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2011 Tax File

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2011 Tax File

2011 tax file Publication 939 - Introductory Material Table of Contents What's New Future developments. 2011 tax file IntroductionSimplified Method. 2011 tax file Ordering forms and publications. 2011 tax file Tax questions. 2011 tax file Useful Items - You may want to see: What's New Beginning in 2013, distributions from an annuity under a nonqualified plan are considered net investment income for the purpose of figuring the net investment income tax (NIIT). 2011 tax file For more information, see the instructions for Form 8960, Net Investment Income Tax – Individuals, Estates and Trusts. 2011 tax file Future developments. 2011 tax file For the latest information about developments related to Publication 939, such as legislation enacted after it was published, go to www. 2011 tax file IRS. 2011 tax file gov/pub939. 2011 tax file Introduction This publication gives you the information you need to determine the tax treatment of your pension and annuity income under the General Rule. 2011 tax file Generally, each of your monthly annuity payments is made up of two parts: the tax-free part that is a return of your net cost, and the taxable balance. 2011 tax file What is the General Rule. 2011 tax file   The General Rule is one of the two methods used to figure the tax-free part of each annuity payment based on the ratio of your investment in the contract to the total expected return. 2011 tax file The other method is the Simplified Method, which is discussed in Publication 575, Pension and Annuity Income. 2011 tax file Who must use the General Rule. 2011 tax file   Use this publication if you receive pension or annuity payments from: A nonqualified plan (for example, a private annuity, a purchased commercial annuity, or a nonqualified employee plan), A qualified plan if: Your annuity starting date is before November 19, 1996 (and after July 1, 1986), and you do not qualify to use, or did not choose to use, the Simplified Method, or Your annuity starting date is after November 18, 1996, and as of that date you are age 75 or over and the annuity payments are guaranteed for at least 5 years. 2011 tax file If your annuity starting date was between July 1, 1986 and November 19, 1996, you were able to elect to use the Simplified Method or the General Rule. 2011 tax file This choice is irrevocable and applied to all later annuity payments. 2011 tax file The following are qualified plans. 2011 tax file A qualified employee plan. 2011 tax file A qualified employee annuity. 2011 tax file A tax-sheltered annuity (TSA) plan or contract. 2011 tax file Simplified Method. 2011 tax file   If you receive pension or annuity payments from a qualified plan and you are not required to use the General Rule, you must use the Simplified Method to determine the tax-free part of each annuity payment. 2011 tax file This method is described in Publication 575, Pension and Annuity Income. 2011 tax file   Also, if, at the time the annuity payments began, you were at least age 75 and were entitled to annuity payments from a qualified plan with fewer than 5 years of guaranteed payments, you must use the Simplified Method. 2011 tax file Beginning in 2013, distributions from an annuity under a nonqualified plan are considered net investment income for the purpose of figuring the net investment income tax (NIIT). 2011 tax file For more information, see the instructions for Form 8960, Net Investment Income Tax – Individuals, Estates and Trusts. 2011 tax file Topics not covered in this publication. 2011 tax file   Certain topics related to pensions and annuities are not covered in this publication. 2011 tax file They include: Simplified Method. 2011 tax file This method is covered in Publication 575. 2011 tax file That publication also covers nonperiodic payments (amounts not received as an annuity) from a qualified pension or annuity plan, rollovers, special averaging and capital gain treatment of lump-sum distributions, and special additional taxes on early distributions, excess distributions, and excess accumulations (not making required minimum distributions). 2011 tax file Individual retirement arrangements (IRAs). 2011 tax file Information on the tax treatment of amounts you receive from an IRA is included in Publication 590, Individual Retirement Arrangements (IRAs). 2011 tax file Life insurance payments. 2011 tax file If you receive life insurance payments because of the death of the insured person, get Publication 525, Taxable and Nontaxable Income, for information on the tax treatment of the proceeds. 2011 tax file Help from IRS. 2011 tax file   If, after reading this publication, you need help to figure the taxable part of your pension or annuity, the IRS can do it for you for a fee. 2011 tax file For information on this service, see Requesting a Ruling on Taxation of Annuity , later. 2011 tax file Comments and suggestions. 2011 tax file   We welcome your comments about this publication and your suggestions for future editions. 2011 tax file   You can write to us at the following address: Internal Revenue Service Tax Forms and Publications Division 1111 Constitution Ave. 2011 tax file NW, IR-6526 Washington, DC 20224   We respond to many letters by telephone. 2011 tax file Therefore, it would be helpful if you would include your daytime phone number, including the area code, in your correspondence. 2011 tax file   You can send your comments from www. 2011 tax file irs. 2011 tax file gov/formspubs/. 2011 tax file Click on “More Information” and then on “Comment on Tax Forms and Publications”. 2011 tax file   Although we cannot respond individually to each comment received, we do appreciate your feedback and will consider your comments as we revise our tax products. 2011 tax file Ordering forms and publications. 2011 tax file   Visit www. 2011 tax file irs. 2011 tax file gov/formspubs/ to download forms and publications, call 1-800-TAX-FORM (1-800-829-3676), or write to the address below and receive a response within 10 days after your request is received. 2011 tax file Internal Revenue Service 1201 N. 2011 tax file Mitsubishi Motorway Bloomington, IL 61705-6613 Tax questions. 2011 tax file   If you have a tax question, check the information available on IRS. 2011 tax file gov or call 1-800-829-1040. 2011 tax file We cannot answer tax questions sent to either of the above addresses. 2011 tax file Useful Items - You may want to see: Publication 524 Credit for the Elderly or the Disabled 525 Taxable and Nontaxable Income 571 Tax-Sheltered Annuity Plans (403(b) Plans) 575 Pension and Annuity Income 590 Individual Retirement Arrangements (IRAs) 721 Tax Guide to U. 2011 tax file S. 2011 tax file Civil Service Retirement Benefits 910 Guide To Free Tax Services Form (and Instructions) 1099-R Distributions From Pensions, Annuities, Retirement or Profit-Sharing Plans, IRAs, Insurance Contracts, etc. 2011 tax file See How To Get Tax Help near the end of this publication for information about getting 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Understanding your 2801C Letter

