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File 2006 Federal Taxes Free

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File 2006 Federal Taxes Free

File 2006 federal taxes free Publication 925 - Main Content Table of Contents Passive Activity LimitsWho Must Use These Rules? Passive Activity Loss Passive Activity Credit Publicly Traded Partnership Excess Farm Loss Passive Activities Activities That Are Not Passive Activities Passive Activity Income and Deductions Grouping Your Activities Recharacterization of Passive Income Dispositions How To Report Your Passive Activity Loss Comprehensive ExampleGeneral Information At-Risk LimitsWho Is Affected? Activities Covered by the At-Risk Rules At-Risk Amounts Amounts Not At Risk Reductions of Amounts At Risk Recapture Rule How To Get Tax HelpLow Income Taxpayer Clinics Passive Activity Limits Who Must Use These Rules? The passive activity rules apply to: Individuals, Estates, Trusts (other than grantor trusts), Personal service corporations, and Closely held corporations. File 2006 federal taxes free Even though the rules do not apply to grantor trusts, partnerships, and S corporations directly, they do apply to the owners of these entities. File 2006 federal taxes free For information about personal service corporations and closely held corporations, including definitions and how the passive activity rules apply to these corporations, see Form 8810 and its instructions. File 2006 federal taxes free Before applying the passive activity limits, you must first determine the amount of the deductions disallowed under the basis, excess farm loss, or at-risk rules. File 2006 federal taxes free See Passive Activity Deductions, later. File 2006 federal taxes free Passive Activity Loss Generally, the passive activity loss for the tax year is not allowed. File 2006 federal taxes free However, there is a special allowance under which some or all of your passive activity loss may be allowed. File 2006 federal taxes free See Special $25,000 allowance , later. File 2006 federal taxes free Definition of passive activity loss. File 2006 federal taxes free    Generally, your passive activity loss for the tax year is the excess of your passive activity deductions over your passive activity gross income. File 2006 federal taxes free See Passive Activity Income and Deductions , later. File 2006 federal taxes free   For a closely held corporation, the passive activity loss is the excess of passive activity deductions over the sum of passive activity gross income and net active income. File 2006 federal taxes free For details on net active income, see the Instructions for Form 8810. File 2006 federal taxes free For the definition of passive activity gross income, see Passive Activity Income , later. File 2006 federal taxes free For the definition of passive activity deductions, see Passive Activity Deductions , later. File 2006 federal taxes free Identification of Disallowed Passive Activity Deductions If all or a part of your passive activity loss is disallowed for the tax year, you may need to allocate the disallowed passive activity loss among different passive activities and among different deductions within a passive activity. File 2006 federal taxes free Allocation of disallowed passive activity loss among activities. File 2006 federal taxes free   If all or any part of your passive activity loss is disallowed for the tax year, a ratable portion of the loss (if any) from each of your passive activities is disallowed. File 2006 federal taxes free The ratable portion of a loss from an activity is computed by multiplying the passive activity loss that is disallowed for the tax year by the fraction obtained by dividing: The loss from the activity for the tax year; by The sum of the losses for the tax year from all activities having losses for the tax year. File 2006 federal taxes free Use Worksheet 5 of Form 8582 to figure the ratable portion of the loss from each activity that is disallowed. File 2006 federal taxes free Loss from an activity. File 2006 federal taxes free   The term “loss from an activity” means: The amount by which the passive activity deductions (defined later) from the activity for the tax year exceed the passive activity gross income (defined later) from the activity for the tax year; reduced by Any part of such amount that is allowed under the Special $25,000 Allowance , later. File 2006 federal taxes free   If your passive activity gross income from significant participation passive activities (defined later) for the tax year is more than your passive activity deductions from those activities for the tax year, those activities shall be treated, solely for purposes of figuring your loss from the activity, as a single activity that does not have a loss for such taxable year. File 2006 federal taxes free See Significant Participation Passive Activities , later. File 2006 federal taxes free Example. File 2006 federal taxes free John Pine holds interests in three passive activities, A, B, and C. File 2006 federal taxes free The gross income and deductions from these activities for the taxable year are as follows:   A B C Total Gross income $7,000 $4,000 $12,000 $23,000 Deductions (16,000) (20,000) (8,000) (44,000)           Net income (loss) ($9,000) ($16,000) $4,000 ($21,000)   John Pine’s $21,000 passive activity loss for the taxable year is disallowed. File 2006 federal taxes free Therefore, a ratable portion of the losses from activities A and B is disallowed. File 2006 federal taxes free He figures the disallowed portion of each loss as follows: A: $21,000 x $9,000/$25,000 $7,560 B: $21,000 x $16,000/$25,000 13,440     Total $21,000 Allocation within loss activities. File 2006 federal taxes free   If all or any part of your loss from an activity is disallowed under Allocation of disallowed passive activity loss among activities for the tax year, a ratable portion of each of your passive activity deductions (defined later), other than an excluded deduction (defined below) from such activity is disallowed. File 2006 federal taxes free The ratable portion of a passive activity deduction is the amount of the disallowed portion of the loss from the activity for the tax year multiplied by the fraction obtained by dividing: The amount of such deduction; by The sum of all of your passive activity deductions (other than excluded deductions) from that activity from the tax year. File 2006 federal taxes free Excluded deductions. File 2006 federal taxes free    “Excluded deduction” means any passive activity deduction that is taken into account in computing your net income from an item of property for a taxable year in which an amount of the taxpayer's gross income from such item of property is treated as not from a passive activity. File 2006 federal taxes free See Recharacterization of Passive Income , later. File 2006 federal taxes free Separately identified deductions. File 2006 federal taxes free   In identifying the deductions from an activity that are disallowed, you do not need to account separately for a deduction unless such deduction may, if separately taken into account, result in an income tax liability for any tax year different from that which would result were such deduction not taken into account separately. File 2006 federal taxes free   Use Form 8582, Worksheet 7, for any activity if you have passive activity deductions for that activity that must be separately identified. File 2006 federal taxes free   Deductions that must be accounted for separately include (but are not limited to) the following deductions. File 2006 federal taxes free Deductions that arise in a rental real estate activity in tax years in which you actively participate in such activity. File 2006 federal taxes free See Active participation , later. File 2006 federal taxes free Deductions that arise in a rental real estate activity in tax years in which you do not actively participate in such activity. File 2006 federal taxes free See Active participation , later. File 2006 federal taxes free Losses from sales or exchanges of capital assets. File 2006 federal taxes free Section 1231 losses. File 2006 federal taxes free See Section 1231 Gains and Losses in Publication 544, Sales and Other Disposition of Assets, for more information. File 2006 federal taxes free Carryover of Disallowed Deductions In the case of an activity with respect to which any deductions or credits are disallowed for a taxable year (the loss activity), the disallowed deductions are allocated among your activities for the next tax year in a manner that reasonably reflects the extent to which each activity continues the loss activity. File 2006 federal taxes free The disallowed deductions or credits allocated to an activity under the preceding sentence are treated as deductions or credits from the activity for the next tax year. File 2006 federal taxes free For more information, see Regulations section 1. File 2006 federal taxes free 469-1(f)(4). File 2006 federal taxes free Passive Activity Credit Generally, the passive activity credit for the tax year is disallowed. File 2006 federal taxes free The passive activity credit is the amount by which the sum of all your credits subject to the passive activity rules exceed your regular tax liability allocable to all passive activities for the tax year. File 2006 federal taxes free Credits that are included in figuring the general business credit are subject to the passive activity rules. File 2006 federal taxes free See the Instructions for Form 8582-CR for more information. File 2006 federal taxes free Publicly Traded Partnership You must apply the rules in this part separately to your income or loss from a passive activity held through a publicly traded partnership (PTP). File 2006 federal taxes free You also must apply the limit on passive activity credits separately to your credits from a passive activity held through a PTP. File 2006 federal taxes free You can offset deductions from passive activities of a PTP only against income or gain from passive activities of the same PTP. File 2006 federal taxes free Likewise, you can offset credits from passive activities of a PTP only against the tax on the net passive income from the same PTP. File 2006 federal taxes free This separate treatment rule also applies to a regulated investment company holding an interest in a PTP for the items attributable to that interest. File 2006 federal taxes free For more information on how to apply the passive activity loss rules to PTPs, and on how to apply the limit on passive activity credits to PTPs, see Publicly Traded Partnerships (PTPs) in the Instructions for Forms 8582 and 8582-CR, respectively. File 2006 federal taxes free Excess Farm Loss If you receive an applicable subsidy for any tax year and you have an excess farm loss for the tax year, special rules apply. File 2006 federal taxes free These rules do not apply to C corporations. File 2006 federal taxes free For information, see the Instructions for Schedule F (Form 1040), Profit or Loss From Farming. File 2006 federal taxes free Passive Activities There are two kinds of passive activities. File 2006 federal taxes free Trade or business activities in which you do not materially participate during the year. File 2006 federal taxes free Rental activities, even if you do materially participate in them, unless you are a real estate professional. File 2006 federal taxes free Material participation in a trade or business is discussed later, under Activities That Are Not Passive Activities . File 2006 federal taxes free Treatment of former passive activities. File 2006 federal taxes free   A former passive activity is an activity that was a passive activity in any earlier tax year, but is not a passive activity in the current tax year. File 2006 federal taxes free You can deduct a prior year's unallowed loss from the activity up to the amount of your current year net income from the activity. File 2006 federal taxes free Treat any remaining prior year unallowed loss like you treat any other passive loss. File 2006 federal taxes free   In addition, any prior year unallowed passive activity credits from a former passive activity offset the allocable part of your current year tax liability. File 2006 federal taxes free The allocable part of your current year tax liability is that part of this year's tax liability that is allocable to the current year net income from the former passive activity. File 2006 federal taxes free You figure this after you reduce your net income from the activity by any prior year unallowed loss from that activity (but not below zero). File 2006 federal taxes free Trade or Business Activities A trade or business activity is an activity that: Involves the conduct of a trade or business (that is, deductions would be allowable under section 162 of the Internal Revenue Code if other limitations, such as the passive activity rules, did not apply), Is conducted in anticipation of starting a trade or business, or Involves research or experimental expenditures that are deductible under Internal Revenue Code section 174 (or that would be deductible if you chose to deduct rather than capitalize them). File 2006 federal taxes free A trade or business activity does not include a rental activity or the rental of property that is incidental to an activity of holding the property for investment. File 2006 federal taxes free You generally report trade or business activities on Schedule C, C-EZ, F, or in Part II or III of Schedule E. File 2006 federal taxes free Rental Activities A rental activity is a passive activity even if you materially participated in that activity, unless you materially participated as a real estate professional. File 2006 federal taxes free See Real Estate Professional under Activities That Are Not Passive Activities, later. File 2006 federal taxes free An activity is a rental activity if tangible property (real or personal) is used by customers or held for use by customers, and the gross income (or expected gross income) from the activity represents amounts paid (or to be paid) mainly for the use of the property. File 2006 federal taxes free It does not matter whether the use is under a lease, a service contract, or some other arrangement. File 2006 federal taxes free Exceptions. File 2006 federal taxes free   Your activity is not a rental activity if any of the following apply. File 2006 federal taxes free The average period of customer use of the property is 7 days or less. File 2006 federal taxes free You figure the average period of customer use by dividing the total number of days in all rental periods by the number of rentals during the tax year. File 2006 federal taxes free If the activity involves renting more than one class of property, multiply the average period of customer use of each class by a fraction. File 2006 federal taxes free The numerator of the fraction is the gross rental income from that class of property and the denominator is the activity's total gross rental income. File 2006 federal taxes free The activity's average period of customer use will equal the sum of the amounts for each class. File 2006 federal taxes free The average period of customer use of the property, as figured in (1) above, is 30 days or less and you provide significant personal services with the rentals. File 2006 federal taxes free Significant personal services include only services performed by individuals. File 2006 federal taxes free To determine if personal services are significant, all relevant facts and circumstances are taken into consideration, including the frequency of the services, the type and amount of labor required to perform the services, and the value of the services relative to the amount charged for use of the property. File 2006 federal taxes free Significant personal services do not include the following. File 2006 federal taxes free Services needed to permit the lawful use of the property, Services to repair or improve property that would extend its useful life for a period substantially longer than the average rental, and Services that are similar to those commonly provided with long-term rentals of real estate, such as cleaning and maintenance of common areas or routine repairs. File 2006 federal taxes free You provide extraordinary personal services in making the rental property available for customer use. File 2006 federal taxes free Services are extraordinary personal services if they are performed by individuals and the customers' use of the property is incidental to their receipt of the services. File 2006 federal taxes free The rental is incidental to a nonrental activity. File 2006 federal taxes free The rental of property is incidental to an activity of holding property for investment if the main purpose of holding the property is to realize a gain from its appreciation and the gross rental income from the property is less than 2% of the smaller of the property's unadjusted basis or fair market value. File 2006 federal taxes free The unadjusted basis of property is its cost not reduced by depreciation or any other basis adjustment. File 2006 federal taxes free The rental of property is incidental to a trade or business activity if all of the following apply. File 2006 federal taxes free You own an interest in the trade or business activity during the year. File 2006 federal taxes free The rental property was used mainly in that trade or business activity during the current year, or during at least 2 of the 5 preceding tax years. File 2006 federal taxes free Your gross rental income from the property is less than 2% of the smaller of its unadjusted basis or fair market value. File 2006 federal taxes free Lodging provided to an employee or the employee's spouse or dependents is incidental to the activity or activities in which the employee performs services if the lodging is furnished for the employer's convenience. File 2006 federal taxes free You customarily make the rental property available during defined business hours for nonexclusive use by various customers. File 2006 federal taxes free You provide the property for use in a nonrental activity in your capacity as an owner of an interest in the partnership, S corporation, or joint venture conducting that activity. File 2006 federal taxes free    If you meet any of the exceptions listed above, see the instructions for Form 8582 for information about how to report any income or loss from the activity. File 2006 federal taxes free Special $25,000 allowance. File 2006 federal taxes free   If you or your spouse actively participated in a passive rental real estate activity, the amount of the passive activity loss that is disallowed is decreased and you therefore can deduct up to $25,000 of loss from the activity from your nonpassive income. File 2006 federal taxes free This special allowance is an exception to the general rule disallowing the passive activity loss. File 2006 federal taxes free Similarly, you can offset credits from the activity against the tax on up to $25,000 of nonpassive income after taking into account any losses allowed under this exception. File 2006 federal taxes free   If you are married, filing a separate return, and lived apart from your spouse for the entire tax year, your special allowance cannot be more than $12,500. File 2006 federal taxes free If you lived with your spouse at any time during the year and are filing a separate return, you cannot use the special allowance to reduce your nonpassive income or tax on nonpassive income. File 2006 federal taxes free   The maximum special allowance is reduced if your modified adjusted gross income exceeds certain amounts. File 2006 federal taxes free See Phaseout rule , later. File 2006 federal taxes free Example. File 2006 federal taxes free Kate, a single taxpayer, has $70,000 in wages, $15,000 income from a limited partnership, a $26,000 loss from rental real estate activities in which she actively participated, and is not subject to the modified adjusted gross income phaseout rule. File 2006 federal taxes free She can use $15,000 of her $26,000 loss to offset her $15,000 passive income from the partnership. File 2006 federal taxes free She actively participated in her rental real estate activities, so she can use the remaining $11,000 rental real estate loss to offset $11,000 of her nonpassive income (wages). File 2006 federal taxes free Commercial revitalization deduction (CRD). File 2006 federal taxes free   The special allowance must first be applied to losses from rental real estate activities figured without the CRD. File 2006 federal taxes free Any remaining part of the special allowance is available for the CRD from the rental real estate activities and is not subject to the active participation rules or the phaseout based on modified adjusted gross income. File 2006 federal taxes free You cannot claim a CRD for a building placed in service after December 31, 2009. File 2006 federal taxes free Active participation. File 2006 federal taxes free   Active participation is not