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Tax Student

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Tax Student

Tax student Index Symbols 403(b) plans, 403(b) Plans A Accounting methods, Nonaccrual-Experience Method Acquisition date: Special depreciation allowance, Acquisition date test. Tax student Special Liberty Zone depreciation allowance, Acquisition date test. Tax student Annuities, tax-sheltered 403(b) plans, 403(b) Plans Assistance (see Tax help) Automobile (see Passenger automobile) B Bonds: New York Liberty, Tax Incentives for New York Liberty Zone Qualified zone academy, Issuance of Qualified Zone Academy Bonds C Car (see Passenger automobile) Car expenses, Car Expenses Catch-up contributions, 403(b), 403(b) Plans Child and dependent care, Child and Dependent Care Expenses Church employees and ministers, Years of service for church employees and ministers. Tax student Clean-fuel vehicle, Electric and Clean-Fuel Vehicles Comments, Comments and suggestions. Tax student Credit: Child and dependent care, Child and Dependent Care Expenses Credit for pension plan startup, Credit For Pension Plan Startup Costs Electric vehicles, Electric and Clean-Fuel Vehicles Indian employment, Indian Employment Credit Extended Renewable electricity production, Renewable Electricity Production Credit Welfare-to-work, Welfare-to-Work Credit Extended Work opportunity, Work Opportunity Credit Expanded in New York Liberty Zone , Work Opportunity Credit Extended D Deduction limit, automobile, Passenger Automobiles Deemed IRAs, Deemed IRAs Depletion, Depletion Depreciation: New property, Special Depreciation Allowance Property on reservations, Depreciation of Property Used on Indian Reservations Special depreciation allowance, Special Depreciation Allowance Special Liberty Zone depreciation allowance, Special Liberty Zone Depreciation Allowance Supplement to Publication 946, Depreciation E Election: Deemed not to claim special allowance, Deemed election. Tax student Not to claim special allowance, Election Not To Claim the Allowance Not to claim special Liberty Zone allowance, Election Not To Claim the Liberty Zone Allowance Electric vehicle, Electric and Clean-Fuel Vehicles Eligible educator, Deduction for Educator Expenses Estimated tax payments, Adjusting your withholding or estimated tax payments for 2002. Tax student Excepted property: Special depreciation allowance, Excepted Property Special Liberty Zone depreciation allowance, Excepted property. Tax student F Foreign missionaries, Foreign missionaries. Tax student Form 1099, Electronic Form 1099 Free tax services, How To Get Tax Help H Help (see Tax help) I Indian employment credit, Indian Employment Credit Extended Indian reservations, depreciation rules, Depreciation of Property Used on Indian Reservations IRAs, Deemed IRAs L Leasehold improvement property, defined, Qualified leasehold improvement property. Tax student Liberty Zone leasehold improvement property: Defined, Qualified New York Liberty Zone leasehold improvement property. Tax student Depreciated as 5-year property, Liberty Zone Leasehold Improvement Property Returns filed before June 1, 2002, Returns Filed Before June 1, 2002 Liberty Zone property: Increased section 179 dollar limit, Increased Dollar Limit Reduced section 179 dollar limit, Reduced Dollar Limit M Marginal production, Depletion More information (see Tax help) N Net operating losses, New 5-Year Carryback Rule for Net Operating Losses (NOLs), New 5-Year Carryback Rule for Net Operating Losses (NOLs) New York Liberty Zone: Area defined, New York Liberty Zone Benefits Leasehold improvement property, Liberty Zone Leasehold Improvement Property Section 179 deduction, Increased Section 179 Deduction Special depreciation, Special Liberty