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2011 Tax Form 1040ez

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2011 Tax Form 1040ez

2011 tax form 1040ez 5. 2011 tax form 1040ez   Exemptions, Deductions, and Credits Table of Contents Topics - This chapter discusses: Useful Items - You may want to see: Items Related to Excluded Income Exemptions Contributions to Foreign Charitable Organizations Moving ExpensesAllocation of Moving Expenses Forms To File Contributions to Individual Retirement Arrangements Taxes of Foreign Countries and U. 2011 tax form 1040ez S. 2011 tax form 1040ez PossessionsCredit for Foreign Income Taxes Deduction for Foreign Income Taxes Deduction for Other Foreign Taxes How To Report Deductions Topics - This chapter discusses: The rules concerning items related to excluded income, Exemptions, Contributions to foreign charitable organizations, Moving expenses, Contributions to individual retirement arrangements (IRAs), Taxes of foreign countries and U. 2011 tax form 1040ez S. 2011 tax form 1040ez possessions, and How to report deductions. 2011 tax form 1040ez Useful Items - You may want to see: Publication 501 Exemptions, Standard Deduction, and Filing Information 514 Foreign Tax Credit for Individuals 521 Moving Expenses 523 Selling Your Home 590 Individual Retirement Arrangements (IRAs) 597 Information on the United States—Canada Income Tax Treaty Form (and Instructions) 1116 Foreign Tax Credit 2106 Employee Business Expenses 2555 Foreign Earned Income 2555-EZ Foreign Earned Income Exclusion 3903 Moving Expenses Schedule A (Form 1040) Itemized Deductions Schedule C (Form 1040) Profit or Loss From Business SS-5 Application for a Social Security Card W-7 Application for IRS Individual Taxpayer Identification Number See chapter 7 for information about getting these publications and forms. 2011 tax form 1040ez Items Related to Excluded Income U. 2011 tax form 1040ez S. 2011 tax form 1040ez citizens and resident aliens living outside the United States generally are allowed the same deductions as citizens and residents living in the United States. 2011 tax form 1040ez If you choose to exclude foreign earned income or housing amounts, you cannot deduct, exclude, or claim a credit for any item that can be allocated to or charged against the excluded amounts. 2011 tax form 1040ez This includes any expenses, losses, and other normally deductible items that are allocable to the excluded income. 2011 tax form 1040ez You can deduct only those expenses connected with earning includible income. 2011 tax form 1040ez These rules apply only to items definitely related to the excluded earned income and they do not apply to other items that are not definitely related to any particular type of gross income. 2011 tax form 1040ez These rules do not apply to items such as: Personal exemptions, Qualified retirement contributions, Alimony payments, Charitable contributions, Medical expenses, Mortgage interest, or Real estate taxes on your personal residence. 2011 tax form 1040ez For purposes of these rules, your housing deduction is not treated as allocable to your excluded income, but the deduction for self- employment tax is. 2011 tax form 1040ez If you receive foreign earned income in a tax year after the year in which you earned it, you may have to file an amended return for the earlier year to properly adjust the amounts of deductions, credits, or exclusions allocable to your foreign earned income and housing exclusions. 2011 tax form 1040ez Example. 2011 tax form 1040ez In 2012, you had $90,400 of foreign earned income and $9,500 of deductions allocable to your foreign earned income. 2011 tax form 1040ez You did not have a housing exclusion. 2011 tax form 1040ez Because you excluded all of your foreign earned income, you would not have been able to claim any of the deductions on your 2012 return. 2011 tax form 1040ez In 2013, you received a $12,000 bonus for work you did abroad in 2012. 2011 tax form 1040ez You can exclude $4,700 of the bonus because the limit on the foreign earned income exclusion for 2012 was $95,100 and you have already excluded $90,400. 2011 tax form 1040ez Since you must include $7,300 of the bonus ($12,000 − $4,700) for work you did in 2012 in income, you can file an amended return for 2012 to claim $677 of the deductions. 2011 tax form 1040ez This is the deductions allocable to the foreign earned income ($9,500) multiplied by the includible portion of the foreign earned income ($7,300) and divided by the total foreign earned income for 2012 ($102,400). 2011 tax form 1040ez Exemptions You can claim an exemption for your nonresident alien spouse on your separate return, provided your spouse has no gross income for U. 2011 tax form 1040ez S. 2011 tax form 1040ez tax purposes and is not the dependent of another U. 2011 tax form 1040ez S. 2011 tax form 1040ez taxpayer. 2011 tax form 1040ez You also can claim exemptions for individuals who qualify as your dependents. 2011 tax form 1040ez To be your dependent, the individual must be a U. 2011 tax form 1040ez S. 2011 tax form 1040ez citizen, U. 2011 tax form 1040ez S. 2011 tax form 1040ez national, U. 2011 tax form 1040ez S. 2011 tax form 1040ez resident alien, or a resident of Canada or Mexico for some part of the calendar year in which your tax year begins. 2011 tax form 1040ez Children. 2011 tax form 1040ez   Children usually are citizens or residents of the same country as their parents. 2011 tax form 1040ez If you were a U. 2011 tax form 1040ez S. 2011 tax form 1040ez citizen when your child was born, your child generally is a U. 2011 tax form 1040ez S. 2011 tax form 1040ez citizen. 2011 tax form 1040ez This is true even if the child's other parent is a nonresident alien, the child was born in a foreign country, and the child lives abroad with the other parent. 2011 tax form 1040ez   If you have a legally adopted child who is not a U. 2011 tax form 1040ez S. 2011 tax form 1040ez citizen, U. 2011 tax form 1040ez S. 2011 tax form 1040ez resident, or U. 2011 tax form 1040ez S. 2011 tax form 1040ez national, the child meets the citizen requirement if you are a U. 2011 tax form 1040ez S. 2011 tax form 1040ez citizen or U. 2011 tax form 1040ez S. 2011 tax form 1040ez national and the child lived with you as a member of your household all year. 2011 tax form 1040ez Social security number. 2011 tax form 1040ez   You must include on your return the social security number (SSN) of each dependent for whom you claim an exemption. 2011 tax form 1040ez To get a social security number for a dependent, apply at a Social Security office or U. 2011 tax form 1040ez S. 2011 tax form 1040ez consulate. 