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Amending A Federal Tax Return

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Amending A Federal Tax Return

Amending a federal tax return Publication 517 - Main Content Table of Contents Social Security CoverageCoverage of Members of the Clergy Coverage of Religious Workers (Church Employees) U. Amending a federal tax return S. Amending a federal tax return Citizens and Resident and Nonresident Aliens Ministerial ServicesMinisters Members of Religious Orders Christian Science Practitioners and Readers Exemption From Self-Employment (SE) TaxMembers of the Clergy Members of Recognized Religious Sects Self-Employment Tax: Figuring Net EarningsRegular Method Nonfarm Optional Method Income Tax: Income and ExpensesIncome Items Expense Items Income Tax Withholding and Estimated Tax Filing Your Return Retirement Savings ArrangementsDeducting contributions to tax-sheltered annuity plans. Amending a federal tax return Full-time student. Amending a federal tax return Adjusted gross income. Amending a federal tax return More information. Amending a federal tax return Earned Income Credit Comprehensive ExampleForm W-2 From Church Form W-2 From College Schedule C-EZ (Form 1040) Form 2106-EZ Schedule A (Form 1040) Schedule SE (Form 1040) Form 1040 Attachment 1 Attachment 2 How To Get Tax HelpLow Income Taxpayer Clinics Social Security Coverage This section gives information about which system (SECA or FICA) is used to collect social security and Medicare taxes from members of the clergy (ministers, members of a religious order, and Christian Science practitioners and readers) and religious workers (church employees). Amending a federal tax return Coverage of Members of the Clergy The services you perform in the exercise of your ministry, of the duties required by your religious order, or of your profession as a Christian Science practitioner or reader are covered by social security and Medicare under SECA. Amending a federal tax return Your earnings for these ministerial services (defined later) are subject to self-employment (SE) tax unless one of the following applies. Amending a federal tax return You are a member of a religious order who has taken a vow of poverty. Amending a federal tax return You ask the Internal Revenue Service (IRS) for an exemption from SE tax for your services and the IRS approves your request. Amending a federal tax return See Exemption From Self-Employment (SE) Tax , later. Amending a federal tax return You are subject only to the social security laws of a foreign country under the provisions of a social security agreement between the United States and that country. Amending a federal tax return For more information, see Bilateral Social Security (Totalization) Agreements in Publication 54. Amending a federal tax return Your earnings that are not from ministerial services may be subject to social security tax under FICA or SECA according to the rules that apply to taxpayers in general. Amending a federal tax return See Ministerial Services , later. Amending a federal tax return Ministers If you are a minister of a church, your earnings for the services you perform in your capacity as a minister are subject to SE tax, even if you perform these services as an employee of that church. Amending a federal tax return However, you can request that the IRS grant you an exemption, as discussed under Exemption From Self-Employment (SE) Tax , later. Amending a federal tax return For the specific services covered, see Ministerial Services , later. Amending a federal tax return Ministers defined. Amending a federal tax return   Ministers are individuals who are duly ordained, commissioned, or licensed by a religious body constituting a church or church denomination. Amending a federal tax return Ministers have the authority to conduct religious worship, perform sacerdotal functions, and administer ordinances or sacraments according to the prescribed tenets and practices of that church or denomination. Amending a federal tax return   If a church or denomination ordains some ministers and licenses or commissions others, anyone licensed or commissioned must be able to perform substantially all the religious functions of an ordained minister to be treated as a minister for social security purposes. Amending a federal tax return Employment status for other tax purposes. Amending a federal tax return   Even though all of your income from performing ministerial services is subject to self-employment tax for social security tax purposes, you may be an employee for income tax or retirement plan purposes in performing those same services. Amending a federal tax return For income tax or retirement plan purposes, your income earned as an employee will be considered wages. Amending a federal tax return Common-law employee. Amending a federal tax return   Under common-law rules, you are considered either an employee or a self-employed person. Amending a federal tax return Generally, you are an employee if you perform services for someone who has the legal right to control both what you do and how you do it, even if you have considerable discretion and freedom of action. Amending a federal tax return For more information about the common-law rules, see Publication 15-A, Employer's Supplemental Tax Guide. Amending a federal tax return   If a congregation employs you and pays you a salary, you are generally a common-law employee and income from the exercise of your ministry is wages for income tax purposes. Amending a federal tax return However, amounts received directly from members of the congregation, such as fees for performing marriages, baptisms, or other personal services, are not wages; such amounts are self-employment income for both income tax purposes and social security tax purposes. Amending a federal tax return Example. Amending a federal tax return A church hires and pays you a salary to perform ministerial services subject to its control. Amending a federal tax return Under the common-law rules, you are an employee of the church while performing those services. Amending a federal tax return Form SS-8. Amending a federal tax return   If you are not certain whether you are an employee or a self-employed person, you can get a determination from the IRS by filing Form SS-8. Amending a federal tax return Members of Religious Orders If you are a member of a religious order who has not taken a vow of poverty, your earnings for ministerial services you perform as a member of the order are subject to SE tax. Amending a federal tax return See Ministerial Services , later. Amending a federal tax return However, you can request that the IRS grant you an exemption as discussed under Exemption From Self-Employment (SE) Tax , later. Amending a federal tax return Vow of poverty. Amending a federal tax return   If you are a member of a religious order and have taken a vow of poverty, you are already exempt from paying SE tax on your earnings for ministerial services you perform as an agent of your church or its agencies. Amending a federal tax return You do not need to request a separate exemption. Amending a federal tax return For income tax purposes, the earnings are tax free to you. Amending a federal tax return Your earnings are considered the income of the religious order. Amending a federal tax return Services covered under FICA at the election of the order. Amending a federal tax return   However, even if you have taken a vow of poverty, the services you perform for your church or its agencies may be covered under social security. Amending a federal tax return Your services are covered if your order, or an autonomous subdivision of the order, elects social security coverage for its current and future vow-of-poverty members. Amending a federal tax return   The order or subdivision elects coverage by filing Form SS-16. Amending a federal tax return The election may cover certain vow-of-poverty members for a retroactive period of up to 20 calendar quarters before the quarter in which it files the certificate. Amending a federal tax return If the election is made, the order or subdivision pays both the employer's and employee's share of the tax. Amending a federal tax return You do not pay any of the FICA tax. Amending a federal tax return Services performed outside the order. Amending a federal tax return   Even if you are a member of a religious order who has taken a vow of poverty and the order requires you to turn over amounts you earn, your earnings are subject to federal income tax and either SE tax or FICA tax (including estimated tax payments and/or withholding) if you: Are self-employed or an employee of an organization outside your religious community, and Perform work not required by, or done on behalf of, the order. Amending a federal tax return   In these cases, your income from self-employment or as an employee of that outside organization is taxable to you directly. Amending a federal tax return You may, however, be able to take a charitable deduction for the amount you turn over to the order. Amending a federal tax return See Publication 526, Charitable Contributions. Amending a federal tax return Rulings. Amending a federal tax return   Organizations and individuals may request rulings from the IRS on whether they are religious orders, or members of a religious order, respectively, for FICA tax, SE tax, and federal income tax withholding purposes. Amending a federal tax return To request a ruling, follow the procedures in Revenue Procedure 2014-1, 2014-1 I. Amending a federal tax return R. Amending a federal tax return B. Amending a federal tax return 1, available at www. Amending a federal tax return irs. Amending a federal tax return gov/irb/2014-1_IRB/ar05. Amending a federal tax return html. Amending a federal tax return Christian Science Practitioners and Readers Generally, your earnings from services you perform in your profession as a Christian Science practitioner or reader are subject to SE tax. Amending a federal tax return However, you can request an exemption as discussed under Exemption From Self-Employment (SE) Tax , later. Amending a federal tax return Practitioners. Amending a federal tax return   Christian Science practitioners are members in good standing of the Mother Church, The First Church of Christ, Scientist, in Boston, Massachusetts, who practice healing according to the teachings of Christian Science. Amending a federal tax return State law specifically exempts Christian Science practitioners from licensing requirements. Amending a federal tax return   Some Christian Science practitioners also are Christian Science teachers or lecturers. Amending a federal tax return Income from teaching or lecturing is considered the same as income from their work as practitioners. Amending a federal tax return Readers. Amending a federal tax return   For tax purposes, Christian Science readers are considered the same as ordained, commissioned, or licensed ministers. Amending a federal tax return Coverage of Religious Workers (Church Employees) If you are a religious worker (a church employee) and are not in one of the classes already discussed, your wages are generally subject to social security and Medicare tax under FICA, not SECA. Amending a federal tax return Some exceptions are discussed next. Amending a federal tax return Election by Church To Exclude Its Employees From FICA Coverage Churches and qualified church-controlled organizations (church organizations) that are opposed for religious reasons to the payment of social security and Medicare taxes can elect to exclude their employees from FICA coverage. Amending a federal tax return If your employer makes this election, it does not pay the employer's portion of the FICA taxes or withhold from your pay your portion of the FICA taxes. Amending a federal tax return Instead, your wages are subject to SECA and you must pay SE tax on your wages if they exceed $108. Amending a federal tax return 28 during the tax year. Amending a federal tax return However, you can request an exemption from SE tax if you are a member of a recognized religious sect, as discussed below. Amending a federal tax return Churches and church organizations make this election by filing two copies of Form 8274. Amending a federal tax return For more information about making this election, see Form 8274. Amending a federal tax return Election by Certain Church Employees Who Are Opposed to Social Security and Medicare You may be able to choose to be exempt from social security and Medicare taxes, including the SE tax, if you are a member of a recognized religious sect or division and work for a church (or church-controlled nonprofit division) that does not pay the employer's part of the social security tax on wages. Amending a federal tax return This exemption does not apply to your service, if any, as a minister of a church or as a member of a religious order. Amending a federal tax return Make this choice by filing Form 4029. Amending a federal tax return See Requesting Exemption—Form 4029 , later, under Members of Recognized Religious Sects. Amending a federal tax return U. Amending a federal tax return S. Amending a federal tax return Citizens and Resident and Nonresident Aliens To be covered under the SE tax provisions (SECA), individuals generally must be citizens or resident aliens of the United States. Amending a federal tax return Nonresident aliens are not covered under SECA unless a social security agreement in effect between the United States and the foreign country determines that you are covered under the U. Amending a federal tax return S. Amending a federal tax return social security system. Amending a federal tax return To determine your alien status, see Publication 519, U. Amending a federal tax return S. Amending a federal tax return Tax Guide