the same as material participation (defined later). File 2006 federal taxes free Active participation is a less stringent standard than material participation. File 2006 federal taxes free For example, you may be treated as actively participating if you make management decisions in a significant and bona fide sense. File 2006 federal taxes free Management decisions that count as active participation include approving new tenants, deciding on rental terms, approving expenditures, and similar decisions. File 2006 federal taxes free   Only individuals can actively participate in rental real estate activities. File 2006 federal taxes free However, a decedent's estate is treated as actively participating for its tax years ending less than 2 years after the decedent's death, if the decedent would have satisfied the active participation requirement for the activity for the tax year the decedent died. File 2006 federal taxes free   A decedent's qualified revocable trust can also be treated as actively participating if both the trustee and the executor (if any) of the estate choose to treat the trust as part of the estate. File 2006 federal taxes free The choice applies to tax years ending after the decedent's death and before: 2 years after the decedent's death if no estate tax return is required, or 6 months after the estate tax liability is finally determined if an estate tax return is required. File 2006 federal taxes free   The choice is irrevocable and cannot be made later than the due date for the estate's first income tax return (including any extensions). File 2006 federal taxes free   Limited partners are not treated as actively participating in a partnership's rental real estate activities. File 2006 federal taxes free   You are not treated as actively participating in a rental real estate activity unless your interest in the activity (including your spouse's interest) was at least 10% (by value) of all interests in the activity throughout the year. File 2006 federal taxes free   Active participation is not required to take the low-income housing credit, the rehabilitation investment credit, or CRD from rental real estate activities. File 2006 federal taxes free Example. File 2006 federal taxes free Mike, a single taxpayer, had the following income and loss during the tax year: Salary $42,300 Dividends 300 Interest 1,400 Rental loss (4,000) The rental loss came from a house Mike owned. File 2006 federal taxes free He advertised and rented the house to the current tenant himself. File 2006 federal taxes free He also collected the rents and did the repairs or hired someone to do them. File 2006 federal taxes free Even though the rental loss is a loss from a passive activity, Mike can use the entire $4,000 loss to offset his other income because he actively participated. File 2006 federal taxes free Phaseout rule. File 2006 federal taxes free   The maximum special allowance of $25,000 ($12,500 for married individuals filing separate returns and living apart at all times during the year) is reduced by 50% of the amount of your modified adjusted gross income that is more than $100,000 ($50,000 if you are married filing separately). File 2006 federal taxes free If your modified adjusted gross income is $150,000 or more ($75,000 or more if you are married filing separately), you generally cannot use the special allowance. File 2006 federal taxes free    Modified adjusted gross income for this purpose is your adjusted gross income figured without the following. File 2006 federal taxes free Taxable social security and tier 1 railroad retirement benefits. File 2006 federal taxes free Deductible contributions to individual retirement accounts (IRAs) and section 501(c)(18) pension plans. File 2006 federal taxes free The exclusion from income of interest from qualified U. File 2006 federal taxes free S. File 2006 federal taxes free savings bonds used to pay qualified higher education expenses. File 2006 federal taxes free The exclusion from income of amounts received from an employer's adoption assistance program. File 2006 federal taxes free Passive activity income or loss included on Form 8582. File 2006 federal taxes free Any rental real estate loss allowed because you materially participated in the rental activity as a Real Estate Professional (as discussed later, under Activities That Are Not Passive Activities). File 2006 federal taxes free Any overall loss from a publicly traded partnership (see Publicly Traded Partnerships (PTPs) in the instructions for Form 8582). File 2006 federal taxes free The deduction for the employer-equivalent portion of self-employment tax. File 2006 federal taxes free The deduction for domestic production activities. File 2006 federal taxes free The deduction allowed for interest on student loans. File 2006 federal taxes free The deduction for qualified tuition and related expenses. File 2006 federal taxes free Example. File 2006 federal taxes free During 2013, John was unmarried and was not a real estate professional. File 2006 federal taxes free For 2013, he had $120,000 in salary and a $31,000 loss from his rental real estate activities in which he actively participated. File 2006 federal taxes free His modified adjusted gross income is $120,000. File 2006 federal taxes free When he files his 2013 return, he can deduct only $15,000 of his passive activity loss. File 2006 federal taxes free He must carry over the remaining $16,000 passive activity loss to 2014. File 2006 federal taxes free He figures his deduction and carryover as follows: Adjusted gross income, modified as required $120,000       Minus amount not subject to phaseout 100,000 Amount subject to phaseout rule $20,000 Multiply by 50% × 50% Required reduction to special allowance $10,000 Maximum special allowance $25,000 Minus required reduction (see above) 10,000 Adjusted special allowance $15,000 Passive loss from rental real estate $31,000 Deduction allowable/Adjusted  special allowance (see above) 15,000       Amount that must be carried forward $16,000 Exceptions to the phaseout rules. File 2006 federal taxes free   A higher phaseout range applies to rehabilitation investment credits from rental real estate activities. File 2006 federal taxes free For those credits, the phaseout of the $25,000 special allowance starts when your modified adjusted gross income exceeds $200,000 ($100,000 if you are a married individual filing a separate return and living apart at all times during the year). File 2006 federal taxes free   There is no phaseout of the $25,000 special allowance for low-income housing credits or for the CRD. File 2006 federal taxes free Ordering rules. File 2006 federal taxes free   If you have more than one of the exceptions to the phaseout rules in the same tax year, you must apply the $25,000 phaseout against your passive activity losses and credits in the following order. File 2006 federal taxes free The portion of passive activity losses not attributable to the CRD. File 2006 federal taxes free The portion of passive activity losses attributable to the CRD. File 2006 federal taxes free The portion of passive activity credits attributable to credits other than the rehabilitation and low-income housing credits. File 2006 federal taxes free The portion of passive activity credits attributable to the rehabilitation credit. File 2006 federal taxes free The portion of passive activity credits attributable to the low-income housing credit. File 2006 federal taxes free Activities That Are Not Passive Activities The following are not passive activities. File 2006 federal taxes free Trade or business activities in which you materially participated for the tax year. File 2006 federal taxes free A working interest in an oil or gas well which you hold directly or through an entity that does not limit your liability (such as a general partner interest in a partnership). File 2006 federal taxes free It does not matter whether you materially participated in the activity for the tax year. File 2006 federal taxes free However, if your liability was limited for part of the year (for example, you converted your general partner interest to a limited partner interest during the year) and you had a net loss from the well for the year, some of your income and deductions from the working interest may be treated as passive activity gross income and passive activity deductions. File 2006 federal taxes free  See Temporary Regulations section 1. File 2006 federal taxes free 469-1T(e)(4)(ii). File 2006 federal taxes free The rental of a dwelling unit that you also used for personal purposes during the year for more than the greater of 14 days or 10% of the number of days during the year that the home was rented at a fair rental. File 2006 federal taxes free An activity of trading personal property for the account of those who own interests in the activity. File 2006 federal taxes free See Temporary Regulations section 1. File 2006 federal taxes free 469-1T(e)(6). File 2006 federal taxes free Rental real estate activities in which you materially participated as a real estate professional. File 2006 federal taxes free See Real Estate Professional , later. File 2006 federal taxes free You should not enter income and losses from these activities on Form 8582. File 2006 federal taxes free Instead, enter them on the forms or schedules you would normally use. File 2006 federal taxes free Material Participation A trade or business activity is not a passive activity if you materially participated in the activity. File 2006 federal taxes free Material participation tests. File 2006 federal taxes free    You materially participated in a trade or business activity for a tax year if you satisfy any of the following tests. File 2006 federal taxes free You participated in the activity for more than 500 hours. File 2006 federal taxes free Your participation was substantially all the participation in the activity of all individuals for the tax year, including the participation of individuals who did not own any interest in the activity. File 2006 federal taxes free You participated in the activity for more than 100 hours during the tax year, and you participated at least as much as any other individual (including individuals who did not own any interest in the activity) for the year. File 2006 federal taxes free The activity is a significant participation activity, and you participated in all significant participation activities for more than 500 hours. File 2006 federal taxes free A significant participation activity is any trade or business activity in which you participated for more than 100 hours during the year and in which you did not materially participate under any of the material participation tests, other than this test. File 2006 federal taxes free See Significant Participation Passive Activities , under Recharacterization of Passive Income, later. File 2006 federal taxes free You materially participated in the activity for any 5 (whether or not consecutive) of the 10 immediately preceding tax years. File 2006 federal taxes free The activity is a personal service activity in which you materially participated for any 3 (whether or not consecutive) preceding tax years. File 2006 federal taxes free An activity is a personal service activity if it involves the performance of personal services in the fields of health (including veterinary services), law, engineering, architecture, accounting, actuarial science, performing arts, consulting, or any other trade or business in which capital is not a material income-producing factor. File 2006 federal taxes free Based on all the facts and circumstances, you participated in the activity on a regular, continuous, and substantial basis during the year. File 2006 federal taxes free   You did not materially participate in the activity under test (7) if you participated in the activity for 100 hours or less during the year. File 2006 federal taxes free Your participation in managing the activity does not count in determining whether you materially participated under this test if: Any person other than you received compensation for managing the activity, or Any individual spent more hours during the tax year managing the activity than you did (regardless of whether the individual was compensated for the management services). File 2006 federal taxes free Participation. File 2006 federal taxes free   In general, any work you do in connection with an activity in which you own an interest is treated as participation in the activity. File 2006 federal taxes free Work not usually performed by owners. File 2006 federal taxes free   You do not treat the work you do in connection with an activity as participation in the activity if both of the following are true. File 2006 federal taxes free The work is not work that is customarily done by the owner of that type of activity. File 2006 federal taxes free One of your main reasons for doing the work is to avoid the disallowance of any loss or credit from the activity under the passive activity rules. File 2006 federal taxes free Participation as an investor. File 2006 federal taxes free   You do not treat the work you do in your capacity as an investor in an activity as participation unless you are directly involved in the day-to-day management or operations of the activity. File 2006 federal taxes free Work you do as an investor includes: Studying and reviewing financial statements or reports on operations of the activity, Preparing or compiling summaries or analyses of the finances or operations of the activity for your own use, and Monitoring the finances or operations of the activity in a nonmanagerial capacity. File 2006 federal taxes free Spouse's participation. File 2006 federal taxes free   Your participation in an activity includes your spouse's participation. File 2006 federal taxes free This applies even if your spouse did not own any interest in the activity and you and your spouse do not file a joint return for the year. File 2006 federal taxes free Proof of participation. File 2006 federal taxes free You can use any reasonable method to prove your participation in an activity for the year. File 2006 federal taxes free You do not have to keep contemporaneous daily time reports, logs, or similar documents if you can establish your participation in some other way. File 2006 federal taxes free For example, you can show the services you performed and the approximate number of hours spent by using an appointment book, calendar, or narrative summary. File 2006 federal taxes free Limited partners. File 2006 federal taxes free   If you owned an activity as a limited partner, you generally are not treated as materially participating in the activity. File 2006 federal taxes free However, you are treated as materially participating in the activity if you met test (1), (5), or (6) under Material participation tests , discussed earlier, for the tax year. File 2006 federal taxes free   You are not treated as a limited partner, however, if you also were a general partner in the partnership at all times during the partnership's tax year ending with or within your tax year (or, if shorter, during that part of the partnership's tax year in which you directly or indirectly owned your limited partner interest). File 2006 federal taxes free Retired or disabled farmer and surviving spouse of a farmer. File 2006 federal taxes free   If you are a retired or disabled farmer, you are treated as materially participating in a farming activity if you materially participated for 5 or more of the 8 years before your retirement or disability. File 2006 federal taxes free Similarly, if you are a surviving spouse of a farmer, you are treated as materially participating in a farming activity if the real property used in the activity meets the estate tax rules for special valuation of farm property passed from a qualifying decedent, and you actively manage the farm. File 2006 federal taxes free Corporations. File 2006 federal taxes free   A closely held corporation or a personal service corporation is treated as materially participating in an activity only if one or more shareholders holding more than 50% by value of the outstanding stock of the corporation materially participate in the activity. File 2006 federal taxes free   A closely held corporation can also satisfy the material participation standard by meeting the first two requirements for the qualifying business exception from the at-risk limits. File 2006 federal taxes free See Special exception for qualified corporations under Activities Covered by the At-Risk Rules, later. File 2006 federal taxes free Real Estate Professional Generally, rental activities are passive activities even if you materially participated in them. File 2006 federal taxes free However, if you qualified as a real estate professional, rental real estate activities in which you materially participated are not passive activities. File 2006 federal taxes free For this purpose, each interest you have in a rental real estate activity is a separate activity, unless you choose to treat all interests in rental real estate activities as one activity. File 2006 federal taxes free See the Instructions for Schedule E (Form 1040), Supplemental Income and Loss, for information about making this choice. File 2006 federal taxes free If you qualified as a real estate professional for 2013, report income or losses from rental real estate activities in which you materially participated as nonpassive income or losses, and complete line 43 of Schedule E (Form 1040). File 2006 federal taxes free If you also have an unallowed loss from these activities from an earlier year when you did not qualify, see Treatment of former passive activities under Passive Activities, earlier. File 2006 federal taxes free Qualifications. File 2006 federal taxes free   You qualified as a real estate professional for the year if you met both of the following requirements. File 2006 federal taxes free More than half of the personal services you performed in all trades or businesses during the tax year were performed in real property trades or businesses in which you materially participated. File 2006 federal taxes free You performed more than 750 hours of services during the tax year in real property trades or businesses in which you materially participated. File 2006 federal taxes free   Do not count personal services you performed as an employee in real property trades or businesses unless you were a 5% owner of your employer. File 2006 federal taxes free You were a 5% owner if you owned (or are considered to have owned) more than 5% of your employer's outstanding stock, outstanding voting stock, or capital or profits interest. File 2006 federal taxes free   If you file a joint return, do not count your spouse's personal services to determine whether you met the preceding requirements. File 2006 federal taxes free However, you can count your spouse's participation in an activity in determining if you materially participated. File 2006 federal taxes free Real property trades or businesses. File 2006 federal taxes free   A real property trade or business is a trade or business that does any of the following with real property. File 2006 federal taxes free Develops or redevelops it. File 2006 federal taxes free Constructs or reconstructs it. File 2006 federal taxes free Acquires it. File 2006 federal taxes free Converts it. File 2006 federal taxes free Rents or leases it. File 2006 federal taxes free Operates or manages it. File 2006 federal taxes free Brokers it. File 2006 federal taxes free Closely held corporations. File 2006 federal taxes free   A closely held corporation can qualify as a real estate professional if more than 50% of the gross receipts for its tax year came from real property trades or businesses in which it materially participated. File 2006 federal taxes free Passive Activity Income and Deductions In figuring your net income or loss from a passive activity, take into account only passive activity income and passive activity deductions. File 2006 federal taxes free Self-charged interest. File 2006 federal taxes free   Certain self-charged interest income or deductions may be treated as passive activity gross income or passive activity deductions if the loan proceeds are used in a passive activity. File 2006 federal taxes free   Generally, self-charged interest income and deductions result from loans between you and a partnership or S corporation in which you had a direct or indirect ownership interest. File 2006 federal taxes free This includes both loans you made to the partnership or S corporation and loans the partnership or S corporation made to you. File 2006 federal taxes free   It also includes loans from one partnership or S corporation to another partnership or S corporation if each owner in the borrowing entity has the same proportional ownership interest in the lending entity. File 2006 federal taxes free    Exception. File 2006 federal taxes free The self-charged interest rules do not apply to your interest in a partnership