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Free Income Tax Filing For Seniors

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Free Income Tax Filing For Seniors

Free income tax filing for seniors Publication 509 - Introductory Material Table of Contents Future Developments What's New Reminders IntroductionOrdering forms and publications. Free income tax filing for seniors Tax questions. Free income tax filing for seniors Background Information for Using the Tax CalendarsElectronic deposit requirement. Free income tax filing for seniors Legal holidays. Free income tax filing for seniors Statewide legal holidays. Free income tax filing for seniors Future Developments For the latest information about developments related to Publication 509, such as legislation enacted after it was published, go to www. Free income tax filing for seniors irs. Free income tax filing for seniors gov/pub509. Free income tax filing for seniors What's New Publication 1518 discontinued after 2013. Free income tax filing for seniors  Publication 1518, IRS Tax Calendar for Small Businesses and Self-Employed, is discontinued after 2013. Free income tax filing for seniors An IRS Tax Calendar and most of the information previously contained in Publication 1518 can be found at www. Free income tax filing for seniors irs. Free income tax filing for seniors gov/taxcalendar. Free income tax filing for seniors Reminders Photographs of missing children. Free income tax filing for seniors  The Internal Revenue Service is a proud partner with the National Center for Missing and Exploited Children. Free income tax filing for seniors Photographs of missing children selected by the Center may appear in this publication on pages that would otherwise be blank. Free income tax filing for seniors You can help bring these children home by looking at the photographs and calling 1-800-THE-LOST (1-800-843-5678) if you recognize a child. Free income tax filing for seniors Introduction A tax calendar is a 12-month calendar divided into quarters. Free income tax filing for seniors The calendar gives specific due dates for: Filing tax forms, Paying taxes, and Taking other actions required by federal tax law. Free income tax filing for seniors What does this publication contain?   This publication contains the following. Free income tax filing for seniors A section on how to use the tax calendars. Free income tax filing for seniors Three tax calendars: General Tax Calendar, Employer's Tax Calendar, and Excise Tax Calendar. Free income tax filing for seniors A table showing the semiweekly deposit due dates for payroll taxes for 2014. Free income tax filing for seniors   Most of the due dates discussed in this publication are also included in the IRS Tax Calendar available at www. Free income tax filing for seniors irs. Free income tax filing for seniors gov/taxcalendar. Free income tax filing for seniors Who should use this publication?   Primarily, employers need to use this publication. Free income tax filing for seniors However, the General Tax Calendar has important due dates for all businesses and individuals. Free income tax filing for seniors Anyone who must pay excise taxes may need the Excise Tax Calendar . Free income tax filing for seniors What are the advantages of using a tax calendar?   The following are advantages of using a calendar. Free income tax filing for seniors You do not have to figure the due dates yourself. Free income tax filing for seniors You can file or pay timely and avoid penalties. Free income tax filing for seniors You do not have to adjust the due dates for Saturdays, Sundays, and legal holidays. Free income tax filing for seniors You do not have to adjust the due dates for special banking rules if you use the Employer's Tax Calendar or Excise Tax Calendar . Free income tax filing for seniors Which calendar(s) should I use?   To decide which calendar(s) to use, first look at the General Tax Calendar and highlight the dates that apply to you. Free income tax filing for seniors If you are an employer, also use the Employer's Tax Calendar . Free income tax filing for seniors If you must pay excise taxes, use the Excise Tax Calendar . Free income tax filing for seniors Depending on your situation, you may need to use more than one calendar. Free income tax filing for seniors Table 1. Free income tax filing for seniors Useful Publications IF you are. Free income tax filing for seniors . Free income tax filing for seniors . Free income tax filing for seniors THEN you may need. Free income tax filing for seniors . Free income tax filing for seniors . Free income tax filing for seniors An employer • Publication 15 (Circular E), Employer's Tax Guide. Free income tax filing for seniors  • Publication 15-A, Employer's Supplemental Tax Guide. Free income tax filing for seniors  • Publication 15-B, Employer's Tax Guide to Fringe Benefits. Free income tax filing for seniors  • Publication 926, Household Employer's Tax Guide. Free income tax filing for seniors A farmer • Publication 51 (Circular A), Agricultural Employer's Tax Guide. Free income tax filing for seniors  • Publication 225, Farmer's Tax Guide. Free income tax filing for seniors An individual • Publication 505, Tax Withholding and Estimated Tax. Free income tax filing for seniors Required to pay excise taxes • Publication 510, Excise Taxes. Free income tax filing for seniors What is not in these calendars?   The calendars do not cover the employment or excise tax deposit rules. Free income tax filing for seniors You can find the deposit rules for employment taxes in Publication 15 (Circular E), Employer's Tax Guide. Free income tax filing for seniors The deposit rules for excise taxes are in Publication 510, Excise Taxes, and in the Instructions for Form 720, Quarterly Federal Excise Tax Return. Free income tax filing for seniors In addition, the calendars do not cover filing forms and other requirements for: Estate taxes, Gift taxes, Trusts, Exempt organizations, Certain types of corporations, or Foreign partnerships. Free income tax filing for seniors What other publications and tax forms will I need?   Table 1 lists other publications you may need to order. Free income tax filing for seniors Each calendar lists the forms you may need. Free income tax filing for seniors   See How To Get Tax Help near the end of this publication for information about getting publications and forms. Free income tax filing for seniors Comments and suggestions. Free income tax filing for seniors   We welcome your comments about this publication and your suggestions for future editions. Free income tax filing for seniors   You can write to us at the following address: Internal Revenue Service Tax Forms and Publications Division 1111 Constitution Ave. Free income tax filing for seniors NW, IR-6526 Washington, DC 20224   We respond to many letters by telephone. Free income tax filing for seniors Therefore, it would be helpful if you would include your daytime phone number, including the area code, in your correspondence. Free income tax filing for seniors   You can send us comments from www. Free income tax filing for seniors irs. Free income tax filing for seniors gov/formspubs. Free income tax filing for seniors Click on More Information and then click on Comment on Tax Forms and Publications. Free income tax filing for seniors   Although we cannot respond individually to each comment received, we do appreciate your feedback and will consider your comments as we revise our forms and publications. Free income tax filing for seniors Ordering forms and publications. Free income tax filing for seniors   Visit www. Free income tax filing for seniors irs. Free income tax filing for seniors gov/formspubs to download forms and publications, call 1-800-TAX-FORM (1-800-829-3676), or write to the address below and receive a response within 10 days after your request is received. Free income tax filing for seniors Internal Revenue Service 1201 N. Free income tax filing for seniors Mitsubishi Motorway Bloomington, IL 61705-6613 Tax questions. Free income tax filing for seniors   If you have a tax question, check the information available on IRS. Free income tax filing for seniors gov or call 1-800-829-1040. Free income tax filing for seniors We cannot answer tax questions sent to either of the above addresses. Free income tax filing for seniors Background Information for Using the Tax Calendars The following brief explanations may be helpful to you in using the tax calendars. Free income tax filing for seniors IRS e-services make taxes easier. Free income tax filing for seniors   Now more than ever before, businesses can enjoy the benefits of filing and paying their federal taxes electronically. Free income tax filing for seniors Whether you rely on a tax professional or handle your own taxes, the IRS offers you