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1040x Example

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1040x Example

1040x example 13. 1040x example   Payment of Taxes Table of Contents How To Make Deposits When To Make Deposits Amount of DepositsSafe Harbor Rule Generally, semimonthly deposits of excise taxes are required. 1040x example A semimonthly period is the first 15 days of a month (the first semimonthly period) or the 16th through the last day of a month (the second semimonthly period). 1040x example However, no deposit is required for the situations listed below; the taxes are payable with Form 720. 1040x example The net liability for taxes listed in Part I (Form 720) does not exceed $2,500 for the quarter. 1040x example The gas guzzler tax is being paid on a one-time filing. 1040x example The liability is for taxes listed in Part II (Form 720), except for the floor stocks tax which generally requires a single deposit. 1040x example How To Make Deposits Electronic deposit requirement. 1040x example   You must use electronic funds transfer to make excise tax deposits. 1040x example Generally, electronic funds transfers are made using the Electronic Federal Tax Payment System (EFTPS). 1040x example 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 deposits on your behalf. 1040x example Also, you may arrange for your financial institution to initiate a same-day wire payment on your behalf. 1040x example   EFTPS is a free service provided by the Department of Treasury. 1040x example Services provided by your tax professional, financial institution, payroll service, or other third party may have a fee. 1040x example To get more information about EFTPS or to enroll in EFTPS, visit www. 1040x example eftps. 1040x example gov or call 1-800-555-4477. 1040x example Additional information about EFTPS is also available in Publication 966, Electronic Federal Tax Payment System: A Guide to Getting Started. 1040x example    Depositing on time. 1040x example For EFTPS deposits to be on time, you must initiate the transaction at least 1 day before the date the deposit is due (before 8:00 p. 1040x example m. 1040x example Eastern time). 1040x example You will automatically be enrolled in EFTPS when you apply for an EIN. 1040x example You will receive a separate mailing containing instructions for activating your EFTPS enrollment after you receive your EIN. 1040x example When To Make Deposits There are two methods for determining deposits: the regular method and the alternative method. 1040x example The regular method applies to all taxes in Part I of Form 720 except for communications and air transportation taxes if deposits are based on amounts billed or tickets sold, rather than on amounts actually collected. 1040x example See Alternative method below. 1040x example If you are depositing more than one tax under a method, combine all the taxes under the method and make one deposit for the semimonthly period. 1040x example Regular method. 1040x example   The deposit of tax for a semimonthly period is due by the 14th day following that period. 1040x example Generally, this is the 29th day of a month for the first semimonthly period and the 14th day of the following month for the second semimonthly period. 1040x example If the 14th or the 29th day falls on a Saturday, Sunday, or legal holiday, you must make the deposit by the immediately preceding day that is not a Saturday, Sunday, or legal holiday. 1040x example Alternative method (IRS Nos. 1040x example 22, 26, 27, and 28). 1040x example   Deposits of communications and air transportation taxes may be based on taxes included in amounts billed or tickets sold during a semimonthly period instead of on taxes actually collected during the period. 1040x example Under the alternative method, the tax included in amounts billed or tickets sold during a semimonthly period is considered collected during the first 7 days of the second following semimonthly period. 1040x example The deposit of tax is due by the 3rd banking day after the 7th day of that period. 1040x example   For an example of the alternative method, see the Instructions for Form 720. 1040x example To use the alternative method, you must keep a separate account of the tax included in amounts billed or tickets sold during the month and report on Form 720 the tax included in amounts billed or tickets sold and not the amount of tax that is actually collected. 1040x example For example, amounts billed in December, January, and February are considered collected during January, February, and March and are reported on Form 720 as the tax for the 1st quarter of the calendar year. 1040x example The separate account for each month must reflect: All items of tax included in amounts billed or tickets sold during the month, and Other items of adjustment relating to tax for prior months (within the statute of limitations on credits or refunds). 1040x example The separate account for any month cannot include an adjustment resulting from a refusal to pay or inability to collect unless the refusal has been reported to the IRS. 1040x example See Uncollected Tax Report in chapter 4. 1040x example The net amount of tax that is considered collected during the semimonthly period must be either: The net amount of tax reflected in the separate account for the corresponding semimonthly period of the preceding month, or One-half of the net amount of tax reflected in the separate account for the preceding month. 1040x example Special rule for deposits of taxes in September. 1040x example   See the Instructions for Form 720 for a special rule on deposits made in September. 1040x example Amount of Deposits Deposits for a semimonthly period generally must be at least 95% of the net tax liability for that period unless the safe harbor rule (discussed later) applies. 1040x example Generally, you do not have to make a deposit for a period in which you incurred no tax liability. 1040x example Net tax liability. 1040x example   Your net tax liability is your tax liability for the period minus any claims on Schedule C (Form 720) for the period. 1040x example You may figure your net tax liability for a semimonthly period by dividing your net liability incurred during the calendar month by two. 1040x example If you use this method, you must use it for all semimonthly periods in the calendar quarter. 1040x example Do not reduce your liability by any amounts from Form 720X. 1040x example Safe Harbor Rule The safe harbor rule applies separately to deposits under the regular method and the alternative method. 1040x example Persons who filed Form 720 for the look-back quarter (the 2nd calendar quarter preceding the current quarter) are considered to meet the semimonthly deposit requirement if the deposit for each semimonthly period in the current quarter is at least 1/6 (16. 1040x example 67%) of the net tax liability reported for the look-back quarter. 1040x example For the semimonthly period for which the additional deposit is required, the additional deposit must be at least 11/90 12. 1040x example 23%), 10/90 (11. 1040x example 12%) for non-EFTPS, of the net tax liability reported for the look-back quarter. 1040x example Also, the total deposit for that semimonthly period must be at least 1/6 (16. 1040x example 67%) of the net tax liability reported for the look-back quarter. 1040x example Exceptions. 1040x example   The safe harbor rule does not apply to: The 1st and 2nd quarters beginning on or after the effective date of an increase in the rate of tax unless the deposit of taxes for each semimonthly period in the calendar quarter is at least 1/6 (16. 1040x example 67%) of the tax liability you would have had for the look-back quarter if the increased rate of tax had been in effect for that look-back quarter, Any quarter if liability includes any tax not in effect throughout the look-back quarter, or For deposits under the alternative method, any quarter if liability includes any tax not in effect throughout the look-back quarter and the month preceding the look-back quarter. 1040x example Requirements to be met. 1040x example   For the safe harbor rule to apply, you must: Make each deposit timely at an authorized financial institution, and Pay any underpayment for the current quarter by the due date of the return. 1040x example    The IRS may withdraw the right to make deposits of tax using the safe harbor rule from any person not complying with these rules. 1040x example Tax rate increases. 1040x example   You must modify the safe harbor rule if there has been an increase in the rate of tax. 1040x example You must figure your tax liability in the look-back quarter as if the increased rate had been in effect. 1040x example To qualify for the safe harbor rule, your deposits cannot be less than 1/6 of the refigured tax liability. 1040x example Prev  Up  Next   Home   More Online Publications
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Consumer Protection Offices

