Filing Your Taxes Online is Fast, Easy and Secure.
Start now and receive your tax refund in as little as 7 days.

1. Get Answers

Your online questions are customized to your unique tax situation.

2. Maximize your Refund

Find tax credits for everything from school tuition to buying a hybri

3. E-File for FREE

E-file free with direct deposit to get your refund in as few as 7 days.

Filing your taxes with paper mail can be difficult and it could take weeks for your refund to arrive. IRS e-file is easy, fast and secure. There is no paperwork going to the IRS so tax refunds can be processed in as little as 7 days with direct deposit. As you prepare your taxes online, you can see your tax refund in real time.

FREE audit support and representation from an enrolled agent – NEW and only from H&R Block

Income Tax 1040 Ez

2010 Tax File FreeIrs Gov Form 1040xForm To Amend TaxesIrs Amended Forms2011 Taxact Online Tax Prepartion Including Free EfilingFile 2007 Taxes For FreeWhere To File Amended 1040xFile My 2011 Tax Return2012 Tax Forms FederalFile My State Tax Return Free1040ez Fillable Form1040 NrezTurbotax 2010 SoftwareI Need Tax Instruction Booklet For 1040ezMyfreetaxes1040ez 2011 FormFree 1040x Tax FormsForm 1040-ez 20131040ez File OnlineTax Form EzState Tax Filing OnlineTurbotax For MilitaryState Tax Return Efile1040 Ez EfileFree Internet Tax FilingAmending Tax Returns OnlineHow To Amend Federal Tax Return1040ez Form Free FileHow To File Your Taxes Online For FreeWww Irs Gov Amended ReturnBack TaxesTax Act 2012 LoginAmmend TaxesSenior TaxesTurbo Tax 20121040ez File Online FreeE File Tax Extension FreeWww Irs Gov 2011freeefileMy 1040ezHow To File An Amended Tax Return Online

Income Tax 1040 Ez

Income tax 1040 ez Publication 554 - Introductory Material Table of Contents What's New Reminders IntroductionVolunteer Income Tax Assistance and Tax Counseling for the Elderly. Income tax 1040 ez Ordering forms and publications. Income tax 1040 ez Tax questions. Income tax 1040 ez What's New Alternative minimum tax exemption increased. Income tax 1040 ez  The AMT exemption amount has increased to $51,900 ($80,800 if married filing jointly or qualifying widow(er); $40,400 if married filing separately). Income tax 1040 ez Earned income credit. Income tax 1040 ez  The maximum amount of income you can earn and still get the credit has increased. Income tax 1040 ez You may be able to take the credit if you earn less than: $14,340 ($19,680 if married filing jointly), do not have a qualifying child, and are at least 25 years old and under 65, $37,870 ($43,210 if married filing jointly), and you have one qualifying child, $43,038 ($48,378 if married filing jointly), and you have two qualifying children, or $46,227 ($51,567 if married filing jointly), and you have three or more qualifying children. Income tax 1040 ez For more information, see Earned Income Credit , later. Income tax 1040 ez Exemption phaseout. Income tax 1040 ez  You lose at least part of the benefit of your exemptions if your adjusted gross income is above a certain amount. Income tax 1040 ez For 2013, the phaseout begins at $150,000 for married individuals filing separate returns; $250,000 for single individuals; $275,000 for heads of household; and $300,000 for married individuals filing joint returns or qualifying widow(er)s. Income tax 1040 ez For more information, see Phaseout of Exemptions in Publication 501. Income tax 1040 ez Limit on itemized deductions. Income tax 1040 ez   Beginning January 1, 2013, itemized deductions for taxpayers with adjusted gross incomes above $150,000 may be reduced. Income tax 1040 ez See Overall limitation , later. Income tax 1040 ez Medical and dental expenses. Income tax 1040 ez   Beginning January 1, 2013, taxpayers 65 and older can deduct only the part of their medical and dental expenses that exceed 7. Income tax 1040 ez 5% of their adjusted gross income (10% for taxpayers under 65). Income tax 1040 ez Same-sex marriages. Income tax 1040 ez  If you have a same-sex spouse whom you legally married in a state (or foreign country) that recognizes same-sex marriage, you and your spouse generally must use the married filing jointly or married filing separately filing status on your 2013 return, even if you and your spouse now live in a state (or foreign country) that does not recognize same-sex marriage. Income tax 1040 ez For more information, see Publication 501. Income tax 1040 ez Reminders Future developments. Income tax 1040 ez  For the latest information about developments related to Publication 554, such as legislation enacted after it was published, go to www. Income tax 1040 ez irs. Income tax 1040 ez gov/pub554. Income tax 1040 ez Tax return preparers. Income tax 1040 ez  Choose your preparer carefully. Income tax 1040 ez If you pay someone to prepare your return, the preparer is required, under the law, to sign the return and fill in the other blanks in the Paid Preparer's area of your return. Income tax 1040 ez Remember, however, that you are still responsible for the accuracy of every item entered on your return. Income tax 1040 ez If there is any underpayment, you are responsible for paying it, plus any interest and penalty that may be due. Income tax 1040 ez Sale of home by surviving spouse. Income tax 1040 ez  If you are an unmarried widow or widower, you may qualify to exclude up to $500,000 of any gain from the sale or exchange of your main home. Income tax 1040 ez For more information, see Sale of Home , later. Income tax 1040 ez Third party designee. Income tax 1040 ez  You can check the “Yes” box in the Third Party Designee area of your return to authorize the IRS to discuss your return with your preparer, a friend, family member, or any other person you choose. Income tax 1040 ez This allows the IRS to call the person you identified as your designee to answer any questions that may arise during the processing of your return. Income tax 1040 ez It also allows your designee to perform certain actions. Income tax 1040 ez See your income tax return instructions for details. Income tax 1040 ez Employment tax withholding. Income tax 1040 ez  Your wages are subject to withholding for income tax, social security tax, and Medicare tax even if you are receiving social security benefits. Income tax 1040 ez Photographs of missing children. Income tax 1040 ez  The Internal Revenue Service is a proud partner with the National Center for Missing and Exploited Children. Income tax 1040 ez Photographs of missing children selected by the Center may appear in this publication on pages that would otherwise be blank. Income tax 1040 ez 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. Income tax 1040 ez Introduction The purpose of this publication is to provide a general overview of selected topics that are of interest to older taxpayers. Income tax 1040 ez The publication will help you determine if you need to file a return and, if so, what items to report on your return. Income tax 1040 ez Each topic is discussed only briefly, so you will find references to other free IRS publications that provide more detail on these topics if you need it. Income tax 1040 ez Table I has a list of questions you may have about filing your federal tax return. Income tax 1040 ez To the right of each question is the location of the answer in this publication. Income tax 1040 ez Also, at the back of this publication there is an index to help you search for the topic you need. Income tax 1040 ez While most federal income tax laws apply equally to all taxpayers, regardless of age, there are some provisions that give special treatment to older taxpayers. Income tax 1040 ez The following are some examples. Income tax 1040 ez Higher gross income threshold for filing. Income tax 1040 ez You must be age 65 or older at the end of the year to get this benefit. Income tax 1040 ez You are considered age 65 on the day before your 65th birthday. Income tax 1040 ez Therefore, you are considered age 65 at the end of the year if your 65th birthday is on or before January 1 of the following year. Income tax 1040 ez Higher standard deduction. Income tax 1040 ez If you do not itemize deductions, you are entitled to a higher standard deduction if you are age 65 or older at the end of the year. Income tax 1040 ez You are considered age 65 at the end of the year if your 65th birthday is on or before January 1 of the following year. Income tax 1040 ez Credit for