for Aliens. Amending a federal tax return Residents of Puerto Rico, the U. Amending a federal tax return S. Amending a federal tax return Virgin Islands, Guam, the CNMI, and American Samoa. Amending a federal tax return   If you are a resident of one of these U. Amending a federal tax return S. Amending a federal tax return possessions but not a U. Amending a federal tax return S. Amending a federal tax return citizen, for SE tax purposes you are treated the same as a citizen or resident alien of the United States. Amending a federal tax return For information on figuring the tax, see Self-Employment Tax: Figuring Net Earnings , later. Amending a federal tax return Ministerial Services Ministerial services, in general, are the services you perform in the exercise of your ministry, in the exercise of your duties as required by your religious order, or in the exercise of your profession as a Christian Science practitioner or reader. Amending a federal tax return Income you receive for performing ministerial services is subject to SE tax unless you have an exemption as explained later. Amending a federal tax return Even if you have an exemption, only the income you receive for performing ministerial services is exempt. Amending a federal tax return The exemption does not apply to any other income. Amending a federal tax return The following discussions provide more detailed information on ministerial services of ministers, members of a religious order, and Christian Science practitioners and readers. Amending a federal tax return Ministers Most services you perform as a minister, priest, rabbi, etc. Amending a federal tax return , are ministerial services. Amending a federal tax return These services include: Performing sacerdotal functions, Conducting religious worship, and Controlling, conducting, and maintaining religious organizations (including the religious boards, societies, and other integral agencies of such organizations) that are under the authority of a religious body that is a church or denomination. Amending a federal tax return You are considered to control, conduct, and maintain a religious organization if you direct, manage, or promote the organization's activities. Amending a federal tax return A religious organization is under the authority of a religious body that is a church or denomination if it is organized for and dedicated to carrying out the principles of a faith according to the requirements governing the creation of institutions of the faith. Amending a federal tax return Services for nonreligious organizations. Amending a federal tax return   Your services for a nonreligious organization are ministerial services if the services are assigned or designated by your church. Amending a federal tax return Assigned or designated services qualify even if they do not involve performing sacerdotal functions or conducting religious worship. Amending a federal tax return   If your services are not assigned or designated by your church, they are ministerial services only if they involve performing sacerdotal functions or conducting religious worship. Amending a federal tax return Services that are not part of your ministry. Amending a federal tax return   Income from services you perform as an employee that are not ministerial services is subject to social security and Medicare tax withholding under FICA (not SECA) under the rules that apply to employees in general. Amending a federal tax return The following are not ministerial services. Amending a federal tax return Services you perform for nonreligious organizations other than the services stated above. Amending a federal tax return Services you perform as a duly ordained, commissioned, or licensed minister of a church as an employee of the United States, the District of Columbia, a foreign government, or any of their political subdivisions. Amending a federal tax return These services are not ministerial services even if you are performing sacerdotal functions or conducting religious worship. Amending a federal tax return (For example, if you perform services as a chaplain in the Armed Forces of the United States, those services are not ministerial services. Amending a federal tax return ) Services you perform in a government-owned and operated hospital. Amending a federal tax return (These services are considered performed by a government employee, not by a minister as part of the ministry. Amending a federal tax return ) However, services that you perform at a church-related hospital or health and welfare institution, or a private nonprofit hospital, are considered to be part of the ministry and are considered ministerial services. Amending a federal tax return Books or articles. Amending a federal tax return   Writing religious books or articles is considered to be in the exercise of your ministry and is considered a ministerial service. Amending a federal tax return   This rule also applies to members of religious orders and to Christian Science practitioners and readers. Amending a federal tax return Members of Religious Orders Services you perform as a member of a religious order in the exercise of duties required by the order are ministerial services. Amending a federal tax return The services are considered ministerial because you perform them as an agent of the order. Amending a federal tax return For example, if the order directs you to perform services for another agency of the supervising church or an associated institution, you are considered to perform the services as an agent of the order. Amending a federal tax return However, if the order directs you to work outside the order, this employment will not be considered a duty required by the order unless: Your services are the kind that are ordinarily performed by members of the order, and Your services are part of the duties that must be exercised for, or on behalf of, the religious order as its agent. Amending a federal tax return Effect of employee status. Amending a federal tax return   Ordinarily, if your services are not considered directed or required of you by the order, you and the outside party for whom you work are considered employee and employer. Amending a federal tax return In this case, your earnings from the services are taxed under the rules that apply to employees in general, not under the rules for services provided as agent for the order. Amending a federal tax return This result is true even if you have taken a vow of poverty. Amending a federal tax return Example. Amending a federal tax return Pat Brown and Chris Green are members of a religious order and have taken vows of poverty. Amending a federal tax return They renounce all claims to their earnings. Amending a federal tax return The earnings belong to the order. Amending a federal tax return Pat is a licensed attorney. Amending a federal tax return The superiors of the order instructed her to get a job with a law firm. Amending a federal tax return Pat joined a law firm as an employee and, as she requested, the firm made the salary payments directly to the order. Amending a federal tax return Chris is a secretary. Amending a federal tax return The superiors of the order instructed him to accept a job with the business office of the church that supervises the order. Amending a federal tax return Chris took the job and gave all his earnings to the order. Amending a federal tax return Pat's services are not duties required by the order. Amending a federal tax return Her earnings are subject to social security and Medicare tax under FICA and to federal income tax. Amending a federal tax return Chris' services are duties required by the order. Amending a federal tax return He is acting as an agent of the order and not as an employee of a third party. Amending a federal tax return He does not include the earnings in gross income, and they are not subject to income tax withholding or to social security and Medicare tax under FICA or SECA. Amending a federal tax return Christian Science Practitioners and Readers Services you perform as a Christian Science practitioner or reader in the exercise of your profession are ministerial services. Amending a federal tax return Amounts you receive for performing these services are generally subject to SE tax. Amending a federal tax return You may request an exemption from SE tax, discussed next, which applies only to those services. Amending a federal tax return Exemption From Self-Employment (SE) Tax You can request an exemption from SE tax if you are a member of the clergy (minister, member of a religious order, or Christian Science practitioner or reader) or a member of a recognized religious sect. Amending a federal tax return Generally, members of religious orders who have taken a vow of poverty are already exempt from paying SE tax, as discussed earlier under Members of Religious Orders under Social Security Coverage. Amending a federal tax return They do not have to request the exemption. Amending a federal tax return Who cannot be exempt. Amending a federal tax return   You cannot be exempt from SE tax if you made one of the following elections to be covered under social security. Amending a federal tax return These elections are irrevocable. Amending a federal tax return You elected to be covered under social security by filing Form 2031, Revocation of Exemption From Self-Employment Tax for Use by Ministers, Members of Religious Orders, and Christian Science Practitioners, for your 1986, 1987, 2000, or 2001 tax year. Amending a federal tax return You elected before 1968 to be covered under social security for your ministerial services. Amending a federal tax return Requesting exemption. Amending a federal tax return    Table 2, earlier, briefly summarizes the procedure for requesting exemption from the SE tax. Amending a federal tax return More detailed explanations follow. Amending a federal tax return If you are a minister, member of a religious order, or Christian Science practitioner, an approved exemption only applies to earnings you receive for ministerial services, discussed earlier. Amending a federal tax return It does not apply to any other self-employment income. Amending a federal tax return Table 2. Amending a federal tax return The Self-Employment Tax Exemption Application and Approval Process   Who Can Apply Members of the Clergy Members of Recognized  Religious Sects How File Form 4361 File Form 4029 When File by the due date (including extensions) of your income tax return for the second tax year in which you had at least $400 of net earnings from self-employment (at least part from ministerial services) File anytime Approval If approved, you will receive an approved copy of Form 4361 If approved, you will receive an approved copy of Form 4029 Effective Date For all tax years after 1967 in which you have at least $400 of net earnings from self-employment For all tax years beginning with the first year you meet the eligibility requirements discussed later Members of the Clergy To claim the exemption from SE tax, you must meet all of the following conditions. Amending a federal tax return You file Form 4361, described below under Requesting Exemption—Form 4361 . Amending a federal tax return You are conscientiously opposed to public insurance because of your individual religious considerations (not because of your general conscience), or you are opposed because of the principles of your religious denomination. Amending a federal tax return You file for other than economic reasons. Amending a federal tax return You inform the ordaining, commissioning, or licensing body of your church or order that you are opposed to public insurance if you are a minister or a member of a religious order (other than a vow-of-poverty member). Amending a federal tax return This requirement does not apply to Christian Science practitioners or readers. Amending a federal tax return You establish that the organization that ordained, commissioned, or licensed you, or your religious order, is a tax-exempt religious organization. Amending a federal tax return You establish that the organization is a church or a convention or association of churches. Amending a federal tax return You did not make an election discussed earlier under Who cannot be exempt . Amending a federal tax return You sign and return the statement the IRS mails to you to certify that you are requesting an exemption based on the grounds listed on the statement. Amending a federal tax return Requesting Exemption—Form 4361 To request exemption from SE tax, file Form 4361 in triplicate (original and two copies) with the IRS. Amending a federal tax return The IRS will return to you a copy of the Form 4361 that you filed indicating whether it has approved your exemption. Amending a federal tax return If it is approved, keep the approved copy of Form 4361 in your permanent records. Amending a federal tax return When to file. Amending a federal tax return   File Form 4361 by the date your income tax return is due, including extensions, for the second tax year in which both of the following are true. Amending a federal tax return You have net earnings from self-employment of at least $400. Amending a federal tax return Any part of those net earnings was from ministerial services you performed as a: Minister, Member of a religious order, or Christian Science practitioner or reader. Amending a federal tax return The 2 years do not have to be consecutive tax years. Amending a federal tax return    The approval process can take some time, so you should file Form 4361 as soon as possible. Amending a federal tax return Example 1. Amending a federal tax return Rev. Amending a federal tax return Lawrence Jaeger, a clergyman ordained in 2013, has net self-employment earnings as a minister of $450 in 2013 and $500 in 2014. Amending a federal tax return He must file his