Zone Depreciation Allowance Tax incentives, Tax Incentives for New York Liberty Zone Work opportunity credit, Work Opportunity Credit Expanded in New York Liberty Zone NOLs, New 5-Year Carryback Rule for Net Operating Losses (NOLs), New 5-Year Carryback Rule for Net Operating Losses (NOLs) Nonaccrual-experience method, Nonaccrual-Experience Method Nonresidential real property, Nonresidential real property and residential rental property. Tax student P Passenger automobile, limit on, Passenger Automobiles Pension plan startup costs, Credit For Pension Plan Startup Costs Placed in service date, Placed in service date test. Tax student , Placed in service date test. Tax student Plans, tax-sheltered annuities, 403(b) plans, 403(b) Plans Publications (see Tax help) Q Qualified leasehold improvement property, defined, Qualified leasehold improvement property. Tax student Qualified Liberty Zone leasehold improvement property, Qualified New York Liberty Zone leasehold improvement property. Tax student Qualified property: Increased section 179 deduction, Qualified property. Tax student Special depreciation allowance, Qualified Property Special Liberty Zone depreciation allowance, Qualified Liberty Zone Property Qualified zone academy bonds, Issuance of Qualified Zone Academy Bonds R Recapture, section 179 deduction, Recapture Rules Renewable electricity, Renewable Electricity Production Credit Residential rental property, Nonresidential real property and residential rental property. Tax student Rollovers, 403(b) plans, Rollovers to and from 403(b) plans. Tax student S Section 1256 contracts, Wash Sale Rules Do Not Apply to Section 1256 Contracts Section 179 deduction: Increased dollar limit for Liberty Zone property, Increased Dollar Limit Reduced dollar limit for Liberty Zone property, Reduced Dollar Limit Returns filed before June 1, 2002, Returns Filed Before June 1, 2002 Simplified employee pensions (SEPs), Simplified Employee Pensions (SEPs) Special depreciation allowance: Election not to claim, Election Not To Claim the Allowance Excepted property, Excepted Property Qualified property, Qualified Property Requirements for claiming, Qualified Property Returns filed before June 1, 2002, Rules for Returns Filed Before June 1, 2002 Tests for qualification, Tests To Be Met Special Liberty Zone depreciation allowance: Election not to claim, Election Not To Claim the Liberty Zone Allowance Excepted property, Excepted property. Tax student Qualified property, Qualified Liberty Zone Property Requirements for claiming, Qualified Liberty Zone Property Returns filed before June 1, 2002, Returns filed before June 1, 2002. Tax student Tests for qualification, Tests to be met. Tax student Substantial use, special Liberty Zone depreciation allowance, Substantial use test. Tax student Suggestions, Comments and suggestions. Tax student T Tax help, How To Get Tax Help Tax-sheltered annuity plans, 403(b) plans, 403(b) Plans Taxpayer Advocate, Contacting your Taxpayer Advocate. Tax student Teachers, classroom materials, Deduction for Educator Expenses Tests for qualification, Tests To Be Met, Tests to be met. Tax student TTY/TDD information, How To Get Tax Help W Wash sale rules, Wash Sale Rules Do Not Apply to Section 1256 Contracts Welfare-to-work credit, Welfare-to-Work Credit Extended Withholding, Adjusting your withholding or estimated tax payments for 2002. Tax student Work opportunity credit, Work Opportunity Credit Expanded in New York Liberty Zone , Work Opportunity Credit Extended Y Years of service, church employees and ministers, Years of service for church employees and ministers. Tax student Prev  Up     Home   More Online Publications
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Letter 2357C Frequently Asked Questions (FAQs)