or S corporation if the entity made an election under Regulations section 1. File 2006 federal taxes free 469-7(g) to avoid the application of these rules. File 2006 federal taxes free For more details on the self-charged interest rules, see Regulations section 1. File 2006 federal taxes free 469-7. File 2006 federal taxes free Passive Activity Income Passive activity income includes all income from passive activities and generally includes gain from disposition of an interest in a passive activity or property used in a passive activity. File 2006 federal taxes free Passive activity income does not include the following items. File 2006 federal taxes free Income from an activity that is not a passive activity. File 2006 federal taxes free These activities are discussed under Activities That Are Not Passive Activities , earlier. File 2006 federal taxes free Portfolio income. File 2006 federal taxes free This includes interest, dividends, annuities, and royalties not derived in the ordinary course of a trade or business. File 2006 federal taxes free It includes gain or loss from the disposition of property that produces these types of income or that is held for investment. File 2006 federal taxes free The exclusion for portfolio income does not apply to self-charged interest treated as passive activity income. File 2006 federal taxes free For more information on self-charged interest, see Self-charged interest , earlier. File 2006 federal taxes free Personal service income. File 2006 federal taxes free This includes salaries, wages, commissions, self-employment income from trade or business activities in which you materially participated, deferred compensation, taxable social security and other retirement benefits, and payments from partnerships to partners for personal services. File 2006 federal taxes free Income from positive section 481 adjustments allocated to activities other than passive activities. File 2006 federal taxes free (Section 481 adjustments are adjustments that must be made due to changes in your accounting method. File 2006 federal taxes free ) Income or gain from investments of working capital. File 2006 federal taxes free Income from an oil or gas property if you treated any loss from a working interest in the property for any tax year beginning after 1986 as a nonpassive loss, as discussed in item (2) under Activities That Are Not Passive Activities , earlier. File 2006 federal taxes free This also applies to income from other oil and gas property the basis of which is determined wholly or partly by the basis of the property in the preceding sentence. File 2006 federal taxes free Any income from intangible property, such as a patent, copyright, or literary, musical, or artistic composition, if your personal efforts significantly contributed to the creation of the property. File 2006 federal taxes free Any other income that must be treated as nonpassive income. File 2006 federal taxes free See Recharacterization of Passive Income , later. File 2006 federal taxes free Overall gain from any interest in a publicly traded partnership. File 2006 federal taxes free See Publicly Traded Partnerships (PTPs) in the instructions for Form 8582. File 2006 federal taxes free State, local, and foreign income tax refunds. File 2006 federal taxes free Income from a covenant not to compete. File 2006 federal taxes free Reimbursement of a casualty or theft loss included in gross income to recover all or part of a prior year loss deduction, if the loss deduction was not a passive activity deduction. File 2006 federal taxes free Alaska Permanent Fund dividends. File 2006 federal taxes free Cancellation of debt income, if at the time the debt is discharged the debt is not allocated to passive activities under the interest expense allocation rules. File 2006 federal taxes free See chapter 4 of Publication 535, Business Expenses, for information about the rules for allocating interest. File 2006 federal taxes free Disposition of property interests. File 2006 federal taxes free   Gain on the disposition of an interest in property generally is passive activity income if, at the time of the disposition, the property was used in an activity that was a passive activity in the year of disposition. File 2006 federal taxes free The gain generally is not passive activity income if, at the time of disposition, the property was used in an activity that was not a passive activity in the year of disposition. File 2006 federal taxes free An exception to this general rule may apply if you previously used the property in a different activity. File 2006 federal taxes free Exception for more than one use in the preceding 12 months. File 2006 federal taxes free   If you used the property in more than one activity during the 12-month period before its disposition, you must allocate the gain between the activities on a basis that reasonably reflects the property's use during that period. File 2006 federal taxes free Any gain allocated to a passive activity is passive activity income. File 2006 federal taxes free   For this purpose, an allocation of the gain solely to the activity in which the property was mainly used during that period reasonably reflects the property's use if the fair market value of your interest in the property is not more than the lesser of: $10,000, or 10% of the total of the fair market value of your interest in the property and the fair market value of all other property used in that activity immediately before the disposition. File 2006 federal taxes free Exception for substantially appreciated property. File 2006 federal taxes free   The gain is passive activity income if the fair market value of the property at disposition was more than 120% of its adjusted basis and either of the following conditions applies. File 2006 federal taxes free You used the property in a passive activity for 20% of the time you held your interest in the property. File 2006 federal taxes free You used the property in a passive activity for the entire 24-month period before its disposition. File 2006 federal taxes free If neither condition applies, the gain is not passive activity income. File 2006 federal taxes free However, it is treated as portfolio income only if you held the property for investment for more than half of the time you held it in nonpassive activities. File 2006 federal taxes free   For this purpose, treat property you held through a corporation (other than an S corporation) or other entity whose owners receive only portfolio income as property held in a nonpassive activity and as property held for investment. File 2006 federal taxes free Also, treat the date you agree to transfer your interest for a fixed or determinable amount as the disposition date. File 2006 federal taxes free   If you used the property in more than one activity during the 12-month period before its disposition, this exception applies only to the part of the gain allocated to a passive activity under the rules described in the preceding discussion. File 2006 federal taxes free Disposition of property converted to inventory. File 2006 federal taxes free   If you disposed of property that you had converted to inventory from its use in another activity (for example, you sold condominium units you previously held for use in a rental activity), a special rule may apply. File 2006 federal taxes free Under this rule, you disregard the property's use as inventory and treat it as if it were still used in that other activity at the time of disposition. File 2006 federal taxes free This rule applies only if you meet all of the following conditions. File 2006 federal taxes free At the time of disposition, you held your interest in the property in a dealing activity (an activity that involves holding the property or similar property mainly for sale to customers in the ordinary course of a trade or business). File 2006 federal taxes free Your other activities included a nondealing activity (an activity that does not involve holding similar property for sale to customers in the ordinary course of a trade or business) in which you used the property for more than 80% of the period you held it. File 2006 federal taxes free You did not acquire or hold your interest in the property for the main purpose of selling it to customers in the ordinary course of a trade or business. File 2006 federal taxes free Passive Activity Deductions Generally, a deduction is a passive activity deduction for a taxable year if and only if such deduction either: Arises in connection with the conduct of an activity that is a passive activity for the tax year; or Is treated as a deduction from an activity for the tax year because it was disallowed by the passive activity rules in the preceding year and carried forward to the tax year. File 2006 federal taxes free For purposes of item (1), above, an item of deduction arises in the taxable year in which the item would be allowable as a deduction under the taxpayer's method of accounting if taxable income for all taxable years were determined without regard to the passive activity rules and without regard to the basis, excess farm loss, and at-risk limits. File 2006 federal taxes free See Coordination with other limitations on deductions that apply before the passive activity rules , later. File 2006 federal taxes free Passive activity deductions generally include losses from dispositions of property used in a passive activity at the time of the disposition and losses from a disposition of less than your entire interest in a passive activity. File 2006 federal taxes free Exceptions. File 2006 federal taxes free   Passive activity deductions do not include the following items. File 2006 federal taxes free Deductions for expenses (other than interest expense) that are clearly and directly allocable to portfolio income. File 2006 federal taxes free Qualified home mortgage interest, capitalized interest expenses, and other interest expenses (other than self-charged interest) properly allocable to passive activities. File 2006 federal taxes free For more information on self-charged interest, see Self-charged interest under Passive Activity Income and Deductions, earlier. File 2006 federal taxes free Losses from dispositions of property that produce portfolio income or property held for investment. File 2006 federal taxes free State, local, and foreign income taxes. File 2006 federal taxes free Miscellaneous itemized deductions that may be disallowed because of the 2%-of-adjusted-gross-income limit. File 2006 federal taxes free Charitable contribution deductions. File 2006 federal taxes free Net operating loss deductions. File 2006 federal taxes free Percentage depletion carryovers for oil and gas wells. File 2006 federal taxes free Capital loss carrybacks and carryovers. File 2006 federal taxes free Items of deduction from a passive activity that are disallowed under the limits on deductions that apply before the passive activity rules. File 2006 federal taxes free See Coordination with other limitations on deductions that apply before the passive activity rules , later. File 2006 federal taxes free Deductions and losses that would have been allowed for tax years beginning before 1987 but for basis or at-risk limits. File 2006 federal taxes free Net negative section 481 adjustments allocated to activities other than passive activities. File 2006 federal taxes free (Section 481 adjustments are adjustments required due to changes in accounting methods. File 2006 federal taxes free ) Casualty and theft losses, unless losses similar in cause and severity recur regularly in the activity. File 2006 federal taxes free The deduction for the employer-equivalent portion of self-employment tax. File 2006 federal taxes free Coordination with other limitations on deductions that apply before the passive activity rules. File 2006 federal taxes free   An item of deduction from a passive activity that is disallowed for a tax year under the basis or at-risk limitations is not a passive activity deduction for the tax year. File 2006 federal taxes free The following sections provide rules for figuring the extent to which items of deduction from a passive activity are disallowed for a tax year under the basis or at-risk limitations. File 2006 federal taxes free Proration of deductions disallowed under basis limitations. File 2006 federal taxes free   If any amount of your distributive share of a partnership's loss for the tax year is disallowed under the basis limitation, a ratable portion of your distributive share of each item of deduction or loss of the partnership is disallowed for the tax year. File 2006 federal taxes free For this purpose, the ratable portion of an item of deduction or loss is the amount of such item multiplied by the fraction obtained by dividing: The amount of your distributive share of partnership loss that is disallowed for the taxable year; by The sum of your distributive shares of all items of deduction and loss of the partnership for the tax year. File 2006 federal taxes free   If any amount of your pro rata share of an S corporation's loss for the tax year is disallowed under the basis limitation, a ratable portion of your pro rata share of each item of deduction or loss of the S corporation is disallowed for the tax year. File 2006 federal taxes free For this purpose, the ratable portion of an item of deduction or loss is the amount of such item multiplied by the fraction obtained by dividing: The amount of your share of S corporation loss that is disallowed for the tax year; by The sum of your pro rata shares of all items of deduction and loss of the corporation for the tax year. File 2006 federal taxes free Proration of deductions disallowed under at-risk limitation. File 2006 federal taxes free   If any amount of your loss from an activity (as defined in Activities Covered by the At-Risk Rules , later) is disallowed under the at-risk rules for the tax year, a ratable portion of each item of deduction or loss from the activity is disallowed for the tax year. File 2006 federal taxes free For this purpose, the ratable portion of an item of deduction or loss is the amount of such item multiplied by the fraction obtained by dividing: The amount of the loss from the activity that is disallowed for the tax year; by The sum of all deductions from the activity for the taxable year. File 2006 federal taxes free Coordination of basis and at-risk limitations. File 2006 federal taxes free   The portion of any item of deduction or loss that is disallowed for the tax year under the basis limitations is not taken into account for the taxable year in determining the loss from an activity (as defined in Activities Covered by the At-Risk Rules , later) for purposes of applying the at-risk rules. File 2006 federal taxes free Separately identified items of deduction and loss. File 2006 federal taxes free   In identifying the items of deduction and loss from an activity that are not disallowed under the basis and at-risk limitations (and that therefore may be treated as passive activity deductions), you need not account separately for any item of deduction or loss unless such item may, if separately taken into account, result in an income tax liability different from that which would result were such item of deduction or loss taken into account separately. File 2006 federal taxes free   Items of deduction or loss that must be accounted for separately include (but are not limited to) items of deduction or loss that: Are attributable to separate activities. File 2006 federal taxes free See Grouping Your Activities , later. File 2006 federal taxes free Arise in a rental real estate activity in tax years in which you actively participate in such activity; Arise in a rental real estate activity in taxable years in which you do not actively participate in such activity; Arose in a taxable year beginning before 1987 and were not allowed for such taxable year under the basis or at-risk limitations; Are taken into account under section 613A(d) (relating to limitations on certain depletion deductions); Are taken into account under section 1211 (relating to the limitation on capital losses); Are taken into account under section 1231 (relating to property used in a trade or business and involuntary conversions). File 2006 federal taxes free See Section 1231 Gains and Losses in Publication 544 for more information. File 2006 federal taxes free Are attributable to pre-enactment interests in activities. File 2006 federal taxes free See Regulations section 1. File 2006 federal taxes free 469-11T(c). File 2006 federal taxes free Grouping Your Activities You can treat one or more trade or business activities, or rental activities, as a single activity if those activities form an appropriate economic unit for measuring gain or loss under the passive activity rules. File 2006 federal taxes free Grouping is important for a number of reasons. File 2006 federal taxes free If you group two activities into one larger activity, you need only show material participation in the activity as a whole. File 2006 federal taxes free But if the two activities are separate, you must show material participation in each one. File 2006 federal taxes free On the other hand, if you group two activities into one larger activity and you dispose of one of the two, then you have disposed of only part of your entire interest in the activity. File 2006 federal taxes free But if the two activities are separate and you dispose of one of them, then you have disposed of your entire interest in that activity. File 2006 federal taxes free Grouping can also be important in determining whether you meet the 10% ownership requirement for actively participating in a rental real estate activity. File 2006 federal taxes free Appropriate Economic Units Generally, to determine if activities form an appropriate economic unit, you must consider all the relevant facts and circumstances. File 2006 federal taxes free You can use any reasonable method of applying the relevant facts and circumstances in grouping activities. File 2006 federal taxes free The following factors have the greatest weight in determining whether activities form an appropriate economic unit. File 2006 federal taxes free All of the factors do not have to apply to treat more than one activity as a single activity. File 2006 federal taxes free The factors that you should consider are: The similarities and differences in the types of trades or businesses, The extent of common control, The extent of common ownership, The geographical location, and The interdependencies between or among activities, which may include the extent to which the activities: Buy or sell goods between or among themselves, Involve products or services that are generally provided together, Have the same customers, Have the same employees, or Use a single set of books and records to account for the activities. File 2006 federal taxes free Example 1. File 2006 federal taxes free John Jackson owns a bakery and a movie theater at a shopping mall in Baltimore and a bakery and movie theater in Philadelphia. File 2006 federal taxes free Based on all the relevant facts and circumstances, there may be more than one reasonable method for grouping John's activities. File 2006 federal taxes free For example, John may be able to group the movie theaters and the bakeries into: One activity, A movie theater activity and a bakery activity, A Baltimore activity and a Philadelphia activity, or Four separate activities. File 2006 federal taxes free Example 2. File 2006 federal taxes free Betty is a partner in ABC partnership, which sells nonfood items to grocery stores. File 2006 federal taxes free Betty is also a partner in DEF (a trucking business). File 2006 federal taxes free ABC and DEF are under common control. File 2006 federal taxes free The main part of DEF's business is transporting goods for ABC. File 2006 federal taxes free DEF is the only trucking business in which Betty is involved. File 2006 federal taxes free Based on the rules of this section, Betty treats ABC's wholesale activity and DEF's trucking activity as a single activity. File 2006 federal taxes free Consistency and disclosure requirement. File 2006 federal taxes free   Generally, when you group activities into appropriate economic units, you may not regroup those activities in a later tax year. File 2006 federal taxes free You must meet any disclosure requirements of the IRS when you first group your activities and when you add or dispose of any activities in your groupings. File 2006 federal taxes free   However, if the original grouping is clearly inappropriate or there is a material change in the facts and circumstances that makes the original grouping clearly inappropriate, you must regroup the activities and comply with any disclosure requirements of the IRS. File 2006 federal taxes free   See Disclosure Requirement , later. File 2006 federal taxes free Regrouping by the IRS. File 2006 federal taxes free   If any of the activities resulting from your grouping