the elderly or the disabled. Income tax 1040 ez If you qualify, you may benefit from the credit for the elderly or the disabled. Income tax 1040 ez To determine if you qualify and how to figure this credit, see Credit for the Elderly or the Disabled , later. Income tax 1040 ez Return preparation assistance. Income tax 1040 ez   The IRS wants to make it easier for you to file your federal tax return. Income tax 1040 ez You may find it helpful to visit a Volunteer Income Tax Assistance (VITA), Tax Counseling for the Elderly (TCE), or American Association of Retired Persons (AARP) Tax-Aide site near you. Income tax 1040 ez Volunteer Income Tax Assistance and Tax Counseling for the Elderly. Income tax 1040 ez   These programs provide free help for low-income taxpayers and taxpayers age 60 or older to fill in and file their returns. Income tax 1040 ez For the VITA/TCE site nearest you, contact your local IRS office. Income tax 1040 ez For more information, see Free help with your tax return under How To Get Tax Help. Income tax 1040 ez   For the location of an AARP Tax-Aide site in your community, call 1-888-227-7669. Income tax 1040 ez When asked, be ready to press in or speak your 5-digit ZIP code. Income tax 1040 ez Or, you can visit their website on the Internet at www. Income tax 1040 ez aarp. Income tax 1040 ez org/money/taxaide. Income tax 1040 ez Comments and suggestions. Income tax 1040 ez   We welcome your comments about this publication and your suggestions for future editions. Income tax 1040 ez   You can write to us at the following address: Internal Revenue Service Tax Forms and Publications Division 1111 Constitution Ave. Income tax 1040 ez NW, IR-6526 Washington, DC 20224   We respond to many letters by telephone. Income tax 1040 ez Therefore, it would be helpful if you would include your daytime phone number, including the area code, in your correspondence. Income tax 1040 ez   You can send your comments from www. Income tax 1040 ez irs. Income tax 1040 ez gov/formspubs/. Income tax 1040 ez Click on “More Information” and then on “Comment on Tax Forms and Publications. Income tax 1040 ez ”   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. Income tax 1040 ez Ordering forms and publications. Income tax 1040 ez   Visit www. Income tax 1040 ez irs. Income tax 1040 ez gov/formspubs/ to download forms and publications, call 1-800-TAX-FORM (1-800-829-3676), or write to the address below and receive a response within 10 business days after your request is received. Income tax 1040 ez Internal Revenue Service 1201 N. Income tax 1040 ez Mitsubishi Motorway Bloomington, IL 61705-6613 Tax questions. Income tax 1040 ez   If you have a tax question, check the information available on IRS. Income tax 1040 ez gov or call 1-800-829-1040. Income tax 1040 ez We cannot answer tax questions sent to either of the above addresses. Income tax 1040 ez Table I. Income tax 1040 ez What You Should Know About Federal Taxes Note. Income tax 1040 ez The following is a list of questions you may have about filling out your federal income tax return. Income tax 1040 ez  To the right of each question is the location of the answer in this publication. Income tax 1040 ez What I Should Know Where To Find the Answer Do I need to file a return? See chapter 1. Income tax 1040 ez Is my income taxable or nontaxable?  If it is nontaxable, must I still report it? See chapter 2. Income tax 1040 ez How do I report benefits I received from the Social Security Administration or the Railroad Retirement Board?  Are these benefits taxable? See Social Security and Equivalent Railroad Retirement Benefits in chapter 2. Income tax 1040 ez Must I report the sale of my home?  If I had a gain, is any part of it taxable? See Sale of Home in chapter 2. Income tax 1040 ez What are some of the items that I can deduct to reduce my income? See chapters 3 and 4. Income tax 1040 ez How do I report the amounts I set aside for my IRA? See Individual Retirement Arrangement (IRA) Contributions and Deductions in chapter 3. Income tax 1040 ez Would it be better for me to claim the standard deduction or itemize my deductions? See chapter 4. Income tax 1040 ez What are some of the credits I can claim to reduce my tax? See chapter 5 for discussions on the credit for the elderly or the disabled, the child and dependent care credit, and the earned income credit. Income tax 1040 ez Must I make estimated tax payments? See chapter 6. Income tax 1040 ez How do I contact the IRS or get more information? See chapter 7. Income tax 1040 ez Prev  Up  Next   Home   More Online Publications
Español

The Income Tax 1040 Ez

Income tax 1040 ez 4. Income tax 1040 ez   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. Income tax 1040 ez Resident aliens are generally taxed in the same way as U. Income tax 1040 ez S. Income tax 1040 ez citizens. Income tax 1040 ez Nonresident aliens are taxed based on the source of their income and whether or not their income is effectively connected with a U. Income tax 1040 ez S. Income tax 1040 ez trade or business. Income tax 1040 ez The following discussions will help you determine if income you receive during the tax year is effectively connected with a U. Income tax 1040 ez S. Income tax 1040 ez trade or business and how it is taxed. Income tax 1040 ez Topics - This chapter discusses: Income that is effectively connected with a U. Income tax 1040 ez S. Income tax 1040 ez trade or business. Income tax 1040 ez Income that is not effectively connected with a U. Income tax 1040 ez S. Income tax 1040 ez trade or business. Income tax 1040 ez Interrupted period of residence. Income tax 1040 ez Expatriation tax. Income tax 1040 ez 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. Income tax 1040 ez Resident Aliens Resident aliens are generally taxed in the same way as U. Income tax 1040 ez S. Income tax 1040 ez citizens. Income tax 1040 ez This means that their worldwide income is subject to U. Income tax 1040 ez S. Income tax 1040 ez tax and must be reported on their U. Income tax 1040 ez S. Income tax 1040 ez tax return. Income tax 1040 ez Income of resident aliens is subject to the graduated tax rates that apply to U. Income tax 1040 ez S. Income tax 1040 ez citizens. Income tax 1040 ez Resident aliens use the Tax Table or Tax Computation Worksheets located in the Form 1040 instructions, which apply to U. Income tax 1040 ez S. Income tax 1040 ez citizens. Income tax 1040 ez Nonresident Aliens A nonresident alien's income that is subject to U. Income tax 1040 ez S. Income tax 1040 ez 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). Income tax 1040 ez The difference between these two categories is that effectively connected income, after allowable deductions, is taxed at graduated rates. Income tax 1040 ez These are the same rates that apply to U. Income tax 1040 ez S. Income tax 1040 ez citizens and residents. Income tax 1040 ez Income that is not effectively connected is taxed at a flat 30% (or lower treaty) rate. Income tax 1040 ez If you were formerly a U. Income tax 1040 ez S. Income tax 1040 ez citizen or resident alien, these rules may not apply. Income tax 1040 ez See Expatriation Tax, later, in this chapter. Income tax 1040 ez 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. Income tax 1040 ez Whether you are engaged in a trade or business in the United States depends on the nature of your activities. Income tax 1040 ez The discussions that follow will help you determine whether you are engaged in a trade or business in the United States. Income tax 1040 ez 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. Income tax 1040 ez Certain compensation paid to a nonresident alien by a foreign employer is not included in gross income. Income tax 1040 ez For more information, see Services Performed for Foreign Employer in chapter 3. Income tax 1040 ez Other Trade or Business Activities Other examples of being engaged in a trade or business in the United States follow. Income tax 1040 ez Students and trainees. Income tax 1040 ez   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. Income tax 1040 ez 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. Income tax 1040 ez The taxable part of any scholarship or fellowship grant that is U. Income tax 1040 ez S. Income tax 1040 ez source income is treated as effectively connected with a trade or business in the United States. Income tax 1040 ez Business operations. Income