convenient programs to make taxes easier. Free income tax filing for seniors    You can e-file your Form 1040; certain business tax returns such as Forms 1120, 1120S, and 1065; certain employment tax returns such as Forms 940 and 941; certain excise tax returns such as Forms 720, 2290, and 8849; and Form 1099 and other information returns. Free income tax filing for seniors Visit www. Free income tax filing for seniors irs. Free income tax filing for seniors gov/efile for more information. Free income tax filing for seniors You can pay taxes online or by phone using the Electronic Federal Tax Payments System (EFTPS). Free income tax filing for seniors For detailed information about using this free service, see Electronic deposit requirement below. Free income tax filing for seniors   Use these electronic options to make filing and paying taxes easier. Free income tax filing for seniors For more information on electronic payments, visit the IRS website at www. Free income tax filing for seniors irs. Free income tax filing for seniors gov/e-pay. Free income tax filing for seniors Tax deposits. Free income tax filing for seniors   Some taxes can be paid with the return on which they are reported. Free income tax filing for seniors However, in many cases, you have to deposit the tax before the due date for filing the return. Free income tax filing for seniors Tax deposits are figured for periods of time that are shorter than the time period covered by the return. Free income tax filing for seniors See Publication 15 (Circular E) for the employment tax deposit rules. Free income tax filing for seniors For the excise tax deposit rules, see Publication 510 or the Instructions for Form 720. Free income tax filing for seniors    Electronic deposit requirement. Free income tax filing for seniors   You must use electronic funds transfer to make all federal tax deposits (such as deposits of employment tax, excise tax, and corporate income tax). Free income tax filing for seniors Generally, electronic fund transfers are made using the Electronic Federal Tax Payment System (EFTPS). Free income tax filing for seniors EFTPS is a free service provided by the Department of Treasury. Free income tax filing for seniors If you do not want to use EFTPS, you can arrange for your tax professional, financial institution, payroll service, or other trusted third party to make electronic deposits on your behalf. Free income tax filing for seniors   To get more information or to enroll in EFTPS, call 1-800-555-4477 (business), 1-800-316-6541 (individual), or 1-800-733-4829 (TDD/TTY). Free income tax filing for seniors You can also visit the EFTPS website at www. Free income tax filing for seniors eftps. Free income tax filing for seniors gov. Free income tax filing for seniors Additional information about EFTPS is also available in Publication 966, Electronic Federal Tax Payment System: A Guide to Getting Started. Free income tax filing for seniors    If you fail to timely, properly, and in full make your federal tax deposit, you may be subject to a failure-to-deposit penalty. Free income tax filing for seniors For an EFTPS deposit to be on time, you must initiate the deposit by 8 p. Free income tax filing for seniors m. Free income tax filing for seniors Eastern time the day before the date the deposit is due. Free income tax filing for seniors Saturday, Sunday, or legal holiday. Free income tax filing for seniors   Generally, if a due date for performing any act for tax purposes falls on a Saturday, Sunday, or legal holiday, the act is considered to be performed timely if it is performed no later than the next day that is not a Saturday, Sunday, or legal holiday. Free income tax filing for seniors The term legal holiday means any legal holiday in the District of Columbia. Free income tax filing for seniors The calendars provided in this publication make the adjustment for Saturdays, Sundays, and legal holidays. Free income tax filing for seniors But you must make any adjustments for statewide legal holidays, as discussed next. Free income tax filing for seniors An exception to this rule for certain excise taxes is noted later under the Excise Tax Calendar. Free income tax filing for seniors Legal holidays. Free income tax filing for seniors   Legal holidays for 2014 are listed below. Free income tax filing for seniors January 1— New Year's Day January 20— Birthday of Martin Luther King, Jr. Free income tax filing for seniors / Inauguration Day February 17— Washington's Birthday April 16— District of Columbia Emancipation Day May 26— Memorial Day July 4— Independence Day September 1— Labor Day October 13— Columbus Day November 11— Veterans Day November 27— Thanksgiving Day December 25— Christmas Day Statewide legal holidays. Free income tax filing for seniors   A statewide legal holiday delays a due date for filing a return only if the IRS office where you are required to file is located in that state. Free income tax filing for seniors A statewide legal holiday does not delay a due date for making a federal tax deposit. Free income tax filing for seniors Extended due date for Forms 1098, 1099, and W-2 if filed electronically. Free income tax filing for seniors   If you file Forms 1098, 1099, or W-2 electronically, your due date for filing them with the IRS or the Social Security Administration (SSA) will be extended to March 31. Free income tax filing for seniors   For 2014, the due date for giving the recipient these forms is January 31. Free income tax filing for seniors   For information about filing Forms 1098, 1099, or W-2G electronically, see Publication 1220, Specifications for Filing Forms 1097, 1098, 1099, 3921, 3922, 5498, 8935, and W-2G Electronically. Free income tax filing for seniors For information about filing Form W-2 electronically with the SSA, visit www. Free income tax filing for seniors ssa. Free income tax filing for seniors gov/employer or call 1-800-772-6270. Free income tax filing for seniors Penalties. Free income tax filing for seniors   Whenever possible, you should take action before the listed due date. Free income tax filing for seniors If you are late, you may have to pay a penalty as well as interest on any overdue taxes. Free income tax filing for seniors   Be sure to follow all the tax laws that apply to you. Free income tax filing for seniors In addition to civil penalties, criminal penalties may be imposed for intentionally not paying taxes, for intentionally filing a false return, or for not filing a required return. Free income tax filing for seniors Use of private delivery services. Free income tax filing for seniors   You can use certain private delivery services designated by the IRS to meet the timely mailing as timely filing/paying rule for tax returns and payments. Free income tax filing for seniors These private delivery services include only the following. Free income tax filing for seniors DHL Express (DHL): DHL Same Day Service. Free income tax filing for seniors Federal Express (FedEx): FedEx Priority Overnight, FedEx Standard Overnight, FedEx 2 Day, FedEx International Priority, and FedEx International First. Free income tax filing for seniors United Parcel Service (UPS): UPS Next Day Air, UPS Next Day Air Saver, UPS 2nd Day Air, UPS 2nd Day Air A. Free income tax filing for seniors M. Free income tax filing for seniors , UPS Worldwide Express Plus, and UPS Worldwide Express. Free income tax filing for seniors   For the IRS mailing address to use if you are using a private delivery service, go to IRS. Free income tax filing for seniors gov and enter “private delivery service” in the search box. Free income tax filing for seniors   The private delivery service can tell you how to get written proof of the mailing date. Free income tax filing for seniors    The U. Free income tax filing for seniors S. Free income tax filing for seniors Postal Service advises that private delivery services cannot deliver items to P. Free income tax filing for seniors O. Free income tax filing for seniors boxes. Free income tax filing for seniors You must use the U. Free income tax filing for seniors S. Free income tax filing for seniors Postal Service to mail any item to an IRS P. Free income tax filing for seniors O. Free income tax filing for seniors box address. Free income tax filing for seniors Prev  Up  Next   Home   More Online Publications
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Hopefully, since you did your research and asked smart questions of the sales staff, you have made a purchase that you are completely satisfied with. However, even careful buyers can run into unforeseen problems later on. To minimize them, follow these steps after you buy:

  • Make sure to get your receipt at the end of your purchase. Keep all contracts, sales receipts, canceled checks, owner's manuals and warranty documents.