What is the letter telling me?

The letter is informing you that we failed to send you the balance due notices we should have sent you.

What do I have to do?

Pay the balance due in the letter as soon as possible.

How much time do I have?

The letter provides you the full pay amount to a specified date.

What happens if I don't take any action?

If you do not make arrangements to pay the balance you owe, we can proceed with enforcement action and may file a levy on your wages or bank account or file a lien on your personal property.

Who should I contact?

If you have any questions about this letter, call us at the number printed in the letter. The person who answers the phone will assist you.

What if I don't agree or have already taken corrective action?

If you do not agree with this letter, call us immediately at the number included. We will do our best to help you. If you have called us about this matter before, but we did not correct the problem, you may want to contact the Office of the Taxpayer Advocate.

Page Last Reviewed or Updated: 30-Jan-2014

The Tax Student

Tax student 4. Tax student   Filing U. Tax student S. Tax student Tax Returns Table of Contents Who Must FileFiling Requirement if Possession Income Is Excluded When To FileExtension of Time To File Where To File Special Rules for Completing Your U. Tax student S. Tax student Tax ReturnU. Tax student S. Tax student Armed Forces. Tax student Deductions if Possession Income Is Excluded Foreign Tax Credit if Possession Income Is Excluded Self-Employment Tax Additional Medicare Tax Net Investment Income Tax Paying Your TaxesEstimated Tax Double TaxationCompetent Authority Assistance The information in chapter 3 will tell you if a U. Tax student S. Tax student income tax return is required for your situation. Tax student If a U. Tax student S. Tax student return is required, your next step is to see if you meet the filing requirements. Tax student If you do meet the filing requirements, the information presented in this chapter will help you understand the special procedures involved. Tax student This chapter discusses: Filing requirements, When to file your return, Where to send your return, How to adjust your deductions and credits if you are excluding income from American Samoa or Puerto Rico, How to make estimated tax payments and pay self-employment tax, and How to request assistance in resolving instances of double taxation. Tax student Who Must File If you are not required to file a possession tax return that includes your worldwide income, you must generally file a U. Tax student S. Tax student income tax return if your gross income is at least the amount shown in Table 4-1, later, for your filing status and age. Tax student If you were a bona fide resident of American Samoa or Puerto Rico and are able to exclude your possession income from your U. Tax student S. Tax student tax return, your filing requirement may be less than the amount in Table 4-1. Tax student For details, see the information under Filing Requirement if Possession Income Is Excluded , later. Tax student Some individuals (such as those who can be claimed as a dependent on another person's return or who owe certain taxes, such as self-employment tax) must file a tax return even though the gross income is less than the amount shown in Table 4-1 for their filing status and age. Tax student For more information, see the Form 1040 instructions. Tax student Filing Requirement if Possession Income Is Excluded If you were a bona fide resident of American Samoa or Puerto Rico and qualify to exclude possession income on your U. Tax student S. Tax student tax return, you must determine your adjusted filing requirement. Tax student Generally, your filing requirement is based on the total of your (and your spouse's if filing a joint return) personal exemption(s) plus your standard deduction. Tax student Personal exemption. Tax student   When figuring your filing requirement, your personal exemption is allowed in full. Tax student Do not reduce it for this purpose. Tax student Do not include exemptions for your dependents. Tax student Allowable standard deduction. Tax student   Unless your filing status is married filing separately, the minimum income level at which you must file a return is based, in part, on the standard deduction for your filing status and age. Tax student Because the standard deduction applies to all types of income, it must be divided between your excluded income and income from other sources. Tax student Multiply the regular standard deduction for your filing status and age (this is zero if you are married filing a separate return; all others, see Form 1040 instructions) by the following fraction:      Gross income subject to U. Tax student S. Tax student income tax     Gross income from all sources (including excluded possession income)   Example. Tax student Barbara Spruce, a U. Tax student S. Tax student citizen, is single, under 65, and a bona fide resident of American Samoa. Tax student During 2013, she received $20,000 of income from American Samoa sources (qualifies for exclusion) and $8,000 of income from sources outside the possession (subject to U. Tax student S. Tax student income tax). Tax student Her allowable standard deduction for 2013 is figured as follows:   $8,000 $28,000 × $6,100 (regular standard deduction) = $1,743   Adjusted filing requirement. Tax student   Figure your adjusted filing requirement by adding the amount of your allowable standard deduction to the amount of your personal exemption. Tax student You must file a U. Tax student S. Tax student income tax return if your gross income is at least the amount shown on line 3 of the following worksheet. Tax student    1. Tax student Enter the allowable standard deduction you figured earlier under Allowable standard deduction . Tax student If your filing status is married filing separately, enter -0-   2. Tax student Personal exemption. Tax student If your filing status is married filing jointly, enter $7,800; if someone can claim you as a dependent, enter -0-; otherwise, enter $3,900   3. Tax student Add lines 1 and 2. Tax student You must file a U. Tax student S. Tax student income tax return if your gross income from sources outside the relevant