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20131040ez

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20131040ez

20131040ez Tax Changes for Businesses Table of Contents 2001 ChangesNew 5-Year Carryback Rule for Net Operating Losses (NOLs) Electronic Form 1099 Tax Incentives for New York Liberty Zone Other 2001 Changes 2002 ChangesNonaccrual-Experience Method Issuance of Qualified Zone Academy Bonds Depletion Work Opportunity Credit Expanded in New York Liberty Zone Credit For Pension Plan Startup Costs Welfare-to-Work Credit Extended Work Opportunity Credit Extended Electric and Clean-Fuel Vehicles Renewable Electricity Production Credit Later ChangesSpecial Depreciation Allowance Extension of Placed in Service Date Special Liberty Zone Depreciation Allowance for New and Used Property Depreciation of Property Used on Indian Reservations Indian Employment Credit Extended 2001 Changes New 5-Year Carryback Rule for Net Operating Losses (NOLs) If you have an NOL from a tax year ending during 2001 or 2002, you must generally carry back the entire amount of the NOL to the 5 tax years before the NOL year (the carryback period). 20131040ez However, you can still choose to use the previous carryback period. 20131040ez You also can choose not to carry back an NOL and only carry it forward. 20131040ez Individuals, estates, and trusts can file Form 1045, Application for Tentative Refund. 20131040ez Corporations can file Form 1139, Corporation Application for Tentative Refund. 20131040ez The instructions for these forms will be revised to reflect the new law. 20131040ez Electronic Form 1099 For tax years ending after March 9, 2002, most Forms 1099 can be furnished electronically if the recipient consents, according to IRS regulations, to receive it that way. 20131040ez Tax Incentives for New York Liberty Zone New tax benefits are provided for the parts of New York City damaged in the terrorist attacks on September 11, 2001. 20131040ez These benefits apply to the newly created New York Liberty Zone, which is the area located on or south of Canal Street, East Broadway (east of its intersection with Canal Street), or Grand Street (east of its intersection with East Broadway), in the Borough of Manhattan. 20131040ez Tax benefits for the New York Liberty Zone include the following. 20131040ez A special depreciation allowance equal to 30% of the adjusted basis of qualified Liberty Zone property. 20131040ez It is allowed for the year the property is placed in service. 20131040ez No alternative minimum tax depreciation adjustment for qualified Liberty Zone property. 20131040ez Classification of Liberty Zone leasehold improvement property as 5-year property. 20131040ez Authorization of the issuance of tax-exempt New York Liberty bonds to finance the acquisition, construction, reconstruction, and renovation of nonresidential real property, residential rental property, and public utility property in the Liberty Zone. 20131040ez An increased section 179 deduction for certain Liberty Zone property. 20131040ez Extension of the replacement period from 2 years to 5 years for certain property involuntarily converted as a result of the terrorist attacks on September 11, 2001, but only if substantially all of the use of the replacement property is in New York City. 20131040ez For more information about involuntary conversions, see Postponement of Gain in Publication 547, Casualties, Disasters, and Thefts. 20131040ez In addition, for 2002 and 2003, the work opportunity credit is expanded by creating a new targeted group, consisting generally of employees who work in the Liberty Zone or, in certain cases, in New York City outside the Liberty Zone. 20131040ez For more information, see Work Opportunity Credit Expanded in New York Liberty Zone under 2002 Changes, later. 20131040ez For more information about the 30% special depreciation allowance, Liberty Zone leasehold improvement property, or increased section 179 deduction, see New York Liberty Zone Benefits, in chapter 5. 20131040ez In addition, the tax benefits for the Liberty Zone will be covered in a new edition of Publication 954, Tax Incentives for Empowerment Zones and Other Distressed Communities, available later in 2002. 20131040ez Other 2001 Changes Other changes are discussed in the following chapters. 20131040ez Chapter 4 Car Expenses Chapter 5 Depreciation 2002 Changes Nonaccrual-Experience Method Under current law, if you perform services and use an accrual method of accounting, you do not accrue income which, based on experience, you expect to be uncollectible. 20131040ez Beginning in 2002, this rule only applies if you perform services in the fields of health, law, engineering, architecture, accounting, actuarial science, performing arts, and consulting, or your average annual gross receipts for the 3 prior tax years does not exceed $5,000,000. 20131040ez As under current law, the nonaccrual-experience method will not apply to amounts on which you charge interest or a late payment penalty. 20131040ez For more information, see Nonaccrual-Experience Method in chapter 11 of Publication 535, Business Expenses. 