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Caution: DRAFT—NOT FOR FILING
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collection through the Federal Register process; for more info, click here.Publication 54
Cat. No. 14999E Contents
Tax Guide for
What's New .................. 2
Department
of the Reminders . . . . . . . . . . . . . . . . . . . 2
U.S. Citizens and
Treasury
Introduction . . . . . . . . . . . . . . . . . . 2
DRAFT AS OF
Internal
Revenue
Resident Aliens
Service Chapter 1. Filing Information . . ..... 3
Filing Requirements . . . . . . ..... 3
Nonresident Alien Spouse
Abroad Treated as a Resident . . .
Estimated Tax . . . . . . . . .
..... 7
..... 7
January 21, 2022
Other Forms You May Have To
File . . . . . . . . . . . . . . ..... 8
Chapter 2. Withholding Tax . . ...... 8
For use in preparing Income Tax Withholding . . ...... 8
2021 Returns
30% Flat Rate Withholding . ...... 9
Social Security and Medicare
Taxes . . . . . . . . . . . ...... 9
Chapter 3. Self-Employment Tax . . . . 10
Who Must Pay Self-Employment
Tax? . . . . . . . . . . . . . . . . . 10
Exemption From Dual-Country
Social Security and
Medicare Taxes . . . . . . . . . . 11
COVID-19 Emergency Relief for
Self-Employed Individuals . . . . . 11
Chapter 4. Foreign Earned Income
and Housing: Exclusion –
Deduction . . . . . . . . . . . . . . . 11
Who Qualifies for the Exclusions
and the Deduction? . . . . . . . . 11
Requirements . . . . . . . . . . . . . . 12
Waiver of Time Requirements . . . . 15
Foreign Earned Income
Exclusion . . . . . . . . . . . . . . 19
Foreign Housing Exclusion and
Deduction . . . . . . . . . . . . . . 21
Form 2555 . . . . . . . . . . . . . . . 23
Chapter 5. Deductions
and Credits . . . . . . . . . . . . . . 23
Items Related to Excluded
Income . . . . . . . . . . . . . . . 23
Contributions to Foreign
Charitable Organizations . . . . . 23
Contributions to Individual
Retirement Arrangements . . . . . 24
Taxes of Foreign Countries and
U.S. Territories . . . . . . . . . . . 24
How To Report Deductions . . . . . . 25
Chapter 6. Tax Treaty Benefits . . . . . 26
Purpose of Tax Treaties . . . . . . . . 26
Common Benefits . . . . . . . . . . . 26
Competent Authority Assistance . . . 27
Obtaining Copies of Tax Treaties . . . 27
Chapter 7. How To Get Tax Help . . . . 27
Index . . . . . . . . . . . . . . . . . . . . . 35
Get forms and other information faster and easier at:
• IRS.gov (English) • IRS.gov/Korean (한국어)
• IRS.gov/Spanish (Español) • IRS.gov/Russian (Pусский)
• IRS.gov/Chinese (中文) • IRS.gov/Vietnamese (Tiếng Việt)
Jan 18, 2022meet the bona fide residence test or physical photographs and calling 1-800-THE-LOST
Future Developments presence test for the foreign earned income ex-
clusion claimed on Form 2555. See COVID-19
(1-800-843-5678) if you recognize a child.
For the latest information about developments
related to Pub. 54, such as legislation enacted
Emergency Relief under Requirements in chap-
ter 4. Introduction
after it was published, go to IRS.gov/Pub54. Coronavirus tax relief for self-employed in- This publication discusses special tax rules for
dividuals paying estimated taxes. The Coro- U.S. citizens and resident aliens who work
navirus Aid, Relief, and Economic Security abroad or who have income earned in foreign
DRAFT AS OF
countries.
What's New (CARES) Act permitted self-employed individu-
als to defer the payment of 50% of the social If you are a U.S. citizen or resident alien,
security tax on net earnings from self-employ- your worldwide income is generally subject to
Standard deduction amount increased. For
ment imposed for the period beginning on U.S. income tax, regardless of where you are
2021, the standard deduction amount has been
March 27, 2020, and ending December 31, living. Also, you are subject to the same income
increased for all filers. The amounts are:
2020. For more information, see chapter 3, tax filing requirements that apply to U.S. citi-
• Single or Married filing sepa- zens or resident aliens living in the United
later.
