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Federal Tax Form 1040 Ez 2011

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Federal Tax Form 1040 Ez 2011

Federal tax form 1040 ez 2011 Publication 514 - Main Content Table of Contents Choosing To Take Credit or DeductionChoice Applies to All Qualified Foreign Taxes Making or Changing Your Choice Why Choose the Credit?Credit for Taxes Paid or Accrued Foreign Currency and Exchange Rates Foreign Tax Redetermination Who Can Take the Credit?U. Federal tax form 1040 ez 2011 S. Federal tax form 1040 ez 2011 Citizens Resident Aliens Nonresident Aliens What Foreign Taxes Qualify for the Credit?Tax Must Be Imposed on You You Must Have Paid or Accrued the Tax Tax Must Be the Legal and Actual Foreign Tax Liability Tax Must Be an Income Tax (or Tax in Lieu of Income Tax) Foreign Taxes for Which You Cannot Take a CreditTaxes on Excluded Income Taxes for Which You Can Only Take an Itemized Deduction Taxes on Foreign Mineral Income Taxes From International Boycott Operations Taxes on Combined Foreign Oil and Gas Income Taxes of U. Federal tax form 1040 ez 2011 S. Federal tax form 1040 ez 2011 Persons Controlling Foreign Corporations and Partnerships Taxes Related to a Foreign Tax Credit Splitting Event How To Figure the CreditLimit on the Credit Separate Limit Income Allocation of Foreign Taxes Foreign Taxes From a Partnership or an S Corporation Figuring the Limit Qualified Dividends Capital Gains and Losses Allocation of Foreign and U. Federal tax form 1040 ez 2011 S. Federal tax form 1040 ez 2011 Losses Tax Treaties Carryback and CarryoverTime Limit on Tax Assessment Claim for Refund Taxes All Credited or All Deducted Married Couples How To Claim the CreditForm 1116 Records To Keep Simple Example — Filled-In Form 1116Part I—Taxable Income or Loss From Sources Outside the United States (for Category Checked Above) Part II—Foreign Taxes Paid or Accrued Part III—Figuring the Credit Part IV—Summary of Credits From Separate Parts III Comprehensive Example — Filled-In Form 1116Foreign earned income. Federal tax form 1040 ez 2011 Employee business expenses. Federal tax form 1040 ez 2011 Forms 1116 Computation of Taxable Income Part I—Taxable Income or Loss From Sources Outside the United States (for Category Checked Above) Part II—Foreign Taxes Paid or Accrued Part III—Figuring the Credit Part IV—Summary of Credits From Separate Parts III Unused Foreign Taxes How To Get Tax HelpLow Income Taxpayer Clinics Choosing To Take Credit or Deduction You can choose whether to take the amount of any qualified foreign taxes paid or accrued during the year as a foreign tax credit or as an itemized deduction. Federal tax form 1040 ez 2011 You can change your choice for each year's taxes. Federal tax form 1040 ez 2011 To choose the foreign tax credit, in most cases you must complete Form 1116 and attach it to your U. Federal tax form 1040 ez 2011 S. Federal tax form 1040 ez 2011 tax return. Federal tax form 1040 ez 2011 However, you may qualify for the exception that allows you to claim the foreign tax credit without using Form 1116. Federal tax form 1040 ez 2011 See How To Figure the Credit , later. Federal tax form 1040 ez 2011 To choose to claim the taxes as an itemized deduction, use Schedule A (Form 1040), Itemized Deductions. Federal tax form 1040 ez 2011 Figure your tax both ways—claiming the credit and claiming the deduction. Federal tax form 1040 ez 2011 Then fill out your return the way that benefits you more. Federal tax form 1040 ez 2011 See Why Choose the Credit, later. Federal tax form 1040 ez 2011 Choice Applies to All Qualified Foreign Taxes As a general rule, you must choose to take either a credit or a deduction for all qualified foreign taxes. Federal tax form 1040 ez 2011 If you choose to take a credit for qualified foreign taxes, you must take the credit for all of them. Federal tax form 1040 ez 2011 You cannot deduct any of them. Federal tax form 1040 ez 2011 Conversely, if you choose to deduct qualified foreign taxes, you must deduct all of them. Federal tax form 1040 ez 2011 You cannot take a credit for any of them. Federal tax form 1040 ez 2011 See What Foreign Taxes Qualify for the Credit , later, for the meaning of qualified foreign taxes. Federal tax form 1040 ez 2011 There are exceptions to this general rule, which are described next. Federal tax form 1040 ez 2011 Exceptions for foreign taxes not allowed as a credit. Federal tax form 1040 ez 2011   Even if you claim a credit for other foreign taxes, you can deduct any foreign tax that is not allowed as a credit if: You paid the tax to a country for which a credit is not allowed because it provides support for acts of international terrorism, or because the United States does not have or does not conduct diplomatic relations with it or recognize its government and that government is not otherwise eligible to purchase defense articles or services under the Arms Export Control Act, You paid withholding tax on dividends from foreign corporations whose stock you did not hold for the required period of time, You paid withholding tax on income or gain (other than dividends) from property you did not hold for the required period of time, You paid withholding tax on income or gain to the extent you had to make related payments on positions in substantially similar or related property, You participated in or cooperated with an international boycott, You paid taxes in connection with the purchase or sale of oil or gas, or You paid or accrued taxes on income or gain in connection with a covered asset acquisition. Federal tax form 1040 ez 2011 Covered asset acquisitions include certain acquisitions that result in a stepped-up basis for U. Federal tax form 1040 ez 2011 S. Federal tax form 1040 ez 2011 tax purposes. Federal tax form 1040 ez 2011 For more information, see Internal Revenue Code section 901(m). Federal tax form 1040 ez 2011 The IRS intends to issue guidance that will explain this provision in greater detail. Federal tax form 1040 ez 2011   For more information on these items, see Taxes for Which You Can Only Take an Itemized Deduction , later, under Foreign Taxes for Which You Cannot Take a Credit. Federal tax form 1040 ez 2011 Foreign taxes that are not income taxes. Federal tax form 1040 ez 2011   In most cases, only foreign income taxes qualify for the foreign tax credit. Federal tax form 1040 ez 2011 Other taxes, such as foreign real and personal property taxes, do not qualify. Federal tax form 1040 ez 2011 But you may be able to deduct these other taxes even if you claim the foreign tax credit for foreign income taxes. Federal tax form 1040 ez 2011   In most cases, you can deduct these other taxes only if they are expenses incurred in a trade or business or in the production of income. Federal tax form 1040 ez 2011 However, you can deduct foreign real property taxes that are not trade or business expenses as an itemized deduction on Schedule A (Form 1040). Federal tax form 1040 ez 2011 Carrybacks and carryovers. Federal tax form 1040 ez 2011   There is a limit on the credit you can claim in a tax year. Federal tax form 1040 ez 2011 If your qualified foreign taxes exceed the credit limit, you may be able to carry over or carry back the excess to another tax year. Federal tax form 1040 ez 2011 If you deduct qualified foreign taxes in a tax year, you cannot use a carryback or carryover in that year. Federal tax form 1040 ez 2011 That is because you cannot take both a deduction and a credit for qualified foreign taxes in the same tax year. Federal tax form 1040 ez 2011   For more information on the limit, see How To Figure the Credit , later. Federal tax form 1040 ez 2011 For more information on carrybacks and carryovers, see Carryback and Carryover , later. Federal tax form 1040 ez 2011 Making or Changing Your Choice You can make or change your choice to claim a deduction or credit at any time during the period within 10 years from the regular due date for filing the return (without regard to any extension of time to file) for the tax year in which the taxes were actually paid or accrued. Federal tax form 1040 ez 2011 You make or change your choice on your tax return (or on an amended return) for the year your choice is to be effective. Federal tax form 1040 ez 2011 Example. Federal tax form 1040 ez 2011 You paid foreign taxes for the last 13 years and chose to deduct them on your U. Federal tax form 1040 ez 2011 S. Federal tax form 1040 ez 2011 income tax returns. Federal tax form 1040 ez 2011 You were timely in both filing your returns and paying your U. Federal tax form 1040 ez 2011 S. Federal tax form 1040 ez 2011 tax liability. Federal tax form 1040 ez 2011 In February 2013, you file an amended return for tax year 2002 choosing to take a credit for your 2002 foreign taxes because you now realize that the credit is more advantageous than the deduction for that year. Federal tax form 1040 ez 2011 Because the regular due date of your 2002 return was April 15, 2003, this choice is timely (within 10 years). Federal tax form 1040 ez 2011 Because there is a limit on the credit for your 2002 foreign tax, you have unused 2002 foreign taxes. Federal tax form 1040 ez 2011 Ordinarily, you first carry back unused foreign taxes arising in 2002 to, and claim them as a credit in, the 2 preceding tax years. Federal tax form 1040 ez 2011 If you are unable to claim all of them in those 2 years, you carry them forward to the 10 years following the year in which they arose. Federal tax form 1040 ez 2011 Because you originally chose to deduct your foreign taxes and the 10-year period for changing the choice for 2000 and 2001 has passed, you cannot change your choice and carry the unused 2002 foreign taxes back to tax years 2000 and 2001. Federal tax form 1040 ez 2011 Because the 10-year periods for changing the choice have not passed for your 2003 through 2012 income tax returns, you can still choose to claim the credit for those years and carry forward any unused 2002 foreign taxes. Federal tax form 1040 ez 2011 However, you must reduce the unused 2002 foreign taxes that you carry forward by the amount that would have been allowed as a carryback if you had timely carried back the foreign tax to tax years 2000 and 2001. Federal tax form 1040 ez 2011 You cannot take a credit or a deduction for foreign taxes paid on income you exclude under the foreign earned income exclusion or the foreign housing exclusion. Federal tax form 1040 ez 2011 See Foreign Earned Income and Housing Exclusions under Foreign Taxes for Which You Cannot Take a Credit, later. Federal tax form 1040 ez 2011 Why Choose the Credit? The foreign tax credit is intended to relieve you of a double tax burden when your foreign source income is taxed by both the United States and the foreign country. Federal tax form 1040 ez 2011 In most cases, if the foreign tax rate is higher than the U. Federal tax form 1040 ez 2011 S. Federal tax form 1040 ez 2011 rate, there will be no U. Federal tax form 1040 ez 2011 S. Federal tax form 1040 ez 2011 tax on the foreign income. Federal tax form 1040 ez 2011 If the foreign tax rate is lower than the U. Federal tax form 1040 ez 2011 S. Federal tax form 1040 ez 2011 rate, U. Federal tax form 1040 ez 2011 S. Federal tax form 1040 ez 2011 tax on the foreign income will be limited to the difference between the rates. Federal tax form 1040 ez 2011 The foreign tax credit can only reduce U. Federal tax form 1040 ez 2011 S. Federal tax form 1040 ez 2011 taxes on foreign source income; it cannot reduce U. Federal tax form 1040 ez 2011 S. Federal tax form 1040 ez 2011 taxes on U. Federal tax form 1040 ez 2011 S. Federal tax form 1040 ez 2011 source income. Federal tax form 1040 ez 2011 Although no one rule covers all situations, in most cases it is better to take a credit for qualified foreign taxes than to deduct them as an itemized deduction. Federal tax form 1040 ez 2011 This is because: A credit reduces your actual U. Federal tax form 1040 ez 2011 S. Federal tax form 1040 ez 2011 income tax on a dollar-for-dollar basis, while a deduction reduces only your income subject to tax, You can choose to take the foreign tax credit even if you do not itemize your deductions. Federal tax form 1040 ez 2011 You then are allowed the standard deduction in addition to the credit, and If you choose to take the foreign tax credit, and the taxes paid or accrued exceed the credit limit for the tax year, you may be able to carry over or carry back the excess to another tax year. Federal tax form 1040 ez 2011 (See Limit on credit under How To Figure the Credit, later. Federal tax form 1040 ez 2011 ) Example 1. Federal tax form 1040 ez 2011 For 2013, you and your spouse have adjusted gross income of $80,300, including $20,000 of dividend income from foreign sources. Federal tax form 1040 ez 2011 None of the dividends are qualified dividends. Federal tax form 1040 ez 2011 You file a joint return and can claim two $3,900 exemptions. Federal tax form 1040 ez 2011 You had to pay $2,000 in foreign income taxes on the dividend income. Federal tax form 1040 ez 2011 If you take the foreign taxes as an itemized deduction, your total itemized deductions are $15,000. Federal tax form 1040 ez 2011 Your taxable income then is $57,500 and your tax is $7,736. Federal tax form 1040 ez 2011 If you take the credit instead, your itemized deductions are only $13,000. Federal tax form 1040 ez 2011 Your taxable income then is $59,500 and your tax before the credit is $8,036. Federal tax form 1040 ez 2011 After the credit, however, your tax is only $6,036. Federal tax form 1040 ez 2011 Therefore, your tax is $1,700 lower ($7,736 − $6,036) by taking the credit. Federal tax form 1040 ez 2011 Example 2. Federal tax form 1040 ez 2011 In 2013, you receive investment income of $5,000 from a foreign country, which imposes a tax of $1,500 on that income. Federal tax form 1040 ez 2011 You report on your U. Federal tax form 1040 ez 2011 S. Federal tax form 1040 ez 2011 return this income as well as $56,000 of U. Federal tax form 1040 ez 2011 S. Federal tax form 1040 ez 2011 source wages and an allowable $49,000 partnership loss from a U. Federal tax form 1040 ez 2011 S. Federal tax form 1040 ez 2011 partnership. Federal tax form 1040 ez 2011 Your share of the partnership's gross income is $25,000 and your share of its expenses is $74,000. Federal tax form 1040 ez 2011 You are single, entitled