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2012 Income Tax Forms

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2012 Income Tax Forms

2012 income tax forms 27. 2012 income tax forms   Tax Benefits for Work-Related Education Table of Contents What's New Introduction Useful Items - You may want to see: Qualifying Work-Related EducationEducation Required by Employer or by Law Education To Maintain or Improve Skills Education To Meet Minimum Requirements Education That Qualifies You for a New Trade or Business What Expenses Can Be DeductedUnclaimed reimbursement. 2012 income tax forms Transportation Expenses Travel Expenses No Double Benefit Allowed Reimbursements Deducting Business ExpensesSelf-Employed Persons Employees Performing Artists and Fee-Basis Officials Impairment-Related Work Expenses Recordkeeping What's New Standard mileage rate. 2012 income tax forms  Generally, if you claim a business deduction for work-related education and you drive your car to and from school, the amount you can deduct for miles driven from January 1, 2013, through December 31, 2013, is 56½ cents per mile. 2012 income tax forms For more information, see Transportation Expenses under What Expenses Can Be Deducted. 2012 income tax forms Introduction This chapter discusses work-related education expenses that you may be able to deduct as business expenses. 2012 income tax forms To claim such a deduction, you must: Itemize your deductions on Schedule A (Form 1040) if you are an employee, File Schedule C (Form 1040), Schedule C-EZ (Form 1040), or Schedule F (Form 1040) if you are self-employed, and Have expenses for education that meet the requirements discussed under Qualifying Work-Related Education . 2012 income tax forms If you are an employee and can itemize your deductions, you may be able to claim a deduction for the expenses you pay for your work-related education. 2012 income tax forms Your deduction will be the amount by which your qualifying work-related education expenses plus other job and certain miscellaneous expenses (except for impairment-related work expenses of disabled individuals) is greater than 2% of your adjusted gross income. 2012 income tax forms See chapter 28. 2012 income tax forms If you are self-employed, you deduct your expenses for qualifying work-related education directly from your self-employment income. 2012 income tax forms Your work-related education expenses may also qualify you for other tax benefits, such as the American opportunity and lifetime learning credits (see chapter 35). 2012 income tax forms You may qualify for these other benefits even if you do not meet the requirements listed earlier. 2012 income tax forms Also, keep in mind that your work-related education expenses may qualify you to claim more than one tax benefit. 2012 income tax forms Generally, you may claim any number of benefits as long as you use different expenses to figure each one. 2012 income tax forms When you figure your taxes, you may want to compare these tax benefits so you can choose the method(s) that give you the lowest tax liability. 2012 income tax forms Useful Items - You may want to see: Publication 463 Travel, Entertainment, Gift, and Car Expenses 970 Tax Benefits for Education Form (and Instructions) 2106 Employee Business Expenses 2106-EZ Unreimbursed Employee Business Expenses Schedule A (Form 1040) Itemized Deductions Qualifying Work-Related Education You can deduct the costs of qualifying work-related education as business expenses. 2012 income tax forms This is education that meets at least one of the following two tests. 2012 income tax forms The education is required by your employer or the law to keep your present salary, status, or job. 2012 income tax forms The required education must serve a bona fide business purpose of your employer. 2012 income tax forms The education maintains or improves skills needed in your present work. 2012 income tax forms However, even if the education meets one or both of the above tests, it is not qualifying work-related education if it: Is needed to meet the minimum educational requirements of your present trade or business, or Is part of a program of study that will qualify you for a new trade or business. 2012 income tax forms You can deduct the costs of qualifying work-related education as a business expense even if the education could lead to a degree. 2012 income tax forms Use Figure 27-A, later, as a quick check to see if your education qualifies. 2012 income tax forms Education Required by Employer or by Law Once you have met the minimum educational requirements for your job, your employer or the law may require you to get more education. 2012 income tax forms This additional education is qualifying work-related education if all three of the following requirements are met. 2012 income tax forms It is required for you to keep your present salary, status, or job, The requirement serves a bona fide business purpose of your employer, and The education is not part of a program that will qualify you for a new trade or business. 2012 income tax forms When you get more education than your employer or the law requires, the additional education can be qualifying work-related education only if it maintains or improves skills required in your present work. 2012 income tax forms See Education To Maintain or Improve Skills , later. 2012 income tax forms Example. 2012 income tax forms You are a teacher who has satisfied the minimum requirements for teaching. 2012 income tax forms Your employer requires you to take an additional college course each year to keep your teaching job. 2012 income tax forms If the courses will not qualify you for a new trade or business, they are qualifying work-related education even if you eventually receive a master's degree and an increase in salary because of this extra education. 2012 income tax forms Education To Maintain or Improve Skills If your education is not required by your employer or the law, it can be qualifying work-related education only if it maintains or improves skills needed in your present work. 2012 income tax forms This could include refresher courses, courses on current developments, and academic or vocational courses. 2012 income tax forms Example. 2012 income tax forms You repair televisions, radios, and stereo systems for XYZ Store. 2012 income tax forms To keep up with the latest changes, you take special courses in radio and stereo service. 2012 income tax forms These courses maintain and improve skills required in your work. 2012 income tax forms Maintaining skills vs. 2012 income tax forms qualifying for new job. 2012 income tax forms   Education to maintain or improve skills needed in your present work is not qualifying education if it will also qualify you for a new trade or business. 2012 income tax forms Education during temporary absence. 2012 income tax forms   If you stop working for a year or less in order to get education to maintain or improve skills needed in your present work and then return to the same general type of work, your absence is considered temporary. 2012 income tax forms Education that you get during a temporary absence is qualifying work-related education if it maintains or improves skills needed in your present work. 2012 income tax forms Example. 2012 income tax forms You quit your biology research job to become a full-time biology graduate student for one year. 2012 income tax forms If you return to work in biology research after completing the courses, the education is related to your present work even if you do not go back to work with the same employer. 2012 income tax forms Education during indefinite absence. 2012 income tax forms   If you stop work for more than a year, your absence from your job is considered indefinite. 2012 income tax forms Education during an indefinite absence, even if it maintains or improves skills needed in the work from which you are absent, is considered to qualify you for a new trade or business. 2012 income tax forms Therefore, it is not qualifying work-related education. 2012 income tax forms Education To Meet Minimum Requirements Education you need to meet the minimum educational requirements for your present trade or business is not qualifying work-related education. 2012 income tax forms The minimum educational requirements are determined by: Laws and regulations, Standards of your profession, trade, or business, and Your employer. 2012 income tax forms Once you have met the minimum educational requirements that were in effect when you were hired, you do not have to meet any new minimum educational requirements. 2012 income tax forms This means that if the minimum requirements change after you were hired, any education you need to meet the new requirements can be qualifying education. 2012 income tax forms You have not necessarily met the minimum educational requirements of your trade or business simply because you are already doing the work. 2012 income tax forms Example 1. 2012 income tax forms You are a full-time engineering student. 2012 income tax forms Although you have not received your degree or certification, you work part-time as an engineer for a firm that will employ you as a full-time engineer after you finish college. 2012 income tax forms Although your college engineering courses improve your skills in your present job, they are also needed to meet the minimum job requirements for a full-time engineer. 2012 income tax forms The education is not qualifying work-related education. 2012 income tax forms Example 2. 2012 income tax forms You are an accountant and you have met the minimum educational requirements of your employer. 2012 income tax forms Your employer later changes the minimum educational requirements and requires you to take college courses to keep your job. 2012 income tax forms These additional courses can be qualifying work-related education because you have already satisfied the minimum requirements that were in effect when you were hired. 2012 income tax forms Requirements for Teachers States or school districts usually set the minimum educational requirements for teachers. 2012 income tax forms The requirement is the college degree or the minimum number of college hours usually required of a person hired for that position. 2012 income tax forms If there are no requirements, you will have met the minimum educational requirements when you become a faculty member. 2012 income tax forms The determination of whether you are a faculty member of an educational institution must be made on the basis of the particular practices of the institution. 2012 income tax forms You generally will be considered a faculty member when one or more of the following occurs. 2012 income tax forms You have tenure. 2012 income tax forms Your years of service count toward obtaining tenure. 2012 income tax forms You have a vote in faculty decisions. 2012 income tax forms Your school makes contributions for you to a retirement plan other than social security or a similar program. 2012 income tax forms Example 1. 2012 income tax forms The law in your state requires beginning secondary school teachers to have a bachelor's degree, including 10 professional education courses. 2012 income tax forms In addition, to keep the job a teacher must complete a fifth year of training within 10 years from the date of hire. 2012 income tax forms If the employing school certifies to the state Department of Education that qualified teachers cannot be found, the school can hire persons with only 3 years of college. 2012 income tax forms However, to keep their jobs, these teachers must get a bachelor's degree and the required professional education courses within 3 years. 2012 income tax forms Under these facts, the bachelor's degree, whether or not it includes the 10 professional education courses, is considered the minimum educational requirement for qualification as a teacher in your state. 2012 income tax forms If you have all the required education except the fifth year, you have met the minimum educational requirements. 2012 income tax forms The fifth year of training is qualifying work-related education unless it is part of a program of study that will qualify you for a new trade or business. 2012 income tax forms Figure 27-A Does Your Work-Related Education Qualify? Please click here for the text description of the image. 2012 income tax forms Figure 27-A. 2012 income tax forms Does Your Work-Related Education Qualify?" Example 2. 2012 income tax forms Assume the same facts as in Example 1 except that you have a bachelor's degree and only six professional education courses. 2012 income tax forms The additional four education courses can be qualifying work-related education. 2012 income tax forms Although you do not have all the required courses, you have already met the minimum educational requirements. 2012 income tax forms Example 3. 2012 income tax forms Assume the same facts as in Example 1 except that you are hired with only 3 years of college. 2012 income tax forms The courses you take that lead to a bachelor's degree (including those in education) are not qualifying work-related education. 2012 income tax forms They are needed to meet the minimum educational requirements for employment as a teacher. 2012 income tax forms Example 4. 2012 income tax forms You have a bachelor's degree and you work as a temporary instructor at a university. 2012 income tax forms At the same time, you take graduate courses toward an advanced degree. 2012 income tax forms The rules of the university state that you can become a faculty member only if you get a graduate degree. 2012 income tax forms Also, you can keep your job as an instructor only as long as you show satisfactory progress toward getting this degree. 2012 income tax forms You have not met the minimum educational requirements to qualify you as a faculty member. 2012 income tax forms The graduate courses are not qualifying work-related education. 2012 income tax forms Certification in a new state. 2012 income tax forms   Once you have met the minimum educational requirements for teachers for your state, you are considered to have met the minimum educational requirements in all states. 