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File Your Taxes Free Online

File your taxes free online 3. File your taxes free online   Gifts Table of Contents If you give gifts in the course of your trade or business, you can deduct all or part of the cost. File your taxes free online This chapter explains the limits and rules for deducting the costs of gifts. File your taxes free online $25 limit. File your taxes free online   You can deduct no more than $25 for business gifts you give directly or indirectly to each person during your tax year. File your taxes free online A gift to a company that is intended for the eventual personal use or benefit of a particular person or a limited class of people will be considered an indirect gift to that particular person or to the individuals within that class of people who receive the gift. File your taxes free online   If you give a gift to a member of a customer's family, the gift is generally considered to be an indirect gift to the customer. File your taxes free online This rule does not apply if you have a bona fide, independent business connection with that family member and the gift is not intended for the customer's eventual use. File your taxes free online   If you and your spouse both give gifts, both of you are treated as one taxpayer. File your taxes free online It does not matter whether you have separate businesses, are separately employed, or whether each of you has an independent connection with the recipient. File your taxes free online If a partnership gives gifts, the partnership and the partners are treated as one taxpayer. File your taxes free online Example. File your taxes free online Bob Jones sells products to Local Company. File your taxes free online He and his wife, Jan, gave Local Company three gourmet gift baskets to thank them for their business. File your taxes free online They paid $80 for each gift basket, or $240 total. File your taxes free online Three of Local Company's executives took the gift baskets home for their families' use. File your taxes free online Bob and Jan have no independent business relationship with any of the executives' other family members. File your taxes free online They can deduct a total of $75 ($25 limit × 3) for the gift baskets. File your taxes free online Incidental costs. File your taxes free online   Incidental costs, such as engraving on jewelry, or packaging, insuring, and mailing, are generally not included in determining the cost of a gift for purposes of the $25 limit. File your taxes free online   A cost is incidental only if it does not add substantial value to the gift. File your taxes free online For example, the cost of gift wrapping is an incidental cost. File your taxes free online However, the purchase of an ornamental basket for packaging fruit is not an incidental cost if the value of the basket is substantial compared to the value of the fruit. File your taxes free online Exceptions. File your taxes free online   The following items are not considered gifts for purposes of the $25 limit. File your taxes free online An item that costs $4 or less and: Has your name clearly and permanently imprinted on the gift, and Is one of a number of identical items you widely distribute. File your taxes free online Examples include pens, desk sets, and plastic bags and cases. File your taxes free online Signs, display racks, or other promotional material to be used on the business premises of the recipient. File your taxes free online    Figure B. File your taxes free online When Are Transportation Expenses Deductible? Most employees and self-employed persons can use this chart. File your taxes free online (Do not use this chart if your home is your principal place of business. File your taxes free online See Office in the home . File your taxes free online ) Please click here for the text description of the image. File your taxes free online Figure B. File your taxes free online When Are Local Transportation Expenses Deductible?TAs for Figure B are: Reg 1. File your taxes free online 162-1(a); RR 55–109; RR 94–47 Gift or entertainment. File your taxes free online   Any item that might be considered either a gift or entertainment generally will be considered entertainment. File your taxes free online However, if you give a customer packaged food or beverages you intend the customer to use at a later date, treat it as a gift. File your taxes free online    If you give a customer tickets to a theater performance or sporting event and you do not go with the customer to the performance or event, you have a choice. File your taxes free online You can treat the cost of the tickets as either a gift expense or an entertainment expense, whichever is to your advantage. File your taxes free online   You can change your treatment of the tickets at a later date by filing an amended return. File your taxes free online Generally, an amended return must be filed within 3 years from the date the original return was filed or within 2 years from the time the tax was paid, whichever is later. File your taxes free online    If you go with the customer to the event, you must treat the cost of the tickets as an entertainment expense. File your taxes free online You cannot choose, in this case, to treat the cost of the tickets as a gift expense. File your taxes free online Prev  Up  Next   Home   More Online Publications
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Time May be Running Out -- March 31 is an Important Deadline

IRS Health Care Tax Tip 2014-11, March 25, 2014                                                Español

Time May be Running Out – March 31 is an Important Deadline

Health Care Law Considerations for 2014

For most people, the Affordable Care Act has no effect on the 2013 income tax return they are filing in 2014. However, some people may need to make important decisions by the March 31, 2014 deadline for open enrollment. 

Below are five things about the health care law you may need to consider soon.

  • Currently Insured – No Change: If you already insured, you do not need to do anything more than continue your insurance.
  • Uninsured – Enroll by March 31: The open enrollment period to purchase health care coverage through the Health Insurance Marketplace for 2014 runs through March 31, 2014. When you get health insurance through the marketplace, you may be able to get advance payments of the premium tax credit that will immediately help lower your monthly premium. Learn more at HealthCare.gov.
  • Premium Tax Credit To Lower Your Monthly Premium: If you get insurance through the Marketplace, you may be eligible to claim the premium tax credit. You can elect to have advance payments of the tax credit sent directly to your insurer during 2014 so that the monthly premium you pay is lower, or wait to claim the credit when you file your tax return in 2015. If you choose to have advance payments sent to your insurer, you will have to reconcile the payments on your 2014 tax return, which will be filed in 2015. If you’re already receiving advance payments of the credit, you need to do nothing at this time unless you have a change in circumstance like a change in income or family size. Learn More.
  • Change in Circumstances: If you're receiving advance payments of the premium tax credit to help pay for your insurance coverage, you should report life changes, such as income, marital status or family size changes, to the Marketplace. Reporting changes will help to make sure you have the right coverage and are getting the proper amount of advance payments of the premium tax credit.
  • Individual Shared Responsibility Payment: Starting January 2014, you and your family have been required to have health care coverage or have an exemption from coverage.  Most people already have qualifying health care coverage.  These individuals will not need to do anything more than maintain that coverage throughout 2014. If you can afford coverage but decide not to buy it and remain uninsured, you may have to make an individual shared responsibility payment when you file your 2014 tax return in 2015. Learn More.

 

More Information

Find out more tax-related provisions of the health care law at IRS.gov/aca

Find out more about the Health Insurance Marketplace at HealthCare.gov.

To receive copies of IRS tax tips via email, subscribe at www.irs.gov/uac/Subscribe-to-IRS-Tax-Tips.

Page Last Reviewed or Updated: 26-Mar-2014

 

The File Your Taxes Free Online

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