You received this letter because we determined that you’re not entitled to claim exempt status or more than a specified number of withholding allowances. Generally, your employer bases the amount of withholding for federal income tax on your Form W-4, Employee's Withholding Allowance Certificate. However, we can review whether you are entitled to claim exempt status or a certain number of withholding allowances.

What you need to do

  • You can ask us to change our decision. Please call us at the number shown below within 30 days from the date of the letter. We will consider your explanation of why you believe you are entitled to a different withholding rate or number of withholding allowances (or exempt status)
  • When you call, have the following information available. If you file jointly, you must have the same information available for your spouse
    • Form W-4 and worksheets. (You must complete the "Two Earners Multiple Jobs Worksheet" on the back of the Form W-4, if you have more than one job or your spouse works.)
    • Most current pay stubs for all jobs
    • Number of withholding allowances you (and your spouse) are claiming on your Form(s) W-4.
    • The social security number and date of birth for any dependent you are entitled to claim
    • A copy of the current tax return due, including all schedules, forms, and attachments

  • If you prefer you can write us at the address below and ask for a redetermination. You must send the information listed above to support your claim that you’re entitled to a different withholding rate (marital status) or number of withholding allowances (or exempt status)

You may want to…

  • Search keyword “withholding compliance” for more information on income tax withholding
  • Download the following materials:
    • Form W-4, Employee’s Withholding Allowance Certificate
    • Publication 505, Tax Withholding and Estimated Tax
  • Use the IRS Withholding Calculator to figure your correct amount of federal income tax withholding. The calculator is particularly helpful if you've had too much or too little withheld in the past, your situation has changed, or you’re starting a new job.

Answers to Common Questions

What happens if the IRS determines that I do not have adequate withholding?
We can tell your employer to withhold federal income tax at an increased rate. We do this by issuing a “lock-in letter.” At that point, your employer must disregard any Form W-4 that decreases the amount of your withholding. You’ll receive a copy of the lock-in letter, and we’ll give you some time before the lock-in rate is effective to submit a new Form W-4. This form must include a statement that explains why you believe you’re entitled to a different withholding rate or number of withholding allowances. You should send your Form W-4 and supporting documents to the IRS address as shown on this webpage. Once we issue a lock-in letter, you won’t be able to decrease your withholding unless we approve it.

What if I don’t want to submit a Form W-4 to my employer?
Your employer must withhold income tax from your wages as if you’re single with zero allowances.

How to get help

  • Call toll free 1-855-839-2235 weekdays between 8:00 a.m. and 8:00 p.m.
  • Send a fax to 1-855-202-8300
  • Write to:

    Internal Revenue Service
    Compliance Services
    Withholding Compliance Unit
    P.O. Box 9047, Stop 837
    Andover, MA 01810-0
Page Last Reviewed or Updated: 26-Sep-2013

