File your Taxes for Free!
  • Get your maximum refund*
  • 100% accurate calculations guaranteed*

TurboTax Federal Free Edition - File Taxes Online

Don't let filing your taxes get you down! We'll help make it as easy as possible. With e-file and direct deposit, there's no faster way to get your refund!

Approved TurboTax Affiliate Site. TurboTax and TurboTax Online, among others, are registered trademarks and/or service marks of Intuit Inc. in the United States and other countries. Other parties' trademarks or service marks are the property of the respective owners.


© 2012 - 2018 All rights reserved.

This is an Approved TurboTax Affiliate site. TurboTax and TurboTax Online, among other are registered trademarks and/or service marks of Intuit, Inc. in the United States and other countries. Other parties' trademarks or service marks are the property of the respective owners.
When discussing "Free e-file", note that state e-file is an additional fee. E-file fees do not apply to New York state returns. Prices are subject to change without notice. E-file and get your refund faster
*If you pay an IRS or state penalty or interest because of a TurboTax calculations error, we'll pay you the penalty and interest.
*Maximum Refund Guarantee - or Your Money Back: If you get a larger refund or smaller tax due from another tax preparation method, we'll refund the applicable TurboTax federal and/or state purchase price paid. TurboTax Federal Free Edition customers are entitled to payment of $14.99 and a refund of your state purchase price paid. Claims must be submitted within sixty (60) days of your TurboTax filing date and no later than 6/15/14. E-file, Audit Defense, Professional Review, Refund Transfer and technical support fees are excluded. This guarantee cannot be combined with the TurboTax Satisfaction (Easy) Guarantee. *We're so confident your return will be done right, we guarantee it. Accurate calculations guaranteed. If you pay an IRS or state penalty or interest because of a TurboTax calculations error, we'll pay you the penalty and interest.
https://turbotax.intuit.com/corp/guarantees.jsp

2008 Tax Software

How Can I File My State Taxes For FreeHow To Amend A Tax Return 2011Military Hr BlockInstructions For 1040ezTax PreparationIrs Form 1040Printable Tax Form 1040xFree Online Taxes 2012IrsfreetaxIrs 1040x FormWww Freefilefillableforms Com Ffa Freefileforms HtmFile An Extension For 2011 Taxes Online140xTax Planning Us 1040Free Turbotax 2013Turbotax Military 2012Tax Credits For StudentsFiling An Amended Tax Return For 2013Www Irs Gov EitcFile 2011 Taxes Online For Free2011 Tax PrepAmendment FormGo 2011 Taxes 2013Tax Forms 1040How To File Amended Tax Return For 2012Federal Tax Forms 1040xEfile 2012Tax 20102011 Tax Return Forms040ez1040nr FilingFree Hr BlockLast Day To File Taxes 2013E File State Tax For Free1040a1040ezformFree Tax Filing Online 2011How To Fill 1040xFree Efile State TaxesForm 1040 Es

