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2011 Income Taxes

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2011 Income Taxes

2011 income taxes 3. 2011 income taxes   Filing Information for Individuals in Certain U. 2011 income taxes S. 2011 income taxes Possessions Table of Contents American SamoaWhere To Get Forms and Information Which Returns To File Special Rules for American Samoa Double Taxation The Commonwealth of Puerto RicoWhere To Get Forms and Information Which Returns To File Special Rules for Puerto Rico Double Taxation The Commonwealth of the Northern Mariana IslandsWhere To Get Forms and Information Which Return To File Special Rules for the CNMI Double Taxation GuamWhere To Get Forms and Information Which Return To File Special Rules for Guam Double Taxation The U. 2011 income taxes S. 2011 income taxes Virgin IslandsWhere To Get Forms and Information Which Return To File Special Rules for the USVI Double Taxation If you have income from American Samoa, the CNMI, Guam, Puerto Rico, or the USVI, you may have to file a tax return with the tax department of that possession. 2011 income taxes Or, you may have to file two annual tax returns, one with the possession's tax department and the other with the U. 2011 income taxes S. 2011 income taxes Internal Revenue Service. 2011 income taxes This chapter covers the general rules for filing returns in the five possessions. 2011 income taxes You must first determine if you are a bona fide resident of the relevant possession. 2011 income taxes See chapter 1 for a discussion of the requirements you must meet. 2011 income taxes You should ask for forms and advice about the filing of possession tax returns from that possession's tax department, not the Internal Revenue Service. 2011 income taxes Contact information is listed in this chapter under the heading for each possession. 2011 income taxes American Samoa American Samoa has its own separate and independent tax system. 2011 income taxes Although its tax laws are modeled on the U. 2011 income taxes S. 2011 income taxes Internal Revenue Code, there are certain differences. 2011 income taxes Where To Get Forms and Information Requests for advice about matters connected with Samoan taxation should be sent to: American Samoa Government Tax Office  Executive Office Building First Floor Pago Pago, AS 96799 The phone number is (684) 633-4181. 2011 income taxes The fax number is (684) 633-1513. 2011 income taxes You can get forms and publications at www. 2011 income taxes americansamoa. 2011 income taxes gov. 2011 income taxes The addresses and phone numbers listed above are subject to change. 2011 income taxes Which Returns To File Your residency status and your source of income with regard to American Samoa determine whether you file your return and pay your tax to American Samoa, to the United States, or to both. 2011 income taxes In addition to the information below that is categorized by residency status, the Special Rules for American Samoa section (later) contains important information for determining the correct forms to file. 2011 income taxes Bona Fide Resident of American Samoa Bona fide residents of American Samoa are generally exempt from U. 2011 income taxes S. 2011 income taxes tax on their American Samoa source income. 2011 income taxes U. 2011 income taxes S. 2011 income taxes citizen or resident alien. 2011 income taxes   If you are a U. 2011 income taxes S. 2011 income taxes citizen or resident alien and a bona fide resident of American Samoa during the entire tax year, you generally must file the following returns. 2011 income taxes An American Samoa tax return reporting your gross income from worldwide sources. 2011 income taxes If you report non-American Samoa source income on your American Samoa tax return, you can claim a credit against your American Samoa tax liability for income taxes paid on that income to the United States, a foreign country, or another possession. 2011 income taxes A U. 2011 income taxes S. 2011 income taxes tax return reporting income from worldwide sources, but excluding income from sources within American Samoa. 2011 income taxes However, amounts received for services performed as an employee of the United States or any of its agencies cannot be excluded (see U. 2011 income taxes S. 2011 income taxes Government employees under Special Rules for American Samoa, later). 2011 income taxes To exclude American Samoa source income, attach a completed Form 4563 to your U. 2011 income taxes S. 2011 income taxes tax return (see Form 4563 for more information). 2011 income taxes If you are excluding American Samoa source income on your U. 2011 income taxes S. 2011 income taxes tax return, you will not be allowed any deductions from gross income or credits against tax that are directly or indirectly allocable to the exempt income. 2011 income taxes For more information, see Special Rules for Completing Your U. 2011 income taxes S. 2011 income taxes Tax Return in chapter 4. 2011 income taxes Nonresident alien. 2011 income taxes   If you are a bona fide resident of American Samoa during the entire tax year, but a nonresident alien of the United States, you generally must file the following returns. 2011 income taxes An American Samoa tax return reporting worldwide income. 2011 income taxes A U. 2011 income taxes S. 2011 income taxes tax return (Form 1040, U. 2011 income taxes S. 2011 income taxes Individual Income Tax Return) reporting income from worldwide sources, but excluding American Samoa source income other than amounts for services performed as an employee of the United States or any of its agencies. 2011 income taxes For more information, see U. 2011 income taxes S. 2011 income taxes Government employees under Special Rules for American Samoa, later. 2011 income taxes To exclude income from sources within American Samoa, attach a completed Form 4563 to your U. 2011 income taxes S. 2011 income taxes tax return (see Form 4563 , below, for more information). 2011 income taxes For all other tax purposes, however, you will be treated as a nonresident alien individual. 2011 income taxes For example, you are not allowed the standard deduction, you cannot file a joint return, and you are not allowed a deduction for a dependent unless that person is a citizen or national of the United States. 2011 income taxes There are also limitations on what deductions and credits are allowed. 2011 income taxes See Publication 519 for more information. 2011 income taxes Form 4563. 2011 income taxes   If you must file a U. 2011 income taxes S. 2011 income taxes income tax return and you qualify to exclude any of your income from American Samoa, claim the exclusion by completing Form 4563 and attaching it to your Form 1040. 2011 income taxes Form 4563 cannot be filed by itself. 2011 income taxes There is an example of a filled-in Form 4563 in chapter 5. 2011 income taxes   If you are a bona fide resident of American Samoa during the entire tax year and you are not including a check or a money order, send your U. 2011 income taxes S. 2011 income taxes tax return and all attachments (including Form 4563) to: Department of the Treasury Internal Revenue Service Austin, TX 73301-0215 USA   If you are including a check or a money order, send your U. 2011 income taxes S. 2011 income taxes tax return and all attachments (including Form 4563) to: Internal Revenue Service P. 2011 income taxes O. 2011 income taxes Box 1303 Charlotte, NC 28201-1303 USA   Send your American Samoa tax return and all attachments to the address given under Where To Get Forms and Information , earlier. 2011 income taxes Self-employment tax. 2011 income taxes   If you are not required to file a U. 2011 income taxes S. 2011 income taxes tax return but have income that is effectively connected with a trade or business in American Samoa, you must file Form 1040-SS with the United States. 2011 income taxes On this form you will report your self-employment income to the United States and, if necessary, pay self-employment tax on that income. 2011 income taxes Additional Medicare Tax. 2011 income taxes   Beginning in 2013, you may be required to pay Additional Medicare Tax. 2011 income taxes Also, you may need to report Additional Medicare Tax withheld by your employer. 2011 income taxes For more information see Additional Medicare Tax under Special Rules for Completing Your U. 2011 income taxes S. 2011 income taxes Tax Return in chapter 4. 2011 income taxes Net Investment Income Tax. 2011 income taxes   Beginning in 2013, the Net Investment Income Tax (NIIT) is 3. 2011 income taxes 8 percent of the lesser of an individual’s net investment income or the excess of the individual’s modified adjusted gross income over a specified threshold amount. 2011 income taxes The NIIT will apply to a bona fide resident of American Samoa if a taxpayer has modified adjusted gross income from sources outside of American Samoa that exceeds a specified threshold amount, e. 2011 income taxes g. 2011 income taxes , $200,000 for single filers. 2011 income taxes The NIIT does not apply to any individual who is a nonresident alien with respect to the United States. 2011 income taxes See Form 8960, Net Investment Income Tax—Individuals, Estates, and Trusts, and its instructions for more information on the NIIT. 2011 income taxes Estimated tax payments. 2011 income taxes   To see if you are required to make payments of estimated income tax, self-employment tax, Additional Medicare Tax, and/or Net Investment Income Tax to the IRS, get Form 1040-ES, Estimated Tax for Individuals. 2011 income taxes   To pay by check or money order, send your payment with the Form 1040-ES payment voucher to: Internal Revenue Service P. 2011 income taxes O. 2011 income taxes Box 1300 Charlotte, NC 28201-1300 USA   To get information on paying electronically (by credit or debit card, or through the Electronic Federal Tax Payment System (EFTPS)), go to www. 2011 income taxes irs. 2011 income taxes gov/e-pay. 2011 income taxes   For information on making estimated income tax payments to American Samoa, see Where To Get Forms and Information , earlier. 2011 income taxes Not a Bona Fide Resident of American Samoa An individual who is not a bona fide resident of American Samoa for the tax year generally files both U. 2011 income taxes S. 2011 income taxes and American Samoa tax returns, and claims a foreign tax credit on the U. 2011 income taxes S. 2011 income taxes return for taxes paid to American Samoa. 2011 income taxes U. 2011 income taxes S. 2011 income taxes citizen or resident alien. 2011 income taxes   If you are a U. 2011 income taxes S. 2011 income taxes citizen or resident alien but not a bona fide resident of American Samoa during the entire tax year, you generally must file the following returns. 2011 income taxes An American Samoa tax return reporting only your income from sources within American Samoa. 2011 income taxes Wages for services performed in American Samoa, whether for a private employer, the U. 2011 income taxes S. 2011 income taxes Government, or otherwise, is income from sources within American Samoa. 2011 income taxes A U. 2011 income taxes S. 2011 income taxes tax return reporting your income from worldwide sources. 2011 income taxes You can take a credit against your U. 2011 income taxes S. 2011 income taxes tax liability if you paid income taxes to American Samoa (or other possession or foreign country) and reported income from those sources on your U. 2011 income taxes S. 2011 income taxes tax return. 2011 income taxes De minimis exception to determining source of income. 2011 income taxes   In certain situations you will not have income from a possession. 2011 income taxes See De minimis exception under Compensation for Labor or Personal Services in chapter 2. 2011 income taxes Nonresident alien. 2011 income taxes   If you are a nonresident alien of the United States who does not qualify as a bona fide resident of American Samoa for the entire tax year, you generally must file the following returns. 2011 income taxes An American Samoa tax return reporting only your income from sources within American Samoa. 2011 income taxes In this situation, wages for services performed in American Samoa, whether for a private employer, the U. 2011 income taxes S. 2011 income taxes Government, or otherwise, is income from sources within American Samoa. 2011 income taxes A U. 2011 income taxes S. 2011 income taxes tax return (Form 1040NR, U. 2011 income taxes S. 2011 income taxes Nonresident Alien Income Tax Return) reporting U. 2011 income taxes S. 2011 income taxes source income according to the rules for a nonresident alien. 2011 income taxes See the Instructions for Form 1040NR. 2011 income taxes   If you are not a bona fide resident of American Samoa during the entire tax year, and you are not including a check or a money order, send your U. 2011 income taxes S. 2011 income taxes tax return and all attachments to: Department of the Treasury Internal Revenue Service Austin, TX 73301-0215 USA   If you are including a check or a money order, send your U. 2011 income taxes S. 2011 income taxes tax return and all attachments to: Internal Revenue Service P. 2011 income taxes O. 2011 income taxes Box 1303 Charlotte, NC 28201-1303 USA   Send your American Samoa tax return and all attachments to the address given under Where To Get Forms and Information , earlier. 