2012 income tax forms This is true even if you must get additional education to be certified in another state. 2012 income tax forms Any additional education you need is qualifying work-related education. 2012 income tax forms You have already met the minimum requirements for teaching. 2012 income tax forms Teaching in another state is not a new trade or business. 2012 income tax forms Example. 2012 income tax forms You hold a permanent teaching certificate in State A and are employed as a teacher in that state for several years. 2012 income tax forms You move to State B and are promptly hired as a teacher. 2012 income tax forms You are required, however, to complete certain prescribed courses to get a permanent teaching certificate in State B. 2012 income tax forms These additional courses are qualifying work-related education because the teaching position in State B involves the same general kind of work for which you were qualified in State A. 2012 income tax forms Education That Qualifies You for a New Trade or Business Education that is part of a program of study that will qualify you for a new trade or business is not qualifying work-related education. 2012 income tax forms This is true even if you do not plan to enter that trade or business. 2012 income tax forms If you are an employee, a change of duties that involves the same general kind of work is not a new trade or business. 2012 income tax forms Example 1. 2012 income tax forms You are an accountant. 2012 income tax forms Your employer requires you to get a law degree at your own expense. 2012 income tax forms You register at a law school for the regular curriculum that leads to a law degree. 2012 income tax forms Even if you do not intend to become a lawyer, the education is not qualifying because the law degree will qualify you for a new trade or business. 2012 income tax forms Example 2. 2012 income tax forms You are a general practitioner of medicine. 2012 income tax forms You take a 2-week course to review developments in several specialized fields of medicine. 2012 income tax forms The course does not qualify you for a new profession. 2012 income tax forms It is qualifying work-related education because it maintains or improves skills required in your present profession. 2012 income tax forms Example 3. 2012 income tax forms While working in the private practice of psychiatry, you enter a program to study and train at an accredited psychoanalytic institute. 2012 income tax forms The program will lead to qualifying you to practice psychoanalysis. 2012 income tax forms The psychoanalytic training does not qualify you for a new profession. 2012 income tax forms It is qualifying work-related education because it maintains or improves skills required in your present profession. 2012 income tax forms Bar or CPA Review Course Review courses to prepare for the bar examination or the certified public accountant (CPA) examination are not qualifying work-related education. 2012 income tax forms They are part of a program of study that can qualify you for a new profession. 2012 income tax forms Teaching and Related Duties All teaching and related duties are considered the same general kind of work. 2012 income tax forms A change in duties in any of the following ways is not considered a change to a new business. 2012 income tax forms Elementary school teacher to secondary school teacher. 2012 income tax forms Teacher of one subject, such as biology, to teacher of another subject, such as art. 2012 income tax forms Classroom teacher to guidance counselor. 2012 income tax forms Classroom teacher to school administrator. 2012 income tax forms What Expenses Can Be Deducted If your education meets the requirements described earlier under Qualifying Work-Related Education , you can generally deduct your education expenses as business expenses. 2012 income tax forms If you are not self-employed, you can deduct business expenses only if you itemize your deductions. 2012 income tax forms You cannot deduct expenses related to tax-exempt and excluded income. 2012 income tax forms Deductible expenses. 2012 income tax forms   The following education expenses can be deducted. 2012 income tax forms Tuition, books, supplies, lab fees, and similar items. 2012 income tax forms Certain transportation and travel costs. 2012 income tax forms Other education expenses, such as costs of research and typing when writing a paper as part of an educational program. 2012 income tax forms Nondeductible expenses. 2012 income tax forms   You cannot deduct personal or capital expenses. 2012 income tax forms For example, you cannot deduct the dollar value of vacation time or annual leave you take to attend classes. 2012 income tax forms This amount is a personal expense. 2012 income tax forms Unclaimed reimbursement. 2012 income tax forms   If you do not claim reimbursement that you are entitled to receive from your employer, you cannot deduct the expenses that apply to that unclaimed reimbursement. 2012 income tax forms Example. 2012 income tax forms Your employer agrees to pay your education expenses if you file a voucher showing your expenses. 2012 income tax forms You do not file a voucher, and you do not get reimbursed. 2012 income tax forms Because you did not file a voucher, you cannot deduct the expenses on your tax return. 2012 income tax forms Transportation Expenses If your education qualifies, you can deduct local transportation costs of going directly from work to school. 2012 income tax forms If you are regularly employed and go to school on a temporary basis, you can also deduct the costs of returning from school to home. 2012 income tax forms Temporary basis. 2012 income tax forms   You go to school on a temporary basis if either of the following situations applies to you. 2012 income tax forms Your attendance at school is realistically expected to last 1 year or less and does indeed last for 1 year or less. 2012 income tax forms Initially, your attendance at school is realistically expected to last 1 year or less, but at a later date your attendance is reasonably expected to last more than 1 year. 2012 income tax forms Your attendance is temporary up to the date you determine it will last more than 1 year. 2012 income tax forms Note. 2012 income tax forms If you are in either situation (1) or (2), your attendance is not temporary if facts and circumstances indicate otherwise. 2012 income tax forms Attendance not on a temporary basis. 2012 income tax forms   You do not go to school on a temporary basis if either of the following situations apply to you. 2012 income tax forms Your attendance at school is realistically expected to last more than 1 year. 2012 income tax forms It does not matter how long you actually attend. 2012 income tax forms Initially, your attendance at school is realistically expected to last 1 year or less, but at a later date your attendance is reasonably expected to last more than 1 year. 2012 income tax forms Your attendance is not temporary after the date you determine it will last more than 1 year. 2012 income tax forms Deductible Transportation Expenses If you are regularly employed and go directly from home to school on a temporary basis, you can deduct the round-trip costs of transportation between your home and school. 2012 income tax forms This is true regardless of the location of the school, the distance traveled, or whether you attend school on nonwork days. 2012 income tax forms Transportation expenses include the actual costs of bus, subway, cab, or other fares, as well as the costs of using your car. 2012 income tax forms Transportation expenses do not include amounts spent for travel, meals, or lodging while you are away from home overnight. 2012 income tax forms Example 1. 2012 income tax forms You regularly work in a nearby town, and go directly from work to home. 2012 income tax forms You also attend school every work night for 3 months to take a course that improves your job skills. 2012 income tax forms Since you are attending school on a temporary basis, you can deduct your daily round-trip transportation expenses in going between home and school. 2012 income tax forms This is true regardless of the distance traveled. 2012 income tax forms Example 2. 2012 income tax forms Assume the same facts as in Example 1 except that on certain nights you go directly from work to school and then home. 2012 income tax forms You can deduct your transportation expenses from your regular work site to school and then home. 2012 income tax forms Example 3. 2012 income tax forms Assume the same facts as in Example 1 except that you attend the school for 9 months on Saturdays, nonwork days. 2012 income tax forms Since you are attending school on a temporary basis, you can deduct your round-trip transportation expenses in going between home and school. 2012 income tax forms Example 4. 2012 income tax forms Assume the same facts as in Example 1 except that you attend classes twice a week for 15 months. 2012 income tax forms Since your attendance in school is not considered temporary, you cannot deduct your transportation expenses in going between home and school. 2012 income tax forms If you go directly from work to school, you can deduct the one-way transportation expenses of going from work to school. 2012 income tax forms If you go from work to home to school and return home, your transportation expenses cannot be more than if you had gone directly from work to school. 2012 income tax forms Using your car. 2012 income tax forms   If you use your car (whether you own or lease it) for transportation to school, you can deduct your actual expenses or use the standard mileage rate to figure the amount you can deduct. 2012 income tax forms The standard mileage rate for miles driven from January 1, 2013, through December 31, 2013 is 56½ cents per mile. 2012 income tax forms Whichever method you use, you can also deduct parking fees and tolls. 2012 income tax forms See chapter 26 for information on deducting your actual expenses of using a car. 2012 income tax forms Travel Expenses You can deduct expenses for travel, meals (see 50% limit on meals , later), and lodging if you travel overnight mainly to obtain qualifying work-related education. 2012 income tax forms Travel expenses for qualifying work-related education are treated the same as travel expenses for other employee business purposes. 2012 income tax forms For more information, see chapter 26. 2012 income tax forms You cannot deduct expenses for personal activities, such as sightseeing, visiting, or entertaining. 2012 income tax forms Mainly personal travel. 2012 income tax forms   If your travel away from home is mainly personal, you cannot deduct all of your expenses for travel, meals, and lodging. 2012 income tax forms You can deduct only your expenses for lodging and 50% of your expenses for meals during the time you attend the qualified educational activities. 2012 income tax forms   Whether a trip's purpose is mainly personal or educational depends upon the facts and circumstances. 2012 income tax forms An important factor is the comparison of time spent on personal activities with time spent on educational activities. 2012 income tax forms If you spend more time on personal activities, the trip is considered mainly educational only if you can show a substantial nonpersonal reason for traveling to a particular location. 2012 income tax forms Example 1. 2012 income tax forms John works in Newark, New Jersey. 2012 income tax forms He traveled to Chicago to take a deductible 1-week course at the request of his employer. 2012 income tax forms His main reason for going to Chicago was to take the course. 2012 income tax forms While there, he took a sight-seeing trip, entertained some friends, and took a side trip to Pleasantville for a day. 2012 income tax forms Since the trip was mainly for business, John can deduct his round-trip airfare to Chicago. 2012 income tax forms He cannot deduct his transportation expenses of going to Pleasantville. 2012 income tax forms He can deduct only the meals (subject to the 50% limit) and lodging connected with his educational activities. 2012 income tax forms Example 2. 2012 income tax forms Sue works in Boston. 2012 income tax forms She went to a university in Michigan to take a course for work. 2012 income tax forms The course is qualifying work-related education. 2012 income tax forms She took one course, which is one-fourth of a full course load of study. 2012 income tax forms She spent the rest of the time on personal activities. 2012 income tax forms Her reasons for taking the course in Michigan were all personal. 2012 income tax forms Sue's trip is mainly personal because three-fourths of her time is considered personal time. 2012 income tax forms She cannot deduct the cost of her round-trip train ticket to Michigan. 2012 income tax forms She can deduct one-fourth of the meals (subject to the 50% limit) and lodging costs for the time she attended the university. 2012 income tax forms Example 3. 2012 income tax forms Dave works in Nashville and recently traveled to California to take a 2-week seminar. 2012 income tax forms The seminar is qualifying work-related education. 2012 income tax forms While there, he spent an extra 8 weeks on personal activities. 2012 income tax forms The facts, including the extra 8-week stay, show that his main purpose was to take a vacation. 2012 income tax forms Dave cannot deduct his round-trip airfare or his meals and lodging for the 8 weeks. 2012 income tax forms He can deduct only his expenses for meals (subject to the 50% limit) and lodging for the 2 weeks he attended the seminar. 2012 income tax forms Cruises and conventions. 2012 income tax forms   Certain cruises and conventions offer seminars or courses as part of their itinerary. 2012 income tax forms Even if the seminars or courses are work-related, your deduction for travel may be limited. 2012 income tax forms This applies to: Travel by ocean liner, cruise ship, or other form of luxury water transportation, and Conventions outside the North American area. 2012 income tax forms   For a discussion of the limits on travel expense deductions that apply to cruises and conventions, see Luxury Water Travel and Conventions in chapter 1 of Publication 463. 