2008 Tax Software

2008 tax software Publication 542 - Main Content Table of Contents Businesses Taxed as CorporationsPersonal services. 2008 tax software Employee-owners. 2008 tax software Other rules. 2008 tax software Other rules. 2008 tax software Property Exchanged for StockNonqualified preferred stock. 2008 tax software Liabilities. 2008 tax software Election to reduce basis. 2008 tax software Capital Contributions Filing and Paying Income TaxesIncome Tax Return Penalties Estimated Tax U. 2008 tax software S. 2008 tax software Real Property Interest Accounting MethodsSection 481(a) adjustment. 2008 tax software Accounting Periods Recordkeeping Income, Deductions, and Special ProvisionsCosts of Going Into Business Related Persons Income From Qualifying Shipping Activities Election to Expense Qualified Refinery Property Deduction to Comply With EPA Sulfur Regulations Energy-Efficient Commercial Building Property Deduction Corporate Preference Items Dividends-Received Deduction Extraordinary Dividends Below-Market Loans Charitable Contributions Capital Losses Net Operating Losses At-Risk Limits Passive Activity Limits Figuring TaxTax Rate Schedule Alternative Minimum Tax (AMT) Credits Recapture Taxes Accumulated Earnings Tax Distributions to ShareholdersMoney or Property Distributions Distributions of Stock or Stock Rights Constructive Distributions Reporting Dividends and Other Distributions How To Get Tax Help Businesses Taxed as Corporations The rules you must use to determine whether a business is taxed as a corporation changed for businesses formed after 1996. 2008 tax software Business formed before 1997. 2008 tax software   A business formed before 1997 and taxed as a corporation under the old rules will generally continue to be taxed as a corporation. 2008 tax software Business formed after 1996. 2008 tax software   The following businesses formed after 1996 are taxed as corporations. 2008 tax software A business formed under a federal or state law that refers to it as a corporation, body corporate, or body politic. 2008 tax software A business formed under a state law that refers to it as a joint-stock company or joint-stock association. 2008 tax software An insurance company. 2008 tax software Certain banks. 2008 tax software A business wholly owned by a state or local government. 2008 tax software A business specifically required to be taxed as a corporation by the Internal Revenue Code (for example, certain publicly traded partnerships). 2008 tax software Certain foreign businesses. 2008 tax software Any other business that elects to be taxed as a corporation. 2008 tax software For example, a limited liability company (LLC) can elect to be treated as an association taxable as a corporation by filing Form 8832, Entity Classification Election. 2008 tax software For more information about LLCs, see Publication 3402, Taxation of Limited Liability Companies. 2008 tax software S corporations. 2008 tax software   Some corporations may meet the qualifications for electing to be S corporations. 2008 tax software For information on S corporations, see the instructions for Form 1120S, U. 2008 tax software S. 2008 tax software Income Tax Return for an S Corporation. 2008 tax software Personal service corporations. 2008 tax software   A corporation is a personal service corporation if it meets all of the following requirements. 2008 tax software Its principal activity during the “testing period” is performing personal services (defined later). 2008 tax software Generally, the testing period for any tax year is the prior tax year. 2008 tax software If the corporation has just been formed, the testing period begins on the first day of its tax year and ends on the earlier of: The last day of its tax year, or The last day of the calendar year in which its tax year begins. 2008 tax software Its employee-owners substantially perform the services in (1), above. 2008 tax software This requirement is met if more than 20% of the corporation's compensation cost for its activities of performing personal services during the testing period is for personal services performed by employee-owners. 2008 tax software Its employee-owners own more than 10% of the fair market value of its outstanding stock on the last day of the testing period. 2008 tax software Personal services. 2008 tax software   Personal services include any activity performed in the fields of accounting, actuarial science, architecture, consulting, engineering, health (including veterinary services), law, and the performing arts. 2008 tax software Employee-owners. 2008 tax software   A person is an employee-owner of a personal service corporation if both of the following apply. 2008 tax software He or she is an employee of the corporation or performs personal services for, or on behalf of, the corporation (even if he or she is an independent contractor for other purposes) on any day of the testing period. 2008 tax software He or she owns any stock in the corporation at any time during the testing period. 2008 tax software Other rules. 2008 tax software   For other rules that apply to personal service corporations see Accounting Periods, later. 2008 tax software Closely held corporations. 2008 tax software   A corporation is closely held if all of the following apply. 2008 tax software It is not a personal service corporation. 2008 tax software At any time during the last half of the tax year, more than 50% of the value of its outstanding stock is, directly or indirectly, owned by or for five or fewer individuals. 2008 tax software “Individual” includes certain trusts and private foundations. 2008 tax software Other rules. 2008 tax software   For the at-risk rules that apply to closely held corporations, seeAt-Risk Limits, later. 2008 tax software Property Exchanged for Stock If you transfer property (or money and property) to a corporation in exchange for stock in that corporation (other than nonqualified preferred stock, described later), and immediately afterward you are in control of the corporation, the exchange is usually not taxable. 2008 tax software This rule applies both to individuals and to groups who transfer property to a corporation. 2008 tax software It also applies whether the corporation is being formed or is already operating. 2008 tax software It does not apply in the following situations. 2008 tax software The corporation is an investment company. 2008 tax software You transfer the property in a bankruptcy or similar proceeding in exchange for stock used to pay creditors. 2008 tax software The stock is received in exchange for the corporation's debt (other than a security) or for interest on the corporation's debt (including a security) that accrued while you held the debt. 2008 tax software Both the corporation and any person involved in a nontaxable exchange of property for stock must attach to their income tax returns a complete statement of all facts pertinent to the exchange. 2008 tax software For more information, see section 1. 2008 tax software 351-3 of the Regulations. 2008 tax software Control of a corporation. 2008 tax software   To be in control of a corporation, you or your group of transferors must own, immediately after the exchange, at least 80% of the total combined voting power of all classes of stock entitled to vote and at least 80% of the outstanding shares of each class of nonvoting stock. 2008 tax software Example 1. 2008 tax software You and Bill Jones buy property for $100,000. 2008 tax software You both organize a corporation when the property has a fair market value of $300,000. 2008 tax software You transfer the property to the corporation for all its authorized capital stock, which has a par value of $300,000. 2008 tax software No gain is recognized by you, Bill, or the corporation. 2008 tax software Example 2. 2008 tax software You and Bill transfer the property with a basis of $100,000 to a corporation in exchange for stock with a fair market value of $300,000. 2008 tax software This represents only 75% of each class of stock of the corporation. 2008 tax software The other 25% was already issued to someone else. 2008 tax software You and Bill recognize a taxable gain of $200,000 on the transaction. 2008 tax software Services rendered. 2008 tax software   The term property does not include services rendered or to be rendered to the issuing corporation. 2008 tax software The value of stock received for services is income to the recipient. 2008 tax software Example. 2008 tax software You transfer property worth $35,000 and render services valued at $3,000 to a corporation in exchange for stock valued at $38,000. 2008 tax software Right after the exchange, you own 85% of the outstanding stock. 2008 tax software No gain is recognized on the exchange of property. 2008 tax software However, you recognize ordinary income of $3,000 as payment for services you rendered to the corporation. 2008 tax software Property of relatively small value. 2008 tax software   The term property does not include property of a relatively small value when it is compared to the value of stock and securities already owned or to be received for services by the transferor if the main purpose of the transfer is to qualify for the nonrecognition of gain or loss by other transferors. 2008 tax software   Property transferred will not be considered to be of relatively small value if its fair market value is at least 10% of the fair market value of the stock and securities already owned or to be received for services by the transferor. 2008 tax software Stock received in disproportion to property transferred. 2008 tax software   If a group of transferors exchange property for corporate stock, each transferor does not have to receive stock in proportion to his or her interest in the property transferred. 2008 tax software If a disproportionate transfer takes place, it will be treated for tax purposes in accordance with its true nature. 2008 tax software It may be treated as if the stock were first received in proportion and then some of it used to make gifts, pay compensation for services, or satisfy the transferor's obligations. 2008 tax software Money or other property received. 2008 tax software   If, in an otherwise nontaxable exchange of property for corporate stock, you also receive money or property other than stock, you may have to recognize gain. 2008 tax software You must recognize gain only up to the amount of money plus the fair market value of the other property you receive. 2008 tax software The rules for figuring the recognized gain in this situation generally follow those for a partially nontaxable exchange discussed in Publication 544 under Like-Kind Exchanges. 2008 tax software If the property you give up includes depreciable property, the recognized gain may have to be reported as ordinary income from depreciation. 2008 tax software See chapter 3 of Publication 544. 2008 tax software No loss is recognized. 2008 tax software Nonqualified preferred stock. 2008 tax software   Nonqualified preferred stock is treated as property other than stock. 2008 tax software Generally, it is preferred stock with any of the following features. 2008 tax software The holder has the right to require the issuer or a related person to redeem or buy the stock. 2008 tax software The issuer or a related person is required to redeem or buy the stock. 2008 tax software The issuer or a related person has the right to redeem or buy the stock and, on the issue date, it is more likely than not that the right will be exercised. 2008 tax software The dividend rate on the stock varies with reference to interest rates, commodity prices, or similar indices. 2008 tax software For a detailed definition of nonqualified preferred stock, see section 351(g)(2) of the Internal Revenue Code. 2008 tax software Liabilities. 2008 tax software   If the corporation assumes your liabilities, the exchange generally is not treated as if you received money or other property. 2008 tax software There are two exceptions to this treatment. 2008 tax software If the liabilities the corporation assumes are more than your adjusted basis in the property you transfer, gain is recognized up to the difference. 2008 tax software However, if the liabilities assumed give rise to a deduction when paid, such as a trade account payable or interest, no gain is recognized. 2008 tax software If there is no good business reason for the corporation to assume your liabilities, or if your main purpose in the exchange is to avoid federal income tax, the assumption is treated as if you received money in the amount of the liabilities. 2008 tax software For more information on the assumption of liabilities, see section 357(d) of the Internal Revenue Code. 2008 tax software Example. 2008 tax software You transfer property to a corporation for stock. 2008 tax software Immediately after the transfer, you control the corporation. 2008 tax software You also receive $10,000 in the exchange. 2008 tax software Your adjusted basis in the transferred property is $20,000. 2008 tax software The stock you receive has a fair market value (FMV) of $16,000. 2008 tax software The corporation also assumes a $5,000 mortgage on the property for which you are personally liable. 2008 tax software Gain is realized as follows. 2008 tax software FMV of stock received $16,000 Cash received 10,000 Liability assumed by corporation 5,000 Total received $31,000 Minus: Adjusted basis of property transferred 20,000 Realized gain $11,000   The liability assumed is not treated as money or other property. 2008 tax software The recognized gain is limited to $10,000, the cash received. 2008 tax software Loss on exchange. 2008 tax software   If you have a loss from an exchange and own, directly or indirectly, more than 50% of the corporation's stock, you cannot deduct the loss. 2008 tax software For more information, see Nondeductible Loss under Sales and Exchanges Between Related Persons in chapter 2 of Publication 544. 2008 tax software Basis of stock or other property received. 2008 tax software   The basis of the stock you receive is generally the adjusted basis of the property you transfer. 2008 tax software Increase this amount by any amount treated as a dividend, plus any gain recognized on the exchange. 2008 tax software Decrease this amount by any cash you received, the fair market value of any other property you received, and any loss recognized on the exchange. 2008 tax software Also decrease this amount by the amount of any liability the corporation or another party to the exchange assumed from you, unless payment of the liability gives rise to a deduction when paid. 2008 tax software    Further decreases may be required when the corporation or another party to the exchange assumes from you a liability that gives rise to a deduction when paid, if the basis of the stock would otherwise be higher than its fair market value on the date of the exchange. 2008 tax software This rule does not apply if the entity assuming the liability acquired either substantially all of the assets or the trade or business with which the liability is associated. 2008 tax software The basis of any other property you receive is its fair market value on the date of the trade. 2008 tax software Basis of property transferred. 2008 tax software   A corporation that receives property from you in exchange for its stock generally has the same basis you had in the property, increased by any gain you recognized on the exchange. 2008 tax software However, the increase for the gain recognized may be limited. 2008 tax software For more information, see section 362 of the Internal Revenue Code. 2008 tax software Election to reduce basis. 2008 tax software   In a section 351 transaction, if the adjusted basis of the property transferred exceeds the property's fair market value, the transferor and transferee may make an irrevocable election to treat the basis of the stock received by the transferor as having a basis equal to the fair market value of the property transferred. 2008 tax software The transferor and transferee make this election by attaching a statement to their tax returns filed by the due date (including extensions) for the tax year in which the transaction occurred. 2008 tax software However, if the transferor makes the election by including the certification provided in Notice 2005-70, 2005-41, I. 2008 tax software R. 2008 tax software B. 2008 tax software 694, on or with its tax return filed by the due date (including extensions), then no election need be made by the transferee. 2008 tax software    For more information on making this election, see section 362(e)(2)(C) of the Internal Revenue Code, and Notice 2005-70. 2008 tax software Capital Contributions This section explains the tax treatment of contributions from shareholders and nonshareholders. 2008 tax software Paid-in capital. 2008 tax software   Contributions to the capital of a corporation, whether or not by shareholders, are paid-in capital. 2008 tax software These contributions are not taxable to the corporation. 2008 tax software Basis. 2008 tax software   The corporation's basis of property contributed to capital by a shareholder is the same as the basis the shareholder had in the property, increased by any gain the shareholder recognized on the exchange. 2008 tax software However, the increase for the gain recognized may be limited. 2008 tax software For more information, see Basis of property transferred, above, and section 362 of the Internal Revenue Code. 2008 tax software   The basis of property contributed to capital by a person other than a shareholder is zero. 2008 tax software   If a corporation receives a cash contribution from a person other than a shareholder, the corporation must reduce the basis of any property acquired with the contribution during the 12-month period beginning on the day it received the contribution by the amount of the contribution. 2008 tax software If the amount contributed is more than the cost of the property acquired, then reduce, but not below zero, the basis of the other properties held by the corporation on the last day of the 12-month period in the following order. 2008 tax software Depreciable property. 2008 tax software Amortizable property. 2008 tax software Property subject to cost depletion but not to percentage depletion. 2008 tax software All other remaining properties. 2008 tax software   Reduce the basis of property in each category to zero before going on to the next category. 2008 tax software   There may be more than one piece of property in each category. 2008 tax software Base the reduction of the basis of each property on the following ratio:   Basis of each piece of property   Bases of all properties (within that category) If the corporation wishes to make this adjustment in some other way, it must get IRS approval. 2008 tax software The corporation files a request for approval with its income tax return for the tax year in which it receives the contribution. 