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1040 ez tax forms 4. 1040 ez tax forms   Communications and Air Transportation Taxes Table of Contents Uncollected Tax Report Communications TaxLocal-only service. 1040 ez tax forms Private communication service. 1040 ez tax forms Exemptions Credits or Refunds Air Transportation TaxesTransportation of Persons by Air International Air Travel Facilities Transportation of Property by Air Special Rules on Transportation Taxes Excise taxes are imposed on amounts paid for certain facilities and services. 1040 ez tax forms If you receive any payment on which tax is imposed, you are required to collect the tax, file returns, and pay the tax over to the government. 1040 ez tax forms If you fail to collect and pay over the taxes, you may be liable for the trust fund recovery penalty. 1040 ez tax forms See chapter 14, later. 1040 ez tax forms Uncollected Tax Report A separate report is required to be filed by collecting agents of communications services and air transportation taxes if the person from whom the facilities or services tax (the tax) is required to be collected (the taxpayer) refuses to pay the tax, or it is impossible for the collecting agent to collect the tax. 1040 ez tax forms The report must contain the name and address of the taxpayer, the type of facility provided or service rendered, the amount paid for the facility or service (the amount on which the tax is based), and the date paid. 1040 ez tax forms Regular method taxpayers. 1040 ez tax forms   For regular method taxpayers, the report must be filed by the due date of the Form 720 on which the tax would have been reported. 1040 ez tax forms Alternative method taxpayers. 1040 ez tax forms   For alternative method taxpayers, the report must be filed by the due date of the Form 720 that includes an adjustment to the separate account for the uncollected tax. 1040 ez tax forms See Alternative method in  chapter 11. 1040 ez tax forms Where to file. 1040 ez tax forms    Do not file the uncollected tax report with Form 720. 1040 ez tax forms Instead, mail the report to: Internal Revenue Service Excise Tax Program SE:S:SP:EX MS C9-109 5000 Ellin Rd. 1040 ez tax forms  Lanham, MD 20706 Communications Tax A 3% tax is imposed on amounts paid for local telephone service and teletypewriter exchange service. 1040 ez tax forms Local telephone service. 1040 ez tax forms   This includes access to a local telephone system and the privilege of telephonic quality communication with most people who are part of the system. 1040 ez tax forms Local telephone service also includes any facility or services provided in connection with this service. 1040 ez tax forms The tax applies to lease payments for certain customer premises equipment (CPE) even though the lessor does not also provide access to a local telecommunications system. 1040 ez tax forms Local-only service. 1040 ez tax forms   Local-only service is local telephone service as described above, provided under a plan that does not include long distance telephone service or that separately states the charge for local service on the bill to customers. 1040 ez tax forms Local-only service also includes any facility or services provided in connection with this service, even though these services and facilities may also be used with long-distance service. 1040 ez tax forms Private communication service. 1040 ez tax forms   Private communication service is not local telephone service. 1040 ez tax forms Private communication service includes accessory-type services provided in connection with a Centrex, PBX, or other similar system for dual use accessory equipment. 1040 ez tax forms However, the charge for the service must be stated separately from the charge for the basic system, and the accessory must function, in whole or in part, in connection with intercommunication among the subscriber's stations. 1040 ez tax forms Teletypewriter exchange service. 1040 ez tax forms   This includes access from a teletypewriter or other data station to a teletypewriter exchange system and the privilege of intercommunication by that station with most persons having teletypewriter or other data stations in the same exchange system. 1040 ez tax forms Figuring the tax. 1040 ez tax forms   The tax is based on the sum of all charges for local telephone service included in the bill. 1040 ez tax forms However, if the bill groups individual items for billing and tax purposes, the tax is based on the sum of the individual items within that group. 1040 ez tax forms The tax on the remaining items not included in any group is based on the charge for each item separately. 