2012 income tax forms 50% limit on meals. 2012 income tax forms   You can deduct only 50% of the cost of your meals while traveling away from home to obtain qualifying work-related education. 2012 income tax forms You cannot have been reimbursed for the meals. 2012 income tax forms   Employees must use Form 2106 or Form 2106-EZ to apply the 50% limit. 2012 income tax forms Travel as Education You cannot deduct the cost of travel as a form of education even if it is directly related to your duties in your work or business. 2012 income tax forms Example. 2012 income tax forms You are a French language teacher. 2012 income tax forms While on sabbatical leave granted for travel, you traveled through France to improve your knowledge of the French language. 2012 income tax forms You chose your itinerary and most of your activities to improve your French language skills. 2012 income tax forms You cannot deduct your travel expenses as education expenses. 2012 income tax forms This is true even if you spent most of your time learning French by visiting French schools and families, attending movies or plays, and engaging in similar activities. 2012 income tax forms No Double Benefit Allowed You cannot do either of the following. 2012 income tax forms Deduct work-related education expenses as business expenses if you benefit from these expenses under any other provision of the law, for example, the tuition and fees deduction (see chapter 35). 2012 income tax forms Deduct work-related education expenses paid with tax-free scholarship, grant, or employer-provided educational assistance. 2012 income tax forms See Adjustments to Qualifying Work-Related Education Expenses , next. 2012 income tax forms Adjustments to Qualifying Work-Related Education Expenses If you pay qualifying work-related education expenses with certain tax-free funds, you cannot claim a deduction for those amounts. 2012 income tax forms You must reduce the qualifying expenses by the amount of such expenses allocable to the tax-free educational assistance. 2012 income tax forms For more information, see chapter 12 of Publication 970. 2012 income tax forms Tax-free educational assistance includes: The tax-free part of scholarships and fellowships (see chapter 1 of Publication 970), The tax-free part of Pell grants (see chapter 1 of Publication 970), The tax-free part of employer-provided educational assistance (see chapter 11 of Publication 970), Veterans' educational assistance (see chapter 1 of Publication 970), and Any other nontaxable (tax-free) payments (other than gifts or inheritances) received for education assistance. 2012 income tax forms Amounts that do not reduce qualifying work-related education expenses. 2012 income tax forms   Do not reduce the qualifying work-related education expenses by amounts paid with funds the student receives as: Payment for services, such as wages, A loan, A gift, An inheritance, or A withdrawal from the student's personal savings. 2012 income tax forms   Also, do not reduce the qualifying work-related education expenses by any scholarship or fellowship reported as income on the student's return or any scholarship which, by its terms, cannot be applied to qualifying work-related education expenses. 2012 income tax forms Reimbursements How you treat reimbursements depends on the arrangement you have with your employer. 2012 income tax forms There are two basic types of reimbursement arrangements—accountable plans and nonaccountable plans. 2012 income tax forms You can tell the type of plan you are reimbursed under by the way the reimbursement is reported on your Form W-2. 2012 income tax forms For information on how to treat reimbursements under both accountable and nonaccountable plans, see Reimbursements in chapter 26. 2012 income tax forms Deducting Business Expenses Self-employed persons and employees report business expenses differently. 2012 income tax forms The following information explains what forms you must use to deduct the cost of your qualifying work-related education as a business expense. 2012 income tax forms Self-Employed Persons If you are self-employed, report the cost of your qualifying work-related education on the appropriate form used to report your business income and expenses (generally Schedule C, C-EZ, or F). 2012 income tax forms If your educational expenses include expenses for a car or truck, travel, or meals, report those expenses the same way you report other business expenses for those items. 2012 income tax forms See the instructions for the form you file for information on how to complete it. 2012 income tax forms Employees If you are an employee, you can deduct the cost of qualifying work-related education only if you: Did not receive (and were not entitled to receive) any reimbursement from your employer, Were reimbursed under a nonaccountable plan (amount is included in box 1 of Form W-2), or Received reimbursement under an accountable plan, but the amount received was less than your expenses for which you claimed reimbursement. 2012 income tax forms If either (1) or (2) applies, you can deduct the total qualifying cost. 2012 income tax forms If (3) applies, you can deduct only the qualifying costs that were more than your reimbursement. 2012 income tax forms In order to deduct the cost of your qualifying work-related education as a business expense, include the amount with your deduction for any other employee business expenses on Schedule A (Form 1040), line 21. 2012 income tax forms (Special rules for expenses of certain performing artists and fee-basis officials and for impairment-related work expenses are explained later. 2012 income tax forms ) This deduction (except for impairment-related work expenses of disabled individuals) is subject to the 2%-of-adjusted-gross-income limit that applies to most miscellaneous itemized deductions. 2012 income tax forms See chapter 28. 2012 income tax forms Form 2106 or 2106-EZ. 2012 income tax forms   To figure your deduction for employee business expenses, including qualifying work-related education, you generally must complete Form 2106 or Form 2106-EZ. 2012 income tax forms Form not required. 2012 income tax forms   Do not complete either Form 2106 or Form 2106-EZ if: If amounts included in box 1 of your Form W-2, are not considered reimbursements, and You are not claiming travel, transportation, meal, or entertainment expenses. 2012 income tax forms   If you meet both of these requirements, enter the expenses directly on Schedule A (Form 1040), line 21. 2012 income tax forms (Special rules for expenses of certain performing artists and fee-basis officials and for impairment-related work expenses are explained later. 2012 income tax forms ) Using Form 2106-EZ. 2012 income tax forms   This form is shorter and easier to use than Form 2106. 2012 income tax forms Generally, you can use this form if: All reimbursements, if any, are included in box 1 of your Form W-2, and You are using the standard mileage rate if you are claiming vehicle expenses. 2012 income tax forms   If you do not meet both of these requirements, use Form 2106. 2012 income tax forms Performing Artists and Fee-Basis Officials If you are a qualified performing artist, or a state (or local) government official who is paid in whole or in part on a fee basis, you can deduct the cost of your qualifying work-related education as an adjustment to gross income rather than as an itemized deduction. 2012 income tax forms Include the cost of your qualifying work-related education with any other employee business expenses on Form 1040, line 24. 2012 income tax forms You do not have to itemize your deductions on Schedule A (Form 1040), and, therefore, the deduction is not subject to the 2%-of-adjusted-gross-income limit. 2012 income tax forms You must complete Form 2106 or 2106-EZ to figure your deduction, even if you meet the requirements described earlier under Form not required . 2012 income tax forms For more information on qualified performing artists, see chapter 6 of Publication 463. 2012 income tax forms Impairment-Related Work Expenses If you are disabled and have impairment-related work expenses that are necessary for you to be able to get qualifying work-related education, you can deduct these expenses on Schedule A (Form 1040), line 28. 2012 income tax forms They are not subject to the 2%-of-adjusted-gross-income limit. 2012 income tax forms To deduct these expenses, you must complete Form 2106 or 2106-EZ even if you meet the requirements described earlier under Form not required . 2012 income tax forms For more information on impairment-related work expenses, see chapter 6 of Publication 463. 2012 income tax forms Recordkeeping You must keep records as proof of any deduction claimed on your tax return. 2012 income tax forms Generally, you should keep your records for 3 years from the date of filing the tax return and claiming the deduction. 2012 income tax forms For specific information about keeping records of business expenses, see Recordkeeping in chapter 26. 2012 income tax forms Prev  Up  Next   Home   More Online Publications
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The 2012 Income Tax Forms

2012 income tax forms 4. 2012 income tax forms   How Income of Aliens Is Taxed Table of Contents Introduction Topics - This chapter discusses: Useful Items - You may want to see: Resident Aliens Nonresident AliensTrade or Business in the United States Effectively Connected Income The 30% Tax Income From Real Property Transportation Tax Interrupted Period of Residence Expatriation TaxExpatriation Before June 4, 2004 Expatriation After June 3, 2004, and Before June 17, 2008 Expatriation After June 16, 2008 Introduction Resident and nonresident aliens are taxed in different ways. 2012 income tax forms Resident aliens are generally taxed in the same way as U. 2012 income tax forms S. 2012 income tax forms citizens. 2012 income tax forms Nonresident aliens are taxed based on the source of their income and whether or not their income is effectively connected with a U. 2012 income tax forms S. 2012 income tax forms trade or business. 2012 income tax forms The following discussions will help you determine if income you receive during the tax year is effectively connected with a U. 2012 income tax forms S. 2012 income tax forms trade or business and how it is taxed. 2012 income tax forms Topics - This chapter discusses: Income that is effectively connected with a U. 2012 income tax forms S. 2012 income tax forms trade or business. 2012 income tax forms Income that is not effectively connected with a U. 2012 income tax forms S. 2012 income tax forms trade or business. 2012 income tax forms Interrupted period of residence. 2012 income tax forms Expatriation tax. 2012 income tax forms Useful Items - You may want to see: Publication 544 Sales and Other Dispositions of Assets 1212 List of Original Issue Discount Instruments Form (and Instructions) 6251 Alternative Minimum Tax—Individuals Schedule D (Form 1040) Capital Gains and Losses See chapter 12 for information about getting these publications and forms. 2012 income tax forms Resident Aliens Resident aliens are generally taxed in the same way as U. 2012 income tax forms S. 2012 income tax forms citizens. 2012 income tax forms This means that their worldwide income is subject to U. 2012 income tax forms S. 2012 income tax forms tax and must be reported on their U. 2012 income tax forms S. 2012 income tax forms tax return. 2012 income tax forms Income of resident aliens is subject to the graduated tax rates that apply to U. 2012 income tax forms S. 2012 income tax forms citizens. 2012 income tax forms Resident aliens use the Tax Table or Tax Computation Worksheets located in the Form 1040 instructions, which apply to U. 2012 income tax forms S. 2012 income tax forms citizens. 2012 income tax forms Nonresident Aliens A nonresident alien's income that is subject to U. 2012 income tax forms S. 2012 income tax forms income tax must be divided into two categories: Income that is effectively connected with a trade or business in the United States, and Income that is not effectively connected with a trade or business in the United States (discussed under The 30% Tax, later). 2012 income tax forms The difference between these two categories is that effectively connected income, after allowable deductions, is taxed at graduated rates. 2012 income tax forms These are the same rates that apply to U. 2012 income tax forms S. 2012 income tax forms citizens and residents. 2012 income tax forms Income that is not effectively connected is taxed at a flat 30% (or lower treaty) rate. 2012 income tax forms If you were formerly a U. 2012 income tax forms S. 2012 income tax forms citizen or resident alien, these rules may not apply. 2012 income tax forms See Expatriation Tax, later, in this chapter. 2012 income tax forms Trade or Business in the United States Generally, you must be engaged in a trade or business during the tax year to be able to treat income received in that year as effectively connected with that trade or business. 2012 income tax forms Whether you are engaged in a trade or business in the United States depends on the nature of your activities. 2012 income tax forms The discussions that follow will help you determine whether you are engaged in a trade or business in the United States. 2012 income tax forms Personal Services If you perform personal services in the United States at any time during the tax year, you usually are considered engaged in a trade or business in the United States. 2012 income tax forms Certain compensation paid to a nonresident alien by a foreign employer is not included in gross income. 2012 income tax forms For more information, see Services Performed for Foreign Employer in chapter 3. 2012 income tax forms Other Trade or Business Activities Other examples of being engaged in a trade or business in the United States follow. 2012 income tax forms Students and trainees. 