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Federal Income Tax Return

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Federal Income Tax Return

Federal income tax return 9. Federal income tax return   Education Exception to Additional Tax on Early IRA Distributions Table of Contents Introduction Who Is Eligible Figuring the Amount Not Subject to the 10% Tax Reporting Early Distributions Introduction Generally, if you take a distribution from your IRA before you reach age 59½, you must pay a 10% additional tax on the early distribution. Federal income tax return This applies to any IRA you own, whether it is a traditional IRA (including a SEP-IRA), a Roth IRA, or a SIMPLE IRA. Federal income tax return The additional tax on an early distribution from a SIMPLE IRA may be as high as 25%. Federal income tax return See Publication 560, Retirement Plans for Small Business, for information on SEP-IRAs, and Publication 590, for information about all other IRAs. Federal income tax return However, you can take distributions from your IRAs for qualified higher education expenses without having to pay the 10% additional tax. Federal income tax return You may owe income tax on at least part of the amount distributed, but you may not have to pay the 10% additional tax. Federal income tax return Generally, if the taxable part of the distribution is less than or equal to the adjusted qualified education expenses (AQEE), none of the distribution is subject to the additional tax. Federal income tax return If the taxable part of the distribution is more than the AQEE, only the excess is subject to the additional tax. Federal income tax return Who Is Eligible You can take a distribution from your IRA before you reach age 59½ and not have to pay the 10% additional tax if, for the year of the distribution, you pay qualified education expenses for: yourself, your spouse, or your or your spouse's child, foster child, adopted child, or descendant of any of them. Federal income tax return Qualified education expenses. Federal income tax return   For purposes of the 10% additional tax, these expenses are tuition, fees, books, supplies, and equipment required for enrollment or attendance at an eligible educational institution. Federal income tax return They also include expenses for special needs services incurred by or for special needs students in connection with their enrollment or attendance. Federal income tax return   In addition, if the student is at least a half-time student, room and board are qualified education expenses. Federal income tax return   The expense for room and board qualifies only to the extent that it is not more than the greater of the following two amounts. Federal income tax return The allowance for room and board, as determined by the eligible educational institution, that was included in the cost of attendance (for federal financial aid purposes) for a particular academic period and living arrangement of the student. Federal income tax return The actual amount charged if the student is residing in housing owned or operated by the eligible educational institution. Federal income tax return You will need to contact the eligible educational institution for qualified room and board costs. Federal income tax return Eligible educational institution. Federal income tax return   An eligible educational institution is any college, university, vocational school, or other postsecondary educational institution eligible to participate in a student aid program administered by the U. Federal income tax return S. Federal income tax return Department of Education. Federal income tax return It includes virtually all accredited public, nonprofit, and proprietary (privately owned profit-making) postsecondary institutions. Federal income tax return The educational institution should be able to tell you if it is an eligible educational institution. Federal income tax return   Certain educational institutions located outside the United States also participate in the U. Federal income tax return S. Federal income tax return Department of Education's Federal Student Aid (FSA) programs. Federal income tax return Half-time student. Federal income tax return   A student is enrolled “at least half-time” if he or she is enrolled for at least half the full-time academic work load for the course of study the student is pursuing as determined under the standards of the school where the student is enrolled. Federal income tax return Figuring the Amount Not Subject to the 10% Tax To determine the amount of your distribution that is not subject to the 10% additional tax, first figure your adjusted qualified education expenses. Federal income tax return You do this by reducing your total qualified