tax 1040 ez   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. Income tax 1040 ez Partnerships. Income tax 1040 ez   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. Income tax 1040 ez Beneficiary of an estate or trust. Income tax 1040 ez   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. Income tax 1040 ez Trading in stocks, securities, and commodities. Income tax 1040 ez   If your only U. Income tax 1040 ez S. Income tax 1040 ez business activity is trading in stocks, securities, or commodities (including hedging transactions) through a U. Income tax 1040 ez S. Income tax 1040 ez resident broker or other agent, you are not engaged in a trade or business in the United States. Income tax 1040 ez   For transactions in stocks or securities, this applies to any nonresident alien, including a dealer or broker in stocks and securities. Income tax 1040 ez   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. Income tax 1040 ez   This discussion does not apply if you have a U. Income tax 1040 ez S. Income tax 1040 ez 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. Income tax 1040 ez Trading for a nonresident alien's own account. Income tax 1040 ez   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. Income tax 1040 ez S. Income tax 1040 ez business activity. Income tax 1040 ez 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. Income tax 1040 ez   This does not apply to trading for your own account if you are a dealer in stocks, securities, or commodities. Income tax 1040 ez 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. Income tax 1040 ez Determine that based on the facts and circumstances in each case or under the rules given above in Trading in stocks, securities, and commodities . Income tax 1040 ez Effectively Connected Income If you are engaged in a U. Income tax 1040 ez S. Income tax 1040 ez 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. Income tax 1040 ez 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. Income tax 1040 ez 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. Income tax 1040 ez In limited circumstances, some kinds of foreign source income may be treated as effectively connected with a trade or business in the United States. Income tax 1040 ez For a discussion of these rules, see Foreign Income , later. Income tax 1040 ez Investment Income Investment income from U. Income tax 1040 ez S. Income tax 1040 ez sources that may or may not be treated as effectively connected with a U. Income tax 1040 ez S. Income tax 1040 ez trade or business generally falls into the following three categories. Income tax 1040 ez Fixed or determinable income (interest, dividends, rents, royalties, premiums, annuities, etc. Income tax 1040 ez ). Income tax 1040 ez Gains (some of which are considered capital gains) from the sale or exchange of the following types of property. Income tax 1040 ez Timber, coal, or domestic iron ore with a retained economic interest. Income tax 1040 ez Patents, copyrights, and similar property on which you receive contingent payments after October 4, 1966. Income tax 1040 ez Patents transferred before October 5, 1966. Income tax 1040 ez Original issue discount obligations. Income tax 1040 ez Capital gains (and losses). Income tax 1040 ez Use the two tests, described next, to determine whether an item of U. Income tax 1040 ez S. Income tax 1040 ez source income falling in one of the three categories above and received during the tax year is effectively connected with your U. Income tax 1040 ez S. Income tax 1040 ez trade or business. Income tax 1040 ez If the tests indicate that the item of income is effectively connected, you must include it with your other effectively connected income. Income tax 1040 ez If the item of income is not effectively connected, include it with all other income discussed under The 30% Tax later, in this chapter. Income tax 1040 ez Asset-use test. Income tax 1040 ez   This test usually applies to income that is not directly produced by trade or business activities. Income tax 1040 ez 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. Income tax 1040 ez   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. Income tax 1040 ez 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. Income tax 1040 ez Business-activities test. Income tax 1040 ez   This test usually applies when income, gain, or loss comes directly from the active conduct of the trade or business. Income tax 1040 ez 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. Income tax 1040 ez Under this test, if the conduct of the U. Income tax 1040 ez S. Income tax 1040 ez trade or business was a material factor in producing the income, the income is considered effectively connected. Income tax 1040 ez Personal Service Income You usually are engaged in a U. Income tax 1040 ez S. Income tax 1040 ez trade or business when you perform personal services in the United States. Income tax 1040 ez Personal service income you receive in a tax year in which you are engaged in a U. Income tax 1040 ez S. Income tax 1040 ez trade or business is effectively connected with a U. Income tax 1040 ez S. Income tax 1040 ez trade or business. Income tax 1040 ez 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. Income tax 1040 ez Personal service income includes wages, salaries, commissions, fees, per diem allowances, and employee allowances and bonuses. Income tax 1040 ez The income may be paid to you in the form of cash, services, or property. Income tax 1040 ez If you are engaged in a U. Income tax 1040 ez S. Income tax 1040 ez 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. Income tax 1040 ez 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. Income tax 1040 ez Pensions. Income tax 1040 ez   If you were a nonresident alien engaged in a U. Income tax 1040 ez S. Income tax 1040 ez 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. Income tax 1040 ez This is true whether or not you are engaged in a U. Income tax 1040 ez S. Income tax 1040 ez trade or business in the year you receive the retirement pay. Income tax 1040 ez Transportation Income Transportation income (defined in chapter 2) is effectively connected if you meet both of the following conditions. Income tax 1040 ez You had a fixed place of business in the United States involved in earning the income. Income tax 1040 ez At least 90% of your U. Income tax 1040 ez S. Income tax 1040 ez source transportation income is attributable to regularly scheduled transportation. Income tax 1040 ez “Fixed place of business” generally means a place, site, structure, or other similar facility through which you engage in a trade or business. Income tax 1040 ez “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. Income tax 1040 ez This definition applies to both scheduled and chartered air transportation. Income tax 1040 ez If you do not meet the two conditions above, the income is not effectively connected and is taxed at a 4% rate. Income tax 1040 ez See Transportation Tax, later, in this chapter. Income tax 1040 ez Business Profits and Losses and Sales Transactions All profits or losses from U. Income tax 1040 ez S. Income tax 1040 ez 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. Income tax 1040 ez 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. Income tax 1040 ez A share of U. Income tax 1040 ez S. Income tax 1040 ez 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. Income tax 1040 ez Real Property Gain or Loss Gains and losses from the sale or exchange of U. Income tax 1040 ez S. Income tax 1040 ez 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. Income tax 1040 ez You must treat the gain or loss as effectively connected with that trade or business. Income tax 1040 ez U. Income tax 1040 ez S. Income tax 1040 ez real property interest. Income tax 1040 ez   This is any interest in real property located in the United States or the U. Income tax 1040 ez S. Income tax 1040 ez Virgin Islands or any interest (other than as a creditor) in a domestic corporation that is a U. Income tax 1040 ez S. Income tax 1040 ez real property holding corporation. Income tax 1040 ez Real property includes the following. Income tax 1040 ez Land and unsevered natural products of the land, such as growing crops and timber, and mines, wells, and other natural deposits. Income tax 1040 ez Improvements on land, including buildings, other permanent structures, and their structural components. Income