in your gross income. 1040 form for 2010 If the payer of the grant is required to provide you with a Form W-2, Wage and Tax Statement, these amounts will be listed as wages. 1040 form for 2010    Certain scholarship and fellowship income may be exempt under other provisions. 1040 form for 2010 See Publication 970, Tax Benefits for Education, chapter 1. 1040 form for 2010 Use of employer's property or facilities. 1040 form for 2010   If you receive fringe benefits in the form of the right to use your employer's property or facilities, the fair market value of that right is earned income. 1040 form for 2010 Fair market value is the price at which the property would change hands between a willing buyer and a willing seller, neither being required to buy or sell, and both having reasonable knowledge of all the necessary facts. 1040 form for 2010 Example. 1040 form for 2010 You are privately employed and live in Japan all year. 1040 form for 2010 You are paid a salary of $6,000 a month. 1040 form for 2010 You live rent-free in a house provided by your employer that has a fair rental value of $3,000 a month. 1040 form for 2010 The house is not provided for your employer's convenience. 1040 form for 2010 You report on the calendar-year, cash basis. 1040 form for 2010 You received $72,000 salary from foreign sources plus $36,000 fair rental value of the house, or a total of $108,000 of earned income. 1040 form for 2010 Reimbursement of employee expenses. 1040 form for 2010   If you are reimbursed under an accountable plan (defined below) for expenses you incur on your employer's behalf and you have adequately accounted to your employer for the expenses, do not include the reimbursement for those expenses in your earned income. 1040 form for 2010   The expenses for which you are reimbursed are not considered allocable (related) to your earned income. 1040 form for 2010 If expenses and reimbursement are equal, there is nothing to allocate to excluded income. 1040 form for 2010 If expenses are more than the reimbursement, the unreimbursed expenses are considered to have been incurred in producing earned income and must be divided between your excluded and included income in determining the amount of unreimbursed expenses you can deduct. 1040 form for 2010 (See chapter 5. 1040 form for 2010 ) If the reimbursement is more than the expenses, no expenses remain to be divided between excluded and included income and the excess reimbursement must be included in earned income. 1040 form for 2010   These rules do not apply to the following individuals. 1040 form for 2010 Straight-commission salespersons. 1040 form for 2010 Employees who have arrangements with their employers under which taxes are not withheld on a percentage of the commissions because the employers consider that percentage to be attributable to the employees' expenses. 1040 form for 2010 Accountable plan. 1040 form for 2010   An accountable plan is a reimbursement or allowance arrangement that includes all three of the following rules. 1040 form for 2010 The expenses covered under the plan must have a business connection. 1040 form for 2010 The employee must adequately account to the employer for these expenses within a reasonable period of time. 1040 form for 2010 The employee must return any excess reimbursement or allowance within a reasonable period of time. 1040 form for 2010 Reimbursement of moving expenses. 1040 form for 2010   Reimbursement of moving expenses may be earned income. 1040 form for 2010 You must include as earned income: Any reimbursements of, or payments for, nondeductible moving expenses, Reimbursements that are more than your deductible expenses and that you do not return to your employer, Any reimbursements made (or treated as made) under a nonaccountable plan (any plan that does not meet the rules listed above for an accountable plan), even if they are for deductible expenses, and Any reimbursement of moving expenses you deducted in an earlier year. 1040 form for 2010 This section discusses reimbursements that must be included in earned income. 1040 form for 2010 Publication 521, Moving Expenses, discusses additional rules that apply to moving expense deductions and reimbursements. 1040 form for 2010   The rules for determining when the reimbursement is considered earned or where the reimbursement is considered earned may differ somewhat from the general rules previously discussed. 1040 form for 2010   Although you receive the reimbursement in one tax year, it may be considered earned for services performed, or to be performed, in another tax year. 1040 form for 2010 You must report the reimbursement as income on your return in the year you receive it, even if it is considered earned during a different year. 1040 form for 2010 Move from U. 1040 form for 2010 S. 1040 form for 2010 to foreign country. 1040 form for 2010   If you move from the United States to a foreign country, your moving expense reimbursement is generally considered pay for future services to be performed at the new location. 1040 form for 2010 The reimbursement is considered earned solely in the year of the move if you qualify for the exclusion for a period that includes at least 120 days during that tax year. 1040 form for 2010   If you are neither a bona fide resident of nor physically present in a foreign country or countries for a period that includes 120 days during the year of the move, a portion of the reimbursement is considered earned in the year of the move and a portion is considered earned in the year following the year of the move. 1040 form for 2010 To figure the amount earned in the year of the move, multiply the reimbursement by a fraction. 1040 form for 2010 The numerator (top number) is the number of days in your qualifying period that fall within the year of the move, and the denominator (bottom number) is the total number of days in the year of the move. 1040 form for 2010   The difference between the total reimbursement and the amount considered earned in the year of the move is the amount considered earned in the year following the year of the move. 1040 form for 2010 The part earned in each year is figured as shown in the following example. 1040 form for 2010 Example. 1040 form for 2010 You are a U. 1040 form for 2010 S. 1040 form for 2010 citizen working in the United States. 1040 form for 2010 You were told in October 2012 that you were being transferred to a foreign country. 1040 form for 2010 You arrived in the foreign country on December 15, 2012, and you are a bona fide resident for the remainder of 2012 and all of 2013. 1040 form for 2010 Your employer reimbursed you $2,000 in January 2013 for the part of the moving expense that you were not allowed to deduct. 1040 form for 2010 Because you did not qualify for the exclusion under the bona fide residence test for at least 120 days in 2012 (the year of the move), the reimbursement is considered pay for services performed in the foreign country for both 2012 and 2013. 