education expenses by any tax-free educational assistance, which includes: Expenses used to figure the tax-free portion of distributions from a Coverdell education savings account (ESA) (see Distributions in chapter 7, Coverdell Education Savings Account), The tax-free part of scholarships and fellowships (see Tax-Free Scholarships and Fellowships in chapter 1, Scholarships, Fellowships, Grants, and Tuition Reductions), Pell grants (see Pell Grants and Other Title IV Need-Based Education Grants in chapter 1, Scholarships, Fellowships, Grants, and Tuition Reductions), Veterans' educational assistance (see Veterans' Benefits in chapter 1, Scholarships, Fellowships, Grants, and Tuition Reductions), Employer-provided educational assistance (see chapter 11, Employer-Provided Educational Assistance ), and Any other nontaxable (tax-free) payments (other than gifts or inheritances) received as educational assistance. Federal income tax return Do not reduce the qualified education expenses by amounts paid with funds the student receives as: Payment for services, such as wages, A loan, A gift, An inheritance given to either the student or the individual making the withdrawal, or A withdrawal from personal savings (including savings from a qualified tuition program (QTP)). Federal income tax return If your IRA distribution is equal to or less than your adjusted qualified education expenses, you are not subject to the 10% additional tax. Federal income tax return Example 1. Federal income tax return In 2013, Erin (age 32) took a year off from teaching to attend graduate school full-time. Federal income tax return She paid $5,800 of qualified education expenses from the following sources. Federal income tax return   Employer-provided educational assistance  (tax free) $5,000     Early distribution from IRA (includes $500 taxable earnings) 3,200           Before Erin can determine if she must pay the 10% additional tax on her IRA distribution, she must reduce her total qualified education expenses. Federal income tax return   Total qualified education expenses $5,800     Minus: Tax-free educational assistance −5,000     Equals: Adjusted qualified  education expenses (AQEE) $ 800   Because Erin's AQEE ($800) are more than the taxable portion of her IRA distribution ($500), she does not have to pay the 10% additional tax on any part of this distribution. Federal income tax return However, she must include the $500 taxable earnings in her gross income subject to income tax. Federal income tax return Example 2. Federal income tax return Assume the same facts as in Example 1 , except that Erin deducted some of the contributions to her IRA, so the taxable part of her early distribution is higher by $1,000. Federal income tax return This must be included in her income subject to income tax. Federal income tax return The taxable part of Erin's IRA distribution ($1,000) is larger than her $800 AQEE. Federal income tax return Therefore, she must pay the 10% additional tax on $200, the taxable part of her distribution ($1,000) that is more than her qualified education expenses ($800). Federal income tax return She does not have to pay the 10% additional tax on the remaining $800 of her taxable distribution. Federal income tax return Reporting Early Distributions By January 31, 2014, the payer of your IRA distribution should send you Form 1099-R, Distributions From Pensions, Annuities, Retirement or Profit-Sharing Plans, IRAs, Insurance Contracts, etc. Federal income tax return The information on this form will help you determine how much of your distribution is taxable for income tax purposes and how much is subject to the 10% additional tax. Federal income tax return If you received an early distribution from your IRA, you must report the taxable earnings on Form 1040, line 15b (Form 1040NR, line 16b). Federal income tax return Then, if you qualify for an exception for qualified higher education expenses, you must file Form 5329 to show how much, if any, of your early distribution is subject to the 10% additional tax. Federal income tax return See the Instructions for Form 5329, Part I, for help in completing the form and entering the results on Form 1040 or 1040NR. Federal income tax return There are many other situations in which Form 5329 is required. Federal income tax return If, during 2013, you had other distributions from IRAs or qualified retirement plans, or have made excess contributions to certain tax-favored accounts, see the instructions for line 58 (Form 1040) or line 56 (Form 1040NR) to determine if you must file Form 5329. Federal income tax return Prev  Up  Next   Home   More Online Publications
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Preparing a Request for Appeals