  • Read and follow product and service instructions. The way you use or take care of a product will affect your warranty rights. 

If you encounter a problem with your purchase, you can write a complaint letter to the seller to explain your problem and how you would like them to resolve it. If the seller will not help you or respond to your complaint, you should then contact the manufacturer. Continue this process of reporting the problem in writing to industry trade organizations, local consumer protection agencies, and if necessary the Better Business Bureau, until your problem is resolved.

The Free Income Tax Filing For Seniors

Free income tax filing for seniors 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 income tax filing for seniors S. Free income tax filing for seniors 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 income tax filing for seniors S. Free income tax filing for seniors 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 income tax filing for seniors S. Free income tax filing for seniors 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 income tax filing for seniors Employee business expenses. Free income tax filing for seniors 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 income tax filing for seniors You can change your choice for each year's taxes. Free income tax filing for seniors To choose the foreign tax credit, in most cases you must complete Form 1116 and attach it to your U. Free income tax filing for seniors S. Free income tax filing for seniors tax return. Free income tax filing for seniors However, you may qualify for the exception that allows you to claim the foreign tax credit without using Form 1116. Free income tax filing for seniors See How To Figure the Credit , later. Free income tax filing for seniors To choose to claim the taxes as an itemized deduction, use Schedule A (Form 1040), Itemized Deductions. Free income tax filing for seniors Figure your tax both ways—claiming the credit and claiming the deduction. Free income tax filing for seniors Then fill out your return the way that benefits you more. Free income tax filing for seniors See Why Choose the Credit, later. Free income tax filing for seniors 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 income tax filing for seniors If you choose to take a credit for qualified foreign taxes, you must take the credit for all of them. Free income tax filing for seniors You cannot deduct any of them. Free income tax filing for seniors Conversely, if you choose to deduct qualified foreign taxes, you must deduct all of them. Free income tax filing for seniors You cannot take a credit for any of them. Free income tax filing for seniors See What Foreign Taxes Qualify for the Credit , later, for the meaning of qualified foreign taxes. Free income tax filing for seniors There are exceptions to this general rule, which are described next. Free income tax filing for seniors Exceptions for foreign taxes not allowed as a credit. Free income tax filing for seniors   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 income tax filing for seniors Covered asset acquisitions include certain acquisitions that result in a stepped-up basis for U. Free income tax filing for seniors S. Free income tax filing for seniors tax purposes. Free income tax filing for seniors For more information, see Internal Revenue Code section 901(m). Free income tax filing for seniors The IRS intends to issue guidance that will explain this provision in greater detail. Free income tax filing for seniors   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 income tax filing for seniors Foreign taxes that are not income taxes. Free income tax filing for seniors   In most cases, only foreign income taxes qualify for the foreign tax credit. Free income tax filing for seniors Other taxes, such as foreign real and personal property taxes, do not qualify. Free income tax filing for seniors But you may be able to deduct these other taxes even if you claim the foreign tax credit for foreign income taxes. Free income tax filing for seniors   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 income tax filing for seniors 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 income tax filing for seniors Carrybacks and carryovers. Free income tax filing for seniors   There is a limit on the credit you can claim in a tax year. Free income tax filing for seniors 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 income tax filing for seniors If you deduct qualified foreign taxes in a tax year, you cannot use a carryback or carryover in that year. Free income tax filing for seniors That is because you cannot take both a deduction and a credit for qualified foreign taxes in the same tax year. Free income tax filing for seniors   For more information on the limit, see How To Figure the Credit , later. Free income tax filing for seniors For more information on carrybacks and carryovers, see Carryback and Carryover , later. Free income tax filing for seniors 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 income tax filing for seniors 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 income tax filing for seniors Example. Free income tax filing for seniors You paid foreign taxes for the last 13 years and chose to deduct them on your U. Free income tax filing for seniors S. Free income tax filing for seniors income tax returns. Free income tax filing for seniors You were timely in both filing your returns and paying your U. Free income tax filing for seniors S. Free income tax filing for seniors tax liability. Free income tax filing for seniors 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 income tax filing for seniors Because the regular due date of your 2002 return was April 15, 2003, this choice is timely (within 10 years). Free income tax filing for seniors Because there is a limit on the credit for your 2002 foreign tax, you have unused 2002 foreign taxes. Free income tax filing for seniors 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 income tax filing for seniors 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 income tax filing for seniors 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 income tax filing for seniors 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 income tax filing for seniors 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 income tax filing for seniors 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 income tax filing for seniors See Foreign Earned Income and Housing Exclusions under Foreign Taxes for Which You Cannot Take a Credit, later. Free income tax filing for seniors 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 income tax filing for seniors In most cases, if the foreign tax rate is higher than the U. Free income tax filing for seniors S. Free income tax filing for seniors rate, there will be no U. Free income tax filing for seniors S. Free income tax filing for seniors tax on the foreign income. Free income tax filing for seniors If the foreign tax rate is lower than the U. Free income tax filing for seniors S. Free income tax filing for seniors rate, U. Free income tax filing for seniors S. Free income tax filing for seniors tax on the foreign income will be limited to the difference between the rates. Free income tax filing for seniors The foreign tax credit can only reduce U. Free income tax filing for seniors S. Free income tax filing for seniors taxes on foreign source income; it cannot reduce U. Free income tax filing for seniors S. Free income tax filing for seniors taxes on U. Free income tax filing for seniors S. Free income tax filing for seniors source income. Free income tax filing for seniors 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 income tax filing for seniors This is because: A credit reduces your actual U. Free income tax filing for seniors S. Free income tax filing for seniors 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 income tax filing for seniors 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 income tax filing for seniors (See Limit on credit under How To Figure the Credit, later. Free income tax filing for seniors ) Example 1. Free income tax filing for seniors For 2013, you and your spouse have adjusted gross income of $80,300, including $20,000 of dividend income from foreign sources. Free income tax filing for seniors None of the dividends are qualified dividends. Free income tax filing for seniors You file a joint return and can claim two $3,900 exemptions. Free income tax filing for seniors You had to pay $2,000 in foreign income taxes on the dividend income. Free income tax filing for seniors If you take the foreign taxes as an itemized deduction, your total itemized deductions are $15,000. Free income tax filing for seniors Your taxable income then is $57,500 and your tax is $7,736. Free income tax filing for seniors If you take the credit instead, your itemized deductions are only $13,000. Free income tax filing for seniors Your taxable income then is $59,500 and your tax before the credit is $8,036. Free income tax filing for seniors After the credit, however, your tax is only $6,036. Free income tax filing for seniors Therefore, your tax is $1,700 lower ($7,736 − $6,036) by taking the credit. Free income tax filing for seniors Example 2. Free income tax filing for seniors In 2013, you receive investment income of $5,000 from a foreign country, which imposes a tax of $1,500 on that income. Free income tax filing for seniors You report on your U. Free income tax filing for seniors S. Free income tax filing for seniors return this income as well as $56,000 of U. Free income tax filing for seniors S. Free income tax filing for seniors source wages and an allowable $49,000 partnership loss from a U. Free income tax filing for seniors S. Free income tax filing for seniors partnership. Free income tax filing for seniors Your share of the partnership's gross income is $25,000 and your share of its expenses is $74,000. Free income tax filing for seniors You are single, entitled to one $3,900 exemption, and have other itemized deductions of $6,850. Free income tax filing for seniors If you deduct the foreign tax on your U. Free income tax filing for seniors S. Free income tax filing for seniors 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 income tax filing for seniors 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 