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Irs 2011 Tax Form

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Irs 2011 Tax Form

Irs 2011 tax form Publication 80 - Main Content Table of Contents Introduction 1. Irs 2011 tax form Employer Identification Number (EIN) 2. Irs 2011 tax form Who Are Employees?Tests. Irs 2011 tax form Business Owned and Operated by Spouses Farm Crew Leaders 3. Irs 2011 tax form Employee's Social Security Number (SSN)Registering for SSNVS. Irs 2011 tax form 4. Irs 2011 tax form Wages and Other CompensationFringe Benefits 5. Irs 2011 tax form TipsOrdering rule. Irs 2011 tax form 6. Irs 2011 tax form Social Security and Medicare Taxes for FarmworkersThe $150 Test or the $2,500 Test 7. Irs 2011 tax form How To Figure Social Security and Medicare TaxesHousehold and agricultural employers. Irs 2011 tax form 8. Irs 2011 tax form Depositing TaxesPayment with Return When To Deposit How To Deposit Deposit Penalties 9. Irs 2011 tax form Employer's ReturnsReporting Adjustments to Form 941-SS, 944-SS, 944, or 943 Current Period Adjustments Prior Period Adjustments 10. Irs 2011 tax form Wage and Tax StatementsWaiver. Irs 2011 tax form 11. Irs 2011 tax form Federal Unemployment (FUTA) Tax—U. Irs 2011 tax form S. Irs 2011 tax form Virgin Islands Employers Only How To Get Tax Help Introduction This publication is for employers whose principal place of business is in the U. Irs 2011 tax form S. Irs 2011 tax form Virgin Islands, Guam, American Samoa, or the Commonwealth of the Northern Mariana Islands, or who have employees who are subject to income tax withholding for any of these jurisdictions. Irs 2011 tax form Employers and employees in these areas are generally subject to social security and Medicare taxes under the Federal Insurance Contributions Act (FICA). Irs 2011 tax form See section 6 and section 7 for more information. Irs 2011 tax form This publication summarizes employer responsibilities to collect, pay, and report these taxes. Irs 2011 tax form Whenever the term “United States” is used in this publication, it includes U. Irs 2011 tax form S. Irs 2011 tax form Virgin Islands, Guam, American Samoa, and the Commonwealth of the Northern Mariana Islands. Irs 2011 tax form This publication also provides employers in the U. Irs 2011 tax form S. Irs 2011 tax form Virgin Islands with a summary of their responsibilities in connection with the tax under the Federal Unemployment Tax Act, known as FUTA tax. Irs 2011 tax form See section 11 for more information. Irs 2011 tax form Except as shown in the table in section 12, social security, Medicare, and FUTA taxes apply to every employer who pays taxable wages to employees or who has employees who report tips. Irs 2011 tax form This publication does not include information relating to the self-employment tax (for social security and Medicare of self-employed persons). Irs 2011 tax form See Publication 570, Tax Guide for Individuals With Income From U. Irs 2011 tax form S. Irs 2011 tax form Possessions, if you need this information. Irs 2011 tax form This publication also does not include information relating to income tax withholding. Irs 2011 tax form In U. Irs 2011 tax form S. Irs 2011 tax form Virgin Islands, Guam, American Samoa, and the Commonwealth of the Northern Mariana Islands, contact your local tax department for information about income tax withholding. Irs 2011 tax form See Publication 15 (Circular E), for information on U. Irs 2011 tax form S. Irs 2011 tax form federal income tax withholding. Irs 2011 tax form Comments and suggestions. Irs 2011 tax form   We welcome your comments about this publication and your suggestions for future editions. Irs 2011 tax form   You can write to us at the following address: Internal Revenue Service Tax Forms and Publications Division 1111 Constitution Ave. Irs 2011 tax form NW, IR-6526 Washington, DC 20224   We respond to many letters by telephone. Irs 2011 tax form Therefore, it would be helpful if you would include your daytime phone number, including the area code, in your correspondence. Irs 2011 tax form    You can also send us comments from www. Irs 2011 tax form irs. Irs 2011 tax form gov/formspubs. Irs 2011 tax form Click on More Information and then click on Comment on Tax Forms and Publications. Irs 2011 tax form   Although we cannot respond individually to each comment received, we do appreciate your feedback and will consider your comments as we revise our tax forms, instructions, and publications. Irs 2011 tax form 1. Irs 2011 tax form Employer Identification Number (EIN) An employer identification number (EIN) is a nine-digit number that the IRS issues. Irs 2011 tax form Its format is 00-0000000. Irs 2011 tax form It is used to identify the tax accounts of employers and certain other organizations and entities that have no employees. Irs 2011 tax form Use your EIN on all of the items that you send to the IRS and SSA for your business. Irs 2011 tax form If you do not have an EIN, you may apply for one online. Irs 2011 tax form Go to IRS. Irs 2011 tax form gov and click on the Apply for an EIN Online link under Tools. Irs 2011 tax form You may also apply for an EIN by calling 1-800-829-4933, (U. Irs 2011 tax form S. Irs 2011 tax form Virgin Islands only) or 267-941-1099 (toll call), or you can fax or mail Form SS-4, Application for Employer Identification Number, to the IRS. Irs 2011 tax form Do not use a social security number (SSN) in place of an EIN. Irs 2011 tax form If you do not have an EIN by the time a return is due, file a paper return and enter “Applied For” and the date that you applied for it in the space shown for the number. Irs 2011 tax form If you took over another employer's business, do not use that employer's EIN. Irs 2011 tax form You should have only one EIN. Irs 2011 tax form If you have more than one, write to the IRS office where you file your returns using the “without a payment” address in the Instructions for Form 941-SS, Instructions for Form 944, or Instructions for Form 943. Irs 2011 tax form Or call the IRS Business & Specialty Tax Line at 1-800-829-4933 (U. Irs 2011 tax form S. Irs 2011 tax form Virgin Islands only) or 267-941-1000 (toll call). Irs 2011 tax form Persons who are deaf, hard of hearing, or have a speech disability (TDD/TTY users) in the U. Irs 2011 tax form S. Irs 2011 tax form Virgin Islands may call 1-800-829-4059. Irs 2011 tax form The IRS will tell you which EIN to use. Irs 2011 tax form For more information, see Publication 1635, Employer Identification Number: Understanding Your EIN, or Publication 583, Starting a Business and Keeping Records. Irs 2011 tax form 2. Irs 2011 tax form Who Are Employees? Generally, employees are defined either under common law or under special statutes for certain situations. Irs 2011 tax form See Publication 15-A, Employer's Supplemental Tax Guide, for details on statutory employees and nonemployees. Irs 2011 tax form Employee status under common law. Irs 2011 tax form   Generally, a worker who performs services for you is your employee if you can control what will be done and how it will be done. Irs 2011 tax form This is so even when you give the employee freedom of action. Irs 2011 tax form What matters is that you have the right to control the details of how the services are performed. Irs 2011 tax form See Publication 15-A for more information on how to determine whether an individual providing services is an independent contractor or an employee. Irs 2011 tax form    Generally, people in business for themselves are not employees. Irs 2011 tax form For example, doctors, lawyers, veterinarians, and others in an independent trade in which they offer their services to the public are usually not employees. Irs 2011 tax form However, if the business is incorporated, corporate officers who work in the business are employees of the corporation. Irs 2011 tax form   If an employer-employee relationship exists, it does not matter what it is called. Irs 2011 tax form The employee may be called an agent or independent contractor. Irs 2011 tax form It also does not matter how payments are measured or paid, what they are called, or if the employee works full or part time. Irs 2011 tax form Statutory employees. Irs 2011 tax form   There are also some special definitions of employees for social security, Medicare, and FUTA taxes. Irs 2011 tax form   While the following persons may not be common law employees, they are considered employees for social security and Medicare purposes if the conditions under Tests , discussed later, are met. Irs 2011 tax form a. Irs 2011 tax form   An agent (or commission) driver who delivers food or beverages (other than milk) or picks up and delivers laundry or dry cleaning for someone else. Irs 2011 tax form b. Irs 2011 tax form   A full-time life insurance salesperson who sells primarily for one company. Irs 2011 tax form c. Irs 2011 tax form   A homeworker who works by the guidelines of the person for whom the work is done, with materials furnished by and returned to that person or to someone that person designates. Irs 2011 tax form d. Irs 2011 tax form   A traveling or city salesperson (other than an agent-driver or commission-driver) who works full time (except for sideline sales activities) for one firm or person getting orders from customers. Irs 2011 tax form The orders must be for merchandise for resale or supplies for use in the customer's business. Irs 2011 tax form The customers must be retailers, wholesalers, contractors, or operators of hotels, restaurants, or other businesses dealing with food or lodging. Irs 2011 tax form Tests. Irs 2011 tax form   Withhold social security and Medicare taxes from statutory employees' wages if all three of the following tests apply. Irs 2011 tax form The service contract states or implies that almost all of the services are to be performed personally by them. Irs 2011 tax form They have little or no investment in the equipment and property used to perform the services (other than an investment in transportation facilities). Irs 2011 tax form The services are performed on a continuing basis for the same payer. Irs 2011 tax form Persons in a or d, earlier, are also employees for FUTA tax purposes if tests 1 through 3 are met (U. Irs 2011 tax form S. Irs 2011 tax form Virgin Islands only). Irs 2011 tax form   Publication 15-A gives examples of the employer-employee relationship. Irs 2011 tax form Statutory nonemployees. Irs 2011 tax form   Certain direct sellers, qualified real estate agents, and certain companion sitters are, by law, considered nonemployees. Irs 2011 tax form They are generally treated as self-employed for employment tax purposes. Irs 2011 tax form See Publication 15-A for details. Irs 2011 tax form H-2A agricultural workers. Irs 2011 tax form   On Form W-2, do not check box 13 (Statutory employee) as H-2A workers are not statutory employees. Irs 2011 tax form Treating employees as nonemployees. Irs 2011 tax form   If you incorrectly treated an employee as a nonemployee and did not withhold social security and Medicare taxes, you will be liable for the taxes. Irs 2011 tax form See Treating employees as nonemployees in section 2 of Publication 15 (Circular E), for details on Internal Revenue Code section 3509, which may apply. Irs 2011 tax form IRS help. Irs 2011 tax form   If you want the IRS to determine if a worker is an employee, file Form SS-8, Determination of Worker Status for Purposes of Federal Employment Taxes and Income Tax Withholding. Irs 2011 tax form Voluntary Classification Settlement Program (VCSP). Irs 2011 tax form   Employers who are currently treating their workers (or a class or group of workers) as independent contractors or other nonemployees and want to voluntarily reclassify their workers as employees for future tax periods may be eligible to participate in the VCSP if certain requirements are met. Irs 2011 tax form To apply, use Form 8952, Application for Voluntary Classification Settlement Program (VCSP). Irs 2011 tax form For more information, visit IRS. Irs 2011 tax form gov and enter “VCSP” in the search box. Irs 2011 tax form Business Owned and Operated by Spouses If you and your spouse jointly own and operate a business and share in the profits and losses, you are partners in a partnership, whether or not you have a formal partnership agreement. Irs 2011 tax form See Publication 541, Partnerships, for more details. Irs 2011 tax form The partnership is considered the employer of any employees, and is liable for any employment taxes due on wages paid to its employees. Irs 2011 tax form Exception—Qualified Joint Venture. Irs 2011 tax form   If you and your spouse materially participate as the only members of a jointly owned and operated business, and you file a joint Form 1040, U. Irs 2011 tax form S. Irs 2011 tax form Individual Income Tax Return, or joint Form 1040-SS, U. Irs 2011 tax form S. Irs 2011 tax form Self-Employment Tax Return—U. Irs 2011 tax form S. Irs 2011 tax form Virgin Islands, Guam, American Samoa, the Commonwealth of the Northern Mariana Islands, or Puerto Rico, you can make a joint election to be taxed as a qualified joint venture instead of a partnership. Irs 2011 tax form See the Instructions for Schedule C (Form 1040) or the Instructions for Form 1040-SS. Irs 2011 tax form Spouses electing qualified joint venture status are treated as sole proprietors for federal tax purposes. Irs 2011 tax form Either of the sole proprietor spouses may report and pay the employment taxes due on wages paid to the employees, using the EIN of that spouse’s sole proprietorship. Irs 2011 tax form For more information on qualified joint ventures, visit IRS. Irs 2011 tax form gov and enter “qualified joint venture” in the search box. Irs 2011 tax form Farm Crew Leaders You are an employer of farmworkers if you are a crew leader. Irs 2011 tax form A crew leader is a person who furnishes and pays (either on his or her own behalf or on behalf of the farm operator) workers to do farmwork for the farm operator. Irs 2011 tax form If there is no written agreement between you and the farm operator stating that you are his or her employee, and if you pay the workers (either for yourself or for the farm operator), then you are a crew leader. Irs 2011 tax form 3. Irs 2011 tax form Employee's Social Security Number (SSN) An employee's social security number (SSN) consists of nine digits separated as follows: 000-00-0000. Irs 2011 tax form You must get each employee's name and SSN and enter them on Form W-2AS, W-2CM, W-2GU, or W-2VI. Irs 2011 tax form If you do not report the employee's correct name and SSN, you may owe a penalty unless you have reasonable cause. Irs 2011 tax form See Publication 1586, Reasonable Cause Regulations and Requirements for Missing and Incorrect Name/TINs, for information on the requirement to solicit the employee's SSN. Irs 2011 tax form Employee's social security card. Irs 2011 tax form   You should ask the employee to show you his or her social security card. Irs 2011 tax form The employee may show the card if it is available. Irs 2011 tax form Do not accept a social security card that says “Not valid for employment. Irs 2011 tax form ” A social security number issued with this legend does not permit employment. Irs 2011 tax form You may, but you are not required to, photocopy the social security card if the employee provides it. Irs 2011 tax form If an employee does not have a social security card or needs a new one, the employee should apply for one on Form SS-5 and submit the necessary documentation. Irs 2011 tax form The employee must complete