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Freetaxusa 2006

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Freetaxusa 2006

Freetaxusa 2006 Part Two -   Ingresos Los ocho capítulos de esta sección abordan distintos tipos de ingresos. Freetaxusa 2006 Explican cuáles ingresos están y cuáles no están sujetos a impuestos. Freetaxusa 2006 Vea la Parte Tres para información sobre ganancias y pérdidas que se declaran en el Formulario 8949 y el Anexo D (Formulario 1040) y para información que debe saber al vender su vivienda. Freetaxusa 2006 Table of Contents 5. Freetaxusa 2006   Salarios, Sueldos y Otros IngresosRecordatorio Introduction Useful Items - You may want to see: Remuneración del EmpleadoNiñeras. Freetaxusa 2006 Otras Clases de Remuneración Beneficios Marginales Aportaciones a un Plan de Jubilación Opciones de Compra de Acciones Bienes Restringidos Reglas Especiales para Algunos EmpleadosClero Miembros de Órdenes Religiosas Empleador Extranjero Fuerzas Armadas Voluntarios Beneficios por Enfermedad y LesionesPensiones por Incapacidad Contratos de Seguro de Cuidados a Largo Plazo Compensación del Seguro Obrero Otros Beneficios por Enfermedad y Lesiones 6. Freetaxusa 2006   Ingresos de PropinasIntroduction Useful Items - You may want to see: Cómo Mantener un Registro Diario de PropinasRegistro electrónico de propinas. Freetaxusa 2006 Cómo Declarar las Propinas a su EmpleadorInforme electrónico de propinas. Freetaxusa 2006 Declaración final. Freetaxusa 2006 Cómo se Declaran las Propinas en la Declaración de Impuestos Asignación de Propinas 7. Freetaxusa 2006   Ingresos de InteresesRecordatorio Introduction Useful Items - You may want to see: Información General SSN para una cuenta conjunta. Freetaxusa 2006 Cuenta de custodia para su hijo. Freetaxusa 2006 Multa por no facilitar un SSN. Freetaxusa 2006 Cómo se declara la retención adicional. Freetaxusa 2006 Cuenta de ahorros con uno de los padres como fideicomisario. Freetaxusa 2006 Intereses que no se declaran en el Formulario 1099-INT. Freetaxusa 2006 Nominatarios. Freetaxusa 2006 Cantidad incorrecta. Freetaxusa 2006 Requisito de declarar ciertos datos. Freetaxusa 2006 Intereses Sujetos a ImpuestosIntereses sujetos a la multa por retiro prematuro de fondos. Freetaxusa 2006 Préstamo para invertir en un certificado de depósito. Freetaxusa 2006 Bonos de Ahorro de los Estados Unidos Programa de Bonos de Ahorro para Estudios Letras, Pagarés y Bonos del Tesoro de los Estados Unidos Bonos que se Venden Entre las Fechas de Pago de los Intereses Seguros Obligaciones del Gobierno Estatal o Local Descuento de la Emisión Original (OID) Cuándo Se Deben Declarar los Ingresos de InteresesRecibo implícito. Freetaxusa 2006 Cómo se Declaran los Ingresos de InteresesAnexo B (Formulario 1040A o Formulario 1040). Freetaxusa 2006 Cómo declarar los intereses exentos de impuesto. Freetaxusa 2006 Intereses de bonos de ahorro de los EE. Freetaxusa 2006 UU. Freetaxusa 2006 declarados anteriormente. Freetaxusa 2006 8. Freetaxusa 2006   Dividendos y Otras DistribucionesRecordatorio Introduction Useful Items - You may want to see: Información GeneralDividendos no declarados en el Formulario 1099-DIV. Freetaxusa 2006 Cómo se le informa del impuesto retenido. Freetaxusa 2006 Nominatarios. Freetaxusa 2006 Dividendos OrdinariosDividendos Calificados Dividendos Utilizados para la Compra de más Acciones Fondos de Inversión del Mercado Monetario Distribuciones de Ganancias de CapitalAjuste a la base. Freetaxusa 2006 Distribuciones que no son DividendosDistribuciones de Liquidación Distribuciones de Acciones y Derechos a Acciones Otras DistribucionesRequisito de declarar ciertos datos. Freetaxusa 2006 Tratamiento del impuesto mínimo alternativo. Freetaxusa 2006 Cómo Declarar el Ingreso de DividendosDeducción de los intereses de inversiones. Freetaxusa 2006 9. Freetaxusa 2006   Ingresos y Gastos de AlquilerIntroduction Useful Items - You may want to see: Ingresos de Alquiler Gastos de AlquilerDesocupada mientras está en venta. Freetaxusa 2006 Reparaciones y Mejoras Otros Gastos Propiedad que Pasa a Ser de Alquiler Alquiler de Parte de una Propiedad Alquiler sin Fines de Lucro Uso Personal de una Unidad Habitable (Incluyendo una Casa de Vacaciones)Cómo Dividir los Gastos Unidad Habitable Usada como Vivienda Cómo Declarar Ingresos y Deducciones DepreciaciónCambio de método contable