2011 income taxes Special Rules for American Samoa Some special rules apply to certain types of income and employment connected with American Samoa. 2011 income taxes U. 2011 income taxes S. 2011 income taxes Armed Forces. 2011 income taxes   Bona fide residents of American Samoa include military personnel whose official home of record is American Samoa. 2011 income taxes Civilian spouse of active duty member of the U. 2011 income taxes S. 2011 income taxes Armed Forces. 2011 income taxes   If, under the rule discussed at the beginning of chapter 1 (see Special rule for civilian spouse of active duty member of the U. 2011 income taxes S. 2011 income taxes Armed Forces ), your tax residence is American Samoa, follow the guidance in the section for bona fide residents under Which Returns To File, earlier. 2011 income taxes However, if your tax residence is one of the 50 states or the District of Columbia and your only income from American Samoa is from wages, salaries, tips, or self-employment, you will be taxed on your worldwide income and file only a U. 2011 income taxes S. 2011 income taxes tax return (Form 1040) and a state and/or local tax return, if required. 2011 income taxes If you have income from American Samoa other than wages, salaries, tips, or self-employment that is considered to be sourced in that possession (see Table 2-1), contact the local tax administration for guidance. 2011 income taxes U. 2011 income taxes S. 2011 income taxes Government employees. 2011 income taxes   If you are employed in American Samoa by the U. 2011 income taxes S. 2011 income taxes Government or any of its agencies, you are subject to tax by American Samoa on your pay from the government. 2011 income taxes Whether you are subject to tax by American Samoa on your non-American Samoa source income depends on your status in American Samoa as a bona fide resident. 2011 income taxes   Wages and salaries paid to employees of the U. 2011 income taxes S. 2011 income taxes Government and its agencies are also subject to U. 2011 income taxes S. 2011 income taxes federal income tax. 2011 income taxes These payments do not qualify for the exclusion of income from sources within American Samoa, discussed earlier. 2011 income taxes   For tax years ending after April 9, 2008, wages and salaries paid to bona fide residents by the Government of American Samoa can be excluded on the U. 2011 income taxes S. 2011 income taxes tax return. 2011 income taxes   If you report government wages on both your U. 2011 income taxes S. 2011 income taxes and American Samoa tax returns, you can take a credit on your U. 2011 income taxes S. 2011 income taxes tax return for income taxes paid or accrued to American Samoa. 2011 income taxes Figure the credit on Form 1116, and attach that form to your U. 2011 income taxes S. 2011 income taxes tax return, Form 1040. 2011 income taxes Show your wages paid for services performed in American Samoa on Form 1116, line 1a, enter “American Samoa” on line g, and check box b above Part I. 2011 income taxes Moving expense deduction. 2011 income taxes   Generally, expenses of a move to American Samoa are directly attributable to American Samoa wages, salaries, and other earned income. 2011 income taxes Likewise, the expenses of a move back to the United States are generally attributable to U. 2011 income taxes S. 2011 income taxes earned income. 2011 income taxes   If your move was to American Samoa, report your deduction for moving expenses as follows. 2011 income taxes If you are a bona fide resident in the tax year of your move, enter your deductible expenses on your American Samoa tax return. 2011 income taxes If you are not a bona fide resident, enter your deductible expenses on both your American Samoa and U. 2011 income taxes S. 2011 income taxes tax returns. 2011 income taxes Also, for purposes of a tax credit against your U. 2011 income taxes S. 2011 income taxes tax liability, reduce your American Samoa “general category income” on Form 1116, line 1a, by entering the deductible moving expenses on line 2. 2011 income taxes   If your move was to the United States, complete Form 3903, Moving Expenses, and enter the deductible amount on Form 1040, line 26. 2011 income taxes Double Taxation A mutual agreement procedure exists to settle cases of double taxation between the United States and American Samoa. 2011 income taxes See Double Taxation in chapter 4. 2011 income taxes The Commonwealth of Puerto Rico The Commonwealth of Puerto Rico has its own separate and independent tax system. 2011 income taxes Although it is modeled after the U. 2011 income taxes S. 2011 income taxes system, there are differences in law and tax rates. 2011 income taxes Where To Get Forms and Information Requests for information about the filing of Puerto Rico tax returns should be addressed to: Departamento de Hacienda Negociado de Asistencia Contributiva  P. 2011 income taxes O. 2011 income taxes Box 9024140 San Juan, Puerto Rico 00902-4140 The phone numbers are (787) 721-8051 and (787) 721-7198. 2011 income taxes    To obtain Puerto Rico tax forms, contact the Forms and Publications Division Office at the above address or call (787) 722-0216, option #7. 2011 income taxes You can access the Hacienda website at www. 2011 income taxes hacienda. 2011 income taxes gobierno. 2011 income taxes pr or email your questions about Puerto Rico taxes to InfoServ@hacienda. 2011 income taxes gobierno. 2011 income taxes pr. 2011 income taxes The addresses and phone numbers listed above are subject to change. 2011 income taxes Which Returns To File Generally, you will file returns with both Puerto Rico and the United States. 2011 income taxes The income reported on each return depends on your residency status in Puerto Rico. 2011 income taxes To determine if you are a bona fide resident of Puerto Rico, see the information in chapter 1. 2011 income taxes Bona Fide Resident of Puerto Rico Bona fide residents of Puerto Rico will generally pay tax to Puerto Rico on their worldwide income. 2011 income taxes U. 2011 income taxes S. 2011 income taxes citizen or resident alien. 2011 income taxes   If you are a U. 2011 income taxes S. 2011 income taxes citizen or resident alien and also a bona fide resident of Puerto Rico during the entire tax year, you generally must file the following returns. 2011 income taxes A Puerto Rico tax return reporting income from worldwide sources. 2011 income taxes If you report U. 2011 income taxes S. 2011 income taxes source income on your Puerto Rico tax return, you can claim a credit against your Puerto Rico tax, up to the amount allowable, for income taxes paid to the United States. 2011 income taxes A U. 2011 income taxes S. 2011 income taxes tax return reporting income from worldwide sources, but excluding Puerto Rico source income. 2011 income taxes However, see U. 2011 income taxes S. 2011 income taxes Government employees under Special Rules for Puerto Rico, later, for an exception. 2011 income taxes If you are excluding Puerto Rico income on your U. 2011 income taxes S. 2011 income taxes tax return, you will not be allowed any deductions or credits that are directly or indirectly allocable to exempt income. 2011 income taxes For more information, see Special Rules for Completing Your U. 2011 income taxes S. 2011 income taxes Tax Return in chapter 4. 2011 income taxes If all of your income is from Puerto Rico sources, you are not required to file a U. 2011 income taxes S. 2011 income taxes tax return. 2011 income taxes However, if you have self-employment income, see Self-employment tax , later. 2011 income taxes U. 2011 income taxes S. 2011 income taxes citizen only. 2011 income taxes   If you are a U. 2011 income taxes S. 2011 income taxes citizen, you may also qualify under these rules if you have been a bona fide resident of Puerto Rico for at least 2 years before moving from Puerto Rico. 2011 income taxes In this case, you can exclude your income derived from sources within Puerto Rico (but not wages and salaries received as an employee of the U. 2011 income taxes S. 2011 income taxes Government or its agencies) that you earned before the date you changed your residence. 2011 income taxes For more information, see Puerto Rico under Year of Moving From a Possession in chapter 1. 2011 income taxes Nonresident alien. 2011 income taxes   If you are a bona fide resident of Puerto Rico during the entire tax year, but a nonresident alien of the United States, you generally must file the following returns. 2011 income taxes A Puerto Rico tax return reporting income from worldwide sources. 2011 income taxes If you report U. 2011 income taxes S. 2011 income taxes source income on your Puerto Rico tax return, you can claim a credit against your Puerto Rico tax, up to the amount allowable, for income taxes paid to the United States. 2011 income taxes A U. 2011 income taxes S. 2011 income taxes tax return (Form 1040) reporting income from worldwide sources, but excluding Puerto Rico source income (other than amounts for services performed as an employee of the United States or any of its agencies). 2011 income taxes For tax purposes other than reporting income, however, you will be treated as a nonresident alien individual. 2011 income taxes For example, you are not allowed the standard deduction, you cannot file a joint return, and you are not allowed a deduction for a dependent unless that person is a citizen or national of the United States. 2011 income taxes There are also limitations on what deductions and credits are allowed. 2011 income taxes See Publication 519 for more information. 2011 income taxes Self-employment tax. 2011 income taxes   If you have no U. 2011 income taxes S. 2011 income taxes filing requirement but have income that is effectively connected with a trade or business in Puerto Rico, you must file Form 1040-SS or Form 1040-PR with the United States to report your self-employment income and, if necessary, pay self-employment tax. 2011 income taxes Additional Medicare Tax. 2011 income taxes   Beginning in 2013, you may be required to pay Additional Medicare Tax. 2011 income taxes Also, you may need to report Additional Medicare Tax withheld by your employer. 2011 income taxes For more information see Additional Medicare Tax under Special Rules for Completing Your U. 2011 income taxes S. 2011 income taxes Tax Return in chapter 4. 2011 income taxes Net Investment Income Tax. 2011 income taxes   Beginning in 2013, the Net Investment Income Tax (NIIT) is 3. 2011 income taxes 8 percent of the lesser of an individual’s net investment income or the excess of the individual’s modified adjusted gross income over a specified threshold amount. 2011 income taxes The NIIT will apply to a bona fide resident of Puerto Rico if a taxpayer has modified adjusted gross income from sources outside of Puerto Rico that exceeds a specified threshold amount, e. 2011 income taxes g. 2011 income taxes , $200,000 for single filers. 2011 income taxes The NIIT does not apply to any individual who is a nonresident alien with respect to the United States. 2011 income taxes See Form 8960, Net Investment Income Tax—Individuals, Estates, and Trusts, and its instructions for more information on the NIIT. 2011 income taxes Estimated tax payments. 2011 income taxes   To see if you are required to make payments of estimated income tax, self-employment tax, Additional Medicare Tax, and/or Net Investment Income Tax to the IRS, get Form 1040-ES (or Form 1040-ES(PR)). 2011 income taxes   To pay by check or money order, send your payment with the Form 1040-ES (or Form 1040-ES(PR)) payment voucher to: Internal Revenue Service P. 2011 income taxes O. 2011 income taxes Box 1300 Charlotte, NC 28201-1300 USA   To get information on paying electronically (by credit or debit card, or through the Electronic Federal Tax Payment System (EFTPS)), go to www. 2011 income taxes irs. 2011 income taxes gov/e-pay. 2011 income taxes   For information on making estimated income tax payments to Hacienda, see Where To Get Forms and Information , earlier. 2011 income taxes Not a Bona Fide Resident of Puerto Rico An individual who is not a bona fide resident of Puerto Rico for the tax year generally files tax returns with both Puerto Rico and the United States. 2011 income taxes U. 2011 income taxes S. 2011 income taxes citizen or resident alien. 2011 income taxes   If you are a U. 2011 income taxes S. 2011 income taxes citizen or resident alien but not a bona fide resident of Puerto Rico during the entire tax year, you generally must file the following returns. 2011 income taxes A Puerto Rico tax return reporting only your income from Puerto Rico sources. 2011 income taxes Wages for services performed in Puerto Rico, whether for a private employer, the U. 2011 income taxes S. 2011 income taxes Government, or otherwise, is income from Puerto Rico sources. 2011 income taxes A U. 2011 income taxes S. 2011 income taxes tax return reporting income from worldwide sources. 2011 income taxes Generally, you can claim a foreign tax credit for income taxes paid to Puerto Rico on the Puerto Rico income that is not exempt from U. 2011 income taxes S. 2011 income taxes taxes (see chapter 4 for more information). 2011 income taxes Nonresident alien. 2011 income taxes   If you are a nonresident alien of the United States who does not qualify as a bona fide resident of Puerto Rico for the entire tax year, you generally must file the following returns. 