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H&r block Publication 510 - Introductory Material Table of Contents What's New Reminders Introduction Useful Items - You may want to see: Excise Taxes Not Covered What's New Medical device excise tax. H&r block  The Affordable Care Act (the “Act”) (Public Law 111-148, amended by Public Law 111-152) imposes a 2. H&r block 3% (. H&r block 023) excise tax on the sale of certain medical devices by the manufacturer, producer, or importer of the device. H&r block The tax applies to sales of taxable medical devices after December 31, 2012. H&r block See Taxable Medical Devices in chapter 5, later. H&r block Tax on seasonal flu vaccines. H&r block  Sales of all vaccines against seasonal influenza are now subject to the section 4131 excise tax at the existing rate of $. H&r block 75 per dose of taxable vaccine. H&r block Previously, only trivalent influenza vaccines were subject to this tax. H&r block See Vaccines in chapter 5, later. H&r block Patient-centered outcomes research fee. H&r block  The Act imposes a fee on issuers of specified health insurance policies (section 4375) and plan sponsors of applicable self-insured health plans (section 4576) to help fund the Patient-Centered Outcomes Research Institute. H&r block The fee, required to be reported annually on the 2nd quarter Form 720 and paid by its due date, July 31st, is based on the average number of lives covered under the policy or plan. H&r block The fee applies to policy or plan years ending on or after October 1, 2012. H&r block See chapter 11, later. H&r block Extension of fuel tax credits. H&r block  The following section 6426 credits, previously expired on December 31, 2011, are retroactively extended. H&r block Biodiesel or renewable diesel mixture credit. H&r block Alternative fuel credit. H&r block Alternative fuel mixture credit. H&r block See Notice 2013–26 (fuel tax credits) on page 984 of I. H&r block R. H&r block B. H&r block 2013–18 at www. H&r block irs. H&r block gov/pub/irs-irbs/irb13-18. H&r block pdf; also see chapter 2, later. H&r block Alternative fuel mixture credit can be claimed on Schedule C (Form 720) only. H&r block  For alternative fuel mixtures produced after December 31, 2011, the section 6426 alternative fuel mixture credit can be claimed on Schedule C (Form 720) only, not on Form 4136, Credit for Federal Tax Paid on Fuels, or Schedule 3 (Form 8849), Claim for Refund of Excise Taxes, and only to the extent of your section 4081 taxable fuel liability for gasoline, diesel, and kerosene. H&r block See Biodiesel or Renewable Diesel Mixture Credit, Alternative Fuel Credit, and Alternative Fuel Mixture Credit in chapter 2, later. H&r block Expiration of alcohol fuel mixture credit. H&r block  The section 6426 alcohol fuel mixture credit expired after December 31, 2011. H&r block Expiration of alcohol fuels credits. H&r block  The section 40 alcohol, alcohol mixture, and small ethanol producer credits expired after December 31, 2011. H&r block Second generation biofuel producer credit and excise tax. H&r block  The section 40 cellulosic biofuel producer credit was retroactively extended to include fuel sold or used through January 2, 2013. H&r block After January 2, 2013, cellulosic biofuel is renamed second generation biofuel, which adds algae-based fuel. H&r block The second generation biofuel producer credit is for fuel sold or used after January 2, 2013, and before January 1, 2014. H&r block You are liable for an excise tax on each gallon of cellulosic or second generation biofuel at the rate you used to figure the credit if you do not use the fuel for the purposes described under Qualified Cellulosic Biofuel Production or Qualified Second Generation Biofuel Production, later. H&r block Report the tax on Form 720. H&r block See Cellulosic or Second Generation Biofuel Not Used as Fuel, later; also see Form 6478, Biofuel Producer Credit, for more information. H&r block Extension of section 40A biodiesel fuels credit. H&r block  The biodiesel fuels credit, previously expired on December 31, 2011, is retroactively extended. H&r block Future developments. H&r block  The IRS has created a page on IRS. H&r block gov that includes information about Publication 510 at www. H&r block irs. H&r block