para deducir depreciación no declarada. Freetaxusa 2006 Límites sobre las Pérdidas de AlquilerReglas sobre el Monto de Riesgo Límites sobre las Actividades Pasivas Cómo Declarar Ingresos y Gastos de AlquilerAnexo E (Formulario 1040) 10. Freetaxusa 2006   Planes de Jubilación, Pensiones y AnualidadesQué Hay de Nuevo Recordatorio IntroductionLa Regla General. Freetaxusa 2006 Arreglos de ahorros para la jubilación (IRA, por sus siglas en inglés). Freetaxusa 2006 Beneficios de la jubilación del gobierno federal. Freetaxusa 2006 Useful Items - You may want to see: Información GeneralReinversiones en arreglos de ahorros para la jubilación designados Roth IRA dentro del mismo plan. Freetaxusa 2006 Cómo Hacer la Declaración Costo (Inversión en el Contrato) Tributación de Pagos PeriódicosExclusión limitada al costo. Freetaxusa 2006 Exclusión no limitada al costo. Freetaxusa 2006 Método Simplificado Tributación de Pagos no PeriódicosDistribuciones de Suma Global ReinversionesReinversiones en arreglos de ahorros para la jubilación designados Roth IRA dentro del mismo plan. Freetaxusa 2006 Impuestos Adicionales EspecialesImpuesto sobre Distribuciones Prematuras Impuestos sobre Acumulación en Exceso Sobrevivientes y Beneficiarios 11. Freetaxusa 2006   Beneficios del Seguro Social y Beneficios Equivalentes de la Jubilación para Empleados FerroviariosIntroduction Useful Items - You may want to see: ¿Está Sujeta a Impuestos Alguna Parte de los Beneficios? Cómo Declarar los Beneficios¿Cuánto Está Sujeto a Impuestos? Ejemplos Deducciones Relacionadas con los BeneficiosReintegros Superiores a los Beneficios Brutos 12. Freetaxusa 2006   Otros IngresosIntroduction Useful Items - You may want to see: Trueque Deudas CanceladasIntereses incluidos en una deuda cancelada. Freetaxusa 2006 Excepciones Anfitrión o Anfitriona Ganancias de un Seguro de VidaCónyuge sobreviviente. Freetaxusa 2006 Ganancias de un Contrato de Dotación Beneficios Acelerados por Fallecimiento Funcionario de Seguridad Pública Fallecido en el Cumplimiento del Deber Ingresos de Sociedades Colectivas Ingresos de Sociedad Anónima de Tipo S Recuperación de FondosRecuperaciones de Deducciones Detalladas Alquileres de Bienes Muebles ReintegrosMétodo 1. Freetaxusa 2006 Método 2. Freetaxusa 2006 RegalíasAgotamiento. Freetaxusa 2006 Carbón y mineral de hierro. Freetaxusa 2006 Venta de participación de bienes. Freetaxusa 2006 Parte de una futura producción vendida. Freetaxusa 2006 Beneficios por DesempleoTipos de compensación por desempleo. Freetaxusa 2006 Programa gubernamental. Freetaxusa 2006 Reintegro de compensación por desempleo. Freetaxusa 2006 Retención de impuestos. Freetaxusa 2006 Reintegro de beneficios. Freetaxusa 2006 Beneficios del Bienestar Social y Otros Beneficios de Asistencia Pública Otros IngresosAngustia emocional. Freetaxusa 2006 Deducción por costos relativos a una demanda por discriminación ilegal. Freetaxusa 2006 Medidas de ahorro de energía. Freetaxusa 2006 Unidad habitable. Freetaxusa 2006 Ingreso actual que se requiere distribuir. Freetaxusa 2006 Ingreso actual que no se requiere distribuir. Freetaxusa 2006 Cómo hacer la declaración. Freetaxusa 2006 Pérdidas. Freetaxusa 2006 Fideicomiso de un cesionario. Freetaxusa 2006 Remuneración para personas que no son empleados. Freetaxusa 2006 Director de una sociedad anónima. Freetaxusa 2006 Representante personal. Freetaxusa 2006 Administrador de una ocupación o negocio de patrimonio en quiebra. Freetaxusa 2006 Notario público. Freetaxusa 2006 Funcionario de distrito electoral. Freetaxusa 2006 Pagos por complejidad del cuidado. Freetaxusa 2006 Mantenimiento del espacio en el hogar. Freetaxusa 2006 Declaración de pagos sujetos a impuestos. Freetaxusa 2006 Loterías y rifas. Freetaxusa 2006 Formulario W-2G. Freetaxusa 2006 Cómo declarar ganancias de juegos y apuestas y mantenimiento de documentación. Freetaxusa 2006 Pensión o arreglo IRA heredado. Freetaxusa 2006 Recompensas o bonificaciones para empleados. Freetaxusa 2006 Premio Pulitzer, Premio Nobel y premios similares. Freetaxusa 2006 Pago por servicios. Freetaxusa 2006 Pagos del Departamento de Asuntos de Veteranos (VA). Freetaxusa 2006 Premios. Freetaxusa 2006 Indemnización por huelga y cierre patronal. Freetaxusa 2006 Prev  Up  Next   Home   More Online Publications
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Understanding your CP42 Notice