income tax filing for seniors You can take a credit of only $113 because of limits discussed later. Free income tax filing for seniors Your tax after the credit is $13 ($126 − $113), which is $13 more than if you deduct the foreign tax. Free income tax filing for seniors If you choose the credit, you will have unused foreign taxes of $1,387 ($1,500 − $113). Free income tax filing for seniors 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 income tax filing for seniors 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 income tax filing for seniors “Tax year” refers to the tax year for which your U. Free income tax filing for seniors S. Free income tax filing for seniors return is filed, not the tax year for which your foreign return is filed. Free income tax filing for seniors Accrual method of accounting. Free income tax filing for seniors   If you use an accrual method of accounting, you can claim the credit only in the year in which you accrue the tax. Free income tax filing for seniors 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 income tax filing for seniors   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 income tax filing for seniors Generally, this occurs on the last day of the tax year for which your foreign return is filed. Free income tax filing for seniors Contesting your foreign tax liability. Free income tax filing for seniors   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 income tax filing for seniors 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 income tax filing for seniors Once your liability is determined, the foreign tax credit is allowable for the year to which the foreign tax relates. Free income tax filing for seniors 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 income tax filing for seniors You may have to post a bond. Free income tax filing for seniors   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 income tax filing for seniors   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 income tax filing for seniors Cash method of accounting. Free income tax filing for seniors   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 income tax filing for seniors 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 income tax filing for seniors Choosing to take credit in the year taxes accrue. Free income tax filing for seniors   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 income tax filing for seniors You make the choice by checking the box in Part II of Form 1116. Free income tax filing for seniors 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 income tax filing for seniors   In addition, the choice to take the credit when foreign taxes accrue applies to all foreign taxes qualifying for the credit. Free income tax filing for seniors You cannot take a credit for some foreign taxes when paid and take a credit for others when accrued. Free income tax filing for seniors   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 income tax filing for seniors Credit based on taxes paid in earlier year. Free income tax filing for seniors   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 income tax filing for seniors Example. Free income tax filing for seniors Last year you took the credit based on taxes paid. Free income tax filing for seniors This year you chose to take the credit based on taxes accrued. Free income tax filing for seniors During the year you paid foreign income taxes owed for last year. Free income tax filing for seniors You also accrued foreign income taxes for this year that you did not pay by the end of the year. Free income tax filing for seniors 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 income tax filing for seniors Foreign Currency and Exchange Rates U. Free income tax filing for seniors S. Free income tax filing for seniors income tax is imposed on income expressed in U. Free income tax filing for seniors S. Free income tax filing for seniors dollars, while in most cases the foreign tax is imposed on income expressed in foreign currency. Free income tax filing for seniors Therefore, fluctuations in the value of the foreign currency relative to the U. Free income tax filing for seniors S. Free income tax filing for seniors dollar may affect the foreign tax credit. Free income tax filing for seniors Translating foreign currency into U. Free income tax filing for seniors S. Free income tax filing for seniors dollars. Free income tax filing for seniors   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 income tax filing for seniors S. Free income tax filing for seniors dollars. Free income tax filing for seniors How and when you do this depends on your functional currency. Free income tax filing for seniors In most cases, your functional currency is the U. Free income tax filing for seniors S. Free income tax filing for seniors dollar unless you are required to use the currency of a foreign country. Free income tax filing for seniors   You must make all federal income tax determinations in your functional currency. Free income tax filing for seniors The U. Free income tax filing for seniors S. Free income tax filing for seniors dollar is the functional currency for all taxpayers except some qualified business units. Free income tax filing for seniors A qualified business unit is a separate and clearly identified unit of a trade or business that maintains separate books and records. Free income tax filing for seniors Unless you are self-employed, your functional currency is the U. Free income tax filing for seniors S. Free income tax filing for seniors dollar. Free income tax filing for seniors   Even if you are self-employed and have a qualified business unit, your functional currency is the U. Free income tax filing for seniors S. Free income tax filing for seniors dollar if any of the following apply. Free income tax filing for seniors You conduct the business primarily in dollars. Free income tax filing for seniors The principal place of business is located in the United States. Free income tax filing for seniors You choose to or are required to use the dollar as your functional currency. Free income tax filing for seniors 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 income tax filing for seniors   If your functional currency is the U. Free income tax filing for seniors S. Free income tax filing for seniors dollar, you must immediately translate into dollars all items of income, expense, etc. Free income tax filing for seniors , that you receive, pay, or accrue in a foreign currency and that will affect computation of your income tax. Free income tax filing for seniors If there is more than one exchange rate, use the one that most properly reflects your income. Free income tax filing for seniors In most cases, you can get exchange rates from banks and U. Free income tax filing for seniors S. Free income tax filing for seniors Embassies. Free income tax filing for seniors   If your functional currency is not the U. Free income tax filing for seniors S. Free income tax filing for seniors dollar, make all income tax determinations in your functional currency. Free income tax filing for seniors At the end of the year, translate the results, such as income or loss, into U. Free income tax filing for seniors S. Free income tax filing for seniors dollars to report on your income tax return. Free income tax filing for seniors    For more information, write to: Internal Revenue Service International Section Philadelphia, PA 19255-0725 Rate of exchange for foreign taxes paid. Free income tax filing for seniors   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 income tax filing for seniors 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 income tax filing for seniors 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 income tax filing for seniors   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 income tax filing for seniors Exception. Free income tax filing for seniors   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 income tax filing for seniors This rule applies to accrued taxes relating to tax years beginning after 1997 and only under the following conditions. Free income tax filing for seniors The foreign taxes are paid on or after the first day of the tax year to which they relate. Free income tax filing for seniors The foreign taxes are paid not later than 2 years after the close of the tax year to which they relate. Free income tax filing for seniors The foreign tax liability is not denominated in an inflationary currency (defined in the Form 1116 instructions). Free income tax filing for seniors (This condition applies to taxes paid or accrued in tax years beginning after November 6, 2007. Free income tax filing for seniors )   For all other foreign taxes, you should use the exchange rate in effect on the date you paid them. Free income tax filing for seniors Election to use exchange rate on date paid. Free income tax filing for seniors   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 income tax filing for seniors If any of the accrued taxes are unpaid, you must translate them into U. Free income tax filing for seniors S. Free income tax filing for seniors dollars using the exchange rate on the last day of the U. Free income tax filing for seniors S. Free income tax filing for seniors tax year to which those taxes relate. Free income tax filing for seniors 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 income tax filing for seniors S. Free income tax filing for seniors dollar functional currency. Free income tax filing for seniors 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 income tax filing for seniors The election is available for tax years beginning after 2004. Free income tax filing for seniors 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 income tax filing for seniors Make the election by attaching a statement to the applicable tax return. Free income tax filing for seniors 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 income tax filing for seniors S. Free income tax filing for seniors dollar functional currency. Free income tax filing for seniors Foreign Tax Redetermination A foreign tax redetermination is any change in your foreign tax liability that may affect your U. Free income tax filing for seniors S. Free income tax filing for seniors foreign tax credit claimed. Free income tax filing for seniors 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 