possession is at least this amount   Table 4-1. Tax student 2013 Filing Requirements Chart for Most Taxpayers IF your filing status is. Tax student . Tax student . Tax student AND at the end of 2013 you were*. Tax student . Tax student . Tax student THEN file a return if your gross income** was at least. Tax student . Tax student . Tax student single under 65 $10,000 65 or older $11,500 married filing jointly*** under 65 (both spouses) $20,000 65 or older (one spouse) $21,200 65 or older (both spouses) $22,400 married filing separately any age $3,900 head of household under 65 $12,850 65 or older $14,350 qualifying widow(er)  with dependent child under 65 $16,100 65 or older $17,300 * If you were born on January 1, 1949, you are considered to be age 65 at the end of 2013. Tax student ** 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 (even if you can exclude part or all of it). Tax student Do not include social security benefits unless (a) you are married filing a separate return and you lived with your spouse at any time during 2013, or (b) one-half of your social security benefits plus your other gross income is more than $25,000 ($32,000 if married filing jointly). Tax student If (a) or (b) applies, see the instructions for Form 1040 or Publication 915, Social Security and Equivalent Railroad Retirement Benefits, to figure the taxable part of social security benefits you must include in gross income. Tax student *** 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. Tax student Example 1. Tax student James and Joan Thompson, one over 65, are U. Tax student S. Tax student citizens and bona fide residents of Puerto Rico during the entire tax year. Tax student They file a joint income tax return. Tax student During 2013, they received $35,000 of income from Puerto Rico sources (qualifies for exclusion) and $6,000 of income from sources outside Puerto Rico (subject to U. Tax student S. Tax student income tax). Tax student Their allowable standard deduction for 2013 is figured as follows:   $6,000 $41,000 × $13,400 ( standard deduction for 65 or older (one spouse) ) = $1,961   The Thompsons do not have to file a U. Tax student S. Tax student income tax return because their gross income subject to U. Tax student S. Tax student tax ($6,000) is less than their allowable standard deduction plus their personal exemptions ($1,961+ $7,800= $9,761). Tax student Example 2. Tax student Barbara Spruce (see Example under Allowable standard deduction, earlier), however, must file a U. Tax student S. Tax student income tax return because her gross income subject to U. Tax student S. Tax student tax ($8,000) is more than her allowable standard deduction plus her personal exemption ($1,743 + $3,900 = $5,643). Tax student If you must file a U. Tax student S. Tax student income tax return, you may be able to file a paperless return using IRS e-file. Tax student See your form instructions or visit our website at IRS. Tax student gov. Tax student When To File If you file on a calendar year basis, the due date for filing your U. Tax student S. Tax student income tax return is April 15 following the end of your tax year. Tax student If you use a fiscal year (a year ending on the last day of a month other than December), the due date is the 15th day of the 4th month after the end of your fiscal year. Tax student If any due date falls on a Saturday, Sunday, or legal holiday, your tax return is due on the next business day. Tax student For your 2013 tax return, the due date is April 15, 2014. Tax student If you mail your federal tax return, it is considered timely if it bears an official postmark dated on or before the due date, including any extensions. Tax student If you use a private delivery service designated by the IRS, generally the postmark date is the date the private delivery service records in its database or marks on the mailing label. Tax student See your form instructions for a list of designated private delivery services. Tax student Extension of Time To File You can get an extension of time to file your U. Tax student S. Tax student income tax return. Tax student Special rules apply for those living outside the United States. Tax student Automatic 6-Month Extension If you cannot file your 2013 return by the due date, you can get an automatic 6-month extension of time to file. Tax student Example. Tax student If your return must be filed by April 15, 2014, you will have until October 15, 2014, to file. Tax student Although you are not required to make a payment of the tax you estimate as due, Form 4868 does not extend the time to pay taxes. Tax student If you do not pay the amount due by the regular due date (generally April 15), you will owe interest on any unpaid tax from the original due date to the date you pay the tax. Tax student You may also be charged penalties (see the Instructions for Form 4868). Tax student How to get the automatic extension. Tax student   You can get the automatic 6-month extension if you do one of the following by the due date for filing your return. Tax student E-file Form 4868 using your personal computer or a tax professional. Tax student E-file and pay by credit or debit card. Tax student Your payment must be at least $1. Tax student You may pay by phone or over the Internet. Tax student Do not file Form 4868. Tax student File a paper Form 4868. Tax student If you are a fiscal year taxpayer, you must file a paper Form 4868. Tax student See Form 4868 for information on getting an extension using these options. Tax student When to file. Tax student   You must request the automatic extension by the due date for your return. Tax student You can file your return any time before the 6-month extension period ends. Tax student When you file your return. Tax student   Enter any payment you made related to the extension of time to file on Form 1040, line 68. Tax student If you file Form 1040A, U. Tax student S. Tax student Individual Income Tax Return, or Form 1040EZ, Income Tax Return for Single and Joint Filers With No Dependents, include that payment in your total payments on Form 1040A, line 41, or Form 1040EZ, line 9. Tax student Also enter “Form 4868” and the amount paid in the space to the left of the entry space for line 41 or line 9. Tax student