1040 ez tax forms Do not include in the tax base state or local sales or use taxes that are separately stated on the taxpayer's bill. 1040 ez tax forms Exemptions Payments for certain services or payments from certain users are exempt from the communications tax. 1040 ez tax forms Nontaxable service. 1040 ez tax forms   Nontaxable service means bundled service and long distance service. 1040 ez tax forms Nontaxable service also includes pre-paid telephone cards and pre-paid cellular service. 1040 ez tax forms Bundled service. 1040 ez tax forms   Bundled service is local and long distance service provided under a plan that does not separately state the charge for the local telephone service. 1040 ez tax forms Bundled service includes plans that provide both local and long distance service for either a flat monthly fee or a charge that varies with the elapsed transmission time for which the service is used. 1040 ez tax forms Telecommunications companies provide bundled service for both landlines and wireless (cellular) service. 1040 ez tax forms If Voice over Internet Protocol service provides both local and long distance service and the charges are not separately stated, such service is bundled service. 1040 ez tax forms   The method for sending or receiving a call, such as on a landline telephone, wireless (cellular), or some other method, does not affect whether a service is local-only or bundled. 1040 ez tax forms Long distance service. 1040 ez tax forms   Long distance service is telephonic quality communication with persons whose telephones are outside the local telephone system of the caller. 1040 ez tax forms Pre-paid telephone cards (PTC). 1040 ez tax forms   A PTC will be treated as bundled service unless a PTC expressly states it is for local-only service. 1040 ez tax forms Generally, the person responsible for collecting the tax is the carrier who transfers the PTC to the transferee. 1040 ez tax forms The transferee is the first person that is not a carrier to whom a PTC is transferred by the carrier. 1040 ez tax forms The transferee is the person liable for the tax and is eligible to request a credit or refund. 1040 ez tax forms For more information, see Regulations section 49. 1040 ez tax forms 4251-4. 1040 ez tax forms   The holder is the person that purchases a PTC to use and not to resell. 1040 ez tax forms Holders are not liable for the tax and cannot request a credit or refund. 1040 ez tax forms Pre-paid cellular telephones. 1040 ez tax forms   Rules similar to the PTC rules described above apply to pre-paid cellular telephones. 1040 ez tax forms The transferee is the person eligible to request the credit or refund. 1040 ez tax forms Installation charges. 1040 ez tax forms   The tax does not apply to payments received for the installation of any instrument, wire, pole, switchboard, apparatus, or equipment. 1040 ez tax forms However, the tax does apply to payments for the repair or replacement of those items incidental to ordinary maintenance. 1040 ez tax forms Answering services. 1040 ez tax forms   The tax does not apply to amounts paid for a private line, an answering service, and a one-way paging or message service if they do not provide access to a local telephone system and the privilege of telephonic communication as part of the local telephone system. 1040 ez tax forms Mobile radio telephone service. 1040 ez tax forms   The tax does not apply to payments for a two-way radio service that does not provide access to a local telephone system. 1040 ez tax forms Coin-operated telephones. 1040 ez tax forms   The tax for local telephone service does not apply to payments made for services by inserting coins in public coin-operated telephones. 1040 ez tax forms But the tax applies if the coin-operated telephone service is furnished for a guaranteed amount. 1040 ez tax forms Figure the tax on the amount paid under the guarantee plus any fixed monthly or other periodic charge. 1040 ez tax forms Telephone-operated security systems. 1040 ez tax forms   The tax does not apply to amounts paid for telephones used only to originate calls to a limited number of telephone stations for security entry into a building. 1040 ez tax forms In addition, the tax does not apply to any amounts paid for rented communication equipment used in the security system. 1040 ez tax forms News services. 1040 ez tax forms   The tax on teletypewriter exchange service does not apply to charges for the following news services. 1040 ez tax forms Services dealing exclusively with the collection or dissemination of news for or through the public press or radio or television broadcasting. 1040 ez tax forms Services used exclusively in the collection or dissemination of news by a news ticker service furnishing a general news service similar to that of the public press. 