income tax filing for seniors If a foreign tax redetermination occurs, a redetermination of your U. Free income tax filing for seniors S. Free income tax filing for seniors tax liability is required if any of the following conditions apply. Free income tax filing for seniors The accrued taxes when paid differ from the amounts claimed as a credit. Free income tax filing for seniors 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 income tax filing for seniors If this applies to you, you must reduce the credit previously claimed by the amount of the unpaid taxes. Free income tax filing for seniors You will not be allowed a credit for the unpaid taxes until you pay them. Free income tax filing for seniors When you pay the accrued taxes, a new foreign tax redetermination occurs and you must translate the taxes into U. Free income tax filing for seniors S. Free income tax filing for seniors dollars using the exchange rate as of the date they were paid. Free income tax filing for seniors The foreign tax credit is allowed for the year to which the foreign tax relates. Free income tax filing for seniors See Rate of exchange for foreign taxes paid , earlier, under Foreign Currency and Exchange Rates. Free income tax filing for seniors The foreign taxes you paid are refunded in whole or in part. Free income tax filing for seniors 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 income tax filing for seniors 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 income tax filing for seniors S. Free income tax filing for seniors tax year. Free income tax filing for seniors In this case, you must adjust your U. Free income tax filing for seniors S. Free income tax filing for seniors tax in the tax year in which the accrued foreign taxes are paid. Free income tax filing for seniors 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 income tax filing for seniors S. Free income tax filing for seniors tax liability for each tax year affected by the redetermination. Free income tax filing for seniors In most cases, you must file Form 1040X, Amended U. Free income tax filing for seniors S. Free income tax filing for seniors Individual Income Tax Return, with a revised Form 1116 and a statement that contains information sufficient for the IRS to redetermine your U. Free income tax filing for seniors S. Free income tax filing for seniors tax liability for the year or years affected. Free income tax filing for seniors See Contents of statement , later. Free income tax filing for seniors 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 income tax filing for seniors There are other exceptions to this requirement. Free income tax filing for seniors They are discussed later under Due date of notification to IRS . Free income tax filing for seniors Contents of statement. Free income tax filing for seniors   The statement must include all of the following. Free income tax filing for seniors Your name, address, and taxpayer identification number. Free income tax filing for seniors The tax year or years that are affected by the foreign tax redetermination. Free income tax filing for seniors The date or dates the foreign taxes were accrued, if applicable. Free income tax filing for seniors The date or dates the foreign taxes were paid. Free income tax filing for seniors The amount of foreign taxes paid or accrued on each date (in foreign currency) and the exchange rate used to translate each amount. Free income tax filing for seniors 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 income tax filing for seniors   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 income tax filing for seniors   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 income tax filing for seniors Due date of notification to IRS. Free income tax filing for seniors   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 income tax filing for seniors There is no limit on the time the IRS has to redetermine and assess the correct U. Free income tax filing for seniors S. Free income tax filing for seniors tax due. Free income tax filing for seniors 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 income tax filing for seniors S. Free income tax filing for seniors taxes. Free income tax filing for seniors See Time Limit on Refund Claims , later. Free income tax filing for seniors   Exceptions to this due date are explained in the next two paragraphs. Free income tax filing for seniors Multiple redeterminations of U. Free income tax filing for seniors S. Free income tax filing for seniors tax liability for same tax year. Free income tax filing for seniors   Where more than one foreign tax redetermination requires a redetermination of U. Free income tax filing for seniors S. Free income tax filing for seniors 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 income tax filing for seniors 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 income tax filing for seniors However, foreign tax redeterminations with respect to the tax year for which a redetermination of U. Free income tax filing for seniors S. Free income tax filing for seniors tax liability is required may occur after the due date for providing that notification. Free income tax filing for seniors In this situation, you may have to file more than one Form 1040X for that tax year. Free income tax filing for seniors Additional U. Free income tax filing for seniors S. Free income tax filing for seniors tax due eliminated by foreign tax credit carryback or carryover. Free income tax filing for seniors   If a foreign tax redetermination requires a redetermination of U. Free income tax filing for seniors S. Free income tax filing for seniors tax liability that would otherwise result in an additional amount of U. Free income tax filing for seniors S. Free income tax filing for seniors 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 income tax filing for seniors 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 income tax filing for seniors You must file the statement by the due date (with extensions) of that return. Free income tax filing for seniors 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 income tax filing for seniors S. Free income tax filing for seniors tax liability is required). Free income tax filing for seniors Failure-to-notify penalty. Free income tax filing for seniors   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 income tax filing for seniors   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 income tax filing for seniors S. Free income tax filing for seniors tax. Free income tax filing for seniors This penalty cannot be more than 25% of the tax due. Free income tax filing for seniors Foreign tax refund. Free income tax filing for seniors   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 income tax filing for seniors S. Free income tax filing for seniors tax for the time before the date of the refund. Free income tax filing for seniors   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 income tax filing for seniors 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 income tax filing for seniors Interest also is owed from the time you receive a refund until you pay the additional tax due. Free income tax filing for seniors Foreign tax imposed on foreign refund. Free income tax filing for seniors   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 income tax filing for seniors 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 income tax filing for seniors Example. Free income tax filing for seniors 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 income tax filing for seniors When you refigure your credit for 2011, you must reduce the $3,000 you paid by $400. Free income tax filing for seniors Time Limit on Refund Claims You have 10 years to file a claim for refund of U. Free income tax filing for seniors S. Free income tax filing for seniors tax if you find that you paid or accrued a larger foreign tax than you claimed a credit for. Free income tax filing for seniors 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 income tax filing for seniors You have 10 years to file your claim regardless of whether you claim the credit for taxes paid or taxes accrued. Free income tax filing for seniors 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 income tax filing for seniors The special 10-year period also applies to making or changing your choice to claim a deduction or credit for foreign taxes. Free income tax filing for seniors See Making or Changing Your Choice discussed earlier under Choosing To Take Credit or Deduction. Free income tax filing for seniors Who Can Take the Credit? U. Free income tax filing for seniors S. Free income tax filing for seniors citizens, resident aliens, and nonresident aliens who paid foreign income tax and are subject to U. Free income tax filing for seniors S. Free income tax filing for seniors tax on foreign source income may be able to take a foreign tax credit. Free income tax filing for seniors U. Free income tax filing for seniors S. Free income tax filing for seniors Citizens If you are a U. Free income tax filing for seniors S. Free income tax filing for seniors citizen, you are taxed by the United States on your worldwide income wherever you live. Free income tax filing for seniors You are normally entitled to take a credit for foreign taxes you pay or accrue. Free income tax filing for seniors 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 income tax filing for seniors S. Free income tax filing for seniors citizens. Free income tax filing for seniors If you are a bona fide resident of Puerto Rico for the entire tax year, you also come under the same rules. Free income tax filing for seniors 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 income tax filing for seniors For information on alien status, see Publication 519. Free income tax filing for seniors Nonresident Aliens If you are a nonresident alien, you cannot take the credit in most cases. Free income tax filing for seniors 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 income tax filing for seniors S. Free income tax filing for seniors possession on income from foreign sources that is effectively connected with a trade or business in the United States. Free income tax filing for seniors But if you must pay tax to a foreign country or U. Free income tax filing for seniors S. Free income tax filing for seniors