City, county, regional, and state consumer offices offer a variety of important services. They might mediate complaints, conduct investigations, prosecute offenders of consumer laws, license and regulate professional service providers, provide educational materials and advocate for consumer rights. To save time, call before sending a written complaint. Ask if the office handles the type of complaint you have and if complaint forms are provided.

State Consumer Protection Offices

California Department of Consumer Affairs

Website: California Department of Consumer Affairs

Address: California Department of Consumer Affairs
Consumer Information Division
1625 N. Market Blvd., Suite N 112
Sacramento, CA 95834

Phone Number: 916- 445-1254

Toll-free: 1-800-952-5210

TTY: 916-928-1227; 1-800-326-2297

California Office of the Attorney General

Website: California Office of the Attorney General

Address: California Office of the Attorney General
Public Inquiry Unit
PO Box 944255
Sacramento, CA 94244-2550

Phone Number: 916-322-3360

Toll-free: 1-800-952-5225 (CA)

TTY: 1-800-735-2929

Contractors State License Board

Website: Contractors State License Board

Address: Contractors State License Board
9821 Business Park Dr.
Sacramento, CA 95827

Phone Number: 916-255-3900 (Headquarters) 916-255-2924 (Northern CA.) 562-345-7600 (Southern CA.)

Toll-free: 1-800-321-2752

California Bureau of Automotive Repair

Website: California Bureau of Automotive Repair

Address: California Bureau of Automotive Repair
Department of Consumer Affairs
10949 N. Mather Blvd.
Rancho Cordova, CA 95670

Toll-free: 1-800-952-5210 (Consumer Questions) 1-866-799-3811 (Complaint Intake)

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County Consumer Protection Offices

Stanislaus County District Attorney's Office

Website: Stanislaus County District Attorney's Office

Address: Stanislaus County District Attorney's Office
Consumer Protection Unit
832 12th St., Suite 300
Modesto, CA 95354

Phone Number: 209-525-5550

Ventura County District Attorney's Office

Website: Ventura County District Attorney's Office

Address: Ventura County District Attorney's Office
Consumer Mediation Section
800 S. Victoria Ave.
Ventura, CA 93009

Phone Number: 805-654-3110

Toll-free: 1-800-660-5474 ext 3110 (Ventura)

Contra Costa County District Attorneys Office

Website: Contra Costa County District Attorneys Office (Consumer protection division of Contra Costa)

Address: Contra Costa County District Attorneys Office
Special Operations Division- Consumer Division
900 Ward St., 4th Floor
Martinez, CA 94553

Phone Number: 925-957-8604

Fresno County District Attorney's Office

Website: Fresno County District Attorney's Office

Address: Fresno County District Attorney's Office
Consumer Protection Division
929 L St.
Fresno, CA 93721

Phone Number: 559-600-3156

Kern County District Attorney's Office

Website: Kern County District Attorney's Office

Address: Kern County District Attorney's Office
Consumer Protection Unit
Justice Building

1215 Truxtun Ave., 4th Floor
Bakersfield, CA 93301

Phone Number: 661-868-7600

Los Angeles County Department of Consumer Affairs

Website: Los Angeles County Department of Consumer Affairs

Address: Los Angeles County Department of Consumer Affairs
500 W. Temple St., Room B-96
Los Angeles, CA 90012-2722

Phone Number: 213-974-1452

Toll-free: 1-800-593-8222 (L.A. County)

TTY: 213-626-0913

Marin County District Attorney's Office

Website: Marin County District Attorney's Office

Address: Marin County District Attorney's Office
Consumer Protection Unit
Hall of Justice, Room 130
3501 Civic Center Dr.
San Rafael, CA 94903

Phone Number: 415-473-6450 415-473-6495 (Mediation)

Monterey County District Attorney's Office

Website: Monterey County District Attorney's Office (District attorneys page)

Address: Monterey County District Attorney's Office
Consumer Protection Division
1200 Aguajito Rd., Room 301
Monterey, CA 93940

Phone Number: 831-755-5073 (Salinas) 831-647-7770 (Monterey) 831-385-8373 (King City)