tax 1040 ez 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. Income tax 1040 ez U. Income tax 1040 ez S. Income tax 1040 ez real property holding corporation. Income tax 1040 ez   A corporation is a U. Income tax 1040 ez S. Income tax 1040 ez real property holding corporation if the fair market value of the corporation's U. Income tax 1040 ez S. Income tax 1040 ez real property interests are at least 50% of the total fair market value of: The corporation's U. Income tax 1040 ez S. Income tax 1040 ez 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. Income tax 1040 ez   Gain or loss on the sale of the stock in any domestic corporation is taxed as if you are engaged in a U. Income tax 1040 ez S. Income tax 1040 ez trade or business unless you establish that the corporation is not a U. Income tax 1040 ez S. Income tax 1040 ez real property holding corporation. Income tax 1040 ez   A U. Income tax 1040 ez S. Income tax 1040 ez 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. Income tax 1040 ez An interest in a foreign corporation owning U. Income tax 1040 ez S. Income tax 1040 ez real property generally is not a U. Income tax 1040 ez S. Income tax 1040 ez real property interest unless the corporation chooses to be treated as a domestic corporation. Income tax 1040 ez Qualified investment entities. Income tax 1040 ez   Special rules apply to qualified investment entities (QIEs). Income tax 1040 ez A QIE is any real estate investment trust (REIT) or any regulated investment company (RIC) that is a U. Income tax 1040 ez S. Income tax 1040 ez real property holding corporation. Income tax 1040 ez    Generally, any distribution from a QIE to a shareholder that is attributable to gain from the sale or exchange of a U. Income tax 1040 ez S. Income tax 1040 ez real property interest is treated as a U. Income tax 1040 ez S. Income tax 1040 ez real property gain by the shareholder receiving the distribution. Income tax 1040 ez 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. Income tax 1040 ez S. Income tax 1040 ez 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. Income tax 1040 ez A distribution that you do not treat as gain from the sale or exchange of a U. Income tax 1040 ez S. Income tax 1040 ez real property interest is included in your gross income as a regular dividend. Income tax 1040 ez Note. Income tax 1040 ez Beginning January 1, 2014 (unless extended by legislation), a RIC that is a U. Income tax 1040 ez S. Income tax 1040 ez 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. Income tax 1040 ez Domestically controlled QIE. Income tax 1040 ez   The sale of an interest in a domestically controlled QIE is not the sale of a U. Income tax 1040 ez S. Income tax 1040 ez real property interest. Income tax 1040 ez 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. Income tax 1040 ez 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. Income tax 1040 ez Wash sale. Income tax 1040 ez    If you dispose of an interest in a domestically controlled QIE in an applicable wash sale transaction, special rules apply. Income tax 1040 ez 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. Income tax 1040 ez S. Income tax 1040 ez 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. Income tax 1040 ez If this occurs, you are treated as having gain from the sale or exchange of a U. Income tax 1040 ez S. Income tax 1040 ez real property interest in an amount equal to the distribution made after June 15, 2006, that would have been treated as such gain. Income tax 1040 ez This also applies to any substitute dividend payment. Income tax 1040 ez   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. Income tax 1040 ez Alternative minimum tax. Income tax 1040 ez   There may be a minimum tax on your net gain from the disposition of U. Income tax 1040 ez S. Income tax 1040 ez real property interests. Income tax 1040 ez Figure the amount of this tax, if any, on Form 6251. Income tax 1040 ez Withholding of tax. Income tax 1040 ez   If you dispose of a U. Income tax 1040 ez S. Income tax 1040 ez real property interest, the buyer may have to withhold tax. Income tax 1040 ez See the discussion of Tax Withheld on Real Property Sales in chapter 8. Income tax 1040 ez 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. Income tax 1040 ez 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. Income tax 1040 ez The three kinds of foreign source income are listed below. Income tax 1040 ez 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. Income tax 1040 ez 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. Income tax 1040 ez 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. Income tax 1040 ez 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. Income tax 1040 ez Income, gain, or loss from the sale outside the United States, through the U. Income tax 1040 ez S. Income tax 1040 ez 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. Income tax 1040 ez 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. Income tax 1040 ez Any foreign source income that is equivalent to any item of income described above is treated as effectively connected with a U. Income tax 1040 ez S. Income tax 1040 ez trade or business. Income tax 1040 ez For example, foreign source interest and dividend equivalents are treated as U. Income tax 1040 ez S. Income tax 1040 ez 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. Income tax 1040 ez 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. Income tax 1040 ez S. Income tax 1040 ez citizens and residents. Income tax 1040 ez 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. Income tax 1040 ez 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. Income tax 1040 ez Example. Income tax 1040 ez Ted Richards, a nonresident alien, entered the United States in August 2012, to perform personal services in the U. Income tax 1040 ez S. Income tax 1040 ez office of his overseas employer. Income tax 1040 ez He worked in the U. Income tax 1040 ez S. Income tax 1040 ez office until December 25, 2012, but did not leave this country until January 11, 2013. Income tax 1040 ez On January 8, 2013, he received his final paycheck for services performed in the United States during 2012. Income tax 1040 ez All of Ted's income during his stay here is U. Income tax 1040 ez S. Income tax 1040 ez source income. Income tax 1040 ez During 2012, Ted was engaged in the trade or business of performing personal services in the United States. Income tax 1040 ez 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. Income tax 1040 ez The salary payment Ted received in January 2013 is U. Income tax 1040 ez S. Income tax 1040 ez source income to him in 2013. Income tax 1040 ez 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. Income tax 1040 ez Real property income. Income tax 1040 ez   You may be able to choose to treat all income from real property as effectively connected. Income tax 1040 ez See Income From Real Property , later, in this chapter. Income tax 1040 ez The 30% Tax Tax at a 30% (or lower treaty) rate applies to certain items of income or gains from U. Income tax 1040 ez S. Income tax 1040 ez sources but only if the items are not effectively connected with your U. Income tax 1040 ez S. Income tax 1040 ez trade or business. Income tax 1040 ez Fixed or Determinable Income The 30% (or lower treaty) rate applies to the gross amount of U. Income tax 1040 ez S. Income tax 1040 ez source fixed or determinable annual or periodic gains, profits, or income. Income tax 1040 ez Income is fixed when it is paid in amounts known ahead of time. Income tax 1040 ez Income is determinable whenever there is a basis for figuring the amount to be paid. Income tax 1040 ez Income can be periodic if it is paid from time to time. Income tax 1040 ez It does not have to be paid annually or at regular intervals. Income tax 1040 ez Income can be determinable or periodic even if the length of time during which the payments are made is increased or decreased. Income tax 1040 ez 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. Income tax 1040 ez 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. Income tax 1040 ez Other items of income, such as royalties, also may be subject to the 30% tax. Income tax 1040 ez Some fixed or determinable income may be exempt from U. Income tax 1040 ez S. Income tax 1040 ez tax. Income tax 1040 ez See chapter 3 if you are not sure whether the income is