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Self Employment Taxes

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Self Employment Taxes

Self employment taxes 14. Self employment taxes   Sale of Property Table of Contents Reminder Introduction Useful Items - You may want to see: Sales and TradesWhat Is a Sale or Trade? How To Figure Gain or Loss Nontaxable Trades Transfers Between Spouses Related Party Transactions Capital Gains and LossesCapital or Ordinary Gain or Loss Capital Assets and Noncapital Assets Holding Period Nonbusiness Bad Debts Wash Sales Rollover of Gain From Publicly Traded Securities Reminder Foreign income. Self employment taxes  If you are a U. Self employment taxes S. Self employment taxes citizen who sells property located outside the United States, you must report all gains and losses from the sale of that property on your tax return unless it is exempt by U. Self employment taxes S. Self employment taxes law. Self employment taxes This is true whether you reside inside or outside the United States and whether or not you receive a Form 1099 from the payer. Self employment taxes Introduction This chapter discusses the tax consequences of selling or trading investment property. Self employment taxes It explains the following. Self employment taxes What a sale or trade is. Self employment taxes Figuring gain or loss. Self employment taxes Nontaxable trades. Self employment taxes Related party transactions. Self employment taxes Capital gains or losses. Self employment taxes Capital assets and noncapital assets. Self employment taxes Holding period. Self employment taxes Rollover of gain from publicly traded securities. Self employment taxes Other property transactions. Self employment taxes   Certain transfers of property are not discussed here. Self employment taxes They are discussed in other IRS publications. Self employment taxes These include the following. Self employment taxes Sales of a main home, covered in chapter 15. Self employment taxes Installment sales, covered in Publication 537, Installment Sales. Self employment taxes Transactions involving business property, covered in Publication 544, Sales and Other Dispositions of Assets. Self employment taxes Dispositions of an interest in a passive activity, covered in Publication 925, Passive Activity and At-Risk Rules. Self employment taxes    Publication 550, Investment Income and Expenses (Including Capital Gains and Losses), provides a more detailed discussion about sales and trades of investment property. Self employment taxes Publication 550 includes information about the rules covering nonbusiness bad debts, straddles, section 1256 contracts, puts and calls, commodity futures, short sales, and wash sales. Self employment taxes It also discusses investment-related expenses. Self employment taxes Useful Items - You may want to see: Publication 550 Investment Income and Expenses Form (and Instructions) Schedule D (Form 1040) Capital Gains and Losses 8949 Sales and Other Dispositions of Capital Assets 8824 Like-Kind Exchanges Sales and Trades If you sold property such as stocks, bonds, or certain commodities through a broker during the year, you should receive, for each sale, a Form 1099-B, Proceeds From Broker and Barter Exchange Transactions, or substitute statement, from the broker. Self employment taxes Generally, you should receive the statement by February 15 of the next year. Self employment taxes It will show the gross proceeds from the sale. Self employment taxes If you sold a covered security in 2013, your 1099-B (or substitute statement) will show your basis. Self employment taxes Generally, a covered security is a security you acquired after 2010, with certain exceptions. Self employment taxes See the Instructions for Form 8949. Self employment taxes The IRS will also get a copy of Form 1099-B from the broker. Self employment taxes Use Form 1099-B (or substitute statement received from your broker) to complete Form 8949. Self employment taxes What Is a Sale or Trade? This section explains what is a sale or trade. Self employment taxes It also explains certain transactions and events that are treated as sales or trades. Self employment taxes A sale is generally a transfer of property for money or a mortgage, note, or other promise to pay money. Self employment taxes A trade is a transfer of property for other property or services and may be taxed in the same way as a sale. Self employment taxes Sale and purchase. Self employment taxes   Ordinarily, a transaction is not a trade when you voluntarily sell property for cash and immediately buy similar property to replace it. Self employment taxes The sale and purchase are two separate transactions. Self employment taxes But see Like-kind exchanges under Nontaxable Trades, later. Self employment taxes Redemption of stock. Self employment taxes   A redemption of stock is treated as a sale or trade and is subject to the capital gain or loss provisions unless the redemption is a dividend or other distribution on stock. Self employment taxes Dividend versus sale or trade. Self employment taxes   Whether a redemption is treated as a sale, trade, dividend, or other distribution depends on the circumstances in each case. Self employment taxes Both direct and indirect ownership of stock will be considered. Self employment taxes The redemption is treated as a sale or trade of stock if: The redemption is not essentially equivalent to a dividend (see chapter 8), There is a substantially disproportionate redemption of stock, There is a complete redemption of all the stock of the corporation owned by the shareholder, or The redemption is a distribution in partial liquidation of a corporation. Self employment taxes Redemption or retirement of bonds. Self employment taxes   A redemption or retirement of bonds or notes at their maturity is generally treated as a sale or trade. Self employment taxes   In addition, a significant modification of a bond is treated as a trade of the original bond for a new bond. Self employment taxes For details, see Regulations section 1. Self employment taxes 1001-3. Self employment taxes Surrender of stock. Self employment taxes   A surrender of stock by a dominant shareholder who retains ownership of more than half of the corporation's voting shares is treated as a contribution to capital rather than as an immediate loss deductible from taxable income. Self employment taxes The surrendering shareholder must reallocate his or her basis in the surrendered shares to the shares he or she retains. Self employment taxes Worthless securities. Self employment taxes    Stocks, stock rights, and bonds (other than those held for sale by a securities dealer) that became completely worthless during the tax year are treated as though they were sold on the last day of the tax year. Self employment taxes This affects whether your capital loss is long term or short term. Self employment taxes See Holding Period , later. Self employment taxes   Worthless securities also include securities that you abandon after March 12, 2008. Self employment taxes To abandon a security, you must permanently surrender and relinquish all rights in the security and receive no consideration in exchange for it. Self employment taxes All the facts and circumstances determine whether the transaction is properly characterized as an abandonment or other type of transaction, such as an actual sale or exchange, contribution to capital, dividend, or gift. Self employment taxes    If you are a cash basis taxpayer and make payments on a negotiable promissory note that you issued for stock that became worthless, you can deduct these payments as losses in the years you actually make the payments. Self employment taxes Do not deduct them in the year the stock became worthless. Self employment taxes How to report loss. Self employment taxes    Report worthless securities in Part I or Part II, whichever applies, of Form 8949. Self employment taxes In column (a), enter “Worthless. Self employment taxes ”    Report your worthless securities transactions on Form 8949 with the correct box checked for these transactions. Self employment taxes See Form 8949 and the Instructions for Form 8949. Self employment taxes For more information on Form 8949 and Schedule D (Form 1040), see Reporting Capital Gains and Losses in chapter 16. Self employment taxes See also Schedule D (Form 1040), Form 8949, and their separate instructions. Self employment taxes Filing a claim for refund. Self employment taxes   If you do not claim a loss for a worthless security on your original return for the year it becomes worthless, you can file a claim for a credit or refund due to the loss. Self employment taxes You must use Form 1040X, Amended U. Self employment taxes S. Self employment taxes Individual Income Tax Return, to amend your return for the year the security became worthless. Self employment taxes You must file it within 7 years from the date your original return for that year had to be filed, or 2 years from the date you paid the tax, whichever is later. Self employment taxes For more information about filing a claim, see Amended Returns and Claims for Refund in chapter 1. Self employment taxes How To Figure Gain or Loss You figure gain or loss on a sale or trade of property by comparing the amount you realize with the adjusted basis of the property. Self employment taxes Gain. Self employment taxes   If the amount you realize from a sale or trade is more than the adjusted basis of the property you transfer, the difference is a gain. Self employment taxes Loss. Self employment taxes   If the adjusted basis of the property you transfer is more than the amount you realize, the difference is a loss. Self employment taxes Adjusted basis. Self employment taxes   The adjusted basis of property is your original cost or other original basis properly adjusted (increased or decreased) for certain items. Self employment taxes See chapter 13 for more information about determining the adjusted basis of property. Self employment taxes Amount realized. Self employment taxes   The amount you realize from a sale or trade of property is everything you receive for the property minus your expenses of sale (such as redemption fees, sales commissions, sales charges, or exit fees). Self employment taxes Amount realized includes the money you receive plus the fair market value of any property or services you receive. Self employment taxes If you received a note or other debt instrument for the property, see How To Figure Gain or Loss in chapter 4 of Publication 550 to figure the amount realized. Self employment taxes If you finance the buyer's purchase of your property and the debt instrument does not provide for adequate stated interest, the unstated interest that you must report as ordinary income will reduce the amount realized from the sale. Self employment taxes For more information, see Publication 537. Self employment taxes Fair market value. Self employment taxes   Fair market value is the price at which the property would change hands between a buyer and a seller, neither being forced to buy or sell and both having reasonable knowledge of all the relevant facts. Self employment taxes Example. Self employment taxes You trade A Company stock with an adjusted basis of $7,000 for B Company stock with a fair market value of $10,000, which is your amount realized. Self employment taxes Your gain is $3,000 ($10,000 − $7,000). Self employment taxes Debt paid off. Self employment taxes    A debt against the property, or against you, that is paid off as a part of the transaction, or that is assumed by the buyer, must be included in the amount realized. Self employment taxes This is true even if neither you nor the buyer is personally liable for the debt. Self employment taxes For example, if you sell or trade property that is subject to a nonrecourse loan, the amount you realize generally includes the full amount of the note assumed by the buyer even if the amount of the note is more than the fair market value of the property. Self employment taxes Example. Self employment taxes You sell stock that you had pledged as security for a bank loan of $8,000. Self employment taxes Your basis in the stock is $6,000. Self employment taxes The buyer pays off your bank loan and pays you $20,000 in cash. Self employment taxes The amount realized is $28,000 ($20,000 + $8,000). Self employment taxes Your gain is $22,000 ($28,000 − $6,000). Self employment taxes Payment of cash. Self employment taxes   If you trade property and cash for other property, the amount you realize is the fair market value of the property you receive. Self employment taxes Determine your gain or loss by subtracting the cash you pay plus the adjusted basis of the property you trade in from the amount you realize. Self employment taxes If the result is a positive number, it is a gain. Self employment taxes If the result is a negative number, it is a loss. Self employment taxes No gain or loss. Self employment taxes   You may have to use a basis for figuring gain that is different from the basis used for figuring loss. Self employment taxes In this case, you may have neither a gain nor a loss. Self employment taxes See Basis Other Than Cost in chapter 13. Self employment taxes Nontaxable Trades This section discusses trades that generally do not result in a taxable gain or deductible loss. Self employment taxes For more information on nontaxable trades, see chapter 1 of Publication 544. Self employment taxes Like-kind exchanges. Self employment taxes   If you trade business or investment property for other business or investment property of a like kind, you do not pay tax on any gain or deduct any loss until you sell or dispose of the property you receive. Self employment taxes To be nontaxable, a trade must meet all six of the following conditions. Self employment taxes The property must be business or investment property. Self employment taxes You must hold both the property you trade and the property you receive for productive use in your trade or business or for investment. Self employment taxes Neither property may be property used for personal purposes, such as your home or family car. Self employment taxes The property must not be held primarily for sale. Self employment taxes The property you trade and the property you receive must not be property you sell to customers, such as merchandise. Self employment taxes The property must not be stocks, bonds, notes, choses in action, certificates of trust or beneficial interest, or other securities or evidences of indebtedness or interest, including partnership interests. Self employment taxes However, see Special rules for mutual ditch, reservoir, or irrigation company stock, in chapter 4 of Publication 550 for an exception. Self employment taxes Also, you can have a nontaxable trade of corporate stocks under a different rule, as discussed later. Self employment taxes There must be a trade of like property. Self employment taxes The trade of real estate for real estate, or personal property for similar personal property, is a trade of like property. Self employment taxes The trade of an apartment house for a store building, or a panel truck for a pickup truck, is a trade of like property. Self employment taxes The trade of a piece of machinery for a store building is not a trade of like property. Self employment taxes Real property located in the United States and real property located outside the United States are not like property. Self employment taxes Also, personal property used predominantly within the United States and personal property used predominantly outside the United States are not like property. Self employment taxes The property to be received must be identified in writing within 45 days after the date you transfer the property given up in the trade. Self employment taxes The property to be received must be received by the earlier of: The 180th day after the date on which you transfer the property given up in the trade, or The due date, including extensions, for your tax return for the year in which the transfer of the property given up occurs. Self employment taxes    If you trade property with a related party in a like-kind exchange, a special rule may apply. Self employment taxes See Related Party Transactions , later in this chapter. Self employment taxes Also, see chapter 1 of Publication 544 for more information on exchanges of business property and special rules for exchanges using qualified intermediaries or involving multiple properties. Self employment taxes Partly nontaxable exchange. Self employment taxes   If you receive money or unlike property in addition to like property, and the above six conditions are met, you have a partly nontaxable trade. Self employment taxes You are taxed on any gain you realize, but only up to the amount of the money and the fair market value of the unlike property you receive. Self employment taxes You cannot deduct a loss. Self employment taxes Like property and unlike property transferred. Self employment taxes   If you give up unlike