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Irs ez 11. Irs ez   Departing Aliens and the Sailing or Departure Permit Table of Contents Introduction Topics - This chapter discusses: Useful Items - You may want to see: Aliens Not Required To Obtain Sailing or Departure Permits Aliens Required To Obtain Sailing or Departure PermitsGetting a Sailing or Departure Permit Forms To File Paying Taxes and Obtaining Refunds Bond To Ensure Payment Filing Annual U. Irs ez S. Irs ez Income Tax Returns Introduction Before leaving the United States, all aliens (except those listed under Aliens Not Required To Obtain Sailing or Departure Permits must obtain a certificate of compliance. Irs ez This document, also popularly known as the sailing permit or departure permit, is part of the income tax form you must file before leaving. Irs ez You will receive a sailing or departure permit after filing a Form 1040-C or Form 2063. Irs ez These forms are discussed in this chapter. Irs ez To find out if you need a sailing or departure permit, first read Aliens Not Required To Obtain Sailing or Departure Permits . Irs ez If you do not fall into one of the categories in that discussion, you must obtain a sailing or departure permit. Irs ez Read Aliens Required To Obtain Sailing or Departure Permits . Irs ez Topics - This chapter discusses: Who needs a sailing permit, How to get a sailing permit, and Forms you file to get a sailing permit. Irs ez Useful Items - You may want to see: Form (and Instructions) 1040-C U. Irs ez S. Irs ez Departing Alien Income Tax Return 2063 U. Irs ez S. Irs ez Departing Alien Income Tax Statement See chapter 12 for information about getting these forms. Irs ez Aliens Not Required To Obtain Sailing or Departure Permits If you are included in one of the following categories, you do not have to get a sailing or departure permit before leaving the United States. Irs ez If you are in one of these categories and do not have to get a sailing or departure permit, you must be able to support your claim for exemption with proper identification or give the authority for the exemption. Irs ez Category 1. Irs ez   Representatives of foreign governments with diplomatic passports, whether accredited to the United States or other countries, members of their households, and servants accompanying them. Irs ez Servants who are leaving, but not with a person with a diplomatic passport, must get a sailing or departure permit. Irs ez However, they can get a sailing or departure permit on Form 2063 without examination of their income tax liability by presenting a letter from the chief of their diplomatic mission certifying that: Their name appears on the “White List” (a list of employees of diplomatic missions), and They do not owe to the United States any income tax, and will not owe any tax up to and including the intended date of departure. Irs ez   The statement must be presented to an IRS office. Irs ez Category 2. Irs ez    Employees of international organizations and foreign governments (other than diplomatic representatives exempt under category 1) and members of their households: Whose compensation for official services is exempt from U. Irs ez S. Irs ez tax under U. Irs ez S. Irs ez tax laws (described in chapter 10), and Who receive no other income from U. Irs ez S. Irs ez sources. Irs ez If you are an alien in category (1) or (2), above, who filed the waiver under section 247(b) of the Immigration and Nationality Act, you must get a sailing or departure permit. Irs ez This is true even if your income is exempt from U. Irs ez S. Irs ez tax because of an income tax treaty, consular agreement, or international agreement. Irs ez Category 3. Irs ez   Alien students, industrial trainees, and exchange visitors, including their spouses and children, who enter on an “F-1,” “F-2,” “H-3,” “H-4,” “J-1,” “J-2,” or “Q” visa only and who receive no income from U. Irs ez S. Irs ez sources while in the United States under those visas other than: Allowances to cover expenses incident to study or training in the United States, such as expenses for travel, maintenance, and tuition, The value of any services or food and lodging connected with this study or training, Income from employment authorized by the U. Irs ez S. Irs ez Citizenship and Immigration Services (USCIS), or Interest income on deposits that is not effectively connected with a U. Irs ez S. Irs ez trade or business. Irs ez (See Interest Income in chapter 3. Irs ez ) Category 4. Irs ez   Alien students, including their spouses and children, who enter on an “M-1” or “M-2” visa only and who receive no income from U. Irs ez S. Irs ez sources while in the United States under those visas, other than: Income from employment authorized by the U. Irs ez S. Irs ez Citizenship and Immigration Services (USCIS) or Interest income on deposits that is not effectively connected with a U. Irs ez S. Irs ez trade or business. Irs ez (See Interest Income in chapter 3. Irs ez ) Category 5. Irs ez   Certain other aliens temporarily in the United States who have received no taxable income during the tax year up to and including the date of departure or during the preceding tax year. Irs ez If the IRS has reason to believe that an alien has received income subject to tax and that the collection of income tax is