2011 income taxes A Puerto Rico tax return reporting only your income from Puerto Rico sources. 2011 income taxes Wages for services performed in Puerto Rico, whether for a private employer, the U. 2011 income taxes S. 2011 income taxes Government, or otherwise, is income from Puerto Rico sources. 2011 income taxes A U. 2011 income taxes S. 2011 income taxes tax return (Form 1040NR) according to the rules for a nonresident alien. 2011 income taxes See the Instructions for Form 1040NR. 2011 income taxes De minimis exception to determining source of income. 2011 income taxes   In certain situations you will not have income from a possession. 2011 income taxes See De minimis exception under Compensation for Labor or Personal Services in chapter 2. 2011 income taxes Use the addresses listed below to file your U. 2011 income taxes S. 2011 income taxes and Puerto Rico income tax returns. 2011 income taxes If you are not including a check or a money order, send your U. 2011 income taxes S. 2011 income taxes tax return and all attachments to: Department of the Treasury Internal Revenue Service Austin, TX 73301-0215 USA If you are including a check or a money order, send your U. 2011 income taxes S. 2011 income taxes tax return and all attachments to: Internal Revenue Service P. 2011 income taxes O. 2011 income taxes Box 1303 Charlotte, NC 28201-1303 USA If you request a refund on your Puerto Rico return, send your Puerto Rico tax return and all attachments to: Departamento de Hacienda P. 2011 income taxes O. 2011 income taxes Box 50072 San Juan, PR 00902-6272 Send all other Puerto Rico tax returns, with all attachments, to: Departamento de Hacienda P. 2011 income taxes O. 2011 income taxes Box 9022501 San Juan, PR 00902-2501 Special Rules for Puerto Rico In addition to the general rules given earlier for filing U. 2011 income taxes S. 2011 income taxes and Puerto Rico tax returns, there are some special rules that apply to certain individuals and types of income. 2011 income taxes U. 2011 income taxes S. 2011 income taxes Government employees. 2011 income taxes   Wages and cost-of-living allowances paid by the U. 2011 income taxes S. 2011 income taxes Government (or one of its agencies) for working in Puerto Rico are subject to Puerto Rico tax. 2011 income taxes However, the cost-of-living allowances are excluded from Puerto Rico gross income up to the amount exempt from U. 2011 income taxes S. 2011 income taxes tax. 2011 income taxes In order to claim this exclusion, you must: Include with your Puerto Rico tax return evidence to show the amount received during the year, and Be in full compliance with your Puerto Rico tax responsibilities. 2011 income taxes   These wages are also subject to U. 2011 income taxes S. 2011 income taxes tax, but the cost-of-living allowances are excludable. 2011 income taxes A foreign tax credit is available in order to avoid double taxation. 2011 income taxes U. 2011 income taxes S. 2011 income taxes Armed Forces. 2011 income taxes   Bona fide residents of Puerto Rico include military personnel whose official home of record is Puerto Rico. 2011 income taxes Civilian spouse of active duty member of the U. 2011 income taxes S. 2011 income taxes Armed Forces. 2011 income taxes   If, under the rule discussed at the beginning of chapter 1 (see Special rule for civilian spouse of active duty member of the U. 2011 income taxes S. 2011 income taxes Armed Forces ), your tax residence is Puerto Rico, follow the guidance in the section for bona fide residents under Which Returns To File, earlier. 2011 income taxes However, if your tax residence is one of the 50 states or the District of Columbia and your only income from Puerto Rico is from wages, salaries, tips, or self-employment, you will be taxed on your worldwide income and file only a U. 2011 income taxes S. 2011 income taxes tax return (Form 1040) and a state and/or local tax return, if required. 2011 income taxes If you have income from Puerto Rico other than wages, salaries, tips, or self-employment that is considered to be sourced in that possession (see Table 2-1 ), contact the Hacienda for guidance. 2011 income taxes Income from sources outside Puerto Rico and the United States. 2011 income taxes   If you are a U. 2011 income taxes S. 2011 income taxes citizen and bona fide resident of Puerto Rico and you have income from sources outside both Puerto Rico and the United States, that income is treated as foreign source income under both tax systems. 2011 income taxes In addition to your Puerto Rico and U. 2011 income taxes S. 2011 income taxes tax returns, you may also have to file a return with the country or possession from which your outside income was derived. 2011 income taxes To avoid double taxation, a foreign tax credit is generally available for either the U. 2011 income taxes S. 2011 income taxes or Puerto Rico return. 2011 income taxes Example. 2011 income taxes Thomas Red is a bona fide resident of Puerto Rico and a U. 2011 income taxes S. 2011 income taxes citizen. 2011 income taxes He traveled to the Dominican Republic and worked in the construction industry for 1 month. 2011 income taxes His wages were $20,000. 2011 income taxes Because the wages were earned outside Puerto Rico and outside the United States, Thomas must file a tax return with Puerto Rico and the United States. 2011 income taxes He may also have to file a tax return with the Dominican Republic. 2011 income taxes Moving expense deduction. 2011 income taxes   Generally, expenses of a move to Puerto Rico are directly attributable to wages, salaries, and other earned income from Puerto Rico. 2011 income taxes Likewise, the expenses of a move back to the United States are generally attributable to U. 2011 income taxes S. 2011 income taxes earned income. 2011 income taxes   If your move was to Puerto Rico, report your deduction for moving expenses as follows. 2011 income taxes If you are a bona fide resident in the tax year of your move, enter your deductible expenses on your Puerto Rico tax return. 2011 income taxes If you are not a bona fide resident, enter your deductible expenses on both your Puerto Rico and U. 2011 income taxes S. 2011 income taxes tax returns. 2011 income taxes Also, for purposes of a tax credit against your U. 2011 income taxes S. 2011 income taxes tax liability, reduce your Puerto Rico “general category income” on Form 1116, line 1a, by entering the deductible moving expenses on line 2. 2011 income taxes   If your move was to the United States, complete Form 3903 and enter the deductible amount on Form 1040, line 26. 2011 income taxes Additional child tax credit. 2011 income taxes   If you are not required to file a U. 2011 income taxes S. 2011 income taxes income tax return, this credit is available only if you meet all three of the following conditions. 2011 income taxes You were a bona fide resident of Puerto Rico during the entire tax year. 2011 income taxes Social security and Medicare taxes were withheld from your wages or you paid self-employment tax. 2011 income taxes You had three or more qualifying children. 2011 income taxes (For the definition of a qualifying child, see the instructions for Form 1040-PR or Form 1040-SS. 2011 income taxes ) If your income exceeds certain levels, you may be disqualified from receiving this credit. 2011 income taxes Use Form 1040-PR or Form 1040-SS to claim the additional child tax credit. 2011 income taxes Advice about possible tax benefits under the Puerto Rico investment incentive programs is available from the Puerto Rico tax authorities. 2011 income taxes Double Taxation A mutual agreement procedure exists to settle cases of double taxation between the United States and the Commonwealth of Puerto Rico. 2011 income taxes See Double Taxation in chapter 4. 2011 income taxes The Commonwealth of the Northern Mariana Islands The Commonwealth of the Northern Mariana Islands (CNMI) has its own tax system based partly on the same tax laws and tax rates that apply to the United States and partly on local taxes imposed by the CNMI government. 2011 income taxes Where To Get Forms and Information Requests for advice about CNMI residency and tax matters should be addressed to: Commonwealth of the Northern Mariana Islands  Division of Revenue and Taxation P. 2011 income taxes O. 2011 income taxes Box 5234 CHRB Dandan Commercial Center First Floor Rm #8  Saipan, MP 96950 You can order forms and publications by calling (670) 664-1000. 2011 income taxes You can order forms and publications through the fax at (670) 664-1015. 2011 income taxes You can get forms and publications at www. 2011 income taxes cnmidof. 2011 income taxes net. 2011 income taxes The addresses and phone numbers listed above are subject to change. 2011 income taxes Which Return To File In general, all individuals with income from the CNMI will file only one return, either to the CNMI or to the United States. 2011 income taxes Your residency status with regard to the CNMI determines which return you will file. 2011 income taxes Be sure to check the Special Rules for the CNMI , later, for additional information about filing your tax return. 2011 income taxes Bona Fide Resident of the CNMI If you are a U. 2011 income taxes S. 2011 income taxes citizen, resident alien, or nonresident alien and a bona fide resident of the CNMI during the entire tax year, file your income tax return with the CNMI. 2011 income taxes Include income from worldwide sources on your CNMI return. 2011 income taxes In determining your total tax payments, include all income tax withheld by either the CNMI or the United States, any credit for an overpayment of income tax to either the CNMI or the United States, and any payments of estimated tax to either the CNMI or the United States. 2011 income taxes Pay any balance of tax due with your tax return. 2011 income taxes Generally, if you properly file your return with, and fully pay your income tax to, the CNMI, then you are not liable for filing an income tax return with, or for paying tax to, the United States for the tax year. 2011 income taxes However, if you were self-employed in 2013, see Self-employment tax , later. 2011 income taxes Example. 2011 income taxes David Gold was a bona fide resident of the CNMI for 2013. 2011 income taxes He received wages of $30,000 paid by a private employer in the CNMI and dividends of $4,000 from U. 2011 income taxes S. 2011 income taxes corporations that carry on business mainly in the United States. 2011 income taxes He must file a 2013 income tax return with the CNMI Division of Revenue and Taxation. 2011 income taxes He reports his total income of $34,000 on the CNMI return. 2011 income taxes   If you are a bona fide resident of the CNMI for the entire tax year, send your return and all attachments to the Division of Revenue and Taxation at the address given earlier. 2011 income taxes U. 2011 income taxes S. 2011 income taxes Citizen or Resident Alien (Other Than a Bona Fide Resident of the CNMI) If you have income from sources within the CNMI and are a U. 2011 income taxes S. 2011 income taxes citizen or resident alien, but you are not a bona fide resident of the CNMI during the entire tax year, file your income tax return with the United States. 2011 income taxes Include income from worldwide sources on your U. 2011 income taxes S. 2011 income taxes return. 2011 income taxes In determining your total tax payments, include all income tax withheld by either the United States or the CNMI, any credit for an overpayment of income tax to either the United States or the CNMI, and any payments of estimated tax to either the United States or the CNMI. 2011 income taxes Pay any balance of tax due with your tax return. 2011 income taxes Note. 2011 income taxes You may also need to complete Form 5074. 2011 income taxes You are not liable for filing an income tax return with, or for paying tax to, the CNMI for the tax year. 2011 income taxes Form 5074. 2011 income taxes   If you file a U. 2011 income taxes S. 2011 income taxes income tax return, attach a completed Form 5074 if you (and your spouse if filing a joint return) have: Adjusted gross income of $50,000 or more for the tax year, and Gross income of $5,000 or more from sources within the CNMI. 2011 income taxes   The United States and the CNMI use this form to divide your income taxes. 2011 income taxes   There is an example of a filled-in Form 5074 in chapter 5. 2011 income taxes De minimis exception to determining source of income. 2011 income taxes   In certain situations you will not have income from a possession. 2011 income taxes See De minimis exception under Compensation for Labor or Personal Services in chapter 2. 2011 income taxes Citizen or resident alien of the United States but not a bona fide resident of the CNMI. 2011 income taxes   If you are a citizen or resident alien of the United States but not a bona fide resident of the CNMI during the entire tax year and you are not including a check or a money order, send your return and all attachments to: Department of the Treasury Internal Revenue Service Austin, TX 73301-0215 USA   If you are including a check or a money order, send your U. 2011 income taxes S. 2011 income taxes tax return and all attachments to: Internal Revenue Service P. 2011 income taxes O. 2011 income taxes Box 1303 Charlotte, NC 28201-1303 USA Nonresident Alien (Other Than a Bona Fide Resident of the CNMI) If you are a nonresident alien of the United States who does not qualify as a bona fide resident of the CNMI for the entire tax year, you generally must file the following returns. 