1040 form for 2010 You figure the part of the reimbursement for services performed in the foreign country in 2012 by multiplying the total reimbursement by a fraction. 1040 form for 2010 The fraction is the number of days during which you were a bona fide resident in 2012 (the year of the move) divided by 366. 1040 form for 2010 The remaining part of the reimbursement is for services performed in the foreign country in 2013. 1040 form for 2010 This computation is used only to determine when the reimbursement is considered earned. 1040 form for 2010 You would include the amount of the reimbursement in income in 2013, the year you received it. 1040 form for 2010 Move between foreign countries. 1040 form for 2010   If you move between foreign countries, any moving expense reimbursement that you must include in income will be considered earned in the year of the move if you qualify for the foreign earned income exclusion for a period that includes at least 120 days in the year of the move. 1040 form for 2010 Move to U. 1040 form for 2010 S. 1040 form for 2010   If you move to the United States, the moving expense reimbursement that you must include in income is generally considered to be U. 1040 form for 2010 S. 1040 form for 2010 source income. 1040 form for 2010   However, if under either an agreement between you and your employer or a statement of company policy that is reduced to writing before your move to the foreign country, your employer will reimburse you for your move back to the United States regardless of whether you continue to work for the employer, the includible reimbursement is considered compensation for past services performed in the foreign country. 1040 form for 2010 The includible reimbursement is considered earned in the year of the move if you qualify for the foreign earned income exclusion for a period that includes at least 120 days during that year. 1040 form for 2010 Otherwise, you treat the includible reimbursement as received for services performed in the foreign country in the year of the move and the year immediately before the year of the move. 1040 form for 2010   See the discussion under Move from U. 1040 form for 2010 S. 1040 form for 2010 to foreign country , earlier, to figure the amount of the includible reimbursement considered earned in the year of the move. 1040 form for 2010 The amount earned in the year before the year of the move is the difference between the total includible reimbursement and the amount earned in the year of the move. 1040 form for 2010 Example. 1040 form for 2010 You are a U. 1040 form for 2010 S. 1040 form for 2010 citizen employed in a foreign country. 1040 form for 2010 You retired from employment with your employer on March 31, 2013, and returned to the United States after having been a bona fide resident of the foreign country for several years. 1040 form for 2010 A written agreement with your employer entered into before you went abroad provided that you would be reimbursed for your move back to the United States. 1040 form for 2010 In April 2013, your former employer reimbursed you $4,000 for the part of the cost of your move back to the United States that you were not allowed to deduct. 1040 form for 2010 Because you were not a bona fide resident of a foreign country or countries for a period that included at least 120 days in 2013 (the year of the move), the includible reimbursement is considered pay for services performed in the foreign country for both 2013 and 2012. 1040 form for 2010 You figure the part of the moving expense reimbursement for services performed in the foreign country for 2013 by multiplying the total includible reimbursement by a fraction. 1040 form for 2010 The fraction is the number of days of foreign residence during the year (90) divided by the number of days in the year (365). 1040 form for 2010 The remaining part of the includible reimbursement is for services performed in the foreign country in 2012. 1040 form for 2010 You report the amount of the includible reimbursement in 2013, the year you received it. 1040 form for 2010    In this example, if you met the physical presence test for a period that included at least 120 days in 2013, the moving expense reimbursement would be considered earned entirely in the year of the move. 1040 form for 2010 Storage expense reimbursements. 1040 form for 2010   If you are reimbursed for storage expenses, the reimbursement is for services you perform during the period of time for which the storage expenses are incurred. 1040 form for 2010 U. 1040 form for 2010 S. 1040 form for 2010 Government Employees For purposes of the foreign earned income exclusion, the foreign housing exclusion, and the foreign housing deduction, foreign earned income does not include any amounts paid by the United States or any of its agencies to its employees. 1040 form for 2010 This includes amounts paid from both appropriated and nonappropriated funds. 1040 form for 2010 The following organizations (and other organizations similarly organized and operated under United States Army, Navy, or Air Force regulations) are integral parts of the Armed Forces, agencies, or instrumentalities of the United States. 1040 form for 2010 United States Armed Forces exchanges. 1040 form for 2010 Commissioned and noncommissioned officers' messes. 1040 form for 2010 Armed Forces motion picture services. 1040 form for 2010 Kindergartens on foreign Armed Forces installations. 1040 form for 2010 Amounts paid by the United States or its agencies to persons who are not their employees may qualify for exclusion or deduction. 1040 form for 2010 If you are a U. 1040 form for 2010 S. 1040 form for 2010 Government employee paid by a U. 1040 form for 2010 S. 1040 form for 2010 agency that assigned you to a foreign government to perform specific services for which the agency is reimbursed by the foreign government, your pay is from the U. 1040 form for 2010 S. 1040 form for 2010 Government and does not qualify for exclusion or deduction. 1040 form for 2010 If you have questions about whether you are an employee or an independent contractor, get Publication 15-A, Employer's Supplemental Tax Guide. 1040 form for 2010 American Institute in Taiwan. 1040 form for 2010   Amounts paid by the American Institute in Taiwan are not foreign earned income for purposes of the foreign earned income exclusion, the foreign housing exclusion, or the foreign housing deduction. 1040 form for 2010 If you are an employee of the American Institute in Taiwan, allowances you receive are exempt from U. 1040 form for 2010 S. 1040 form for 2010 tax up to the amount that equals tax-exempt allowances received by civilian employees of the U. 1040 form for 2010 S. 1040 form for 2010 Government. 1040 form for 2010 Allowances. 