to one $3,900 exemption, and have other itemized deductions of $6,850. Federal tax form 1040 ez 2011 If you deduct the foreign tax on your U. Federal tax form 1040 ez 2011 S. Federal tax form 1040 ez 2011 return, your taxable income is a negative $250 ($5,000 + $56,000 − $49,000 − $1,500 − $6,850 − $3,900) and your tax is $0. Federal tax form 1040 ez 2011 If you take the credit instead, your taxable income is $1,250 ($5,000 + $56,000 − $49,000 − $3,900 − $6,850) and your tax before the credit is $126. Federal tax form 1040 ez 2011 You can take a credit of only $113 because of limits discussed later. Federal tax form 1040 ez 2011 Your tax after the credit is $13 ($126 − $113), which is $13 more than if you deduct the foreign tax. Federal tax form 1040 ez 2011 If you choose the credit, you will have unused foreign taxes of $1,387 ($1,500 − $113). Federal tax form 1040 ez 2011 When deciding whether to take the credit or the deduction this year, you will need to consider whether you can benefit from a carryback or carryover of that unused foreign tax. Federal tax form 1040 ez 2011 Credit for Taxes Paid or Accrued You can claim the credit for a qualified foreign tax in the tax year in which you pay it or accrue it, depending on your method of accounting. Federal tax form 1040 ez 2011 “Tax year” refers to the tax year for which your U. Federal tax form 1040 ez 2011 S. Federal tax form 1040 ez 2011 return is filed, not the tax year for which your foreign return is filed. Federal tax form 1040 ez 2011 Accrual method of accounting. Federal tax form 1040 ez 2011   If you use an accrual method of accounting, you can claim the credit only in the year in which you accrue the tax. Federal tax form 1040 ez 2011 You are using an accrual method of accounting if you report income when you earn it, rather than when you receive it, and you deduct your expenses when you incur them, rather than when you pay them. Federal tax form 1040 ez 2011   In most cases, foreign taxes accrue when all the events have taken place that fix the amount of the tax and your liability to pay it. Federal tax form 1040 ez 2011 Generally, this occurs on the last day of the tax year for which your foreign return is filed. Federal tax form 1040 ez 2011 Contesting your foreign tax liability. Federal tax form 1040 ez 2011   If you are contesting your foreign tax liability, you cannot accrue it and take a credit until the amount of foreign tax due is finally determined. Federal tax form 1040 ez 2011 However, if you choose to pay the tax liability you are contesting, you can take a credit for the amount you pay before a final determination of foreign tax liability is made. Federal tax form 1040 ez 2011 Once your liability is determined, the foreign tax credit is allowable for the year to which the foreign tax relates. Federal tax form 1040 ez 2011 If the amount of foreign taxes taken as a credit differs from the final foreign tax liability, you may have to adjust the credit, as discussed later under Foreign Tax Redetermination . Federal tax form 1040 ez 2011 You may have to post a bond. Federal tax form 1040 ez 2011   If you claim a credit for taxes accrued but not paid, you may have to post an income tax bond to guarantee your payment of any tax due in the event the amount of foreign tax paid differs from the amount claimed. Federal tax form 1040 ez 2011   The IRS can request this bond at any time without regard to the Time Limit on Tax Assessment discussed later under Carryback and Carryover. Federal tax form 1040 ez 2011 Cash method of accounting. Federal tax form 1040 ez 2011   If you use the cash method of accounting, you can choose to take the credit either in the year you pay the tax or in the year you accrue it. Federal tax form 1040 ez 2011 You are using the cash method of accounting if you report income in the year you actually or constructively receive it, and deduct expenses in the year you pay them. Federal tax form 1040 ez 2011 Choosing to take credit in the year taxes accrue. Federal tax form 1040 ez 2011   Even if you use the cash method of accounting, you can choose to take a credit for foreign taxes in the year they accrue. Federal tax form 1040 ez 2011 You make the choice by checking the box in Part II of Form 1116. Federal tax form 1040 ez 2011 Once you make that choice, you must follow it in all later years and take a credit for foreign taxes in the year they accrue. Federal tax form 1040 ez 2011   In addition, the choice to take the credit when foreign taxes accrue applies to all foreign taxes qualifying for the credit. Federal tax form 1040 ez 2011 You cannot take a credit for some foreign taxes when paid and take a credit for others when accrued. Federal tax form 1040 ez 2011   If you make the choice to take the credit when foreign taxes accrue and pay them in a later year, you cannot claim a deduction for any part of the previously accrued taxes. Federal tax form 1040 ez 2011 Credit based on taxes paid in earlier year. Federal tax form 1040 ez 2011   If, in earlier years, you took the credit based on taxes paid, and this year you choose to take the credit based on taxes accrued, you may be able to take the credit this year for taxes from more than one year. Federal tax form 1040 ez 2011 Example. Federal tax form 1040 ez 2011 Last year you took the credit based on taxes paid. Federal tax form 1040 ez 2011 This year you chose to take the credit based on taxes accrued. Federal tax form 1040 ez 2011 During the year you paid foreign income taxes owed for last year. Federal tax form 1040 ez 2011 You also accrued foreign income taxes for this year that you did not pay by the end of the year. Federal tax form 1040 ez 2011 You can base the credit on your return for this year on both last year's taxes that you paid and this year's taxes that you accrued. Federal tax form 1040 ez 2011 Foreign Currency and Exchange Rates U. Federal tax form 1040 ez 2011 S. Federal tax form 1040 ez 2011 income tax is imposed on income expressed in U. Federal tax form 1040 ez 2011 S. Federal tax form 1040 ez 2011 dollars, while in most cases the foreign tax is imposed on income expressed in foreign currency. Federal tax form 1040 ez 2011 Therefore, fluctuations in the value of the foreign currency relative to the U. Federal tax form 1040 ez 2011 S. Federal tax form 1040 ez 2011 dollar may affect the foreign tax credit. Federal tax form 1040 ez 2011 Translating foreign currency into U. Federal tax form 1040 ez 2011 S. Federal tax form 1040 ez 2011 dollars. Federal tax form 1040 ez 2011   If you receive all or part of your income or pay some or all of your expenses in foreign currency, you must translate the foreign currency into U. Federal tax form 1040 ez 2011 S. Federal tax form 1040 ez 2011 dollars. Federal tax form 1040 ez 2011 How and when you do this depends on your functional currency. Federal tax form 1040 ez 2011 In most cases, your functional currency is the U. Federal tax form 1040 ez 2011 S. Federal tax form 1040 ez 2011 dollar unless you are required to use the currency of a foreign country. Federal tax form 1040 ez 2011   You must make all federal income tax determinations in your functional currency. Federal tax form 1040 ez 2011 The U. Federal tax form 1040 ez 2011 S. Federal tax form 1040 ez 2011 dollar is the functional currency for all taxpayers except some qualified business units. Federal tax form 1040 ez 2011 A qualified business unit is a separate and clearly identified unit of a trade or business that maintains separate books and records. Federal tax form 1040 ez 2011 Unless you are self-employed, your functional currency is the U. Federal tax form 1040 ez 2011 S. Federal tax form 1040 ez 2011 dollar. Federal tax form 1040 ez 2011   Even if you are self-employed and have a qualified business unit, your functional currency is the U. Federal tax form 1040 ez 2011 S. Federal tax form 1040 ez 2011 dollar if any of the following apply. Federal tax form 1040 ez 2011 You conduct the business primarily in dollars. Federal tax form 1040 ez 2011 The principal place of business is located in the United States. Federal tax form 1040 ez 2011 You choose to or are required to use the dollar as your functional currency. Federal tax form 1040 ez 2011 The business books and records are not kept in the currency of the economic environment in which a significant part of the business activities is conducted. Federal tax form 1040 ez 2011   If your functional currency is the U. Federal tax form 1040 ez 2011 S. Federal tax form 1040 ez 2011 dollar, you must immediately translate into dollars all items of income, expense, etc. Federal tax form 1040 ez 2011 , that you receive, pay, or accrue in a foreign currency and that will affect computation of your income tax. Federal tax form 1040 ez 2011 If there is more than one exchange rate, use the one that most properly reflects your income. Federal tax form 1040 ez 2011 In most cases, you can get exchange rates from banks and U. Federal tax form 1040 ez 2011 S. Federal tax form 1040 ez 2011 Embassies. Federal tax form 1040 ez 2011   If your functional currency is not the U. Federal tax form 1040 ez 2011 S. Federal tax form 1040 ez 2011 dollar, make all income tax determinations in your functional currency. Federal tax form 1040 ez 2011 At the end of the year, translate the results, such as income or loss, into U. Federal tax form 1040 ez 2011 S. Federal tax form 1040 ez 2011 dollars to report on your income tax return. Federal tax form 1040 ez 2011    For more information, write to: Internal Revenue Service International Section Philadelphia, PA 19255-0725 Rate of exchange for foreign taxes paid. Federal tax form 1040 ez 2011   Use the rate of exchange in effect on the date you paid the foreign taxes to the foreign country unless you meet the exception discussed next. Federal tax form 1040 ez 2011 If your tax was withheld in foreign currency, use the rate of exchange in effect for the date on which the tax was withheld. Federal tax form 1040 ez 2011 If you make foreign estimated tax payments, you use the rate of exchange in effect for the date on which you made the estimated tax payment. Federal tax form 1040 ez 2011   The exchange rate rules discussed here apply even if the foreign taxes are paid or accrued with respect to a foreign tax credit splitting event (discussed later). Federal tax form 1040 ez 2011 Exception. Federal tax form 1040 ez 2011   If you claim the credit for foreign taxes on an accrual basis, in most cases you must use the average exchange rate for the tax year to which the taxes relate. Federal tax form 1040 ez 2011 This rule applies to accrued taxes relating to tax years beginning after 1997 and only under the following conditions. Federal tax form 1040 ez 2011 The foreign taxes are paid on or after the first day of the tax year to which they relate. Federal tax form 1040 ez 2011 The foreign taxes are paid not later than 2 years after the close of the tax year to which they relate. Federal tax form 1040 ez 2011 The foreign tax liability is not denominated in an inflationary currency (defined in the Form 1116 instructions). Federal tax form 1040 ez 2011 (This condition applies to taxes paid or accrued in tax years beginning after November 6, 2007. Federal tax form 1040 ez 2011 )   For all other foreign taxes, you should use the exchange rate in effect on the date you paid them. Federal tax form 1040 ez 2011 Election to use exchange rate on date paid. Federal tax form 1040 ez 2011   If you have accrued foreign taxes that you are otherwise required to convert using the average exchange rate, you may elect to use the exchange rate in effect on the date the foreign taxes are paid if the taxes are denominated in a nonfunctional foreign currency. Federal tax form 1040 ez 2011 If any of the accrued taxes are unpaid, you must translate them into U. Federal tax form 1040 ez 2011 S. Federal tax form 1040 ez 2011 dollars using the exchange rate on the last day of the U. Federal tax form 1040 ez 2011 S. Federal tax form 1040 ez 2011 tax year to which those taxes relate. Federal tax form 1040 ez 2011 You may make the election for all nonfunctional currency foreign income taxes or only those nonfunctional currency foreign income taxes that are attributable to qualified business units with a U. Federal tax form 1040 ez 2011 S. Federal tax form 1040 ez 2011 dollar functional currency. Federal tax form 1040 ez 2011 Once made, the election applies to the tax year for which made and all subsequent tax years unless revoked with the consent of the IRS. Federal tax form 1040 ez 2011 The election is available for tax years beginning after 2004. Federal tax form 1040 ez 2011 It must be made by the due date (including extensions) for filing the tax return for the first tax year to which the election applies. Federal tax form 1040 ez 2011 Make the election by attaching a statement to the applicable tax return. Federal tax form 1040 ez 2011 The statement must identify whether the election is made for all foreign taxes or only for foreign taxes attributable to qualified business units with a U. Federal tax form 1040 ez 2011 S. Federal tax form 1040 ez 2011 dollar functional currency. Federal tax form 1040 ez 2011 Foreign Tax Redetermination A foreign tax redetermination is any change in your foreign tax liability that may affect your U. Federal tax form 1040 ez 2011 S. Federal tax form 1040 ez 2011 foreign tax credit claimed. Federal tax form 1040 ez 2011 The year in which to claim the credit remains the year to which the foreign taxes paid or accrued relate, even if the change in foreign tax liability occurs in a later year. Federal tax form 1040 ez 2011 If a foreign tax redetermination occurs, a redetermination of your U. Federal tax form 1040 ez 2011 S. Federal tax form 1040 ez 2011 tax liability is required if any of the following conditions apply. Federal tax form 1040 ez 2011 The accrued taxes when paid differ from the amounts claimed as a credit. Federal tax form 1040 ez 2011 The accrued taxes you claimed as a credit in one tax year are not paid within 2 years after the end of that tax year. Federal tax form 1040 ez 2011 If this applies to you, you must reduce the credit previously claimed by the amount of the unpaid taxes. Federal tax form 1040 ez 2011 You will not be allowed a credit for the unpaid taxes until you pay them. Federal tax form 1040 ez 2011 When you pay the accrued taxes, a new foreign tax redetermination occurs and