The amount of your refund has changed because we used it to pay your
spouse's past due tax debt.


What you need to do

  • Read your notice carefully — it'll explain how we used your refund and how much of it is left.
  • Contact us if you disagree.

You may want to...


Answers to Common Questions

What should I do if I disagree with the notice?
Call us at the toll free number on the top right corner of your notice. Please have your paperwork (such as cancelled checks, amended return, etc.) ready when you call.

Part of the refund you used is mine. You used it to pay taxes my spouse owes. I don't owe any taxes. What can I do?
You can file a Form 8379, Injured Spouse Allocation to claim your share of the refund.

What happens to the part of my refund you didn't use?
You'll receive a refund check for any part we didn't use.


Tips for next year

Consider filing your taxes electronically. Filing online can help you avoid mistakes and find credits and deductions that you may qualify for. In many cases you can file for free. Learn more about e-file.

Printable samples of this notice (PDF)

Tax publications you may find useful

How to get help

Calling the 1-800 number listed on the top right corner of your notice is the fastest way to get your questions answered.

You can also authorize someone (such as an accountant) to contact the IRS on your behalf using this Power of Attorney and Declaration of Representative (Form 2848).

Or you may qualify for help from a Low Income Taxpayer Clinic.
 

Page Last Reviewed or Updated: 04-Mar-2014

The Freetaxusa 2006

Freetaxusa 2006 5. Freetaxusa 2006   Exemptions, Deductions, and Credits Table of Contents Topics - This chapter discusses: Useful Items - You may want to see: Items Related to Excluded Income Exemptions Contributions to Foreign Charitable Organizations Moving ExpensesAllocation of Moving Expenses Forms To File Contributions to Individual Retirement Arrangements Taxes of Foreign Countries and U. Freetaxusa 2006 S. Freetaxusa 2006 PossessionsCredit for Foreign Income Taxes Deduction for Foreign Income Taxes Deduction for Other Foreign Taxes How To Report Deductions Topics - This chapter discusses: The rules concerning items related to excluded income, Exemptions, Contributions to foreign charitable organizations, Moving expenses, Contributions to individual retirement arrangements (IRAs), Taxes of foreign countries and U. Freetaxusa 2006 S. Freetaxusa 2006 possessions, and How to report deductions. Freetaxusa 2006 Useful Items - You may want to see: Publication 501 Exemptions, Standard Deduction, and Filing Information 514 Foreign Tax Credit for Individuals 521 Moving Expenses 523 Selling Your Home 590 Individual Retirement Arrangements (IRAs) 597 Information on the United States—Canada Income Tax Treaty Form (and Instructions) 1116 Foreign Tax Credit 2106 Employee Business Expenses 2555 Foreign Earned Income 2555-EZ Foreign Earned Income Exclusion 3903 Moving Expenses Schedule A (Form 1040) Itemized Deductions Schedule C (Form 1040) Profit or Loss From Business SS-5 Application for a Social Security Card W-7 Application for IRS Individual Taxpayer Identification Number See chapter 7 for information about getting these publications and forms. Freetaxusa 2006 Items Related to Excluded Income U. Freetaxusa 2006 S. Freetaxusa 2006 citizens and resident aliens living outside the United States generally are allowed the same deductions as citizens and residents living in the United States. Freetaxusa 2006 If you choose to exclude foreign earned income or housing amounts, you cannot deduct, exclude, or claim a credit for any item that can be allocated to or charged against the excluded amounts. Freetaxusa 2006 This includes any expenses, losses, and other normally deductible items that are allocable to the excluded income. Freetaxusa 2006 You can deduct only those expenses connected with earning includible income. Freetaxusa 2006 These rules apply only to items definitely related to the excluded earned income and they do not apply to other items that are not definitely related to any particular type of gross income. Freetaxusa 2006 These rules do not apply to items such as: Personal exemptions, Qualified retirement contributions, Alimony payments, Charitable contributions, Medical expenses, Mortgage interest, or Real estate taxes on your personal residence. Freetaxusa 2006 For purposes of these rules, your housing deduction is not treated as allocable to your excluded income, but the deduction for self- employment tax is. Freetaxusa 2006 If you receive foreign earned income in a tax year after the year in which you earned it, you may have to file an amended return for the earlier year to properly adjust the amounts of deductions, credits, or exclusions allocable to your foreign earned income and housing exclusions. Freetaxusa 2006 Example. Freetaxusa 2006 In 2012, you had $90,400 of foreign earned income and $9,500 of deductions allocable to your foreign earned income. Freetaxusa 2006 You did not have a housing exclusion. Freetaxusa 2006 Because you excluded all of your foreign earned income, you would not have been able to claim any of the deductions on your 2012 return. Freetaxusa 2006 In 2013, you received a $12,000 bonus for work you did abroad in 2012. Freetaxusa 2006 You can exclude $4,700 of the bonus because the limit on the foreign earned income exclusion for 2012 was $95,100 and you have already excluded $90,400. Freetaxusa 2006 Since you must include $7,300 of the bonus ($12,000 − $4,700) for work you did in 2012 in income, you can file an amended return for 2012 to claim $677 of the deductions. Freetaxusa 2006 This is the deductions allocable to the foreign earned income ($9,500) multiplied by the includible portion of the foreign earned income ($7,300) and divided by the total foreign earned income for 2012 ($102,400). Freetaxusa 2006 Exemptions You can claim an exemption for your nonresident alien spouse on your separate return, provided your spouse has no gross income for U. Freetaxusa 2006 S. Freetaxusa 2006 tax purposes and is not the dependent of another U. Freetaxusa 2006 S. Freetaxusa 2006 taxpayer. Freetaxusa 2006 You also can claim exemptions for individuals who qualify as your dependents. Freetaxusa 2006 To be your dependent, the individual must be a U. Freetaxusa 2006 S. Freetaxusa 2006 citizen, U. Freetaxusa 2006 S. Freetaxusa 2006 national, U. Freetaxusa 2006 S. Freetaxusa 2006 resident alien, or a resident of Canada or Mexico for some part of the