jeopardized by departure, it may then require the alien to obtain a sailing or departure permit. Irs ez Aliens in this category are: Alien military trainees who enter the United States for training under the sponsorship of the Department of Defense and who leave the United States on official military travel orders, Alien visitors for business on a “B-1” visa, or on both a “B-1” visa and a “B-2” visa, who do not remain in the United States or a U. Irs ez S. Irs ez possession for more than 90 days during the tax year, Alien visitors for pleasure on a “B-2” visa, Aliens in transit through the United States or any of its possessions on a “C-1” visa, or under a contract, such as a bond agreement, between a transportation line and the Attorney General, and Aliens who enter the United States on a border-crossing identification card or for whom passports, visas, and border-crossing identification cards are not required, if they are: Visitors for pleasure, Visitors for business who do not remain in the United States or a U. Irs ez S. Irs ez possession for more than 90 days during the tax year, or In transit through the United States or any of its possessions. Irs ez Category 6. Irs ez   Alien residents of Canada or Mexico who frequently commute between that country and the United States for employment, and whose wages are subject to the withholding of U. Irs ez S. Irs ez tax. Irs ez Aliens Required To Obtain Sailing or Departure Permits If you do not fall into one of the categories listed under Aliens Not Required To Obtain Sailing or Departure Permits, you must obtain a sailing or departure permit. Irs ez To obtain a permit, file Form 1040-C or Form 2063 (whichever applies) with your local IRS office before you leave the United States. Irs ez See Forms To File , later. Irs ez You must also pay all the tax shown as due on Form 1040-C and any taxes due for past years. Irs ez See Paying Taxes and Obtaining Refunds , later. Irs ez Getting a Sailing or Departure Permit The following discussion covers when and where to get your sailing permit. Irs ez Where to get a sailing or departure permit. Irs ez   If you have been working in the United States, you should get the permit from an IRS office in the area of your employment, or you may obtain one from an IRS office in the area of your departure. Irs ez When to get a sailing or departure permit. Irs ez   You should get your sailing or departure permit at least 2 weeks before you plan to leave. Irs ez You cannot apply earlier than 30 days before your planned departure date. Irs ez Do not wait until the last minute in case there are unexpected problems. Irs ez Papers to submit. Irs ez   Getting your sailing or departure permit will go faster if you bring to the IRS office papers and documents related to your income and your stay in the United States. Irs ez Bring the following records with you if they apply. Irs ez Your passport and alien registration card or visa. Irs ez Copies of your U. Irs ez S. Irs ez income tax returns filed for the past 2 years. Irs ez If you were in the United States for less than 2 years, bring the income tax returns you filed for that period. Irs ez Receipts for income taxes paid on these returns. Irs ez Receipts, bank records, canceled checks, and other documents that prove your deductions, business expenses, and dependents claimed on your returns. Irs ez A statement from each employer showing wages paid and tax withheld from January 1 of the current year to the date of departure if you were an employee. Irs ez If you were self-employed, you must bring a statement of income and expenses up to the date you plan to leave. Irs ez Proof of estimated tax payments for the past year and this year. Irs ez Documents showing any gain or loss from the sale of personal property and/or real property, including capital assets and merchandise. Irs ez Documents relating to scholarship or fellowship grants including: Verification of the grantor, source, and purpose of the grant. Irs ez Copies of the application for, and approval of, the grant. Irs ez A statement of the amount paid, and your duties and obligations under the grant. Irs ez A list of any previous grants. Irs ez Documents indicating you qualify for any special tax treaty benefits claimed. Irs ez Document verifying your date of departure from the United States, such as an airline ticket. Irs ez Document verifying your U. Irs ez S. Irs ez taxpayer identification number, such as a social security card or an IRS issued Notice CP 565 showing your individual taxpayer identification number (ITIN). Irs ez Note. Irs ez   If you are married and reside in a community property state, also bring the above-listed documents for your spouse. Irs ez This applies whether or not your spouse requires a permit. Irs ez Forms To File If you must get a sailing or departure permit, you must file Form 2063 or Form 1040-C. Irs ez Employees in the IRS office can assist in filing these forms. Irs ez Both forms have a “certificate of compliance” section. Irs ez When the certificate of compliance is signed by an agent of the Field Assistance Area Director, it certifies that your U. Irs ez S. Irs ez tax obligations have been satisfied according to available information. Irs ez Your Form 1040-C copy of the signed certificate, or the one detached from Form 