you must translate the taxes into U. Federal tax form 1040 ez 2011 S. Federal tax form 1040 ez 2011 dollars using the exchange rate as of the date they were paid. Federal tax form 1040 ez 2011 The foreign tax credit is allowed for the year to which the foreign tax relates. Federal tax form 1040 ez 2011 See Rate of exchange for foreign taxes paid , earlier, under Foreign Currency and Exchange Rates. Federal tax form 1040 ez 2011 The foreign taxes you paid are refunded in whole or in part. Federal tax form 1040 ez 2011 For taxes taken into account when accrued but translated into dollars on the date of payment, the dollar value of the accrued tax differs from the dollar value of the tax paid because of fluctuations in the exchange rate between the date of accrual and the date of payment. Federal tax form 1040 ez 2011 However, no redetermination is required if the change in foreign tax liability for each foreign country is solely attributable to exchange rate fluctuations and is less than the smaller of: $10,000, or 2% of the total dollar amount of the foreign tax initially accrued for that foreign country for the U. Federal tax form 1040 ez 2011 S. Federal tax form 1040 ez 2011 tax year. Federal tax form 1040 ez 2011 In this case, you must adjust your U. Federal tax form 1040 ez 2011 S. Federal tax form 1040 ez 2011 tax in the tax year in which the accrued foreign taxes are paid. Federal tax form 1040 ez 2011 Notice to the Internal Revenue Service (IRS) of Redetermination You are required to notify the IRS about a foreign tax credit redetermination that affects your U. Federal tax form 1040 ez 2011 S. Federal tax form 1040 ez 2011 tax liability for each tax year affected by the redetermination. Federal tax form 1040 ez 2011 In most cases, you must file Form 1040X, Amended U. Federal tax form 1040 ez 2011 S. Federal tax form 1040 ez 2011 Individual Income Tax Return, with a revised Form 1116 and a statement that contains information sufficient for the IRS to redetermine your U. Federal tax form 1040 ez 2011 S. Federal tax form 1040 ez 2011 tax liability for the year or years affected. Federal tax form 1040 ez 2011 See Contents of statement , later. Federal tax form 1040 ez 2011 You are not required to attach Form 1116 for a tax year affected by a redetermination if: The amount of your creditable taxes paid or accrued during the tax year is not more than $300 ($600 if married filing a joint return) as a result of the foreign tax redetermination, and You meet the requirements listed under Exemption from foreign tax credit limit under How To Figure the Credit, later. Federal tax form 1040 ez 2011 There are other exceptions to this requirement. Federal tax form 1040 ez 2011 They are discussed later under Due date of notification to IRS . Federal tax form 1040 ez 2011 Contents of statement. Federal tax form 1040 ez 2011   The statement must include all of the following. Federal tax form 1040 ez 2011 Your name, address, and taxpayer identification number. Federal tax form 1040 ez 2011 The tax year or years that are affected by the foreign tax redetermination. Federal tax form 1040 ez 2011 The date or dates the foreign taxes were accrued, if applicable. Federal tax form 1040 ez 2011 The date or dates the foreign taxes were paid. Federal tax form 1040 ez 2011 The amount of foreign taxes paid or accrued on each date (in foreign currency) and the exchange rate used to translate each amount. Federal tax form 1040 ez 2011 Information sufficient to determine any interest due from or owing to you, including the amount of any interest paid to you by the foreign government and the dates received. Federal tax form 1040 ez 2011   In the case of any foreign taxes that were not paid before the date two years after the close of the tax year to which those taxes relate, you must provide the amount of those taxes in foreign currency and the exchange rate that was used to translate that amount when originally claimed as a credit. Federal tax form 1040 ez 2011   If any foreign tax was refunded in whole or in part, you must provide the date and amount (in foreign currency) of each refund, the exchange rate that was used to translate each amount when originally claimed as a credit, and the exchange rate for the date the refund was received (for purposes of computing foreign currency gain or loss under Internal Revenue Code section 988). Federal tax form 1040 ez 2011 Due date of notification to IRS. Federal tax form 1040 ez 2011   If you pay less foreign tax than you originally claimed a credit for, in most cases you must file a notification by the due date (with extensions) of your original return for your tax year in which the foreign tax redetermination occurred. Federal tax form 1040 ez 2011 There is no limit on the time the IRS has to redetermine and assess the correct U. Federal tax form 1040 ez 2011 S. Federal tax form 1040 ez 2011 tax due. Federal tax form 1040 ez 2011 If you pay more foreign tax than you originally claimed a credit for, you have 10 years to file a claim for refund of U. Federal tax form 1040 ez 2011 S. Federal tax form 1040 ez 2011 taxes. Federal tax form 1040 ez 2011 See Time Limit on Refund Claims , later. Federal tax form 1040 ez 2011   Exceptions to this due date are explained in the next two paragraphs. Federal tax form 1040 ez 2011 Multiple redeterminations of U. Federal tax form 1040 ez 2011 S. Federal tax form 1040 ez 2011 tax liability for same tax year. Federal tax form 1040 ez 2011   Where more than one foreign tax redetermination requires a redetermination of U. Federal tax form 1040 ez 2011 S. Federal tax form 1040 ez 2011 tax liability for the same tax year and those redeterminations occur in the same tax year or within two consecutive tax years, you can file for that tax year one notification (Form 1040X with a Form 1116 and the required statement) that reflects all those tax redeterminations. Federal tax form 1040 ez 2011 If you choose to file one notification, the due date for that notification is the due date of the original return (with extensions) for the year in which the first foreign tax redetermination that reduced your foreign tax liability occurred. Federal tax form 1040 ez 2011 However, foreign tax redeterminations with respect to the tax year for which a redetermination of U. Federal tax form 1040 ez 2011 S. Federal tax form 1040 ez 2011 tax liability is required may occur after the due date for providing that notification. Federal tax form 1040 ez 2011 In this situation, you may have to file more than one Form 1040X for that tax year. Federal tax form 1040 ez 2011 Additional U. Federal tax form 1040 ez 2011 S. Federal tax form 1040 ez 2011 tax due eliminated by foreign tax credit carryback or carryover. Federal tax form 1040 ez 2011   If a foreign tax redetermination requires a redetermination of U. Federal tax form 1040 ez 2011 S. Federal tax form 1040 ez 2011 tax liability that would otherwise result in an additional amount of U. Federal tax form 1040 ez 2011 S. Federal tax form 1040 ez 2011 tax due, but the additional tax is eliminated by a carryback or carryover of an unused foreign tax, you do not have to amend your tax return for the year affected by the redetermination. Federal tax form 1040 ez 2011 Instead, you can notify the IRS by attaching a statement to the original return for the tax year in which the foreign tax redetermination occurred. Federal tax form 1040 ez 2011 You must file the statement by the due date (with extensions) of that return. Federal tax form 1040 ez 2011 The statement must show the amount of the unused foreign taxes paid or accrued and a detailed schedule showing the computation of the carryback or carryover (including the amounts carried back or over to the year for which a redetermination on U. Federal tax form 1040 ez 2011 S. Federal tax form 1040 ez 2011 tax liability is required). Federal tax form 1040 ez 2011 Failure-to-notify penalty. Federal tax form 1040 ez 2011   If you fail to notify the IRS of a foreign tax redetermination and cannot show reasonable cause for the failure, you may have to pay a penalty. Federal tax form 1040 ez 2011   For each month, or part of a month, that the failure continues, you pay a penalty of 5% of the tax due resulting from a redetermination of your U. Federal tax form 1040 ez 2011 S. Federal tax form 1040 ez 2011 tax. Federal tax form 1040 ez 2011 This penalty cannot be more than 25% of the tax due. Federal tax form 1040 ez 2011 Foreign tax refund. Federal tax form 1040 ez 2011   If you receive a foreign tax refund without interest from the foreign government, you will not have to pay interest on the amount of tax due resulting from the adjustment to your U. Federal tax form 1040 ez 2011 S. Federal tax form 1040 ez 2011 tax for the time before the date of the refund. Federal tax form 1040 ez 2011   However, if you receive a foreign tax refund with interest, you must pay interest to the IRS up to the amount of the interest paid to you by the foreign government. Federal tax form 1040 ez 2011 The interest you must pay cannot be more than the interest you would have had to pay on taxes that were unpaid for any other reason for the same period. Federal tax form 1040 ez 2011 Interest also is owed from the time you receive a refund until you pay the additional tax due. Federal tax form 1040 ez 2011 Foreign tax imposed on foreign refund. Federal tax form 1040 ez 2011   If your foreign tax refund is taxed by the foreign country, you cannot take a separate credit or deduction for this additional foreign tax. Federal tax form 1040 ez 2011 However, when you refigure the foreign tax credit taken for the original foreign tax, reduce the amount of the refund by the foreign tax paid on the refund. Federal tax form 1040 ez 2011 Example. Federal tax form 1040 ez 2011 You paid a foreign income tax of $3,000 in 2011, and received a foreign tax refund of $500 in 2013 on which a foreign tax of $100 was imposed. Federal tax form 1040 ez 2011 When you refigure your credit for 2011, you must reduce the $3,000 you paid by $400. Federal tax form 1040 ez 2011 Time Limit on Refund Claims You have 10 years to file a claim for refund of U. Federal tax form 1040 ez 2011 S. Federal tax form 1040 ez 2011 tax if you find that you paid or accrued a larger foreign tax than you claimed a credit for. Federal tax form 1040 ez 2011 The 10-year period begins the day after the regular due date for filing the return (without extensions) for the year in which the taxes were actually paid or accrued. Federal tax form 1040 ez 2011 You have 10 years to file your claim regardless of whether you claim the credit for taxes paid or taxes accrued. Federal tax form 1040 ez 2011 The 10-year period applies to claims for refund or credit based on: Fixing math errors in figuring qualified foreign taxes, Reporting qualified foreign taxes not originally reported on the return, or Any other change in the size of the credit (including one caused by correcting the foreign tax credit limit). Federal tax form 1040 ez 2011 The special 10-year period also applies to making or changing your choice to claim a deduction or credit for foreign taxes. Federal tax form 1040 ez 2011 See Making or Changing Your Choice discussed earlier under Choosing To Take Credit or Deduction. Federal tax form 1040 ez 2011 Who Can Take the Credit? U. Federal tax form 1040 ez 2011 S. Federal tax form 1040 ez 2011 citizens, resident aliens, and nonresident aliens who paid foreign income tax and are subject to U. Federal tax form 1040 ez 2011 S. Federal tax form 1040 ez 2011 tax on foreign source income may be able to take a foreign tax credit. Federal tax form 1040 ez 2011 U. Federal tax form 1040 ez 2011 S. Federal tax form 1040 ez 2011 Citizens If you are a U. Federal tax form 1040 ez 2011 S. Federal tax form 1040 ez 2011 citizen, you are taxed by the United States on your worldwide income wherever you live. Federal tax form 1040 ez 2011 You are normally entitled to take a credit for foreign taxes you pay or accrue. Federal tax form 1040 ez 2011 Resident Aliens If you are a resident alien of the United States, you can take a credit for foreign taxes subject to the same general rules as U. Federal tax form 1040 ez 2011 S. Federal tax form 1040 ez 2011 citizens. Federal tax form 1040 ez 2011 If you are a bona fide resident of Puerto Rico for the entire tax year, you also come under the same rules. Federal tax form 1040 ez 2011 Usually, you can take a credit only for those foreign taxes imposed on income you actually or constructively received while you had resident alien status. Federal tax form 1040 ez 2011 For information on alien status, see Publication 519. Federal tax form 1040 ez 2011 Nonresident Aliens If you are a nonresident alien, you cannot take the credit in most cases. Federal tax form 1040 ez 2011 However, you may be able to take the credit if: You were a bona fide resident of Puerto Rico during your entire tax year, or You pay or accrue tax to a foreign country or U. Federal tax form 1040 ez 2011 S. Federal tax form 1040 ez 2011 possession on income from foreign sources that is effectively connected with a trade or business in the United States. Federal tax form 1040 ez 2011 But if you must pay tax to a foreign country or U. Federal tax form 1040 ez 2011 S. Federal tax form 1040 ez 2011 possession on income from U. Federal tax form 1040 ez 2011 S. Federal tax form 1040 ez 2011 sources only because you are a citizen or a resident of that country or U. Federal tax form 1040 ez 2011 S. Federal tax form 1040 ez 2011 possession, do not use that tax in figuring the amount of your credit. Federal tax form 1040 ez 2011 For information on alien status and effectively connected income, see Publication 519. Federal tax form 1040 ez 2011 What Foreign Taxes Qualify for the Credit? In most cases, the following four tests must be met for any foreign tax to qualify for the credit. Federal tax form 1040 ez 2011 The tax must be imposed on you. Federal tax form 1040 ez 2011 You must have paid or accrued the tax. Federal tax form 1040 ez 2011 The tax must be the legal and actual foreign tax liability. Federal tax form 1040 ez 2011 The tax must be an income tax (or a tax in lieu of an income tax). Federal tax form 1040 ez 2011 Certain foreign taxes do not qualify for the credit even if the four tests are met. Federal tax form 1040 ez 2011 See Foreign Taxes for Which You Cannot Take a Credit, later. Federal tax form 1040 ez 