January 21, 2022
rately—$12,550;
States. Expatriation tax provisions apply to U.S.
• Married filing jointly or Qualifying Credits for certain self-employed individu-
citizens who have renounced their citizenship
widow(er)—$25,100; and als. Refundable income tax credits are availa-
and long-term residents who have ended their
• Head of household—$18,800. ble for certain self-employed individuals impac-
residency. These provisions are discussed in
ted by COVID-19. For more information, see
Due to the increase in the standard de- chapter 4 of Pub. 519.
chapter 3. Also, see Form 7202 and its instruc-
duction, you may be required to file a
tions.
new Form W-4. For more information, Resident alien. A resident alien is an individ-
go to IRS.gov/Payments/Tax-Withholding. Denial or revocation of U.S. passport. The ual who is not a citizen or national of the United
IRS is required to notify the State Department of States and who meets either the green card test
Exclusion amount. The maximum foreign taxpayers certified as owing a seriously delin- or the substantial presence test for the calendar
earned income exclusion is adjusted annually quent tax debt. The State Department is gener- year.
for inflation. For 2021, the maximum exclusion ally prohibited from issuing or renewing a pass-
has increased to $108,700. See Limit on Ex- port to a taxpayer with seriously delinquent tax 1. Green card test. You are a U.S. resident
cludable Amount under Foreign Earned Income debt. if you were a lawful permanent resident of
Exclusion in chapter 4. the United States at any time during the
If you currently have a valid passport, the calendar year. This is known as the green
Housing expenses—base amount. The State Department may revoke your passport or card test because resident aliens hold im-
computation of the base housing amount (line limit your ability to travel. Additional information migrant visas (also known as green
32 of Form 2555) is tied to the maximum foreign on passport certification is available at IRS.gov/ cards).
earned income exclusion. The amount is 16% Passports.
of the exclusion amount (figured on a daily ba- 2. Substantial presence test. You are con-
Individual taxpayer identification number
sis), multiplied by the number of days in your sidered a U.S. resident if you meet the
(ITIN) renewal. An ITIN for a nonresident alien
qualifying period that fall within your 2021 tax substantial presence test for the calendar
spouse or dependent used on a prior year in-
year. For 2021, this amount is $47.64 per day year. To meet this test, you must be physi-
come tax return may require renewal. For more
($17,392 per year). See Housing Amount under cally present in the United States on at
information, go to IRS.gov/ITIN.
Foreign Housing Exclusion and Deduction in least:
chapter 4. Figuring tax on income not excluded. If you
claim the foreign earned income exclusion, the a. 31 days during the current calendar
Housing expenses—maximum amount. The year; and
amount of qualified housing expenses eligible housing exclusion, or both, you must figure the
for the housing exclusion and housing deduc- tax on your nonexcluded income using the tax b. A total of 183 days during the current
tion has changed for some locations. See Limit rates that would have applied had you not year and the 2 preceding years,
on housing expenses under Foreign Housing claimed the exclusions. See the Instructions for counting all the days of physical pres-
Exclusion and Deduction in chapter 4. Form 1040 and complete the Foreign Earned ence in the current year, but only 1/3
Income Tax Worksheet to figure the amount of the number of days of presence in the
Self-employment tax rate. For 2021, the tax to enter on Form 1040 or 1040-SR, line 16. first preceding year, and only 1/6 the
maximum amount of net earnings from self-em- If you must attach Form 6251, Alternative Mini- number of days in the second preced-
ployment that is subject to the social security mum Tax—Individuals, to your return, use the ing year.
part of the self-employment tax has increased Foreign Earned Income Tax Worksheet provi-
to $142,800. All net earnings are subject to the ded in the Instructions for Form 6251. Example. You were physically present in
Medicare part of the tax. For more information,
Moving expenses suspended. The deduc- the United States for 120 days in each of the
see chapter 3.
tion for moving expenses is suspended unless years 2019, 2020, and 2021. To determine if
IRA limitations for 2021. You may be able to you meet the substantial presence test for
you are a member of the U.S. Armed Forces
take an IRA deduction if you were covered by a 2021, count the full 120 days of presence in
who moves pursuant to a military order and inci-
retirement plan and your 2021 modified adjus- 2021, 40 days in 2020 (1/3 of 120), and 20 days
dent to a permanent change of station.