2011 tax form 1040ez You must provide original or certified copies of documents to verify the dependent's age, identity, and citizenship, and complete Form SS-5. 2011 tax form 1040ez   If you do not have an SSN for a child who was born in 2013 and died in 2013, attach a copy of the child's birth certificate to your tax return. 2011 tax form 1040ez Print “Died” in column (2) of line 6c of your Form 1040 or Form 1040A. 2011 tax form 1040ez   If your dependent is a nonresident alien who is not eligible to get a social security number, you must list the dependent's individual taxpayer identification number (ITIN) instead of an SSN. 2011 tax form 1040ez To apply for an ITIN, file Form W-7 with the IRS. 2011 tax form 1040ez It usually takes 6 to 10 weeks to get an ITIN. 2011 tax form 1040ez Enter your dependent's ITIN wherever an SSN is requested on your tax return. 2011 tax form 1040ez More information. 2011 tax form 1040ez   For more information about exemptions, see Publication 501. 2011 tax form 1040ez Contributions to Foreign Charitable Organizations If you make contributions directly to a foreign church or other foreign charitable organization, you generally cannot deduct them. 2011 tax form 1040ez Exceptions are explained under Canadian, Mexican, and Israeli charities, later. 2011 tax form 1040ez You can deduct contributions to a U. 2011 tax form 1040ez S. 2011 tax form 1040ez organization that transfers funds to a charitable foreign organization if the U. 2011 tax form 1040ez S. 2011 tax form 1040ez organization controls the use of the funds by the foreign organization or if the foreign organization is just an administrative arm of the U. 2011 tax form 1040ez S. 2011 tax form 1040ez organization. 2011 tax form 1040ez Canadian, Mexican, and Israeli charities. 2011 tax form 1040ez   Under the income tax treaties with Canada, Mexico and Israel, you may be able to deduct contributions to certain Canadian, Mexican, and Israeli charitable organizations. 2011 tax form 1040ez Generally, you must have income from sources in Canada, Mexico, or Israel, and the organization must meet certain requirements. 2011 tax form 1040ez See Publication 597, Information on the United States-Canada Income Tax Treaty, and Publication 526, Charitable Contributions, for more information. 2011 tax form 1040ez Moving Expenses If you moved to a new home in 2013 because of your job or business, you may be able to deduct the expenses of your move. 2011 tax form 1040ez Generally, to be deductible, the moving expenses must have been paid or incurred in connection with starting work at a new job location. 2011 tax form 1040ez See Publication 521 for a complete discussion of the deduction for moving expenses and information about moves within the United States. 2011 tax form 1040ez Foreign moves. 2011 tax form 1040ez   A foreign move is a move in connection with the start of work at a new job location outside the United States and its possessions. 2011 tax form 1040ez A foreign move does not include a move back to the United States or its possessions. 2011 tax form 1040ez Allocation of Moving Expenses When your new place of work is in a foreign country, your moving expenses are directly connected with the income earned in that foreign country. 2011 tax form 1040ez If you exclude all or part of the income that you earn at the new location under the foreign earned income exclusion or the foreign housing exclusion, you cannot deduct the part of your moving expense that is allocable to the excluded income. 2011 tax form 1040ez Also, you cannot deduct the part of the moving expense related to the excluded income for a move from a foreign country to the United States if you receive a reimbursement that you are able to treat as compensation for services performed in the foreign country. 2011 tax form 1040ez Year to which expense is connected. 2011 tax form 1040ez   The moving expense is connected with earning the income (including reimbursements, as discussed in chapter 4 under Reimbursement of moving expenses ) either entirely in the year of the move or in 2 years. 2011 tax form 1040ez It is connected with earning the income entirely in the year of the move if you qualify for the foreign earned income exclusion under the bona fide residence test or physical presence test for at least 120 days during that tax year. 2011 tax form 1040ez   If you do not qualify under either the bona fide residence test or the physical presence test for at least 120 days during the year of the move, the expense is connected with earning the income in 2 years. 2011 tax form 1040ez The moving expense is connected with the year of the move and the following year if the move is from the United States to a foreign country. 2011 tax form 1040ez The moving expense is connected with the year of the move and the preceding year if the move is from a foreign country to the United States. 2011 tax form 1040ez Amount allocable to excluded income. 2011 tax form 1040ez   To figure the amount of your moving expense that is allocable to your excluded foreign earned income (and not deductible), you must multiply your total moving expense deduction by a fraction. 2011 tax form 1040ez The numerator (top number) of the fraction is the total of your excluded foreign earned income and housing amounts for both years and the denominator (bottom number) of the fraction is your total foreign earned income for both years. 2011 tax form 1040ez Example. 2011 tax form 1040ez On November 1, 2012, you transfer to Monaco. 2011 tax form 1040ez Your tax home is in Monaco, and you are a bona fide resident of Monaco for the entire tax year 2013. 2011 tax form 1040ez In 2012, you paid $6,000 for allowable moving expenses for your move from the United States to Monaco. 2011 tax form 1040ez You were fully reimbursed (under a nonaccountable plan) for these expenses in the same year. 2011 tax form 1040ez The reimbursement is included in your income. 2011 tax form 1040ez Your only other income consists of $16,000 wages earned in 2012 after the date of your move, and $100,100 wages earned in Monaco for 2013. 2011 tax form 1040ez Because you did not meet the bona fide residence test for at least 120 days during 2012, the year of the move, the moving expenses are for services you performed in both 2012 and the following year, 2013. 2011 tax form 1040ez Your total foreign earned income for both years is $122,100, consisting of $16,000 wages for 2012, $100,100 wages for 2013, and $6,000 moving expense reimbursement for both years. 2011 tax form 1040ez You have no housing exclusion. 