and sign Form SS-5; it cannot be filed by the employer. Irs 2011 tax form You may be asked to supply a letter to accompany Form SS-5 if the employee has exceeded his or her yearly or lifetime limit for the number of replacement cards allowed. Irs 2011 tax form If your employee has applied for an SSN but has not received the card before you must file your Form W-2 reports, and you are filing your reports on paper, enter “Applied For” in box d. Irs 2011 tax form Enter all zeroes in the SSN field if filing electronically. Irs 2011 tax form When the employee receives the SSN, file Copy A of Form W-2c with SSA to show the employee's SSN. Irs 2011 tax form Correctly record the employee's name and SSN. Irs 2011 tax form   Record the name and number of each employee as they appear on his or her social security card. Irs 2011 tax form If the name is not correct as shown on the card (for example, because of marriage or divorce), the employee should request a corrected card from the SSA. Irs 2011 tax form Continue to use the old name until the employee shows you the replacement social security card with the corrected name. Irs 2011 tax form   If the SSA issues the employee a replacement card after a name change, or a new card with a different social security number after a change in alien work status, file a Form W-2c to correct the name/SSN reported on the most recently filed Form W-2AS, W-2CM, W-2GU, or W-2VI. Irs 2011 tax form It is not necessary to correct other years if the previous name and SSN were used for years before the most recent Form W-2. Irs 2011 tax form Where to get and file social security number application forms. Irs 2011 tax form    U. Irs 2011 tax form S. Irs 2011 tax form Virgin Islands—U. Irs 2011 tax form S. Irs 2011 tax form Social Security Administration, 8000 Nisky Center, First Floor, Suite 2, St. Irs 2011 tax form Thomas, VI 00802. Irs 2011 tax form  Guam—U. Irs 2011 tax form S. Irs 2011 tax form Social Security Administration, 655 Harmon Loop Road, Suite 300, Dededo, GU 96929. Irs 2011 tax form  American Samoa—U. Irs 2011 tax form S. Irs 2011 tax form Social Security Administration, Pago Plaza, Suite 117, Pago Pago, AS 96799. Irs 2011 tax form  Commonwealth of the Northern Mariana Islands—U. Irs 2011 tax form S. Irs 2011 tax form Social Security Administration, MH Building, Suite 201, Saipan, MP 96950. Irs 2011 tax form Verification of social security numbers. Irs 2011 tax form   Employers and authorized reporting agents can use the Social Security Number Verification Service (SSNVS) to instantly verify up to 10 names and SSNs (per screen) at a time, or submit an electronic file of up to 250,000 names and SSNs and usually receive the results the next business day. Irs 2011 tax form Visit www. Irs 2011 tax form socialsecurity. Irs 2011 tax form gov/employer/ssnv. Irs 2011 tax form htm for more information. Irs 2011 tax form Registering for SSNVS. Irs 2011 tax form   You must register online and receive authorization from your employer to use SSNVS. Irs 2011 tax form To register, visit SSA's website at www. Irs 2011 tax form ssa. Irs 2011 tax form gov/employer and click on the Business Services Online link. Irs 2011 tax form Follow the registration instructions to obtain a user identification (ID) and password. Irs 2011 tax form You will need to provide the following information about yourself and your company. Irs 2011 tax form Name. Irs 2011 tax form SSN. Irs 2011 tax form Date of birth. Irs 2011 tax form Type of employer. Irs 2011 tax form EIN. Irs 2011 tax form Company name, address, and telephone number. Irs 2011 tax form Email address. Irs 2011 tax form   When you have completed the online registration process, SSA will mail a one-time activation code to your employer. Irs 2011 tax form You must enter the activation code online to use SSNVS. Irs 2011 tax form 4. Irs 2011 tax form Wages and Other Compensation Generally, all wages are subject to social security and Medicare tax (and FUTA tax for U. Irs 2011 tax form S. Irs 2011 tax form Virgin Islands employers). Irs 2011 tax form However, wages subject to social security tax and FUTA tax are limited by a wage base amount that you pay to each employee for the year. Irs 2011 tax form The wage base for social security tax is $117,000 for 2014. Irs 2011 tax form After you pay $117,000 to an employee in 2014, including tips, do not withhold social security tax on any amount that you later pay to the employee for the year. Irs 2011 tax form The wage base for FUTA tax is $7,000 for 2014. Irs 2011 tax form All wages are subject to Medicare tax. Irs 2011 tax form The wages may be in cash or in other forms, such as an automobile for personal use. Irs 2011 tax form Wages include salaries, vacation allowances, bonuses, commissions, and fringe benefits. Irs 2011 tax form It does not matter how payments are measured or paid. Irs 2011 tax form See the table in section 12 for exceptions to social security, Medicare, and FUTA taxes on wages. Irs 2011 tax form See section 5 and section 6 for a discussion of how the rules apply to tips and farmworkers. Irs 2011 tax form Social security and Medicare taxes apply to most payments of sick pay, including payments by third parties such as insurance companies. Irs 2011 tax form Special rules apply to the reporting of third-party sick pay. Irs 2011 tax form For details, see Publication 15-A. Irs 2011 tax form Determine the value of noncash pay (such as goods, lodging, and meals) by its fair market value. Irs 2011 tax form However, see Fringe Benefits , later in this section. Irs 2011 tax form Except for farmworkers and household employees, this kind of pay may be subject to social security, Medicare, and FUTA taxes. Irs 2011 tax form Back pay, including retroactive wage increases (but not amounts paid as liquidated damages), is taxed as ordinary wages in the year paid. Irs 2011 tax form For information on reporting back pay to the Social Security Administration, see Publication 957, Reporting Back Pay and Special Wage Payments to the Social Security Administration. Irs 2011 tax form Travel and business expenses. Irs 2011 tax form   Payments to your employee for travel and other necessary expenses of your business generally are included in taxable wages if (a) your employee is not required to or does not substantiate timely those expenses to you with receipts or other documentation, or (b) you advance an amount to your employee for business expenses and your employee is not required to or does not return timely any amount that he or she does not substantiate. Irs 2011 tax form Sick pay. Irs 2011 tax form   In general, sick pay is any amount that you pay, under a plan that you take part in, to an employee because of sickness or injury. Irs 2011 tax form These amounts are sometimes paid by a third party, such as an insurance company. Irs 2011 tax form In either case, these payments are subject to social security and Medicare taxes (and FUTA tax for U. Irs 2011 tax form S. Irs 2011 tax form Virgin Islands employers). Irs 2011 tax form Sick pay becomes exempt from these taxes after the end of 6 calendar months after the calendar month the employee last worked for the employer. Irs 2011 tax form Publication 15-A explains the employment tax rules that apply to sick pay, disability benefits, and similar payments to employees. Irs 2011 tax form Fringe Benefits Generally, fringe benefits are includible in the gross income of an employee and are subject to employment taxes. Irs 2011 tax form Examples of fringe benefits include the use of an automobile, aircraft flights that you provide, free or discounted commercial airline flights, vacations, discounts on property or services, memberships in country clubs or other social clubs, and tickets to entertainment or sporting events. Irs 2011 tax form In general, the amount included in the employee's income is the excess of the fair market value of the benefit over the sum of any amount paid for it by the employee and any amount excluded by law. Irs 2011 tax form For more information, see Publication 15-B, Employer's Tax Guide to Fringe Benefits. Irs 2011 tax form When fringe benefits are treated as paid. Irs 2011 tax form   You can choose to treat certain noncash fringe benefits (including personal use of an automobile provided by you) as paid by the pay period, quarter, or on any other basis that you choose, but they must be treated as paid at least annually. Irs 2011 tax form You do not have to make a formal choice of payment dates or notify the IRS. Irs 2011 tax form You do not have to use the same basis for all employees. Irs 2011 tax form You may change methods as often as you like, as long as all benefits provided in a calendar year are treated as paid no later than December 31 of the calendar year. Irs 2011 tax form However, see Special accounting rule for fringe benefits provided during November and December , later in this section. Irs 2011 tax form   You can treat the value of a single taxable noncash fringe benefit as paid on one or more dates in the same calendar year, even if the employee gets the entire benefit at one time. Irs 2011 tax form However, once you elect the payment dates, you must report the taxes on your return in the same tax period in which you treated them as paid. Irs 2011 tax form This election does not apply to a fringe benefit where real property or investment personal property is transferred. Irs 2011 tax form Withholding social security and Medicare taxes on fringe benefits. Irs 2011 tax form   You add the value of fringe benefits to regular wages for a payroll period and figure social security and Medicare taxes on the total. Irs 2011 tax form   If you withhold less than the required amount of social security and Medicare taxes from the employee in a calendar year but report and pay the proper amount, you may recover the taxes from the employee. Irs 2011 tax form Depositing taxes on fringe benefits. Irs 2011 tax form   Once you choose payment dates for taxable noncash fringe benefits, you must deposit taxes in the same deposit period that you treat the fringe benefits as paid. Irs 2011 tax form You may make a reasonable estimate of the value of the fringe benefits. Irs 2011 tax form In general, the value of taxable noncash fringe benefits provided in a calendar year must be determined by January 31 of the following year. Irs 2011 tax form   You may claim a refund of overpayments or elect to have any overpayment applied to the next employment tax return. Irs 2011 tax form If deposits are underpaid, see Deposit Penalties in section 8. Irs 2011 tax form Valuation of vehicles provided to employees. Irs 2011 tax form    If you provide a vehicle to your employees, you may either determine the actual value of the benefit for the entire calendar year, taking into account the business use of the vehicle, or consider the entire use for the calendar year as personal and include 100% of the value of the vehicle in the employee's income. Irs 2011 tax form For reporting information to employees, see the box 14 instructions in the General Instructions for Forms W-2 and W-3. Irs 2011 tax form Special accounting rule for fringe benefits provided during November and December. Irs 2011 tax form   You may choose to treat the value of taxable noncash fringe benefits provided during November and December as paid in the next year. Irs 2011 tax form However, this applies only to those benefits that you actually provided during November and December, not to those you merely treated as paid during those months. Irs 2011 tax form   If you use this rule, you must notify each affected employee between the time of the employee's last paycheck of the calendar year and at or near the time that you give the employee Form W-2AS, W-2CM, W-2GU, or W-2VI. Irs 2011 tax form If you use the special accounting rule, your employee must also use it for the same period that you use it. Irs 2011 tax form You cannot use this rule for a fringe benefit of real property or tangible or intangible real property of a kind normally held for investment that is transferred to your employee. Irs 2011 tax form 5. Irs 2011 tax form Tips Tips that your employee receives from customers are generally subject to social security and Medicare withholding. Irs 2011 tax form Your employee must report cash tips to you by the 10th of the month after the month that the tips are received. Irs 2011 tax form The report should include tips you paid over to the employee for charge customers, tips the employee received directly from customers, and tips received from other employees under any tip-sharing arrangement. Irs 2011 tax form Both directly and indirectly tipped employees must report tips to you. Irs 2011 tax form The report should not include tips that the employee paid out to other employees. Irs 2011 tax form No report is required for months when tips are less than $20. Irs 2011 tax form Your employees report tips on Form 4070, Employee's Report of Tips to Employer, or on a similar statement. Irs 2011 tax form They may also use Form 4070A, Employee's Daily Record of Tips, to keep a record of their tips. Irs 2011 tax form Both forms are included in Publication 1244, Employee's Daily Record of Tips and Report to Employer, available at IRS. Irs 2011 tax form gov. Irs 2011 tax form The statement must be signed by the employee and must include: The employee's name, address, and SSN, Your name and address, The month or period that the report covers, and The total tips received during the month or period. Irs 2011 tax form You are permitted to establish a system for electronic tip reporting by employees. Irs 2011 tax form See Regulations section 31. Irs 2011 tax form 6053-1(d). Irs 2011 tax form Collecting taxes on tips. Irs 2011 tax form   You must collect the employee social security and Medicare taxes on the employee's tips. Irs 2011 tax form You can also collect these taxes from the employee's wages or from other funds that he or she makes available. Irs 2011 tax form Stop collecting the employee social security tax when his or her total wages and tips for 2014 reach $117,000. Irs 2011 tax form Collect the employee Medicare tax for the whole year on all wages and tips. Irs 2011 tax form   You are responsible for the employer social security tax on wages and tips until the wages (including tips) reach the wage base limit. Irs 2011 tax form You are responsible for the employer Medicare tax for the whole year on all wages and tips. Irs 2011 tax form File Form 941-SS (or Form 944) to report withholding and employer taxes on tips. Irs 2011 tax form The withholding rules for withholding an employee's share of Medicare tax on tips also apply to withholding the Additional Medicare Tax once wages and tips exceed $200,000 in the calendar year. Irs 2011 tax form Ordering rule. Irs 2011 tax form   If, by the 10th of the month after the month you received an employee's report on tips, you do not have enough employee funds available to deduct the employee social security and Medicare tax on tips, you no longer have to collect it and are not liable for it. Irs 2011 tax form Reporting tips. Irs 2011 tax form   Report tips and any collected and uncollected social security in boxes 1, 5, 7, and 12 on Forms W-2AS, W-2CM, W-2GU, or W-2VI and on Form 941-SS, lines 5b, 5c, and 5d (Form 944, lines 4b, 4c, and 4d). Irs 2011 tax form Do not include any uncollected Additional Medicare Tax in box 12 of Form W-2. Irs 2011 tax form Report an adjustment on Form 941-SS, line 9 (Form 944, line 6), for the uncollected social security and Medicare taxes. Irs 2011 tax form The table in section 12 shows how tips are treated for FUTA