taxable. Income tax 1040 ez Original issue discount (OID). Income tax 1040 ez   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. Income tax 1040 ez The amount of OID is the difference between the stated redemption price at maturity and the issue price of the debt instrument. Income tax 1040 ez The 30% tax applies in the following circumstances. Income tax 1040 ez You received a payment on a debt instrument. Income tax 1040 ez 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. Income tax 1040 ez But the tax on the OID cannot be more than the payment minus the tax on the interest payment on the debt instrument. Income tax 1040 ez You sold or exchanged the debt instrument. Income tax 1040 ez 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. Income tax 1040 ez   Report on your return the amount of OID shown on Form 1042-S, Foreign Person's U. Income tax 1040 ez S. Income tax 1040 ez Source Income Subject to Withholding, if you bought the debt instrument at original issue. Income tax 1040 ez However, you must recompute your proper share of OID shown on Form 1042-S if any of the following apply. Income tax 1040 ez You bought the debt instrument at a premium or paid an acquisition premium. Income tax 1040 ez The debt instrument is a stripped bond or a stripped coupon (including zero coupon instruments backed by U. Income tax 1040 ez S. Income tax 1040 ez Treasury securities). Income tax 1040 ez The debt instrument is a contingent payment or inflation-indexed debt instrument. Income tax 1040 ez For the definition of premium and acquisition premium and instructions on how to recompute OID, get Publication 1212. Income tax 1040 ez   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. Income tax 1040 ez See chapter 12. Income tax 1040 ez 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. Income tax 1040 ez S. Income tax 1040 ez trade or business and is not exempted by treaty. Income tax 1040 ez 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. Income tax 1040 ez Nonresident aliens are taxed at graduated rates on net gambling income won in the United States that is effectively connected with a U. Income tax 1040 ez S. Income tax 1040 ez trade or business. Income tax 1040 ez Social Security Benefits A nonresident alien must include 85% of any U. Income tax 1040 ez S. Income tax 1040 ez social security benefit (and the social security equivalent part of a tier 1 railroad retirement benefit) in U. Income tax 1040 ez S. Income tax 1040 ez source fixed or determinable annual or periodic income. Income tax 1040 ez Social security benefits include monthly retirement, survivor, and disability benefits. Income tax 1040 ez This income is exempt under some tax treaties. Income tax 1040 ez See Table 1 in Publication 901, U. Income tax 1040 ez S. Income tax 1040 ez Tax Treaties, for a list of tax treaties that exempt U. Income tax 1040 ez S. Income tax 1040 ez social security benefits from U. Income tax 1040 ez S. Income tax 1040 ez tax. Income tax 1040 ez 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. Income tax 1040 ez They apply even if you are engaged in a trade or business in the United States. Income tax 1040 ez These rules do not apply to the sale or exchange of a U. Income tax 1040 ez S. Income tax 1040 ez real property interest or to the sale of any property that is effectively connected with a trade or business in the United States. Income tax 1040 ez See Real Property Gain or Loss , earlier, under Effectively Connected Income. Income tax 1040 ez A capital asset is everything you own except: Inventory. Income tax 1040 ez Business accounts or notes receivable. Income tax 1040 ez Depreciable property used in a trade or business. Income tax 1040 ez Real property used in a trade or business. Income tax 1040 ez Supplies regularly used in a trade or business. Income tax 1040 ez Certain copyrights, literary or musical or artistic compositions, letters or memoranda, or similar property. Income tax 1040 ez Certain U. Income tax 1040 ez S. Income tax 1040 ez government publications. Income tax 1040 ez Certain commodities derivative financial instruments held by a commodities derivatives dealer. Income tax 1040 ez Hedging transactions. Income tax 1040 ez A capital gain is a gain on the sale or exchange of a capital asset. Income tax 1040 ez A capital loss is a loss on the sale or exchange of a capital asset. Income tax 1040 ez 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. Income tax 1040 ez S. Income tax 1040 ez currency at the rate of exchange prevailing as of the date of the purchase and date of the sale, respectively. Income tax 1040 ez You may want to read Publication 544. Income tax 1040 ez However, use Publication 544 only to determine what is a sale or exchange of a capital asset, or what is treated as such. Income tax 1040 ez Specific tax treatment that applies to U. Income tax 1040 ez S. Income tax 1040 ez citizens or residents generally does not apply to you. Income tax 1040 ez The following gains are subject to the 30% (or lower treaty) rate without regard to the 183-day rule, discussed later. Income tax 1040 ez Gains on the disposal of timber, coal, or domestic iron ore with a retained economic interest. Income tax 1040 ez Gains on contingent payments received from the sale or exchange of patents, copyrights, and similar property after October 4, 1966. Income tax 1040 ez Gains on certain transfers of all substantial rights to, or an undivided interest in, patents if the transfers were made before October 5, 1966. Income tax 1040 ez Gains on the sale or exchange of original issue discount obligations. Income tax 1040 ez 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. Income tax 1040 ez S. Income tax 1040 ez trade or business. Income tax 1040 ez See Income From Real Property , later. Income tax 1040 ez 183-day rule. Income tax 1040 ez   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. Income tax 1040 ez For purposes of the 30% (or lower treaty) rate, net gain is the excess of your capital gains from U. Income tax 1040 ez S. Income tax 1040 ez sources over your capital losses from U. Income tax 1040 ez S. Income tax 1040 ez sources. Income tax 1040 ez This rule applies even if any of the transactions occurred while you were not in the United States. Income tax 1040 ez   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. Income tax 1040 ez S. Income tax 1040 ez trade or business during the year and the gains and losses were effectively connected with that trade or business during the tax year. Income tax 1040 ez   In arriving at your net gain, do not take the following into consideration. Income tax 1040 ez The four types of gains listed earlier. Income tax 1040 ez The deduction for a capital loss carryover. Income tax 1040 ez Capital losses in excess of capital gains. Income tax 1040 ez Exclusion for gain from the sale or exchange of qualified small business stock (section 1202 exclusion). Income tax 1040 ez Losses from the sale or exchange of property held for personal use. Income tax 1040 ez However, losses resulting from casualties or thefts may be deductible on Schedule A (Form 1040NR). Income tax 1040 ez See Itemized Deductions in chapter 5. Income tax 1040 ez   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. Income tax 1040 ez Also, you must file your tax return on a calendar-year basis. Income tax 1040 ez   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. Income tax 1040 ez Reporting. Income tax 1040 ez   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. Income tax 1040 ez 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. Income tax 1040 ez Attach them to Form 1040NR. Income tax 1040 ez 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. Income tax 1040 ez 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. Income tax 1040 ez This includes income from rents, royalties from mines, oil or gas wells, or other natural resources. Income tax 1040 ez It also includes gains from the sale or exchange of timber, coal, or domestic iron ore with a retained economic interest. Income tax 1040 ez You can make this choice only for real property income that is not otherwise effectively connected with your U. Income tax 1040 ez S. Income tax 1040 ez trade or business. Income tax 1040 ez 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. Income tax 1040 ez This choice does not treat a nonresident alien, who is not otherwise engaged in a U. Income tax 