2012 income tax forms   You are considered engaged in a trade or business in the United States if you are temporarily present in the United States as a nonimmigrant under an “F,” “J,” “M,” or “Q” visa. 2012 income tax forms A nonresident alien temporarily present in the United States under a “J” visa includes a nonresident alien individual admitted to the United States as an exchange visitor under the Mutual Educational and Cultural Exchange Act of 1961. 2012 income tax forms The taxable part of any scholarship or fellowship grant that is U. 2012 income tax forms S. 2012 income tax forms source income is treated as effectively connected with a trade or business in the United States. 2012 income tax forms Business operations. 2012 income tax forms   If you own and operate a business in the United States selling services, products, or merchandise, you are, with certain exceptions, engaged in a trade or business in the United States. 2012 income tax forms Partnerships. 2012 income tax forms   If you are a member of a partnership that at any time during the tax year is engaged in a trade or business in the United States, you are considered to be engaged in a trade or business in the United States. 2012 income tax forms Beneficiary of an estate or trust. 2012 income tax forms   If you are the beneficiary of an estate or trust that is engaged in a trade or business in the United States, you are treated as being engaged in the same trade or business. 2012 income tax forms Trading in stocks, securities, and commodities. 2012 income tax forms   If your only U. 2012 income tax forms S. 2012 income tax forms business activity is trading in stocks, securities, or commodities (including hedging transactions) through a U. 2012 income tax forms S. 2012 income tax forms resident broker or other agent, you are not engaged in a trade or business in the United States. 2012 income tax forms   For transactions in stocks or securities, this applies to any nonresident alien, including a dealer or broker in stocks and securities. 2012 income tax forms   For transactions in commodities, this applies to commodities that are usually traded on an organized commodity exchange and to transactions that are usually carried out at such an exchange. 2012 income tax forms   This discussion does not apply if you have a U. 2012 income tax forms S. 2012 income tax forms office or other fixed place of business at any time during the tax year through which, or by the direction of which, you carry out your transactions in stocks, securities, or commodities. 2012 income tax forms Trading for a nonresident alien's own account. 2012 income tax forms   You are not engaged in a trade or business in the United States if trading for your own account in stocks, securities, or commodities is your only U. 2012 income tax forms S. 2012 income tax forms business activity. 2012 income tax forms This applies even if the trading takes place while you are present in the United States or is done by your employee or your broker or other agent. 2012 income tax forms   This does not apply to trading for your own account if you are a dealer in stocks, securities, or commodities. 2012 income tax forms This does not necessarily mean, however, that as a dealer you are considered to be engaged in a trade or business in the United States. 2012 income tax forms Determine that based on the facts and circumstances in each case or under the rules given above in Trading in stocks, securities, and commodities . 2012 income tax forms Effectively Connected Income If you are engaged in a U. 2012 income tax forms S. 2012 income tax forms trade or business, all income, gain, or loss for the tax year that you get from sources within the United States (other than certain investment income) is treated as effectively connected income. 2012 income tax forms This applies whether or not there is any connection between the income and the trade or business being carried on in the United States during the tax year. 2012 income tax forms Two tests, described next under Investment Income, determine whether certain items of investment income (such as interest, dividends, and royalties) are treated as effectively connected with that business. 2012 income tax forms In limited circumstances, some kinds of foreign source income may be treated as effectively connected with a trade or business in the United States. 2012 income tax forms For a discussion of these rules, see Foreign Income , later. 2012 income tax forms Investment Income Investment income from U. 2012 income tax forms S. 2012 income tax forms sources that may or may not be treated as effectively connected with a U. 2012 income tax forms S. 2012 income tax forms trade or business generally falls into the following three categories. 2012 income tax forms Fixed or determinable income (interest, dividends, rents, royalties, premiums, annuities, etc. 2012 income tax forms ). 2012 income tax forms Gains (some of which are considered capital gains) from the sale or exchange of the following types of property. 2012 income tax forms Timber, coal, or domestic iron ore with a retained economic interest. 2012 income tax forms Patents, copyrights, and similar property on which you receive contingent payments after October 4, 1966. 2012 income tax forms Patents transferred before October 5, 1966. 2012 income tax forms Original issue discount obligations. 2012 income tax forms Capital gains (and losses). 2012 income tax forms Use the two tests, described next, to determine whether an item of U. 2012 income tax forms S. 2012 income tax forms source income falling in one of the three categories above and received during the tax year is effectively connected with your U. 2012 income tax forms S. 2012 income tax forms trade or business. 2012 income tax forms If the tests indicate that the item of income is effectively connected, you must include it with your other effectively connected income. 2012 income tax forms If the item of income is not effectively connected, include it with all other income discussed under The 30% Tax later, in this chapter. 2012 income tax forms Asset-use test. 2012 income tax forms   This test usually applies to income that is not directly produced by trade or business activities. 2012 income tax forms Under this test, if an item of income is from assets (property) used in, or held for use in, the trade or business in the United States, it is considered effectively connected. 2012 income tax forms   An asset is used in, or held for use in, the trade or business in the United States if the asset is: Held for the principal purpose of promoting the conduct of a trade or business in the United States, Acquired and held in the ordinary course of the trade or business conducted in the United States (for example, an account receivable or note receivable arising from that trade or business), or Otherwise held to meet the present needs of the trade or business in the United States and not its anticipated future needs. 2012 income tax forms Generally, stock of a corporation is not treated as an asset used in, or held for use in, a trade or business in the United States. 2012 income tax forms Business-activities test. 2012 income tax forms   This test usually applies when income, gain, or loss comes directly from the active conduct of the trade or business. 2012 income tax forms The business-activities test is most important when: Dividends or interest are received by a dealer in stocks or securities, Royalties are received in the trade or business of licensing patents or similar property, or Service fees are earned by a servicing business. 2012 income tax forms Under this test, if the conduct of the U. 2012 income tax forms S. 2012 income tax forms trade or business was a material factor in producing the income, the income is considered effectively connected. 2012 income tax forms Personal Service Income You usually are engaged in a U. 2012 income tax forms S. 2012 income tax forms trade or business when you perform personal services in the United States. 2012 income tax forms Personal service income you receive in a tax year in which you are engaged in a U. 2012 income tax forms S. 2012 income tax forms trade or business is effectively connected with a U. 2012 income tax forms S. 2012 income tax forms trade or business. 2012 income tax forms Income received in a year other than the year you performed the services is also effectively connected if it would have been effectively connected if received in the year you performed the services. 2012 income tax forms Personal service income includes wages, salaries, commissions, fees, per diem allowances, and employee allowances and bonuses. 2012 income tax forms The income may be paid to you in the form of cash, services, or property. 2012 income tax forms If you are engaged in a U. 2012 income tax forms S. 2012 income tax forms trade or business only because you perform personal services in the United States during the tax year, income and gains from assets, and gains and losses from the sale or exchange of capital assets are generally not effectively connected with your trade or business. 2012 income tax forms However, if there is a direct economic relationship between your holding of the asset and your trade or business of performing personal services, the income, gain, or loss is effectively connected. 2012 income tax forms Pensions. 2012 income tax forms   If you were a nonresident alien engaged in a U. 2012 income tax forms S. 2012 income tax forms trade or business after 1986 because you performed personal services in the United States, and you later receive a pension or retirement pay attributable to these services, such payments are effectively connected income in each year you receive them. 2012 income tax forms This is true whether or not you are engaged in a U. 2012 income tax forms S. 2012 income tax forms trade or business in the year you receive the retirement pay. 2012 income tax forms Transportation Income Transportation income (defined in chapter 2) is effectively connected if you meet both of the following conditions. 2012 income tax forms You had a fixed place of business in the United States involved in earning the income. 2012 income tax forms At least 90% of your U. 2012 income tax forms S. 2012 income tax forms source transportation income is attributable to regularly scheduled transportation. 2012 income tax forms “Fixed place of business” generally means a place, site, structure, or other similar facility through which you engage in a trade or business. 2012 income tax forms “Regularly scheduled transportation” means that a ship or aircraft follows a published schedule with repeated sailings or flights at regular intervals between the same points for voyages or flights that begin or end in the United States. 2012 income tax forms This definition applies to both scheduled and chartered air transportation. 2012 income tax forms If you do not meet the two conditions above, the income is not effectively connected and is taxed at a 4% rate. 2012 income tax forms See Transportation Tax, later, in this chapter. 2012 income tax forms Business Profits and Losses and Sales Transactions All profits or losses from U. 2012 income tax forms S. 2012 income tax forms sources that are from the operation of a business in the United States are effectively connected with a trade or business in the United States. 2012 income tax forms For example, profit from the sale in the United States of inventory property purchased either in this country or in a foreign country is effectively connected trade or business income. 2012 income tax forms A share of U. 2012 income tax forms S. 2012 income tax forms source profits or losses of a partnership that is engaged in a trade or business in the United States is also effectively connected with a trade or business in the United States. 2012 income tax forms Real Property Gain or Loss Gains and losses from the sale or exchange of U. 2012 income tax forms S. 2012 income tax forms real property interests (whether or not they are capital assets) are taxed as if you are engaged in a trade or business in the United States. 2012 income tax forms You must treat the gain or loss as effectively connected with that trade or business. 2012 income tax forms U. 2012 income tax forms S. 2012 income tax forms real property interest. 2012 income tax forms   This is any interest in real property located in the United States or the U. 2012 income tax forms S. 2012 income tax forms Virgin Islands or any interest (other than as a creditor) in a domestic corporation that is a U. 2012 income tax forms S. 2012 income tax forms real property holding corporation. 2012 income tax forms Real property includes the following. 2012 income tax forms Land and unsevered natural products of the land, such as growing crops and timber, and mines, wells, and other natural deposits. 2012 income tax forms Improvements on land, including buildings, other permanent structures, and their structural components. 2012 income tax forms Personal property associated with the use of real property, such as equipment used in farming, mining, forestry, or construction or property used in lodging facilities or rented office space, unless the personal property is: Disposed of more than one year before or after the disposition of the real property, or Separately sold to persons unrelated either to the seller or to the buyer of the real property. 2012 income tax forms U. 2012 income tax forms S. 2012 income tax forms real property holding corporation. 2012 income tax forms   A corporation is a U. 2012 income tax forms S. 2012 income tax forms real property holding corporation if the fair market value of the corporation's U. 2012 income tax forms S. 2012 income tax forms real property interests are at least 50% of the total fair market value of: The corporation's U. 2012 income tax forms S. 2012 income tax forms real property interests, plus The corporation's interests in real property located outside the United States, plus The corporation's other assets that are used in, or held for use in, a trade or business. 2012 income tax forms   Gain or loss on the sale of the stock in any domestic corporation is taxed as if you are engaged in a U. 2012 income tax forms S. 2012 income tax forms trade or business unless you establish that the corporation is not a U. 2012 income tax forms S. 2012 income tax forms real property holding corporation. 