16. Other (Alternative Minimum Tax, Estates, Trusts, Tax Shelters, State Tax Inquiries):

This is archived information that pertains only to the 2005 Tax Year. If you
are looking for information for the current tax year, go to the Tax Prep Help Area.

I am filing my U.S. tax return from the U.K. and am eligible for the automatic 2-month extension. Do my forms need to be in Philadelphia by June 15th, or do they just need to be postmarked by June 15th?

Your return must be postmarked by June 15th.

For an American citizen residing in Canada using Form 1040A, is the taxable amount of U.S. social security benefits $0.00 due to the Canada-U.S. tax treaty?

Under the 1997 protocol to the Canada - U.S. tax treaty, the Canadian and U.S. governments agreed to return to a residence-based system under which social security benefits are taxable exclusively in the country where the recipient resides. As a result, the entry for taxable social security is $0.00.

I am a U.S. citizen. If I move to Canada to live and work there as a Canadian permanent resident, do I pay both U.S. and Canadian Taxes?

United States citizens living abroad are required to file annual U.S. income tax returns and report their worldwide income if they meet the minimum income filing requirements for their filing status and age. You must contact the Canadian Government to determine whether you must file a Canadian tax return and pay Canadian taxes. For the United States income tax return, you will have several options available to you regarding claiming a foreign tax credit or excluding some or all of your foreign earned income.

Are the Canada Pension Plan and Canadian Old Age Security Benefits taxable? If they are, please tell me where they should be entered on Form 1040.

Benefits paid under the Canada Pension Plan (CPP), Quebec Pension Plan (QPP), and Old Age Security (OAS) program to a U.S. resident are taxable, if at all, only in the United States. According to the U.S. - Canada income tax treaty, taxation of these benefits is based on residence. U.S. citizens or green card holders who reside in Canada are not subject to U.S. tax on this income.

These Canadian benefits are treated as U.S. social security benefits for U.S. tax purposes. Thus, under section 86 of the Internal Revenue Code, the portion of the benefits that is taxable will depend on your income and filing status. If your modified adjusted gross income is above certain limits, a maximum of 85% of your benefits will be subject to U.S. tax. Refer to Tax Topic 423 for information about determining the taxable amount of your benefits. Any benefit under the social security legislation of Canada that would not be subject to Canadian tax if paid to a resident of Canada is not subject to U.S. tax.

Canadian benefits that are treated as U.S. social security benefits are reported onForm 1040 (PDF) , U. S. Individual Income Tax Return or Form 1040A (PDF).

What is foreign earned income? Is it income from a foreign source or income paid by a U.S. company while living abroad?

Earned income is pay for personal services performed, such as wages, salaries, or professional fees. Foreign earned income is income you receive for services you perform in a foreign country during a period when your tax home is in a foreign country and during which time you meet either the bona fide residence test or the physical presence test. It does not matter whether earned income is paid by a U.S. employer or a foreign employer. Foreign earned income does not include the following amounts.

The previously excluded value of meals and lodging furnished for the convenience of your employer.
Pension or annuity payments including social security benefits.
Payments by the U.S. Government, or any U.S. government agency or instrumentality, to its employees.
Amounts included in your income because of your employer's contributions to a nonexempt employee trust or to a nonqualifying annuity contract.
Recaptured unallowable moving expenses
Payments received after the end of the tax year following the tax year in which you performed the services that earned the income.

Do I have to meet the 330-day presence test or have a valid working resident visa to meet the requirement for foreign income exclusion?

To claim the foreign earned income exclusion, the foreign housing exclusion, or the foreign housing deduction, you must have foreign earned income, your tax home must be in a foreign country, and you must be one of the following:

A U.S. citizen who is a bona fide resident of a foreign country or countries for an uninterrupted period that includes an entire tax year,
A U.S. resident alien who is a citizen or national of a country with which the United States has an income tax treaty with a nondiscrimination article in effect and who is a bona fide resident of a foreign country or countries for an uninterrupted period that includes an entire tax year, or
A U.S. citizen or a U.S. resident alien who is physically present in a foreign country or countries for at least 330 full days during any period of 12 consecutive months.