1040 ez S. Income tax 1040 ez trade or business, as being engaged in a trade or business in the United States during the year. Income tax 1040 ez Example. Income tax 1040 ez You are a nonresident alien and are not engaged in a U. Income tax 1040 ez S. Income tax 1040 ez trade or business. Income tax 1040 ez You own a single-family house in the United States that you rent out. Income tax 1040 ez Your rental income for the year is $10,000. Income tax 1040 ez This is your only U. Income tax 1040 ez S. Income tax 1040 ez source income. Income tax 1040 ez As discussed earlier under The 30% Tax, the rental income is subject to a tax at a 30% (or lower treaty) rate. Income tax 1040 ez You received a Form 1042-S showing that your tenants properly withheld this tax from the rental income. Income tax 1040 ez You do not have to file a U. Income tax 1040 ez S. Income tax 1040 ez tax return (Form 1040NR) because your U. Income tax 1040 ez S. Income tax 1040 ez tax liability is satisfied by the withholding of tax. Income tax 1040 ez If you make the choice discussed earlier, you can offset the $10,000 income by certain rental expenses. Income tax 1040 ez (See Publication 527, Residential Rental Property, for information on rental expenses. Income tax 1040 ez ) Any resulting net income is taxed at graduated rates. Income tax 1040 ez If you make this choice, report the rental income and expenses on Schedule E (Form 1040) and attach the schedule to Form 1040NR. Income tax 1040 ez For the first year you make the choice, also attach the statement discussed next. Income tax 1040 ez Making the choice. Income tax 1040 ez   Make the initial choice by attaching a statement to your return, or amended return, for the year of the choice. Income tax 1040 ez Include the following in your statement. Income tax 1040 ez That you are making the choice. Income tax 1040 ez Whether the choice is under Internal Revenue Code section 871(d) (explained earlier) or a tax treaty. Income tax 1040 ez A complete list of all your real property, or any interest in real property, located in the United States. Income tax 1040 ez Give the legal identification of U. Income tax 1040 ez S. Income tax 1040 ez timber, coal, or iron ore in which you have an interest. Income tax 1040 ez The extent of your ownership in the property. Income tax 1040 ez The location of the property. Income tax 1040 ez A description of any major improvements to the property. Income tax 1040 ez The dates you owned the property. Income tax 1040 ez Your income from the property. Income tax 1040 ez Details of any previous choices and revocations of the real property income choice. Income tax 1040 ez   This choice stays in effect for all later tax years unless you revoke it. Income tax 1040 ez Revoking the choice. Income tax 1040 ez   You can revoke the choice without IRS approval by filing Form 1040X, Amended U. Income tax 1040 ez S. Income tax 1040 ez Individual Income Tax Return, for the year you made the choice and for later tax years. Income tax 1040 ez 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. Income tax 1040 ez If this time period has expired for the year of choice, you cannot revoke the choice for that year. Income tax 1040 ez However, you may revoke the choice for later tax years only if you have IRS approval. Income tax 1040 ez For information on how to get IRS approval, see Regulation section 1. Income tax 1040 ez 871-10(d)(2). Income tax 1040 ez 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 . Income tax 1040 ez If you receive transportation income subject to the 4% tax, you should figure the tax and show it on line 57 of Form 1040NR. Income tax 1040 ez Attach a statement to your return that includes the following information (if applicable). Income tax 1040 ez Your name, taxpayer identification number, and tax year. Income tax 1040 ez A description of the types of services performed (whether on or off board). Income tax 1040 ez Names of vessels or registration numbers of aircraft on which you performed the services. Income tax 1040 ez Amount of U. Income tax 1040 ez S. Income tax 1040 ez source transportation income derived from each type of service for each vessel or aircraft for the calendar year. Income tax 1040 ez Total amount of U. Income tax 1040 ez S. Income tax 1040 ez source transportation income derived from all types of services for the calendar year. Income tax 1040 ez This 4% tax applies to your U. Income tax 1040 ez S. Income tax 1040 ez source gross transportation income. Income tax 1040 ez 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. Income tax 1040 ez For transportation income from personal services, the transportation must be between the United States and a U. Income tax 1040 ez S. Income tax 1040 ez possession. Income tax 1040 ez For personal services of a nonresident alien, this only applies to income derived from, or in connection with, an aircraft. Income tax 1040 ez Interrupted Period of Residence You are subject to tax under a special rule if you interrupt your period of U. Income tax 1040 ez S. Income tax 1040 ez residence with a period of nonresidence. Income tax 1040 ez The special rule applies if you meet all of the following conditions. Income tax 1040 ez You were a U. Income tax 1040 ez S. Income tax 1040 ez resident for a period that includes at least 3 consecutive calendar years. Income tax 1040 ez You were a U. Income tax 1040 ez S. Income tax 1040 ez resident for at least 183 days in each of those years. Income tax 1040 ez You ceased to be treated as a U. Income tax 1040 ez S. Income tax 1040 ez resident. Income tax 1040 ez You then again became a U. Income tax 1040 ez S. Income tax 1040 ez resident before the end of the third calendar year after the end of the period described in (1) above. Income tax 1040 ez Under this special rule, you are subject to tax on your U. Income tax 1040 ez S. Income tax 1040 ez 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. Income tax 1040 ez S. Income tax 1040 ez trade or business. Income tax 1040 ez 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. Income tax 1040 ez Example. Income tax 1040 ez John Willow, a citizen of New Zealand, entered the United States on April 1, 2008, as a lawful permanent resident. Income tax 1040 ez On August 1, 2010, John ceased to be a lawful permanent resident and returned to New Zealand. Income tax 1040 ez 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). Income tax 1040 ez He returned to the United States on October 5, 2013, as a lawful permanent resident. Income tax 1040 ez 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). Income tax 1040 ez 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. Income tax 1040 ez Reporting requirements. Income tax 1040 ez   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. Income tax 1040 ez The return is due by the due date (including extensions) for filing your U. Income tax 1040 ez S. Income tax 1040 ez income tax return for the year that you again become a U. Income tax 1040 ez S. Income tax 1040 ez resident. Income tax 1040 ez If you already filed returns for that period, you must file amended returns. Income tax 1040 ez You must attach a statement to your return that identifies the source of all of your U. Income tax 1040 ez S. Income tax 1040 ez and foreign gross income and the items of income subject to this special rule. Income tax 1040 ez Expatriation Tax The expatriation tax provisions apply to U. Income tax 1040 ez S. Income tax 1040 ez citizens who have renounced their citizenship and long-term residents who have ended their residency. Income tax 1040 ez The rules that apply are based on the dates of expatriation, which are described in the following sections. Income tax 1040 ez Expatriation Before June 4, 2004. Income tax 1040 ez Expatriation After June 3, 2004, and Before June 17, 2008. Income tax 1040 ez Expatriation After June 16, 2008. Income tax 1040 ez Long-term resident defined. Income tax 1040 ez   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. Income tax 1040 ez 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. Income tax 1040 ez 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. Income tax 1040 ez S. Income tax 1040 ez taxes. Income tax 1040 ez Unless you received a ruling from the IRS that you did not expatriate to avoid U. Income tax 1040 ez S. Income tax 1040 ez 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. Income tax 1040 ez The amounts