gov/pub510. H&r block Information about any future developments will be posted on that page. H&r block Reminders Publication 510 updates. H&r block  Publication 510 is not updated annually. H&r block Instead, it will be updated only when there are major changes in the tax law. H&r block Use of international air travel facilities. H&r block  Generally, the tax on the use of international air travel facilities increases annually. H&r block See the Instructions for Form 720 for the tax rate. H&r block For more information, see Air Transportation Taxes in chapter 4. H&r block Aviation fuels for use in foreign trade. H&r block  Aviation gasoline and kerosene for use in aviation are exempt from the leaking underground storage tank (LUST) tax. H&r block Arrow shafts, tax rate. H&r block  Generally, the tax on arrow shafts increases annually. H&r block See Form 720 for the tax rate. H&r block Disregarded entities and qualified subchapter S subsidiaries. H&r block  Qualified subchapter S subsidiaries (QSubs) and eligible single-owner disregarded entities are treated as separate entities for excise tax and reporting purposes. H&r block QSubs and eligible single-owner disregarded entities must pay and report excise taxes (other than IRS Nos. H&r block 31, 51, and 117), register for most excise tax activities, and claim any refunds, credits, and payments under the entity's employer identification number (EIN). H&r block These actions cannot take place under the owner's taxpayer identification number (TIN). H&r block Some QSubs and disregarded entities may already have an EIN. H&r block However, if you are unsure, please call the IRS Business and Specialty Tax line at 1-800-829-4933. H&r block Generally, QSubs and eligible single-owner disregarded entities will continue to be treated as disregarded entities for other federal tax purposes (other than employment taxes). H&r block For more information on these regulations, see Treasury Decision (T. H&r block D. H&r block ) 9356, T. H&r block D. H&r block 9462, and T. H&r block D. H&r block 9596. H&r block You can find T. H&r block D. H&r block 9356 on page 675 of Internal Revenue Bulletin (I. H&r block R. H&r block B. H&r block ) 2007-39 at  www. H&r block irs. H&r block gov/pub/irs-irbs/irb07-39. H&r block pdf;  T. H&r block D. H&r block 9462 on page 504 of I. H&r block R. H&r block B. H&r block 2009-42 at  www. H&r block irs. H&r block gov/pub/irs-irbs/irb09-42. H&r block pdf;  and T. H&r block D. H&r block 9596 on page 84 of I. H&r block R. H&r block B. H&r block 2012-30 at  www. H&r block irs. H&r block gov/pub/irs-irbs/irb12-30. H&r block pdf. H&r block Registration for certain activities. H&r block  You are required to be registered for certain excise tax activities, such as blending of gasoline, diesel fuel, or kerosene outside the bulk transfer/terminal system. H&r block See the instructions for Form 637 for the list of activities for which you must register. H&r block Also see Registration Requirements under Fuel Taxes in chapter 1 for information on registration for activities related to fuel. H&r block Each business unit that has, or is required to have, a separate employer identification number must be registered. H&r block To apply for registration, complete Form 637 and provide the information requested in its instructions. H&r block If your application is approved, you will receive a Letter of Registration showing the activities for which you are registered, the effective date of the registration, and your registration number. H&r block A copy of Form 637 is not a Letter of Registration. H&r block Photographs of missing children. H&r block  The Internal Revenue Service is a proud partner with the National Center for Missing and Exploited Children. H&r block Photographs of missing children selected by the Center may appear in this publication on pages that would otherwise be blank. H&r block You can help bring these children home by looking at the photographs and calling 1-800-THE-LOST (1-800-843-5678) if you recognize a child. H&r block Introduction This publication covers the excise taxes for which you may be liable and which are reported on Form 720 and other forms. H&r block It also covers fuel tax credits and refunds. H&r block For information on fuel credits against