2011 income taxes A CNMI tax return reporting only your income from sources within the CNMI. 2011 income taxes In this situation, wages for services performed in the CNMI, whether for a private employer, the U. 2011 income taxes S. 2011 income taxes Government, or otherwise, is income from sources within the CNMI. 2011 income taxes A U. 2011 income taxes S. 2011 income taxes tax return (Form 1040NR) reporting U. 2011 income taxes S. 2011 income taxes source income according to the rules for a nonresident alien. 2011 income taxes See the instructions for Form 1040NR. 2011 income taxes If you are not a bona fide resident of the CNMI during the entire tax year and you are not including a check or a money order, send your U. 2011 income taxes S. 2011 income taxes tax return and all attachments to: Department of the Treasury Internal Revenue Service Austin, TX 73301-0215 USA If you are including a check or a money order, send your U. 2011 income taxes S. 2011 income taxes tax return and all attachments to:  Internal Revenue Service P. 2011 income taxes O. 2011 income taxes Box 1303 Charlotte, NC 28201-1303 USA Send your CNMI tax return and all attachments to:  Department of Finance Division of Revenue and Taxation Commonwealth of the Northern Mariana Islands P. 2011 income taxes O. 2011 income taxes Box 5234 CHRB Saipan, MP 96950 Citizen of the CNMI If you are a citizen of the CNMI (meaning that you were born or naturalized in the CNMI) but not otherwise a U. 2011 income taxes S. 2011 income taxes citizen or a U. 2011 income taxes S. 2011 income taxes resident alien during the tax year, file your income tax return with the CNMI. 2011 income taxes Include income from worldwide sources on your CNMI return. 2011 income taxes Take into account tax withheld by both jurisdictions in determining if there is tax overdue or an overpayment. 2011 income taxes Pay any balance of tax due with your tax return. 2011 income taxes Send your return and all attachments to:   Department of Finance Division of Revenue and Taxation Commonwealth of the Northern Mariana Islands P. 2011 income taxes O. 2011 income taxes Box 5234 CHRB Saipan, MP 96950 Special Rules for the CNMI Special rules apply to certain types of income, employment, and filing status. 2011 income taxes Joint return. 2011 income taxes   If you file a joint return, file your return (and pay the tax) with the jurisdiction where the spouse who has the greater adjusted gross income (AGI) would have to file if you were filing separately. 2011 income taxes If the spouse with the greater AGI is a bona fide resident of the CNMI during the entire tax year, file the joint return with the CNMI. 2011 income taxes If the spouse with the greater AGI is a U. 2011 income taxes S. 2011 income taxes citizen or resident alien but not a bona fide resident of the CNMI during the entire tax year, file your joint return with the United States. 2011 income taxes For this purpose, income is determined without regard to community property laws. 2011 income taxes Example. 2011 income taxes Marsha Blue, a U. 2011 income taxes S. 2011 income taxes citizen, was a resident of the United States, and her spouse, a citizen of the CNMI, was a bona fide resident of the CNMI during the entire tax year. 2011 income taxes Marsha earned $65,000 as a computer programmer in the United States. 2011 income taxes Her spouse earned $20,000 as an artist in the CNMI. 2011 income taxes Marsha and her spouse will file a joint return. 2011 income taxes Because Marsha has the greater AGI, she and her spouse must file their return with the United States and report the entire $85,000 on that return. 2011 income taxes U. 2011 income taxes S. 2011 income taxes Armed Forces. 2011 income taxes   If you are a member of the U. 2011 income taxes S. 2011 income taxes Armed Forces who qualified as a bona fide resident of the CNMI in a prior tax year, your absence from the CNMI solely in compliance with military orders will not change your bona fide residency. 2011 income taxes If you did not qualify as a bona fide resident of the CNMI in a prior tax year, your presence in the CNMI solely in compliance with military orders will not qualify you as a bona fide resident of the CNMI. 2011 income taxes Civilian spouse of active duty member of the U. 2011 income taxes S. 2011 income taxes Armed Forces. 2011 income taxes   If, under the rule discussed at the beginning of chapter 1 (see Special rule for civilian spouse of active duty member of the U. 2011 income taxes S. 2011 income taxes Armed Forces ), your tax residence is the CNMI, follow the guidance in the section for bona fide residents under Which Return To File, earlier. 2011 income taxes However, if your tax residence is one of the 50 states or the District of Columbia and your only income from the CNMI is from wages, salaries, tips, or self-employment, you will be taxed on your worldwide income and file only a U. 2011 income taxes S. 2011 income taxes tax return (Form 1040) and a state and/or local tax return, if required. 2011 income taxes If you have income from the CNMI other than wages, salaries, tips, or self-employment that is considered to be sourced in that possession (see Table 2-1), you may need to file Form 5074 with your U. 2011 income taxes S. 2011 income taxes tax return. 2011 income taxes Moving expense deduction. 2011 income taxes   Generally, expenses of a move to the CNMI are directly attributable to wages, salaries, and other earned income from the CNMI. 2011 income taxes Likewise, the expenses of a move back to the United States are generally attributable to U. 2011 income taxes S. 2011 income taxes earned income. 2011 income taxes   If your move was to the CNMI, report your deduction for moving expenses as follows. 2011 income taxes If you are a bona fide resident in the tax year of your move, enter your deductible expenses on your CNMI tax return. 2011 income taxes If you are not a bona fide resident, enter your deductible expenses on Form 3903 and enter the deductible amount on Form 1040, line 26, and on Form 5074, line 20. 2011 income taxes   If your move was to the United States, complete Form 3903 and enter the deductible amount on Form 1040, line 26. 2011 income taxes Foreign tax credit. 2011 income taxes   Under the filing rules explained earlier, individuals with CNMI source income normally will not claim a foreign tax credit on a U. 2011 income taxes S. 2011 income taxes income tax return for tax paid to the CNMI. 2011 income taxes Self-employment tax. 2011 income taxes   If you have no U. 2011 income taxes S. 2011 income taxes filing requirement, but have income that is effectively connected with a trade or business in the CNMI, you must file Form 1040-SS with the United States to report your self-employment income and, if necessary, pay self-employment tax. 2011 income taxes Additional Medicare Tax. 2011 income taxes   Beginning in 2013, you may be required to pay Additional Medicare Tax. 2011 income taxes Also, you may need to report Additional Medicare Tax withheld by your employer. 2011 income taxes For more information see Additional Medicare Tax under Special Rules for Completing Your U. 2011 income taxes S. 2011 income taxes Tax Return in chapter 4. 2011 income taxes Estimated tax payments. 2011 income taxes   To see if you are required to make payments of estimated income tax, self-employment tax, and/or Additional Medicare Tax to the IRS, get Form 1040-ES. 2011 income taxes Payment of estimated tax. 2011 income taxes   If you must pay estimated tax, make your payment to the jurisdiction where you would file your income tax return if your tax year were to end on the date your first estimated tax payment is due. 2011 income taxes Generally, you should make the rest of your quarterly payments of estimated tax to the jurisdiction where you made your first payment of estimated tax. 2011 income taxes However, estimated tax payments to either jurisdiction will be treated as payments to the jurisdiction with which you file the tax return. 2011 income taxes   If you make a joint payment of estimated tax, make your payment to the jurisdiction where the spouse who has the greater estimated AGI would have to pay (if a separate payment were made). 2011 income taxes For this purpose, income is determined without regard to community property laws. 2011 income taxes Early payment. 2011 income taxes   If you make your first payment of estimated tax early, follow the rules given earlier to determine where to send it. 2011 income taxes If you send it to the wrong jurisdiction, make all later payments to the jurisdiction to which the first payment should have been sent. 2011 income taxes   To pay by check or money order, send your payment with the Form 1040-ES payment voucher to:  Internal Revenue Service P. 2011 income taxes O. 2011 income taxes Box 1300 Charlotte, NC 28201-1300 USA   To get information on paying electronically (by credit or debit card, or through the Electronic Federal Tax Payment System (EFTPS)), go to www. 2011 income taxes irs. 2011 income taxes gov/e-pay. 2011 income taxes   For information on making estimated income tax payments to the CNMI, see Where To Get Forms and Information , earlier. 2011 income taxes Double Taxation A mutual agreement procedure exists to settle cases of double taxation between the United States and the CNMI. 2011 income taxes See Double Taxation in chapter 4. 2011 income taxes Guam Guam has its own tax system based on the same tax laws and tax rates that apply in the United States. 2011 income taxes Where To Get Forms and Information Requests for advice about Guam residency and tax matters should be addressed to: Department of Revenue and Taxation Government of Guam P. 2011 income taxes O. 2011 income taxes Box 23607 GMF, GU 96921 You can order forms and publications by calling (671) 635-1840 or (671) 635-1841. 2011 income taxes You can order forms and publications through the fax at (671) 633-2643. 2011 income taxes You can get forms and publications at www. 2011 income taxes guamtax. 2011 income taxes com. 2011 income taxes The addresses and phone numbers listed above are subject to change. 2011 income taxes Which Return To File Bona fide residents of Guam are subject to special U. 2011 income taxes S. 2011 income taxes tax rules. 2011 income taxes In general, all individuals with income from Guam will file only one return—either to Guam or the United States. 2011 income taxes Bona Fide Resident of Guam If you are a bona fide resident of Guam during the entire tax year, file your return with Guam. 2011 income taxes This applies to all bona fide residents who are citizens, resident aliens, or nonresident aliens of the United States. 2011 income taxes Include income from worldwide sources on your Guam return. 2011 income taxes In determining your total tax payments, include all income tax withheld by either Guam or the United States, any credit for an overpayment of income tax to either Guam or the United States, and any payments of estimated tax to either Guam or the United States. 2011 income taxes Pay any balance of tax due with your tax return. 2011 income taxes Generally, if you properly file your return with, and fully pay your income tax to, Guam, then you are not liable for filing an income tax return with, or for paying tax to, the United States. 2011 income taxes However, if you were self-employed in 2013, see Self-employment tax , later. 2011 income taxes Example. 2011 income taxes Gary Barker was a bona fide resident of Guam for 2013. 2011 income taxes He received wages of $25,000 paid by a private employer in Guam and dividends of $2,000 from U. 2011 income taxes S. 2011 income taxes corporations that carry on business mainly in the United States. 2011 income taxes He must file a 2013 income tax return with the Government of Guam. 2011 income taxes He reports his total income of $27,000 on the Guam return. 2011 income taxes If you are a bona fide resident of Guam for the entire tax year, send your return and all attachments to:  Department of Revenue and Taxation Government of Guam P. 2011 income taxes O. 2011 income taxes Box 23607 GMF, GU 96921 U. 2011 income taxes S. 2011 income taxes Citizen or Resident Alien (Other Than a Bona Fide Resident of Guam) If you have income from sources within Guam and are a U. 2011 income taxes S. 2011 income taxes citizen or resident alien, but you are not a bona fide resident of Guam during the entire tax year, file your income tax return with the United States. 2011 income taxes Include income from worldwide sources on your U. 2011 income taxes S. 2011 income taxes return. 2011 income taxes In determining your total tax payments, include all income tax withheld by either the United States or Guam, any credit for an overpayment of income tax to either the United States or Guam, and any payments of estimated tax to either the United States or Guam. 2011 income taxes Pay any balance of tax due with your tax return. 2011 income taxes You may also need to complete Form 5074. 2011 income taxes You are not liable for filing an income tax return with, or for paying tax to, Guam for the tax year. 2011 income taxes Form 5074. 