If you disagree with the IRS's determination, you may request an Appeals conference by filing a written protest. You may represent yourself, or have a professional represent you. The representative must be an attorney, a certified public accountant, or an enrolled agent authorized to practice before the IRS. If you want your representative to talk to us without you, you must provide us with  a copy of a completed power of attorney Form 2848, Power of Attorney and Declaration of Representative.

To decide if you should appeal your tax dispute, consider the following:

  • If you believe the IRS made an incorrect decision based on a misinterpretation of the law, check the publications discussing your issue(s), or refer to Tax Topics.
  • If you believe the IRS did not properly apply the law due to a misunderstanding of the facts, be prepared to clarify and support your position.
  • If you believe the IRS is taking inappropriate collection action against you, or your offer in compromise was denied and you disagree with that decision, be prepared to clarify and support your position. 
  • If you believe the facts used by the IRS are incorrect, then you should have records or other evidence to support your position.

Protests

A formal written protest is required in all cases to request an Appeals conference, unless you qualify for the Small Case Request procedure discussed below or another special appeal procedure.  

Note: If you disagree with a lien, levy, seizure, or denial or termination of an installment agreement, see Publication 1660, Collection Appeal Rights, for information on filing your protest.

How to file a Formal Written Protest

Include all of the following:

  1. Your name, address, and a daytime telephone number.
  2. A statement that you want to appeal the IRS findings to the Office of Appeals.
  3. A copy of the letter you received that shows the proposed change(s).
  4. The tax period(s) or year(s) involved.
  5. A list of each proposed item with which you disagree.
  6. The reason(s) you disagree with each item.
  7. The facts that support your position on each item.
  8. The law or authority, if any, that supports your position on each item. 
  9. The penalties of perjury statement as follows: “Under the penalties of perjury, I declare that the facts stated in this protest and any accompanying documents are true, correct, and complete to the best of my knowledge and belief.”
  10. Your signature under the penalties of perjury statement.

If your representative prepares and signs the protest for you, he or she must substitute a declaration for the penalties of perjury statement that includes:

  1. That he or she submitted the protest and any accompanying documents, and
  2. Whether he or she knows personally that the facts stated in the protest and any accompanying documents are true and correct.

You must send your formal written protest within the time limit specified in the letter that offers you the right to appeal the proposed changes. Generally, the time limit is 30 days from the date of the letter.

How to file a Small Case Request

You may submit a Small Case Request if the entire amount of additional tax and penalty proposed for each tax period is $25,000 or less. For an offer in compromise, the entire amount for each tax period includes total unpaid tax, penalty and interest due. 

Note: Employee plan, exempt organizations, S corporations and partnerships are not eligible for Small Case Requests.

  1. Follow the instructions in the letter you received.
  2. Use Form 12203, Request for Appeals Review, or the form referenced in the letter to file your appeal, or prepare a brief written statement. List the disagreed item(s) and the reason(s) you disagree.

Note: Forms to use to file your appeal are available online or by calling 1-800-829-3676 (1-800-TAX-FORM).