2012 income tax forms   A U. 2012 income tax forms S. 2012 income tax forms real property interest does not include a class of stock of a corporation that is regularly traded on an established securities market, unless you hold more than 5% of the fair market value of that class of stock. 2012 income tax forms An interest in a foreign corporation owning U. 2012 income tax forms S. 2012 income tax forms real property generally is not a U. 2012 income tax forms S. 2012 income tax forms real property interest unless the corporation chooses to be treated as a domestic corporation. 2012 income tax forms Qualified investment entities. 2012 income tax forms   Special rules apply to qualified investment entities (QIEs). 2012 income tax forms A QIE is any real estate investment trust (REIT) or any regulated investment company (RIC) that is a U. 2012 income tax forms S. 2012 income tax forms real property holding corporation. 2012 income tax forms    Generally, any distribution from a QIE to a shareholder that is attributable to gain from the sale or exchange of a U. 2012 income tax forms S. 2012 income tax forms real property interest is treated as a U. 2012 income tax forms S. 2012 income tax forms real property gain by the shareholder receiving the distribution. 2012 income tax forms A distribution by a QIE on stock regularly traded on an established securities market in the United States is not treated as gain from the sale or exchange of a U. 2012 income tax forms S. 2012 income tax forms real property interest if you did not own more than 5% of that stock at any time during the 1-year period ending on the date of the distribution. 2012 income tax forms A distribution that you do not treat as gain from the sale or exchange of a U. 2012 income tax forms S. 2012 income tax forms real property interest is included in your gross income as a regular dividend. 2012 income tax forms Note. 2012 income tax forms Beginning January 1, 2014 (unless extended by legislation), a RIC that is a U. 2012 income tax forms S. 2012 income tax forms real property holding corporation will only be treated as a QIE for certain distributions from the RIC that are directly or indirectly attributable to distributions received by the RIC from a REIT. 2012 income tax forms Domestically controlled QIE. 2012 income tax forms   The sale of an interest in a domestically controlled QIE is not the sale of a U. 2012 income tax forms S. 2012 income tax forms real property interest. 2012 income tax forms The entity is domestically controlled if at all times during the testing period less than 50% in value of its stock was held, directly or indirectly, by foreign persons. 2012 income tax forms The testing period is the shorter of (a) the 5-year period ending on the date of disposition, or (b) the period during which the entity was in existence. 2012 income tax forms Wash sale. 2012 income tax forms    If you dispose of an interest in a domestically controlled QIE in an applicable wash sale transaction, special rules apply. 2012 income tax forms An applicable wash sale transaction is one in which you: Dispose of an interest in the domestically controlled QIE during the 30-day period before the ex-dividend date of a distribution that you would (but for the disposition) have treated as gain from the sale or exchange of a U. 2012 income tax forms S. 2012 income tax forms real property interest, and Acquire, or enter into a contract or option to acquire, a substantially identical interest in that entity during the 61-day period that began on the first day of the 30-day period. 2012 income tax forms If this occurs, you are treated as having gain from the sale or exchange of a U. 2012 income tax forms S. 2012 income tax forms real property interest in an amount equal to the distribution made after June 15, 2006, that would have been treated as such gain. 2012 income tax forms This also applies to any substitute dividend payment. 2012 income tax forms   A transaction is not treated as an applicable wash sale transaction if: You actually receive the distribution from the domestically controlled QIE related to the interest disposed of, or acquired, in the transaction, or You dispose of any class of stock in a QIE that is regularly traded on an established securities market in the United States but only if you did not own more than 5% of that class of stock at any time during the 1-year period ending on the date of the distribution. 2012 income tax forms Alternative minimum tax. 2012 income tax forms   There may be a minimum tax on your net gain from the disposition of U. 2012 income tax forms S. 2012 income tax forms real property interests. 2012 income tax forms Figure the amount of this tax, if any, on Form 6251. 2012 income tax forms Withholding of tax. 2012 income tax forms   If you dispose of a U. 2012 income tax forms S. 2012 income tax forms real property interest, the buyer may have to withhold tax. 2012 income tax forms See the discussion of Tax Withheld on Real Property Sales in chapter 8. 2012 income tax forms Foreign Income You must treat three kinds of foreign source income as effectively connected with a trade or business in the United States if: You have an office or other fixed place of business in the United States to which the income can be attributed, That office or place of business is a material factor in producing the income, and The income is produced in the ordinary course of the trade or business carried on through that office or other fixed place of business. 2012 income tax forms An office or other fixed place of business is a material factor if it significantly contributes to, and is an essential economic element in, the earning of the income. 2012 income tax forms The three kinds of foreign source income are listed below. 2012 income tax forms Rents and royalties for the use of, or for the privilege of using, intangible personal property located outside the United States or from any interest in such property. 2012 income tax forms Included are rents or royalties for the use, or for the privilege of using, outside the United States, patents, copyrights, secret processes and formulas, goodwill, trademarks, trade brands, franchises, and similar properties if the rents or royalties are from the active conduct of a trade or business in the United States. 2012 income tax forms Dividends, interest, or amounts received for the provision of a guarantee of indebtedness issued after September 27, 2010, from the active conduct of a banking, financing, or similar business in the United States. 2012 income tax forms A substitute dividend or interest payment received under a securities lending transaction or a sale-repurchase transaction is treated the same as the amounts received on the transferred security. 2012 income tax forms Income, gain, or loss from the sale outside the United States, through the U. 2012 income tax forms S. 2012 income tax forms office or other fixed place of business, of: Stock in trade, Property that would be included in inventory if on hand at the end of the tax year, or Property held primarily for sale to customers in the ordinary course of business. 2012 income tax forms Item (3) will not apply if you sold the property for use, consumption, or disposition outside the United States and an office or other fixed place of business in a foreign country was a material factor in the sale. 2012 income tax forms Any foreign source income that is equivalent to any item of income described above is treated as effectively connected with a U. 2012 income tax forms S. 2012 income tax forms trade or business. 2012 income tax forms For example, foreign source interest and dividend equivalents are treated as U. 2012 income tax forms S. 2012 income tax forms effectively connected income if the income is derived by a foreign person in the active conduct of a banking, financing, or similar business within the United States. 2012 income tax forms Tax on Effectively Connected Income Income you receive during the tax year that is effectively connected with your trade or business in the United States is, after allowable deductions, taxed at the rates that apply to U. 2012 income tax forms S. 2012 income tax forms citizens and residents. 2012 income tax forms Generally, you can receive effectively connected income only if you are a nonresident alien engaged in trade or business in the United States during the tax year. 2012 income tax forms However, income you receive from the sale or exchange of property, the performance of services, or any other transaction in another tax year is treated as effectively connected in that year if it would have been effectively connected in the year the transaction took place or you performed the services. 2012 income tax forms Example. 2012 income tax forms Ted Richards, a nonresident alien, entered the United States in August 2012, to perform personal services in the U. 2012 income tax forms S. 2012 income tax forms office of his overseas employer. 2012 income tax forms He worked in the U. 2012 income tax forms S. 2012 income tax forms office until December 25, 2012, but did not leave this country until January 11, 2013. 2012 income tax forms On January 8, 2013, he received his final paycheck for services performed in the United States during 2012. 2012 income tax forms All of Ted's income during his stay here is U. 2012 income tax forms S. 2012 income tax forms source income. 2012 income tax forms During 2012, Ted was engaged in the trade or business of performing personal services in the United States. 2012 income tax forms Therefore, all amounts paid to him in 2012 for services performed in the United States during 2012 are effectively connected with that trade or business during 2012. 2012 income tax forms The salary payment Ted received in January 2013 is U. 2012 income tax forms S. 2012 income tax forms source income to him in 2013. 2012 income tax forms It is effectively connected with a trade or business in the United States because he was engaged in a trade or business in the United States during 2012 when he performed the services that earned the income. 2012 income tax forms Real property income. 2012 income tax forms   You may be able to choose to treat all income from real property as effectively connected. 2012 income tax forms See Income From Real Property , later, in this chapter. 2012 income tax forms The 30% Tax Tax at a 30% (or lower treaty) rate applies to certain items of income or gains from U. 2012 income tax forms S. 2012 income tax forms sources but only if the items are not effectively connected with your U. 2012 income tax forms S. 2012 income tax forms trade or business. 2012 income tax forms Fixed or Determinable Income The 30% (or lower treaty) rate applies to the gross amount of U. 2012 income tax forms S. 2012 income tax forms source fixed or determinable annual or periodic gains, profits, or income. 2012 income tax forms Income is fixed when it is paid in amounts known ahead of time. 2012 income tax forms Income is determinable whenever there is a basis for figuring the amount to be paid. 2012 income tax forms Income can be periodic if it is paid from time to time. 2012 income tax forms It does not have to be paid annually or at regular intervals. 2012 income tax forms Income can be determinable or periodic even if the length of time during which the payments are made is increased or decreased. 2012 income tax forms Items specifically included as fixed or determinable income are interest (other than original issue discount), dividends, dividend equivalent payments (defined in chapter 2), rents, premiums, annuities, salaries, wages, and other compensation. 2012 income tax forms A substitute dividend or interest payment received under a securities lending transaction or a sale-repurchase transaction is treated the same as the amounts received on the transferred security. 2012 income tax forms Other items of income, such as royalties, also may be subject to the 30% tax. 2012 income tax forms Some fixed or determinable income may be exempt from U. 2012 income tax forms S. 2012 income tax forms tax. 2012 income tax forms See chapter 3 if you are not sure whether the income is taxable. 2012 income tax forms Original issue discount (OID). 2012 income tax forms   If you sold, exchanged, or received a payment on a bond or other debt instrument that was issued at a discount after March 31, 1972, all or part of the original issue discount (OID) (other than portfolio interest) may be subject to the 30% tax. 2012 income tax forms The amount of OID is the difference between the stated redemption price at maturity and the issue price of the debt instrument. 2012 income tax forms The 30% tax applies in the following circumstances. 2012 income tax forms You received a payment on a debt instrument. 2012 income tax forms In this case, the amount of OID subject to tax is the OID that accrued while you held the debt instrument minus the OID previously taken into account. 2012 income tax forms But the tax on the OID cannot be more than the payment minus the tax on the interest payment on the debt instrument. 2012 income tax forms You sold or exchanged the debt instrument. 2012 income tax forms The amount of OID subject to tax is the OID that accrued while you held the debt instrument minus the amount already taxed in (1) above. 2012 income tax forms   Report on your return the amount of OID shown on Form 1042-S, Foreign Person's U. 2012 income tax forms S. 2012 income tax forms Source Income Subject to Withholding, if you bought the debt instrument at original issue. 2012 income tax forms However, you must recompute your proper share of OID shown on Form 1042-S if any of the following apply. 2012 income tax forms You bought the debt instrument at a premium or paid an acquisition premium. 2012 income tax forms The debt instrument is a stripped bond or a stripped coupon (including zero coupon instruments backed by U. 2012 income tax forms S. 2012 income tax forms Treasury securities). 2012 income tax forms The debt instrument is a contingent payment or inflation-indexed debt instrument. 