2011 income taxes   If you file a U. 2011 income taxes S. 2011 income taxes income tax return, attach a completed Form 5074 if you (and your spouse if filing a joint return) have: Adjusted gross income of $50,000 or more for the tax year, and Gross income of $5,000 or more from sources within Guam. 2011 income taxes   The United States and Guam use this form to divide your income taxes. 2011 income taxes   See the Illustrated Example of Form 5074 in chapter 5. 2011 income taxes De minimis exception to determining source of income. 2011 income taxes   In certain situations you will not have income from a possession. 2011 income taxes See De minimis exception under Compensation for Labor or Personal Services in chapter 2. 2011 income taxes   If you are a citizen or resident alien of the United States but not a bona fide resident of Guam during the entire tax year and you are not including a check or money order, send your U. 2011 income taxes S. 2011 income taxes tax return and all attachments (including Form 5074) to:  Department of the Treasury Internal Revenue Service Austin, TX 73301-0215 USA   If you are including a check or a money order, send your U. 2011 income taxes S. 2011 income taxes tax return and all attachments (including Form 5074) to:  Internal Revenue Service P. 2011 income taxes O. 2011 income taxes Box 1303 Charlotte, NC 28201-1303 USA Nonresident Alien (Other Than a Bona Fide Resident of Guam) If you are a nonresident alien of the United States who does not qualify as a bona fide resident of Guam for the entire tax year, you generally must file the following returns. 2011 income taxes A Guam tax return reporting only your income from sources within Guam. 2011 income taxes In this situation, wages for services performed in Guam, whether for a private employer, the U. 2011 income taxes S. 2011 income taxes Government, or otherwise, is income from sources within Guam. 2011 income taxes A U. 2011 income taxes S. 2011 income taxes tax return (Form 1040NR) reporting U. 2011 income taxes S. 2011 income taxes source income according to the rules for a nonresident alien. 2011 income taxes See the instructions for Form 1040NR. 2011 income taxes If you are not a bona fide resident of Guam during the entire tax year and you are not including a check or money order, send your U. 2011 income taxes S. 2011 income taxes tax return and all attachments to:  Department of the Treasury Internal Revenue Service Austin, TX 73301-0215 USA If you are including a check or a money order, send your U. 2011 income taxes S. 2011 income taxes tax return and all attachments to:  Internal Revenue Service P. 2011 income taxes O. 2011 income taxes Box 1303 Charlotte, NC 28201-1303 USA Send your Guam tax return and all attachments to:   Department of Revenue and Taxation P. 2011 income taxes O. 2011 income taxes Box 23607 GMF, GU 96921 Citizen of Guam If you are a citizen of Guam (meaning that you were born or naturalized in Guam) but not otherwise a U. 2011 income taxes S. 2011 income taxes citizen or a U. 2011 income taxes S. 2011 income taxes resident alien during the tax year, file your income tax return with Guam. 2011 income taxes Include income from worldwide sources on your Guam return. 2011 income taxes Take into account tax withheld by both jurisdictions in determining if there is tax overdue or an overpayment. 2011 income taxes Pay any balance of tax due with your tax return. 2011 income taxes If you are a citizen of Guam, send your return and all attachments to:  Department of Revenue and Taxation Government of Guam P. 2011 income taxes O. 2011 income taxes Box 23607 GMF, GU 96921 Special Rules for Guam Special rules apply to certain types of income, employment, and filing status. 2011 income taxes Joint return. 2011 income taxes   If you file a joint return, you should file your return (and pay the tax) with the jurisdiction where the spouse who has the greater adjusted gross income (AGI) would have to file if you were filing separately. 2011 income taxes If the spouse with the greater AGI is a bona fide resident of Guam during the entire tax year, file the joint return with Guam. 2011 income taxes If the spouse with the greater AGI is a U. 2011 income taxes S. 2011 income taxes citizen or resident alien but not a bona fide resident of Guam during the entire tax year, file the joint return with the United States. 2011 income taxes For this purpose, income is determined without regard to community property laws. 2011 income taxes Example. 2011 income taxes Bill Whiting, a U. 2011 income taxes S. 2011 income taxes citizen, was a resident of the United States, and his spouse, a citizen of Guam, was a bona fide resident of Guam during the entire tax year. 2011 income taxes Bill earned $45,000 as an engineer in the United States. 2011 income taxes His spouse earned $15,000 as a teacher in Guam. 2011 income taxes Bill and his spouse will file a joint return. 2011 income taxes Because Bill has the greater AGI, he and his spouse must file their return with the United States and report the entire $60,000 on that return. 2011 income taxes U. 2011 income taxes S. 2011 income taxes Armed Forces. 2011 income taxes   If you are a member of the U. 2011 income taxes S. 2011 income taxes Armed Forces who qualified as a bona fide resident of Guam in a prior tax year, your absence from Guam solely in compliance with military orders will not change your bona fide residency. 2011 income taxes If you did not qualify as a bona fide resident of Guam in a prior tax year, your presence in Guam solely in compliance with military orders will not qualify you as a bona fide resident of Guam. 2011 income taxes Civilian spouse of active duty member of the U. 2011 income taxes S. 2011 income taxes Armed Forces. 2011 income taxes   If, under the rule discussed at the beginning of chapter 1 (see Special rule for civilian spouse of active duty member of the U. 2011 income taxes S. 2011 income taxes Armed Forces ), your tax residence is Guam, follow the guidance in the section for bona fide residents under Which Return To File, earlier. 2011 income taxes However, if your tax residence is one of the 50 states or the District of Columbia and your only income from Guam is from wages, salaries, tips, or self-employment, you will be taxed on your worldwide income and file only a U. 2011 income taxes S. 2011 income taxes tax return (Form 1040) and a state and/or local tax return, if required. 2011 income taxes If you have income from Guam other than wages, salaries, tips, or self-employment that is considered to be sourced in that possession (see Table 2-1), you may need to file Form 5074 with your U. 2011 income taxes S. 2011 income taxes tax return. 2011 income taxes Moving expense deduction. 2011 income taxes   Generally, expenses of a move to Guam are directly attributable to wages, salaries, and other earned income from Guam. 2011 income taxes Likewise, the expenses of a move back to the United States are generally attributable to U. 2011 income taxes S. 2011 income taxes earned income. 2011 income taxes   If your move was to Guam, report your deduction for moving expenses as follows. 2011 income taxes If you are a bona fide resident in the tax year of your move, enter your deductible expenses on your Guam tax return. 2011 income taxes If you are not a bona fide resident, enter your deductible expenses on Form 3903 and enter the deductible amount on Form 1040, line 26, and on Form 5074, line 20. 2011 income taxes   If your move was to the United States, complete Form 3903 and enter the deductible amount on Form 1040, line 26. 2011 income taxes Foreign tax credit. 2011 income taxes   Under the filing rules explained earlier, individuals with Guam source income normally will not claim a foreign tax credit on a U. 2011 income taxes S. 2011 income taxes income tax return for tax paid to Guam. 2011 income taxes Self-employment tax. 2011 income taxes   If you have no U. 2011 income taxes S. 2011 income taxes filing requirement, but have income that is effectively connected with a trade or business in Guam, you must file Form 1040-SS with the United States to report your self-employment income and, if necessary, pay self-employment tax. 2011 income taxes Additional Medicare Tax. 2011 income taxes   Beginning in 2013, you may be required to pay Additional Medicare Tax. 2011 income taxes Also, you may need to report Additional Medicare Tax withheld by your employer. 2011 income taxes For more information see Additional Medicare Tax under Special Rules for Completing Your U. 2011 income taxes S. 2011 income taxes Tax Return in chapter 4. 2011 income taxes Estimated tax payments. 2011 income taxes   To see if you are required to make payments of estimated income tax, self-employment tax, and/or Additional Medicare Tax, to the IRS, get Form 1040-ES. 2011 income taxes Payment of estimated tax. 2011 income taxes   If you must pay estimated tax, make your payment to the jurisdiction where you would file your income tax return if your tax year were to end on the date your first estimated tax payment is due. 2011 income taxes Generally, you should make the rest of your quarterly payments of estimated tax to the jurisdiction where you made your first payment of estimated tax. 2011 income taxes However, estimated tax payments to either jurisdiction will be treated as payments to the jurisdiction with which you file the tax return. 2011 income taxes   If you make a joint payment of estimated tax, make your payment to the jurisdiction where the spouse who has the greater estimated AGI would have to pay (if a separate payment were made). 2011 income taxes For this purpose, income is determined without regard to community property laws. 2011 income taxes Early payment. 2011 income taxes   If you make your first payment of estimated tax early, follow the rules given earlier to determine where to send it. 2011 income taxes If you send it to the wrong jurisdiction, make all later payments to the jurisdiction to which the first payment should have been sent. 2011 income taxes   To pay by check or money order, send your payment with the Form 1040-ES payment voucher to:  Department of Revenue and Taxation Government of Guam P. 2011 income taxes O. 2011 income taxes Box 23607 GMF, GU 96921   To get information on paying electronically (by credit or debit card, or through the Electronic Federal Tax Payment System (EFTPS)), go to www. 2011 income taxes irs. 2011 income taxes gov/e-pay. 2011 income taxes   For information on making estimated income tax payments to the Department of Revenue and Taxation, see Where To Get Forms and Information , earlier. 2011 income taxes Double Taxation A mutual agreement procedure exists to settle cases of double taxation between the United States and Guam. 2011 income taxes See Double Taxation in chapter 4. 2011 income taxes The U. 2011 income taxes S. 2011 income taxes Virgin Islands The U. 2011 income taxes S. 2011 income taxes Virgin Islands has its own tax system based on the same tax laws and tax rates that apply in the United States. 2011 income taxes An important factor in USVI taxation is whether, during the entire tax year, you are a bona fide resident of the USVI. 2011 income taxes Where To Get Forms and Information For information about filing your U. 2011 income taxes S. 2011 income taxes Virgin Islands tax return or about Form 1040INFO, in St. 2011 income taxes Thomas contact : Bureau of Internal Revenue  6115 Estate Smith Bay  St. 2011 income taxes Thomas, VI 00802 You can order forms and publications by calling (340) 715-1040. 2011 income taxes You can order forms and publications through the fax at (340) 774-2672. 2011 income taxes For information about filing your U. 2011 income taxes S. 2011 income taxes Virgin Islands tax return or about Form 1040INFO, in St. 2011 income taxes Croix contact : Bureau of Internal Revenue  4008 Estate Diamond- Plot 7B Christiansted, V. 2011 income taxes I. 2011 income taxes 00820–4421 You can order forms and publications by calling (340) 773-1040. 2011 income taxes You can order forms and publications through the fax at (340) 773-1006. 2011 income taxes You can access the USVI website at www. 2011 income taxes viirb. 2011 income taxes com. 2011 income taxes The addresses and phone numbers listed above are subject to change. 2011 income taxes Which Return To File In general, bona fide residents of the USVI pay taxes only to the USVI. 2011 income taxes U. 2011 income taxes S. 2011 income taxes citizens or resident aliens (but not bona fide residents of the USVI) with USVI source income pay a portion of the tax to each jurisdiction. 2011 income taxes Bona Fide Resident of the USVI File your tax return with the USVI if you are a U. 2011 income taxes S. 2011 income taxes citizen, resident alien, or nonresident alien and a bona fide resident of the USVI during the entire tax year. 2011 income taxes Include your worldwide income on your USVI return. 2011 income taxes In determining your total tax payments, take into account all income tax withheld by either the USVI or the United States, any credit for an overpayment of income tax to either the USVI or the United States, and any payments of estimated tax to either the USVI or the United States. 2011 income taxes Pay any balance of tax due with your tax return. 