2063, is your sailing or departure permit. Irs ez Form 2063 This is a short form that asks for certain information but does not include a tax computation. Irs ez The following departing aliens can get their sailing or departure permits by filing Form 2063. Irs ez Aliens, whether resident or nonresident, who have had no taxable income for the tax year up to and including the date of departure and for the preceding year, if the period for filing the income tax return for that year has not expired. Irs ez Resident aliens who have received taxable income during the tax year or preceding year and whose departure will not hinder the collection of any tax. Irs ez However, if the IRS has information indicating that the aliens are leaving to avoid paying their income tax, they must file a Form 1040-C. Irs ez Aliens in either of these categories who have not filed an income tax return or paid income tax for any tax year must file the return and pay the income tax before they can be issued a sailing or departure permit on Form 2063. Irs ez The sailing or departure permit detached from Form 2063 can be used for all departures during the current year. Irs ez However, the IRS may cancel the sailing or departure permit for any later departure if it believes the collection of income tax is jeopardized by that later departure. Irs ez Form 1040-C If you must get a sailing or departure permit and you do not qualify to file Form 2063, you must file Form 1040-C. Irs ez Ordinarily, all income received or reasonably expected to be received during the tax year up to and including the date of departure must be reported on Form 1040-C and the tax on it must be paid. Irs ez When you pay any tax shown as due on the Form 1040-C, and you file all returns and pay all tax due for previous years, you will receive a sailing or departure permit. Irs ez However, the IRS may permit you to furnish a bond guaranteeing payment instead of paying the taxes for certain years. Irs ez See Bond To Ensure Payment , discussed later. Irs ez The sailing or departure permit issued under the conditions in this paragraph is only for the specific departure for which it is issued. Irs ez Returning to the United States. Irs ez   If you furnish the IRS with information showing, to the satisfaction of the IRS, that you intend to return to the United States and that your departure does not jeopardize the collection of income tax, you can get a sailing or departure permit by filing Form 1040-C without having to pay the tax shown on it. Irs ez You must, however, file all income tax returns that have not yet been filed as required, and pay all income tax that is due on these returns. Irs ez   Your Form 1040-C must include all income received and reasonably expected to be received during the entire year of departure. Irs ez The sailing or departure permit issued with this Form 1040-C can be used for all departures during the current year. Irs ez However, the Service may cancel the sailing or departure permit for any later departure if the payment of income tax appears to be in jeopardy. Irs ez Joint return on Form 1040-C. Irs ez   Departing husbands and wives who are nonresident aliens cannot file joint returns. Irs ez However, if both spouses are resident aliens, they can file a joint return on Form 1040-C if: Both spouses can reasonably be expected to qualify to file a joint return at the normal close of their tax year, and The tax years of the spouses end at the same time. Irs ez Paying Taxes and Obtaining Refunds You must pay all tax shown as due on the Form 1040-C at the time of filing it, except when a bond is furnished, or the IRS is satisfied that your departure does not jeopardize the collection of income tax. Irs ez You must also pay any taxes due for past years. Irs ez If the tax computation on Form 1040-C results in an overpayment, there is no tax to pay at the time you file that return. Irs ez However, the IRS cannot provide a refund at the time of departure. Irs ez If you are due a refund, you must file either Form 1040NR or Form 1040NR-EZ at the end of the tax year. Irs ez Bond To Ensure Payment Usually, you must pay the tax shown as due on Form 1040-C when you file it. Irs ez However, if you pay all taxes due that you owe for prior years, you can furnish a bond guaranteeing payment instead of paying the income taxes shown as due on the Form 1040-C or the tax return for the preceding year if the period for filing that return has not expired. Irs ez The bond must equal the tax due plus interest to the date of payment as figured by the IRS. Irs ez Information about the form of bond and security on it can be obtained from your IRS office. Irs ez Filing Annual U. Irs ez S. Irs ez Income Tax Returns Form 1040-C is not an annual U. Irs ez S. Irs ez income tax return. Irs ez If an income tax return is required by law, that return must be filed even though a Form 1040-C has already been filed. Irs ez Chapters 5 and 7 discuss filing an annual U. Irs ez S. Irs ez income tax return. Irs ez The tax paid with Form 1040-C should be taken as a credit against the tax liability for the entire tax year on your annual U. Irs ez S. Irs ez income tax return. Irs ez Prev  Up  Next   Home   More Online Publications
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Consumer Protection Offices

