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Where Do I File 2011 Taxes

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Where Do I File 2011 Taxes

Where do i file 2011 taxes 2. Where do i file 2011 taxes   Entertainment Table of Contents Directly-Related Test Associated TestMeetings at conventions. Where do i file 2011 taxes 50% LimitExceptions to the 50% Limit What Entertainment Expenses Are Deductible?A meal as a form of entertainment. Where do i file 2011 taxes Deduction may depend on your type of business. Where do i file 2011 taxes Exception for events that benefit charitable organizations. Where do i file 2011 taxes Food and beverages in skybox seats. Where do i file 2011 taxes What Entertainment Expenses Are Not Deductible?Out-of-pocket expenses. Where do i file 2011 taxes You may be able to deduct business-related entertainment expenses you have for entertaining a client, customer, or employee. Where do i file 2011 taxes The rules and definitions are summarized in Table 2-1 . Where do i file 2011 taxes You can deduct entertainment expenses only if they are both ordinary and necessary and meet one of the following tests. Where do i file 2011 taxes Directly-related test. Where do i file 2011 taxes Associated test. Where do i file 2011 taxes Both of these tests are explained later. Where do i file 2011 taxes An ordinary expense is one that is common and accepted in your trade or business. Where do i file 2011 taxes A necessary expense is one that is helpful and appropriate for your business. Where do i file 2011 taxes An expense does not have to be required to be considered necessary. Where do i file 2011 taxes The amount you can deduct for entertainment expenses may be limited. Where do i file 2011 taxes Generally, you can deduct only 50% of your unreimbursed entertainment expenses. Where do i file 2011 taxes This limit is discussed later under 50% Limit. Where do i file 2011 taxes Directly-Related Test To meet the directly-related test for entertainment expenses (including entertainment-related meals), you must show that: The main purpose of the combined business and entertainment was the active conduct of business, You did engage in business with the person during the entertainment period, and You had more than a general expectation of getting income or some other specific business benefit at some future time. Where do i file 2011 taxes Business is generally not considered to be the main purpose when business and entertainment are combined on hunting or fishing trips, or on yachts or other pleasure boats. Where do i file 2011 taxes Even if you show that business was the main purpose, you generally cannot deduct the expenses for the use of an entertainment facility. Where do i file 2011 taxes See Entertainment facilities under What Entertainment Expenses Are Not Deductible? later in this chapter. Where do i file 2011 taxes You must consider all the facts, including the nature of the business transacted and the reasons for conducting business during the entertainment. Where do i file 2011 taxes It is not necessary to devote more time to business than to entertainment. Where do i file 2011 taxes However, if the business discussion is only incidental to the entertainment, the entertainment expenses do not meet the directly-related test. Where do i file 2011 taxes Table 2-1. Where do i file 2011 taxes When Are Entertainment Expenses Deductible? General rule You can deduct ordinary and necessary expenses to entertain a client, customer, or employee if the expenses meet the directly-related test or the associated test. Where do i file 2011 taxes Definitions Entertainment includes any activity generally considered to provide entertainment, amusement, or recreation, and includes meals provided to a customer or client. Where do i file 2011 taxes An ordinary expense is one that is common and accepted in your trade or business. Where do i file 2011 taxes A necessary expense is one that is helpful and appropriate. Where do i file 2011 taxes Tests to be met Directly-related test Entertainment took place in a clear business setting, or Main purpose of entertainment was the active conduct of business, and You did engage in business with the person during the entertainment period, and You had more than a general expectation of getting income or some other specific business benefit. Where do i file 2011 taxes   Associated test Entertainment is associated with your trade or business, and Entertainment is directly before or after a substantial business discussion. Where do i file 2011 taxes Other rules You cannot deduct the cost of your meal as an entertainment expense if you are claiming the meal as a travel expense. Where do i file 2011 taxes You cannot deduct expenses that are lavish or extravagant under the circumstances. Where do i file 2011 taxes You generally can deduct only 50% of your unreimbursed entertainment expenses (see 50% Limit ). Where do i file 2011 taxes You do not have to show that business income or other business benefit actually resulted from each entertainment expense. Where do i file 2011 taxes Clear business setting. Where do i file 2011 taxes   If the entertainment takes place in a clear business setting and is for your business or work, the expenses are considered directly related to your business or work. Where do i file 2011 taxes The following situations are examples of entertainment in a clear business setting. Where do i file 2011 taxes Entertainment in a hospitality room at a convention where business goodwill is created through the display or discussion of business products. Where do i file 2011 taxes Entertainment that is mainly a price rebate on the sale of your products (such as a restaurant owner providing an occasional free meal to a loyal customer). Where do i file 2011 taxes Entertainment of a clear business nature occurring under circumstances where there is no meaningful personal or social relationship between you and the persons entertained. Where do i file 2011 taxes An example is entertainment of business and civic leaders at the opening of a new hotel or play when the purpose is to get business publicity rather than to create or maintain the goodwill of the persons entertained. Where do i file 2011 taxes Expenses not considered directly related. Where do i file 2011 taxes   Entertainment expenses generally are not considered directly related if you are not there or in situations where there are substantial distractions that generally prevent you from actively conducting business. Where do i file 2011 taxes The following are examples of situations where there are substantial distractions. Where do i file 2011 taxes A meeting or discussion at a nightclub, theater, or sporting event. Where do i file 2011 taxes A meeting or discussion during what is essentially a social gathering, such as a cocktail party. Where do i file 2011 taxes A meeting with a group that includes persons who are not business associates at places such as cocktail lounges, country clubs, golf clubs, athletic clubs, or vacation resorts. Where do i file 2011 taxes Associated Test Even if your expenses do not meet the directly-related test, they may meet the associated test. Where do i file 2011 taxes To meet the associated test for entertainment expenses (including entertainment-related meals), you must show that the entertainment is: Associated with the active conduct of your trade or business, and Directly before or after a substantial business discussion (defined later). Where do i file 2011 taxes Associated with trade or business. Where do i file 2011 taxes   Generally, an expense is associated with the active conduct of your trade or business if you can show that you had a clear business purpose for having the expense. Where do i file 2011 taxes The purpose may be to get new business or to encourage the continuation of an existing business relationship. Where do i file 2011 taxes Substantial business discussion. Where do i file 2011 taxes   Whether a business discussion is substantial depends on the facts of each case. Where do i file 2011 taxes A business discussion will not be considered substantial unless you can show that you actively engaged in the discussion, meeting, negotiation, or other business transaction to get income or some other specific business benefit. Where do i file 2011 taxes   The meeting does not have to be for any specified length of time, but you must show that the business discussion was substantial in relation to the meal or entertainment. Where do i file 2011 taxes It is not necessary that you devote more time to business than to entertainment. Where do i file 2011 taxes You do not have to discuss business during the meal or entertainment. Where do i file 2011 taxes Meetings at conventions. Where do i file 2011 taxes   You are considered to have a substantial business discussion if you attend meetings at a convention or similar event, or at a trade or business meeting sponsored and conducted by a business or professional organization. Where do i file 2011 taxes However, your reason for attending the convention or meeting must be to further your trade or business. Where do i file 2011 taxes The organization that sponsors the convention or meeting must schedule a program of business activities that is the main activity of the convention or meeting. Where do i file 2011 taxes Directly before or after business discussion. Where do i file 2011 taxes   If the entertainment is held on the same day as the business discussion, it is considered to be held directly before or after the business discussion. Where do i file 2011 taxes   If the entertainment and the business discussion are not held on the same day, you must consider the facts of each case to see if the associated test is met. Where do i file 2011 taxes Among the facts to consider are the place, date, and duration of the business discussion. Where do i file 2011 taxes If you or your business associates are from out of town, you must also consider the dates of arrival and departure, and the reasons the entertainment and the discussion did not take place on the same day. Where do i file 2011 taxes Example. Where do i file 2011 taxes A group of business associates comes from out of town to your place of business to hold a substantial business discussion. Where do i file 2011 taxes If you entertain those business guests on the evening before the business discussion, or on the evening of the day following the business discussion, the entertainment generally is considered to be held directly before or after the discussion. Where do i file 2011 taxes The expense meets the associated test. Where do i file 2011 taxes 50% Limit In general, you can deduct only 50% of your business-related meal and entertainment expenses. Where do i file 2011 taxes (If you are subject to the Department of Transportation's “hours of service” limits, you can deduct 80% of your business-related meal and entertainment expenses. Where do i file 2011 taxes See Individuals subject to “hours of service” limits , later. Where do i file 2011 taxes ) The 50% limit applies to employees or their employers, and to self-employed persons (including independent contractors) or their clients, depending on whether the expenses are reimbursed. Where do i file 2011 taxes Figure A summarizes the general rules explained in this section. Where do i file 2011 taxes The 50% limit applies to business meals or entertainment expenses you have while: Traveling away from home (whether eating alone or with others) on business, Entertaining customers at your place of business, a restaurant, or other location, or Attending a business convention or reception, business meeting, or business luncheon at a club. Where do i file 2011 taxes Included expenses. Where do i file 2011 taxes   Expenses subject to the 50% limit include: Taxes and tips relating to a business meal or entertainment activity, Cover charges for admission to a nightclub, Rent paid for a room in which you hold a dinner or cocktail party, and Amounts paid for parking at a sports arena. Where do i file 2011 taxes However, the cost of transportation to and from a business meal or a business-related entertainment activity is not subject to the 50% limit. Where do i file 2011 taxes Figure A. Where do i file 2011 taxes Does the 50% Limit Apply to Your Expenses? There are exceptions to these rules. Where do i file 2011 taxes See Exceptions to the 50% Limit . Where do i file 2011 taxes Please click here for the text description of the image. Where do i file 2011 taxes Figure A. Where do i file 2011 taxes Does the 50% limit apply to Your Expenses?TAs for Figure A are: Notice 87-23; Form 2106 instructions Application of 50% limit. Where do i file 2011 taxes   The 50% limit on meal and entertainment expenses applies if the expense is otherwise deductible and is not covered by one of the exceptions discussed later. Where do i file 2011 taxes   The 50% limit also applies to certain meal and entertainment expenses that are not business related. Where do i file 2011 taxes It applies to meal and entertainment expenses you have for the production of income, including rental or royalty income. Where do i file 2011 taxes It also applies to the cost of meals included in deductible educational expenses. Where do i file 2011 taxes When to apply the 50% limit. Where do i file 2011 taxes   You apply the 50% limit after determining the amount that would otherwise qualify for a deduction. Where do i file 2011 taxes You first have to determine the amount of meal and entertainment expenses that would be deductible under the other rules discussed in this publication. Where do i file 2011 taxes Example 1. Where do i file 2011 taxes You spend $200 for a business-related meal. Where do i file 2011 taxes If $110 of that amount is not allowable because it is lavish and extravagant, the remaining $90 is subject to the 50% limit. Where do i file 2011 taxes Your deduction cannot be more than $45 (50% × $90). Where do i file 2011 taxes Example 2. Where do i file 2011 taxes You purchase two tickets to a concert and give them to a client. Where do i file 2011 taxes You purchased the tickets through a ticket agent. Where do i file 2011 taxes You paid $200 for the two tickets, which had a face value of $80 each ($160 total). Where do i file 2011 taxes Your deduction cannot be more than $80 (50% × $160). Where do i file 2011 taxes Exceptions to the 50% Limit Generally, business-related meal and entertainment expenses are subject to the 50% limit. Where do i file 2011 taxes Figure A can help you determine if the 50% limit applies to you. Where do i file 2011 taxes Expenses not subject to 50% limit. Where do i file 2011 taxes   Your meal or entertainment expense is not subject to the 50% limit if the expense meets one of the following exceptions. Where do i file 2011 taxes 1 - Employee's reimbursed expenses. Where do i file 2011 taxes   If you are an employee, you are not subject to the 50% limit on expenses for which your employer reimburses you under an accountable plan. Where do i file 2011 taxes Accountable plans are discussed in chapter 6. Where do i file 2011 taxes 2 - Self-employed. Where do i file 2011 taxes   If you are self-employed, your deductible meal and entertainment expenses are not subject to the 50% limit if all of the following requirements are met. Where do i file 2011 taxes You have these expenses as an independent contractor. Where do i file 2011 taxes Your customer or client reimburses you or gives you an allowance for these expenses in connection with services you perform. Where do i file 2011 taxes You provide adequate records of these expenses to your customer or client. Where do i file 2011 taxes (See chapter 5 . Where do i file 2011 taxes )   In this case, your client or customer is subject to the 50% limit on the expenses. Where do i file 2011 taxes Example. Where do i file 2011 taxes You are a self-employed attorney who adequately accounts for meal and entertainment expenses to a client who reimburses you for these expenses. Where do i file 2011 taxes You are not subject to the directly-related or associated test, nor are you subject to the 50% limit. Where do i file 2011 taxes If the client can deduct the expenses, the client is subject to the 50% limit. Where do i file 2011 taxes If you (as an independent contractor) have expenses for