1040 ez tax forms This exemption applies to payments received for messages from one member of the news media to another member (or to or from their bona fide correspondents). 1040 ez tax forms For the exemption to apply, the charge for these services must be billed in writing to the person paying for the service and that person must certify in writing that the services are used for an exempt purpose. 1040 ez tax forms Services not exempted. 1040 ez tax forms   The tax applies to amounts paid by members of the news media for local telephone service. 1040 ez tax forms International organizations and the American Red Cross. 1040 ez tax forms   The tax does not apply to communication services furnished to an international organization or to the American National Red Cross. 1040 ez tax forms Nonprofit hospitals. 1040 ez tax forms   The tax does not apply to telephone services furnished to income tax-exempt nonprofit hospitals for their use. 1040 ez tax forms Also, the tax does not apply to amounts paid by these hospitals to provide local telephone service in the homes of their personnel who must be reached during their off-duty hours. 1040 ez tax forms Nonprofit educational organizations. 1040 ez tax forms   The tax does not apply to payments received for services and facilities furnished to a nonprofit educational organization for its use. 1040 ez tax forms A nonprofit educational organization is one that satisfies all the following requirements. 1040 ez tax forms It normally maintains a regular faculty and curriculum. 1040 ez tax forms It normally has a regularly enrolled body of pupils or students in attendance at the place where its educational activities are regularly carried on. 1040 ez tax forms It is exempt from income tax under section 501(a). 1040 ez tax forms This includes a school operated by an organization exempt under section 501(c)(3) if the school meets the above qualifications. 1040 ez tax forms Qualified blood collector organizations. 1040 ez tax forms   The tax does not apply to telephone services furnished to qualified blood collector organizations for their use. 1040 ez tax forms A qualified blood collector organization is one that is: Described in section 501(c)(3) and exempt from tax under section 501(a), Primarily engaged in the activity of collecting human blood, Registered with the IRS, and Registered by the Food and Drug Administration to collect blood. 1040 ez tax forms Federal, state, and local government. 1040 ez tax forms   The tax does not apply to communication services provided to the government of the United States, the government of any state or its political subdivisions, the District of Columbia, or the United Nations. 1040 ez tax forms Treat an Indian tribal government as a state for the exemption from the communications tax only if the services involve the exercise of an essential tribal government function. 1040 ez tax forms Exemption certificate. 1040 ez tax forms   Any form of exemption certificate will be acceptable if it includes all the information required by the Internal Revenue Code and Regulations. 1040 ez tax forms See Regulations section 49. 1040 ez tax forms 4253-11. 1040 ez tax forms File the certificate with the provider of the communication services. 1040 ez tax forms An exemption certificate is not required for nontaxable services. 1040 ez tax forms   The following users that are exempt from the communications tax do not have to file an annual exemption certificate after they have filed the initial certificate to claim an exemption from the communications tax. 1040 ez tax forms The American National Red Cross and other international organizations. 1040 ez tax forms Nonprofit hospitals. 1040 ez tax forms Nonprofit educational organizations. 1040 ez tax forms Qualified blood collector organizations. 1040 ez tax forms State and local governments. 1040 ez tax forms   The federal government does not have to file any exemption certificate. 1040 ez tax forms   All other organizations must furnish exemption certificates when required. 1040 ez tax forms Credits or Refunds If tax is collected and paid over for nontaxable services, or for certain services or users exempt from the communications tax, the collector or taxpayer may claim a credit or refund if it has repaid the tax to the person from whom the tax was collected or obtained the consent of that person to the allowance of the credit or refund. 1040 ez tax forms Alternatively, the person who paid the tax may claim a refund. 1040 ez tax forms For more information on how to file for credits or refunds, see the Instructions for Form 720 or Form 8849. 1040 ez tax forms Collectors. 