property in addition to the like property, you must recognize gain or loss on the unlike property you give up. Self employment taxes The gain or loss is the difference between the adjusted basis of the unlike property and its fair market value. Self employment taxes Like property and money transferred. Self employment taxes   If all of the above conditions (1) – (6) are met, you have a nontaxable trade even if you pay money in addition to the like property. Self employment taxes Basis of property received. Self employment taxes   To figure the basis of the property received, see Nontaxable Exchanges in chapter 13. Self employment taxes How to report. Self employment taxes   You must report the trade of like property on Form 8824. Self employment taxes If you figure a recognized gain or loss on Form 8824, report it on Schedule D (Form 1040), or on Form 4797, Sales of Business Property, whichever applies. Self employment taxes See the instructions for Line 22 in the Instructions for Form 8824. Self employment taxes   For information on using Form 4797, see chapter 4 of Publication 544. Self employment taxes Corporate stocks. Self employment taxes   The following trades of corporate stocks generally do not result in a taxable gain or a deductible loss. Self employment taxes Corporate reorganizations. Self employment taxes   In some instances, a company will give you common stock for preferred stock, preferred stock for common stock, or stock in one corporation for stock in another corporation. Self employment taxes If this is a result of a merger, recapitalization, transfer to a controlled corporation, bankruptcy, corporate division, corporate acquisition, or other corporate reorganization, you do not recognize gain or loss. Self employment taxes Stock for stock of the same corporation. Self employment taxes   You can exchange common stock for common stock or preferred stock for preferred stock in the same corporation without having a recognized gain or loss. Self employment taxes This is true for a trade between two stockholders as well as a trade between a stockholder and the corporation. Self employment taxes Convertible stocks and bonds. Self employment taxes   You generally will not have a recognized gain or loss if you convert bonds into stock or preferred stock into common stock of the same corporation according to a conversion privilege in the terms of the bond or the preferred stock certificate. Self employment taxes Property for stock of a controlled corporation. Self employment taxes   If you transfer property to a corporation solely in exchange for stock in that corporation, and immediately after the trade you are in control of the corporation, you ordinarily will not recognize a gain or loss. Self employment taxes This rule applies both to individuals and to groups who transfer property to a corporation. Self employment taxes It does not apply if the corporation is an investment company. Self employment taxes   For this purpose, to be in control of a corporation, you or your group of transferors must own, immediately after the exchange, at least 80% of the total combined voting power of all classes of stock entitled to vote and at least 80% of the outstanding shares of each class of nonvoting stock of the corporation. Self employment taxes   If this provision applies to you, you may have to attach to your return a complete statement of all facts pertinent to the exchange. Self employment taxes For details, see Regulations section 1. Self employment taxes 351-3. Self employment taxes Additional information. Self employment taxes   For more information on trades of stock, see Nontaxable Trades in chapter 4 of Publication 550. Self employment taxes Insurance policies and annuities. Self employment taxes   You will not have a recognized gain or loss if the insured or annuitant is the same under both contracts and you trade: A life insurance contract for another life insurance contract or for an endowment or annuity contract or for a qualified long-term care insurance contract, An endowment contract for another endowment contract that provides for regular payments beginning at a date no later than the beginning date under the old contract or for an annuity contract or for a qualified long-term insurance contract, An annuity contract for annuity contract or for a qualified long-term care insurance contract, or A qualified long-term care insurance contract for a qualified long-term care insurance contract. Self employment taxes   You also may not have to recognize gain or loss on an exchange of a portion of an annuity contract for another annuity contract. Self employment taxes For transfers completed before October 24, 2011, see Revenue Ruling 2003-76 in Internal Revenue Bulletin 2003-33 and Revenue Procedure 2008-24 in Internal Revenue Bulletin 2008-13. Self employment taxes Revenue Ruling 2003-76 is available at www. Self employment taxes irs. Self employment taxes gov/irb/2003-33_IRB/ar11. Self employment taxes html. Self employment taxes Revenue Procedure 2008-24 is available at www. Self employment taxes irs. Self employment taxes gov/irb/2008-13_IRB/ar13. Self employment taxes html. Self employment taxes For transfers completed on or after October 24, 2011, see Revenue Ruling 2003-76, above, and Revenue Procedure 2011-38, in Internal Revenue Bulletin 2011-30. Self employment taxes Revenue Procedure 2011-38 is available at www. Self employment taxes irs. Self employment taxes gov/irb/2011-30_IRB/ar09. Self employment taxes html. Self employment taxes   For tax years beginning after December 31, 2010, amounts received as an annuity for a period of 10 years or more, or for the lives of one or more individuals, under any portion of an annuity, endowment, or life insurance contract, are treated as a separate contract and are considered partial annuities. Self employment taxes A portion of an annuity, endowment, or life insurance contract may be annuitized, provided that the annuitization period is for 10 years or more or for the lives of one or more individuals. Self employment taxes The investment in the contract is allocated between the part of the contract from which amounts are received as an annuity and the part of the contract from which amounts are not received as an annuity. Self employment taxes   Exchanges of contracts not included in this list, such as an annuity contract for an endowment contract, or an annuity or endowment contract for a life insurance contract, are taxable. Self employment taxes Demutualization of life insurance companies. Self employment taxes   If you received stock in exchange for your equity interest as a policyholder or an annuitant, you generally will not have a recognized gain or loss. Self employment taxes See Demutualization of Life Insurance Companies in Publication 550. Self employment taxes U. Self employment taxes S. Self employment taxes Treasury notes or bonds. Self employment taxes   You can trade certain issues of U. Self employment taxes S. Self employment taxes Treasury obligations for other issues designated by the Secretary of the Treasury, with no gain or loss recognized on the trade. Self employment taxes See Savings bonds traded in chapter 1 of Publication 550 for more information. Self employment taxes Transfers Between Spouses Generally, no gain or loss is recognized on a transfer of property from an individual to (or in trust for the benefit of) a spouse, or if incident to a divorce, a former spouse. Self employment taxes This nonrecognition rule does not apply in the following situations. Self employment taxes The recipient spouse or former spouse is a nonresident alien. Self employment taxes Property is transferred in trust and liability exceeds basis. Self employment taxes Gain must be recognized to the extent the amount of the liabilities assumed by the trust, plus any liabilities on the property, exceed the adjusted basis of the property. Self employment taxes For other situations, see Transfers Between Spouses in chapter 4 of Publication 550. Self employment taxes Any transfer of property to a spouse or former spouse on which gain or loss is not recognized is treated by the recipient as a gift and is not considered a sale or exchange. Self employment taxes The recipient's basis in the property will be the same as the adjusted basis of the giver immediately before the transfer. Self employment taxes This carryover basis rule applies whether the adjusted basis of the transferred property is less than, equal to, or greater than either its fair market value at the time of transfer or any consideration paid by the recipient. Self employment taxes This rule applies for purposes of determining loss as well as gain. Self employment taxes Any gain recognized on a transfer in trust increases the basis. Self employment taxes A transfer of property is incident to a divorce if the transfer occurs within 1 year after the date on which the marriage ends, or if the transfer is related to the ending of the marriage. Self employment taxes Related Party Transactions Special rules apply to the sale or trade of property between related parties. Self employment taxes Gain on sale or trade of depreciable property. Self employment taxes   Your gain from the sale or trade of property to a related party may be ordinary income, rather than capital gain, if the property can be depreciated by the party receiving it. Self employment taxes See chapter 3 of Publication 544 for more information. Self employment taxes Like-kind exchanges. Self employment taxes   Generally, if you trade business or investment property for other business or investment property of a like kind, no gain or loss is recognized. Self employment taxes See Like-kind exchanges , earlier, under Nontaxable Trades. Self employment taxes   This rule also applies to trades of property between related parties, defined next under Losses on sales or trades of property. Self employment taxes However, if either you or the related party disposes of the like property within 2 years after the trade, you both must report any gain or loss not recognized on the original trade on your return filed for the year in which the later disposition occurs. Self employment taxes See Related Party Transactions in chapter 4 of Publication 550 for exceptions. Self employment taxes Losses on sales or trades of property. Self employment taxes   You cannot deduct a loss on the sale or trade of property, other than a distribution in complete liquidation of a corporation, if the transaction is directly or indirectly between you and the following related parties. Self employment taxes Members of your family. Self employment taxes This includes only your brothers and sisters, half-brothers and half-sisters, spouse, ancestors (parents, grandparents, etc. Self employment taxes ), and lineal descendants (children, grandchildren, etc. Self employment taxes ). Self employment taxes A partnership in which you directly or indirectly own more than 50% of the capital interest or the profits interest. Self employment taxes A corporation in which you directly or indirectly own more than 50% in value of the outstanding stock. Self employment taxes (See Constructive ownership of stock , later. Self employment taxes ) A tax-exempt charitable or educational organization directly or indirectly controlled, in any manner or by any method, by you or by a member of your family, whether or not this control is legally enforceable. Self employment taxes   In addition, a loss on the sale or trade of property is not deductible if the transaction is directly or indirectly between the following related parties. Self employment taxes A grantor and fiduciary, or the fiduciary and beneficiary, of any trust. Self employment taxes Fiduciaries of two different trusts, or the fiduciary and beneficiary of two different trusts, if the same person is the grantor of both trusts. Self employment taxes A trust fiduciary and a corporation of which more than 50% in value of the outstanding stock is directly or indirectly owned by or for the trust, or by or for the grantor of the trust. Self employment taxes A corporation and a partnership if the same persons own more than 50% in value of the outstanding stock of the corporation and more than 50% of the capital interest, or the profits interest, in the partnership. Self employment taxes Two S corporations if the same persons own more than 50% in value of the outstanding stock of each corporation. Self employment taxes Two corporations, one of which is an S corporation, if the same persons own more than 50% in value of the outstanding stock of each corporation. Self employment taxes An executor and a beneficiary of an estate (except in the case of a sale or trade to satisfy a pecuniary bequest). Self employment taxes Two corporations that are members of the same controlled group. Self employment taxes (Under certain conditions, however, these losses are not disallowed but must be deferred. Self employment taxes ) Two partnerships if the same persons own, directly or indirectly, more than 50% of the capital interests or the profit interests in both partnerships. Self employment taxes Multiple property sales or trades. Self employment taxes   If you sell or trade to a related party a number of blocks of stock or pieces of property in a lump sum, you must figure the gain or loss separately for each block of stock or piece of property. Self employment taxes The gain on each item may be taxable. Self employment taxes However, you cannot deduct the loss on any item. Self employment taxes Also, you cannot reduce gains from the sales of any of these items by losses on the sales of any of the other items. Self employment taxes Indirect transactions. Self employment taxes   You cannot deduct your loss on the sale of stock through your broker if, under a prearranged plan, a related party buys the same stock you had owned. Self employment taxes This does not apply to a trade between related parties through an exchange that is purely coincidental and is not prearranged. Self employment taxes Constructive ownership of stock. Self employment taxes   In determining whether a person directly or indirectly owns any of the outstanding stock of a corporation, the following rules apply. Self employment taxes Rule 1. Self employment taxes   Stock directly or indirectly owned by or for a corporation, partnership, estate, or trust is considered owned proportionately by or for its shareholders, partners, or beneficiaries. Self employment taxes Rule 2. Self employment taxes   An individual is considered to own the stock directly or indirectly owned by or for his or her family. Self employment taxes Family includes only brothers and sisters, half-brothers and half-sisters, spouse, ancestors, and lineal descendants. Self employment taxes Rule 3. Self employment taxes   An individual owning, other than by applying rule 2, any stock in a corporation is considered to own the stock directly or indirectly owned by or for his or her partner. Self employment taxes Rule 4. Self employment taxes   When applying rule 1, 2, or 3, stock constructively owned by a person under rule 1 is treated as actually owned by that person. Self employment taxes But stock constructively owned by an individual under rule 2 or rule 3 is not treated as owned by that individual for again applying either rule 2 or rule 3 to make another person the constructive owner of the stock. Self employment taxes Property received from a related party. Self employment taxes    If you sell or trade at a gain property you acquired from a related party, you recognize the gain only to the extent it is more than the loss previously disallowed to the related party. Self employment taxes This rule applies only if you are the original transferee and you acquired the property by purchase or exchange. Self employment taxes This rule does not apply if the related party's loss was disallowed because of the wash sale rules described in chapter 4 of Publication 550 under Wash Sales. Self employment taxes   If you sell or trade at a loss property you acquired from a related party, you cannot recognize the loss that was not allowed to the related party. Self employment taxes Example 1. Self employment taxes Your brother sells you stock for $7,600. Self employment taxes His cost basis is $10,000. Self employment taxes Your brother cannot deduct the loss of $2,400. Self employment taxes Later, you sell the same stock to an unrelated party for $10,500, realizing a gain of $2,900. Self employment taxes Your reportable gain is $500 (the $2,900 gain minus the $2,400 loss not allowed to your brother). Self employment taxes Example 2. Self employment taxes If, in Example 1, you sold the stock for $6,900 instead of $10,500, your recognized loss is only $700 (your $7,600 basis minus $6,900). Self employment taxes You cannot deduct the loss that was not allowed to your brother. Self employment taxes Capital Gains and Losses This section discusses the tax treatment of gains and losses from different types of investment transactions. Self employment taxes Character of gain or loss. Self employment taxes   