meals and entertainment related to providing services for a client but do not adequately account for and seek reimbursement from the client for those expenses, you are subject to the directly-related or associated test and to the 50% limit. Where do i file 2011 taxes 3 - Advertising expenses. Where do i file 2011 taxes   You are not subject to the 50% limit if you provide meals, entertainment, or recreational facilities to the general public as a means of advertising or promoting goodwill in the community. Where do i file 2011 taxes For example, neither the expense of sponsoring a television or radio show nor the expense of distributing free food and beverages to the general public is subject to the 50% limit. Where do i file 2011 taxes 4 - Sale of meals or entertainment. Where do i file 2011 taxes   You are not subject to the 50% limit if you actually sell meals, entertainment, goods and services, or use of facilities to the public. Where do i file 2011 taxes For example, if you run a nightclub, your expense for the entertainment you furnish to your customers, such as a floor show, is not subject to the 50% limit. Where do i file 2011 taxes 5 - Charitable sports event. Where do i file 2011 taxes   You are not subject to the 50% limit if you pay for a package deal that includes a ticket to a qualified charitable sports event. Where do i file 2011 taxes For the conditions the sports event must meet, see Exception for events that benefit charitable organizations under What Entertainment Expenses Are Deductible?, later. Where do i file 2011 taxes Individuals subject to “hours of service” limits. Where do i file 2011 taxes   You can deduct a higher percentage of your meal expenses while traveling away from your tax home if the meals take place during or incident to any period subject to the Department of Transportation's “hours of service” limits. Where do i file 2011 taxes The percentage is 80%. Where do i file 2011 taxes   Individuals subject to the Department of Transportation's “hours of service” limits include the following persons. Where do i file 2011 taxes Certain air transportation workers (such as pilots, crew, dispatchers, mechanics, and control tower operators) who are under Federal Aviation Administration regulations. Where do i file 2011 taxes Interstate truck operators and bus drivers who are under Department of Transportation regulations. Where do i file 2011 taxes Certain railroad employees (such as engineers, conductors, train crews, dispatchers, and control operations personnel) who are under Federal Railroad Administration regulations. Where do i file 2011 taxes Certain merchant mariners who are under Coast Guard regulations. Where do i file 2011 taxes What Entertainment Expenses Are Deductible? This section explains different types of entertainment expenses you may be able to deduct. Where do i file 2011 taxes Entertainment. Where do i file 2011 taxes   Entertainment includes any activity generally considered to provide entertainment, amusement, or recreation. Where do i file 2011 taxes Examples include entertaining guests at nightclubs; at social, athletic, and sporting clubs; at theaters; at sporting events; on yachts; or on hunting, fishing, vacation, and similar trips. Where do i file 2011 taxes   Entertainment also may include meeting personal, living, or family needs of individuals, such as providing meals, a hotel suite, or a car to customers or their families. Where do i file 2011 taxes A meal as a form of entertainment. Where do i file 2011 taxes   Entertainment includes the cost of a meal you provide to a customer or client, whether the meal is a part of other entertainment or by itself. Where do i file 2011 taxes A meal expense includes the cost of food, beverages, taxes, and tips for the meal. Where do i file 2011 taxes To deduct an entertainment-related meal, you or your employee must be present when the food or beverages are provided. Where do i file 2011 taxes    You cannot claim the cost of your meal both as an entertainment expense and as a travel expense. Where do i file 2011 taxes    Meals sold in the normal course of your business are not considered entertainment. Where do i file 2011 taxes Deduction may depend on your type of business. Where do i file 2011 taxes   Your kind of business may determine if a particular activity is considered entertainment. Where do i file 2011 taxes For example, if you are a dress designer and have a fashion show to introduce your new designs to store buyers, the show generally is not considered entertainment. Where do i file 2011 taxes This is because fashion shows are typical in your business. Where do i file 2011 taxes But, if you are an appliance distributor and hold a fashion show for the spouses of your retailers, the show generally is considered entertainment. Where do i file 2011 taxes Separating costs. Where do i file 2011 taxes   If you have one expense that includes the costs of entertainment and other services (such as lodging or transportation), you must allocate that expense between the cost of entertainment and the cost of other services. Where do i file 2011 taxes You must have a reasonable basis for making this allocation. Where do i file 2011 taxes For example, you must allocate your expenses if a hotel includes entertainment in its lounge on the same bill with your room charge. Where do i file 2011 taxes Taking turns paying for meals or entertainment. Where do i file 2011 taxes   If a group of business acquaintances takes turns picking up each others' meal or entertainment checks primarily for personal reasons, without regard to whether any business purposes are served, no member of the group can deduct any part of the expense. Where do i file 2011 taxes Lavish or extravagant expenses. Where do i file 2011 taxes   You cannot deduct expenses for entertainment that are lavish or extravagant. Where do i file 2011 taxes An expense is not considered lavish or extravagant if it is reasonable considering the facts and circumstances. Where do i file 2011 taxes Expenses will not be disallowed just because they are more than a fixed dollar amount or take place at deluxe restaurants, hotels, nightclubs, or resorts. Where do i file 2011 taxes Allocating between business and nonbusiness. Where do i file 2011 taxes   If you entertain business and nonbusiness individuals at the same event, you must divide your entertainment expenses between business and nonbusiness. Where do i file 2011 taxes You can deduct only the business part. Where do i file 2011 taxes If you cannot establish the part of the expense for each person participating, allocate the expense to each participant on a pro rata basis. Where do i file 2011 taxes Example. Where do i file 2011 taxes You entertain a group of individuals that includes yourself, three business prospects, and seven social guests. Where do i file 2011 taxes Only 4/11 of the expense qualifies as a business entertainment expense. Where do i file 2011 taxes You cannot deduct the expenses for the seven social guests because those costs are nonbusiness expenses. Where do i file 2011 taxes Trade association meetings. Where do i file 2011 taxes   You can deduct entertainment expenses that are directly related to and necessary for attending business meetings or conventions of certain exempt organizations if the expenses of your attendance are related to your active trade or business. Where do i file 2011 taxes These organizations include business leagues, chambers of commerce, real estate boards, trade associations, and professional associations. Where do i file 2011 taxes Entertainment tickets. Where do i file 2011 taxes   Generally, you cannot deduct more than the face value of an entertainment ticket, even if you paid a higher price. Where do i file 2011 taxes For example, you cannot deduct service fees you pay to ticket agencies or brokers or any amount over the face value of the tickets you pay to scalpers. Where do i file 2011 taxes Exception for events that benefit charitable organizations. Where do i file 2011 taxes   Different rules apply when the cost of a ticket to a sports event benefits a charitable organization. Where do i file 2011 taxes You can take into account the full cost you pay for the ticket, even if it is more than the face value, if all of the following conditions apply. Where do i file 2011 taxes The event's main purpose is to benefit a qualified charitable organization. Where do i file 2011 taxes The entire net proceeds go to the charity. Where do i file 2011 taxes The event uses volunteers to perform substantially all the event's work. Where do i file 2011 taxes    The 50% limit on entertainment does not apply to any expense for a package deal that includes a ticket to such a charitable sports event. Where do i file 2011 taxes Example 1. Where do i file 2011 taxes You purchase tickets to a golf tournament organized by the local volunteer fire company. Where do i file 2011 taxes All net proceeds will be used to buy new fire equipment. Where do i file 2011 taxes The volunteers will run the tournament. Where do i file 2011 taxes You can deduct the entire cost of the tickets as a business expense if they otherwise qualify as an entertainment expense. Where do i file 2011 taxes Example 2. Where do i file 2011 taxes You purchase tickets to a college football game through a ticket broker. Where do i file 2011 taxes After having a business discussion, you take a client to the game. Where do i file 2011 taxes Net proceeds from the game go to colleges that qualify as charitable organizations. Where do i file 2011 taxes However, since the colleges also pay individuals to perform services, such as coaching and recruiting, you can only use the face value of the tickets in determining your business deduction. Where do i file 2011 taxes Skyboxes and other private luxury boxes. Where do i file 2011 taxes   If you rent a skybox or other private luxury box for more than one event at the same sports arena, you generally cannot deduct more than the price of a nonluxury box seat ticket. Where do i file 2011 taxes   To determine whether a skybox has been rented for more than one event, count each game or other performance as one event. Where do i file 2011 taxes For example, renting a skybox for a series of playoff games is considered renting it for more than one event. Where do i file 2011 taxes All skyboxes you rent in the same arena, along with any rentals by related parties, are considered in making this determination. Where do i file 2011 taxes   Related parties include: Family members (spouses, ancestors, and lineal descendants), Parties who have made a reciprocal arrangement involving the sharing of skyboxes, Related corporations, A partnership and its principal partners, and A corporation and a partnership with common ownership. Where do i file 2011 taxes Example. Where do i file 2011 taxes You pay $3,000 to rent a 10-seat skybox at Team Stadium for three baseball games. Where do i file 2011 taxes The cost of regular nonluxury box seats at each event is $30 a seat. Where do i file 2011 taxes You can deduct (subject to the 50% limit) $900 ((10 seats × $30 each) × 3 events). Where do i file 2011 taxes Food and beverages in skybox seats. Where do i file 2011 taxes   If expenses for food and beverages are separately stated, you can deduct these expenses in addition to the amounts allowable for the skybox, subject to the requirements and limits that apply. Where do i file 2011 taxes The amounts separately stated for food and beverages must be reasonable. Where do i file 2011 taxes You cannot inflate the charges for food and beverages to avoid the limited deduction for skybox rentals. Where do i file 2011 taxes What Entertainment Expenses Are Not Deductible? This section explains different types of entertainment expenses you generally may not be able to deduct. Where do i file 2011 taxes Club dues and membership fees. Where do i file 2011 taxes   You cannot deduct dues (including initiation fees) for membership in any club organized for: Business, Pleasure, Recreation, or Other social purpose. Where do i file 2011 taxes This rule applies to any membership organization if one of its principal purposes is either: To conduct entertainment activities for members or their guests, or To provide members or their guests with access to entertainment facilities, discussed later. Where do i file 2011 taxes   The purposes and activities of a club, not its name, will determine whether or not you can deduct the dues. Where do i file 2011 taxes You cannot deduct dues paid to: Country clubs, Golf and athletic clubs, Airline clubs, Hotel clubs, and Clubs operated to provide meals under circumstances generally considered to be conducive to business discussions. Where do i file 2011 taxes Entertainment facilities. Where do i file 2011 taxes   Generally, you cannot deduct any expense for the use of an entertainment facility. Where do i file 2011 taxes This includes expenses for depreciation and operating costs such as rent, utilities, maintenance, and protection. Where do i file 2011 taxes   An entertainment facility is any property you own, rent, or use for entertainment. Where do i file 2011 taxes Examples include a yacht, hunting lodge, fishing camp, swimming pool, tennis court, bowling alley, car, airplane, apartment, hotel suite, or home in a vacation resort. Where do i file 2011 taxes Out-of-pocket expenses. Where do i file 2011 taxes   You can deduct out-of-pocket expenses, such as for food and beverages, catering, gas, and fishing bait, that you provided during entertainment at a facility. Where do i file 2011 taxes These are not expenses for the use of an entertainment facility. Where do i file 2011 taxes However, these expenses are subject to the directly-related and associated tests and to the 50% limit , all discussed earlier. Where do i file 2011 taxes Expenses for spouses. Where do i file 2011 taxes   You generally cannot deduct the cost of entertainment for your spouse or for the spouse of a customer. Where do i file 2011 taxes However, you can deduct these costs if you can show you had a clear business purpose, rather than a personal or social purpose, for providing the entertainment. Where do i file 2011 taxes Example. Where do i file 2011 taxes You entertain a customer. Where do i file 2011 taxes The cost is an ordinary and necessary business expense and is allowed under the entertainment rules. Where do i file 2011 taxes The customer's spouse joins you because it is impractical to entertain the customer without the spouse. Where do i file 2011 taxes You can deduct the cost of entertaining the customer's spouse. Where do i file 2011 taxes If your spouse joins the party because the customer's spouse is present, the cost of the entertainment for your spouse is also deductible. Where do i file 2011 taxes Gift or entertainment. Where do i file 2011 taxes   Any item that might be considered either a gift or entertainment generally will be considered entertainment. Where do i file 2011 taxes However, if you give a customer packaged food or beverages that you intend the customer to use at a later date, treat it as a gift. Where do i file 2011 taxes   If you give a customer tickets to a theater performance or sporting event and you do not go with the customer to the performance or event, you have a choice. Where do i file 2011 taxes You can treat the tickets as either a gift or entertainment, whichever is to your advantage. Where do i file 2011 taxes   You can change your treatment of the tickets at a later date by filing an amended return. Where do i file 2011 taxes Generally, an amended return must be filed within 3 years from the date the original return was filed or within 2 years from the time the tax was paid, whichever is later. Where do i file 2011 taxes   If you go with the customer to the event, you must treat the cost of the tickets as an entertainment expense. Where do i file 2011 taxes You cannot choose, in this case, to treat the tickets as a gift. Where do i file 2011 taxes Prev  Up  Next   Home   More Online Publications
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Fiscal Year 2013 Enforcement and Service Results

The Fiscal Year 2013 Enforcement and Service Results tables provide details about IRS audit, collection and taxpayer service. Fiscal Year 2013 began on Oct. 1, 2012, and ended on Sept. 30, 2013.