You cannot ask the Internal Revenue Service to figure your tax if you use the extension of time to file. Tax student Individuals Outside the United States and Puerto Rico You are allowed an automatic 2-month extension (until June 16, 2014, if you use the calendar year) to file your 2013 return and pay any federal income tax due if: You are a U. Tax student S. Tax student citizen or resident, and On the due date of your return: You are living outside of the United States and Puerto Rico, and your main place of business or post of duty is outside the United States and Puerto Rico, or You are in military or naval service on duty outside the United States and Puerto Rico. Tax student However, if you pay the tax due after the regular due date (generally April 15), interest will be charged from April 15 until the date the tax is paid. Tax student If you serve in a combat zone or qualified hazardous duty area, you may be eligible for a longer extension of time to file. Tax student For more information, see Publication 3, Armed Forces' Tax Guide. Tax student Married taxpayers. Tax student   If you file a joint return, only one spouse has to qualify for this automatic extension. Tax student However, if you and your spouse file separate returns, this automatic extension applies only to the spouse who qualifies. Tax student How to get the extension. Tax student   To use this special automatic extension, you must attach a statement to your return explaining what situation qualified you for the extension. Tax student (See the situations listed under (2), earlier. Tax student ) Extension beyond 2 months. Tax student   If you cannot file your 2013 return within the automatic 2-month extension period, you can get an additional 4-month extension, for a total of 6 months. Tax student File Form 4868 by the end of the automatic extension period (June 16, 2014 for calendar year taxpayers). Tax student Be sure to check the box on Form 4868, line 8, if appropriate. Tax student   In addition to this 6-month extension, taxpayers who are out of the country (as defined under (2) earlier) can request a discretionary 2-month additional extension of time to file their returns (to December 15 for calendar year taxpayers). Tax student   To request this extension, you must send the IRS a letter explaining the reasons why you need the additional 2 months. Tax student Send the letter by the extended due date (October 15 for calendar year taxpayers) to:  Department of the Treasury Internal Revenue Service Austin, TX 73301-0215 USA   You will not receive any notification from the IRS unless your request is denied for being untimely. Tax student Where To File Use the addresses listed below if you have to file Form 1040 with the United States and you are excluding possession income from American Samoa or Puerto Rico. Tax student If you are not including a check or a money order, send your U. Tax student S. Tax student tax return and all attachments to:   Department of the Treasury Internal Revenue Service Austin, TX 73301-0215 USA If you are including a check or a money order, send your U. Tax student S. Tax student tax return and all attachments to:  Internal Revenue Service P. Tax student O. Tax student Box 1303 Charlotte, NC 28201-1303 USA Also send your U. Tax student S. Tax student return to these addresses if you are attaching Form 5074 or Form 8689. Tax student If you are not in either of the above categories, send your return to the address shown in the Form 1040 instructions for the possession or state in which you reside. Tax student Special Rules for Completing Your U. Tax student S. Tax student Tax Return If you are not excluding possession income from your U. Tax student S. Tax student tax return, follow the instructions for the specific forms you file. Tax student However, you may not qualify to claim the earned income credit (EIC). Tax student Earned income credit. Tax student   Even if you maintain a household in one of the possessions discussed in this publication that is your main home and the home of your qualifying child, you cannot claim the earned income credit on your U. Tax student S. Tax student tax return. Tax student This credit is available only if you maintain the household in the United States or you are serving on extended active duty in the U. Tax student S. Tax student Armed Forces. Tax student U. Tax student S. Tax student Armed Forces. Tax student   U. Tax student S. Tax student military personnel stationed outside the United States on extended active duty are considered to live in the United States during that duty period for purposes of the EIC. Tax student Extended active duty means you are called or ordered to duty for an indefinite period or for a period of more than 90 days. Tax student Once you begin serving your extended active duty, you are still considered to have been on extended active duty even if you do not serve more than 90 days. Tax student Income from American Samoa or Puerto Rico excluded. Tax student   You will not be allowed to take deductions and credits that apply to the excluded income. Tax student The additional information you need follows. Tax student Deductions if Possession Income Is Excluded Deductions that specifically apply to your excluded possession income, such as employee business expenses, are not allowable on your U. Tax student S. Tax student income tax return. Tax student Deductions that do not specifically apply to any particular type of income must be divided between your excluded income from sources in the relevant possession and income from all other sources to find the part that you can deduct on your U. Tax student S. Tax student tax return. Tax student Examples of such deductions are alimony payments, the standard deduction, and certain itemized deductions (such as medical expenses, charitable contributions, real estate taxes, and mortgage interest on your home). Tax student Figuring the deduction. Tax student   To find the part of a deduction that is allowable, multiply the deduction by the following fraction. Tax student   Gross income subject to U. Tax student S. Tax student income tax     Gross income from all sources (including excluded possession income)   Adjustments to Income Your adjusted gross income equals your gross