You need to classify your gains and losses as either ordinary or capital gains or losses. Self employment taxes You then need to classify your capital gains and losses as either short term or long term. Self employment taxes If you have long-term gains and losses, you must identify your 28% rate gains and losses. Self employment taxes If you have a net capital gain, you must also identify any unrecaptured section 1250 gain. Self employment taxes   The correct classification and identification helps you figure the limit on capital losses and the correct tax on capital gains. Self employment taxes Reporting capital gains and losses is explained in chapter 16. Self employment taxes Capital or Ordinary Gain or Loss If you have a taxable gain or a deductible loss from a transaction, it may be either a capital gain or loss or an ordinary gain or loss, depending on the circumstances. Self employment taxes Generally, a sale or trade of a capital asset (defined next) results in a capital gain or loss. Self employment taxes A sale or trade of a noncapital asset generally results in ordinary gain or loss. Self employment taxes Depending on the circumstances, a gain or loss on a sale or trade of property used in a trade or business may be treated as either capital or ordinary, as explained in Publication 544. Self employment taxes In some situations, part of your gain or loss may be a capital gain or loss and part may be an ordinary gain or loss. Self employment taxes Capital Assets and Noncapital Assets For the most part, everything you own and use for personal purposes, pleasure, or investment is a capital asset. Self employment taxes Some examples are: Stocks or bonds held in your personal account, A house owned and used by you and your family, Household furnishings, A car used for pleasure or commuting, Coin or stamp collections, Gems and jewelry, and Gold, silver, or any other metal. Self employment taxes Any property you own is a capital asset, except the following noncapital assets. Self employment taxes Property held mainly for sale to customers or property that will physically become a part of the merchandise for sale to customers. Self employment taxes For an exception, see Capital Asset Treatment for Self-Created Musical Works , later. Self employment taxes Depreciable property used in your trade or business, even if fully depreciated. Self employment taxes Real property used in your trade or business. Self employment taxes A copyright, a literary, musical, or artistic composition, a letter or memorandum, or similar property that is: Created by your personal efforts, Prepared or produced for you (in the case of a letter, memorandum, or similar property), or Acquired under circumstances (for example, by gift) entitling you to the basis of the person who created the property or for whom it was prepared or produced. Self employment taxes For an exception to this rule, see Capital Asset Treatment for Self-Created Musical Works , later. Self employment taxes Accounts or notes receivable acquired in the ordinary course of a trade or business for services rendered or from the sale of property described in (1). Self employment taxes U. Self employment taxes S. Self employment taxes Government publications that you received from the government free or for less than the normal sales price, or that you acquired under circumstances entitling you to the basis of someone who received the publications free or for less than the normal sales price. Self employment taxes Certain commodities derivative financial instruments held by commodities derivatives dealers. Self employment taxes Hedging transactions, but only if the transaction is clearly identified as a hedging transaction before the close of the day on which it was acquired, originated, or entered into. Self employment taxes Supplies of a type you regularly use or consume in the ordinary course of your trade or business. Self employment taxes Investment Property Investment property is a capital asset. Self employment taxes Any gain or loss from its sale or trade is generally a capital gain or loss. Self employment taxes Gold, silver, stamps, coins, gems, etc. Self employment taxes   These are capital assets except when they are held for sale by a dealer. Self employment taxes Any gain or loss you have from their sale or trade generally is a capital gain or loss. Self employment taxes Stocks, stock rights, and bonds. Self employment taxes   All of these (including stock received as a dividend) are capital assets except when held for sale by a securities dealer. Self employment taxes However, if you own small business stock, see Losses on Section 1244 (Small Business) Stock , later, and Losses on Small Business Investment Company Stock, in chapter 4 of Publication 550. Self employment taxes Personal Use Property Property held for personal use only, rather than for investment, is a capital asset, and you must report a gain from its sale as a capital gain. Self employment taxes However, you cannot deduct a loss from selling personal use property. Self employment taxes Capital Asset Treatment for Self-Created Musical Works You can elect to treat musical compositions and copyrights in musical works as capital assets when you sell or exchange them if: Your personal efforts created the property, or You acquired the property under circumstances (for example, by gift) entitling you to the basis of the person who created the property or for whom it was prepared or produced. Self employment taxes You must make a separate election for each musical composition (or copyright in a musical work) sold or exchanged during the tax year. Self employment taxes You must make the election on or before the due date (including extensions) of the income tax return for the tax year of the sale or exchange. Self employment taxes You must make the election on Form 8949 by treating the sale or exchange as the sale or exchange of a capital asset, according to Form 8949, Schedule D (Form 1040), and their separate instructions. Self employment taxes For more information on Form 8949 and Schedule D (Form 1040), see Reporting Capital Gains and Losses in chapter 16. Self employment taxes See also Schedule D (Form 1040), Form 8949, and their separate instructions. Self employment taxes You can revoke the election if you have IRS approval. Self employment taxes To get IRS approval, you must submit a request for a letter ruling under the appropriate IRS revenue procedure. Self employment taxes See, for example, Rev. Self employment taxes Proc. Self employment taxes 2013-1, corrected by Announcement 2013–9, and amplified and modified by Rev. Self employment taxes Proc. Self employment taxes 2013–32, available at www. Self employment taxes irs. Self employment taxes gov/irb/2013-01_IRB/ar06. Self employment taxes html. Self employment taxes Alternatively, you are granted an automatic 6-month extension from the due date of your income tax return (excluding extensions) to revoke the election, provided you timely file your income tax return, and within this 6-month extension period, you file Form 1040X that treats the sale or exchange as the sale or exchange of property that is not a capital asset. Self employment taxes Discounted Debt Instruments Treat your gain or loss on the sale, redemption, or retirement of a bond or other debt instrument originally issued at a discount or bought at a discount as capital gain or loss, except as explained in the following discussions. Self employment taxes Short-term government obligations. Self employment taxes   Treat gains on short-term federal, state, or local government obligations (other than tax-exempt obligations) as ordinary income up to your ratable share of the acquisition discount. Self employment taxes This treatment applies to obligations with a fixed maturity date not more than 1 year from the date of issue. Self employment taxes Acquisition discount is the stated redemption price at maturity minus your basis in the obligation. Self employment taxes   However, do not treat these gains as income to the extent you previously included the discount in income. Self employment taxes See Discount on Short-Term Obligations in chapter 1 of Publication 550. Self employment taxes Short-term nongovernment obligations. Self employment taxes   Treat gains on short-term nongovernment obligations as ordinary income up to your ratable share of original issue discount (OID). Self employment taxes This treatment applies to obligations with a fixed maturity date of not more than 1 year from the date of issue. Self employment taxes   However, to the extent you previously included the discount in income, you do not have to include it in income again. Self employment taxes See Discount on Short-Term Obligations in chapter 1 of Publication 550. Self employment taxes Tax-exempt state and local government bonds. Self employment taxes   If these bonds were originally issued at a discount before September 4, 1982, or you acquired them before March 2, 1984, treat your part of OID as tax-exempt interest. Self employment taxes To figure your gain or loss on the sale or trade of these bonds, reduce the amount realized by your part of OID. Self employment taxes   If the bonds were issued after September 3, 1982, and acquired after March 1, 1984, increase the adjusted basis by your part of OID to figure gain or loss. Self employment taxes For more information on the basis of these bonds, see Discounted Debt Instruments in chapter 4 of Publication 550. Self employment taxes   Any gain from market discount is usually taxable on disposition or redemption of tax-exempt bonds. Self employment taxes If you bought the bonds before May 1, 1993, the gain from market discount is capital gain. Self employment taxes If you bought the bonds after April 30, 1993, the gain is ordinary income. Self employment taxes   You figure the market discount by subtracting the price you paid for the bond from the sum of the original issue price of the bond and the amount of accumulated OID from the date of issue that represented interest to any earlier holders. Self employment taxes For more information, see Market Discount Bonds in chapter 1 of Publication 550. Self employment taxes    A loss on the sale or other disposition of a tax-exempt state or local government bond is deductible as a capital loss. Self employment taxes Redeemed before maturity. Self employment taxes   If a state or local bond issued before June 9, 1980, is redeemed before it matures, the OID is not taxable to you. Self employment taxes   If a state or local bond issued after June 8, 1980, is redeemed before it matures, the part of OID earned while you hold the bond is not taxable to you. Self employment taxes However, you must report the unearned part of OID as a capital gain. Self employment taxes Example. Self employment taxes On July 2, 2002, the date of issue, you bought a 20-year, 6% municipal bond for $800. Self employment taxes The face amount of the bond was $1,000. Self employment taxes The $200 discount was OID. Self employment taxes At the time the bond was issued, the issuer had no intention of redeeming it before it matured. Self employment taxes The bond was callable at its face amount beginning 10 years after the issue date. Self employment taxes The issuer redeemed the bond at the end of 11 years (July 2, 2013) for its face amount of $1,000 plus accrued annual interest of $60. Self employment taxes The OID earned during the time you held the bond, $73, is not taxable. Self employment taxes The $60 accrued annual interest also is not taxable. Self employment taxes However, you must report the unearned part of OID ($127) as a capital gain. Self employment taxes Long-term debt instruments issued after 1954 and before May 28, 1969 (or before July 2, 1982, if a government instrument). Self employment taxes   If you sell, trade, or redeem for a gain one of these debt instruments, the part of your gain that is not more than your ratable share of the OID at the time of the sale or redemption is ordinary income. Self employment taxes The rest of the gain is capital gain. Self employment taxes If, however, there was an intention to call the debt instrument before maturity, all of your gain that is not more than the entire OID is treated as ordinary income at the time of the sale. Self employment taxes This treatment of taxable gain also applies to corporate instruments issued after May 27, 1969, under a written commitment that was binding on May 27, 1969, and at all times thereafter. Self employment taxes Long-term debt instruments issued after May 27, 1969 (or after July 1, 1982, if a government instrument). Self employment taxes   If you hold one of these debt instruments, you must include a part of OID in your gross income each year you own the instrument. Self employment taxes Your basis in that debt instrument is increased by the amount of OID that you have included in your gross income. Self employment taxes See Original Issue Discount (OID) in chapter 7 for information about OID that you must report on your tax return. Self employment taxes   If you sell or trade the debt instrument before maturity, your gain is a capital gain. Self employment taxes However, if at the time the instrument was originally issued there was an intention to call it before its maturity, your gain generally is ordinary income to the extent of the entire OID reduced by any amounts of OID previously includible in your income. Self employment taxes In this case, the rest of the gain is capital gain. Self employment taxes Market discount bonds. Self employment taxes   If the debt instrument has market discount and you chose to include the discount in income as it accrued, increase your basis in the debt instrument by the accrued discount to figure capital gain or loss on its disposition. Self employment taxes If you did not choose to include the discount in income as it accrued, you must report gain as ordinary interest income up to the instrument's accrued market discount. Self employment taxes The rest of the gain is capital gain. Self employment taxes See Market Discount Bonds in chapter 1 of Publication 550. Self employment taxes   A different rule applies to market discount bonds issued before July 19, 1984, and purchased by you before May 1, 1993. Self employment taxes See Market discount bonds under Discounted Debt Instruments in chapter 4 of Publication 550. Self employment taxes Retirement of debt instrument. Self employment taxes   Any amount you receive on the retirement of a debt instrument is treated in the same way as if you had sold or traded that instrument. Self employment taxes Notes of individuals. Self employment taxes   If you hold an obligation of an individual issued with OID after March 1, 1984, you generally must include the OID in your income currently, and your gain or loss on its sale or retirement is generally capital gain or loss. Self employment taxes An exception to this treatment applies if the obligation is a loan between individuals and all the following requirements are met. Self employment taxes The lender is not in the business of lending money. Self employment taxes The amount of the loan, plus the amount of any outstanding prior loans, is $10,000 or less. Self employment taxes Avoiding federal tax is not one of the principal purposes of the loan. Self employment taxes   If the exception applies, or the obligation was issued before March 2, 1984, you do not include the OID in your income currently. Self employment taxes When you sell or redeem the obligation, the part of your gain that is not more than your accrued share of OID at that time is ordinary income. Self employment taxes The rest of the gain, if any, is capital gain. Self employment taxes Any loss on the sale or redemption is capital loss. Self employment taxes Deposit in Insolvent or Bankrupt Financial Institution If you lose money you have on deposit in a bank, credit union, or other financial institution that becomes insolvent or bankrupt, you may be able to deduct your loss in one of three ways. Self employment taxes Ordinary loss. Self employment taxes Casualty loss. Self employment taxes Nonbusiness bad debt (short-term capital loss). Self employment taxes  For more information, see Deposit in Insolvent or Bankrupt Financial Institution, in chapter 4 of Publication 550. Self employment taxes Sale of Annuity The part of any gain on the sale of an annuity contract before its maturity date that is based on interest accumulated on the contract is ordinary income. Self employment taxes Losses on Section 1244 (Small Business) Stock You can deduct as an ordinary loss, rather than as a capital loss, your loss on the sale, trade, or worthlessness of section 1244 stock. Self employment taxes Report the loss on Form 4797, line 10. Self employment taxes Any gain on section 1244 stock is a capital gain if the stock is a capital asset in your hands. Self employment taxes Report the gain on Form 8949. Self employment taxes See Losses on Section 1244 (Small Business) Stock in chapter 4 of Publication 550. Self employment taxes For more information