1040 form for 2010   Cost-of-living and foreign-area allowances paid under certain acts of Congress to U. 1040 form for 2010 S. 1040 form for 2010 civilian officers and employees stationed in Alaska and Hawaii or elsewhere outside the 48 contiguous states and the District of Columbia can be excluded from gross income. 1040 form for 2010 Post differentials are wages that must be included in gross income, regardless of the act of Congress under which they are paid. 1040 form for 2010 More information. 1040 form for 2010   Publication 516, U. 1040 form for 2010 S. 1040 form for 2010 Government Civilian Employees Stationed Abroad, has more information for U. 1040 form for 2010 S. 1040 form for 2010 Government employees abroad. 1040 form for 2010 Exclusion of Meals and Lodging You do not include in your income the value of meals and lodging provided to you and your family by your employer at no charge if the following conditions are met. 1040 form for 2010 The meals are furnished: On the business premises of your employer, and For the convenience of your employer. 1040 form for 2010 The lodging is furnished: On the business premises of your employer, For the convenience of your employer, and As a condition of your employment. 1040 form for 2010 If these conditions are met, do not include the value of the meals or lodging in your income, even if a law or your employment contract says that they are provided as compensation. 1040 form for 2010 Amounts you do not include in income because of these rules are not foreign earned income. 1040 form for 2010 If you receive a Form W-2, excludable amounts should not be included in the total reported in box 1 as wages. 1040 form for 2010 Family. 1040 form for 2010   Your family, for this purpose, includes only your spouse and your dependents. 1040 form for 2010 Lodging. 1040 form for 2010   The value of lodging includes the cost of heat, electricity, gas, water, sewer service, and similar items needed to make the lodging fit to live in. 1040 form for 2010 Business premises of employer. 1040 form for 2010   Generally, the business premises of your employer is wherever you work. 1040 form for 2010 For example, if you work as a housekeeper, meals and lodging provided in your employer's home are provided on the business premises of your employer. 1040 form for 2010 Similarly, meals provided to cowhands while herding cattle on land leased or owned by their employer are considered provided on the premises of their employer. 1040 form for 2010 Convenience of employer. 1040 form for 2010   Whether meals or lodging are provided for your employer's convenience must be determined from all the facts and circumstances. 1040 form for 2010 Meals furnished at no charge are considered provided for your employer's convenience if there is a good business reason for providing them, other than to give you more pay. 1040 form for 2010   On the other hand, if your employer provides meals to you or your family as a means of giving you more pay, and there is no other business reason for providing them, their value is extra income to you because they are not furnished for the convenience of your employer. 1040 form for 2010 Condition of employment. 1040 form for 2010   Lodging is provided as a condition of employment if you must accept the lodging to properly carry out the duties of your job. 1040 form for 2010 You must accept lodging to properly carry out your duties if, for example, you must be available for duty at all times or you could not perform your duties if the lodging was not furnished. 1040 form for 2010 Foreign camps. 1040 form for 2010   If the lodging is in a camp located in a foreign country, the camp is considered part of your employer's business premises. 1040 form for 2010 The camp must be: Provided for your employer's convenience because the place where you work is in a remote area where satisfactory housing is not available to you on the open market within a reasonable commuting distance, Located as close as reasonably possible in the area where you work, and Provided in a common area or enclave that is not available to the general public for lodging or accommodations and that normally houses at least ten employees. 1040 form for 2010 Foreign Earned Income Exclusion If your tax home is in a foreign country and you meet the bona fide residence test or the physical presence test, you can choose to exclude from your income a limited amount of your foreign earned income. 1040 form for 2010 Foreign earned income was defined earlier in this chapter. 1040 form for 2010 You also can choose to exclude from your income a foreign housing amount. 1040 form for 2010 This is explained later under Foreign Housing Exclusion. 1040 form for 2010 If you choose to exclude a foreign housing amount, you must figure the foreign housing exclusion before you figure the foreign earned income exclusion. 1040 form for 2010 Your foreign earned income exclusion is limited to your foreign earned income minus your foreign housing exclusion. 1040 form for 2010 If you choose to exclude foreign earned income, you cannot deduct, exclude, or claim a credit for any item that can be allocated to or charged against the excluded amounts. 1040 form for 2010 This includes any expenses, losses, and other normally deductible items allocable to the excluded income. 1040 form for 2010 For more information about deductions and credits, see chapter 5 . 1040 form for 2010 Limit on Excludable Amount You may be able to exclude up to $97,600 of your foreign earned income in 2013. 1040 form for 2010 You cannot exclude more than the smaller of: $97,600, or Your foreign earned income (discussed earlier) for the tax year minus your foreign housing exclusion (discussed later). 1040 form for 2010 If both you and your spouse work abroad and each of you meets either the bona fide residence test or the physical presence test, you can each choose the foreign earned income exclusion. 1040 form for 2010 You do not both need to meet the same test. 1040 form for 2010 Together, you and your spouse can exclude as much as $195,200. 1040 form for 2010 Paid in year following work. 1040 form for 2010   Generally, you are considered to have earned income in the year in which you do the work for which you receive the income, even if you work in one year but are not paid until the following year. 1040 form for 2010 If you report your income on a cash basis, you report the income on your return for the year you receive it. 1040 form for 2010 If you work one year, but are not paid for that work until the next year, the amount you can exclude in the year you are paid is the amount you could have excluded in the year you did the work if you had been paid in that year. 1040 form for 2010 For an exception to this general rule, see Year-end payroll period, later. 1040 form for 2010 Example. 1040 form for 2010 You were a bona fide resident of Brazil for all of 2012 and 2013. 1040 form for 2010 You report your income on the cash basis. 1040 form for 2010 In 2012, you were paid $84,200 for work you did in Brazil during that year. 1040 form for 2010 You excluded all of the $84,200 from your income in 2012. 