ted gross income (MAGI) is less than $76,000 in 2019 (1/6 of 120). Because the total for the
($125,000 if married filing jointly or a qualifying Tax home for individuals serving in a com- 3-year period is 180 days, you are not consid-
widow(er)). These limits are increased from bat zone. New rules apply for certain individu- ered a resident under the substantial presence
2020. If your spouse was covered by a retire- als serving in a combat zone in support of the test for 2021.
ment plan, but you were not, you may be able to U.S. Armed Forces. For more information, see
Even if you do not meet either of these tests,
take an IRA deduction if your 2021 MAGI is less Tax Home in chapter 4.
you may be able to choose to be treated as a
than $208,000. See the Instructions for Form Form 8938. If you had foreign financial assets U.S. resident for part of the year under the
1040 for details and exceptions. in 2021, you may have to file Form 8938 with first-year choice test, discussed in Pub. 519.
your return. See Form 8938 in chapter 1. For more information on resident and non-
Photographs of missing children. The IRS is resident status, the tests for residence, and the
Reminders a proud partner with the National Center for
Missing & Exploited Children® (NCMEC). Pho-
exceptions to them, see Pub. 519.
COVID-19 waiver of time requirements. Due tographs of missing children selected by the Filing information. Chapter 1 contains gen-
to the global health emergency caused by Center may appear in this publication on pages eral filing information, such as:
COVID-19, you may be eligible for a waiver of that would otherwise be blank. You can help • Whether you must file a U.S. tax return,
the minimum time requirements necessary to bring these children home by looking at the • When and where to file your return,
Page 2 Publication 54 (2021)• How to report your income if it is paid in Although we can’t respond individually to Form (and Instructions)
foreign currency, each comment received, we do appreciate your
1040-ES Estimated Tax for Individuals
• How to treat a nonresident alien spouse as feedback and will consider your comments and
1040-ES
a U.S. resident, and suggestions as we revise our tax forms, instruc- 1040-X Amended U.S. Individual Income
• Whether you must pay estimated tax. tions, and publications. Do not send tax ques-
1040-X
Tax Return
tions, tax returns, or payments to the above ad-
Withholding tax. Chapter 2 discusses the dress. 2350 Application for Extension of Time To
2350
withholding of income, social security, and File U.S. Income Tax Return
Getting answers to your tax questions.
DRAFT AS OF
Medicare taxes from the pay of U.S. citizens 2555 Foreign Earned Income
and resident aliens. If you have a tax question not answered by this
2555
publication or the How To Get Tax Help section 4868 Application for Automatic Extension
at the end of this publication, go to the IRS In-
4868
Self-employment tax. Chapter 3 discusses of Time To File U.S. Individual
who must pay self-employment tax. teractive Tax Assistant page at IRS.gov/ Income Tax Return
Help/ITA where you can find topics by using the
search feature or viewing the categories listed. 8822 Change of Address
Foreign earned income exclusion and
8822
January 21, 2022
housing exclusion and deduction. Chap- All of these forms, instructions, and publications
Getting tax forms, instructions, and pub-
ter 4 discusses income tax benefits that apply if can be downloaded from IRS.gov. See chap-
lications. Visit IRS.gov/Forms to download
you meet certain requirements while living ter 7 for information about getting these publica-
current and prior-year forms, instructions, and
abroad. You may qualify to treat up to $108,700 tions and forms.
publications.
of your income as not taxable by the United
States. You may also be able to either deduct Ordering tax forms, instructions, and
part of your housing expenses from your in- publications. Go to IRS.gov/OrderForms to Filing Requirements
come or treat a limited amount of income used order current forms, instructions, and publica-
for housing expenses as not taxable by the Uni- tions; call 800-829-3676 to order prior-year If you are a U.S. citizen or resident alien, the
ted States. These benefits are called the foreign forms and instructions. The IRS will process rules for filing income, estate, and gift tax re-
earned income exclusion and the foreign hous- your order for forms and publications as soon turns and for paying estimated tax are generally
ing deduction and exclusion. as possible. Do not resubmit requests you’ve the same whether you are in the United States
To qualify for either of the exclusions or the already sent us. You can get forms and publica- or abroad.
deduction, you must have a tax home in a for- tions faster online.
eign country and earn income from personal Your income, filing status, and age generally
services performed in a foreign country. These determine whether you must file an income tax
rules are explained in chapter 4. return. Generally, you must file a return for 2021
If you are going to exclude or deduct your in- if your gross income from worldwide sources is
come as discussed above, you must file Form at least the amount shown for your filing status
2555. in the following table.