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The Where Do I File 2011 Taxes

Where do i file 2011 taxes Publication 514 - Main Content Table of Contents Choosing To Take Credit or DeductionChoice Applies to All Qualified Foreign Taxes Making or Changing Your Choice Why Choose the Credit?Credit for Taxes Paid or Accrued Foreign Currency and Exchange Rates Foreign Tax Redetermination Who Can Take the Credit?U. Where do i file 2011 taxes S. Where do i file 2011 taxes Citizens Resident Aliens Nonresident Aliens What Foreign Taxes Qualify for the Credit?Tax Must Be Imposed on You You Must Have Paid or Accrued the Tax Tax Must Be the Legal and Actual Foreign Tax Liability Tax Must Be an Income Tax (or Tax in Lieu of Income Tax) Foreign Taxes for Which You Cannot Take a CreditTaxes on Excluded Income Taxes for Which You Can Only Take an Itemized Deduction Taxes on Foreign Mineral Income Taxes From International Boycott Operations Taxes on Combined Foreign Oil and Gas Income Taxes of U. Where do i file 2011 taxes S. Where do i file 2011 taxes Persons Controlling Foreign Corporations and Partnerships Taxes Related to a Foreign Tax Credit Splitting Event How To Figure the CreditLimit on the Credit Separate Limit Income Allocation of Foreign Taxes Foreign Taxes From a Partnership or an S Corporation Figuring the Limit Qualified Dividends Capital Gains and Losses Allocation of Foreign and U. Where do i file 2011 taxes S. Where do i file 2011 taxes Losses Tax Treaties Carryback and CarryoverTime Limit on Tax Assessment Claim for Refund Taxes All Credited or All Deducted Married Couples How To Claim the CreditForm 1116 Records To Keep Simple Example — Filled-In Form 1116Part I—Taxable Income or Loss From Sources Outside the United States (for Category Checked Above) Part II—Foreign Taxes Paid or Accrued Part III—Figuring the Credit Part IV—Summary of Credits From Separate Parts III Comprehensive Example — Filled-In Form 1116Foreign earned income. Where do i file 2011 taxes Employee business expenses. Where do i file 2011 taxes Forms 1116 Computation of Taxable Income Part I—Taxable Income or Loss From Sources Outside the United States (for Category Checked Above) Part II—Foreign Taxes Paid or Accrued Part III—Figuring the Credit Part IV—Summary of Credits From Separate Parts III Unused Foreign Taxes How To Get Tax HelpLow Income Taxpayer Clinics Choosing To Take Credit or Deduction You can choose whether to take the amount of any qualified foreign taxes paid or accrued during the year as a foreign tax credit or as an itemized deduction. Where do i file 2011 taxes You can change your choice for each year's taxes. Where do i file 2011 taxes To choose the foreign tax credit, in most cases you must complete Form 1116 and attach it to your U. Where do i file 2011 taxes S. Where do i file 2011 taxes tax return. Where do i file 2011 taxes However, you may qualify for the exception that allows you to claim the foreign tax credit without using Form 1116. Where do i file 2011 taxes See How To Figure the Credit , later. Where do i file 2011 taxes To choose to claim the taxes as an itemized deduction, use Schedule A (Form 1040), Itemized Deductions. Where do i file 2011 taxes Figure your tax both ways—claiming the credit and claiming the deduction. Where do i file 2011 taxes Then fill out your return the way that benefits you more. Where do i file 2011 taxes See Why Choose the Credit, later. Where do i file 2011 taxes Choice Applies to All Qualified Foreign Taxes As a general rule, you must choose to take either a credit or a deduction for all qualified foreign taxes. Where do i file 2011 taxes If you choose to take a credit for qualified foreign taxes, you must take the credit for all of them. Where do i file 2011 taxes You cannot deduct any of them. Where do i file 2011 taxes Conversely, if you choose to deduct qualified foreign taxes, you must deduct all of them. Where do i file 2011 taxes You cannot take a credit for any of them. Where do i file 2011 taxes See What Foreign Taxes Qualify for the Credit , later, for the meaning of qualified foreign taxes. Where do i file 2011 taxes There are exceptions to this general rule, which are described next. Where do i file 2011 taxes Exceptions for foreign taxes not allowed as a credit. Where do i file 2011 taxes   Even if you claim a credit for other foreign taxes, you can deduct any foreign tax that is not allowed as a credit if: You paid the tax to a country for which a credit is not allowed because it provides support for acts of international terrorism, or because the United States does not have or does not conduct diplomatic relations with it or recognize its government and that government is not otherwise eligible to purchase defense articles or services under the Arms Export Control Act, You paid withholding tax on dividends from foreign corporations whose stock you did not hold for the required period of time, You paid withholding tax on income or gain (other than dividends) from property you did not hold for the required period of time, You paid withholding tax on income or gain to the extent you had to make related payments on positions in substantially similar or related property, You participated in or cooperated with an international boycott, You paid taxes in connection with the purchase or sale of oil or gas, or You paid or accrued taxes on income or gain in connection with a covered asset acquisition. Where do i file 2011 taxes Covered asset acquisitions include certain acquisitions that result in a stepped-up basis for U. Where do i file 2011 taxes S. Where do i file 2011 taxes tax purposes. Where do i file 2011 taxes For more information, see Internal Revenue Code section 901(m). Where do i file 2011 taxes The IRS intends to issue guidance that will explain this provision in greater detail. Where do i file 2011 taxes   For more information on these items, see Taxes for Which You Can Only Take an Itemized Deduction , later, under Foreign Taxes for Which You Cannot Take a Credit. Where do i file 2011 taxes Foreign taxes that are not income taxes. Where do i file 2011 taxes   In most cases, only foreign income taxes qualify for the foreign tax credit. Where do i file 2011 taxes Other taxes, such as foreign real and personal property taxes, do not qualify. Where do i file 2011 taxes But you may be able to deduct these other taxes even if you claim the foreign tax credit for foreign income taxes. Where do i file 2011 taxes   In most cases, you can deduct these other taxes only if they are expenses incurred in a trade or business or in the production of income. Where do i file 2011 taxes However, you can deduct foreign real property taxes that are not trade or business expenses as an itemized deduction on Schedule A (Form 1040). Where do i file 2011 taxes Carrybacks and carryovers. Where do i file 2011 taxes   There is a limit on the credit you can claim in a tax year. Where do i file 2011 taxes If your qualified foreign taxes exceed the credit limit, you may be able to carry over or carry back the excess to another tax year. Where do i file 2011 taxes If you deduct qualified foreign taxes in a tax year, you cannot use a carryback or carryover in that year. Where do i file 2011 taxes That is because you cannot take both a deduction and a credit for qualified foreign taxes in the same tax year. Where do i file 2011 taxes   For more information on the limit, see How To Figure the Credit , later. Where do i file 2011 taxes For more information on carrybacks and carryovers, see Carryback and Carryover , later. Where do i file 2011 taxes Making or Changing Your Choice You can make or change your choice to claim a deduction or credit at any time during the period within 10 years from the regular due date for filing the return (without regard to any extension of time to file) for the tax year in which the taxes were actually paid or accrued. Where do i file 2011 taxes You make or change your choice on your tax return (or on an amended return) for the year your choice is to be effective. Where do i file 2011 taxes Example. Where do i file 2011 taxes You paid foreign taxes for the last 13 years and chose to deduct them on your U. Where do i file 2011 taxes S. Where do i file 2011 taxes income tax returns. Where do i file 2011 taxes You were timely in both filing your returns and paying your U. Where do i file 2011 taxes S. Where do i file 2011 taxes tax liability. Where do i file 2011 taxes In February 2013, you file an amended return for tax year 2002 choosing to take a credit for your 2002 foreign taxes because you now realize that the credit is more advantageous than the deduction for that year. Where do i file 2011 taxes Because the regular due date of your 2002 return was April 15, 2003, this choice is timely (within 10 years). Where do i file 2011 taxes Because there is a limit on the credit for your 2002 foreign tax, you have unused 2002 foreign taxes. Where do i file 2011 taxes Ordinarily, you first carry back unused foreign taxes arising in 2002 to, and claim them as a credit in, the 2 preceding tax years. Where do i file 2011 taxes If you are unable to claim all of them in those 2 years, you carry them forward to the 10 years following the year in which they arose. Where do i file 2011 taxes Because you originally chose to deduct your foreign taxes and the 10-year period for changing the choice for 2000 and 2001 has passed, you cannot change your choice and carry the unused 2002 foreign taxes back to tax years 2000 and 2001. Where do i file 2011 taxes Because the 10-year periods for changing the choice have not passed for your 2003 through 2012 income tax returns, you can still choose to claim the credit for those years and carry forward any unused 2002 foreign taxes. Where do i file 2011 taxes However, you must reduce the unused 2002 foreign taxes that you carry forward by the amount that would have been allowed as a carryback if you had timely carried back the foreign tax to tax years 2000 and 2001. Where do i file 2011 taxes You cannot take a credit or a deduction for foreign taxes paid on income you exclude under the foreign earned income exclusion or the foreign housing exclusion. Where do i file 2011 taxes See Foreign Earned Income and Housing Exclusions under Foreign Taxes for Which You Cannot Take a Credit, later. Where do i file 2011 taxes Why Choose the Credit? The foreign tax credit is intended to relieve you of a double tax burden when your foreign source income is taxed by both the United States and the foreign country. Where do i file 2011 taxes In most cases, if the foreign tax rate is higher than the U. Where do i file 2011 taxes S. Where do i file 2011 taxes rate, there will be no U. Where do i file 2011 taxes S. Where do i file 2011 taxes tax on the foreign income. Where do i file 2011 taxes If the foreign tax rate is lower than the U. Where do i file 2011 taxes S. Where do i file 2011 taxes rate, U. Where do i file 2011 taxes S. Where do i file 2011 taxes tax on the foreign income will be limited to the difference between the rates. Where do i file 2011 taxes The foreign tax credit can only reduce U. Where do i file 2011 taxes S. Where do i file 2011 taxes taxes on foreign source income; it cannot reduce U. Where do i file 2011 taxes S. Where do i file 2011 taxes taxes on U. Where do i file 2011 taxes S. Where do i file 2011 taxes source income. Where do i file 2011 taxes Although no one rule covers all situations, in most cases it is better to take a credit for qualified foreign taxes than to deduct them as an itemized deduction. Where do i file 2011 taxes This is because: A credit reduces your actual U. Where do i file 2011 taxes S. Where do i file 2011 taxes income tax on a dollar-for-dollar basis, while a deduction reduces only your income subject to tax, You can choose to take the foreign tax credit even if you do not itemize your deductions. Where do i file 2011 taxes You then are allowed the standard deduction in addition to the credit, and If you choose to take the foreign tax credit, and the taxes paid or accrued exceed the credit limit for the tax year, you may be able to carry over or carry back the excess to another tax year. Where do i file 2011 taxes (See Limit on credit under How To Figure the Credit, later. Where do i file 2011 taxes ) Example 1. Where do i file 2011 taxes For 2013, you and your spouse have adjusted gross income of $80,300, including $20,000 of dividend income from foreign sources. Where do i file 2011 taxes None of the dividends are qualified dividends. Where do i file 2011 taxes You file a joint return and can claim two $3,900 exemptions. Where do i file 2011 taxes You had to pay $2,000 in foreign income taxes on the dividend income. Where do i file 2011 taxes If you take the foreign taxes as an itemized deduction, your total itemized deductions are $15,000. Where do i file 2011 taxes Your taxable income then is $57,500 and your tax is $7,736. Where do i file 2011 taxes If you take the credit instead, your itemized deductions are only $13,000. Where do i file 2011 taxes Your taxable income then is $59,500 and your tax before the credit is $8,036. Where do i file 2011 taxes After the credit, however, your tax is only $6,036. Where do i file 2011 taxes Therefore, your tax is $1,700 lower ($7,736 − $6,036) by taking the credit. Where do i file 2011 taxes Example 2. Where do i file 2011 taxes In 2013, you receive investment income of $5,000 from a foreign country, which imposes a tax of $1,500 on that income. Where do i file 2011 taxes You report on your U. Where do i file 2011 taxes S. Where do i file 2011 taxes return this income as well as $56,000 of U. Where do i file 2011 taxes S. Where do i file 2011 taxes source wages and an allowable $49,000 partnership loss from a U. Where do i file 2011 taxes S. Where do i file 2011 taxes partnership. Where do i file 2011 taxes Your share of the partnership's gross income is $25,000 and your share of its expenses is $74,000. Where do i file 2011 taxes You are single, entitled to one $3,900 