City, county, regional, and state consumer offices offer a variety of important services. They might mediate complaints, conduct investigations, prosecute offenders of consumer laws, license and regulate professional service providers, provide educational materials and advocate for consumer rights. To save time, call before sending a written complaint. Ask if the office handles the type of complaint you have and if complaint forms are provided.

State Consumer Protection Offices

New Hampshire Office of the Attorney General

Website: New Hampshire Office of the Attorney General

Address: New Hampshire Office of the Attorney General
Consumer Protection and Antitrust Bureau
33 Capitol St.
Concord, NH 03301

Phone Number: 603-271-3641

Toll-free: 1-888-468-4454 (Consumer Protection Hotline)

TTY: 1-800-735-2964 (NH)

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Banking Authorities

The officials listed in this section regulate and supervise state-chartered banks. Many of them handle or refer problems and complaints about other types of financial institutions as well. Some also answer general questions about banking and consumer credit. If you are dealing with a federally chartered bank, check Federal Agencies.

State Banking Department

Website: State Banking Department

Address: State Banking Department
53 Regional Dr., Suite 200
Concord, NH 03301

Phone Number: 603-271-3561

Toll-free: 1-800-437-5991

TTY: 1-800-735-2964

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Insurance Regulators

Each state has its own laws and regulations for each type of insurance. The officials listed in this section enforce these laws. Many of these offices can also provide you with information to help you make informed insurance buying decisions.

Insurance Department

Website: Insurance Department

Address: Insurance Department
21 S. Fruit St., Suite 14
Concord, NH 03301

Phone Number: 603-271-2261

Toll-free: 1-800-852-3416 (NH)

TTY: 1-800-735-2964 (NH)

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Securities Administrators

Each state has its own laws and regulations for securities brokers and securities - including stocks, mutual funds, commodities, real estate, etc. The officials and agencies listed in this section enforce these laws and regulations. Many of these offices can also provide information to help you make informed investment decisions.

Secretary of State

Website: Secretary of State

Address: Secretary of State
Bureau of Securities Regulation
107 N. Main St., #204
Concord, NH 03301

Phone Number: 603-271-1463

Toll-free: 1-800-994-4200

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Utility Commissions

State Utility Commissions regulate services and rates for gas, electricity and telephones within your state. In some states, the utility commissions regulate other services such as water, transportation, and the moving of household goods. Many utility commissions handle consumer complaints. Sometimes, if a number of complaints are received about the same utility matter, they will conduct investigations.

Public Utilities Commission

Website: Public Utilities Commission

Address: Public Utilities Commission
Consumer Affairs Division
21 S. Fruit St., Suite 10
Concord, NH 03301-2429

Phone Number: 603-271-2431

Toll-free: 1-800-852-3793 (NH)