application for exemption by the due date, including extensions, for his 2014 income tax return. Amending a federal tax return However, if Rev. Amending a federal tax return Jaeger does not receive IRS approval for an exemption by April 15, 2015, his SE tax for 2014 is due by that date. Amending a federal tax return Example 2. Amending a federal tax return Rev. Amending a federal tax return Louise Wolfe has only $300 in net self-employment earnings as a minister in 2013, but earned more than $400 in 2012 and expects to earn more than $400 in 2014. Amending a federal tax return She must file her application for exemption by the due date, including extensions, for her 2014 income tax return. Amending a federal tax return However, if she does not receive IRS approval for an exemption by April 15, 2015, her SE tax for 2014 is due by that date. Amending a federal tax return Example 3. Amending a federal tax return In 2011, Rev. Amending a federal tax return David Moss was ordained a minister and had $700 in net self-employment earnings as a minister. Amending a federal tax return In 2012, he received $1,000 as a minister, but his related expenses were over $1,000. Amending a federal tax return Therefore, he had no net self-employment earnings as a minister in 2012. Amending a federal tax return Also in 2012, he opened a book store and had $8,000 in net self-employment earnings from the store. Amending a federal tax return In 2013, he had net self-employment earnings of $1,500 as a minister and $10,000 net self-employment earnings from the store. Amending a federal tax return Rev. Amending a federal tax return Moss had net earnings from self-employment in 2011 and 2013 that were $400 or more each year, and part of the self-employment earnings in each of those years was for his services as a minister. Amending a federal tax return Thus, he must file his application for exemption by the due date, including extensions, for his 2013 income tax return. Amending a federal tax return Death of individual. Amending a federal tax return   The right to file an application for exemption ends with an individual's death. Amending a federal tax return A surviving spouse, executor, or administrator cannot file an exemption application for a deceased clergy member. Amending a federal tax return Effective date of exemption. Amending a federal tax return   An approved exemption is effective for all tax years after 1967 in which you have $400 or more of net earnings from self-employment and any part of those earnings is for services as a member of the clergy. Amending a federal tax return Once the exemption is approved, it is irrevocable. Amending a federal tax return Example. Amending a federal tax return Rev. Amending a federal tax return Trudy Austin, ordained in 2010, had $400 or more in net self-employment earnings as a minister in both 2010 and 2013. Amending a federal tax return She files an application for exemption on February 20, 2014. Amending a federal tax return If an exemption is granted, it is effective for 2010 and the following years. Amending a federal tax return Refunds of SE tax. Amending a federal tax return   If, after receiving an approved Form 4361, you find that you overpaid SE tax, you can file a claim for refund on Form 1040X. Amending a federal tax return Generally, for a refund, you must file Form 1040X within 3 years from the date you filed the return or within 2 years from the date you paid the tax, whichever is later. Amending a federal tax return A return you filed, or tax you paid, before the due date is considered to have been filed or paid on the due date. Amending a federal tax return   If you file a claim after the 3-year period but within 2 years from the time you paid the tax, the credit or refund will not be more than the tax you paid within the 2 years immediately before you file the claim. Amending a federal tax return Members of Recognized Religious Sects If you are a member of a recognized religious sect, or a division of a recognized religious sect, you can apply for an exemption from payment of social security and Medicare taxes on both your self-employment income and the wages you earn from an employer who also has an exemption. Amending a federal tax return Exception. Amending a federal tax return   If you received social security benefits or payments, or anyone else received these benefits or payments based on your wages or self-employment income, you cannot apply. Amending a federal tax return However, if you pay your benefits back, you may be considered for exemption. Amending a federal tax return Contact your local Social Security Administration office to find out the amount you must pay back. Amending a federal tax return Eligibility requirements. Amending a federal tax return   To claim this exemption from SE tax, all the following requirements must be met. Amending a federal tax return You must file Form 4029, discussed later under Requesting Exemption—Form 4029 . Amending a federal tax return As a follower of the established teachings of the sect or division, you must be conscientiously opposed to accepting benefits of any private or public insurance that makes payments for death, disability, old age, retirement, or medical care, or provides services for medical care. Amending a federal tax return You must waive all rights to receive any social security payment or benefit and agree that no benefits or payments will be made to anyone else based on your wages and self-employment income. Amending a federal tax return The Commissioner of Social Security must determine that: Your sect or division has the established teachings as described in (2) above, It is the practice, and has been for a substantial period of time, for members of the sect or division to provide for their dependent members in a manner that is reasonable in view of the members' general level of living, and The sect or division has existed at all times since December 31, 1950. Amending a federal tax return Requesting Exemption—Form 4029 To request the exemption, file Form 4029 in triplicate (original and two copies) with the Social Security Administration at the address shown on the form. Amending a federal tax return The sect or division must complete part of the form. Amending a federal tax return The IRS will return to you a copy of the Form 4029 that you filed indicating whether it has approved your exemption. Amending a federal tax return If it is approved, keep the approved copy of Form 4029 in your permanent records. Amending a federal tax return When to file. Amending a federal tax return   You can file Form 4029 at any time. Amending a federal tax return   If you have an approved exemption from SE tax and for some reason that approved exemption ended, you must file a new Form 4029 if you subsequently meet the eligibility requirements, discussed earlier. Amending a federal tax return See Effective date of exemption next for information on when the newly approved exemption would become effective. Amending a federal tax return    If you have a previously approved exemption from SE tax and you change membership to another recognized religious sect, without any change to your eligibility requirements, then you do not need to file a new Form 4029. Amending a federal tax return Effective date of exemption. Amending a federal tax return   An approved exemption from SE tax generally is effective for all tax years beginning with the first year you meet the eligibility requirements discussed earlier. Amending a federal tax return (For example, if you meet the eligibility requirements in 2011, you file Form 4029 in 2012, and the IRS approves your exemption in 2013, your exemption is effective for tax year 2011 and all later years. Amending a federal tax return )   The exemption will end if you fail to meet the eligibility requirements or if the Commissioner of Social Security determines that the sect or division fails to meet them. Amending a federal tax return You must notify the IRS within 60 days if you are no longer a member of the religious group, or if you no longer follow the established teachings of this group. Amending a federal tax return The exemption will end for the tax year where you or your sect/division first fails to meet the eligibility requirements. Amending a federal tax return Refunds of SE tax paid. Amending a federal tax return    To get a refund of any SE tax you paid while the exemption was in effect, file Form 1040X. Amending a federal tax return For information on filing this form, see Refunds of SE tax under Requesting Exemption—Form 4361, earlier. Amending a federal tax return Exemption From FICA Taxes Generally, under FICA, the employer and the employee each pay half of the social security and Medicare tax. Amending a federal tax return Both the employee and the employer, if they meet the eligibility requirements discussed earlier, can apply to be exempt from their share of FICA taxes on wages paid by the employer to the employee. Amending a federal tax return A partnership in which each partner holds a religious exemption from social security and Medicare is an employer for this purpose. Amending a federal tax return If the employer's application is approved, the exemption will apply only to FICA taxes on wages paid to employees who also received an approval of identical applications. Amending a federal tax return Information for employers. Amending a federal tax return   If you have an approved Form 4029 and you have an employee who has an approved Form 4029, do not report wages you paid to the employee as social security and Medicare wages. Amending a federal tax return   If you have an employee who does not have an approved Form 4029, you must withhold the employee's share of social security and Medicare taxes and pay the employer's share. Amending a federal tax return Form W-2. Amending a federal tax return   When preparing a Form W-2 for an employee with an approved Form 4029, enter “Form 4029” in box 14, “Other. Amending a federal tax return ” Do not make any entries in boxes 3, 4, 5, or 6. Amending a federal tax return Forms 941, 943, and 944. Amending a federal tax return   If both you and your employee have received approved Forms 4029, do not include these exempt wages on the following forms. Amending a federal tax return Instead, follow the instructions given below. Amending a federal tax return Form 941, Employer's QUARTERLY Federal Tax Return: check the box on line 4 and enter “Form 4029” in the empty space below the check box. Amending a federal tax return Form 943, Employer's Annual Federal Tax Return for Agricultural Employees: enter “Form 4029” on the dotted line next to the lines 2 and 4 entry spaces. Amending a federal tax return Form 944, Employer's ANNUAL Federal Tax Return: check the box on line 3 and enter “Form 4029” in the empty space below the check box. Amending a federal tax return Effective date. Amending a federal tax return   An approved exemption from FICA becomes effective on the first day of the first calendar quarter after the quarter in which you file Form 4029. Amending a federal tax return The exemption will end on the last day of the calendar quarter before the quarter in which the employer, employee, sect, or division fails to meet the requirements. Amending a federal tax return Self-Employment Tax: Figuring Net Earnings There are two methods for figuring your net earnings from self-employment as a member of the clergy or a religious worker. Amending a federal tax return Regular method. Amending a federal tax return Nonfarm optional method. Amending a federal tax return You may find Worksheets 1 through 4 helpful in figuring your net earnings from self-employment. Amending a federal tax return Blank worksheets are in the back of this publication, after the Comprehensive Example. Amending a federal tax return Regular Method Most people use the regular method. Amending a federal tax return Under this method, figure your net earnings from self-employment by totaling your gross income for services you performed as a minister, a member of a religious order who has not taken a vow of poverty, or a Christian Science practitioner or reader. Amending a federal tax return Then, subtract your allowable business deductions and multiply the difference by 92. Amending a federal tax return 35% (. Amending a federal tax return 9235). Amending a federal tax return Use Schedule SE (Form 1040) to figure your net earnings and SE tax. Amending a federal tax return If you are an employee of a church that elected to exclude you from FICA coverage, figure net earnings by multiplying your church wages shown on Form W-2 by 92. Amending a federal tax return 35% (. Amending a federal tax return 9235). Amending a federal tax return Do not reduce your wages by any business deductions when making this computation. Amending a federal tax return Use Schedule SE (Form 1040), Section B, to figure your net earnings and SE tax. Amending a federal tax return If you have an approved exemption, or you are automatically exempt, do not include the income or deductions from ministerial services in figuring your net earnings from self-employment. Amending a federal tax return Amounts included in gross income. Amending a federal tax return   To figure your net earnings from self-employment (on Schedule SE (Form 1040)), include in gross income: Salaries and fees for your ministerial services (discussed earlier), Offerings you receive for marriages, baptisms, funerals, masses, etc. Amending a federal tax return , The value of meals and lodging provided to you, your spouse, and your dependents for your employer's convenience, The fair rental value of a parsonage provided to you (including the cost of utilities that are furnished) and the rental allowance (including an amount for payment of utilities) paid to you, and Any amount a church pays toward