on Form 8949 and Schedule D (Form 1040), see Reporting Capital Gains and Losses in chapter 16. Self employment taxes See also Schedule D (Form 1040), Form 8949, and their separate instructions. Self employment taxes Holding Period If you sold or traded investment property, you must determine your holding period for the property. Self employment taxes Your holding period determines whether any capital gain or loss was a short-term or long-term capital gain or loss. Self employment taxes Long-term or short-term. Self employment taxes   If you hold investment property more than 1 year, any capital gain or loss is a long-term capital gain or loss. Self employment taxes If you hold the property 1 year or less, any capital gain or loss is a short-term capital gain or loss. Self employment taxes   To determine how long you held the investment property, begin counting on the date after the day you acquired the property. Self employment taxes The day you disposed of the property is part of your holding period. Self employment taxes Example. Self employment taxes If you bought investment property on February 6, 2012, and sold it on February 6, 2013, your holding period is not more than 1 year and you have a short-term capital gain or loss. Self employment taxes If you sold it on February 7, 2013, your holding period is more than 1 year and you will have a long-term capital gain or loss. Self employment taxes Securities traded on established market. Self employment taxes   For securities traded on an established securities market, your holding period begins the day after the trade date you bought the securities, and ends on the trade date you sold them. Self employment taxes    Do not confuse the trade date with the settlement date, which is the date by which the stock must be delivered and payment must be made. Self employment taxes Example. Self employment taxes You are a cash method, calendar year taxpayer. Self employment taxes You sold stock at a gain on December 30, 2013. Self employment taxes According to the rules of the stock exchange, the sale was closed by delivery of the stock 4 trading days after the sale, on January 6, 2014. Self employment taxes You received payment of the sales price on that same day. Self employment taxes Report your gain on your 2013 return, even though you received the payment in 2014. Self employment taxes The gain is long term or short term depending on whether you held the stock more than 1 year. Self employment taxes Your holding period ended on December 30. Self employment taxes If you had sold the stock at a loss, you would also report it on your 2013 return. Self employment taxes U. Self employment taxes S. Self employment taxes Treasury notes and bonds. Self employment taxes   The holding period of U. Self employment taxes S. Self employment taxes Treasury notes and bonds sold at auction on the basis of yield starts the day after the Secretary of the Treasury, through news releases, gives notification of acceptance to successful bidders. Self employment taxes The holding period of U. Self employment taxes S. Self employment taxes Treasury notes and bonds sold through an offering on a subscription basis at a specified yield starts the day after the subscription is submitted. Self employment taxes Automatic investment service. Self employment taxes   In determining your holding period for shares bought by the bank or other agent, full shares are considered bought first and any fractional shares are considered bought last. Self employment taxes Your holding period starts on the day after the bank's purchase date. Self employment taxes If a share was bought over more than one purchase date, your holding period for that share is a split holding period. Self employment taxes A part of the share is considered to have been bought on each date that stock was bought by the bank with the proceeds of available funds. Self employment taxes Nontaxable trades. Self employment taxes   If you acquire investment property in a trade for other investment property and your basis for the new property is determined, in whole or in part, by your basis in the old property, your holding period for the new property begins on the day following the date you acquired the old property. Self employment taxes Property received as a gift. Self employment taxes   If you receive a gift of property and your basis is determined by the donor's adjusted basis, your holding period is considered to have started on the same day the donor's holding period started. Self employment taxes   If your basis is determined by the fair market value of the property, your holding period starts on the day after the date of the gift. Self employment taxes Inherited property. Self employment taxes   Generally, if you inherited investment property, your capital gain or loss on any later disposition of that property is long-term capital gain or loss. Self employment taxes This is true regardless of how long you actually held the property. Self employment taxes However, if you inherited property from someone who died in 2010, see the information below. Self employment taxes Inherited property from someone who died in 2010. Self employment taxes   If you inherit investment property from a decedent who died in 2010, and the executor of the decedent's estate made the election to file Form 8939, refer to the information provided by the executor or see Publication 4895, Tax Treatment of Property Acquired From a Decedent Dying in 2010, to determine your holding period. Self employment taxes Real property bought. Self employment taxes   To figure how long you have held real property bought under an unconditional contract, begin counting on the day after you received title to it or on the day after you took possession of it and assumed the burdens and privileges of ownership, whichever happened first. Self employment taxes However, taking delivery or possession of real property under an option agreement is not enough to start the holding period. Self employment taxes The holding period cannot start until there is an actual contract of sale. Self employment taxes The holding period of the seller cannot end before that time. Self employment taxes Real property repossessed. Self employment taxes   If you sell real property but keep a security interest in it, and then later repossess the property under the terms of the sales contract, your holding period for a later sale includes the period you held the property before the original sale and the period after the repossession. Self employment taxes Your holding period does not include the time between the original sale and the repossession. Self employment taxes That is, it does not include the period during which the first buyer held the property. Self employment taxes Stock dividends. Self employment taxes   The holding period for stock you received as a taxable stock dividend begins on the date of distribution. Self employment taxes   The holding period for new stock you received as a nontaxable stock dividend begins on the same day as the holding period of the old stock. Self employment taxes This rule also applies to stock acquired in a “spin-off,” which is a distribution of stock or securities in a controlled corporation. Self employment taxes Nontaxable stock rights. Self employment taxes   Your holding period for nontaxable stock rights begins on the same day as the holding period of the underlying stock. Self employment taxes The holding period for stock acquired through the exercise of stock rights begins on the date the right was exercised. Self employment taxes Nonbusiness Bad Debts If someone owes you money that you cannot collect, you have a bad debt. Self employment taxes You may be able to deduct the amount owed to you when you figure your tax for the year the debt becomes worthless. Self employment taxes Generally, nonbusiness bad debts are bad debts that did not come from operating your trade or business, and are deductible as short-term capital losses. Self employment taxes To be deductible, nonbusiness bad debts must be totally worthless. Self employment taxes You cannot deduct a partly worthless nonbusiness debt. Self employment taxes Genuine debt required. Self employment taxes   A debt must be genuine for you to deduct a loss. Self employment taxes A debt is genuine if it arises from a debtor-creditor relationship based on a valid and enforceable obligation to repay a fixed or determinable sum of money. Self employment taxes Basis in bad debt required. Self employment taxes    To deduct a bad debt, you must have a basis in it—that is, you must have already included the amount in your income or loaned out your cash. Self employment taxes For example, you cannot claim a bad debt deduction for court-ordered child support not paid to you by your former spouse. Self employment taxes If you are a cash method taxpayer (as most individuals are), you generally cannot take a bad debt deduction for unpaid salaries, wages, rents, fees, interest, dividends, and similar items. Self employment taxes When deductible. Self employment taxes   You can take a bad debt deduction only in the year the debt becomes worthless. Self employment taxes You do not have to wait until a debt is due to determine whether it is worthless. Self employment taxes A debt becomes worthless when there is no longer any chance that the amount owed will be paid. Self employment taxes   It is not necessary to go to court if you can show that a judgment from the court would be uncollectible. Self employment taxes You must only show that you have taken reasonable steps to collect the debt. Self employment taxes Bankruptcy of your debtor is generally good evidence of the worthlessness of at least a part of an unsecured and unpreferred debt. Self employment taxes How to report bad debts. Self employment taxes    Deduct nonbusiness bad debts as short-term capital losses on Form 8949. Self employment taxes    Make sure you report your bad debt(s) (and any other short-term transactions for which you did not receive a Form 1099-B) on Form 8949, Part I, with box C checked. Self employment taxes    For more information on Form 8949 and Schedule D (Form 1040), see Reporting Capital Gains and Losses in chapter 16. Self employment taxes See also Schedule D (Form 1040), Form 8949, and their separate instructions. Self employment taxes   For each bad debt, attach a statement to your return that contains: A description of the debt, including the amount, and the date it became due, The name of the debtor, and any business or family relationship between you and the debtor, The efforts you made to collect the debt, and Why you decided the debt was worthless. Self employment taxes For example, you could show that the borrower has declared bankruptcy, or that legal action to collect would probably not result in payment of any part of the debt. Self employment taxes Filing a claim for refund. Self employment taxes    If you do not deduct a bad debt on your original return for the year it becomes worthless, you can file a claim for a credit or refund due to the bad debt. Self employment taxes To do this, use Form 1040X to amend your return for the year the debt became worthless. Self employment taxes You must file it within 7 years from the date your original return for that year had to be filed, or 2 years from the date you paid the tax, whichever is later. Self employment taxes For more information about filing a claim, see Amended Returns and Claims for Refund in chapter 1. Self employment taxes Additional information. Self employment taxes   For more information, see Nonbusiness Bad Debts in Publication 550. Self employment taxes For information on business bad debts, see chapter 10 of Publication 535, Business Expenses. Self employment taxes Wash Sales You cannot deduct losses from sales or trades of stock or securities in a wash sale. Self employment taxes A wash sale occurs when you sell or trade stock or securities at a loss and within 30 days before or after the sale you: Buy substantially identical stock or securities, Acquire substantially identical stock or securities in a fully taxable trade, Acquire a contract or option to buy substantially identical stock or securities, or Acquire substantially identical stock for your individual retirement account (IRA) or Roth IRA. Self employment taxes If your loss was disallowed because of the wash sale rules, add the disallowed loss to the cost of the new stock or securities (except in (4) above). Self employment taxes The result is your basis in the new stock or securities. Self employment taxes This adjustment postpones the loss deduction until the disposition of the new stock or securities. Self employment taxes Your holding period for the new stock or securities includes the holding period of the stock or securities sold. Self employment taxes For more information, see Wash Sales, in chapter 4 of Publication 550. Self employment taxes Rollover of Gain From Publicly Traded Securities You may qualify for a tax-free rollover of certain gains from the sale of publicly traded securities. Self employment taxes This means that if you buy certain replacement property and make the choice described in this section, you postpone part or all of your gain. Self employment taxes You postpone the gain by adjusting the basis of the replacement property as described in Basis of replacement property , later. Self employment taxes This postpones your gain until the year you dispose of the replacement property. Self employment taxes You qualify to make this choice if you meet all the following tests. Self employment taxes You sell publicly traded securities at a gain. Self employment taxes Publicly traded securities are securities traded on an established securities market. Self employment taxes Your gain from the sale is a capital gain. Self employment taxes During the 60-day period beginning on the date of the sale, you buy replacement property. Self employment taxes This replacement property must be either common stock of, or a partnership interest in a specialized small business investment company (SSBIC). Self employment taxes This is any partnership or corporation licensed by the Small Business Administration under section 301(d) of the Small Business Investment Act of 1958, as in effect on May 13, 1993. Self employment taxes Amount of gain recognized. Self employment taxes   If you make the choice described in this section, you must recognize gain only up to the following amount. Self employment taxes The amount realized on the sale, minus The cost of any common stock or partnership interest in an SSBIC that you bought during the 60-day period beginning on the date of sale (and did not previously take into account on an earlier sale of publicly traded securities). Self employment taxes  If this amount is less than the amount of your gain, you can postpone the rest of your gain, subject to the limit described next. Self employment taxes If this amount is equal to or more than the amount of your gain, you must recognize the full amount of your gain. Self employment taxes Limit on gain postponed. Self employment taxes   The amount of gain you can postpone each year is limited to the smaller of: $50,000 ($25,000 if you are married and file a separate return), or $500,000 ($250,000 if you are married and file a separate return), minus the amount of gain you postponed for all earlier years. Self employment taxes Basis of replacement property. Self employment taxes   You must subtract the amount of postponed gain from the basis of your replacement property. Self employment taxes How to report and postpone gain. Self employment taxes    See How to report and postpone gain under Rollover of Gain From Publicly Traded Securities in chapter 4 of Publication 550 for details. Self employment taxes Prev  Up  Next   Home   More Online Publications
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The Self Employment Taxes

