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

TurboTax Federal Free Edition - File Taxes Online

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

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


© 2012 - 2018 All rights reserved.

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

Pa 1040ez

File 2011 Taxes Online For FreeState TaxFile Taxes FreeTurbotax Deluxe Federal E File State 2011 For Pc DownloadIrs Tax Forms For 2009Efile TaxesHow To Complete A 1040xForm 1040ez More:label_form_201040ez More:taxes1040ez 2013 InstructionsIrs 1040ez 2011 Form2007 Tax ReturnsForms For Filing State Tax ReturnsWww Free1040taxreturn ComState Income Tax Free Filing2012 Tax Preparation Software1040 Ez Tax Form 20121040a 2011 Tax FormFile Tax AmendmentForm 1040ez 2012 InstructionsOnline State Tax FilingInternal Revenue Tax Forms 2012Amended Tax Return 1098 T1040Free Ohio Tax Form 1040ezFile 2011 Taxes Free OnlineTurbo Tax2011 TaxesH R Bloc Amended Tax Return1040ez Form 2013 InstructionsTaxes UnemployedIrs Gov State Tax FormsHow To File 2011 Taxes Late OnlineFederal Tax Forms 1040 EzIf I Am Unemployed Do I File TaxesMi 1040xFederal Tax Forms 2012 1040Ez 1040 Online1040 EzTax Planning Us 1040xDownload 1040ezCan You E File An Amended 1040x