2011 income taxes Filing this return with the USVI generally also starts the statute of limitations on assessment of your U. 2011 income taxes S. 2011 income taxes income tax. 2011 income taxes You generally do not have to file with the United States for any tax year in which you are a bona fide resident of the USVI during the entire tax year, provided you report and pay tax on your income from all sources to the USVI and identify the source(s) of the income on the return. 2011 income taxes However, if you have self-employment income, you may be required to file Form 1040-SS with the United States. 2011 income taxes For more information, see Self-employment tax under Special Rules for the USVI, later. 2011 income taxes Form 1040INFO. 2011 income taxes   If you are a bona fide resident of the USVI and have non-USVI source income, you must also file Virgin Islands Form 1040INFO, Non-Virgin Islands Source Income of Virgin Islands Residents, with the Virgin Islands Bureau of Internal Revenue. 2011 income taxes Attach Form 1040INFO to your USVI tax return before filing. 2011 income taxes You can get Form 1040INFO by contacting the address or website given earlier. 2011 income taxes   If you are a bona fide resident of the USVI for the entire tax year, file your return and all attachments with the Virgin Islands Bureau of Internal Revenue at:  USVI Bureau of Internal Revenue 6115 Estate Smith Bay St. 2011 income taxes Thomas, VI 00802 U. 2011 income taxes S. 2011 income taxes Citizen or Resident Alien (Other Than a Bona Fide Resident of the USVI) If you are a U. 2011 income taxes S. 2011 income taxes citizen or resident alien but not a bona fide resident of the USVI during the entire tax year, you must file your original Form 1040 with the United States and an identical copy of that return with the USVI if you have: Income from sources in the USVI, or Income effectively connected with the conduct of a trade or business in the USVI. 2011 income taxes File your original Form 1040 with the United States and file a signed copy of the U. 2011 income taxes S. 2011 income taxes return (including all attachments, forms, and schedules) with the Virgin Islands Bureau of Internal Revenue by the due date for filing Form 1040. 2011 income taxes Use Form 8689 to figure the amount of tax you must pay to the USVI. 2011 income taxes Form 8689. 2011 income taxes   Complete this form and attach it to both the return you file with the United States and the copy you file with the USVI. 2011 income taxes Figure the amount of tax you must pay to the USVI as follows:      Total tax on  U. 2011 income taxes S. 2011 income taxes return (after certain adjustments) × USVI AGI Worldwide AGI     Pay any tax due to the USVI when you file your return with the Virgin Islands Bureau of Internal Revenue. 2011 income taxes To receive credit on your U. 2011 income taxes S. 2011 income taxes return for taxes paid to the USVI, include the amounts from Form 8689, lines 40 and 45, in the total on Form 1040, line 72. 2011 income taxes On the dotted line next to line 72, enter “Form 8689” and show the amounts. 2011 income taxes   See the illustrated example in chapter 5. 2011 income taxes De minimis exception to determining source of income. 2011 income taxes   In certain situations you will not have income from a possession. 2011 income taxes See De minimis exception under Compensation for Labor or Personal Services in chapter 2. 2011 income taxes   If you are not a bona fide resident of the USVI during the entire tax year, but you have USVI source income, and you are not including a check or a money order, file Form 1040 and all attachments (including Form 8689) with the:  Department of the Treasury Internal Revenue Service Austin, TX 73301-0215 USA   If you are including a check or a money order, send your U. 2011 income taxes S. 2011 income taxes tax return and all attachments (including Form 8689) to:  Internal Revenue Service P. 2011 income taxes O. 2011 income taxes Box 1303 Charlotte, NC 28201-1303 USA   File a copy of your U. 2011 income taxes S. 2011 income taxes Form 1040 with the Virgin Islands Bureau of Internal Revenue at:  USVI Bureau of Internal Revenue 6115 Estate Smith Bay St. 2011 income taxes Thomas, VI 00802 Nonresident Alien (Other Than a Bona Fide Resident of the USVI) If you are a nonresident alien of the United States who does not qualify as a bona fide resident of the USVI for the entire tax year, you generally must file the following returns. 2011 income taxes A USVI tax return reporting only your income from sources within the USVI. 2011 income taxes In this situation, wages for services performed in the USVI, whether for a private employer, the U. 2011 income taxes S. 2011 income taxes Government, or otherwise, is income from sources within the USVI. 2011 income taxes A U. 2011 income taxes S. 2011 income taxes tax return (Form 1040NR) reporting U. 2011 income taxes S. 2011 income taxes source income according to the rules for a nonresident alien. 2011 income taxes See the instructions for Form 1040NR. 2011 income taxes   If you are not a bona fide resident of the USVI during the entire tax year, and you are not including a check or a money order, send your U. 2011 income taxes S. 2011 income taxes tax return and all attachments (including Form 8689) to:  Department of the Treasury Internal Revenue Service Austin, TX 73301-0215 USA   If you are including a check or a money order, send your U. 2011 income taxes S. 2011 income taxes tax return and all attachments (including Form 8689) to:  Internal Revenue Service P. 2011 income taxes O. 2011 income taxes Box 1303 Charlotte, NC 28201-1303  USA   Send your USVI tax return and all attachments to:  Bureau of Internal Revenue 6115 Estate Smith Bay St. 2011 income taxes Thomas, VI 00802 Special Rules for the USVI There are some special rules for certain types of income, employment, and filing status. 2011 income taxes Joint return. 2011 income taxes   If you file a joint return, you should file your return (and pay the tax) with the jurisdiction where the spouse who has the greater adjusted gross income (AGI) would have to file if you were filing separately. 2011 income taxes If the spouse with the greater AGI is a bona fide resident of the USVI during the entire tax year, file the joint return with the USVI. 2011 income taxes If the spouse with the greater AGI is a U. 2011 income taxes S. 2011 income taxes citizen or resident alien of the United States but not a bona fide resident of the USVI during the entire tax year, file the joint return with the United States. 2011 income taxes For this purpose, income is determined without regard to community property laws. 2011 income taxes Example. 2011 income taxes Marge Birch, a U. 2011 income taxes S. 2011 income taxes citizen, was a resident of the United States, and her spouse, a citizen of the USVI, was a bona fide resident of the USVI during the entire tax year. 2011 income taxes Marge earned $55,000 as an architect in the United States. 2011 income taxes Her spouse earned $30,000 as a librarian in the USVI. 2011 income taxes Marge and her spouse will file a joint return. 2011 income taxes Because Marge has the greater AGI, she and her spouse must file their return with the United States and report the entire $85,000 on that return. 2011 income taxes U. 2011 income taxes S. 2011 income taxes Armed Forces. 2011 income taxes   If you are a member of the U. 2011 income taxes S. 2011 income taxes Armed Forces who qualified as a bona fide resident of the U. 2011 income taxes S. 2011 income taxes Virgin Islands in a prior tax year, your absence from the U. 2011 income taxes S. 2011 income taxes Virgin Islands solely in compliance with military orders will not change your bona fide residency. 2011 income taxes If you did not qualify as a bona fide resident of the U. 2011 income taxes S. 2011 income taxes Virgin Islands in a prior tax year, your presence in the U. 2011 income taxes S. 2011 income taxes Virgin Islands solely in compliance with military orders will not qualify you as a bona fide resident of the U. 2011 income taxes S. 2011 income taxes Virgin Islands. 2011 income taxes Civilian spouse of active duty member of the U. 2011 income taxes S. 2011 income taxes Armed Forces. 2011 income taxes   If, under the rule discussed at the beginning of chapter 1 (see Special rule for civilian spouse of active duty member of the U. 2011 income taxes S. 2011 income taxes Armed Forces ), your tax residence is the USVI, follow the guidance in the section for bona fide residents under Which Return To File, earlier. 2011 income taxes However, if your tax residence is one of the 50 states or the District of Columbia and your only income from the USVI is from wages, salaries, tips, or self-employment, you will be taxed on your worldwide income and file only a U. 2011 income taxes S. 2011 income taxes tax return (Form 1040) and a state and/or local tax return, if required. 2011 income taxes If you have income from the USVI other than wages, salaries, tips, or self-employment that is considered to be sourced in that possession (see Table 2-1), you may need to file Form 8689 with your U. 2011 income taxes S. 2011 income taxes tax return. 2011 income taxes In this case, follow the guidance under U. 2011 income taxes S. 2011 income taxes Citizen or Resident Alien (Other Than a Bona Fide Resident of the USVI ), earlier. 2011 income taxes Moving expense deduction. 2011 income taxes   Generally, expenses of a move to the USVI are directly attributable to wages, salaries, and other earned income from the USVI. 2011 income taxes Likewise, the expenses of a move back to the United States are generally attributable to U. 2011 income taxes S. 2011 income taxes earned income. 2011 income taxes   If your move was to the USVI, report your deduction for moving expenses as follows. 2011 income taxes If you are a bona fide resident in the tax year of your move, enter your deductible expenses on your USVI tax return. 2011 income taxes If you are not a bona fide resident, enter your deductible expenses on Form 3903 and enter the deductible amount on Form 1040, line 26, and on Form 8689, line 20. 2011 income taxes   If your move was to the United States, complete Form 3903 and enter the deductible amount on Form 1040, line 26. 2011 income taxes Foreign tax credit. 2011 income taxes   Under the filing rules explained earlier, individuals with USVI source income normally will not claim a foreign tax credit on a U. 2011 income taxes S. 2011 income taxes income tax return for tax paid to the USVI. 2011 income taxes However, individuals other than bona fide residents of the USVI may claim a direct credit for such tax (see Form 8689 earlier in this section). 2011 income taxes Self-employment tax. 2011 income taxes   If you have no U. 2011 income taxes S. 2011 income taxes filing requirement, but have income that is effectively connected with a trade or business in the USVI, you must file Form 1040-SS with the United States to report your self-employment income and, if necessary, pay self-employment tax. 2011 income taxes Additional Medicare Tax. 2011 income taxes   Beginning in 2013, you may be required to pay Additional Medicare Tax. 2011 income taxes Also, you may need to report Additional Medicare Tax withheld by your employer. 2011 income taxes For more information see Additional Medicare Tax under Special Rules for Completing Your U. 2011 income taxes S. 2011 income taxes Tax Return in chapter 4. 2011 income taxes Estimated tax payments. 2011 income taxes   To see if you are required to make payments of estimated income tax, self-employment tax, and/or Additional Medicare Tax, to the IRS, get Form 1040-ES. 2011 income taxes   To pay by check or money order, send your payment with the Form 1040-ES payment voucher to:  Virgin Islands Bureau of Internal Revenue 6115 Estate Smith Bay St. 2011 income taxes Thomas, VI 00802   To get information on paying electronically (by credit or debit card, or through the Electronic Federal Tax Payment System (EFTPS)), go to www. 2011 income taxes irs. 2011 income taxes gov/e-pay. 2011 income taxes   For information on making estimated income tax payments to the Bureau of Internal Revenue, see Where To Get Forms and Information , earlier. 2011 income taxes Extension of time to file. 2011 income taxes   You can get an automatic 6-month extension of time to file your tax return. 2011 income taxes See Extension of Time To File in chapter 4. 2011 income taxes Bona fide residents of the USVI during the entire tax year must file a paper Form 4868 with the Virgin Islands Bureau of Internal Revenue. 2011 income taxes Nonresidents of the USVI should file separate extension requests with the IRS and the Virgin Islands Bureau of Internal Revenue and make any payments due to the respective jurisdictions. 2011 income taxes However, the Virgin Islands Bureau of Internal Revenue will honor an extension request that is timely filed with the IRS. 2011 income taxes Double Taxation A mutual agreement procedure exists to settle cases of double taxation between the United States and the U. 2011 income taxes S. 2011 income taxes Virgin Islands. 2011 income taxes See Double Taxation in chapter 4. 2011 income taxes Prev  Up  Next   Home   More Online Publications
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The American Recovery and Reinvestment Act of 2009: Information Center