Self employment taxes 5. Self employment taxes   Figuring Your Tax Table of Contents Introduction Topics - This chapter discusses: Useful Items - You may want to see: Tax Year Identification NumberF-1 and M-1 visa holders. Self employment taxes J-1 visa holders. Self employment taxes Filing StatusResident Aliens Nonresident Aliens Reporting Your Income DeductionsResident Aliens Nonresident Aliens ExemptionsResident Aliens Nonresident Aliens Itemized DeductionsResident Aliens Nonresident Aliens Tax Credits and PaymentsResident Aliens Nonresident Aliens Bona Fide Residents of American Samoa or Puerto Rico Introduction After you have determined your alien status, the source of your income, and if and how that income is taxed in the United States, your next step is to figure your tax. Self employment taxes The information in this chapter is not as comprehensive for resident aliens as it is for nonresident aliens. Self employment taxes Resident aliens should get publications, forms, and instructions for U. Self employment taxes S. Self employment taxes citizens, because the information for filing returns for resident aliens is generally the same as for U. Self employment taxes S. Self employment taxes citizens. Self employment taxes If you are both a nonresident alien and a resident alien in the same tax year, see chapter 6 for a discussion of dual-status aliens. Self employment taxes Topics - This chapter discusses: Identification numbers, Filing status, Deductions, Exemptions, Tax credits and payments, and Special rules for bona fide residents of American Samoa and Puerto Rico. Self employment taxes Useful Items - You may want to see: Publication 463 Travel, Entertainment, Gift, and Car Expenses 501 Exemptions, Standard Deduction, and Filing Information 521 Moving Expenses 526 Charitable Contributions 535 Business Expenses 597 Information on the United States–Canada Income Tax Treaty Form (and Instructions) W-7 Application for IRS Individual Taxpayer Identification Number 1040 U. Self employment taxes S. Self employment taxes Individual Income Tax Return 1040NR U. Self employment taxes S. Self employment taxes Nonresident Alien Income Tax Return 1040NR-EZ U. Self employment taxes S. Self employment taxes Income Tax Return for Certain Nonresident Aliens With No Dependents 2106 Employee Business Expenses 2106-EZ Unreimbursed Employee Business Expenses 3903 Moving Expenses 4563 Exclusion of Income for Bona Fide Residents of American Samoa 8959 Additional Medicare Tax See chapter 12 for information about getting these publications and forms. Self employment taxes Tax Year You must figure your income and file a tax return on the basis of an annual accounting period called a tax year. Self employment taxes If you have not previously established a fiscal tax year, your tax year is the calendar year. Self employment taxes A calendar year is 12 consecutive months ending on December 31. Self employment taxes If you have previously established a regular fiscal year (12 consecutive months ending on the last day of a month other than December or a 52–53 week year) and are considered to be a U. Self employment taxes S. Self employment taxes resident for any calendar year, you will be treated as a U. Self employment taxes S. Self employment taxes resident for any part of your fiscal year that falls within that calendar year. Self employment taxes Identification Number A taxpayer identification number must be furnished on returns, statements, and other tax-related documents. Self employment taxes For an individual, this is a social security number (SSN). Self employment taxes If you do not have and are not eligible to get an SSN, you must apply for an individual taxpayer identification number (ITIN). Self employment taxes An employer identification number (EIN) is required if you are engaged in a trade or business as a sole proprietor and have employees or a qualified retirement plan. Self employment taxes You must furnish a taxpayer identification number if you are: An alien who has income effectively connected with the conduct of a U. Self employment taxes S. Self employment taxes trade or business at any time during the year, An alien who has a U. Self employment taxes S. Self employment taxes office or place of business at any time during the year, A nonresident alien spouse treated as a resident, as discussed in chapter 1, or Any other alien who files a tax return, an amended return, or a refund claim (but not information returns). Self employment taxes Social security number (SSN). Self employment taxes   Generally, you can get an SSN if you have been lawfully admitted to the United States for permanent residence or under other immigration categories that authorize U. Self employment taxes S. Self employment taxes employment. Self employment taxes   To apply for this number, get Form SS-5, Application for a Social Security Card, from your local Social Security Administration (SSA) office or call the SSA at 1-800-772-1213. Self employment taxes You can also download Form SS-5 from the SSA's website at www. Self employment taxes socialsecurity. Self employment taxes gov/ssnumber/ss5. Self employment taxes htm. Self employment taxes You must visit an SSA office in person and submit your Form SS-5 along with original documentation showing your age, identity, immigration status, and authority to work in the United States. Self employment taxes Generally, you will receive your card about 2 weeks after the SSA has all of the necessary information. Self employment taxes F-1 and M-1 visa holders. Self employment taxes    If you are an F-1 or M-1 student, you must also show your Form I-20. Self employment taxes For more information, see SSA Publication 05-10181, International Students and Social Security Numbers, available online at www. Self employment taxes socialsecurity. Self employment taxes gov/pubs/10181. Self employment taxes html. Self employment taxes J-1 visa holders. Self employment taxes   If you are a J-1 exchange visitor, you will also need to show your Form DS-2019. Self employment taxes For more information, see SSA Publication 05-10107, Foreign Workers and Social Security Numbers, available online at www. Self employment taxes socialsecurity. Self employment taxes gov/pubs/10107. Self employment taxes html. Self employment taxes Individual taxpayer identification number (ITIN). Self employment taxes   If you do not have and are not eligible to get an SSN, you must apply for an ITIN. Self employment taxes For details on how to do so, see Form W-7 and its instructions. Self employment taxes Allow 6 to 10 weeks for the IRS to notify you of your ITIN. Self employment taxes If you already have an ITIN, enter it wherever an SSN is required on your tax return. Self employment taxes   An ITIN is for tax use only. Self employment taxes It does not entitle you to social security benefits or change your employment or immigration status under U. Self employment taxes S. Self employment taxes law. Self employment taxes   In addition to those aliens who are required to furnish a taxpayer identification number and are not eligible for an SSN, a Form W-7 must be filed for: Alien individuals who are claimed as dependents and are not eligible for an SSN, and Alien spouses who are claimed as exemptions and are not eligible for an SSN. Self employment taxes Employer identification number (EIN). Self employment taxes   An individual may use an SSN (or ITIN) for individual taxes and an EIN for business taxes. Self employment taxes To apply for an EIN, file Form SS-4, Application for Employer Identification Number, with the IRS. Self employment taxes Filing Status The amount of your tax depends on your filing status. Self employment taxes Your filing status is important in determining whether you can take certain deductions and credits. Self employment taxes The rules for determining your filing status are different for resident aliens and nonresident aliens. Self employment taxes Resident Aliens Resident aliens can use the same filing statuses available to U. Self employment taxes S. Self employment taxes citizens. Self employment taxes See your form instructions or Publication 501 for more information on filing status. Self employment taxes Married filing jointly. Self employment taxes   Generally, you can file as married filing jointly only if both you and your spouse were resident aliens for the entire tax year, or if you make one of the choices discussed in chapter 1 to treat your spouse as a resident alien for the entire tax year. Self employment taxes Qualifying widow(er). Self employment taxes   If your spouse died in 2011 or 2012, you did not remarry before the end of 2013, and you have a dependent child living with you, you may qualify to file as a qualifying widow(er) and use the joint return tax rates. Self employment taxes This applies only if you could have filed a joint return with your spouse for the year your spouse died. Self employment taxes Head of household. Self employment taxes   You can qualify as head of household if you are unmarried or considered unmarried on the last day of the year and you pay more than half the cost of keeping up a home for you and a qualifying person. Self employment taxes You must be a resident alien for the entire tax year. Self employment taxes   You are considered unmarried for this purpose if your spouse was a nonresident alien at any time during the year and you do not make one of the choices discussed in chapter 1 to treat your spouse as a resident alien for the entire tax year. Self employment taxes Note. Self employment taxes   Even if you are considered unmarried for head of household purposes because you are married to a nonresident alien, you may still be considered married for purposes of the earned income credit. Self employment taxes In that case, you will not be entitled to the credit. Self employment taxes See Publication 596 for more information. Self employment taxes Nonresident Aliens If you are a nonresident alien filing Form 1040NR, you may be able to use one of the filing statuses discussed later. Self employment taxes If you are filing Form 1040NR-EZ, you can only claim “Single nonresident alien” or “Married nonresident alien” as your filing status. Self employment taxes Married nonresident alien. Self employment taxes   Married nonresident aliens who are not married to U. Self employment taxes S. Self employment taxes citizens or residents generally must use the Tax Table column or the Tax Computation Worksheet for married filing separate returns when determining the tax on income effectively connected with a U. Self employment taxes S. Self employment taxes trade or business. Self employment taxes Exceptions. Self employment taxes   Married nonresident aliens normally cannot use the Tax Table column or the Tax Computation Worksheet for single individuals. Self employment taxes However, you may be able to file as single if you lived apart from your spouse during the last 6 months of the year and you are a married resident of Canada, Mexico, South Korea, or are a married U. Self employment taxes S. Self employment taxes national. Self employment taxes See the instructions for Form 1040NR or Form 1040NR-EZ to see if you qualify. Self employment taxes U. Self employment taxes S. Self employment taxes national is defined later in this section under Qualifying widow(er) . Self employment taxes   A nonresident alien generally cannot file as married filing jointly. Self employment taxes However, a nonresident alien who is married to a U. Self employment taxes S. Self employment taxes citizen or resident can choose to be treated as a resident and file a joint return on Form 1040, Form 1040A, or Form 1040EZ. Self employment taxes For information on these choices, see chapter 1. Self employment taxes If you do not make the choice to file jointly, file Form 1040NR or Form 1040NR-EZ and use the Tax Table column or the Tax Computation Worksheet for married individuals filing separately. Self employment taxes Qualifying widow(er). Self employment taxes   You may be eligible to file as a qualifying widow(er) and use the joint return tax rates if all of the following conditions apply. Self employment taxes You were a resident of Canada, Mexico, or South Korea, or a U. Self employment taxes S. Self employment taxes national (defined later). Self employment taxes Your spouse died in 2011 or 2012 and you did not remarry before the end of 2013. Self employment taxes You have a dependent child living with you. Self employment taxes See the instructions for Form 1040NR for the rules for filing as a qualifying widow(er) with a dependent child. Self employment taxes   A U. Self employment taxes S. Self employment taxes national is an individual who, although not a U. Self employment taxes S. Self employment taxes citizen, owes his or her allegiance to the United States. Self employment taxes U. Self employment taxes S. Self employment taxes nationals include American Samoans and Northern Mariana Islanders who chose to become U. Self employment taxes S. Self employment taxes nationals instead of U. Self employment taxes S. Self employment taxes citizens. Self employment taxes Head of household. Self employment taxes   You cannot file as head of household if you are a nonresident alien at any time during the tax year. Self employment taxes However, if you are married, your spouse can qualify as a head of household if: Your spouse is a resident alien or U. Self employment taxes S. Self employment taxes citizen for the entire tax year, You do not choose to be treated as a resident alien, and Your spouse meets the other requirements for this filing status, as discussed earlier under Resident Aliens . Self employment taxes Note. Self employment taxes   Even if your spouse is considered unmarried for head of household purposes because you are a nonresident alien, your spouse may still be considered married for purposes of the earned income credit. Self employment taxes In that case, your spouse will not be entitled to the credit. Self employment taxes See Publication 596 for more information. Self employment taxes Estates and trusts. Self employment taxes   A nonresident alien estate or trust using Form 1040NR must use Tax Rate Schedule W in the Form 1040NR instructions when determining the tax on income effectively connected with a U. Self employment taxes S. Self employment taxes trade or business. Self employment taxes Special rules for aliens from certain U. Self employment taxes S. Self employment taxes possessions. Self employment taxes   A nonresident alien who is a bona fide resident of American Samoa or Puerto Rico for the entire tax year and who is temporarily working in the United States should read Bona Fide Residents of American Samoa or Puerto Rico, at the end of this chapter, for information about special rules. Self employment taxes Reporting Your Income You must report each item of income that is taxable according to the rules in chapters 2, 3, and 4. Self employment taxes For resident aliens, this includes income from sources both within and outside the United States. Self employment taxes For nonresident aliens, this includes both income that is effectively connected with a trade or business in the United States (subject to graduated tax rates) and income from U. Self employment taxes S. Self employment taxes sources that is not effectively connected (subject to a flat 30% tax rate or lower tax treaty rate). Self employment taxes Deductions Resident and nonresident aliens can claim similar deductions on their U. Self employment taxes S. Self employment taxes tax returns. Self employment taxes However, nonresident aliens generally can claim only deductions related to income that is effectively connected with their U. Self employment taxes S. Self employment taxes trade or business. Self employment taxes Resident Aliens You can claim the same deductions allowed to U. Self employment taxes S. Self employment taxes citizens if you are a resident alien for the entire tax year. Self employment taxes While the discussion that follows contains some of the same general rules and guidelines that apply to you, it is specifically directed toward nonresident aliens. Self employment taxes You should get Form 1040 and instructions for more information on how to claim your allowable deductions. Self employment taxes Nonresident Aliens You can claim deductions to figure your effectively connected taxable income. Self employment taxes You generally cannot claim deductions related to income that is not connected with your U. Self employment taxes S. Self employment taxes business activities. Self employment taxes Except for personal exemptions, and certain itemized deductions, discussed later, you can claim deductions only to the extent they are connected with your effectively connected income. Self employment taxes Ordinary and necessary business expenses. Self employment taxes   You can deduct all ordinary and necessary expenses in the operation of your U. Self employment taxes S. Self employment taxes trade or business to the extent they relate to income effectively connected with that trade or business. Self employment taxes The deduction for travel expenses while in the United States is discussed under Itemized Deductions, later. Self employment taxes For information about other business expenses, see Publication 535. Self employment taxes Losses. Self employment taxes   You can deduct losses resulting from transactions that you entered into for profit and that you were not reimbursed for by insurance, etc. Self employment taxes to the extent that they relate to income that is effectively connected with a trade or business in the United States. Self employment taxes Educator expenses. Self employment taxes   If you were an eligible educator in 2013, you can deduct as an adjustment to income up to $250 in unreimbursed qualified expenses you paid or incurred during 2013 for books, supplies (other than nonathletic supplies for courses of instruction in health or physical education), computer equipment, and other equipment and materials used in the classroom. Self employment taxes For more information, see your tax form instructions. Self employment taxes Individual retirement arrangement (IRA). Self employment taxes   If you