Exemptions, deductions, and credits.
1.
Filing Status* Amount
Chapter 5 discusses exemptions, deductions, Single . . . . . . . . . . . . . . . . . . . . . . . . . $12,550
and credits you may be able to claim on your re-
turn. These are generally the same as if you Filing 65 or older . . . . . . . . . . . . . . . . . . .
Head of household . . . . . . . . . . . . . . .
$14,250
$18,800
were living in the United States. However, if you 65 or older . . . . . . . . . . . . . . . . . . . $20,500
choose to exclude foreign earned income or
housing amounts, you can’t deduct or exclude
Information Qualifying widow(er) . . . . . . . . . . . . .
65 or older . . . . . . . . . . . . . . . . . . .
$25,100
$26,450
any item or take a credit for any item that is rela- Married filing jointly . . . . . . . . . . . . . . $25,100
ted to the amounts you exclude. Among the Topics Not living with spouse at end of
topics discussed in chapter 5 are: This chapter discusses: year . . . . . . . . . . . . . . . . . . . . . . . . $5
• Contributions to foreign organizations, One spouse 65 or older . . . . . . . . . $26,450
• Contributions to individual retirement ar- Both spouses 65 or older . . . . . . . $27,800
rangements (IRAs), and • Whether you have to file a return,
• When to file your return and pay any tax Married filing separately . . . . . . . . . . . $5
• Foreign taxes.
due, * If you are the dependent of another taxpayer, see
Tax treaty benefits. Chapter 6 discusses • How to treat foreign currency, the Instructions for Form 1040 (and 1040-SR) for
some benefits that are common to most tax • How to file electronically, more information on whether you must file a return.
treaties and explains how to get help if you think • Where to file your return,
you are not receiving a treaty benefit to which • When you can treat your nonresident alien
you are entitled. It also explains how to get cop- spouse as a resident, and Note. If you are married and entitled to file
ies of tax treaties. • When you may have to make estimated jointly, use the married filing jointly threshold
tax payments. unless your spouse has filed a separate return
How to get tax help. Chapter 7 is an explana- or another taxpayer claims your spouse as a
tion of how to get information and assistance Useful Items dependent.
from the IRS. You may want to see:
Gross income. This includes all income you
Questions and answers. Frequently asked receive in the form of money, goods, property,
Publication
questions and answers to those questions are and services that is not exempt from tax.
presented in the back of the publication. 3 Armed Forces' Tax Guide For purposes of determining whether you
must file a return, gross income includes any in-
3
Comments and suggestions. We welcome 501 Dependents, Standard Deduction, come that you can exclude as foreign earned
your comments about this publication and your income or as a foreign housing amount.
501
and Filing Information
suggestions for future editions.
505 Tax Withholding and Estimated Tax If you are self-employed, your gross income
You can send us comments through
includes the amount on Part I, line 7, of
505
IRS.gov/FormComments, Or, you can write to
519 U.S. Tax Guide for Aliens Schedule C (Form 1040).
the Internal Revenue Service, Tax Forms and 519
Publications, 1111 Constitution Ave. NW,
970 Tax Benefits for Education Self-employed individuals. If your net earn-
IR-6526, Washington, DC 20224.
970
ings from self-employment are $400 or more,
Chapter 1 Filing Information Page 3you must file a return even if your gross income This publication discusses four extensions: provide certain information from your tax
is below the amount listed for your filing status an automatic 2-month extension, an automatic return for 2020. If you wish to make a pay-
in the table shown earlier. Net earnings from 6-month extension, an additional extension for ment by electronic funds withdrawal, see
self-employment are defined in Pub. 334. taxpayers out of the country, and an extension the instructions for Form 4868. If you e-file
of time to meet residency tests. If you served in Form 4868, do not also send a paper
65 or older. You are considered to be age 65 a combat zone or qualified hazardous duty Form 4868 unless you also mail a check or
on the day before your 65th birthday. For exam- area, see Pub. 3 for a discussion of extensions money order for your tax payment.
ple, if your 65th birthday is on January 1, 2022, of deadlines.
2. E-file and pay by credit or debit card.
DRAFT AS OF
you are considered 65 for 2021.