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The Irs Ez

Irs ez 5. Irs ez   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. Irs ez S. Irs ez 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. Irs ez S. Irs ez possessions, and How to report deductions. Irs ez 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. Irs ez Items Related to Excluded Income U. Irs ez S. Irs ez citizens and resident aliens living outside the United States generally are allowed the same deductions as citizens and residents living in the United States. Irs ez 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. Irs ez This includes any expenses, losses, and other normally deductible items that are allocable to the excluded income. Irs ez You can deduct only those expenses connected with earning includible income. Irs ez 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. Irs ez 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. Irs ez 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. Irs ez 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. Irs ez Example. Irs ez In 2012, you had $90,400 of foreign earned income and $9,500 of deductions allocable to your foreign earned income. Irs ez You did not have a housing exclusion. Irs ez 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. Irs ez In 2013, you received a $12,000 bonus for work you did abroad in 2012. Irs ez 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. Irs ez 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. Irs ez 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). Irs ez Exemptions You can claim an exemption for your nonresident alien spouse on your separate return, provided your spouse has no gross income for U. Irs ez S. Irs ez tax purposes and is not the dependent of another U. Irs ez S. Irs ez taxpayer. Irs ez You also can claim exemptions for individuals who qualify as your dependents. Irs ez To be your dependent, the individual must be a U. Irs ez S. Irs ez citizen, U. Irs ez S. Irs ez national, U. Irs ez S. Irs ez resident alien, or a resident of Canada or Mexico for some part of the calendar year in which your tax year begins. Irs ez Children. Irs ez   Children usually are citizens or residents of the same country as their parents. Irs ez If you were a U. Irs ez S. Irs ez citizen when your child was born, your child generally is a U. Irs ez S. Irs ez citizen. Irs ez 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. Irs ez   If you have a legally adopted child who is not a U. Irs ez S. Irs ez citizen, U. Irs ez S. Irs ez resident, or U. Irs ez S. Irs ez national, the child meets the citizen requirement if you are a U. Irs ez S. Irs ez citizen or U. Irs ez S. Irs ez national and the child lived with you as a member of your household all year. Irs ez Social security number. Irs ez   You must include on your return the social security number (SSN) of each dependent for whom you claim an exemption. Irs ez To get a social security number for a dependent, apply at a Social Security office or U. Irs ez S. Irs ez consulate. Irs ez You must provide original or certified copies of documents to verify the dependent's age, identity, and citizenship, and complete Form SS-5. Irs ez   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. Irs ez Print “Died” in column (2) of line 6c of your Form 1040 or Form 1040A. Irs ez   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. Irs ez To apply for an ITIN, file Form W-7 with the IRS. Irs ez It usually takes 6 to 10 weeks to get an ITIN. Irs ez Enter your dependent's ITIN wherever an SSN is requested on your tax return. Irs ez More information. Irs ez   For more information about exemptions, see Publication 501. Irs ez Contributions to Foreign Charitable Organizations If you make contributions directly to a foreign church or other foreign charitable organization, you generally cannot deduct them. Irs ez Exceptions are explained under Canadian, Mexican, and Israeli charities, later. Irs ez You can deduct contributions to a U. Irs ez S. Irs ez organization that transfers funds to a charitable foreign organization if the U. Irs ez S. Irs ez organization controls the use of the funds by the foreign organization or if the foreign organization is just an administrative arm of the U. Irs ez S. Irs ez organization. Irs ez Canadian, Mexican, and Israeli charities. Irs ez   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. Irs ez Generally, you must have income from sources in Canada, Mexico, or Israel, and the organization must meet certain requirements. Irs ez See Publication 597, Information on the United States-Canada Income Tax Treaty, and Publication 526, Charitable Contributions, for more information. Irs ez 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. Irs ez Generally, to be deductible, the moving expenses must have been paid or incurred in connection with starting work at a new job location. Irs ez See Publication 521 for a complete discussion of the deduction for moving expenses and information about moves within the United States. Irs ez Foreign moves. Irs ez   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. Irs ez A foreign move does not include a move back to the United States or its possessions. Irs ez 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. Irs ez 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. Irs ez 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. Irs ez Year to which expense is connected. Irs ez   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. Irs ez 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. Irs ez   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. Irs ez 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. Irs ez 