U.S. tax law does not specifically require a foreign resident visa or work visa for this purpose, but you (must/should) comply with the other country's laws.

I live in a foreign country. How do I get a social security number for my dependent who qualifies for a social security card?

Use Form SS-5-FS which may be obtained from the Social Security Administration.

My spouse is a nonresident alien. How can I get a nonworking social security number for her?

Each foreign person who does not have and cannot obtain a social security number must use an IRS Individual Taxpayer Identification Number (ITIN) on any U.S. tax return or refund claim filed. For additional information on ITINs click on Individual Taxpayer Identification Number.

I am a U.S. citizen working abroad. Are my foreign earnings taxable?

A U.S. citizen or resident alien is generally subject to U.S. tax on total worldwide income. However, if you are a United States citizen or a resident alien who lives and works abroad, you may qualify to exclude all or part of your foreign earned income. For specific information, refer to Tax Topic 853, Foreign Earned Income Exclusion - General.

If you would like more information on who qualifies for the exclusion, refer to Tax Topic 854, Foreign Earned Income Exclusion - Who Qualifies. For more information on what type of income qualifies for the exclusion, refer to Tax Topic 855, Foreign Earned Income Exclusion - What Qualifies. You may also wish to refer to chapter 4 Publication 54, Tax Guide for U.S. Citizens and Resident Aliens Abroad, for a detailed discussion.

If the information you need relating to this topic is not addressed in Publication 54, you may call the IRS International Tax Law hotline. The number is (215) 516-2000. This is not a toll-free number.

I am a U.S. citizen working for a U.S. firm in a foreign country. Is any part of my wages or expenses tax deductible?

U.S. citizens are taxed on their worldwide income, no matter where they work. Some taxpayers may qualify for the foreign earned income exclusion, foreign housing exclusion, or foreign housing deduction, if their tax home is in a foreign country and they are either a bona fide resident of a foreign country or countries for an uninterrupted period that includes an entire tax year, or are physically present in a foreign country or countries for at least 330 full days during any period of 12 consecutive months. If the taxpayer is temporarily away from his or her tax home in the United States on business (less than a year), the taxpayer may qualify to deduct away from home expenses (for travel, meals, and lodging ) but would not qualify for the foreign earned income exclusion.

I am a U.S. citizen living and working overseas. Can I have a tax credit on my U.S. taxes for the taxes I pay to the foreign country?

The foreign tax credit is intended to relieve U.S. taxpayers of the double tax burden when their foreign source income is taxed by both the United States and the foreign country from which the income is derived.

Generally, only income taxes paid or accrued to a foreign country or a U.S. possession qualify for the foreign tax credit. You can choose to take the amount of any qualified foreign taxes paid or accrued during the year as a foreign tax credit or as an itemized deduction.

To choose the foreign tax credit you must generally complete Form 1116 (PDF), Foreign Tax Credit and attach it to your Form 1040 (PDF). You may claim credit without attaching Form 1116 if all of your foreign source income is passive income (such as interest and dividends) reported to you on a payee statement and the total amount of qualifying foreign taxes you paid or accrued is not more than $300 ($600 in the case of a joint return) and is also reported to you on a payee statement. To choose the deduction, you must itemize deductions onForm 1040, Schedule A (PDF) .

You may not take either a credit or a deduction for taxes paid or accrued on income you exclude under the foreign earned income exclusion or the foreign housing exclusion. There is no double taxation in this situation because the income is not subject to U.S. tax.

How do I know if the U.S. has an income tax treaty with another country?

Publication 901, U.S. Tax Treaties , has information regarding United States tax treaties.

You can also locate the complete text of most current treaties at Income Tax Treaties or use our search engine with keywords "income tax treaties."

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