2008 tax software Filing and Paying Income Taxes The federal income tax is a pay-as-you-go tax. 2008 tax software A corporation generally must make estimated tax payments as it earns or receives income during its tax year. 2008 tax software After the end of the year, the corporation must file an income tax return. 2008 tax software This section will help you determine when and how to pay and file corporate income taxes. 2008 tax software For certain corporations affected by Presidentially declared disasters such as hurricanes, the due dates for filing returns, paying taxes, and performing other time-sensitive acts may be extended. 2008 tax software The IRS may also forgive the interest and penalties on any underpaid tax for the length of any extension. 2008 tax software For more information, visit www. 2008 tax software irs. 2008 tax software gov/newsroom/article/0,,id=108362. 2008 tax software 00. 2008 tax software Income Tax Return This section will help you determine when and how to report a corporation's income tax. 2008 tax software Who must file. 2008 tax software   Unless exempt under section 501 of the Internal Revenue Code, all domestic corporations in existence for any part of a tax year (including corporations in bankruptcy) must file an income tax return whether or not they have taxable income. 2008 tax software Which form to file. 2008 tax software   A corporation generally must file Form 1120, U. 2008 tax software S. 2008 tax software Corporation Income Tax Return, to report its income, gains, losses, deductions, credits, and to figure its income tax liability. 2008 tax software Certain organizations and entities must file special returns. 2008 tax software For more information, see Special Returns for Certain Organizations, in the Instructions for Form 1120. 2008 tax software Electronic filing. 2008 tax software   Corporations can generally electronically file (e-file) Form 1120 and certain related forms, schedules, and attachments. 2008 tax software Certain corporations with total assets of $10 million or more, that file at least 250 returns a year must e-file Form 1120. 2008 tax software However, in certain instances, these corporations can request a waiver. 2008 tax software For more information regarding electronic filing, visit www. 2008 tax software irs. 2008 tax software gov/efile. 2008 tax software When to file. 2008 tax software   Generally, a corporation must file its income tax return by the 15th day of the 3rd month after the end of its tax year. 2008 tax software A new corporation filing a short-period return must generally file by the 15th day of the 3rd month after the short period ends. 2008 tax software A corporation that has dissolved must generally file by the 15th day of the 3rd month after the date it dissolved. 2008 tax software Example 1. 2008 tax software A corporation's tax year ends December 31. 2008 tax software It must file its income tax return by March 15th. 2008 tax software Example 2. 2008 tax software A corporation's tax year ends June 30. 2008 tax software It must file its income tax return by September 15th. 2008 tax software   If the due date falls on a Saturday, Sunday, or legal holiday, the due date is extended to the next business day. 2008 tax software Extension of time to file. 2008 tax software   File Form 7004, Application for Automatic Extension of Time To File Certain Business Income Tax, Information and Other Returns, to request an extension of time to file a corporation income tax return. 2008 tax software The IRS will grant the extension if you complete the form properly, file it, and pay any tax due by the original due date for the return. 2008 tax software   Form 7004 does not extend the time for paying the tax due on the return. 2008 tax software Interest, and possibly penalties, will be charged on any part of the final tax due not shown as a balance due on Form 7004. 2008 tax software The interest is figured from the original due date of the return to the date of payment. 2008 tax software   For more information, see the instructions for Form 7004. 2008 tax software How to pay your taxes. 2008 tax software   A corporation must pay its tax due in full no later than the 15th day of the 3rd month after the end of its tax year. 2008 tax software Electronic Federal Tax Payment System (EFTPS). 2008 tax software   Corporations generally must use EFTPS to make deposits of all tax liabilities (including social security, Medicare, withheld income, excise, and corporate income taxes). 2008 tax software For more information on EFTPS and enrollment, visit www. 2008 tax software eftps. 2008 tax software gov or call 1-800-555-4477. 2008 tax software Also see Publication 966, The Secure Way to Pay Your Federal Taxes. 2008 tax software Note. 2008 tax software Forms 8109 and 8109-B, Federal Tax Deposit Coupon, can no longer be used to make federal tax deposits. 2008 tax software Penalties Generally, if the corporation receives a notice about interest and penalties after it files its return, send the IRS an explanation and we will determine if the corporation meets reasonable-cause criteria. 2008 tax software Do not attach an explanation when the corporation's return is filed. 2008 tax software See the instructions for your income tax return. 2008 tax software Late filing of return. 2008 tax software    A corporation that does not file its tax return by the due date, including extensions, may be penalized 5% of the unpaid tax for each month or part of a month the return is late, up to a maximum of 25% of the unpaid tax. 2008 tax software If the corporation is charged a penalty for late payment of tax (discussed next) for the same period of time, the penalty for late filing is reduced by the amount of the penalty for late payment. 2008 tax software The minimum penalty for a return that is over 60 days late is the smaller of the tax due or $100. 2008 tax software The penalty will not be imposed if the corporation can show the failure to file on time was due to a reasonable cause. 2008 tax software Late payment of tax. 2008 tax software    A corporation that does not pay the tax when due may be penalized ½ of 1% of the unpaid tax for each month or part of a month the tax is not paid, up to a maximum of 25% of the unpaid tax. 2008 tax software The penalty will not be imposed if the corporation can show that the failure to pay on time was due to a reasonable cause. 2008 tax software Trust fund recovery penalty. 2008 tax software   If income, social security, and Medicare taxes that a corporation must withhold from employee wages are not withheld or are not deposited or paid to the United States Treasury, the trust fund recovery penalty may apply. 2008 tax software The penalty is the full amount of the unpaid trust fund tax. 2008 tax software This penalty may apply to you if these unpaid taxes cannot be immediately collected from the business. 2008 tax software   The trust fund recovery penalty may be imposed on all persons who are determined by the IRS to be responsible for collecting, accounting for, and paying these taxes, and who acted willfully in not doing so. 2008 tax software   A responsible person can be an officer or employee of a corporation, an accountant, or a volunteer director/trustee. 2008 tax software A responsible person also may include one who signs checks for the corporation or otherwise has authority to cause the spending of business funds. 2008 tax software   Willfully means voluntarily, consciously, and intentionally. 2008 tax software A responsible person acts willfully if the person knows the required actions are not taking place. 2008 tax software   For more information on withholding and paying these taxes, see Publication 15 (Circular E), Employer's Tax Guide, and Publication 51, (Circular A), Agricultural Employer's Tax Guide. 2008 tax software Other penalties. 2008 tax software   Other penalties can be imposed for negligence, substantial understatement of tax, reportable transaction understatements, and fraud. 2008 tax software See sections 6662, 6662A, and 6663 of the Internal Revenue Code. 2008 tax software Estimated Tax Generally, a corporation must make installment payments if it expects its estimated tax for the year to be $500 or more. 2008 tax software If the corporation does not pay the installments when they are due, it could be subject to an underpayment penalty. 2008 tax software This section will explain how to avoid this penalty. 2008 tax software When to pay estimated tax. 2008 tax software   Installment payments are due by the 15th day of the 4th, 6th, 9th, and 12th months of the corporation's tax year. 2008 tax software Example 1. 2008 tax software Your corporation's tax year ends December 31. 2008 tax software Installment payments are due on April 15, June 15, September 15, and December 15. 2008 tax software Example 2. 2008 tax software Your corporation's tax year ends June 30. 2008 tax software Installment payments are due on October 15, December 15, March 15, and June 15. 2008 tax software   If any due date falls on a Saturday, Sunday, or legal holiday, the installment is due on the next business day. 2008 tax software How to figure each required installment. 2008 tax software   Use Form 1120-W, Estimated Tax for Corporations, as a worksheet to figure each required installment of estimated tax. 2008 tax software You will generally use one of the following two methods to figure each required installment. 2008 tax software You should use the method that yields the smallest installment payments. 2008 tax software Note. 2008 tax software In these discussions, “return” generally refers to the corporation's original return. 2008 tax software However, an amended return is considered the original return if it is filed by the due date (including extensions) of the original return. 2008 tax software Method 1. 2008 tax software   Each required installment is 25% of the income tax the corporation will show on its return for the current year. 2008 tax software Method 2. 2008 tax software   Each required installment is 25% of the income tax shown on the corporation's return for the previous year. 2008 tax software   To use Method 2: The corporation must have filed a return for the previous year, The return must have been for a full 12 months, and The return must have shown a positive tax liability (not zero). 2008 tax software Also, if the corporation is a large corporation, it can use Method 2 to figure the first installment only. 2008 tax software   See the Instructions for Form 1120-W, for the definition of a large corporation and other special rules for large corporations. 2008 tax software Other methods. 2008 tax software   If a corporation's income is expected to vary during the year because, for example, its business is seasonal, it may be able to lower the amount of one or more required installments by using one or both of the following methods. 2008 tax software The annualized income installment method. 2008 tax software The adjusted seasonal installment method. 2008 tax software Use Schedule A of Form 1120-W to determine if using one or both of these methods will lower the amount of any required installments. 2008 tax software Refiguring required installments. 2008 tax software   If after the corporation figures and deposits its estimated tax it finds that its tax liability for the year will be more or less than originally estimated, it may have to refigure its required installments to see if an underpayment penalty may apply. 2008 tax software An immediate catchup payment should be made to reduce any penalty resulting from the underpayment of any earlier installments. 2008 tax software Underpayment penalty. 2008 tax software   If the corporation does not pay a required installment of estimated tax by its due date, it may be subject to a penalty. 2008 tax software The penalty is figured separately for each installment due date. 2008 tax software The corporation may owe a penalty for an earlier due date, even if it paid enough tax later to make up the underpayment. 2008 tax software This is true even if the corporation is due a refund when its return is filed. 2008 tax software Form 2220. 2008 tax software   Use Form 2220, Underpayment of Estimated Tax by Corporations, to determine if a corporation is subject to the penalty for underpayment of estimated tax and to figure the amount of the penalty. 2008 tax software   If the corporation is charged a penalty, the amount of the penalty depends on the following three factors. 2008 tax software The amount of the underpayment. 2008 tax software The period during which the underpayment was due and unpaid. 2008 tax software The interest rate for underpayments published quarterly by the IRS in the Internal Revenue Bulletin. 2008 tax software   A corporation generally does not have to file Form 2220 with its income tax return because the IRS will figure any penalty and bill the corporation. 2008 tax software However, even if the corporation does not owe a penalty, complete and attach the form to the corporation's tax return if any of the following apply. 2008 tax software The annualized income installment method was used to figure any required installment. 2008 tax software The adjusted seasonal installment method was used to figure any required installment. 2008 tax software The corporation is a large corporation figuring its first required installment based on the prior year's tax. 2008 tax software How to pay estimated tax. 2008 tax software   A corporation is generally required to use EFTPS to pay its taxes. 2008 tax software See Electronic Federal Tax Payment System (EFTPS), earlier. 2008 tax software Also see the Instructions for Form 1120-W. 2008 tax software Quick refund of overpayments. 2008 tax software   A corporation that has overpaid its estimated tax for the tax year may be able to apply for a quick refund. 2008 tax software Use Form 4466, Corporation Application for Quick Refund of Overpayment of Estimated Tax, to apply for a quick refund of an overpayment of estimated tax. 2008 tax software A corporation can apply for a quick refund if the overpayment is: At least 10% of its expected tax liability, and At least $500. 2008 tax software Use Form 4466 to figure the corporation's expected tax liability and the overpayment of estimated tax. 2008 tax software File Form 4466 before the 16th day of the 3rd month after the end of the tax year, but before the corporation files its income tax return. 2008 tax software Do not file Form 4466 before the end of the corporation's tax year. 2008 tax software An extension of time to file the corporation's income tax return will not extend the time for filing Form 4466. 2008 tax software The IRS will act on the form within 45 days from the date you file it. 2008 tax software U. 2008 tax software S. 2008 tax software Real Property Interest If a domestic corporation acquires a U. 2008 tax software S. 2008 tax software real property interest from a foreign person or firm, the corporation may have to withhold tax on the amount it pays for the property. 2008 tax software The amount paid includes cash, the fair market value of other property, and any assumed liability. 2008 tax software If a domestic corporation distributes a U. 2008 tax software S. 2008 tax software real property interest to a foreign person or firm, it may have to withhold tax on the fair market value of the property. 2008 tax software A corporation that fails to withhold may be liable for the tax, and any penalties and interest that apply. 2008 tax software For more information, see section 1445 of the Internal Revenue Code; Publication 515, Withholding of Tax on Nonresident Aliens and Foreign Entities; Form 8288, U. 2008 tax software S. 2008 tax software Withholding Tax Return for Dispositions by Foreign Persons of U. 2008 tax software S. 2008 tax software Real Property Interests; and Form 8288-A, Statement of Withholding on Dispositions by Foreign Persons of U. 2008 tax software S. 2008 tax software Real Property Interests. 2008 tax software Accounting Methods An accounting method is a set of rules used to determine when and how income and expenses are reported. 2008 tax software Taxable income should be determined using the method of accounting regularly used in keeping the corporation's books and records. 2008 tax software In all cases, the method used must clearly show taxable income. 2008 tax software Generally, permissible methods include: Cash, Accrual, or Any other method authorized by the Internal Revenue Code. 2008 tax software Accrual method. 2008 tax software   Generally, a corporation (other than a qualified personal service corporation) must use the accrual method of accounting if its average annual gross receipts exceed $5 million. 2008 tax software A corporation engaged in farming operations also must use the accrual method. 2008 tax software   If inventories are required, the accrual method generally must be used for sales and purchases of merchandise. 2008 tax software However, qualifying taxpayers and eligible businesses of qualifying small business taxpayers are excepted from using the accrual method for eligible trades or businesses and may account for inventoriable items as materials and supplies that are not incidental. 2008 tax software   Under the accrual method, an amount is includable in income when: All the events have occurred that fix the right to receive the income, which is the earliest of the date: The required performance takes place, Payment is due, or Payment is received; and The amount can be determined with reasonable accuracy. 2008 tax software   Generally, an accrual basis taxpayer can deduct accrued expenses in the tax year when: All events that determine the liability have occurred, The amount of the liability can be figured with reasonable accuracy, and Economic performance takes place with respect to the expense. 2008 tax software   There are exceptions to the economic performance rule for certain items, including recurring expenses. 2008 tax software See section 461(h) of the Internal Revenue Code and the related regulations for the rules for determining when economic performance takes place. 2008 tax software Nonaccrual experience method. 2008 tax software   Accrual method corporations are not required to maintain accruals for certain amounts from the performance of services that, on the basis of their experience, will not be collected, if: The services are in the fields of health, law, engineering, architecture, accounting, actuarial science, performing arts, or consulting; or The corporation's average annual gross receipts for the 3 prior tax years does not exceed $5 million. 2008 tax software   This provision does not apply if interest is required to be paid on the amount or if there is any penalty for failure to pay the amount timely. 2008 tax software Percentage of completion method. 