income minus certain deductions (adjustments). Tax student Moving expense deduction. Tax student   Generally, expenses of a move to a possession are directly attributable to wages, salaries, and other earned income from that possession. Tax student Likewise, the expenses of a move back to the United States are generally attributable to U. Tax student S. Tax student earned income. Tax student   If you are claiming expenses for a move to a relevant possession, how and where you will deduct the expenses depends on your status as a bona fide resident and if any of your possession income is excluded on your U. Tax student S. Tax student tax return. Tax student For more information, see Moving expense deduction in chapter 3 under the name of the relevant possession. Tax student   If you are claiming expenses for a move from a U. Tax student S. Tax student possession to the United States, use Form 3903 to figure your deductible expenses and enter the amount on Form 1040, line 26. Tax student For purposes of deducting moving expenses, the possessions are considered part of the United States. Tax student See Publication 521, Moving Expenses, for information about what expenses are deductible. Tax student Self-employment tax deduction. Tax student   Generally, if you are reporting self-employment income on your U. Tax student S. Tax student return, you can include the deductible part of your self-employment tax on Form 1040, line 27. Tax student This is an income tax deduction only; it is not a deduction in figuring net earnings from self-employment (for self-employment tax). Tax student   However, if you are a bona fide resident of American Samoa or Puerto Rico and you exclude all of your self-employment income from gross income, you cannot take the deduction on Form 1040, line 27, because the deduction is related to excluded income. Tax student   If only part of your self-employment income is excluded, the part of the deduction that is based on the nonexcluded income is allowed. Tax student This would happen if, for instance, you have two businesses and only the income from one of them is excludable. Tax student   For purposes of the deduction only, figure the self-employment tax on the nonexcluded income by multiplying your total self-employment tax (from Schedule SE (Form 1040)), Self-Employment Tax) by the following fraction. Tax student   Self-employment income subject to U. Tax student S. Tax student income tax     Total self-employment income (including excluded possession income)   The result is your self-employment tax on nonexcluded income. Tax student Include the deductible part of this amount on Form 1040, line 27. Tax student Individual retirement arrangement (IRA) deduction. Tax student   Do not take excluded income into account when figuring your deductible IRA contribution. Tax student Standard Deduction The standard deduction is composed of the regular standard deduction amount and the additional standard deduction for taxpayers who are blind or age 65 or over. Tax student To find the amount you can claim on Form 1040, line 40, first figure your full standard deduction according to the Instructions for Form 1040. Tax student Then multiply your full standard deduction by the following fraction. Tax student   Gross income subject to U. Tax student S. Tax student income tax     Gross income from all sources (including excluded possession income)   In the space above line 40, enter “Standard deduction modified due to income excluded under section 931 (if American Samoa) or section 933 (if Puerto Rico). Tax student ” This calculation may not be the same as the one you used to determine if you need to file a U. Tax student S. Tax student tax return. Tax student Itemized Deductions Most itemized deductions do not apply to a particular type of income. Tax student However, itemized deductions can be divided into three categories. Tax student Those that apply specifically to excluded income, such as employee business expenses, are not deductible. Tax student Those that apply specifically to income subject to U. Tax student S. Tax student income tax, which might also be employee business expenses, are fully allowable under the Instructions for Schedule A (Form 1040), Itemized Deductions. Tax student Those that do not apply to specific income must be allocated between your gross income subject to U. Tax student S. Tax student income tax and your total gross income from all sources. Tax student The example given later shows how to figure the deductible part of each type of expense that is not related to specific income. Tax student Example. Tax student In 2013, you and your spouse are both under 65 and U. Tax student S. Tax student citizens who are bona fide residents of Puerto Rico during the entire tax year. Tax student You file a joint income tax return. Tax student During 2013, you earned $20,000 from Puerto Rican sources (excluded from U. Tax student S. Tax student gross income) and your spouse earned $60,000 from the U. Tax student S. Tax student Government. Tax student You have $16,000 of itemized deductions that do not apply to any specific type of income. Tax student These are medical expenses of $4,000, real estate taxes of $5,000, home mortgage interest of $6,000, and charitable contributions of $1,000 (cash contributions). Tax student You determine the amount of each deduction that you can claim on your Schedule A (Form 1040), Itemized Deductions, by multiplying the deduction by the fraction shown under Figuring the deduction , earlier under Deductions if Possession Income is Excluded. Tax student   Medical Expenses   $60,000$80,000 × $4,000 = $3,000  (enter on line 1  of Schedule A)     Real Estate Taxes   $60,000$80,000 × $5,000 = $3,750  (enter on line 6  of Schedule A)     Home Mortgage Interest   $60,000$80,000 × $6,000 = $4,500  (enter on line 10 or 11 of  Schedule A)     Charitable Contributions (cash contributions)   $60,000$80,000 × $1,000 = $750  (enter on line 16 of Schedule A)   Enter on Schedule A (Form 1040) only the allowable portion of each deduction. Tax student Overall limitation on itemized deductions. Tax student   If your adjusted gross income (discussed earlier) is over $300,000 if married filing jointly or qualifying widow(er); $275,000 if head of