is not an appropriate economic unit and one of the primary purposes of your grouping (or failure to regroup) is to avoid the passive activity rules, the IRS may regroup your activities. File 2006 federal taxes free Rental activities. File 2006 federal taxes free   In general, you cannot group a rental activity with a trade or business activity. File 2006 federal taxes free However, you can group them together if the activities form an appropriate economic unit and: The rental activity is insubstantial in relation to the trade or business activity, The trade or business activity is insubstantial in relation to the rental activity, or Each owner of the trade or business activity has the same ownership interest in the rental activity, in which case the part of the rental activity that involves the rental of items of property for use in the trade or business activity may be grouped with the trade or business activity. File 2006 federal taxes free Example. File 2006 federal taxes free Herbert and Wilma are married and file a joint return. File 2006 federal taxes free Healthy Food, an S corporation, is a grocery store business. File 2006 federal taxes free Herbert is Healthy Food's only shareholder. File 2006 federal taxes free Plum Tower, an S corporation, owns and rents out the building. File 2006 federal taxes free Wilma is Plum Tower's only shareholder. File 2006 federal taxes free Plum Tower rents part of its building to Healthy Food. File 2006 federal taxes free Plum Tower's grocery store rental business and Healthy Food's grocery business are not insubstantial in relation to each other. File 2006 federal taxes free Herbert and Wilma file a joint return, so they are treated as one taxpayer for purposes of the passive activity rules. File 2006 federal taxes free The same owner (Herbert and Wilma) owns both Healthy Food and Plum Tower with the same ownership interest (100% in each). File 2006 federal taxes free If the grouping forms an appropriate economic unit, as discussed earlier, Herbert and Wilma can group Plum Tower's grocery store rental and Healthy Food's grocery business into a single trade or business activity. File 2006 federal taxes free Grouping of real and personal property rentals. File 2006 federal taxes free   In general, you cannot treat an activity involving the rental of real property and an activity involving the rental of personal property as a single activity. File 2006 federal taxes free However, you can treat them as a single activity if you provide the personal property in connection with the real property or the real property in connection with the personal property. File 2006 federal taxes free Certain activities may not be grouped. File 2006 federal taxes free   In general, if you own an interest as a limited partner or a limited entrepreneur in one of the following activities, you may not group that activity with any other activity in another type of business. File 2006 federal taxes free Holding, producing, or distributing motion picture films or video tapes. File 2006 federal taxes free Farming. File 2006 federal taxes free Leasing any section 1245 property (as defined in section 1245(a)(3) of the Internal Revenue Code). File 2006 federal taxes free For a list of section 1245 property, see Section 1245 property under Activities Covered by the At-Risk Rules , later. File 2006 federal taxes free Exploring for, or exploiting, oil and gas resources. File 2006 federal taxes free Exploring for, or exploiting, geothermal deposits. File 2006 federal taxes free   If you own an interest as a limited partner or a limited entrepreneur in an activity described in the list above, you may group that activity with another activity in the same type of business if the grouping forms an appropriate economic unit as discussed earlier. File 2006 federal taxes free Limited entrepreneur. File 2006 federal taxes free   A limited entrepreneur is a person who: Has an interest in an enterprise other than as a limited partner, and Does not actively participate in the management of the enterprise. File 2006 federal taxes free Activities conducted through another entity. File 2006 federal taxes free   A personal service corporation, closely held corporation, partnership, or S corporation must group its activities using the rules discussed in this section. File 2006 federal taxes free Once the entity groups its activities, you, as the partner or shareholder of the entity, may group those activities (following the rules of this section): With each other, With activities conducted directly by you, or With activities conducted through other entities. File 2006 federal taxes free    You may not treat activities grouped together by the entity as separate activities. File 2006 federal taxes free Personal service and closely held corporations. File 2006 federal taxes free   You may group an activity conducted through a personal service or closely held corporation with your other activities only to determine whether you materially or significantly participated in those other activities. File 2006 federal taxes free See Material Participation , earlier, and Significant Participation Passive Activities , later. File 2006 federal taxes free Publicly traded partnership (PTP). File 2006 federal taxes free   You may not group activities conducted through a PTP with any other activity, including an activity conducted through another PTP. File 2006 federal taxes free Partial dispositions. File 2006 federal taxes free   If you dispose of substantially all of an activity during your tax year, you may treat the part disposed of as a separate activity. File 2006 federal taxes free However, you can do this only if you can show with reasonable certainty: The amount of deductions and credits disallowed in prior years under the passive activity rules that is allocable to the part of the activity disposed of, and The amount of gross income and any other deductions and credits for the current tax year that is allocable to the part of the activity disposed of. File 2006 federal taxes free Disclosure Requirement For tax years beginning after January 24, 2010, the following disclosure requirements for groupings apply. File 2006 federal taxes free You are required to report certain changes to your groupings that occur during the tax year to the IRS. File 2006 federal taxes free If you fail to report these changes, each trade or business activity or rental activity will be treated as a separate activity. File 2006 federal taxes free You will be considered to have made a timely disclosure if you filed all affected income tax returns consistent with the claimed grouping and make the required disclosure on the income tax return for the year in which you first discovered the failure to disclose. File 2006 federal taxes free If the IRS discovered the failure to disclose, you must have reasonable cause for not making the required disclosure. File 2006 federal taxes free New grouping. File 2006 federal taxes free   You must file a written statement with your original income tax return for the first tax year in which two or more activities are originally grouped into a single activity. File 2006 federal taxes free The statement must provide the names, addresses, and employer identification numbers (EINs), if applicable, for the activities being grouped as a single activity. File 2006 federal taxes free In addition, the statement must contain a declaration that the grouped activities make up an appropriate economic unit for the measurement of gain or loss under the passive activity rules. File 2006 federal taxes free Addition to an existing grouping. File 2006 federal taxes free   You must file a written statement with your original income tax return for the tax year in which you add a new activity to an existing group. File 2006 federal taxes free The statement must provide the name, address, and EIN, if applicable, for the activity that is being added and for the activities in the existing group. File 2006 federal taxes free In addition, the statement must contain a declaration that the activities make up an appropriate economic unit for the measurement of gain or loss under the passive activity rules. File 2006 federal taxes free Regrouping. File 2006 federal taxes free   You must file a written statement with your original income tax return for the tax year in which you regroup the activities. File 2006 federal taxes free The statement must provide the names, addresses, and EINs, if applicable, for the activities that are being regrouped. File 2006 federal taxes free If two or more activities are being regrouped into a single activity, the statement must contain a declaration that the regrouped activities make up an appropriate economic unit for the measurement of gain or loss under the passive activity rules. File 2006 federal taxes free In addition, the statement must contain an explanation of the material change in the facts and circumstances that made the original grouping clearly inappropriate. File 2006 federal taxes free Groupings by partnerships and S corporations. File 2006 federal taxes free   Partnerships and S corporations are not subject to the rules for new grouping, addition to an existing grouping, or regrouping. File 2006 federal taxes free Instead, they must comply with the disclosure instructions for grouping activities provided in their Form 1065, U. File 2006 federal taxes free S. File 2006 federal taxes free Return of Partnership Income, or Form 1120S, U. File 2006 federal taxes free S. File 2006 federal taxes free Income Tax Return for an S Corporation, whichever is applicable. File 2006 federal taxes free   The partner or shareholder is not required to make a separate disclosure of the groupings disclosed by the entity unless the partner or shareholder: Groups together any of the activities that the entity does not group together, Groups the entity's activities with activities conducted directly by the partner or shareholder, or Groups an entity's activities with activities conducted through another entity. File 2006 federal taxes free   A partner or shareholder may not treat activities grouped together by the entity as separate activities. File 2006 federal taxes free Recharacterization of Passive Income Net income from the following passive activities may have to be recharacterized and excluded from passive activity income. File 2006 federal taxes free Significant participation passive activities, Rental of property when less than 30% of the unadjusted basis of the property is subject to depreciation, Equity-financed lending activities, Rental of property incidental to development activities, Rental of property to nonpassive activities, and Licensing of intangible property by  pass-through entities. File 2006 federal taxes free If you are engaged in or have an interest in one of these activities during the tax year (either directly or through a partnership or an S corporation), combine the income and losses from the activity to determine if you have a net loss or net income from that activity. File 2006 federal taxes free If the result is a net loss, treat the income and losses the same as any other income or losses from that type of passive activity (trade or business activity or rental activity). File 2006 federal taxes free If the result is net income, do not enter any of the income or losses from the activity or property on Form 8582 or its worksheets. File 2006 federal taxes free Instead, enter income or losses on the form and schedules you normally use. File 2006 federal taxes free However, see Significant Participation Passive Activities , later, if the activity is a significant participation passive activity and you also have a net loss from a different significant participation passive activity. File 2006 federal taxes free Limit on recharacterized passive income. File 2006 federal taxes free   The total amount that you treat as nonpassive income under the rules described later in this discussion for significant participation passive activities, rental of nondepreciable property, and equity-financed lending activities cannot exceed the greatest amount that you treat as nonpassive income under any one of these rules. File 2006 federal taxes free Investment income and investment expense. File 2006 federal taxes free   To figure your investment interest expense limitation on Form 4952, treat as investment income any net passive income recharacterized as nonpassive income from rental of nondepreciable property, equity-financed lending activity, or licensing of intangible property by a pass-through entity. File 2006 federal taxes free Significant Participation Passive Activities A significant participation passive activity is any trade or business activity in which you participated for more than 100 hours during the tax year but did not materially participate. File 2006 federal taxes free If your gross income from all significant participation passive activities is more than your deductions from those activities, a part of your net income from each significant participation passive activity is treated as nonpassive income. File 2006 federal taxes free Corporations. File 2006 federal taxes free   An activity of a personal service corporation or closely held corporation is a significant participation passive activity if both of the following statements are true. File 2006 federal taxes free The corporation is not treated as materially participating in the activity for the year. File 2006 federal taxes free One or more individuals, each of whom is treated as significantly participating in the activity, directly or indirectly hold (in total) more than 50% (by value) of the corporation's outstanding stock. File 2006 federal taxes free Worksheet A. File 2006 federal taxes free   Complete Worksheet A. File 2006 federal taxes free Significant Participation Passive Activities , below, if you have income or losses from any significant participation activity. File 2006 federal taxes free Begin by entering the name of each activity in the left column. File 2006 federal taxes free Column (a). File 2006 federal taxes free   Enter the number of hours you participated in each activity and total the column. File 2006 federal taxes free   If the total is more than 500, do not complete Worksheet A or B. File 2006 federal taxes free None of the activities are passive activities because you satisfy test 4 for material participation. File 2006 federal taxes free (See Material participation tests , earlier. File 2006 federal taxes free ) Report all the income and losses from these activities on the forms and schedules you normally use. File 2006 federal taxes free Do not include the income and losses on Form 8582. File 2006 federal taxes free Column (b). File 2006 federal taxes free   Enter the net loss, if any, from the activity. File 2006 federal taxes free Net loss from an activity means either: The activity's current year net loss (if any) plus prior year unallowed losses (if any), or The excess of prior year unallowed losses over the current year net income (if any). File 2006 federal taxes free Enter -0- here if the prior year unallowed loss is the same as the current year net income. File 2006 federal taxes free Column (c). File 2006 federal taxes free   Enter net income (if any) from the activity. File 2006 federal taxes free Net income means the excess of the current year's net income from the activity over any prior year unallowed losses from the activity. File 2006 federal taxes free Column (d). File 2006 federal taxes free   Combine amounts in the Totals row for columns (b) and (c) and enter the total net income or net loss in the Totals row of column (d). File 2006 federal taxes free If column (d) is a net loss, skip Worksheet B, Significant Participation Activities With Net Income. File 2006 federal taxes free Include the income and losses in Worksheet 3 of Form 8582 (or Worksheet 2 in the Form 88
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U.S. Senate

The U.S. Senate and the U.S. House of Representatives make up the two chambers of Congress. The Senate has 100 members, 2 from each state, who are elected to serve for a term of 6 years.

The File 2006 Federal Taxes Free

File 2006 federal taxes free 3. File 2006 federal taxes free   Filing Information for Individuals in Certain U. File 2006 federal taxes free S. File 2006 federal taxes free Possessions Table of Contents American SamoaWhere To Get Forms and Information Which Returns To File Special Rules for American Samoa Double Taxation The Commonwealth of Puerto RicoWhere To Get Forms and Information Which Returns To File Special Rules for Puerto Rico Double Taxation The Commonwealth of the Northern Mariana IslandsWhere To Get Forms and Information Which Return To File Special Rules for the CNMI Double Taxation GuamWhere To Get Forms and Information Which Return To File Special Rules for Guam Double Taxation The U. File 2006 federal taxes free S. File 2006 federal taxes free Virgin IslandsWhere To Get Forms and Information Which Return To File Special Rules for the USVI Double Taxation If you have income from American Samoa, the CNMI, Guam, Puerto Rico, or the USVI, you may have to file a tax return with the tax department of that possession. File 2006 federal taxes free Or, you may have to file two annual tax returns, one with the possession's tax department and the other with the U. File 2006 federal taxes free S. File 2006 federal taxes free Internal Revenue Service. File 2006 federal taxes free This chapter covers the general rules for filing returns in the five possessions. File 2006 federal taxes free You must first determine if you are a bona fide resident of the relevant possession. File 2006 federal taxes free See chapter 1 for a discussion of the requirements you must meet. File 2006 federal taxes free You should ask for forms and advice about the filing of possession tax returns from that possession's tax department, not the Internal Revenue Service. File 2006 federal taxes free Contact information is listed in this chapter under the heading for each possession. File 2006 federal taxes free American Samoa American Samoa has its own separate and independent tax system. File 2006 federal taxes free Although its tax laws are modeled on the U. File 2006 federal taxes free S. File 2006 federal taxes free Internal Revenue Code, there are certain differences. File 2006 federal taxes free Where To Get Forms and Information Requests for advice about matters connected with Samoan taxation should be sent to: American Samoa Government Tax Office  Executive Office Building First Floor Pago Pago, AS 96799 The phone number is (684) 633-4181. File 2006 federal taxes free The fax number is (684) 633-1513. File 2006 federal taxes free You can get forms and publications at www. File 2006 federal taxes free americansamoa. File 2006 federal taxes free gov. File 2006 federal taxes free The addresses and phone numbers listed above are subject to change. File 2006 federal taxes free Which Returns To File Your residency status and your source of income with regard to American Samoa determine whether you file your return and pay your tax to American Samoa, to the United States, or to both. File 2006 federal taxes free In addition to the information below that is categorized by residency status, the Special Rules for American Samoa section (later) contains important information for determining the correct forms to file. File 2006 federal taxes free Bona Fide Resident of American Samoa Bona fide residents of American Samoa are generally exempt from U. File 2006 federal taxes free S. File 2006 federal taxes free tax on their American Samoa source income. File 2006 federal taxes free U. File 2006 federal taxes free S. File 2006 federal taxes free citizen or resident alien. File 2006 federal taxes free   If you are a U. File 2006 federal taxes free S. File 2006 federal taxes free citizen or resident alien and a bona fide resident of American Samoa during the entire tax year, you generally must file the following returns. File 2006 federal taxes free An American Samoa tax return reporting your gross income from worldwide sources. File 2006 federal taxes free If you report non-American Samoa source income on your American Samoa tax return, you can claim a credit against your American Samoa tax liability for income taxes paid on that income to the United States, a foreign country, or another possession. File 2006 federal taxes free A U. File 2006 federal taxes free S. File 2006 federal taxes free tax return reporting income from worldwide sources, but excluding income from sources within American Samoa. File 2006 federal taxes free However, amounts received for services performed as an employee of the United States or any of its agencies cannot be excluded (see U. File 2006 federal taxes free S. File 2006 federal taxes free Government employees under Special Rules for American Samoa, later). File 2006 federal taxes free To exclude American Samoa source income, attach a completed Form 4563 to your U. File 2006 federal taxes free S. File 