Page Last Reviewed or Updated: 16-Jan-2014

The Federal Income Tax Return

Federal income tax return 4. Federal income tax return   Filing U. Federal income tax return S. Federal income tax return 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. Federal income tax return S. Federal income tax return Tax ReturnU. Federal income tax return S. Federal income tax return Armed Forces. Federal income tax return 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. Federal income tax return S. Federal income tax return income tax return is required for your situation. Federal income tax return If a U. Federal income tax return S. Federal income tax return return is required, your next step is to see if you meet the filing requirements. Federal income tax return If you do meet the filing requirements, the information presented in this chapter will help you understand the special procedures involved. Federal income tax return 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. Federal income tax return 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. Federal income tax return S. Federal income tax return income tax return if your gross income is at least the amount shown in Table 4-1, later, for your filing status and age. Federal income tax return If you were a bona fide resident of American Samoa or Puerto Rico and are able to exclude your possession income from your U. Federal income tax return S. Federal income tax return tax return, your filing requirement may be less than the amount in Table 4-1. Federal income tax return For details, see the information under Filing Requirement if Possession Income Is Excluded , later. Federal income tax return 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. Federal income tax return For more information, see the Form 1040 instructions. Federal income tax return 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. Federal income tax return S. Federal income tax return tax return, you must determine your adjusted filing requirement. Federal income tax return 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. Federal income tax return Personal exemption. Federal income tax return   When figuring your filing requirement, your personal exemption is allowed in full. Federal income tax return Do not reduce it for this purpose. Federal income tax return Do not include exemptions for your dependents. Federal income tax return Allowable standard deduction. Federal income tax return   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. Federal income tax return Because the standard deduction applies to all types of income, it must be divided between your excluded income and income from other sources. Federal income tax return 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. Federal income tax return S. Federal income tax return income tax     Gross income from all sources (including excluded possession income)   Example. Federal income tax return Barbara Spruce, a U. Federal income tax return S. Federal income tax return citizen, is single, under 65, and a bona fide resident of American Samoa. Federal income tax return 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. Federal income tax return S. Federal income tax return income tax). Federal income tax return Her allowable standard deduction for 2013 is figured as follows:   $8,000 $28,000 × $6,100 (regular standard deduction) = $1,743   Adjusted filing requirement. Federal income tax return   Figure your adjusted filing requirement by adding the amount of your allowable standard deduction to the amount of your personal exemption. Federal income tax return You must file a U. Federal income tax return S. Federal income tax return income tax return if your gross income is at least the amount shown on line 3 of the following worksheet. Federal income tax return    1. Federal income tax return Enter the allowable standard deduction you figured earlier under Allowable standard deduction . Federal income tax return If your filing status is married filing separately, enter -0-   2. Federal income tax return Personal exemption. Federal income tax return 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. Federal income tax return Add lines 1 and 2. Federal income tax return You must file a U. Federal income tax return S. Federal income tax return income tax return if your gross income from sources outside the relevant possession is at least this amount   Table 4-1. Federal income tax return 2013 Filing Requirements Chart for Most Taxpayers IF your filing status is. Federal income tax return . Federal income tax return . Federal income tax return AND at the end of 2013 you were*. Federal income tax return . Federal income tax return . Federal income tax return THEN file a return if your gross income** was at least. Federal income tax return . Federal income tax return . Federal income tax return 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. Federal income tax return ** 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). Federal income tax return 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). Federal income tax return 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. Federal income tax return *** 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. Federal income tax return Example 1. Federal income tax return James and Joan Thompson, one over 65, are U. Federal income tax return S. Federal income tax return citizens and bona fide residents of Puerto Rico during the entire tax year. Federal income tax return They file a joint income tax return. Federal income tax return 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. Federal income tax return S. Federal income tax return income tax). Federal income tax return 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. Federal income tax return S. Federal income tax return income tax return because their gross income subject to U. Federal income tax return S. Federal income tax return tax ($6,000) is less than their allowable standard deduction plus their personal exemptions ($1,961+ $7,800= $9,761). Federal income tax return Example 2. Federal income tax return Barbara Spruce (see Example under Allowable standard deduction, earlier), however, must file a U. Federal income tax return S. Federal income tax return income tax return because her gross income subject to U. Federal income tax return S. Federal income