your income tax or SE tax, other than withholding the amount from your salary. Amending a federal tax return This amount is also subject to income tax. Amending a federal tax return   For the income tax treatment of items (2) and (4), see Income Tax: Income and Expenses , later. Amending a federal tax return Example. Amending a federal tax return Pastor Roger Adams receives an annual salary of $39,000 as a full-time minister. Amending a federal tax return The $39,000 includes $5,000 that is designated as a rental allowance to pay utilities. Amending a federal tax return His church owns a parsonage that has a fair rental value of $12,000 per year. Amending a federal tax return The church gives Pastor Adams the use of the parsonage. Amending a federal tax return He is not exempt from SE tax. Amending a federal tax return He must include $51,000 ($39,000 plus $12,000) when figuring his net earnings for SE tax purposes. Amending a federal tax return The results would be the same if, instead of the use of the parsonage and receipt of the rental allowance for utilities, Pastor Adams had received an annual salary of $51,000 of which $17,000 ($5,000 plus $12,000) per year was designated as a rental allowance. Amending a federal tax return Overseas duty. Amending a federal tax return   Your net earnings from self-employment are determined without any foreign earned income exclusion or the foreign housing exclusion or deduction if you are a U. Amending a federal tax return S. Amending a federal tax return citizen or resident alien serving abroad and living in a foreign country. Amending a federal tax return   For information on excluding foreign earned income or the foreign housing amount, see Publication 54. Amending a federal tax return Example. Amending a federal tax return Diane Jones was the minister of a U. Amending a federal tax return S. Amending a federal tax return church in Mexico. Amending a federal tax return She earned $35,000 in that position and was able to exclude it all for income tax purposes under the foreign earned income exclusion. Amending a federal tax return The United States does not have a social security agreement with Mexico, so Mrs. Amending a federal tax return Jones is subject to U. Amending a federal tax return S. Amending a federal tax return SE tax and must include $35,000 when figuring net earnings from self-employment. Amending a federal tax return Specified U. Amending a federal tax return S. Amending a federal tax return possessions. Amending a federal tax return    The exclusion from gross income for amounts derived from American Samoa or Puerto Rico does not apply in computing net earnings from self-employment. Amending a federal tax return Also see Residents of Puerto Rico, the U. Amending a federal tax return S. Amending a federal tax return Virgin Islands, Guam, the CNMI, and American Samoa , earlier, under U. Amending a federal tax return S. Amending a federal tax return Citizens and Resident and Nonresident Aliens. Amending a federal tax return Amounts not included in gross income. Amending a federal tax return   Do not include the following amounts in gross income when figuring your net earnings from self-employment. Amending a federal tax return Offerings that others made to the church. Amending a federal tax return Contributions by your church to a tax-sheltered annuity plan set up for you, including any salary reduction contributions (elective deferrals) that are not included in your gross income. Amending a federal tax return Pension payments or retirement allowances you receive for your past ministerial services. Amending a federal tax return The rental value of a parsonage or a parsonage allowance provided to you after you retire. Amending a federal tax return Allowable deductions. Amending a federal tax return   When figuring your net earnings from self-employment, deduct all your expenses related to your ministerial services performed as a self-employed person. Amending a federal tax return These are ministerial expenses you incurred while working other than as a common-law employee of the church. Amending a federal tax return They include expenses incurred in performing marriages and baptisms, and in delivering speeches. Amending a federal tax return Deduct these expenses on Schedule C or C-EZ (Form 1040), and carry the net amount to line 2 of Schedule SE (Form 1040), Section A or B. Amending a federal tax return   Wages earned as a common-law employee (explained earlier) of a church are generally subject to self-employment tax unless an exemption is requested, as discussed earlier under Exemption From Self-Employment (SE) Tax . Amending a federal tax return Subtract any allowable expenses (including unreimbursed employee business expenses) from those wages, include the net amount on line 2 of Schedule SE (Form 1040), Section A or B, and attach an explanation. Amending a federal tax return Do not complete Schedule C or C-EZ (Form 1040). Amending a federal tax return However, for income tax purposes, the expenses are allowed only as an itemized deduction on Schedule A (Form 1040) to the extent they exceed 2% of adjusted gross income. Amending a federal tax return Employee reimbursement arrangements. Amending a federal tax return   If you received an advance, allowance, or reimbursement for your employee expenses, how you report this amount and your employee expenses depends on whether your employer reimbursed you under an accountable plan or a nonaccountable plan. Amending a federal tax return Ask your employer if you are not sure if it reimburses you using an accountable or a nonaccountable plan. Amending a federal tax return Accountable plans. Amending a federal tax return   To be an accountable plan, your employer's reimbursement arrangement must include all three of the following rules. Amending a federal tax return Your expenses must have a business connection—that is, you must have paid or incurred deductible expenses while performing services as an employee of your employer. Amending a federal tax return You must adequately account to your employer for these expenses within a reasonable period of time. Amending a federal tax return You must return any excess reimbursement or allowance within a reasonable period of time. Amending a federal tax return   The reimbursement is not reported on your Form W-2. Amending a federal tax return Generally, if your expenses equal your reimbursement, you have no deduction. Amending a federal tax return If your expenses are more than your reimbursement, you can deduct your excess expenses for SE tax and income tax purposes. Amending a federal tax return Nonaccountable plan. Amending a federal tax return   A nonaccountable plan is a reimbursement arrangement that does not meet all three of the rules listed under Accountable plans above. Amending a federal tax return In addition, even if your employer has an accountable plan, the following payments will be treated as being paid under a nonaccountable plan. Amending a federal tax return Excess reimbursements you fail to return to your employer. Amending a federal tax return Reimbursement of nondeductible expenses related to your employer's business. Amending a federal tax return   Your employer will combine any reimbursement paid to you under a nonaccountable plan with your wages, salary, or other compensation and report the combined total in box 1 of your Form W-2. Amending a federal tax return Since reimbursements under a nonaccountable plan are included in your gross income, you can deduct your related expenses (for SE tax and income tax purposes) regardless of whether they are more than, less than, or equal to your reimbursement. Amending a federal tax return   For more information on accountable and nonaccountable plans, see Publication 463, Travel, Entertainment, Gift, and Car Expenses. Amending a federal tax return Married Couple Missionary Team If both spouses are duly ordained, commissioned, or licensed ministers of a church and have an agreement that each will perform specific services for which they are paid jointly or separately, they must divide the self-employment income according to the agreement. Amending a federal tax return If the agreement is with one spouse only and the other spouse is not paid for any specific duties, amounts received for their services are included only in the self-employment income of the spouse having the agreement. Amending a federal tax return Earnings Subject to SE Tax For 2013, the maximum net earnings from self-employment subject to social security (old age, survivors, and disability insurance) tax is $113,700 minus any wages and tips you earned that were subject to social security tax. Amending a federal tax return The tax rate for the social security part is 12. Amending a federal tax return 4%. Amending a federal tax return In addition, all of your net earnings are subject to the Medicare (hospital insurance) part of the SE tax. Amending a federal tax return This tax rate is 2. Amending a federal tax return 9%. Amending a federal tax return The combined self-employment tax rate is 15. Amending a federal tax return 3%. Amending a federal tax return Additional Medicare Tax. Amending a federal tax return   Beginning in 2013, a 0. Amending a federal tax return 9% Additional Medicare Tax applies to Medicare wages, railroad retirement (RRTA) compensation, and self-employment income that are more than: $125,000 if married filing separately, $250,000 if married filing jointly, or $200,000 for any other filing status. Amending a federal tax return Medicare wages and self-employment income are combined to determine if income exceeds the threshold. Amending a federal tax return A self-employment loss is not considered for purposes of this tax. Amending a federal tax return RRTA compensation is separately compared to the threshold. Amending a federal tax return For more information, see Form 8959, Additional Medicare Tax, and its separate instructions. Amending a federal tax return Nonfarm Optional Method You may be able to use the nonfarm optional method for figuring your net earnings from self-employment. Amending a federal tax return In general, the nonfarm optional method is intended to permit continued coverage for social security and Medicare purposes when your income for the tax year is low. Amending a federal tax return You may use the nonfarm optional method if you meet all the following tests. Amending a federal tax return You are self-employed on a regular basis. Amending a federal tax return You meet this test if your actual net earnings from self-employment were $400 or more in at least 2 of the 3 tax years before the one for which you use this method. Amending a federal tax return The net earnings can be from either farm or nonfarm earnings or both. Amending a federal tax return You have used this method less than 5 prior years. Amending a federal tax return (There is a 5-year lifetime limit. Amending a federal tax return ) The years do not have to be consecutive. Amending a federal tax return Your net nonfarm profits were: Less than $5,024, and Less than 72. Amending a federal tax return 189% of your gross nonfarm income. Amending a federal tax return If you meet all three tests, use Table 3 to figure your net earnings from self-employment under the nonfarm optional method. Amending a federal tax return Table 3. Amending a federal tax return Figuring Nonfarm Net Earnings IF your gross nonfarm income is . Amending a federal tax return . Amending a federal tax return . Amending a federal tax return THEN your net earnings are equal to . Amending a federal tax return . Amending a federal tax return . Amending a federal tax return $6,960 or less Two-thirds of your gross nonfarm income. Amending a federal tax return More than $6,960 $4,640. Amending a federal tax return Actual net earnings. Amending a federal tax return   Multiply your total earnings subject to SE tax by 92. Amending a federal tax return 35% (. Amending a federal tax return 9235) to get actual net earnings. Amending a federal tax return Actual net earnings are equivalent to net earnings under the “Regular Method. Amending a federal tax return ” More information. Amending a federal tax return   For more information on the nonfarm optional method, see Publication 334, Tax Guide for Small Business, and the Schedule SE (Form 1040) instructions. Amending a federal tax return Income Tax: Income and Expenses Some income and expense items are treated the same for both income tax and SE tax purposes and some are treated differently. Amending a federal tax return Note. Amending a federal tax return For purposes of this section, references to members of the clergy are only to ministers or members of a religious order. Amending a federal tax return Income Items The tax treatment of offerings and fees, outside earnings, rental allowances, rental value of a parsonage, earnings of members of religious orders, and foreign earned income is discussed here. Amending a federal tax return Offerings and Fees If you are a member of the clergy, you must include in your income offerings and fees you receive for marriages, baptisms, funerals, masses, etc. Amending a federal tax return , in addition to your salary. Amending a federal tax return If the offering is made to the religious institution, it is not taxable to you. Amending a federal tax return Outside Earnings If you are a member of a religious organization and you give your outside earnings to the organization, you still must include the earnings in your income. Amending a federal tax return However, you may be entitled to a charitable contribution deduction for the amount paid to the organization. Amending a federal tax return For more information, see Publication 526. Amending a federal tax return Exclusion of Rental Allowance and Fair Rental Value of a Parsonage Ordained, commissioned, or