possession on income from U. Free income tax filing for seniors S. Free income tax filing for seniors sources only because you are a citizen or a resident of that country or U. Free income tax filing for seniors S. Free income tax filing for seniors possession, do not use that tax in figuring the amount of your credit. Free income tax filing for seniors For information on alien status and effectively connected income, see Publication 519. Free income tax filing for seniors 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 income tax filing for seniors The tax must be imposed on you. Free income tax filing for seniors You must have paid or accrued the tax. Free income tax filing for seniors The tax must be the legal and actual foreign tax liability. Free income tax filing for seniors The tax must be an income tax (or a tax in lieu of an income tax). Free income tax filing for seniors Certain foreign taxes do not qualify for the credit even if the four tests are met. Free income tax filing for seniors See Foreign Taxes for Which You Cannot Take a Credit, later. Free income tax filing for seniors 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 income tax filing for seniors S. Free income tax filing for seniors possession. Free income tax filing for seniors For example, a tax that is deducted from your wages is considered to be imposed on you. Free income tax filing for seniors You cannot shift the right to claim the credit by contract or other means. Free income tax filing for seniors Foreign country. Free income tax filing for seniors   A foreign country includes any foreign state and its political subdivisions. Free income tax filing for seniors Income, war profits, and excess profits taxes paid or accrued to a foreign city or province qualify for the foreign tax credit. Free income tax filing for seniors U. Free income tax filing for seniors S. Free income tax filing for seniors possessions. Free income tax filing for seniors   For foreign tax credit purposes, all qualified taxes paid to U. Free income tax filing for seniors S. Free income tax filing for seniors possessions are considered foreign taxes. Free income tax filing for seniors For this purpose, U. Free income tax filing for seniors S. Free income tax filing for seniors possessions include Puerto Rico and American Samoa. Free income tax filing for seniors   When the term “foreign country” is used in this publication, it includes U. Free income tax filing for seniors S. Free income tax filing for seniors possessions unless otherwise stated. Free income tax filing for seniors 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 income tax filing for seniors S. Free income tax filing for seniors possession. Free income tax filing for seniors 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 income tax filing for seniors Joint return. Free income tax filing for seniors   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 income tax filing for seniors Combined income. Free income tax filing for seniors   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 income tax filing for seniors 901-2(f)(3)(iii). Free income tax filing for seniors 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 income tax filing for seniors   These rules apply to foreign taxes paid or accrued in tax years beginning after February 14, 2012. Free income tax filing for seniors 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 income tax filing for seniors For more details, see paragraphs (f) and (h) of Regulations section 1. Free income tax filing for seniors 901-2. Free income tax filing for seniors For similar rules applicable to prior tax years, see Regulations section 1. Free income tax filing for seniors 901-2 (revised as of April 1, 2011). Free income tax filing for seniors Example. Free income tax filing for seniors You and your spouse reside in Country X, which imposes income tax on your combined incomes. Free income tax filing for seniors Both of you use the “u” as your functional currency. Free income tax filing for seniors Country X apportions tax based on income. Free income tax filing for seniors You had income of 30,000u and your spouse had income of 20,000u. Free income tax filing for seniors Your filing status on your U. Free income tax filing for seniors S. Free income tax filing for seniors income tax return is married filing separately. Free income tax filing for seniors You can claim only 60% (30,000u/50,000u) of the foreign taxes imposed on your income on your U. Free income tax filing for seniors S income tax return. Free income tax filing for seniors Your spouse can claim only 40% (20,000u/50,000u). Free income tax filing for seniors Partner or S corporation shareholder. Free income tax filing for seniors   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 income tax filing for seniors These amounts will be shown on the Schedule K-1 you receive from the partnership or S corporation. Free income tax filing for seniors 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 income tax filing for seniors Beneficiary. Free income tax filing for seniors   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 income tax filing for seniors This amount will be shown on the Schedule K-1 you receive from the estate or trust. Free income tax filing for seniors However, you must show that the tax was imposed on income of the estate and not on income received by the decedent. Free income tax filing for seniors Mutual fund shareholder. Free income tax filing for seniors   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 income tax filing for seniors 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 income tax filing for seniors If you do not receive this information, you will need to contact the fund. Free income tax filing for seniors Controlled foreign corporation shareholder. Free income tax filing for seniors   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 income tax filing for seniors If you make this election, you must claim the credit by filing Form 1118, Foreign Tax Credit—Corporations. Free income tax filing for seniors Controlled foreign corporation. Free income tax filing for seniors   A controlled foreign corporation is a foreign corporation in which U. Free income tax filing for seniors S. Free income tax filing for seniors shareholders own more than 50% of the voting power or value of the stock. Free income tax filing for seniors You are considered a U. Free income tax filing for seniors S. Free income tax filing for seniors 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 income tax filing for seniors See Internal Revenue Code sections 951(b) and 958(b) for more information. Free income tax filing for seniors 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 income tax filing for seniors Only the legal and actual foreign tax liability that you paid or accrued during the year qualifies for the credit. Free income tax filing for seniors Foreign tax refund. Free income tax filing for seniors   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 income tax filing for seniors   For example, the United States has tax treaties with many countries allowing U. Free income tax filing for seniors S. Free income tax filing for seniors citizens and residents reductions in the rates of tax of those foreign countries. Free income tax filing for seniors However, some treaty countries require U. Free income tax filing for seniors S. Free income tax filing for seniors 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 income tax filing for seniors 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 income tax filing for seniors Subsidy received. Free income tax filing for seniors   Tax payments a foreign country returns to you in the form of a subsidy do not qualify for the foreign tax credit. Free income tax filing for seniors 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 income tax filing for seniors 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 income tax filing for seniors   The term “subsidy” includes any type of benefit. Free income tax filing for seniors Some ways of providing a subsidy are refunds, credits, deductions, payments, or discharges of obligations. Free income tax filing for seniors Shareholder receiving refund for corporate tax in integrated system. Free income tax filing for seniors   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 income tax filing for seniors You may be able to claim a refund of these taxes from the foreign government. Free income tax filing for seniors You must include the refund (including any amount withheld) in your income in the year received. Free income tax filing for seniors Any tax withheld from the refund is a qualified foreign tax. Free income tax filing for seniors Example. Free income tax filing for seniors You are a shareholder of a French corporation. Free income tax filing for seniors You receive a $100 refund of the tax paid to France by the corporation on the earnings distributed to you as a dividend. Free income tax filing for seniors The French government imposes a 15% withholding tax ($15) on the refund you received. Free income tax filing for seniors You receive a check for $85. Free income tax filing for seniors You include $100 in your income. Free income tax filing for seniors The $15 of tax withheld is a qualified foreign tax. Free income tax filing for seniors 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 income tax filing for seniors Foreign taxes on wages, dividends, interest, and royalties qualify for the credit in most cases. Free income tax filing for seniors 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 income tax filing for seniors See Taxes in Lieu of Income Taxes , later. Free income tax filing for seniors 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 income tax filing for seniors A foreign levy is an income tax only if it meets both of the following requirements. Free income tax filing for seniors It is a tax; that is, you have to pay it and you get no specific economic benefit (discussed below) from paying it. Free income tax filing for seniors The predominant character of the tax is that of an income tax in the U. Free income tax filing for seniors S. Free income tax filing for seniors sense. Free income tax filing for seniors A foreign levy may meet these requirements even if the foreign tax law differs from U. Free income tax filing for