1040 ez tax forms   The collector may request a credit or refund if it has repaid the tax to the person from whom the tax was collected, or obtained the consent of that person to the allowance of the credit or refund. 1040 ez tax forms These requirements also apply to nontaxable service refunds. 1040 ez tax forms Collectors using the regular method for deposits. 1040 ez tax forms   Collectors using the regular method for deposits must use Form 720X to request a credit or refund if the collector has repaid the tax to the person from whom the tax was collected, or obtained the consent of that person to the allowance of the credit or refund. 1040 ez tax forms Collectors using the alternative method for deposits. 1040 ez tax forms   Collectors using the alternative method for deposits must adjust their separate accounts for the credit or refund if it has repaid the tax to the person from whom the tax was collected, or obtained the consent of that person to the allowance of the credit or refund. 1040 ez tax forms For more information, see the Instructions for Form 720. 1040 ez tax forms Air Transportation Taxes Taxes are imposed on amounts paid for: Transportation of persons by air, Use of international air travel facilities, and Transportation of property by air. 1040 ez tax forms Transportation of Persons by Air The tax on transportation of persons by air is made up of the: Percentage tax, and Domestic-segment tax. 1040 ez tax forms Percentage tax. 1040 ez tax forms   A tax of 7. 1040 ez tax forms 5% applies to amounts paid for taxable transportation of persons by air. 1040 ez tax forms Amounts paid for transportation include charges for layover or waiting time and movement of aircraft in deadhead service. 1040 ez tax forms Mileage awards. 1040 ez tax forms   The percentage tax may apply to an amount paid (in cash or in kind) to an air carrier (or any related person) for the right to provide mileage awards for, or other reductions in the cost of, any transportation of persons by air. 1040 ez tax forms For example, this applies to mileage awards purchased by credit card companies, telephone companies, restaurants, hotels, and other businesses. 1040 ez tax forms   Generally, the percentage tax does not apply to amounts paid for mileage awards where the mileage awards cannot, under any circumstances, be redeemed for air transportation that is subject to the tax. 1040 ez tax forms Until regulations are issued, the following rules apply to mileage awards. 1040 ez tax forms Amounts paid for mileage awards that cannot be redeemed for taxable transportation beginning and ending in the United States are not subject to the tax. 1040 ez tax forms For this rule, mileage awards issued by a foreign air carrier are considered to be usable only on that foreign air carrier and thus not redeemable for taxable transportation beginning and ending in the United States. 1040 ez tax forms Therefore, amounts paid to a foreign air carrier for mileage awards are not subject to the tax. 1040 ez tax forms Amounts paid by an air carrier to a domestic air carrier for mileage awards that can be redeemed for taxable transportation are not subject to the tax to the extent those miles will be awarded in connection with the purchase of taxable transportation. 1040 ez tax forms Amounts paid by an air carrier to a domestic air carrier for mileage awards that can be redeemed for taxable transportation are subject to the tax to the extent those miles will not be awarded in connection with the purchase of taxable transportation. 1040 ez tax forms Domestic-segment tax. 1040 ez tax forms   The domestic-segment tax is a flat dollar amount for each segment of taxable transportation for which an amount is paid. 1040 ez tax forms However, see Rural airports, later. 1040 ez tax forms A segment is a single takeoff and a single landing. 1040 ez tax forms The amount of the domestic-segment tax is in the Instructions for Form 720. 1040 ez tax forms Charter flights. 1040 ez tax forms    If an aircraft is chartered, the domestic-segment tax for each segment of taxable transportation is figured by multiplying the tax by the number of passengers transported on the aircraft. 1040 ez tax forms Rural airports. 1040 ez tax forms   The domestic-segment tax does not apply to a segment to or from a rural airport. 1040 ez tax forms An airport is a rural airport for a calendar year if fewer than 100,000 commercial passengers departed from the airport by air during the second preceding calendar year (the 100,000 passenger rule), and one of the following is true: The airport is not located within 75 miles of another airport from which 100,000 or more commercial passengers departed during the second preceding calendar year, The airport was receiving essential air service subsidies as of August 5, 1997, or The airport is not connected by paved roads to another airport. 