tax return tax ($8,000) is more than her allowable standard deduction plus her personal exemption ($1,743 + $3,900 = $5,643). Federal income tax return If you must file a U. Federal income tax return S. Federal income tax return income tax return, you may be able to file a paperless return using IRS e-file. Federal income tax return See your form instructions or visit our website at IRS. Federal income tax return gov. Federal income tax return When To File If you file on a calendar year basis, the due date for filing your U. Federal income tax return S. Federal income tax return income tax return is April 15 following the end of your tax year. Federal income tax return 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. Federal income tax return If any due date falls on a Saturday, Sunday, or legal holiday, your tax return is due on the next business day. Federal income tax return For your 2013 tax return, the due date is April 15, 2014. Federal income tax return 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. Federal income tax return 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. Federal income tax return See your form instructions for a list of designated private delivery services. Federal income tax return Extension of Time To File You can get an extension of time to file your U. Federal income tax return S. Federal income tax return income tax return. Federal income tax return Special rules apply for those living outside the United States. Federal income tax return 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. Federal income tax return Example. Federal income tax return If your return must be filed by April 15, 2014, you will have until October 15, 2014, to file. Federal income tax return 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. Federal income tax return 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. Federal income tax return You may also be charged penalties (see the Instructions for Form 4868). Federal income tax return How to get the automatic extension. Federal income tax return   You can get the automatic 6-month extension if you do one of the following by the due date for filing your return. Federal income tax return E-file Form 4868 using your personal computer or a tax professional. Federal income tax return E-file and pay by credit or debit card. Federal income tax return Your payment must be at least $1. Federal income tax return You may pay by phone or over the Internet. Federal income tax return Do not file Form 4868. Federal income tax return File a paper Form 4868. Federal income tax return If you are a fiscal year taxpayer, you must file a paper Form 4868. Federal income tax return See Form 4868 for information on getting an extension using these options. Federal income tax return When to file. Federal income tax return   You must request the automatic extension by the due date for your return. Federal income tax return You can file your return any time before the 6-month extension period ends. Federal income tax return When you file your return. Federal income tax return   Enter any payment you made related to the extension of time to file on Form 1040, line 68. Federal income tax return If you file Form 1040A, U. Federal income tax return S. Federal income tax return 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. Federal income tax return Also enter “Form 4868” and the amount paid in the space to the left of the entry space for line 41 or line 9. Federal income tax return You cannot ask the Internal Revenue Service to figure your tax if you use the extension of time to file. Federal income tax return 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. Federal income tax return S. Federal income tax return 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. Federal income tax return 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. Federal income tax return If you serve in a combat zone or qualified hazardous duty area, you may be eligible for a longer extension of time to file. Federal income tax return For more information, see Publication 3, Armed Forces' Tax Guide. Federal income tax return Married taxpayers. Federal income tax return   If you file a joint return, only one spouse has to qualify for this automatic extension. Federal income tax return However, if you and your spouse file separate returns, this automatic extension applies only to the spouse who qualifies. Federal income tax return How to get the extension. Federal income tax return   To use this special automatic extension, you must attach a statement to your return explaining what situation qualified you for the extension. Federal income tax return (See the situations listed under (2), earlier. Federal income tax return ) Extension beyond 2 months. Federal income tax return   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. Federal income tax return File Form 4868 by the end of the automatic extension period (June 16, 2014 for calendar year taxpayers). Federal income tax return Be sure to check the box on Form 4868, line 8, if appropriate. Federal income tax return   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). Federal income tax return   To request this extension, you must send the IRS a letter explaining the reasons why you need the additional 2 months. Federal income tax return 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. Federal income tax return 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. Federal income tax return If you are not including a check or a money order, send your U. Federal income tax return S. Federal income tax return 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. Federal income tax return S. Federal income tax return tax return and all attachments to:  Internal Revenue Service P. Federal income tax return O. Federal income tax return Box 1303 Charlotte, NC 28201-1303 USA Also send your U. Federal income tax return S. Federal income tax return return to these addresses if you are attaching Form 5074 or Form 8689. Federal income tax return 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. Federal income tax return Special Rules for Completing Your U. Federal income tax return S. Federal income tax return Tax Return If you are not excluding possession income from your U. Federal income tax return S. Federal income tax return tax return, follow the instructions for the