2011 tax form 1040ez The total amount you can exclude is $113,190, consisting of the $97,600 full-year exclusion for 2013 and a $15,590 part-year exclusion for 2012 ($95,100 times the fraction of 60 qualifying bona fide residence days over 366 total days in the year). 2011 tax form 1040ez To find the part of your moving expenses that is not deductible, multiply your $6,000 total expenses by the fraction $113,190 over $122,100. 2011 tax form 1040ez The result, $5,562, is your nondeductible amount. 2011 tax form 1040ez    You must report the full amount of the moving expense reimbursement in the year in which you received the reimbursement. 2011 tax form 1040ez In the preceding example, this year was 2012. 2011 tax form 1040ez You attribute the reimbursement to both 2012 and 2013 only to figure the amount of foreign earned income eligible for exclusion for each year. 2011 tax form 1040ez Move between foreign countries. 2011 tax form 1040ez   If you move between foreign countries, your moving expense is allocable to income earned in the year of the move if you qualified under either the bona fide residence test or the physical presence test for a period that includes at least 120 days in the year of the move. 2011 tax form 1040ez New place of work in U. 2011 tax form 1040ez S. 2011 tax form 1040ez   If your new place of work is in the United States, the deductible moving expenses are directly connected with the income earned in the United States. 2011 tax form 1040ez If you treat a reimbursement from your employer as foreign earned income (see the discussion in chapter 4), you must allocate deductible moving expenses to foreign earned income. 2011 tax form 1040ez Storage expenses. 2011 tax form 1040ez   These expenses are attributable to work you do during the year in which you incur the storage expenses. 2011 tax form 1040ez You cannot deduct the amount allocable to excluded income. 2011 tax form 1040ez Moving Expense Attributable to Foreign Earnings in 2 Years If your moving expense deduction is attributable to your foreign earnings in 2 years (the year of the move and the following year), you should request an extension of time to file your return for the year of the move until after the end of the second year. 2011 tax form 1040ez By then, you should have all the information needed to properly figure the moving expense deduction. 2011 tax form 1040ez See Extensions under When To File and Pay in chapter 1. 2011 tax form 1040ez If you do not request an extension, you should figure the part of the moving expense that you cannot deduct because it is allocable to the foreign earned income you are excluding. 2011 tax form 1040ez You do this by multiplying the moving expense by a fraction, the numerator (top number) of which is your excluded foreign earned income for the year of the move, and the denominator (bottom number) of which is your total foreign earned income for the year of the move. 2011 tax form 1040ez Once you know your foreign earnings and exclusion for the following year, you must either: Adjust the moving expense deduction by filing an amended return for the year of the move, or Recapture any additional unallowable amount as income on your return for the following year. 2011 tax form 1040ez If, after you make the final computation, you have an additional amount of allowable moving expense deduction, you can claim this only on an amended return for the year of the move. 2011 tax form 1040ez You cannot claim it on the return for the second year. 2011 tax form 1040ez Forms To File Report your moving expenses on Form 3903. 2011 tax form 1040ez Report your moving expense deduction on line 26 of Form 1040. 2011 tax form 1040ez If you must reduce your moving expenses by the amount allocable to excluded income (as explained later under How To Report Deductions ), attach a statement to your return showing how you figured this amount. 2011 tax form 1040ez For more information about figuring moving expenses, see Publication 521. 2011 tax form 1040ez Contributions to Individual Retirement Arrangements Contributions to your individual retirement arrangements (IRAs) that are traditional IRAs or Roth IRAs are generally limited to the lesser of $5,500 ($6,500 if 50 or older) or your compensation that is includible in your gross income for the tax year. 2011 tax form 1040ez In determining compensation for this purpose, do not take into account amounts you exclude under either the foreign earned income exclusion or the foreign housing exclusion. 2011 tax form 1040ez Do not reduce your compensation by the foreign housing deduction. 2011 tax form 1040ez If you are covered by an employer retirement plan at work, your deduction for your contributions to your traditional IRAs is generally limited based on your modified adjusted gross income. 2011 tax form 1040ez This is your adjusted gross income figured without taking into account the foreign earned income exclusion, the foreign housing exclusion, or the foreign housing deduction. 2011 tax form 1040ez Other modifications are also required. 2011 tax form 1040ez For more information on IRAs, see Publication 590. 2011 tax form 1040ez Taxes of Foreign Countries and U. 2011 tax form 1040ez S. 2011 tax form 1040ez Possessions You can take either a credit or a deduction for income taxes paid to a foreign country or a U. 2011 tax form 1040ez S. 2011 tax form 1040ez possession. 2011 tax form 1040ez Taken as a deduction, foreign income taxes reduce your taxable income. 2011 tax form 1040ez Taken as a credit, foreign income taxes reduce your tax liability. 2011 tax form 1040ez You must treat all foreign income taxes the same way. 2011 tax form 1040ez If you take a credit for any foreign income taxes, you cannot deduct any foreign income taxes. 2011 tax form 1040ez However, you may be able to deduct other foreign taxes. 2011 tax form 1040ez See Deduction for Other Foreign Taxes, later. 2011 tax form 1040ez There is no rule to determine whether it is to your advantage to take a deduction or a credit for foreign income taxes. 2011 tax form 1040ez In most cases, it is to your advantage to take foreign income taxes as a tax credit, which you subtract directly from your U. 2011 tax form 1040ez S. 2011 tax form 1040ez tax liability, rather than as a deduction in figuring taxable income. 2011 tax form 1040ez However, if foreign income taxes were imposed at a high rate and the proportion of foreign income to U. 2011 tax form 1040ez S. 2011 tax form 1040ez income is small, a lower final tax may result from deducting the foreign income taxes. 2011 tax form 1040ez In any event, you should figure your tax liability both ways and then use the one that is better for you. 2011 tax form 1040ez You can make or change your choice within 10 years from the due date for filing the tax return on which you are entitled to take either the deduction or the credit. 