made contributions to a traditional IRA for 2013, you may be able to take an IRA deduction. Self employment taxes But you must have taxable compensation effectively connected with a U. Self employment taxes S. Self employment taxes trade or business to do so. Self employment taxes A Form 5498 should be sent to you by May 31, 2014, that shows all contributions to your traditional IRA for 2013. Self employment taxes If you were covered by a retirement plan (qualified pension, profit-sharing (including 401(k)), annuity, SEP, SIMPLE, etc. Self employment taxes ) at work or through self-employment, your IRA deduction may be reduced or eliminated. Self employment taxes But you can still make contributions to a traditional IRA even if you cannot deduct them. Self employment taxes If you made nondeductible contributions to a traditional IRA for 2013, you must report them on Form 8606, Nondeductible IRAs. Self employment taxes   For more information, see Publication 590, Individual Retirement Arrangements (IRAs). Self employment taxes Moving expenses. Self employment taxes   If you are a nonresident alien temporarily in the United States earning taxable income for performing personal services, you can deduct moving expenses to the United States if you meet both of the following tests. Self employment taxes You are a full-time employee for at least 39 weeks during the 12 months right after you move, or if you are self-employed, you work full time for at least 39 weeks during the first 12 months and 78 weeks during the first 24 months right after you move. Self employment taxes Your new job location is at least 50 miles farther (by the shortest commonly traveled route) from your former home than your former job location was. Self employment taxes If you had no former job location, the new job location must be at least 50 miles from your former home. Self employment taxes   You cannot deduct the moving expense you have when returning to your home abroad or moving to a foreign job site. Self employment taxes   Figure your deductible moving expenses to the United States on Form 3903, and deduct them on line 26 of Form 1040NR. Self employment taxes   For more information on the moving expense deduction, see Publication 521. Self employment taxes Reimbursements. Self employment taxes   If your employer reimbursed you for allowable moving expenses under an accountable plan, your employer should have excluded these reimbursements from your income. Self employment taxes You can only deduct allowable moving expenses that were not reimbursed by your employer or that were reimbursed but the reimbursement was included in your income. Self employment taxes For more information, see Publication 521. Self employment taxes Moving expense or travel expense. Self employment taxes   If you deduct moving expenses to the United States, you cannot also deduct travel expenses (discussed later under Itemized Deductions) while temporarily away from your tax home in a foreign country. Self employment taxes Moving expenses are based on a change in your principal place of business while travel expenses are based on your temporary absence from your principal place of business. Self employment taxes Self-employed SEP, SIMPLE, and qualified retirement plans. Self employment taxes   If you are self-employed, you may be able to deduct contributions to a SEP, SIMPLE, or qualified retirement plan that provides retirement benefits for yourself and your common-law employees, if any. Self employment taxes To make deductible contributions for yourself, you must have net earnings from self-employment that are effectively connected with your U. Self employment taxes S. Self employment taxes trade or business. Self employment taxes   Get Publication 560, Retirement Plans for Small Business (SEP, SIMPLE, and Qualified Plans), for further information. Self employment taxes Penalty on early withdrawal of savings. Self employment taxes   You must include in income all effectively connected interest income you receive or that is credited to your account during the year. Self employment taxes Do not reduce it by any penalty you must pay on an early withdrawal from a time savings account. Self employment taxes However, if the interest income is effectively connected with your U. Self employment taxes S. Self employment taxes trade or business during the year, you can deduct on line 30 of Form 1040NR the amount of the early withdrawal penalty that the banking institution charged. Self employment taxes Student loan interest expense. Self employment taxes   If you paid interest on a student loan in 2013, you may be able to deduct up to $2,500 of the interest you paid. Self employment taxes Generally, you can claim the deduction if all the following requirements are met. Self employment taxes Your filing status is any filing status except married filing separately. Self employment taxes Your modified adjusted gross income is less than $75,000. Self employment taxes No one else is claiming an exemption for you on his or her 2013 tax return. Self employment taxes You paid interest on a loan taken out only to pay tuition and other qualified higher education expenses for yourself, your spouse, someone who was your dependent when the loan was taken out, or someone you could have claimed as a dependent for the year the loan was taken out except that: The person filed a joint return, The person had gross income that was equal to or more than the exemption amount for that year ($3,900 for 2013), or You could be claimed as a dependent on someone else's return. Self employment taxes The loan is not from a related person or a person who borrowed the proceeds under a qualified employer plan or a contract purchased under such a plan. Self employment taxes The education expenses were paid or incurred within a reasonable period of time before or after the loan was taken out. Self employment taxes The person for whom the expenses were paid or incurred was an eligible student. Self employment taxes Use the worksheet in the Form 1040NR or Form 1040NR-EZ instructions to figure the deduction. Self employment taxes For more information, see Publication 970, Tax Benefits for Education. Self employment taxes Exemptions Resident aliens can claim personal exemptions and exemptions for dependents in the same way as U. Self employment taxes S. Self employment taxes citizens. Self employment taxes However, nonresident aliens generally can claim only a personal exemption for themselves on their U. Self employment taxes S. Self employment taxes tax return. Self employment taxes Resident Aliens You can claim personal exemptions and exemptions for dependents according to the dependency rules for U. Self employment taxes S. Self employment taxes citizens. Self employment taxes You can claim an exemption for your spouse on a separate return if your spouse had no gross income for U. Self employment taxes S. Self employment taxes tax purposes and was not the dependent of another taxpayer. Self employment taxes You can claim this exemption even if your spouse has not been a resident alien for a full tax year or is an alien who has not come to the United States. Self employment taxes You can claim an exemption for each person who qualifies as a dependent according to the rules for U. Self employment taxes S. Self employment taxes citizens. Self employment taxes The dependent must be a citizen or national (defined earlier) of the United States or be a resident of the United States, Canada, or Mexico for some part of the calendar year in which your tax year begins. Self employment taxes Get Publication 501 for more information. Self employment taxes Your spouse and each dependent for whom you claim an exemption must have either an SSN or an ITIN. Self employment taxes See Identification Number, earlier. Self employment taxes Nonresident Aliens Generally, if you are a nonresident alien engaged in a trade or business in the United States, you can claim only one personal exemption ($3,900 for 2013). Self employment taxes You may be able to claim an exemption for a spouse and a dependent if you are described in any of the following discussions. Self employment taxes Your spouse and each dependent for whom you claim an exemption must have either an SSN or an ITIN. Self employment taxes See Identification Number, earlier. Self employment taxes Residents of Mexico or Canada or U. Self employment taxes S. Self employment taxes nationals. Self employment taxes   If you are a resident of Mexico or Canada or a national of the United States (defined earlier), you can also claim a personal exemption for your spouse if your spouse had no gross income for U. Self employment taxes S. Self employment taxes tax purposes and cannot be claimed as the dependent on another U. Self employment taxes S. Self employment taxes taxpayer's return. Self employment taxes In addition, you can claim exemptions for your dependents who meet certain tests. Self employment taxes Residents of Mexico, Canada, or nationals of the United States must use the same rules as U. Self employment taxes S. Self employment taxes citizens to determine who is a dependent and for which dependents exemptions can be claimed. Self employment taxes See Publication 501 for these rules. Self employment taxes For purposes of these rules, dependents who are U. Self employment taxes S. Self employment taxes nationals meet the citizenship test discussed in Publication 501. Self employment taxes Residents of South Korea. Self employment taxes   Nonresident aliens who are residents of South Korea may be able to claim exemptions for a spouse and children. Self employment taxes The income tax treaty with South Korea imposes two additional requirements on South Korean residents: The spouse and all children claimed must live with the alien in the United States at some time during the tax year, and The additional deduction for the exemptions must be prorated based on the ratio of the alien's U. Self employment taxes S. Self employment taxes source gross income effectively connected with a U. Self employment taxes S. Self employment taxes trade or business for the tax year to the alien's entire income from all sources during the tax year. Self employment taxes Example. Self employment taxes Mr. Self employment taxes Park, a nonresident alien who is a resident of South Korea, lives temporarily in the United States with his wife and two children. Self employment taxes During the tax year he receives U. Self employment taxes S. Self employment taxes compensation of $18,000. Self employment taxes He also receives $6,000 of income from sources outside the United States that is not effectively connected with his U. Self employment taxes S. Self employment taxes trade or business. Self employment taxes Thus, his total income for the year is $24,000. Self employment taxes Mr. Self employment taxes Park meets all requirements for claiming exemptions for his spouse and two children. Self employment taxes The additional deduction for 2013 is $8,775 figured as follows: $18,000 $24,000 × $11,700* = $8,775               *3 × $3,900 = $11,700   Students and business apprentices from India. Self employment taxes   Students and business apprentices who are eligible for the benefits of Article 21(2) of the United States–India Income Tax Treaty may be able to claim exemptions for their spouse and dependents. Self employment taxes   You can claim an exemption for your spouse if he or she had no gross income during the year and cannot be claimed as a dependent on another U. Self employment taxes S. Self employment taxes taxpayer's return. Self employment taxes   You can claim exemptions for each of your dependents not admitted to the United States on “F-2,” “J-2,” or “M-2” visas if they meet the same rules that apply to U. Self employment taxes S. Self employment taxes citizens. Self employment taxes See Publication 501 for these rules. Self employment taxes   List your spouse and dependents on line 7c of Form 1040NR. Self employment taxes Enter the total on the appropriate line to the right of line 7c. Self employment taxes Itemized Deductions Nonresident aliens can claim some of the same itemized deductions that resident aliens can claim. Self employment taxes However, nonresident aliens can claim itemized deductions only if they have income effectively connected with their U. Self employment taxes S. Self employment taxes trade or business. Self employment taxes Resident Aliens You can claim the same itemized deductions as U. Self employment taxes S. Self employment taxes citizens, using Schedule A of Form 1040. Self employment taxes These deductions include certain medical and dental expenses, state and local income taxes, real estate taxes, interest you paid on a home mortgage, charitable contributions, casualty and theft losses, and miscellaneous deductions. Self employment taxes If you do not itemize your deductions, you can claim the standard deduction for your particular filing status. Self employment taxes For further information, see Form 1040 and instructions. Self employment taxes Nonresident Aliens You can deduct certain itemized deductions if you receive income effectively connected with your U. Self employment taxes S. Self employment taxes trade or business. Self employment taxes These deductions include state and local income taxes, charitable contributions to U. Self employment taxes S. Self employment taxes organizations, casualty and theft losses, and miscellaneous deductions. Self employment taxes Use Schedule A of Form 1040NR to claim itemized deductions. Self employment taxes If you are filing Form 1040NR-EZ, you can only claim a deduction for state or local income taxes. Self employment taxes If you are claiming any other itemized deduction, you must file Form 1040NR. Self employment taxes Standard deduction. Self employment taxes   Nonresident aliens cannot claim the standard deduction. Self employment taxes However, see Students and business apprentices from India , next. Self employment taxes Students and business apprentices from India. Self employment taxes   A special rule applies to students and business apprentices who are eligible for the benefits of Article 21(2) of the United States–India Income Tax Treaty. Self employment taxes You can claim the standard deduction provided you do not claim itemized deductions. Self employment taxes   Use Worksheet 5-1 to figure your standard deduction. Self employment taxes If you are married and your spouse files a return and itemizes deductions, you cannot take the standard deduction. Self employment taxes State and local income taxes. Self employment taxes   You can deduct state and local income taxes you paid on income that is effectively connected with a trade or business in the United States. Self employment taxes If you received a refund or rebate in 2013 of taxes you paid in an earlier year, do not reduce your deduction by that amount. Self employment taxes Instead, you must include the refund or rebate in income if you deducted the taxes in the earlier year and the deduction reduced your tax. Self employment taxes See Recoveries in Publication 525 for details on how to figure the amount to include in income. Self employment taxes Charitable contributions. Self employment taxes   You can deduct your charitable contributions or gifts to qualified organizations subject to certain limits. Self employment taxes Qualified organizations include organizations that are religious, charitable, educational, scientific, or literary in nature, or that work to prevent cruelty to children or animals. Self employment taxes Certain organizations that promote national or international amateur sports competition are also qualified organizations. Self employment taxes Foreign organizations. Self employment taxes   Contributions made directly to a foreign organization are not deductible. Self employment taxes However, you can deduct contributions to a U. Self employment taxes S. Self employment taxes organization that transfers funds to a charitable foreign organization if the U. Self employment taxes S. Self employment taxes organization controls the use of the funds or if the foreign organization is only an administrative arm of the U. Self employment taxes S. Self employment taxes organization. Self employment taxes   For more information about organizations that qualify to receive charitable contributions, see Publication 526, Charitable Contributions. Self employment taxes Worksheet 5-1. Self employment taxes 2013 Standard Deduction Worksheet for Students and Business Apprentices From India Caution. Self employment taxes If you are married filing a separate return and your spouse itemizes deductions, do not complete this worksheet. Self employment taxes You cannot take the standard deduction even if you were born before January 2, 1949, or are blind. Self employment taxes 1 Enter the amount shown below for your filing status. Self employment taxes           Single or married filing separately—$6,100 Qualifying widow(er)—$12,200 1. Self employment taxes           2 Can you be claimed as a dependent on someone else's U. Self employment taxes S. Self employment taxes income tax return?  