tax purposes. Irs 2011 tax form   Revenue Ruling 2012-18 provides guidance for employers regarding social security and Medicare taxes imposed on tips, including information on the reporting of the employer share of social security and Medicare taxes under section 3121(q), the difference between tips and service charges, and the section 45B credit. Irs 2011 tax form See Revenue Ruling 2012-18, 2012-26 I. Irs 2011 tax form R. Irs 2011 tax form B. Irs 2011 tax form 1032, available at www. Irs 2011 tax form irs. Irs 2011 tax form gov/irb/2012-26_IRB/ar07. Irs 2011 tax form html. Irs 2011 tax form 6. Irs 2011 tax form Social Security and Medicare Taxes for Farmworkers The tests described below apply only to services that are defined as agricultural labor (farmwork). Irs 2011 tax form In general, you are an employer of farmworkers if your employees: Raise or harvest agricultural or horticultural products on your farm (including the raising and feeding of livestock); Work in connection with the operation, management, conservation, improvement, or maintenance of your farm and its tools and equipment; Provide services relating to salvaging timber, or clearing land of brush and other debris, left by a hurricane (also known as hurricane labor); Handle, process, or package any agricultural or horticultural commodity if you produced over half of the commodity (for a group of up to 20 unincorporated operators, all of the commodity); or Do work for you related to cotton ginning, turpentine, gum resin products, or the operation and maintenance of irrigation facilities. Irs 2011 tax form For this purpose, the term “farm” includes stock, dairy, poultry, fruit, fur-bearing animal, and truck farms, as well as plantations, ranches, nurseries, ranges, greenhouses or other similar structures used primarily for the raising of agricultural or horticultural commodities, and orchards. Irs 2011 tax form Farmwork does not include reselling activities that do not involve any substantial activity of raising agricultural or horticultural commodities, such as a retail store or a greenhouse used primarily for display or storage. Irs 2011 tax form A “share farmer” working for you is not your employee. Irs 2011 tax form However, the share farmer may be subject to self-employment tax. Irs 2011 tax form In general, share farming is an arrangement in which certain commodity products are shared between the farmer and the owner (or tenant) of the land. Irs 2011 tax form For details, see Regulations section 31. Irs 2011 tax form 3121(b)(16)-1. Irs 2011 tax form The $150 Test or the $2,500 Test All cash wages that you pay to any employee for farmwork are subject to social security and Medicare taxes if either of the following two tests is met. Irs 2011 tax form You pay cash wages to the employee of $150 or more in a year (count all cash wages paid on a time, piecework, or other basis) for farmwork. Irs 2011 tax form The $150 test applies separately to each farmworker that you employ. Irs 2011 tax form If you employ a family of workers, each member is treated separately. Irs 2011 tax form Do not count wages paid by other employers. Irs 2011 tax form The total that you pay for farmwork (cash and noncash) to all of your employees is $2,500 or more during the year. Irs 2011 tax form Exceptions. Irs 2011 tax form   The $150 and $2,500 tests do not apply to wages that you pay to a farmworker who receives less than $150 in annual cash wages and the wages are not subject to social security and Medicare taxes even if you pay $2,500 or more in that year to all of your farmworkers if the farmworker: Is employed in agriculture as a hand-harvest laborer, Is paid piece rates in an operation that is usually paid on a piece-rate basis in the region of employment, Commutes daily from his or her home to the farm, and Had been employed in agriculture less than 13 weeks in the preceding calendar year. Irs 2011 tax form   Amounts that you pay to these seasonal farmworkers, however, count toward the $2,500-or-more test to determine whether wages that you pay to other farmworkers are subject to social security and Medicare taxes. Irs 2011 tax form 7. Irs 2011 tax form How To Figure Social Security and Medicare Taxes The tax rate for social security is 6. Irs 2011 tax form 2% (amount withheld) each for the employer and employee (12. Irs 2011 tax form 4% total). Irs 2011 tax form The social security wage base limit is $117,000. Irs 2011 tax form The tax rate for Medicare is 1. Irs 2011 tax form 45% (amount withheld) each for the employee and employer (2. Irs 2011 tax form 9% total). Irs 2011 tax form There is no wage base limit for Medicare tax; all covered wages are subject to Medicare tax. Irs 2011 tax form Multiply each wage payment by these percentages to figure the tax to withhold from employees. Irs 2011 tax form Employers report both the employee and employer shares on Forms 941-SS, 944, or Form 943 (farm employment). Irs 2011 tax form See section 5 for information on tips. Irs 2011 tax form Additional Medicare Tax withholding. Irs 2011 tax form   In addition to withholding Medicare tax at 1. Irs 2011 tax form 45%, you must withhold a 0. Irs 2011 tax form 9% Additional Medicare Tax from wages you pay to an employee in excess of $200,000 in a calendar year. Irs 2011 tax form You are required to begin withholding Additional Medicare Tax in the pay period in which you pay wages in excess of $200,000 to an employee and continue to withhold it each pay period until the end of the calendar year. Irs 2011 tax form Additional Medicare Tax is only imposed on the employee. Irs 2011 tax form There is no employer share of Additional Medicare Tax. Irs 2011 tax form All wages that are subject to Medicare tax are subject to Additional Medicare Tax withholding if paid in excess of the $200,000 withholding threshold. Irs 2011 tax form   For more information on what wages are subject to Medicare tax, see the chart Special Rules for Various Types of Employment and Payments in section 12. Irs 2011 tax form For more information on Additional Medicare Tax, visit IRS. Irs 2011 tax form gov and enter “Additional Medicare Tax” in the search box. Irs 2011 tax form Deducting the tax. Irs 2011 tax form   Deduct the employee tax from each wage payment. Irs 2011 tax form If you are not sure that the wages that you pay to a farmworker during the year will be taxable, you may either deduct the tax when you make the payments or wait until the $2,500 test or the $150 test explained in section 6 has been met. Irs 2011 tax form Employee's portion of taxes paid by employer. Irs 2011 tax form   If you pay your employee's social security and Medicare taxes without deducting them from the employee's pay, you must include the amount of the payments in the employee's wages for social security and Medicare taxes. Irs 2011 tax form This increase in the employee's wage payment for your payment of the employee's social security and Medicare taxes is also subject to employee social security and Medicare taxes. Irs 2011 tax form This again increases the amount of the additional taxes that you must pay. Irs 2011 tax form Household and agricultural employers. Irs 2011 tax form   This discussion does not apply to household and agricultural employers. Irs 2011 tax form If you pay a household or agricultural employee's social security and Medicare taxes, these payments must be included in the employee's wages. Irs 2011 tax form However, this wage increase due to the tax payments is not subject to social security or Medicare taxes as discussed in this section. Irs 2011 tax form See Publication 15-A for details. Irs 2011 tax form Sick pay payments. Irs 2011 tax form   Social security and Medicare taxes apply to most payments of sick pay, including payments made by third parties such as insurance companies. Irs 2011 tax form For details on third-party payers of sick pay, see Publication 15-A. Irs 2011 tax form 8. Irs 2011 tax form Depositing Taxes You must deposit social security and Medicare taxes if your tax liability (Form 941-SS, line 10; Form 944, line 7; or Form 943, line 11) is $2,500 or more for the tax return period. Irs 2011 tax form You must make the deposit by electronic funds transfer. Irs 2011 tax form For more information about electronic funds transfers, see How To Deposit , later in this section. Irs 2011 tax form Payment with Return $2,500 rule. Irs 2011 tax form   Instead of making deposits during the current quarter, you can pay your total Form 941-SS tax liability when you timely file Form 941-SS if: Your total Form 941-SS tax liability for either the current quarter or the preceding quarter is less than $2,500 and You do not incur a $100,000 next-day deposit obligation during the current quarter. Irs 2011 tax form   If you are not sure your total liability for the current quarter will be less than $2,500, (and your liability for the preceding quarter was not less than $2,500), make deposits using the semiweekly or monthly rules so you won't be subject to failure to deposit penalties. Irs 2011 tax form Employers who have been notified to file Form 944 can pay their tax liability due for the fourth quarter with Form 944, if their fourth quarter tax liability is less than $2,500. Irs 2011 tax form Employers must have deposited any tax liability due for the first, second, and third quarters, according to the deposit rules, in order to avoid failure-to-deposit penalties for deposits due during those quarters. Irs 2011 tax form Only monthly schedule depositors are allowed to make an Accuracy of Deposits Rule payment with the return. Irs 2011 tax form Semiweekly schedule depositors must timely deposit the amount. Irs 2011 tax form See Accuracy of Deposits Rule and How To Deposit, later in this section. Irs 2011 tax form When To Deposit Under the rules discussed below, the only difference between farm and nonfarm workers' employment tax deposit rules is the lookback period. Irs 2011 tax form Therefore, farm and nonfarm workers are discussed together except where noted. Irs 2011 tax form Depending on your total taxes reported during a lookback period (discussed later), you are either a monthly schedule depositor or a semiweekly schedule depositor. Irs 2011 tax form The terms “monthly schedule depositor” and “semiweekly schedule depositor” do not refer to how often you pay your employees or how often you are required to make deposits. Irs 2011 tax form The terms identify which set of rules that you must follow when a tax liability arises (for example, when you have a payday). Irs 2011 tax form You will need to determine your deposit schedule for a calendar year based on the total employment taxes reported on Forms 941-SS, line 10; Form 944, line 7; or Form 943, line 9, for your lookback period (defined below). Irs 2011 tax form If you filed both Forms 941-SS and 941 during the lookback period, combine the tax liabilities for these returns for purposes of determining your deposit schedule. Irs 2011 tax form Determine your deposit schedule for Form 943 separately from Forms 941-SS and 941. Irs 2011 tax form Lookback period for employers of nonfarm workers. Irs 2011 tax form   The lookback period for Form 941-SS (or Form 941) consists of four quarters beginning July 1 of the second preceding year and ending June 30 of the prior year. Irs 2011 tax form These four quarters are your lookback period even if you did not report any taxes for any of the quarters. Irs 2011 tax form For 2014, the lookback period is July 1, 2012, through June 30, 2013. Irs 2011 tax form    Table 1. Irs 2011 tax form Lookback Period for Calendar Year 2014 Lookback Period July 1, 2012 Oct. Irs 2011 tax form 1, 2012 Jan. Irs 2011 tax form 1, 2013 Apr. Irs 2011 tax form 1, 2013 through through through through Sep. Irs 2011 tax form 30, 2012 Dec. Irs 2011 tax form 31, 2012 Mar. Irs 2011 tax form 31, 2013 June 30, 2013    The lookback period for Form 944 is the second calendar year preceding the current calendar year. Irs 2011 tax form For example, the lookback period for calendar year 2014 is calendar year 2012. Irs 2011 tax form In addition, for employers who filed Form 944 for 2012 or for 2013 and will file Form 941-SS (or Form 941) for 2014, the lookback period for 2014 is the second calendar year preceding the current calendar year, that is, 2012. Irs 2011 tax form Lookback period for employers of farmworkers. Irs 2011 tax form   The lookback period for Form 943 is the second calendar year preceding the current calendar year. Irs 2011 tax form The lookback period for calendar year 2014 is calendar year 2012. Irs 2011 tax form Adjustments to lookback period taxes. Irs 2011 tax form   To determine your taxes for the lookback period, use only the tax that you reported on the original returns (Forms 941-SS, 943, or 944). Irs 2011 tax form Do not include any adjustments shown on Form 941-X, 943-X, or 944-X. Irs 2011 tax form Example. Irs 2011 tax form   An employer originally reported total taxes of $45,000 for the lookback period. Irs 2011 tax form The employer discovered during January 2014 that the tax reported during the lookback period was understated by $10,000 and corrected this error by filing Form 941-X. Irs 2011 tax form The employer is a monthly schedule depositor for 2014 because the lookback period tax liabilities are based on the amounts originally reported, and they were $50,000 or less. Irs 2011 tax form Deposit Period The term “deposit period” refers to the period during which tax liabilities are accumulated for each required deposit due date. Irs 2011 tax form For monthly schedule depositors, the deposit period is a calendar month. Irs 2011 tax form The deposit periods for semiweekly schedule depositors are Wednesday through Friday and Saturday through Tuesday. Irs 2011 tax form Monthly Deposit Schedule If your total tax reported for the lookback period is $50,000 or less, you are a monthly schedule depositor for the current year. Irs 2011 tax form You must deposit taxes on wage payments made during a calendar month by the 15th day of the following month. Irs 2011 tax form New employers. Irs 2011 tax form   Your tax liability for any quarter in the lookback period before the date you started or acquired your business is considered to be zero. Irs 2011 tax form Therefore, you are a monthly schedule depositor for the first calendar year of your business (but see the $100,000 Next-Day Deposit Rule , later in this section). Irs 2011 tax form Semiweekly Deposit Schedule If your total tax reported for the lookback period is more than $50,000, you are a semiweekly schedule depositor for the current year. Irs 2011 tax form If you are a semiweekly schedule depositor, you must deposit on Wednesday and/or Friday, depending on what day of the week that you make wage payments, as follows. Irs 2011 tax form Deposit taxes on wage payments made on Wednesday, Thursday, and/or Friday by the following Wednesday. Irs 2011 tax form Deposit taxes on wage payments made on Saturday, Sunday, Monday, and/or Tuesday by the following Friday. Irs 2011 tax form Semiweekly depositors are generally not required to deposit twice a week if their payments were in the same semiweekly period unless the $100,000 Next-Day Deposit Rule , discussed later in this section, applies. Irs 2011 tax form For example, if you made a payment on both Wednesday and Friday and incurred taxes of $10,000 for each pay date, deposit the $20,000 on the following Wednesday. Irs 2011 tax form If you made no additional payments on Saturday through Tuesday, no deposit is due on Friday. Irs 2011 tax form Semiweekly deposit period spanning two quarters. Irs 2011 tax form   If