You can get an extension by paying part or
Automatic 2-month extension. You are al-
Residents of U.S. territories. If you are (or all of your estimate of tax due by using a
lowed an automatic 2-month extension to file
were) a bona fide resident of a U.S. territory, credit or debit card. You can do this by
your return and pay federal income tax if you
you may be required to file Form 8898. See the phone or over the Internet. If you do this,
are a U.S. citizen or resident alien, and on the
instructions for the form, available at IRS.gov/ you do not file Form 4868. For more infor-
regular due date of your return:
mation, see the instructions for your tax re-
Form8898, for more information. • You are living outside the United States
January 21, 2022
turn.
and Puerto Rico and your main place of
When To File and Pay business or post of duty is outside the Uni-
ted States and Puerto Rico, or
When to file. Generally, you must request
the 6-month extension by the regular due date
If you file on a calendar year basis, the due date • You are in military or naval service on duty of your return.
outside the United States and Puerto Rico.
for filing your return is April 15 of the following Previous 2-month extension. If you can-
year. If you file on a fiscal year basis (a year If you use a calendar year, the regular due not file your return within the automatic 2-month
ending on the last day of any month except De- date of your return is April 15. Even if you are al- extension period, you can generally get an ad-
cember), the due date is 3 months and 15 days lowed an extension, you will have to pay inter- ditional 4 months to file your return, for a total of
after the close of your fiscal year. In general, the est on any tax not paid by the regular due date 6 months. The 2-month period and the 6-month
tax shown on your return should be paid by the of your return. period start at the same time. You have to re-
due date of the return, without regard to any ex- quest the additional 4 months by the new due
tension of time for filing the return. Married taxpayers. If you file a joint return,
either you or your spouse can qualify for the au- date allowed by the 2-month extension.
When the due date for doing any act for tax tomatic extension. If you and your spouse file The additional 4 months of time to file (un-
purposes—filing a return, paying taxes, etc.— separate returns, this automatic extension ap- like the original 2-month extension) is not an ex-
falls on a Saturday, Sunday, or legal holiday, plies only to the spouse who qualifies for it. tension of time to pay. You must make an accu-
the due date is delayed until the next business rate estimate of your tax based on the
day. How to get the extension. To use this au- information available to you. If you find you can-
tomatic 2-month extension, you must attach a not pay the full amount due with Form 4868,
A tax return delivered by the U.S. mail statement to your return explaining which of the you can still get the extension. You will owe in-
! or a designated delivery service that is two situations listed earlier qualified you for the terest on the unpaid amount from the original
CAUTION postmarked or dated by the delivery
extension. due date of the return.
service on or before the due date is considered You may also be charged a penalty for pay-
to have been filed on or before that date. Go to Automatic 6-month extension. If you are not ing the tax late unless you have reasonable
IRS.gov/PDS for the current list of designated able to file your return by the due date, you can cause for not paying your tax when due. Penal-
services. generally get an automatic 6-month extension ties for paying the tax late are assessed from
of time to file (but not of time to pay). To get this the original due date of your return, unless you
Direct Pay option. You can pay online with a automatic extension, you must file a paper qualify for the automatic 2-month extension. In
direct transfer from your bank account using Di- Form 4868 or use IRS e-file (electronic filing). that situation, penalties for paying late are as-
rect Pay, the Electronic Federal Tax Payment For more information about filing electronically, sessed from the extended due date of the pay-
System (EFTPS), or by debit or credit card. You see E-file options, later. ment (June 15 for calendar year taxpayers).
can also pay by phone using EFTPS or by debit The form must show your properly estima-
or credit card. For more information, go to ted tax liability based on the information availa- Additional extension of time for taxpayers
IRS.gov/Payments. ble to you. out of the country. In addition to the 6-month
extension, taxpayers who are out of the country
You may not be eligible. You cannot
Foreign wire transfers. If you have a U.S. can request a discretionary 2-month additional
! use the automatic 6-month extension
bank account, you can use: extension of time to file their returns (to Decem-
of time to file if:
• EFTPS, or ber 15 for calendar year taxpayers).