2006 federal taxes free tax return (see Form 4563 for more information). File 2006 federal taxes free If you are excluding American Samoa source income on your U. File 2006 federal taxes free S. File 2006 federal taxes free tax return, you will not be allowed any deductions from gross income or credits against tax that are directly or indirectly allocable to the exempt income. File 2006 federal taxes free For more information, see Special Rules for Completing Your U. File 2006 federal taxes free S. File 2006 federal taxes free Tax Return in chapter 4. File 2006 federal taxes free Nonresident alien. File 2006 federal taxes free   If you are a bona fide resident of American Samoa during the entire tax year, but a nonresident alien of the United States, you generally must file the following returns. File 2006 federal taxes free An American Samoa tax return reporting worldwide income. File 2006 federal taxes free A U. File 2006 federal taxes free S. File 2006 federal taxes free tax return (Form 1040, U. File 2006 federal taxes free S. File 2006 federal taxes free Individual Income Tax Return) reporting income from worldwide sources, but excluding American Samoa source income other than amounts for services performed as an employee of the United States or any of its agencies. File 2006 federal taxes free For more information, see U. File 2006 federal taxes free S. File 2006 federal taxes free Government employees under Special Rules for American Samoa, later. File 2006 federal taxes free To exclude income from sources within American Samoa, attach a completed Form 4563 to your U. File 2006 federal taxes free S. File 2006 federal taxes free tax return (see Form 4563 , below, for more information). File 2006 federal taxes free For all other tax purposes, however, you will be treated as a nonresident alien individual. File 2006 federal taxes free For example, you are not allowed the standard deduction, you cannot file a joint return, and you are not allowed a deduction for a dependent unless that person is a citizen or national of the United States. File 2006 federal taxes free There are also limitations on what deductions and credits are allowed. File 2006 federal taxes free See Publication 519 for more information. File 2006 federal taxes free Form 4563. File 2006 federal taxes free   If you must file a U. File 2006 federal taxes free S. File 2006 federal taxes free income tax return and you qualify to exclude any of your income from American Samoa, claim the exclusion by completing Form 4563 and attaching it to your Form 1040. File 2006 federal taxes free Form 4563 cannot be filed by itself. File 2006 federal taxes free There is an example of a filled-in Form 4563 in chapter 5. File 2006 federal taxes free   If you are a bona fide resident of American Samoa during the entire tax year and you are not including a check or a money order, send your U. File 2006 federal taxes free S. File 2006 federal taxes free tax return and all attachments (including Form 4563) 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. File 2006 federal taxes free S. File 2006 federal taxes free tax return and all attachments (including Form 4563) to: Internal Revenue Service P. File 2006 federal taxes free O. File 2006 federal taxes free Box 1303 Charlotte, NC 28201-1303 USA   Send your American Samoa tax return and all attachments to the address given under Where To Get Forms and Information , earlier. File 2006 federal taxes free Self-employment tax. File 2006 federal taxes free   If you are not required to file a U. File 2006 federal taxes free S. File 2006 federal taxes free tax return but have income that is effectively connected with a trade or business in American Samoa, you must file Form 1040-SS with the United States. File 2006 federal taxes free On this form you will report your self-employment income to the United States and, if necessary, pay self-employment tax on that income. File 2006 federal taxes free Additional Medicare Tax. File 2006 federal taxes free   Beginning in 2013, you may be required to pay Additional Medicare Tax. File 2006 federal taxes free Also, you may need to report Additional Medicare Tax withheld by your employer. File 2006 federal taxes free For more information see Additional Medicare Tax under Special Rules for Completing Your U. File 2006 federal taxes free S. File 2006 federal taxes free Tax Return in chapter 4. File 2006 federal taxes free Net Investment Income Tax. File 2006 federal taxes free   Beginning in 2013, the Net Investment Income Tax (NIIT) is 3. File 2006 federal taxes free 8 percent of 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. File 2006 federal taxes free The NIIT will apply to a bona fide resident of American Samoa if a taxpayer has modified adjusted gross income from sources outside of American Samoa that exceeds a specified threshold amount, e. File 2006 federal taxes free g. File 2006 federal taxes free , $200,000 for single filers. File 2006 federal taxes free The NIIT does not apply to any individual who is a nonresident alien with respect to the United States. File 2006 federal taxes free See Form 8960, Net Investment Income Tax—Individuals, Estates, and Trusts, and its instructions for more information on the NIIT. File 2006 federal taxes free Estimated tax payments. File 2006 federal taxes free   To see if you are required to make payments of estimated income tax, self-employment tax, Additional Medicare Tax, and/or Net Investment Income Tax to the IRS, get Form 1040-ES, Estimated Tax for Individuals. File 2006 federal taxes free   To pay by check or money order, send your payment with the Form 1040-ES payment voucher to: Internal Revenue Service P. File 2006 federal taxes free O. File 2006 federal taxes free Box 1300 Charlotte, NC 28201-1300 USA   To get information on paying electronically (by credit or debit card, or through the Electronic Federal Tax Payment System (EFTPS)), go to www. File 2006 federal taxes free irs. File 2006 federal taxes free gov/e-pay. File 2006 federal taxes free   For information on making estimated income tax payments to American Samoa, see Where To Get Forms and Information , earlier. File 2006 federal taxes free Not a Bona Fide Resident of American Samoa An individual who is not a bona fide resident of American Samoa for the tax year generally files both U. File 2006 federal taxes free S. File 2006 federal taxes free and American Samoa tax returns, and claims a foreign tax credit on the U. File 2006 federal taxes free S. File 2006 federal taxes free return for taxes paid to American Samoa. File 2006 federal taxes free U. File 2006 federal taxes free S. File 2006 federal taxes free citizen or resident alien. File 2006 federal taxes free   If you are a U. File 2006 federal taxes free S. File 2006 federal taxes free citizen or resident alien but not a bona fide resident of American Samoa during the entire tax year, you generally must file the following returns. File 2006 federal taxes free An American Samoa tax return reporting only your income from sources within American Samoa. File 2006 federal taxes free Wages for services performed in American Samoa, whether for a private employer, the U. File 2006 federal taxes free S. File 2006 federal taxes free Government, or otherwise, is income from sources within American Samoa. File 2006 federal taxes free A U. File 2006 federal taxes free S. File 2006 federal taxes free tax return reporting your income from worldwide sources. File 2006 federal taxes free You can take a credit against your U. File 2006 federal taxes free S. File 2006 federal taxes free tax liability if you paid income taxes to American Samoa (or other possession or foreign country) and reported income from those sources on your U. File 2006 federal taxes free S. File 2006 federal taxes free tax return. File 2006 federal taxes free De minimis exception to determining source of income. File 2006 federal taxes free   In certain situations you will not have income from a possession. File 2006 federal taxes free See De minimis exception under Compensation for Labor or Personal Services in chapter 2. File 2006 federal taxes free Nonresident alien. File 2006 federal taxes free   If you are a nonresident alien of the United States who does not qualify as a bona fide resident of American Samoa for the entire tax year, you generally must file the following returns. File 2006 federal taxes free An American Samoa tax return reporting only your income from sources within American Samoa. File 2006 federal taxes free In this situation, wages for services performed in American Samoa, whether for a private employer, the U. File 2006 federal taxes free S. File 2006 federal taxes free Government, or otherwise, is income from sources within American Samoa. File 2006 federal taxes free A U. File 2006 federal taxes free S. File 2006 federal taxes free tax return (Form 1040NR, U. File 2006 federal taxes free S. File 2006 federal taxes free Nonresident Alien Income Tax Return) reporting U. File 2006 federal taxes free S. File 2006 federal taxes free source income according to the rules for a nonresident alien. File 2006 federal taxes free See the Instructions for Form 1040NR. File 2006 federal taxes free   If you are not a bona fide resident of American Samoa during the entire tax year, and you are not including a check or a money order, send your U. File 2006 federal taxes free S. File 2006 federal taxes free 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. File 2006 federal taxes free S. File 2006 federal taxes free tax return and all attachments to: Internal Revenue Service P. File 2006 federal taxes free O. File 2006 federal taxes free Box 1303 Charlotte, NC 28201-1303 USA   Send your American Samoa tax return and all attachments to the address given under Where To Get Forms and Information , earlier. File 2006 federal taxes free Special Rules for American Samoa Some special rules apply to certain types of income and employment connected with American Samoa. File 2006 federal taxes free U. File 2006 federal taxes free S. File 2006 federal taxes free Armed Forces. File 2006 federal taxes free   Bona fide residents of American Samoa include military personnel whose official home of record is American Samoa. File 2006 federal taxes free Civilian spouse of active duty member of the U. File 2006 federal taxes free S. File 2006 federal taxes free Armed Forces. File 2006 federal taxes free   If, under the rule discussed at the beginning of chapter 1 (see Special rule for civilian spouse of active duty member of the U. File 2006 federal taxes free S. File 2006 federal taxes free Armed Forces ), your tax residence is American Samoa, follow the guidance in the section for bona fide residents under Which Returns To File, earlier. File 2006 federal taxes free However, if your tax residence is one of the 50 states or the District of Columbia and your only income from American Samoa is from wages, salaries, tips, or self-employment, you will be taxed on your worldwide income and file only a U. File 2006 federal taxes free S. File 2006 federal taxes free tax return (Form 1040) and a state and/or local tax return, if required. File 2006 federal taxes free If you have income from American Samoa other than wages, salaries, tips, or self-employment that is considered to be sourced in that possession (see Table 2-1), contact the local tax administration for guidance. File 2006 federal taxes free U. File 2006 federal taxes free S. File 2006 federal taxes free Government employees. File 2006 federal taxes free   If you are employed in American Samoa by the U. File 2006 federal taxes free S. File 2006 federal taxes free Government or any of its agencies, you are subject to tax by American Samoa on your pay from the government. File 2006 federal taxes free Whether you are subject to tax by American Samoa on your non-American Samoa source income depends on your status in American Samoa as a bona fide resident. File 2006 federal taxes free   Wages and salaries paid to employees of the U. File 2006 federal taxes free S. File 2006 federal taxes free Government and its agencies are also subject to U. File 2006 federal taxes free S. File 2006 federal taxes free federal income tax. File 2006 federal taxes free These payments do not qualify for the exclusion of income from sources within American Samoa, discussed earlier. File 2006 federal taxes free   For tax years ending after April 9, 2008, wages and salaries paid to bona fide residents by the Government of American Samoa can be excluded on the U. File 2006 federal taxes free S. File 2006 federal taxes free tax return. File 2006 federal taxes free   If you report government wages on both your U. File 2006 federal taxes free S. File 2006 federal taxes free and American Samoa tax returns, you can take a credit on your U. File 2006 federal taxes free S. File 2006 federal taxes free tax return for income taxes paid or accrued to American Samoa. File 2006 federal taxes free Figure the credit on Form 1116, and attach that form to your U. File 2006 federal taxes free S. File 2006 federal taxes free tax return, Form 1040. File 2006 federal taxes free Show your wages paid for services performed in American Samoa on Form 1116, line 1a, enter “American Samoa” on line g, and check box b above Part I. File 2006 federal taxes free Moving expense deduction. File 2006 federal taxes free   Generally, expenses of a move to American Samoa are directly attributable to American Samoa wages, salaries, and other earned income. File 2006 federal taxes free Likewise, the expenses of a move back to the United States are generally attributable to U. File 2006 federal taxes free S. File 2006 federal taxes free earned income. File 2006 federal taxes free   If your move was to American Samoa, report your deduction for moving expenses as follows. File 2006 federal taxes free If you are a bona fide resident in the tax year of your move, enter your deductible expenses on your American Samoa tax return. File 2006 federal taxes free If you are not a bona fide resident, enter your deductible expenses on both your American Samoa and U. File 2006 federal taxes free S. File 2006 federal taxes free tax returns. File 2006 federal taxes free Also, for purposes of a tax credit against your U. File 2006 federal taxes free S. File 2006 federal taxes free tax liability, reduce your American Samoa “general category income” on Form 1116, line 1a, by entering the deductible moving expenses on line 2. File 2006 federal taxes free   If your move was to the United States, complete Form 3903, Moving Expenses, and enter the deductible amount on Form 1040, line 26. File 2006 federal taxes free Double Taxation A mutual agreement procedure exists to settle cases of double taxation between the United States and American Samoa. File 2006 federal taxes free See Double Taxation in chapter 4. File 2006 federal taxes free The Commonwealth of Puerto Rico The Commonwealth of Puerto Rico has its own separate and independent tax system. File 2006 federal taxes free Although it is modeled after the U. File 2006 federal taxes free S. File 2006 federal taxes free system, there are differences in law and tax rates. File 2006 federal taxes free Where To Get Forms and Information Requests for information about the filing of Puerto Rico tax returns should be addressed to: Departamento de Hacienda Negociado de Asistencia Contributiva  P. File 2006 federal taxes free O. File 2006 federal taxes free Box 9024140 San Juan, Puerto Rico 00902-4140 The phone numbers are (787) 721-8051 and (787) 721-7198. File 2006 federal taxes free    To obtain Puerto Rico tax forms, contact the Forms and Publications Division Office at the above address or call (787) 722-0216, option #7. File 2006 federal taxes free You can access the Hacienda website at www. File 2006 federal taxes free hacienda. File 2006 federal taxes free gobierno. File 2006 federal taxes free pr or email your questions about Puerto Rico taxes to InfoServ@hacienda. File 2006 federal taxes free gobierno. File 2006 federal taxes free pr. File 2006 federal taxes free The addresses and phone numbers listed above are subject to change. File 2006 federal taxes free Which Returns To File Generally, you will file returns with both Puerto Rico and the United States. File 2006 federal taxes free The income reported on each return depends on your residency status in Puerto Rico. File 2006 federal taxes free To determine if you are a bona fide resident of Puerto Rico, see the information in chapter 1. File 2006 federal taxes free Bona Fide Resident of Puerto Rico Bona fide residents of Puerto Rico will generally pay tax to Puerto Rico on their worldwide income. File 2006 federal taxes free U. File 2006 federal taxes free S. File 2006 federal taxes free citizen or resident alien. File 2006 federal taxes free   If you are a U. File 2006 federal taxes free S. File 2006 federal taxes free citizen or resident alien and also a bona fide resident of Puerto Rico during the entire tax year, you generally must file the following returns. File 2006 federal taxes free A Puerto Rico tax return reporting income from worldwide sources. File 2006 federal taxes free If you report U. File 2006 federal taxes free S. File 2006 federal taxes free source income on your Puerto Rico tax return, you can claim a credit against your Puerto Rico tax, up to the amount allowable, for income taxes paid to the United States. File 2006 federal taxes free A U. File 2006 federal taxes free S. File 2006 federal taxes free tax return reporting income from worldwide sources, but excluding Puerto Rico source income. File 2006 federal taxes free However, see U. File 2006 federal taxes free S. File 2006 federal taxes free Government employees under Special Rules for Puerto Rico, later, for an exception. File 2006 federal taxes free If you are excluding Puerto Rico income on your U. File 2006 federal taxes free S. File 2006 federal taxes free tax return, you will not be allowed any deductions or credits that are directly or indirectly allocable to exempt income. File 2006 federal taxes free For more information, see Special Rules for Completing Your U. File 2006 federal taxes free S. File 2006 federal taxes free Tax Return in chapter 4. File 2006 federal taxes free If all of your income is from Puerto Rico sources, you are not required to file a U. File 2006 federal taxes free S. File 2006 federal taxes free tax return. File 2006 federal taxes free However, if you have self-employment income, see Self-employment tax , later. File 2006 federal taxes free U. File 2006 federal taxes free S. File 2006 federal taxes free citizen only. File 2006 federal taxes free   If you are a U. File 2006 federal taxes free S. File 2006 federal taxes free citizen, you may also qualify under these rules if you have been a bona fide resident of Puerto Rico for at least 2 years before moving from Puerto Rico. File 2006 federal taxes free In this case, you can exclude your income derived from sources within Puerto Rico (but not wages and salaries received as an employee of the U. File 2006 federal taxes free S. File 2006 federal taxes free Government or its agencies) that you earned before the date you changed your residence. File 2006 federal taxes free For more information, see Puerto Rico under Year of Moving From a Possession in chapter 1. File 2006 federal taxes free Nonresident alien. File 2006 federal taxes free   If you are a bona fide resident of Puerto Rico during the entire tax year, but a nonresident alien of the United States, you generally must file the following returns. File 2006 federal taxes free A Puerto Rico tax return reporting income from worldwide sources. File 2006 federal taxes free If you report U. File 2006 federal taxes free S. File 2006 federal taxes free source income on your Puerto Rico tax return, you can claim a credit against your Puerto Rico tax, up to the amount allowable, for income taxes paid to the United States. File 2006 federal taxes free A U. File 2006 federal taxes free S. File 2006 federal taxes free tax return (Form 1040) reporting income from worldwide sources, but excluding Puerto Rico source income (other than amounts for services performed as an employee of the United States or any of its agencies). File 2006 federal taxes free For tax purposes other than reporting income, however, you will be treated as a nonresident alien individual. File 2006 federal taxes free For example, you are not allowed the standard deduction, you cannot file a joint return, and you are not allowed a deduction for a dependent unless that person is a citizen or national of the United States. File 2006 federal taxes free There are also limitations on what deductions and credits are allowed. File 2006 federal taxes free See Publication 519 for more information. File 2006 federal taxes free Self-employment tax. File 2006 federal taxes free   If you have no U. File 2006 federal taxes free S. File 2006 federal taxes free filing requirement but have income that is effectively connected with a trade or business in Puerto Rico, you must file