Napa County District Attorney's Office

Website: Napa County District Attorney's Office (Napa County website)

Address: Napa County District Attorney's Office
Consumer Affairs
931 Parkway Mall
Napa, CA 94559

Phone Number: 707-253-4059 (Hotline)

Orange County District Attorney's Office

Website: Orange County District Attorney's Office

Address: Orange County District Attorney's Office
Consumer Protection Unit
401 Civic Center Dr., W
Santa Ana, CA 92701

Phone Number: 714-834-6553

San Diego County District Attorney's Office

Website: San Diego County District Attorney's Office

Address: San Diego County District Attorney's Office
Consumer Protection Unit
330 W. Broadway
San Diego, CA 92101

Phone Number: 619-531-4040 619-531-3507 (Consumer Fraud Hotline)

San Francisco County District Attorney's Office

Website: San Francisco County District Attorney's Office

Address: San Francisco County District Attorney's Office
Special Operations Division- Consumer Protection Unit
732 Brannan St.
San Francisco, CA 94102

Phone Number: 415-551-9595 (Hotline)

San Luis Obispo County District Attorneys Office

Website: San Luis Obispo County District Attorneys Office

Address: San Luis Obispo County District Attorneys Office
Economic Crime Unit
Consumer Advisory

County Courthouse Annex
1050 Monterey St., Room 223
San Luis Obispo, CA 93408

Phone Number: 805-781-5856

San Mateo County District Attorneys Office

Website: San Mateo County District Attorneys Office

Address: San Mateo County District Attorneys Office
Consumer Environmental & Protection Unit
Hall of Justice and Records
400 County Center, 3rd Floor
Redwood City, CA 94063

Phone Number: 650-363-4651 650-363-4636 (Complaints)

Santa Barbara County District Attorney's Office

Website: Santa Barbara County District Attorney's Office

Address: Santa Barbara County District Attorney's Office
Consumer Mediation Services
1112 Santa Barbara St.
Santa Maria, CA 93101

Phone Number: 805-568-2300

Santa Clara County District Attorney's Office

Website: Santa Clara County District Attorney's Office

Address: Santa Clara County District Attorney's Office
Consumer Protection Unit
70 W. Hedding St.
West Wing
San Jose, CA 95110

Phone Number: 408-792-2880

Santa Cruz County District Attorney's Office

Website: Santa Cruz County District Attorney's Office

Address: Santa Cruz County District Attorney's Office
Consumer Affairs Unit
701 Ocean St., Room 200
Santa Cruz, CA 95060

Phone Number: 831-454-2050

TTY: 831-454-2123

Solano County District Attorney's Office

Website: Solano County District Attorney's Office

Phone Number: 707-784-6859

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City Consumer Protection Offices

Los Angeles City Attorney's Office

Website: Los Angeles City Attorney's Office

Address: Los Angeles City Attorney's Office
Consumer Protection Unit
200 N. Main St.,
800 City Hall East
Los Angeles, CA 90012

Phone Number: 213-978-8070

TTY: 213-978-8310

San Diego City Attorney's Office

Website: San Diego City Attorney's Office

Address: San Diego City Attorney's Office
Consumer and Environmental Protection Unit
1200 Third Ave., #1620
San Diego, CA 92101

Phone Number: 619-533-5600

TTY: 619-702-7198

Santa Monica City Attorneys Office

Website: Santa Monica City Attorneys Office

Address: Santa Monica City Attorneys Office
Consumer Protection Unit
1685 Main St., 3rd Floor
Santa Monica, CA 90401

Phone Number: 310-458-8336

TTY: 310-458-8696

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Banking Authorities

The officials listed in this section regulate and supervise state-chartered banks. Many of them handle or refer problems and complaints about other types of financial institutions as well. Some also answer general questions about banking and consumer credit. If you are dealing with a federally chartered bank, check Federal Agencies.

Department of Business Oversight

Website: Department of Business Oversight

Address: Department of Business Oversight
Consumer Services
1515 K St., Suite 200
Sacramento, CA 95814

Phone Number: 916-327-7585

Toll-free: 1-866-275-2677 (CA)

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Insurance Regulators

Each state has its own laws and regulations for each type of insurance. The officials listed in this section enforce these laws. Many of these offices can also provide you with information to help you make informed insurance buying decisions.

Department of Insurance

Website: Department of Insurance

Address: Department of Insurance
Consumer Services Division
300 S. Spring St., South Tower
Los Angeles, CA 90013

Phone Number: 213-897-8921

Toll-free: 1-800-927-4357 (CA)

TTY: 1-800-482-4833

Department of Managed Health Care, California HMO Help Center

Website: Department of Managed Health Care, California HMO Help Center

Address: Department of Managed Health Care, California HMO Help Center
980 9th St., Suite 500
Sacramento, CA 95814-2725

Toll-free: 1-888-466-2219

TTY: 1-877-688-9891

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Securities Administrators

Each state has its own laws and regulations for securities brokers and securities - including stocks, mutual funds, commodities, real estate, etc. The officials and agencies listed in this section enforce these laws and regulations. Many of these offices can also provide information to help you make informed investment decisions.

Department of Business Oversight

Website: Department of Business Oversight

Address: Department of Business Oversight
Consumer Services
1515 K St., Suite 200
Sacramento, CA 95814

Toll-free: 1-866-275-2677

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Utility Commissions

State Utility Commissions regulate services and rates for gas, electricity and telephones within your state. In some states, the utility commissions regulate other services such as water, transportation, and the moving of household goods. Many utility commissions handle consumer complaints. Sometimes, if a number of complaints are received about the same utility matter, they will conduct investigations.