1040 ez tax forms   To apply the 100,000 passenger rule to any airport described in (3) above, only count commercial passengers departing from the airport by air on flight segments of at least 100 miles. 1040 ez tax forms   An updated list of rural airports can be found on the Department of Transportation website at www. 1040 ez tax forms dot. 1040 ez tax forms gov and enter the phrase “Essential Air Service” in the search box. 1040 ez tax forms Taxable transportation. 1040 ez tax forms   Taxable transportation is transportation by air that meets either of the following tests. 1040 ez tax forms It begins and ends either in the United States or at any place in Canada or Mexico not more than 225 miles from the nearest point on the continental United States boundary (this is the 225-mile zone). 1040 ez tax forms It is directly or indirectly from one port or station in the United States to another port or station in the United States, but only if it is not a part of uninterrupted international air transportation, discussed later. 1040 ez tax forms Round trip. 1040 ez tax forms   A round trip is considered two separate trips. 1040 ez tax forms The first trip is from the point of departure to the destination. 1040 ez tax forms The second trip is the return trip from that destination. 1040 ez tax forms Uninterrupted international air transportation. 1040 ez tax forms   This means transportation entirely by air that does not begin and end in the United States or in the 225-mile zone if there is not more than a 12-hour scheduled interval between arrival and departure at any station in the United States. 1040 ez tax forms For a special rule that applies to military personnel, see Exemptions, later. 1040 ez tax forms Transportation between the continental U. 1040 ez tax forms S. 1040 ez tax forms and Alaska or Hawaii. 1040 ez tax forms   This transportation is partially exempt from the tax on transportation of persons by air. 1040 ez tax forms The tax does not apply to the part of the trip between the point at which the route of transportation leaves or enters the continental United States (or a port or station in the 225-mile zone) and the point at which it enters or leaves Hawaii or Alaska. 1040 ez tax forms Leaving or entering occurs when the route of the transportation passes over either the United States border or a point 3 nautical miles (3. 1040 ez tax forms 45 statute miles) from low tide on the coast line, or when it leaves a port or station in the 225-mile zone. 1040 ez tax forms Therefore, this transportation is subject to the percentage tax on the part of the trip in U. 1040 ez tax forms S. 1040 ez tax forms airspace, the domestic-segment tax for each domestic segment, and the tax on the use of international air travel facilities, discussed later. 1040 ez tax forms Transportation within Alaska or Hawaii. 1040 ez tax forms   The tax on transportation of persons by air applies to the entire fare paid in the case of flights between any of the Hawaiian Islands, and between any ports or stations in the Aleutian Islands or other ports or stations elsewhere in Alaska. 1040 ez tax forms The tax applies even though parts of the flights may be over international waters or over Canada, if no point on the direct line of transportation between the ports or stations is more than 225 miles from the United States (Hawaii or Alaska). 1040 ez tax forms Package tours. 1040 ez tax forms   The air transportation taxes apply to “complimentary” air transportation furnished solely to participants in package holiday tours. 1040 ez tax forms The amount paid for these package tours includes a charge for air transportation even though it may be advertised as “free. 1040 ez tax forms ” This rule also applies to the tax on the use of international air travel facilities, discussed later. 1040 ez tax forms Liability for tax. 1040 ez tax forms   The person paying for taxable transportation is liable for the tax and, ordinarily, the person receiving the payment collects the tax, files the returns, and pays the tax over to the government. 1040 ez tax forms However, if payment is made outside the United States for a prepaid order, exchange order, or similar order, the person furnishing the initial transportation provided for under that order must collect the tax. 1040 ez tax forms    A travel agency that is an independent broker and sells tours on aircraft that it charters must collect the transportation tax, file the returns, and pay the tax over to the government. 