20131040ez Issuance of Qualified Zone Academy Bonds State and local governments issue qualified zone academy bonds to raise funds for the use of qualified zone academies. 20131040ez The amount of bonds that may be issued was limited to $400 million each year for 1998, 1999, 2000, and 2001. 20131040ez This provision has been extended to provide for an additional $400 million of bonds to be issued each year for 2002 and 2003. 20131040ez For more information about qualified zone academy bonds, see Publication 954, Tax Incentives for Empowerment Zones and Other Distressed Communities. 20131040ez Depletion The suspension of the taxable income limit on percentage depletion from the marginal production of oil and natural gas that was scheduled to expire for tax years beginning after 2001 has been extended to tax years beginning before 2004. 20131040ez For more information on marginal production, see section 613A(c) of the Internal Revenue Code. 20131040ez Work Opportunity Credit Expanded in New York Liberty Zone The work opportunity credit is expanded to include a new targeted group consisting generally of employees who perform substantially all their services: In the New York Liberty Zone (defined earlier under Tax Incentives for New York Liberty Zone, under 2001 Changes), or Elsewhere in New York City for a business that relocated from the Liberty Zone due to the destruction or damage of its place of business by the September 11, 2001, terrorist attack. 20131040ez The credit is available to employers for wages paid to new employees and existing employees for work performed during 2002 or 2003. 20131040ez Certain limits apply. 20131040ez For more information about the work opportunity credit, see Publication 954, Tax Incentives for Empowerment Zones and Other Distressed Communities. 20131040ez Credit For Pension Plan Startup Costs The credit for pension plan startup costs is now allowed for plans that become effective after December 31, 2001. 20131040ez Previously, the credit was only allowed for plans established after December 31, 2001. 20131040ez For more information on the credit, see Important Changes for 2002 in Publication 560, Retirement Plans for Small Business. 20131040ez Welfare-to-Work Credit Extended The welfare-to-work credit that was scheduled to expire for wages paid to individuals who began working for you after 2001 has been extended to include wages paid to qualified individuals who begin work for you in 2002 or 2003. 20131040ez For more information on the welfare-to-work credit, see Publication 954, Tax Incentives for Empowerment Zones and Other Distressed Communities. 20131040ez Work Opportunity Credit Extended The work opportunity credit that was scheduled to expire for wages paid to individuals who began working for you after 2001 has been extended to include wages paid to qualified individuals who begin work for you in 2002 or 2003. 20131040ez For more information about the work opportunity credit, see Publication 954, Tax Incentives for Empowerment Zones and Other Distressed Communities. 20131040ez Electric and Clean-Fuel Vehicles The maximum clean-fuel vehicle deduction and qualified electric vehicle credit were scheduled to be 25% lower for 2002 and both were scheduled to be phased out completely by 2005. 20131040ez The full deduction and credit are now allowed for qualified property placed in service in 2002 and 2003. 20131040ez The phaseout of the deduction and the credit will begin in 2004, and no deduction or credit will be allowed for property placed in service after 2006. 20131040ez For more information about electric and clean-fuel vehicles, see chapter 12 in Publication 535, Business Expenses. 20131040ez Renewable Electricity Production Credit The renewable electricity production credit is extended to include electricity produced by facilities placed in service after 2001 and before 2004. 20131040ez Later Changes Special Depreciation Allowance You can claim the special depreciation allowance (an additional 30% depreciation deduction) for new property that you acquire before September 11, 2004, and place in service for your business generally before January 1, 2005, if you meet the other requirements for qualified property covered in chapter 5. 20131040ez Accordingly, you will generally no longer be able to claim the special depreciation allowance for the qualified property if you acquire it after September 10, 2004, or place it in service for your business after December 31, 2004. 20131040ez However, you will be able to claim the special Liberty Zone depreciation allowance (an additional 30% depreciation deduction) for most qualified property if you place it in service in the Liberty Zone after December 31, 2004, and generally before January 1, 2007, provided you meet the other requirements for qualified Liberty Zone property covered in chapter 5. 20131040ez Extension of Placed in Service Date To qualify for the special depreciation allowance, your property must meet certain tests, including the placed in service date test, as well as the other requirements covered in chapter 5 of this publication. 20131040ez To meet the placed in service date test, your property must generally be placed in service for use in your trade or business or for the production of income after September 10, 2001, and before January 1, 2005. 