specific forms you file. Federal income tax return However, you may not qualify to claim the earned income credit (EIC). Federal income tax return Earned income credit. Federal income tax return   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. Federal income tax return S. Federal income tax return tax return. Federal income tax return 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. Federal income tax return S. Federal income tax return Armed Forces. Federal income tax return U. Federal income tax return S. Federal income tax return Armed Forces. Federal income tax return   U. Federal income tax return S. Federal income tax return 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. Federal income tax return Extended active duty means you are called or ordered to duty for an indefinite period or for a period of more than 90 days. Federal income tax return 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. Federal income tax return Income from American Samoa or Puerto Rico excluded. Federal income tax return   You will not be allowed to take deductions and credits that apply to the excluded income. Federal income tax return The additional information you need follows. Federal income tax return 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. Federal income tax return S. Federal income tax return income tax return. Federal income tax return 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. Federal income tax return S. Federal income tax return tax return. Federal income tax return 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). Federal income tax return Figuring the deduction. Federal income tax return   To find the part of a deduction that is allowable, multiply the deduction by the following fraction. Federal income tax return   Gross income subject to U. Federal income tax return S. Federal income tax return 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). Federal income tax return Moving expense deduction. Federal income tax return   Generally, expenses of a move to a possession are directly attributable to wages, salaries, and other earned income from that possession. Federal income tax return Likewise, the expenses of a move back to the United States are generally attributable to U. Federal income tax return S. Federal income tax return earned income. Federal income tax return   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. Federal income tax return S. Federal income tax return tax return. Federal income tax return For more information, see Moving expense deduction in chapter 3 under the name of the relevant possession. Federal income tax return   If you are claiming expenses for a move from a U. Federal income tax return S. Federal income tax return possession to the United States, use Form 3903 to figure your deductible expenses and enter the amount on Form 1040, line 26. Federal income tax return For purposes of deducting moving expenses, the possessions are considered part of the United States. Federal income tax return See Publication 521, Moving Expenses, for information about what expenses are deductible. Federal income tax return Self-employment tax deduction. Federal income tax return   Generally, if you are reporting self-employment income on your U. Federal income tax return S. Federal income tax return return, you can include the deductible part of your self-employment tax on Form 1040, line 27. Federal income tax return This is an income tax deduction only; it is not a deduction in figuring net earnings from self-employment (for self-employment tax). Federal income tax return   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. Federal income tax return   If only part of your self-employment income is excluded, the part of the deduction that is based on the nonexcluded income is allowed. Federal income tax return This would happen if, for instance, you have two businesses and only the income from one of them is excludable. Federal income tax return   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. Federal income tax return   Self-employment income subject to U. Federal income tax return S. Federal income tax return income tax     Total self-employment income (including excluded possession income)   The result is your self-employment tax on nonexcluded income. Federal income tax return Include the deductible part of this amount on Form 1040, line 27. Federal income tax return Individual retirement arrangement (IRA) deduction. Federal income tax return   Do not take excluded income into account when figuring your deductible IRA contribution. Federal income tax return 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. Federal income tax return 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. Federal income tax return Then multiply your full standard deduction by the following fraction. Federal income tax return   Gross income subject to U. Federal income tax return S. Federal income tax return 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). Federal income tax return ” This calculation may not be the same as the one you used to determine if you need to file a U. Federal income tax return S. Federal income tax return tax return. Federal income tax return Itemized Deductions Most itemized deductions do not apply to a particular type of income. Federal income tax return However, itemized deductions can be divided into three categories. Federal income tax return Those that apply specifically to excluded income, such as employee business expenses, are not deductible. Federal income tax return Those that apply specifically to income subject to U. Federal income tax return S. Federal income tax return income tax, which might also be employee business expenses, are fully allowable under the Instructions for Schedule A (Form 1040), Itemized Deductions. Federal income tax return Those that do not apply to specific income must be allocated between your gross income subject to U. Federal income tax return S. Federal income tax return income tax and your total gross income from all sources. Federal income tax return The example given later shows how to figure the deductible part of each type of expense that is not related to specific income. Federal income tax return Example. Federal income tax return In 2013, you and your spouse are both under 65 and U. Federal income tax return S. Federal income tax return citizens