1040 ez tax forms However, a travel agency that sells tours as the agent of an airline must collect the tax and remit it to the airline for the filing of returns and for the payment of the tax over to the government. 1040 ez tax forms An independent third party that is not under the airline's supervision or control, but is acting on behalf of, and receiving compensation from, a passenger, is not required to collect the tax and pay it to the government. 1040 ez tax forms For more information on resellers of air transportation, see Revenue Ruling 2006-52. 1040 ez tax forms You can find Revenue Ruling 2006-52 on page 761 of I. 1040 ez tax forms R. 1040 ez tax forms B. 1040 ez tax forms 2006-43 at www. 1040 ez tax forms irs. 1040 ez tax forms gov/pub/irs-irbs/irb06-43. 1040 ez tax forms pdf. 1040 ez tax forms   The fact that the aircraft does not use public or commercial airports in taking off and landing has no effect on the tax. 1040 ez tax forms But see Certain helicopter uses, later. 1040 ez tax forms   For taxable transportation that begins and ends in the United States, the tax applies regardless of whether the payment is made in or outside the United States. 1040 ez tax forms   If the tax is not paid when payment for the transportation is made, the air carrier providing the initial segment of the transportation that begins or ends in the United States becomes liable for the tax. 1040 ez tax forms Exemptions. 1040 ez tax forms   The tax on transportation of persons by air does not apply in the following situations. 1040 ez tax forms See also Special Rules on Transportation Taxes, later. 1040 ez tax forms Military personnel on international trips. 1040 ez tax forms   When traveling in uniform at their own expense, United States military personnel on authorized leave are deemed to be traveling in uninterrupted international air transportation (defined earlier) even if the scheduled interval between arrival and departure at any station in the United States is actually more than 12 hours. 1040 ez tax forms However, such personnel must buy their tickets within 12 hours after landing at the first domestic airport and accept the first available accommodation of the type called for by their tickets. 1040 ez tax forms The trip must begin or end outside the United States and the 225-mile zone. 1040 ez tax forms Certain helicopter uses. 1040 ez tax forms   The tax does not apply to air transportation by helicopter if the helicopter is used for any of the following purposes. 1040 ez tax forms Transporting individuals, equipment, or supplies in the exploration for, or the development or removal of, hard minerals, oil, or gas. 1040 ez tax forms Planting, cultivating, cutting, transporting, or caring for trees (including logging operations). 1040 ez tax forms Providing emergency medical transportation. 1040 ez tax forms   However, during a use described in items (1) or (2), the tax applies if the helicopter takes off from, or lands at, a facility eligible for assistance under the Airport and Airway Development Act of 1970, or otherwise uses services provided under section 44509 or 44913(b) or subchapter I of chapter 471 of title 49, United States Code. 1040 ez tax forms For item (1), treat each flight segment as a separate flight. 1040 ez tax forms Fixed-wing aircraft uses. 1040 ez tax forms   The tax does not apply to air transportation by fixed-wing aircraft if the fixed-wing aircraft is used for any of the following purposes. 1040 ez tax forms Planting, cultivating, cutting, transporting, or caring for trees (including logging operations). 1040 ez tax forms Providing emergency medical transportation. 1040 ez tax forms The aircraft must be equipped for and exclusively dedicated on that flight to acute care emergency medical services. 1040 ez tax forms   However, during a use described in item (1), the tax applies if the fixed-wing aircraft takes off from, or lands at, a facility eligible for assistance under the Airport and Airway Development Act of 1970, or otherwise uses services provided under section 44509 or 44913(b) or subchapter I of chapter 471 of title 49, United States Code. 1040 ez tax forms Skydiving. 1040 ez tax forms   The tax does not apply to any air transportation exclusively for the purpose of skydiving. 1040 ez tax forms Seaplanes. 1040 ez tax forms   The tax does not apply to any air transportation by seaplane for any segment consisting of a takeoff from, and a landing on, water if the places where the takeoff and landing occur are not receiving financial assistance from the Airport and Airways Trust Fund. 1040 ez tax forms Bonus tickets. 1040 ez tax forms   The tax does not apply to free bonus tickets issued by an airline company to its customers who have satisfied all requirements to qualify for the bonus tickets. 