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. Irs ez Amount allocable to excluded income. Irs ez   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. Irs ez 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. Irs ez Example. Irs ez On November 1, 2012, you transfer to Monaco. Irs ez Your tax home is in Monaco, and you are a bona fide resident of Monaco for the entire tax year 2013. Irs ez In 2012, you paid $6,000 for allowable moving expenses for your move from the United States to Monaco. Irs ez You were fully reimbursed (under a nonaccountable plan) for these expenses in the same year. Irs ez The reimbursement is included in your income. Irs ez 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. Irs ez 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. Irs ez 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. Irs ez You have no housing exclusion. Irs ez 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). Irs ez 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. Irs ez The result, $5,562, is your nondeductible amount. Irs ez    You must report the full amount of the moving expense reimbursement in the year in which you received the reimbursement. Irs ez In the preceding example, this year was 2012. Irs ez You attribute the reimbursement to both 2012 and 2013 only to figure the amount of foreign earned income eligible for exclusion for each year. Irs ez Move between foreign countries. Irs ez   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. Irs ez New place of work in U. Irs ez S. Irs ez   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. Irs ez 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. Irs ez Storage expenses. Irs ez   These expenses are attributable to work you do during the year in which you incur the storage expenses. Irs ez You cannot deduct the amount allocable to excluded income. Irs ez 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. Irs ez By then, you should have all the information needed to properly figure the moving expense deduction. Irs ez See Extensions under When To File and Pay in chapter 1. Irs ez 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. Irs ez 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. Irs ez 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. Irs ez 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. Irs ez You cannot claim it on the return for the second year. Irs ez Forms To File Report your moving expenses on Form 3903. Irs ez Report your moving expense deduction on line 26 of Form 1040. Irs ez 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. Irs ez For more information about figuring moving expenses, see Publication 521. Irs ez 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. Irs ez 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. Irs ez Do not reduce your compensation by the foreign housing deduction. Irs ez 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. Irs ez 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. Irs ez Other modifications are also required. Irs ez For more information on IRAs, see Publication 590. Irs ez Taxes of Foreign Countries and U. Irs ez S. Irs ez Possessions You can take either a credit or a deduction for income taxes paid to a foreign country or a U. Irs ez S. Irs ez possession. Irs ez Taken as a deduction, foreign income taxes reduce your taxable income. Irs ez Taken as a credit, foreign income taxes reduce your tax liability. Irs ez You must treat all foreign income taxes the same way. Irs ez If you take a credit for any foreign income taxes, you cannot deduct any foreign income taxes. Irs ez However, you may be able to deduct other foreign taxes. Irs ez See Deduction for Other Foreign Taxes, later. Irs ez There is no rule to determine whether it is to your advantage to take a deduction or a credit for foreign income taxes. Irs ez In most cases, it is to your advantage to take foreign income taxes as a tax credit, which you subtract directly from your U. Irs ez S. Irs ez tax liability, rather than as a deduction in figuring taxable income. Irs ez However, if foreign income taxes were imposed at a high rate and the proportion of foreign income to U. Irs ez S. Irs ez income is small, a lower final tax may result from deducting the foreign income taxes. Irs ez In any event, you should figure your tax liability both ways and then use the one that is better for you. Irs ez 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. Irs ez Foreign income taxes. Irs ez   These are generally income taxes you pay to any foreign country or possession of the United States. Irs ez Foreign income taxes on U. Irs ez S. Irs ez return. Irs ez   Foreign income taxes can only be taken as a credit on Form 1040, line 47, or as an itemized deduction on Schedule A. Irs ez These amounts cannot be included as withheld income taxes on Form 1040, line 62. Irs ez Foreign taxes paid on excluded income. Irs ez   You cannot take a credit or deduction for foreign income taxes paid on earnings you exclude from tax under any of the following. Irs ez Foreign earned income exclusion. Irs ez Foreign housing exclusion. Irs ez Possession exclusion. Irs ez If your wages are completely excluded, you cannot deduct or take a credit for any of the foreign taxes paid on your wages. Irs ez   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. Irs ez 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. Irs ez 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). Irs ez 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). Irs ez   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. Irs ez    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. Irs ez Credit for Foreign Income Taxes If you take the foreign tax credit, you may have