2011 Tax Must Be Imposed on You You can claim a credit only for foreign taxes that are imposed on you by a foreign country or U. Federal tax form 1040 ez 2011 S. Federal tax form 1040 ez 2011 possession. Federal tax form 1040 ez 2011 For example, a tax that is deducted from your wages is considered to be imposed on you. Federal tax form 1040 ez 2011 You cannot shift the right to claim the credit by contract or other means. Federal tax form 1040 ez 2011 Foreign country. Federal tax form 1040 ez 2011   A foreign country includes any foreign state and its political subdivisions. Federal tax form 1040 ez 2011 Income, war profits, and excess profits taxes paid or accrued to a foreign city or province qualify for the foreign tax credit. Federal tax form 1040 ez 2011 U. Federal tax form 1040 ez 2011 S. Federal tax form 1040 ez 2011 possessions. Federal tax form 1040 ez 2011   For foreign tax credit purposes, all qualified taxes paid to U. Federal tax form 1040 ez 2011 S. Federal tax form 1040 ez 2011 possessions are considered foreign taxes. Federal tax form 1040 ez 2011 For this purpose, U. Federal tax form 1040 ez 2011 S. Federal tax form 1040 ez 2011 possessions include Puerto Rico and American Samoa. Federal tax form 1040 ez 2011   When the term “foreign country” is used in this publication, it includes U. Federal tax form 1040 ez 2011 S. Federal tax form 1040 ez 2011 possessions unless otherwise stated. Federal tax form 1040 ez 2011 You Must Have Paid or Accrued the Tax In most cases, you can claim the credit only if you paid or accrued the foreign tax to a foreign country or U. Federal tax form 1040 ez 2011 S. Federal tax form 1040 ez 2011 possession. Federal tax form 1040 ez 2011 However, the paragraphs that follow describe some instances in which you can claim the credit even if you did not directly pay or accrue the tax yourself. Federal tax form 1040 ez 2011 Joint return. Federal tax form 1040 ez 2011   If you file a joint return, you can claim the credit based on the total foreign income taxes paid or accrued by you and your spouse. Federal tax form 1040 ez 2011 Combined income. Federal tax form 1040 ez 2011   If foreign tax is imposed on the combined income of two or more persons (for example, spouses), the tax is allocated among, and considered paid by, these persons on a pro rata basis in proportion to each person's portion of the combined income, as determined under foreign law and Regulations section 1. Federal tax form 1040 ez 2011 901-2(f)(3)(iii). Federal tax form 1040 ez 2011 Combined income with respect to each foreign tax that is imposed on a combined basis (and combined income subject to tax exemption or preferential tax rates) is computed separately, and the tax on that combined income is allocated separately. Federal tax form 1040 ez 2011   These rules apply to foreign taxes paid or accrued in tax years beginning after February 14, 2012. Federal tax form 1040 ez 2011 However, you can choose to apply the new rules to foreign taxes paid or accrued in tax years beginning after December 31, 2010, and before February 15, 2012. Federal tax form 1040 ez 2011 For more details, see paragraphs (f) and (h) of Regulations section 1. Federal tax form 1040 ez 2011 901-2. Federal tax form 1040 ez 2011 For similar rules applicable to prior tax years, see Regulations section 1. Federal tax form 1040 ez 2011 901-2 (revised as of April 1, 2011). Federal tax form 1040 ez 2011 Example. Federal tax form 1040 ez 2011 You and your spouse reside in Country X, which imposes income tax on your combined incomes. Federal tax form 1040 ez 2011 Both of you use the “u” as your functional currency. Federal tax form 1040 ez 2011 Country X apportions tax based on income. Federal tax form 1040 ez 2011 You had income of 30,000u and your spouse had income of 20,000u. Federal tax form 1040 ez 2011 Your filing status on your U. Federal tax form 1040 ez 2011 S. Federal tax form 1040 ez 2011 income tax return is married filing separately. Federal tax form 1040 ez 2011 You can claim only 60% (30,000u/50,000u) of the foreign taxes imposed on your income on your U. Federal tax form 1040 ez 2011 S income tax return. Federal tax form 1040 ez 2011 Your spouse can claim only 40% (20,000u/50,000u). Federal tax form 1040 ez 2011 Partner or S corporation shareholder. Federal tax form 1040 ez 2011   If you are a member of a partnership, or a shareholder in an S corporation, you can claim the credit based on your proportionate share of the foreign income taxes paid or accrued by the partnership or the S corporation. Federal tax form 1040 ez 2011 These amounts will be shown on the Schedule K-1 you receive from the partnership or S corporation. Federal tax form 1040 ez 2011 However, if you are a shareholder in an S corporation that in turn owns stock in a foreign corporation, you cannot claim a credit for your share of foreign taxes paid by the foreign corporation. Federal tax form 1040 ez 2011 Beneficiary. Federal tax form 1040 ez 2011   If you are a beneficiary of an estate or trust, you may be able to claim the credit based on your proportionate share of foreign income taxes paid or accrued by the estate or trust. Federal tax form 1040 ez 2011 This amount will be shown on the Schedule K-1 you receive from the estate or trust. Federal tax form 1040 ez 2011 However, you must show that the tax was imposed on income of the estate and not on income received by the decedent. Federal tax form 1040 ez 2011 Mutual fund shareholder. Federal tax form 1040 ez 2011   If you are a shareholder of a mutual fund or other regulated investment company (RIC), you may be able to claim the credit based on your share of foreign income taxes paid by the fund if it chooses to pass the credit on to its shareholders. Federal tax form 1040 ez 2011 You should receive from the mutual fund or other RIC a Form 1099-DIV, or similar statement, showing your share of the foreign income, and your share of the foreign taxes paid. Federal tax form 1040 ez 2011 If you do not receive this information, you will need to contact the fund. Federal tax form 1040 ez 2011 Controlled foreign corporation shareholder. Federal tax form 1040 ez 2011   If you are a shareholder of a controlled foreign corporation and choose to be taxed at corporate rates on the amount you must include in gross income from that corporation, you can claim the credit based on your share of foreign taxes paid or accrued by the controlled foreign corporation. Federal tax form 1040 ez 2011 If you make this election, you must claim the credit by filing Form 1118, Foreign Tax Credit—Corporations. Federal tax form 1040 ez 2011 Controlled foreign corporation. Federal tax form 1040 ez 2011   A controlled foreign corporation is a foreign corporation in which U. Federal tax form 1040 ez 2011 S. Federal tax form 1040 ez 2011 shareholders own more than 50% of the voting power or value of the stock. Federal tax form 1040 ez 2011 You are considered a U. Federal tax form 1040 ez 2011 S. Federal tax form 1040 ez 2011 shareholder if you own, directly or indirectly, 10% or more of the total voting power of all classes of the foreign corporation's stock. Federal tax form 1040 ez 2011 See Internal Revenue Code sections 951(b) and 958(b) for more information. Federal tax form 1040 ez 2011 Tax Must Be the Legal and Actual Foreign Tax Liability The amount of foreign tax that qualifies is not necessarily the amount of tax withheld by the foreign country. Federal tax form 1040 ez 2011 Only the legal and actual foreign tax liability that you paid or accrued during the year qualifies for the credit. Federal tax form 1040 ez 2011 Foreign tax refund. Federal tax form 1040 ez 2011   You cannot take a foreign tax credit for income taxes paid to a foreign country if it is reasonably certain the amount would be refunded, credited, rebated, abated, or forgiven if you made a claim. Federal tax form 1040 ez 2011   For example, the United States has tax treaties with many countries allowing U. Federal tax form 1040 ez 2011 S. Federal tax form 1040 ez 2011 citizens and residents reductions in the rates of tax of those foreign countries. Federal tax form 1040 ez 2011 However, some treaty countries require U. Federal tax form 1040 ez 2011 S. Federal tax form 1040 ez 2011 citizens and residents to pay the tax figured without regard to the lower treaty rates and then claim a refund for the amount by which the tax actually paid is more than the amount of tax figured using the lower treaty rate. Federal tax form 1040 ez 2011 The qualified foreign tax is the amount figured using the lower treaty rate and not the amount actually paid, because the excess tax is refundable. Federal tax form 1040 ez 2011 Subsidy received. Federal tax form 1040 ez 2011   Tax payments a foreign country returns to you in the form of a subsidy do not qualify for the foreign tax credit. Federal tax form 1040 ez 2011 This rule applies even if the subsidy is given to a person related to you, or persons who participated with you in a transaction or a related transaction. Federal tax form 1040 ez 2011 A subsidy can be provided by any means but must be determined, directly or indirectly, in relation to the amount of tax, or to the base used to figure the tax. Federal tax form 1040 ez 2011   The term “subsidy” includes any type of benefit. Federal tax form 1040 ez 2011 Some ways of providing a subsidy are refunds, credits, deductions, payments, or discharges of obligations. Federal tax form 1040 ez 2011 Shareholder receiving refund for corporate tax in integrated system. Federal tax form 1040 ez 2011   Under some foreign tax laws and treaties, a shareholder is considered to have paid part of the tax that is imposed on the corporation. Federal tax form 1040 ez 2011 You may be able to claim a refund of these taxes from the foreign government. Federal tax form 1040 ez 2011 You must include the refund (including any amount withheld) in your income in the year received. Federal tax form 1040 ez 2011 Any tax withheld from the refund is a qualified foreign tax. Federal tax form 1040 ez 2011 Example. Federal tax form 1040 ez 2011 You are a shareholder of a French corporation. Federal tax form 1040 ez 2011 You receive a $100 refund of the tax paid to France by the corporation on the earnings distributed to you as a dividend. Federal tax form 1040 ez 2011 The French government imposes a 15% withholding tax ($15) on the refund you received. Federal tax form 1040 ez 2011 You receive a check for $85. Federal tax form 1040 ez 2011 You include $100 in your income. Federal tax form 1040 ez 2011 The $15 of tax withheld is a qualified foreign tax. Federal tax form 1040 ez 2011 Tax Must Be an Income Tax (or Tax in Lieu of Income Tax) In most cases, only income, war profits, and excess profits taxes (income taxes) qualify for the foreign tax credit. Federal tax form 1040 ez 2011 Foreign taxes on wages, dividends, interest, and royalties qualify for the credit in most cases. Federal tax form 1040 ez 2011 Furthermore, foreign taxes on income can qualify even though they are not imposed under an income tax law if the tax is in lieu of an income, war profits, or excess profits tax. Federal tax form 1040 ez 2011 See Taxes in Lieu of Income Taxes , later. Federal tax form 1040 ez 2011 Income Tax Simply because the levy is called an income tax by the foreign taxing authority does not make it an income tax for this purpose. Federal tax form 1040 ez 2011 A foreign levy is an income tax only if it meets both of the following requirements. Federal tax form 1040 ez 2011 It is a tax; that is, you have to pay it and you get no specific economic benefit (discussed below) from paying it. Federal tax form 1040 ez 2011 The predominant character of the tax is that of an income tax in the U. Federal tax form 1040 ez 2011 S. Federal tax form 1040 ez 2011 sense. Federal tax form 1040 ez 2011 A foreign levy may meet these requirements even if the foreign tax law differs from U. Federal tax form 1040 ez 2011 S. Federal tax form 1040 ez 2011 tax law. Federal tax form 1040 ez 2011 The foreign law may include in income items that U. Federal tax form 1040 ez 2011 S. Federal tax form 1040 ez 2011 law does not include, or it may allow certain exclusions or deductions that U. Federal tax form 1040 ez 2011 S. Federal tax form 1040 ez 2011 law does not allow. Federal tax form 1040 ez 2011 Specific economic benefit. Federal tax form 1040 ez 2011   In most cases, you get a specific economic benefit if you receive, or are considered to receive, an economic benefit from the foreign country imposing the levy, and: If there is a generally imposed income tax, the economic benefit is not available on substantially the same terms to all persons subject to the income tax, or If there is no generally imposed income tax, the economic benefit is not available on substantially the same terms to the population of the foreign country in general. Federal tax form 1040 ez 2011   You are considered to receive a specific economic benefit if you have a business transaction with a person who receives a specific economic benefit from the foreign country and, under the terms and conditions of the transaction, you receive directly or indirectly all or part of the benefit. Federal tax form 1040 ez 2011   However, see the exception discussed later under Pension, unemployment, and disability fund payments . Federal tax form 1040 ez 2011 Economic benefits. Federal tax form 1040 ez 2011   Economic benefits include the following. Federal tax form 1040 ez 2011 Goods. Federal tax form 1040 ez 2011 Services. Federal tax form 1040 ez 2011 Fees or other payments. Federal tax form 1040 ez 2011 Rights to use, acquire, or extract resources, patents, or other property the foreign country owns or controls. Federal tax form 1040 ez 2011 Discharges of contractual obligations. Federal tax form 1040 ez 2011   In most cases, the right or privilege merely to engage in business is not an economic benefit. Federal tax form 1040 ez 2011 Dual-capacity taxpayers. Federal tax form 1040 ez 2011   If you are subject to a foreign country's levy and you also receive a specific economic benefit from that foreign country, you are a “dual-capacity taxpayer. Federal tax form 1040 ez 2011 ” As a dual-capacity taxpayer, you cannot claim a credit for any part of the foreign levy, unless you establish that the amount paid under a distinct element of the foreign levy is a tax, rather than a compulsory payment for a