The 2011 Tax File

2011 tax file 4. 2011 tax file   Filing U. 2011 tax file S. 2011 tax file Tax Returns Table of Contents Who Must FileFiling Requirement if Possession Income Is Excluded When To FileExtension of Time To File Where To File Special Rules for Completing Your U. 2011 tax file S. 2011 tax file Tax ReturnU. 2011 tax file S. 2011 tax file Armed Forces. 2011 tax file Deductions if Possession Income Is Excluded Foreign Tax Credit if Possession Income Is Excluded Self-Employment Tax Additional Medicare Tax Net Investment Income Tax Paying Your TaxesEstimated Tax Double TaxationCompetent Authority Assistance The information in chapter 3 will tell you if a U. 2011 tax file S. 2011 tax file income tax return is required for your situation. 2011 tax file If a U. 2011 tax file S. 2011 tax file return is required, your next step is to see if you meet the filing requirements. 2011 tax file If you do meet the filing requirements, the information presented in this chapter will help you understand the special procedures involved. 2011 tax file This chapter discusses: Filing requirements, When to file your return, Where to send your return, How to adjust your deductions and credits if you are excluding income from American Samoa or Puerto Rico, How to make estimated tax payments and pay self-employment tax, and How to request assistance in resolving instances of double taxation. 2011 tax file Who Must File If you are not required to file a possession tax return that includes your worldwide income, you must generally file a U. 2011 tax file S. 2011 tax file income tax return if your gross income is at least the amount shown in Table 4-1, later, for your filing status and age. 2011 tax file If you were a bona fide resident of American Samoa or Puerto Rico and are able to exclude your possession income from your U. 2011 tax file S. 2011 tax file tax return, your filing requirement may be less than the amount in Table 4-1. 2011 tax file For details, see the information under Filing Requirement if Possession Income Is Excluded , later. 2011 tax file Some individuals (such as those who can be claimed as a dependent on another person's return or who owe certain taxes, such as self-employment tax) must file a tax return even though the gross income is less than the amount shown in Table 4-1 for their filing status and age. 2011 tax file For more information, see the Form 1040 instructions. 2011 tax file Filing Requirement if Possession Income Is Excluded If you were a bona fide resident of American Samoa or Puerto Rico and qualify to exclude possession income on your U. 2011 tax file S. 2011 tax file tax return, you must determine your adjusted filing requirement. 2011 tax file Generally, your filing requirement is based on the total of your (and your spouse's if filing a joint return) personal exemption(s) plus your standard deduction. 2011 tax file Personal exemption. 2011 tax file   When figuring your filing requirement, your personal exemption is allowed in full. 2011 tax file Do not reduce it for this purpose. 2011 tax file Do not include exemptions for your dependents. 2011 tax file Allowable standard deduction. 2011 tax file   Unless your filing status is married filing separately, the minimum income level at which you must file a return is based, in part, on the standard deduction for your filing status and age. 2011 tax file Because the standard deduction applies to all types of income, it must be divided between your excluded income and income from other sources. 2011 tax file Multiply the regular standard deduction for your filing status and age (this is zero if you are married filing a separate return; all others, see Form 1040 instructions) by the following fraction:      Gross income subject to U. 2011 tax file S. 2011 tax file income tax     Gross income from all sources (including excluded possession income)   Example. 2011 tax file Barbara Spruce, a U. 2011 tax file S. 2011 tax file citizen, is single, under 65, and a bona fide resident of American Samoa. 2011 tax file During 2013, she received $20,000 of income from American Samoa sources (qualifies for exclusion) and $8,000 of income from sources outside the possession (subject to U. 2011 tax file S. 2011 tax file income tax). 2011 tax file Her allowable standard deduction for 2013 is figured as follows:   $8,000 $28,000 × $6,100 (regular standard deduction) = $1,743   Adjusted filing requirement. 2011 tax file   Figure your adjusted filing requirement by adding the amount of your allowable standard deduction to the amount of your personal exemption. 2011 tax file You must file a U. 2011 tax file S. 2011 tax file income tax return if your gross income is at least the amount shown on line 3 of the following worksheet. 2011 tax file    1. 2011 tax file Enter the allowable standard deduction you figured earlier under Allowable standard deduction . 2011 tax file If your filing status is married filing separately, enter -0-   2. 2011 tax file Personal exemption. 2011 tax file If your filing status is married filing jointly, enter $7,800; if someone can claim you as a dependent, enter -0-; otherwise, enter $3,900   3. 2011 tax file Add lines 1 and 2. 2011 tax file You must file a U. 2011 tax file S. 2011 tax file income tax return if your gross income from sources outside the relevant possession is at least this amount   Table 4-1. 2011 tax file 2013 Filing Requirements Chart for Most Taxpayers IF your filing status is. 2011 tax file . 2011 tax file . 2011 tax file AND at the end of 2013 you were*. 2011 tax file . 2011 tax file . 2011 tax file THEN file a return if your gross income** was at least. 2011 tax file . 2011 tax file . 2011 tax file single under 65 $10,000 65 or older $11,500 married filing jointly*** under 65 (both spouses) $20,000 65 or older (one spouse) $21,200 65 or older (both spouses) $22,400 married filing separately any age $3,900 head of household under 65 $12,850 65 or older $14,350 qualifying widow(er)  with dependent child under 65 $16,100 65 or older $17,300 * If you were born on January 1, 1949, you are considered to be age 65 at the end of 2013. 2011 tax file ** Gross income means all income you received in the form of money, goods, property, and services that is not exempt from tax, including any income from sources outside the United States (even if you can exclude part or all of it). 