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Free 2012 Tax Forms

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Free 2012 Tax Forms

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

NIMH is the federal agency that conducts and supports research that seeks to understand, treat, and prevent mental illness. Contact NIMH for information on the symptoms, diagnosis and treatment of mental disorders, clinical trials and research. A publications ordering system is available on the NIMH website. Some publications are available in Spanish.

Contact the Agency or Department

Website: National Institute of Mental Health (NIMH)

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Address: 6001 Executive Blvd.
Room 8184, MSC 9663

Bethesda, MD 20892-9663

Phone Number: (301) 443-4513

Toll-free: (866) 615-6464

TTY: (301) 443-8431
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The Free 2012 Tax Forms

Free 2012 tax forms 15. Free 2012 tax forms   Examination and Appeal Procedures If your excise tax return is examined and you disagree with the findings, you can get information about audit and appeal procedures from Publication 556, Examination of Returns, Appeal Rights, and Claims for Refund. Free 2012 tax forms An unagreed case involving an excise tax covered in this publication differs from other tax cases in that you can only contest it in court after payment of the tax by filing suit for a refund in the United States District Court or the United States Court of Federal Claims. Free 2012 tax forms Prev  Up  Next   Home   More Online Publications