income tax (the section 40 credits for the production of cellulosic biofuel and second generation biofuel, and the section 40A credit for biodiesel and renewable diesel used as fuel) see the instructions for Form 6478 and Form 8864, Biodiesel and Renewable Diesel Fuels Credit. H&r block Comments and suggestions. H&r block   We welcome your comments about this publication and your suggestions for future editions. H&r block   You can write to us at the following address: Internal Revenue Service Individual and Specialty Forms and Publications Branch SE:W:CAR:MP:T:I 1111 Constitution Ave. H&r block NW, IR-6526 Washington, DC 20224   We respond to many letters by telephone. H&r block Therefore, it would be helpful if you would include your daytime phone number, including the area code, in your correspondence. H&r block   You can email us at taxforms@irs. H&r block gov. H&r block Please put “Publications Comment” on the subject line. H&r block You can also send us comments from www. H&r block irs. H&r block gov/Forms-&-Pubs/More-Information/ and select “Comment on Tax Forms and Publications”. H&r block   Although we cannot respond individually to each comment received, we do appreciate your feedback and will consider your comments as we revise our tax products. H&r block Useful Items - You may want to see: Publication 509 Tax Calendars Form (and Instructions) 11-C Occupational Tax and Registration Return for Wagering 637 Application for Registration (For Certain Excise Tax Activities) 720 Quarterly Federal Excise Tax Return 720X Amended Quarterly Federal Excise Tax Return 730 Monthly Tax Return for Wagers 1363 Export Exemption Certificate 2290 Heavy Highway Vehicle Use Tax Return 2290(SP) Declaración del Impuesto sobre el Uso de Vehículos Pesados en las Carreteras 4136 Credit for Federal Tax Paid on Fuels 6197 Gas Guzzler Tax 6478 Biofuel Producer Credit 6627 Environmental Taxes 8849 Claim for Refund of Excise Taxes, and Schedules 1–3, 5, 6, and 8 8864 Biodiesel and Renewable Diesel Fuels Credit Information Returns    Form 720-TO, Terminal Operator Report Form 720-CS, Carrier Summary Report   See How To Get Tax Help in chapter 17 for information about ordering forms and publications. H&r block Guidance    You can find Notice 2005-4 (fuel tax guidance) on page 289 of I. H&r block R. H&r block B. H&r block 2005-2 at www. H&r block irs. H&r block gov/pub/irs-irbs/irb05-02. H&r block pdf. H&r block Notice 2005-62 (biodiesel and aviation-grade kerosene) on page 443 of I. H&r block R. H&r block B. H&r block 2005-35 at www. H&r block irs. H&r block gov/pub/irs-irbs/irb05-35. H&r block pdf. H&r block Notice 2005-80 (LUST, kerosene, claims by credit card issuers, and mechanical dye injection) on page 953 of I. H&r block R. H&r block B. H&r block 2005-46 at www. H&r block irs. H&r block gov/pub/irs-irbs/irb05-46. H&r block pdf. H&r block Notice 2006-92 (alternative fuels and alternative fuel mixtures) on page 774 of I. H&r block R. H&r block B. H&r block 2006-43 at www. H&r block irs. H&r block gov/pub/irs-irbs/irb06-43. H&r block pdf. H&r block Notice 2008-110 (biodiesel and cellulosic biofuel) on page 1298 of I. H&r block R. H&r block B. H&r block 2008-51 at www. H&r block irs. H&r block gov/pub/irs-irbs/irb08-51. H&r block pdf. H&r block Notice 2010-68 (Alaska dyed diesel exemption) on page 576 of I. H&r block R. H&r block B. H&r block 2010-44 at www. H&r block irs. H&r block gov/pub/irs-irbs/irb10-44. H&r block pdf. H&r block Notice 2012-27 (fractional aircraft ownership programs fuel surtax) on page 849 of I. H&r block R. H&r block B. H&r block 2012-17 at www. H&r block irs. H&r block gov/pub/irs-irbs/irb12-17. H&r block pdf. H&r block Notice 2013-26 (fuel tax credits) on page 984 of I. H&r block R. H&r block B. H&r block 2013-18 at www. H&r block irs. H&r block gov/pub/irs-irbs/irb13-18. H&r block pdf. H&r block T. H&r block D. H&r block 9604 and Notice 2012–77 (medical device tax) on pages 730 and 781, respectively, of I. H&r block R. H&r block B. H&r block 2012-52 at www. H&r block irs. H&r block gov/pub/irs-irbs/irb12-52. H&r block pdf. H&r block T. H&r block D. H&r block 9602 (patient-centered outcomes research fee) on page 746 of I. H&r block R. H&r block B. H&r block 2012-52 at www. H&r block irs. H&r block gov/pub/irs-irbs/irb12-52. H&r