2012 income tax forms For the definition of premium and acquisition premium and instructions on how to recompute OID, get Publication 1212. 2012 income tax forms   If you held a bond or other debt instrument that was issued at a discount before April 1, 1972, contact the IRS for further information. 2012 income tax forms See chapter 12. 2012 income tax forms Gambling Winnings In general, nonresident aliens are subject to the 30% tax on the gross proceeds from gambling won in the United States if that income is not effectively connected with a U. 2012 income tax forms S. 2012 income tax forms trade or business and is not exempted by treaty. 2012 income tax forms However, no tax is imposed on nonbusiness gambling income a nonresident alien wins playing blackjack, baccarat, craps, roulette, or big-6 wheel in the United States. 2012 income tax forms Nonresident aliens are taxed at graduated rates on net gambling income won in the United States that is effectively connected with a U. 2012 income tax forms S. 2012 income tax forms trade or business. 2012 income tax forms Social Security Benefits A nonresident alien must include 85% of any U. 2012 income tax forms S. 2012 income tax forms social security benefit (and the social security equivalent part of a tier 1 railroad retirement benefit) in U. 2012 income tax forms S. 2012 income tax forms source fixed or determinable annual or periodic income. 2012 income tax forms Social security benefits include monthly retirement, survivor, and disability benefits. 2012 income tax forms This income is exempt under some tax treaties. 2012 income tax forms See Table 1 in Publication 901, U. 2012 income tax forms S. 2012 income tax forms Tax Treaties, for a list of tax treaties that exempt U. 2012 income tax forms S. 2012 income tax forms social security benefits from U. 2012 income tax forms S. 2012 income tax forms tax. 2012 income tax forms Sales or Exchanges of Capital Assets These rules apply only to those capital gains and losses from sources in the United States that are not effectively connected with a trade or business in the United States. 2012 income tax forms They apply even if you are engaged in a trade or business in the United States. 2012 income tax forms These rules do not apply to the sale or exchange of a U. 2012 income tax forms S. 2012 income tax forms real property interest or to the sale of any property that is effectively connected with a trade or business in the United States. 2012 income tax forms See Real Property Gain or Loss , earlier, under Effectively Connected Income. 2012 income tax forms A capital asset is everything you own except: Inventory. 2012 income tax forms Business accounts or notes receivable. 2012 income tax forms Depreciable property used in a trade or business. 2012 income tax forms Real property used in a trade or business. 2012 income tax forms Supplies regularly used in a trade or business. 2012 income tax forms Certain copyrights, literary or musical or artistic compositions, letters or memoranda, or similar property. 2012 income tax forms Certain U. 2012 income tax forms S. 2012 income tax forms government publications. 2012 income tax forms Certain commodities derivative financial instruments held by a commodities derivatives dealer. 2012 income tax forms Hedging transactions. 2012 income tax forms A capital gain is a gain on the sale or exchange of a capital asset. 2012 income tax forms A capital loss is a loss on the sale or exchange of a capital asset. 2012 income tax forms If the sale is in foreign currency, for the purpose of determining gain, the cost and selling price of the property should be expressed in U. 2012 income tax forms S. 2012 income tax forms currency at the rate of exchange prevailing as of the date of the purchase and date of the sale, respectively. 2012 income tax forms You may want to read Publication 544. 2012 income tax forms However, use Publication 544 only to determine what is a sale or exchange of a capital asset, or what is treated as such. 2012 income tax forms Specific tax treatment that applies to U. 2012 income tax forms S. 2012 income tax forms citizens or residents generally does not apply to you. 2012 income tax forms The following gains are subject to the 30% (or lower treaty) rate without regard to the 183-day rule, discussed later. 2012 income tax forms Gains on the disposal of timber, coal, or domestic iron ore with a retained economic interest. 2012 income tax forms Gains on contingent payments received from the sale or exchange of patents, copyrights, and similar property after October 4, 1966. 2012 income tax forms Gains on certain transfers of all substantial rights to, or an undivided interest in, patents if the transfers were made before October 5, 1966. 2012 income tax forms Gains on the sale or exchange of original issue discount obligations. 2012 income tax forms Gains in (1) are not subject to the 30% (or lower treaty) rate if you choose to treat the gains as effectively connected with a U. 2012 income tax forms S. 2012 income tax forms trade or business. 2012 income tax forms See Income From Real Property , later. 2012 income tax forms 183-day rule. 2012 income tax forms   If you were in the United States for 183 days or more during the tax year, your net gain from sales or exchanges of capital assets is taxed at a 30% (or lower treaty) rate. 2012 income tax forms For purposes of the 30% (or lower treaty) rate, net gain is the excess of your capital gains from U. 2012 income tax forms S. 2012 income tax forms sources over your capital losses from U. 2012 income tax forms S. 2012 income tax forms sources. 2012 income tax forms This rule applies even if any of the transactions occurred while you were not in the United States. 2012 income tax forms   To determine your net gain, consider the amount of your gains and losses that would be recognized and taken into account only if, and to the extent that, they would be recognized and taken into account if you were in a U. 2012 income tax forms S. 2012 income tax forms trade or business during the year and the gains and losses were effectively connected with that trade or business during the tax year. 2012 income tax forms   In arriving at your net gain, do not take the following into consideration. 2012 income tax forms The four types of gains listed earlier. 2012 income tax forms The deduction for a capital loss carryover. 2012 income tax forms Capital losses in excess of capital gains. 2012 income tax forms Exclusion for gain from the sale or exchange of qualified small business stock (section 1202 exclusion). 2012 income tax forms Losses from the sale or exchange of property held for personal use. 2012 income tax forms However, losses resulting from casualties or thefts may be deductible on Schedule A (Form 1040NR). 2012 income tax forms See Itemized Deductions in chapter 5. 2012 income tax forms   If you are not engaged in a trade or business in the United States and have not established a tax year for a prior period, your tax year will be the calendar year for purposes of the 183-day rule. 2012 income tax forms Also, you must file your tax return on a calendar-year basis. 2012 income tax forms   If you were in the United States for less than 183 days during the tax year, capital gains (other than gains listed earlier) are tax exempt unless they are effectively connected with a trade or business in the United States during your tax year. 2012 income tax forms Reporting. 2012 income tax forms   Report your gains and losses from the sales or exchanges of capital assets that are not effectively connected with a trade or business in the United States on page 4 of Form 1040NR. 2012 income tax forms Report gains and losses from sales or exchanges of capital assets (including real property) that are effectively connected with a trade or business in the United States on a separate Schedule D (Form 1040), Form 4797, or both. 2012 income tax forms Attach them to Form 1040NR. 2012 income tax forms Income From Real Property If you have income from real property located in the United States that you own or have an interest in and hold for the production of income, you can choose to treat all income from that property as income effectively connected with a trade or business in the United States. 2012 income tax forms The choice applies to all income from real property located in the United States and held for the production of income and to all income from any interest in such property. 2012 income tax forms This includes income from rents, royalties from mines, oil or gas wells, or other natural resources. 2012 income tax forms It also includes gains from the sale or exchange of timber, coal, or domestic iron ore with a retained economic interest. 2012 income tax forms You can make this choice only for real property income that is not otherwise effectively connected with your U. 2012 income tax forms S. 2012 income tax forms trade or business. 2012 income tax forms If you make the choice, you can claim deductions attributable to the real property income and only your net income from real property is taxed. 2012 income tax forms This choice does not treat a nonresident alien, who is not otherwise engaged in a U. 2012 income tax forms S. 2012 income tax forms trade or business, as being engaged in a trade or business in the United States during the year. 2012 income tax forms Example. 2012 income tax forms You are a nonresident alien and are not engaged in a U. 2012 income tax forms S. 2012 income tax forms trade or business. 2012 income tax forms You own a single-family house in the United States that you rent out. 2012 income tax forms Your rental income for the year is $10,000. 2012 income tax forms This is your only U. 2012 income tax forms S. 2012 income tax forms source income. 2012 income tax forms As discussed earlier under The 30% Tax, the rental income is subject to a tax at a 30% (or lower treaty) rate. 2012 income tax forms You received a Form 1042-S showing that your tenants properly withheld this tax from the rental income. 2012 income tax forms You do not have to file a U. 2012 income tax forms S. 2012 income tax forms tax return (Form 1040NR) because your U. 2012 income tax forms S. 2012 income tax forms tax liability is satisfied by the withholding of tax. 2012 income tax forms If you make the choice discussed earlier, you can offset the $10,000 income by certain rental expenses. 2012 income tax forms (See Publication 527, Residential Rental Property, for information on rental expenses. 2012 income tax forms ) Any resulting net income is taxed at graduated rates. 2012 income tax forms If you make this choice, report the rental income and expenses on Schedule E (Form 1040) and attach the schedule to Form 1040NR. 2012 income tax forms For the first year you make the choice, also attach the statement discussed next. 2012 income tax forms Making the choice. 2012 income tax forms   Make the initial choice by attaching a statement to your return, or amended return, for the year of the choice. 2012 income tax forms Include the following in your statement. 2012 income tax forms That you are making the choice. 2012 income tax forms Whether the choice is under Internal Revenue Code section 871(d) (explained earlier) or a tax treaty. 2012 income tax forms A complete list of all your real property, or any interest in real property, located in the United States. 2012 income tax forms Give the legal identification of U. 2012 income tax forms S. 2012 income tax forms timber, coal, or iron ore in which you have an interest. 2012 income tax forms The extent of your ownership in the property. 2012 income tax forms The location of the property. 2012 income tax forms A description of any major improvements to the property. 2012 income tax forms The dates you owned the property. 2012 income tax forms Your income from the property. 2012 income tax forms Details of any previous choices and revocations of the real property income choice. 2012 income tax forms   This choice stays in effect for all later tax years unless you revoke it. 2012 income tax forms Revoking the choice. 2012 income tax forms   You can revoke the choice without IRS approval by filing Form 1040X, Amended U. 2012 income tax forms S. 2012 income tax forms Individual Income Tax Return, for the year you made the choice and for later tax years. 2012 income tax forms You must file Form 1040X within 3 years from the date your return was filed or 2 years from the time the tax was paid, whichever is later. 2012 income tax forms If this time period has expired for the year of choice, you cannot revoke the choice for that year. 2012 income tax forms However, you may revoke the choice for later tax years only if you have IRS approval. 2012 income tax forms For information on how to get IRS approval, see Regulation section 1. 2012 income tax forms 871-10(d)(2). 2012 income tax forms Transportation Tax A 4% tax rate applies to transportation income that is not effectively connected because it does not meet the two conditions listed earlier under Transportation Income . 2012 income tax forms If you receive transportation income subject to the 4% tax, you should figure the tax and show it on line 57 of Form 1040NR. 2012 income tax forms Attach a statement to your return that includes the following information (if applicable). 2012 income tax forms Your name, taxpayer identification number, and tax year. 2012 income tax forms A description of the types of services performed (whether on or off board). 2012 income tax forms Names of vessels or registration numbers of aircraft on which you performed the services. 2012 income tax forms Amount of U. 2012 income tax forms S. 2012 income tax forms source transportation income derived from each type of service for each vessel or aircraft for the calendar year. 2012 income tax forms Total amount of U. 2012 income tax forms S. 2012 income tax forms source transportation income derived from all types of services for the calendar year. 2012 income tax forms This 4% tax applies to your U. 2012 income tax forms S. 2012 income tax forms source gross transportation income. 