2011 tax file Do not include social security benefits unless (a) you are married filing a separate return and you lived with your spouse at any time during 2013, or (b) one-half of your social security benefits plus your other gross income is more than $25,000 ($32,000 if married filing jointly). 2011 tax file If (a) or (b) applies, see the instructions for Form 1040 or Publication 915, Social Security and Equivalent Railroad Retirement Benefits, to figure the taxable part of social security benefits you must include in gross income. 2011 tax file *** If you did not live with your spouse at the end of 2013 (or on the date your spouse died) and your gross income was at least $3,900 you must file a return regardless of your age. 2011 tax file Example 1. 2011 tax file James and Joan Thompson, one over 65, are U. 2011 tax file S. 2011 tax file citizens and bona fide residents of Puerto Rico during the entire tax year. 2011 tax file They file a joint income tax return. 2011 tax file During 2013, they received $35,000 of income from Puerto Rico sources (qualifies for exclusion) and $6,000 of income from sources outside Puerto Rico (subject to U. 2011 tax file S. 2011 tax file income tax). 2011 tax file Their allowable standard deduction for 2013 is figured as follows:   $6,000 $41,000 × $13,400 ( standard deduction for 65 or older (one spouse) ) = $1,961   The Thompsons do not have to file a U. 2011 tax file S. 2011 tax file income tax return because their gross income subject to U. 2011 tax file S. 2011 tax file tax ($6,000) is less than their allowable standard deduction plus their personal exemptions ($1,961+ $7,800= $9,761). 2011 tax file Example 2. 2011 tax file Barbara Spruce (see Example under Allowable standard deduction, earlier), however, must file a U. 2011 tax file S. 2011 tax file income tax return because her gross income subject to U. 2011 tax file S. 2011 tax file tax ($8,000) is more than her allowable standard deduction plus her personal exemption ($1,743 + $3,900 = $5,643). 2011 tax file If you must file a U. 2011 tax file S. 2011 tax file income tax return, you may be able to file a paperless return using IRS e-file. 2011 tax file See your form instructions or visit our website at IRS. 2011 tax file gov. 2011 tax file When To File If you file on a calendar year basis, the due date for filing your U. 2011 tax file S. 2011 tax file income tax return is April 15 following the end of your tax year. 2011 tax file If you use a fiscal year (a year ending on the last day of a month other than December), the due date is the 15th day of the 4th month after the end of your fiscal year. 2011 tax file If any due date falls on a Saturday, Sunday, or legal holiday, your tax return is due on the next business day. 2011 tax file For your 2013 tax return, the due date is April 15, 2014. 2011 tax file If you mail your federal tax return, it is considered timely if it bears an official postmark dated on or before the due date, including any extensions. 2011 tax file If you use a private delivery service designated by the IRS, generally the postmark date is the date the private delivery service records in its database or marks on the mailing label. 2011 tax file See your form instructions for a list of designated private delivery services. 2011 tax file Extension of Time To File You can get an extension of time to file your U. 2011 tax file S. 2011 tax file income tax return. 2011 tax file Special rules apply for those living outside the United States. 2011 tax file Automatic 6-Month Extension If you cannot file your 2013 return by the due date, you can get an automatic 6-month extension of time to file. 2011 tax file Example. 2011 tax file If your return must be filed by April 15, 2014, you will have until October 15, 2014, to file. 2011 tax file Although you are not required to make a payment of the tax you estimate as due, Form 4868 does not extend the time to pay taxes. 2011 tax file If you do not pay the amount due by the regular due date (generally April 15), you will owe interest on any unpaid tax from the original due date to the date you pay the tax. 2011 tax file You may also be charged penalties (see the Instructions for Form 4868). 2011 tax file How to get the automatic extension. 2011 tax file   You can get the automatic 6-month extension if you do one of the following by the due date for filing your return. 2011 tax file E-file Form 4868 using your personal computer or a tax professional. 2011 tax file E-file and pay by credit or debit card. 2011 tax file Your payment must be at least $1. 2011 tax file You may pay by phone or over the Internet. 2011 tax file Do not file Form 4868. 2011 tax file File a paper Form 4868. 2011 tax file If you are a fiscal year taxpayer, you must file a paper Form 4868. 2011 tax file See Form 4868 for information on getting an extension using these options. 2011 tax file When to file. 2011 tax file   You must request the automatic extension by the due date for your return. 2011 tax file You can file your return any time before the 6-month extension period ends. 2011 tax file When you file your return. 2011 tax file   Enter any payment you made related to the extension of time to file on Form 1040, line 68. 2011 tax file If you file Form 1040A, U. 2011 tax file S. 2011 tax file Individual Income Tax Return, or Form 1040EZ, Income Tax Return for Single and Joint Filers With No Dependents, include that payment in your total payments on Form 1040A, line 41, or Form 1040EZ, line 9. 2011 tax file Also enter “Form 4868” and the amount paid in the space to the left of the entry space for line 41 or line 9. 2011 tax file You cannot ask the Internal Revenue Service to figure your tax if you use the extension of time to file. 2011 tax file Individuals Outside the United States and Puerto Rico You are allowed an automatic 2-month extension (until June 16, 2014, if you use the calendar year) to file your 2013 return and pay any federal income tax due if: You are a U. 2011 tax file S. 2011 tax file citizen or resident, and On the due date of your return: You are living outside of the United States and Puerto Rico, and your main place of business or post of duty is outside the United States and Puerto Rico, or You are in military or naval service on duty outside the United States and Puerto Rico. 2011 tax file However, if you pay the tax due after the regular due date (generally April 15), interest will be charged from April 15 until the date the tax is paid. 2011 tax file If you serve in a combat zone or qualified hazardous duty area, you may be eligible for a longer extension of time to file. 2011 tax file For more information, see Publication 3, Armed Forces' Tax Guide. 