licensed ministers of the gospel may be able to exclude from income tax the rental allowance or fair rental value of a parsonage that is provided to them as pay for their services. Amending a federal tax return Services include: Ministerial services, discussed earlier, Administrative duties and teaching at theological seminaries, and The ordinary duties of a minister performed as an employee of the United States (other than as a chaplain in the Armed Forces), a state, possession, political subdivision, or the District of Columbia. Amending a federal tax return This exclusion applies only for income tax purposes. Amending a federal tax return It does not apply for SE tax purposes, as discussed earlier under Amounts included in gross income under Self-Employment Tax: Figuring Net Earnings. Amending a federal tax return Designation requirement. Amending a federal tax return   The church or organization that employs you must officially designate the payment as a housing allowance before it makes the payment. Amending a federal tax return It must designate a definite amount. Amending a federal tax return It cannot determine the amount of the housing allowance at a later date. Amending a federal tax return If the church or organization does not officially designate a definite amount as a housing allowance, you must include your total salary in your income. Amending a federal tax return   If you are employed and paid by a local congregation, a resolution by a national church agency of your denomination does not effectively designate a housing allowance for you. Amending a federal tax return The local congregation must officially designate the part of your salary that is a housing allowance. Amending a federal tax return However, a resolution of a national church agency can designate your housing allowance if you are directly employed by the national agency. Amending a federal tax return Rental allowances. Amending a federal tax return   If you receive in your salary an amount officially designated as a rental allowance (including an amount to pay utility costs), you can exclude the allowance from your gross income if: You use the amount to provide or rent a home, and The amount is not more than reasonable pay for your services. Amending a federal tax return   The amount you exclude cannot be more than the fair rental value of the home, including furnishings, plus the cost of utilities. Amending a federal tax return Fair rental value of parsonage. Amending a federal tax return   You can exclude from gross income the fair rental value of a house or parsonage, including utilities, furnished to you as part of your earnings. Amending a federal tax return However, the exclusion cannot be more than the reasonable pay for your services. Amending a federal tax return If you pay for the utilities, you can exclude any allowance designated for utility costs, up to your actual cost. Amending a federal tax return Example. Amending a federal tax return Rev. Amending a federal tax return Joanna Baker is a full-time minister. Amending a federal tax return The church allows her to use a parsonage that has an annual fair rental value of $24,000. Amending a federal tax return The church pays her an annual salary of $67,000, of which $7,500 is designated for utility costs. Amending a federal tax return Her actual utility costs during the year were $7,000. Amending a federal tax return For income tax purposes, Rev. Amending a federal tax return Baker excludes $31,000 from gross income ($24,000 fair rental value of the parsonage plus $7,000 from the allowance for utility costs). Amending a federal tax return She will report $60,000 ($59,500 salary plus $500 of unused utility allowance). Amending a federal tax return Her income for SE tax purposes, however, is $91,000 ($67,000 salary + $24,000 fair rental value of the parsonage). Amending a federal tax return Home ownership. Amending a federal tax return   If you own your home and you receive as part of your salary a housing or rental allowance, you may exclude from gross income the smallest of: The amount actually used to provide a home, The amount officially designated as a rental allowance, or The fair rental value of the home, including furnishings, utilities, garage, etc. Amending a federal tax return Excess rental allowance. Amending a federal tax return   You must include in gross income the amount of any rental allowance that is more than the smallest of: Your reasonable salary, The fair rental value of the home plus utilities, or The amount actually used to provide a home. Amending a federal tax return   Include in the total on Form 1040, line 7. Amending a federal tax return On the dotted line next to line 7, enter “Excess allowance” and the amount. Amending a federal tax return You may deduct the home mortgage interest and real estate taxes paid on your home even though you pay all or part of those expenses with funds you get through a tax-free rental or parsonage allowance. Amending a federal tax return However, you can only deduct these expenses as itemized deductions on Schedule A (Form 1040). Amending a federal tax return Retired ministers. Amending a federal tax return   If you are a retired minister, you can exclude from your gross income the rental value of a home (plus utilities) furnished to you by your church as a part of your pay for past services, or the part of your pension that was designated as a rental allowance. Amending a federal tax return However, a minister's surviving spouse cannot exclude the rental value unless the rental value is for ministerial services he or she performs or performed. Amending a federal tax return Teachers or administrators. Amending a federal tax return   If you are a minister employed as a teacher or administrator by a church school, college, or university, you are performing ministerial services for purposes of the housing exclusion. Amending a federal tax return However, if you perform services as a teacher or administrator on the faculty of a nonchurch college, you cannot exclude from your income a housing allowance or the value of a home that the college provides to you. Amending a federal tax return    If you live in faculty lodging as an employee of an educational institution or academic health center, all or part of the value of that lodging may be nontaxable under a different rule. Amending a federal tax return In Publication 525, see Faculty lodging in the discussion on meals and lodging under Fringe Benefits. Amending a federal tax return   If you serve as a minister of music or minister of education, or serve in an administrative or other function of your religious organization, but are not authorized to perform substantially all of the religious duties of an ordained minister in your church (even if you are commissioned as a minister of the gospel), the housing exclusion does not apply to you. Amending a federal tax return Theological students. Amending a federal tax return   If you are a theological student serving a required internship as a part-time or assistant pastor, you cannot exclude a parsonage or rental allowance from your income unless you are ordained, commissioned, or licensed as a minister. Amending a federal tax return Traveling evangelists. Amending a federal tax return   You can exclude a designated rental allowance from out-of-town churches if you meet all of the following requirements. Amending a federal tax return You are an ordained minister. Amending a federal tax return You perform ministerial services at churches located away from your community. Amending a federal tax return You actually use the rental allowance to maintain your permanent home. Amending a federal tax return Cantors. Amending a federal tax return   If you have a bona fide commission and your congregation employs you on a full-time basis to perform substantially all the religious functions of the Jewish faith, you can exclude a rental allowance from your gross income. Amending a federal tax return Earnings—Members of Religious Orders Your earnings may be exempt from both income tax and SE tax if you are a member of a religious order who: Has taken a vow of poverty, Receives earnings for services performed as an agent of the order and in the exercise of duties required by the order, and Renounces the earnings and gives them to the order. Amending a federal tax return See Members of Religious Orders , earlier, under Social Security Coverage. Amending a federal tax return Foreign Earned Income Certain income may be exempt from income tax if you work in a foreign country or in a specified U. Amending a federal tax return S. Amending a federal tax return possession. Amending a federal tax return Publication 54 discusses the foreign earned income exclusion. Amending a federal tax return Publication 570, Tax Guide for Individuals With Income From U. Amending a federal tax return S. Amending a federal tax return Possessions, covers the rules for taxpayers with income from U. Amending a federal tax return S. Amending a federal tax return possessions. Amending a federal tax return You can get these free publications from the Internal Revenue Service at IRS. Amending a federal tax return gov or from most U. Amending a federal tax return S. Amending a federal tax return Embassies or consulates. Amending a federal tax return Expense Items The tax treatment of ministerial trade or business expenses, expenses allocable to tax-free income, and health insurance costs is discussed here. Amending a federal tax return Ministerial Trade or Business Expenses as an Employee When you figure your income tax, you must itemize your deductions on Schedule A (Form 1040) to claim allowable deductions for ministerial trade or business expenses incurred while working as an employee. Amending a federal tax return You also may have to file Form 2106, Employee Business Expenses (or Form 2106-EZ, Unreimbursed Employee Business Expenses). Amending a federal tax return You claim these expenses as miscellaneous itemized deductions that are subject to the 2%-of-adjusted-gross-income (AGI) limit. Amending a federal tax return See Publication 529 for more information on this limit. Amending a federal tax return However, you cannot deduct any of your employee business expenses that are allocable to tax-free income (discussed next). Amending a federal tax return Expenses Allocable to Tax-Free Income If you receive a rental or parsonage allowance that is exempt from income tax (tax free), you must allocate a portion of the expenses of operating your ministry to that tax-free income. Amending a federal tax return You cannot deduct the portion of your expenses that you allocate to your tax-free rental or parsonage allowance. Amending a federal tax return Exception. Amending a federal tax return   This rule does not apply to your deductions for home mortgage interest or real estate taxes on your home. Amending a federal tax return Figuring the allocation. Amending a federal tax return   Figure the portion of your otherwise deductible expenses that you cannot deduct (because you must allocate that portion to tax-free income) by multiplying the expenses by the following fraction:      Tax-free rental or parsonage allowance     All income (taxable and tax free) earned from your ministry           When figuring the allocation, include the income and expenses related to the ministerial duties you perform both as an employee and as a self-employed person. Amending a federal tax return    Reduce your otherwise deductible expenses only in figuring your income tax, not your SE tax. Amending a federal tax return Example. Amending a federal tax return Rev. Amending a federal tax return Charles Ashford received $40,000 in earnings for ministerial services consisting of a $28,000 salary for ministerial services performed as an employee, $2,000 for weddings and baptisms performed as a self-employed person, and a $10,000 tax-free parsonage allowance. Amending a federal tax return He incurred $4,000 of unreimbursed expenses connected with his earnings for ministerial services. Amending a federal tax return $3,500 of the $4,000 is for employee expenses related to his ministerial salary, and $500 is related to the weddings and baptisms he performed as a self-employed person. Amending a federal tax return Rev. Amending a federal tax return Ashford figures the nondeductible (tax-free) portion of expenses related to his ministerial salary as follows: ($10,000 ÷ $40,000) x $3,500 = $875   Rev. Amending a federal tax return Ashford figures the nondeductible (tax-free) portion of expenses related to his wedding and baptism income as follows: ($10,000 ÷ $40,000) x $500 = $125 Required statement. Amending a federal tax return   If you receive a tax-free rental or parsonage allowance and have ministerial expenses, attach a statement to your tax return. Amending a federal tax return The statement must contain all of the following information. Amending a federal tax return A list of each item of taxable ministerial income by source (such as wages, salary, weddings, baptisms, etc. Amending a federal tax return ) plus the amount. Amending a federal tax return A list of each item of tax-free ministerial income by source (parsonage allowance) plus the amount. Amending a federal tax return A list of each item of otherwise deductible ministerial expenses plus the amount. Amending a federal tax return How you figured the nondeductible part of your otherwise deductible expenses. Amending a federal tax return A statement that the other deductions claimed on your tax return are not allocable to your tax-free income. Amending a federal tax return   See the attachments prepared for the Comprehensive Example , later. Amending a federal tax return Following the example, you will find blank worksheets for your own use. Amending a federal tax return Health Insurance