Pa 1040ez

Pa 1040ez 2. Pa 1040ez   Source of Income Table of Contents Introduction Topics - This chapter discusses: Resident Aliens Nonresident AliensInterest Income Dividends Guarantee of Indebtedness Personal Services Transportation Income Scholarships, Grants, Prizes, and Awards Pensions and Annuities Rents or Royalties Real Property Personal Property Community Income Introduction After you have determined your alien status, you must determine the source of your income. Pa 1040ez This chapter will help you determine the source of different types of income you may receive during the tax year. Pa 1040ez This chapter also discusses special rules for married individuals who are domiciled in a country with community property laws. Pa 1040ez Topics - This chapter discusses: Income source rules, and Community income. Pa 1040ez Resident Aliens A resident alien's income is generally subject to tax in the same manner as a U. Pa 1040ez S. Pa 1040ez citizen. Pa 1040ez If you are a resident alien, you must report all interest, dividends, wages, or other compensation for services, income from rental property or royalties, and other types of income on your U. Pa 1040ez S. Pa 1040ez tax return. Pa 1040ez You must report these amounts from sources within and outside the United States. Pa 1040ez Nonresident Aliens A nonresident alien usually is subject to U. Pa 1040ez S. Pa 1040ez income tax only on U. Pa 1040ez S. Pa 1040ez source income. Pa 1040ez Under limited circumstances, certain foreign source income is subject to U. Pa 1040ez S. Pa 1040ez tax. Pa 1040ez See Foreign Income in chapter 4. Pa 1040ez The general rules for determining U. Pa 1040ez S. Pa 1040ez source income that apply to most nonresident aliens are shown in Table 2-1. Pa 1040ez The following discussions cover the general rules as well as the exceptions to these rules. Pa 1040ez Not all items of U. Pa 1040ez S. Pa 1040ez source income are taxable. Pa 1040ez See chapter 3. Pa 1040ez Interest Income Generally, U. Pa 1040ez S. Pa 1040ez source interest income includes the following items. Pa 1040ez Interest on bonds, notes, or other interest-bearing obligations of U. Pa 1040ez S. Pa 1040ez residents or domestic corporations. Pa 1040ez Interest paid by a domestic or foreign partnership or foreign corporation engaged in a U. Pa 1040ez S. Pa 1040ez trade or business at any time during the tax year. Pa 1040ez Original issue discount. Pa 1040ez Interest from a state, the District of Columbia, or the U. Pa 1040ez S. Pa 1040ez Government. Pa 1040ez The place or manner of payment is immaterial in determining the source of the income. Pa 1040ez A substitute interest payment made to the transferor of a security in a securities lending transaction or a sale-repurchase transaction is sourced in the same manner as the interest on the transferred security. Pa 1040ez Exceptions. Pa 1040ez   U. Pa 1040ez S. Pa 1040ez source interest income does not include the following items. Pa 1040ez Interest paid by a resident alien or a domestic corporation on obligations issued before August 10, 2010, if for the 3-year period ending with the close of the payer's tax year preceding the interest payment, at least 80% of the payer's total gross income: Is from sources outside the United States, and Is attributable to the active conduct of a trade or business by the individual or corporation in a foreign country or a U. Pa 1040ez S. Pa 1040ez possession. Pa 1040ez However, the interest will be considered U. Pa 1040ez S. Pa 1040ez source interest income if either of the following apply. Pa 1040ez The recipient of the interest is related to the resident alien or domestic corporation. Pa 1040ez See section 954(d)(3) for the definition of related person. Pa 1040ez The terms of the obligation are significantly modified after August 9, 2010. Pa 1040ez Any extension of the term of the obligation is considered a significant modification. Pa 1040ez Interest paid by a foreign branch of a domestic corporation or a domestic partnership on deposits or withdrawable accounts with mutual savings banks, cooperative banks, credit unions, domestic building and loan associations, and other savings institutions chartered and supervised as savings and loan or similar associations under federal or state law if the interest paid or credited can be deducted by the association. Pa 1040ez Interest on deposits with a foreign branch of a domestic corporation or domestic partnership, but only if the branch is in the commercial banking business. Pa 1040ez Dividends In most cases, dividend income received from domestic corporations is U. Pa 1040ez S. Pa 1040ez source income. Pa 1040ez Dividend income from foreign corporations is usually foreign source income. Pa 1040ez Exceptions to both of these rules are discussed below. Pa 1040ez A substitute dividend payment made to the transferor of a security in a securities lending transaction or a sale-repurchase transaction is sourced in the same manner as a distribution on the transferred security. Pa 1040ez Dividend equivalent payments. Pa 1040ez   U. Pa 1040ez S. Pa 1040ez source dividends also include all dividend equivalent payments. Pa 1040ez Dividend equivalent payments include substitute dividends, payments made pursuant to a specified notional principal contract, and all similar payments that, directly or indirectly, are contingent on or determined by reference to, the payment of a dividend from U. Pa 1040ez S. Pa 1040ez sources. Pa 1040ez    The Internal Revenue Service has issued final regulations that would affect the treatment of dividend equivalent payments and specified notional principal contracts. Pa 1040ez You can view this regulation at www. Pa 1040ez irs. Pa 1040ez gov/irb/2013-52_IRB/ar08. Pa 1040ez html. Pa 1040ez First exception. Pa 1040ez   Dividends received from a domestic corporation are not U. Pa 1040ez S. Pa 1040ez source income if the corporation elects to take the American Samoa economic development credit. Pa 1040ez Second exception. Pa 1040ez   Part of the dividends received from a foreign corporation is U. Pa 1040ez S. Pa 1040ez source income if 25% or more of its total gross income for the 3-year period ending with the close of its tax year preceding the declaration of dividends was effectively connected with a trade or business in the United States. Pa 1040ez If the corporation was formed less than 3 years before the declaration, use its total gross income from the time it was formed. Pa 1040ez Determine the part that is U. Pa 1040ez S. Pa 1040ez source income by multiplying the dividend by the following fraction. Pa 1040ez   Foreign corporation's gross income connected with a U. Pa 1040ez S. Pa 1040ez trade or business for the 3-year period     Foreign corporation's gross income from all sources for that period   Guarantee of Indebtedness Certain amounts received directly or indirectly, for the provision of a guarantee of indebtedness issued after September 27, 2010, are U. Pa 1040ez S. Pa 1040ez source income. Pa 1040ez They must be paid by a noncorporate resident or U. Pa 1040ez S. Pa 1040ez corporation or by any foreign