calendar year in which your tax year begins. Freetaxusa 2006 Children. Freetaxusa 2006   Children usually are citizens or residents of the same country as their parents. Freetaxusa 2006 If you were a U. Freetaxusa 2006 S. Freetaxusa 2006 citizen when your child was born, your child generally is a U. Freetaxusa 2006 S. Freetaxusa 2006 citizen. Freetaxusa 2006 This is true even if the child's other parent is a nonresident alien, the child was born in a foreign country, and the child lives abroad with the other parent. Freetaxusa 2006   If you have a legally adopted child who is not a U. Freetaxusa 2006 S. Freetaxusa 2006 citizen, U. Freetaxusa 2006 S. Freetaxusa 2006 resident, or U. Freetaxusa 2006 S. Freetaxusa 2006 national, the child meets the citizen requirement if you are a U. Freetaxusa 2006 S. Freetaxusa 2006 citizen or U. Freetaxusa 2006 S. Freetaxusa 2006 national and the child lived with you as a member of your household all year. Freetaxusa 2006 Social security number. Freetaxusa 2006   You must include on your return the social security number (SSN) of each dependent for whom you claim an exemption. Freetaxusa 2006 To get a social security number for a dependent, apply at a Social Security office or U. Freetaxusa 2006 S. Freetaxusa 2006 consulate. Freetaxusa 2006 You must provide original or certified copies of documents to verify the dependent's age, identity, and citizenship, and complete Form SS-5. Freetaxusa 2006   If you do not have an SSN for a child who was born in 2013 and died in 2013, attach a copy of the child's birth certificate to your tax return. Freetaxusa 2006 Print “Died” in column (2) of line 6c of your Form 1040 or Form 1040A. Freetaxusa 2006   If your dependent is a nonresident alien who is not eligible to get a social security number, you must list the dependent's individual taxpayer identification number (ITIN) instead of an SSN. Freetaxusa 2006 To apply for an ITIN, file Form W-7 with the IRS. Freetaxusa 2006 It usually takes 6 to 10 weeks to get an ITIN. Freetaxusa 2006 Enter your dependent's ITIN wherever an SSN is requested on your tax return. Freetaxusa 2006 More information. Freetaxusa 2006   For more information about exemptions, see Publication 501. Freetaxusa 2006 Contributions to Foreign Charitable Organizations If you make contributions directly to a foreign church or other foreign charitable organization, you generally cannot deduct them. Freetaxusa 2006 Exceptions are explained under Canadian, Mexican, and Israeli charities, later. Freetaxusa 2006 You can deduct contributions to a U. Freetaxusa 2006 S. Freetaxusa 2006 organization that transfers funds to a charitable foreign organization if the U. Freetaxusa 2006 S. Freetaxusa 2006 organization controls the use of the funds by the foreign organization or if the foreign organization is just an administrative arm of the U. Freetaxusa 2006 S. Freetaxusa 2006 organization. Freetaxusa 2006 Canadian, Mexican, and Israeli charities. Freetaxusa 2006   Under the income tax treaties with Canada, Mexico and Israel, you may be able to deduct contributions to certain Canadian, Mexican, and Israeli charitable organizations. Freetaxusa 2006 Generally, you must have income from sources in Canada, Mexico, or Israel, and the organization must meet certain requirements. Freetaxusa 2006 See Publication 597, Information on the United States-Canada Income Tax Treaty, and Publication 526, Charitable Contributions, for more information. Freetaxusa 2006 Moving Expenses If you moved to a new home in 2013 because of your job or business, you may be able to deduct the expenses of your move. Freetaxusa 2006 Generally, to be deductible, the moving expenses must have been paid or incurred in connection with starting work at a new job location. Freetaxusa 2006 See Publication 521 for a complete discussion of the deduction for moving expenses and information about moves within the United States. Freetaxusa 2006 Foreign moves. Freetaxusa 2006   A foreign move is a move in connection with the start of work at a new job location outside the United States and its possessions. Freetaxusa 2006 A foreign move does not include a move back to the United States or its possessions. Freetaxusa 2006 Allocation of Moving Expenses When your new place of work is in a foreign country, your moving expenses are directly connected with the income earned in that foreign country. Freetaxusa 2006 If you exclude all or part of the income that you earn at the new location under the foreign earned income exclusion or the foreign housing exclusion, you cannot deduct the part of your moving expense that is allocable to the excluded income. Freetaxusa 2006 Also, you cannot deduct the part of the moving expense related to the excluded income for a move from a foreign country to the United States if you receive a reimbursement that you are able to treat as compensation for services performed in the foreign country. Freetaxusa 2006 Year to which expense is connected. Freetaxusa 2006   The moving expense is connected with earning the income (including reimbursements, as discussed in chapter 4 under Reimbursement of moving expenses ) either entirely in the year of the move or in 2 years. Freetaxusa 2006 It is connected with earning the income entirely in the year of the move if you qualify for the foreign earned income exclusion under the bona fide residence test or physical presence test for at least 120 days during that tax year. Freetaxusa 2006   If you do not qualify under either the bona fide residence test or the physical presence test for at least 120 days during the year of the move, the expense is connected with earning the income in 2 years. Freetaxusa 2006 The moving expense is connected with the year of the move and the following year if the move is from the United States to a foreign country. Freetaxusa 2006 The moving expense is connected with the year of the move and the preceding year if the move is from a foreign country to the United States. Freetaxusa 2006 Amount allocable to excluded income. Freetaxusa 2006   To figure the amount of your moving expense that is allocable to your excluded foreign earned income (and not deductible), you must multiply your total moving expense deduction by a fraction. Freetaxusa 2006 The numerator (top number) of the fraction is the total of your excluded foreign earned income and housing amounts for both years and the denominator (bottom number) of the fraction is your total foreign earned income for both years. Freetaxusa 2006 