2008 tax software   Long-term contracts (except for certain real property construction contracts) must generally be accounted for using the percentage of completion method described in section 460 of the Internal Revenue Code. 2008 tax software Mark-to-market accounting method. 2008 tax software   Generally, dealers in securities must use the mark-to-market accounting method described in section 475 of the Internal Revenue Code. 2008 tax software Under this method any security held by a dealer as inventory must be included in inventory at its FMV. 2008 tax software Any security not held as inventory at the close of the tax year is treated as sold at its FMV on the last business day of the tax year. 2008 tax software Any gain or loss must be taken into account in determining gross income. 2008 tax software The gain or loss taken into account is treated as ordinary gain or loss. 2008 tax software   Dealers in commodities and traders in securities and commodities can elect to use the mark-to-market accounting method. 2008 tax software Change in accounting method. 2008 tax software   A corporation can change its method of accounting used to report taxable income (for income as a whole or for the treatment of any material item). 2008 tax software The corporation must file Form 3115, Application for Change in Accounting Method. 2008 tax software For more information, see Form 3115 and Publication 538. 2008 tax software Section 481(a) adjustment. 2008 tax software   The corporation may have to make an adjustment under section 481(a) of the Internal Revenue Code to prevent amounts of income or expense from being duplicated or omitted. 2008 tax software The section 481(a) adjustment period is generally 1 year for a net negative adjustment and 4 years for a net positive adjustment. 2008 tax software However, a corporation can elect to use a 1-year adjustment period if the net section 481(a) adjustment for the change is less than $25,000. 2008 tax software The corporation must complete the appropriate lines of Form 3115 to make the election. 2008 tax software See the Instructions for Form 3115. 2008 tax software Accounting Periods A corporation must figure its taxable income on the basis of a tax year. 2008 tax software A tax year is the annual accounting period a corporation uses to keep its records and report its income and expenses. 2008 tax software Generally, corporations can use either a calendar year or a fiscal year as its tax year. 2008 tax software Unless special rules apply, a corporation generally adopts a tax year by filing its first federal income tax return using that tax year. 2008 tax software For more information, see Publication 538. 2008 tax software Personal service corporation. 2008 tax software   A personal service corporation must use a calendar year as its tax year unless: It elects to use a 52–53 week tax year that ends with reference to the calendar year; It can establish a business purpose for a different tax year and obtains approval of the IRS. 2008 tax software See Form 1128, Application To Adopt, Change, or Retain a Tax Year, and Publication 538; or It elects under section 444 of the Internal Revenue Code to have a tax year other than a calendar year. 2008 tax software Use Form 8716, Election to Have a Tax Year Other Than a Required Tax Year, to make the election. 2008 tax software   If a personal service corporation makes a section 444 election, its deduction for certain amounts paid to employee-owners may be limited. 2008 tax software See Schedule H (Form 1120), Section 280H Limitations for a Personal Service Corporation (PSC), to figure the maximum deduction. 2008 tax software Change of tax year. 2008 tax software   Generally, a corporation must get the consent of the IRS before changing its tax year by filing Form 1128. 2008 tax software However, under certain conditions, a corporation can change its tax year without getting the consent. 2008 tax software For more information, see Form 1128 and Publication 538. 2008 tax software Recordkeeping A corporation should keep its records for as long as they may be needed for the administration of any provision of the Internal Revenue Code. 2008 tax software Usually records that support items of income, deductions, or credits on the return must be kept for 3 years from the date the return is due or filed, whichever is later. 2008 tax software Keep records that verify the corporation's basis in property for as long as they are needed to figure the basis of the original or replacement property. 2008 tax software The corporation should keep copies of all filed returns. 2008 tax software They help in preparing future and amended returns and in the calculation of earnings and profits. 2008 tax software Income, Deductions, and Special Provisions Rules on income and deductions that apply to individuals also apply, for the most part, to corporations. 2008 tax software However, the following special provisions apply only to corporations. 2008 tax software Costs of Going Into Business When you go into business, treat all costs you incur to get your business started as capital expenses. 2008 tax software However, a corporation can elect to deduct a limited amount of start-up or organizational costs. 2008 tax software Any costs not deducted can be amortized. 2008 tax software Start-up costs are costs for creating an active trade or business or investigating the creation or acquisition of an active trade or business. 2008 tax software Organizational costs are the direct costs of creating the corporation. 2008 tax software For more information on deducting or amortizing start-up and organizational costs, see the instructions for your income tax return. 2008 tax software Also see, Publication 535, chapter 7, Costs You Can Deduct or Capitalize, and chapter 8, Amortization. 2008 tax software Related Persons A corporation that uses an accrual method of accounting cannot deduct business expenses and interest owed to a related person who uses the cash method of accounting until the corporation makes the payment and the corresponding amount is includible in the related person's gross income. 2008 tax software Determine the relationship, for this rule, as of the end of the tax year for which the expense or interest would otherwise be deductible. 2008 tax software If a deduction is denied, the rule will continue to apply even if the corporation's relationship with the person ends before the expense or interest is includible in the gross income of that person. 2008 tax software These rules also deny the deduction of losses on the sale or exchange of property between related persons. 2008 tax software Related persons. 2008 tax software   For purposes of this rule, the following persons are related to a corporation. 2008 tax software Another corporation, that is a member of the same controlled group (as defined in section 267(f) of the Internal Revenue Code). 2008 tax software An individual who owns, directly or indirectly, more than 50% of the value of the outstanding stock of the corporation. 2008 tax software A trust fiduciary, when the trust or the grantor of the trust owns, directly or indirectly, more than 50% in value of the outstanding stock of the corporation. 2008 tax software An S corporation, if the same persons own more than 50% in value of the outstanding stock of each corporation. 2008 tax software A partnership, if the same persons own more than 50% in value of the outstanding stock of the corporation and more than 50% of the capital or profits interest in the partnership. 2008 tax software Any employee-owner, if the corporation is a personal service corporation (see Personal service corporation, earlier), regardless of the amount of stock owned by the employee-owner. 2008 tax software Ownership of stock. 2008 tax software   To determine whether an individual directly or indirectly owns any of the outstanding stock of a corporation, the following apply. 2008 tax software Stock owned, directly or indirectly, by or for a corporation, partnership, estate, or trust, is treated as being owned proportionately by or for its shareholders, partners, or beneficiaries. 2008 tax software An individual is treated as owning the stock owned, directly or indirectly, by or for the individual's family. 2008 tax software Family includes only brothers and sisters (including half brothers and half sisters), a spouse, ancestors, and lineal descendants. 2008 tax software Any individual owning (other than by applying (2), above) stock in a corporation, is treated as also owning the stock owned directly or indirectly by that individual's partner. 2008 tax software To apply (1), (2), or (3), above, stock constructively owned by a person under (1) is treated as actually owned by that person. 2008 tax software But stock constructively owned by an individual under (2) or (3) is not treated as actually owned by the individual for applying either (2) or (3) to make another person the constructive owner of that stock. 2008 tax software Reallocation of income and deductions. 2008 tax software   Where it is necessary to clearly show income or prevent tax evasion, the IRS can reallocate gross income, deductions, credits, or allowances between two or more organizations, trades, or businesses owned or controlled directly, or indirectly, by the same interests. 2008 tax software Complete liquidations. 2008 tax software   The disallowance of losses from the sale or exchange of property between related persons does not apply to liquidating distributions. 2008 tax software More information. 2008 tax software   For more information about the related person rules, see Publication 544. 2008 tax software Income From Qualifying Shipping Activities A corporation may make an election to be taxed on its notional shipping income at the highest corporate tax rate. 2008 tax software If a corporation makes this election it may exclude income from qualifying shipping activities from gross income. 2008 tax software Also if the election is made, the corporation generally may not claim any loss, deduction, or credit with respect to qualifying shipping activities. 2008 tax software A corporation making this election may also elect to defer gain on the disposition of a qualifying vessel. 2008 tax software A corporation uses Form 8902, Alternative Tax on Qualifying Shipping Activities, to make the election and figure the alternative tax. 2008 tax software For more information regarding the election, see Form 8902. 2008 tax software Election to Expense Qualified Refinery Property A corporation can make an irrevocable election on its tax return filed by the due date (including extensions) to deduct 50% of the cost of qualified refinery property (defined in section 179C(c) of the Internal Revenue Code), placed in service before January 1, 2014. 2008 tax software The deduction is allowed for the year in which the property is placed in service. 2008 tax software A subchapter T cooperative can make an irrevocable election on its return by the due date (including extensions) to allocate this deduction to its owners based on their ownership interest. 2008 tax software For more information, see section 179C of the Internal Revenue Code and the related Regulations. 2008 tax software Deduction to Comply With EPA Sulfur Regulations A small business refiner can make an irrevocable election on its tax return filed by the due date (including extensions) to deduct up to 75% of qualified costs paid or incurred to comply with the Highway Diesel Fuel Sulfur Control Requirements of the Environmental Protection Agency (EPA). 2008 tax software A subchapter T cooperative can make an irrevocable election on its return filed by the due date (including extensions) to allocate the deduction to its owners based on their ownership interest. 2008 tax software For more information, see sections 45H and 179B of the Internal Revenue Code and the related Regulations. 2008 tax software Energy-Efficient Commercial Building Property Deduction A corporation can claim a deduction for costs associated with energy-efficient commercial building property, placed in service before January 1, 2014. 2008 tax software In order to qualify for the deduction: The costs must be associated with depreciable or amortizable property in a Standard 90. 2008 tax software 1-2001 domestic building; The property must be either a part of the interior lighting system, the heating, cooling, ventilation and hot water system, or the building envelope (defined in section 179D(c)(1)(C) of the Internal Revenue Code); and The property must be installed as part of a plan to reduce the total annual energy and power costs of the building by 50% or more. 2008 tax software The deduction is limited to $1. 2008 tax software 80 per square foot of the building less the total amount of deductions taken for this property in prior tax years. 2008 tax software Other rules and limitations apply. 2008 tax software The corporation must reduce the basis of any property by any deduction taken. 2008 tax software The deduction is subject to recapture if the corporation fails to fully implement an energy savings plan. 2008 tax software For more information, see section 179D of the Internal Revenue Code. 2008 tax software Also see Notice 2006-52, 2006-26 I. 2008 tax software R. 2008 tax software B. 2008 tax software 1175, clarified and amplified by Notice 2008-40, 2008-14 I. 2008 tax software R. 2008 tax software B. 2008 tax software 725, and any successor. 2008 tax software Corporate Preference Items A corporation must make special adjustments to certain items before it takes them into account in determining its taxable income. 2008 tax software These items are known as corporate preference items and they include the following. 2008 tax software Gain on the disposition of section 1250 property. 2008 tax software For more information, see section 1250 Property under Depreciation Recapture in chapter 3 of Publication 544. 2008 tax software Percentage depletion for iron ore and coal (including lignite). 2008 tax software For more information, see Mines and Geothermal Deposits under Mineral Property in chapter 9 of Publication 535. 2008 tax software Amortization of pollution control facilities. 2008 tax software For more information, see Pollution Control Facilities in chapter 8 of Publication 535 and section 291(a)(5) of the Internal Revenue Code. 2008 tax software Mineral exploration and development costs. 2008 tax software For more information, see Exploration Costs and Development Costs in chapter 7 of Publication 535. 2008 tax software For more information on corporate preference items, see section 291 of the Internal Revenue Code. 2008 tax software Dividends-Received Deduction A corporation can deduct a percentage of certain dividends received during its tax year. 2008 tax software This section discusses the general rules that apply. 2008 tax software The deduction is figured on Form 1120, Schedule C, or the applicable schedule of your income tax return. 2008 tax software For more information, see the Instructions for Form 1120, or the instructions for your applicable income tax return. 2008 tax software Dividends from domestic corporations. 2008 tax software   A corporation can deduct, within certain limits, 70% of the dividends received if the corporation receiving the dividend owns less than 20% of the corporation distributing the dividend. 2008 tax software If the corporation owns 20% or more of the distributing corporation's stock, it can, subject to certain limits, deduct 80% of the dividends received. 2008 tax software Ownership. 2008 tax software   Determine ownership, for these rules, by the amount of voting power and value of the paying corporation's stock (other than certain preferred stock) the receiving corporation owns. 2008 tax software Small business investment companies. 2008 tax software   Small business investment companies can deduct 100% of the dividends received from taxable domestic corporations. 2008 tax software Dividends from regulated investment companies. 2008 tax software   Regulated investment company dividends received are subject to certain limits. 2008 tax software Capital gain dividends received from a regulated investment company do not qualify for the deduction. 2008 tax software For more information, see section 854 of the Internal Revenue Code. 2008 tax software No deduction allowed for certain dividends. 2008 tax software   Corporations cannot take a deduction for dividends received from the following entities. 2008 tax software A real estate investment trust (REIT). 2008 tax software A corporation exempt from tax under section 501 or 521 of the Internal Revenue Code either for the tax year of the distribution or the preceding tax year. 2008 tax software A corporation whose stock was held less than 46 days during the 91-day period beginning 45 days before the stock became ex-dividend with respect to the dividend. 2008 tax software Ex-dividend means the holder has no rights to the dividend. 2008 tax software A corporation whose preferred stock was held less than 91 days during the 181-day period beginning 90 days before the stock became ex-dividend with respect to the dividend if the dividends received are for a period or periods totaling more than 366 days. 2008 tax software Any corporation, if your corporation is under an obligation (pursuant to a short sale or otherwise) to make related payments with respect to positions in substantially similar or related property. 2008 tax software Dividends on deposits. 2008 tax software   Dividends on deposits or withdrawable accounts in domestic building and loan associations, mutual savings banks, cooperative banks, and similar organizations are interest, not dividends. 2008 tax software They do not qualify for this deduction. 2008 tax software Limit on deduction for dividends. 2008 tax software   The total deduction for dividends received or accrued is generally limited (in the following order) to: 80% of the difference between taxable income and the 100% deduction allowed for dividends received from affiliated corporations, or by a small business investment company, for dividends received or accrued from 20%-owned corporations, then 70% of the difference between taxable income and the 100% deduction allowed for dividends received from affiliated corporations, or by a small business investment company, for dividends received or accrued from less-than-20%-owned corporations (reducing taxable income by the total dividends received from 20%-owned corporations). 2008 tax software Figuring the limit. 2008 tax software   In figuring the limit, determine taxable income without the following items. 2008 tax software The net operating loss deduction. 2008 tax software The domestic production activities deduction. 2008 tax software The deduction for dividends received. 2008 tax software Any adjustment due to the nontaxable part of an extraordinary dividend (see Extraordinary Dividends, below). 