Update May 31, 2013 — Some of the credits and other provisions described on this page, which either expired at the end of 2011 or were set to change or expire at the end of 2012, were extended by the American Taxpayer Relief Act of 2012 (ATRA). Updated information is noted, where applicable, on the web pages relating to these specific credits and other provisions.

Update Oct. 31, 2011 — Some of the credits and other provisions described on this page, which were to change or expire at the end of 2010, were extended by the Tax Relief and Job Creation Act of 2010. Additional updated information is noted, where applicable, on the web pages relating to these specific credits and other provisions.

Update July 6, 2010 — For those claiming the homebuyer credit, the deadline for closing (going to settlement) on home purchases was extended from June 30 to Sept. 30, 2010. 

Información en Español

Information for Individuals

Can you benefit from Recovery Act tax credits? Try the White House Tax Savings Tool to find out.

 Many of the Recovery Act provisions are geared toward individuals:

  • Education benefits. The American Opportunity Tax Credit and enhanced benefits for 529 college savings plans help families and students find ways to pay higher education expenses.

  • Earned Income Tax Credit. The EITC increased beginning in  2009.

  • Additional child tax credit. More families qualify for the ACTC starting in 2009.

  • Home energy efficiency and renewable energy incentives. See what you can do to reap tax rewards.

  • Increased Transportation Subsidy. Employer-provided benefits for transit and parking rose beginning in 2009.

  • Homebuyer Credit. Homebuyers who purchased by April 30, 2010, and settled by Sept. 30, 2010, may be eligible for a credit of up to $8,000. Documentation requirements apply. See the first-time homebuyer page for more.

  • COBRA. Workers who lost their jobs between Sept. 1, 2008, and May 31, 2010, may qualify for reduced COBRA health insurance premiums for up to 15 months.

  • Making Work Pay Tax Credit. This credit meant more take-home pay for many Americans in 2009 and 2010. Make sure enough tax is withheld from your pay with the help of the IRS withholding calculator. See Making Work Pay for more.

  • $250 for Social Security Recipients, Veterans and Railroad Retirees. The Economic Recovery Payment was paid by the Social Security Administration, Department of Veterans Affairs and the Railroad Retirement Board in 2009 or, in some cases, 2010. To verify whether you received it, call 1-866-234-2942 and select Option 1 or visit Did I Receive a 2010 Economic Recovery Payment? (no longer available) on this website.

  • Money Back for New Vehicles. Taxpayers who bought new cars and certain other new vehicles in 2009 can deduct the state and local sales taxes they paid as well as other taxes and fees they paid in states with no sales tax.

  • Up to $2,400 in Unemployment Benefits Tax Free in 2009. Individuals should check their tax withholding.

  • Health Coverage Tax Credit. This credit increased from 65 percent to 80 percent of qualified health insurance premiums, and more people are eligible.

Information for Businesses

The following Recovery Act provisions affect businesses:

 Related Items:

 


For information on the Administration's broader economic recovery program, visit

 