Example. Freetaxusa 2006 On November 1, 2012, you transfer to Monaco. Freetaxusa 2006 Your tax home is in Monaco, and you are a bona fide resident of Monaco for the entire tax year 2013. Freetaxusa 2006 In 2012, you paid $6,000 for allowable moving expenses for your move from the United States to Monaco. Freetaxusa 2006 You were fully reimbursed (under a nonaccountable plan) for these expenses in the same year. Freetaxusa 2006 The reimbursement is included in your income. Freetaxusa 2006 Your only other income consists of $16,000 wages earned in 2012 after the date of your move, and $100,100 wages earned in Monaco for 2013. Freetaxusa 2006 Because you did not meet the bona fide residence test for at least 120 days during 2012, the year of the move, the moving expenses are for services you performed in both 2012 and the following year, 2013. Freetaxusa 2006 Your total foreign earned income for both years is $122,100, consisting of $16,000 wages for 2012, $100,100 wages for 2013, and $6,000 moving expense reimbursement for both years. Freetaxusa 2006 You have no housing exclusion. Freetaxusa 2006 The total amount you can exclude is $113,190, consisting of the $97,600 full-year exclusion for 2013 and a $15,590 part-year exclusion for 2012 ($95,100 times the fraction of 60 qualifying bona fide residence days over 366 total days in the year). Freetaxusa 2006 To find the part of your moving expenses that is not deductible, multiply your $6,000 total expenses by the fraction $113,190 over $122,100. Freetaxusa 2006 The result, $5,562, is your nondeductible amount. Freetaxusa 2006    You must report the full amount of the moving expense reimbursement in the year in which you received the reimbursement. Freetaxusa 2006 In the preceding example, this year was 2012. Freetaxusa 2006 You attribute the reimbursement to both 2012 and 2013 only to figure the amount of foreign earned income eligible for exclusion for each year. Freetaxusa 2006 Move between foreign countries. Freetaxusa 2006   If you move between foreign countries, your moving expense is allocable to income earned in the year of the move if you qualified under either the bona fide residence test or the physical presence test for a period that includes at least 120 days in the year of the move. Freetaxusa 2006 New place of work in U. Freetaxusa 2006 S. Freetaxusa 2006   If your new place of work is in the United States, the deductible moving expenses are directly connected with the income earned in the United States. Freetaxusa 2006 If you treat a reimbursement from your employer as foreign earned income (see the discussion in chapter 4), you must allocate deductible moving expenses to foreign earned income. Freetaxusa 2006 Storage expenses. Freetaxusa 2006   These expenses are attributable to work you do during the year in which you incur the storage expenses. Freetaxusa 2006 You cannot deduct the amount allocable to excluded income. Freetaxusa 2006 Moving Expense Attributable to Foreign Earnings in 2 Years If your moving expense deduction is attributable to your foreign earnings in 2 years (the year of the move and the following year), you should request an extension of time to file your return for the year of the move until after the end of the second year. Freetaxusa 2006 By then, you should have all the information needed to properly figure the moving expense deduction. Freetaxusa 2006 See Extensions under When To File and Pay in chapter 1. Freetaxusa 2006 If you do not request an extension, you should figure the part of the moving expense that you cannot deduct because it is allocable to the foreign earned income you are excluding. Freetaxusa 2006 You do this by multiplying the moving expense by a fraction, the numerator (top number) of which is your excluded foreign earned income for the year of the move, and the denominator (bottom number) of which is your total foreign earned income for the year of the move. Freetaxusa 2006 Once you know your foreign earnings and exclusion for the following year, you must either: Adjust the moving expense deduction by filing an amended return for the year of the move, or Recapture any additional unallowable amount as income on your return for the following year. Freetaxusa 2006 If, after you make the final computation, you have an additional amount of allowable moving expense deduction, you can claim this only on an amended return for the year of the move. Freetaxusa 2006 You cannot claim it on the return for the second year. Freetaxusa 2006 Forms To File Report your moving expenses on Form 3903. Freetaxusa 2006 Report your moving expense deduction on line 26 of Form 1040. Freetaxusa 2006 If you must reduce your moving expenses by the amount allocable to excluded income (as explained later under How To Report Deductions ), attach a statement to your return showing how you figured this amount. Freetaxusa 2006 For more information about figuring moving expenses, see Publication 521. Freetaxusa 2006 Contributions to Individual Retirement Arrangements Contributions to your individual retirement arrangements (IRAs) that are traditional IRAs or Roth IRAs are generally limited to the lesser of $5,500 ($6,500 if 50 or older) or your compensation that is includible in your gross income for the tax year. Freetaxusa 2006 In determining compensation for this purpose, do not take into account amounts you exclude under either the foreign earned income exclusion or the foreign housing exclusion. Freetaxusa 2006 Do not reduce your compensation by the foreign housing deduction. Freetaxusa 2006 If you are covered by an employer retirement plan at work, your deduction for your contributions to your traditional IRAs is generally limited based on your modified adjusted gross income. Freetaxusa 2006 This is your adjusted gross income figured without taking into account the foreign earned income exclusion, the foreign housing exclusion, or the foreign housing deduction. Freetaxusa 2006 Other modifications are also required. Freetaxusa 2006 For more information on IRAs, see Publication 590. Freetaxusa 2006 Taxes of Foreign Countries and U. Freetaxusa 2006 S. Freetaxusa 2006 Possessions You can take either a credit or a deduction for income taxes paid to a foreign country or a U. Freetaxusa 2006 S. Freetaxusa 2006 possession. Freetaxusa 2006 Taken as a deduction, foreign income taxes reduce your taxable income. Freetaxusa 2006 Taken as a credit, foreign income taxes reduce your tax liability. Freetaxusa 2006 You must treat all foreign income taxes the same