you have more than one pay date during a semiweekly period and the pay dates fall in different calendar quarters, you will need to make separate deposits for the separate liabilities. Irs 2011 tax form Example. Irs 2011 tax form   If you have a pay date on Monday, March 31, 2014 (first quarter), and another pay date on Tuesday, April 1, 2014 (second quarter), two separate deposits will be required even though the pay dates fall within the same semiweekly period. Irs 2011 tax form Both deposits will be due on Friday, April 4, 2014 (3 business days from the end of the semiweekly deposit period). Irs 2011 tax form Examples of Monthly and Semiweekly Schedules Employers of nonfarm workers. Irs 2011 tax form   Rose Co. Irs 2011 tax form reported Form 941-SS taxes as follows: 2013 Lookback Period 3rd Quarter 2011 $12,000 4th Quarter 2011 12,000 1st Quarter 2012 12,000 2nd Quarter 2012 12,000   $48,000 2014 Lookback Period 3rd Quarter 2012 $12,000 4th Quarter 2012 12,000 1st Quarter 2013 12,000 2nd Quarter 2013 15,000   $51,000 Rose Co. Irs 2011 tax form is a monthly schedule depositor for 2013 because its taxes for the four quarters in its lookback period ($48,000 for the 3rd quarter of 2011 through the 2nd quarter of 2012) were not more than $50,000. Irs 2011 tax form However, for 2014, Rose Co. Irs 2011 tax form is a semiweekly schedule depositor because the total taxes for the four quarters in its lookback period ($51,000 for the 3rd quarter of 2012 through the 2nd quarter of 2013) exceeded $50,000. Irs 2011 tax form Employers of farmworkers. Irs 2011 tax form   Red Co. Irs 2011 tax form reported taxes on its 2012 Form 943, line 9, of $48,000. Irs 2011 tax form On its 2013 Form 943, line 11, it reported taxes of $60,000. Irs 2011 tax form   Red Co. Irs 2011 tax form is a monthly schedule depositor for 2014 because its taxes for its lookback period ($48,000 for calendar year 2012) were not more than $50,000. Irs 2011 tax form However, for 2015, Red Co. Irs 2011 tax form is a semiweekly schedule depositor because the total taxes for its lookback period ($60,000 for calendar year 2013) exceeded $50,000. Irs 2011 tax form New agricultural employers. Irs 2011 tax form   New agricultural employers filing Form 943 are monthly schedule depositors for the first and second calendar years of their business because their taxes for the lookback period (2 years) are considered to be zero. Irs 2011 tax form However, see the $100,000 Next-Day Deposit Rule , later in this section. Irs 2011 tax form Deposits on Business Days Only If a deposit due date falls on a day that is not a business day, the deposit is considered timely if it is made by the close of the next business day. Irs 2011 tax form A business day is any day other than a Saturday, Sunday, or legal holiday. Irs 2011 tax form For example, if a deposit is required to be made on Friday, but Friday is a legal holiday, the deposit is considered timely if it is made by the following Monday (if Monday is a business day). Irs 2011 tax form Semiweekly schedule depositors have at least 3 business days to make a deposit. Irs 2011 tax form If any of the 3 weekdays after the end of a semiweekly period is a legal holiday, you will have an additional day for each day that is a legal holiday to make the required deposit. Irs 2011 tax form For example, if a semiweekly schedule depositor accumulated taxes for payments made on Friday and the following Monday is a legal holiday, the deposit normally due on Wednesday may be made on Thursday (this allows 3 business days to make the deposit). Irs 2011 tax form Legal holiday. Irs 2011 tax form   The term “legal holiday” means any legal holiday in the District of Columbia. Irs 2011 tax form Legal holidays for 2014 are listed below. Irs 2011 tax form January 1—New Year's Day January 20—Birthday of Martin Luther King, Jr. Irs 2011 tax form 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 Application of Monthly and Semiweekly Schedules The following examples illustrate the procedure for determining the deposit date under the two different deposit schedules. Irs 2011 tax form Monthly schedule example. Irs 2011 tax form   Spruce Co. Irs 2011 tax form is a monthly schedule depositor with seasonal employees. Irs 2011 tax form It paid wages each Friday during August but did not pay any wages during September. Irs 2011 tax form Under the monthly deposit schedule, Spruce Co. Irs 2011 tax form must deposit the combined tax liabilities for the four August paydays by September 15. Irs 2011 tax form Spruce Co. Irs 2011 tax form does not have a deposit requirement for September (due by October 15) because no wages were paid and, therefore, it did not have a tax liability for September. Irs 2011 tax form Semiweekly schedule example. Irs 2011 tax form   Green, Inc. Irs 2011 tax form is a semiweekly schedule depositor and pays wages once each month on the last Friday of the month. Irs 2011 tax form Although Green, Inc. Irs 2011 tax form , has a semiweekly deposit schedule, it will deposit just once a month because it pays wages only once a month. Irs 2011 tax form The deposit, however, will be made under the semiweekly deposit schedule as follows: Green, Inc. Irs 2011 tax form ’s tax liability for the April 25, 2014 (Friday), payday must be deposited by April 30, 2014 (Wednesday). Irs 2011 tax form Under the semiweekly deposit schedule, liabilities for wages paid on Wednesday through Friday must be deposited by the following Wednesday. Irs 2011 tax form $100,000 Next-Day Deposit Rule If you accumulate taxes of $100,000 or more on any day during a deposit period, you must deposit by the close of the next business day, whether you are a monthly or a semiweekly schedule depositor. Irs 2011 tax form For purposes of the $100,000 rule, do not continue accumulating taxes after the end of a deposit period. Irs 2011 tax form For example, if a semiweekly schedule depositor has accumulated taxes of $95,000 on Tuesday and $10,000 on Wednesday, the $100,000 next-day deposit rule does not apply because the $10,000 is accumulated in the next deposit period. Irs 2011 tax form Thus, $95,000 must be deposited by Friday and $10,000 must be deposited by the following Wednesday. Irs 2011 tax form However, once you accumulate at least $100,000 in a deposit period, stop accumulating at the end of that day and begin to accumulate anew on the next day. Irs 2011 tax form For example, Fir Co. Irs 2011 tax form is a semiweekly schedule depositor. Irs 2011 tax form On Monday, Fir Co. Irs 2011 tax form accumulates taxes of $110,000 and must deposit on Tuesday, the next business day. Irs 2011 tax form On Tuesday, Fir Co. Irs 2011 tax form accumulates additional taxes of $30,000. Irs 2011 tax form Because the $30,000 is not added to the previous $110,000 and is less than $100,000, Fir Co. Irs 2011 tax form does not have to deposit the $30,000 until Friday (following the semiweekly deposit schedule). Irs 2011 tax form If you are a monthly schedule depositor and you accumulate a $100,000 tax liability on any day during a month, you become a semiweekly schedule depositor on the next day and remain so for the remainder of the calendar year and for the following calendar year. Irs 2011 tax form Example. Irs 2011 tax form   Elm, Inc. Irs 2011 tax form started its business on May 1, 2014. Irs 2011 tax form On May 8, it paid wages for the first time and accumulated a tax liability of $40,000. Irs 2011 tax form On Friday, May 9, Elm, Inc. Irs 2011 tax form paid wages and accumulated a liability of $60,000, making its accumulated Form 941-SS tax liability total $100,000. Irs 2011 tax form Elm, Inc. Irs 2011 tax form must deposit $100,000 by Monday, May 12, the next business day. Irs 2011 tax form Because this was the first year of its business, the tax liability for its lookback period is considered to be zero, and it would be a monthly schedule depositor based on the lookback rules. Irs 2011 tax form However, because Elm, Inc. Irs 2011 tax form accumulated $100,000 on May 9, it became a semiweekly schedule depositor on May 10. Irs 2011 tax form It will be a semiweekly schedule depositor for the remainder of 2014 and for 2015. Irs 2011 tax form Accuracy of Deposits Rule You are required to deposit 100% of your tax liability on or before the deposit due date. Irs 2011 tax form However, penalties will not be applied for depositing less than 100% if both of the following conditions are met. Irs 2011 tax form Any deposit shortfall does not exceed the greater of $100 or 2% of the amount of taxes otherwise required to be deposited, and The deposit shortfall is paid or deposited by the shortfall makeup date as described below. Irs 2011 tax form Makeup date for deposit shortfall: Monthly schedule depositor. Irs 2011 tax form Deposit or pay the shortfall by the due date of your Form 941-SS, 944, or 943 for the period in which the shortfall occurred. Irs 2011 tax form You may pay the shortfall with your return even if the amount is $2,500 or more. Irs 2011 tax form Semiweekly schedule depositor. Irs 2011 tax form Deposit by the earlier of: The first Wednesday or Friday (whichever comes first) that comes on or after the 15th of the month following the month in which the shortfall occurred, or The return due date for the period in which the shortfall occurred. Irs 2011 tax form For example, if a semiweekly schedule depositor filing Form 941-SS has a deposit shortfall during July 2014, the shortfall makeup date is August 15, 2014 (Friday). Irs 2011 tax form However, if the shortfall occurred on the required April 2 (Wednesday), deposit date for a March 28 (Friday) pay date, the return due date for the March 28 pay date (April 30) would come before the May 16 (Friday) shortfall makeup date. Irs 2011 tax form In this case, the shortfall must be deposited by April 30, 2014. Irs 2011 tax form Employers of Both Farm and Nonfarm Workers If you employ both farm and nonfarm workers, you must treat employment taxes for the farmworkers (Form 943 taxes) separately from employment taxes for the nonfarm workers (Form 941-SS or 944 taxes). Irs 2011 tax form Form 943 taxes and Form 941-SS (or Form 944) taxes are not combined for purposes of applying any of the deposit rules. Irs 2011 tax form If a deposit is due, deposit the Form 941-SS (or Form 944) taxes and Form 943 taxes separately, as discussed next. Irs 2011 tax form How To Deposit You must deposit employment taxes by electronic funds transfer. Irs 2011 tax form See Payment with Return , earlier in this section, for exceptions explaining when taxes may be paid with the tax return instead of being deposited. Irs 2011 tax form Electronic deposit requirement. Irs 2011 tax form   You must use electronic funds transfer to make all federal tax deposits (such as deposits of employment tax, excise tax, and corporate income tax). Irs 2011 tax form Generally, electronic fund transfers are made using the Electronic Federal Tax Payment System (EFTPS). Irs 2011 tax form 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. Irs 2011 tax form   EFTPS is a free service provided by the Department of the Treasury. Irs 2011 tax form To get more information or to enroll in EFTPS, call 1-800-555-4477 (U. Irs 2011 tax form S. Irs 2011 tax form Virgin Islands only) or 303-967-5916 (toll call). Irs 2011 tax form You can also visit the EFTPS website at www. Irs 2011 tax form eftps. Irs 2011 tax form gov. Irs 2011 tax form Additional information about EFTPS is also available in Publication 966. Irs 2011 tax form When you receive your EIN. Irs 2011 tax form   If you are a new employer that indicated a federal tax obligation when requesting an EIN, you will be pre-enrolled in EFTPS. Irs 2011 tax form You will receive information about Express Enrollment in your Employer Identification Number (EIN) Package and an additional mailing containing your EFTPS personal identification number (PIN) and instructions for activating your PIN. Irs 2011 tax form Follow the steps in your “How to Activate Your Enrollment” brochure to activate your enrollment and begin making your payroll tax deposits. Irs 2011 tax form If you outsource any of your payroll and related tax duties to a third party payer, such as a payroll service provider or reporting agent, be sure to tell them about your EFTPS enrollment. Irs 2011 tax form Deposit record. Irs 2011 tax form   For your records, an Electronic Funds Transfer (EFT) Trace Number will be provided with each successful payment. Irs 2011 tax form The number can be used as a receipt or to trace the payment. Irs 2011 tax form Depositing on time. Irs 2011 tax form   For deposits made by EFTPS to be on time, you must initiate the deposit by 8 p. Irs 2011 tax form m. Irs 2011 tax form Eastern time the day before the date the deposit is due. Irs 2011 tax form If you use a third party to make deposits on your behalf, they may have different cutoff times. Irs 2011 tax form Same-day payment option. Irs 2011 tax form   If you fail to initiate a deposit transaction on EFTPS by 8 p. Irs 2011 tax form m. Irs 2011 tax form Eastern time the day before the date a deposit is due, you can still make your deposit on time by using the Federal Tax Application (FTA). Irs 2011 tax form To use the same-day payment method, you will need to make arrangements with your financial institution ahead of time. Irs 2011 tax form Please check with your financial institution regarding availability, deadlines, and costs. Irs 2011 tax form Your financial institution may charge you a fee for payments made this way. Irs 2011 tax form To learn more about the information you will need to provide your financial institution to make a same-day wire payment, please visit www. Irs 2011 tax form eftps. Irs 2011 tax form gov to download the Same-Day Payment Worksheet. Irs 2011 tax form How to claim credit for overpayments. Irs 2011 tax form   If you deposited more than the right amount of taxes for a tax period, you can choose on Form 941-SS, 941, 944, or 943 for that tax period to have the overpayment refunded or applied as a credit to your next return. Irs 2011 tax form Do not ask EFTPS to request a refund from the IRS for you. Irs 2011 tax form Deposit Penalties Penalties may apply if you do not make required deposits on time or if you make deposits of less than the required amount. Irs 2011 tax form The penalties do not apply if any failure to make a proper and timely deposit was due to reasonable cause and not to willful neglect. Irs 2011 tax form The IRS may also waive penalties if you inadvertently fail to deposit in the first quarter that a deposit is due, or the first quarter during which your frequency of deposits changed, if you timely filed your employment tax return. Irs 2011 tax form For amounts not properly or timely deposited, the penalty rates are as follows. Irs 2011 tax form 2% - Deposits made 1 to 5 days late. Irs 2011 tax form 5% - Deposits made 6 to 15 days late. Irs 2011 tax form 10% - Deposits made 16 or more days late. Irs 2011 tax form Also applies to amounts paid within 10 days of the date of the first notice that the IRS sent asking for the tax due. Irs 2011 tax form 10% - Amounts (that should have been deposited) paid directly to the IRS or paid with your tax return (but see Payment with Return , earlier in this section, for exceptions). Irs 2011 tax form 15% - Amounts still unpaid more than 10 days after the date of the first notice that the IRS sent asking for the tax due or the day on which you received notice and demand for immediate payment, whichever is earlier. Irs 2011 tax form Late deposit penalty amounts are determined using calendar days, starting from the due date