exemption, and have other itemized deductions of $6,850. Where do i file 2011 taxes If you deduct the foreign tax on your U. Where do i file 2011 taxes S. Where do i file 2011 taxes return, your taxable income is a negative $250 ($5,000 + $56,000 − $49,000 − $1,500 − $6,850 − $3,900) and your tax is $0. Where do i file 2011 taxes If you take the credit instead, your taxable income is $1,250 ($5,000 + $56,000 − $49,000 − $3,900 − $6,850) and your tax before the credit is $126. Where do i file 2011 taxes You can take a credit of only $113 because of limits discussed later. Where do i file 2011 taxes Your tax after the credit is $13 ($126 − $113), which is $13 more than if you deduct the foreign tax. Where do i file 2011 taxes If you choose the credit, you will have unused foreign taxes of $1,387 ($1,500 − $113). Where do i file 2011 taxes When deciding whether to take the credit or the deduction this year, you will need to consider whether you can benefit from a carryback or carryover of that unused foreign tax. Where do i file 2011 taxes Credit for Taxes Paid or Accrued You can claim the credit for a qualified foreign tax in the tax year in which you pay it or accrue it, depending on your method of accounting. Where do i file 2011 taxes “Tax year” refers to the tax year for which your U. Where do i file 2011 taxes S. Where do i file 2011 taxes return is filed, not the tax year for which your foreign return is filed. Where do i file 2011 taxes Accrual method of accounting. Where do i file 2011 taxes   If you use an accrual method of accounting, you can claim the credit only in the year in which you accrue the tax. Where do i file 2011 taxes You are using an accrual method of accounting if you report income when you earn it, rather than when you receive it, and you deduct your expenses when you incur them, rather than when you pay them. Where do i file 2011 taxes   In most cases, foreign taxes accrue when all the events have taken place that fix the amount of the tax and your liability to pay it. Where do i file 2011 taxes Generally, this occurs on the last day of the tax year for which your foreign return is filed. Where do i file 2011 taxes Contesting your foreign tax liability. Where do i file 2011 taxes   If you are contesting your foreign tax liability, you cannot accrue it and take a credit until the amount of foreign tax due is finally determined. Where do i file 2011 taxes However, if you choose to pay the tax liability you are contesting, you can take a credit for the amount you pay before a final determination of foreign tax liability is made. Where do i file 2011 taxes Once your liability is determined, the foreign tax credit is allowable for the year to which the foreign tax relates. Where do i file 2011 taxes If the amount of foreign taxes taken as a credit differs from the final foreign tax liability, you may have to adjust the credit, as discussed later under Foreign Tax Redetermination . Where do i file 2011 taxes You may have to post a bond. Where do i file 2011 taxes   If you claim a credit for taxes accrued but not paid, you may have to post an income tax bond to guarantee your payment of any tax due in the event the amount of foreign tax paid differs from the amount claimed. Where do i file 2011 taxes   The IRS can request this bond at any time without regard to the Time Limit on Tax Assessment discussed later under Carryback and Carryover. Where do i file 2011 taxes Cash method of accounting. Where do i file 2011 taxes   If you use the cash method of accounting, you can choose to take the credit either in the year you pay the tax or in the year you accrue it. Where do i file 2011 taxes You are using the cash method of accounting if you report income in the year you actually or constructively receive it, and deduct expenses in the year you pay them. Where do i file 2011 taxes Choosing to take credit in the year taxes accrue. Where do i file 2011 taxes   Even if you use the cash method of accounting, you can choose to take a credit for foreign taxes in the year they accrue. Where do i file 2011 taxes You make the choice by checking the box in Part II of Form 1116. Where do i file 2011 taxes Once you make that choice, you must follow it in all later years and take a credit for foreign taxes in the year they accrue. Where do i file 2011 taxes   In addition, the choice to take the credit when foreign taxes accrue applies to all foreign taxes qualifying for the credit. Where do i file 2011 taxes You cannot take a credit for some foreign taxes when paid and take a credit for others when accrued. Where do i file 2011 taxes   If you make the choice to take the credit when foreign taxes accrue and pay them in a later year, you cannot claim a deduction for any part of the previously accrued taxes. Where do i file 2011 taxes Credit based on taxes paid in earlier year. Where do i file 2011 taxes   If, in earlier years, you took the credit based on taxes paid, and this year you choose to take the credit based on taxes accrued, you may be able to take the credit this year for taxes from more than one year. Where do i file 2011 taxes Example. Where do i file 2011 taxes Last year you took the credit based on taxes paid. Where do i file 2011 taxes This year you chose to take the credit based on taxes accrued. Where do i file 2011 taxes During the year you paid foreign income taxes owed for last year. Where do i file 2011 taxes You also accrued foreign income taxes for this year that you did not pay by the end of the year. Where do i file 2011 taxes You can base the credit on your return for this year on both last year's taxes that you paid and this year's taxes that you accrued. Where do i file 2011 taxes Foreign Currency and Exchange Rates U. Where do i file 2011 taxes S. Where do i file 2011 taxes income tax is imposed on income expressed in U. Where do i file 2011 taxes S. Where do i file 2011 taxes dollars, while in most cases the foreign tax is imposed on income expressed in foreign currency. Where do i file 2011 taxes Therefore, fluctuations in the value of the foreign currency relative to the U. Where do i file 2011 taxes S. Where do i file 2011 taxes dollar may affect the foreign tax credit. Where do i file 2011 taxes Translating foreign currency into U. Where do i file 2011 taxes S. Where do i file 2011 taxes dollars. Where do i file 2011 taxes   If you receive all or part of your income or pay some or all of your expenses in foreign currency, you must translate the foreign currency into U. Where do i file 2011 taxes S. Where do i file 2011 taxes dollars. Where do i file 2011 taxes How and when you do this depends on your functional currency. Where do i file 2011 taxes In most cases, your functional currency is the U. Where do i file 2011 taxes S. Where do i file 2011 taxes dollar unless you are required to use the currency of a foreign country. Where do i file 2011 taxes   You must make all federal income tax determinations in your functional currency. Where do i file 2011 taxes The U. Where do i file 2011 taxes S. Where do i file 2011 taxes dollar is the functional currency for all taxpayers except some qualified business units. Where do i file 2011 taxes A qualified business unit is a separate and clearly identified unit of a trade or business that maintains separate books and records. Where do i file 2011 taxes Unless you are self-employed, your functional currency is the U. Where do i file 2011 taxes S. Where do i file 2011 taxes dollar. Where do i file 2011 taxes   Even if you are self-employed and have a qualified business unit, your functional currency is the U. Where do i file 2011 taxes S. Where do i file 2011 taxes dollar if any of the following apply. Where do i file 2011 taxes You conduct the business primarily in dollars. Where do i file 2011 taxes The principal place of business is located in the United States. Where do i file 2011 taxes You choose to or are required to use the dollar as your functional currency. Where do i file 2011 taxes The business books and records are not kept in the currency of the economic environment in which a significant part of the business activities is conducted. Where do i file 2011 taxes   If your functional currency is the U. Where do i file 2011 taxes S. Where do i file 2011 taxes dollar, you must immediately translate into dollars all items of income, expense, etc. Where do i file 2011 taxes , that you receive, pay, or accrue in a foreign currency and that will affect computation of your income tax. Where do i file 2011 taxes If there is more than one exchange rate, use the one that most properly reflects your income. Where do i file 2011 taxes In most cases, you can get exchange rates from banks and U. Where do i file 2011 taxes S. Where do i file 2011 taxes Embassies. Where do i file 2011 taxes   If your functional currency is not the U. Where do i file 2011 taxes S. Where do i file 2011 taxes dollar, make all income tax determinations in your functional currency. Where do i file 2011 taxes At the end of the year, translate the results, such as income or loss, into U. Where do i file 2011 taxes S. Where do i file 2011 taxes dollars to report on your income tax return. Where do i file 2011 taxes    For more information, write to: Internal Revenue Service International Section Philadelphia, PA 19255-0725 Rate of exchange for foreign taxes paid. Where do i file 2011 taxes   Use the rate of exchange in effect on the date you paid the foreign taxes to the foreign country unless you meet the exception discussed next. Where do i file 2011 taxes If your tax was withheld in foreign currency, use the rate of exchange in effect for the date on which the tax was withheld. Where do i file 2011 taxes If you make foreign estimated tax payments, you use the rate of exchange in effect for the date on which you made the estimated tax payment. Where do i file 2011 taxes   The exchange rate rules discussed here apply even if the foreign taxes are paid or accrued with respect to a foreign tax credit splitting event (discussed later). Where do i file 2011 taxes Exception. Where do i file 2011 taxes   If you claim the credit for foreign taxes on an accrual basis, in most cases you must use the average exchange rate for the tax year to which the taxes relate. Where do i file 2011 taxes This rule applies to accrued taxes relating to tax years beginning after 1997 and only under the following conditions. Where do i file 2011 taxes The foreign taxes are paid on or after the first day of the tax year to which they relate. Where do i file 2011 taxes The foreign taxes are paid not later than 2 years after the close of the tax year to which they relate. Where do i file 2011 taxes The foreign tax liability is not denominated in an inflationary currency (defined in the Form 1116 instructions). Where do i file 2011 taxes (This condition applies to taxes paid or accrued in tax years beginning after November 6, 2007. Where do i file 2011 taxes )   For all other foreign taxes, you should use the exchange rate in effect on the date you paid them. Where do i file 2011 taxes Election to use exchange rate on date paid. Where do i file 2011 taxes   If you have accrued foreign taxes that you are otherwise required to convert using the average exchange rate, you may elect to use the exchange rate in effect on the date the foreign taxes are paid if the taxes are denominated in a nonfunctional foreign currency. Where do i file 2011 taxes If any of the accrued taxes are unpaid, you must translate them into U. Where do i file 2011 taxes S. Where do i file 2011 taxes dollars using the exchange rate on the last day of the U. Where do i file 2011 taxes S. Where do i file 2011 taxes tax year to which those taxes relate. Where do i file 2011 taxes You may make the election for all nonfunctional currency foreign income taxes or only those nonfunctional currency foreign income taxes that are attributable to qualified business units with a U. Where do i file 2011 taxes S. Where do i file 2011 taxes dollar functional currency. Where do i file 2011 taxes Once made, the election applies to the tax year for which made and all subsequent tax years unless revoked with the consent of the IRS. Where do i file 2011 taxes The election is available for tax years beginning after 2004. Where do i file 2011 taxes It must be made by the due date (including extensions) for filing the tax return for the first tax year to which the election applies. Where do i file 2011 taxes Make the election by attaching a statement to the applicable tax return. Where do i file 2011 taxes The statement must identify whether the election is made for all foreign taxes or only for foreign taxes attributable to qualified business units with a U. Where do i file 2011 taxes S. Where do i file 2011 taxes dollar functional currency. Where do i file 2011 taxes Foreign Tax Redetermination A foreign tax redetermination is any change in your foreign tax liability that may affect your U. Where do i file 2011 taxes S. Where do i file 2011 taxes foreign tax credit claimed. Where do i file 2011 taxes The year in which to claim the credit remains the year to which the foreign taxes paid or accrued relate, even if the change in foreign tax liability occurs in a later year. Where do i file 2011 taxes If a foreign tax redetermination occurs, a redetermination of your U. Where do i file 2011 taxes S. Where do i file 2011 taxes tax liability is required if any of the following conditions apply. Where do i file 2011 taxes The accrued taxes when paid differ from the amounts claimed as a credit. Where do i file 2011 taxes The accrued taxes you claimed as a credit in one tax year are not paid within 2 years after the end of that tax year. Where do i file 2011 taxes If this applies to you, you must reduce the credit previously claimed by the amount of the unpaid taxes. Where do i file 2011 taxes You will not be allowed a credit for the unpaid taxes until you pay them. Where do i file 2011 taxes When you pay the accrued taxes, a new foreign tax redetermination occurs and you must translate