2008 tax software Any capital loss carryback to the tax year. 2008 tax software Effect of net operating loss. 2008 tax software   If a corporation has a net operating loss (NOL) for a tax year, the limit of 80% (or 70%) of taxable income does not apply. 2008 tax software To determine whether a corporation has an NOL, figure the dividends-received deduction without the 80% (or 70%) of taxable income limit. 2008 tax software Example 1. 2008 tax software A corporation loses $25,000 from operations. 2008 tax software It receives $100,000 in dividends from a 20%-owned corporation. 2008 tax software Its taxable income is $75,000 ($100,000 – $25,000) before the deduction for dividends received. 2008 tax software If it claims the full dividends-received deduction of $80,000 ($100,000 × 80%) and combines it with an operations loss of $25,000, it will have an NOL of ($5,000). 2008 tax software Therefore, the 80% of taxable income limit does not apply. 2008 tax software The corporation can deduct the full $80,000. 2008 tax software Example 2. 2008 tax software Assume the same facts as in Example 1, except that the corporation only loses $15,000 from operations. 2008 tax software Its taxable income is $85,000 before the deduction for dividends received. 2008 tax software After claiming the dividends-received deduction of $80,000 ($100,000 × 80%), its taxable income is $5,000. 2008 tax software Because the corporation will not have an NOL after applying a full dividends-received deduction, its allowable dividends-received deduction is limited to 80% of its taxable income, or $68,000 ($85,000 × 80%). 2008 tax software Extraordinary Dividends If a corporation receives an extraordinary dividend on stock held 2 years or less before the dividend announcement date, it generally must reduce its basis in the stock by the nontaxed part of the dividend. 2008 tax software The nontaxed part is any dividends-received deduction allowable for the dividends. 2008 tax software Extraordinary dividend. 2008 tax software   An extraordinary dividend is any dividend on stock that equals or exceeds a certain percentage of the corporation's adjusted basis in the stock. 2008 tax software The percentages are: 5% for stock preferred as to dividends, or 10% for other stock. 2008 tax software Treat all dividends received that have ex-dividend dates within an 85-consecutive-day period as one dividend. 2008 tax software Treat all dividends received that have ex-dividend dates within a 365-consecutive-day period as extraordinary dividends if the total of the dividends exceeds 20% of the corporation's adjusted basis in the stock. 2008 tax software Disqualified preferred stock. 2008 tax software   Any dividend on disqualified preferred stock is treated as an extraordinary dividend regardless of the period of time the corporation held the stock. 2008 tax software   Disqualified preferred stock is any stock preferred as to dividends if any of the following apply. 2008 tax software The stock when issued has a dividend rate that declines (or can reasonably be expected to decline) in the future. 2008 tax software The issue price of the stock exceeds its liquidation rights or stated redemption price. 2008 tax software The stock is otherwise structured to avoid the rules for extraordinary dividends and to enable corporate shareholders to reduce tax through a combination of dividends-received deductions and loss on the disposition of the stock. 2008 tax software   These rules apply to stock issued after July 10, 1989, unless it was issued under a written binding contract in effect on that date, and thereafter, before the issuance of the stock. 2008 tax software More information. 2008 tax software   For more information on extraordinary dividends, see section 1059 of the Internal Revenue Code. 2008 tax software Below-Market Loans If a corporation receives a below-market loan and uses the proceeds for its trade or business, it may be able to deduct the forgone interest. 2008 tax software A below-market loan is a loan on which no interest is charged or on which interest is charged at a rate below the applicable federal rate. 2008 tax software A below-market loan generally is treated as an arm's-length transaction in which the borrower is considered as having received both the following: A loan in exchange for a note that requires payment of interest at the applicable federal rate, and An additional payment in an amount equal to the forgone interest. 2008 tax software Treat the additional payment as a gift, dividend, contribution to capital, payment of compensation, or other payment, depending on the substance of the transaction. 2008 tax software Foregone interest. 2008 tax software   For any period, forgone interest is equal to: The interest that would be payable for that period if interest accrued on the loan at the applicable federal rate and was payable annually on December 31, minus Any interest actually payable on the loan for the period. 2008 tax software See Below-market loans, in chapter 4 of Publication 535 for more information. 2008 tax software Charitable Contributions A corporation can claim a limited deduction for charitable contributions made in cash or other property. 2008 tax software The contribution is deductible if made to, or for the use of, a qualified organization. 2008 tax software For more information on qualified organizations, see Publication 526, Charitable Contributions. 2008 tax software Also see, Exempt Organizations Select Check (EO Select Check) at www. 2008 tax software irs. 2008 tax software gov/charities, the on-line search tool for finding information on organizations eligible to receive tax-deductible contributions. 2008 tax software Note. 2008 tax software You cannot take a deduction if any of the net earnings of an organization receiving contributions benefit any private shareholder or individual. 2008 tax software Cash method corporation. 2008 tax software   A corporation using the cash method of accounting deducts contributions in the tax year paid. 2008 tax software Accrual method corporation. 2008 tax software   A corporation using an accrual method of accounting can choose to deduct unpaid contributions for the tax year the board of directors authorizes them if it pays them by the 15th day of the 3rd month after the close of that tax year. 2008 tax software Make the choice by reporting the contribution on the corporation's return for the tax year. 2008 tax software A declaration stating that the board of directors adopted the resolution during the tax year must accompany the return. 2008 tax software The declaration must include the date the resolution was adopted. 2008 tax software Limitations on deduction. 2008 tax software   A corporation cannot deduct charitable contributions that exceed 10% of its taxable income for the tax year. 2008 tax software Figure taxable income for this purpose without the following. 2008 tax software The deduction for charitable contributions. 2008 tax software The dividends-received deduction. 2008 tax software The deduction allowed under section 249 of the Internal Revenue Code. 2008 tax software The domestic production activities deduction. 2008 tax software Any net operating loss carryback to the tax year. 2008 tax software Any capital loss carryback to the tax year. 2008 tax software Farmers and ranchers. 2008 tax software    Corporations that are farmers and ranchers should see section 170(b)(2) of the Internal Revenue Code for special rules that may affect the deduction limit. 2008 tax software Carryover of excess contributions. 2008 tax software   You can carry over, within certain limits, to each of the subsequent 5 years any charitable contributions made during the current year that exceed the 10% limit. 2008 tax software You lose any excess not used within that period. 2008 tax software For example, if a corporation has a carryover of excess contributions paid in 2010 and it does not use all the excess on its return for 2011, it can carry any excess over to 2012, 2013, 2014, and 2015, if applicable. 2008 tax software Any excess not used in 2015 is lost. 2008 tax software Do not deduct a carryover of excess contributions in the carryover year until after you deduct contributions made in that year (subject to the 10% limit). 2008 tax software You cannot deduct a carryover of excess contributions to the extent it increases a net operating loss carryover. 2008 tax software Cash contributions. 2008 tax software   A corporation must maintain a record of any contribution of cash, check, or other monetary contribution, regardless of the amount. 2008 tax software The record can be a bank record, receipt, letter, or other written communication from the donee indicating the name of the organization, the date of the contribution, and the amount of the contribution. 2008 tax software Keep the record of the contribution with the other corporate records. 2008 tax software Do not attach the records to the corporation's return. 2008 tax software For more information on cash contributions, see Publication 526. 2008 tax software Gifts of $250 or more. 2008 tax software   Generally, no deduction is allowed for any contribution of $250 or more unless the corporation gets a written acknowledgement from the donee organization. 2008 tax software The acknowledgement should show the amount of cash contributed, a description of the property contributed, and either gives a description and a good faith estimate of the value of any goods or services provided in return for the contribution or states that no goods or services were provided in return for the contribution. 2008 tax software The acknowledgement should be received by the due date (including extensions) of the return, or, if earlier, the date the return was filed. 2008 tax software Keep the acknowledgement with other corporate records. 2008 tax software Do not attach the acknowledgement to the return. 2008 tax software Contributions of property other than cash. 2008 tax software   If a corporation (other than a closely-held or a personal service corporation) claims a deduction of more than $500 for contributions of property other than cash, a schedule describing the property and the method used to determine its fair market value must be attached to the corporation's return. 2008 tax software In addition the corporation should keep a record of: The approximate date and manner of acquisition of the donated property and The cost or other basis of the donated property held by the donor for less than 12 months prior to contribution. 2008 tax software   Closely held and personal service corporations must complete and attach Form 8283, Noncash Charitable Contributions, to their returns if they claim a deduction of more than $500 for non-cash contributions. 2008 tax software For all other corporations, if the deduction claimed for donated property exceeds $5,000, complete Form 8283 and attach it to the corporation's return. 2008 tax software   A corporation must obtain a qualified appraisal for all deductions of property claimed in excess of $5,000. 2008 tax software A qualified appraisal is not required for the donation of cash, publicly traded securities, inventory, and any qualified vehicles sold by a donee organization without any significant intervening use or material improvement. 2008 tax software The appraisal should be maintained with other corporate records and only attached to the corporation's return when the deduction claimed exceeds $500,000; $20,000 for donated art work. 2008 tax software   See Form 8283 for more information. 2008 tax software Qualified conservation contributions. 2008 tax software   If a corporation makes a qualified conservation contribution, the corporation must provide information regarding the legal interest being donated, the fair market value of the underlying property before and after the donation, and a description of the conservation purpose for which the property will be used. 2008 tax software For more information, see section 170(h) of the Internal Revenue Code. 2008 tax software Contributions of used vehicles. 2008 tax software   A corporation is allowed a deduction for the contribution of used motor vehicles, boats, and airplanes. 2008 tax software The deduction is limited, and other special rules apply. 2008 tax software For more information, see Publication 526. 2008 tax software Reduction for contributions of certain property. 2008 tax software   For a charitable contribution of property, the corporation must reduce the contribution by the sum of: The ordinary income and short-term capital gain that would have resulted if the property were sold at its FMV and For certain contributions, the long-term capital gain that would have resulted if the property were sold at its FMV. 2008 tax software   The reduction for the long-term capital gain applies to: Contributions of tangible personal property for use by an exempt organization for a purpose or function unrelated to the basis for its exemption; Contributions of any property to or for the use of certain private foundations except for stock for which market quotations are readily available; and Contributions of any patent, certain copyrights, trademark, trade name, trade secret, know-how, software (that is a section 197 intangible), or similar property, or applications or registrations of such property. 2008 tax software Larger deduction. 2008 tax software   A corporation (other than an S corporation) may be able to claim a deduction equal to the lesser of (a) the basis of the donated inventory or property plus one-half of the inventory or property's appreciation (gain if the donated inventory or property was sold at fair market value on the date of the donation), or (b) two times basis of the donated inventory or property. 2008 tax software This deduction may be allowed for certain contributions of: Certain inventory and other property made to a donee organization and used solely for the care of the ill, the needy, and infants. 2008 tax software Scientific property constructed by the corporation (other than an S corporation, personal holding company, or personal service corporation) and donated no later than 2 years after substantial completion of the construction. 2008 tax software The property must be donated to a qualified organization and its original use must be by the donee for research, experimentation, or research training within the United States in the area of physical or biological science. 2008 tax software Computer technology and equipment acquired or constructed and donated no later than 3 years after either acquisition or substantial completion of construction to an educational organization for educational purposes within the United States. 2008 tax software Contributions to organizations conducting lobbying activities. 2008 tax software   Contributions made to an organization that conducts lobbying activities are not deductible if: The lobbying activities relate to matters of direct financial interest to the donor's trade or business and The principal purpose of the contribution was to avoid federal income tax by obtaining a deduction for activities that would have been nondeductible under the lobbying expense rules if conducted directly by the donor. 2008 tax software More information. 2008 tax software   For more information on charitable contributions, including substantiation and recordkeeping requirements, see section 170 of the Internal Revenue Code, the related regulations, and Publication 526. 2008 tax software Capital Losses A corporation can deduct capital losses only up to the amount of its capital gains. 2008 tax software In other words, if a corporation has an excess capital loss, it cannot deduct the loss in the current tax year. 2008 tax software Instead, it carries the loss to other tax years and deducts it from any net capital gains that occur in those years. 2008 tax software A capital loss is carried to other years in the following order. 2008 tax software 3 years prior to the loss year. 2008 tax software 2 years prior to the loss year. 2008 tax software 1 year prior to the loss year. 2008 tax software Any loss remaining is carried forward for 5 years. 2008 tax software When you carry a net capital loss to another tax year, treat it as a short-term loss. 2008 tax software It does not retain its original identity as long term or short term. 2008 tax software Example. 2008 tax software A calendar year corporation has a net short-term capital gain of $3,000 and a net long-term capital loss of $9,000. 2008 tax software The short-term gain offsets some of the long-term loss, leaving a net capital loss of $6,000. 2008 tax software The corporation treats this $6,000 as a short-term loss when carried back or forward. 2008 tax software The corporation carries the $6,000 short-term loss back 3 years. 2008 tax software In year 1, the corporation had a net short-term capital gain of $8,000 and a net long-term capital gain of $5,000. 2008 tax software It subtracts the $6,000 short-term loss first from the net short-term gain. 2008 tax software This results in a net capital gain for year 1 of $7,000. 2008 tax software This consists of a net short-term capital gain of $2,000 ($8,000 − $6,000) and a net long-term capital gain of $5,000. 2008 tax software S corporation status. 2008 tax software   A corporation may not carry a capital loss from, or to, a year for which it is an S corporation. 2008 tax software Rules for carryover and carryback. 2008 tax software   When carrying a capital loss from one year to another, the following rules apply. 2008 tax software When figuring the current year's net capital loss, you cannot combine it with a capital loss carried from another year. 2008 tax software In other words, you can carry capital losses only to years that would otherwise have a total net capital gain. 2008 tax software If you carry capital losses from 2 or more years to the same year, deduct the loss from the earliest year first. 2008 tax software You cannot use a capital loss carried from another year to produce or increase a net operating loss in the year to which you carry it back. 2008 tax software Refunds. 2008 tax software   When you carry back a capital loss to an earlier tax year, refigure your tax for that year. 2008 tax software If your corrected tax is less than the tax you originally owed, use either Form 1139, Corporate Application for Tentative Refund, or Form 1120X, Amended U. 2008 tax software S. 2008 tax software Corporation Income Tax Return, to apply for a refund. 2008 tax software Form 1139. 2008 tax software    A corporation can get a refund faster by using Form 1139. 2008 tax software It cannot file Form 1139 before filing the return for the corporation's capital loss year, but it must file Form 1139 no later than 1 year after the year it sustains the capital loss. 2008 tax software Form 1120X. 2008 tax software   If the corporation does not file Form 1139, it must file Form 1120X to apply for a refund. 2008 tax software The corporation must file the Form 1120X within 3 years of the due date, includin
Español