No. Self employment taxes Enter the amount from line 1 on line 4. Self employment taxes Skip line 3 and go to line 5. Self employment taxes   Yes. Self employment taxes Go to line 3. Self employment taxes         3 Is your earned income* more than $650?           Yes. Self employment taxes Add $350 to your earned income. Self employment taxes Enter the total. Self employment taxes           No. Self employment taxes Enter $1,000 3. Self employment taxes       4 Enter the smaller of line 1 or line 3 4. Self employment taxes   5 If born before January 2, 1949, OR blind, enter $1,200 ($1,500 if single). Self employment taxes If born before January 2, 1949, AND blind, enter $2,400 ($3,000 if single). Self employment taxes Otherwise, enter -0- 5. Self employment taxes   6 Add lines 4 and 5. Self employment taxes Enter the total here and on Form 1040NR, line 38 (or Form 1040NR-EZ, line 11). Self employment taxes Print “Standard Deduction Allowed Under U. Self employment taxes S. Self employment taxes –India Income Tax Treaty” in the space to the left of these lines. Self employment taxes This is your standard deduction for 2013. Self employment taxes 6. Self employment taxes   *Earned income includes wages, salaries, tips, professional fees, and other compensation received for personal services you performed. Self employment taxes It also includes any amount received as a scholarship that you must include in your income. Self employment taxes Generally, your earned income is the total of the amount(s) you reported on Form 1040NR, lines 8,12,13, and 19, minus amounts on lines 27 and 31 (or Form 1040NR-EZ, lines 3 and 5, minus any amount on line 8). Self employment taxes Contributions from which you benefit. Self employment taxes   If you receive a benefit as a result of making a contribution to a qualified organization, you can deduct only the amount of your contribution that is more than the value of the benefit you receive. Self employment taxes   If you pay more than the fair market value to a qualified organization for merchandise, goods, or services, the amount you pay that is more than the value of the item can be a charitable contribution. Self employment taxes For the excess amount to qualify, you must pay it with the intent to make a charitable contribution. Self employment taxes Cash contributions. Self employment taxes   You cannot deduct a cash contribution, regardless of the amount, unless you keep as a record of the contribution a bank record (such as a canceled check, a bank copy of a canceled check, or a bank statement containing the name of the charity, the date, and the amount) or a written record from the charity. Self employment taxes The written record must include the name of the charity, date of the contribution, and the amount of the contribution. Self employment taxes   You may deduct a cash contribution of $250 or more only if you have a written statement from the charitable organization showing: The amount of any money contributed, Whether the organization gave you any goods or services in return for your contribution, and A description and estimate of the value of any goods or services described in (2). Self employment taxes If you received only intangible religious benefits, the organization must state this, but it does not have to describe or value the benefit. Self employment taxes Noncash contributions. Self employment taxes   For contributions not made in cash, the records you must keep depend on the amount of your deduction. Self employment taxes See Publication 526 for details. Self employment taxes For example, if you make a noncash contribution and the amount of your deduction is more than $500, you must complete and attach to your tax return Form 8283, Noncash Charitable Contributions. Self employment taxes If you deduct more than $500 for a contribution of a motor vehicle, boat, or airplane, you must also attach a statement from the charitable organization to your return. Self employment taxes If your total deduction is over $5,000, you also may have to get appraisals of the values of the property. Self employment taxes If the donated property is valued at more than $5,000, you must obtain a qualified appraisal. Self employment taxes You generally must attach to your tax return an appraisal of any property if your deduction for the property is more than $500,000. Self employment taxes See Form 8283 and its instructions for details. Self employment taxes Contributions of appreciated property. Self employment taxes   If you contribute property to a qualified organization, the amount of your charitable contribution is generally the fair market value of the property at the time of the contribution. Self employment taxes However, if you contribute property with a fair market value that is more than your basis in it, you may have to reduce the fair market value by the amount of appreciation (increase in value) when you figure your deduction. Self employment taxes Your basis in the property is generally what you paid for it. Self employment taxes If you need more information about basis, get Publication 551, Basis of Assets. Self employment taxes   Different rules apply to figuring your deduction, depending on whether the property is: Ordinary income property, or Capital gain property. Self employment taxes For information about these rules, see Publication 526. Self employment taxes Limit. Self employment taxes   The amount you can deduct in a tax year is limited in the same way it is for a citizen or resident of the United States. Self employment taxes For a discussion of limits on charitable contributions and other information, get Publication 526. Self employment taxes Casualty and theft losses. Self employment taxes   You can deduct your loss from fire, storm, shipwreck, or other casualty, or theft of property even though your property is not connected with a U. Self employment taxes S. Self employment taxes trade or business. Self employment taxes The property can be personal use property or income-producing property not connected with a U. Self employment taxes S. Self employment taxes trade or business. Self employment taxes The property must be located in the United States at the time of the casualty or theft. Self employment taxes You can deduct theft losses only in the year in which you discover the loss. Self employment taxes   The amount of the loss is the fair market value of the property immediately before the casualty or theft less its fair market value immediately after the casualty or theft (but not more than its cost or adjusted basis) less any insurance or other reimbursement. Self employment taxes The fair market value of property immediately after a theft is considered zero, because you no longer have the property. Self employment taxes   If your property is covered by insurance, you should file a timely insurance claim for reimbursement. Self employment taxes If you do not, you cannot deduct this loss as a casualty or theft loss. Self employment taxes   Figure your deductible casualty and theft losses on Form 4684, Casualties and Thefts. Self employment taxes Losses from personal use property. Self employment taxes    You cannot deduct the first $100 of each casualty or theft loss to property held for personal use. Self employment taxes You can deduct only the total of these losses for the year (reduced by the $100 limit) that is more than 10% of your adjusted gross income (line 37, Form 1040NR) for the year. Self employment taxes Losses from income-producing property. Self employment taxes   These losses are not subject to the limitations that apply to personal use property. Self employment taxes Use Section B of Form 4684 to figure your deduction for these losses. Self employment taxes Job expenses and other miscellaneous deductions. Self employment taxes   You can deduct job expenses, such as allowable unreimbursed travel expenses (discussed next), and other miscellaneous deductions. Self employment taxes Generally, the allowable deductions must be related to effectively connected income. Self employment taxes Deductible expenses include: Union dues, Safety equipment and small tools needed for your job, Dues to professional organizations, Subscriptions to professional journals, Tax return preparation fees, and Casualty and theft losses of property used in performing services as an employee (employee property). Self employment taxes   Most miscellaneous itemized deductions are deductible only if they are more than 2% of your adjusted gross income (line 37, Form 1040NR). Self employment taxes For more information on miscellaneous deductions, see the instructions for Form 1040NR. Self employment taxes Travel expenses. Self employment taxes   You may be able to deduct your ordinary and necessary travel expenses while you are temporarily performing personal services in the United States. Self employment taxes Generally, a temporary assignment in a single location is one that is realistically expected to last (and does in fact last) for one year or less. Self employment taxes You must be able to show you were present in the United States on an activity that required your temporary absence from your regular place of work. Self employment taxes   For example, if you have established a “tax home” through regular employment in a foreign country, and intend to return to similar employment in the same country at the end of your temporary stay in the United States, you can deduct reasonable travel expenses you paid. Self employment taxes You cannot deduct travel expenses for other members of your family or party. Self employment taxes Deductible travel expenses. Self employment taxes   If you qualify, you can deduct your expenses for: Transportation—airfare, local transportation, including train, bus, etc. Self employment taxes , Lodging—rent paid, utilities (do not include telephone), hotel or motel room expenses, and Meal expenses—actual expenses allowed if you keep records of the amounts, or, if you do not wish to keep detailed records, you are generally allowed a standard meal allowance amount depending on the date and area of your travel. Self employment taxes You generally can deduct only 50% of unreimbursed meal expenses. Self employment taxes The standard meal allowance rates for high-cost areas are available at www. Self employment taxes gsa. Self employment taxes gov/perdiem. Self employment taxes The rates for other areas are in Publication 463. Self employment taxes   Use Form 2106 or 2106-EZ to figure your allowable expenses that you claim on line 7 of Schedule A (Form 1040NR). Self employment taxes Expenses allocable to U. Self employment taxes S. Self employment taxes tax-exempt income. Self employment taxes   You cannot deduct an expense, or part of an expense, that is allocable to U. Self employment taxes S. Self employment taxes tax-exempt income, including income exempt by tax treaty. Self employment taxes Example. Self employment taxes Irina Oak, a citizen of Poland, resided in the United States for part of the year to acquire business experience from a U. Self employment taxes S. Self employment taxes company. Self employment taxes During her stay in the United States, she received a salary of $8,000 from her Polish employer. Self employment taxes She received no other U. Self employment taxes S. Self employment taxes source income. Self employment taxes She spent $3,000 on travel expenses, of which $1,000 were for meals. Self employment taxes None of these expenses were reimbursed. Self employment taxes Under the tax treaty with Poland, $5,000 of her salary is exempt from U. Self employment taxes S. Self employment taxes income tax. Self employment taxes In filling out Form 2106-EZ, she must reduce her deductible meal expenses by half ($500). Self employment taxes She must reduce the remaining $2,500 of travel expenses by 62. Self employment taxes 5% ($1,563) because 62. Self employment taxes 5% ($5,000 ÷ $8,000) of her salary is exempt from tax. Self employment taxes She enters the remaining total of $937 on line 7 of Schedule A (Form 1040NR). Self employment taxes She completes the remaining lines according to the instructions for Schedule A. Self employment taxes More information. Self employment taxes   For more information about deductible expenses, reimbursements, and recordkeeping, get Publication 463. Self employment taxes Tax Credits and Payments This discussion covers tax credits and payments for resident aliens, followed by a discussion of the credits and payments for nonresident aliens. Self employment taxes Resident Aliens Resident aliens generally claim tax credits and report tax payments, including withholding, using the same rules that apply to U. Self employment taxes S. Self employment taxes citizens. Self employment taxes The following items are some of the credits you may be able to claim. Self employment taxes Foreign tax credit. Self employment taxes   You can claim a credit, subject to certain limits, for income tax you paid or accrued to a foreign country on foreign source income. Self employment taxes You cannot claim a credit for taxes paid or accrued on excluded foreign earned income. Self employment taxes To claim a credit for income taxes paid or accrued to a foreign country, you generally will file Form 1116, Foreign Tax Credit (Individual, Estate, or Trust), with your Form 1040. Self employment taxes   For more information, get Publication 514, Foreign Tax Credit for Individuals. Self employment taxes Child and dependent care credit. Self employment taxes   You may be able to take this credit if you pay someone to care for your qualifying child who is under age 13, or your disabled dependent or disabled spouse, so that you can work or look for work. Self employment taxes Generally, you must be able to claim an exemption for your dependent. Self employment taxes   For more information, get Publication 503, Child and Dependent Care Expenses, and Form 2441, Child and Dependent Care Expenses. Self employment taxes Credit for the elderly or the disabled. Self employment taxes   You may qualify for this credit if you are 65 or older or if you retired on permanent and total disability. Self employment taxes For more information on this credit, get Publication 524, Credit for the Elderly or the Disabled, and Schedule R (Form 1040A or 1040). Self employment taxes Education credits. Self employment taxes   You may qualify for these credits if you paid qualified education expenses for yourself, your spouse, or your dependent. Self employment taxes There are two education credits: the American Opportunity Credit and the lifetime learning credit. Self employment taxes You cannot claim these credits if you are married filing separately. Self employment taxes Use Form 8863, Education Credits (American Opportunity and Lifetime Learning Credits), to figure the credit. Self employment taxes For more information, see Publication 970. Self employment taxes Retirement savings contributions credit. Self employment taxes   You may qualify for this credit (also known as the saver's credit) if you made eligible contributions to an employer-sponsored retirement plan or to an individual retirement arrangement (IRA) in 2013. Self employment taxes You cannot claim this credit if: You were born after January 1, 1996, You were a full-time student, Your exemption is claimed by someone else on his or her 2013 tax return, or Your adjusted gross income is more than: $59,000, if your filing status is married filing jointly, $44,250, if your filing status is head of household, or $29,500, if your filing status is single, married filing separately, or qualifying widow(er). Self employment taxes Use Form 8880, Credit for Qualified Retirement Savings Contributions, to figure the credit. Self employment taxes For more information, see Publication 590. Self employment taxes Child tax credit. Self employment taxes   You may be able to take this credit if you have a qualifying child. Self employment taxes   A qualifying child for purposes of the child tax credit is a child who: Was under age 17 at the end of 2013. Self employment taxes Is your son, daughter, stepchild, foster child, brother, sister, stepbrother, stepsister, half brother, half sister, or a descendant of any of them (for example, your grandchild, niece, or nephew). Self employment taxes Is a U. Self employment taxes S. Self employment taxes citizen, a U. Self employment taxes S. Self employment taxes national, or a resident alien. Self employment taxes Did not provide over half of his or her own support for 2013. Self employment taxes Lived with you more than half of 2013. Self employment taxes Temporary absences, such as for school, vacation, or medical care, count as time lived in the home. Self employment taxes Is claimed as a dependent on your return. Self employment taxes An adopted child is always treated as your own child. Self employment taxes An adopted child includes a child lawfully placed with you for legal adoption. Self employment taxes   See your form instructions for additional