2012 income tax forms This only includes transportation income that is treated as derived from sources in the United States if the transportation begins or ends in the United States. 2012 income tax forms For transportation income from personal services, the transportation must be between the United States and a U. 2012 income tax forms S. 2012 income tax forms possession. 2012 income tax forms For personal services of a nonresident alien, this only applies to income derived from, or in connection with, an aircraft. 2012 income tax forms Interrupted Period of Residence You are subject to tax under a special rule if you interrupt your period of U. 2012 income tax forms S. 2012 income tax forms residence with a period of nonresidence. 2012 income tax forms The special rule applies if you meet all of the following conditions. 2012 income tax forms You were a U. 2012 income tax forms S. 2012 income tax forms resident for a period that includes at least 3 consecutive calendar years. 2012 income tax forms You were a U. 2012 income tax forms S. 2012 income tax forms resident for at least 183 days in each of those years. 2012 income tax forms You ceased to be treated as a U. 2012 income tax forms S. 2012 income tax forms resident. 2012 income tax forms You then again became a U. 2012 income tax forms S. 2012 income tax forms resident before the end of the third calendar year after the end of the period described in (1) above. 2012 income tax forms Under this special rule, you are subject to tax on your U. 2012 income tax forms S. 2012 income tax forms source gross income and gains on a net basis at the graduated rates applicable to individuals (with allowable deductions) for the period you were a nonresident alien, unless you would be subject to a higher tax under the 30% tax (discussed earlier) on income not connected with a U. 2012 income tax forms S. 2012 income tax forms trade or business. 2012 income tax forms For information on how to figure the special tax, see How To Figure the Expatriation Tax (If You Expatriated Before June 17, 2008) under Expatriation Tax , below. 2012 income tax forms Example. 2012 income tax forms John Willow, a citizen of New Zealand, entered the United States on April 1, 2008, as a lawful permanent resident. 2012 income tax forms On August 1, 2010, John ceased to be a lawful permanent resident and returned to New Zealand. 2012 income tax forms During his period of residence, he was present in the United States for at least 183 days in each of three consecutive years (2008, 2009, and 2010). 2012 income tax forms He returned to the United States on October 5, 2013, as a lawful permanent resident. 2012 income tax forms He became a resident before the close of the third calendar year (2013) beginning after the end of his first period of residence (August 1, 2010). 2012 income tax forms Therefore, he is subject to tax under the special rule for the period of nonresidence (August 2, 2010, through October 4, 2013) if it is more than the tax that would normally apply to him as a nonresident alien. 2012 income tax forms Reporting requirements. 2012 income tax forms   If you are subject to this tax for any year in the period you were a nonresident alien, you must file Form 1040NR for that year. 2012 income tax forms The return is due by the due date (including extensions) for filing your U. 2012 income tax forms S. 2012 income tax forms income tax return for the year that you again become a U. 2012 income tax forms S. 2012 income tax forms resident. 2012 income tax forms If you already filed returns for that period, you must file amended returns. 2012 income tax forms You must attach a statement to your return that identifies the source of all of your U. 2012 income tax forms S. 2012 income tax forms and foreign gross income and the items of income subject to this special rule. 2012 income tax forms Expatriation Tax The expatriation tax provisions apply to U. 2012 income tax forms S. 2012 income tax forms citizens who have renounced their citizenship and long-term residents who have ended their residency. 2012 income tax forms The rules that apply are based on the dates of expatriation, which are described in the following sections. 2012 income tax forms Expatriation Before June 4, 2004. 2012 income tax forms Expatriation After June 3, 2004, and Before June 17, 2008. 2012 income tax forms Expatriation After June 16, 2008. 2012 income tax forms Long-term resident defined. 2012 income tax forms   You are a long-term resident if you were a lawful permanent resident of the United States in at least 8 of the last 15 tax years ending with the year your residency ends. 2012 income tax forms In determining if you meet the 8-year requirement, do not count any year that you are treated as a resident of a foreign country under a tax treaty and do not waive treaty benefits. 2012 income tax forms Expatriation Before June 4, 2004 If you expatriated before June 4, 2004, the expatriation rules apply if one of the principal purposes of the action is the avoidance of U. 2012 income tax forms S. 2012 income tax forms taxes. 2012 income tax forms Unless you received a ruling from the IRS that you did not expatriate to avoid U. 2012 income tax forms S. 2012 income tax forms taxes, you are presumed to have tax avoidance as a principal purpose if: Your average annual net income tax for the last 5 tax years ending before the date of your action to relinquish your citizenship or terminate your residency was more than $100,000, or Your net worth on the date of your action was $500,000 or more. 2012 income tax forms The amounts above are adjusted for inflation if your expatriation action is after 1997 (see Table 4-1). 2012 income tax forms Table 4-1. 2012 income tax forms Inflation-Adjusted Amounts for Expatriation Actions Before June 4, 2004 IF you expatriated during . 2012 income tax forms . 2012 income tax forms . 2012 income tax forms   THEN the rules outlined on this page apply if . 2012 income tax forms . 2012 income tax forms . 2012 income tax forms     Your 5-year average annual net income tax was more than . 2012 income tax forms . 2012 income tax forms . 2012 income tax forms OR Your net worth equaled or exceeded . 2012 income tax forms . 2012 income tax forms . 2012 income tax forms 1999   110,000   552,000 2000   112,000   562,000 2001   116,000   580,000 2002   120,000   599,000 2003   122,000   608,000 2004 (before June 4)*   124,000   622,000 *If you expatriated after June 3, 2004, see Expatriation After June 3, 2004, and Before June 17, 2008 or Expatriation After June 16, 2008. 2012 income tax forms Reporting requirements. 2012 income tax forms   If you lost your U. 2012 income tax forms S. 2012 income tax forms citizenship, you should have filed Form 8854 with a consular office or a federal court at the time of loss of citizenship. 2012 income tax forms If you ended your long-term residency, you should have filed Form 8854 with the Internal Revenue Service when you filed your dual-status tax return for the year your residency ended. 2012 income tax forms   Your U. 2012 income tax forms S. 2012 income tax forms residency is considered to have ended when you ceased to be a lawful permanent resident or you began to be treated as a resident of another country under a tax treaty and do not waive treaty benefits. 2012 income tax forms Penalties. 2012 income tax forms   If you failed to file Form 8854, you may have to pay a penalty equal to the greater of 5% of the expatriation tax or $1,000. 2012 income tax forms The penalty will be assessed for each year of the 10-year period beginning on the date of expatriation during which your failure to file continues. 2012 income tax forms The penalty will not be imposed if you can show that the failure is due to reasonable cause and not willful neglect. 2012 income tax forms Expatriation tax. 2012 income tax forms   The expatriation tax applies to the 10-year period following the date of expatriation or termination of residency. 2012 income tax forms It is figured in the same way as for those expatriating after June 3, 2004, and before June 17, 2008. 2012 income tax forms See How To Figure the Expatriation Tax (If You Expatriated Before June 17, 2008) in the next section. 2012 income tax forms Expatriation After June 3, 2004, and Before June 17, 2008 If you expatriated after June 3, 2004, and before June 17, 2008, the expatriation rules apply to you if any of the following statements apply. 2012 income tax forms Your average annual net income tax for the 5 tax years ending before the date of expatriation or termination of residency is more than: $124,000 if you expatriated or terminated residency in 2004. 2012 income tax forms $127,000 if you expatriated or terminated residency in 2005. 2012 income tax forms $131,000 if you expatriated or terminated residency in 2006. 2012 income tax forms $136,000 if you expatriated or terminated residency in 2007. 2012 income tax forms $139,000 if you expatriated or terminated residency in 2008. 2012 income tax forms Your net worth is $2 million or more on the date of your expatriation or termination of residency. 2012 income tax forms You fail to certify on Form 8854 that you have complied with all U. 2012 income tax forms S. 2012 income tax forms federal tax obligations for the 5 tax years preceding the date of your expatriation or termination of residency. 2012 income tax forms Exception for dual-citizens and certain minors. 2012 income tax forms   Certain dual-citizens and certain minors (defined next) are not subject to the expatriation tax even if they meet (1) or (2) earlier. 2012 income tax forms However, they still must provide the certification required in (3). 2012 income tax forms Certain dual-citizens. 2012 income tax forms   You may qualify for the exception described above if all of the following apply. 2012 income tax forms You became at birth a U. 2012 income tax forms S. 2012 income tax forms citizen and a citizen of another country and you continue to be a citizen of that other country. 2012 income tax forms You were never a resident alien of the United States (as defined in chapter 1). 2012 income tax forms You never held a U. 2012 income tax forms S. 2012 income tax forms passport. 2012 income tax forms You were present in the United States for no more than 30 days during any calendar year that is 1 of the 10 calendar years preceding your loss of U. 2012 income tax forms S. 2012 income tax forms citizenship. 2012 income tax forms Certain minors. 2012 income tax forms   You may qualify for the exception described above if you meet all of the following requirements. 2012 income tax forms You became a U. 2012 income tax forms S. 2012 income tax forms citizen at birth. 2012 income tax forms Neither of your parents was a U. 2012 income tax forms S. 2012 income tax forms citizen at the time of your birth. 2012 income tax forms You expatriated before you were 18½. 2012 income tax forms You were present in the United States for not more than 30 days during any calendar year that is 1 of the 10 calendar years preceding your expatriation. 2012 income tax forms Tax consequences of presence in the United States. 2012 income tax forms   The following rules apply if you do not meet the exception above for dual-citizens and certain minors and the expatriation rules would otherwise apply to you. 2012 income tax forms   The expatriation tax does not apply to any tax year during the 10-year period if you are physically present in the United States for more than 30 days during the calendar year ending in that year. 2012 income tax forms Instead, you are treated as a U. 2012 income tax forms S. 2012 income tax forms citizen or resident and taxed on your worldwide income for that tax year. 2012 income tax forms You must file Form 1040, 1040A, or 1040EZ and figure your tax as prescribed in the instructions for those forms. 2012 income tax forms   When counting the number of days of presence during a calendar year, count any day you were physically present in the United States at any time during the day. 2012 income tax forms However, do not count any days (up to a limit of 30 days) on which you performed personal services in the United States for an employer who is not related to you if either of the following apply. 2012 income tax forms You have ties with other countries. 2012 income tax forms You have ties with other countries if: You became (within a reasonable period after your expatriation or termination of residency) a citizen or resident of the country in which you, your spouse, or either of your parents were born, and You became fully liable for income tax in that country. 2012 income tax forms You were physically present in the United States for 30 days or less during each year in the 10-year period ending on the date of expatriation or termination of residency. 2012 income tax forms Do not count any day you were an exempt individual or were unable to leave the United States because of a medical condition that arose while you were in the United States. 2012 income tax forms See Exempt individual and Medical condition in chapter 1 under Substantial Presence Test, but disregard the information about Form 8843. 2012 income tax forms Related employer. 2012 income tax forms   If your employer in the United States is any of the following, then your employer is related to you. 2012 income tax forms You must count any days you performed services in the United States for that employer as days of presence in the United States. 2012 income tax forms Members of your family. 2012 income tax forms This includes only your brothers and sisters, half-brothers and half-sisters, spouse, ancestors (parents, grandparents, etc. 2012 income tax forms ), and lineal descendants (children, grandchildren, etc. 2012 income tax forms ). 2012 income tax forms A partnership in which you directly or indirectly own more than 50% of the capital interest or the profits interest. 2012 income tax forms A corporation in which you directly or indirectly own more than 50% in value of the outstanding stock. 2012 income tax forms (See Publication 550, chapter 4, Constructive ownership of stock, for how to determine whether you directly or indirectly own outstanding stock. 