Culture and Ethnic Groups

Explore American culture and ethnic groups.

Asian American History and Culture

Hispanic and Latino History and Culture

The 2008 Tax Software

2008 tax software 1. 2008 tax software   Nonresident Alien or Resident Alien? Table of Contents Introduction Topics - This chapter discusses: Useful Items - You may want to see: Nonresident Aliens Resident AliensGreen Card Test Substantial Presence Test Effect of Tax Treaties Dual-Status AliensFirst Year of Residency Choosing Resident Alien Status Last Year of Residency Nonresident Spouse Treated as a ResidentHow To Make the Choice Aliens From American Samoa or Puerto Rico Introduction You should first determine whether, for income tax purposes, you are a nonresident alien or a resident alien. 2008 tax software If you are both a nonresident and resident in the same year, you have a dual status. 2008 tax software Dual status is explained later. 2008 tax software Also explained later are a choice to treat your nonresident spouse as a resident and some other special situations. 2008 tax software Topics - This chapter discusses: How to determine if you are a nonresident, resident, or dual-status alien, and How to treat a nonresident spouse as a resident alien. 2008 tax software Useful Items - You may want to see: Form (and Instructions) 1040 U. 2008 tax software S. 2008 tax software Individual Income Tax Return 1040A U. 2008 tax software S. 2008 tax software Individual Income Tax Return 1040NR U. 2008 tax software S. 2008 tax software Nonresident Alien Income Tax Return 8833 Treaty-Based Return Position Disclosure Under Section 6114 or 7701(b) 8840 Closer Connection Exception Statement for Aliens 8843 Statement for Exempt Individuals and Individuals With a Medical Condition See chapter 12 for information about getting these forms. 2008 tax software Nonresident Aliens If you are an alien (not a U. 2008 tax software S. 2008 tax software citizen), you are considered a nonresident alien unless you meet one of the two tests described next under Resident Aliens. 2008 tax software Resident Aliens You are a resident alien of the United States for tax purposes if you meet either the green card test or the substantial presence test for calendar year 2013 (January 1–December 31). 2008 tax software Even if you do not meet either of these tests, you may be able to choose to be treated as a U. 2008 tax software S. 2008 tax software resident for part of the year. 2008 tax software See First-Year Choice under Dual-Status Aliens, later. 2008 tax software Green Card Test You are a resident for tax purposes if you are a lawful permanent resident of the United States at any time during calendar year 2013. 2008 tax software (However, see Dual-Status Aliens , later. 2008 tax software ) This is known as the “green card” test. 2008 tax software You are a lawful permanent resident of the United States at any time if you have been given the privilege, according to the immigration laws, of residing permanently in the United States as an immigrant. 2008 tax software You generally have this status if the U. 2008 tax software S. 2008 tax software Citizenship and Immigration Services (USCIS) (or its predecessor organization) has issued you an alien registration card, also known as a “green card. 2008 tax software ” You continue to have resident status under this test unless the status is taken away from you or is administratively or judicially determined to have been abandoned. 2008 tax software Resident status taken away. 2008 tax software   Resident status is considered to have been taken away from you if the U. 2008 tax software S. 2008 tax software government issues you a final administrative or judicial order of exclusion or deportation. 2008 tax software A final judicial order is an order that you may no longer appeal to a higher court of competent jurisdiction. 2008 tax software Resident status abandoned. 2008 tax software   An administrative or judicial determination of abandonment of resident status may be initiated by you, the USCIS, or a U. 2008 tax software S. 2008 tax software consular officer. 2008 tax software    If you initiate the determination, your resident status is considered to be abandoned when you file either of the following with the USCIS or U. 2008 tax software S. 2008 tax software consular officer. 2008 tax software Your application for abandonment. 2008 tax software Your Alien Registration Receipt Card attached to a letter stating your intent to abandon your resident status. 2008 tax software You must file the letter by certified mail, return receipt requested. 2008 tax software You must keep a copy of the letter and proof that it was mailed and received. 2008 tax software    Until you have proof your letter was received, you remain a resident alien for tax purposes even if the USCIS would not recognize the validity of your green card because it is more than ten years old or because you have been absent from the United States for a period of time. 2008 tax software   If the USCIS or U. 2008 tax software S. 2008 tax software consular officer initiates this determination, your resident status will be considered to be abandoned when the final administrative order of abandonment is issued. 2008 tax software If you are granted an appeal to a federal court of competent jurisdiction, a final judicial order is required. 2008 tax software   Under U. 2008 tax software S. 2008 tax software immigration law, a lawful permanent resident who is required to file a tax return as a resident and fails to do so may be regarded as having abandoned status and may lose permanent resident status. 2008 tax software    A long-term resident who ceases to be a lawful permanent resident may be subject to special reporting requirements and tax provisions. 2008 tax software See Expatriation Tax in chapter 4. 2008 tax software Termination of residency after June 3, 2004, and before June 17, 2008. 2008 tax software   If you terminated your residency after June 3, 2004, and before June 17, 2008, you will still be considered a U. 2008 tax software S. 2008 tax software resident for tax purposes until you notify the Secretary of Homeland Security and file Form 8854, Initial and Annual Expatriation Statement. 2008 tax software Termination of residency after June 16, 2008. 2008 tax software   For information on your residency termination date, see Former long-term resident under Expatriation After June 16, 2008, in chapter 4. 2008 tax software Substantial Presence Test You will be considered a U. 2008 tax software S. 2008 tax software resident for tax purposes if you meet the substantial presence test for calendar year 2013. 2008 tax software To meet this test, you must be physically present in the United States on at least: 31 days during 2013, and 183 days during the 3-year period that includes 2013, 2012, and 2011, counting: All the days you were present in 2013, and 1/3 of the days you were present in 2012, and 1/6 of the days you were present in 2011. 2008 tax software Example. 2008 tax software You were physically present in the United States on 120 days in each of the years 2011, 2012, and 2013. 2008 tax software To determine if you meet the substantial presence test for 2013, count the full 120 days of presence in 2013, 40 days in 2012 (1/3 of 120), and 20 days in 2011 (1/6 of 120). 2008 tax software Because the total for the 3-year period is 180 days, you are not considered a resident under the substantial presence test for 2013. 2008 tax software The term United States includes the following areas. 2008 tax software All 50 states and the District of Columbia. 2008 tax software The territorial waters of the United States. 2008 tax software The seabed and subsoil of those submarine areas that are adjacent to U. 2008 tax software S. 2008 tax software territorial waters and over which the United States has exclusive rights under international law to explore and exploit natural resources. 2008 tax software The term does not include U. 2008 tax software S. 2008 tax software possessions and territories or U. 2008 tax software S. 2008 tax software airspace. 2008 tax software Days of Presence in the United States You are treated as present in the United States on any day you are physically present in the country at any time during the day. 2008 tax software However, there are exceptions to this rule. 2008 tax software Do not count the following as days of presence in the United States for the substantial presence test. 2008 tax software Days you commute to work in the United States from a residence in Canada or Mexico if you regularly commute from Canada or Mexico. 2008 tax software Days you are in the United States for less than 24 hours when you are in transit between two places outside the United States. 2008 tax software Days you are in the United States as a crew member of a foreign vessel. 2008 tax software Days you are unable to leave the United States because of a medical condition that arose while you are in the United States. 2008 tax software Days you are an exempt individual. 2008 tax software The specific rules that apply to each of these categories are discussed next. 2008 tax software Regular commuters from Canada or Mexico. 2008 tax software   Do not count the days on which you commute to work in the United States from your residence in Canada or Mexico if you regularly commute from Canada or Mexico. 2008 tax software You are considered to commute regularly if you commute to work in the United States on more than 75% of the workdays during your working period. 2008 tax software   For this purpose, “commute” means to travel to work and return to your residence within a 24-hour period. 2008 tax software “Workdays” are the days on which you work in the United States or Canada or Mexico. 2008 tax software “Working period” means the period beginning with the first day in the current year on which you are physically present in the United States to work and ending on the last day in the current year on which you are physically present in the United States to work. 2008 tax software If your work requires you to be present in the United States only on a seasonal or cyclical basis, your working period begins on the first day of the season or cycle on which you are present in the United States to work and ends on the last day of the season or cycle on which you are present in the United States to work. 2008 tax software You can have more than one working period in a calendar year, and your working period can begin in one calendar year and end in the following calendar year. 2008 tax software Example. 2008 tax software Maria Perez lives in Mexico and works for Compañía ABC in its office in Mexico. 2008 tax software She was assigned to her firm's office in the United States from February 1 through June 1. 2008 tax software On June 2, she resumed her employment in Mexico. 2008 tax software On 69 days, Maria commuted each morning from her home in Mexico to work in Compañía ABC's U. 2008 tax software S. 2008 tax software office. 2008 tax software She returned to her home in Mexico on each of those evenings. 2008 tax software On 7 days, she worked in her firm's Mexico office. 2008 tax software For purposes of the substantial presence test, Maria does not count the days she commuted to work in the United States because those days equal more than 75% of the workdays during the working period (69 workdays in the United States divided by 76 workdays in the working period equals 90. 2008 tax software 8%). 2008 tax software Days in transit. 2008 tax software   Do not count the days you are in the United States for less than 24 hours and you are in transit between two places outside the United States. 2008 tax software You are considered to be in transit if you engage in activities that are substantially related to completing travel to your foreign destination. 2008 tax software For example, if you travel between airports in the United States to change planes en route to your foreign destination, you are considered to be in transit. 2008 tax software However, you are not considered to be in transit if you attend a business meeting while in the United States. 2008 tax software This is true even if the meeting is held at the airport. 2008 tax software Crew members. 2008 tax software   Do not count the days you are temporarily present in the United States as a regular crew member of a foreign vessel (boat or ship) engaged in transportation between the United States and a foreign country or a U. 2008 tax software S. 2008 tax software possession. 2008 tax software However, this exception does not apply if you otherwise engage in any trade or business in the United States on those days. 2008 tax software Medical condition. 2008 tax software   Do not count the days you intended to leave, but could not leave the United States because of a medical condition or problem that arose while you were in the United States. 2008 tax software Whether you intended to leave the United States on a particular day is determined based on all the facts and circumstances. 2008 tax software For example, you may be able to establish that you intended to leave if your purpose for visiting the United States could be accomplished during a period that is not long enough to qualify you for the substantial presence test. 2008 tax software However, if you need an extended period of time to accomplish the purpose of your visit and that period would qualify you for the substantial presence test, you would not be able to establish an intent to leave the United States before the end of that extended period. 2008 tax software   In the case of an individual who is judged mentally incompetent, proof of intent to leave the United States can be determined by analyzing the individual's pattern of behavior before he or she was judged mentally incompetent. 2008 tax software   If you qualify to exclude days of presence because of a medical condition, you must file a fully completed Form 8843 with the IRS. 2008 tax software See Form 8843 , later. 2008 tax software   You cannot exclude any days of presence in the United States under the following circumstances. 2008 tax software You were initially prevented from leaving, were then able to leave, but remained in the United States beyond a reasonable period for making arrangements to leave. 2008 tax software You returned to the United States for treatment of a medical condition that arose during a prior stay. 2008 tax software The condition existed before your arrival in the United States and you were aware of the condition. 2008 tax software It does not matter whether you needed treatment for the condition when you entered the United States. 2008 tax software Exempt individual. 2008 tax software   Do not count days for which you are an exempt individual. 2008 tax software The term “exempt individual” does not refer to someone exempt from U. 2008 tax software S. 2008 tax software tax, but to anyone in the following categories. 2008 tax software An individual temporarily present in the United States as a foreign government-related individual under an “A” or “G” visa. 2008 tax software A teacher or trainee temporarily present in the United States under a “J” or “Q” visa, who substantially complies with the requirements of the visa. 2008 tax software A student temporarily present in the United States under an “F,” “J,” “M,” or “Q” visa, who substantially complies with the requirements of the visa. 2008 tax software A professional athlete temporarily in the United States to compete in a charitable sports event. 2008 tax software   The specific rules for each of these four categories (including any rules on the length of time you will be an exempt individual) are discussed next. 2008 tax software Foreign government-related individuals. 2008 tax software   A foreign government-related individual is an individual (or a member of the individual's immediate family) who is temporarily present in the United States: As a full-time employee of an international organization, By reason of diplomatic status, or By reason of a visa (other than a visa that grants lawful permanent residence) that the Secretary of the Treasury determines represents full-time diplomatic or consular status. 2008 tax software Note. 2008 tax software You are considered temporarily present in the United States regardless of the actual amount of time you are present in the United States. 2008 tax software    An international organization is any public international organization that the President of the United States has designated by Executive Order as being entitled to the privileges, exemptions, and immunities provided for in the International Organizations Act. 2008 tax software An individual is a full-time employee if his or her work schedule meets the organization's standard full-time work schedule. 2008 tax software   An individual is considered to have full-time diplomatic or consular status if he or she: Has been accredited by a foreign government that is recognized by the United States, Intends to engage primarily in official activities for that foreign government while in the United States, and Has been recognized by the President, Secretary of State, or a consular officer as being entitled to that status. 2008 tax software Note. 2008 tax software If you are present in the United States under an “A” or “G” visa you are considered a foreign government-related individual (with full-time diplomatic or consular status). 2008 tax software None of your days count for purposes of the substantial presence test. 2008 tax software   Members of the immediate family include the individual's spouse and unmarried children (whether by blood or adoption) but only if the spouse's or unmarried children's visa statuses are derived from and dependent on the exempt individual's visa classification. 2008 tax software Unmarried children are included only if they: Are under 21 years of age, Reside regularly in the exempt individual's household, and Are not members of another household. 2008 tax software Teachers and trainees. 2008 tax software   A teacher or trainee is an individual, other than a student, who is temporarily in the United States under a “J” or “Q” visa and substantially complies with the requirements of that visa. 2008 tax software You are considered to have substantially complied with the visa requirements if you have not engaged in activities that are prohibited by U. 2008 tax software S. 2008 tax software immigration laws and could result in the loss of your visa status. 2008 tax software   Also included are immediate family members of exempt teachers and trainees. 2008 tax software See the definition of immediate family, earlier, under Foreign government-related individuals . 2008 tax software   You will not be an exempt individual as a teacher or trainee in 2013 if you were exempt as a teacher, trainee, or student for any part of 2 of the 6 preceding calendar years. 2008 tax software However, you will be an exempt individual if all of the following conditions are met. 2008 tax software You were exempt as a teacher, trainee, or student for any part of 3 (or fewer) of the 6 preceding calendar years, A foreign employer paid all of your compensation during 2013, and A foreign employer paid all of your compensation during each of the preceding 6 years you were present in the United States as a teacher or trainee. 2008 tax software A foreign employer includes an office or place of business of an American entity in a foreign country or a U. 2008 tax software S. 2008 tax software possession. 2008 tax software   If you qualify to exclude days of presence as a teacher or trainee, you must file a fully completed Form 8843 with the IRS. 2008 tax software See Form 8843 , later. 2008 tax software Example. 2008 tax software Carla was temporarily in the United States during the year as a teacher on a “J” visa. 2008 tax software Her compensation for the year was paid by a foreign employer. 2008 tax software Carla was treated as an exempt teacher for the previous 2 years but her compensation was not paid by a foreign employer. 2008 tax software She will not be considered an exempt individual for the current year because she was exempt as a teacher for at least 2 of the past 6 years. 2008 tax software If her compensation for the past 2 years had been paid by a foreign employer, she would be an exempt individual for the current year. 2008 tax software Students. 2008 tax software   A student is any individual who is temporarily in the United States on an “F,” “J,” “M,” or “Q” visa and who substantially complies with the requirements of that visa. 2008 tax software You are considered to have substantially complied with the visa requirements if you have not engaged in activities that are prohibited by U. 2008 tax software S. 2008 tax software immigration laws and could result in the loss of your visa status. 2008 tax software   Also included are immediate family members of exempt students. 2008 tax software See the definition of immediate family, earlier, under Foreign government-related individuals . 