person if the amounts are effectively connected with the conduct of a U. Pa 1040ez S. Pa 1040ez trade or business. Pa 1040ez For more information, see Internal Revenue Code sections 861(a)(9) and 862(a)(9). Pa 1040ez Personal Services All wages and any other compensation for services performed in the United States are considered to be from sources in the United States. Pa 1040ez The only exceptions to this rule are discussed in chapter 3 under Employees of foreign persons, organizations, or offices, and under Crew members. Pa 1040ez If you are an employee and receive compensation for labor or personal services performed both inside and outside the United States, special rules apply in determining the source of the compensation. Pa 1040ez Compensation (other than certain fringe benefits) is sourced on a time basis. Pa 1040ez Certain fringe benefits (such as housing and education) are sourced on a geographical basis. Pa 1040ez Or, you may be permitted to use an alternative basis to determine the source of compensation. Pa 1040ez See Alternative Basis , later. Pa 1040ez Multi-level marketing. Pa 1040ez   Certain companies sell products through a multi-level marketing arrangement, such that an upper-tier distributor, who has sponsored a lower-tier distributor, is entitled to a payment from the company based on certain activities of that lower-tier distributor. Pa 1040ez Generally, depending on the facts, payments from such multi-level marketing companies to independent (non-employee) distributors (upper-tier distributors) that are based on the sales or purchases of persons whom they have sponsored (lower-tier distributors) constitute income for the performance of personal services in recruiting, training, and supporting the lower-tier distributors. Pa 1040ez The source of such income is generally based on where the services of the upper-tier distributor are performed, and may, depending on the facts, be considered multi-year compensation, with the source of income determined over the period to which such compensation is attributable. Pa 1040ez Self-employed individuals. Pa 1040ez   If you are self-employed, you determine the source of compensation for labor or personal services from self-employment on the basis that most correctly reflects the proper source of that income under the facts and circumstances of your particular case. Pa 1040ez In many cases, the facts and circumstances will call for an apportionment on a time basis as explained next. Pa 1040ez Time Basis Use a time basis to figure your U. Pa 1040ez S. Pa 1040ez source compensation (other than the fringe benefits discussed later). Pa 1040ez Do this by multiplying your total compensation (other than the fringe benefits discussed later) by the following fraction:   Number of days you performed services in the United States during the year     Total number of days you performed services during the year   You can use a unit of time less than a day in the above fraction, if appropriate. Pa 1040ez The time period for which the compensation is made does not have to be a year. Pa 1040ez Instead, you can use another distinct, separate, and continuous time period if you can establish to the satisfaction of the IRS that this other period is more appropriate. Pa 1040ez Example 1. Pa 1040ez Christina Brooks, a resident of the Netherlands, worked 240 days for a U. Pa 1040ez S. Pa 1040ez company during the tax year. Pa 1040ez She received $80,000 in compensation. Pa 1040ez None of it was for fringe benefits. Pa 1040ez Christina performed services in the United States for 60 days and performed services in the Netherlands for 180 days. Pa 1040ez Using the time basis for determining the source of compensation, $20,000 ($80,000 × 60/240) is her U. Pa 1040ez S. Pa 1040ez source income. Pa 1040ez Example 2. Pa 1040ez Rob Waters, a resident of South Africa, is employed by a corporation. Pa 1040ez His annual salary is $100,000. Pa 1040ez None of it is for fringe benefits. Pa 1040ez During the first quarter of the year he worked entirely within the United States. Pa 1040ez On April 1, Rob was transferred to Singapore for the remainder of the year. Pa 1040ez Rob is able to establish that the first quarter of the year and the last 3 quarters of the year are two separate, distinct, and continuous periods of time. Pa 1040ez Accordingly, $25,000 of Rob's annual salary is attributable to the first quarter of the year (. Pa 1040ez 25 × $100,000). Pa 1040ez All of it is U. Pa 1040ez S. Pa 1040ez source income because he worked entirely within the United States during that quarter. Pa 1040ez The remaining $75,000 is attributable to the last three quarters of the year. Pa 1040ez During those quarters, he worked 150 days in Singapore and 30 days in the United States. Pa 1040ez His periodic performance of services in the United States did not result in distinct, separate, and continuous periods of time. Pa 1040ez Of this $75,000, $12,500 ($75,000 × 30/180) is U. Pa 1040ez S. Pa 1040ez source income. Pa 1040ez Multi-year compensation. Pa 1040ez   The source of multi-year compensation is generally determined on a time basis over the period to which the compensation is attributable. Pa 1040ez Multi-year compensation is compensation that is included in your income in one tax year but that is attributable to a period that includes two or more tax years. Pa 1040ez   You determine the period to which the compensation is attributable based on the facts and circumstances of your case. Pa 1040ez For example, an amount of compensation that specifically relates to a period of time that includes several calendar years is attributable to the entire multi-year period. Pa 1040ez   The amount of compensation treated as from U. Pa 1040ez S. Pa 1040ez sources is figured by multiplying the total multi-year compensation by a fraction. Pa 1040ez The numerator of the fraction is the number of days (or unit of time less than a day, if appropriate) that you performed labor or personal services in the United States in connection with the project. Pa 1040ez The denominator of the fraction is the total number of days (or unit of time less than a day, if appropriate) that you performed labor or personal services in connection with the project. Pa 1040ez Geographical Basis Compensation you receive as an employee in the form of the following fringe benefits is sourced on a geographical basis. Pa 1040ez Housing. Pa 1040ez Education. Pa 1040ez Local transportation. Pa 1040ez Tax reimbursement. Pa 1040ez Hazardous or hardship duty pay as defined in Regulations section 1. Pa 1040ez 861-4(b)(2)(ii)(D)(5). Pa 1040ez Moving expense reimbursement. Pa 1040ez The amount of fringe benefits must be reasonable and you must substantiate them by adequate records or by sufficient evidence. Pa 1040ez Principal place of work. Pa 1040ez   The above fringe benefits, except for tax reimbursement and hazardous or hardship duty pay, are sourced based on your principal place of work. Pa 1040ez Your principal place of work is usually the place where you spend most of your working time. Pa 1040ez This could be your