CAUTION
• Federal Tax Collection Service (same-day • You want the IRS to figure your tax, or To request this extension, you must send
wire transfer). • You are under a court order to file by the the IRS a letter explaining the reasons why you
If you do not have a U.S. bank account, ask if regular due date. need the additional 2 months. Send the letter by
your financial institution has a U.S. affiliate that the extended due date (October 15 for calendar
can help you make same-day wire transfers. E-file options. You can use e-file to get an year taxpayers) to the following address:
For more information, visit EFTPS.gov. Also, extension of time to file. You can either file
Department of the Treasury
see the International Guide for Paying Federal Form 4868 electronically or you can pay part or
Internal Revenue Service
Taxes Electronically, available at all of your estimate of tax due using a credit or
Austin, TX 73301-0045
download.EFTPS.gov/ debit card or direct transfer. You can do this by
International_Taxpayer_Fact_Sheet_1010.pdf. phone or over the Internet. You don’t file Form
4868. You will not receive any notification from the
First, complete Form 4868 to use as a work- IRS unless your request is denied.
Extensions
sheet. If you think you may owe tax when you The discretionary 2-month additional exten-
You can get an extension of time to file your re- file your return, use Part II of the form to esti- sion is not available to taxpayers who have an
turn. In some circumstances, you can also get mate your balance due. approved extension of time to file on Form
an extension of time to file and pay any tax due. Then, do one of the following. 2350, discussed next.
1. E-file Form 4868. You can use a tax soft- Extension of time to meet residency tests.
However, if you pay the tax due after the ware package with your personal com-
regular due date, interest will be charged from You cannot generally get an extension of more
puter or a tax professional to file Form than 6 months. However, if you are outside the
the regular due date until the date the tax is 4868 electronically. You will need to
paid.
Page 4 Chapter 1 Filing InformationUnited States and meet certain requirements, Foreign Currency with your tax return. For this information return,
you may be able to get a longer extension. you should use another Form 1040 or 1040-SR
You can get an extension of more than 6 You must express the amounts you report on labeled “Report of Deferrable Foreign Income,
months to file your tax return if you need the your U.S. tax return in U.S. dollars. If you re- pursuant to Rev. Rul. 74-351.” You must de-
time to meet either the bona fide residence test ceive all or part of your income, or pay some or clare on the information return that you will in-
or the physical presence test to qualify for either all of your expenses, in foreign currency, you clude the deferrable income in your taxable in-
the foreign earned income exclusion or the for- must translate the foreign currency into U.S. come for the year that it becomes unblocked.
eign housing exclusion or deduction. The tests, dollars. How you do this depends on your func- You must also state that you waive any right to
DRAFT AS OF
the exclusions, and the deduction are explained tional currency. Your functional currency is gen- claim that the deferrable income was includible
in chapter 4. erally the U.S. dollar unless you are required to in your income for any earlier year.
You should request an extension if all three use the currency of a foreign country.
of the following apply. You must report your income on your infor-
You must make all federal income tax deter- mation return using the foreign currency in
1. You are a U.S. citizen or resident alien. minations in your functional currency. The U.S. which you received that income. If you have
2. You expect to meet either the bona fide dollar is the functional currency for all taxpayers blocked income from more than one foreign
January 21, 2022
residence test or the physical presence except some qualified business units (QBUs). A country, include a separate information return
test, but not until after your tax return is QBU is a separate and clearly identified unit of for each country.
due. a trade or business that maintains separate
books and records. Income becomes unblocked and reportable
3. Your tax home is in a foreign country (or
countries) throughout your period of bona Even if you have a QBU, your functional cur- for tax purposes when it becomes convertible,
fide residence or physical presence, rency is the dollar if any of the following apply. or when it is converted, into U.S. dollars or into
whichever applies. • You conduct the business in U.S. dollars. other money or property that is convertible into
• The principal place of business is located U.S. currency. Also, if you use blocked income
If you are granted an extension, it will gener- in the United States. for your personal expenses or dispose of it by
ally be to 30 days beyond the date on which • You choose to or are required to use the gift, bequest, or devise, you must treat it as un-
you can reasonably expect to qualify for an ex- U.S. dollar as your functional currency. blocked and reportable.
clusion or deduction under either the bona fide • The business books and records are not
residence test or the physical presence test. kept in the currency of the economic envi- If you have received blocked income on
How to get an extension. To obtain an ex- ronment in which a significant part of the which you have not paid tax, you should check
tension, file Form 2350 either by giving it to a lo- business activities is conducted. to see whether that income is still blocked. If it is
cal IRS representative or other IRS employee or not, you should take immediate steps to pay tax
Make all income tax determinations in your on it, file a declaration or amended declaration
by mailing it to: functional currency. If your functional currency of estimated tax, and include the income on
is the U.S. dollar, you must immediately trans- your tax return for the year in which the income
Department of the Treasury
late into U.S. dollars all items of income, ex- became unblocked.