Costs of Self-Employed Ministers If you are self-employed, you may be able to deduct the amount you paid in 2013 for medical and dental insurance and qualified long-term care insurance for you, your spouse, and your dependents. Amending a federal tax return If you qualify, you can take this deduction as an adjustment to income on Form 1040, line 29. Amending a federal tax return See the Instructions for Form 1040 to figure your deduction. Amending a federal tax return The following special rules apply to the self-employed health insurance deduction. Amending a federal tax return You cannot take a medical expense deduction on Schedule A (Form 1040) for any expenses you claim for purposes of the self-employed health insurance deduction. Amending a federal tax return You cannot take the deduction for any month you are eligible to participate in a subsidized plan of your (or your spouse's) employer. Amending a federal tax return The deduction cannot exceed your net earnings from the business under which the insurance plan is established. Amending a federal tax return Your net earnings under this rule do not include the income you earned as a common-law employee (discussed earlier) of a church. Amending a federal tax return More information. Amending a federal tax return   For more information about the self-employed health insurance deduction, see chapter 6 in Publication 535. Amending a federal tax return Deduction for SE Tax You can deduct one-half of your SE tax in figuring adjusted gross income. Amending a federal tax return This is an income tax deduction only, on Form 1040, line 27. Amending a federal tax return Do not claim this deduction in figuring net earnings from self-employment subject to SE tax. Amending a federal tax return Income Tax Withholding and Estimated Tax The federal income tax is a pay-as-you-go tax. Amending a federal tax return You must pay the tax as you earn or receive income during the year. Amending a federal tax return An employee usually has income tax withheld from his or her wages or salary. Amending a federal tax return However, your salary is not subject to federal income tax withholding if both of the following conditions apply. Amending a federal tax return You are a duly ordained, commissioned, or licensed minister, a member of a religious order (who has not taken a vow of poverty), or a Christian Science practitioner or reader. Amending a federal tax return Your salary is for ministerial services (see Ministerial Services , earlier). Amending a federal tax return If your salary is not subject to withholding, or if you do not pay enough tax through withholding, you may need to make estimated tax payments to avoid penalties for not paying enough tax as you earn your income. Amending a federal tax return You generally must make estimated tax payments if you expect to owe taxes, including SE tax, of $1,000 or more, when you file your return. Amending a federal tax return Determine your estimated tax by using the worksheets in Publication 505, Tax Withholding and Estimated Tax. Amending a federal tax return Pay the entire estimated tax for 2014 or the first installment by April 15, 2014. Amending a federal tax return See Form 1040-ES for the different payment methods. Amending a federal tax return The April 15 date applies whether or not your tax home and your abode are outside the United States and Puerto Rico. Amending a federal tax return For more information, see chapter 2 of Publication 505. Amending a federal tax return If you perform your services as a common-law employee of the church and your salary is not subject to income tax withholding, you can enter into a voluntary withholding agreement with the church to cover any income and SE tax that may be due. Amending a federal tax return Filing Your Return You must file an income tax return for 2013 if your gross income was at least the amount shown in the third column of Table 4 above. Amending a federal tax return Table 4. Amending a federal tax return 2013 Filing Requirements for Most Taxpayers IF your filing status is . Amending a federal tax return . Amending a federal tax return . Amending a federal tax return AND at the end of 2013 you were* . Amending a federal tax return . Amending a federal tax return . Amending a federal tax return THEN file a return if your gross income** was at least . Amending a federal tax return . Amending a federal tax return . Amending a federal tax return single under age 65 65 or older   $10,000 $11,500   married filing jointly*** under 65 (both spouses) 65 or older (one spouse) 65 or older (both spouses)   $20,000  $21,200  $22,400   married filing separately any age   $3,900   head of household under 65 65 or older   $12,850 $14,350   qualifying widow(er) with dependent child under 65 65 or older   $16,100  $17,300   * If you were born on January 1, 1949, you are considered to be age 65 at the end of 2013. Amending a federal tax return ** Gross income means all income you received in the form of money, goods, property, and services that is not exempt from tax, including any income from sources outside the United States or from the sale of your main home (even if you can exclude part or all of it). Amending a federal tax return Do not include any social security benefits unless (a) you are married filing a separate return and you lived with your spouse at any time in 2013, or (b) one-half of your social security benefits plus your other gross income and any tax-exempt interest is more than $25,000 ($32,000 if married filing jointly). Amending a federal tax return If (a) or (b) applies, see the instructions for Form 1040, lines 20a and 20b, to figure the taxable part of social security benefits you must include in gross income. Amending a federal tax return Gross income includes gains, but not losses, reported on Form 8949 or Schedule D (Form 1040). Amending a federal tax return Gross income from a business means, for example, the amount on Schedule C (Form 1040), line 7, or Schedule F (Form 1040), line 9. Amending a federal tax return But, in figuring gross income, do not reduce your income by any losses, including any loss on Schedule C (Form 1040), line 7, or Schedule F (Form 1040), line 9. Amending a federal tax return *** If you did not live with your spouse at the end of 2013 (or on the date your spouse died) and your gross income was at least $3,900, you must file a return regardless of your age. Amending a federal tax return Additional requirements. Amending a federal tax return   Even if your income was less than the amount shown in Table 4, you must file an income tax return on Form 1040, and attach a completed Schedule SE (Form 1040), if:    You are not exempt from SE tax, and you have net earnings from self-employment (discussed earlier under Self-Employment Tax: Figuring Net Earnings ) of $400 or more in the tax year, You are exempt from SE tax on earnings from ministerial services and you have $400 or more of other net earnings subject to SE tax, or You had wages of $108. Amending a federal tax return 28 or more from an electing church or church-controlled organization (see Coverage of Religious Workers (Church Employees) , earlier, under Social Security Coverage). Amending a federal tax return Self-employment tax. Amending a federal tax return   If you are liable for SE tax, you must file Schedule SE (Form 1040) with your return. Amending a federal tax return   If you filed Form 4361 and did not receive approval from the IRS, you must pay SE tax on your ministerial earnings, as explained earlier. Amending a federal tax return You should report ministerial earnings and expenses from nonemployee ministerial services on Schedule C or C-EZ (Form 1040). Amending a federal tax return You should then carry the net amount over to line 2 of Schedule SE (Form 1040), Section A or B. Amending a federal tax return However, if you were a duly ordained minister who was an employee of a church and you must pay SE tax on the wages you earned for those services, do not report those wages on Schedule C or C-EZ (Form 1040). Amending a federal tax return Instead, report those wages less any allowable expenses (including any unreimbursed employee business expenses), on line 2 of Schedule SE (Form 1040), Section A or B, and attach an explanation. Amending a federal tax return Note. Amending a federal tax return For income tax purposes, the unreimbursed employee business expenses that you incurred as an employee of the church and subtracted from your wages on line 2 of Schedule SE (Form 1040) are allowed only as an itemized deduction on Schedule A (Form 1040) if they exceed 2% of your adjusted gross income. Amending a federal tax return You cannot deduct these expenses on Schedule C or C-EZ (Form 1040) as a trade or business expense. Amending a federal tax return Exemption from SE tax. Amending a federal tax return   If you filed Form 4361 and received IRS approval not to be taxed on your ministerial earnings, and you do not have any other income subject to SE tax, do not file Schedule SE (Form 1040). Amending a federal tax return Instead, enter “Exempt—Form 4361” on the dotted line next to Form 1040, line 56. Amending a federal tax return However, if you had net earnings from another trade or business of $400 or more subject to SE tax, see line A at the top of Schedule SE (Form 1040), Section B. Amending a federal tax return    If you filed Form 4029 and received IRS approval not to be taxed on those earnings, and you do not have any other income subject to SE tax, do not file Schedule SE (Form 1040). Amending a federal tax return Instead, enter “Exempt—Form 4029” on the dotted line next to Form 1040, line 56. Amending a federal tax return More information. Amending a federal tax return   For more information on filing your return, including when and where to file it, see the Instructions for Form 1040. Amending a federal tax return Retirement Savings Arrangements Retirement savings arrangements are plans that offer you a tax-favored way to save for your retirement. Amending a federal tax return You generally can deduct your contributions to the plan. Amending a federal tax return Your contributions and the earnings on them are not taxed until they are distributed. Amending a federal tax return Retirement plans for the self-employed. Amending a federal tax return   To set up one of the following plans you must be self-employed. Amending a federal tax return SEP (simplified employee pension) plan. Amending a federal tax return SIMPLE (savings incentive match plan for employees) plan. Amending a federal tax return Qualified retirement plan (also called a Keogh or H. Amending a federal tax return R. Amending a federal tax return 10 plan). Amending a federal tax return   The common-law rules determine whether you are an employee or a self-employed person for purposes of setting up a retirement plan. Amending a federal tax return See Employment status for other tax purposes under Coverage of Members of the Clergy, earlier. Amending a federal tax return This result is true even if your compensation for ministerial services (defined earlier) is subject to SE tax. Amending a federal tax return   For example, if a congregation pays you a salary for performing ministerial services and you are subject to the congregation's control, you generally are a common-law employee. Amending a federal tax return You are not a self-employed person for purposes of setting up a retirement plan. Amending a federal tax return This result is true even if your salary is subject to SE tax. Amending a federal tax return   On the other hand, amounts received directly from members of the congregation, such as fees for performing marriages, baptisms, or other personal services that you report on Schedule C or C-EZ (Form 1040), are earnings from self-employment for all tax purposes. Amending a federal tax return   For more information on establishing a SEP, SIMPLE, or qualified retirement plan, see Publication 560, Retirement Plans for Small Business (SEP, SIMPLE, and Qualified Plans). Amending a federal tax return Individual retirement arrangements (IRAs). Amending a federal tax return   The traditional IRA and the Roth IRA are two individual retirement arrangements you can use to save money for your retirement. Amending a federal tax return Generally, your maximum contribution for 2013 to either of these plans (or to a combination of the two) is the smaller of your taxable compensation or $5,500 ($6,500 if you are age 50 or older). Amending a federal tax return   However, your maximum contribution to a Roth IRA will be further reduced or eliminated if your adjusted gross income is above a certain amount. Amending a federal tax return You cannot deduct Roth IRA contributions, but if you satisfy certain requirements, all earnings in the Roth IRA are tax free and neither your nondeductible contributions nor any earnings on them are taxable when distributed. Amending a federal tax return   If you contribute to a traditional IRA, your contribution may be deductible. Amending a federal tax return However, your deduction may be reduced or eliminated if you or your spouse is covered by an employer retirement plan (including, but not limited to, a SEP, SIMPLE, or qualified retirement plan). Amending a federal tax return   For more information on IRAs, see Publication 590. Amending a federal tax return Tax-sheltered annuity plans. Amending a federal tax return   Church employees, members of religious orders, and duly ordained, commissioned, or licensed ministers working as ministers or chaplains can participate in tax-sheltered annuity (403(b)) plans. Amending a federal tax return For more
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Retirement

Use these resources to help you estimate your retirement benefits, learn about factors that could affect your retirement, and more.