office, plant, store, shop, or other location. Pa 1040ez If there is no one place where you spend most of your working time, your main job location is the place where your work is centered, such as where you report for work or are otherwise required to “base” your work. Pa 1040ez   If you have more than one job at any time, your main job location depends on the facts in each case. Pa 1040ez The more important factors to be considered are: The total time you spend at each place, The amount of work you do at each place, and How much money you earn at each place. Pa 1040ez Housing. Pa 1040ez   The source of a housing fringe benefit is determined based on the location of your principal place of work. Pa 1040ez A housing fringe benefit includes payments to you or on your behalf (and your family's if your family resides with you) only for the following. Pa 1040ez Rent. Pa 1040ez Utilities (except telephone charges). Pa 1040ez Real and personal property insurance. Pa 1040ez Occupancy taxes not deductible under section 164 or 216(a). Pa 1040ez Nonrefundable fees for securing a leasehold. Pa 1040ez Rental of furniture and accessories. Pa 1040ez Household repairs. Pa 1040ez Residential parking. Pa 1040ez Fair rental value of housing provided in kind by your employer. Pa 1040ez   A housing fringe benefit does not include: Deductible interest and taxes (including deductible interest and taxes of a tenant-stockholder in a cooperative housing corporation), The cost of buying property, including principal payments on a mortgage, The cost of domestic labor (maids, gardeners, etc. Pa 1040ez ), Pay television subscriptions, Improvements and other expenses that increase the value or appreciably prolong the life of property, Purchased furniture or accessories, Depreciation or amortization of property or improvements, The value of meals or lodging that you exclude from gross income, or The value of meals or lodging that you deduct as moving expenses. Pa 1040ez Education. Pa 1040ez   The source of an education fringe benefit for the education expenses of your dependents is determined based on the location of your principal place of work. Pa 1040ez An education fringe benefit includes payments only for the following expenses for education at an elementary or secondary school. Pa 1040ez Tuition, fees, academic tutoring, special needs services for a special needs student, books, supplies, and other equipment. Pa 1040ez Room and board and uniforms that are required or provided by the school in connection with enrollment or attendance. Pa 1040ez Local transportation. Pa 1040ez   The source of a local transportation fringe benefit is determined based on the location of your principal place of work. Pa 1040ez Your local transportation fringe benefit is the amount that you receive as compensation for local transportation for you or your spouse or dependents at the location of your principal place of work. Pa 1040ez The amount treated as a local transportation fringe benefit is limited to actual expenses incurred for local transportation and the fair rental value of any employer-provided vehicle used predominantly by you, your spouse, or your dependents for local transportation. Pa 1040ez Actual expenses do not include the cost (including interest) of any vehicle purchased by you or on your behalf. Pa 1040ez Tax reimbursement. Pa 1040ez   The source of a tax reimbursement fringe benefit is determined based on the location of the jurisdiction that imposed the tax for which you are reimbursed. Pa 1040ez Moving expense reimbursement. Pa 1040ez   The source of a moving expense reimbursement is generally based on the location of your new principal place of work. Pa 1040ez However, the source is determined based on the location of your former principal place of work if you provide sufficient evidence that such determination of source is more appropriate under the facts and circumstances of your case. Pa 1040ez Sufficient evidence generally requires an agreement between you and your employer, or a written statement of company policy, which is reduced to writing before the move and which is entered into or established to induce you or other employees to move to another country. Pa 1040ez The written statement or agreement must state that your employer will reimburse you for moving expenses that you incur to return to your former principal place of work regardless of whether you continue to work for your employer after returning to that location. Pa 1040ez It may contain certain conditions upon which the right to reimbursement is determined as long as those conditions set forth standards that are definitely ascertainable and can only be fulfilled prior to, or through completion of, your return move to your former principal place of work. Pa 1040ez Alternative Basis If you are an employee, you can determine the source of your compensation under an alternative basis if you establish to the satisfaction of the IRS that, under the facts and circumstances of your case, the alternative basis more properly determines the source of your compensation than the time or geographical basis. Pa 1040ez If you use an alternative basis, you must keep (and have available for inspection) records to document why the alternative basis more properly determines the source of your compensation. Pa 1040ez Also, if your total compensation from all sources is $250,000 or more, check “Yes” to both questions on line K on page 5 of Form 1040NR, and attach a written statement to your tax return that sets forth all of the following. Pa 1040ez Your name and social security number (written across the top of the statement). Pa 1040ez The specific compensation income, or the specific fringe benefit, for which you are using the alternative basis. Pa 1040ez For each item in (2), the alternative basis of allocation of source used. Pa 1040ez For each item in (2), a computation showing how the alternative allocation was computed. Pa 1040ez A comparison of the dollar amount of the U. Pa 1040ez S. Pa 1040ez compensation and foreign compensation sourced under both the alternative basis and the time or geographical basis discussed earlier. Pa 1040ez Transportation Income Transportation income is income from the use of a vessel or aircraft or for the performance of services directly related to the use of any vessel or aircraft. Pa 1040ez This is true whether the vessel or aircraft is owned, hired, or leased. Pa 1040ez The term “vessel or aircraft” includes any container used in connection with a vessel or aircraft. Pa 1040ez All income from transportation that begins and ends in the United States is treated as derived from sources in the United States. Pa 1040ez If the transportation begins or ends in the United States, 50% of the transportation income is treated as derived from sources in the United States. Pa 1040ez For transportation income from personal services, 50% of the income is U. Pa 1040ez S. Pa 1040ez source income if the transportation is between the United States and a U. Pa 1040ez S. Pa 1040ez possession. Pa 1040ez For nonresident aliens, this only applies to income derived