1040 form for 2010 In 2013, you were paid $117,300 for your work in Brazil. 1040 form for 2010 $18,800 was for work you did in 2012 and $98,500 was for work you did in 2013. 1040 form for 2010 You can exclude $10,900 of the $18,800 from your income in 2013. 1040 form for 2010 This is the $95,100 maximum exclusion in 2012 minus the $84,200 actually excluded that year. 1040 form for 2010 You must include the remaining $7,900 in income in 2013 because you could not have excluded that income in 2012 if you had received it that year. 1040 form for 2010 You can exclude $97,600 of the $98,500 you were paid for work you did in 2013 from your 2013 income. 1040 form for 2010 Your total foreign earned income exclusion for 2013 is $108,500 ($10,900 for work you did in 2012 and $97,600 for work you did in 2013). 1040 form for 2010 You would include in your 2013 income $8,800 ($7,900 for the work you did in 2012 and $900 for the work you did in 2013). 1040 form for 2010 Year-end payroll period. 1040 form for 2010   There is an exception to the general rule that income is considered earned in the year you do the work for which you receive the income. 1040 form for 2010 If you are a cash-basis taxpayer, any salary or wage payment you receive after the end of the year in which you do the work for which you receive the pay is considered earned entirely in the year you receive it if all four of the following apply. 1040 form for 2010 The period for which the payment is made is a normal payroll period of your employer that regularly applies to you. 1040 form for 2010 The payroll period includes the last day of your tax year (December 31 if you figure your taxes on a calendar-year basis). 1040 form for 2010 The payroll period is not longer than 16 days. 1040 form for 2010 The payday comes at the same time in relation to the payroll period that it would normally come and it comes before the end of the next payroll period. 1040 form for 2010 Example. 1040 form for 2010 You are paid twice a month. 1040 form for 2010 For the normal payroll period that begins on the first of the month and ends on the fifteenth of the month, you are paid on the sixteenth day of the month. 1040 form for 2010 For the normal payroll period that begins on the sixteenth of the month and ends on the last day of the month, you are paid on the first day of the following month. 1040 form for 2010 Because all of the above conditions are met, the pay you received on January 1, 2013, is considered earned in 2013. 1040 form for 2010 Income earned over more than 1 year. 1040 form for 2010   Regardless of when you actually receive income, you must apply it to the year in which you earned it in figuring your excludable amount for that year. 1040 form for 2010 For example, a bonus may be based on work you did over several years. 1040 form for 2010 You determine the amount of the bonus that is considered earned in a particular year in two steps. 1040 form for 2010 Divide the bonus by the number of calendar months in the period when you did the work that resulted in the bonus. 1040 form for 2010 Multiply the result of (1) by the number of months you did the work during the year. 1040 form for 2010 This is the amount that is subject to the exclusion limit for that tax year. 1040 form for 2010 Income received more than 1 year after it was earned. 1040 form for 2010   You cannot exclude income you receive after the end of the year following the year you do the work to earn it. 1040 form for 2010 Example. 1040 form for 2010   You were a bona fide resident of Sweden for 2011, 2012, and 2013. 1040 form for 2010 You report your income on the cash basis. 1040 form for 2010 In 2011, you were paid $69,000 for work you did in Sweden that year and in 2012 you were paid $74,000 for that year's work in Sweden. 1040 form for 2010 You excluded all the income on your 2011 and 2012 returns. 1040 form for 2010   In 2013, you were paid $92,000; $82,000 for your work in Sweden during 2013, and $10,000 for work you did in Sweden in 2011. 1040 form for 2010 You cannot exclude any of the $10,000 for work done in 2011 because you received it after the end of the year following the year in which you earned it. 1040 form for 2010 You must include the $10,000 in income. 1040 form for 2010 You can exclude all of the $82,000 received for work you did in 2013. 1040 form for 2010 Community income. 1040 form for 2010   The maximum exclusion applies separately to the earnings of spouses. 1040 form for 2010 Ignore any community property laws when you figure your limit on the foreign earned income exclusion. 1040 form for 2010 Part-year exclusion. 1040 form for 2010   If the period for which you qualify for the foreign earned income exclusion includes only part of the year, you must adjust the maximum limit based on the number of qualifying days in the year. 1040 form for 2010 The number of qualifying days is the number of days in the year within the period on which you both: Have your tax home in a foreign country, and Meet either the bona fide residence test or the physical presence test. 1040 form for 2010   For this purpose, you can count as qualifying days all days within a period of 12 consecutive months once you are physically present and have your tax home in a foreign country for 330 full days. 1040 form for 2010 To figure your maximum exclusion, multiply the maximum excludable amount for the year by the number of your qualifying days in the year, and then divide the result by the number of days in the year. 1040 form for 2010 Example. 1040 form for 2010 You report your income on the calendar-year basis and you qualified for the foreign earned income exclusion under the bona fide residence test for 75 days in 2013. 1040 form for 2010 You can exclude a maximum of 75/365 of $97,600, or $20,055, of your foreign earned income for 2013. 1040 form for 2010 If you qualify under the bona fide residence test for all of 2014, you can exclude your foreign earned income up to the 2014 limit. 1040 form for 2010 Physical presence test. 1040 form for 2010   Under the physical presence test, a 12-month period can be any period of 12 consecutive months that includes 330 full days. 1040 form for 2010 If you qualify for the foreign earned income exclusion under the physical presence test for part of a year, it is important to carefully choose the 12-month period that will allow the maximum exclusion for that year. 1040 form for 2010 Example. 1040 form for 2010 You are physically present and have your tax home in a foreign country for a 16-month period from June 1, 2012, through September 30, 2013, except for 16 days in December 2012 when you were on vacation in the United States. 1040 form for 2010 You figure the maximum exclusion for 2012 as follows. 1040 form for 2010 Beginning with June 1, 2012, count forward 330 full days. 1040 form for 2010 Do not count the 16 days you spent in the United States. 