direct or indirect specific economic benefit. Federal tax form 1040 ez 2011    For more information on how to establish amounts paid under separate elements of a levy, write to: Internal Revenue Service International Section Philadelphia, PA 19255-0725 Pension, unemployment, and disability fund payments. Federal tax form 1040 ez 2011   A foreign tax imposed on an individual to pay for retirement, old-age, death, survivor, unemployment, illness, or disability benefits, or for substantially similar purposes, is not payment for a specific economic benefit if the amount of the tax does not depend on the age, life expectancy, or similar characteristics of that individual. Federal tax form 1040 ez 2011    No deduction or credit is allowed, however, for social security taxes paid or accrued to a foreign country with which the United States has a social security agreement. Federal tax form 1040 ez 2011 For more information about these agreements, see Publication 54. Federal tax form 1040 ez 2011 Soak-up taxes. Federal tax form 1040 ez 2011   A foreign tax is not predominantly an income tax and does not qualify for credit to the extent it is a soak-up tax. Federal tax form 1040 ez 2011 A tax is a soak-up tax to the extent that liability for it depends on the availability of a credit for it against income tax imposed by another country. Federal tax form 1040 ez 2011 This rule applies only if and to the extent that the foreign tax would not be imposed if the credit were not available. Federal tax form 1040 ez 2011 Penalties and interest. Federal tax form 1040 ez 2011   Amounts paid to a foreign government to satisfy a liability for interest, fines, penalties, or any similar obligation are not taxes and do not qualify for the credit. Federal tax form 1040 ez 2011 Taxes not based on income. Federal tax form 1040 ez 2011   Foreign taxes based on gross receipts or the number of units produced, rather than on realized net income, do not qualify unless they are imposed in lieu of an income tax, as discussed next. Federal tax form 1040 ez 2011 Taxes based on assets, such as property taxes, do not qualify for the credit. Federal tax form 1040 ez 2011 Taxes in Lieu of Income Taxes A tax paid or accrued to a foreign country qualifies for the credit if it is imposed in lieu of an income tax otherwise generally imposed. Federal tax form 1040 ez 2011 A foreign levy is a tax in lieu of an income tax only if: It is not payment for a specific economic benefit as discussed earlier, and The tax is imposed in place of, and not in addition to, an income tax otherwise generally imposed. Federal tax form 1040 ez 2011 A tax in lieu of an income tax does not have to be based on realized net income. Federal tax form 1040 ez 2011 A foreign tax imposed on gross income, gross receipts or sales, or the number of units produced or exported can qualify for the credit. Federal tax form 1040 ez 2011 In most cases, a soak-up tax (discussed earlier) does not qualify as a tax in lieu of an income tax. Federal tax form 1040 ez 2011 However, if the foreign country imposes a soak-up tax in lieu of an income tax, the amount that does not qualify for foreign tax credit is the lesser of the following amounts. Federal tax form 1040 ez 2011 The soak-up tax. Federal tax form 1040 ez 2011 The foreign tax you paid that is more than the amount you would have paid if you had been subject to the generally imposed income tax. Federal tax form 1040 ez 2011 Foreign Taxes for Which You Cannot Take a Credit This part discusses the foreign taxes for which you cannot take a credit. Federal tax form 1040 ez 2011 These are: Taxes on excluded income, Taxes for which you can only take an itemized deduction, Taxes on foreign mineral income, Taxes from international boycott operations, A portion of taxes on combined foreign oil and gas income, Taxes of U. Federal tax form 1040 ez 2011 S. Federal tax form 1040 ez 2011 persons controlling foreign corporations and partnerships who fail to file required information returns, and Taxes related to a foreign tax splitting event. Federal tax form 1040 ez 2011 Taxes on Excluded Income You cannot take a credit for foreign taxes paid or accrued on certain income that is excluded from U. Federal tax form 1040 ez 2011 S. Federal tax form 1040 ez 2011 gross income. Federal tax form 1040 ez 2011 Foreign Earned Income and Housing Exclusions You must reduce your foreign taxes available for the credit by the amount of those taxes paid or accrued on income that is excluded from U. Federal tax form 1040 ez 2011 S. Federal tax form 1040 ez 2011 income under the foreign earned income exclusion or the foreign housing exclusion. Federal tax form 1040 ez 2011 See Publication 54 for more information on the foreign earned income and housing exclusions. Federal tax form 1040 ez 2011 Wages completely excluded. Federal tax form 1040 ez 2011   If your wages are completely excluded, you cannot take a credit for any of the foreign taxes paid or accrued on these wages. Federal tax form 1040 ez 2011 Wages partly excluded. Federal tax form 1040 ez 2011   If only part of your wages is excluded, you cannot take a credit for the foreign income taxes allocable to the excluded part. Federal tax form 1040 ez 2011 You find the amount allocable to your excluded wages by multiplying the foreign tax paid or accrued on foreign earned income received or accrued during the tax year by a fraction. Federal tax form 1040 ez 2011   The numerator of the fraction is your foreign earned income and housing amounts excluded under the foreign earned income and housing exclusions for the tax year minus otherwise deductible expenses definitely related and properly apportioned to that income. Federal tax form 1040 ez 2011 Deductible expenses do not include the foreign housing deduction. Federal tax form 1040 ez 2011   The denominator is your total foreign earned income received or accrued during the tax year minus all deductible expenses allocable to that income (including the foreign housing deduction). Federal tax form 1040 ez 2011 If the foreign law taxes foreign earned income and some other income (for example, earned income from U. Federal tax form 1040 ez 2011 S. Federal tax form 1040 ez 2011 sources or a type of income not subject to U. Federal tax form 1040 ez 2011 S. Federal tax form 1040 ez 2011 tax), and the taxes on the other income cannot be segregated, the denominator of the fraction is the total amount of income subject to the foreign tax minus deductible expenses allocable to that income. Federal tax form 1040 ez 2011 Example. Federal tax form 1040 ez 2011 You are a U. Federal tax form 1040 ez 2011 S. Federal tax form 1040 ez 2011 citizen and a cash basis taxpayer, employed by Company X and living in Country A. Federal tax form 1040 ez 2011 Your records show the following: Foreign earned income received $125,000 Unreimbursed business travel expenses 20,000 Income tax paid to Country A 30,000 Exclusion of foreign earned  income and housing allowance 97,600     Because you can exclude part of your wages, you cannot claim a credit for part of the foreign taxes. Federal tax form 1040 ez 2011 To find that part, do the following. Federal tax form 1040 ez 2011 First, find the amount of business expenses allocable to excluded wages and therefore not deductible. Federal tax form 1040 ez 2011 To do this, multiply the otherwise deductible expenses by a fraction. Federal tax form 1040 ez 2011 That fraction is the excluded wages over your foreign earned income. Federal tax form 1040 ez 2011   $20,000 × $97,600 $125,000 = $15,616             Next, find the numerator of the fraction by which you will multiply the foreign taxes paid. Federal tax form 1040 ez 2011 To do this, subtract business expenses allocable to excluded wages ($15,616) from excluded wages ($97,600). Federal tax form 1040 ez 2011 The result is $81,984. Federal tax form 1040 ez 2011 Then, find the denominator of the fraction by subtracting all your deductible expenses from all your foreign earned income ($125,000 − $20,000 = $105,000). Federal tax form 1040 ez 2011 Finally, multiply the foreign tax you paid by the resulting fraction. Federal tax form 1040 ez 2011   $30,000 × $81,984  $105,000 = $23,424 The amount of Country A tax you cannot take a credit for is $23,424. Federal tax form 1040 ez 2011 Taxes on Income From Puerto Rico Exempt From U. Federal tax form 1040 ez 2011 S. Federal tax form 1040 ez 2011 Tax If you have income from Puerto Rican sources that is not taxable, you must reduce your foreign taxes paid or accrued by the taxes allocable to the exempt income. Federal tax form 1040 ez 2011 For information on figuring the reduction, see Publication 570. Federal tax form 1040 ez 2011 Possession Exclusion If you are a bona fide resident of American Samoa and exclude income from sources in American Samoa, you cannot take a credit for the taxes you pay or accrue on the excluded income. Federal tax form 1040 ez 2011 For more information on this exclusion, see Publication 570. Federal tax form 1040 ez 2011 Extraterritorial Income Exclusion You cannot take a credit for taxes you pay on qualifying foreign trade income excluded on Form 8873, Extraterritorial Income Exclusion. Federal tax form 1040 ez 2011 However, see Internal Revenue Code section 943(d) for an exception for certain withholding taxes. Federal tax form 1040 ez 2011 Taxes for Which You Can Only Take an Itemized Deduction You cannot claim a foreign tax credit for foreign income taxes paid or accrued under the following circumstances. Federal tax form 1040 ez 2011 However, you can claim an itemized deduction for these taxes. Federal tax form 1040 ez 2011 See Choosing To Take Credit or Deduction , earlier. Federal tax form 1040 ez 2011 Taxes Imposed By Sanctioned Countries (Section 901(j) Income) You cannot claim a foreign tax credit for income taxes paid or accrued to any country if the income giving rise to the tax is for a period (the sanction period) during which: The Secretary of State has designated the country as one that repeatedly provides support for acts of international terrorism, The United States has severed or does not conduct diplomatic relations with the country, or The United States does not recognize the country's government, and that government is not otherwise eligible to purchase defense articles or services under the Arms Export Control Act. Federal tax form 1040 ez 2011 The following countries meet this description for 2013. Federal tax form 1040 ez 2011 Income taxes paid or accrued to these countries in 2013 do not qualify for the credit. Federal tax form 1040 ez 2011 Cuba. Federal tax form 1040 ez 2011 Iran. Federal tax form 1040 ez 2011 Libya (but see Note later). Federal tax form 1040 ez 2011 North Korea. Federal tax form 1040 ez 2011 Sudan. Federal tax form 1040 ez 2011 Syria. Federal tax form 1040 ez 2011 Waiver of denial of the credit. Federal tax form 1040 ez 2011   A waiver can be granted to a sanctioned country if the President of the United States determines that granting the waiver is in the national interest of the United States and will expand trade and investment opportunities for U. Federal tax form 1040 ez 2011 S. Federal tax form 1040 ez 2011 companies in the sanctioned country. Federal tax form 1040 ez 2011 The President must report to Congress his intentions to grant the waiver and his reasons for granting the waiver not less than 30 days before the date on which the waiver is granted. Federal tax form 1040 ez 2011 Note. Federal tax form 1040 ez 2011 Effective December 10, 2004, the President granted a waiver to Libya. Federal tax form 1040 ez 2011 Income taxes arising on or after this date qualify for the credit if they meet the other requirements in this publication. Federal tax form 1040 ez 2011 Limit on credit. Federal tax form 1040 ez 2011   In figuring the foreign tax credit limit, discussed later, income from a sanctioned country is a separate category of foreign income unless a Presidential waiver is granted. Federal tax form 1040 ez 2011 You must fill out a separate Form 1116 for this income. Federal tax form 1040 ez 2011 This will prevent you from claiming a credit for foreign taxes paid or accrued to the sanctioned country. Federal tax form 1040 ez 2011 Example. Federal tax form 1040 ez 2011 You lived and worked in Iran until August, when you were transferred to Italy. Federal tax form 1040 ez 2011 You paid taxes to each country on the income earned in that country. Federal tax form 1040 ez 2011 You cannot claim a foreign tax credit for the foreign taxes paid on the income earned in Iran. Federal tax form 1040 ez 2011 Because the income earned in Iran is a separate category of foreign income, you must fill out a separate Form 1116 for that income. Federal tax form 1040 ez 2011 You cannot take a credit for taxes paid on the income earned in Iran, but that income is taxable by the United States. Federal tax form 1040 ez 2011 Figuring the credit when a sanction ends. Federal tax form 1040 ez 2011    Table 1 lists the countries for which sanctions have ended or for which a Presidential waiver has been granted. Federal tax form 1040 ez 2011 For any of these countries, you can claim a foreign tax credit for the taxes paid or accrued to that country on the income for the period that begins after the end of the sanction period or the date the Presidential waiver was granted. Federal tax form 1040 ez 2011 Example. Federal tax form 1040 ez 2011 The sanctions against Country X ended on July 31. Federal tax form 1040 ez 2011 On August 19, you receive a distribution from a mutual fund of Country X income. Federal tax form 1040 ez 2011 The fund paid Country X income tax for you on the distribution. Federal tax form 1040 ez 2011 Because the distribution was made after the sanction ended, you may include the foreign tax paid on the distribution to compute your foreign tax credit. Federal tax form 1040 ez 2011 Amounts for the nonsanctioned period. Federal tax form 1040 ez 2011   If a sanction period ends (or a Presidential waiver is granted) during your tax year and you are not able to determine the actual income and taxes for that period, you can allocate amounts to that period based on the number of days in the period that fall in your tax year. Federal tax form 1040 ez 2011 Multiply the income or taxes for the year by the following fraction to determine the amounts allocable to that period. Federal tax form 1040 ez 2011   Number of