from, or in connection with, an aircraft. Pa 1040ez For information on how U. Pa 1040ez S. Pa 1040ez source transportation income is taxed, see chapter 4. Pa 1040ez Scholarships, Grants, Prizes, and Awards Generally, the source of scholarships, fellowship grants, grants, prizes, and awards is the residence of the payer regardless of who actually disburses the funds. Pa 1040ez However, see Activities to be performed outside the United States , later. Pa 1040ez For example, payments for research or study in the United States made by the United States, a noncorporate U. Pa 1040ez S. Pa 1040ez resident, or a domestic corporation, are from U. Pa 1040ez S. Pa 1040ez sources. Pa 1040ez Similar payments from a foreign government or foreign corporation are foreign source payments even though the funds may be disbursed through a U. Pa 1040ez S. Pa 1040ez agent. Pa 1040ez Payments made by an entity designated as a public international organization under the International Organizations Immunities Act are from foreign sources. Pa 1040ez Activities to be performed outside the United States. Pa 1040ez   Scholarships, fellowship grants, targeted grants, and achievement awards received by nonresident aliens for activities performed, or to be performed, outside the United States are not U. Pa 1040ez S. Pa 1040ez source income. Pa 1040ez    These rules do not apply to amounts paid as salary or other compensation for services. Pa 1040ez See Personal Services, earlier, for the source rules that apply. Pa 1040ez Pensions and Annuities If you receive a pension from a domestic trust for services performed both in and outside the United States, part of the pension payment is from U. Pa 1040ez S. Pa 1040ez sources. Pa 1040ez That part is the amount attributable to earnings of the pension plan and the employer contributions made for services performed in the United States. Pa 1040ez This applies whether the distribution is made under a qualified or nonqualified stock bonus, pension, profit-sharing, or annuity plan (whether or not funded). Pa 1040ez If you performed services as an employee of the United States, you may receive a distribution from the U. Pa 1040ez S. Pa 1040ez Government under a plan, such as the Civil Service Retirement System, that is treated as a qualified pension plan. Pa 1040ez Your U. Pa 1040ez S. Pa 1040ez source income is the otherwise taxable amount of the distribution that is attributable to your total U. Pa 1040ez S. Pa 1040ez Government basic pay other than tax-exempt pay for services performed outside the United States. Pa 1040ez Rents or Royalties Your U. Pa 1040ez S. Pa 1040ez source income includes rent and royalty income received during the tax year from property located in the United States or from any interest in that property. Pa 1040ez U. Pa 1040ez S. Pa 1040ez source income also includes rents or royalties for the use of, or for the privilege of using, in the United States, intangible property such as patents, copyrights, secret processes and formulas, goodwill, trademarks, franchises, and similar property. Pa 1040ez Real Property Real property is land and buildings and generally anything built on, growing on, or attached to land. Pa 1040ez Gross income from sources in the United States includes gains, profits, and income from the sale or other disposition of real property located in the United States. Pa 1040ez Natural resources. Pa 1040ez   The income from the sale of products of any farm, mine, oil or gas well, other natural deposit, or timber located in the United States and sold in a foreign country, or located in a foreign country and sold in the United States, is partly from sources in the United States. Pa 1040ez For information on determining that part, see section 1. Pa 1040ez 863-1(b) of the regulations. Pa 1040ez Table 2-1. Pa 1040ez Summary of Source Rules for Income of Nonresident Aliens Item of income Factor determining source Salaries, wages, other compensation Where services performed Business income:   Personal services Where services performed Sale of inventory—purchased Where sold Sale of inventory—produced Allocation Interest Residence of payer Dividends Whether a U. Pa 1040ez S. Pa 1040ez or foreign corporation* Rents Location of property Royalties:   Natural resources Location of property Patents, copyrights, etc. Pa 1040ez Where property is used Sale of real property Location of property Sale of personal property Seller's tax home (but see Personal Property , later, for exceptions) Pension distributions attributable to contributions Where services were performed that earned the pension Investment earnings on pension contributions Location of pension trust Sale of natural resources Allocation based on fair market value of product at export terminal. Pa 1040ez For more information, see section 1. Pa 1040ez 863-1(b) of the regulations. Pa 1040ez *Exceptions include: a) Dividends paid by a U. Pa 1040ez S. Pa 1040ez corporation are foreign source if the corporation elects the  American Samoa economic development credit. Pa 1040ez  b) Part of a dividend paid by a foreign corporation is U. Pa 1040ez S. Pa 1040ez source if at least 25% of the  corporation's gross income is effectively connected with a U. Pa 1040ez S. Pa 1040ez trade or business for the  3 tax years before the year in which the dividends are declared. Pa 1040ez Personal Property Personal property is property, such as machinery, equipment, or furniture, that is not real property. Pa 1040ez Gain or loss from the sale or exchange of personal property generally has its source in the United States if you have a tax home in the United States. Pa 1040ez If you do not have a tax home in the United States, the gain or loss generally is considered to be from sources outside the United States. Pa 1040ez Tax home. Pa 1040ez   Your tax home is the general area of your main place of business, employment, or post of duty, regardless of where you maintain your family home. Pa 1040ez Your tax home is the place where you permanently or indefinitely work as an employee or a self-employed individual. Pa 1040ez If you do not have a regular or main place of business because of the nature of your work, then your tax home is the place where you regularly live. Pa 1040ez If you do not fit either of these categories, you are considered an itinerant and your tax home is wherever you work. Pa 1040ez Inventory property. Pa 1040ez   Inventory property is personal property that is stock in trade or that is held primarily for sale to customers in the ordinary course of your trade or business. Pa 1040ez Income from the sale of inventory that you purchased is sourced where the property is sold. Pa 1040ez Generally, this is where title to the property passes to the buyer. Pa 1040ez For example, income from the sale of inventory in the United States is U. Pa 1040ez S. Pa 1040ez source income, whether you purchased it in the United States or in a foreign country. Pa 1040ez   Income from the sale of inventory property that you produced in the United States and sold outside the United States (or vice versa) is partly from sources in the