Public Utilities Commission

Website: Public Utilities Commission

Address: Public Utilities Commission
Consumer Affairs Branch
505 Van Ness Ave.
San Francisco, CA 94102

Phone Number: 415-703-2782

Toll-free: 1-800-649-7570 (CA)

TTY: 1-866-836-7825

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The 1040x Example

1040x example 2. 1040x example   Source of Income Table of Contents Introduction Topics - This chapter discusses: Resident Aliens Nonresident AliensInterest Income Dividends Guarantee of Indebtedness Personal Services Transportation Income Scholarships, Grants, Prizes, and Awards Pensions and Annuities Rents or Royalties Real Property Personal Property Community Income Introduction After you have determined your alien status, you must determine the source of your income. 1040x example This chapter will help you determine the source of different types of income you may receive during the tax year. 1040x example This chapter also discusses special rules for married individuals who are domiciled in a country with community property laws. 1040x example Topics - This chapter discusses: Income source rules, and Community income. 1040x example Resident Aliens A resident alien's income is generally subject to tax in the same manner as a U. 1040x example S. 1040x example citizen. 1040x example If you are a resident alien, you must report all interest, dividends, wages, or other compensation for services, income from rental property or royalties, and other types of income on your U. 1040x example S. 1040x example tax return. 1040x example You must report these amounts from sources within and outside the United States. 1040x example Nonresident Aliens A nonresident alien usually is subject to U. 1040x example S. 1040x example income tax only on U. 1040x example S. 1040x example source income. 1040x example Under limited circumstances, certain foreign source income is subject to U. 1040x example S. 1040x example tax. 1040x example See Foreign Income in chapter 4. 1040x example The general rules for determining U. 1040x example S. 1040x example source income that apply to most nonresident aliens are shown in Table 2-1. 1040x example The following discussions cover the general rules as well as the exceptions to these rules. 1040x example Not all items of U. 1040x example S. 1040x example source income are taxable. 1040x example See chapter 3. 1040x example Interest Income Generally, U. 1040x example S. 1040x example source interest income includes the following items. 1040x example Interest on bonds, notes, or other interest-bearing obligations of U. 1040x example S. 1040x example residents or domestic corporations. 1040x example Interest paid by a domestic or foreign partnership or foreign corporation engaged in a U. 1040x example S. 1040x example trade or business at any time during the tax year. 1040x example Original issue discount. 1040x example Interest from a state, the District of Columbia, or the U. 1040x example S. 1040x example Government. 1040x example The place or manner of payment is immaterial in determining the source of the income. 1040x example A substitute interest payment made to the transferor of a security in a securities lending transaction or a sale-repurchase transaction is sourced in the same manner as the interest on the transferred security. 1040x example Exceptions. 1040x example   U. 1040x example S. 1040x example source interest income does not include the following items. 1040x example Interest paid by a resident alien or a domestic corporation on obligations issued before August 10, 2010, if for the 3-year period ending with the close of the payer's tax year preceding the interest payment, at least 80% of the payer's total gross income: Is from sources outside the United States, and Is attributable to the active conduct of a trade or business by the individual or corporation in a foreign country or a U. 1040x example S. 1040x example possession. 1040x example However, the interest will be considered U. 1040x example S. 1040x example source interest income if either of the following apply. 1040x example The recipient of the interest is related to the resident alien or domestic corporation. 1040x example See section 954(d)(3) for the definition of related person. 1040x example The terms of the obligation are significantly modified after August 9, 2010. 1040x example Any extension of the term of the obligation is considered a significant modification. 1040x example Interest paid by a foreign branch of a domestic corporation or a domestic partnership on deposits or withdrawable accounts with mutual savings banks, cooperative banks, credit unions, domestic building and loan associations, and other savings institutions chartered and supervised as savings and loan or similar associations under federal or state law if the interest paid or credited can be deducted by the association. 1040x example Interest on deposits with a foreign branch of a domestic corporation or domestic partnership, but only if the branch is in the commercial banking business. 1040x example Dividends In most cases, dividend income received from domestic corporations is U. 1040x example S. 1040x example source income. 1040x example Dividend income from foreign corporations is usually foreign source income. 1040x example Exceptions to both of these rules are discussed below. 1040x example A substitute dividend payment made to the transferor of a security in a securities lending transaction or a sale-repurchase transaction is sourced in the same manner as a distribution on the transferred security. 1040x example Dividend equivalent payments. 1040x example   U. 1040x example S. 1040x example source dividends also include all dividend equivalent payments. 1040x example Dividend equivalent payments include substitute dividends, payments made pursuant to a specified notional principal contract, and all similar payments that, directly or indirectly, are contingent on or determined by reference to, the payment of a dividend from U. 1040x example S. 1040x example sources. 1040x example    The Internal Revenue Service has issued final regulations that would affect the treatment of dividend equivalent payments and specified notional principal contracts. 1040x example You can view this regulation at www. 1040x example irs. 1040x example gov/irb/2013-52_IRB/ar08. 1040x example html. 1040x example First exception. 1040x example   Dividends received from a domestic corporation are not U. 1040x example S. 1040x example source income if the corporation elects to take the American Samoa economic development credit. 1040x example Second exception. 1040x example   Part of the dividends received from a foreign corporation is U. 1040x example S. 1040x example source income if 25% or more of its total gross income for the 3-year period ending with the close of its tax year preceding the declaration of dividends was effectively connected with a trade or business in the United States. 1040x example If the corporation was formed less than 3 years before the declaration, use its total gross income from the time it was formed. 1040x example Determine the part that is U. 1040x example S. 1040x example source income by multiplying the dividend by the following fraction. 