who are bona fide residents of Puerto Rico during the entire tax year. Federal income tax return You file a joint income tax return. Federal income tax return During 2013, you earned $20,000 from Puerto Rican sources (excluded from U. Federal income tax return S. Federal income tax return gross income) and your spouse earned $60,000 from the U. Federal income tax return S. Federal income tax return Government. Federal income tax return You have $16,000 of itemized deductions that do not apply to any specific type of income. Federal income tax return 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). Federal income tax return 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. Federal income tax return   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. Federal income tax return Overall limitation on itemized deductions. Federal income tax return   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. Federal income tax return Personal Exemptions Personal exemptions are allowed in full even if excluding possession income. Federal income tax return However, depending upon your adjusted gross income and filing status, the amount you can deduct may be reduced. Federal income tax return See the Deduction for Exemptions Worksheet—Line 42 in the instructions for Form 1040. Federal income tax return Foreign Tax Credit if Possession Income Is Excluded If you must report American Samoa or Puerto Rico source income on your U. Federal income tax return S. Federal income tax return tax return, you can claim a foreign tax credit for income taxes paid to the possession on that income. Federal income tax return However, you cannot claim a foreign tax credit for taxes paid on possession income that is excluded on your U. Federal income tax return S. Federal income tax return tax return. Federal income tax return The foreign tax credit is generally figured on Form 1116. Federal income tax return If you have income, such as U. Federal income tax return S. Federal income tax return 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. Federal income tax return You make this reduction for each separate income category. Federal income tax return To find the amount of this reduction, use the following formula for each income category. Federal income tax return 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. Federal income tax return For more information on the foreign tax credit, see Publication 514. Federal income tax return Example. Federal income tax return Jason and Lynn Reddy are U. Federal income tax return S. Federal income tax return citizens who were bona fide residents of Puerto Rico during all of 2013. Federal income tax return They file a joint tax return. Federal income tax return The following table shows their excludable and taxable income for U. Federal income tax return S. Federal income tax return federal income tax purposes. Federal income tax return   Taxable   Excludable Jason's wages from  U. Federal income tax return S. Federal income tax return Government $25,000     Lynn's wages from Puerto Rico  corp. Federal income tax return     $15,000 Dividend from Puerto Rico corp. Federal income tax return doing business in Puerto Rico     200 Dividend from U. Federal income tax return S. Federal income tax return  corp. Federal income tax return doing business  in U. Federal income tax return S. Federal income tax return * 1,000     Totals $26,000   $15,200 * Income from sources outside Puerto Rico is taxable. Federal income tax return   Jason and Lynn must file 2013 income tax returns with both Puerto Rico and the United States. Federal income tax return They have gross income of $26,000 for U. Federal income tax return S. Federal income tax return tax purposes. Federal income tax return They paid taxes to Puerto Rico of $4,000 ($3,980 on their wages and $20 on the dividend from the Puerto Rico corporation). Federal income tax return They figure their foreign tax credit on two Forms 1116, which they must attach to their U. Federal income tax return S. Federal income tax return return. Federal income tax return They fill out one Form 1116 for wages and one Form 1116 for the dividend. Federal income tax return Jason and Lynn figure the Puerto Rico taxes on excluded income as follows. Federal income tax return   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. Federal income tax return Self-Employment Tax Self-employment tax includes both social security and Medicare taxes for individuals who are self-employed. Federal income tax return A U. Federal income tax return S. Federal income tax return citizen or resident alien who is self-employed must pay self-employment tax on net self-employment earnings of $400 or more. Federal income tax return This rule applies whether or not the earnings are excludable from gross income (or whether or not a U. Federal income tax return S. Federal income tax return income tax return must otherwise be filed). Federal income tax return Bona fide residents of the possessions discussed in this publication are considered U. Federal income tax return S. Federal income tax return residents for this purpose and are subject to the self-employment tax. Federal income tax return Forms to file. Federal income tax return   If you have net self-employment income and are subject to self-employment tax, file one of the following with the United States. Federal income tax return If you are required to file Form 1040 with the United States, complete Schedule SE (Form 1040) and attach it to your Form 1040. Federal income tax return 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. Federal income tax return If you are a resident of Puerto Rico, you can file the Spanish-language Form 1040-PR instead. Federal income tax return Do not file forms 1040-SS or 1040-PR with Form 1040. Federal income tax return 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. Federal income tax return Chapter 11 Bankruptcy cases. Federal income tax return   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. Federal income tax return S. Federal income tax return Income Tax Return for Estates and Trusts) of the bankruptcy estate. Federal income tax return However, you—not the bankruptcy estate—are responsible for paying self-employment tax on your net earnings from self-employment. Federal income tax return   Use Schedule SE (Form 1040), Form 1040-SS, or Form 1040-PR, as