United States and partly from sources outside the United States. Pa 1040ez For information on making this allocation, see section 1. Pa 1040ez 863-3 of the regulations. Pa 1040ez   These rules apply even if your tax home is not in the United States. Pa 1040ez Depreciable property. Pa 1040ez   To determine the source of any gain from the sale of depreciable personal property, you must first figure the part of the gain that is not more than the total depreciation adjustments on the property. Pa 1040ez You allocate this part of the gain to sources in the United States based on the ratio of U. Pa 1040ez S. Pa 1040ez depreciation adjustments to total depreciation adjustments. Pa 1040ez The rest of this part of the gain is considered to be from sources outside the United States. Pa 1040ez   For this purpose, “U. Pa 1040ez S. Pa 1040ez depreciation adjustments” are the depreciation adjustments to the basis of the property that are allowable in figuring taxable income from U. Pa 1040ez S. Pa 1040ez sources. Pa 1040ez However, if the property is used predominantly in the United States during a tax year, all depreciation deductions allowable for that year are treated as U. Pa 1040ez S. Pa 1040ez depreciation adjustments. Pa 1040ez But there are some exceptions for certain transportation, communications, and other property used internationally. Pa 1040ez   Gain from the sale of depreciable property that is more than the total depreciation adjustments on the property is sourced as if the property were inventory property, as discussed above. Pa 1040ez   A loss is sourced in the same way as the depreciation deductions were sourced. Pa 1040ez However, if the property was used predominantly in the United States, the entire loss reduces U. Pa 1040ez S. Pa 1040ez source income. Pa 1040ez   The basis of property usually means the cost (money plus the fair market value of other property or services) of property you acquire. Pa 1040ez Depreciation is an amount deducted to recover the cost or other basis of a trade or business asset. Pa 1040ez The amount you can deduct depends on the property's cost, when you began using the property, how long it will take to recover your cost, and which depreciation method you use. Pa 1040ez A depreciation deduction is any deduction for depreciation or amortization or any other allowable deduction that treats a capital expenditure as a deductible expense. Pa 1040ez Intangible property. Pa 1040ez   Intangible property includes patents, copyrights, secret processes or formulas, goodwill, trademarks, trade names, or other like property. Pa 1040ez The gain from the sale of amortizable or depreciable intangible property, up to the previously allowable amortization or depreciation deductions, is sourced in the same way as the original deductions were sourced. Pa 1040ez This is the same as the source rule for gain from the sale of depreciable property. Pa 1040ez See Depreciable property , earlier, for details on how to apply this rule. Pa 1040ez   Gain in excess of the amortization or depreciation deductions is sourced in the country where the property is used if the income from the sale is contingent on the productivity, use, or disposition of that property. Pa 1040ez If the income is not contingent on the productivity, use, or disposition of the property, the income is sourced according to your tax home as discussed earlier. Pa 1040ez If payments for goodwill do not depend on its productivity, use, or disposition, their source is the country in which the goodwill was generated. Pa 1040ez Sales through offices or fixed places of business. Pa 1040ez   Despite any of the earlier rules, if you do not have a tax home in the United States, but you maintain an office or other fixed place of business in the United States, treat the income from any sale of personal property (including inventory property) that is attributable to that office or place of business as U. Pa 1040ez S. Pa 1040ez source income. Pa 1040ez However, this rule does not apply to sales of inventory property for use, disposition, or consumption outside the United States if your office or other fixed place of business outside the United States materially participated in the sale. Pa 1040ez   If you have a tax home in the United States but maintain an office or other fixed place of business outside the United States, income from sales of personal property, other than inventory, depreciable property, or intangibles, that is attributable to that foreign office or place of business may be treated as U. Pa 1040ez S. Pa 1040ez source income. Pa 1040ez The income is treated as U. Pa 1040ez S. Pa 1040ez source income if an income tax of less than 10% of the income from the sale is paid to a foreign country. Pa 1040ez This rule also applies to losses if the foreign country would have imposed an income tax of less than 10% had the sale resulted in a gain. Pa 1040ez Community Income If you are married and you or your spouse is subject to the community property laws of a foreign country, a U. Pa 1040ez S. Pa 1040ez state, or a U. Pa 1040ez S. Pa 1040ez possession, you generally must follow those laws to determine the income of yourself and your spouse for U. Pa 1040ez S. Pa 1040ez tax purposes. Pa 1040ez But you must disregard certain community property laws if: Both you and your spouse are nonresident aliens, or One of you is a nonresident alien and the other is a U. Pa 1040ez S. Pa 1040ez citizen or resident and you do not both choose to be treated as U. Pa 1040ez S. Pa 1040ez residents as explained in chapter 1. Pa 1040ez In these cases, you and your spouse must report community income as explained later. Pa 1040ez Earned income. Pa 1040ez   Earned income of a spouse, other than trade or business income and a partner's distributive share of partnership income, is treated as the income of the spouse whose services produced the income. Pa 1040ez That spouse must report all of it on his or her separate return. Pa 1040ez Trade or business income. Pa 1040ez   Trade or business income, other than a partner's distributive share of partnership income, is treated as the income of the spouse carrying on the trade or business. Pa 1040ez That spouse must report all of it on his or her separate return. Pa 1040ez Partnership income (or loss). Pa 1040ez   A partner's distributive share of partnership income (or loss) is treated as the income (or loss) of the partner. Pa 1040ez The partner must report all of it on his or her separate return. Pa 1040ez Separate property income. Pa 1040ez   Income derived from the separate property of one spouse (and which is not earned income, trade or business income, or partnership distributive share income) is treated as the income of that spouse. Pa 1040ez That spouse must report all of it on his or her separate return. Pa 1040ez Use the appropriate community property law to determine what is separate property. Pa 1040ez Other community income. Pa 1040ez   All other community income is treated as provided by the applicable community property laws. Pa 1040ez Prev  Up  Next   Home   More Online Publications
Español