nonsanctioned days in year  Number of days in year Example. Federal tax form 1040 ez 2011 You are a calendar year filer and received $20,000 of income from Country X in 2013 on which you paid tax of $4,500. Federal tax form 1040 ez 2011 Sanctions against Country X ended on July 11, 2013. Federal tax form 1040 ez 2011 You are unable to determine how much of the income or tax is for the nonsanctioned period. Federal tax form 1040 ez 2011 Because your tax year starts on January 1, and the Country X sanction ended on July 11, 2013, 173 days of your tax year are in the nonsanctioned period. Federal tax form 1040 ez 2011 You would compute the income for the nonsanctioned period as follows. Federal tax form 1040 ez 2011 173 365 × $20,000 = $9,479             You would figure the tax for the nonsanctioned period as follows. Federal tax form 1040 ez 2011 173 365 × $4,500 = $2,133 To figure your foreign tax credit, you would use $9,479 as the income from Country X and $2,133 as the tax. Federal tax form 1040 ez 2011 Further information. Federal tax form 1040 ez 2011   The rules for figuring the foreign tax credit after a country's sanction period ends are more fully explained in Revenue Ruling 92-62, Cumulative Bulletin 1992-2, page 193. Federal tax form 1040 ez 2011 This Cumulative Bulletin can be found in many libraries and IRS offices. Federal tax form 1040 ez 2011 Table 1. Federal tax form 1040 ez 2011 Countries Removed From the Sanction List or Granted Presidential Waiver   Sanction Period Country Starting Date Ending Date Iraq February 1, 1991 June 27, 2004 Libya January 1, 1987 December 9, 2004* *Presidential waiver granted for qualified income taxes arising after December 9, 2004. Federal tax form 1040 ez 2011 Taxes Imposed on Certain Dividends You cannot claim a foreign tax credit for withholding tax (defined later ) on dividends paid or accrued if either of the following applies to the dividends. Federal tax form 1040 ez 2011 The dividends are on stock you held for less than 16 days during the 31-day period that begins 15 days before the ex-dividend date (defined later). Federal tax form 1040 ez 2011 The dividends are for a period or periods totaling more than 366 days on preferred stock you held for less than 46 days during the 91-day period that begins 45 days before the ex-dividend date. Federal tax form 1040 ez 2011 If the dividend is not for more than 366 days, rule (1) applies to the preferred stock. Federal tax form 1040 ez 2011 When figuring how long you held the stock, count the day you sold it, but do not count the day you acquired it or any days on which you were protected from risk of loss. Federal tax form 1040 ez 2011 Regardless of how long you held the stock, you cannot claim the credit to the extent you have an obligation under a short sale or otherwise to make payments related to the dividend for positions in substantially similar or related property. Federal tax form 1040 ez 2011 Withholding tax. Federal tax form 1040 ez 2011   For this purpose, withholding tax includes any tax determined on a gross basis. Federal tax form 1040 ez 2011 It does not include any tax which is in the nature of a prepayment of a tax imposed on a net basis. Federal tax form 1040 ez 2011 Ex-dividend date. Federal tax form 1040 ez 2011   The ex-dividend date is the first date following the declaration of a dividend on which the purchaser of a stock is not entitled to receive the next dividend payment. Federal tax form 1040 ez 2011 Example 1. Federal tax form 1040 ez 2011 You bought common stock from a foreign corporation on November 3. Federal tax form 1040 ez 2011 You sold the stock on November 19. Federal tax form 1040 ez 2011 You received a dividend on this stock because you owned it on the ex-dividend date of November 5. Federal tax form 1040 ez 2011 To claim the credit, you must have held the stock for at least 16 days within the 31-day period that began on October 21 (15 days before the ex-dividend date). Federal tax form 1040 ez 2011 Because you held the stock for 16 days, from November 4 until November 19, you are entitled to the credit. Federal tax form 1040 ez 2011 Example 2. Federal tax form 1040 ez 2011 The facts are the same as in Example 1 except that you sold the stock on November 14. Federal tax form 1040 ez 2011 You held the stock for only 11 days. Federal tax form 1040 ez 2011 You are not entitled to the credit. Federal tax form 1040 ez 2011 Exception. Federal tax form 1040 ez 2011   If you are a securities dealer who actively conducts business in a foreign country, you may be able to claim a foreign tax credit for qualified taxes paid on dividends regardless of how long you held the stock or whether you were obligated to make payments for positions in substantially similar or related property. Federal tax form 1040 ez 2011 See section 901(k)(4) of the Internal Revenue Code for more information. Federal tax form 1040 ez 2011 Taxes Withheld on Income or Gain (Other Than Dividends) For income or gain (other than dividends) paid or accrued on property, you cannot claim a foreign tax credit for withholding tax (defined later): If you have not held the property for at least 16 days during the 31-day period that begins 15 days before the date on which the right to receive the payment arises, or To the extent you have to make related payments on positions in substantially similar or related property. Federal tax form 1040 ez 2011 When figuring how long you held the property, count the day you sold it, but do not count the day you acquired it or any days on which you were protected from risk of loss. Federal tax form 1040 ez 2011 Withholding tax. Federal tax form 1040 ez 2011   For this purpose, withholding tax includes any tax determined on a gross basis. Federal tax form 1040 ez 2011 It does not include any tax which is in the nature of a prepayment of a tax imposed on a net basis. Federal tax form 1040 ez 2011 Exception for dealers. Federal tax form 1040 ez 2011   If you are a dealer in property who actively conducts business in a foreign country, you may be able to claim a foreign tax credit for qualified taxes withheld on income or gain from that property regardless of how long you held it or whether you have to make related payments on positions in substantially similar or related property. Federal tax form 1040 ez 2011 See section 901(I)(2) of the Internal Revenue Code for more information. Federal tax form 1040 ez 2011 Covered Asset Acquisition ???You cannot take a credit for the disqualified portion of any foreign tax paid or accrued in connection with a covered asset acquisition. Federal tax form 1040 ez 2011 A covered asset acquisition includes certain acquisitions that result in a stepped-up basis for U. Federal tax form 1040 ez 2011 S. Federal tax form 1040 ez 2011 tax purposes but not for foreign tax purposes. Federal tax form 1040 ez 2011 For more information, see Internal Revenue Code section 901(m). Federal tax form 1040 ez 2011 The IRS intends to issue guidance that will explain this provision in greater detail. Federal tax form 1040 ez 2011 Taxes in Connection With the Purchase or Sale of Oil or Gas You cannot claim a foreign tax credit for taxes paid or accrued to a foreign country in connection with the purchase or sale of oil or gas extracted in that country if you do not have an economic interest in the oil or gas, and the purchase price or sales price is different from the fair market value of the oil or gas at the time of purchase or sale. Federal tax form 1040 ez 2011 Taxes on Foreign Mineral Income You must reduce any taxes paid or accrued to a foreign country or possession on mineral income from that country or possession if you were allowed a deduction for percentage depletion for any part of the mineral income. Federal tax form 1040 ez 2011 For details, see Regulations section 1. Federal tax form 1040 ez 2011 901-3. Federal tax form 1040 ez 2011 Taxes From International Boycott Operations If you participate in or cooperate with an international boycott during the tax year, your foreign taxes resulting from boycott activities will reduce the total taxes available for credit. Federal tax form 1040 ez 2011 See the instructions for line 12 in the Form 1116 instructions to figure this reduction. Federal tax form 1040 ez 2011 In most cases, this rule does not apply to employees with wages who are working and living in boycotting countries, or to retirees with pensions who are living in these countries. Federal tax form 1040 ez 2011 List of boycotting countries. Federal tax form 1040 ez 2011   A list of the countries which may require participation in or cooperation with an international boycott is published by the Department of the Treasury. Federal tax form 1040 ez 2011 As of November 2013, the following countries are listed. Federal tax form 1040 ez 2011 Iraq. Federal tax form 1040 ez 2011 Kuwait. Federal tax form 1040 ez 2011 Lebanon. Federal tax form 1040 ez 2011 Libya. Federal tax form 1040 ez 2011 Qatar. Federal tax form 1040 ez 2011 Saudi Arabia. Federal tax form 1040 ez 2011 Syria. Federal tax form 1040 ez 2011 United Arab Emirates. Federal tax form 1040 ez 2011 Yemen. Federal tax form 1040 ez 2011    For information concerning changes to the list, write to: Internal Revenue Service International Section Philadelphia, PA 19255-0725 Determinations of whether the boycott rule applies. Federal tax form 1040 ez 2011   You may request a determination from the Internal Revenue Service as to whether a particular operation constitutes participation in or cooperation with an international boycott. Federal tax form 1040 ez 2011 The procedures for obtaining a determination from the Service are outlined in Revenue Procedure 77-9 in Cumulative Bulletin 1977-1. Federal tax form 1040 ez 2011 Cumulative Bulletins are available in most IRS offices and you are welcome to read them there. Federal tax form 1040 ez 2011 Public inspection. Federal tax form 1040 ez 2011   A determination and any related background file is open to public inspection. Federal tax form 1040 ez 2011 However, your identity and certain other information will remain confidential. Federal tax form 1040 ez 2011 Reporting requirements. Federal tax form 1040 ez 2011   You must file a report with the IRS if you or any of the following persons have operations in or related to a boycotting country or with the government, a company, or a national of a boycotting country. Federal tax form 1040 ez 2011 A foreign corporation in which you own 10% or more of the voting power of all voting stock but only if you own the stock of the foreign corporation directly or through foreign entities. Federal tax form 1040 ez 2011 A partnership in which you are a partner. Federal tax form 1040 ez 2011 A trust you are treated as owning. Federal tax form 1040 ez 2011 Form 5713 required. Federal tax form 1040 ez 2011   If you have to file a report, you must use Form 5713, International Boycott Report, and attach all supporting schedules. Federal tax form 1040 ez 2011 See the Instructions for Form 5713 for information on when and where to file the form. Federal tax form 1040 ez 2011 Penalty for failure to file. Federal tax form 1040 ez 2011   If you willfully fail to make a report, in addition to other penalties, you may be fined $25,000 or imprisoned for no more than one year, or both. Federal tax form 1040 ez 2011 Taxes on Combined Foreign Oil and Gas Income You must reduce your foreign taxes by a portion of any foreign taxes imposed on combined foreign oil and gas income. Federal tax form 1040 ez 2011 The amount of the reduction is the amount by which your foreign oil and gas taxes exceed the amount of your combined foreign oil and gas income multiplied by a fraction equal to your pre-credit U. Federal tax form 1040 ez 2011 S. Federal tax form 1040 ez 2011 tax liability (Form 1040, line 44) divided by your worldwide taxable income. Federal tax form 1040 ez 2011 You may be entitled to carry over to other years taxes reduced under this rule. Federal tax form 1040 ez 2011 See Internal Revenue Code section 907(f). Federal tax form 1040 ez 2011 Combined foreign oil and gas income means the sum of foreign oil related income and foreign oil and gas extraction income. Federal tax form 1040 ez 2011 Foreign oil and gas taxes are the sum of foreign oil and gas extraction taxes and foreign oil related taxes. Federal tax form 1040 ez 2011 Taxes of U. Federal tax form 1040 ez 2011 S. Federal tax form 1040 ez 2011 Persons Controlling Foreign Corporations and Partnerships If you had control of a foreign corporation or a foreign partnership for the annual accounting period of that corporation or partnership that ended with or within your tax year, you may have to file an annual information return. Federal tax form 1040 ez 2011 If you do not file the required information return, you may have to reduce the foreign taxes that may be used for the foreign tax credit. Federal tax form 1040 ez 2011 See Penalty for not filing Form 5471 or Form 8865 , later. Federal tax form 1040 ez 2011 U. Federal tax form 1040 ez 2011 S. Federal tax form 1040 ez 2011 persons controlling foreign corporations. Federal tax form 1040 ez 2011   If you are a U. Federal tax form 1040 ez 2011 S. Federal tax form 1040 ez 2011 citizen or resident who had control of a foreign corporation for an uninterrupted period of at least 30 days during the annual accounting period of that corporation, you may have to file an annual information return on Form 5471, Information Return of U. Federal tax form 1040 ez 2011 S. Federal tax form 1040 ez 2011 Persons With Respect To Certain Foreign Corporations. Federal tax form 1040 ez 2011 Under this rule, you generally had control of a foreign corporation if at any time during your tax year you owned: Stock possessing more than 50% of the total combined voting power of all classes of stock entitled to vote, or More than 50% of the total value of shares of all classes of stock of the foreign corporation. Federal tax form 1040 ez 2011 U. Federal tax form 1040 ez 2011 S. Federal tax form 1040 ez 2011 persons controlling foreign partnerships. Federal tax form 1040 ez 2011   If you are a U. Federal tax form 1040 ez 2011 S. Federal tax form 1040 ez 2011 citizen or resident who had control of a foreign partnership at any time during the partnership's tax year, you may have to file
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Individual Shared Responsibility Provision - Exemptions