2011 tax form 1040ez Foreign income taxes. 2011 tax form 1040ez   These are generally income taxes you pay to any foreign country or possession of the United States. 2011 tax form 1040ez Foreign income taxes on U. 2011 tax form 1040ez S. 2011 tax form 1040ez return. 2011 tax form 1040ez   Foreign income taxes can only be taken as a credit on Form 1040, line 47, or as an itemized deduction on Schedule A. 2011 tax form 1040ez These amounts cannot be included as withheld income taxes on Form 1040, line 62. 2011 tax form 1040ez Foreign taxes paid on excluded income. 2011 tax form 1040ez   You cannot take a credit or deduction for foreign income taxes paid on earnings you exclude from tax under any of the following. 2011 tax form 1040ez Foreign earned income exclusion. 2011 tax form 1040ez Foreign housing exclusion. 2011 tax form 1040ez Possession exclusion. 2011 tax form 1040ez If your wages are completely excluded, you cannot deduct or take a credit for any of the foreign taxes paid on your wages. 2011 tax form 1040ez   If only part of your wages is excluded, you cannot deduct or take a credit for the foreign income taxes allocable to the excluded part. 2011 tax form 1040ez You find the taxes allocable to your excluded wages by applying a fraction to the foreign taxes paid on foreign earned income received during the tax year. 2011 tax form 1040ez The numerator (top number) of the fraction is your excluded foreign earned income received during the tax year minus deductible expenses allocable to that income (not including the foreign housing deduction). 2011 tax form 1040ez The denominator (bottom number) of the fraction is your total foreign earned income received during the tax year minus all deductible expenses allocable to that income (including the foreign housing deduction). 2011 tax form 1040ez   If foreign law taxes both earned income and some other type of income and the taxes on the other type cannot be separated, the denominator of the fraction is the total amount of income subject to foreign tax minus deductible expenses allocable to that income. 2011 tax form 1040ez    If you take a foreign tax credit for tax on income you could have excluded under your choice to exclude foreign earned income or your choice to exclude foreign housing costs, one or both of the choices may be considered revoked. 2011 tax form 1040ez Credit for Foreign Income Taxes If you take the foreign tax credit, you may have to file Form 1116 with Form 1040. 2011 tax form 1040ez Form 1116 is used to figure the amount of foreign tax paid or accrued that can be claimed as a foreign tax credit. 2011 tax form 1040ez Do not include the amount of foreign tax paid or accrued as withheld federal income taxes on Form 1040, line 62. 2011 tax form 1040ez The foreign income tax for which you can claim a credit is the amount of legal and actual tax liability you pay or accrue during the year. 2011 tax form 1040ez The amount for which you can claim a credit is not necessarily the amount withheld by the foreign country. 2011 tax form 1040ez You cannot take a foreign tax credit for income tax you paid to a foreign country that would be refunded by the foreign country if you made a claim for refund. 2011 tax form 1040ez Subsidies. 2011 tax form 1040ez   If a foreign country returns your foreign tax payments to you in the form of a subsidy, you cannot claim a foreign tax credit based on these payments. 2011 tax form 1040ez This rule applies to a subsidy provided by any means that is determined, directly or indirectly, by reference to the amount of tax, or to the base used to figure the tax. 2011 tax form 1040ez   Some ways of providing a subsidy are refunds, credits, deductions, payments, or discharges of obligations. 2011 tax form 1040ez A credit is also not allowed if the subsidy is given to a person related to you, or persons who participated in a transaction or a related transaction with you. 2011 tax form 1040ez Limit The foreign tax credit is limited to the part of your total U. 2011 tax form 1040ez S. 2011 tax form 1040ez tax that is in proportion to your taxable income from sources outside the United States compared to your total taxable income. 2011 tax form 1040ez The allowable foreign tax credit cannot be more than your actual foreign tax liability. 2011 tax form 1040ez Exemption from limit. 2011 tax form 1040ez   You will not be subject to this limit and will not have to file Form 1116 if you meet all three of the following requirements. 2011 tax form 1040ez Your only foreign source income for the year is passive income (dividends, interest, royalties, etc. 2011 tax form 1040ez ) that is reported to you on a payee statement (such as a Form 1099-DIV or 1099-INT). 2011 tax form 1040ez Your foreign taxes for the year that qualify for the credit are not more than $300 ($600 if you are filing a joint return) and are reported on a payee statement. 2011 tax form 1040ez You elect this procedure. 2011 tax form 1040ez If you make this election, you cannot carry back or carry over any unused foreign tax to or from this year. 2011 tax form 1040ez Separate limit. 2011 tax form 1040ez   You must figure the limit on a separate basis with regard to “passive category income” and “general category income” (see the instructions for Form 1116). 2011 tax form 1040ez Figuring the limit. 2011 tax form 1040ez   In figuring taxable income in each category, you take into account only the amount that you must include in income on your federal tax return. 2011 tax form 1040ez Do not take any excluded amount into account. 2011 tax form 1040ez   To determine your taxable income in each category, deduct expenses and losses that are definitely related to that income. 2011 tax form 1040ez   Other expenses (such as itemized deductions or the standard deduction) not definitely related to specific items of income must be apportioned to the foreign income in each category by multiplying them by a fraction. 2011 tax form 1040ez The numerator (top number) of the fraction is your gross foreign income in the separate limit category. 2011 tax form 1040ez The denominator (bottom number) of the fraction is your gross income from all sources. 2011 tax form 1040ez For this purpose, gross income includes income that is excluded under the foreign earned income provisions but does not include any other exempt income. 2011 tax form 1040ez You must use special rules for deducting interest expenses. 2011 tax form 1040ez For more information on allocating and apportioning your deductions, see Publication 514. 