the taxes into U. Where do i file 2011 taxes S. Where do i file 2011 taxes dollars using the exchange rate as of the date they were paid. Where do i file 2011 taxes The foreign tax credit is allowed for the year to which the foreign tax relates. Where do i file 2011 taxes See Rate of exchange for foreign taxes paid , earlier, under Foreign Currency and Exchange Rates. Where do i file 2011 taxes The foreign taxes you paid are refunded in whole or in part. Where do i file 2011 taxes For taxes taken into account when accrued but translated into dollars on the date of payment, the dollar value of the accrued tax differs from the dollar value of the tax paid because of fluctuations in the exchange rate between the date of accrual and the date of payment. Where do i file 2011 taxes However, no redetermination is required if the change in foreign tax liability for each foreign country is solely attributable to exchange rate fluctuations and is less than the smaller of: $10,000, or 2% of the total dollar amount of the foreign tax initially accrued for that foreign country for the U. Where do i file 2011 taxes S. Where do i file 2011 taxes tax year. Where do i file 2011 taxes In this case, you must adjust your U. Where do i file 2011 taxes S. Where do i file 2011 taxes tax in the tax year in which the accrued foreign taxes are paid. Where do i file 2011 taxes Notice to the Internal Revenue Service (IRS) of Redetermination You are required to notify the IRS about a foreign tax credit redetermination that affects your U. Where do i file 2011 taxes S. Where do i file 2011 taxes tax liability for each tax year affected by the redetermination. Where do i file 2011 taxes In most cases, you must file Form 1040X, Amended U. Where do i file 2011 taxes S. Where do i file 2011 taxes Individual Income Tax Return, with a revised Form 1116 and a statement that contains information sufficient for the IRS to redetermine your U. Where do i file 2011 taxes S. Where do i file 2011 taxes tax liability for the year or years affected. Where do i file 2011 taxes See Contents of statement , later. Where do i file 2011 taxes You are not required to attach Form 1116 for a tax year affected by a redetermination if: The amount of your creditable taxes paid or accrued during the tax year is not more than $300 ($600 if married filing a joint return) as a result of the foreign tax redetermination, and You meet the requirements listed under Exemption from foreign tax credit limit under How To Figure the Credit, later. Where do i file 2011 taxes There are other exceptions to this requirement. Where do i file 2011 taxes They are discussed later under Due date of notification to IRS . Where do i file 2011 taxes Contents of statement. Where do i file 2011 taxes   The statement must include all of the following. Where do i file 2011 taxes Your name, address, and taxpayer identification number. Where do i file 2011 taxes The tax year or years that are affected by the foreign tax redetermination. Where do i file 2011 taxes The date or dates the foreign taxes were accrued, if applicable. Where do i file 2011 taxes The date or dates the foreign taxes were paid. Where do i file 2011 taxes The amount of foreign taxes paid or accrued on each date (in foreign currency) and the exchange rate used to translate each amount. Where do i file 2011 taxes Information sufficient to determine any interest due from or owing to you, including the amount of any interest paid to you by the foreign government and the dates received. Where do i file 2011 taxes   In the case of any foreign taxes that were not paid before the date two years after the close of the tax year to which those taxes relate, you must provide the amount of those taxes in foreign currency and the exchange rate that was used to translate that amount when originally claimed as a credit. Where do i file 2011 taxes   If any foreign tax was refunded in whole or in part, you must provide the date and amount (in foreign currency) of each refund, the exchange rate that was used to translate each amount when originally claimed as a credit, and the exchange rate for the date the refund was received (for purposes of computing foreign currency gain or loss under Internal Revenue Code section 988). Where do i file 2011 taxes Due date of notification to IRS. Where do i file 2011 taxes   If you pay less foreign tax than you originally claimed a credit for, in most cases you must file a notification by the due date (with extensions) of your original return for your tax year in which the foreign tax redetermination occurred. Where do i file 2011 taxes There is no limit on the time the IRS has to redetermine and assess the correct U. Where do i file 2011 taxes S. Where do i file 2011 taxes tax due. Where do i file 2011 taxes If you pay more foreign tax than you originally claimed a credit for, you have 10 years to file a claim for refund of U. Where do i file 2011 taxes S. Where do i file 2011 taxes taxes. Where do i file 2011 taxes See Time Limit on Refund Claims , later. Where do i file 2011 taxes   Exceptions to this due date are explained in the next two paragraphs. Where do i file 2011 taxes Multiple redeterminations of U. Where do i file 2011 taxes S. Where do i file 2011 taxes tax liability for same tax year. Where do i file 2011 taxes   Where more than one foreign tax redetermination requires a redetermination of U. Where do i file 2011 taxes S. Where do i file 2011 taxes tax liability for the same tax year and those redeterminations occur in the same tax year or within two consecutive tax years, you can file for that tax year one notification (Form 1040X with a Form 1116 and the required statement) that reflects all those tax redeterminations. Where do i file 2011 taxes If you choose to file one notification, the due date for that notification is the due date of the original return (with extensions) for the year in which the first foreign tax redetermination that reduced your foreign tax liability occurred. Where do i file 2011 taxes However, foreign tax redeterminations with respect to the tax year for which a redetermination of U. Where do i file 2011 taxes S. Where do i file 2011 taxes tax liability is required may occur after the due date for providing that notification. Where do i file 2011 taxes In this situation, you may have to file more than one Form 1040X for that tax year. Where do i file 2011 taxes Additional U. Where do i file 2011 taxes S. Where do i file 2011 taxes tax due eliminated by foreign tax credit carryback or carryover. Where do i file 2011 taxes   If a foreign tax redetermination requires a redetermination of U. Where do i file 2011 taxes S. Where do i file 2011 taxes tax liability that would otherwise result in an additional amount of U. Where do i file 2011 taxes S. Where do i file 2011 taxes tax due, but the additional tax is eliminated by a carryback or carryover of an unused foreign tax, you do not have to amend your tax return for the year affected by the redetermination. Where do i file 2011 taxes Instead, you can notify the IRS by attaching a statement to the original return for the tax year in which the foreign tax redetermination occurred. Where do i file 2011 taxes You must file the statement by the due date (with extensions) of that return. Where do i file 2011 taxes The statement must show the amount of the unused foreign taxes paid or accrued and a detailed schedule showing the computation of the carryback or carryover (including the amounts carried back or over to the year for which a redetermination on U. Where do i file 2011 taxes S. Where do i file 2011 taxes tax liability is required). Where do i file 2011 taxes Failure-to-notify penalty. Where do i file 2011 taxes   If you fail to notify the IRS of a foreign tax redetermination and cannot show reasonable cause for the failure, you may have to pay a penalty. Where do i file 2011 taxes   For each month, or part of a month, that the failure continues, you pay a penalty of 5% of the tax due resulting from a redetermination of your U. Where do i file 2011 taxes S. Where do i file 2011 taxes tax. Where do i file 2011 taxes This penalty cannot be more than 25% of the tax due. Where do i file 2011 taxes Foreign tax refund. Where do i file 2011 taxes   If you receive a foreign tax refund without interest from the foreign government, you will not have to pay interest on the amount of tax due resulting from the adjustment to your U. Where do i file 2011 taxes S. Where do i file 2011 taxes tax for the time before the date of the refund. Where do i file 2011 taxes   However, if you receive a foreign tax refund with interest, you must pay interest to the IRS up to the amount of the interest paid to you by the foreign government. Where do i file 2011 taxes The interest you must pay cannot be more than the interest you would have had to pay on taxes that were unpaid for any other reason for the same period. Where do i file 2011 taxes Interest also is owed from the time you receive a refund until you pay the additional tax due. Where do i file 2011 taxes Foreign tax imposed on foreign refund. Where do i file 2011 taxes   If your foreign tax refund is taxed by the foreign country, you cannot take a separate credit or deduction for this additional foreign tax. Where do i file 2011 taxes However, when you refigure the foreign tax credit taken for the original foreign tax, reduce the amount of the refund by the foreign tax paid on the refund. Where do i file 2011 taxes Example. Where do i file 2011 taxes You paid a foreign income tax of $3,000 in 2011, and received a foreign tax refund of $500 in 2013 on which a foreign tax of $100 was imposed. Where do i file 2011 taxes When you refigure your credit for 2011, you must reduce the $3,000 you paid by $400. Where do i file 2011 taxes Time Limit on Refund Claims You have 10 years to file a claim for refund of U. Where do i file 2011 taxes S. Where do i file 2011 taxes tax if you find that you paid or accrued a larger foreign tax than you claimed a credit for. Where do i file 2011 taxes The 10-year period begins the day after the regular due date for filing the return (without extensions) for the year in which the taxes were actually paid or accrued. Where do i file 2011 taxes You have 10 years to file your claim regardless of whether you claim the credit for taxes paid or taxes accrued. Where do i file 2011 taxes The 10-year period applies to claims for refund or credit based on: Fixing math errors in figuring qualified foreign taxes, Reporting qualified foreign taxes not originally reported on the return, or Any other change in the size of the credit (including one caused by correcting the foreign tax credit limit). Where do i file 2011 taxes The special 10-year period also applies to making or changing your choice to claim a deduction or credit for foreign taxes. Where do i file 2011 taxes See Making or Changing Your Choice discussed earlier under Choosing To Take Credit or Deduction. Where do i file 2011 taxes Who Can Take the Credit? U. Where do i file 2011 taxes S. Where do i file 2011 taxes citizens, resident aliens, and nonresident aliens who paid foreign income tax and are subject to U. Where do i file 2011 taxes S. Where do i file 2011 taxes tax on foreign source income may be able to take a foreign tax credit. Where do i file 2011 taxes U. Where do i file 2011 taxes S. Where do i file 2011 taxes Citizens If you are a U. Where do i file 2011 taxes S. Where do i file 2011 taxes citizen, you are taxed by the United States on your worldwide income wherever you live. Where do i file 2011 taxes You are normally entitled to take a credit for foreign taxes you pay or accrue. Where do i file 2011 taxes Resident Aliens If you are a resident alien of the United States, you can take a credit for foreign taxes subject to the same general rules as U. Where do i file 2011 taxes S. Where do i file 2011 taxes citizens. Where do i file 2011 taxes If you are a bona fide resident of Puerto Rico for the entire tax year, you also come under the same rules. Where do i file 2011 taxes Usually, you can take a credit only for those foreign taxes imposed on income you actually or constructively received while you had resident alien status. Where do i file 2011 taxes For information on alien status, see Publication 519. Where do i file 2011 taxes Nonresident Aliens If you are a nonresident alien, you cannot take the credit in most cases. Where do i file 2011 taxes However, you may be able to take the credit if: You were a bona fide resident of Puerto Rico during your entire tax year, or You pay or accrue tax to a foreign country or U. Where do i file 2011 taxes S. Where do i file 2011 taxes possession on income from foreign sources that is effectively connected with a trade or business in the United States. Where do i file 2011 taxes But if you must pay tax to a foreign country or U. Where do i file 2011 taxes S. Where do i file 2011 taxes possession on income from U. Where do i file 2011 taxes S. Where do i file 2011 taxes sources only because you are a citizen or a resident of that country or U. Where do i file 2011 taxes S. Where do i file 2011 taxes possession, do not use that tax in figuring the amount of your credit. Where do i file 2011 taxes For information on alien status and effectively connected income, see Publication 519. Where do i file 2011 taxes What Foreign Taxes Qualify for the Credit? In most cases, the following four tests must be met for any foreign tax to qualify for the credit. Where do i file 2011 taxes The tax must be imposed on you. Where do i file 2011 taxes You must have paid or accrued the tax. Where do i file 2011 taxes The tax must be the legal and actual foreign tax liability. Where do i file 2011 taxes The tax must be an income tax (or a tax in lieu of an income tax). Where do i file 2011 taxes Certain foreign taxes do not qualify for the credit even if the four tests are met. Where do i file 2011 taxes See Foreign Taxes for Which You Cannot Take a Credit, later. Where do i file 2011 taxes Tax Must Be