Form 1040-SS or Form 1040-PR with the United States to report your self-employment income and, if necessary, pay self-employment tax. File 2006 federal taxes free Additional Medicare Tax. File 2006 federal taxes free   Beginning in 2013, you may be required to pay Additional Medicare Tax. File 2006 federal taxes free Also, you may need to report Additional Medicare Tax withheld by your employer. File 2006 federal taxes free For more information see Additional Medicare Tax under Special Rules for Completing Your U. File 2006 federal taxes free S. File 2006 federal taxes free Tax Return in chapter 4. File 2006 federal taxes free Net Investment Income Tax. File 2006 federal taxes free   Beginning in 2013, the Net Investment Income Tax (NIIT) is 3. File 2006 federal taxes free 8 percent of 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. File 2006 federal taxes free The NIIT will apply to a bona fide resident of Puerto Rico if a taxpayer has modified adjusted gross income from sources outside of Puerto Rico that exceeds a specified threshold amount, e. File 2006 federal taxes free g. File 2006 federal taxes free , $200,000 for single filers. File 2006 federal taxes free The NIIT does not apply to any individual who is a nonresident alien with respect to the United States. File 2006 federal taxes free See Form 8960, Net Investment Income Tax—Individuals, Estates, and Trusts, and its instructions for more information on the NIIT. File 2006 federal taxes free Estimated tax payments. File 2006 federal taxes free   To see if you are required to make payments of estimated income tax, self-employment tax, Additional Medicare Tax, and/or Net Investment Income Tax to the IRS, get Form 1040-ES (or Form 1040-ES(PR)). File 2006 federal taxes free   To pay by check or money order, send your payment with the Form 1040-ES (or Form 1040-ES(PR)) payment voucher to: Internal Revenue Service P. File 2006 federal taxes free O. File 2006 federal taxes free Box 1300 Charlotte, NC 28201-1300 USA   To get information on paying electronically (by credit or debit card, or through the Electronic Federal Tax Payment System (EFTPS)), go to www. File 2006 federal taxes free irs. File 2006 federal taxes free gov/e-pay. File 2006 federal taxes free   For information on making estimated income tax payments to Hacienda, see Where To Get Forms and Information , earlier. File 2006 federal taxes free Not a Bona Fide Resident of Puerto Rico An individual who is not a bona fide resident of Puerto Rico for the tax year generally files tax returns with both Puerto Rico and the United States. File 2006 federal taxes free U. File 2006 federal taxes free S. File 2006 federal taxes free citizen or resident alien. File 2006 federal taxes free   If you are a U. File 2006 federal taxes free S. File 2006 federal taxes free citizen or resident alien but not a bona fide resident of Puerto Rico during the entire tax year, you generally must file the following returns. File 2006 federal taxes free A Puerto Rico tax return reporting only your income from Puerto Rico sources. File 2006 federal taxes free Wages for services performed in Puerto Rico, whether for a private employer, the U. File 2006 federal taxes free S. File 2006 federal taxes free Government, or otherwise, is income from Puerto Rico sources. File 2006 federal taxes free A U. File 2006 federal taxes free S. File 2006 federal taxes free tax return reporting income from worldwide sources. File 2006 federal taxes free Generally, you can claim a foreign tax credit for income taxes paid to Puerto Rico on the Puerto Rico income that is not exempt from U. File 2006 federal taxes free S. File 2006 federal taxes free taxes (see chapter 4 for more information). File 2006 federal taxes free Nonresident alien. File 2006 federal taxes free   If you are a nonresident alien of the United States who does not qualify as a bona fide resident of Puerto Rico for the entire tax year, you generally must file the following returns. File 2006 federal taxes free A Puerto Rico tax return reporting only your income from Puerto Rico sources. File 2006 federal taxes free Wages for services performed in Puerto Rico, whether for a private employer, the U. File 2006 federal taxes free S. File 2006 federal taxes free Government, or otherwise, is income from Puerto Rico sources. File 2006 federal taxes free A U. File 2006 federal taxes free S. File 2006 federal taxes free tax return (Form 1040NR) according to the rules for a nonresident alien. File 2006 federal taxes free See the Instructions for Form 1040NR. File 2006 federal taxes free De minimis exception to determining source of income. File 2006 federal taxes free   In certain situations you will not have income from a possession. File 2006 federal taxes free See De minimis exception under Compensation for Labor or Personal Services in chapter 2. File 2006 federal taxes free Use the addresses listed below to file your U. File 2006 federal taxes free S. File 2006 federal taxes free and Puerto Rico income tax returns. File 2006 federal taxes free If you are not including a check or a money order, send your U. File 2006 federal taxes free S. File 2006 federal taxes free 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. File 2006 federal taxes free S. File 2006 federal taxes free tax return and all attachments to: Internal Revenue Service P. File 2006 federal taxes free O. File 2006 federal taxes free Box 1303 Charlotte, NC 28201-1303 USA If you request a refund on your Puerto Rico return, send your Puerto Rico tax return and all attachments to: Departamento de Hacienda P. File 2006 federal taxes free O. File 2006 federal taxes free Box 50072 San Juan, PR 00902-6272 Send all other Puerto Rico tax returns, with all attachments, to: Departamento de Hacienda P. File 2006 federal taxes free O. File 2006 federal taxes free Box 9022501 San Juan, PR 00902-2501 Special Rules for Puerto Rico In addition to the general rules given earlier for filing U. File 2006 federal taxes free S. File 2006 federal taxes free and Puerto Rico tax returns, there are some special rules that apply to certain individuals and types of income. File 2006 federal taxes free U. File 2006 federal taxes free S. File 2006 federal taxes free Government employees. File 2006 federal taxes free   Wages and cost-of-living allowances paid by the U. File 2006 federal taxes free S. File 2006 federal taxes free Government (or one of its agencies) for working in Puerto Rico are subject to Puerto Rico tax. File 2006 federal taxes free However, the cost-of-living allowances are excluded from Puerto Rico gross income up to the amount exempt from U. File 2006 federal taxes free S. File 2006 federal taxes free tax. File 2006 federal taxes free In order to claim this exclusion, you must: Include with your Puerto Rico tax return evidence to show the amount received during the year, and Be in full compliance with your Puerto Rico tax responsibilities. File 2006 federal taxes free   These wages are also subject to U. File 2006 federal taxes free S. File 2006 federal taxes free tax, but the cost-of-living allowances are excludable. File 2006 federal taxes free A foreign tax credit is available in order to avoid double taxation. File 2006 federal taxes free U. File 2006 federal taxes free S. File 2006 federal taxes free Armed Forces. File 2006 federal taxes free   Bona fide residents of Puerto Rico include military personnel whose official home of record is Puerto Rico. File 2006 federal taxes free Civilian spouse of active duty member of the U. File 2006 federal taxes free S. File 2006 federal taxes free Armed Forces. File 2006 federal taxes free   If, under the rule discussed at the beginning of chapter 1 (see Special rule for civilian spouse of active duty member of the U. File 2006 federal taxes free S. File 2006 federal taxes free Armed Forces ), your tax residence is Puerto Rico, follow the guidance in the section for bona fide residents under Which Returns To File, earlier. File 2006 federal taxes free However, if your tax residence is one of the 50 states or the District of Columbia and your only income from Puerto Rico is from wages, salaries, tips, or self-employment, you will be taxed on your worldwide income and file only a U. File 2006 federal taxes free S. File 2006 federal taxes free tax return (Form 1040) and a state and/or local tax return, if required. File 2006 federal taxes free If you have income from Puerto Rico other than wages, salaries, tips, or self-employment that is considered to be sourced in that possession (see Table 2-1 ), contact the Hacienda for guidance. File 2006 federal taxes free Income from sources outside Puerto Rico and the United States. File 2006 federal taxes free   If you are a U. File 2006 federal taxes free S. File 2006 federal taxes free citizen and bona fide resident of Puerto Rico and you have income from sources outside both Puerto Rico and the United States, that income is treated as foreign source income under both tax systems. File 2006 federal taxes free In addition to your Puerto Rico and U. File 2006 federal taxes free S. File 2006 federal taxes free tax returns, you may also have to file a return with the country or possession from which your outside income was derived. File 2006 federal taxes free To avoid double taxation, a foreign tax credit is generally available for either the U. File 2006 federal taxes free S. File 2006 federal taxes free or Puerto Rico return. File 2006 federal taxes free Example. File 2006 federal taxes free Thomas Red is a bona fide resident of Puerto Rico and a U. File 2006 federal taxes free S. File 2006 federal taxes free citizen. File 2006 federal taxes free He traveled to the Dominican Republic and worked in the construction industry for 1 month. File 2006 federal taxes free His wages were $20,000. File 2006 federal taxes free Because the wages were earned outside Puerto Rico and outside the United States, Thomas must file a tax return with Puerto Rico and the United States. File 2006 federal taxes free He may also have to file a tax return with the Dominican Republic. File 2006 federal taxes free Moving expense deduction. File 2006 federal taxes free   Generally, expenses of a move to Puerto Rico are directly attributable to wages, salaries, and other earned income from Puerto Rico. File 2006 federal taxes free Likewise, the expenses of a move back to the United States are generally attributable to U. File 2006 federal taxes free S. File 2006 federal taxes free earned income. File 2006 federal taxes free   If your move was to Puerto Rico, report your deduction for moving expenses as follows. File 2006 federal taxes free If you are a bona fide resident in the tax year of your move, enter your deductible expenses on your Puerto Rico tax return. File 2006 federal taxes free If you are not a bona fide resident, enter your deductible expenses on both your Puerto Rico and U. File 2006 federal taxes free S. File 2006 federal taxes free tax returns. File 2006 federal taxes free Also, for purposes of a tax credit against your U. File 2006 federal taxes free S. File 2006 federal taxes free tax liability, reduce your Puerto Rico “general category income” on Form 1116, line 1a, by entering the deductible moving expenses on line 2. File 2006 federal taxes free   If your move was to the United States, complete Form 3903 and enter the deductible amount on Form 1040, line 26. File 2006 federal taxes free Additional child tax credit. File 2006 federal taxes free   If you are not required to file a U. File 2006 federal taxes free S. File 2006 federal taxes free income tax return, this credit is available only if you meet all three of the following conditions. File 2006 federal taxes free You were a bona fide resident of Puerto Rico during the entire tax year. File 2006 federal taxes free Social security and Medicare taxes were withheld from your wages or you paid self-employment tax. File 2006 federal taxes free You had three or more qualifying children. File 2006 federal taxes free (For the definition of a qualifying child, see the instructions for Form 1040-PR or Form 1040-SS. File 2006 federal taxes free ) If your income exceeds certain levels, you may be disqualified from receiving this credit. File 2006 federal taxes free Use Form 1040-PR or Form 1040-SS to claim the additional child tax credit. File 2006 federal taxes free Advice about possible tax benefits under the Puerto Rico investment incentive programs is available from the Puerto Rico tax authorities. File 2006 federal taxes free Double Taxation A mutual agreement procedure exists to settle cases of double taxation between the United States and the Commonwealth of Puerto Rico. File 2006 federal taxes free See Double Taxation in chapter 4. File 2006 federal taxes free The Commonwealth of the Northern Mariana Islands The Commonwealth of the Northern Mariana Islands (CNMI) has its own tax system based partly on the same tax laws and tax rates that apply to the United States and partly on local taxes imposed by the CNMI government. File 2006 federal taxes free Where To Get Forms and Information Requests for advice about CNMI residency and tax matters should be addressed to: Commonwealth of the Northern Mariana Islands  Division of Revenue and Taxation P. File 2006 federal taxes free O. File 2006 federal taxes free Box 5234 CHRB Dandan Commercial Center First Floor Rm #8  Saipan, MP 96950 You can order forms and publications by calling (670) 664-1000. File 2006 federal taxes free You can order forms and publications through the fax at (670) 664-1015. File 2006 federal taxes free You can get forms and publications at www. File 2006 federal taxes free cnmidof. File 2006 federal taxes free net. File 2006 federal taxes free The addresses and phone numbers listed above are subject to change. File 2006 federal taxes free Which Return To File In general, all individuals with income from the CNMI will file only one return, either to the CNMI or to the United States. File 2006 federal taxes free Your residency status with regard to the CNMI determines which return you will file. File 2006 federal taxes free Be sure to check the Special Rules for the CNMI , later, for additional information about filing your tax return. File 2006 federal taxes free Bona Fide Resident of the CNMI If you are a U. File 2006 federal taxes free S. File 2006 federal taxes free citizen, resident alien, or nonresident alien and a bona fide resident of the CNMI during the entire tax year, file your income tax return with the CNMI. File 2006 federal taxes free Include income from worldwide sources on your CNMI return. File 2006 federal taxes free In determining your total tax payments, include all income tax withheld by either the CNMI or the United States, any credit for an overpayment of income tax to either the CNMI or the United States, and any payments of estimated tax to either the CNMI or the United States. File 2006 federal taxes free Pay any balance of tax due with your tax return. File 2006 federal taxes free Generally, if you properly file your return with, and fully pay your income tax to, the CNMI, then you are not liable for filing an income tax return with, or for paying tax to, the United States for the tax year. File 2006 federal taxes free However, if you were self-employed in 2013, see Self-employment tax , later. File 2006 federal taxes free Example. File 2006 federal taxes free David Gold was a bona fide resident of the CNMI for 2013. File 2006 federal taxes free He received wages of $30,000 paid by a private employer in the CNMI and dividends of $4,000 from U. File 2006 federal taxes free S. File 2006 federal taxes free corporations that carry on business mainly in the United States. File 2006 federal taxes free He must file a 2013 income tax return with the CNMI Division of Revenue and Taxation. File 2006 federal taxes free He reports his total income of $34,000 on the CNMI return. File 2006 federal taxes free   If you are a bona fide resident of the CNMI for the entire tax year, send your return and all attachments to the Division of Revenue and Taxation at the address given earlier. File 2006 federal taxes free U. File 2006 federal taxes free S. File 2006 federal taxes free Citizen or Resident Alien (Other Than a Bona Fide Resident of the CNMI) If you have income from sources within the CNMI and are a U. File 2006 federal taxes free S. File 2006 federal taxes free citizen or resident alien, but you are not a bona fide resident of the CNMI during the entire tax year, file your income tax return with the United States. File 2006 federal taxes free Include income from worldwide sources on your U. File 2006 federal taxes free S. File 2006 federal taxes free return. File 2006 federal taxes free In determining your total tax payments, include all income tax withheld by either the United States or the CNMI, any credit for an overpayment of income tax to either the United States or the CNMI, and any payments of estimated tax to either the United States or the CNMI. File 2006 federal taxes free Pay any balance of tax due with your tax return. File 2006 federal taxes free Note. File 2006 federal taxes free You may also need to complete Form 5074. File 2006 federal taxes free You are not liable for filing an income tax return with, or for paying tax to, the CNMI for the tax year. File 2006 federal taxes free Form 5074. File 2006 federal taxes free   If you file a U. File 2006 federal taxes free S. File 2006 federal taxes free income tax return, attach a completed Form 5074 if you (and your spouse if filing a joint return) have: Adjusted gross income of $50,000 or more for the tax year, and Gross income of $5,000 or more from sources within the CNMI. File 2006 federal taxes free   The United States and the CNMI use this form to divide your income taxes. File 2006 federal taxes free   There is an example of a filled-in Form 5074 in chapter 5. File 2006 federal taxes free De minimis exception to determining source of income. File 2006 federal taxes free   In certain situations you will not have income from a possession. File 2006 federal taxes free See De minimis exception under Compensation for Labor or Personal Services in chapter 2. File 2006 federal taxes free Citizen or resident alien of the United States but not a bona fide resident of the CNMI. File 2006 federal taxes free   If you are a citizen or resident alien of the United States but not a bona fide resident of the CNMI during the entire tax year and you are not including a check or a money order, send your 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. File 2006 federal taxes free S. File 2006 federal taxes free tax return and all attachments to: Internal Revenue Service P. File 2006 federal taxes free O. File 2006 federal taxes free Box 1303 Charlotte, NC 28201-1303 USA Nonresident Alien (Other Than a Bona Fide Resident of the CNMI) If you are a nonresident alien of the United States who does not qualify as a bona fide resident of the CNMI for the entire tax year, you generally must file the following returns. File 2006 federal taxes free A CNMI tax return reporting only your income from sources within the CNMI. File 2006 federal taxes free In this situation, wages for services performed in the CNMI, whether for a private employer, the U. File 2006 federal taxes free S. File 2006 federal taxes free Government, or otherwise, is income from sources within the CNMI. File 2006 federal taxes free A U. File 2006 federal taxes free S. File 2006 federal taxes free tax return (Form 1040NR) reporting U. File 2006 federal taxes free S. File 2006 federal taxes free source income according to the rules for a nonresident alien. File 2006 federal taxes free See the instructions for Form 1040NR. File 2006 federal taxes free If you are not a bona fide resident of the CNMI during the entire tax year and you are not including a check or a money order, send your U. File 2006 federal taxes free S. File 2006 federal taxes free 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. File 2006 federal taxes free S. File 2006 federal taxes free tax return and all attachments to:  Internal Revenue Service P. File 2006 federal taxes free O. File 2006 federal taxes free Box 1303 Charlotte, NC 28201-1303 USA Send your CNMI tax return and all attachments to:  Department of Finance Division of Revenue and Taxation Commonwealth of the Northern Mariana Islands P. File 2006 federal taxes free O. File 2006 federal taxes free Box 5234 CHRB Saipan, MP 96950 Citizen of the CNMI If you are a citizen of the CNMI (meaning that you were born or naturalized in the CNMI) but not otherwise a U. File 2006 federal taxes free S. File 2006 federal taxes free citizen or a U. File 2006 federal taxes free S. File 2006 federal taxes free resident alien during the tax year, file your income tax return with the CNMI. File 2006 federal taxes free Include income from worldwide sources on your CNMI return. File 2006 federal taxes free Take into account tax withheld by both jurisdictions in determining if there is tax overdue or an overpayment. File 2006 federal taxes