20131040ez However, certain property placed in service before January 1, 2006, may meet this test. 20131040ez Transportation property and property with a recovery period of 10 years or longer meet the test if one of the following applies. 20131040ez The property has an estimated production period of more than 2 years. 20131040ez The property has an estimated production period of more than 1 year and it costs more than $1 million. 20131040ez Transportation property is any tangible personal property used in the trade or business of transporting persons or property. 20131040ez For property that qualifies for the special depreciation allowance solely because of the one-year extension of the placed in service date, only the part of the basis attributable to manufacture, construction, or production before September 11, 2004, is eligible for the special depreciation allowance. 20131040ez Special Liberty Zone Depreciation Allowance for New and Used Property You can claim the special Liberty Zone depreciation allowance (an additional 30% depreciation deduction) for used property that you acquire after September 10, 2001, if the property meets the requirements listed under Qualified Liberty Zone Property in chapter 5 of this publication. 20131040ez You will be able to claim the allowance for both new and used property that you acquire after September 10, 2004, provided the property meets the other requirements for qualified Liberty Zone property. 20131040ez Depreciation of Property Used on Indian Reservations The special depreciation rules that apply to qualified property used on an Indian reservation were scheduled to expire for property placed in service after 2003. 20131040ez These special rules have been extended to include property placed in service in 2004. 20131040ez For more information about these rules, see Publication 946, How To Depreciate Property. 20131040ez Indian Employment Credit Extended The Indian employment credit that was scheduled to expire for tax years beginning after 2003 has been extended to include a tax year beginning in 2004. 20131040ez For more information about this credit, see Publication 954, Tax Incentives for Empowerment Zones and Other Distressed Communities. 20131040ez Prev  Up  Next   Home   More Online Publications
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The 20131040ez

20131040ez 2. 20131040ez   Withholding Tax Table of Contents Topics - This chapter discusses: Useful Items - You may want to see: Income Tax Withholding Statement. 20131040ez 30% Flat Rate Withholding Social Security and Medicare TaxesGeneral Information Bilateral Social Security (Totalization) Agreements Topics - This chapter discusses: Withholding income tax from the pay of U. 20131040ez S. 20131040ez citizens, Withholding tax at a flat rate, and Social security and Medicare taxes. 20131040ez Useful Items - You may want to see: Publication 505 Tax Withholding and Estimated Tax Form (and Instructions) 673 Statement For Claiming Exemption From Withholding on Foreign Earned Income Eligible for the Exclusion Provided by Section 911 W-4 Employee's Withholding Allowance Certificate W-9 Request for Taxpayer Identification Number and Certification See chapter 7 for information about getting this publication and these forms. 20131040ez Income Tax Withholding U. 20131040ez S. 20131040ez employers generally must withhold U. 20131040ez S. 20131040ez income tax from the pay of U. 20131040ez S. 20131040ez citizens working abroad unless the employer is required by foreign law to withhold foreign income tax. 20131040ez Foreign earned income exclusion. 20131040ez   Your employer does not have to withhold U. 20131040ez S. 20131040ez income taxes from wages you earn abroad if it is reasonable to believe that you will exclude them from income under the foreign earned income exclusion or the foreign housing exclusion. 20131040ez   Your employer should withhold taxes from any wages you earn for working in the United States. 20131040ez Statement. 20131040ez   You can give a statement to your employer indicating that you expect to qualify for the foreign earned income exclusion under either the bona fide residence test or the physical presence test and indicating your estimated housing cost exclusion. 20131040ez   Form 673 is an acceptable statement. 20131040ez You can use Form 673 only if you are a U. 20131040ez S. 20131040ez citizen. 20131040ez You do not have to use the form. 20131040ez You can prepare your own statement. 20131040ez See a copy of Form 673, later. 20131040ez   Generally, your employer can stop the withholding once you submit the statement that includes a declaration that the statement is made under penalties of perjury. 20131040ez However, if your employer has reason to believe that you will not qualify for either the foreign earned income or the foreign housing exclusion, your employer must continue to withhold. 20131040ez   In determining whether your foreign earned income is more than the limit on either the foreign earned income exclusion or the foreign housing exclusion, if your employer has any information about pay you received from any other source outside the United States, your employer must take that information into account. 