Office for Civil Rights, Department of Education

This office works to ensure equal access to education and resolve complaints of discrimination.

Contact the Agency or Department

Website: Office for Civil Rights, Department of Education

E-mail:

Address: 400 Maryland Ave SW
Washington, DC 20202-1100

Phone Number: (202) 245-6700

Toll-free: (800) 421-3481

TTY: (800) 877-8339

The Pa 1040ez

Pa 1040ez 1. Pa 1040ez   Canceled Debts Table of Contents General RulesForm 1099-C Discounts and loan modifications Sales or other dispositions (such as foreclosures and repossessions) Abandonments Stockholder debt This chapter discusses the tax treatment of canceled debts. Pa 1040ez General Rules Generally, if a debt for which you are personally liable is forgiven or discharged for less than the full amount owed, the debt is considered canceled in whatever amount it remained unpaid. Pa 1040ez There are exceptions to this rule, discussed under Exceptions , later. Pa 1040ez Generally, you must include the canceled debt in your income. Pa 1040ez However, you may be able to exclude the canceled debt. Pa 1040ez See Exclusions , later. Pa 1040ez Example. Pa 1040ez John owed $1,000 to Mary. Pa 1040ez Mary agreed to accept and John paid $400 in satisfaction of the entire debt. Pa 1040ez John has canceled debt of $600. Pa 1040ez Example. Pa 1040ez Margaret owed $1,000 to Henry. Pa 1040ez Henry and Margaret agreed that Margaret would provide Henry with services (instead of money) in full satisfaction of the debt. Pa 1040ez Margaret does not have canceled debt. Pa 1040ez Instead, she has income from services. Pa 1040ez A debt includes any indebtedness: For which you are liable, or Subject to which you hold property. Pa 1040ez Debt for which you are personally liable is recourse debt. Pa 1040ez All other debt is nonrecourse debt. Pa 1040ez If you are not personally liable for the debt, you do not have ordinary income from the cancellation of debt unless you retain the collateral and either: The lender offers a discount for the early payment of the debt, or The lender agrees to a loan modification that results in the reduction of the principal balance of the debt. Pa 1040ez See Discounts and loan modifications , later. Pa 1040ez However, upon the disposition of the property securing a nonrecourse debt, the amount realized includes the entire unpaid amount of the debt, not just the FMV of the property. Pa 1040ez As a result, you may realize a gain or loss if the outstanding debt immediately before the disposition is more or less than your adjusted basis in the property. Pa 1040ez For more details on figuring your gain or loss, see chapter 2 of this publication or see Publication 544. Pa 1040ez There are several exceptions and exclusions that may result in part or all of a canceled debt being nontaxable. Pa 1040ez See Exceptions and Exclusions, later. Pa 1040ez You must report any taxable canceled debt as ordinary income on: Form 1040 or Form 1040NR, line 21, if the debt is a nonbusiness debt; Schedule C (Form 1040), line 6 (or Schedule C-EZ (Form 1040), line 1), if the debt is related to a nonfarm sole proprietorship; Schedule E (Form 1040), line 3, if the debt is related to nonfarm rental of real property; Form 4835, line 6, if the debt is related to a farm rental activity for which you use Form 4835 to report farm rental income based on crops or livestock produced by a tenant; or Schedule F (Form 1040), line 8, if the debt is farm debt and you are a farmer. Pa 1040ez Form 1099-C If you receive a Form 1099-C, that means an applicable entity has reported an identifiable event to the IRS regarding a debt you owe. Pa 1040ez The identifiable event may be an actual cancellation of the debt or it may be an event the applicable entity is required, solely for purposes of reporting to the IRS, to treat as a cancellation of debt. Pa 1040ez For information on the reasons an applicable entity files Form 1099-C, see Identifiable event codes, later. Pa 1040ez Unless you meet one of the exceptions or exclusions discussed later, this canceled debt is ordinary income and must be reported on the appropriate form discussed above. Pa 1040ez An applicable entity includes: A federal government agency, A financial institution, A credit union, and Any organization a significant trade or business of which is lending money. Pa 1040ez Identifiable event codes. Pa 1040ez    Box 6 of Form 1099-C should indicate the reason the creditor filed this form. Pa 1040ez The codes shown in box 6 are explained below. Pa 1040ez Also see the chart after the explanation for a quick reference guide for the codes used in Box 6. Pa 1040ez Note. Pa 1040ez Codes A through G and I identify specific occurrences resulting from an actual discharge of indebtedness. Pa 1040ez However, Code H, Expiration of nonpayment testing period, does not necessarily identify an actual discharge of indebtedness. Pa 1040ez Code A — Bankruptcy. Pa 1040ez Code A is used to identify cancellation of debt as a result of a title 11 bankruptcy case. Pa 1040ez See Bankruptcy , later. Pa 1040ez Code B — Other judicial debt relief. Pa 1040ez Code B is used to identify cancellation of debt as a result of a receivership, foreclosure, or similar federal or state court proceeding other than bankruptcy. Pa 1040ez Code C — Statute of limitations or expiration of deficiency period. Pa 1040ez Code C is used to identify cancellation of debt either when the statute of limitations for collecting the debt expires or when the statutory period for filing a claim or beginning a deficiency judgment proceeding expires. Pa 1040ez In the case of the expiration of a statute of limitations, an identifiable event occurs only if and when your affirmative defense of the statute of limitations is upheld in a final judgment or decision in a judicial proceeding, and the period for appealing the judgment or decision has expired. Pa 1040ez Code D — Foreclosure election. Pa 1040ez Code D is used to identify cancellation of debt when the creditor elects foreclosure remedies that statutorily end or bar the creditor's right to pursue collection of the debt. Pa 1040ez This event applies to a mortgage lender or holder who is barred from pursuing debt collection after a power of sale in the mortgage or deed of trust is exercised. Pa 1040ez Code E — Debt relief from probate or similar proceeding. Pa 1040ez Code E is used to identify cancellation of debt as a result of a probate court or similar legal proceeding. Pa 1040ez Code F — By agreement. Pa 1040ez Code F is used to identify cancellation of debt as a result of an agreement between the creditor and the debtor to cancel the debt at less than full consideration. Pa 1040ez Code G — Decision or policy to discontinue collection. Pa 1040ez Code G is used to identify cancellation of debt as a result of a decision or a defined policy of the creditor to discontinue collection activity and cancel the debt. Pa 1040ez For purposes of this identifiable event, a defined policy includes both a written policy and the creditor's established business practice. Pa 1040ez Code H — Expiration of nonpayment testing