free Pay any balance of tax due with your tax return. File 2006 federal taxes free Send your return and all attachments to:   Department of Finance Division of Revenue and Taxation Commonwealth of the Northern Mariana Islands P. File 2006 federal taxes free O. File 2006 federal taxes free Box 5234 CHRB Saipan, MP 96950 Special Rules for the CNMI Special rules apply to certain types of income, employment, and filing status. File 2006 federal taxes free Joint return. File 2006 federal taxes free   If you file a joint return, file your return (and pay the tax) with the jurisdiction where the spouse who has the greater adjusted gross income (AGI) would have to file if you were filing separately. File 2006 federal taxes free If the spouse with the greater AGI is a bona fide resident of the CNMI during the entire tax year, file the joint return with the CNMI. File 2006 federal taxes free If the spouse with the greater AGI is a U. File 2006 federal taxes free S. File 2006 federal taxes free citizen or resident alien but not a bona fide resident of the CNMI during the entire tax year, file your joint return with the United States. File 2006 federal taxes free For this purpose, income is determined without regard to community property laws. File 2006 federal taxes free Example. File 2006 federal taxes free Marsha Blue, a U. File 2006 federal taxes free S. File 2006 federal taxes free citizen, was a resident of the United States, and her spouse, a citizen of the CNMI, was a bona fide resident of the CNMI during the entire tax year. File 2006 federal taxes free Marsha earned $65,000 as a computer programmer in the United States. File 2006 federal taxes free Her spouse earned $20,000 as an artist in the CNMI. File 2006 federal taxes free Marsha and her spouse will file a joint return. File 2006 federal taxes free Because Marsha has the greater AGI, she and her spouse must file their return with the United States and report the entire $85,000 on that return. File 2006 federal taxes free U. File 2006 federal taxes free S. File 2006 federal taxes free Armed Forces. File 2006 federal taxes free   If you are a member of the U. File 2006 federal taxes free S. File 2006 federal taxes free Armed Forces who qualified as a bona fide resident of the CNMI in a prior tax year, your absence from the CNMI solely in compliance with military orders will not change your bona fide residency. File 2006 federal taxes free If you did not qualify as a bona fide resident of the CNMI in a prior tax year, your presence in the CNMI solely in compliance with military orders will not qualify you as a bona fide resident of the CNMI. File 2006 federal taxes free Civilian spouse of active duty member of the U. File 2006 federal taxes free S. File 2006 federal taxes free Armed Forces. File 2006 federal taxes free   If, under the rule discussed at the beginning of chapter 1 (see Special rule for civilian spouse of active duty member of the U. File 2006 federal taxes free S. File 2006 federal taxes free Armed Forces ), your tax residence is the CNMI, follow the guidance in the section for bona fide residents under Which Return To File, earlier. File 2006 federal taxes free However, if your tax residence is one of the 50 states or the District of Columbia and your only income from the CNMI is from wages, salaries, tips, or self-employment, you will be taxed on your worldwide income and file only a U. File 2006 federal taxes free S. File 2006 federal taxes free tax return (Form 1040) and a state and/or local tax return, if required. File 2006 federal taxes free If you have income from the CNMI other than wages, salaries, tips, or self-employment that is considered to be sourced in that possession (see Table 2-1), you may need to file Form 5074 with your U. File 2006 federal taxes free S. File 2006 federal taxes free tax return. File 2006 federal taxes free Moving expense deduction. File 2006 federal taxes free   Generally, expenses of a move to the CNMI are directly attributable to wages, salaries, and other earned income from the CNMI. File 2006 federal taxes free Likewise, the expenses of a move back to the United States are generally attributable to U. File 2006 federal taxes free S. File 2006 federal taxes free earned income. File 2006 federal taxes free   If your move was to the CNMI, report your deduction for moving expenses as follows. File 2006 federal taxes free If you are a bona fide resident in the tax year of your move, enter your deductible expenses on your CNMI tax return. File 2006 federal taxes free If you are not a bona fide resident, enter your deductible expenses on Form 3903 and enter the deductible amount on Form 1040, line 26, and on Form 5074, line 20. File 2006 federal taxes free   If your move was to the United States, complete Form 3903 and enter the deductible amount on Form 1040, line 26. File 2006 federal taxes free Foreign tax credit. File 2006 federal taxes free   Under the filing rules explained earlier, individuals with CNMI source income normally will not claim a foreign tax credit on a U. File 2006 federal taxes free S. File 2006 federal taxes free income tax return for tax paid to the CNMI. File 2006 federal taxes free Self-employment tax. File 2006 federal taxes free   If you have no U. File 2006 federal taxes free S. File 2006 federal taxes free filing requirement, but have income that is effectively connected with a trade or business in the CNMI, you must file Form 1040-SS with the United States to report your self-employment income and, if necessary, pay self-employment tax. File 2006 federal taxes free Additional Medicare Tax. File 2006 federal taxes free   Beginning in 2013, you may be required to pay Additional Medicare Tax. File 2006 federal taxes free Also, you may need to report Additional Medicare Tax withheld by your employer. File 2006 federal taxes free For more information see Additional Medicare Tax under Special Rules for Completing Your U. File 2006 federal taxes free S. File 2006 federal taxes free Tax Return in chapter 4. File 2006 federal taxes free Estimated tax payments. File 2006 federal taxes free   To see if you are required to make payments of estimated income tax, self-employment tax, and/or Additional Medicare Tax to the IRS, get Form 1040-ES. File 2006 federal taxes free Payment of estimated tax. File 2006 federal taxes free   If you must pay estimated tax, make your payment to the jurisdiction where you would file your income tax return if your tax year were to end on the date your first estimated tax payment is due. File 2006 federal taxes free Generally, you should make the rest of your quarterly payments of estimated tax to the jurisdiction where you made your first payment of estimated tax. File 2006 federal taxes free However, estimated tax payments to either jurisdiction will be treated as payments to the jurisdiction with which you file the tax return. File 2006 federal taxes free   If you make a joint payment of estimated tax, make your payment to the jurisdiction where the spouse who has the greater estimated AGI would have to pay (if a separate payment were made). File 2006 federal taxes free For this purpose, income is determined without regard to community property laws. File 2006 federal taxes free Early payment. File 2006 federal taxes free   If you make your first payment of estimated tax early, follow the rules given earlier to determine where to send it. File 2006 federal taxes free If you send it to the wrong jurisdiction, make all later payments to the jurisdiction to which the first payment should have been sent. File 2006 federal taxes free   To pay by check or money order, send your payment with the Form 1040-ES payment voucher to:  Internal Revenue Service P. File 2006 federal taxes free O. File 2006 federal taxes free Box 1300 Charlotte, NC 28201-1300 USA   To get information on paying electronically (by credit or debit card, or through the Electronic Federal Tax Payment System (EFTPS)), go to www. File 2006 federal taxes free irs. File 2006 federal taxes free gov/e-pay. File 2006 federal taxes free   For information on making estimated income tax payments to the CNMI, see Where To Get Forms and Information , earlier. File 2006 federal taxes free Double Taxation A mutual agreement procedure exists to settle cases of double taxation between the United States and the CNMI. File 2006 federal taxes free See Double Taxation in chapter 4. File 2006 federal taxes free Guam Guam has its own tax system based on the same tax laws and tax rates that apply in the United States. File 2006 federal taxes free Where To Get Forms and Information Requests for advice about Guam residency and tax matters should be addressed to: Department of Revenue and Taxation Government of Guam P. File 2006 federal taxes free O. File 2006 federal taxes free Box 23607 GMF, GU 96921 You can order forms and publications by calling (671) 635-1840 or (671) 635-1841. File 2006 federal taxes free You can order forms and publications through the fax at (671) 633-2643. File 2006 federal taxes free You can get forms and publications at www. File 2006 federal taxes free guamtax. File 2006 federal taxes free com. File 2006 federal taxes free The addresses and phone numbers listed above are subject to change. File 2006 federal taxes free Which Return To File Bona fide residents of Guam are subject to special U. File 2006 federal taxes free S. File 2006 federal taxes free tax rules. File 2006 federal taxes free In general, all individuals with income from Guam will file only one return—either to Guam or the United States. File 2006 federal taxes free Bona Fide Resident of Guam If you are a bona fide resident of Guam during the entire tax year, file your return with Guam. File 2006 federal taxes free This applies to all bona fide residents who are citizens, resident aliens, or nonresident aliens of the United States. File 2006 federal taxes free Include income from worldwide sources on your Guam return. File 2006 federal taxes free In determining your total tax payments, include all income tax withheld by either Guam or the United States, any credit for an overpayment of income tax to either Guam or the United States, and any payments of estimated tax to either Guam or the United States. File 2006 federal taxes free Pay any balance of tax due with your tax return. File 2006 federal taxes free Generally, if you properly file your return with, and fully pay your income tax to, Guam, then you are not liable for filing an income tax return with, or for paying tax to, the United States. File 2006 federal taxes free However, if you were self-employed in 2013, see Self-employment tax , later. File 2006 federal taxes free Example. File 2006 federal taxes free Gary Barker was a bona fide resident of Guam for 2013. File 2006 federal taxes free He received wages of $25,000 paid by a private employer in Guam and dividends of $2,000 from U. File 2006 federal taxes free S. File 2006 federal taxes free corporations that carry on business mainly in the United States. File 2006 federal taxes free He must file a 2013 income tax return with the Government of Guam. File 2006 federal taxes free He reports his total income of $27,000 on the Guam return. File 2006 federal taxes free If you are a bona fide resident of Guam for the entire tax year, send your return and all attachments to:  Department of Revenue and Taxation Government of Guam P. File 2006 federal taxes free O. File 2006 federal taxes free Box 23607 GMF, GU 96921 U. File 2006 federal taxes free S. File 2006 federal taxes free Citizen or Resident Alien (Other Than a Bona Fide Resident of Guam) If you have income from sources within Guam and are a U. File 2006 federal taxes free S. File 2006 federal taxes free citizen or resident alien, but you are not a bona fide resident of Guam during the entire tax year, file your income tax return with the United States. File 2006 federal taxes free Include income from worldwide sources on your U. File 2006 federal taxes free S. File 2006 federal taxes free return. File 2006 federal taxes free In determining your total tax payments, include all income tax withheld by either the United States or Guam, any credit for an overpayment of income tax to either the United States or Guam, and any payments of estimated tax to either the United States or Guam. File 2006 federal taxes free Pay any balance of tax due with your tax return. File 2006 federal taxes free You may also need to complete Form 5074. File 2006 federal taxes free You are not liable for filing an income tax return with, or for paying tax to, Guam for the tax year. File 2006 federal taxes free Form 5074. File 2006 federal taxes free   If you file a U. File 2006 federal taxes free S. File 2006 federal taxes free income tax return, attach a completed Form 5074 if you (and your spouse if filing a joint return) have: Adjusted gross income of $50,000 or more for the tax year, and Gross income of $5,000 or more from sources within Guam. File 2006 federal taxes free   The United States and Guam use this form to divide your income taxes. File 2006 federal taxes free   See the Illustrated Example of Form 5074 in chapter 5. File 2006 federal taxes free De minimis exception to determining source of income. File 2006 federal taxes free   In certain situations you will not have income from a possession. File 2006 federal taxes free See De minimis exception under Compensation for Labor or Personal Services in chapter 2. File 2006 federal taxes free   If you are a citizen or resident alien of the United States but not a bona fide resident of Guam during the entire tax year and you are not including a check or money order, send your U. File 2006 federal taxes free S. File 2006 federal taxes free tax return and all attachments (including Form 5074) 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. File 2006 federal taxes free S. File 2006 federal taxes free tax return and all attachments (including Form 5074) to:  Internal Revenue Service P. File 2006 federal taxes free O. File 2006 federal taxes free Box 1303 Charlotte, NC 28201-1303 USA Nonresident Alien (Other Than a Bona Fide Resident of Guam) If you are a nonresident alien of the United States who does not qualify as a bona fide resident of Guam for the entire tax year, you generally must file the following returns. File 2006 federal taxes free A Guam tax return reporting only your income from sources within Guam. File 2006 federal taxes free In this situation, wages for services performed in Guam, whether for a private employer, the U. File 2006 federal taxes free S. File 2006 federal taxes free Government, or otherwise, is income from sources within Guam. File 2006 federal taxes free A U. File 2006 federal taxes free S. File 2006 federal taxes free tax return (Form 1040NR) reporting U. File 2006 federal taxes free S. File 2006 federal taxes free source income according to the rules for a nonresident alien. File 2006 federal taxes free See the instructions for Form 1040NR. File 2006 federal taxes free If you are not a bona fide resident of Guam during the entire tax year and you are not including a check or money order, send your U. File 2006 federal taxes free S. File 2006 federal taxes free 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. File 2006 federal taxes free S. File 2006 federal taxes free tax return and all attachments to:  Internal Revenue Service P. File 2006 federal taxes free O. File 2006 federal taxes free Box 1303 Charlotte, NC 28201-1303 USA Send your Guam tax return and all attachments to:   Department of Revenue and Taxation P. File 2006 federal taxes free O. File 2006 federal taxes free Box 23607 GMF, GU 96921 Citizen of Guam If you are a citizen of Guam (meaning that you were born or naturalized in Guam) but not otherwise a U. File 2006 federal taxes free S. File 2006 federal taxes free citizen or a U. File 2006 federal taxes free S. File 2006 federal taxes free resident alien during the tax year, file your income tax return with Guam. File 2006 federal taxes free Include income from worldwide sources on your Guam return. File 2006 federal taxes free Take into account tax withheld by both jurisdictions in determining if there is tax overdue or an overpayment. File 2006 federal taxes free Pay any balance of tax due with your tax return. File 2006 federal taxes free If you are a citizen of Guam, send your return and all attachments to:  Department of Revenue and Taxation Government of Guam P. File 2006 federal taxes free O. File 2006 federal taxes free Box 23607 GMF, GU 96921 Special Rules for Guam Special rules apply to certain types of income, employment, and filing status. File 2006 federal taxes free Joint return. File 2006 federal taxes free   If you file a joint return, you should file your return (and pay the tax) with the jurisdiction where the spouse who has the greater adjusted gross income (AGI) would have to file if you were filing separately. File 2006 federal taxes free If the spouse with the greater AGI is a bona fide resident of Guam during the entire tax year, file the joint return with Guam. File 2006 federal taxes free If the spouse with the greater AGI is a U. File 2006 federal taxes free S. File 2006 federal taxes free citizen or resident alien but not a bona fide resident of Guam during the entire tax year, file the joint return with the United States. File 2006 federal taxes free For this purpose, income is determined without regard to community property laws. File 2006 federal taxes free Example. File 2006 federal taxes free Bill Whiting, a U. File 2006 federal taxes free S. File 2006 federal taxes free citizen, was a resident of the United States, and his spouse, a citizen of Guam, was a bona fide resident of Guam during the entire tax year. File 2006 federal taxes free Bill earned $45,000 as an engineer in the United States. File 2006 federal taxes free His spouse earned $15,000 as a teacher in Guam. File 2006 federal taxes free Bill and his spouse will file a joint return. File 2006 federal taxes free Because Bill has the greater AGI, he and his spouse must file their return with the United States and report the entire $60,000 on that return. File 2006 federal taxes free U. File 2006 federal taxes free S. File 2006 federal taxes free Armed Forces. File 2006 federal taxes free   If you are a member of the U. File 2006 federal taxes free S. File 2006 federal taxes free Armed Forces who qualified as a bona fide resident of Guam in a prior tax year, your absence from Guam solely in compliance with military orders will not change your bona fide residency. File 2006 federal taxes free If you did not qualify as a bona fide resident of Guam in a prior tax year, your presence in Guam solely in compliance with military orders will not qualify you as a bona fide resident of Guam. File 2006 federal taxes free Civilian spouse of active duty member of the U. File 2006 federal taxes free S. File 2006 federal taxes free Armed Forces. File 2006 federal taxes free   If, under the rule discussed at the beginning of chapter 1 (see Special rule for civilian spouse of active duty member of the U. File 2006 federal taxes free S. File 2006 federal taxes free Armed Forces ), your tax residence is Guam, follow the guidance in the section for bona fide residents under Which Return To File, earlier. File 2006 federal taxes free However, if your tax residence is one of the 50 states or the District of Columbia and your only income from Guam is from wages, salaries, tips, or self-employment, you will be taxed on your worldwide income and file only a U. File 2006 federal taxes free S. File 2006 federal taxes free tax return (Form 1040) and a state and/or local tax return, if required. File 2006 federal taxes free If you have income from Guam other than wages, salaries, tips, or self-employment that is considered to be sourced in that possession (see Table 2-1), you may need to file Form 5074 with your U. File 2006 federal taxes free S. File 2006 federal taxes free tax return. File 2006 federal taxes free Moving expense deduction. File 2006 federal taxes free   Generally, expenses of a move to Guam are directly attributable to wages, salaries, and other earned income from Guam. File 2006 federal taxes free Likewise, the expenses of a move back to the United States are generally attributable to U. File 2006 federal taxes free S. File 2006 federal taxes free earned income. File 2006 federal taxes free   If your move was to Guam, report your deduction for moving expenses as follows. File 2006 federal taxes free If you are a bona fide resident in the tax year of your move, enter your deductible expenses on your Guam tax return. File 2006 federal taxes free If you are not a bona fide resident, enter your deductible expenses on Form 3903 and enter the deductible amount on Form 1040, line 26, and on Form 5074, line 20. File 2006 federal taxes free   If your move was to the United States, complete Form 3903 and enter the deductible amount on Form 1040, line 26. File 2006 federal taxes free Foreign tax credit. File 2006 federal taxes free   Under the filing rules explained