way. Freetaxusa 2006 If you take a credit for any foreign income taxes, you cannot deduct any foreign income taxes. Freetaxusa 2006 However, you may be able to deduct other foreign taxes. Freetaxusa 2006 See Deduction for Other Foreign Taxes, later. Freetaxusa 2006 There is no rule to determine whether it is to your advantage to take a deduction or a credit for foreign income taxes. Freetaxusa 2006 In most cases, it is to your advantage to take foreign income taxes as a tax credit, which you subtract directly from your U. Freetaxusa 2006 S. Freetaxusa 2006 tax liability, rather than as a deduction in figuring taxable income. Freetaxusa 2006 However, if foreign income taxes were imposed at a high rate and the proportion of foreign income to U. Freetaxusa 2006 S. Freetaxusa 2006 income is small, a lower final tax may result from deducting the foreign income taxes. Freetaxusa 2006 In any event, you should figure your tax liability both ways and then use the one that is better for you. Freetaxusa 2006 You can make or change your choice within 10 years from the due date for filing the tax return on which you are entitled to take either the deduction or the credit. Freetaxusa 2006 Foreign income taxes. Freetaxusa 2006   These are generally income taxes you pay to any foreign country or possession of the United States. Freetaxusa 2006 Foreign income taxes on U. Freetaxusa 2006 S. Freetaxusa 2006 return. Freetaxusa 2006   Foreign income taxes can only be taken as a credit on Form 1040, line 47, or as an itemized deduction on Schedule A. Freetaxusa 2006 These amounts cannot be included as withheld income taxes on Form 1040, line 62. Freetaxusa 2006 Foreign taxes paid on excluded income. Freetaxusa 2006   You cannot take a credit or deduction for foreign income taxes paid on earnings you exclude from tax under any of the following. Freetaxusa 2006 Foreign earned income exclusion. Freetaxusa 2006 Foreign housing exclusion. Freetaxusa 2006 Possession exclusion. Freetaxusa 2006 If your wages are completely excluded, you cannot deduct or take a credit for any of the foreign taxes paid on your wages. Freetaxusa 2006   If only part of your wages is excluded, you cannot deduct or take a credit for the foreign income taxes allocable to the excluded part. Freetaxusa 2006 You find the taxes allocable to your excluded wages by applying a fraction to the foreign taxes paid on foreign earned income received during the tax year. Freetaxusa 2006 The numerator (top number) of the fraction is your excluded foreign earned income received during the tax year minus deductible expenses allocable to that income (not including the foreign housing deduction). Freetaxusa 2006 The denominator (bottom number) of the fraction is your total foreign earned income received during the tax year minus all deductible expenses allocable to that income (including the foreign housing deduction). Freetaxusa 2006   If foreign law taxes both earned income and some other type of income and the taxes on the other type cannot be separated, the denominator of the fraction is the total amount of income subject to foreign tax minus deductible expenses allocable to that income. Freetaxusa 2006    If you take a foreign tax credit for tax on income you could have excluded under your choice to exclude foreign earned income or your choice to exclude foreign housing costs, one or both of the choices may be considered revoked. Freetaxusa 2006 Credit for Foreign Income Taxes If you take the foreign tax credit, you may have to file Form 1116 with Form 1040. Freetaxusa 2006 Form 1116 is used to figure the amount of foreign tax paid or accrued that can be claimed as a foreign tax credit. Freetaxusa 2006 Do not include the amount of foreign tax paid or accrued as withheld federal income taxes on Form 1040, line 62. Freetaxusa 2006 The foreign income tax for which you can claim a credit is the amount of legal and actual tax liability you pay or accrue during the year. Freetaxusa 2006 The amount for which you can claim a credit is not necessarily the amount withheld by the foreign country. Freetaxusa 2006 You cannot take a foreign tax credit for income tax you paid to a foreign country that would be refunded by the foreign country if you made a claim for refund. Freetaxusa 2006 Subsidies. Freetaxusa 2006   If a foreign country returns your foreign tax payments to you in the form of a subsidy, you cannot claim a foreign tax credit based on these payments. Freetaxusa 2006 This rule applies to a subsidy provided by any means that is determined, directly or indirectly, by reference to the amount of tax, or to the base used to figure the tax. Freetaxusa 2006   Some ways of providing a subsidy are refunds, credits, deductions, payments, or discharges of obligations. Freetaxusa 2006 A credit is also not allowed if the subsidy is given to a person related to you, or persons who participated in a transaction or a related transaction with you. Freetaxusa 2006 Limit The foreign tax credit is limited to the part of your total U. Freetaxusa 2006 S. Freetaxusa 2006 tax that is in proportion to your taxable income from sources outside the United States compared to your total taxable income. Freetaxusa 2006 The allowable foreign tax credit cannot be more than your actual foreign tax liability. Freetaxusa 2006 Exemption from limit. Freetaxusa 2006   You will not be subject to this limit and will not have to file Form 1116 if you meet all three of the following requirements. Freetaxusa 2006 Your only foreign source income for the year is passive income (dividends, interest, royalties, etc. Freetaxusa 2006 ) that is reported to you on a payee statement (such as a Form 1099-DIV or 1099-INT). Freetaxusa 2006 Your foreign taxes for the year that qualify for the credit are not more than $300 ($600 if you are filing a joint return) and are reported on a payee statement. Freetaxusa 2006 You elect this procedure. Freetaxusa 2006 If you make this election, you cannot carry back or carry over any unused foreign tax to or from this year. Freetaxusa 2006 Separate limit. Freetaxusa 2006   You must figure the limit on a separate basis with regard to “passive category income” and “general category income” (see the instructions for Form 1116). Freetaxusa 2006 Figuring the limit. Freetaxusa 2006   In figuring taxable income in each category, you take into account only the amount that you must include in income on your federal tax return. Freetaxusa 2006 Do not take any excluded amount into account. Freetaxusa 2006   To