2012 income tax forms ) A tax-exempt charitable or educational organization that is directly or indirectly controlled, in any manner or by any method, by you or by a member of your family, whether or not this control is legally enforceable. 2012 income tax forms Date of tax expatriation. 2012 income tax forms   For purposes of U. 2012 income tax forms S. 2012 income tax forms tax rules, the date of your expatriation or termination of residency is the later of the dates on which you perform the following actions. 2012 income tax forms You notify either the Department of State or the Department of Homeland Security (whichever is appropriate) of your expatriating act or termination of residency. 2012 income tax forms You file Form 8854 in accordance with the form instructions. 2012 income tax forms Annual return. 2012 income tax forms   If the expatriation tax applies to you, you must file Form 8854 each year during the 10-year period following the date of expatriation. 2012 income tax forms You must file this form even if you owe no U. 2012 income tax forms S. 2012 income tax forms tax. 2012 income tax forms Penalty. 2012 income tax forms   If you fail to file Form 8854 for any tax year, fail to include all information required to be shown on the form, or include incorrect information, you may have to pay a penalty of $10,000. 2012 income tax forms You will not have to pay a penalty if you show that the failure is due to reasonable cause and not to willful neglect. 2012 income tax forms How To Figure the Expatriation Tax (If You Expatriated Before June 17, 2008) If the expatriation tax applies to you, you are generally subject to tax on your U. 2012 income tax forms S. 2012 income tax forms source gross income and gains on a net basis at the graduated rates applicable to individuals (with allowable deductions) unless you would be subject to a higher tax under the 30% tax (discussed earlier) on income not connected with a U. 2012 income tax forms S. 2012 income tax forms trade or business. 2012 income tax forms For this purpose, U. 2012 income tax forms S. 2012 income tax forms source gross income (defined in chapter 2) includes gains from the sale or exchange of: Property (other than stock or debt obligations) located in the United States, Stock issued by a U. 2012 income tax forms S. 2012 income tax forms domestic corporation, and Debt obligations of U. 2012 income tax forms S. 2012 income tax forms persons or of the United States, a state or political subdivision thereof, or the District of Columbia. 2012 income tax forms U. 2012 income tax forms S. 2012 income tax forms source income also includes any income or gain derived from stock in certain controlled foreign corporations if you owned, or were considered to own, at any time during the 2-year period ending on the date of expatriation, more than 50% of: The total combined voting power of all classes of that corporation's stock, or The total value of the stock. 2012 income tax forms The income or gain is considered U. 2012 income tax forms S. 2012 income tax forms source income only to the extent of your share of earnings and profits earned or accumulated before the date of expatriation and during the periods you met the ownership requirements discussed above. 2012 income tax forms Any exchange of property is treated as a sale of the property at its fair market value on the date of the exchange and any gain is treated as U. 2012 income tax forms S. 2012 income tax forms source gross income in the tax year of the exchange unless you enter into a gain recognition agreement under Notice 97-19. 2012 income tax forms Other information. 2012 income tax forms   For more information on the expatriation tax provisions, including exceptions to the tax and special U. 2012 income tax forms S. 2012 income tax forms source rules, see section 877 of the Internal Revenue Code. 2012 income tax forms Expatriation Tax Return If you expatriated or terminated your U. 2012 income tax forms S. 2012 income tax forms residency, or you are subject to the expatriation tax, you must file Form 8854, Initial and Annual Expatriation Statement. 2012 income tax forms Attach it to Form 1040NR if you are required to file that form. 2012 income tax forms If you are present in the United States following your expatriation and are subject to tax as a U. 2012 income tax forms S. 2012 income tax forms citizen or resident, file Form 8854 with Form 1040. 2012 income tax forms Expatriation After June 16, 2008 If you expatriated after June 16, 2008, the expatriation rules apply to you if you meet any of the following conditions. 2012 income tax forms Your average annual net income tax for the 5 years ending before the date of expatriation or termination of residency is more than: $139,000 if you expatriated or terminated residency in 2008. 2012 income tax forms $145,000 if you expatriated or terminated residency in 2009 or 2010. 2012 income tax forms $147,000 if you expatriated or terminated residency in 2011. 2012 income tax forms $151,000 if you expatriated or terminated residency in 2012. 2012 income tax forms $155,000 if you expatriated or terminated residency in 2013. 2012 income tax forms Your net worth is $2 million or more on the date of your expatriation or termination of residency. 2012 income tax forms You fail to certify on Form 8854 that you have complied with all U. 2012 income tax forms S. 2012 income tax forms federal tax obligations for the 5 years preceding the date of your expatriation or termination of residency. 2012 income tax forms Exception for dual-citizens and certain minors. 2012 income tax forms   Certain dual-citizens and certain minors (defined next) are not subject to the expatriation tax even if they meet (1) or (2) above. 2012 income tax forms However, they still must provide the certification required in (3) above. 2012 income tax forms Certain dual-citizens. 2012 income tax forms   You may qualify for the exception described above if both of the following apply. 2012 income tax forms You became at birth a U. 2012 income tax forms S. 2012 income tax forms citizen and a citizen of another country and you continue to be a citizen of, and are taxed as a resident of, that other country. 2012 income tax forms You have been a resident of the United States for not more than 10 years during the 15-year tax period ending with the tax year during which the expatriation occurs. 2012 income tax forms For the purpose of determining U. 2012 income tax forms S. 2012 income tax forms residency, use the substantial presence test described in chapter 1. 2012 income tax forms Certain minors. 2012 income tax forms   You may qualify for the exception described earlier if you meet both of the following requirements. 2012 income tax forms You expatriated before you were 18½. 2012 income tax forms You have been a resident of the United States for not more than 10 tax years before the expatriation occurs. 2012 income tax forms For the purpose of determining U. 2012 income tax forms S. 2012 income tax forms residency, use the substantial presence test described in chapter 1. 2012 income tax forms Expatriation date. 2012 income tax forms   Your expatriation date is the date you relinquish U. 2012 income tax forms S. 2012 income tax forms citizenship (in the case of a former citizen) or terminate your long-term residency (in the case of a former U. 2012 income tax forms S. 2012 income tax forms resident). 2012 income tax forms Former U. 2012 income tax forms S. 2012 income tax forms citizen. 2012 income tax forms   You are considered to have relinquished your U. 2012 income tax forms S. 2012 income tax forms citizenship on the earliest of the following dates. 2012 income tax forms The date you renounced U. 2012 income tax forms S. 2012 income tax forms citizenship before a diplomatic or consular officer of the United States (provided that the voluntary renouncement was later confirmed by the issuance of a certificate of loss of nationality). 2012 income tax forms The date you furnished to the State Department a signed statement of voluntary relinquishment of U. 2012 income tax forms S. 2012 income tax forms nationality confirming the performance of an expatriating act (provided that the voluntary relinquishment was later confirmed by the issuance of a certificate of loss of nationality). 2012 income tax forms The date the State Department issued a certificate of loss of nationality. 2012 income tax forms The date that a U. 2012 income tax forms S. 2012 income tax forms court canceled your certificate of naturalization. 2012 income tax forms Former long-term resident. 2012 income tax forms   You are considered to have terminated your long-term residency on the earliest of the following dates. 2012 income tax forms The date you voluntarily relinquished your lawful permanent resident status by filing Department of Homeland Security Form I-407 with a U. 2012 income tax forms S. 2012 income tax forms consular or immigration officer, and the Department of Homeland Security determined that you have, in fact, abandoned your lawful permanent resident status. 2012 income tax forms The date you became subject to a final administrative order for your removal from the United States under the Immigration and Nationality Act and you actually left the United States as a result of that order. 2012 income tax forms If you were a dual resident of the United States and a country with which the United States has an income tax treaty, the date you began to be treated as a resident of that country and you determined that, for purposes of the treaty, you are a resident of the treaty country and notify the IRS of that treatment on Forms 8833 and 8854. 2012 income tax forms See Effect of Tax Treaties in chapter 1 for more information about dual residents. 2012 income tax forms How To Figure the Expatriation Tax (If You Expatriate After June 16, 2008) In the year you expatriate, you are subject to income tax on the net unrealized gain (or loss) in your property as if the property had been sold for its fair market value on the day before your expatriation date (“mark-to-market tax”). 2012 income tax forms This applies to most types of property interests you held on the date of relinquishment of citizenship or termination of residency. 2012 income tax forms But see Exceptions , later. 2012 income tax forms Gains arising from deemed sales must be taken into account for the tax year of the deemed sale without regard to other U. 2012 income tax forms S. 2012 income tax forms internal revenue laws. 2012 income tax forms Losses from deemed sales must be taken into account to the extent otherwise provided under U. 2012 income tax forms S. 2012 income tax forms internal revenue laws. 2012 income tax forms However, Internal Revenue Code section 1091 (relating to the disallowance of losses on wash sales of stock and securities) does not apply. 2012 income tax forms The net gain that you otherwise must include in your income is reduced (but not below zero) by: $600,000 if you expatriated or terminated residency before January 1, 2009. 2012 income tax forms $626,000 if you expatriated or terminated residency in 2009. 2012 income tax forms $627,000 if you expatriated or terminated residency in 2010. 2012 income tax forms $636,000 if you expatriated or terminated residency in 2011. 2012 income tax forms $651,000 if you expatriated or terminated residency in 2012. 2012 income tax forms $668,000 if you expatriated or terminated residency in 2013. 2012 income tax forms Exceptions. 2012 income tax forms   The mark-to-market tax does not apply to the following. 2012 income tax forms Eligible deferred compensation items. 2012 income tax forms Ineligible deferred compensation items. 2012 income tax forms Interests in nongrantor trusts. 2012 income tax forms Specified tax deferred accounts. 2012 income tax forms Instead, items (1) and (3) may be subject to withholding at source. 2012 income tax forms In the case of item (2), you are treated as receiving the present value of your accrued benefit as of the day before the expatriation date. 2012 income tax forms In the case of item (4), you are treated as receiving a distribution of your entire interest in the account on the day before your expatriation date. 2012 income tax forms See paragraphs (d), (e), and (f) of section 877A for more information. 2012 income tax forms Expatriation Tax Return If you expatriated or terminated your U. 2012 income tax forms S. 2012 income tax forms residency, or you are subject to the expatriation rules (as discussed earlier in the first paragraph under Expatriation After June 16, 2008), you must file Form 8854. 2012 income tax forms Attach it to Form 1040 or Form 1040NR if you are required to file either of those forms. 2012 income tax forms Deferral of payment of mark-to-market tax. 2012 income tax forms   You can make an irrevocable election to defer payment of the mark-to-market tax imposed on the deemed sale of property. 2012 income tax forms If you make this election, the following rules apply. 2012 income tax forms You can make the election on a property-by-property basis. 2012 income tax forms The deferred tax attributable to a particular property is due on the return for the tax year in which you dispose of the property. 2012 income tax forms Interest is charged for the period the tax is deferred. 2012 income tax forms The due date for the payment of the deferred tax cannot be extended beyond the earlier of the following dates. 2012 income tax forms The due date of the return required for the year of death. 2012 income tax forms The time that the security provided for the property fails to be adequate. 2012 income tax forms See item (6) below. 2012 income tax forms You make the election on Form 8854. 2012 income tax forms You must provide adequate security (such as a bond). 2012 income tax forms You must make an irrevocable waiver of any right under any treaty of the United States which would preclude assessment or collection of the mark-to-market tax. 2012 income tax forms   For more information about the deferral of payment, see the Instructions for Form 8854. 2012 income tax forms Prev  Up  Next   Home   More Online Publications