1040 ez tax forms However, the tax applies to amounts paid by customers for advance bonus tickets when customers have traveled insufficient mileage to fully qualify for the free advance bonus tickets. 1040 ez tax forms International Air Travel Facilities A tax per person is imposed (whether in or outside the United States) for international flights that begin or end in the United States. 1040 ez tax forms However, for a domestic segment that begins or ends in Alaska or Hawaii, a reduced tax per person applies only to departures. 1040 ez tax forms This tax does not apply if all the transportation is subject to the percentage tax, discussed earlier. 1040 ez tax forms It also doesn't apply if the surtax on fuel used in a fractional ownership program aircraft (discussed earlier) is imposed. 1040 ez tax forms See the Instructions for Form 720 for the tax rates. 1040 ez tax forms Transportation of Property by Air A tax of 6. 1040 ez tax forms 25% is imposed on amounts paid (whether in or outside the United States) for transportation of property by air. 1040 ez tax forms The fact that the aircraft may not use public or commercial airports in taking off and landing has no effect on the tax. 1040 ez tax forms The tax applies only to amounts paid to a person engaged in the business of transporting property by air for hire. 1040 ez tax forms The tax applies only to transportation (including layover time and movement of aircraft in deadhead service) that begins and ends in the United States. 1040 ez tax forms Thus, the tax does not apply to transportation of property by air that begins or ends outside the United States. 1040 ez tax forms Exemptions. 1040 ez tax forms   The tax on transportation of property by air does not apply in the following situations. 1040 ez tax forms See also Special Rules on Transportation Taxes, later. 1040 ez tax forms Cropdusting and firefighting service. 1040 ez tax forms   The tax does not apply to amounts paid for cropdusting or aerial firefighting service. 1040 ez tax forms Exportation. 1040 ez tax forms    The tax does not apply to payments for transportation of property by air in the course of exportation (including to United States possessions) by continuous movement, as evidenced by the execution of Form 1363, Export Exemption Certificate. 1040 ez tax forms See Form 1363 for more information. 1040 ez tax forms Certain helicopter and fixed-wing air ambulance uses. 1040 ez tax forms   The tax does not apply to amounts paid for the use of helicopters in construction to set heating and air conditioning units on roofs of buildings, to dismantle tower cranes, and to aid in construction of power lines and ski lifts. 1040 ez tax forms   The tax also does not apply to air transportation by helicopter or fixed-wing aircraft for the purpose of providing emergency medical services. 1040 ez tax forms The fixed-wing aircraft must be equipped for and exclusively dedicated on that flight to acute care emergency medical services. 1040 ez tax forms Skydiving. 1040 ez tax forms   The tax does not apply to any air transportation exclusively for the purpose of skydiving. 1040 ez tax forms Excess baggage. 1040 ez tax forms    The tax does not apply to excess baggage accompanying a passenger on an aircraft operated on an established line. 1040 ez tax forms Surtax on fuel used in a fractional ownership program aircraft. 1040 ez tax forms   The tax does not apply if the surtax on fuel used in a fractional ownership program aircraft (discussed earlier) is imposed. 1040 ez tax forms Alaska and Hawaii. 1040 ez tax forms   For transportation of property to and from Alaska and Hawaii, the tax in general does not apply to the portion of the transportation that is entirely outside the continental United States (or the 225-mile zone if the aircraft departs from or arrives at an airport in the 225-mile zone). 1040 ez tax forms But the tax applies to flights between ports or stations in Alaska and the Aleutian Islands, as well as between ports or stations in Hawaii. 1040 ez tax forms The tax applies even though parts of the flights may be over international waters or over Canada, if no point on a line drawn from where the route of transportation leaves the United States (Alaska) to where it reenters the United States (Alaska) is more than 225 miles from the United States. 1040 ez tax forms Liability for tax. 1040 ez tax forms   The person paying for taxable transportation is liable for the tax and, ordinarily, the person engaged in the business of transporting property by air for hire receives the payment, collects the tax, files the returns, and pays the tax over to the government. 