determine your taxable income in each category, deduct expenses and losses that are definitely related to that income. Freetaxusa 2006   Other expenses (such as itemized deductions or the standard deduction) not definitely related to specific items of income must be apportioned to the foreign income in each category by multiplying them by a fraction. Freetaxusa 2006 The numerator (top number) of the fraction is your gross foreign income in the separate limit category. Freetaxusa 2006 The denominator (bottom number) of the fraction is your gross income from all sources. Freetaxusa 2006 For this purpose, gross income includes income that is excluded under the foreign earned income provisions but does not include any other exempt income. Freetaxusa 2006 You must use special rules for deducting interest expenses. Freetaxusa 2006 For more information on allocating and apportioning your deductions, see Publication 514. Freetaxusa 2006 Exemptions. Freetaxusa 2006   Do not take the deduction for exemptions for yourself, your spouse, or your dependents in figuring taxable income for purposes of the limit. Freetaxusa 2006 Recapture of foreign losses. Freetaxusa 2006   If you have an overall foreign loss and the loss reduces your U. Freetaxusa 2006 S. Freetaxusa 2006 source income (resulting in a reduction of your U. Freetaxusa 2006 S. Freetaxusa 2006 tax liability), you must recapture the loss in later years when you have taxable income from foreign sources. Freetaxusa 2006 This is done by treating a part of your taxable income from foreign sources in later years as U. Freetaxusa 2006 S. Freetaxusa 2006 source income. Freetaxusa 2006 This reduces the numerator of the limiting fraction and the resulting foreign tax credit limit. Freetaxusa 2006 Recapture of domestic losses. Freetaxusa 2006   If you have an overall domestic loss (resulting in no U. Freetaxusa 2006 S. Freetaxusa 2006 tax liability), you cannot claim a foreign tax credit for taxes paid during that year. Freetaxusa 2006 You must recapture the loss in later years when you have U. Freetaxusa 2006 S. Freetaxusa 2006 source taxable income. Freetaxusa 2006 This is done by treating a part of your taxable income from U. Freetaxusa 2006 S. Freetaxusa 2006 sources in later years as foreign source income. Freetaxusa 2006 This increases the numerator of the limiting fraction and the resulting foreign tax credit limit. Freetaxusa 2006 Foreign tax credit carryback and carryover. Freetaxusa 2006   The amount of foreign income tax not allowed as a credit because of the limit can be carried back 1 year and carried forward 10 years. Freetaxusa 2006   More information on figuring the foreign tax credit can be found in Publication 514. Freetaxusa 2006 Deduction for Foreign Income Taxes Instead of taking the foreign tax credit, you can deduct foreign income taxes as an itemized deduction on Schedule A (Form 1040). Freetaxusa 2006 You can deduct only foreign income taxes paid on income that is subject to U. Freetaxusa 2006 S. Freetaxusa 2006 tax. Freetaxusa 2006 You cannot deduct foreign taxes paid on earnings you exclude from tax under any of the following. Freetaxusa 2006 Foreign earned income exclusion. Freetaxusa 2006 Foreign housing exclusion. Freetaxusa 2006 Possession exclusion. Freetaxusa 2006 Example. Freetaxusa 2006 You are a U. Freetaxusa 2006 S. Freetaxusa 2006 citizen and qualify to exclude your foreign earned income. Freetaxusa 2006 Your excluded wages in Country X are $70,000 on which you paid income tax of $10,000. Freetaxusa 2006 You received dividends from Country X of $2,000 on which you paid income tax of $600. Freetaxusa 2006 You can deduct the $600 tax payment because the dividends relating to it are subject to U. Freetaxusa 2006 S. Freetaxusa 2006 tax. Freetaxusa 2006 Because you exclude your wages, you cannot deduct the income tax of $10,000. Freetaxusa 2006 If you exclude only a part of your wages, see the earlier discussion under Foreign taxes paid on excluded income. Freetaxusa 2006 Deduction for Other Foreign Taxes You can deduct real property taxes you pay that are imposed on you by a foreign country. Freetaxusa 2006 You take this deduction on Schedule A (Form 1040). Freetaxusa 2006 You cannot deduct other foreign taxes, such as personal property taxes, unless you incurred the expenses in a trade or business or in the production of income. Freetaxusa 2006 On the other hand, you generally can deduct personal property taxes when you pay them to U. Freetaxusa 2006 S. Freetaxusa 2006 possessions. Freetaxusa 2006 But if you claim the possession exclusion, see Publication 570. Freetaxusa 2006 The deduction for foreign taxes other than foreign income taxes is not related to the foreign tax credit. Freetaxusa 2006 You can take deductions for these miscellaneous foreign taxes and also claim the foreign tax credit for income taxes imposed by a foreign country. Freetaxusa 2006 How To Report Deductions If you exclude foreign earned income or housing amounts, how you show your deductions on your tax return and how you figure the amount allocable to your excluded income depends on whether the expenses are used in figuring adjusted gross income (Form 1040, line 38) or are itemized deductions. Freetaxusa 2006 If you have deductions used in figuring adjusted gross income, enter the total amount for each of these items on the appropriate lines and schedules of Form 1040. Freetaxusa 2006 Generally, you figure the amount of a deduction related to the excluded income by multiplying the deduction by a fraction, the numerator of which is your foreign earned income exclusion and the denominator of which is your foreign earned income. Freetaxusa 2006 Enter the amount of the deduction(s) related to excluded income on line 44 of Form 2555. Freetaxusa 2006 If you have itemized deductions related to excluded income, enter on Schedule A (Form 1040) only the part not related to excluded income. Freetaxusa 2006 You figure that amount by subtracting from the total deduction the amount related to excluded income. Freetaxusa 2006 Generally, you figure the amount that is related to the excluded income by multiplying the total deduction by a fraction, the numerator of which is your foreign earned income exclusion and the denominator of which is your foreign earned income. Freetaxusa 2006 Attach a statement to your return showing how you figured the deductible amount. Freetaxusa 2006 Example 1. Freetaxusa 2006 You are a U. Freetaxusa 2006 S. Freetaxusa 2006 citizen employed as an accountant. Freetaxusa 