Imposed on You You can claim a credit only for foreign taxes that are imposed on you by a foreign country or U. Where do i file 2011 taxes S. Where do i file 2011 taxes possession. Where do i file 2011 taxes For example, a tax that is deducted from your wages is considered to be imposed on you. Where do i file 2011 taxes You cannot shift the right to claim the credit by contract or other means. Where do i file 2011 taxes Foreign country. Where do i file 2011 taxes   A foreign country includes any foreign state and its political subdivisions. Where do i file 2011 taxes Income, war profits, and excess profits taxes paid or accrued to a foreign city or province qualify for the foreign tax credit. Where do i file 2011 taxes U. Where do i file 2011 taxes S. Where do i file 2011 taxes possessions. Where do i file 2011 taxes   For foreign tax credit purposes, all qualified taxes paid to U. Where do i file 2011 taxes S. Where do i file 2011 taxes possessions are considered foreign taxes. Where do i file 2011 taxes For this purpose, U. Where do i file 2011 taxes S. Where do i file 2011 taxes possessions include Puerto Rico and American Samoa. Where do i file 2011 taxes   When the term “foreign country” is used in this publication, it includes U. Where do i file 2011 taxes S. Where do i file 2011 taxes possessions unless otherwise stated. Where do i file 2011 taxes You Must Have Paid or Accrued the Tax In most cases, you can claim the credit only if you paid or accrued the foreign tax to a foreign country or U. Where do i file 2011 taxes S. Where do i file 2011 taxes possession. Where do i file 2011 taxes However, the paragraphs that follow describe some instances in which you can claim the credit even if you did not directly pay or accrue the tax yourself. Where do i file 2011 taxes Joint return. Where do i file 2011 taxes   If you file a joint return, you can claim the credit based on the total foreign income taxes paid or accrued by you and your spouse. Where do i file 2011 taxes Combined income. Where do i file 2011 taxes   If foreign tax is imposed on the combined income of two or more persons (for example, spouses), the tax is allocated among, and considered paid by, these persons on a pro rata basis in proportion to each person's portion of the combined income, as determined under foreign law and Regulations section 1. Where do i file 2011 taxes 901-2(f)(3)(iii). Where do i file 2011 taxes Combined income with respect to each foreign tax that is imposed on a combined basis (and combined income subject to tax exemption or preferential tax rates) is computed separately, and the tax on that combined income is allocated separately. Where do i file 2011 taxes   These rules apply to foreign taxes paid or accrued in tax years beginning after February 14, 2012. Where do i file 2011 taxes However, you can choose to apply the new rules to foreign taxes paid or accrued in tax years beginning after December 31, 2010, and before February 15, 2012. Where do i file 2011 taxes For more details, see paragraphs (f) and (h) of Regulations section 1. Where do i file 2011 taxes 901-2. Where do i file 2011 taxes For similar rules applicable to prior tax years, see Regulations section 1. Where do i file 2011 taxes 901-2 (revised as of April 1, 2011). Where do i file 2011 taxes Example. Where do i file 2011 taxes You and your spouse reside in Country X, which imposes income tax on your combined incomes. Where do i file 2011 taxes Both of you use the “u” as your functional currency. Where do i file 2011 taxes Country X apportions tax based on income. Where do i file 2011 taxes You had income of 30,000u and your spouse had income of 20,000u. Where do i file 2011 taxes Your filing status on your U. Where do i file 2011 taxes S. Where do i file 2011 taxes income tax return is married filing separately. Where do i file 2011 taxes You can claim only 60% (30,000u/50,000u) of the foreign taxes imposed on your income on your U. Where do i file 2011 taxes S income tax return. Where do i file 2011 taxes Your spouse can claim only 40% (20,000u/50,000u). Where do i file 2011 taxes Partner or S corporation shareholder. Where do i file 2011 taxes   If you are a member of a partnership, or a shareholder in an S corporation, you can claim the credit based on your proportionate share of the foreign income taxes paid or accrued by the partnership or the S corporation. Where do i file 2011 taxes These amounts will be shown on the Schedule K-1 you receive from the partnership or S corporation. Where do i file 2011 taxes However, if you are a shareholder in an S corporation that in turn owns stock in a foreign corporation, you cannot claim a credit for your share of foreign taxes paid by the foreign corporation. Where do i file 2011 taxes Beneficiary. Where do i file 2011 taxes   If you are a beneficiary of an estate or trust, you may be able to claim the credit based on your proportionate share of foreign income taxes paid or accrued by the estate or trust. Where do i file 2011 taxes This amount will be shown on the Schedule K-1 you receive from the estate or trust. Where do i file 2011 taxes However, you must show that the tax was imposed on income of the estate and not on income received by the decedent. Where do i file 2011 taxes Mutual fund shareholder. Where do i file 2011 taxes   If you are a shareholder of a mutual fund or other regulated investment company (RIC), you may be able to claim the credit based on your share of foreign income taxes paid by the fund if it chooses to pass the credit on to its shareholders. Where do i file 2011 taxes You should receive from the mutual fund or other RIC a Form 1099-DIV, or similar statement, showing your share of the foreign income, and your share of the foreign taxes paid. Where do i file 2011 taxes If you do not receive this information, you will need to contact the fund. Where do i file 2011 taxes Controlled foreign corporation shareholder. Where do i file 2011 taxes   If you are a shareholder of a controlled foreign corporation and choose to be taxed at corporate rates on the amount you must include in gross income from that corporation, you can claim the credit based on your share of foreign taxes paid or accrued by the controlled foreign corporation. Where do i file 2011 taxes If you make this election, you must claim the credit by filing Form 1118, Foreign Tax Credit—Corporations. Where do i file 2011 taxes Controlled foreign corporation. Where do i file 2011 taxes   A controlled foreign corporation is a foreign corporation in which U. Where do i file 2011 taxes S. Where do i file 2011 taxes shareholders own more than 50% of the voting power or value of the stock. Where do i file 2011 taxes You are considered a U. Where do i file 2011 taxes S. Where do i file 2011 taxes shareholder if you own, directly or indirectly, 10% or more of the total voting power of all classes of the foreign corporation's stock. Where do i file 2011 taxes See Internal Revenue Code sections 951(b) and 958(b) for more information. Where do i file 2011 taxes Tax Must Be the Legal and Actual Foreign Tax Liability The amount of foreign tax that qualifies is not necessarily the amount of tax withheld by the foreign country. Where do i file 2011 taxes Only the legal and actual foreign tax liability that you paid or accrued during the year qualifies for the credit. Where do i file 2011 taxes Foreign tax refund. Where do i file 2011 taxes   You cannot take a foreign tax credit for income taxes paid to a foreign country if it is reasonably certain the amount would be refunded, credited, rebated, abated, or forgiven if you made a claim. Where do i file 2011 taxes   For example, the United States has tax treaties with many countries allowing U. Where do i file 2011 taxes S. Where do i file 2011 taxes citizens and residents reductions in the rates of tax of those foreign countries. Where do i file 2011 taxes However, some treaty countries require U. Where do i file 2011 taxes S. Where do i file 2011 taxes citizens and residents to pay the tax figured without regard to the lower treaty rates and then claim a refund for the amount by which the tax actually paid is more than the amount of tax figured using the lower treaty rate. Where do i file 2011 taxes The qualified foreign tax is the amount figured using the lower treaty rate and not the amount actually paid, because the excess tax is refundable. Where do i file 2011 taxes Subsidy received. Where do i file 2011 taxes   Tax payments a foreign country returns to you in the form of a subsidy do not qualify for the foreign tax credit. Where do i file 2011 taxes This rule applies even if the subsidy is given to a person related to you, or persons who participated with you in a transaction or a related transaction. Where do i file 2011 taxes A subsidy can be provided by any means but must be determined, directly or indirectly, in relation to the amount of tax, or to the base used to figure the tax. Where do i file 2011 taxes   The term “subsidy” includes any type of benefit. Where do i file 2011 taxes Some ways of providing a subsidy are refunds, credits, deductions, payments, or discharges of obligations. Where do i file 2011 taxes Shareholder receiving refund for corporate tax in integrated system. Where do i file 2011 taxes   Under some foreign tax laws and treaties, a shareholder is considered to have paid part of the tax that is imposed on the corporation. Where do i file 2011 taxes You may be able to claim a refund of these taxes from the foreign government. Where do i file 2011 taxes You must include the refund (including any amount withheld) in your income in the year received. Where do i file 2011 taxes Any tax withheld from the refund is a qualified foreign tax. Where do i file 2011 taxes Example. Where do i file 2011 taxes You are a shareholder of a French corporation. Where do i file 2011 taxes You receive a $100 refund of the tax paid to France by the corporation on the earnings distributed to you as a dividend. Where do i file 2011 taxes The French government imposes a 15% withholding tax ($15) on the refund you received. Where do i file 2011 taxes You receive a check for $85. Where do i file 2011 taxes You include $100 in your income. Where do i file 2011 taxes The $15 of tax withheld is a qualified foreign tax. Where do i file 2011 taxes Tax Must Be an Income Tax (or Tax in Lieu of Income Tax) In most cases, only income, war profits, and excess profits taxes (income taxes) qualify for the foreign tax credit. Where do i file 2011 taxes Foreign taxes on wages, dividends, interest, and royalties qualify for the credit in most cases. Where do i file 2011 taxes Furthermore, foreign taxes on income can qualify even though they are not imposed under an income tax law if the tax is in lieu of an income, war profits, or excess profits tax. Where do i file 2011 taxes See Taxes in Lieu of Income Taxes , later. Where do i file 2011 taxes Income Tax Simply because the levy is called an income tax by the foreign taxing authority does not make it an income tax for this purpose. Where do i file 2011 taxes A foreign levy is an income tax only if it meets both of the following requirements. Where do i file 2011 taxes It is a tax; that is, you have to pay it and you get no specific economic benefit (discussed below) from paying it. Where do i file 2011 taxes The predominant character of the tax is that of an income tax in the U. Where do i file 2011 taxes S. Where do i file 2011 taxes sense. Where do i file 2011 taxes A foreign levy may meet these requirements even if the foreign tax law differs from U. Where do i file 2011 taxes S. Where do i file 2011 taxes tax law. Where do i file 2011 taxes The foreign law may include in income items that U. Where do i file 2011 taxes S. Where do i file 2011 taxes law does not include, or it may allow certain exclusions or deductions that U. Where do i file 2011 taxes S. Where do i file 2011 taxes law does not allow. Where do i file 2011 taxes Specific economic benefit. Where do i file 2011 taxes   In most cases, you get a specific economic benefit if you receive, or are considered to receive, an economic benefit from the foreign country imposing the levy, and: If there is a generally imposed income tax, the economic benefit is not available on substantially the same terms to all persons subject to the income tax, or If there is no generally imposed income tax, the economic benefit is not available on substantially the same terms to the population of the foreign country in general. Where do i file 2011 taxes   You are considered to receive a specific economic benefit if you have a business transaction with a person who receives a specific economic benefit from the foreign country and, under the terms and conditions of the transaction, you receive directly or indirectly all or part of the benefit. Where do i file 2011 taxes   However, see the exception discussed later under Pension, unemployment, and disability fund payments . Where do i file 2011 taxes Economic benefits. Where do i file 2011 taxes   Economic benefits include the following. Where do i file 2011 taxes Goods. Where do i file 2011 taxes Services. Where do i file 2011 taxes Fees or other payments. Where do i file 2011 taxes Rights to use, acquire, or extract resources, patents, or other property the foreign country owns or controls. Where do i file 2011 taxes Discharges of contractual obligations. Where do i file 2011 taxes   In most cases, the right or privilege merely to engage in business is not an economic benefit. Where do i file 2011 taxes Dual-capacity taxpayers. Where do i file 2011 taxes   If you are subject to a foreign country's levy and you also receive a specific economic benefit from that foreign country, you are a “dual-capacity taxpayer. Where do i file 2011 taxes ” As a dual-capacity taxpayer, you cannot claim a credit for any part of the foreign levy, unless you establish that the amount paid under a distinct element of the foreign levy is a tax, rather than a compulsory payment for a direct or indirect