seniors S. Free income tax filing for seniors tax law. Free income tax filing for seniors The foreign law may include in income items that U. Free income tax filing for seniors S. Free income tax filing for seniors law does not include, or it may allow certain exclusions or deductions that U. Free income tax filing for seniors S. Free income tax filing for seniors law does not allow. Free income tax filing for seniors Specific economic benefit. Free income tax filing for seniors   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 income tax filing for seniors   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 income tax filing for seniors   However, see the exception discussed later under Pension, unemployment, and disability fund payments . Free income tax filing for seniors Economic benefits. Free income tax filing for seniors   Economic benefits include the following. Free income tax filing for seniors Goods. Free income tax filing for seniors Services. Free income tax filing for seniors Fees or other payments. Free income tax filing for seniors Rights to use, acquire, or extract resources, patents, or other property the foreign country owns or controls. Free income tax filing for seniors Discharges of contractual obligations. Free income tax filing for seniors   In most cases, the right or privilege merely to engage in business is not an economic benefit. Free income tax filing for seniors Dual-capacity taxpayers. Free income tax filing for seniors   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 income tax filing for seniors ” 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 income tax filing for seniors    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 income tax filing for seniors   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 income tax filing for seniors    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 income tax filing for seniors For more information about these agreements, see Publication 54. Free income tax filing for seniors Soak-up taxes. Free income tax filing for seniors   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 income tax filing for seniors 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 income tax filing for seniors This rule applies only if and to the extent that the foreign tax would not be imposed if the credit were not available. Free income tax filing for seniors Penalties and interest. Free income tax filing for seniors   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 income tax filing for seniors Taxes not based on income. Free income tax filing for seniors   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 income tax filing for seniors Taxes based on assets, such as property taxes, do not qualify for the credit. Free income tax filing for seniors 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 income tax filing for seniors 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 income tax filing for seniors A tax in lieu of an income tax does not have to be based on realized net income. Free income tax filing for seniors 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 income tax filing for seniors In most cases, a soak-up tax (discussed earlier) does not qualify as a tax in lieu of an income tax. Free income tax filing for seniors 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 income tax filing for seniors The soak-up tax. Free income tax filing for seniors 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 income tax filing for seniors Foreign Taxes for Which You Cannot Take a Credit This part discusses the foreign taxes for which you cannot take a credit. Free income tax filing for seniors 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 income tax filing for seniors S. Free income tax filing for seniors persons controlling foreign corporations and partnerships who fail to file required information returns, and Taxes related to a foreign tax splitting event. Free income tax filing for seniors Taxes on Excluded Income You cannot take a credit for foreign taxes paid or accrued on certain income that is excluded from U. Free income tax filing for seniors S. Free income tax filing for seniors gross income. Free income tax filing for seniors 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 income tax filing for seniors S. Free income tax filing for seniors income under the foreign earned income exclusion or the foreign housing exclusion. Free income tax filing for seniors See Publication 54 for more information on the foreign earned income and housing exclusions. Free income tax filing for seniors Wages completely excluded. Free income tax filing for seniors   If your wages are completely excluded, you cannot take a credit for any of the foreign taxes paid or accrued on these wages. Free income tax filing for seniors Wages partly excluded. Free income tax filing for seniors   If only part of your wages is excluded, you cannot take a credit for the foreign income taxes allocable to the excluded part. Free income tax filing for seniors 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 income tax filing for seniors   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 income tax filing for seniors Deductible expenses do not include the foreign housing deduction. Free income tax filing for seniors   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 income tax filing for seniors If the foreign law taxes foreign earned income and some other income (for example, earned income from U. Free income tax filing for seniors S. Free income tax filing for seniors sources or a type of income not subject to U. Free income tax filing for seniors S. Free income tax filing for seniors 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 income tax filing for seniors Example. Free income tax filing for seniors You are a U. Free income tax filing for seniors S. Free income tax filing for seniors citizen and a cash basis taxpayer, employed by Company X and living in Country A. Free income tax filing for seniors 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 income tax filing for seniors To find that part, do the following. Free income tax filing for seniors First, find the amount of business expenses allocable to excluded wages and therefore not deductible. Free income tax filing for seniors To do this, multiply the otherwise deductible expenses by a fraction. Free income tax filing for seniors That fraction is the excluded wages over your foreign earned income. Free income tax filing for seniors   $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 income tax filing for seniors To do this, subtract business expenses allocable to excluded wages ($15,616) from excluded wages ($97,600). Free income tax filing for seniors The result is $81,984. Free income tax filing for seniors 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 income tax filing for seniors Finally, multiply the foreign tax you paid by the resulting fraction. Free income tax filing for seniors   $30,000 × $81,984  $105,000 = $23,424 The amount of Country A tax you cannot take a credit for is $23,424. Free income tax filing for seniors Taxes on Income From Puerto Rico Exempt From U. Free income tax filing for seniors S. Free income tax filing for seniors 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 income tax filing for seniors For information on figuring the reduction, see Publication 570. Free income tax filing for seniors 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 income tax filing for seniors For more information on this exclusion, see Publication 570. Free income tax filing for seniors 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 income tax filing for seniors However, see Internal Revenue Code section 943(d) for an exception for certain withholding taxes. Free income tax filing for seniors 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 income tax filing for seniors However, you can claim an itemized deduction for these taxes. Free income tax filing for seniors See Choosing To Take Credit or Deduction , earlier. Free income tax filing for seniors 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 income tax filing for seniors The following countries meet this description for 2013. Free income tax filing for seniors Income taxes paid or accrued to these countries in 2013 do not qualify for the credit. Free income tax filing for seniors Cuba. Free income tax filing for seniors Iran. Free income tax filing for seniors Libya (but see Note later). Free income tax filing for seniors North Korea. Free income tax filing for seniors Sudan. Free income tax filing for seniors Syria. Free income tax filing for seniors Waiver of denial of the credit. Free income tax filing for seniors   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 income tax filing for seniors S. Free income tax filing for seniors companies in the sanctioned country. Free income tax filing for seniors 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 income tax filing for seniors Note. Free income tax filing for seniors Effective December 10, 2004, the President granted a waiver to Libya. Free income tax filing for seniors Income taxes arising on or after this date qualify for the credit if they meet the other requirements in this publication. Free income tax filing for seniors Limit on credit. Free income tax filing for seniors   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 income tax filing for seniors You must fill out a separate Form 1116 for this income. Free income tax filing for seniors This will prevent you from claiming a credit for foreign taxes paid or accrued to the sanctioned country. Free income tax filing for seniors Example. Free income tax filing for seniors You lived and worked in Iran until August, when you were transferred to Italy. Free income tax filing for seniors You paid taxes to each country on the income earned in that country. Free income tax filing for seniors You cannot claim a foreign tax credit for the foreign taxes paid on the income earned in Iran. Free income tax filing for seniors 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 income tax filing for seniors You cannot take a credit for taxes paid on the income earned in Iran, but that income is taxable by the United States. Free income tax filing for seniors Figuring the credit when a sanction ends. Free income tax filing for seniors    Table 1 lists