2011 tax file Married taxpayers. 2011 tax file   If you file a joint return, only one spouse has to qualify for this automatic extension. 2011 tax file However, if you and your spouse file separate returns, this automatic extension applies only to the spouse who qualifies. 2011 tax file How to get the extension. 2011 tax file   To use this special automatic extension, you must attach a statement to your return explaining what situation qualified you for the extension. 2011 tax file (See the situations listed under (2), earlier. 2011 tax file ) Extension beyond 2 months. 2011 tax file   If you cannot file your 2013 return within the automatic 2-month extension period, you can get an additional 4-month extension, for a total of 6 months. 2011 tax file File Form 4868 by the end of the automatic extension period (June 16, 2014 for calendar year taxpayers). 2011 tax file Be sure to check the box on Form 4868, line 8, if appropriate. 2011 tax file   In addition to this 6-month extension, taxpayers who are out of the country (as defined under (2) earlier) can request a discretionary 2-month additional extension of time to file their returns (to December 15 for calendar year taxpayers). 2011 tax file   To request this extension, you must send the IRS a letter explaining the reasons why you need the additional 2 months. 2011 tax file Send the letter by the extended due date (October 15 for calendar year taxpayers) to:  Department of the Treasury Internal Revenue Service Austin, TX 73301-0215 USA   You will not receive any notification from the IRS unless your request is denied for being untimely. 2011 tax file Where To File Use the addresses listed below if you have to file Form 1040 with the United States and you are excluding possession income from American Samoa or Puerto Rico. 2011 tax file If you are not including a check or a money order, send your U. 2011 tax file S. 2011 tax file tax return and all attachments to:   Department of the Treasury Internal Revenue Service Austin, TX 73301-0215 USA If you are including a check or a money order, send your U. 2011 tax file S. 2011 tax file tax return and all attachments to:  Internal Revenue Service P. 2011 tax file O. 2011 tax file Box 1303 Charlotte, NC 28201-1303 USA Also send your U. 2011 tax file S. 2011 tax file return to these addresses if you are attaching Form 5074 or Form 8689. 2011 tax file If you are not in either of the above categories, send your return to the address shown in the Form 1040 instructions for the possession or state in which you reside. 2011 tax file Special Rules for Completing Your U. 2011 tax file S. 2011 tax file Tax Return If you are not excluding possession income from your U. 2011 tax file S. 2011 tax file tax return, follow the instructions for the specific forms you file. 2011 tax file However, you may not qualify to claim the earned income credit (EIC). 2011 tax file Earned income credit. 2011 tax file   Even if you maintain a household in one of the possessions discussed in this publication that is your main home and the home of your qualifying child, you cannot claim the earned income credit on your U. 2011 tax file S. 2011 tax file tax return. 2011 tax file This credit is available only if you maintain the household in the United States or you are serving on extended active duty in the U. 2011 tax file S. 2011 tax file Armed Forces. 2011 tax file U. 2011 tax file S. 2011 tax file Armed Forces. 2011 tax file   U. 2011 tax file S. 2011 tax file military personnel stationed outside the United States on extended active duty are considered to live in the United States during that duty period for purposes of the EIC. 2011 tax file Extended active duty means you are called or ordered to duty for an indefinite period or for a period of more than 90 days. 2011 tax file Once you begin serving your extended active duty, you are still considered to have been on extended active duty even if you do not serve more than 90 days. 2011 tax file Income from American Samoa or Puerto Rico excluded. 2011 tax file   You will not be allowed to take deductions and credits that apply to the excluded income. 2011 tax file The additional information you need follows. 2011 tax file Deductions if Possession Income Is Excluded Deductions that specifically apply to your excluded possession income, such as employee business expenses, are not allowable on your U. 2011 tax file S. 2011 tax file income tax return. 2011 tax file Deductions that do not specifically apply to any particular type of income must be divided between your excluded income from sources in the relevant possession and income from all other sources to find the part that you can deduct on your U. 2011 tax file S. 2011 tax file tax return. 2011 tax file Examples of such deductions are alimony payments, the standard deduction, and certain itemized deductions (such as medical expenses, charitable contributions, real estate taxes, and mortgage interest on your home). 2011 tax file Figuring the deduction. 2011 tax file   To find the part of a deduction that is allowable, multiply the deduction by the following fraction. 2011 tax file   Gross income subject to U. 2011 tax file S. 2011 tax file income tax     Gross income from all sources (including excluded possession income)   Adjustments to Income Your adjusted gross income equals your gross income minus certain deductions (adjustments). 2011 tax file Moving expense deduction. 2011 tax file   Generally, expenses of a move to a possession are directly attributable to wages, salaries, and other earned income from that possession. 2011 tax file Likewise, the expenses of a move back to the United States are generally attributable to U. 2011 tax file S. 2011 tax file earned income. 