to file Form 1116 with Form 1040. Irs ez Form 1116 is used to figure the amount of foreign tax paid or accrued that can be claimed as a foreign tax credit. Irs ez Do not include the amount of foreign tax paid or accrued as withheld federal income taxes on Form 1040, line 62. Irs ez 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. Irs ez The amount for which you can claim a credit is not necessarily the amount withheld by the foreign country. Irs ez 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. Irs ez Subsidies. Irs ez   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. Irs ez 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. Irs ez   Some ways of providing a subsidy are refunds, credits, deductions, payments, or discharges of obligations. Irs ez 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. Irs ez Limit The foreign tax credit is limited to the part of your total U. Irs ez S. Irs ez tax that is in proportion to your taxable income from sources outside the United States compared to your total taxable income. Irs ez The allowable foreign tax credit cannot be more than your actual foreign tax liability. Irs ez Exemption from limit. Irs ez   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. Irs ez Your only foreign source income for the year is passive income (dividends, interest, royalties, etc. Irs ez ) that is reported to you on a payee statement (such as a Form 1099-DIV or 1099-INT). Irs ez 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. Irs ez You elect this procedure. Irs ez If you make this election, you cannot carry back or carry over any unused foreign tax to or from this year. Irs ez Separate limit. Irs ez   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). Irs ez Figuring the limit. Irs ez   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. Irs ez Do not take any excluded amount into account. Irs ez   To determine your taxable income in each category, deduct expenses and losses that are definitely related to that income. Irs ez   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. Irs ez The numerator (top number) of the fraction is your gross foreign income in the separate limit category. Irs ez The denominator (bottom number) of the fraction is your gross income from all sources. Irs ez For this purpose, gross income includes income that is excluded under the foreign earned income provisions but does not include any other exempt income. Irs ez You must use special rules for deducting interest expenses. Irs ez For more information on allocating and apportioning your deductions, see Publication 514. Irs ez Exemptions. Irs ez   Do not take the deduction for exemptions for yourself, your spouse, or your dependents in figuring taxable income for purposes of the limit. Irs ez Recapture of foreign losses. Irs ez   If you have an overall foreign loss and the loss reduces your U. Irs ez S. Irs ez source income (resulting in a reduction of your U. Irs ez S. Irs ez tax liability), you must recapture the loss in later years when you have taxable income from foreign sources. Irs ez This is done by treating a part of your taxable income from foreign sources in later years as U. Irs ez S. Irs ez source income. Irs ez This reduces the numerator of the limiting fraction and the resulting foreign tax credit limit. Irs ez Recapture of domestic losses. Irs ez   If you have an overall domestic loss (resulting in no U. Irs ez S. Irs ez tax liability), you cannot claim a foreign tax credit for taxes paid during that year. Irs ez You must recapture the loss in later years when you have U. Irs ez S. Irs ez source taxable income. Irs ez This is done by treating a part of your taxable income from U. Irs ez S. Irs ez sources in later years as foreign source income. Irs ez This increases the numerator of the limiting fraction and the resulting foreign tax credit limit. Irs ez Foreign tax credit carryback and carryover. Irs ez   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. Irs ez   More information on figuring the foreign tax credit can be found in Publication 514. Irs ez 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). Irs ez You can deduct only foreign income taxes paid on income that is subject to U. Irs ez S. Irs ez tax. Irs ez You cannot deduct foreign taxes paid on earnings you exclude from tax under any of the following. Irs ez Foreign earned income exclusion. Irs ez Foreign housing exclusion. Irs ez Possession exclusion. Irs ez Example. Irs ez You are a U. Irs ez S. Irs ez citizen and qualify to exclude your foreign earned income. Irs ez Your excluded wages in Country X are $70,000 on which you paid income tax of $10,000. Irs ez You received dividends from Country X of $2,000 on which you paid income tax of $600. Irs ez You can deduct the $600 tax payment because the dividends relating to it are subject to U. Irs ez S. Irs ez tax. Irs ez Because you exclude your wages, you cannot deduct the income tax of $10,000. Irs ez If you exclude only a part of your wages, see the earlier discussion under Foreign taxes paid on excluded income. Irs ez Deduction for Other Foreign Taxes You can deduct real property taxes you pay that are imposed on you by a foreign country. Irs ez You take this deduction on Schedule A (Form 1040). Irs ez 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. Irs ez On the other hand, you generally can deduct personal property taxes when you pay them to U. Irs ez S. Irs ez possessions. Irs ez But if you claim the possession exclusion, see Publication 570. Irs ez The deduction for foreign taxes other than foreign income taxes is not related to the foreign tax credit. Irs ez You can take deductions for these miscellaneous foreign taxes and also claim the foreign tax credit for