specific economic benefit. Where do i file 2011 taxes    For more information on how to establish amounts paid under separate elements of a levy, write to: Internal Revenue Service International Section Philadelphia, PA 19255-0725 Pension, unemployment, and disability fund payments. Where do i file 2011 taxes   A foreign tax imposed on an individual to pay for retirement, old-age, death, survivor, unemployment, illness, or disability benefits, or for substantially similar purposes, is not payment for a specific economic benefit if the amount of the tax does not depend on the age, life expectancy, or similar characteristics of that individual. Where do i file 2011 taxes    No deduction or credit is allowed, however, for social security taxes paid or accrued to a foreign country with which the United States has a social security agreement. Where do i file 2011 taxes For more information about these agreements, see Publication 54. Where do i file 2011 taxes Soak-up taxes. Where do i file 2011 taxes   A foreign tax is not predominantly an income tax and does not qualify for credit to the extent it is a soak-up tax. Where do i file 2011 taxes A tax is a soak-up tax to the extent that liability for it depends on the availability of a credit for it against income tax imposed by another country. Where do i file 2011 taxes This rule applies only if and to the extent that the foreign tax would not be imposed if the credit were not available. Where do i file 2011 taxes Penalties and interest. Where do i file 2011 taxes   Amounts paid to a foreign government to satisfy a liability for interest, fines, penalties, or any similar obligation are not taxes and do not qualify for the credit. Where do i file 2011 taxes Taxes not based on income. Where do i file 2011 taxes   Foreign taxes based on gross receipts or the number of units produced, rather than on realized net income, do not qualify unless they are imposed in lieu of an income tax, as discussed next. Where do i file 2011 taxes Taxes based on assets, such as property taxes, do not qualify for the credit. Where do i file 2011 taxes Taxes in Lieu of Income Taxes A tax paid or accrued to a foreign country qualifies for the credit if it is imposed in lieu of an income tax otherwise generally imposed. Where do i file 2011 taxes A foreign levy is a tax in lieu of an income tax only if: It is not payment for a specific economic benefit as discussed earlier, and The tax is imposed in place of, and not in addition to, an income tax otherwise generally imposed. Where do i file 2011 taxes A tax in lieu of an income tax does not have to be based on realized net income. Where do i file 2011 taxes A foreign tax imposed on gross income, gross receipts or sales, or the number of units produced or exported can qualify for the credit. Where do i file 2011 taxes In most cases, a soak-up tax (discussed earlier) does not qualify as a tax in lieu of an income tax. Where do i file 2011 taxes However, if the foreign country imposes a soak-up tax in lieu of an income tax, the amount that does not qualify for foreign tax credit is the lesser of the following amounts. Where do i file 2011 taxes The soak-up tax. Where do i file 2011 taxes The foreign tax you paid that is more than the amount you would have paid if you had been subject to the generally imposed income tax. Where do i file 2011 taxes Foreign Taxes for Which You Cannot Take a Credit This part discusses the foreign taxes for which you cannot take a credit. Where do i file 2011 taxes These are: Taxes on excluded income, Taxes for which you can only take an itemized deduction, Taxes on foreign mineral income, Taxes from international boycott operations, A portion of taxes on combined foreign oil and gas income, Taxes of U. Where do i file 2011 taxes S. Where do i file 2011 taxes persons controlling foreign corporations and partnerships who fail to file required information returns, and Taxes related to a foreign tax splitting event. Where do i file 2011 taxes Taxes on Excluded Income You cannot take a credit for foreign taxes paid or accrued on certain income that is excluded from U. Where do i file 2011 taxes S. Where do i file 2011 taxes gross income. Where do i file 2011 taxes Foreign Earned Income and Housing Exclusions You must reduce your foreign taxes available for the credit by the amount of those taxes paid or accrued on income that is excluded from U. Where do i file 2011 taxes S. Where do i file 2011 taxes income under the foreign earned income exclusion or the foreign housing exclusion. Where do i file 2011 taxes See Publication 54 for more information on the foreign earned income and housing exclusions. Where do i file 2011 taxes Wages completely excluded. Where do i file 2011 taxes   If your wages are completely excluded, you cannot take a credit for any of the foreign taxes paid or accrued on these wages. Where do i file 2011 taxes Wages partly excluded. Where do i file 2011 taxes   If only part of your wages is excluded, you cannot take a credit for the foreign income taxes allocable to the excluded part. Where do i file 2011 taxes You find the amount allocable to your excluded wages by multiplying the foreign tax paid or accrued on foreign earned income received or accrued during the tax year by a fraction. Where do i file 2011 taxes   The numerator of the fraction is your foreign earned income and housing amounts excluded under the foreign earned income and housing exclusions for the tax year minus otherwise deductible expenses definitely related and properly apportioned to that income. Where do i file 2011 taxes Deductible expenses do not include the foreign housing deduction. Where do i file 2011 taxes   The denominator is your total foreign earned income received or accrued during the tax year minus all deductible expenses allocable to that income (including the foreign housing deduction). Where do i file 2011 taxes If the foreign law taxes foreign earned income and some other income (for example, earned income from U. Where do i file 2011 taxes S. Where do i file 2011 taxes sources or a type of income not subject to U. Where do i file 2011 taxes S. Where do i file 2011 taxes tax), and the taxes on the other income cannot be segregated, the denominator of the fraction is the total amount of income subject to the foreign tax minus deductible expenses allocable to that income. Where do i file 2011 taxes Example. Where do i file 2011 taxes You are a U. Where do i file 2011 taxes S. Where do i file 2011 taxes citizen and a cash basis taxpayer, employed by Company X and living in Country A. Where do i file 2011 taxes Your records show the following: Foreign earned income received $125,000 Unreimbursed business travel expenses 20,000 Income tax paid to Country A 30,000 Exclusion of foreign earned  income and housing allowance 97,600     Because you can exclude part of your wages, you cannot claim a credit for part of the foreign taxes. Where do i file 2011 taxes To find that part, do the following. Where do i file 2011 taxes First, find the amount of business expenses allocable to excluded wages and therefore not deductible. Where do i file 2011 taxes To do this, multiply the otherwise deductible expenses by a fraction. Where do i file 2011 taxes That fraction is the excluded wages over your foreign earned income. Where do i file 2011 taxes   $20,000 × $97,600 $125,000 = $15,616             Next, find the numerator of the fraction by which you will multiply the foreign taxes paid. Where do i file 2011 taxes To do this, subtract business expenses allocable to excluded wages ($15,616) from excluded wages ($97,600). Where do i file 2011 taxes The result is $81,984. Where do i file 2011 taxes Then, find the denominator of the fraction by subtracting all your deductible expenses from all your foreign earned income ($125,000 − $20,000 = $105,000). Where do i file 2011 taxes Finally, multiply the foreign tax you paid by the resulting fraction. Where do i file 2011 taxes   $30,000 × $81,984  $105,000 = $23,424 The amount of Country A tax you cannot take a credit for is $23,424. Where do i file 2011 taxes Taxes on Income From Puerto Rico Exempt From U. Where do i file 2011 taxes S. Where do i file 2011 taxes Tax If you have income from Puerto Rican sources that is not taxable, you must reduce your foreign taxes paid or accrued by the taxes allocable to the exempt income. Where do i file 2011 taxes For information on figuring the reduction, see Publication 570. Where do i file 2011 taxes Possession Exclusion If you are a bona fide resident of American Samoa and exclude income from sources in American Samoa, you cannot take a credit for the taxes you pay or accrue on the excluded income. Where do i file 2011 taxes For more information on this exclusion, see Publication 570. Where do i file 2011 taxes Extraterritorial Income Exclusion You cannot take a credit for taxes you pay on qualifying foreign trade income excluded on Form 8873, Extraterritorial Income Exclusion. Where do i file 2011 taxes However, see Internal Revenue Code section 943(d) for an exception for certain withholding taxes. Where do i file 2011 taxes Taxes for Which You Can Only Take an Itemized Deduction You cannot claim a foreign tax credit for foreign income taxes paid or accrued under the following circumstances. Where do i file 2011 taxes However, you can claim an itemized deduction for these taxes. Where do i file 2011 taxes See Choosing To Take Credit or Deduction , earlier. Where do i file 2011 taxes Taxes Imposed By Sanctioned Countries (Section 901(j) Income) You cannot claim a foreign tax credit for income taxes paid or accrued to any country if the income giving rise to the tax is for a period (the sanction period) during which: The Secretary of State has designated the country as one that repeatedly provides support for acts of international terrorism, The United States has severed or does not conduct diplomatic relations with the country, or The United States does not recognize the country's government, and that government is not otherwise eligible to purchase defense articles or services under the Arms Export Control Act. Where do i file 2011 taxes The following countries meet this description for 2013. Where do i file 2011 taxes Income taxes paid or accrued to these countries in 2013 do not qualify for the credit. Where do i file 2011 taxes Cuba. Where do i file 2011 taxes Iran. Where do i file 2011 taxes Libya (but see Note later). Where do i file 2011 taxes North Korea. Where do i file 2011 taxes Sudan. Where do i file 2011 taxes Syria. Where do i file 2011 taxes Waiver of denial of the credit. Where do i file 2011 taxes   A waiver can be granted to a sanctioned country if the President of the United States determines that granting the waiver is in the national interest of the United States and will expand trade and investment opportunities for U. Where do i file 2011 taxes S. Where do i file 2011 taxes companies in the sanctioned country. Where do i file 2011 taxes The President must report to Congress his intentions to grant the waiver and his reasons for granting the waiver not less than 30 days before the date on which the waiver is granted. Where do i file 2011 taxes Note. Where do i file 2011 taxes Effective December 10, 2004, the President granted a waiver to Libya. Where do i file 2011 taxes Income taxes arising on or after this date qualify for the credit if they meet the other requirements in this publication. Where do i file 2011 taxes Limit on credit. Where do i file 2011 taxes   In figuring the foreign tax credit limit, discussed later, income from a sanctioned country is a separate category of foreign income unless a Presidential waiver is granted. Where do i file 2011 taxes You must fill out a separate Form 1116 for this income. Where do i file 2011 taxes This will prevent you from claiming a credit for foreign taxes paid or accrued to the sanctioned country. Where do i file 2011 taxes Example. Where do i file 2011 taxes You lived and worked in Iran until August, when you were transferred to Italy. Where do i file 2011 taxes You paid taxes to each country on the income earned in that country. Where do i file 2011 taxes You cannot claim a foreign tax credit for the foreign taxes paid on the income earned in Iran. Where do i file 2011 taxes Because the income earned in Iran is a separate category of foreign income, you must fill out a separate Form 1116 for that income. Where do i file 2011 taxes You cannot take a credit for taxes paid on the income earned in Iran, but that income is taxable by the United States. Where do i file 2011 taxes Figuring the credit when a sanction ends. Where do i file 2011 taxes    Table 1 lists the countries for which sanctions have ended or for which a Presidential waiver has been granted. Where do i file 2011 taxes For any of these countries, you can claim a foreign tax credit for the taxes paid or accrued to that country on the income for the period that begins after the end of the sanction period or the date the Presidential waiver was granted. Where do i file 2011 taxes Example. Where do i file 2011 taxes The sanctions against Country X ended on July 31. Where do i file 2011 taxes On August 19, you receive a distribution from a mutual fund of Country X income. Where do i file 2011 taxes The fund paid Country X income tax for you on the distribution. Where do i file 2011 taxes Because the distribution was made after the sanction ended, you may include the foreign tax paid on the distribution to compute your foreign tax credit. Where do i file 2011 taxes Amounts for the nonsanctioned period. Where do i file 2011 taxes   If a sanction period ends (or a Presidential waiver is granted) during your tax year and you are not able to determine the actual income and taxes for that period, you can allocate amounts to that period based on the number of days in the period that fall in your tax year. Where do i file 2011 taxes Multiply the income or taxes for the year by the following fraction to determine the amounts allocable to