The Amending A Federal Tax Return

Amending a federal tax return Publication 597 - Main Content Table of Contents Application of Treaty Personal Services Pensions, Annuities, Social Security, and AlimonyRoth IRAs. Amending a federal tax return Tax-deferred plans. Amending a federal tax return Investment Income From Canadian Sources Other Income Charitable ContributionsQualified charities. Amending a federal tax return Income Tax Credits Competent Authority Assistance How To Get Tax HelpText of Treaty U. Amending a federal tax return S. Amending a federal tax return Taxation Canadian Taxation Application of Treaty The benefits of the income tax treaty are generally provided on the basis of residence for income tax purposes. Amending a federal tax return That is, a person who is recognized as a resident of the United States who has income from Canada, will often pay less income tax to Canada on that income than if no treaty was in effect. Amending a federal tax return Article IV provides definitions of residents of Canada and the United States, and provides specific criteria for applying the treaty in cases where a taxpayer is considered by both countries to be a resident. Amending a federal tax return Saving clause. Amending a federal tax return   In most instances, a treaty does not affect the right of a country to tax its own residents (including those who are U. Amending a federal tax return S. Amending a federal tax return citizens) or of the United States to tax its residents or citizens (including U. Amending a federal tax return S. Amending a federal tax return citizens who are residents of the foreign country). Amending a federal tax return This provision is known as the “saving clause. Amending a federal tax return ”   For example, an individual who is a U. Amending a federal tax return S. Amending a federal tax return citizen and a resident of Canada may have dividend income from a U. Amending a federal tax return S. Amending a federal tax return corporation. Amending a federal tax return The treaty provides a maximum rate of 15% on dividends received by a resident of Canada from sources in the United States. Amending a federal tax return Even though a resident of Canada, the individual is a U. Amending a federal tax return S. Amending a federal tax return citizen and the saving clause overrides the treaty article that limits the U. Amending a federal tax return S. Amending a federal tax return tax to 15%. Amending a federal tax return    Exceptions to the saving clause can be found in Article XXIX, paragraph 3. Amending a federal tax return Treaty-based position. Amending a federal tax return   If you take the position that any U. Amending a federal tax return S. Amending a federal tax return tax is overruled or otherwise reduced by a U. Amending a federal tax return S. Amending a federal tax return treaty (a treaty-based position), you generally must disclose that position on Form 8833, Treaty-Based Return Position Disclosure Under Section 6114 or 7701(b), and attach it to your return. Amending a federal tax return Personal Services A U. Amending a federal tax return S. Amending a federal tax return citizen or resident who is temporarily present in Canada during the tax year is exempt from Canadian income taxes on pay for services performed, or remittances received from the United States, if the citizen or resident qualifies under one of the treaty exemption provisions set out below. Amending a federal tax return Income from employment (Article XV). Amending a federal tax return   Income U. Amending a federal tax return S. Amending a federal tax return residents receive for the performance of dependent personal services in Canada (except as public entertainers) is exempt from Canadian tax if it is not more than $10,000 in Canadian currency for the year. Amending a federal tax return If it is more than $10,000 for the year, it is exempt only if: The residents are present in Canada for no more than 183 days in any 12-month period beginning or ending in the year concerned, and The income is not paid by, or on behalf of, a Canadian resident and is not borne by a permanent establishment in Canada. Amending a federal tax return    Whether there is a permanent establishment in Canada is determined by the rules set forth in Article V. Amending a federal tax return Example. Amending a federal tax return You are a U. Amending a federal tax return S. Amending a federal tax return resident employed under an 8-month contract with a Canadian firm to install equipment in their Montreal plant. Amending a federal tax return During the calendar year you were physically present in Canada for 179 days and were paid $16,500 (Canadian) for your services. Amending a federal tax return Although you were in Canada for not more than 183 days during the year, your income is not exempt from Canadian income tax because it was paid by a Canadian resident and was more than $10,000 (Canadian) for the year. Amending a federal tax return Pay received by a U. Amending a federal tax return S. Amending a federal tax return resident for work regularly done in more than one country as an employee on a ship, aircraft, motor vehicle, or train operated by a U. Amending a federal tax return S. Amending a federal tax return resident is exempt from Canadian tax. Amending a federal tax return Income from self-employment (Article VII). Amending a federal tax return   Income from services performed (other than those performed as an employee) are taxed in Canada if they are attributable to a permanent establishment in Canada. Amending a federal tax return This income is treated as business profits, and deductions similar to those allowed under U. Amending a federal tax return S. Amending a federal tax return law are allowable. Amending a federal tax return   If you carry on (or have carried on) business in both Canada and the United States, the business profits are attributable to each country based on the profits that the permanent establishment might be expected to make if it were a distinct and separate person engaged in the same or similar activities. Amending a federal tax return The business profits attributable to the permanent establishment include only those profits derived from assets used, risks assumed, and activities performed by the permanent establishment. Amending a federal tax return   You may be considered to have a permanent establishment if you meet certain conditions. Amending a federal tax return For more information, see Article V (Permanent Establishment) and Article VII (Business Profits). Amending a federal tax return Public entertainers (Article XVI). Amending a federal tax return   The provisions under income from employment or income from self-employment do not apply to public entertainers (such as theater, motion picture, radio, or television artistes, musicians, or athletes) from the United States who receive more than $15,000 in gross receipts in Canadian currency, including reimbursed expenses, from their entertainment activities in Canada during the calendar year. Amending a federal tax return However, this provision for public entertainers does not apply (and the other provisions will apply) to athletes participating in team sports in leagues with regularly scheduled games in both the United States and Canada. Amending a federal tax return Compensation paid by the U. Amending a federal tax return S. Amending a federal tax return Government (Article XIX). Amending a federal tax return   Wages, salaries, and similar income (other than pensions) paid to a U. Amending a federal tax return S. Amending a federal tax return citizen by the United States or any of its agencies, instrumentalities, or political subdivisions for discharging governmental functions are exempt from Canadian income tax. Amending a federal tax return   The exemption does not apply to pay for services performed in connection with any trade or business carried on for profit by the United States, or any of its agencies, instrumentalities, or political subdivisions. Amending a federal tax return Students and apprentices (Article XX). Amending a federal tax return   A full-time student, apprentice, or business trainee who is in Canada to study or acquire business experience is exempt from Canadian income tax on remittances received from any source outside Canada for maintenance, education, or training. Amending a federal tax return The recipient must be or must have been a U. Amending a federal tax return S. Amending a federal tax return resident immediately before visiting Canada. Amending a federal tax return   An apprentice or business trainee can claim this exemption only for a period of one year from the date the individual first arrived in Canada for the purpose of training. Amending a federal tax return Pensions, Annuities, Social Security, and Alimony Under Article XVIII, pensions and annuities from Canadian sources paid to U. Amending a federal tax return S. Amending a federal tax return residents are subject to tax by Canada, but the tax is limited to 15% of the gross amount (if a periodic pension payment) or of the taxable amount (if an annuity). Amending a federal tax return Canadian pensions and annuities paid to U. Amending a federal tax return S. Amending a federal tax return residents may be taxed by the United States, but the amount of any pension included in income for U. Amending a federal tax return S. Amending a federal tax return tax purposes may not be more than the amount that would be included in income in Canada if the recipient were a Canadian resident. Amending a federal tax return Pensions. Amending a federal tax return   A pension includes any payment under a pension or other retirement arrangement, Armed Forces retirement pay, war veterans pensions and allowances, and payments under a sickness, accident, or disability plan. Amending a federal tax return It includes pensions paid by private employers and the government for services rendered. Amending a federal tax return   Pensions also include payments from individual retirement arrangements (IRAs) in the United States, registered retirement savings plans (RRSPs) and registered retirement income funds (RRIFs) in Canada. Amending a federal tax return   Pensions do not include social security benefits. Amending a federal tax return Roth IRAs. Amending a federal tax return   A distribution from a Roth IRA is exempt from Canadian tax to the extent it would be exempt from U. Amending a federal tax return S. Amending a federal tax return tax if paid to a U. Amending a federal tax return S. Amending a federal tax return resident. Amending a federal tax return In addition, you may elect to defer any tax in Canada on income accrued within the Roth IRA but not distributed by the Roth IRA. Amending a federal tax return However, you cannot defer tax on any accruals due to contributions made after you become a Canadian resident. Amending a federal tax return Tax-deferred plans. Amending a federal tax return   Generally, income that accrues in a Canadian RRSP or RRIF is subject to U. Amending a federal tax return S. Amending a federal tax return tax, even if it is not distributed. Amending a federal tax return However, a U. Amending a federal tax return S. Amending a federal tax return citizen or resident can elect to defer U. Amending a federal tax return S. Amending a federal tax return tax on income from the plan until the income is distributed. Amending a federal tax return Form 8891 is used to make the election. Amending a federal tax return Annuities. Amending a federal tax return    An annuity is a stated sum payable periodically at stated times, during life, or during a specified number of years, under an obligation to make the payments in return for adequate and full consideration (other than services rendered). Amending a federal tax return Annuities do not include: Non-periodic payments, or An annuity the cost of which was deductible for tax purposes. Amending a federal tax return Special rules. Amending a federal tax return    Special rules apply to pensions and annuities with respect to: Short-term assignments, Cross-border commuters, and Individuals who participate in a Canadian qualifying plan. Amending a federal tax return Generally, distributions in such cases are deemed to be earned in the country in which the plan is established, without regard to where the services were rendered. Amending a federal tax return Social security benefits. Amending a federal tax return   U. Amending a federal tax return S. Amending a federal tax return social security benefits paid to a resident of Canada are taxed in Canada as if they were benefits under the Canada Pension Plan, except that 15% of the amount of the benefit is exempt from Canadian tax. Amending a federal tax return Alimony. Amending a federal tax return   Alimony and similar amounts (including child support payments) from Canadian sources paid to U. Amending a federal tax return S. Amending a federal tax return residents are exempt from Canadian tax. Amending a federal tax return For purposes of U. Amending a federal tax return S. Amending a federal tax return tax, these amounts are excluded from income to the same extent they would be excluded from income in Canada if the recipient was a Canadian resident. Amending a federal tax return Investment Income From Canadian Sources The treaty provides