2008 tax software   You will not be an exempt individual as a student in 2013 if you have been exempt as a teacher, trainee, or student for any part of more than 5 calendar years unless you meet both of the following requirements. 2008 tax software You establish that you do not intend to reside permanently in the United States. 2008 tax software You have substantially complied with the requirements of your visa. 2008 tax software The facts and circumstances to be considered in determining if you have demonstrated an intent to reside permanently in the United States include, but are not limited to, the following. 2008 tax software Whether you have maintained a closer connection to a foreign country (discussed later). 2008 tax software Whether you have taken affirmative steps to change your status from nonimmigrant to lawful permanent resident as discussed later under Closer Connection to a Foreign Country . 2008 tax software   If you qualify to exclude days of presence as a student, you must file a fully completed Form 8843 with the IRS. 2008 tax software See Form 8843 , later. 2008 tax software Professional athletes. 2008 tax software   A professional athlete who is temporarily in the United States to compete in a charitable sports event is an exempt individual. 2008 tax software A charitable sports event is one that meets the following conditions. 2008 tax software The main purpose is to benefit a qualified charitable organization. 2008 tax software The entire net proceeds go to charity. 2008 tax software Volunteers perform substantially all the work. 2008 tax software   In figuring the days of presence in the United States, you can exclude only the days on which you actually competed in a sports event. 2008 tax software You cannot exclude the days on which you were in the United States to practice for the event, to perform promotional or other activities related to the event, or to travel between events. 2008 tax software   If you qualify to exclude days of presence as a professional athlete, you must file a fully completed Form 8843 with the IRS. 2008 tax software See Form 8843 , next. 2008 tax software Form 8843. 2008 tax software   If you exclude days of presence in the United States because you fall into any of the following categories, you must file a fully completed Form 8843. 2008 tax software You were unable to leave the United States as planned because of a medical condition or problem. 2008 tax software You were temporarily in the United States as a teacher or trainee on a “J” or “Q” visa. 2008 tax software You were temporarily in the United States as a student on an “F,” “J,” “M,” or “Q” visa. 2008 tax software You were a professional athlete competing in a charitable sports event. 2008 tax software Attach Form 8843 to your 2013 income tax return. 2008 tax software If you do not have to file a return, send Form 8843 to the Department of the Treasury, Internal Revenue Service Center, Austin, TX 73301-0215, by the due date for filing Form 1040NR or Form 1040NR-EZ. 2008 tax software The due date for filing is discussed in chapter 7. 2008 tax software If you do not timely file Form 8843, you cannot exclude the days you were present in the United States as a professional athlete or because of a medical condition that arose while you were in the United States. 2008 tax software This does not apply if you can show by clear and convincing evidence that you took reasonable actions to become aware of the filing requirements and significant steps to comply with those requirements. 2008 tax software Closer Connection to a Foreign Country Even if you meet the substantial presence test, you can be treated as a nonresident alien if you: Are present in the United States for less than 183 days during the year, Maintain a tax home in a foreign country during the year, and Have a closer connection during the year to one foreign country in which you have a tax home than to the United States (unless you have a closer connection to two foreign countries, discussed next). 2008 tax software Closer connection to two foreign countries. 2008 tax software   You can demonstrate that you have a closer connection to two foreign countries (but not more than two) if you meet all of the following conditions. 2008 tax software You maintained a tax home beginning on the first day of the year in one foreign country. 2008 tax software You changed your tax home during the year to a second foreign country. 2008 tax software You continued to maintain your tax home in the second foreign country for the rest of the year. 2008 tax software You had a closer connection to each foreign country than to the United States for the period during which you maintained a tax home in that foreign country. 2008 tax software You are subject to tax as a resident under the tax laws of either foreign country for the entire year or subject to tax as a resident in both foreign countries for the period during which you maintained a tax home in each foreign country. 2008 tax software Tax home. 2008 tax software   Your tax home is the general area of your main place of business, employment, or post of duty, regardless of where you maintain your family home. 2008 tax software Your tax home is the place where you permanently or indefinitely work as an employee or a self-employed individual. 2008 tax software If you do not have a regular or main place of business because of the nature of your work, then your tax home is the place where you regularly live. 2008 tax software If you do not fit either of these categories, you are considered an itinerant and your tax home is wherever you work. 2008 tax software   For determining whether you have a closer connection to a foreign country, your tax home must also be in existence for the entire current year, and must be located in the same foreign country to which you are claiming to have a closer connection. 2008 tax software Foreign country. 2008 tax software   In determining whether you have a closer connection to a foreign country, the term “foreign country” means: Any territory under the sovereignty of the United Nations or a government other than that of the United States, The territorial waters of the foreign country (determined under U. 2008 tax software S. 2008 tax software law), The seabed and subsoil of those submarine areas which are adjacent to the territorial waters of the foreign country and over which the foreign country has exclusive rights under international law to explore and exploit natural resources, and Possessions and territories of the United States. 2008 tax software Establishing a closer connection. 2008 tax software   You will be considered to have a closer connection to a foreign country than the United States if you or the IRS establishes that you have maintained more significant contacts with the foreign country than with the United States. 2008 tax software In determining whether you have maintained more significant contacts with the foreign country than with the United States, the facts and circumstances to be considered include, but are not limited to, the following. 2008 tax software The country of residence you designate on forms and documents. 2008 tax software The types of official forms and documents you file, such as Form W-9, Form W-8BEN, or Form W-8ECI. 2008 tax software The location of: Your permanent home, Your family, Your personal belongings, such as cars, furniture, clothing, and jewelry, Your current social, political, cultural, professional, or religious affiliations, Your business activities (other than those that constitute your tax home), The jurisdiction in which you hold a driver's license, The jurisdiction in which you vote, and Charitable organizations to which you contribute. 2008 tax software It does not matter whether your permanent home is a house, an apartment, or a furnished room. 2008 tax software It also does not matter whether you rent or own it. 2008 tax software It is important, however, that your home be available at all times, continuously, and not solely for short stays. 2008 tax software When you cannot have a closer connection. 2008 tax software   You cannot claim you have a closer connection to a foreign country if either of the following applies: You personally applied, or took other steps during the year, to change your status to that of a permanent resident, or You had an application pending for adjustment of status during the current year. 2008 tax software Steps to change your status to that of a permanent resident include, but are not limited to, the filing of the following forms. 2008 tax software Form I-508, Waiver of Rights, Privileges, Exemptions and Immunities Form I-485, Application to Register Permanent Residence or Adjust Status Form I-130, Petition for Alien Relative, on your behalf Form I-140, Immigrant Petition for Alien Worker, on your behalf Form ETA-750, Application for Alien Employment Certification, on your behalf Form DS-230, Application for Immigrant Visa and Alien Registration Form 8840. 2008 tax software   You must attach a fully completed Form 8840 to your income tax return to claim you have a closer connection to a foreign country or countries. 2008 tax software   If you do not have to file a return, send the form to the Department of the Treasury, Internal Revenue Service Center, Austin, TX 73301-0215, by the due date for filing Form 1040NR or Form 1040NR-EZ. 2008 tax software The due date for filing is discussed later in chapter 7. 2008 tax software   If you do not timely file Form 8840, you cannot claim a closer connection to a foreign country or countries. 2008 tax software This does not apply if you can show by clear and convincing evidence that you took reasonable actions to become aware of the filing requirements and significant steps to comply with those requirements. 2008 tax software Effect of Tax Treaties The rules given here to determine if you are a U. 2008 tax software S. 2008 tax software resident do not override tax treaty definitions of residency. 2008 tax software If you are a dual-resident taxpayer, you can still claim the benefits under an income tax treaty. 2008 tax software A dual-resident taxpayer is one who is a resident of both the United States and another country under each country's tax laws. 2008 tax software The income tax treaty between the two countries must contain a provision that provides for resolution of conflicting claims of residence (tie-breaker rule). 2008 tax software If you are treated as a resident of a foreign country under a tax treaty, you are treated as a nonresident alien in figuring your U. 2008 tax software S. 2008 tax software income tax. 2008 tax software For purposes other than figuring your tax, you will be treated as a U. 2008 tax software S. 2008 tax software resident. 2008 tax software For example, the rules discussed here do not affect your residency time periods as discussed later under Dual-Status Aliens . 2008 tax software Information to be reported. 2008 tax software   If you are a dual-resident taxpayer and you claim treaty benefits, you must file a return by the due date (including extensions) using Form 1040NR or Form 1040NR-EZ, and compute your tax as a nonresident alien. 2008 tax software You must also attach a fully completed Form 8833 if you determine your residency under a tax treaty and receive payments or income items totaling more than $100,000. 2008 tax software You may also have to attach Form 8938 (discussed in chapter 7). 2008 tax software See Reporting Treaty Benefits Claimed in chapter 9 for more information on reporting treaty benefits. 2008 tax software Dual-Status Aliens You can be both a nonresident alien and a resident alien during the same tax year. 2008 tax software This usually occurs in the year you arrive in or depart from the United States. 2008 tax software Aliens who have dual status should see chapter 6 for information on filing a return for a dual-status tax year. 2008 tax software First Year of Residency If you are a U. 2008 tax software S. 2008 tax software resident for the calendar year, but you were not a U. 2008 tax software S. 2008 tax software resident at any time during the preceding calendar year, you are a U. 2008 tax software S. 2008 tax software resident only for the part of the calendar year that begins on the residency starting date. 2008 tax software You are a nonresident alien for the part of the year before that date. 2008 tax software Residency starting date under substantial presence test. 2008 tax software   If you meet the substantial presence test for a calendar year, your residency starting date is generally the first day you are present in the United States during that calendar year. 2008 tax software However, you do not have to count up to 10 days of actual presence in the United States if on those days you establish that: You had a closer connection to a foreign country than to the United States, and Your tax home was in that foreign country. 2008 tax software See Closer Connection to a Foreign Country , earlier. 2008 tax software   In determining whether you can exclude up to 10 days, the following rules apply. 2008 tax software You can exclude days from more than one period of presence as long as the total days in all periods are not more than 10. 2008 tax software You cannot exclude any days in a period of consecutive days of presence if all the days in that period cannot be excluded. 2008 tax software Although you can exclude up to 10 days of presence in determining your residency starting date, you must include those days when determining whether you meet the substantial presence test. 2008 tax software Example. 2008 tax software Ivan Ivanovich is a citizen of Russia. 2008 tax software He came to the United States for the first time on January 6, 2013, to attend a business meeting and returned to Russia on January 10, 2013. 2008 tax software His tax home remained in Russia. 2008 tax software On March 1, 2013, he moved to the United States and resided here for the rest of the year. 2008 tax software Ivan is able to establish a closer connection to Russia for the period January 6–10. 2008 tax software Thus, his residency starting date is March 1. 2008 tax software Statement required to exclude up to 10 days of presence. 2008 tax software   You must file a statement with the IRS if you are excluding up to 10 days of presence in the United States for purposes of your residency starting date. 2008 tax software You must sign and date this statement and include a declaration that it is made under penalties of perjury. 2008 tax software The statement must contain the following information (as applicable). 2008 tax software Your name, address, U. 2008 tax software S. 2008 tax software taxpayer identification number (if any), and U. 2008 tax software S. 2008 tax software visa number (if any). 2008 tax software Your passport number and the name of the country that issued your passport. 2008 tax software The tax year for which the statement applies. 2008 tax software The first day that you were present in the United States during the year. 2008 tax software The dates of the days you are excluding in figuring your first day of residency. 2008 tax software Sufficient facts to establish that you have maintained your tax home in and a closer connection to a foreign country during the period you are excluding. 2008 tax software   Attach the required statement to your income tax return. 2008 tax software If you are not required to file a return, send the statement to the Department of the Treasury, Internal Revenue Service Center, Austin, TX 73301-0215, on or before the due date for filing Form 1040NR or Form 1040NR-EZ. 2008 tax software The due date for filing is discussed in chapter 7. 2008 tax software   If you do not file the required statement as explained above, you cannot claim that you have a closer connection to a foreign country or countries. 2008 tax software Therefore, your first day of residency will be the first day you are present in the United States. 2008 tax software This does not apply if you can show by clear and convincing evidence that you took reasonable actions to become aware of the requirements for filing the statement and significant steps to comply with those requirements. 2008 tax software Residency starting date under green card test. 2008 tax software   If you meet the green card test at any time during a calendar year, but do not meet the substantial presence test for that year, your residency starting date is the first day in the calendar year on which you are present in the United States as a lawful permanent resident. 2008 tax software   If you meet both the substantial presence test and the green card test, your residency starting date is the earlier of the first day during the year you are present in the United States under the substantial presence test or as a lawful permanent resident. 2008 tax software Residency during the preceding year. 2008 tax software   If you were a U. 2008 tax software S. 2008 tax software resident during any part of the preceding calendar year and you are a U. 2008 tax software S. 2008 tax software resident for any part of the current year, you will be considered a U. 2008 tax software S. 2008 tax software resident at the beginning of the current year. 2008 tax software This applies whether you are a resident under the substantial presence test or green card test. 2008 tax software Example. 2008 tax software Robert Bach is a citizen of Switzerland. 2008 tax software He came to the United States as a U. 2008 tax software S. 2008 tax software resident for the first time on May 1, 2012, and remained until November 5, 2012, when he returned to Switzerland. 2008 tax software Robert came back to the United States on March 5, 2013, as a lawful permanent resident and still resides here. 2008 tax software In calendar year 2013, Robert's U. 2008 tax software S. 2008 tax software residency is deemed to begin on January 1, 2013, because he qualified as a resident in calendar year 2012. 2008 tax software First-Year Choice If you do not meet either the green card test or the substantial presence test for 2012 or 2013 and you did not choose to be treated as a resident for part of 2012, but you meet the substantial presence test for 2014, you can choose to be treated as a U. 2008 tax software S. 2008 tax software resident for part of 2013. 2008 tax software To make this choice, you must: Be present in the United States for at least 31 days in a row in 2013, and Be present in the United States for at least 75% of the number of days beginning with the first day of the 31-day period and ending with the last day of 2013. 2008 tax software For purposes of this 75% requirement, you can treat up to 5 days of absence from the United States as days of presence in the United States. 2008 tax software When counting the days of presence in (1) and (2) above, do not count the days you were in the United States under any of the exceptions discussed earlier under Days of Presence in the United States. 2008 tax software If you make the first-year choice, your residency starting date for 2013 is the first day of the earliest 31-day period (described in (1) above) that you use to qualify for the choice. 2008 tax software You are treated as a U. 2008 tax software S. 2008 tax software resident for the rest of the year. 2008 tax software If you are present for more than one 31-day period and you satisfy condition (2) above for each of those periods, your residency starting date is the first day of the first 31-day period. 2008 tax software If you are present for more than one 31-day period but you satisfy condition (2) above only for a later 31-day period, your residency starting date is the first day of the later 31-day period. 2008 tax software Note. 2008 tax software You do not have to be married to make this choice. 2008 tax software Example 1. 2008 tax software Juan DaSilva is a citizen of the Philippines. 2008 tax software He came to the United States for the first time on November 1, 2013, and was here on 31 consecutive days (from November 1 through December 1, 2013). 2008 tax software Juan returned to the Philippines on December 1 and came back to the United States on December 17, 2013. 2008 tax software He stayed in the United States for the rest of the year. 2008 tax software During 2014, Juan was a resident of the United States under the substantial presence test. 2008 tax software Juan can make the first-year choice for 2013 because he was in the United States in 2013 for a period of 31 days in a row (November 1 through December 1) and for at least 75% of the days following (and including) the first day of his 31-day period (46 total days of presence in the United States divided by 61 days in the period from November 1 through December 31 equals 75. 2008 tax software 4%). 2008 tax software If Juan makes the first-year choice, his residency starting date will be November 1, 2013. 2008 tax software Example 2. 2008 tax software The facts are the same as in Example 1, except that Juan was also absent from the United States on December 24, 25, 29, 30, and 31. 