2011 tax form 1040ez Exemptions. 2011 tax form 1040ez   Do not take the deduction for exemptions for yourself, your spouse, or your dependents in figuring taxable income for purposes of the limit. 2011 tax form 1040ez Recapture of foreign losses. 2011 tax form 1040ez   If you have an overall foreign loss and the loss reduces your U. 2011 tax form 1040ez S. 2011 tax form 1040ez source income (resulting in a reduction of your U. 2011 tax form 1040ez S. 2011 tax form 1040ez tax liability), you must recapture the loss in later years when you have taxable income from foreign sources. 2011 tax form 1040ez This is done by treating a part of your taxable income from foreign sources in later years as U. 2011 tax form 1040ez S. 2011 tax form 1040ez source income. 2011 tax form 1040ez This reduces the numerator of the limiting fraction and the resulting foreign tax credit limit. 2011 tax form 1040ez Recapture of domestic losses. 2011 tax form 1040ez   If you have an overall domestic loss (resulting in no U. 2011 tax form 1040ez S. 2011 tax form 1040ez tax liability), you cannot claim a foreign tax credit for taxes paid during that year. 2011 tax form 1040ez You must recapture the loss in later years when you have U. 2011 tax form 1040ez S. 2011 tax form 1040ez source taxable income. 2011 tax form 1040ez This is done by treating a part of your taxable income from U. 2011 tax form 1040ez S. 2011 tax form 1040ez sources in later years as foreign source income. 2011 tax form 1040ez This increases the numerator of the limiting fraction and the resulting foreign tax credit limit. 2011 tax form 1040ez Foreign tax credit carryback and carryover. 2011 tax form 1040ez   The amount of foreign income tax not allowed as a credit because of the limit can be carried back 1 year and carried forward 10 years. 2011 tax form 1040ez   More information on figuring the foreign tax credit can be found in Publication 514. 2011 tax form 1040ez Deduction for Foreign Income Taxes Instead of taking the foreign tax credit, you can deduct foreign income taxes as an itemized deduction on Schedule A (Form 1040). 2011 tax form 1040ez You can deduct only foreign income taxes paid on income that is subject to U. 2011 tax form 1040ez S. 2011 tax form 1040ez tax. 2011 tax form 1040ez You cannot deduct foreign taxes paid on earnings you exclude from tax under any of the following. 2011 tax form 1040ez Foreign earned income exclusion. 2011 tax form 1040ez Foreign housing exclusion. 2011 tax form 1040ez Possession exclusion. 2011 tax form 1040ez Example. 2011 tax form 1040ez You are a U. 2011 tax form 1040ez S. 2011 tax form 1040ez citizen and qualify to exclude your foreign earned income. 2011 tax form 1040ez Your excluded wages in Country X are $70,000 on which you paid income tax of $10,000. 2011 tax form 1040ez You received dividends from Country X of $2,000 on which you paid income tax of $600. 2011 tax form 1040ez You can deduct the $600 tax payment because the dividends relating to it are subject to U. 2011 tax form 1040ez S. 2011 tax form 1040ez tax. 2011 tax form 1040ez Because you exclude your wages, you cannot deduct the income tax of $10,000. 2011 tax form 1040ez If you exclude only a part of your wages, see the earlier discussion under Foreign taxes paid on excluded income. 2011 tax form 1040ez Deduction for Other Foreign Taxes You can deduct real property taxes you pay that are imposed on you by a foreign country. 2011 tax form 1040ez You take this deduction on Schedule A (Form 1040). 2011 tax form 1040ez You cannot deduct other foreign taxes, such as personal property taxes, unless you incurred the expenses in a trade or business or in the production of income. 2011 tax form 1040ez On the other hand, you generally can deduct personal property taxes when you pay them to U. 2011 tax form 1040ez S. 2011 tax form 1040ez possessions. 2011 tax form 1040ez But if you claim the possession exclusion, see Publication 570. 2011 tax form 1040ez The deduction for foreign taxes other than foreign income taxes is not related to the foreign tax credit. 2011 tax form 1040ez You can take deductions for these miscellaneous foreign taxes and also claim the foreign tax credit for income taxes imposed by a foreign country. 2011 tax form 1040ez How To Report Deductions If you exclude foreign earned income or housing amounts, how you show your deductions on your tax return and how you figure the amount allocable to your excluded income depends on whether the expenses are used in figuring adjusted gross income (Form 1040, line 38) or are itemized deductions. 2011 tax form 1040ez If you have deductions used in figuring adjusted gross income, enter the total amount for each of these items on the appropriate lines and schedules of Form 1040. 2011 tax form 1040ez Generally, you figure the amount of a deduction related to the excluded income by multiplying the deduction by a fraction, the numerator of which is your foreign earned income exclusion and the denominator of which is your foreign earned income. 2011 tax form 1040ez Enter the amount of the deduction(s) related to excluded income on line 44 of Form 2555. 2011 tax form 1040ez If you have itemized deductions related to excluded income, enter on Schedule A (Form 1040) only the part not related to excluded income. 2011 tax form 1040ez You figure that amount by subtracting from the total deduction the amount related to excluded income. 2011 tax form 1040ez Generally, you figure the amount that is related to the excluded income by multiplying the total deduction by a fraction, the numerator of which is your foreign earned income exclusion and the denominator of which is your foreign earned income. 2011 tax form 1040ez Attach a statement to your return showing how you figured the deductible amount. 2011 tax form 1040ez Example 1. 2011 tax form 1040ez You are a U. 2011 tax form 1040ez S. 2011 tax form 1040ez citizen employed as an accountant. 2011 tax form 1040ez Your tax home is in Germany for the entire tax year. 2011 tax form 1040ez You meet the physical presence test. 2011 tax form 1040ez Your foreign earned income for the year was $122,000 and your investment income was $10,380. 2011 tax form 1040ez After excluding $97,600, your AGI is $34,780. 2011 tax form 1040ez You had unreimbursed business expenses of $2,500 for travel and entertainment in earning your foreign income, of which $500 was for meals and entertainment. 2011 tax form 1040ez These expenses are deductible only as miscellaneous deductions on Schedule A (Form 1040). 2011 tax form 1040ez You also have $500 of miscellaneous expenses that are not related to your foreign income that you enter on line 23 of Schedule A. 2011 tax form 1040ez You must fill out Form 2106. 