income taxes imposed by a foreign country. Irs ez 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. Irs ez 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. Irs ez 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. Irs ez Enter the amount of the deduction(s) related to excluded income on line 44 of Form 2555. Irs ez If you have itemized deductions related to excluded income, enter on Schedule A (Form 1040) only the part not related to excluded income. Irs ez You figure that amount by subtracting from the total deduction the amount related to excluded income. Irs ez 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. Irs ez Attach a statement to your return showing how you figured the deductible amount. Irs ez Example 1. Irs ez You are a U. Irs ez S. Irs ez citizen employed as an accountant. Irs ez Your tax home is in Germany for the entire tax year. Irs ez You meet the physical presence test. Irs ez Your foreign earned income for the year was $122,000 and your investment income was $10,380. Irs ez After excluding $97,600, your AGI is $34,780. Irs ez 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. Irs ez These expenses are deductible only as miscellaneous deductions on Schedule A (Form 1040). Irs ez You also have $500 of miscellaneous expenses that are not related to your foreign income that you enter on line 23 of Schedule A. Irs ez You must fill out Form 2106. Irs ez On that form, reduce your deductible meal and entertainment expenses by 50% ($250). Irs ez 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. Irs ez You carry the remaining total of $450 to line 21 of Schedule A. Irs ez Add the $450 to the $500 that you have on line 23 and enter the total ($950) on line 24. Irs ez 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. Irs ez Enter $254 on line 27 of Schedule A. Irs ez Example 2. Irs ez You are a U. Irs ez S. Irs ez citizen, have a tax home in Spain, and meet the physical presence test. Irs ez You are self-employed and personal services produce the business income. Irs ez Your gross income was $116,931, business expenses $66,895, and net income (profit) $50,036. Irs ez You choose the foreign earned income exclusion and exclude $97,600 of your gross income. Irs ez Since your excluded income is 83. Irs ez 47% of your total income, 83. Irs ez 47% of your business expenses are not deductible. Irs ez Report your total income and expenses on Schedule C (Form 1040). Irs ez 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. Irs ez 47% × $66,895) business expenses attributable to the exclusion. Irs ez In this situation (Example 2), you cannot use Form 2555-EZ since you had self-employment income and business expenses. Irs ez Example 3. Irs ez Assume in Example 2 that both capital and personal services combine to produce the business income. Irs ez 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. Irs ez Your exclusion of $15,011 is 12. Irs ez 84% of your gross income ($15,011 ÷ $116,931). Irs ez Because you excluded 12. Irs ez 84% of your total income, $8,589 (. Irs ez 1284 x $66,895) of your business expenses is attributable to the excluded income and is not deductible. Irs ez Example 4. Irs ez You are a U. Irs ez S. Irs ez citizen, have a tax home in Brazil, and meet the physical presence test. Irs ez You are self-employed and both capital and personal services combine to produce business income. Irs ez Your gross income was $146,000, business expenses were $172,000, and your net loss was $26,000. Irs ez A reasonable allowance for the services you performed for the business is $77,000. Irs ez Because you incurred a net loss, the earned income limit of 30% of your net profit does not apply. Irs ez The $77,000 is foreign earned income. Irs ez If you choose to exclude the $77,000, you exclude 52. Irs ez 74% of your gross income ($77,000 ÷ $146,000), and 52. Irs ez 74% of your business expenses ($90,713) is attributable to that income and is not deductible. Irs ez Show your total income and expenses on Schedule C (Form 1040). Irs ez On Form 2555, exclude $77,000 and show $90,713 on line 44. Irs ez Subtract line 44 from line 43, and enter the difference as a negative (in parentheses) on line 45. Irs ez 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. Irs ez 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. Irs ez If you had chosen the exclusion in an earlier year, you might want to revoke the choice for this year. Irs ez To do so would mean that you could not claim the exclusion again for the next 5 tax years without IRS approval. Irs ez See Choosing the Exclusion in chapter 4. Irs ez Example 5. Irs ez You are a U. Irs ez S. Irs ez citizen, have a tax home in Panama, and meet the bona fide residence test. Irs ez You have been performing services for clients as a partner in a firm that provides services exclusively in Panama. Irs ez Capital investment is not material in producing the partnership's income. Irs ez Under the terms of the partnership agreement, you are to receive 50% of the net profits. Irs ez The partnership received gross income of $244,000 and incurred operating expenses of $98,250. Irs ez Of the net profits of $145,750, you received $72,875 as your distributive share. Irs ez You choose to exclude $97,600 of your share of the gross income. Irs ez 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 (. Irs ez 80 × $49,125). Irs ez Report $72,875, your distributive share of the partnership net profit, on Schedule E (Form 1040), Supplemental Income and Loss. Irs ez On Form 2555, show $97,600 on line 42 and show $39,300 on line 44. Irs ez Your exclusion on Form 2555 is $58,300. Irs ez 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. Irs ez Prev  Up  Next   Home   More Online Publications