1040 form for 2010 The 330th day, May 12, 2013, is the last day of a 12-month period. 1040 form for 2010 Count backward 12 months from May 11, 2013, to find the first day of this 12-month period, May 12, 2012. 1040 form for 2010 This 12-month period runs from May 12, 2012, through May 11, 2013. 1040 form for 2010 Count the total days during 2012 that fall within this 12-month period. 1040 form for 2010 This is 234 days (May 12, 2012 – December 31, 2012). 1040 form for 2010 Multiply $95,100 (the maximum exclusion for 2012) by the fraction 234/366 to find your maximum exclusion for 2012 ($60,802). 1040 form for 2010 You figure the maximum exclusion for 2013 in the opposite manner. 1040 form for 2010 Beginning with your last full day, September 30, 2013, count backward 330 full days. 1040 form for 2010 Do not count the 16 days you spent in the United States. 1040 form for 2010 That day, October 20, 2012, is the first day of a 12-month period. 1040 form for 2010 Count forward 12 months from October 20, 2012, to find the last day of this 12-month period, October 19, 2013. 1040 form for 2010 This 12-month period runs from October 20, 2012, through October 19, 2013. 1040 form for 2010 Count the total days during 2013 that fall within this 12-month period. 1040 form for 2010 This is 292 days (January 1, 2013 – October 19, 2013). 1040 form for 2010 Multiply $97,600, the maximum limit, by the fraction 292/365 to find your maximum exclusion for 2013 ($78,080). 1040 form for 2010 Choosing the Exclusion The foreign earned income exclusion is voluntary. 1040 form for 2010 You can choose the exclusion by completing the appropriate parts of Form 2555. 1040 form for 2010 When You Can Choose the Exclusion Your initial choice of the exclusion on Form 2555 or Form 2555-EZ generally must be made with one of the following returns. 1040 form for 2010 A return filed by the due date (including any extensions). 1040 form for 2010 A return amending a timely-filed return. 1040 form for 2010 Amended returns generally must be filed by the later of 3 years after the filing date of the original return or 2 years after the tax is paid. 1040 form for 2010 A return filed within 1 year from the original due date of the return (determined without regard to any extensions). 1040 form for 2010 Filing after the above periods. 1040 form for 2010   You can choose the exclusion on a return filed after the periods described above if you owe no federal income tax after taking into account the exclusion. 1040 form for 2010 If you owe federal income tax after taking into account the exclusion, you can choose the exclusion on a return filed after the periods described earlier if you file before the IRS discovers that you failed to choose the exclusion. 1040 form for 2010 Whether or not you owe federal income tax after taking the exclusion into account, if you file your return after the periods described earlier, you must type or legibly print at the top of the first page of the Form 1040 “Filed pursuant to section 1. 1040 form for 2010 911-7(a)(2)(i)(D). 1040 form for 2010 ” If you owe federal income tax after taking into account the foreign earned income exclusion and the IRS discovered that you failed to choose the exclusion, you may still be able to choose the exclusion. 1040 form for 2010 You must request a private letter ruling under Income Tax Regulation 301. 1040 form for 2010 9100-3 and Revenue Procedure 2013-1, 2013-1 I. 1040 form for 2010 R. 1040 form for 2010 B. 1040 form for 2010 1, available at www. 1040 form for 2010 irs. 1040 form for 2010 gov/irb/2013-01_IRB/ar06. 1040 form for 2010 html. 1040 form for 2010 Effect of Choosing the Exclusion Once you choose to exclude your foreign earned income, that choice remains in effect for that year and all later years unless you revoke it. 1040 form for 2010 Foreign tax credit or deduction. 1040 form for 2010  
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The 1040 Form For 2010

1040 form for 2010 Publication 597 - Main Content Table of Contents Application of Treaty Personal Services Pensions, Annuities, Social Security, and AlimonyRoth IRAs. 1040 form for 2010 Tax-deferred plans. 1040 form for 2010 Investment Income From Canadian Sources Other Income Charitable ContributionsQualified charities. 1040 form for 2010 Income Tax Credits Competent Authority Assistance How To Get Tax HelpText of Treaty U. 1040 form for 2010 S. 1040 form for 2010 Taxation Canadian Taxation Application of Treaty The benefits of the income tax treaty are generally provided on the basis of residence for income tax purposes. 1040 form for 2010 That is, a person who is recognized as a resident of the United States who has income from Canada, will often pay less income tax to Canada on that income than if no treaty was in effect. 1040 form for 2010 Article IV provides definitions of residents of Canada and the United States, and provides specific criteria for applying the treaty in cases where a taxpayer is considered by both countries to be a resident. 1040 form for 2010 Saving clause. 1040 form for 2010   In most instances, a treaty does not affect the right of a country to tax its own residents (including those who are U. 1040 form for 2010 S. 1040 form for 2010 citizens) or of the United States to tax its residents or citizens (including U. 1040 form for 2010 S. 1040 form for 2010 citizens who are residents of the foreign country). 1040 form for 2010 This provision is known as the “saving clause. 1040 form for 2010 ”   For example, an individual who is a U. 1040 form for 2010 S. 1040 form for 2010 citizen and a resident of Canada may have dividend income from a U. 1040 form for 2010 S. 1040 form for 2010 corporation. 1040 form for 2010 The treaty provides a maximum rate of 15% on dividends received by a resident of Canada from sources in the United States. 1040 form for 2010 Even though a resident of Canada, the individual is a U. 1040 form for 2010 S. 1040 form for 2010 citizen and the saving clause overrides the treaty article that limits the U. 1040 form for 2010 S. 1040 form for 2010 tax to 15%. 1040 form for 2010    Exceptions to the saving clause can be found in Article XXIX, paragraph 3. 1040 form for 2010 Treaty-based position. 1040 form for 2010   If you take the position that any U. 1040 form for 2010 S. 1040 form for 2010 tax is overruled or otherwise reduced by a U. 1040 form for 2010 S. 1040 form for 2010 treaty (a treaty-based position), you generally must disclose that position on Form 8833, Treaty-Based Return Position Disclosure Under Section 6114 or 7701(b), and attach it to your return. 1040 form for 2010 Personal Services A U. 1040 form for 2010 S. 1040 form for 2010 citizen or resident who is temporarily present in Canada during the tax year is exempt from Canadian income taxes on pay for services performed, or remittances received from the United States, if the citizen or resident qualifies under one of the treaty exemption provisions set out below. 