household; $250,000 if single; or $150,000 if married filing separately; see the Itemized Deductions Worksheet in the Instructions for Schedule A (Form 1040), to figure your itemized deductions. Tax student Personal Exemptions Personal exemptions are allowed in full even if excluding possession income. Tax student However, depending upon your adjusted gross income and filing status, the amount you can deduct may be reduced. Tax student See the Deduction for Exemptions Worksheet—Line 42 in the instructions for Form 1040. Tax student Foreign Tax Credit if Possession Income Is Excluded If you must report American Samoa or Puerto Rico source income on your U. Tax student S. Tax student tax return, you can claim a foreign tax credit for income taxes paid to the possession on that income. Tax student However, you cannot claim a foreign tax credit for taxes paid on possession income that is excluded on your U. Tax student S. Tax student tax return. Tax student The foreign tax credit is generally figured on Form 1116. Tax student If you have income, such as U. Tax student S. Tax student Government wages, that is not excludable, and you also have possession source income that is excludable, you must figure the credit by reducing your foreign taxes paid or accrued by the taxes based on the excluded income. Tax student You make this reduction for each separate income category. Tax student To find the amount of this reduction, use the following formula for each income category. Tax student Excluded income from possession sources less deductible expenses based on that income x Tax paid or accrued to the possession = Reduction in foreign taxes Total income subject to possession tax less deductible expenses based on that income Enter the amount of the reduction on Form 1116, line 12. Tax student For more information on the foreign tax credit, see Publication 514. Tax student Example. Tax student Jason and Lynn Reddy are U. Tax student S. Tax student citizens who were bona fide residents of Puerto Rico during all of 2013. Tax student They file a joint tax return. Tax student The following table shows their excludable and taxable income for U. Tax student S. Tax student federal income tax purposes. Tax student   Taxable   Excludable Jason's wages from  U. Tax student S. Tax student Government $25,000     Lynn's wages from Puerto Rico  corp. Tax student     $15,000 Dividend from Puerto Rico corp. Tax student doing business in Puerto Rico     200 Dividend from U. Tax student S. Tax student  corp. Tax student doing business  in U. Tax student S. Tax student * 1,000     Totals $26,000   $15,200 * Income from sources outside Puerto Rico is taxable. Tax student   Jason and Lynn must file 2013 income tax returns with both Puerto Rico and the United States. Tax student They have gross income of $26,000 for U. Tax student S. Tax student tax purposes. Tax student They paid taxes to Puerto Rico of $4,000 ($3,980 on their wages and $20 on the dividend from the Puerto Rico corporation). Tax student They figure their foreign tax credit on two Forms 1116, which they must attach to their U. Tax student S. Tax student return. Tax student They fill out one Form 1116 for wages and one Form 1116 for the dividend. Tax student Jason and Lynn figure the Puerto Rico taxes on excluded income as follows. Tax student   Wages: ($15,000 ÷ $40,000) × $3,980 = $1,493   Dividend: ($200 ÷ $200) × $20 = $20 They enter $1,493 on Form 1116, line 12, for wages and $20 on the second Form 1116, line 12, for the dividend. Tax student Self-Employment Tax Self-employment tax includes both social security and Medicare taxes for individuals who are self-employed. Tax student A U. Tax student S. Tax student citizen or resident alien who is self-employed must pay self-employment tax on net self-employment earnings of $400 or more. Tax student This rule applies whether or not the earnings are excludable from gross income (or whether or not a U. Tax student S. Tax student income tax return must otherwise be filed). Tax student Bona fide residents of the possessions discussed in this publication are considered U. Tax student S. Tax student residents for this purpose and are subject to the self-employment tax. Tax student Forms to file. Tax student   If you have net self-employment income and are subject to self-employment tax, file one of the following with the United States. Tax student If you are required to file Form 1040 with the United States, complete Schedule SE (Form 1040) and attach it to your Form 1040. Tax student If you are not required to file Form 1040 with the United States and you are a bona fide resident of American Samoa, the CNMI, Guam, Puerto Rico, or the USVI, file Form 1040-SS. Tax student If you are a resident of Puerto Rico, you can file the Spanish-language Form 1040-PR instead. Tax student Do not file forms 1040-SS or 1040-PR with Form 1040. Tax student If you are required to pay Additional Medicare Tax (discussed later) on your self-employment income, attach Form 8959, Additional Medicare Tax to Form 1040, Form 1040-SS, or Form 1040-PR, as applicable. Tax student Chapter 11 Bankruptcy cases. Tax student   While you are a debtor in a chapter 11 bankruptcy case, your net profit or loss from self-employment will be included on the income tax return (Form 1041, U. Tax student S. Tax student Income Tax Return for Estates and Trusts) of the bankruptcy estate. Tax student However, you—not the bankruptcy estate—are responsible for paying self-employment tax on your net earnings from self-employment. Tax student   Use Schedule SE (Form 1040), Form 1040-SS, or Form 1040-PR, as determined above, to figure your correct amount of self-employment tax. Tax student   For other reporting requirements, see Chapter 11 Bankruptcy Cases in the Instructions for Form 1040. Tax student Additional Medicare Tax Beginning in 2013, a 0. Tax student 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 if single, head of household, or qualifying widow(er). Tax student Medicare wages and self-employment income are combined to determine if income exceeds the threshold. Tax student A self-employment loss should not be considered for purposes of this tax. Tax student RRTA compensation should be separately compared to the threshold. Tax student