20131040ez Foreign tax credit. 20131040ez   If you plan to take a foreign tax credit, you may be eligible for additional withholding allowances on Form W-4. 20131040ez You can take these additional withholding allowances only for foreign tax credits attributable to taxable salary or wage income. 20131040ez Withholding from pension payments. 20131040ez   U. 20131040ez S. 20131040ez payers of benefits from employer-deferred compensation plans, individual retirement plans, and commercial annuities generally must withhold income tax from payments delivered outside of the United States. 20131040ez You can choose exemption from withholding if you: Provide the payer of the benefits with a residence address in the United States or a U. 20131040ez S. 20131040ez possession, or Certify to the payer that you are not a U. 20131040ez S. 20131040ez citizen or resident alien or someone who left the United States to avoid tax. 20131040ez Check your withholding. 20131040ez   Before you report U. 20131040ez S. 20131040ez income tax withholding on your tax return, you should carefully review all information documents, such as Form W-2, Wage and Tax Statement, and the Form 1099 information returns. 20131040ez Compare other records, such as final pay records or bank statements, with Form W-2 or Form 1099 to verify the withholding on these forms. 20131040ez Check your U. 20131040ez S. 20131040ez income tax withholding even if you pay someone else to prepare your tax return. 20131040ez You may be assessed penalties and interest if you claim more than your correct amount of withholding allowances. 20131040ez This image is too large to be displayed in the current screen. 20131040ez Please click the link to view the image. 20131040ez Form 673 30% Flat Rate Withholding Generally, U. 20131040ez S. 20131040ez payers of income other than wages, such as dividends and royalties, are required to withhold tax at a flat 30% (or lower treaty) rate on nonwage income paid to nonresident aliens. 20131040ez If you are a U. 20131040ez S. 20131040ez citizen or resident alien and this tax is withheld in error from payments to you because you have a foreign address, you should notify the payer of the income to stop the withholding. 20131040ez Use Form W-9 to notify the payer. 20131040ez You can claim the tax withheld in error as a withholding credit on your tax return if the amount is not adjusted by the payer. 20131040ez Social security benefits paid to residents. 20131040ez   If you are a lawful permanent resident (green card holder) and a flat 30% tax was withheld in error on your social security benefits, the tax is refundable by the Social Security Administration (SSA) or the IRS. 20131040ez The SSA will refund the tax withheld if the refund can be processed during the same calendar year in which the tax was withheld. 20131040ez If the SSA cannot refund the tax withheld, you must file a Form 1040 or 1040A with the Internal Revenue Service Center at the address listed under Where To File to determine if you are entitled to a refund. 20131040ez The following information must be submitted with your Form 1040 or Form 1040A. 20131040ez A copy of Form SSA-1042S, Social Security Benefit Statement. 20131040ez A copy of your “green card. 20131040ez ” A signed declaration that includes the following statements. 20131040ez   “I am a U. 20131040ez S. 20131040ez lawful permanent resident and my green card has been neither revoked nor administratively or judicially determined to have been abandoned. 20131040ez I am filing a U. 20131040ez S. 20131040ez income tax return for the taxable year as a resident alien reporting all of my worldwide income. 20131040ez I have not claimed benefits for the taxable year under an income tax treaty as a nonresident alien. 20131040ez ” Social Security and Medicare Taxes Social security and Medicare taxes may apply to wages paid to an employee regardless of where the services are performed. 20131040ez General Information In general, U. 20131040ez S. 20131040ez social security and Medicare taxes do not apply to wages for services you perform as an employee outside the United States unless one of the following exceptions applies. 20131040ez You perform the services on or in connection with an American vessel or aircraft (defined later) and either: You entered into your employment contract within the United States, or The vessel or aircraft touches at a U. 20131040ez S. 20131040ez port while you are employed on it. 20131040ez You are working in one of the countries with which the United States has entered into a bilateral social security agreement (discussed later). 20131040ez You are working for an American employer (defined later). 20131040ez You are working for a foreign affiliate (defined later) of an American employer under a voluntary agreement entered into between the American employer and the U. 20131040ez S. 20131040ez Treasury Department. 20131040ez American vessel or aircraft. 20131040ez   An American vessel is any vessel documented or numbered under the laws of the United States and any other vessel whose crew is employed solely by one or more U. 20131040ez S. 20131040ez citizens, residents, or corporations. 