1040 form for 2010 Income from employment (Article XV). 1040 form for 2010   Income U. 1040 form for 2010 S. 1040 form for 2010 residents receive for the performance of dependent personal services in Canada (except as public entertainers) is exempt from Canadian tax if it is not more than $10,000 in Canadian currency for the year. 1040 form for 2010 If it is more than $10,000 for the year, it is exempt only if: The residents are present in Canada for no more than 183 days in any 12-month period beginning or ending in the year concerned, and The income is not paid by, or on behalf of, a Canadian resident and is not borne by a permanent establishment in Canada. 1040 form for 2010    Whether there is a permanent establishment in Canada is determined by the rules set forth in Article V. 1040 form for 2010 Example. 1040 form for 2010 You are a U. 1040 form for 2010 S. 1040 form for 2010 resident employed under an 8-month contract with a Canadian firm to install equipment in their Montreal plant. 1040 form for 2010 During the calendar year you were physically present in Canada for 179 days and were paid $16,500 (Canadian) for your services. 1040 form for 2010 Although you were in Canada for not more than 183 days during the year, your income is not exempt from Canadian income tax because it was paid by a Canadian resident and was more than $10,000 (Canadian) for the year. 1040 form for 2010 Pay received by a U. 1040 form for 2010 S. 1040 form for 2010 resident for work regularly done in more than one country as an employee on a ship, aircraft, motor vehicle, or train operated by a U. 1040 form for 2010 S. 1040 form for 2010 resident is exempt from Canadian tax. 1040 form for 2010 Income from self-employment (Article VII). 1040 form for 2010   Income from services performed (other than those performed as an employee) are taxed in Canada if they are attributable to a permanent establishment in Canada. 1040 form for 2010 This income is treated as business profits, and deductions similar to those allowed under U. 1040 form for 2010 S. 1040 form for 2010 law are allowable. 1040 form for 2010   If you carry on (or have carried on) business in both Canada and the United States, the business profits are attributable to each country based on the profits that the permanent establishment might be expected to make if it were a distinct and separate person engaged in the same or similar activities. 1040 form for 2010 The business profits attributable to the permanent establishment include only those profits derived from assets used, risks assumed, and activities performed by the permanent establishment. 1040 form for 2010   You may be considered to have a permanent establishment if you meet certain conditions. 1040 form for 2010 For more information, see Article V (Permanent Establishment) and Article VII (Business Profits). 1040 form for 2010 Public entertainers (Article XVI). 1040 form for 2010   The provisions under income from employment or income from self-employment do not apply to public entertainers (such as theater, motion picture, radio, or television artistes, musicians, or athletes) from the United States who receive more than $15,000 in gross receipts in Canadian currency, including reimbursed expenses, from their entertainment activities in Canada during the calendar year. 1040 form for 2010 However, this provision for public entertainers does not apply (and the other provisions will apply) to athletes participating in team sports in leagues with regularly scheduled games in both the United States and Canada. 1040 form for 2010 Compensation paid by the U. 1040 form for 2010 S. 1040 form for 2010 Government (Article XIX). 1040 form for 2010   Wages, salaries, and similar income (other than pensions) paid to a U. 1040 form for 2010 S. 1040 form for 2010 citizen by the United States or any of its agencies, instrumentalities, or political subdivisions for discharging governmental functions are exempt from Canadian income tax. 1040 form for 2010   The exemption does not apply to pay for services performed in connection with any trade or business carried on for profit by the United States, or any of its agencies, instrumentalities, or political subdivisions. 1040 form for 2010 Students and apprentices (Article XX). 1040 form for 2010   A full-time student, apprentice, or business trainee who is in Canada to study or acquire business experience is exempt from Canadian income tax on remittances received from any source outside Canada for maintenance, education, or training. 1040 form for 2010 The recipient must be or must have been a U. 1040 form for 2010 S. 1040 form for 2010 resident immediately before visiting Canada. 1040 form for 2010   An apprentice or business trainee can claim this exemption only for a period of one year from the date the individual first arrived in Canada for the purpose of training. 1040 form for 2010 Pensions, Annuities, Social Security, and Alimony Under Article XVIII, pensions and annuities from Canadian sources paid to U. 1040 form for 2010 S. 1040 form for 2010 residents are subject to tax by Canada, but the tax is limited to 15% of the gross amount (if a periodic pension payment) or of the taxable amount (if an annuity). 1040 form for 2010 Canadian pensions and annuities paid to U. 1040 form for 2010 S. 1040 form for 2010 residents may be taxed by the United States, but the amount of any pension included in income for U. 1040 form for 2010 S. 1040 form for 2010 tax purposes may not be more than the amount that would be included in income in Canada if the recipient were a Canadian resident. 1040 form for 2010 Pensions. 1040 form for 2010   A pension includes any payment under a pension or other retirement arrangement, Armed Forces retirement pay, war veterans pensions and allowances, and payments under a sickness, accident, or disability plan. 1040 form for 2010 It includes pensions paid by private employers and the government for services rendered. 1040 form for 2010   Pensions also include payments from individual retirement arrangements (IRAs) in the United States, registered retirement savings plans (RRSPs) and registered retirement income funds (RRIFs) in Canada. 1040 form for 2010   Pensions do not include social security benefits. 1040 form for 2010 Roth IRAs. 1040 form for 2010   A distribution from a Roth IRA is exempt from Canadian tax to the extent it would be exempt from U. 1040 form for 2010 S. 1040 form for 2010 tax if paid to a U. 1040 form for 2010 S. 1040 form for 2010 resident. 1040 form for 2010 In addition, you may elect to defer any tax in Canada on income accrued within the Roth IRA but not distributed by the Roth IRA. 1040 form for 2010 However, you cannot defer tax on any accruals due to contributions made after you become a Canadian resident. 1040 form for 2010 Tax-deferred plans. 1040 form for 2010   Generally, income that accrues in a Canadian RRSP or RRIF is subject to U. 1040 form for 2010 S. 1040 form for 2010 tax, even if it is not distributed. 