1040x example   Foreign corporation's gross income connected with a U. 1040x example S. 1040x example trade or business for the 3-year period     Foreign corporation's gross income from all sources for that period   Guarantee of Indebtedness Certain amounts received directly or indirectly, for the provision of a guarantee of indebtedness issued after September 27, 2010, are U. 1040x example S. 1040x example source income. 1040x example They must be paid by a noncorporate resident or U. 1040x example S. 1040x example corporation or by any foreign person if the amounts are effectively connected with the conduct of a U. 1040x example S. 1040x example trade or business. 1040x example For more information, see Internal Revenue Code sections 861(a)(9) and 862(a)(9). 1040x example Personal Services All wages and any other compensation for services performed in the United States are considered to be from sources in the United States. 1040x example The only exceptions to this rule are discussed in chapter 3 under Employees of foreign persons, organizations, or offices, and under Crew members. 1040x example If you are an employee and receive compensation for labor or personal services performed both inside and outside the United States, special rules apply in determining the source of the compensation. 1040x example Compensation (other than certain fringe benefits) is sourced on a time basis. 1040x example Certain fringe benefits (such as housing and education) are sourced on a geographical basis. 1040x example Or, you may be permitted to use an alternative basis to determine the source of compensation. 1040x example See Alternative Basis , later. 1040x example Multi-level marketing. 1040x example   Certain companies sell products through a multi-level marketing arrangement, such that an upper-tier distributor, who has sponsored a lower-tier distributor, is entitled to a payment from the company based on certain activities of that lower-tier distributor. 1040x example Generally, depending on the facts, payments from such multi-level marketing companies to independent (non-employee) distributors (upper-tier distributors) that are based on the sales or purchases of persons whom they have sponsored (lower-tier distributors) constitute income for the performance of personal services in recruiting, training, and supporting the lower-tier distributors. 1040x example The source of such income is generally based on where the services of the upper-tier distributor are performed, and may, depending on the facts, be considered multi-year compensation, with the source of income determined over the period to which such compensation is attributable. 1040x example Self-employed individuals. 1040x example   If you are self-employed, you determine the source of compensation for labor or personal services from self-employment on the basis that most correctly reflects the proper source of that income under the facts and circumstances of your particular case. 1040x example In many cases, the facts and circumstances will call for an apportionment on a time basis as explained next. 1040x example Time Basis Use a time basis to figure your U. 1040x example S. 1040x example source compensation (other than the fringe benefits discussed later). 1040x example Do this by multiplying your total compensation (other than the fringe benefits discussed later) by the following fraction:   Number of days you performed services in the United States during the year     Total number of days you performed services during the year   You can use a unit of time less than a day in the above fraction, if appropriate. 1040x example The time period for which the compensation is made does not have to be a year. 1040x example Instead, you can use another distinct, separate, and continuous time period if you can establish to the satisfaction of the IRS that this other period is more appropriate. 1040x example Example 1. 1040x example Christina Brooks, a resident of the Netherlands, worked 240 days for a U. 1040x example S. 1040x example company during the tax year. 1040x example She received $80,000 in compensation. 1040x example None of it was for fringe benefits. 1040x example Christina performed services in the United States for 60 days and performed services in the Netherlands for 180 days. 1040x example Using the time basis for determining the source of compensation, $20,000 ($80,000 × 60/240) is her U. 1040x example S. 1040x example source income. 1040x example Example 2. 1040x example Rob Waters, a resident of South Africa, is employed by a corporation. 1040x example His annual salary is $100,000. 1040x example None of it is for fringe benefits. 1040x example During the first quarter of the year he worked entirely within the United States. 1040x example On April 1, Rob was transferred to Singapore for the remainder of the year. 1040x example Rob is able to establish that the first quarter of the year and the last 3 quarters of the year are two separate, distinct, and continuous periods of time. 1040x example Accordingly, $25,000 of Rob's annual salary is attributable to the first quarter of the year (. 1040x example 25 × $100,000). 1040x example All of it is U. 1040x example S. 1040x example source income because he worked entirely within the United States during that quarter. 1040x example The remaining $75,000 is attributable to the last three quarters of the year. 1040x example During those quarters, he worked 150 days in Singapore and 30 days in the United States. 1040x example His periodic performance of services in the United States did not result in distinct, separate, and continuous periods of time. 1040x example Of this $75,000, $12,500 ($75,000 × 30/180) is U. 1040x example S. 1040x example source income. 1040x example Multi-year compensation. 1040x example   The source of multi-year compensation is generally determined on a time basis over the period to which the compensation is attributable. 1040x example Multi-year compensation is compensation that is included in your income in one tax year but that is attributable to a period that includes two or more tax years. 1040x example   You determine the period to which the compensation is attributable based on the facts and circumstances of your case. 1040x example For example, an amount of compensation that specifically relates to a period of time that includes several calendar years is attributable to the entire multi-year period. 1040x example   The amount of compensation treated as from U. 1040x example S. 1040x example sources is figured by multiplying the total multi-year compensation by a fraction. 1040x example The numerator of the fraction is the number of days (or unit of time less than a day, if appropriate) that you performed labor or personal services in the United States in connection with the project. 1040x example The denominator of the fraction is the total number of days (or unit of time less than a day, if appropriate) that you performed labor or personal services in connection with the project. 1040x example Geographical Basis Compensation you receive as an employee in the form of the following fringe benefits is sourced on a geographical basis. 1040x example Housing. 1040x example Education. 1040x example Local transportation. 1040x example Tax reimbursement. 1040x example Hazardous or hardship duty pay as defined in Regulations section 1. 1040x example 861-4(b)(2)(ii)(D)(5). 1040x example Moving expense reimbursement. 1040x example The amount of fringe benefits must be reasonable and you must substantiate them by adequate records or by sufficient evidence. 