of the liability. Irs 2011 tax form Special rule for former Form 944 filers. Irs 2011 tax form    If you filed Form 944 for the prior year and must file Forms 941-SS for the current year because your employment tax liability for the prior year exceeded the Form 944 eligibility requirement ($1,000 or less), the failure-to-deposit penalty will not apply to a late deposit of employment taxes for the first month of the current year if the taxes are deposited in full by March 15 of the current year. Irs 2011 tax form Order in which deposits are applied. Irs 2011 tax form   Deposits generally are applied to the most recent tax liability within the return period (quarter or year). Irs 2011 tax form However, if you receive a failure-to-deposit penalty notice, you may designate how your payment is to be applied in order to minimize the amount of the penalty, if you do so within 90 days of the date of the notice. Irs 2011 tax form Follow the instructions on the penalty notice that you received. Irs 2011 tax form For more information on designating deposits, see Revenue Procedure 2001-58. Irs 2011 tax form You can find Revenue Procedure 2001-58 on page 579 of Internal Revenue Bulletin 2001-50 at www. Irs 2011 tax form irs. Irs 2011 tax form gov/pub/irs-irbs/irb01-50. Irs 2011 tax form pdf. Irs 2011 tax form Example. Irs 2011 tax form Cedar, Inc. Irs 2011 tax form is required to make a deposit of $1,000 on July 15 and $1,500 on August 15. Irs 2011 tax form It does not make the deposit on July 15. Irs 2011 tax form On August 15, Cedar, Inc. Irs 2011 tax form deposits $2,000. Irs 2011 tax form Under the deposits rule, which applies deposits to the most recent tax liability, $1,500 of the deposit is applied to the August 15 deposit and the remaining $500 is applied to the July deposit. Irs 2011 tax form Accordingly, $500 of the July 15 liability remains undeposited. Irs 2011 tax form The penalty on this underdeposit will apply as explained earlier. Irs 2011 tax form Trust fund recovery penalty. Irs 2011 tax form   If federal income, social security, or Medicare taxes that must be withheld are not withheld or are not deposited or paid to the United States Treasury, the trust fund recovery penalty may apply. Irs 2011 tax form The penalty is the full amount of the unpaid trust fund tax. Irs 2011 tax form This penalty may apply to you if these unpaid taxes cannot be immediately collected from the employer or business. Irs 2011 tax form   The trust fund recovery penalty may be imposed on all persons who are determined by the IRS to be responsible for collecting, accounting for, and paying over these taxes, and who acted willfully in not doing so. Irs 2011 tax form   A responsible person can be an officer or employee of a corporation, a partner or employee of a partnership, an accountant, a volunteer director/trustee, or an employee of a sole proprietorship, or any other person or entity that is responsible for collecting, accounting for, and paying over trust fund taxes. Irs 2011 tax form A responsible person also may include one who signs checks for the business or otherwise has authority to cause the spending of business funds. Irs 2011 tax form    Willfully means voluntarily, consciously, and intentionally. Irs 2011 tax form A responsible person acts willfully if the person knows the required actions of collecting, accounting for or paying over trust fund taxes are not taking place, or recklessly disregards obvious and known risks to the government's right to receive trust fund taxes. Irs 2011 tax form “Averaged” failure-to-deposit penalty. Irs 2011 tax form   The IRS may assess an “averaged” failure-to-deposit (FTD) penalty of 2% to 10% if you are a monthly schedule depositor and did not properly complete Form 941-SS, line 14, when your tax liability shown on Form 941-SS, line 10, was $2,500 or more. Irs 2011 tax form IRS may also assess this penalty of 2% to 10% if you are a semiweekly schedule depositor and your tax liability shown on Form 941-SS, line 10, was $2,500 or more and you did any of the following. Irs 2011 tax form Completed Form 941-SS, line 14, instead of Schedule B (Form 941). Irs 2011 tax form Failed to attach a properly completed Schedule B (Form 941). Irs 2011 tax form Completed Schedule B (Form 941) incorrectly, for example, by entering tax deposits instead of tax liabilities in the numbered spaces. Irs 2011 tax form   The IRS figures the penalty by allocating your total tax liability shown on Form 941-SS, line 10, equally throughout the tax period. Irs 2011 tax form Your deposits and payments may not be counted as timely because IRS does not know the actual dates of your tax liabilities. Irs 2011 tax form   You can avoid the penalty by reviewing your return before filing it. Irs 2011 tax form Follow these steps before filing your Form 941-SS. Irs 2011 tax form If you are a monthly schedule depositor, report your tax liabilities (not your deposits) in the monthly entry spaces on Form 941-SS, line 14. Irs 2011 tax form If you are a semiweekly schedule depositor, report your tax liabilities (not your deposits) on Schedule B (Form 941) in the lines that represent the dates you paid your employees. Irs 2011 tax form Verify that your total liability shown on Form 941-SS, line 14, or the bottom of Schedule B (Form 941) equals your tax liability shown on Form 941-SS,  line 10. Irs 2011 tax form Do not show negative amounts on Form 941-SS, line 14, or Schedule B (Form 941). Irs 2011 tax form For prior period errors, do not adjust your tax liabilities reported on your current Form 941-SS, line 14, or on Schedule B (Form 941). Irs 2011 tax form Instead, file an adjusted return (Form 941-X (if you are adjusting a previously filed Form 941-SS) or Form 944-X (if you are adjusting a previously filed Form 944-SS or 944)) if you are also adjusting your tax liability. Irs 2011 tax form If you are only adjusting your deposits in response to a failure-to-deposit penalty notice, see the Instructions for Schedule B (Form 941) (if you previously filed Form 941-SS) or the Instructions for Form 944-X (if you previously filed Form 944-SS or 944). Irs 2011 tax form If you filed Form 944 for 2013 and line 7 was $2,500 or more, you were required to complete Form 944, lines 13a–13m, or attach Form 945-A, Annual Record of Federal Tax Liability. Irs 2011 tax form If you failed to complete lines 13a–13m, or failed to attach Form 945-A, whichever was required, IRS may assess an “averaged” failure-to-deposit (FTD) penalty. Irs 2011 tax form 9. Irs 2011 tax form Employer's Returns General instructions. Irs 2011 tax form   File Forms 941-SS (or Form 944) for nonfarm workers and Form 943 for farmworkers. Irs 2011 tax form (U. Irs 2011 tax form S. Irs 2011 tax form Virgin Islands employers may be required to file Form 940 for the combined wages of nonfarm workers and farmworkers. Irs 2011 tax form ) Employers with employees subject to U. Irs 2011 tax form S. Irs 2011 tax form income tax withholding. Irs 2011 tax form   If you have both employees who are subject to U. Irs 2011 tax form S. Irs 2011 tax form income tax withholding and employees who are not subject to U. Irs 2011 tax form S. Irs 2011 tax form income tax withholding, you must file only Form 941 (or Form 944) and include all your employees’ wages on that form. Irs 2011 tax form Nonfarm employers. Irs 2011 tax form   File Form 941-SS for the calendar quarter in which you first pay wages for nonfarm workers and for each quarter thereafter unless you are a seasonal employer or file a final return. Irs 2011 tax form Due dates for each quarter of the calendar year are as follows. Irs 2011 tax form Quarter Due Jan. Irs 2011 tax form , Feb. Irs 2011 tax form , Mar. Irs 2011 tax form Apr. Irs 2011 tax form 30 Apr. Irs 2011 tax form , May, June July 31 July, Aug. Irs 2011 tax form , Sept. Irs 2011 tax form Oct. Irs 2011 tax form 31 Oct. Irs 2011 tax form , Nov. Irs 2011 tax form , Dec. Irs 2011 tax form Jan. Irs 2011 tax form 31   However, if you deposited all taxes when due for the quarter, you have 10 additional days from the due dates to file the return. Irs 2011 tax form If the due date for filing your return falls on a Saturday, Sunday, or legal holiday, you may file on the next business day. Irs 2011 tax form   If you closed your business or stopped paying wages and do not have to file returns in the future, check the box on line 15 of your final Form 941-SS and show the date final wages were paid. Irs 2011 tax form Form 944. Irs 2011 tax form   If IRS notified you to file Form 944, file your 2013 Form 944 by January 31, 2014, or by February 10, 2014 (if you deposited all taxes when due). Irs 2011 tax form Household employers reporting social security and Medicare taxes. Irs 2011 tax form   If you are a sole proprietor and file Forms 941-SS (or Form 944) for business employees, you may include taxes for household employees on your Forms 941-SS (or Form 944). Irs 2011 tax form Otherwise, report social security and Medicare taxes for household employees on Schedule H (Form 1040), Household Employment Taxes. Irs 2011 tax form See Publication 926, Household Employer's Tax Guide, for more information. Irs 2011 tax form Employers of farmworkers. Irs 2011 tax form   Every employer of farmworkers must file a Form 943 for each calendar year beginning with the first year the employer pays $2,500 or more for farmwork or employs a farmworker who meets the $150 test described in section 6. Irs 2011 tax form   File a Form 943 each year for all taxable wages paid for farmwork. Irs 2011 tax form You may report household workers in a private home on a farm operated for profit on Form 943. Irs 2011 tax form Do not report wages for farmworkers on Form 941-SS or 944. Irs 2011 tax form   Send Form 943 to the IRS by January 31 of the following year. Irs 2011 tax form Send it with payment of any taxes due that you are not required to deposit. Irs 2011 tax form If you deposited all taxes when due, you have 10 additional days to file. Irs 2011 tax form Penalties. Irs 2011 tax form   For each whole or part month that a return is not filed when required (disregarding any extensions of the filing deadline), there is a failure-to-file penalty of 5% of the unpaid tax due with that return. Irs 2011 tax form The maximum penalty is generally 25% of the tax due. Irs 2011 tax form Also, for each whole or part month that the tax is paid late (disregarding any extensions of the payment deadline), there is a failure-to-pay penalty of 0. Irs 2011 tax form 5% per month of the amount of tax. Irs 2011 tax form For individual filers only, the failure-to-pay penalty is reduced from 0. Irs 2011 tax form 5% per month to 0. Irs 2011 tax form 25% per month if an installment agreement is in effect. Irs 2011 tax form You must have filed your return on or before the due date of the return to qualify for the reduced penalty. Irs 2011 tax form The maximum amount of the failure-to-pay penalty is also 25% of the tax due. Irs 2011 tax form If both penalties apply in any month, the failure-to-file penalty is reduced by the amount of the failure-to-pay penalty. Irs 2011 tax form The penalties will not be charged if you have a reasonable cause for failing to file or pay. Irs 2011 tax form If you receive a penalty notice, you can provide an explanation of why you believe reasonable cause exists. Irs 2011 tax form Reporting Adjustments to Form 941-SS, 944-SS, 944, or 943 Current Period Adjustments Make current period adjustments for fractions of cents, sick pay, tips, and group-term life insurance on your Form 941-SS, 944, or 943. Irs 2011 tax form See the Instructions for Form 941-SS, Instructions for Form 944, or Instructions for Form 943 for information on how to report these adjustments. Irs 2011 tax form Prior Period Adjustments Forms for prior period adjustments. Irs 2011 tax form   Use Form 941-X or Form 944-X to make a correction after you discover an error on a previously filed Form 941 or Form 944. Irs 2011 tax form There are also Forms 943-X, 945-X, and CT-1X to report corrections on the corresponding returns. Irs 2011 tax form Form 941-X and Form 944-X also replace Form 843, Claim for Refund and Request for Abatement, for employers to request a refund or abatement of overreported employment taxes. Irs 2011 tax form Continue to use Form 843 when requesting a refund or abatement of assessed interest or penalties. Irs 2011 tax form See Revenue Ruling 2009-39, 2009-52 I. Irs 2011 tax form R. Irs 2011 tax form B. Irs 2011 tax form 951, for examples of how the interest-free adjustment and claim for refund rules apply in 10 different situations. Irs 2011 tax form You can find Revenue Ruling 2009-39, at www. Irs 2011 tax form irs. Irs 2011 tax form gov/irb/2009-52_IRB/ar14. Irs 2011 tax form html. Irs 2011 tax form Background. Irs 2011 tax form   Treasury Decision 9405 changed the process for making interest-free adjustments to employment taxes reported on Forms 941-SS, 943, 944-SS, and 944, and for filing a claim for refund of employment taxes. Irs 2011 tax form Treasury Decision 9405, 2008-32 I. Irs 2011 tax form R. Irs 2011 tax form B. Irs 2011 tax form 293, is available at www. Irs 2011 tax form irs. Irs 2011 tax form gov/irb/2008-32_IRB/ar13. Irs 2011 tax form html. Irs 2011 tax form You will use the adjustment process if you underreported employment taxes and are making a payment, or if you overreported employment taxes and will be applying the credit to the Form 941-SS, 943, or 944 period during which you file Forms 941-X, 943-X, or 944-X, respectively. Irs 2011 tax form You will use the claim process if you overreported employment taxes and are requesting a refund or abatement of the overreported amount. Irs 2011 tax form We use the terms “correct” and “corrections” to include interest-free adjustments under sections 6205 and 6413, and claims for refund and abatement under sections 6402, 6414, and 6404 of the Internal Revenue Code. Irs 2011 tax form Correcting employment taxes. Irs 2011 tax form   When you discover an error on a previously filed Form 941-SS, 943, 944-SS, or 944, you must: Correct that error using Form 941-X, Form 943-X, or Form 944-X, File a separate Form 941-X, Form 943-X, or Form 944-X for
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A-Z Index for Business
Find it Fast! Know what you're looking for and want to find it fast? Select business topics using our A-Z listing, or by business type such as sole proprietor, corporation, etc. We also provide links to major business subjects, such as Business Expenses, which provides a gateway to all related information on that subject.

Affordable Care Act Tax Provisions
Health coverage legislation enacted this year and future changes.

Business Tax Credits
A list of forms for claiming business tax credits, and a complete explanation about when carryovers, credits and deductions cease.

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If you have a financial interest in or signature authority over a foreign financial account, including a bank account, brokerage account, mutual fund, trust, or other type of foreign financial account, the Bank Secrecy Act may require you to report the account yearly to the Internal Revenue Service by filing Form TD F 90-22.1, Report of Foreign Bank and Financial Accounts (FBAR).

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This workshop helps business owners understand federal tax obligations.

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A collection of links to State government Web sites with useful information for businesses.

Struggling with Paying Your Taxes? Let IRS Help You Get a Fresh Start.