1040 form for 2010 However, a U. 1040 form for 2010 S. 1040 form for 2010 citizen or resident can elect to defer U. 1040 form for 2010 S. 1040 form for 2010 tax on income from the plan until the income is distributed. 1040 form for 2010 Form 8891 is used to make the election. 1040 form for 2010 Annuities. 1040 form for 2010    An annuity is a stated sum payable periodically at stated times, during life, or during a specified number of years, under an obligation to make the payments in return for adequate and full consideration (other than services rendered). 1040 form for 2010 Annuities do not include: Non-periodic payments, or An annuity the cost of which was deductible for tax purposes. 1040 form for 2010 Special rules. 1040 form for 2010    Special rules apply to pensions and annuities with respect to: Short-term assignments, Cross-border commuters, and Individuals who participate in a Canadian qualifying plan. 1040 form for 2010 Generally, distributions in such cases are deemed to be earned in the country in which the plan is established, without regard to where the services were rendered. 1040 form for 2010 Social security benefits. 1040 form for 2010   U. 1040 form for 2010 S. 1040 form for 2010 social security benefits paid to a resident of Canada are taxed in Canada as if they were benefits under the Canada Pension Plan, except that 15% of the amount of the benefit is exempt from Canadian tax. 1040 form for 2010 Alimony. 1040 form for 2010   Alimony and similar amounts (including child support payments) from Canadian sources paid to U. 1040 form for 2010 S. 1040 form for 2010 residents are exempt from Canadian tax. 1040 form for 2010 For purposes of U. 1040 form for 2010 S. 1040 form for 2010 tax, these amounts are excluded from income to the same extent they would be excluded from income in Canada if the recipient was a Canadian resident. 1040 form for 2010 Investment Income From Canadian Sources The treaty provides beneficial treatment for certain items of Canadian source income that result from an investment of capital. 1040 form for 2010 Dividends (Article X). 1040 form for 2010   For Canadian source dividends received by U. 1040 form for 2010 S. 1040 form for 2010 residents, the Canadian income tax generally may not be more than 15%. 1040 form for 2010   A 5% rate applies to intercorporate dividends paid from a subsidiary to a parent corporation owning at least 10% of the subsidiary's voting stock. 1040 form for 2010 However, a 10% rate applies if the payer of the dividend is a nonresident-owned Canadian investment corporation. 1040 form for 2010   These rates do not apply if the owner of the dividends carries on, or has carried on, a business in Canada through a permanent establishment and the holding on which the income is paid is effectively connected with that permanent establishment. 1040 form for 2010 Interest (Article XI). 1040 form for 2010   Generally, Canadian source interest received by U. 1040 form for 2010 S. 1040 form for 2010 residents is exempt from Canadian income tax. 1040 form for 2010   The exemption does not apply if the owner of the interest carries on, or has carried on, a business in Canada through a permanent establishment and the debt on which the income is paid is effectively connected with that permanent establishment. 1040 form for 2010 Gains from the sale of property (Article XIII). 1040 form for 2010   Generally, gains from the sale of personal property by a U. 1040 form for 2010 S. 1040 form for 2010 resident having no permanent establishment in Canada are exempt from Canadian income tax. 1040 form for 2010 However, the exemption from Canadian tax does not apply to gains realized by U. 1040 form for 2010 S. 1040 form for 2010 residents on Canadian real property, and on personal property belonging to a permanent establishment in Canada. 1040 form for 2010   If the property subject to Canadian tax is a capital asset and was owned by the U. 1040 form for 2010 S. 1040 form for 2010 resident on September 26, 1980, not as part of the business property of a permanent establishment in Canada, generally the taxable gain is limited to the appreciation after 1984. 1040 form for 2010 Royalties (Article XII). 1040 form for 2010   The following are exempt from Canadian tax: Copyright royalties and other like payments for the production or reproduction of any literary, dramatic, musical, or artistic work (other than payments for motion pictures and works on film, videotape, or other means of reproduction for use in connection with television, which may be taxed at 10%), Payments for the use of, or the right to use, computer software, Payments for the use of, or the right to use, any patent or any information concerning industrial, commercial, or scientific experience (but not within a rental or franchise agreement), and Payments for broadcasting as agreed to in an exchange of notes between the countries. 1040 form for 2010   This rate or exemption does not apply if the owner of the royalties carries on, or has carried on, a business in Canada through a permanent establishment and the right or property on which the income is paid is effectively connected with that permanent establishment. 1040 form for 2010   This exemption (or lower rate) does not apply to royalties to explore for or to exploit mineral deposits, timber, and other natural resources. 1040 form for 2010 Other Income Generally, Canadian source income that is not specifically mentioned in the treaty, may be taxed by Canada. 1040 form for 2010 Gambling losses. 1040 form for 2010   Canadian residents may deduct gambling losses in the U. 1040 form for 2010 S. 1040 form for 2010 against gambling winnings in the U. 1040 form for 2010 S. 1040 form for 2010 in the same manner as a U. 1040 form for 2010 S. 1040 form for 2010 resident. 1040 form for 2010 Charitable Contributions United States income tax return. 1040 form for 2010   Under Article XXI, you may deduct contributions to certain qualified Canadian charitable organizations on your United States income tax return. 1040 form for 2010 Besides being subject to the overall limits applicable to all your charitable contributions under U. 1040 form for 2010 S. 1040 form for 2010 tax law, your charitable contributions to Canadian organizations (other than contributions to a college or university at which you or a member of your family is or was enrolled) are subject to the U. 1040 form for 2010 S. 1040 form for 2010 percentage limits on charitable contributions, applied to your Canadian source income. 1040 form for 2010 If your return does not include gross income from Canadian sources, charitable contributions to Canadian organizations are generally not deductible. 1040 form for 2010 Example. 1040 form for 2010 You are a U. 1040 form for 2010 S. 1040 form for 2010 citizen living in Canada. 1040 form for 2010 You have both U. 1040 form for 2010 S. 1040 form for 2010 and Canadian source income. 