2011 tax form 1040ez On that form, reduce your deductible meal and entertainment expenses by 50% ($250). 2011 tax form 1040ez You must reduce the remaining $2,250 of travel and entertainment expenses by 80% ($1,800) because you excluded 80% ($97,600/$122,000) of your foreign earned income. 2011 tax form 1040ez You carry the remaining total of $450 to line 21 of Schedule A. 2011 tax form 1040ez Add the $450 to the $500 that you have on line 23 and enter the total ($950) on line 24. 2011 tax form 1040ez On line 26 of Schedule A, enter $696, which is 2% of your adjusted gross income of $34,780 (line 38, Form 1040) and subtract it from the amount on line 24. 2011 tax form 1040ez Enter $254 on line 27 of Schedule A. 2011 tax form 1040ez Example 2. 2011 tax form 1040ez You are a U. 2011 tax form 1040ez S. 2011 tax form 1040ez citizen, have a tax home in Spain, and meet the physical presence test. 2011 tax form 1040ez You are self-employed and personal services produce the business income. 2011 tax form 1040ez Your gross income was $116,931, business expenses $66,895, and net income (profit) $50,036. 2011 tax form 1040ez You choose the foreign earned income exclusion and exclude $97,600 of your gross income. 2011 tax form 1040ez Since your excluded income is 83. 2011 tax form 1040ez 47% of your total income, 83. 2011 tax form 1040ez 47% of your business expenses are not deductible. 2011 tax form 1040ez Report your total income and expenses on Schedule C (Form 1040). 2011 tax form 1040ez On Form 2555 you will show the following: Line 20a, $116,931, gross income, Lines 42 and 43, $97,600, foreign earned income exclusion, and Line 44, $55,837 (83. 2011 tax form 1040ez 47% × $66,895) business expenses attributable to the exclusion. 2011 tax form 1040ez In this situation (Example 2), you cannot use Form 2555-EZ since you had self-employment income and business expenses. 2011 tax form 1040ez Example 3. 2011 tax form 1040ez Assume in Example 2 that both capital and personal services combine to produce the business income. 2011 tax form 1040ez No more than 30% of your net income, or $15,011, assuming that this amount is a reasonable allowance for your services, is considered earned and can be excluded. 2011 tax form 1040ez Your exclusion of $15,011 is 12. 2011 tax form 1040ez 84% of your gross income ($15,011 ÷ $116,931). 2011 tax form 1040ez Because you excluded 12. 2011 tax form 1040ez 84% of your total income, $8,589 (. 2011 tax form 1040ez 1284 x $66,895) of your business expenses is attributable to the excluded income and is not deductible. 2011 tax form 1040ez Example 4. 2011 tax form 1040ez You are a U. 2011 tax form 1040ez S. 2011 tax form 1040ez citizen, have a tax home in Brazil, and meet the physical presence test. 2011 tax form 1040ez You are self-employed and both capital and personal services combine to produce business income. 2011 tax form 1040ez Your gross income was $146,000, business expenses were $172,000, and your net loss was $26,000. 2011 tax form 1040ez A reasonable allowance for the services you performed for the business is $77,000. 2011 tax form 1040ez Because you incurred a net loss, the earned income limit of 30% of your net profit does not apply. 2011 tax form 1040ez The $77,000 is foreign earned income. 2011 tax form 1040ez If you choose to exclude the $77,000, you exclude 52. 2011 tax form 1040ez 74% of your gross income ($77,000 ÷ $146,000), and 52. 2011 tax form 1040ez 74% of your business expenses ($90,713) is attributable to that income and is not deductible. 2011 tax form 1040ez Show your total income and expenses on Schedule C (Form 1040). 2011 tax form 1040ez On Form 2555, exclude $77,000 and show $90,713 on line 44. 2011 tax form 1040ez Subtract line 44 from line 43, and enter the difference as a negative (in parentheses) on line 45. 2011 tax form 1040ez Because this amount is negative, enter it as a positive (no parentheses) on line 21, Form 1040, and combine it with your other income to arrive at total income on line 22 of Form 1040. 2011 tax form 1040ez In this situation (Example 4), you would probably not want to choose the foreign earned income exclusion if this was the first year you were eligible. 2011 tax form 1040ez If you had chosen the exclusion in an earlier year, you might want to revoke the choice for this year. 2011 tax form 1040ez To do so would mean that you could not claim the exclusion again for the next 5 tax years without IRS approval. 2011 tax form 1040ez See Choosing the Exclusion in chapter 4. 2011 tax form 1040ez Example 5. 2011 tax form 1040ez You are a U. 2011 tax form 1040ez S. 2011 tax form 1040ez citizen, have a tax home in Panama, and meet the bona fide residence test. 2011 tax form 1040ez You have been performing services for clients as a partner in a firm that provides services exclusively in Panama. 2011 tax form 1040ez Capital investment is not material in producing the partnership's income. 2011 tax form 1040ez Under the terms of the partnership agreement, you are to receive 50% of the net profits. 2011 tax form 1040ez The partnership received gross income of $244,000 and incurred operating expenses of $98,250. 2011 tax form 1040ez Of the net profits of $145,750, you received $72,875 as your distributive share. 2011 tax form 1040ez You choose to exclude $97,600 of your share of the gross income. 2011 tax form 1040ez Because you exclude 80% ($97,600 ÷ $122,000) of your share of the gross income, you cannot deduct $39,300, 80% of your share of the operating expenses (. 2011 tax form 1040ez 80 × $49,125). 2011 tax form 1040ez Report $72,875, your distributive share of the partnership net profit, on Schedule E (Form 1040), Supplemental Income and Loss. 2011 tax form 1040ez On Form 2555, show $97,600 on line 42 and show $39,300 on line 44. 2011 tax form 1040ez Your exclusion on Form 2555 is $58,300. 2011 tax form 1040ez In this situation (Example 5), you cannot use Form 2555-EZ since you had earned income other than salaries and wages and you had business expenses. 2011 tax form 1040ez Prev  Up  Next   Home   More Online Publications
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The 2011 Tax Form 1040ez