earlier, individuals with Guam source income normally will not claim a foreign tax credit on a U. File 2006 federal taxes free S. File 2006 federal taxes free income tax return for tax paid to Guam. File 2006 federal taxes free Self-employment tax. File 2006 federal taxes free   If you have no U. File 2006 federal taxes free S. File 2006 federal taxes free filing requirement, but have income that is effectively connected with a trade or business in Guam, you must file Form 1040-SS with the United States to report your self-employment income and, if necessary, pay self-employment tax. File 2006 federal taxes free Additional Medicare Tax. File 2006 federal taxes free   Beginning in 2013, you may be required to pay Additional Medicare Tax. File 2006 federal taxes free Also, you may need to report Additional Medicare Tax withheld by your employer. File 2006 federal taxes free For more information see Additional Medicare Tax under Special Rules for Completing Your U. File 2006 federal taxes free S. File 2006 federal taxes free Tax Return in chapter 4. File 2006 federal taxes free Estimated tax payments. File 2006 federal taxes free   To see if you are required to make payments of estimated income tax, self-employment tax, and/or Additional Medicare Tax, to the IRS, get Form 1040-ES. File 2006 federal taxes free Payment of estimated tax. File 2006 federal taxes free   If you must pay estimated tax, make your payment to the jurisdiction where you would file your income tax return if your tax year were to end on the date your first estimated tax payment is due. File 2006 federal taxes free Generally, you should make the rest of your quarterly payments of estimated tax to the jurisdiction where you made your first payment of estimated tax. File 2006 federal taxes free However, estimated tax payments to either jurisdiction will be treated as payments to the jurisdiction with which you file the tax return. File 2006 federal taxes free   If you make a joint payment of estimated tax, make your payment to the jurisdiction where the spouse who has the greater estimated AGI would have to pay (if a separate payment were made). File 2006 federal taxes free For this purpose, income is determined without regard to community property laws. File 2006 federal taxes free Early payment. File 2006 federal taxes free   If you make your first payment of estimated tax early, follow the rules given earlier to determine where to send it. File 2006 federal taxes free If you send it to the wrong jurisdiction, make all later payments to the jurisdiction to which the first payment should have been sent. File 2006 federal taxes free   To pay by check or money order, send your payment with the Form 1040-ES payment voucher to:  Department of Revenue and Taxation Government of Guam P. File 2006 federal taxes free O. File 2006 federal taxes free Box 23607 GMF, GU 96921   To get information on paying electronically (by credit or debit card, or through the Electronic Federal Tax Payment System (EFTPS)), go to www. File 2006 federal taxes free irs. File 2006 federal taxes free gov/e-pay. File 2006 federal taxes free   For information on making estimated income tax payments to the Department of Revenue and Taxation, see Where To Get Forms and Information , earlier. File 2006 federal taxes free Double Taxation A mutual agreement procedure exists to settle cases of double taxation between the United States and Guam. File 2006 federal taxes free See Double Taxation in chapter 4. File 2006 federal taxes free The U. File 2006 federal taxes free S. File 2006 federal taxes free Virgin Islands The U. File 2006 federal taxes free S. File 2006 federal taxes free Virgin Islands has its own tax system based on the same tax laws and tax rates that apply in the United States. File 2006 federal taxes free An important factor in USVI taxation is whether, during the entire tax year, you are a bona fide resident of the USVI. File 2006 federal taxes free Where To Get Forms and Information For information about filing your U. File 2006 federal taxes free S. File 2006 federal taxes free Virgin Islands tax return or about Form 1040INFO, in St. File 2006 federal taxes free Thomas contact : Bureau of Internal Revenue  6115 Estate Smith Bay  St. File 2006 federal taxes free Thomas, VI 00802 You can order forms and publications by calling (340) 715-1040. File 2006 federal taxes free You can order forms and publications through the fax at (340) 774-2672. File 2006 federal taxes free For information about filing your U. File 2006 federal taxes free S. File 2006 federal taxes free Virgin Islands tax return or about Form 1040INFO, in St. File 2006 federal taxes free Croix contact : Bureau of Internal Revenue  4008 Estate Diamond- Plot 7B Christiansted, V. File 2006 federal taxes free I. File 2006 federal taxes free 00820–4421 You can order forms and publications by calling (340) 773-1040. File 2006 federal taxes free You can order forms and publications through the fax at (340) 773-1006. File 2006 federal taxes free You can access the USVI website at www. File 2006 federal taxes free viirb. File 2006 federal taxes free com. File 2006 federal taxes free The addresses and phone numbers listed above are subject to change. File 2006 federal taxes free Which Return To File In general, bona fide residents of the USVI pay taxes only to the USVI. File 2006 federal taxes free U. File 2006 federal taxes free S. File 2006 federal taxes free citizens or resident aliens (but not bona fide residents of the USVI) with USVI source income pay a portion of the tax to each jurisdiction. File 2006 federal taxes free Bona Fide Resident of the USVI File your tax return with the USVI if you are a U. File 2006 federal taxes free S. File 2006 federal taxes free citizen, resident alien, or nonresident alien and a bona fide resident of the USVI during the entire tax year. File 2006 federal taxes free Include your worldwide income on your USVI return. File 2006 federal taxes free In determining your total tax payments, take into account all income tax withheld by either the USVI or the United States, any credit for an overpayment of income tax to either the USVI or the United States, and any payments of estimated tax to either the USVI or the United States. File 2006 federal taxes free Pay any balance of tax due with your tax return. File 2006 federal taxes free Filing this return with the USVI generally also starts the statute of limitations on assessment of your U. File 2006 federal taxes free S. File 2006 federal taxes free income tax. File 2006 federal taxes free You generally do not have to file with the United States for any tax year in which you are a bona fide resident of the USVI during the entire tax year, provided you report and pay tax on your income from all sources to the USVI and identify the source(s) of the income on the return. File 2006 federal taxes free However, if you have self-employment income, you may be required to file Form 1040-SS with the United States. File 2006 federal taxes free For more information, see Self-employment tax under Special Rules for the USVI, later. File 2006 federal taxes free Form 1040INFO. File 2006 federal taxes free   If you are a bona fide resident of the USVI and have non-USVI source income, you must also file Virgin Islands Form 1040INFO, Non-Virgin Islands Source Income of Virgin Islands Residents, with the Virgin Islands Bureau of Internal Revenue. File 2006 federal taxes free Attach Form 1040INFO to your USVI tax return before filing. File 2006 federal taxes free You can get Form 1040INFO by contacting the address or website given earlier. File 2006 federal taxes free   If you are a bona fide resident of the USVI for the entire tax year, file your return and all attachments with the Virgin Islands Bureau of Internal Revenue at:  USVI Bureau of Internal Revenue 6115 Estate Smith Bay St. File 2006 federal taxes free Thomas, VI 00802 U. File 2006 federal taxes free S. File 2006 federal taxes free Citizen or Resident Alien (Other Than a Bona Fide Resident of the USVI) If you are a U. File 2006 federal taxes free S. File 2006 federal taxes free citizen or resident alien but not a bona fide resident of the USVI during the entire tax year, you must file your original Form 1040 with the United States and an identical copy of that return with the USVI if you have: Income from sources in the USVI, or Income effectively connected with the conduct of a trade or business in the USVI. File 2006 federal taxes free File your original Form 1040 with the United States and file a signed copy of the U. File 2006 federal taxes free S. File 2006 federal taxes free return (including all attachments, forms, and schedules) with the Virgin Islands Bureau of Internal Revenue by the due date for filing Form 1040. File 2006 federal taxes free Use Form 8689 to figure the amount of tax you must pay to the USVI. File 2006 federal taxes free Form 8689. File 2006 federal taxes free   Complete this form and attach it to both the return you file with the United States and the copy you file with the USVI. File 2006 federal taxes free Figure the amount of tax you must pay to the USVI as follows:      Total tax on  U. File 2006 federal taxes free S. File 2006 federal taxes free return (after certain adjustments) × USVI AGI Worldwide AGI     Pay any tax due to the USVI when you file your return with the Virgin Islands Bureau of Internal Revenue. File 2006 federal taxes free To receive credit on your U. File 2006 federal taxes free S. File 2006 federal taxes free return for taxes paid to the USVI, include the amounts from Form 8689, lines 40 and 45, in the total on Form 1040, line 72. File 2006 federal taxes free On the dotted line next to line 72, enter “Form 8689” and show the amounts. File 2006 federal taxes free   See the illustrated example in chapter 5. File 2006 federal taxes free De minimis exception to determining source of income. File 2006 federal taxes free   In certain situations you will not have income from a possession. File 2006 federal taxes free See De minimis exception under Compensation for Labor or Personal Services in chapter 2. File 2006 federal taxes free   If you are not a bona fide resident of the USVI during the entire tax year, but you have USVI source income, and you are not including a check or a money order, file Form 1040 and all attachments (including Form 8689) with the:  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. File 2006 federal taxes free S. File 2006 federal taxes free tax return and all attachments (including Form 8689) to:  Internal Revenue Service P. File 2006 federal taxes free O. File 2006 federal taxes free Box 1303 Charlotte, NC 28201-1303 USA   File a copy of your U. File 2006 federal taxes free S. File 2006 federal taxes free Form 1040 with the Virgin Islands Bureau of Internal Revenue at:  USVI Bureau of Internal Revenue 6115 Estate Smith Bay St. File 2006 federal taxes free Thomas, VI 00802 Nonresident Alien (Other Than a Bona Fide Resident of the USVI) If you are a nonresident alien of the United States who does not qualify as a bona fide resident of the USVI for the entire tax year, you generally must file the following returns. File 2006 federal taxes free A USVI tax return reporting only your income from sources within the USVI. File 2006 federal taxes free In this situation, wages for services performed in the USVI, whether for a private employer, the U. File 2006 federal taxes free S. File 2006 federal taxes free Government, or otherwise, is income from sources within the USVI. File 2006 federal taxes free A U. File 2006 federal taxes free S. File 2006 federal taxes free tax return (Form 1040NR) reporting U. File 2006 federal taxes free S. File 2006 federal taxes free source income according to the rules for a nonresident alien. File 2006 federal taxes free See the instructions for Form 1040NR. File 2006 federal taxes free   If you are not a bona fide resident of the USVI during the entire tax year, and you are not including a check or a money order, send your U. File 2006 federal taxes free S. File 2006 federal taxes free tax return and all attachments (including Form 8689) 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. File 2006 federal taxes free S. File 2006 federal taxes free tax return and all attachments (including Form 8689) to:  Internal Revenue Service P. File 2006 federal taxes free O. File 2006 federal taxes free Box 1303 Charlotte, NC 28201-1303  USA   Send your USVI tax return and all attachments to:  Bureau of Internal Revenue 6115 Estate Smith Bay St. File 2006 federal taxes free Thomas, VI 00802 Special Rules for the USVI There are some special rules for certain types of income, employment, and filing status. File 2006 federal taxes free Joint return. File 2006 federal taxes free   If you file a joint return, you should file your return (and pay the tax) with the jurisdiction where the spouse who has the greater adjusted gross income (AGI) would have to file if you were filing separately. File 2006 federal taxes free If the spouse with the greater AGI is a bona fide resident of the USVI during the entire tax year, file the joint return with the USVI. File 2006 federal taxes free If the spouse with the greater AGI is a U. File 2006 federal taxes free S. File 2006 federal taxes free citizen or resident alien of the United States but not a bona fide resident of the USVI during the entire tax year, file the joint return with the United States. File 2006 federal taxes free For this purpose, income is determined without regard to community property laws. File 2006 federal taxes free Example. File 2006 federal taxes free Marge Birch, a U. File 2006 federal taxes free S. File 2006 federal taxes free citizen, was a resident of the United States, and her spouse, a citizen of the USVI, was a bona fide resident of the USVI during the entire tax year. File 2006 federal taxes free Marge earned $55,000 as an architect in the United States. File 2006 federal taxes free Her spouse earned $30,000 as a librarian in the USVI. File 2006 federal taxes free Marge and her spouse will file a joint return. File 2006 federal taxes free Because Marge has the greater AGI, she and her spouse must file their return with the United States and report the entire $85,000 on that return. File 2006 federal taxes free U. File 2006 federal taxes free S. File 2006 federal taxes free Armed Forces. File 2006 federal taxes free   If you are a member of the U. File 2006 federal taxes free S. File 2006 federal taxes free Armed Forces who qualified as a bona fide resident of the U. File 2006 federal taxes free S. File 2006 federal taxes free Virgin Islands in a prior tax year, your absence from the U. File 2006 federal taxes free S. File 2006 federal taxes free Virgin Islands solely in compliance with military orders will not change your bona fide residency. File 2006 federal taxes free If you did not qualify as a bona fide resident of the U. File 2006 federal taxes free S. File 2006 federal taxes free Virgin Islands in a prior tax year, your presence in the U. File 2006 federal taxes free S. File 2006 federal taxes free Virgin Islands solely in compliance with military orders will not qualify you as a bona fide resident of the U. File 2006 federal taxes free S. File 2006 federal taxes free Virgin Islands. File 2006 federal taxes free Civilian spouse of active duty member of the U. File 2006 federal taxes free S. File 2006 federal taxes free Armed Forces. File 2006 federal taxes free   If, under the rule discussed at the beginning of chapter 1 (see Special rule for civilian spouse of active duty member of the U. File 2006 federal taxes free S. File 2006 federal taxes free Armed Forces ), your tax residence is the USVI, follow the guidance in the section for bona fide residents under Which Return To File, earlier. File 2006 federal taxes free However, if your tax residence is one of the 50 states or the District of Columbia and your only income from the USVI is from wages, salaries, tips, or self-employment, you will be taxed on your worldwide income and file only a U. File 2006 federal taxes free S. File 2006 federal taxes free tax return (Form 1040) and a state and/or local tax return, if required. File 2006 federal taxes free If you have income from the USVI other than wages, salaries, tips, or self-employment that is considered to be sourced in that possession (see Table 2-1), you may need to file Form 8689 with your U. File 2006 federal taxes free S. File 2006 federal taxes free tax return. File 2006 federal taxes free In this case, follow the guidance under U. File 2006 federal taxes free S. File 2006 federal taxes free Citizen or Resident Alien (Other Than a Bona Fide Resident of the USVI ), earlier. File 2006 federal taxes free Moving expense deduction. File 2006 federal taxes free   Generally, expenses of a move to the USVI are directly attributable to wages, salaries, and other earned income from the USVI. File 2006 federal taxes free Likewise, the expenses of a move back to the United States are generally attributable to U. File 2006 federal taxes free S. File 2006 federal taxes free earned income. File 2006 federal taxes free   If your move was to the USVI, report your deduction for moving expenses as follows. File 2006 federal taxes free If you are a bona fide resident in the tax year of your move, enter your deductible expenses on your USVI tax return. File 2006 federal taxes free If you are not a bona fide resident, enter your deductible expenses on Form 3903 and enter the deductible amount on Form 1040, line 26, and on Form 8689, line 20. File 2006 federal taxes free   If your move was to the United States, complete Form 3903 and enter the deductible amount on Form 1040, line 26. File 2006 federal taxes free Foreign tax credit. File 2006 federal taxes free   Under the filing rules explained earlier, individuals with USVI source income normally will not claim a foreign tax credit on a U. File 2006 federal taxes free S. File 2006 federal taxes free income tax return for tax paid to the USVI. File 2006 federal taxes free However, individuals other than bona fide residents of the USVI may claim a direct credit for such tax (see Form 8689 earlier in this section). File 2006 federal taxes free Self-employment tax. File 2006 federal taxes free   If you have no U. File 2006 federal taxes free S. File 2006 federal taxes free filing requirement, but have income that is effectively connected with a trade or business in the USVI, you must file Form 1040-SS with the United States to report your self-employment income and, if necessary, pay self-employment tax. File 2006 federal taxes free Additional Medicare Tax. File 2006 federal taxes free   Beginning in 2013, you may be required to pay Additional Medicare Tax. File 2006 federal taxes free Also, you may need to report Additional Medicare Tax withheld by your employer. File 2006 federal taxes free For more information see Additional Medicare Tax under Special Rules for Completing Your U. File 2006 federal taxes free S. File 2006 federal taxes free Tax Return in chapter 4. File 2006 federal taxes free Estimated tax payments. File 2006 federal taxes free   To see if you are required to make payments of estimated income tax, self-employment tax, and/or Additional Medicare Tax, to the IRS, get Form 1040-ES. File 2006 federal taxes free   To pay by check or money order, send your payment with the Form 1040-ES payment voucher to:  Virgin Islands Bureau of Internal Revenue 6115 Estate Smith Bay St. File 2006 federal taxes free Thomas, VI 00802   To get information on paying electronically (by credit or debit card, or through the Electronic Federal Tax Payment System (EFTPS)), go to www. File 2006 federal taxes free irs. File 2006 federal taxes free gov/e-pay. File 2006 federal taxes free   For information on making estimated income tax payments to the Bureau of Internal Revenue, see Where To Get Forms and Information , earlier. File 2006 federal taxes free Extension of time to file. File 2006 federal taxes free   You can get an automatic 6-month extension of time to file your tax return. File 2006 federal taxes free See Extension of Time To File in chapter 4. File 2006 federal taxes free Bona fide residents of the USVI during the entire tax year must file a paper Form 4868 with the Virgin Islands Bureau of Internal Revenue. File 2006 federal taxes free Nonresidents of the USVI should file separate extension requests with the IRS and the Virgin Islands Bureau of Internal Revenue and make any payments due to the respective jurisdictions. File 2006 federal taxes free However, the Virgin Islands Bureau of Internal Revenue will honor an extension request that is timely filed with the IRS. File 2006 federal taxes free Double Taxation A mutual agreement procedure exists to settle cases of double taxation between the United States and the U. File 2006 federal taxes free S. File 2006 federal taxes free Virgin Islands. File 2006 federal taxes free See Double Taxation in chapter 4. File 2006 federal taxes free Prev  Up  Next   Home   More Online Publications