the countries for which sanctions have ended or for which a Presidential waiver has been granted. Free income tax filing for seniors 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 income tax filing for seniors Example. Free income tax filing for seniors The sanctions against Country X ended on July 31. Free income tax filing for seniors On August 19, you receive a distribution from a mutual fund of Country X income. Free income tax filing for seniors The fund paid Country X income tax for you on the distribution. Free income tax filing for seniors 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 income tax filing for seniors Amounts for the nonsanctioned period. Free income tax filing for seniors   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 income tax filing for seniors Multiply the income or taxes for the year by the following fraction to determine the amounts allocable to that period. Free income tax filing for seniors   Number of nonsanctioned days in year  Number of days in year Example. Free income tax filing for seniors 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 income tax filing for seniors Sanctions against Country X ended on July 11, 2013. Free income tax filing for seniors You are unable to determine how much of the income or tax is for the nonsanctioned period. Free income tax filing for seniors 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 income tax filing for seniors You would compute the income for the nonsanctioned period as follows. Free income tax filing for seniors 173 365 × $20,000 = $9,479             You would figure the tax for the nonsanctioned period as follows. Free income tax filing for seniors 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 income tax filing for seniors Further information. Free income tax filing for seniors   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 income tax filing for seniors This Cumulative Bulletin can be found in many libraries and IRS offices. Free income tax filing for seniors Table 1. Free income tax filing for seniors 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 income tax filing for seniors 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 income tax filing for seniors 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 income tax filing for seniors 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 income tax filing for seniors If the dividend is not for more than 366 days, rule (1) applies to the preferred stock. Free income tax filing for seniors 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 income tax filing for seniors 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 income tax filing for seniors Withholding tax. Free income tax filing for seniors   For this purpose, withholding tax includes any tax determined on a gross basis. Free income tax filing for seniors It does not include any tax which is in the nature of a prepayment of a tax imposed on a net basis. Free income tax filing for seniors Ex-dividend date. Free income tax filing for seniors   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 income tax filing for seniors Example 1. Free income tax filing for seniors You bought common stock from a foreign corporation on November 3. Free income tax filing for seniors You sold the stock on November 19. Free income tax filing for seniors You received a dividend on this stock because you owned it on the ex-dividend date of November 5. Free income tax filing for seniors 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 income tax filing for seniors Because you held the stock for 16 days, from November 4 until November 19, you are entitled to the credit. Free income tax filing for seniors Example 2. Free income tax filing for seniors The facts are the same as in Example 1 except that you sold the stock on November 14. Free income tax filing for seniors You held the stock for only 11 days. Free income tax filing for seniors You are not entitled to the credit. Free income tax filing for seniors Exception. Free income tax filing for seniors   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 income tax filing for seniors See section 901(k)(4) of the Internal Revenue Code for more information. Free income tax filing for seniors 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 income tax filing for seniors 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 income tax filing for seniors Withholding tax. Free income tax filing for seniors   For this purpose, withholding tax includes any tax determined on a gross basis. Free income tax filing for seniors It does not include any tax which is in the nature of a prepayment of a tax imposed on a net basis. Free income tax filing for seniors Exception for dealers. Free income tax filing for seniors   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 income tax filing for seniors See section 901(I)(2) of the Internal Revenue Code for more information. Free income tax filing for seniors 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 income tax filing for seniors A covered asset acquisition includes certain acquisitions that result in a stepped-up basis for U. Free income tax filing for seniors S. Free income tax filing for seniors tax purposes but not for foreign tax purposes. Free income tax filing for seniors For more information, see Internal Revenue Code section 901(m). Free income tax filing for seniors The IRS intends to issue guidance that will explain this provision in greater detail. Free income tax filing for seniors 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 income tax filing for seniors 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 income tax filing for seniors For details, see Regulations section 1. Free income tax filing for seniors 901-3. Free income tax filing for seniors 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 income tax filing for seniors See the instructions for line 12 in the Form 1116 instructions to figure this reduction. Free income tax filing for seniors 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 income tax filing for seniors List of boycotting countries. Free income tax filing for seniors   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 income tax filing for seniors As of November 2013, the following countries are listed. Free income tax filing for seniors Iraq. Free income tax filing for seniors Kuwait. Free income tax filing for seniors Lebanon. Free income tax filing for seniors Libya. Free income tax filing for seniors Qatar. Free income tax filing for seniors Saudi Arabia. Free income tax filing for seniors Syria. Free income tax filing for seniors United Arab Emirates. Free income tax filing for seniors Yemen. Free income tax filing for seniors    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 income tax filing for seniors   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 income tax filing for seniors The procedures for obtaining a determination from the Service are outlined in Revenue Procedure 77-9 in Cumulative Bulletin 1977-1. Free income tax filing for seniors Cumulative Bulletins are available in most IRS offices and you are welcome to read them there. Free income tax filing for seniors Public inspection. Free income tax filing for seniors   A determination and any related background file is open to public inspection. Free income tax filing for seniors However, your identity and certain other information will remain confidential. Free income tax filing for seniors Reporting requirements. Free income tax filing for seniors   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 income tax filing for seniors 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 income tax filing for seniors A partnership in which you are a partner. Free income tax filing for seniors A trust you are treated as owning. Free income tax filing for seniors Form 5713 required. Free income tax filing for seniors   If you have to file a report, you must use Form 5713, International Boycott Report, and attach all supporting schedules. Free income tax filing for seniors See the Instructions for Form 5713 for information on when and where to file the form. Free income tax filing for seniors Penalty for failure to file. Free income tax filing for seniors   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 income tax filing for seniors 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 income tax filing for seniors 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 income tax filing for seniors S. Free income tax filing for seniors tax liability (Form 1040, line 44) divided by your worldwide taxable income. Free income tax filing for seniors You may be entitled to carry over to other years taxes reduced under this rule. Free income tax filing for seniors See Internal Revenue Code section 907(f). Free income tax filing for seniors Combined foreign oil and gas income means the sum of foreign oil related income and foreign oil and gas extraction income. Free income tax filing for seniors Foreign oil and gas taxes are the sum of foreign oil and gas extraction taxes and foreign oil related taxes. Free income tax filing for seniors Taxes of U. Free income tax filing for seniors S. Free income tax filing for seniors 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 income tax filing for seniors 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 income tax filing for seniors See Penalty for not filing Form 5471 or Form 8865 , later. Free income tax filing for seniors U. Free income tax filing for seniors S. Free income tax filing for seniors persons controlling foreign corporations. Free income tax filing for seniors   If you are a U. Free income tax filing for seniors S. Free income tax filing for seniors 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 income tax filing for seniors S. Free income tax filing for seniors Persons With Respect To Certain Foreign Corporations. Free income tax filing for seniors 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 income tax filing for seniors U. Free income tax filing for seniors S. Free income tax filing for seniors persons controlling foreign partnerships. Free income tax filing for seniors   If you are a U. Free income tax filing for seniors S. Free income tax filing for seniors citizen or resident who had control of a foreign partnership at any time during the partnership's tax year, you may have to file