2011 tax file   If you are claiming expenses for a move to a relevant possession, how and where you will deduct the expenses depends on your status as a bona fide resident and if any of your possession income is excluded on your U. 2011 tax file S. 2011 tax file tax return. 2011 tax file For more information, see Moving expense deduction in chapter 3 under the name of the relevant possession. 2011 tax file   If you are claiming expenses for a move from a U. 2011 tax file S. 2011 tax file possession to the United States, use Form 3903 to figure your deductible expenses and enter the amount on Form 1040, line 26. 2011 tax file For purposes of deducting moving expenses, the possessions are considered part of the United States. 2011 tax file See Publication 521, Moving Expenses, for information about what expenses are deductible. 2011 tax file Self-employment tax deduction. 2011 tax file   Generally, if you are reporting self-employment income on your U. 2011 tax file S. 2011 tax file return, you can include the deductible part of your self-employment tax on Form 1040, line 27. 2011 tax file This is an income tax deduction only; it is not a deduction in figuring net earnings from self-employment (for self-employment tax). 2011 tax file   However, if you are a bona fide resident of American Samoa or Puerto Rico and you exclude all of your self-employment income from gross income, you cannot take the deduction on Form 1040, line 27, because the deduction is related to excluded income. 2011 tax file   If only part of your self-employment income is excluded, the part of the deduction that is based on the nonexcluded income is allowed. 2011 tax file This would happen if, for instance, you have two businesses and only the income from one of them is excludable. 2011 tax file   For purposes of the deduction only, figure the self-employment tax on the nonexcluded income by multiplying your total self-employment tax (from Schedule SE (Form 1040)), Self-Employment Tax) by the following fraction. 2011 tax file   Self-employment income subject to U. 2011 tax file S. 2011 tax file income tax     Total self-employment income (including excluded possession income)   The result is your self-employment tax on nonexcluded income. 2011 tax file Include the deductible part of this amount on Form 1040, line 27. 2011 tax file Individual retirement arrangement (IRA) deduction. 2011 tax file   Do not take excluded income into account when figuring your deductible IRA contribution. 2011 tax file Standard Deduction The standard deduction is composed of the regular standard deduction amount and the additional standard deduction for taxpayers who are blind or age 65 or over. 2011 tax file To find the amount you can claim on Form 1040, line 40, first figure your full standard deduction according to the Instructions for Form 1040. 2011 tax file Then multiply your full standard deduction by the following fraction. 2011 tax file   Gross income subject to U. 2011 tax file S. 2011 tax file income tax     Gross income from all sources (including excluded possession income)   In the space above line 40, enter “Standard deduction modified due to income excluded under section 931 (if American Samoa) or section 933 (if Puerto Rico). 2011 tax file ” This calculation may not be the same as the one you used to determine if you need to file a U. 2011 tax file S. 2011 tax file tax return. 2011 tax file Itemized Deductions Most itemized deductions do not apply to a particular type of income. 2011 tax file However, itemized deductions can be divided into three categories. 2011 tax file Those that apply specifically to excluded income, such as employee business expenses, are not deductible. 2011 tax file Those that apply specifically to income subject to U. 2011 tax file S. 2011 tax file income tax, which might also be employee business expenses, are fully allowable under the Instructions for Schedule A (Form 1040), Itemized Deductions. 2011 tax file Those that do not apply to specific income must be allocated between your gross income subject to U. 2011 tax file S. 2011 tax file income tax and your total gross income from all sources. 2011 tax file The example given later shows how to figure the deductible part of each type of expense that is not related to specific income. 2011 tax file Example. 2011 tax file In 2013, you and your spouse are both under 65 and U. 2011 tax file S. 2011 tax file citizens who are bona fide residents of Puerto Rico during the entire tax year. 2011 tax file You file a joint income tax return. 2011 tax file During 2013, you earned $20,000 from Puerto Rican sources (excluded from U. 2011 tax file S. 2011 tax file gross income) and your spouse earned $60,000 from the U. 2011 tax file S. 2011 tax file Government. 2011 tax file You have $16,000 of itemized deductions that do not apply to any specific type of income. 2011 tax file These are medical expenses of $4,000, real estate taxes of $5,000, home mortgage interest of $6,000, and charitable contributions of $1,000 (cash contributions). 2011 tax file You determine the amount of each deduction that you can claim on your Schedule A (Form 1040), Itemized Deductions, by multiplying the deduction by the fraction shown under Figuring the deduction , earlier under Deductions if Possession Income is Excluded. 2011 tax file   Medical Expenses   $60,000$80,000 × $4,000 = $3,000  (enter on line 1  of Schedule A)     Real Estate Taxes   $60,000$80,000 × $5,000 = $3,750  (enter on line 6  of Schedule A)     Home Mortgage Interest   $60,000$80,000 × $6,000 = $4,500  (enter on line 10 or 11 of  Schedule A)     Charitable Contributions (cash contributions)   $60,000$80,000 × $1,000 = $750  (enter on line 16 of Schedule A)   Enter on Schedule A (Form 1040) only the allowable portion of each deduction. 2011 tax file Overall limitation on itemized deductions. 2011 tax file   If your adjusted gross income (discussed earlier) is over $300,000 if married filing jointly or qualifying widow(er); $275,000 if head of household; $250,000 if single; or $150,000 if married filing separately; see the Itemized Deductions Worksheet in the Instructions for Schedule A (Form 1040), to figure your itemized deductions. 2011 tax file Personal Exemptions Personal exemptions are allowed in full even if excluding possession income. 2011 tax file However, depending upon your adjusted gross income and filing status, the amount you can deduct may be reduced. 