 

The individual shared responsibility provision requires you and each member of your family to have basic health insurance coverage (also known as minimum essential coverage), qualify for an exemption, or make an individual shared responsibility payment when you file your federal income tax return.

How you get the exemption depends upon the type of exemption for which you are eligible. You can obtain some exemptions only from the Marketplace in the area where you live, others only from the IRS, and yet others from either the Marketplace or the IRS.

This chart shows the types of exemptions available and whether they must be granted by the Marketplace, claimed on an income tax return filed with the IRS, or either may be granted by the Marketplace or claimed on a tax return. For additional information about how to get exemptions that may be granted by the Marketplace, visit HealthCare.gov/exemptions.

Information will be made available later about how to report health insurance coverage and claim exemptions on your income tax return.

Exemptions May only be granted by Marketplace May be granted by Marketplace or claimed on tax return May only be claimed on tax return
Coverage is considered unaffordable - The amount you would have paid for employer-sponsored coverage or a bronze level health plan (depending on your circumstances) is more than eight percent of your actual household income for the year as computed on your tax return. Also see the second hardship listed below, which provides a prospective exemption granted by the Marketplace if the amount you would have paid for coverage is more than eight percent of your projected household income for the year.    
Short coverage gap - You went without coverage for less than three consecutive months during the year. For more information, see question 22 of our questions and answers.    
Household income below the return filing threshold - Your household income is below the minimum threshold for filing a tax return. Learn more about household income    
Certain noncitizens - You are neither a U.S. citizen, a U.S. national, nor an alien lawfully present in the U.S.    
Members of a health care sharing ministry - You are a member of a health care sharing ministry, which is an organization described in section 501(c)(3) whose members share a common set of ethical or religious beliefs and have shared medical expenses in accordance with those beliefs continuously since at least December 31, 1999.  

 

 

 

 

 

Members of Federally-recognized Indian Tribes - You are a member of a federally-recognized Indian tribe.    
Incarceration - You are in a jail, prison, or similar penal institution or correctional facility after the disposition of charges.    
Members of certain religious sects - You are a member of a religious sect in existence since December 31, 1950, that is recognized by the Social Security Administration (SSA) as conscientiously opposed to accepting any insurance benefits, including Medicare and Social Security.    
Hardships:      
  • Your gross income is below the filing threshold. To find out if you are required to file, use our Interactive Tax Assistant.
   
  • Two or more family members' aggregate cost of self-only employer-sponsored coverage exceeds 8 percent of household income, as does the cost of any available employer-sponsored coverage for the entire family.
   
  • You purchased insurance through the Marketplace during the initial enrollment period but have a coverage gap at the beginning of 2014. See this HHS Question and Answer.
   
  • You are experiencing circumstances that prevent you from obtaining coverage under a qualified health plan. Learn more about the criteria for this exemption.
   
  • You do not have access to affordable coverage based on your projected household income.
   
  • You are ineligible for Medicaid solely because the State does not participate in the Medicaid expansion under the Affordable Care Act.
   
  • You are an American Indian, Alaska Native, or a spouse or descendant who is eligible for services through an Indian health care provider. Learn more.
   
  • You have been notified that your health insurance policy will not be renewed and you consider the other plans available unaffordable. See HHS guidance and HHS Questions and Answers for more information.
   

 

 