determined above, to figure your correct amount of self-employment tax. Federal income tax return   For other reporting requirements, see Chapter 11 Bankruptcy Cases in the Instructions for Form 1040. Federal income tax return Additional Medicare Tax Beginning in 2013, a 0. Federal income tax return 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). Federal income tax return Medicare wages and self-employment income are combined to determine if income exceeds the threshold. Federal income tax return A self-employment loss should not be considered for purposes of this tax. Federal income tax return RRTA compensation should be separately compared to the threshold. Federal income tax return Your employer is responsible for withholding the 0. Federal income tax return 9% Additional Medicare Tax on Medicare wages or RRTA compensation it pays to you in excess of $200,000. Federal income tax return You should consider this withholding, if applicable, in determining whether you need to make estimated tax payments. Federal income tax return There are no special rules for U. Federal income tax return S. Federal income tax return citizens and nonresident aliens living abroad for purposes of this provision. Federal income tax return 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. Federal income tax return For more information, see Form 8959, Additional Medicare Tax, and its instructions or visit www. Federal income tax return irs. Federal income tax return gov and enter the following words in the search box: Additional Medicare Tax. Federal income tax return You cannot include the Additional Medicare Tax as a deductible part of your self-employment tax. Federal income tax return Net Investment Income Tax Beginning in 2013, the Net Investment Income Tax (NIIT) imposes a 3. Federal income tax return 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. Federal income tax return 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. Federal income tax return The NIIT does not apply to any individual who is a nonresident alien with respect to the United States. Federal income tax return Bona fide residents must take into account any additional tax liability associated with the NIIT when calculating your estimated tax payments. Federal income tax return Forms to file. Federal income tax return   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. Federal income tax return For more information, see Form 8960 and its instructions. Federal income tax return 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. Federal income tax return This is often true if you have income that is not subject to withholding, such as self-employment, interest, or rental income. Federal income tax return In this situation, you may need to make estimated tax payments. Federal income tax return 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. Federal income tax return Include the Additional Medicare Tax and Net Investment Income Tax if applicable. Federal income tax return If you are paying by check or money order, use the payment vouchers in the Form 1040-ES package. Federal income tax return Or, you can make your payments electronically and not have to file any paper forms. Federal income tax return See the Form 1040-ES instructions for information on making payments. Federal income tax return 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. Federal income tax return American Samoa. Federal income tax return The Commonwealth of Puerto Rico. Federal income tax return The Commonwealth of the Northern Mariana Islands. Federal income tax return Guam. Federal income tax return The U. Federal income tax return S. Federal income tax return Virgin Islands. Federal income tax return 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. Federal income tax return 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. Federal income tax return How to make your request. Federal income tax return   Your request for competent authority assistance must include all the information listed in Revenue Procedure 2006-23, 2006-20 I. Federal income tax return R. Federal income tax return B. Federal income tax return 900 available at www. Federal income tax return irs. Federal income tax return gov/pub/irs-irbs/irb06-49. Federal income tax return pdf. Federal income tax return    Also, see Notice 2013-78, which provides proposed updates to the procedures for requesting U. Federal income tax return S. Federal income tax return competent authority assistance under tax treaties. Federal income tax return As noted, an update to Revenue Procedure 2006-23 will be published in the future. Federal income tax return   Your request must be in the form of a letter addressed to the Deputy Commissioner (International) LB&I. Federal income tax return It must contain a statement that competent authority assistance is requested under the mutual agreement procedure with the possession. Federal income tax return You (or a person having authority to sign your federal return) must sign and date the request. Federal income tax return    Send your written request for U. Federal income tax return S. Federal income tax return assistance under this procedure to:   Deputy Commissioner (International) Large Business and International Division Internal Revenue Service 1111 Constitution Avenue, N. Federal income tax return W. Federal income tax return  Routing: M4-365 Washington, DC 20224 (Attention: TAIT) Nonresident aliens generally must present their initial request for assistance to the relevant possession tax agency. Federal income tax return Credit or Refund In addition to the tax assistance request, if you seek a credit or refund of any overpayment of U. Federal income tax return S. Federal income tax return tax paid on the income in question, you should file a claim on Form 1040X, Amended U. Federal income tax return S. Federal income tax return Individual Income Tax Return. Federal income tax return Indicate on the form that a request for assistance under the mutual agreement procedure with the possession has been filed. Federal income tax return Attach a copy of the request to the form. Federal income tax return 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. Federal income tax return See Revenue Procedure 2006-54 (or its successor), section 9, for complete information. Federal income tax return Prev  Up  Next   Home   More Online Publications