Internal Revenue Service
pense, etc. (including taxes), that you receive,
Austin, TX 73301-0045
pay, or accrue in a foreign currency and that will If you choose to postpone reporting blocked
affect computation of your income tax. Use the income and in a later tax year you wish to begin
You must file Form 2350 by the due date for exchange rate prevailing when you receive,
filing your return. Generally, if both your tax including it in gross income although it is still
pay, or accrue the item. You can generally get blocked, you must obtain the permission of the
home and your abode are outside the United exchange rates from banks and U.S. Embas-
States and Puerto Rico on the regular due date IRS to do so. To apply for permission, file Form
sies. You may also need to recognize foreign 3115. You must also request permission from
of your return and you file on a calendar year currency gain or loss on certain foreign cur-
basis, the due date for filing your return is June the IRS on Form 3115 if you have not chosen to
rency transactions. See section 988 and the defer the reporting of blocked income in the
15. regulations thereunder. past, but now wish to begin reporting blocked
What if tests are not met. If you obtain an If you have a QBU with a functional currency income under the deferred method. See the
extension and unforeseen events make it im- that is not the U.S. dollar, make all income de- Instructions for Form 3115 for information on
possible for you to meet either the bona fide terminations in the QBU's functional currency, changing your accounting method.
residence test or the physical presence test, and, where appropriate, translate such income
you should file your income tax return as soon or loss at the appropriate exchange rate. Fulbright Grant
as possible because you must pay interest on
any tax due after the regular due date of the re- All income must be reported in U.S. dollars. In
turn (even though an extension was granted). Blocked Income
most cases, the tax must also be paid in U.S.
You should make any request for an You must generally report your foreign income dollars. If, however, at least 70% of your Ful-
extension early, so that if it is denied in terms of U.S. dollars and, with one exception bright grant has been paid in nonconvertible for-
!
CAUTION you still can file your return on time. (see Fulbright Grant, later), you must pay taxes eign currency (blocked income), you can use
Otherwise, if you file late and additional tax is due on it in U.S. dollars. the currency of the host country to pay the part
due, you may be subject to a penalty. of the U.S. tax that is based on the blocked in-
If, because of restrictions in a foreign coun- come.
Return filed before test is met. If you file try, your income is not readily convertible into
a return before you meet the bona fide resi- U.S. dollars or into other money or property that Paying U.S. tax in foreign currency. To
dence test or the physical presence test, you is readily convertible into U.S. dollars, your in- qualify for this method of payment, you must
must include all income from both U.S. and for- come is “blocked” or “deferrable” income. You prepare a statement that shows the following in-
eign sources and pay the tax on that income. If can report this income in one of the following formation.
you later meet either of the tests, you can claim two ways. • You were a Fulbright grantee and were
paid in nonconvertible foreign currency.
the foreign earned income exclusion, the for- • Report the income and pay your federal in-
eign housing exclusion, or the foreign housing come tax with U.S. dollars that you have in • The total grant you received during the
deduction on Form 1040-X. the United States or in some other country. year and the amount you received in non-
convertible foreign currency.
• Postpone the reporting of the income until
it becomes unblocked. • At least 70% of the grant was paid in non-
convertible foreign currency.
If you choose to postpone the reporting of The statement must be certified by the U.S. ed-
the income, you must file an information return ucational foundation or commission paying the
Chapter 1 Filing Information Page 5grant or other person having control of grant Deposit receipt. Upon accepting the for- ing your entire tax year, you are generally not
payments to you. eign currency, the disbursing officer will give required to file a U.S. return. However, you
You should prepare at least two copies of you a receipt in duplicate. The original of this re- must file a return with the USVI.
this statement. Attach one copy to your Form ceipt (showing the amount of foreign currency
Send your return to:
1040 or 1040-SR and keep the other copy for deposited and its equivalent in U.S. dollars)
identification purposes when you make a tax should be attached to your Form 1040 or
Virgin Islands Bureau
deposit of nonconvertible foreign currency. 1040-SR or payment voucher from Form 1040-
of Internal Revenue
ES. Keep the copy for your records.