above are adjusted for inflation if your expatriation action is after 1997 (see Table 4-1). Income tax 1040 ez Table 4-1. Income tax 1040 ez Inflation-Adjusted Amounts for Expatriation Actions Before June 4, 2004 IF you expatriated during . Income tax 1040 ez . Income tax 1040 ez . Income tax 1040 ez   THEN the rules outlined on this page apply if . Income tax 1040 ez . Income tax 1040 ez . Income tax 1040 ez     Your 5-year average annual net income tax was more than . Income tax 1040 ez . Income tax 1040 ez . Income tax 1040 ez OR Your net worth equaled or exceeded . Income tax 1040 ez . Income tax 1040 ez . Income tax 1040 ez 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. Income tax 1040 ez Reporting requirements. Income tax 1040 ez   If you lost your U. Income tax 1040 ez S. Income tax 1040 ez citizenship, you should have filed Form 8854 with a consular office or a federal court at the time of loss of citizenship. Income tax 1040 ez 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. Income tax 1040 ez   Your U. Income tax 1040 ez S. Income tax 1040 ez 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. Income tax 1040 ez Penalties. Income tax 1040 ez   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. Income tax 1040 ez 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. Income tax 1040 ez The penalty will not be imposed if you can show that the failure is due to reasonable cause and not willful neglect. Income tax 1040 ez Expatriation tax. Income tax 1040 ez   The expatriation tax applies to the 10-year period following the date of expatriation or termination of residency. Income tax 1040 ez It is figured in the same way as for those expatriating after June 3, 2004, and before June 17, 2008. Income tax 1040 ez See How To Figure the Expatriation Tax (If You Expatriated Before June 17, 2008) in the next section. Income tax 1040 ez 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. Income tax 1040 ez 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. Income tax 1040 ez $127,000 if you expatriated or terminated residency in 2005. Income tax 1040 ez $131,000 if you expatriated or terminated residency in 2006. Income tax 1040 ez $136,000 if you expatriated or terminated residency in 2007. Income tax 1040 ez $139,000 if you expatriated or terminated residency in 2008. Income tax 1040 ez Your net worth is $2 million or more on the date of your expatriation or termination of residency. Income tax 1040 ez You fail to certify on Form 8854 that you have complied with all U. Income tax 1040 ez S. Income tax 1040 ez federal tax obligations for the 5 tax years preceding the date of your expatriation or termination of residency. Income tax 1040 ez Exception for dual-citizens and certain minors. Income tax 1040 ez   Certain dual-citizens and certain minors (defined next) are not subject to the expatriation tax even if they meet (1) or (2) earlier. Income tax 1040 ez However, they still must provide the certification required in (3). Income tax 1040 ez Certain dual-citizens. Income tax 1040 ez   You may qualify for the exception described above if all of the following apply. Income tax 1040 ez You became at birth a U. Income tax 1040 ez S. Income tax 1040 ez citizen and a citizen of another country and you continue to be a citizen of that other country. Income tax 1040 ez You were never a resident alien of the United States (as defined in chapter 1). Income tax 1040 ez You never held a U. Income tax 1040 ez S. Income tax 1040 ez passport. Income tax 1040 ez 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. Income tax 1040 ez S. Income tax 1040 ez citizenship. Income tax 1040 ez Certain minors. Income tax 1040 ez   You may qualify for the exception described above if you meet all of the following requirements. Income tax 1040 ez You became a U. Income tax 1040 ez S. Income tax 1040 ez citizen at birth. Income tax 1040 ez Neither of your parents was a U. Income tax 1040 ez S. Income tax 1040 ez citizen at the time of your birth. Income tax 1040 ez You expatriated before you were 18½. Income tax 1040 ez 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. Income tax 1040 ez Tax consequences of presence in the United States. Income tax 1040 ez   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. Income tax 1040 ez   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. Income tax 1040 ez Instead, you are treated as a U. Income tax 1040 ez S. Income tax 1040 ez citizen or resident and taxed on your worldwide income for that tax year. Income tax 1040 ez You must file Form 1040, 1040A, or 1040EZ and figure your tax as prescribed in the instructions for those forms. Income tax 1040 ez   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. Income tax 1040 ez 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. Income tax 1040 ez You have ties with other countries. Income tax 1040 ez 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. Income tax 1040 ez 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. Income tax 1040 ez 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. Income tax 1040 ez See Exempt individual and Medical condition in chapter 1 under Substantial Presence Test, but disregard the information about Form 8843. Income tax 1040 ez Related employer. Income tax 1040 ez   If your employer in the United States is any of the following, then your employer is related to you. Income tax 1040 ez You must count any days you performed services in the United States for that employer as days of presence in the United States. Income tax 1040 ez Members of your family. Income tax 1040 ez This includes only your brothers and sisters, half-brothers and half-sisters, spouse, ancestors (parents, grandparents, etc. Income tax 1040 ez ), and lineal descendants (children, grandchildren, etc. Income tax 1040 ez ). Income tax 1040 ez A partnership in which you directly or indirectly own more than 50% of the capital interest or the profits interest. Income tax 1040 ez A corporation in which you directly or indirectly own more than 50% in value of the outstanding stock. Income tax 1040 ez (See Publication 550, chapter 4, Constructive ownership of stock, for how to determine whether you directly or indirectly own outstanding stock. Income tax 1040 ez ) 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. Income tax 1040 ez Date of tax expatriation. Income tax 1040 ez   For purposes of U. Income tax 1040 ez S. Income tax 1040 ez tax rules, the date of your expatriation or termination of residency is the later of the dates on which you perform the following actions. Income tax 1040 ez You notify either the Department of State or the Department of Homeland Security (whichever is appropriate) of your expatriating act or termination of residency. Income tax 1040 ez You file Form 8854 in accordance with the form instructions. Income tax 1040 ez Annual return. Income tax 1040 ez   If the expatriation tax applies to you, you must file Form 8854 each year during the 10-year period following the date of expatriation. Income tax 1040 ez You must file this form even if you owe no U. Income tax 1040 ez S. Income tax 1040 ez tax. Income tax 1040 ez Penalty. Income tax 1040 ez   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. Income tax 1040 ez You will not have to pay a penalty if you show that the failure is due to reasonable cause and not to willful neglect. Income tax 1040 ez 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. Income tax 1040 ez S. Income tax 1040 ez 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. Income tax 1040 ez S. Income tax 1040 ez trade or business. Income tax 1040 ez For this purpose, U. Income tax 1040 ez S. Income tax 1040 ez 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. Income tax 1040 ez S. Income tax 1040 ez domestic corporation, and Debt obligations of U. Income tax 1040 ez S. Income tax 1040 ez persons or of the United States, a state or political subdivision thereof, or the District of Columbia. Income tax 1040 ez U. Income tax 1040 ez S. Income tax 1040 ez 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. Income tax 1040 ez The income or gain is considered U. Income tax 1040 ez S. Income tax 1040 ez 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. Income tax 1040 ez 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. Income tax 1040 ez S. Income tax 1040 ez source gross income in the tax year of the exchange unless you enter