block pdf. H&r block Revenue Procedure 2012-41 (inflation adjustments) on page 539 of I. H&r block R. H&r block B. H&r block 2012-45 at www. H&r block irs. H&r block gov/pub/irs-irbs/irb12-45. H&r block pdf. H&r block T. H&r block D. H&r block 9621 (indoor tanning services tax) on page 49 of I. H&r block R. H&r block B. H&r block 2013-28 at www. H&r block irs. H&r block gov/pub/irs-irbs/irb13-28. H&r block pdf. H&r block Excise Taxes Not Covered In addition to the taxes discussed in this publication, you may have to report certain other excise taxes. H&r block For tax forms relating to alcohol, firearms, and tobacco, visit the Alcohol and Tobacco Tax and Trade Bureau website at www. H&r block ttb. H&r block gov. H&r block Heavy highway vehicle use tax. H&r block   You report the federal excise tax on the use of certain trucks, truck tractors, and buses used on public highways on Form 2290, Heavy Highway Vehicle Use Tax Return. H&r block The tax applies to highway motor vehicles with a taxable gross weight of 55,000 pounds or more. H&r block Vans, pickup trucks, panel trucks, and similar trucks generally are not subject to this tax. H&r block Note. H&r block A Spanish version (Formulario 2290(SP)) is also available. H&r block See How To Get Tax Help in chapter 17. H&r block Registration of vehicles. H&r block   Generally, you must prove that you paid your heavy highway vehicle use tax to register your taxable vehicle with your state motor vehicle department or to enter the United States in a Canadian or Mexican registered taxable vehicle. H&r block Generally, a copy of Schedule 1 (Form 2290) is stamped by the IRS and returned to you as proof of payment. H&r block    If you have questions on Form 2290, see its separate instructions, or you can call the Form 2290 call site at 1-866-699-4096 (toll free) from the United States, and 1-859-669-5733 (not toll free) from Canada and Mexico. H&r block The hours of service are 8:00 a. H&r block m. H&r block to 6:00 p. H&r block m. H&r block Eastern time. H&r block Wagering tax and occupational tax. H&r block   The information on wagering tax can be found in the instructions for Form 730, Tax on Wagering, and Form 11-C, Occupational Tax and Registration Return for Wagering. H&r block Prev  Up  Next   Home   More Online Publications
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LT 39 (Letter 3228) Frequently Asked Questions (FAQs)

What is the notice telling me?

This is a reminder notice required by law informing you that you owe overdue tax.

What do I have to do?

If you are already working with us to resolve the balance, no action is required. You should contact us if you have unanswered questions about the overdue taxes or wrote or called us over 30 days ago and have not received a response. If you are able to pay the amount owed, send us full payment as outlined in the letter. If you are unable to full pay or believe that the overdue tax is incorrect, call us to resolve the account.

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To avoid enforcement action, contact us within 10 days of the date on the letter.

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Enforced collection action may be taken to collect the amount you owe, including the filing of a Notice of Federal Tax Lien, or garnishment of your wages or other income sources, and/or bank accounts. A lien is a public notice to your creditors that the government has a right to your interests in your current assets and assets you acquire after we file the lien; it can affect your ability to obtain credit.

Who should I contact?

Contact us at the phone number shown on the letter.

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If you do not agree with this notice, call us immediately at the number printed at the top of the notice. We will do our best to help you. If you called us about this matter before, but we did not correct the problem, you may want to contact the Office of the Taxpayer Advocate.

If you have already paid or arranged for an installment agreement, you should still call us at the number printed at the top of the notice to make sure your account reflects this.

Page Last Reviewed or Updated: 03-Feb-2014

The H&r Block

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