2011 tax form 1040ez 1. 2011 tax form 1040ez   Definitions You Need To Know Table of Contents Other options. 2011 tax form 1040ez Exception. 2011 tax form 1040ez Certain terms used in this publication are defined below. 2011 tax form 1040ez The same term used in another publication may have a slightly different meaning. 2011 tax form 1040ez Annual additions. 2011 tax form 1040ez   Annual additions are the total of all your contributions in a year, employee contributions (not including rollovers), and forfeitures allocated to a participant's account. 2011 tax form 1040ez Annual benefits. 2011 tax form 1040ez   Annual benefits are the benefits to be paid yearly in the form of a straight life annuity (with no extra benefits) under a plan to which employees do not contribute and under which no rollover contributions are made. 2011 tax form 1040ez Business. 2011 tax form 1040ez   A business is an activity in which a profit motive is present and economic activity is involved. 2011 tax form 1040ez Service as a newspaper carrier under age 18 or as a public official is not a business. 2011 tax form 1040ez Common-law employee. 2011 tax form 1040ez   A common-law employee is any individual who, under common law, would have the status of an employee. 2011 tax form 1040ez A leased employee can also be a common-law employee. 2011 tax form 1040ez   A common-law employee is a person who performs services for an employer who has the right to control and direct the results of the work and the way in which it is done. 2011 tax form 1040ez For example, the employer: Provides the employee's tools, materials, and workplace, and Can fire the employee. 2011 tax form 1040ez   Common-law employees are not self-employed and cannot set up retirement plans for income from their work, even if that income is self-employment income for social security tax purposes. 2011 tax form 1040ez For example, common-law employees who are ministers, members of religious orders, full-time insurance salespeople, and U. 2011 tax form 1040ez S. 2011 tax form 1040ez citizens employed in the United States by foreign governments cannot set up retirement plans for their earnings from those employments, even though their earnings are treated as self-employment income. 2011 tax form 1040ez   However, an individual may be a common-law employee and a self-employed person as well. 2011 tax form 1040ez For example, an attorney can be a corporate common-law employee during regular working hours and also practice law in the evening as a self-employed person. 2011 tax form 1040ez In another example, a minister employed by a congregation for a salary is a common-law employee even though the salary is treated as self-employment income for social security tax purposes. 2011 tax form 1040ez However, fees reported on Schedule C (Form 1040), Profit or Loss From Business, for performing marriages, baptisms, and other personal services are self-employment earnings for qualified plan purposes. 2011 tax form 1040ez Compensation. 2011 tax form 1040ez   Compensation for plan allocations is the pay a participant received from you for personal services for a year. 2011 tax form 1040ez You can generally define compensation as including all the following payments. 2011 tax form 1040ez Wages and salaries. 2011 tax form 1040ez Fees for professional services. 2011 tax form 1040ez Other amounts received (cash or noncash) for personal services actually rendered by an employee, including, but not limited to, the following items. 2011 tax form 1040ez Commissions and tips. 2011 tax form 1040ez Fringe benefits. 2011 tax form 1040ez Bonuses. 2011 tax form 1040ez   For a self-employed individual, compensation means the earned income, discussed later, of that individual. 2011 tax form 1040ez   Compensation generally includes amounts deferred in the following employee benefit plans. 2011 tax form 1040ez These amounts are elective deferrals. 2011 tax form 1040ez Qualified cash or deferred arrangement (section 401(k) plan). 2011 tax form 1040ez Salary reduction agreement to contribute to a tax-sheltered annuity (section 403(b) plan), a SIMPLE IRA plan, or a SARSEP. 2011 tax form 1040ez Section 457 nonqualified deferred compensation plan. 2011 tax form 1040ez Section 125 cafeteria plan. 2011 tax form 1040ez   However, an employer can choose to exclude elective deferrals under the above plans from the definition of compensation. 2011 tax form 1040ez The limit on elective deferrals is discussed in chapter 2 under Salary Reduction Simplified Employee Pension (SARSEP) and in chapter 4. 2011 tax form 1040ez Other options. 2011 tax form 1040ez   In figuring the compensation of a participant, you can treat any of the following amounts as the employee's compensation. 2011 tax form 1040ez The employee's wages as defined for income tax withholding purposes. 2011 tax form 1040ez The employee's wages you report in box 1 of Form W-2, Wage and Tax Statement. 2011 tax form 1040ez The employee's social security wages (including elective deferrals). 2011 tax form 1040ez   Compensation generally cannot include either of the following items. 2011 tax form 1040ez Nontaxable reimbursements or other expense allowances. 2011 tax form 1040ez Deferred compensation (other than elective deferrals). 2011 tax form 1040ez SIMPLE plans. 2011 tax form 1040ez   A special definition of compensation applies for SIMPLE plans. 2011 tax form 1040ez See chapter 3. 2011 tax form 1040ez Contribution. 2011 tax form 1040ez   A contribution is an amount you pay into a plan for all those participating in the plan, including self-employed individuals. 2011 tax form 1040ez Limits apply to how much, under the contribution formula of the plan, can be contributed each year for a participant. 2011 tax form 1040ez Deduction. 2011 tax form 1040ez   A deduction is the plan contributions you can subtract from gross income on your federal income tax return. 2011 tax form 1040ez Limits apply to the amount deductible. 2011 tax form 1040ez Earned income. 2011 tax form 1040ez   Earned income is net earnings from self-employment, discussed later, from a business in which your services materially helped to produce the income. 2011 tax form 1040ez   You can also have earned income from property your personal efforts helped create, such as royalties from your books or inventions. 2011 tax form 1040ez Earned income includes net earnings from selling or otherwise disposing of the property, but it does not include capital gains. 2011 tax form 1040ez It includes income from licensing the use of property other than goodwill. 2011 tax form 1040ez   Earned income includes amounts received for services by self-employed members of recognized religious sects opposed to social security benefits who are exempt from self-employment tax. 2011 tax form 1040ez   If you have more than one business, but only one has a retirement plan, only the earned income from that business is considered for that plan. 2011 tax form 1040ez Employer. 2011 tax form 1040ez   An employer is generally any person for whom an individual performs or did perform any service, of whatever nature, as an employee. 