2011 tax file See the Deduction for Exemptions Worksheet—Line 42 in the instructions for Form 1040. 2011 tax file Foreign Tax Credit if Possession Income Is Excluded If you must report American Samoa or Puerto Rico source income on your U. 2011 tax file S. 2011 tax file tax return, you can claim a foreign tax credit for income taxes paid to the possession on that income. 2011 tax file However, you cannot claim a foreign tax credit for taxes paid on possession income that is excluded on your U. 2011 tax file S. 2011 tax file tax return. 2011 tax file The foreign tax credit is generally figured on Form 1116. 2011 tax file If you have income, such as U. 2011 tax file S. 2011 tax file Government wages, that is not excludable, and you also have possession source income that is excludable, you must figure the credit by reducing your foreign taxes paid or accrued by the taxes based on the excluded income. 2011 tax file You make this reduction for each separate income category. 2011 tax file To find the amount of this reduction, use the following formula for each income category. 2011 tax file Excluded income from possession sources less deductible expenses based on that income x Tax paid or accrued to the possession = Reduction in foreign taxes Total income subject to possession tax less deductible expenses based on that income Enter the amount of the reduction on Form 1116, line 12. 2011 tax file For more information on the foreign tax credit, see Publication 514. 2011 tax file Example. 2011 tax file Jason and Lynn Reddy are U. 2011 tax file S. 2011 tax file citizens who were bona fide residents of Puerto Rico during all of 2013. 2011 tax file They file a joint tax return. 2011 tax file The following table shows their excludable and taxable income for U. 2011 tax file S. 2011 tax file federal income tax purposes. 2011 tax file   Taxable   Excludable Jason's wages from  U. 2011 tax file S. 2011 tax file Government $25,000     Lynn's wages from Puerto Rico  corp. 2011 tax file     $15,000 Dividend from Puerto Rico corp. 2011 tax file doing business in Puerto Rico     200 Dividend from U. 2011 tax file S. 2011 tax file  corp. 2011 tax file doing business  in U. 2011 tax file S. 2011 tax file * 1,000     Totals $26,000   $15,200 * Income from sources outside Puerto Rico is taxable. 2011 tax file   Jason and Lynn must file 2013 income tax returns with both Puerto Rico and the United States. 2011 tax file They have gross income of $26,000 for U. 2011 tax file S. 2011 tax file tax purposes. 2011 tax file They paid taxes to Puerto Rico of $4,000 ($3,980 on their wages and $20 on the dividend from the Puerto Rico corporation). 2011 tax file They figure their foreign tax credit on two Forms 1116, which they must attach to their U. 2011 tax file S. 2011 tax file return. 2011 tax file They fill out one Form 1116 for wages and one Form 1116 for the dividend. 2011 tax file Jason and Lynn figure the Puerto Rico taxes on excluded income as follows. 2011 tax file   Wages: ($15,000 ÷ $40,000) × $3,980 = $1,493   Dividend: ($200 ÷ $200) × $20 = $20 They enter $1,493 on Form 1116, line 12, for wages and $20 on the second Form 1116, line 12, for the dividend. 2011 tax file Self-Employment Tax Self-employment tax includes both social security and Medicare taxes for individuals who are self-employed. 2011 tax file A U. 2011 tax file S. 2011 tax file citizen or resident alien who is self-employed must pay self-employment tax on net self-employment earnings of $400 or more. 2011 tax file This rule applies whether or not the earnings are excludable from gross income (or whether or not a U. 2011 tax file S. 2011 tax file income tax return must otherwise be filed). 2011 tax file Bona fide residents of the possessions discussed in this publication are considered U. 2011 tax file S. 2011 tax file residents for this purpose and are subject to the self-employment tax. 2011 tax file Forms to file. 2011 tax file   If you have net self-employment income and are subject to self-employment tax, file one of the following with the United States. 2011 tax file If you are required to file Form 1040 with the United States, complete Schedule SE (Form 1040) and attach it to your Form 1040. 2011 tax file If you are not required to file Form 1040 with the United States and you are a bona fide resident of American Samoa, the CNMI, Guam, Puerto Rico, or the USVI, file Form 1040-SS. 2011 tax file If you are a resident of Puerto Rico, you can file the Spanish-language Form 1040-PR instead. 2011 tax file Do not file forms 1040-SS or 1040-PR with Form 1040. 2011 tax file If you are required to pay Additional Medicare Tax (discussed later) on your self-employment income, attach Form 8959, Additional Medicare Tax to Form 1040, Form 1040-SS, or Form 1040-PR, as applicable. 2011 tax file Chapter 11 Bankruptcy cases. 2011 tax file   While you are a debtor in a chapter 11 bankruptcy case, your net profit or loss from self-employment will be included on the income tax return (Form 1041, U. 2011 tax file S. 2011 tax file Income Tax Return for Estates and Trusts) of the bankruptcy estate. 2011 tax file However, you—not the bankruptcy estate—are responsible for paying self-employment tax on your net earnings from self-employment. 2011 tax file   Use Schedule SE (Form 1040), Form 1040-SS, or Form 1040-PR, as determined above, to figure your correct amount of self-employment tax. 2011 tax file   For other reporting requirements, see Chapter 11 Bankruptcy Cases in the Instructions for Form 1040. 2011 tax file Additional Medicare Tax Beginning in 2013, a 0. 2011 tax file 9% Additional Medicare Tax applies to Medicare wages, railroad retirement (RRTA) compensation, and self-employment income that are more than: $125,000 if married filing separately, $250,000 if married filing jointly, or $200,000 if single, head of household, or qualifying widow(er). 2011 tax file Medicare wages and self-employment income are combined to determine if income exceeds the threshold. 2011 tax file A self-employment loss should not be considered for purposes of this tax. 2011 tax file RRTA compensation should be separately compared to the threshold. 2011 tax file Your employer is responsible for withholding the 0. 