20131040ez An American aircraft is an aircraft registered under the laws of the United States. 20131040ez American employer. 20131040ez   An American employer includes any of the following. 20131040ez The U. 20131040ez S. 20131040ez Government or any of its instrumentalities. 20131040ez An individual who is a resident of the United States. 20131040ez A partnership of which at least two-thirds of the partners are U. 20131040ez S. 20131040ez residents. 20131040ez A trust of which all the trustees are U. 20131040ez S. 20131040ez residents. 20131040ez A corporation organized under the laws of the United States, any U. 20131040ez S. 20131040ez state, or the District of Columbia, Puerto Rico, the U. 20131040ez S. 20131040ez Virgin Islands, Guam, or American Samoa. 20131040ez   An American employer also includes any foreign person with an employee who is performing services in connection with a contract between the U. 20131040ez S. 20131040ez government (or any instrumentality thereof) and a member of a domestically controlled group of entities which includes such foreign person. 20131040ez Foreign affiliate. 20131040ez   A foreign affiliate of an American employer is any foreign entity in which the American employer has at least a 10% interest, directly or through one or more entities. 20131040ez For a corporation, the 10% interest must be in its voting stock. 20131040ez For any other entity, the 10% interest must be in its profits. 20131040ez   Form 2032, Contract Coverage Under Title II of the Social Security Act, is used by American employers to extend social security coverage to U. 20131040ez S. 20131040ez citizens and resident aliens working abroad for foreign affiliates of American employers. 20131040ez Once you enter into an agreement, coverage cannot be terminated. 20131040ez Excludable meals and lodging. 20131040ez   Social security tax does not apply to the value of meals and lodging provided to you for the convenience of your employer if it is reasonable to believe that you will be able to exclude the value from your income. 20131040ez Bilateral Social Security (Totalization) Agreements The United States has entered into agreements with some foreign countries to coordinate social security coverage and taxation of workers who are employed in those countries. 20131040ez These agreements are commonly referred to as totalization agreements and are in effect with the following countries. 20131040ez Australia Greece Norway Austria Ireland Poland Belgium Italy Portugal Canada Japan Spain Chile Korea, Sweden Czech South Switzerland Republic Luxembourg United Denmark Netherlands Kingdom Finland     France     Germany           Under these agreements, dual coverage and dual contributions (taxes) for the same work are eliminated. 20131040ez The agreements generally make sure that you pay social security taxes to only one country. 20131040ez Generally, under these agreements, you will only be subject to social security taxes in the country where you are working. 20131040ez However, if you are temporarily sent to work in a foreign country and your pay would otherwise be subject to social security taxes in both the United States and that country, you generally can remain covered only by U. 20131040ez S. 20131040ez social security. 20131040ez You can get more information on any specific agreement by contacting: Social Security Administration Office of International Programs P. 20131040ez O. 20131040ez Box 17741 Baltimore, MD 21235-7741 If you have access to the Internet, you can get more information at: http://www. 20131040ez socialsecurity. 20131040ez gov/international. 20131040ez Covered by U. 20131040ez S. 20131040ez only. 20131040ez   If your pay in a foreign country is subject only to U. 20131040ez S. 20131040ez social security tax and is exempt from foreign social security tax, your employer should get a certificate of coverage from the Office of International Programs. 20131040ez Covered by foreign country only. 20131040ez   If you are permanently working in a foreign country with which the United States has a social security agreement and, under the agreement, your pay is exempt from U. 20131040ez S. 20131040ez social security tax, you or your employer should get a statement from the authorized official or agency of the foreign country verifying that your pay is subject to social security coverage in that country. 20131040ez   If the authorities of the foreign country will not issue such a statement, either you or your employer should get a statement from the U. 20131040ez S. 20131040ez Social Security Administration, Office of International Programs, at the address listed earlier. 20131040ez The statement should indicate that your wages are not covered by the U. 20131040ez S. 20131040ez social security system. 20131040ez   This statement should be kept by your employer because it establishes that your pay is exempt from U. 20131040ez S. 20131040ez social security tax. 20131040ez   Only wages paid on or after the effective date of the totalization agreement can be exempt from U. 20131040ez S. 20131040ez social security tax. 20131040ez Prev  Up  Next   Home   More Online Publications