1040x example Principal place of work. 1040x example   The above fringe benefits, except for tax reimbursement and hazardous or hardship duty pay, are sourced based on your principal place of work. 1040x example Your principal place of work is usually the place where you spend most of your working time. 1040x example This could be your office, plant, store, shop, or other location. 1040x example If there is no one place where you spend most of your working time, your main job location is the place where your work is centered, such as where you report for work or are otherwise required to “base” your work. 1040x example   If you have more than one job at any time, your main job location depends on the facts in each case. 1040x example The more important factors to be considered are: The total time you spend at each place, The amount of work you do at each place, and How much money you earn at each place. 1040x example Housing. 1040x example   The source of a housing fringe benefit is determined based on the location of your principal place of work. 1040x example A housing fringe benefit includes payments to you or on your behalf (and your family's if your family resides with you) only for the following. 1040x example Rent. 1040x example Utilities (except telephone charges). 1040x example Real and personal property insurance. 1040x example Occupancy taxes not deductible under section 164 or 216(a). 1040x example Nonrefundable fees for securing a leasehold. 1040x example Rental of furniture and accessories. 1040x example Household repairs. 1040x example Residential parking. 1040x example Fair rental value of housing provided in kind by your employer. 1040x example   A housing fringe benefit does not include: Deductible interest and taxes (including deductible interest and taxes of a tenant-stockholder in a cooperative housing corporation), The cost of buying property, including principal payments on a mortgage, The cost of domestic labor (maids, gardeners, etc. 1040x example ), Pay television subscriptions, Improvements and other expenses that increase the value or appreciably prolong the life of property, Purchased furniture or accessories, Depreciation or amortization of property or improvements, The value of meals or lodging that you exclude from gross income, or The value of meals or lodging that you deduct as moving expenses. 1040x example Education. 1040x example   The source of an education fringe benefit for the education expenses of your dependents is determined based on the location of your principal place of work. 1040x example An education fringe benefit includes payments only for the following expenses for education at an elementary or secondary school. 1040x example Tuition, fees, academic tutoring, special needs services for a special needs student, books, supplies, and other equipment. 1040x example Room and board and uniforms that are required or provided by the school in connection with enrollment or attendance. 1040x example Local transportation. 1040x example   The source of a local transportation fringe benefit is determined based on the location of your principal place of work. 1040x example Your local transportation fringe benefit is the amount that you receive as compensation for local transportation for you or your spouse or dependents at the location of your principal place of work. 1040x example The amount treated as a local transportation fringe benefit is limited to actual expenses incurred for local transportation and the fair rental value of any employer-provided vehicle used predominantly by you, your spouse, or your dependents for local transportation. 1040x example Actual expenses do not include the cost (including interest) of any vehicle purchased by you or on your behalf. 1040x example Tax reimbursement. 1040x example   The source of a tax reimbursement fringe benefit is determined based on the location of the jurisdiction that imposed the tax for which you are reimbursed. 1040x example Moving expense reimbursement. 1040x example   The source of a moving expense reimbursement is generally based on the location of your new principal place of work. 1040x example However, the source is determined based on the location of your former principal place of work if you provide sufficient evidence that such determination of source is more appropriate under the facts and circumstances of your case. 1040x example Sufficient evidence generally requires an agreement between you and your employer, or a written statement of company policy, which is reduced to writing before the move and which is entered into or established to induce you or other employees to move to another country. 1040x example The written statement or agreement must state that your employer will reimburse you for moving expenses that you incur to return to your former principal place of work regardless of whether you continue to work for your employer after returning to that location. 1040x example It may contain certain conditions upon which the right to reimbursement is determined as long as those conditions set forth standards that are definitely ascertainable and can only be fulfilled prior to, or through completion of, your return move to your former principal place of work. 1040x example Alternative Basis If you are an employee, you can determine the source of your compensation under an alternative basis if you establish to the satisfaction of the IRS that, under the facts and circumstances of your case, the alternative basis more properly determines the source of your compensation than the time or geographical basis. 1040x example If you use an alternative basis, you must keep (and have available for inspection) records to document why the alternative basis more properly determines the source of your compensation. 1040x example Also, if your total compensation from all sources is $250,000 or more, check “Yes” to both questions on line K on page 5 of Form 1040NR, and attach a written statement to your tax return that sets forth all of the following. 1040x example Your name and social security number (written across the top of the statement). 1040x example The specific compensation income, or the specific fringe benefit, for which you are using the alternative basis. 1040x example For each item in (2), the alternative basis of allocation of source used. 1040x example For each item in (2), a computation showing how the alternative allocation was computed. 1040x example A comparison of the dollar amount of the U. 1040x example S. 1040x example compensation and foreign compensation sourced under both the alternative basis and the time or geographical basis discussed earlier. 1040x example Transportation Income Transportation income is income from the use of a vessel or aircraft or for the performance of services directly related to the use of any vessel or aircraft. 1040x example This is true whether the vessel or aircraft is owned, hired, or leased. 1040x example The term “vessel or aircraft” includes any container used in connection with a vessel or aircraft. 1040x example All income from transportation that begins and ends in the United States is treated as derived from sources in the United States. 1040x example If the transportation begins or ends in the United States, 50% of the transportation income is treated as derived from sources in the United States. 1040x example For transportation income from personal services, 50% of the income is U. 1040x example S. 1040x example source income if the transportation is between the United States and a U. 1040x example S. 1040x example possession. 