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Page Last Reviewed or Updated: 06-Dec-2013

The Irs 2011 Tax Form

Irs 2011 tax form 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. Irs 2011 tax form S. Irs 2011 tax form 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. Irs 2011 tax form S. Irs 2011 tax form 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. Irs 2011 tax form S. Irs 2011 tax form 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. Irs 2011 tax form Employee business expenses. Irs 2011 tax form 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. Irs 2011 tax form You can change your choice for each year's taxes. Irs 2011 tax form To choose the foreign tax credit, in most cases you must complete Form 1116 and attach it to your U. Irs 2011 tax form S. Irs 2011 tax form tax return. Irs 2011 tax form However, you may qualify for the exception that allows you to claim the foreign tax credit without using Form 1116. Irs 2011 tax form See How To Figure the Credit , later. Irs 2011 tax form To choose to claim the taxes as an itemized deduction, use Schedule A (Form 1040), Itemized Deductions. Irs 2011 tax form Figure your tax both ways—claiming the credit and claiming the deduction. Irs 2011 tax form Then fill out your return the way that benefits you more. Irs 2011 tax form See Why Choose the Credit, later. Irs 2011 tax form 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. Irs 2011 tax form If you choose to take a credit for qualified foreign taxes, you must take the credit for all of them. Irs 2011 tax form You cannot deduct any of them. Irs 2011 tax form Conversely, if you choose to deduct qualified foreign taxes, you must deduct all of them. Irs 2011 tax form You cannot take a credit for any of them. Irs 2011 tax form See What Foreign Taxes Qualify for the Credit , later, for the meaning of qualified foreign taxes. Irs 2011 tax form There are exceptions to this general rule, which are described next. Irs 2011 tax form Exceptions for foreign taxes not allowed as a credit. Irs 2011 tax form   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. Irs 2011 tax form Covered asset acquisitions include certain acquisitions that result in a stepped-up basis for U. Irs 2011 tax form S. Irs 2011 tax form tax purposes. Irs 2011 tax form For more information, see Internal Revenue Code section 901(m). Irs 2011 tax form The IRS intends to issue guidance that will explain this provision in greater detail. Irs 2011 tax form   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. Irs 2011 tax form Foreign taxes that are not income taxes. Irs 2011 tax form   In most cases, only foreign income taxes qualify for the foreign tax credit. Irs 2011 tax form Other taxes, such as foreign real and personal property taxes, do not qualify. Irs 2011 tax form But you may be able to deduct these other taxes even if you claim the foreign tax credit for foreign income taxes. Irs 2011 tax form   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. Irs 2011 tax form However, you can deduct foreign real property taxes that are not trade or business expenses as an itemized deduction on Schedule A (Form 1040). Irs 2011 tax form Carrybacks and carryovers. Irs 2011 tax form   There is a limit on the credit you can claim in a tax year. Irs 2011 tax form 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. Irs 2011 tax form If you deduct qualified foreign taxes in a tax year, you cannot use a carryback or carryover in that year. Irs 2011 tax form That is because you cannot take both a deduction and a credit for qualified foreign taxes in the same tax year. Irs 2011 tax form   For more information on the limit, see How To Figure the Credit , later. Irs 2011 tax form For more information on carrybacks and carryovers, see Carryback and Carryover , later. Irs 2011 tax form 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. Irs 2011 tax form You make or change your choice on your tax return (or on an amended return) for the year your choice is to be effective. Irs 2011 tax form Example. Irs 2011 tax form You paid foreign taxes for the last 13 years and chose to deduct them on your U. Irs 2011 tax form S. Irs 2011 tax form income tax returns. Irs 2011 tax form You were timely in both filing your returns and paying your U. Irs 2011 tax form S. Irs 2011 tax form tax liability. Irs 2011 tax form 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. Irs 2011 tax form Because the regular due date of your 2002 return was April 15, 2003, this choice is timely (within 10 years). Irs 2011 tax form Because there is a limit on the credit for your 2002 foreign tax, you have unused 2002 foreign taxes. Irs 2011 tax form Ordinarily, you first carry back unused foreign taxes arising in 2002 to, and claim them as a credit in, the 2 preceding tax years. Irs 2011 tax form 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. Irs 2011 tax form 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. Irs 2011 tax form 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. Irs 2011 tax form 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. Irs 2011 tax form 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. Irs 2011 tax form See Foreign Earned Income and Housing Exclusions under Foreign Taxes for Which You Cannot Take a Credit, later. Irs 2011 tax form 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. Irs 2011 tax form In most cases, if the foreign tax rate is higher than the U. Irs 2011 tax form S. Irs 2011 tax form rate, there will be no U. Irs 2011 tax form S. Irs 2011 tax form tax on the foreign income. Irs 2011 tax form If the foreign tax rate is lower than the U. Irs 2011 tax form S. Irs 2011 tax form rate, U. Irs 2011 tax form S. Irs 2011 tax form tax on the foreign income will be limited to the difference between the rates. Irs 2011 tax form The foreign tax credit can only reduce U. Irs 2011 tax form S. Irs 2011 tax form taxes on foreign source income; it cannot reduce U. Irs 2011 tax form S. Irs 2011 tax form taxes on U. Irs 2011 tax form S. Irs 2011 tax form source income. Irs 2011 tax form 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. Irs 2011 tax form This is because: A credit reduces your actual U. Irs 2011 tax form S. Irs 2011 tax form 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. Irs 2011 tax form 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. Irs 2011 tax form (See Limit on credit under How To Figure the Credit, later. Irs 2011 tax form ) Example 1. Irs 2011 tax form For 2013, you and your spouse have adjusted gross income of $80,300, including $20,000 of dividend income from foreign sources. Irs 2011 tax form None of the dividends are qualified dividends. Irs 2011 tax form You file a joint return and can claim two $3,900 exemptions. Irs 2011 tax form You had to pay $2,000 in foreign income taxes on the dividend income. Irs 2011 tax form If you take the foreign taxes as an itemized deduction, your total itemized deductions are $15,000. Irs 2011 tax form Your taxable income then is $57,500 and your tax is $7,736. Irs 2011 tax form If you take the credit instead, your itemized deductions are only $13,000. Irs 2011 tax form Your taxable income then is $59,500 and your tax before the credit is $8,036. Irs 2011 tax form After the credit, however, your tax is only $6,036. Irs 2011 tax form Therefore, your tax is $1,700 lower ($7,736 − $6,036) by taking the credit. Irs 2011 tax form Example 2. Irs 2011 tax form In 2013, you receive investment income of $5,000 from a foreign country, which imposes a tax of $1,500 on that income. Irs 2011 tax form You report on your U. Irs 2011 tax form S. Irs 2011 tax form return this income as well as $56,000 of U. Irs 2011 tax form S. Irs 2011 tax form source wages and an allowable $49,000 partnership loss from a U. Irs 2011 tax form S. Irs 2011 tax form partnership. Irs 2011 tax form Your share of the partnership's gross income is $25,000 and your share of its expenses is $74,000. Irs 2011 tax form You are single, entitled to one $3,900 exemption, and have other itemized deductions of $6,850. Irs 2011 tax form If you deduct the foreign tax on your U. Irs 2011 tax form S. Irs 2011 tax form 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. Irs 2011 tax form 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. Irs 2011 tax form You can take a credit of only $113 because of limits discussed later. Irs 2011 tax form Your tax after the credit is $13 ($126 − $113), which is $13 more than if you deduct the foreign tax. Irs 2011 tax form If you choose the credit, you will have unused foreign taxes of $1,387 ($1,500 − $113). Irs 2011 tax form 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. Irs 2011 tax form 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. Irs 2011 tax form “Tax year” refers to the tax year for which your U. Irs 2011 tax form S. Irs 2011 tax form return is filed, not the tax year for which your foreign return is filed. Irs 2011 tax form Accrual method of accounting. Irs 2011 tax form   If you use an accrual method of accounting, you can claim the credit only in the year in which you accrue the tax. Irs 2011 tax form 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. Irs 2011 tax form   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. Irs 2011 tax form Generally, this occurs on the last day of the tax year for which your foreign return is filed. Irs 2011 tax form Contesting your foreign tax liability. Irs 2011 tax form   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. Irs 2011 tax form 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. Irs 2011 tax form Once your liability is determined, the foreign tax credit is allowable for the year to which the foreign tax relates. Irs 2011 tax form 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 . Irs 2011 tax form You may have to post a bond. Irs 2011 tax form   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. Irs 2011 tax form   The IRS can request this bond at any time without regard to the Time Limit on Tax Assessment discussed later under Carryback and Carryover. Irs 2011 tax form Cash method of accounting. Irs 2011 tax form   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. Irs 2011 tax form 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. Irs 2011 tax form Choosing to take credit in the year taxes accrue. Irs 2011 tax form   Even if you use the cash method of accounting, you can choose to take a credit for foreign taxes in the year they accrue. Irs 2011 tax form You make the choice by checking the box in Part II of Form 1116. Irs 2011 tax form 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. Irs 2011 tax form   In addition, the choice to take the credit when foreign taxes accrue applies to all foreign taxes qualifying for the credit. Irs 2011 tax form You cannot take a credit for some foreign taxes when paid and take a credit for others when accrued. Irs 2011 tax form   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. Irs 2011 tax form Credit based on taxes paid in earlier year. Irs 2011 tax form   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. Irs 2011 tax form Example. Irs 2011 tax form Last year you took the credit based on taxes paid. Irs 2011 tax form This year you chose to take the credit based on taxes accrued. Irs 2011 tax form During the year you paid foreign income taxes owed for last year. Irs 2011 tax form You also accrued foreign income taxes for this year that you did not pay by the end of the year. Irs 2011 tax form 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. Irs 2011 tax form Foreign Currency and Exchange Rates U. Irs 2011 tax form S. Irs 2011 tax form income tax is imposed on income expressed in U. Irs 2011 tax form S. Irs 2011 tax form dollars, while in most cases the foreign tax is imposed on income expressed in foreign currency. Irs 2011 tax form Therefore, fluctuations in the value of the foreign currency relative to the U. Irs 2011 tax form S. Irs 2011 tax form dollar may affect the foreign tax credit. Irs 2011 tax form Translating foreign currency into U. Irs 2011 tax form S. Irs 2011 tax form dollars. Irs 2011 tax form   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. Irs 2011 tax form S. Irs 2011 tax form dollars. Irs 2011 tax form How and when you do this depends on your functional currency. Irs 2011 tax form In most cases, your functional currency is the U. Irs 2011 tax form S. Irs 2011 tax form dollar unless you are required to use the currency of a foreign country. Irs 2011 tax form   You must make all federal income tax determinations in your functional currency. Irs 2011 tax form The U. Irs 2011 tax form S. Irs 2011 tax form dollar is the functional currency for all taxpayers except some qualified business units. Irs 2011 tax form A qualified business unit is a separate and clearly identified unit of a trade or business that maintains separate books and records. Irs 2011 tax form Unless you are self-employed, your functional currency is the U. Irs 2011 tax form S. Irs 2011 tax form dollar. Irs 2011 tax form   Even if you are self-employed and have a qualified business unit, your functional currency is the U. Irs 2011 tax form S. Irs 2011 tax form dollar if any of the following apply. Irs 2011 tax form You conduct the business primarily in dollars. Irs 2011 tax form The principal place of business is located in the United States. Irs 2011 tax form You choose to or are required to use the dollar as your functional currency. Irs 2011 tax form 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. Irs 2011 tax form   If your functional currency is the U. Irs 2011 tax form S. Irs 2011 tax form dollar, you must immediately translate into dollars all items of income, expense, etc. Irs 2011 tax form , that you receive, pay, or accrue in a foreign currency and that will affect computation of your income tax. Irs 2011 tax form If there is more than one exchange rate, use the one that most properly reflects your income. Irs 2011 tax form In most cases, you can get exchange rates from banks and U. Irs 2011 tax form S. Irs 2011 tax form Embassies. Irs 2011 tax form   If your functional currency is not the U. Irs 2011 tax form S. Irs 2011 tax form dollar, make all income tax determinations in your functional currency. Irs 2011 tax form At the end of the year, translate the results, such as income or loss, into U. Irs 2011 tax form S. Irs 2011 tax form dollars to report on your income tax return. Irs 2011 tax form    For more information, write to: Internal Revenue Service International Section Philadelphia, PA 19255-0725 Rate of exchange for foreign taxes paid. Irs 2011 tax form   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. Irs 2011 tax form If your tax was withheld in foreign currency, use the rate of exchange in effect for the date on which the tax was withheld. Irs 2011 tax form 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. Irs 2011 tax form   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). Irs 2011 tax form Exception. Irs 2011 tax form   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. Irs 2011 tax form This rule applies to accrued taxes relating to tax years beginning after 1997 and only under the following conditions. Irs 2011 tax form The foreign taxes are paid on or after the first day of the tax year to which they relate. Irs 2011 tax form The foreign taxes are paid not later than 2 years after the close of the tax year to which they relate. Irs 2011 tax form The foreign tax liability is not denominated in an inflationary currency (defined in the Form 1116 instructions). Irs 2011 tax form (This condition applies to taxes paid or accrued in tax years beginning after November 6, 2007. Irs 2011 tax form )   For all other foreign taxes, you should use the exchange rate in effect on the date you paid them. Irs 2011 tax form Election to use exchange rate on date paid. Irs 2011 tax form   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. Irs 2011 tax form If any of the accrued taxes are unpaid, you must translate them into U. Irs 2011 tax form S. Irs 2011 tax form dollars using the exchange rate on the last day of the U. Irs 2011 tax form S. Irs 2011 tax form tax year to which those taxes relate. Irs 2011 tax form 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. Irs 2011 tax form S. Irs 2011 tax form dollar functional currency. Irs 2011 tax form 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. Irs 2011 tax form The election is available for tax years beginning after 2004. Irs 2011 tax form 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. Irs 2011 tax form Make the election by attaching a statement to the applicable tax return. Irs 2011 tax form 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. Irs 2011 tax form S. Irs 2011 tax form dollar functional currency. Irs 2011 tax form Foreign Tax Redetermination A foreign tax redetermination is any change in your foreign tax liability that may affect your U. Irs 2011 tax form S. Irs 2011 tax form foreign tax credit claimed. Irs 2011 tax form 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. Irs 2011 tax form If a foreign tax redetermination occurs, a redetermination of your U. Irs 2011 tax form S. Irs 2011 tax form tax liability is required if any of the following conditions