beneficial treatment for certain items of Canadian source income that result from an investment of capital. Amending a federal tax return Dividends (Article X). Amending a federal tax return   For Canadian source dividends received by U. Amending a federal tax return S. Amending a federal tax return residents, the Canadian income tax generally may not be more than 15%. Amending a federal tax return   A 5% rate applies to intercorporate dividends paid from a subsidiary to a parent corporation owning at least 10% of the subsidiary's voting stock. Amending a federal tax return However, a 10% rate applies if the payer of the dividend is a nonresident-owned Canadian investment corporation. Amending a federal tax return   These rates do not apply if the owner of the dividends carries on, or has carried on, a business in Canada through a permanent establishment and the holding on which the income is paid is effectively connected with that permanent establishment. Amending a federal tax return Interest (Article XI). Amending a federal tax return   Generally, Canadian source interest received by U. Amending a federal tax return S. Amending a federal tax return residents is exempt from Canadian income tax. Amending a federal tax return   The exemption does not apply if the owner of the interest carries on, or has carried on, a business in Canada through a permanent establishment and the debt on which the income is paid is effectively connected with that permanent establishment. Amending a federal tax return Gains from the sale of property (Article XIII). Amending a federal tax return   Generally, gains from the sale of personal property by a U. Amending a federal tax return S. Amending a federal tax return resident having no permanent establishment in Canada are exempt from Canadian income tax. Amending a federal tax return However, the exemption from Canadian tax does not apply to gains realized by U. Amending a federal tax return S. Amending a federal tax return residents on Canadian real property, and on personal property belonging to a permanent establishment in Canada. Amending a federal tax return   If the property subject to Canadian tax is a capital asset and was owned by the U. Amending a federal tax return S. Amending a federal tax return resident on September 26, 1980, not as part of the business property of a permanent establishment in Canada, generally the taxable gain is limited to the appreciation after 1984. Amending a federal tax return Royalties (Article XII). Amending a federal tax return   The following are exempt from Canadian tax: Copyright royalties and other like payments for the production or reproduction of any literary, dramatic, musical, or artistic work (other than payments for motion pictures and works on film, videotape, or other means of reproduction for use in connection with television, which may be taxed at 10%), Payments for the use of, or the right to use, computer software, Payments for the use of, or the right to use, any patent or any information concerning industrial, commercial, or scientific experience (but not within a rental or franchise agreement), and Payments for broadcasting as agreed to in an exchange of notes between the countries. Amending a federal tax return   This rate or exemption does not apply if the owner of the royalties carries on, or has carried on, a business in Canada through a permanent establishment and the right or property on which the income is paid is effectively connected with that permanent establishment. Amending a federal tax return   This exemption (or lower rate) does not apply to royalties to explore for or to exploit mineral deposits, timber, and other natural resources. Amending a federal tax return Other Income Generally, Canadian source income that is not specifically mentioned in the treaty, may be taxed by Canada. Amending a federal tax return Gambling losses. Amending a federal tax return   Canadian residents may deduct gambling losses in the U. Amending a federal tax return S. Amending a federal tax return against gambling winnings in the U. Amending a federal tax return S. Amending a federal tax return in the same manner as a U. Amending a federal tax return S. Amending a federal tax return resident. Amending a federal tax return Charitable Contributions United States income tax return. Amending a federal tax return   Under Article XXI, you may deduct contributions to certain qualified Canadian charitable organizations on your United States income tax return. Amending a federal tax return Besides being subject to the overall limits applicable to all your charitable contributions under U. Amending a federal tax return S. Amending a federal tax return tax law, your charitable contributions to Canadian organizations (other than contributions to a college or university at which you or a member of your family is or was enrolled) are subject to the U. Amending a federal tax return S. Amending a federal tax return percentage limits on charitable contributions, applied to your Canadian source income. Amending a federal tax return If your return does not include gross income from Canadian sources, charitable contributions to Canadian organizations are generally not deductible. Amending a federal tax return Example. Amending a federal tax return You are a U. Amending a federal tax return S. Amending a federal tax return citizen living in Canada. Amending a federal tax return You have both U. Amending a federal tax return S. Amending a federal tax return and Canadian source income. Amending a federal tax return During your tax year, you contribute to Canadian organizations that would qualify as charitable organizations under U. Amending a federal tax return S. Amending a federal tax return tax law if they were U. Amending a federal tax return S. Amending a federal tax return organizations. Amending a federal tax return To figure the maximum amount of the contribution to Canadian organizations that you can deduct on your U. Amending a federal tax return S. Amending a federal tax return income tax return, multiply your adjusted gross income from Canadian sources by the percentage limit that applies to contributions under U. Amending a federal tax return S. Amending a federal tax return income tax law. Amending a federal tax return Then include this amount on your return along with all your domestic charitable contributions, subject to the appropriate percentage limit required for contributions under U. Amending a federal tax return S. Amending a federal tax return income tax law. Amending a federal tax return The appropriate percentage limit for U. Amending a federal tax return S. Amending a federal tax return tax purposes is applied to your total adjusted gross income from all sources. Amending a federal tax return Qualified charities. Amending a federal tax return   These Canadian organizations must meet the qualifications that a U. Amending a federal tax return S. Amending a federal tax return charitable organization must meet under U. Amending a federal tax return S. Amending a federal tax return tax law. Amending a federal tax return Usually an organization will notify you if it qualifies. Amending a federal tax return For further information on charitable contributions and the U. Amending a federal tax return S. Amending a federal tax return percentage limits, see Publication 526, Charitable Contributions. Amending a federal tax return Canadian income tax return. Amending a federal tax return   Under certain conditions, contributions to qualified U. Amending a federal tax return S. Amending a federal tax return charitable organizations may also be claimed on your Canadian income tax return if you are a Canadian resident. Amending a federal tax return Income Tax Credits The treaty contains a credit provision (Article XXIV) for the elimination of double taxation. Amending a federal tax return In general, the United States and Canada both allow a credit against their income tax for the income tax paid to the other country on income from sources in that other country. Amending a federal tax return For detailed discussions of the U. Amending a federal tax return S. Amending a federal tax return income tax treatment of tax paid to foreign countries, see Publication 514, Foreign Tax Credit for Individuals. Amending a federal tax return See paragraphs (4) and (5) of Article XXIV for certain provisions that affect the computation of the credit allowed by the United States for Canadian income taxes paid by U. Amending a federal tax return S. Amending a federal tax return citizens residing in Canada. Amending a federal tax return Competent Authority Assistance Under Article XXVI, a U. Amending a federal tax return S. Amending a federal tax return citizen or resident may request assistance from the U. Amending a federal tax return S. Amending a federal tax return competent authority when the actions of Canada, the United States, or both, potentially result in double taxation or taxation contrary to the treaty. Amending a federal tax return The U. Amending a federal tax return S. Amending a federal tax return competent authority may then consult with the Canadian competent authority to determine if the double taxation or denial of treaty benefits in question can be avoided. Amending a federal tax return If the competent authorities are not able to reach agreement in a case, binding arbitration proceedings may apply. Amending a federal tax return It is important that your request for competent authority assistance be made as soon as you have been notified by either Canada or the United States of proposed adjustments that would result in denial of treaty benefits or in double taxation. Amending a federal tax return This is so that implementation of any agreement reached by the competent authorities is not barred by administrative, legal, or procedural barriers. Amending a federal tax return For information that you should include with your request for competent authority assistance, see Revenue Procedure 2006-54, 2006-49 IRB 1035, available at www. Amending a federal tax return irs. Amending a federal tax return gov/irb/2006-49_IRB/ar13. Amending a federal tax return html. Amending a federal tax return The request should be addressed to:  Deputy Commissioner (International) Large Business and International Division Attn: Office of Tax Treaty  Internal Revenue Service 1111 Constitution Ave. Amending a federal tax return , NW Routing: MA3-322A Washington, D. Amending a federal tax return C. Amending a federal tax return 20024 In addition to a timely request for assistance, you should take the following measures: File a timely protective claim for credit or refund of U. Amending a federal tax return S. Amending a federal tax return taxes on Form 1040X, Form 1120X, or amended Form 1041, whichever is appropriate. Amending a federal tax return This will, among other things, give you the benefit of a foreign tax credit in case you do not qualify for the treaty benefit in question. Amending a federal tax return For figuring this credit, attach either Form 1116, Foreign Tax Credit (Individual, Estate, or Trust), or Form 1118, Foreign Tax Credit — Corporations, as appropriate. Amending a federal tax return Attach your protective claim to your request for competent authority assistance. Amending a federal tax return Take appropriate action under Canadian procedures to avoid the lapse or termination of your right of appeal under Canadian income tax law. Amending a federal tax return How To Get Tax Help You can get help with unresolved tax issues, order free publications and forms, ask tax questions, and get information from the IRS and the Canada Revenue Agency in several ways. Amending a federal tax return Text of Treaty You can get the text of the U. Amending a federal tax return S. Amending a federal tax return —Canada income tax treaty from: Superintendent of Documents U. Amending a federal tax return S. Amending a federal tax return Government Printing Office P. Amending a federal tax return O. Amending a federal tax return Box 371954 Pittsburgh, PA 15250-7954 The treaty can also be found on the Internet at IRS. Amending a federal tax return gov. Amending a federal tax return U. Amending a federal tax return S. Amending a federal tax return Taxation During the filing season, the IRS conducts a taxpayer assistance program in Canada. Amending a federal tax return To find out if IRS personnel will be in your area, you should contact the consular office at the nearest U. Amending a federal tax return S. Amending a federal tax return Embassy or consulate. Amending a federal tax return Mail. Amending a federal tax return For answers to technical or account questions, you can write to:   Internal Revenue Service International Section Philadelphia, PA 19255-0525 Phone. Amending a federal tax return You can call the IRS for help at (267) 941-1000 (not a toll-free call). Amending a federal tax return Canadian Taxation You can get information on Canadian taxation from the Canada Revenue Agency. Amending a federal tax return The International Tax Services Office can be contacted on 1-800-267-5177 (from anywhere in Canada and the U. Amending a federal tax return S. Amending a federal tax return ) or on the Internet at www. Amending a federal tax return cra-arc. Amending a federal tax return gc. 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