Your employer is responsible for withholding the 0. Tax student 9% Additional Medicare Tax on Medicare wages or RRTA compensation it pays to you in excess of $200,000. Tax student You should consider this withholding, if applicable, in determining whether you need to make estimated tax payments. Tax student There are no special rules for U. Tax student S. Tax student citizens and nonresident aliens living abroad for purposes of this provision. Tax student Wages, RRTA compensation, and self-employment income that are subject to Medicare tax will also be subject to Additional Medicare Tax if in excess of the applicable threshold. Tax student For more information, see Form 8959, Additional Medicare Tax, and its instructions or visit www. Tax student irs. Tax student gov and enter the following words in the search box: Additional Medicare Tax. Tax student You cannot include the Additional Medicare Tax as a deductible part of your self-employment tax. Tax student Net Investment Income Tax Beginning in 2013, the Net Investment Income Tax (NIIT) imposes a 3. Tax student 8% tax on the lesser of an individual’s net investment income or the excess of the individual’s modified adjusted gross income over a specified threshold amount. Tax student Bona fide residents of Puerto Rico and American Samoa who may have a federal income tax return filing obligation may be liable for the NIIT if the taxpayer’s modified adjusted gross income from non-territory sources exceeds a specified threshold amount. Tax student The NIIT does not apply to any individual who is a nonresident alien with respect to the United States. Tax student Bona fide residents must take into account any additional tax liability associated with the NIIT when calculating your estimated tax payments. Tax student Forms to file. Tax student   If you are a bona fide resident of American Samoa and Puerto Rico and you are required to pay the NIIT, you must file Form 1040 with the United States and attach Form 8960, Net Investment Income Tax—Individuals, Estates, and Trusts. Tax student For more information, see Form 8960 and its instructions. Tax student Paying Your Taxes You may find that not all of your income tax has been paid through withholding by either the United States or the possession. Tax student This is often true if you have income that is not subject to withholding, such as self-employment, interest, or rental income. Tax student In this situation, you may need to make estimated tax payments. Tax student Estimated Tax If your estimated income tax obligation is to the United States, use the worksheet in the Form 1040-ES package to figure your estimated tax, including self-employment tax. Tax student Include the Additional Medicare Tax and Net Investment Income Tax if applicable. Tax student If you are paying by check or money order, use the payment vouchers in the Form 1040-ES package. Tax student Or, you can make your payments electronically and not have to file any paper forms. Tax student See the Form 1040-ES instructions for information on making payments. Tax student Double Taxation Mutual agreement procedures exist to settle issues where there is inconsistent tax treatment between the IRS and the taxing authorities of the following possessions. Tax student American Samoa. Tax student The Commonwealth of Puerto Rico. Tax student The Commonwealth of the Northern Mariana Islands. Tax student Guam. Tax student The U. Tax student S. Tax student Virgin Islands. Tax student These issues usually involve allocations of income, deductions, credits, or allowances between related persons; determinations of residency; and determinations of the source of income and related expenses. Tax student Competent Authority Assistance The tax coordination agreements between the United States and the possession tax departments contain provisions allowing the competent authorities of the United States and the relevant possession to resolve, by mutual agreement, inconsistent tax treatment by the two jurisdictions. Tax student How to make your request. Tax student   Your request for competent authority assistance must include all the information listed in Revenue Procedure 2006-23, 2006-20 I. Tax student R. Tax student B. Tax student 900 available at www. Tax student irs. Tax student gov/pub/irs-irbs/irb06-49. Tax student pdf. Tax student    Also, see Notice 2013-78, which provides proposed updates to the procedures for requesting U. Tax student S. Tax student competent authority assistance under tax treaties. Tax student As noted, an update to Revenue Procedure 2006-23 will be published in the future. Tax student   Your request must be in the form of a letter addressed to the Deputy Commissioner (International) LB&I. Tax student It must contain a statement that competent authority assistance is requested under the mutual agreement procedure with the possession. Tax student You (or a person having authority to sign your federal return) must sign and date the request. Tax student    Send your written request for U. Tax student S. Tax student assistance under this procedure to:   Deputy Commissioner (International) Large Business and International Division Internal Revenue Service 1111 Constitution Avenue, N. Tax student W. Tax student  Routing: M4-365 Washington, DC 20224 (Attention: TAIT) Nonresident aliens generally must present their initial request for assistance to the relevant possession tax agency. Tax student Credit or Refund In addition to the tax assistance request, if you seek a credit or refund of any overpayment of U. Tax student S. Tax student tax paid on the income in question, you should file a claim on Form 1040X, Amended U. Tax student S. Tax student Individual Income Tax Return. Tax student Indicate on the form that a request for assistance under the mutual agreement procedure with the possession has been filed. Tax student Attach a copy of the request to the form. Tax student Also, you should take whatever steps must be taken under the possession tax code to prevent the expiration of the statutory period for filing a claim for credit or refund of a possession tax. Tax student See Revenue Procedure 2006-54 (or its successor), section 9, for complete information. Tax student Prev  Up  Next   Home   More Online Publications