2011 tax file 9% Additional Medicare Tax on Medicare wages or RRTA compensation it pays to you in excess of $200,000. 2011 tax file You should consider this withholding, if applicable, in determining whether you need to make estimated tax payments. 2011 tax file There are no special rules for U. 2011 tax file S. 2011 tax file citizens and nonresident aliens living abroad for purposes of this provision. 2011 tax file Wages, RRTA compensation, and self-employment income that are subject to Medicare tax will also be subject to Additional Medicare Tax if in excess of the applicable threshold. 2011 tax file For more information, see Form 8959, Additional Medicare Tax, and its instructions or visit www. 2011 tax file irs. 2011 tax file gov and enter the following words in the search box: Additional Medicare Tax. 2011 tax file You cannot include the Additional Medicare Tax as a deductible part of your self-employment tax. 2011 tax file Net Investment Income Tax Beginning in 2013, the Net Investment Income Tax (NIIT) imposes a 3. 2011 tax file 8% tax on the lesser of an individual’s net investment income or the excess of the individual’s modified adjusted gross income over a specified threshold amount. 2011 tax file Bona fide residents of Puerto Rico and American Samoa who may have a federal income tax return filing obligation may be liable for the NIIT if the taxpayer’s modified adjusted gross income from non-territory sources exceeds a specified threshold amount. 2011 tax file The NIIT does not apply to any individual who is a nonresident alien with respect to the United States. 2011 tax file Bona fide residents must take into account any additional tax liability associated with the NIIT when calculating your estimated tax payments. 2011 tax file Forms to file. 2011 tax file   If you are a bona fide resident of American Samoa and Puerto Rico and you are required to pay the NIIT, you must file Form 1040 with the United States and attach Form 8960, Net Investment Income Tax—Individuals, Estates, and Trusts. 2011 tax file For more information, see Form 8960 and its instructions. 2011 tax file Paying Your Taxes You may find that not all of your income tax has been paid through withholding by either the United States or the possession. 2011 tax file This is often true if you have income that is not subject to withholding, such as self-employment, interest, or rental income. 2011 tax file In this situation, you may need to make estimated tax payments. 2011 tax file Estimated Tax If your estimated income tax obligation is to the United States, use the worksheet in the Form 1040-ES package to figure your estimated tax, including self-employment tax. 2011 tax file Include the Additional Medicare Tax and Net Investment Income Tax if applicable. 2011 tax file If you are paying by check or money order, use the payment vouchers in the Form 1040-ES package. 2011 tax file Or, you can make your payments electronically and not have to file any paper forms. 2011 tax file See the Form 1040-ES instructions for information on making payments. 2011 tax file Double Taxation Mutual agreement procedures exist to settle issues where there is inconsistent tax treatment between the IRS and the taxing authorities of the following possessions. 2011 tax file American Samoa. 2011 tax file The Commonwealth of Puerto Rico. 2011 tax file The Commonwealth of the Northern Mariana Islands. 2011 tax file Guam. 2011 tax file The U. 2011 tax file S. 2011 tax file Virgin Islands. 2011 tax file These issues usually involve allocations of income, deductions, credits, or allowances between related persons; determinations of residency; and determinations of the source of income and related expenses. 2011 tax file Competent Authority Assistance The tax coordination agreements between the United States and the possession tax departments contain provisions allowing the competent authorities of the United States and the relevant possession to resolve, by mutual agreement, inconsistent tax treatment by the two jurisdictions. 2011 tax file How to make your request. 2011 tax file   Your request for competent authority assistance must include all the information listed in Revenue Procedure 2006-23, 2006-20 I. 2011 tax file R. 2011 tax file B. 2011 tax file 900 available at www. 2011 tax file irs. 2011 tax file gov/pub/irs-irbs/irb06-49. 2011 tax file pdf. 2011 tax file    Also, see Notice 2013-78, which provides proposed updates to the procedures for requesting U. 2011 tax file S. 2011 tax file competent authority assistance under tax treaties. 2011 tax file As noted, an update to Revenue Procedure 2006-23 will be published in the future. 2011 tax file   Your request must be in the form of a letter addressed to the Deputy Commissioner (International) LB&I. 2011 tax file It must contain a statement that competent authority assistance is requested under the mutual agreement procedure with the possession. 2011 tax file You (or a person having authority to sign your federal return) must sign and date the request. 2011 tax file    Send your written request for U. 2011 tax file S. 2011 tax file assistance under this procedure to:   Deputy Commissioner (International) Large Business and International Division Internal Revenue Service 1111 Constitution Avenue, N. 2011 tax file W. 2011 tax file  Routing: M4-365 Washington, DC 20224 (Attention: TAIT) Nonresident aliens generally must present their initial request for assistance to the relevant possession tax agency. 2011 tax file Credit or Refund In addition to the tax assistance request, if you seek a credit or refund of any overpayment of U. 2011 tax file S. 2011 tax file tax paid on the income in question, you should file a claim on Form 1040X, Amended U. 2011 tax file S. 2011 tax file Individual Income Tax Return. 2011 tax file Indicate on the form that a request for assistance under the mutual agreement procedure with the possession has been filed. 2011 tax file Attach a copy of the request to the form. 2011 tax file Also, you should take whatever steps must be taken under the possession tax code to prevent the expiration of the statutory period for filing a claim for credit or refund of a possession tax. 2011 tax file See Revenue Procedure 2006-54 (or its successor), section 9, for complete information. 2011 tax file Prev  Up  Next   Home   More Online Publications