apply. Irs 2011 tax form The accrued taxes when paid differ from the amounts claimed as a credit. Irs 2011 tax form 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. Irs 2011 tax form If this applies to you, you must reduce the credit previously claimed by the amount of the unpaid taxes. Irs 2011 tax form You will not be allowed a credit for the unpaid taxes until you pay them. Irs 2011 tax form When you pay the accrued taxes, a new foreign tax redetermination occurs and you must translate the taxes into U. Irs 2011 tax form S. Irs 2011 tax form dollars using the exchange rate as of the date they were paid. Irs 2011 tax form The foreign tax credit is allowed for the year to which the foreign tax relates. Irs 2011 tax form See Rate of exchange for foreign taxes paid , earlier, under Foreign Currency and Exchange Rates. Irs 2011 tax form The foreign taxes you paid are refunded in whole or in part. Irs 2011 tax form 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. Irs 2011 tax form 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. Irs 2011 tax form S. Irs 2011 tax form tax year. Irs 2011 tax form In this case, you must adjust your U. Irs 2011 tax form S. Irs 2011 tax form tax in the tax year in which the accrued foreign taxes are paid. Irs 2011 tax form 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. Irs 2011 tax form S. Irs 2011 tax form tax liability for each tax year affected by the redetermination. Irs 2011 tax form In most cases, you must file Form 1040X, Amended U. Irs 2011 tax form S. Irs 2011 tax form Individual Income Tax Return, with a revised Form 1116 and a statement that contains information sufficient for the IRS to redetermine your U. Irs 2011 tax form S. Irs 2011 tax form tax liability for the year or years affected. Irs 2011 tax form See Contents of statement , later. Irs 2011 tax form 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. Irs 2011 tax form There are other exceptions to this requirement. Irs 2011 tax form They are discussed later under Due date of notification to IRS . Irs 2011 tax form Contents of statement. Irs 2011 tax form   The statement must include all of the following. Irs 2011 tax form Your name, address, and taxpayer identification number. Irs 2011 tax form The tax year or years that are affected by the foreign tax redetermination. Irs 2011 tax form The date or dates the foreign taxes were accrued, if applicable. Irs 2011 tax form The date or dates the foreign taxes were paid. Irs 2011 tax form The amount of foreign taxes paid or accrued on each date (in foreign currency) and the exchange rate used to translate each amount. Irs 2011 tax form 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. Irs 2011 tax form   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. Irs 2011 tax form   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). Irs 2011 tax form Due date of notification to IRS. Irs 2011 tax form   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. Irs 2011 tax form There is no limit on the time the IRS has to redetermine and assess the correct U. Irs 2011 tax form S. Irs 2011 tax form tax due. Irs 2011 tax form 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. Irs 2011 tax form S. Irs 2011 tax form taxes. Irs 2011 tax form See Time Limit on Refund Claims , later. Irs 2011 tax form   Exceptions to this due date are explained in the next two paragraphs. Irs 2011 tax form Multiple redeterminations of U. Irs 2011 tax form S. Irs 2011 tax form tax liability for same tax year. Irs 2011 tax form   Where more than one foreign tax redetermination requires a redetermination of U. Irs 2011 tax form S. Irs 2011 tax form 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. Irs 2011 tax form 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. Irs 2011 tax form However, foreign tax redeterminations with respect to the tax year for which a redetermination of U. Irs 2011 tax form S. Irs 2011 tax form tax liability is required may occur after the due date for providing that notification. Irs 2011 tax form In this situation, you may have to file more than one Form 1040X for that tax year. Irs 2011 tax form Additional U. Irs 2011 tax form S. Irs 2011 tax form tax due eliminated by foreign tax credit carryback or carryover. Irs 2011 tax form   If a foreign tax redetermination requires a redetermination of U. Irs 2011 tax form S. Irs 2011 tax form tax liability that would otherwise result in an additional amount of U. Irs 2011 tax form S. Irs 2011 tax form 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. Irs 2011 tax form 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. Irs 2011 tax form You must file the statement by the due date (with extensions) of that return. Irs 2011 tax form 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. Irs 2011 tax form S. Irs 2011 tax form tax liability is required). Irs 2011 tax form Failure-to-notify penalty. Irs 2011 tax form   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. Irs 2011 tax form   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. Irs 2011 tax form S. Irs 2011 tax form tax. Irs 2011 tax form This penalty cannot be more than 25% of the tax due. Irs 2011 tax form Foreign tax refund. Irs 2011 tax form   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. Irs 2011 tax form S. Irs 2011 tax form tax for the time before the date of the refund. Irs 2011 tax form   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. Irs 2011 tax form 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. Irs 2011 tax form Interest also is owed from the time you receive a refund until you pay the additional tax due. Irs 2011 tax form Foreign tax imposed on foreign refund. Irs 2011 tax form   If your foreign tax refund is taxed by the foreign country, you cannot take a separate credit or deduction for this additional foreign tax. Irs 2011 tax form 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. Irs 2011 tax form Example. Irs 2011 tax form 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. Irs 2011 tax form When you refigure your credit for 2011, you must reduce the $3,000 you paid by $400. Irs 2011 tax form Time Limit on Refund Claims You have 10 years to file a claim for refund of U. Irs 2011 tax form S. Irs 2011 tax form tax if you find that you paid or accrued a larger foreign tax than you claimed a credit for. Irs 2011 tax form 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. Irs 2011 tax form You have 10 years to file your claim regardless of whether you claim the credit for taxes paid or taxes accrued. Irs 2011 tax form 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). Irs 2011 tax form The special 10-year period also applies to making or changing your choice to claim a deduction or credit for foreign taxes. Irs 2011 tax form See Making or Changing Your Choice discussed earlier under Choosing To Take Credit or Deduction. Irs 2011 tax form Who Can Take the Credit? U. Irs 2011 tax form S. Irs 2011 tax form citizens, resident aliens, and nonresident aliens who paid foreign income tax and are subject to U. Irs 2011 tax form S. Irs 2011 tax form tax on foreign source income may be able to take a foreign tax credit. Irs 2011 tax form U. Irs 2011 tax form S. Irs 2011 tax form Citizens If you are a U. Irs 2011 tax form S. Irs 2011 tax form citizen, you are taxed by the United States on your worldwide income wherever you live. Irs 2011 tax form You are normally entitled to take a credit for foreign taxes you pay or accrue. Irs 2011 tax form 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. Irs 2011 tax form S. Irs 2011 tax form citizens. Irs 2011 tax form If you are a bona fide resident of Puerto Rico for the entire tax year, you also come under the same rules. Irs 2011 tax form 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. Irs 2011 tax form For information on alien status, see Publication 519. Irs 2011 tax form Nonresident Aliens If you are a nonresident alien, you cannot take the credit in most cases. Irs 2011 tax form 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. Irs 2011 tax form S. Irs 2011 tax form possession on income from foreign sources that is effectively connected with a trade or business in the United States. Irs 2011 tax form But if you must pay tax to a foreign country or U. Irs 2011 tax form S. Irs 2011 tax form possession on income from U. Irs 2011 tax form S. Irs 2011 tax form sources only because you are a citizen or a resident of that country or U. Irs 2011 tax form S. Irs 2011 tax form possession, do not use that tax in figuring the amount of your credit. Irs 2011 tax form For information on alien status and effectively connected income, see Publication 519. Irs 2011 tax form 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. Irs 2011 tax form The tax must be imposed on you. Irs 2011 tax form You must have paid or accrued the tax. Irs 2011 tax form The tax must be the legal and actual foreign tax liability. Irs 2011 tax form The tax must be an income tax (or a tax in lieu of an income tax). Irs 2011 tax form Certain foreign taxes do not qualify for the credit even if the four tests are met. Irs 2011 tax form See Foreign Taxes for Which You Cannot Take a Credit, later. Irs 2011 tax form 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. Irs 2011 tax form S. Irs 2011 tax form possession. Irs 2011 tax form For example, a tax that is deducted from your wages is considered to be imposed on you. Irs 2011 tax form You cannot shift the right to claim the credit by contract or other means. Irs 2011 tax form Foreign country. Irs 2011 tax form   A foreign country includes any foreign state and its political subdivisions. Irs 2011 tax form Income, war profits, and excess profits taxes paid or accrued to a foreign city or province qualify for the foreign tax credit. Irs 2011 tax form U. Irs 2011 tax form S. Irs 2011 tax form possessions. Irs 2011 tax form   For foreign tax credit purposes, all qualified taxes paid to U. Irs 2011 tax form S. Irs 2011 tax form possessions are considered foreign taxes. Irs 2011 tax form For this purpose, U. Irs 2011 tax form S. Irs 2011 tax form possessions include Puerto Rico and American Samoa. Irs 2011 tax form   When the term “foreign country” is used in this publication, it includes U. Irs 2011 tax form S. Irs 2011 tax form possessions unless otherwise stated. Irs 2011 tax form 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. Irs 2011 tax form S. Irs 2011 tax form possession. Irs 2011 tax form 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. Irs 2011 tax form Joint return. Irs 2011 tax form   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. Irs 2011 tax form Combined income. Irs 2011 tax form   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. Irs 2011 tax form 901-2(f)(3)(iii). Irs 2011 tax form 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. Irs 2011 tax form   These rules apply to foreign taxes paid or accrued in tax years beginning after February 14, 2012. Irs 2011 tax form 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. Irs 2011 tax form For more details, see paragraphs (f) and (h) of Regulations section 1. Irs 2011 tax form 901-2. Irs 2011 tax form For similar rules applicable to prior tax years, see Regulations section 1. Irs 2011 tax form 901-2 (revised as of April 1, 2011). Irs 2011 tax form Example. Irs 2011 tax form You and your spouse reside in Country X, which imposes income tax on your combined incomes. Irs 2011 tax form Both of you use the “u” as your functional currency. Irs 2011 tax form Country X apportions tax based on income. Irs 2011 tax form You had income of 30,000u and your spouse had income of 20,000u. Irs 2011 tax form Your filing status on your U. Irs 2011 tax form S. Irs 2011 tax form income tax return is married filing separately. Irs 2011 tax form You can claim only 60% (30,000u/50,000u) of the foreign taxes imposed on your income on your U. Irs 2011 tax form S income tax return. Irs 2011 tax form Your spouse can claim only 40% (20,000u/50,000u). Irs 2011 tax form Partner or S corporation shareholder. Irs 2011 tax form   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. Irs 2011 tax form These amounts will be shown on the Schedule K-1 you receive from the partnership or S corporation. Irs 2011 tax form 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. Irs 2011 tax form Beneficiary. Irs 2011 tax form   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. Irs 2011 tax form This amount will be shown on the Schedule K-1 you receive from the estate or trust. Irs 2011 tax form However, you must show that the tax was imposed on income of the estate and not on income received by the decedent. Irs 2011 tax form Mutual fund shareholder. Irs 2011 tax form   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. Irs 2011 tax form 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. Irs 2011 tax form If you do not receive this information, you will need to contact the fund. Irs 2011 tax form Controlled foreign corporation shareholder. Irs 2011 tax form   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. Irs 2011 tax form If you make this election, you must claim the credit by filing Form 1118, Foreign Tax Credit—Corporations. Irs 2011 tax form Controlled foreign corporation. Irs 2011 tax form   A controlled foreign corporation is a foreign corporation in which U. Irs 2011 tax form S. Irs 2011 tax form shareholders own more than 50% of the voting power or value of the stock. Irs 2011 tax form You are considered a U. Irs 2011 tax form S. Irs 2011 tax form shareholder if you own, directly or indirectly, 10% or more of the total voting power of all classes of the foreign corporation's stock. Irs 2011 tax form See Internal Revenue Code sections 951(b) and 958(b) for more information. Irs 2011 tax form 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. Irs 2011 tax form Only the legal and actual foreign tax liability that you paid or accrued during the year qualifies for the credit. Irs 2011 tax form Foreign tax refund. Irs 2011 tax form   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. Irs 2011 tax form   For example, the United States has tax treaties with many countries allowing U. Irs 2011 tax form S. Irs 2011 tax form citizens and residents reductions in the rates of tax of those foreign countries. Irs 2011 tax form However, some treaty countries require U. Irs 2011 tax form S. Irs 2011 tax form 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. Irs 2011 tax form 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. Irs 2011 tax form Subsidy received. Irs 2011 tax form   Tax payments a foreign country returns to you in the form of a subsidy do not qualify for the foreign tax credit. Irs 2011 tax form 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. Irs 2011 tax form 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. Irs 2011 tax form   The term “subsidy” includes any type of benefit. Irs 2011 tax form Some ways of providing a subsidy are refunds, credits, deductions, payments, or discharges of obligations. Irs 2011 tax form Shareholder receiving refund for corporate tax in integrated system. Irs 2011 tax form   Under some foreign tax laws and treaties, a shareholder is considered to have paid part of the tax that is imposed on the corporation. Irs 2011 tax form You may be able to claim a refund of these taxes from the foreign government. Irs 2011 tax form You must include the refund (including any amount withheld) in your income in the year received. Irs 2011 tax form Any tax withheld from the refund is a qualified foreign tax. Irs 2011 tax form Example. Irs 2011 tax form You are a shareholder of a French corporation. Irs 2011 tax form You receive a $100 refund of the tax paid to France by the corporation on the earnings distributed to you as a dividend. Irs 2011 tax form The French government imposes a 15% withholding tax ($15) on the refund you received. Irs 2011 tax form You receive a check for $85. Irs 2011 tax form You include $100 in your income. Irs 2011 tax form The $15 of tax withheld is a qualified foreign tax. Irs 2011 tax form 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. Irs 2011 tax form Foreign taxes on wages, dividends, interest, and royalties qualify for the credit in most cases. Irs 2011 tax form 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. Irs 2011 tax form See Taxes in Lieu of Income Taxes , later. Irs 2011 tax form 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. Irs 2011 tax form A foreign levy is an income tax only if it meets both of the following requirements. Irs 2011 tax form It is a tax; that is, you have to pay it and you get no specific economic benefit (discussed below) from paying it. Irs 2011 tax form The predominant character of the tax is that of an income tax in the U. Irs 2011 tax form S. Irs 2011 tax form sense. Irs 2011 tax form A foreign levy may meet these requirements even if the foreign tax law differs from U. Irs 2011 tax form S. Irs 2011 tax form tax law. Irs 2011 tax form The foreign law may include in income items that U. Irs 2011 tax form S. Irs 2011 tax form law does not include, or it may allow certain exclusions or deductions that U. Irs 2011 tax form S. Irs 2011 tax form law does not allow. Irs 2011 tax form Specific economic