that period. Where do i file 2011 taxes   Number of nonsanctioned days in year  Number of days in year Example. Where do i file 2011 taxes You are a calendar year filer and received $20,000 of income from Country X in 2013 on which you paid tax of $4,500. Where do i file 2011 taxes Sanctions against Country X ended on July 11, 2013. Where do i file 2011 taxes You are unable to determine how much of the income or tax is for the nonsanctioned period. Where do i file 2011 taxes Because your tax year starts on January 1, and the Country X sanction ended on July 11, 2013, 173 days of your tax year are in the nonsanctioned period. Where do i file 2011 taxes You would compute the income for the nonsanctioned period as follows. Where do i file 2011 taxes 173 365 × $20,000 = $9,479             You would figure the tax for the nonsanctioned period as follows. Where do i file 2011 taxes 173 365 × $4,500 = $2,133 To figure your foreign tax credit, you would use $9,479 as the income from Country X and $2,133 as the tax. Where do i file 2011 taxes Further information. Where do i file 2011 taxes   The rules for figuring the foreign tax credit after a country's sanction period ends are more fully explained in Revenue Ruling 92-62, Cumulative Bulletin 1992-2, page 193. Where do i file 2011 taxes This Cumulative Bulletin can be found in many libraries and IRS offices. Where do i file 2011 taxes Table 1. Where do i file 2011 taxes Countries Removed From the Sanction List or Granted Presidential Waiver   Sanction Period Country Starting Date Ending Date Iraq February 1, 1991 June 27, 2004 Libya January 1, 1987 December 9, 2004* *Presidential waiver granted for qualified income taxes arising after December 9, 2004. Where do i file 2011 taxes Taxes Imposed on Certain Dividends You cannot claim a foreign tax credit for withholding tax (defined later ) on dividends paid or accrued if either of the following applies to the dividends. Where do i file 2011 taxes The dividends are on stock you held for less than 16 days during the 31-day period that begins 15 days before the ex-dividend date (defined later). Where do i file 2011 taxes The dividends are for a period or periods totaling more than 366 days on preferred stock you held for less than 46 days during the 91-day period that begins 45 days before the ex-dividend date. Where do i file 2011 taxes If the dividend is not for more than 366 days, rule (1) applies to the preferred stock. Where do i file 2011 taxes When figuring how long you held the stock, count the day you sold it, but do not count the day you acquired it or any days on which you were protected from risk of loss. Where do i file 2011 taxes Regardless of how long you held the stock, you cannot claim the credit to the extent you have an obligation under a short sale or otherwise to make payments related to the dividend for positions in substantially similar or related property. Where do i file 2011 taxes Withholding tax. Where do i file 2011 taxes   For this purpose, withholding tax includes any tax determined on a gross basis. Where do i file 2011 taxes It does not include any tax which is in the nature of a prepayment of a tax imposed on a net basis. Where do i file 2011 taxes Ex-dividend date. Where do i file 2011 taxes   The ex-dividend date is the first date following the declaration of a dividend on which the purchaser of a stock is not entitled to receive the next dividend payment. Where do i file 2011 taxes Example 1. Where do i file 2011 taxes You bought common stock from a foreign corporation on November 3. Where do i file 2011 taxes You sold the stock on November 19. Where do i file 2011 taxes You received a dividend on this stock because you owned it on the ex-dividend date of November 5. Where do i file 2011 taxes To claim the credit, you must have held the stock for at least 16 days within the 31-day period that began on October 21 (15 days before the ex-dividend date). Where do i file 2011 taxes Because you held the stock for 16 days, from November 4 until November 19, you are entitled to the credit. Where do i file 2011 taxes Example 2. Where do i file 2011 taxes The facts are the same as in Example 1 except that you sold the stock on November 14. Where do i file 2011 taxes You held the stock for only 11 days. Where do i file 2011 taxes You are not entitled to the credit. Where do i file 2011 taxes Exception. Where do i file 2011 taxes   If you are a securities dealer who actively conducts business in a foreign country, you may be able to claim a foreign tax credit for qualified taxes paid on dividends regardless of how long you held the stock or whether you were obligated to make payments for positions in substantially similar or related property. Where do i file 2011 taxes See section 901(k)(4) of the Internal Revenue Code for more information. Where do i file 2011 taxes Taxes Withheld on Income or Gain (Other Than Dividends) For income or gain (other than dividends) paid or accrued on property, you cannot claim a foreign tax credit for withholding tax (defined later): If you have not held the property for at least 16 days during the 31-day period that begins 15 days before the date on which the right to receive the payment arises, or To the extent you have to make related payments on positions in substantially similar or related property. Where do i file 2011 taxes When figuring how long you held the property, count the day you sold it, but do not count the day you acquired it or any days on which you were protected from risk of loss. Where do i file 2011 taxes Withholding tax. Where do i file 2011 taxes   For this purpose, withholding tax includes any tax determined on a gross basis. Where do i file 2011 taxes It does not include any tax which is in the nature of a prepayment of a tax imposed on a net basis. Where do i file 2011 taxes Exception for dealers. Where do i file 2011 taxes   If you are a dealer in property who actively conducts business in a foreign country, you may be able to claim a foreign tax credit for qualified taxes withheld on income or gain from that property regardless of how long you held it or whether you have to make related payments on positions in substantially similar or related property. Where do i file 2011 taxes See section 901(I)(2) of the Internal Revenue Code for more information. Where do i file 2011 taxes Covered Asset Acquisition ???You cannot take a credit for the disqualified portion of any foreign tax paid or accrued in connection with a covered asset acquisition. Where do i file 2011 taxes A covered asset acquisition includes certain acquisitions that result in a stepped-up basis for U. Where do i file 2011 taxes S. Where do i file 2011 taxes tax purposes but not for foreign tax purposes. Where do i file 2011 taxes For more information, see Internal Revenue Code section 901(m). Where do i file 2011 taxes The IRS intends to issue guidance that will explain this provision in greater detail. Where do i file 2011 taxes Taxes in Connection With the Purchase or Sale of Oil or Gas You cannot claim a foreign tax credit for taxes paid or accrued to a foreign country in connection with the purchase or sale of oil or gas extracted in that country if you do not have an economic interest in the oil or gas, and the purchase price or sales price is different from the fair market value of the oil or gas at the time of purchase or sale. Where do i file 2011 taxes Taxes on Foreign Mineral Income You must reduce any taxes paid or accrued to a foreign country or possession on mineral income from that country or possession if you were allowed a deduction for percentage depletion for any part of the mineral income. Where do i file 2011 taxes For details, see Regulations section 1. Where do i file 2011 taxes 901-3. Where do i file 2011 taxes Taxes From International Boycott Operations If you participate in or cooperate with an international boycott during the tax year, your foreign taxes resulting from boycott activities will reduce the total taxes available for credit. Where do i file 2011 taxes See the instructions for line 12 in the Form 1116 instructions to figure this reduction. Where do i file 2011 taxes In most cases, this rule does not apply to employees with wages who are working and living in boycotting countries, or to retirees with pensions who are living in these countries. Where do i file 2011 taxes List of boycotting countries. Where do i file 2011 taxes   A list of the countries which may require participation in or cooperation with an international boycott is published by the Department of the Treasury. Where do i file 2011 taxes As of November 2013, the following countries are listed. Where do i file 2011 taxes Iraq. Where do i file 2011 taxes Kuwait. Where do i file 2011 taxes Lebanon. Where do i file 2011 taxes Libya. Where do i file 2011 taxes Qatar. Where do i file 2011 taxes Saudi Arabia. Where do i file 2011 taxes Syria. Where do i file 2011 taxes United Arab Emirates. Where do i file 2011 taxes Yemen. Where do i file 2011 taxes    For information concerning changes to the list, write to: Internal Revenue Service International Section Philadelphia, PA 19255-0725 Determinations of whether the boycott rule applies. Where do i file 2011 taxes   You may request a determination from the Internal Revenue Service as to whether a particular operation constitutes participation in or cooperation with an international boycott. Where do i file 2011 taxes The procedures for obtaining a determination from the Service are outlined in Revenue Procedure 77-9 in Cumulative Bulletin 1977-1. Where do i file 2011 taxes Cumulative Bulletins are available in most IRS offices and you are welcome to read them there. Where do i file 2011 taxes Public inspection. Where do i file 2011 taxes   A determination and any related background file is open to public inspection. Where do i file 2011 taxes However, your identity and certain other information will remain confidential. Where do i file 2011 taxes Reporting requirements. Where do i file 2011 taxes   You must file a report with the IRS if you or any of the following persons have operations in or related to a boycotting country or with the government, a company, or a national of a boycotting country. Where do i file 2011 taxes A foreign corporation in which you own 10% or more of the voting power of all voting stock but only if you own the stock of the foreign corporation directly or through foreign entities. Where do i file 2011 taxes A partnership in which you are a partner. Where do i file 2011 taxes A trust you are treated as owning. Where do i file 2011 taxes Form 5713 required. Where do i file 2011 taxes   If you have to file a report, you must use Form 5713, International Boycott Report, and attach all supporting schedules. Where do i file 2011 taxes See the Instructions for Form 5713 for information on when and where to file the form. Where do i file 2011 taxes Penalty for failure to file. Where do i file 2011 taxes   If you willfully fail to make a report, in addition to other penalties, you may be fined $25,000 or imprisoned for no more than one year, or both. Where do i file 2011 taxes Taxes on Combined Foreign Oil and Gas Income You must reduce your foreign taxes by a portion of any foreign taxes imposed on combined foreign oil and gas income. Where do i file 2011 taxes The amount of the reduction is the amount by which your foreign oil and gas taxes exceed the amount of your combined foreign oil and gas income multiplied by a fraction equal to your pre-credit U. Where do i file 2011 taxes S. Where do i file 2011 taxes tax liability (Form 1040, line 44) divided by your worldwide taxable income. Where do i file 2011 taxes You may be entitled to carry over to other years taxes reduced under this rule. Where do i file 2011 taxes See Internal Revenue Code section 907(f). Where do i file 2011 taxes Combined foreign oil and gas income means the sum of foreign oil related income and foreign oil and gas extraction income. Where do i file 2011 taxes Foreign oil and gas taxes are the sum of foreign oil and gas extraction taxes and foreign oil related taxes. Where do i file 2011 taxes Taxes of U. Where do i file 2011 taxes S. Where do i file 2011 taxes Persons Controlling Foreign Corporations and Partnerships If you had control of a foreign corporation or a foreign partnership for the annual accounting period of that corporation or partnership that ended with or within your tax year, you may have to file an annual information return. Where do i file 2011 taxes If you do not file the required information return, you may have to reduce the foreign taxes that may be used for the foreign tax credit. Where do i file 2011 taxes See Penalty for not filing Form 5471 or Form 8865 , later. Where do i file 2011 taxes U. Where do i file 2011 taxes S. Where do i file 2011 taxes persons controlling foreign corporations. Where do i file 2011 taxes   If you are a U. Where do i file 2011 taxes S. Where do i file 2011 taxes citizen or resident who had control of a foreign corporation for an uninterrupted period of at least 30 days during the annual accounting period of that corporation, you may have to file an annual information return on Form 5471, Information Return of U. Where do i file 2011 taxes S. Where do i file 2011 taxes Persons With Respect To Certain Foreign Corporations. Where do i file 2011 taxes Under this rule, you generally had control of a foreign corporation if at any time during your tax year you owned: Stock possessing more than 50% of the total combined voting power of all classes of stock entitled to vote, or More than 50% of the total value of shares of all classes of stock of the foreign corporation. Where do i file 2011 taxes U. Where do i file 2011 taxes S. Where do i file 2011 taxes persons controlling foreign partnerships. Where do i file 2011 taxes   If you are a U. Where do i file 2011 taxes S. Where do i file 2011 taxes citizen or resident who had control of a foreign partnership at any time during the partnership's tax year, you may have to file