2011 tax form 1040ez A sole proprietor is treated as his or her own employer for retirement plan purposes. 2011 tax form 1040ez However, a partner is not an employer for retirement plan purposes. 2011 tax form 1040ez Instead, the partnership is treated as the employer of each partner. 2011 tax form 1040ez Highly compensated employee. 2011 tax form 1040ez   A highly compensated employee is an individual who: Owned more than 5% of the interest in your business at any time during the year or the preceding year, regardless of how much compensation that person earned or received, or For the preceding year, received compensation from you of more than $115,000 (if the preceding year is 2012, 2013, or 2014) and, if you so choose, was in the top 20% of employees when ranked by compensation. 2011 tax form 1040ez Leased employee. 2011 tax form 1040ez   A leased employee who is not your common-law employee must generally be treated as your employee for retirement plan purposes if he or she does all the following. 2011 tax form 1040ez Provides services to you under an agreement between you and a leasing organization. 2011 tax form 1040ez Has performed services for you (or for you and related persons) substantially full time for at least 1 year. 2011 tax form 1040ez Performs services under your primary direction or control. 2011 tax form 1040ez Exception. 2011 tax form 1040ez   A leased employee is not treated as your employee if all the following conditions are met. 2011 tax form 1040ez Leased employees are not more than 20% of your non-highly compensated work force. 2011 tax form 1040ez The employee is covered under the leasing organization's qualified pension plan. 2011 tax form 1040ez The leasing organization's plan is a money purchase pension plan that has all the following provisions. 2011 tax form 1040ez Immediate participation. 2011 tax form 1040ez (This requirement does not apply to any individual whose compensation from the leasing organization in each plan year during the 4-year period ending with the plan year is less than $1,000. 2011 tax form 1040ez ) Full and immediate vesting. 2011 tax form 1040ez A nonintegrated employer contribution rate of at least 10% of compensation for each participant. 2011 tax form 1040ez However, if the leased employee is your common-law employee, that employee will be your employee for all purposes, regardless of any pension plan of the leasing organization. 2011 tax form 1040ez Net earnings from self-employment. 2011 tax form 1040ez   For SEP and qualified plans, net earnings from self-employment is your gross income from your trade or business (provided your personal services are a material income-producing factor) minus allowable business deductions. 2011 tax form 1040ez Allowable deductions include contributions to SEP and qualified plans for common-law employees and the deduction allowed for the deductible part of your self-employment tax. 2011 tax form 1040ez   Net earnings from self-employment does not include items excluded from gross income (or their related deductions) other than foreign earned income and foreign housing cost amounts. 2011 tax form 1040ez   For the deduction limits, earned income is net earnings for personal services actually rendered to the business. 2011 tax form 1040ez You take into account the income tax deduction for the deductible part of self-employment tax and the deduction for contributions to the plan made on your behalf when figuring net earnings. 2011 tax form 1040ez   Net earnings include a partner's distributive share of partnership income or loss (other than separately stated items, such as capital gains and losses). 2011 tax form 1040ez It does not include income passed through to shareholders of S corporations. 2011 tax form 1040ez Guaranteed payments to limited partners are net earnings from self-employment if they are paid for services to or for the partnership. 2011 tax form 1040ez Distributions of other income or loss to limited partners are not net earnings from self-employment. 2011 tax form 1040ez   For SIMPLE plans, net earnings from self-employment is the amount on line 4 of Short Schedule SE or line 6 of Long Schedule SE (Form 1040), Self-Employment Tax, before subtracting any contributions made to the SIMPLE plan for yourself. 2011 tax form 1040ez Qualified plan. 2011 tax form 1040ez   A qualified plan is a retirement plan that offers a tax-favored way to save for retirement. 2011 tax form 1040ez You can deduct contributions made to the plan for your employees. 2011 tax form 1040ez Earnings on these contributions are generally tax free until distributed at retirement. 2011 tax form 1040ez Profit-sharing, money purchase, and defined benefit plans are qualified plans. 2011 tax form 1040ez A 401(k) plan is also a qualified plan. 2011 tax form 1040ez Participant. 2011 tax form 1040ez   A participant is an eligible employee who is covered by your retirement plan. 2011 tax form 1040ez See the discussions of the different types of plans for the definition of an employee eligible to participate in each type of plan. 2011 tax form 1040ez Partner. 2011 tax form 1040ez   A partner is an individual who shares ownership of an unincorporated trade or business with one or more persons. 2011 tax form 1040ez For retirement plans, a partner is treated as an employee of the partnership. 2011 tax form 1040ez Self-employed individual. 2011 tax form 1040ez   An individual in business for himself or herself, and whose business is not incorporated, is self-employed. 2011 tax form 1040ez Sole proprietors and partners are self-employed. 2011 tax form 1040ez Self-employment can include part-time work. 2011 tax form 1040ez   Not everyone who has net earnings from self-employment for social security tax purposes is self-employed for qualified plan purposes. 2011 tax form 1040ez See Common-law employee and Net earnings from self-employment , earlier. 2011 tax form 1040ez   In addition, certain fishermen may be considered self-employed for setting up a qualified plan. 2011 tax form 1040ez See Publication 595, Capital Construction Fund for Commercial Fishermen, for the special rules used to determine whether fishermen are self-employed. 2011 tax form 1040ez Sole proprietor. 2011 tax form 1040ez   A sole proprietor is an individual who owns an unincorporated business by himself or herself, including a single member limited liability company that is treated as a disregarded entity for tax purposes. 2011 tax form 1040ez For retirement plans, a sole proprietor is treated as both an employer and an employee. 2011 tax form 1040ez Prev  Up  Next   Home   More Online Publications