1040 form for 2010 During your tax year, you contribute to Canadian organizations that would qualify as charitable organizations under U. 1040 form for 2010 S. 1040 form for 2010 tax law if they were U. 1040 form for 2010 S. 1040 form for 2010 organizations. 1040 form for 2010 To figure the maximum amount of the contribution to Canadian organizations that you can deduct on your U. 1040 form for 2010 S. 1040 form for 2010 income tax return, multiply your adjusted gross income from Canadian sources by the percentage limit that applies to contributions under U. 1040 form for 2010 S. 1040 form for 2010 income tax law. 1040 form for 2010 Then include this amount on your return along with all your domestic charitable contributions, subject to the appropriate percentage limit required for contributions under U. 1040 form for 2010 S. 1040 form for 2010 income tax law. 1040 form for 2010 The appropriate percentage limit for U. 1040 form for 2010 S. 1040 form for 2010 tax purposes is applied to your total adjusted gross income from all sources. 1040 form for 2010 Qualified charities. 1040 form for 2010   These Canadian organizations must meet the qualifications that a U. 1040 form for 2010 S. 1040 form for 2010 charitable organization must meet under U. 1040 form for 2010 S. 1040 form for 2010 tax law. 1040 form for 2010 Usually an organization will notify you if it qualifies. 1040 form for 2010 For further information on charitable contributions and the U. 1040 form for 2010 S. 1040 form for 2010 percentage limits, see Publication 526, Charitable Contributions. 1040 form for 2010 Canadian income tax return. 1040 form for 2010   Under certain conditions, contributions to qualified U. 1040 form for 2010 S. 1040 form for 2010 charitable organizations may also be claimed on your Canadian income tax return if you are a Canadian resident. 1040 form for 2010 Income Tax Credits The treaty contains a credit provision (Article XXIV) for the elimination of double taxation. 1040 form for 2010 In general, the United States and Canada both allow a credit against their income tax for the income tax paid to the other country on income from sources in that other country. 1040 form for 2010 For detailed discussions of the U. 1040 form for 2010 S. 1040 form for 2010 income tax treatment of tax paid to foreign countries, see Publication 514, Foreign Tax Credit for Individuals. 1040 form for 2010 See paragraphs (4) and (5) of Article XXIV for certain provisions that affect the computation of the credit allowed by the United States for Canadian income taxes paid by U. 1040 form for 2010 S. 1040 form for 2010 citizens residing in Canada. 1040 form for 2010 Competent Authority Assistance Under Article XXVI, a U. 1040 form for 2010 S. 1040 form for 2010 citizen or resident may request assistance from the U. 1040 form for 2010 S. 1040 form for 2010 competent authority when the actions of Canada, the United States, or both, potentially result in double taxation or taxation contrary to the treaty. 1040 form for 2010 The U. 1040 form for 2010 S. 1040 form for 2010 competent authority may then consult with the Canadian competent authority to determine if the double taxation or denial of treaty benefits in question can be avoided. 1040 form for 2010 If the competent authorities are not able to reach agreement in a case, binding arbitration proceedings may apply. 1040 form for 2010 It is important that your request for competent authority assistance be made as soon as you have been notified by either Canada or the United States of proposed adjustments that would result in denial of treaty benefits or in double taxation. 1040 form for 2010 This is so that implementation of any agreement reached by the competent authorities is not barred by administrative, legal, or procedural barriers. 1040 form for 2010 For information that you should include with your request for competent authority assistance, see Revenue Procedure 2006-54, 2006-49 IRB 1035, available at www. 1040 form for 2010 irs. 1040 form for 2010 gov/irb/2006-49_IRB/ar13. 1040 form for 2010 html. 1040 form for 2010 The request should be addressed to:  Deputy Commissioner (International) Large Business and International Division Attn: Office of Tax Treaty  Internal Revenue Service 1111 Constitution Ave. 1040 form for 2010 , NW Routing: MA3-322A Washington, D. 1040 form for 2010 C. 1040 form for 2010 20024 In addition to a timely request for assistance, you should take the following measures: File a timely protective claim for credit or refund of U. 1040 form for 2010 S. 1040 form for 2010 taxes on Form 1040X, Form 1120X, or amended Form 1041, whichever is appropriate. 1040 form for 2010 This will, among other things, give you the benefit of a foreign tax credit in case you do not qualify for the treaty benefit in question. 1040 form for 2010 For figuring this credit, attach either Form 1116, Foreign Tax Credit (Individual, Estate, or Trust), or Form 1118, Foreign Tax Credit — Corporations, as appropriate. 1040 form for 2010 Attach your protective claim to your request for competent authority assistance. 1040 form for 2010 Take appropriate action under Canadian procedures to avoid the lapse or termination of your right of appeal under Canadian income tax law. 1040 form for 2010 How To Get Tax Help You can get help with unresolved tax issues, order free publications and forms, ask tax questions, and get information from the IRS and the Canada Revenue Agency in several ways. 1040 form for 2010 Text of Treaty You can get the text of the U. 1040 form for 2010 S. 1040 form for 2010 —Canada income tax treaty from: Superintendent of Documents U. 1040 form for 2010 S. 1040 form for 2010 Government Printing Office P. 1040 form for 2010 O. 1040 form for 2010 Box 371954 Pittsburgh, PA 15250-7954 The treaty can also be found on the Internet at IRS. 1040 form for 2010 gov. 1040 form for 2010 U. 1040 form for 2010 S. 1040 form for 2010 Taxation During the filing season, the IRS conducts a taxpayer assistance program in Canada. 1040 form for 2010 To find out if IRS personnel will be in your area, you should contact the consular office at the nearest U. 1040 form for 2010 S. 1040 form for 2010 Embassy or consulate. 1040 form for 2010 Mail. 1040 form for 2010 For answers to technical or account questions, you can write to:   Internal Revenue Service International Section Philadelphia, PA 19255-0525 Phone. 1040 form for 2010 You can call the IRS for help at (267) 941-1000 (not a toll-free call). 1040 form for 2010 Canadian Taxation You can get information on Canadian taxation from the Canada Revenue Agency. 1040 form for 2010 The International Tax Services Office can be contacted on 1-800-267-5177 (from anywhere in Canada and the U. 1040 form for 2010 S. 1040 form for 2010 ) or on the Internet at www. 1040 form for 2010 cra-arc. 1040 form for 2010 gc. 1040 form for 2010 ca. 1040 form for 2010 Prev  Up  Next   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