2006 Your tax home is in Germany for the entire tax year. Freetaxusa 2006 You meet the physical presence test. Freetaxusa 2006 Your foreign earned income for the year was $122,000 and your investment income was $10,380. Freetaxusa 2006 After excluding $97,600, your AGI is $34,780. Freetaxusa 2006 You had unreimbursed business expenses of $2,500 for travel and entertainment in earning your foreign income, of which $500 was for meals and entertainment. Freetaxusa 2006 These expenses are deductible only as miscellaneous deductions on Schedule A (Form 1040). Freetaxusa 2006 You also have $500 of miscellaneous expenses that are not related to your foreign income that you enter on line 23 of Schedule A. Freetaxusa 2006 You must fill out Form 2106. Freetaxusa 2006 On that form, reduce your deductible meal and entertainment expenses by 50% ($250). Freetaxusa 2006 You must reduce the remaining $2,250 of travel and entertainment expenses by 80% ($1,800) because you excluded 80% ($97,600/$122,000) of your foreign earned income. Freetaxusa 2006 You carry the remaining total of $450 to line 21 of Schedule A. Freetaxusa 2006 Add the $450 to the $500 that you have on line 23 and enter the total ($950) on line 24. Freetaxusa 2006 On line 26 of Schedule A, enter $696, which is 2% of your adjusted gross income of $34,780 (line 38, Form 1040) and subtract it from the amount on line 24. Freetaxusa 2006 Enter $254 on line 27 of Schedule A. Freetaxusa 2006 Example 2. Freetaxusa 2006 You are a U. Freetaxusa 2006 S. Freetaxusa 2006 citizen, have a tax home in Spain, and meet the physical presence test. Freetaxusa 2006 You are self-employed and personal services produce the business income. Freetaxusa 2006 Your gross income was $116,931, business expenses $66,895, and net income (profit) $50,036. Freetaxusa 2006 You choose the foreign earned income exclusion and exclude $97,600 of your gross income. Freetaxusa 2006 Since your excluded income is 83. Freetaxusa 2006 47% of your total income, 83. Freetaxusa 2006 47% of your business expenses are not deductible. Freetaxusa 2006 Report your total income and expenses on Schedule C (Form 1040). Freetaxusa 2006 On Form 2555 you will show the following: Line 20a, $116,931, gross income, Lines 42 and 43, $97,600, foreign earned income exclusion, and Line 44, $55,837 (83. Freetaxusa 2006 47% × $66,895) business expenses attributable to the exclusion. Freetaxusa 2006 In this situation (Example 2), you cannot use Form 2555-EZ since you had self-employment income and business expenses. Freetaxusa 2006 Example 3. Freetaxusa 2006 Assume in Example 2 that both capital and personal services combine to produce the business income. Freetaxusa 2006 No more than 30% of your net income, or $15,011, assuming that this amount is a reasonable allowance for your services, is considered earned and can be excluded. Freetaxusa 2006 Your exclusion of $15,011 is 12. Freetaxusa 2006 84% of your gross income ($15,011 ÷ $116,931). Freetaxusa 2006 Because you excluded 12. Freetaxusa 2006 84% of your total income, $8,589 (. Freetaxusa 2006 1284 x $66,895) of your business expenses is attributable to the excluded income and is not deductible. Freetaxusa 2006 Example 4. Freetaxusa 2006 You are a U. Freetaxusa 2006 S. Freetaxusa 2006 citizen, have a tax home in Brazil, and meet the physical presence test. Freetaxusa 2006 You are self-employed and both capital and personal services combine to produce business income. Freetaxusa 2006 Your gross income was $146,000, business expenses were $172,000, and your net loss was $26,000. Freetaxusa 2006 A reasonable allowance for the services you performed for the business is $77,000. Freetaxusa 2006 Because you incurred a net loss, the earned income limit of 30% of your net profit does not apply. Freetaxusa 2006 The $77,000 is foreign earned income. Freetaxusa 2006 If you choose to exclude the $77,000, you exclude 52. Freetaxusa 2006 74% of your gross income ($77,000 ÷ $146,000), and 52. Freetaxusa 2006 74% of your business expenses ($90,713) is attributable to that income and is not deductible. Freetaxusa 2006 Show your total income and expenses on Schedule C (Form 1040). Freetaxusa 2006 On Form 2555, exclude $77,000 and show $90,713 on line 44. Freetaxusa 2006 Subtract line 44 from line 43, and enter the difference as a negative (in parentheses) on line 45. Freetaxusa 2006 Because this amount is negative, enter it as a positive (no parentheses) on line 21, Form 1040, and combine it with your other income to arrive at total income on line 22 of Form 1040. Freetaxusa 2006 In this situation (Example 4), you would probably not want to choose the foreign earned income exclusion if this was the first year you were eligible. Freetaxusa 2006 If you had chosen the exclusion in an earlier year, you might want to revoke the choice for this year. Freetaxusa 2006 To do so would mean that you could not claim the exclusion again for the next 5 tax years without IRS approval. Freetaxusa 2006 See Choosing the Exclusion in chapter 4. Freetaxusa 2006 Example 5. Freetaxusa 2006 You are a U. Freetaxusa 2006 S. Freetaxusa 2006 citizen, have a tax home in Panama, and meet the bona fide residence test. Freetaxusa 2006 You have been performing services for clients as a partner in a firm that provides services exclusively in Panama. Freetaxusa 2006 Capital investment is not material in producing the partnership's income. Freetaxusa 2006 Under the terms of the partnership agreement, you are to receive 50% of the net profits. Freetaxusa 2006 The partnership received gross income of $244,000 and incurred operating expenses of $98,250. Freetaxusa 2006 Of the net profits of $145,750, you received $72,875 as your distributive share. Freetaxusa 2006 You choose to exclude $97,600 of your share of the gross income. Freetaxusa 2006 Because you exclude 80% ($97,600 ÷ $122,000) of your share of the gross income, you cannot deduct $39,300, 80% of your share of the operating expenses (. Freetaxusa 2006 80 × $49,125). Freetaxusa 2006 Report $72,875, your distributive share of the partnership net profit, on Schedule E (Form 1040), Supplemental Income and Loss. Freetaxusa 2006 On Form 2555, show $97,600 on line 42 and show $39,300 on line 44. Freetaxusa 2006 Your exclusion on Form 2555 is $58,300. Freetaxusa 2006 In this situation (Example 5), you cannot use Form 2555-EZ since you had earned income other than salaries and wages and you had business expenses. Freetaxusa 2006 Prev  Up  Next   Home   More Online Publications