details. Self employment taxes Adoption credit. Self employment taxes   You may qualify to take a tax credit of up to $12,970 for qualifying expenses paid to adopt an eligible child. Self employment taxes This amount may be allowed for the adoption of a child with special needs regardless of whether you have qualifying expenses. Self employment taxes To claim the adoption credit, file Form 8839, Qualified Adoption Expenses, with your Form 1040. Self employment taxes Earned income credit. Self employment taxes   You may qualify for an earned income credit of up to $3,250 if a child lived with you in the United States and your earned income and adjusted gross income were each less than $37,870 ($43,210 if married filing jointly). Self employment taxes If two children lived with you in the United States and your earned income and adjusted gross income were each less than $43,038 ($48,378 if married filing jointly), your credit could be as much as $5,372. Self employment taxes If three or more children lived with you in the United States and your earned income and adjusted gross income were each less than $46,227 ($51,567 if married filing jointly), your credit could be as much as $6,044. Self employment taxes If you do not have a qualifying child and your earned income and adjusted gross income were each less than $14,340 ($19,680 if married filing jointly), your credit could be as much as $487. Self employment taxes You cannot claim the earned income credit if your filing status is married filing separately. Self employment taxes    You and your spouse (if filing a joint return) and any qualifying child must have valid SSNs to claim this credit. Self employment taxes You cannot claim the credit using an ITIN. Self employment taxes If a social security card has a legend that says Not Valid for Employment and the number was issued so that you (or your spouse or your qualifying child) could receive a federally funded benefit, you cannot claim the earned income credit. Self employment taxes An example of a federally funded benefit is Medicaid. Self employment taxes If a card has this legend and the individual's immigration status has changed so that the individual is now a U. Self employment taxes S. Self employment taxes citizen or lawful permanent resident, ask the SSA to issue a new social security card without the legend. Self employment taxes Other information. Self employment taxes   There are other eligibility rules that are not discussed here. Self employment taxes For more information, get Publication 596, Earned Income Credit. Self employment taxes Nonresident Aliens You can claim some of the same credits that resident aliens can claim. Self employment taxes You can also report certain taxes you paid, are considered to have paid, or that were withheld from your income. Self employment taxes Credits Credits are allowed only if you receive effectively connected income. Self employment taxes You may be able to claim some of the following credits. Self employment taxes Foreign tax credit. Self employment taxes   If you receive foreign source income that is effectively connected with a trade or business in the United States, you can claim a credit for any income taxes paid or accrued to any foreign country or U. Self employment taxes S. Self employment taxes possession on that income. Self employment taxes   If you do not have foreign source income effectively connected with a U. Self employment taxes S. Self employment taxes trade or business, you cannot claim credits against your U. Self employment taxes S. Self employment taxes tax for taxes paid or accrued to a foreign country or U. Self employment taxes S. Self employment taxes possession. Self employment taxes   You cannot take any credit for taxes imposed by a foreign country or U. Self employment taxes S. Self employment taxes possession on your U. Self employment taxes S. Self employment taxes source income if those taxes were imposed only because you are a citizen or resident of the foreign country or possession. Self employment taxes   If you claim a foreign tax credit, you generally will have to attach to your return a Form 1116. Self employment taxes See Publication 514 for more information. Self employment taxes Child and dependent care credit. Self employment taxes   You may qualify for this credit if you pay someone to care for your qualifying child who is under age 13, or your disabled dependent or disabled spouse, so that you can work or look for work. Self employment taxes Generally, you must be able to claim an exemption for your dependent. Self employment taxes   Married nonresident aliens can claim the credit only if they choose to file a joint return with a U. Self employment taxes S. Self employment taxes citizen or resident spouse as discussed in chapter 1, or if they qualify as certain married individuals living apart (see Joint Return Test in Publication 503). Self employment taxes   The amount of your child and dependent care expense that qualifies for the credit in any tax year cannot be more than your earned income from the United States for that tax year. Self employment taxes Earned income generally means wages, salaries, and professional fees for personal services performed. Self employment taxes   For more information, get Publication 503. Self employment taxes Education credits. Self employment taxes   If you are a nonresident alien for any part of the year, you generally cannot claim the education credits. Self employment taxes However, if you are married and choose to file a joint return with a U. Self employment taxes S. Self employment taxes citizen or resident spouse as discussed in chapter 1, you may be eligible for these credits. Self employment taxes Retirement savings contributions credit. Self employment taxes   You may qualify for this credit (also known as the saver's credit) if you made eligible contributions to an employer-sponsored retirement plan or to an individual retirement arrangement (IRA) in 2013. Self employment taxes You cannot claim this credit if: You were born after January 1, 1996, You were a full-time student, Your exemption is claimed by someone else on his or her 2013 tax return, or Your adjusted gross income is more than $29,500. Self employment taxes Use Form 8880 to figure the credit. Self employment taxes For more information, see Publication 590. Self employment taxes Child tax credit. Self employment taxes   You may be able to take this credit if you have a qualifying child. Self employment taxes   A qualifying child for purposes of the child tax credit is a child who: Was under age 17 at the end of 2013. Self employment taxes Is your son, daughter, stepchild, foster child, brother, sister, stepbrother, stepsister, half brother, half sister, or a descendant of any of them (for example, your grandchild, niece, or nephew). Self employment taxes Is a U. Self employment taxes S. Self employment taxes citizen, a U. Self employment taxes S. Self employment taxes national, or a resident alien. Self employment taxes Did not provide over half of his or her own support for 2013. Self employment taxes Lived with you more than half of 2013. Self employment taxes Temporary absences, such as for school, vacation, or medical care, count as time lived in the home. Self employment taxes Is claimed as a dependent on your return. Self employment taxes An adopted child is always treated as your own child. Self employment taxes An adopted child includes a child lawfully placed with you for legal adoption. Self employment taxes   See your form instructions for additional details. Self employment taxes Adoption credit. Self employment taxes   You may qualify to take a tax credit of up to $12,970 for qualifying expenses paid to adopt an eligible child. Self employment taxes This amount may be allowed for the adoption of a child with special needs regardless of whether you have qualifying expenses. Self employment taxes To claim the adoption credit, file Form 8839 with your Form 1040NR. Self employment taxes   Married nonresident aliens can claim the credit only if they choose to file a joint return with a U. Self employment taxes S. Self employment taxes citizen or resident spouse as discussed in chapter 1, or if they qualify as certain married individuals living apart (see Married Persons Not Filing Jointly in the Form 8839 instructions). Self employment taxes Credit for prior year minimum tax. Self employment taxes   If you paid alternative minimum tax in a prior year, get Form 8801, Credit for Prior Year Minimum Tax—Individuals, Estates, and Trusts, to see if you qualify for this credit. Self employment taxes Earned income credit. Self employment taxes   If you are a nonresident alien for any part of the tax year, you generally cannot get the earned income credit. Self employment taxes However, if you are married and choose to file a joint return with a U. Self employment taxes S. Self employment taxes citizen or resident spouse as discussed in chapter 1, you may be eligible for the credit. Self employment taxes    You, your spouse, and any qualifying child must have valid SSNs to claim this credit. Self employment taxes You cannot claim the credit using an ITIN. Self employment taxes If a social security card has a legend that says Not Valid for Employment and the number was issued so that you (or your spouse or your qualifying child) could receive a federally funded benefit, you cannot claim the earned income credit. Self employment taxes An example of a federally funded benefit is Medicaid. Self employment taxes If a card has this legend and the individual's immigration status has changed so that the individual is now a U. Self employment taxes S. Self employment taxes citizen or lawful permanent resident, ask the SSA to issue a new social security card without the legend. Self employment taxes   See Publication 596 for more information on the credit. Self employment taxes Tax Withheld You can claim the tax withheld during the year as a payment against your U. Self employment taxes S. Self employment taxes tax. Self employment taxes You claim it on line 61 of Form 1040NR or on line 18 of Form 1040NR-EZ. Self employment taxes The tax withheld reduces any tax you owe with Form 1040NR or Form 1040NR-EZ. Self employment taxes Withholding from wages. Self employment taxes   Any federal income tax withheld from your wages during the tax year while you were a nonresident alien is allowed as a payment against your U. Self employment taxes S. Self employment taxes income tax liability for the same year. Self employment taxes You can claim the income tax withheld whether or not you were engaged in a trade or business in the United States during the year, and whether or not the wages (or any other income) were connected with a trade or business in the United States. Self employment taxes Excess social security tax withheld. Self employment taxes   If you have two or more employers, you may be able to claim a credit against your U. Self employment taxes S. Self employment taxes income tax liability for social security tax withheld in excess of the maximum required. Self employment taxes See Social Security and Medicare Taxes in chapter 8 for more information. Self employment taxes Additional Medicare Tax. Self employment taxes   Your employer is responsible for withholding the 0. Self employment taxes 9% Additional Medicare Tax on Medicare wages or RRTA compensation it pays to you in excess of $200,000 in 2013. Self employment taxes If you do not owe Additional Medicare Tax, you can claim a credit for any withheld Additional Medicare Tax against the total tax liability shown on your tax return by filing Form 8959. Self employment taxes Tax paid on undistributed long-term capital gains. Self employment taxes   If you are a shareholder in a mutual fund (or other regulated investment company) or real estate investment trust, you can claim a credit for your share of any taxes paid by the company on its undistributed long-term capital gains. Self employment taxes You will receive information on Form 2439, Notice to Shareholder of Undistributed Long-Term Capital Gains, which you must attach to your return. Self employment taxes Tax withheld at the source. Self employment taxes   You can claim as a payment any tax withheld at the source on investment and other fixed or determinable annual or periodic income paid to you. Self employment taxes Fixed or determinable income includes interest, dividend, rental, and royalty income that you do not claim to be effectively connected income. Self employment taxes Wage or salary payments can be fixed or determinable income to you, but usually are subject to withholding as discussed above. Self employment taxes Taxes on fixed or determinable income are withheld at a 30% rate or at a lower treaty rate. Self employment taxes Tax withheld on partnership income. Self employment taxes   If you are a foreign partner in a partnership, the partnership will withhold tax on your share of effectively connected taxable income from the partnership. Self employment taxes The partnership will give you a statement on Form 8805, Foreign Partner's Information Statement of Section 1446 Withholding Tax, showing the tax withheld. Self employment taxes A partnership that is publicly traded may withhold on your actual distributions of effectively connected income. Self employment taxes In this case, the partnership will give you a statement on Form 1042-S. Self employment taxes Claim the tax withheld as a payment on line 61b or 61d of Form 1040NR, as appropriate. Self employment taxes Claiming tax withheld on your return. Self employment taxes   When you fill out your tax return, take extra care to enter the correct amount of any tax withheld shown on your information documents. Self employment taxes The following table lists some of the more common information documents and shows where to find the amount of tax withheld. Self employment taxes Form number Location  of tax  withheld RRB-1042S Box 12 SSA-1042S Box 9 W-2 Box 2 W-2c Box 2 1042-S Box 9 8805 Line 10 8288-A Box 2 Bona Fide Residents of American Samoa or Puerto Rico If you are a nonresident alien who is a bona fide resident of American Samoa or Puerto Rico for the entire tax year, you generally are taxed the same as resident aliens. Self employment taxes You should file Form 1040 and report all income from sources both in and outside the United States. Self employment taxes However, you can exclude the income discussed in the following paragraphs. Self employment taxes For tax purposes other than reporting income, however, you will be treated as a nonresident alien. Self employment taxes For example, you are not allowed the standard deduction, you cannot file a joint return, and you are not allowed a deduction for a dependent unless that person is a citizen or national of the United States. Self employment taxes There are also limits on what deductions and credits are allowed. Self employment taxes See Nonresident Aliens under Deductions , Itemized Deductions , and Tax Credits and Payments in this chapter. Self employment taxes Residents of Puerto Rico. Self employment taxes   If you are a bona fide resident of Puerto Rico for the entire year, you can exclude from gross income all income from sources in Puerto Rico (other than amounts for services performed as an employee of the United States or any of its agencies). Self employment taxes   If you report income on a calendar year basis and you do not have wages subject to withholding, file your return and pay your tax by June 15. Self employment taxes You must also make your first payment of estimated tax by June 15. Self employment taxes You cannot file a joint income tax return or make joint payments of estimated tax. Self employment taxes However, if you are married to a U. Self employment taxes S. Self employment taxes citizen or resident, see Nonresident Spouse Treated as a Resident in chapter 1. Self employment taxes   If you earn wages subject to withholding, your U. Self employment taxes S. Self employment taxes income tax return is due by April 15. Self employment taxes Your first payment of estimated tax is also due by April 15. Self employment taxes For information on withholding and estimated tax, see chapter 8 . Self employment taxes Residents of American Samoa. Self employment taxes   If you are a bona fide resident of American Samoa for the entire year, you can exclude from gross income all income from sources in American Samoa (other than amounts for services performed as an employee of the U. Self employment taxes S. Self employment taxes government or any of its agencies). Self employment taxes An employee of the American Samoan government is not considered an employee of the U. Self employment taxes S. Self employment taxes government or any of its agencies for purposes of the exclusion. Self employment taxes For more information about this exclusion, get Form 4563 and Publication 570, Tax Guide for Individuals With Income From U. Self employment taxes S. Self employment taxes Possessions. Self employment taxes Prev  Up  Next   Home   More Online Publications