Page Last Reviewed or Updated: 24-Mar-2014

The Federal Tax Form 1040 Ez 2011

Federal tax form 1040 ez 2011 Publication 600 - Main Contents Table of Contents Actual Expenses Optional Sales Tax Tables Instructions for the State and Local General Sales Tax Deduction WorksheetWhat if you lived in more than one state? What if you lived in more than one locality? What if your local general sales tax rate changed during 2006? What if you lived in more than one locality in the same state during 2006? Actual Expenses Generally, you can deduct the actual state and local general sales taxes (including compensating use taxes) you paid in 2006 if the tax rate was the same as the general sales tax rate. Federal tax form 1040 ez 2011 However, sales taxes on food, clothing, medical supplies, and motor vehicles are deductible as a general sales tax even if the tax rate was less than the general sales tax rate. Federal tax form 1040 ez 2011 If you paid sales tax on a motor vehicle at a rate higher than the general sales tax rate, you can deduct only the amount of tax that you would have paid at the general sales tax rate on that vehicle. Federal tax form 1040 ez 2011 Motor vehicles include cars, motorcycles, motor homes, recreational vehicles, sport utility vehicles, trucks, vans, and off-road vehicles. Federal tax form 1040 ez 2011 Also include any state and local general sales taxes paid for a leased motor vehicle. Federal tax form 1040 ez 2011 Do not include sales taxes paid on items used in your trade or business. Federal tax form 1040 ez 2011 To deduct your actual expenses, enter the amount on Schedule A, line 5, and enter “ST” on the dotted line to the left of the line 5 entry space. Federal tax form 1040 ez 2011 You must keep your actual receipts showing general sales taxes paid to use this method. Federal tax form 1040 ez 2011 Refund of general sales taxes. Federal tax form 1040 ez 2011   If you received a refund of state or local general sales taxes in 2006 for amounts paid in 2006, reduce your actual 2006 state and local general sales taxes by this amount. Federal tax form 1040 ez 2011 If you received a refund of state or local general sales taxes in 2006 for prior year purchases, do not reduce your 2006 state and local general sales taxes by this amount. Federal tax form 1040 ez 2011 But if you deducted your actual state and local general sales taxes in the earlier year and the deduction reduced your tax, you may have to include the refund in income on Form 1040, line 21. Federal tax form 1040 ez 2011 See Recoveries in Pub. Federal tax form 1040 ez 2011 525 for details. Federal tax form 1040 ez 2011 Optional Sales Tax Tables Instead of using your actual expenses, you can use the tables on pages 5 through 7 to figure your state and local general sales tax deduction. Federal tax form 1040 ez 2011 You may also be able to add the state and local general sales taxes paid on certain specified items. Federal tax form 1040 ez 2011 To figure your state and local general sales tax deduction using the tables, complete the worksheet below. Federal tax form 1040 ez 2011 If your filing status is married filing separately, both you and your spouse elect to deduct sales taxes, and your spouse elects to use the optional sales tax tables, you also must use the tables to figure your state and local general sales tax deduction. Federal tax form 1040 ez 2011 State and Local General Sales Tax Deduction Worksheet (See the instructions that begin on page 3. Federal tax form 1040 ez 2011 ) Before you begin: See the instructions for line 1 on page 3 if: You lived in more than one state during 2006, or You had any nontaxable income in 2006. Federal tax form 1040 ez 2011   1. Federal tax form 1040 ez 2011 Enter your state general sales taxes from the applicable table on page 5 or 6 (see page 3 of the instructions) 1. Federal tax form 1040 ez 2011 $     Next. Federal tax form 1040 ez 2011 If, for all of 2006, you lived only in Connecticut, the District of Columbia, Hawaii, Indiana, Kentucky, Maine, Maryland, Massachusetts, Michigan, Mississippi, New Jersey, Rhode Island, Virginia, or West Virginia, skip lines 2 through 5, enter -0- on line 6, and go to line 7. Federal tax form 1040 ez 2011 Otherwise, go to line 2       2. Federal tax form 1040 ez 2011 Did you live in Alaska, Arizona, Arkansas (Texarkana only), California (Los Angeles County only), Colorado, Georgia, Illinois, Louisiana, New York State, or North Carolina in 2006?         No. Federal tax form 1040 ez 2011 Enter -0-                   Yes. Federal tax form 1040 ez 2011 Enter your local general sales taxes from the applicable table on page 7 (see page 3 of the instructions)     2. Federal tax form 1040 ez 2011 $       3. Federal tax form 1040 ez 2011 Did your locality impose a local general sales tax in 2006? Residents of California, Nevada, and Texarkana, Arkansas, see page 3 of the instructions             No. Federal tax form 1040 ez 2011 Skip lines 3 through 5, enter -0- on line 6, and go to line 7             Yes. Federal tax form 1040 ez 2011 Enter your local general sales tax rate, but omit the percentage sign. Federal tax form 1040 ez 2011 For example, if your local general sales tax rate was 2. Federal tax form 1040 ez 2011 5%, enter 2. Federal tax form 1040 ez 2011 5. Federal tax form 1040 ez 2011 If your local general sales tax rate changed or you lived in more than one locality in the same state during 2006, see page 3 of the instructions. Federal tax form 1040 ez 2011 (If you do not know your local general sales tax rate, contact your local government. Federal tax form 1040 ez 2011 ) 3. Federal tax form 1040 ez 2011 . Federal tax form 1040 ez 2011       4. Federal tax form 1040 ez 2011 Did you enter -0- on line 2 above?             No. Federal tax form 1040 ez 2011 Skip lines 4 and 5 and go to line 6             Yes. Federal tax form 1040 ez 2011 Enter your state general sales tax rate (shown in the table heading for your state), but omit the percentage sign. Federal tax form 1040 ez 2011 For example, if your state general sales tax rate is 6%, enter 6. Federal tax form 1040 ez 2011 0 4. Federal tax form 1040 ez 2011 . Federal tax form 1040 ez 2011       5. Federal tax form 1040 ez 2011 Divide line 3 by line 4. Federal tax form 1040 ez 2011 Enter the result as a decimal (rounded to at least three places) 5. Federal tax form 1040 ez 2011 . Federal tax form 1040 ez 2011       6. Federal tax form 1040 ez 2011 Did you enter -0- on line 2 above?             No. Federal tax form 1040 ez 2011 Multiply line 2 by line 3   6. Federal tax form 1040 ez 2011 $     Yes. Federal tax form 1040 ez 2011 Multiply line 1 by line 5. Federal tax form 1040 ez 2011 If you lived in more than one locality in the same state during 2006, see page 4 of the instructions           7. Federal tax form 1040 ez 2011 Enter your state and local general sales taxes paid on specified items, if any (see page 4 of the instructions) 7. Federal tax form 1040 ez 2011 $   8. Federal tax form 1040 ez 2011 Deduction for general sales taxes. Federal tax form 1040 ez 2011 Add lines 1, 6, and 7. Federal tax form 1040 ez 2011 Enter the result here and the total from all your state and local general sales tax deduction worksheets, if you completed more than one, on Schedule A, line 5. Federal tax form 1040 ez 2011 Be sure to enter “ST” on the dotted line to the left of the entry space 8. Federal tax form 1040 ez 2011 $     Instructions for the State and Local General Sales Tax Deduction Worksheet Line 1. Federal tax form 1040 ez 2011    If you lived in the same state for all of 2006, enter the applicable amount, based on your 2006 income and exemptions, from the optional state sales tax table for your state on page 5 or 6. Federal tax form 1040 ez 2011 Read down the “At least-But less than” columns for your state and find the line that includes your 2006 income. Federal tax form 1040 ez 2011 If married filing separately, do not include your spouse's income. Federal tax form 1040 ez 2011 Your 2006 income is the amount shown on your Form 1040, line 38, plus any nontaxable items, such as the following. Federal tax form 1040 ez 2011 Tax-exempt interest. Federal tax form 1040 ez 2011 Veterans' benefits. Federal tax form 1040 ez 2011 Nontaxable combat pay. Federal tax form 1040 ez 2011 Workers' compensation. Federal tax form 1040 ez 2011 Nontaxable part of social security and railroad retirement benefits. Federal tax form 1040 ez 2011 Nontaxable part of IRA, pension, or annuity distributions. Federal tax form 1040 ez 2011 Do not include rollovers. Federal tax form 1040 ez 2011 Public assistance payments. Federal tax form 1040 ez 2011 The exemptions column refers to the number of exemptions claimed on Form 1040, line 6d. Federal tax form 1040 ez 2011 Do not include any additional exemptions you listed on Form 8914 for individuals displaced by Hurricane Katrina. Federal tax form 1040 ez 2011 What if you lived in more than one state?    If you lived in more than one state during 2006, look up the table amount for each state using the above rules. Federal tax form 1040 ez 2011 If there is no table for your state, the table amount is considered to be zero. Federal tax form 1040 ez 2011 Multiply the table amount for each state you lived in by a fraction. Federal tax form 1040 ez 2011 The numerator of the fraction is the number of days you lived in the state during 2006 and the denominator is the total number of days in the year (365). Federal tax form 1040 ez 2011 Enter the total of the prorated table amounts for each state on line 1. Federal tax form 1040 ez 2011 However, if you also lived in a locality during 2006 that imposed a local general sales tax, do not enter the total on line 1. Federal tax form 1040 ez 2011 Instead, complete a separate worksheet for each state you lived in and enter the prorated amount for that state on line 1. Federal tax form 1040 ez 2011 Example. Federal tax form 1040 ez 2011 You lived in State A from January 1 through August 31, 2006 (243 days), and in State B from September 1 through December 31, 2006 (122 days). Federal tax form 1040 ez 2011 The table amount for State A is $500. Federal tax form 1040 ez 2011 The table amount for State B is $400. Federal tax form 1040 ez 2011 You would figure your state general sales tax as follows. Federal tax form 1040 ez 2011 State A: $500 x 243/365 = $333   State B: $400 x 122/365 = 134   Total = $467   If none of the localities in which you lived during 2006 imposed a local general sales tax, enter $467 on line 1 of your worksheet. Federal tax form 1040 ez 2011 Otherwise, complete a separate worksheet for State A and State B. Federal tax form 1040 ez 2011 Enter $333 on line 1 of the State A worksheet and $134 on line 1 of the State B worksheet. Federal tax form 1040 ez 2011 Line 2. Federal tax form 1040 ez 2011   If you checked the “No” box, enter -0- on line 2, and go to line 3. Federal tax form 1040 ez 2011 If you checked the “Yes” box and lived in the same locality for all of 2006, enter the applicable amount, based on your 2006 income and exemptions, from the optional local sales tax table for your locality on page 7. Federal tax form 1040 ez 2011 Read down the “At least-But less than” columns for your locality and find the line that includes your 2006 income. Federal tax form 1040 ez 2011 See the line 1 instructions on this page to figure your 2006 income. Federal tax form 1040 ez 2011 The exemptions column refers to the number of exemptions claimed on Form 1040, line 6d. Federal tax form 1040 ez 2011 Do not include any additional exemptions you listed on Form 8914 for individuals displaced by Hurricane Katrina. Federal tax form 1040 ez 2011 What if you lived in more than one locality?   If you lived in more than one locality during 2006, look up the table amount for each locality using the above rules. Federal tax form 1040 ez 2011 If there is no table for your locality, the table amount is considered to be zero. Federal tax form 1040 ez 2011 Multiply the table amount for each locality you lived in by a fraction. Federal tax form 1040 ez 2011 The numerator of the fraction is the number of days you lived in the locality during 2006 and the denominator is the total number of days in the year (365). Federal tax form 1040 ez 2011 If you lived in more than one locality in the same state and the local general sales tax rate was the same for each locality, enter the total of the prorated table amounts for each locality in that state on line 2. Federal tax form 1040 ez 2011 Otherwise, complete a separate worksheet for lines 2 through 6 for each locality and enter each prorated table amount on line 2 of the applicable worksheet. Federal tax form 1040 ez 2011 Example. Federal tax form 1040 ez 2011 You lived in Locality 1 from January 1 through August 31, 2006 (243 days), and in Locality 2 from September 1 through December 31, 2006 (122 days). Federal tax form 1040 ez 2011 The table amount for Locality 1 is $100. Federal tax form 1040 ez 2011 The table amount for Locality 2 is $150. Federal tax form 1040 ez 2011 You would figure the amount to enter on line 2 as follows. Federal tax form 1040 ez 2011 Note that this amount may not equal your local sales tax deduction, which is figured on line 6 of the worksheet. Federal tax form 1040 ez 2011 Locality 1: $100 x 243/365 = $67   Locality 2: $150 x 122/365 = 50   Total = $117   Line 3. Federal tax form 1040 ez 2011   If you lived in California, check the “No” box if your combined state and local general sales tax rate is 7. Federal tax form 1040 ez 2011 25%. Federal tax form 1040 ez 2011 Otherwise, check the “Yes” box and include on line 3 only the part of the combined rate that is more than 7. Federal tax form 1040 ez 2011 25%. Federal tax form 1040 ez 2011   If you lived in Nevada, check the “No” box if your combined state and local general sales tax rate is 6. Federal tax form 1040 ez 2011 5%. Federal tax form 1040 ez 2011 Otherwise, check the “Yes” box and include on line 3 only the part of the combined rate that is more than 6. Federal tax form 1040 ez 2011 5%. Federal tax form 1040 ez 2011   If you lived in Texarkana, Arkansas, check the “Yes” box and enter “4. Federal tax form 1040 ez 2011 0” on line 3. Federal tax form 1040 ez 2011 Your local general sales tax rate of 4. Federal tax form 1040 ez 2011 0% includes the additional 1. Federal tax form 1040 ez 2011 0% Arkansas state sales tax rate for Texarkana and the 1. Federal tax form 1040 ez 2011 5% sales tax rate for Miller County. Federal tax form 1040 ez 2011 What if your local general sales tax rate changed during 2006?    If you checked the “Yes” box and your local general sales tax rate changed during 2006, figure the rate to enter on line 3 as follows. Federal tax form 1040 ez 2011 Multiply each tax rate for the period it was in effect by a fraction. Federal tax form 1040 ez 2011 The numerator of the fraction is the number of days the rate was in effect during 2006 and the denominator is the total number of days in the year (365). Federal tax form 1040 ez 2011 Enter the total of the prorated tax rates on line 3. Federal tax form 1040 ez 2011 Example. Federal tax form 1040 ez 2011 Locality 1 imposed a 1% local general sales tax from January 1 through September 30, 2006 (273 days). Federal tax form 1040 ez 2011 The rate increased to 1. Federal tax form 1040 ez 2011 75% for the period from October 1 through December 31, 2006 (92 days). Federal tax form 1040 ez 2011 You would enter “1. Federal tax form 1040 ez 2011 189” on line 3, figured as follows. Federal tax form 1040 ez 2011 January 1 - September 30: 1. Federal tax form 1040 ez 2011 00 x 273/365 = 0. Federal tax form 1040 ez 2011 748   October 1 - December 31: 1. Federal tax form 1040 ez 2011 75 x 92/365 = 0. Federal tax form 1040 ez 2011 441   Total = 1. Federal tax form 1040 ez 2011 189   What if you lived in more than one locality in the same state during 2006?    Complete a separate worksheet for lines 2 through 6 for each locality in your state if you lived in more than one locality in the same state during 2006 and either of the following applies. Federal tax form 1040 ez 2011 Each locality did not have the same local general sales tax rate. Federal tax form 1040 ez 2011 You lived in Texarkana, AR, or Los Angeles County, CA. Federal tax form 1040 ez 2011   To figure the amount to enter on line 3 of the worksheet for each locality in which you lived (except a locality for which you used the table on page 7 to figure your local general sales tax deduction), multiply the local general sales tax rate by a fraction. Federal tax form 1040 ez 2011 The numerator of the fraction is the number of days you lived in the locality during 2006 and the denominator is the total number of days in the year (365). Federal tax form 1040 ez 2011 Example. Federal tax form 1040 ez 2011 You lived in Locality 1 from January 1 through August 31, 2006 (243 days), and in Locality 2 from September 1 through December 31, 2006 (122 days). Federal tax form 1040 ez 2011 The local general sales tax rate for Locality 1 is 1%. Federal tax form 1040 ez 2011 The rate for Locality 2 is 1. Federal tax form 1040 ez 2011 75%. Federal tax form 1040 ez 2011 You would enter “0. Federal tax form 1040 ez 2011 666” on line 3 for the Locality 1 worksheet and “0. Federal tax form 1040 ez 2011 585” for the Locality 2 worksheet, figured as follows. Federal tax form 1040 ez 2011 Locality 1: 1. Federal tax form 1040 ez 2011 00 x 243/365 = 0. Federal tax form 1040 ez 2011 666   Locality 2: 1. Federal tax form 1040 ez 2011 75 x 122/365 = 0. Federal tax form 1040 ez 2011 585   Line 6. Federal tax form 1040 ez 2011   If you lived in more than one locality in the same state during 2006, you should have completed line 1 only on the first worksheet for that state and separate worksheets for lines 2 through 6 for any other locality within that state in which you lived during 2006. Federal tax form 1040 ez 2011 If you checked the “Yes” box on line 6 of any of those worksheets, multiply line 5 of that worksheet by the amount that you entered on line 1 for that state on the first worksheet. Federal tax form 1040 ez 2011 Line 7. Federal tax form 1040 ez 2011    Enter on line 7 any state and local general sales taxes paid on the following specified items. Federal tax form 1040 ez 2011 If you are completing more than one worksheet, include the total for line 7 on only one of the worksheets. Federal tax form 1040 ez 2011 A motor vehicle (including a car, motorcycle, motor home, recreational vehicle, sport utility vehicle, truck, van, and off-road vehicle). Federal tax form 1040 ez 2011 Also include any state and local general sales taxes paid for a leased motor vehicle. Federal tax form 1040 ez 2011 If the state sales tax rate on these items is higher than the general sales tax rate, only include the amount of tax you would have paid at the general sales tax rate. Federal tax form 1040 ez 2011 An aircraft or boat, if the tax rate was the same as the general sales tax rate. Federal tax form 1040 ez 2011 A home (including a mobile home or prefabricated home) or substantial addition to or major renovation of a home, but only if the tax rate was the same as the general sales tax rate and any of the following applies. Federal tax form 1040 ez 2011 Your state or locality imposes a general sales tax directly on the sale of a home or on the cost of a substantial addition or major renovation. Federal tax form 1040 ez 2011 You purchased the materials to build a home or substantial addition or to perform a major renovation and paid the sales tax directly. Federal tax form 1040 ez 2011 Under your state law, your contractor is considered your agent in the construction of the home or substantial addition or the performance of a major renovation. Federal tax form 1040 ez 2011 The contract must state that the contractor is authorized to act in your name and must follow your directions on construction decisions. Federal tax form 1040 ez 2011 In this case, you will be considered to have purchased any items subject to a sales tax and to have paid the sales tax directly. Federal tax form 1040 ez 2011   Do not include sales taxes paid on items used in your trade or business. Federal tax form 1040 ez 2011 If you received a refund of state or local general sales taxes in 2006, see Refund of general sales taxes on page 1. 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