1040x example For nonresident aliens, this only applies to income derived from, or in connection with, an aircraft. 1040x example For information on how U. 1040x example S. 1040x example source transportation income is taxed, see chapter 4. 1040x example Scholarships, Grants, Prizes, and Awards Generally, the source of scholarships, fellowship grants, grants, prizes, and awards is the residence of the payer regardless of who actually disburses the funds. 1040x example However, see Activities to be performed outside the United States , later. 1040x example For example, payments for research or study in the United States made by the United States, a noncorporate U. 1040x example S. 1040x example resident, or a domestic corporation, are from U. 1040x example S. 1040x example sources. 1040x example Similar payments from a foreign government or foreign corporation are foreign source payments even though the funds may be disbursed through a U. 1040x example S. 1040x example agent. 1040x example Payments made by an entity designated as a public international organization under the International Organizations Immunities Act are from foreign sources. 1040x example Activities to be performed outside the United States. 1040x example   Scholarships, fellowship grants, targeted grants, and achievement awards received by nonresident aliens for activities performed, or to be performed, outside the United States are not U. 1040x example S. 1040x example source income. 1040x example    These rules do not apply to amounts paid as salary or other compensation for services. 1040x example See Personal Services, earlier, for the source rules that apply. 1040x example Pensions and Annuities If you receive a pension from a domestic trust for services performed both in and outside the United States, part of the pension payment is from U. 1040x example S. 1040x example sources. 1040x example That part is the amount attributable to earnings of the pension plan and the employer contributions made for services performed in the United States. 1040x example This applies whether the distribution is made under a qualified or nonqualified stock bonus, pension, profit-sharing, or annuity plan (whether or not funded). 1040x example If you performed services as an employee of the United States, you may receive a distribution from the U. 1040x example S. 1040x example Government under a plan, such as the Civil Service Retirement System, that is treated as a qualified pension plan. 1040x example Your U. 1040x example S. 1040x example source income is the otherwise taxable amount of the distribution that is attributable to your total U. 1040x example S. 1040x example Government basic pay other than tax-exempt pay for services performed outside the United States. 1040x example Rents or Royalties Your U. 1040x example S. 1040x example source income includes rent and royalty income received during the tax year from property located in the United States or from any interest in that property. 1040x example U. 1040x example S. 1040x example source income also includes rents or royalties for the use of, or for the privilege of using, in the United States, intangible property such as patents, copyrights, secret processes and formulas, goodwill, trademarks, franchises, and similar property. 1040x example Real Property Real property is land and buildings and generally anything built on, growing on, or attached to land. 1040x example Gross income from sources in the United States includes gains, profits, and income from the sale or other disposition of real property located in the United States. 1040x example Natural resources. 1040x example   The income from the sale of products of any farm, mine, oil or gas well, other natural deposit, or timber located in the United States and sold in a foreign country, or located in a foreign country and sold in the United States, is partly from sources in the United States. 1040x example For information on determining that part, see section 1. 1040x example 863-1(b) of the regulations. 1040x example Table 2-1. 1040x example Summary of Source Rules for Income of Nonresident Aliens Item of income Factor determining source Salaries, wages, other compensation Where services performed Business income:   Personal services Where services performed Sale of inventory—purchased Where sold Sale of inventory—produced Allocation Interest Residence of payer Dividends Whether a U. 1040x example S. 1040x example or foreign corporation* Rents Location of property Royalties:   Natural resources Location of property Patents, copyrights, etc. 1040x example Where property is used Sale of real property Location of property Sale of personal property Seller's tax home (but see Personal Property , later, for exceptions) Pension distributions attributable to contributions Where services were performed that earned the pension Investment earnings on pension contributions Location of pension trust Sale of natural resources Allocation based on fair market value of product at export terminal. 1040x example For more information, see section 1. 1040x example 863-1(b) of the regulations. 1040x example *Exceptions include: a) Dividends paid by a U. 1040x example S. 1040x example corporation are foreign source if the corporation elects the  American Samoa economic development credit. 1040x example  b) Part of a dividend paid by a foreign corporation is U. 1040x example S. 1040x example source if at least 25% of the  corporation's gross income is effectively connected with a U. 1040x example S. 1040x example trade or business for the  3 tax years before the year in which the dividends are declared. 1040x example Personal Property Personal property is property, such as machinery, equipment, or furniture, that is not real property. 1040x example Gain or loss from the sale or exchange of personal property generally has its source in the United States if you have a tax home in the United States. 1040x example If you do not have a tax home in the United States, the gain or loss generally is considered to be from sources outside the United States. 1040x example Tax home. 1040x example   Your tax home is the general area of your main place of business, employment, or post of duty, regardless of where you maintain your family home. 1040x example Your tax home is the place where you permanently or indefinitely work as an employee or a self-employed individual. 1040x example If you do not have a regular or main place of business because of the nature of your work, then your tax home is the place where you regularly live. 1040x example If you do not fit either of these categories, you are considered an itinerant and your tax home is wherever you work. 1040x example Inventory property. 1040x example   Inventory property is personal property that is stock in trade or that is held primarily for sale to customers in the ordinary course of your trade or business. 1040x example Income from the sale of inventory that you purchased is sourced where the property is sold. 1040x example Generally, this is where title to the property passes to the buyer. 1040x example For example, income from the sale of inventory in the United States is U. 1040x example S. 1040x example source income, whether you purchased it in the United States or in a foreign country. 