2008 tax software He can make the first-year choice for 2013 because up to 5 days of absence are considered days of presence for purposes of the 75% requirement. 2008 tax software Statement required to make the first-year choice for 2013. 2008 tax software   You must attach a statement to Form 1040 to make the first-year choice for 2013. 2008 tax software The statement must contain your name and address and specify the following. 2008 tax software That you are making the first-year choice for 2013. 2008 tax software That you were not a resident in 2012. 2008 tax software That you are a resident under the substantial presence test in 2014. 2008 tax software The number of days of presence in the United States during 2014. 2008 tax software The date or dates of your 31-day period of presence and the period of continuous presence in the United States during 2013. 2008 tax software The date or dates of absence from the United States during 2013 that you are treating as days of presence. 2008 tax software You cannot file Form 1040 or the statement until you meet the substantial presence test for 2014. 2008 tax software If you have not met the test for 2014 as of April 15, 2014, you can request an extension of time for filing your 2013 Form 1040 until a reasonable period after you have met that test. 2008 tax software To request an extension to file until October 15, 2014, use Form 4868, Application for Automatic Extension of Time To File U. 2008 tax software S. 2008 tax software Individual Income Tax Return. 2008 tax software You can file the paper form or use one of the electronic filing options explained in the Form 4868 instructions. 2008 tax software You should pay with this extension the amount of tax you expect to owe for 2013 figured as if you were a nonresident alien the entire year. 2008 tax software You can use Form 1040NR or Form 1040NR-EZ to figure the tax. 2008 tax software Enter the tax on Form 4868. 2008 tax software If you do not pay the tax due, you will be charged interest on any tax not paid by the regular due date of your return, and you may be charged a penalty on the late payment. 2008 tax software   Once you make the first-year choice, you may not revoke it without the approval of the Internal Revenue Service. 2008 tax software   If you do not follow the procedures discussed here for making the first-year choice, you will be treated as a nonresident alien for all of 2013. 2008 tax software However, this does not apply if you can show by clear and convincing evidence that you took reasonable actions to become aware of the filing procedures and significant steps to comply with the procedures. 2008 tax software Choosing Resident Alien Status If you are a dual-status alien, you can choose to be treated as a U. 2008 tax software S. 2008 tax software resident for the entire year if all of the following apply. 2008 tax software You were a nonresident alien at the beginning of the year. 2008 tax software You are a resident alien or U. 2008 tax software S. 2008 tax software citizen at the end of the year. 2008 tax software You are married to a U. 2008 tax software S. 2008 tax software citizen or resident alien at the end of the year. 2008 tax software Your spouse joins you in making the choice. 2008 tax software This includes situations in which both you and your spouse were nonresident aliens at the beginning of the tax year and both of you are resident aliens at the end of the tax year. 2008 tax software Note. 2008 tax software If you are single at the end of the year, you cannot make this choice. 2008 tax software If you make this choice, the following rules apply. 2008 tax software You and your spouse are treated as U. 2008 tax software S. 2008 tax software residents for the entire year for income tax purposes. 2008 tax software You and your spouse are taxed on worldwide income. 2008 tax software You and your spouse must file a joint return for the year of the choice. 2008 tax software Neither you nor your spouse can make this choice for any later tax year, even if you are separated, divorced, or remarried. 2008 tax software The special instructions and restrictions for dual-status taxpayers in chapter 6 do not apply to you. 2008 tax software Note. 2008 tax software A similar choice is available if, at the end of the tax year, one spouse is a nonresident alien and the other spouse is a U. 2008 tax software S. 2008 tax software citizen or resident. 2008 tax software See Nonresident Spouse Treated as a Resident , later. 2008 tax software If you previously made that choice and it is still in effect, you do not need to make the choice explained here. 2008 tax software Making the choice. 2008 tax software   You should attach a statement signed by both spouses to your joint return for the year of the choice. 2008 tax software The statement must contain the following information. 2008 tax software A declaration that you both qualify to make the choice and that you choose to be treated as U. 2008 tax software S. 2008 tax software residents for the entire tax year. 2008 tax software The name, address, and taxpayer identification number (SSN or ITIN) of each spouse. 2008 tax software (If one spouse died, include the name and address of the person who makes the choice for the deceased spouse. 2008 tax software )   You generally make this choice when you file your joint return. 2008 tax software However, you also can make the choice by filing Form 1040X, Amended U. 2008 tax software S. 2008 tax software Individual Income Tax Return. 2008 tax software Attach Form 1040, Form 1040A, or Form 1040EZ and print “Amended” across the top of the corrected return. 2008 tax software If you make the choice with an amended return, you and your spouse must also amend any returns that you may have filed after the year for which you made the choice. 2008 tax software   You generally must file the amended joint return within 3 years from the date you filed your original U. 2008 tax software S. 2008 tax software income tax return or 2 years from the date you paid your income tax for that year, whichever is later. 2008 tax software Last Year of Residency If you were a U. 2008 tax software S. 2008 tax software resident in 2013 but are not a U. 2008 tax software S. 2008 tax software resident during any part of 2014, you cease to be a U. 2008 tax software S. 2008 tax software resident on your residency termination date. 2008 tax software Your residency termination date is December 31, 2013, unless you qualify for an earlier date as discussed next. 2008 tax software Earlier residency termination date. 2008 tax software   You may qualify for a residency termination date that is earlier than December 31. 2008 tax software This date is: The last day in 2013 that you are physically present in the United States, if you met the substantial presence test, The first day in 2013 that you are no longer a lawful permanent resident of the United States, if you met the green card test, or The later of (1) or (2), if you met both tests. 2008 tax software You can use this date only if, for the remainder of 2013, your tax home was in a foreign country and you had a closer connection to that foreign country. 2008 tax software See Closer Connection to a Foreign Country , earlier. 2008 tax software    A long-term resident who ceases to be a lawful permanent resident may be subject to special reporting requirements and tax provisions. 2008 tax software See Expatriation Tax in chapter 4. 2008 tax software Termination of residency. 2008 tax software   For information on your residency termination date, see Former long-term resident under Expatriation After June 16, 2008, in chapter 4. 2008 tax software De minimis presence. 2008 tax software   If you are a U. 2008 tax software S. 2008 tax software resident because of the substantial presence test and you qualify to use the earlier residency termination date, you can exclude up to 10 days of actual presence in the United States in determining your residency termination date. 2008 tax software In determining whether you can exclude up to 10 days, the following rules apply. 2008 tax software You can exclude days from more than one period of presence as long as the total days in all periods are not more than 10. 2008 tax software You cannot exclude any days in a period of consecutive days of presence if all the days in that period cannot be excluded. 2008 tax software Although you can exclude up to 10 days of presence in determining your residency termination date, you must include those days when determining whether you meet the substantial presence test. 2008 tax software Example. 2008 tax software Lola Bovary is a citizen of Malta. 2008 tax software She came to the United States for the first time on March 1, 2013, and resided here until August 25, 2013. 2008 tax software On December 12, 2013, Lola came to the United States for vacation and stayed here until December 16, 2013, when she returned to Malta. 2008 tax software She is able to establish a closer connection to Malta for the period December 12–16. 2008 tax software Lola is not a U. 2008 tax software S. 2008 tax software resident for tax purposes during 2014 and can establish a closer connection to Malta for the rest of calendar year 2013. 2008 tax software Lola is a U. 2008 tax software S. 2008 tax software resident under the substantial presence test for 2013 because she was present in the United States for 183 days (178 days for the period March 1 to August 25 plus 5 days in December). 2008 tax software Lola's residency termination date is August 25, 2013. 2008 tax software Residency during the next year. 2008 tax software   If you are a U. 2008 tax software S. 2008 tax software resident during any part of 2014 and you are a resident during any part of 2013, you will be treated as a resident through the end of 2013. 2008 tax software This applies whether you have a closer connection to a foreign country than the United States during 2013, and whether you are a resident under the substantial presence test or green card test. 2008 tax software Statement required to establish your residency termination date. 2008 tax software   You must file a statement with the IRS to establish your residency termination date. 2008 tax software You must sign and date this statement and include a declaration that it is made under penalties of perjury. 2008 tax software The statement must contain the following information (as applicable). 2008 tax software Your name, address, U. 2008 tax software S. 2008 tax software taxpayer identification number (if any), and U. 2008 tax software S. 2008 tax software visa number (if any). 2008 tax software Your passport number and the name of the country that issued your passport. 2008 tax software The tax year for which the statement applies. 2008 tax software The last day that you were present in the United States during the year. 2008 tax software Sufficient facts to establish that you have maintained your tax home in, and that you have a closer connection to, a foreign country following your last day of presence in the United States during the year or following the abandonment or rescission of your status as a lawful permanent resident during the year. 2008 tax software The date that your status as a lawful permanent resident was abandoned or rescinded. 2008 tax software Sufficient facts (including copies of relevant documents) to establish that your status as a lawful permanent resident has been abandoned or rescinded. 2008 tax software If you can exclude days under the de minimis presence rule, discussed earlier, include the dates of the days you are excluding and sufficient facts to establish that you have maintained your tax home in and that you have a closer connection to a foreign country during the period you are excluding. 2008 tax software   Attach the required statement to your income tax return. 2008 tax software If you are not required to file a return, send the statement to the Department of the Treasury, Internal Revenue Service Center, Austin, TX 73301-0215, on or before the due date for filing Form 1040NR or Form 1040NR-EZ. 2008 tax software The due date for filing is discussed in chapter 7. 2008 tax software   If you do not file the required statement as explained above, you cannot claim that you have a closer connection to a foreign country or countries. 2008 tax software This does not apply if you can show by clear and convincing evidence that you took reasonable actions to become aware of the requirements for filing the statement and significant steps to comply with those requirements. 2008 tax software Nonresident Spouse Treated as a Resident If, at the end of your tax year, you are married and one spouse is a U. 2008 tax software S. 2008 tax software citizen or a resident alien and the other spouse is a nonresident alien, you can choose to treat the nonresident spouse as a U. 2008 tax software S. 2008 tax software resident. 2008 tax software This includes situations in which one spouse is a nonresident alien at the beginning of the tax year, but a resident alien at the end of the year, and the other spouse is a nonresident alien at the end of the year. 2008 tax software If you make this choice, you and your spouse are treated for income tax purposes as residents for your entire tax year. 2008 tax software Neither you nor your spouse can claim under any tax treaty not to be a U. 2008 tax software S. 2008 tax software resident. 2008 tax software You are both taxed on worldwide income. 2008 tax software You must file a joint income tax return for the year you make the choice, but you and your spouse can file joint or separate returns in later years. 2008 tax software If you file a joint return under this provision, the special instructions and restrictions for dual-status taxpayers in chapter 6 do not apply to you. 2008 tax software Example. 2008 tax software Bob and Sharon Williams are married and both are nonresident aliens at the beginning of the year. 2008 tax software In June, Bob became a resident alien and remained a resident for the rest of the year. 2008 tax software Bob and Sharon both choose to be treated as resident aliens by attaching a statement to their joint return. 2008 tax software Bob and Sharon must file a joint return for the year they make the choice, but they can file either joint or separate returns for later years. 2008 tax software How To Make the Choice Attach a statement, signed by both spouses, to your joint return for the first tax year for which the choice applies. 2008 tax software It should contain the following information. 2008 tax software A declaration that one spouse was a nonresident alien and the other spouse a U. 2008 tax software S. 2008 tax software citizen or resident alien on the last day of your tax year, and that you choose to be treated as U. 2008 tax software S. 2008 tax software residents for the entire tax year. 2008 tax software The name, address, and identification number of each spouse. 2008 tax software (If one spouse died, include the name and address of the person making the choice for the deceased spouse. 2008 tax software ) Amended return. 2008 tax software   You generally make this choice when you file your joint return. 2008 tax software However, you can also make the choice by filing a joint amended return on Form 1040X. 2008 tax software Attach Form 1040, Form 1040A, or Form 1040EZ and print “Amended” across the top of the corrected return. 2008 tax software If you make the choice with an amended return, you and your spouse must also amend any returns that you may have filed after the year for which you made the choice. 2008 tax software   You generally must file the amended joint return within 3 years from the date you filed your original U. 2008 tax software S. 2008 tax software income tax return or 2 years from the date you paid your income tax for that year, whichever is later. 2008 tax software Suspending the Choice The choice to be treated as a resident alien is suspended for any tax year (after the tax year you made the choice) if neither spouse is a U. 2008 tax software S. 2008 tax software citizen or resident alien at any time during the tax year. 2008 tax software This means each spouse must file a separate return as a nonresident alien for that year if either meets the filing requirements for nonresident aliens discussed in chapter 7. 2008 tax software Example. 2008 tax software Dick Brown was a resident alien on December 31, 2010, and married to Judy, a nonresident alien. 2008 tax software They chose to treat Judy as a resident alien and filed joint 2010 and 2011 income tax returns. 2008 tax software On January 10, 2012, Dick became a nonresident alien. 2008 tax software Judy had remained a nonresident alien throughout the period. 2008 tax software Dick and Judy could have filed joint or separate returns for 2012 because Dick was a resident alien for part of that year. 2008 tax software However, because neither Dick nor Judy is a resident alien at any time during 2013, their choice is suspended for that year. 2008 tax software If either meets the filing requirements for nonresident aliens discussed in chapter 7, they must file separate returns as nonresident aliens for 2013. 2008 tax software If Dick becomes a resident alien again in 2014, their choice is no longer suspended. 2008 tax software Ending the Choice Once made, the choice to be treated as a resident applies to all later years unless suspended (as explained earlier under Suspending the Choice ) or ended in one of the following ways. 2008 tax software If the choice is ended in one of the following ways, neither spouse can make this choice in any later tax year. 2008 tax software Revocation. 2008 tax software Either spouse can revoke the choice for any tax year, provided he or she makes the revocation by the due date for filing the tax return for that tax year. 2008 tax software The spouse who revokes the choice must attach a signed statement declaring that the choice is being revoked. 2008 tax software The statement must include the name, address, and identification number of each spouse. 2008 tax software (If one spouse dies, include the name and address of the person who is revoking the choice for the deceased spouse. 2008 tax software ) The statement also must include a list of any states, foreign countries, and possessions that have community property laws in which either spouse is domiciled or where real property is located from which either spouse receives income. 2008 tax software File the statement as follows. 2008 tax software If the spouse revoking the choice must file a return, attach the statement to the return for the first year the revocation applies. 2008 tax software If the spouse revoking the choice does not have to file a return, but does file a return (for example, to obtain a refund), attach the statement to the return. 2008 tax software If the spouse revoking the choice does not have to file a return and does not file a claim for refund, send the statement to the Internal Revenue Service Center where you filed the last joint return. 2008 tax software Death. 2008 tax software The death of either spouse ends the choice, beginning with the first tax year following the year the spouse died. 2008 tax software However, if the surviving spouse is a U. 2008 tax software S. 2008 tax software citizen or resident and is entitled to the joint tax rates as a surviving spouse, the choice will not end until the close of the last year for which these joint rates may be used. 2008 tax software If both spouses die in the same tax year, the choice ends on the first day after the close of the tax year in which the spouses died. 2008 tax software Legal separation. 2008 tax software A legal separation under a decree of divorce or separate maintenance ends the choice as of the beginning of the tax year in which the legal separation occurs. 2008 tax software Inadequate records. 2008 tax software The Internal Revenue Service can end the choice for any tax year that either spouse has failed to keep adequate books, records, and other information necessary to determine the correct income tax liability, or to provide adequate access to those records. 2008 tax software Aliens From American Samoa or Puerto Rico If you are a nonresident alien in the United States and a bona fide resident of American Samoa or Puerto Rico during the entire tax year, you are taxed, with certain exceptions, according to the rules for resident aliens of the United States. 2008 tax software For more information, see Bona Fide Residents of American Samoa or Puerto Rico in chapter 5. 2008 tax software If you are a nonresident alien from American Samoa or Puerto Rico who does not qualify as a bona fide resident of American Samoa or Puerto Rico for the entire tax year, you are taxed as a nonresident alien. 2008 tax software Resident aliens who formerly were bona fide residents of American Samoa or Puerto Rico are taxed according to the rules for resident aliens. 2008 tax software Prev  Up  Next   Home   More Online Publications