Page Last Reviewed or Updated: 26-Mar-2014

The 2011 Income Taxes

2011 income taxes 3. 2011 income taxes   Rent Expense Table of Contents Introduction Topics - This chapter discusses: RentConditional sales contract. 2011 income taxes Leveraged leases. 2011 income taxes Leveraged leases of limited-use property. 2011 income taxes Taxes on Leased Property Cost of Getting a Lease Improvements by Lessee Capitalizing Rent Expenses Introduction This chapter discusses the tax treatment of rent or lease payments you make for property you use in your business but do not own. 2011 income taxes It also discusses how to treat other kinds of payments you make that are related to your use of this property. 2011 income taxes These include payments you make for taxes on the property. 2011 income taxes Topics - This chapter discusses: The definition of rent Taxes on leased property The cost of getting a lease Improvements by the lessee Capitalizing rent expenses Rent Rent is any amount you pay for the use of property you do not own. 2011 income taxes In general, you can deduct rent as an expense only if the rent is for property you use in your trade or business. 2011 income taxes If you have or will receive equity in or title to the property, the rent is not deductible. 2011 income taxes Unreasonable rent. 2011 income taxes   You cannot take a rental deduction for unreasonable rent. 2011 income taxes Ordinarily, the issue of reasonableness arises only if you and the lessor are related. 2011 income taxes Rent paid to a related person is reasonable if it is the same amount you would pay to a stranger for use of the same property. 2011 income taxes Rent is not unreasonable just because it is figured as a percentage of gross sales. 2011 income taxes For examples of related persons, see Related persons in chapter 2, Publication 544. 2011 income taxes Rent on your home. 2011 income taxes   If you rent your home and use part of it as your place of business, you may be able to deduct the rent you pay for that part. 2011 income taxes You must meet the requirements for business use of your home. 2011 income taxes For more information, see Business use of your home in chapter 1. 2011 income taxes Rent paid in advance. 2011 income taxes   Generally, rent paid in your trade or business is deductible in the year paid or accrued. 2011 income taxes If you pay rent in advance, you can deduct only the amount that applies to your use of the rented property during the tax year. 2011 income taxes You can deduct the rest of your payment only over the period to which it applies. 2011 income taxes Example 1. 2011 income taxes You are a calendar year taxpayer and you leased a building for 5 years beginning July 1. 2011 income taxes Your rent is $12,000 per year. 2011 income taxes You paid the first year's rent ($12,000) on June 30. 2011 income taxes You can deduct only $6,000 (6/12 × $12,000) for the rent that applies to the first year. 2011 income taxes Example 2. 2011 income taxes You are a calendar year taxpayer. 2011 income taxes Last January you leased property for 3 years for $6,000 a year. 2011 income taxes You paid the full $18,000 (3 × $6,000) during the first year of the lease. 2011 income taxes Each year you can deduct only $6,000, the part of the lease that applies to that year. 2011 income taxes Canceling a lease. 2011 income taxes   You generally can deduct as rent an amount you pay to cancel a business lease. 2011 income taxes Lease or purchase. 2011 income taxes   There may be instances in which you must determine whether your payments are for rent or for the purchase of the property. 2011 income taxes You must first determine whether your agreement is a lease or a conditional sales contract. 2011 income taxes Payments made under a conditional sales contract are not deductible as rent expense. 2011 income taxes Conditional sales contract. 2011 income taxes   Whether an agreement is a conditional sales contract depends on the intent of the parties. 2011 income taxes Determine intent based on the provisions of the agreement and the facts and circumstances that exist when you make the agreement. 2011 income taxes No single test, or special combination of tests, always applies. 2011 income taxes However, in general, an agreement may be considered a conditional sales contract rather than a lease if any of the following is true. 2011 income taxes The agreement applies part of each payment toward an equity interest you will receive. 2011 income taxes You get title to the property after you make a stated amount of required payments. 2011 income taxes The amount you must pay to use the property for a short time is a large part of the amount you would pay to get title to the property. 2011 income taxes You pay much more than the current fair rental value of the property. 2011 income taxes You have an option to buy the property at a nominal price compared to the value of the property when you may exercise the option. 2011 income taxes Determine this value when you make the agreement. 2011 income taxes You have an option to buy the property at a nominal price compared to the total amount you have to pay under the agreement. 2011 income taxes The agreement designates part of the payments as interest, or that part is easy to recognize as interest. 2011 income taxes Leveraged leases. 2011 income taxes   Leveraged lease transactions may not be considered leases. 2011 income taxes Leveraged leases generally involve three parties: a lessor, a lessee, and a lender to the lessor. 2011 income taxes Usually the lease term covers a large part of the useful life of the leased property, and the lessee's payments to the lessor are enough to cover the lessor's payments to the lender. 2011 income taxes   If you plan to take part in what appears to be a leveraged lease, you may want to get an advance ruling. 2011 income taxes Revenue Procedure 2001-28 on page 1156 of Internal Revenue Bulletin 2001-19 contains the guidelines the IRS will use to determine if a leveraged lease is a lease for federal income tax purposes. 2011 income taxes Revenue Procedure 2001-29 on page 1160 of the same Internal Revenue Bulletin provides the information required to be furnished in a request for an advance ruling on a leveraged lease transaction. 2011 income taxes Internal Revenue Bulletin 2001-19 is available at www. 2011 income taxes irs. 2011 income taxes gov/pub/irs-irbs/irb01-19. 2011 income taxes pdf. 2011 income taxes   In general, Revenue Procedure 2001-28 provides that, for advance ruling purposes only, the IRS will consider the lessor in a leveraged lease transaction to be the owner of the property and the transaction to be a valid lease if all the factors in the revenue procedure are met, including the following. 2011 income taxes The lessor must maintain a minimum unconditional “at risk” equity investment in the property (at least 20% of the cost of the property) during the entire lease term. 2011 income taxes The lessee may not have a contractual right to buy the property from the lessor at less than fair market value when the right is exercised. 2011 income taxes The lessee may not invest in the property, except as provided by Revenue Procedure 2001-28. 2011 income taxes The lessee may not lend any money to the lessor to buy the property or guarantee the loan used by the lessor to buy the property. 2011 income taxes The lessor must show that it expects to receive a profit apart from the tax deductions, allowances, credits, and other tax attributes. 2011 income taxes   The IRS may charge you a user fee for issuing a tax ruling. 2011 income taxes For more information, see Revenue Procedure 2014-1 available at  www. 2011 income taxes irs. 2011 income taxes gov/irb/2014-1_IRB/ar05. 2011 income taxes html. 2011 income taxes Leveraged leases of limited-use property. 2011 income taxes   The IRS will not issue advance rulings on leveraged leases of so-called limited-use property. 2011 income taxes Limited-use property is property not expected to be either useful to or usable by a lessor at the end of the lease term except for continued leasing or transfer to a lessee. 2011 income taxes See Revenue Procedure 2001-28 for examples of limited-use property and property that is not limited-use property. 2011 income taxes Leases over $250,000. 2011 income taxes   Special rules are provided for certain leases of tangible property. 2011 income taxes The rules apply if the lease calls for total payments of more than $250,000 and any of the following apply. 2011 income taxes Rents increase during the lease. 2011 income taxes Rents decrease during the lease. 2011 income taxes Rents are deferred (rent is payable after the end of the calendar year following the calendar year in which the use occurs and the rent is allocated). 2011 income taxes Rents are prepaid (rent is payable before the end of the calendar year preceding the calendar year in which the use occurs and the rent is allocated). 2011 income taxes These rules do not apply if your lease specifies equal amounts of rent for each month in the lease term and all rent payments are due in the calendar year to which the rent relates (or in the preceding or following calendar year). 2011 income taxes   Generally, if the special rules apply, you must use an accrual method of accounting (and time value of money principles) for your rental expenses, regardless of your overall method of accounting. 2011 income taxes In addition, in certain cases in which the IRS has determined that a lease was designed to achieve tax avoidance, you must take rent and stated or imputed interest into account under a constant rental accrual method in which the rent is treated as accruing ratably over the entire lease term. 2011 income taxes For details, see section 467 of the Internal Revenue Code. 2011 income taxes Taxes on Leased Property If you lease business property, you can deduct as additional rent any taxes you have to pay to or for the lessor. 2011 income taxes When you can deduct these taxes as additional rent depends on your accounting method. 2011 income taxes Cash method. 2011 income taxes   If you use the cash method of accounting, you can deduct the taxes as additional rent only for the tax year in which you pay them. 2011 income taxes Accrual method. 2011 income taxes   If you use an accrual method of accounting, you can deduct taxes as additional rent for the tax year in which you can determine all the following. 2011 income taxes That you have a liability for taxes on the leased property. 2011 income taxes How much the liability is. 2011 income taxes That economic performance occurred. 2011 income taxes   The liability and amount of taxes are determined by state or local law and the lease agreement. 2011 income taxes Economic performance occurs as you use the property. 2011 income taxes Example 1. 2011 income taxes Oak Corporation is a calendar year taxpayer that uses an accrual method of accounting. 2011 income taxes Oak leases land for use in its business. 2011 income taxes Under state law, owners of real property become liable (incur a lien on the property) for real estate taxes for the year on January 1 of that year. 2011 income taxes However, they do not have to pay these taxes until July 1 of the next year (18 months later) when tax bills are issued. 2011 income taxes Under the terms of the lease, Oak becomes liable for the real estate taxes in the later year when the tax bills are issued. 2011 income taxes If the lease ends before the tax bill for a year is issued, Oak is not liable for the taxes for that year. 2011 income taxes Oak cannot deduct the real estate taxes as rent until the tax bill is issued. 2011 income taxes This is when Oak's liability under the lease becomes fixed. 2011 income taxes Example 2. 2011 income taxes The facts are the same as in Example 1 except that, according to the terms of the lease, Oak becomes liable for the real estate taxes when the owner of the property becomes liable for them. 2011 income taxes As a result, Oak will deduct the real estate taxes as rent on its tax return for the earlier year. 2011 income taxes This is the year in which Oak's liability under the lease becomes fixed. 2011 income taxes Cost of Getting a Lease You may either enter into a new lease with the lessor of the property or get an existing lease from another lessee. 2011 income taxes Very often when you get an existing lease from another lessee, you must pay the previous lessee money to get the lease, besides having to pay the rent on the lease. 2011 income taxes If you get an existing lease on property or equipment for your business, you generally must amortize any amount you pay to get that lease over the remaining term of the lease. 2011 income taxes For example, if you pay $10,000 to get a lease and there are 10 years remaining on the lease with no option to renew, you can deduct $1,000 each year. 2011 income taxes The cost of getting an existing lease of tangible property is not subject to the amortization rules for section 197 intangibles discussed in chapter 8. 2011 income taxes Option to renew. 2011 income taxes   The term of the lease for amortization includes all renewal options plus any other period for which you and the lessor reasonably expect the lease to be renewed. 2011 income taxes However, this applies only if less than 75% of the cost of getting the lease is for the term remaining on the purchase date (not including any period for which you may choose to renew, extend, or continue the lease). 2011 income taxes Allocate the lease cost to the original term and any option term based on the facts and circumstances. 2011 income taxes In some cases, it may be appropriate to make the allocation using a present value computation. 2011 income taxes For more information, see Regulations section 1. 2011 income taxes 178-1(b)(5). 2011 income taxes Example 1. 2011 income taxes You paid $10,000 to get a lease with 20 years remaining on it and two options to renew for 5 years each. 2011 income taxes Of this cost, you paid $7,000 for the original lease and $3,000 for the renewal options. 2011 income taxes Because $7,000 is less than 75% of the total $10,000 cost of the lease (or $7,500), you must amortize the $10,000 over 30 years. 2011 income taxes That is the remaining life of your present lease plus the periods for renewal. 2011 income taxes Example 2. 2011 income taxes The facts are the same as in Example 1, except that you paid $8,000 for the original lease and $2,000 for the renewal options. 2011 income taxes You can amortize the entire $10,000 over the 20-year remaining life of the original lease. 2011 income taxes The $8,000 cost of getting the original lease was not less than 75% of the total cost of the lease (or $7,500). 2011 income taxes Cost of a modification agreement. 2011 income taxes   You may have to pay an additional “rent” amount over part of the lease period to change certain provisions in your lease. 2011 income taxes You must capitalize these payments and amortize them over the remaining period of the lease. 2011 income taxes You cannot deduct the payments as additional rent, even if they are described as rent in the agreement. 2011 income taxes Example. 2011 income taxes You are a calendar year taxpayer and sign a 20-year lease to rent part of a building starting on January 1. 2011 income taxes However, before you occupy it, you decide that you really need less space. 2011 income taxes The lessor agrees to reduce your rent from $7,000 to $6,000 per year and to release the excess space from the original lease. 2011 income taxes In exchange, you agree to pay an additional rent amount of $3,000, payable in 60 monthly installments of $50 each. 2011 income taxes   You must capitalize the $3,000 and amortize it over the 20-year term of the lease. 2011 income taxes Your amortization deduction each year will be $150 ($3,000 ÷ 20). 2011 income taxes You cannot deduct the $600 (12 × $50) that you will pay during each of the first 5 years as rent. 2011 income taxes Commissions, bonuses, and fees. 2011 income taxes   Commissions, bonuses, fees, and other amounts you pay to get a lease on property you use in your business are capital costs. 2011 income taxes You must amortize these costs over the term of the lease. 2011 income taxes Loss on merchandise and fixtures. 2011 income taxes   If you sell at a loss merchandise and fixtures that you bought solely to get a lease, the loss is a cost of getting the lease. 2011 income taxes You must capitalize the loss and amortize it over the remaining term of the lease. 2011 income taxes Improvements by Lessee If you add buildings or make other permanent improvements to leased property, depreciate the cost of the improvements using the modified accelerated cost recovery system (MACRS). 2011 income taxes Depreciate the property over its appropriate recovery period. 2011 income taxes You cannot amortize the cost over the remaining term of the lease. 2011 income taxes If you do not keep the improvements when you end the lease, figure your gain or loss based on your adjusted basis in the improvements at that time. 2011 income taxes For more information, see the discussion of MACRS in Publication 946, How To Depreciate Property. 2011 income taxes Assignment of a lease. 2011 income taxes   If a long-term lessee who makes permanent improvements to land later assigns all lease rights to you for money and you pay the rent required by the lease, the amount you pay for the assignment is a capital investment. 2011 income taxes If the rental value of the leased land increased since the lease began, part of your capital investment is for that increase in the rental value. 2011 income taxes The rest is for your investment in the permanent improvements. 2011 income taxes   The part that is for the increased rental value of the land is a cost of getting a lease, and you amortize it over the remaining term of the lease. 2011 income taxes You can depreciate the part that is for your investment in the improvements over the recovery period of the property as discussed earlier, without regard to the lease term. 2011 income taxes Capitalizing Rent Expenses Under the uniform capitalization rules, you must capitalize the direct costs and part of the indirect costs for certain production or resale activities. 2011 income taxes Include these costs in the basis of property you produce or acquire for resale, rather than claiming them as a current deduction. 2011 income taxes You recover the costs through depreciation, amortization, or cost of goods sold when you use, sell, or otherwise dispose of the property. 2011 income taxes Indirect costs include amounts incurred for renting or leasing equipment, facilities, or land. 2011 income taxes Uniform capitalization rules. 2011 income taxes   You may be subject to the uniform capitalization rules if you do any of the following, unless the property is produced for your use other than in a business or an activity carried on for profit. 2011 income taxes Produce real property or tangible personal property. 2011 income taxes For this purpose, tangible personal property includes a film, sound recording, video tape, book, or similar property. 2011 income taxes Acquire property for resale. 2011 income taxes However, these rules do not apply to the following property. 2011 income taxes Personal property you acquire for resale if your average annual gross receipts are $10 million or less for the 3 prior tax years. 2011 income taxes Property you produce if you meet either of the following conditions. 2011 income taxes Your indirect costs of producing the property are $200,000 or less. 2011 income taxes You use the cash method of accounting and do not account for inventories. 2011 income taxes Example 1. 2011 income taxes You rent construction equipment to build a storage facility. 2011 income taxes If you are subject to the uniform capitalization rules, you must capitalize as part of the cost of the building the rent you paid for the equipment. 2011 income taxes You recover your cost by claiming a deduction for depreciation on the building. 2011 income taxes Example 2. 2011 income taxes You rent space in a facility to conduct your business of manufacturing tools. 2011 income taxes If you are subject to the uniform capitalization rules, you must include the rent you paid to occupy the facility in the cost of the tools you produce. 2011 income taxes More information. 2011 income taxes   For more information on these rules, see Uniform Capitalization Rules in Publication 538 and the regulations under Internal Revenue Code section 263A. 2011 income taxes Prev  Up  Next   Home   More Online Publications