1040 ez tax forms   If tax is not paid when a payment is made outside the United States, the person furnishing the last segment of taxable transportation collects the tax from the person to whom the property is delivered in the United States. 1040 ez tax forms Special Rules on Transportation Taxes In certain circumstances, special rules apply to the taxes on transportation of persons and property by air. 1040 ez tax forms Aircraft used by affiliated corporations. 1040 ez tax forms   The taxes do not apply to payments received by one member of an affiliated group of corporations from another member for services furnished in connection with the use of an aircraft. 1040 ez tax forms However, the aircraft must be owned or leased by a member of the affiliated group and cannot be available for hire by a nonmember of the affiliated group. 1040 ez tax forms Determine whether an aircraft is available for hire by a nonmember of an affiliated group on a flight-by-flight basis. 1040 ez tax forms   For this rule, an affiliated group of corporations is any group of corporations connected with a common parent corporation through 80% or more of stock ownership. 1040 ez tax forms Small aircraft. 1040 ez tax forms   The taxes do not apply to transportation furnished by an aircraft having a maximum certificated takeoff weight of 6,000 pounds or less. 1040 ez tax forms However, the taxes do apply if the aircraft is operated on an established line. 1040 ez tax forms “Operated on an established line” means the aircraft operates with some degree of regularity between definite points. 1040 ez tax forms However, it does not include any time an aircraft is being operated on a flight that is solely for sightseeing. 1040 ez tax forms   Consider an aircraft to be operated on an established line if it is operated on a charter basis between two cities also served by that carrier on a regularly scheduled basis. 1040 ez tax forms   Also, the taxes apply if the aircraft is jet-powered, regardless of its maximum certificated takeoff weight or whether or not it is operated on an established line. 1040 ez tax forms Mixed load of persons and property. 1040 ez tax forms   If a single amount is paid for air transportation of persons and property, the payment must be allocated between the amount subject to the tax on transportation of persons and the amount subject to the tax on transportation of property. 1040 ez tax forms The allocation must be reasonable and supported by adequate records. 1040 ez tax forms Credits or refunds. 1040 ez tax forms   If tax is collected and paid over for air transportation that is not taxable air transportation, the collector may claim a credit or refund if it has repaid the tax to the person from whom the tax was collected or obtained the consent of that person to the allowance of the credit or refund. 1040 ez tax forms Alternatively, the person who paid the tax may claim a refund. 1040 ez tax forms For information on how to file for credits or refunds, see the Instructions for Form 720 or Form 8849. 1040 ez tax forms Prev  Up  Next   Home   More Online Publications
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Letter 2271C Frequently Asked Questions (FAQs)

What is the letter telling me?

This letter confirms your financial request for an Installment Agreement has been approved.  It explains the fees we charge for establishing your agreement.  It also explains what to do if you qualify for a Low Income Fee Reduction.  This letter can also request missing information need based on the financial you previously provided.

What do I have to do?

The letter tells you what your payment due date is. You should mail your payment to us 10 days prior to the due date.  It tells you what items you need to put on your check so it can be correctly identified and applied to your account. If the letter is requesting more information, please provid the requested information.

How much time do I have?

The letter tells you the date when you first payment is due or the date you should return the requested information.

What happens if I don't take any action?

If installment payments are not received as agreed or requested documentation is not received, we can proceed with enforcement action and may file a levy on your wages or bank account or file a lien on your personal property.

Who should I contact?

If you have any questions about this letter, call us at the number printed in the letter. The person who answers the phone will assist you.

What if I don't agree or have already taken corrective action?

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

Page Last Reviewed or Updated: 30-Jan-2014

The 1040 Ez Tax Forms

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