benefit. Irs 2011 tax form   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. Irs 2011 tax form   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. Irs 2011 tax form   However, see the exception discussed later under Pension, unemployment, and disability fund payments . Irs 2011 tax form Economic benefits. Irs 2011 tax form   Economic benefits include the following. Irs 2011 tax form Goods. Irs 2011 tax form Services. Irs 2011 tax form Fees or other payments. Irs 2011 tax form Rights to use, acquire, or extract resources, patents, or other property the foreign country owns or controls. Irs 2011 tax form Discharges of contractual obligations. Irs 2011 tax form   In most cases, the right or privilege merely to engage in business is not an economic benefit. Irs 2011 tax form Dual-capacity taxpayers. Irs 2011 tax form   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. Irs 2011 tax form ” 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. Irs 2011 tax form    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. Irs 2011 tax form   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. Irs 2011 tax form    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. Irs 2011 tax form For more information about these agreements, see Publication 54. Irs 2011 tax form Soak-up taxes. Irs 2011 tax form   A foreign tax is not predominantly an income tax and does not qualify for credit to the extent it is a soak-up tax. Irs 2011 tax form 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. Irs 2011 tax form This rule applies only if and to the extent that the foreign tax would not be imposed if the credit were not available. Irs 2011 tax form Penalties and interest. Irs 2011 tax form   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. Irs 2011 tax form Taxes not based on income. Irs 2011 tax form   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. Irs 2011 tax form Taxes based on assets, such as property taxes, do not qualify for the credit. Irs 2011 tax form 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. Irs 2011 tax form 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. Irs 2011 tax form A tax in lieu of an income tax does not have to be based on realized net income. Irs 2011 tax form A foreign tax imposed on gross income, gross receipts or sales, or the number of units produced or exported can qualify for the credit. Irs 2011 tax form In most cases, a soak-up tax (discussed earlier) does not qualify as a tax in lieu of an income tax. Irs 2011 tax form 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. Irs 2011 tax form The soak-up tax. Irs 2011 tax form 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. Irs 2011 tax form Foreign Taxes for Which You Cannot Take a Credit This part discusses the foreign taxes for which you cannot take a credit. Irs 2011 tax form 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. Irs 2011 tax form S. Irs 2011 tax form persons controlling foreign corporations and partnerships who fail to file required information returns, and Taxes related to a foreign tax splitting event. Irs 2011 tax form Taxes on Excluded Income You cannot take a credit for foreign taxes paid or accrued on certain income that is excluded from U. Irs 2011 tax form S. Irs 2011 tax form gross income. Irs 2011 tax form 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. Irs 2011 tax form S. Irs 2011 tax form income under the foreign earned income exclusion or the foreign housing exclusion. Irs 2011 tax form See Publication 54 for more information on the foreign earned income and housing exclusions. Irs 2011 tax form Wages completely excluded. Irs 2011 tax form   If your wages are completely excluded, you cannot take a credit for any of the foreign taxes paid or accrued on these wages. Irs 2011 tax form Wages partly excluded. Irs 2011 tax form   If only part of your wages is excluded, you cannot take a credit for the foreign income taxes allocable to the excluded part. Irs 2011 tax form 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. Irs 2011 tax form   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. Irs 2011 tax form Deductible expenses do not include the foreign housing deduction. Irs 2011 tax form   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). Irs 2011 tax form If the foreign law taxes foreign earned income and some other income (for example, earned income from U. Irs 2011 tax form S. Irs 2011 tax form sources or a type of income not subject to U. Irs 2011 tax form S. Irs 2011 tax form 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. Irs 2011 tax form Example. Irs 2011 tax form You are a U. Irs 2011 tax form S. Irs 2011 tax form citizen and a cash basis taxpayer, employed by Company X and living in Country A. Irs 2011 tax form 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. Irs 2011 tax form To find that part, do the following. Irs 2011 tax form First, find the amount of business expenses allocable to excluded wages and therefore not deductible. Irs 2011 tax form To do this, multiply the otherwise deductible expenses by a fraction. Irs 2011 tax form That fraction is the excluded wages over your foreign earned income. Irs 2011 tax form   $20,000 × $97,600 $125,000 = $15,616             Next, find the numerator of the fraction by which you will multiply the foreign taxes paid. Irs 2011 tax form To do this, subtract business expenses allocable to excluded wages ($15,616) from excluded wages ($97,600). Irs 2011 tax form The result is $81,984. Irs 2011 tax form 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). Irs 2011 tax form Finally, multiply the foreign tax you paid by the resulting fraction. Irs 2011 tax form   $30,000 × $81,984  $105,000 = $23,424 The amount of Country A tax you cannot take a credit for is $23,424. Irs 2011 tax form Taxes on Income From Puerto Rico Exempt From U. Irs 2011 tax form S. Irs 2011 tax form 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. Irs 2011 tax form For information on figuring the reduction, see Publication 570. Irs 2011 tax form 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. Irs 2011 tax form For more information on this exclusion, see Publication 570. Irs 2011 tax form Extraterritorial Income Exclusion You cannot take a credit for taxes you pay on qualifying foreign trade income excluded on Form 8873, Extraterritorial Income Exclusion. Irs 2011 tax form However, see Internal Revenue Code section 943(d) for an exception for certain withholding taxes. Irs 2011 tax form 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. Irs 2011 tax form However, you can claim an itemized deduction for these taxes. Irs 2011 tax form See Choosing To Take Credit or Deduction , earlier. Irs 2011 tax form 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. Irs 2011 tax form The following countries meet this description for 2013. Irs 2011 tax form Income taxes paid or accrued to these countries in 2013 do not qualify for the credit. Irs 2011 tax form Cuba. Irs 2011 tax form Iran. Irs 2011 tax form Libya (but see Note later). Irs 2011 tax form North Korea. Irs 2011 tax form Sudan. Irs 2011 tax form Syria. Irs 2011 tax form Waiver of denial of the credit. Irs 2011 tax form   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. Irs 2011 tax form S. Irs 2011 tax form companies in the sanctioned country. Irs 2011 tax form 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. Irs 2011 tax form Note. Irs 2011 tax form Effective December 10, 2004, the President granted a waiver to Libya. Irs 2011 tax form Income taxes arising on or after this date qualify for the credit if they meet the other requirements in this publication. Irs 2011 tax form Limit on credit. Irs 2011 tax form   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. Irs 2011 tax form You must fill out a separate Form 1116 for this income. Irs 2011 tax form This will prevent you from claiming a credit for foreign taxes paid or accrued to the sanctioned country. Irs 2011 tax form Example. Irs 2011 tax form You lived and worked in Iran until August, when you were transferred to Italy. Irs 2011 tax form You paid taxes to each country on the income earned in that country. Irs 2011 tax form You cannot claim a foreign tax credit for the foreign taxes paid on the income earned in Iran. Irs 2011 tax form Because the income earned in Iran is a separate category of foreign income, you must fill out a separate Form 1116 for that income. Irs 2011 tax form You cannot take a credit for taxes paid on the income earned in Iran, but that income is taxable by the United States. Irs 2011 tax form Figuring the credit when a sanction ends. Irs 2011 tax form    Table 1 lists the countries for which sanctions have ended or for which a Presidential waiver has been granted. Irs 2011 tax form 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. Irs 2011 tax form Example. Irs 2011 tax form The sanctions against Country X ended on July 31. Irs 2011 tax form On August 19, you receive a distribution from a mutual fund of Country X income. Irs 2011 tax form The fund paid Country X income tax for you on the distribution. Irs 2011 tax form 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. Irs 2011 tax form Amounts for the nonsanctioned period. Irs 2011 tax form   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. Irs 2011 tax form Multiply the income or taxes for the year by the following fraction to determine the amounts allocable to that period. Irs 2011 tax form   Number of nonsanctioned days in year  Number of days in year Example. Irs 2011 tax form 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. Irs 2011 tax form Sanctions against Country X ended on July 11, 2013. Irs 2011 tax form You are unable to determine how much of the income or tax is for the nonsanctioned period. Irs 2011 tax form 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. Irs 2011 tax form You would compute the income for the nonsanctioned period as follows. Irs 2011 tax form 173 365 × $20,000 = $9,479             You would figure the tax for the nonsanctioned period as follows. Irs 2011 tax form 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. Irs 2011 tax form Further information. Irs 2011 tax form   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. Irs 2011 tax form This Cumulative Bulletin can be found in many libraries and IRS offices. Irs 2011 tax form Table 1. Irs 2011 tax form 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. Irs 2011 tax form 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. Irs 2011 tax form 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). Irs 2011 tax form 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. Irs 2011 tax form If the dividend is not for more than 366 days, rule (1) applies to the preferred stock. Irs 2011 tax form 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. Irs 2011 tax form 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. Irs 2011 tax form Withholding tax. Irs 2011 tax form   For this purpose, withholding tax includes any tax determined on a gross basis. Irs 2011 tax form It does not include any tax which is in the nature of a prepayment of a tax imposed on a net basis. Irs 2011 tax form Ex-dividend date. Irs 2011 tax form   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. Irs 2011 tax form Example 1. Irs 2011 tax form You bought common stock from a foreign corporation on November 3. Irs 2011 tax form You sold the stock on November 19. Irs 2011 tax form You received a dividend on this stock because you owned it on the ex-dividend date of November 5. Irs 2011 tax form 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). Irs 2011 tax form Because you held the stock for 16 days, from November 4 until November 19, you are entitled to the credit. Irs 2011 tax form Example 2. Irs 2011 tax form The facts are the same as in Example 1 except that you sold the stock on November 14. Irs 2011 tax form You held the stock for only 11 days. Irs 2011 tax form You are not entitled to the credit. Irs 2011 tax form Exception. Irs 2011 tax form   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. Irs 2011 tax form See section 901(k)(4) of the Internal Revenue Code for more information. Irs 2011 tax form 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. Irs 2011 tax form 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. Irs 2011 tax form Withholding tax. Irs 2011 tax form   For this purpose, withholding tax includes any tax determined on a gross basis. Irs 2011 tax form It does not include any tax which is in the nature of a prepayment of a tax imposed on a net basis. Irs 2011 tax form Exception for dealers. Irs 2011 tax form   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. Irs 2011 tax form See section 901(I)(2) of the Internal Revenue Code for more information. Irs 2011 tax form 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. Irs 2011 tax form A covered asset acquisition includes certain acquisitions that result in a stepped-up basis for U. Irs 2011 tax form S. Irs 2011 tax form tax purposes but not for foreign tax purposes. Irs 2011 tax form For more information, see Internal Revenue Code section 901(m). Irs 2011 tax form The IRS intends to issue guidance that will explain this provision in greater detail. Irs 2011 tax form 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. Irs 2011 tax form 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. Irs 2011 tax form For details, see Regulations section 1. Irs 2011 tax form 901-3. Irs 2011 tax form 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. Irs 2011 tax form See the instructions for line 12 in the Form 1116 instructions to figure this reduction. Irs 2011 tax form 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. Irs 2011 tax form List of boycotting countries. Irs 2011 tax form   A list of the countries which may require participation in or cooperation with an international boycott is published by the Department of the Treasury. Irs 2011 tax form As of November 2013, the following countries are listed. Irs 2011 tax form Iraq. Irs 2011 tax form Kuwait. Irs 2011 tax form Lebanon. Irs 2011 tax form Libya. Irs 2011 tax form Qatar. Irs 2011 tax form Saudi Arabia. Irs 2011 tax form Syria. Irs 2011 tax form United Arab Emirates. Irs 2011 tax form Yemen. Irs 2011 tax form    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. Irs 2011 tax form   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. Irs 2011 tax form The procedures for obtaining a determination from the Service are outlined in Revenue Procedure 77-9 in Cumulative Bulletin 1977-1. Irs 2011 tax form Cumulative Bulletins are available in most IRS offices and you are welcome to read them there. Irs 2011 tax form Public inspection. Irs 2011 tax form   A determination and any related background file is open to public inspection. Irs 2011 tax form However, your identity and certain other information will remain confidential. Irs 2011 tax form Reporting requirements. Irs 2011 tax form   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. Irs 2011 tax form 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. Irs 2011 tax form A partnership in which you are a partner. Irs 2011 tax form A trust you are treated as owning. Irs 2011 tax form Form 5713 required. Irs 2011 tax form   If you have to file a report, you must use Form 5713, International Boycott Report, and attach all supporting schedules. Irs 2011 tax form See the Instructions for Form 5713 for information on when and where to file the form. Irs 2011 tax form Penalty for failure to file. Irs 2011 tax form   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. Irs 2011 tax form 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. Irs 2011 tax form 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. Irs 2011 tax form S. Irs 2011 tax form tax liability (Form 1040, line 44) divided by your worldwide taxable income. Irs 2011 tax form You may be entitled to carry over to other years taxes reduced under this rule. Irs 2011 tax form See Internal Revenue Code section 907(f). Irs 2011 tax form Combined foreign oil and gas income means the sum of foreign oil related income and foreign oil and gas extraction income. Irs 2011 tax form Foreign oil and gas taxes are the sum of foreign oil and gas extraction taxes and foreign oil related taxes. Irs 2011 tax form Taxes of U. Irs 2011 tax form S. Irs 2011 tax form 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. Irs 2011 tax form 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. Irs 2011 tax form See Penalty for not filing Form 5471 or Form 8865 , later. Irs 2011 tax form U. Irs 2011 tax form S. Irs 2011 tax form persons controlling foreign corporations. Irs 2011 tax form   If you are a U. Irs 2011 tax form S. Irs 2011 tax form 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. Irs 2011 tax form S. Irs 2011 tax form Persons With Respect To Certain Foreign Corporations. Irs 2011 tax form 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. Irs 2011 tax form U. Irs 2011 tax form S. Irs 2011 tax form persons controlling foreign partnerships. Irs 2011 tax form   If you are a U. Irs 2011 tax form S. Irs 2011 tax form citizen or resident who had control of a foreign partnership at any time during the partnership's tax year, you may have to file