into a gain recognition agreement under Notice 97-19. Income tax 1040 ez Other information. Income tax 1040 ez   For more information on the expatriation tax provisions, including exceptions to the tax and special U. Income tax 1040 ez S. Income tax 1040 ez source rules, see section 877 of the Internal Revenue Code. Income tax 1040 ez Expatriation Tax Return If you expatriated or terminated your U. Income tax 1040 ez S. Income tax 1040 ez residency, or you are subject to the expatriation tax, you must file Form 8854, Initial and Annual Expatriation Statement. Income tax 1040 ez Attach it to Form 1040NR if you are required to file that form. Income tax 1040 ez If you are present in the United States following your expatriation and are subject to tax as a U. Income tax 1040 ez S. Income tax 1040 ez citizen or resident, file Form 8854 with Form 1040. Income tax 1040 ez 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. Income tax 1040 ez 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. Income tax 1040 ez $145,000 if you expatriated or terminated residency in 2009 or 2010. Income tax 1040 ez $147,000 if you expatriated or terminated residency in 2011. Income tax 1040 ez $151,000 if you expatriated or terminated residency in 2012. Income tax 1040 ez $155,000 if you expatriated or terminated residency in 2013. Income tax 1040 ez Your net worth is $2 million or more on the date of your expatriation or termination of residency. Income tax 1040 ez You fail to certify on Form 8854 that you have complied with all U. Income tax 1040 ez S. Income tax 1040 ez federal tax obligations for the 5 years preceding the date of your expatriation or termination of residency. Income tax 1040 ez Exception for dual-citizens and certain minors. Income tax 1040 ez   Certain dual-citizens and certain minors (defined next) are not subject to the expatriation tax even if they meet (1) or (2) above. Income tax 1040 ez However, they still must provide the certification required in (3) above. Income tax 1040 ez Certain dual-citizens. Income tax 1040 ez   You may qualify for the exception described above if both of the following apply. Income tax 1040 ez You became at birth a U. Income tax 1040 ez S. Income tax 1040 ez 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. Income tax 1040 ez 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. Income tax 1040 ez For the purpose of determining U. Income tax 1040 ez S. Income tax 1040 ez residency, use the substantial presence test described in chapter 1. Income tax 1040 ez Certain minors. Income tax 1040 ez   You may qualify for the exception described earlier if you meet both of the following requirements. Income tax 1040 ez You expatriated before you were 18½. Income tax 1040 ez You have been a resident of the United States for not more than 10 tax years before the expatriation occurs. Income tax 1040 ez For the purpose of determining U. Income tax 1040 ez S. Income tax 1040 ez residency, use the substantial presence test described in chapter 1. Income tax 1040 ez Expatriation date. Income tax 1040 ez   Your expatriation date is the date you relinquish U. Income tax 1040 ez S. Income tax 1040 ez citizenship (in the case of a former citizen) or terminate your long-term residency (in the case of a former U. Income tax 1040 ez S. Income tax 1040 ez resident). Income tax 1040 ez Former U. Income tax 1040 ez S. Income tax 1040 ez citizen. Income tax 1040 ez   You are considered to have relinquished your U. Income tax 1040 ez S. Income tax 1040 ez citizenship on the earliest of the following dates. Income tax 1040 ez The date you renounced U. Income tax 1040 ez S. Income tax 1040 ez 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). Income tax 1040 ez The date you furnished to the State Department a signed statement of voluntary relinquishment of U. Income tax 1040 ez S. Income tax 1040 ez 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). Income tax 1040 ez The date the State Department issued a certificate of loss of nationality. Income tax 1040 ez The date that a U. Income tax 1040 ez S. Income tax 1040 ez court canceled your certificate of naturalization. Income tax 1040 ez Former long-term resident. Income tax 1040 ez   You are considered to have terminated your long-term residency on the earliest of the following dates. Income tax 1040 ez The date you voluntarily relinquished your lawful permanent resident status by filing Department of Homeland Security Form I-407 with a U. Income tax 1040 ez S. Income tax 1040 ez consular or immigration officer, and the Department of Homeland Security determined that you have, in fact, abandoned your lawful permanent resident status. Income tax 1040 ez 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. Income tax 1040 ez 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. Income tax 1040 ez See Effect of Tax Treaties in chapter 1 for more information about dual residents. Income tax 1040 ez 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”). Income tax 1040 ez This applies to most types of property interests you held on the date of relinquishment of citizenship or termination of residency. Income tax 1040 ez But see Exceptions , later. Income tax 1040 ez Gains arising from deemed sales must be taken into account for the tax year of the deemed sale without regard to other U. Income tax 1040 ez S. Income tax 1040 ez internal revenue laws. Income tax 1040 ez Losses from deemed sales must be taken into account to the extent otherwise provided under U. Income tax 1040 ez S. Income tax 1040 ez internal revenue laws. Income tax 1040 ez However, Internal Revenue Code section 1091 (relating to the disallowance of losses on wash sales of stock and securities) does not apply. Income tax 1040 ez 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. Income tax 1040 ez $626,000 if you expatriated or terminated residency in 2009. Income tax 1040 ez $627,000 if you expatriated or terminated residency in 2010. Income tax 1040 ez $636,000 if you expatriated or terminated residency in 2011. Income tax 1040 ez $651,000 if you expatriated or terminated residency in 2012. Income tax 1040 ez $668,000 if you expatriated or terminated residency in 2013. Income tax 1040 ez Exceptions. Income tax 1040 ez   The mark-to-market tax does not apply to the following. Income tax 1040 ez Eligible deferred compensation items. Income tax 1040 ez Ineligible deferred compensation items. Income tax 1040 ez Interests in nongrantor trusts. Income tax 1040 ez Specified tax deferred accounts. Income tax 1040 ez Instead, items (1) and (3) may be subject to withholding at source. Income tax 1040 ez 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. Income tax 1040 ez 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. Income tax 1040 ez See paragraphs (d), (e), and (f) of section 877A for more information. Income tax 1040 ez Expatriation Tax Return If you expatriated or terminated your U. Income tax 1040 ez S. Income tax 1040 ez 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. Income tax 1040 ez Attach it to Form 1040 or Form 1040NR if you are required to file either of those forms. Income tax 1040 ez Deferral of payment of mark-to-market tax. Income tax 1040 ez   You can make an irrevocable election to defer payment of the mark-to-market tax imposed on the deemed sale of property. Income tax 1040 ez If you make this election, the following rules apply. Income tax 1040 ez You can make the election on a property-by-property basis. Income tax 1040 ez The deferred tax attributable to a particular property is due on the return for the tax year in which you dispose of the property. Income tax 1040 ez Interest is charged for the period the tax is deferred. Income tax 1040 ez The due date for the payment of the deferred tax cannot be extended beyond the earlier of the following dates. Income tax 1040 ez The due date of the return required for the year of death. Income tax 1040 ez The time that the security provided for the property fails to be adequate. Income tax 1040 ez See item (6) below. Income tax 1040 ez You make the election on Form 8854. Income tax 1040 ez You must provide adequate security (such as a bond). Income tax 1040 ez 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. Income tax 1040 ez   For more information about the deferral of payment, see the Instructions for Form 8854. Income tax 1040 ez Prev  Up  Next   Home   More Online Publications