1040x example   Income from the sale of inventory property that you produced in the United States and sold outside the United States (or vice versa) is partly from sources in the United States and partly from sources outside the United States. 1040x example For information on making this allocation, see section 1. 1040x example 863-3 of the regulations. 1040x example   These rules apply even if your tax home is not in the United States. 1040x example Depreciable property. 1040x example   To determine the source of any gain from the sale of depreciable personal property, you must first figure the part of the gain that is not more than the total depreciation adjustments on the property. 1040x example You allocate this part of the gain to sources in the United States based on the ratio of U. 1040x example S. 1040x example depreciation adjustments to total depreciation adjustments. 1040x example The rest of this part of the gain is considered to be from sources outside the United States. 1040x example   For this purpose, “U. 1040x example S. 1040x example depreciation adjustments” are the depreciation adjustments to the basis of the property that are allowable in figuring taxable income from U. 1040x example S. 1040x example sources. 1040x example However, if the property is used predominantly in the United States during a tax year, all depreciation deductions allowable for that year are treated as U. 1040x example S. 1040x example depreciation adjustments. 1040x example But there are some exceptions for certain transportation, communications, and other property used internationally. 1040x example   Gain from the sale of depreciable property that is more than the total depreciation adjustments on the property is sourced as if the property were inventory property, as discussed above. 1040x example   A loss is sourced in the same way as the depreciation deductions were sourced. 1040x example However, if the property was used predominantly in the United States, the entire loss reduces U. 1040x example S. 1040x example source income. 1040x example   The basis of property usually means the cost (money plus the fair market value of other property or services) of property you acquire. 1040x example Depreciation is an amount deducted to recover the cost or other basis of a trade or business asset. 1040x example The amount you can deduct depends on the property's cost, when you began using the property, how long it will take to recover your cost, and which depreciation method you use. 1040x example A depreciation deduction is any deduction for depreciation or amortization or any other allowable deduction that treats a capital expenditure as a deductible expense. 1040x example Intangible property. 1040x example   Intangible property includes patents, copyrights, secret processes or formulas, goodwill, trademarks, trade names, or other like property. 1040x example The gain from the sale of amortizable or depreciable intangible property, up to the previously allowable amortization or depreciation deductions, is sourced in the same way as the original deductions were sourced. 1040x example This is the same as the source rule for gain from the sale of depreciable property. 1040x example See Depreciable property , earlier, for details on how to apply this rule. 1040x example   Gain in excess of the amortization or depreciation deductions is sourced in the country where the property is used if the income from the sale is contingent on the productivity, use, or disposition of that property. 1040x example If the income is not contingent on the productivity, use, or disposition of the property, the income is sourced according to your tax home as discussed earlier. 1040x example If payments for goodwill do not depend on its productivity, use, or disposition, their source is the country in which the goodwill was generated. 1040x example Sales through offices or fixed places of business. 1040x example   Despite any of the earlier rules, if you do not have a tax home in the United States, but you maintain an office or other fixed place of business in the United States, treat the income from any sale of personal property (including inventory property) that is attributable to that office or place of business as U. 1040x example S. 1040x example source income. 1040x example However, this rule does not apply to sales of inventory property for use, disposition, or consumption outside the United States if your office or other fixed place of business outside the United States materially participated in the sale. 1040x example   If you have a tax home in the United States but maintain an office or other fixed place of business outside the United States, income from sales of personal property, other than inventory, depreciable property, or intangibles, that is attributable to that foreign office or place of business may be treated as U. 1040x example S. 1040x example source income. 1040x example The income is treated as U. 1040x example S. 1040x example source income if an income tax of less than 10% of the income from the sale is paid to a foreign country. 1040x example This rule also applies to losses if the foreign country would have imposed an income tax of less than 10% had the sale resulted in a gain. 1040x example Community Income If you are married and you or your spouse is subject to the community property laws of a foreign country, a U. 1040x example S. 1040x example state, or a U. 1040x example S. 1040x example possession, you generally must follow those laws to determine the income of yourself and your spouse for U. 1040x example S. 1040x example tax purposes. 1040x example But you must disregard certain community property laws if: Both you and your spouse are nonresident aliens, or One of you is a nonresident alien and the other is a U. 1040x example S. 1040x example citizen or resident and you do not both choose to be treated as U. 1040x example S. 1040x example residents as explained in chapter 1. 1040x example In these cases, you and your spouse must report community income as explained later. 1040x example Earned income. 1040x example   Earned income of a spouse, other than trade or business income and a partner's distributive share of partnership income, is treated as the income of the spouse whose services produced the income. 1040x example That spouse must report all of it on his or her separate return. 1040x example Trade or business income. 1040x example   Trade or business income, other than a partner's distributive share of partnership income, is treated as the income of the spouse carrying on the trade or business. 1040x example That spouse must report all of it on his or her separate return. 1040x example Partnership income (or loss). 1040x example   A partner's distributive share of partnership income (or loss) is treated as the income (or loss) of the partner. 1040x example The partner must report all of it on his or her separate return. 1040x example Separate property income. 1040x example   Income derived from the separate property of one spouse (and which is not earned income, trade or business income, or partnership distributive share income) is treated as the income of that spouse. 1040x example That spouse must report all of it on his or her separate return. 1040x example Use the appropriate community property law to determine what is separate property. 1040x example Other community income. 1040x example   All other community income is treated as provided by the applicable community property laws. 1040x example Prev  Up  Next   Home   More Online Publications