period. Pa 1040ez Code H is used to indicate that the creditor has not received a payment on the debt during a testing period ending on December 31, 2013. Pa 1040ez The testing period is a 36-month period increased by the number of months the creditor was prevented from engaging in collection activity by a stay in bankruptcy or similar bar under state or local law. Pa 1040ez This identifiable event applies only for a creditor that is a financial institution or credit union (and certain of their subsidiaries), the Federal Deposit Insurance Corporation (FDIC), Resolution Trust Corporation (RTC), National Credit Union Administration (NCUA), and other Federal executive agencies. Pa 1040ez Expiration of the nonpayment testing period does not necessarily result from an actual discharge of indebtedness. Pa 1040ez Code I — Other actual discharge before identifiable event. Pa 1040ez Code I is used to identify an actual cancellation of debt that occurs before any of the identifiable events described in codes A through H. Pa 1040ez Form 1099-C Reference Guide for Box 6 Identifiable Event Codes A Bankruptcy B Other judicial debt relief C Statute of limitations or expiration of deficiency period D Foreclosure election E Debt relief from probate or similar proceeding F By agreement G Decision or policy to discontinue collection H Expiration of nonpayment testing period I Other actual discharge before identifiable event Even if you did not receive a Form 1099-C, you must report canceled debt as gross income on your tax return unless one of the exceptions or exclusions described later applies. Pa 1040ez Amount of canceled debt. Pa 1040ez    The amount in box 2 of Form 1099-C may represent some or all of the debt that has been canceled or treated as canceled. Pa 1040ez The amount in box 2 will include principal and may include interest and other nonprincipal amounts (such as fees or penalties). Pa 1040ez Unless you meet one of the exceptions or exclusions discussed later, the amount of the debt that has been canceled is ordinary income and must be reported on the appropriate form as discussed earlier. Pa 1040ez Interest included in canceled debt. Pa 1040ez    If any interest is included in the amount of canceled debt in box 2, it will be shown in box 3. Pa 1040ez Whether the interest portion of the canceled debt must be included in your income depends on whether the interest would be deductible if you paid it. Pa 1040ez See Deductible Debt under Exceptions, later. Pa 1040ez Persons who each receive a Form 1099-C showing the full amount of debt. Pa 1040ez    If you and another person were jointly and severally liable for a canceled debt, each of you may get a Form 1099-C showing the entire amount of the canceled debt. Pa 1040ez However, you may not have to report that entire amount as income. Pa 1040ez The amount, if any, you must report depends on all the facts and circumstances, including: State law, The amount of debt proceeds each person received, How much of any interest deduction from the debt was claimed by each person, How much of the basis of any co-owned property bought with the debt proceeds was allocated to each co-owner, and Whether the canceled debt qualifies for any of the exceptions or exclusions described in this publication. Pa 1040ez See Example 3 under Insolvency, later. Pa 1040ez Discounts and loan modifications If a lender discounts (reduces) the principal balance of a loan because you pay it off early, or agrees to a loan modification (a “workout”) that includes a reduction in the principal balance of a loan, the amount of the discount or the amount of principal reduction is canceled debt. Pa 1040ez However, if the debt is nonrecourse and you did not retain the collateral, you do not have cancellation of the debt income. Pa 1040ez The amount of the canceled debt must be included in income unless one of the exceptions or exclusions described later applies. Pa 1040ez For more details, see Exceptions and Exclusions, later. Pa 1040ez Sales or other dispositions (such as foreclosures and repossessions) Recourse debt. Pa 1040ez   If you owned property that was subject to a recourse debt in excess of the FMV of the property, the lender's foreclosure or repossession of the property is treated as a sale or disposition of the property by you and may result in your realization of gain or loss. Pa 1040ez The gain or loss on the disposition of the property is measured by the difference between the FMV of the property at the time of the disposition and your adjusted basis (usually your cost) in the property. Pa 1040ez The character of the gain or loss (such as ordinary or capital) is determined by the character of the property. Pa 1040ez If the lender forgives all or part of the amount of the debt in excess of the FMV of the property, the cancellation of the excess debt may result in ordinary income. Pa 1040ez The ordinary income from the cancellation of debt (the excess of the canceled debt over the FMV of the property) must be included in your gross income reported on your tax return unless one of the exceptions or exclusions described later applies. Pa 1040ez For more details, see Exceptions and Exclusions, later. Pa 1040ez Nonrecourse debt. Pa 1040ez   If you owned property that was subject to a nonrecourse debt in excess of the FMV of the property, the lender's foreclosure on the property does not result in ordinary income from the cancellation of debt. Pa 1040ez The entire amount of the nonrecourse debt is treated as an amount realized on the disposition of the property. Pa 1040ez The gain or loss on the disposition of the property is measured by the difference between the total amount realized (the entire amount of the nonrecourse debt plus the amount of cash and the FMV of any property received) and your adjusted basis in the property. Pa 1040ez The character of the gain or loss is determined by the character of the property. Pa 1040ez More information. Pa 1040ez    See Publications 523, 544, and 551, and chapter 2 of this publication for more details. Pa 1040ez Abandonments Recourse debt. Pa 1040ez   If you abandon property that secures a debt for which you are personally liable (recourse debt) and the debt is canceled, you will realize ordinary income equal to the canceled debt. Pa 1040ez You must report this income on your tax return unless one of the exceptions or exclusions described later applies. Pa 1040ez For more details, see Exceptions and Exclusions, later. Pa 1040ez This income is separate from any amount realized from the abandonment of the property. Pa 1040ez For more details, see chapter 3. Pa 1040ez Nonrecourse debt. Pa 1040ez   If you abandon property that secures a debt for which you are not personally liable (nonrecourse debt), you may realize gain or loss but will not have cancellation of indebtedness income. Pa 1040ez Stockholder debt If you are a stockholder in a corporation and the corporation cancels or forgives your debt to it, the canceled debt is a constructive distribution. Pa 1040ez For more information, see Publication 542, Corporations. Pa 1040ez Prev  Up  Next   Home   More Online Publications