Figuring actual tax. When you prepare 6115 Estate Smith Bay
DRAFT AS OF
your income tax return, you may owe tax or the St. Thomas, Virgin Islands 00802
entire liability may have been satisfied with your Does My Return Have To Be
estimated tax payments. If you owe tax, figure on Paper?
the part due to (and payable in) the nonconver- Non-USVI resident with USVI income. If you
tible foreign currency by using the following for- IRS e-file (electronic filing) is the fastest, easi- are a U.S. citizen or resident alien and you have
mula. est, and most convenient way to file your in- income from sources in the USVI or income ef-
January 21, 2022
come tax return electronically. fectively connected with the conduct of a trade
Adjusted IRS e-file offers accurate, safe, and fast al- or business in the USVI, and you are not a bona
gross ternatives to filing on paper. IRS computers fide resident of the USVI during your entire tax
income that quickly and automatically check for errors or year, you must file identical tax returns with the
is blocked other missing information. United States and the USVI. File the original re-
Tax on
income Total
× = blocked turn with the United States and file a signed
U.S. tax Note. Returns with a foreign address can be
Total income copy of the U.S. return (including all attach-
adjusted e-filed. ments, forms, and schedules) with the Virgin Is-
gross lands Bureau of Internal Revenue.
income How to e-file. There are three ways you can You must complete Form 8689 and attach a
e-file. copy to both your U.S. return and your USVI re-
You must attach all of the following to the re- turn. You should file your U.S. return with the
turn. 1. Use your personal computer.
address listed under Where To File, earlier.
• A copy of the certified statement discussed 2. Use a volunteer. Many programs offering
See Pub. 570 for information about filing
earlier. free tax help can e-file your return.
U.S. Virgin Islands returns.
• A detailed statement showing the alloca- 3. Use a tax professional. Most tax professio-
tion of tax from amounts received in for-
nals can e-file your return. Resident of Guam. If you are a bona fide resi-
eign currency and the rates of exchange
dent of Guam during your entire tax year, you
used in determining your tax liability in U.S. These methods are explained in detail in the in- should file a return with Guam.
dollars. structions for your tax return.
• The original deposit receipt for any bal- Send your return to:
ance of tax due that you paid in noncon-
vertible foreign currency. Where To File Department of Revenue and Taxation
Government of Guam
Figuring estimated tax on nonconverti- If any of the following situations apply to you, do P.O. Box 23607
ble foreign currency. If you are liable for esti- not file your return with the service center listed GMF, GU 96921
mated tax (discussed later), figure the amount for your home state.
you can pay to the IRS in nonconvertible foreign • You claim the foreign earned income ex-
currency using the following formula. clusion. However, if you have income from sources
• You claim the foreign housing exclusion or within Guam and you are a U.S. citizen or resi-
Adjusted deduction. dent alien, but not a bona fide resident of Guam
gross income • You live in a foreign country. during the entire tax year, you should file a re-
that is Instead, use one of the following special ad- turn with the United States. Send your return to
Estimated
blocked Total
tax on dresses. If you are not enclosing a check or the address listed under Where To File, earlier.
income × estimated U.S. = money order, file your return with: See Pub. 570 for information about filing
blocked
tax Guam returns.
Total income
adjusted Department of the Treasury
gross income Internal Revenue Service Resident of the Commonwealth of the
Austin, TX 73301-0215 USA Northern Mariana Islands (CNMI). If you are
If you must pay your host country income tax a bona fide resident of the CNMI during your
on your grant, subtract any estimated foreign If you are enclosing a check or money order, file entire tax year, you should file a return with the
tax credit that applies to your grant from the es- your return with: CNMI.
timated tax on the blocked income.
Send your return to:
Internal Revenue Service
Deposit of foreign currency with disbursing P.O. Box 1303 Division of Revenue and Taxation
officer. Once you have determined the amount Charlotte, NC 28201-1303 USA Commonwealth of the Northern Mariana
of the actual tax or estimated tax that you can
Islands
pay in nonconvertible foreign currency, deposit
If you do not know where your legal resi- P.O. Box 5234, CHRB
that amount with the disbursing officer of the
dence is and you do not have a principal place Saipan, MP 96950
Department of State in the foreign country in
which the foundation or commission paying the of business in the United States, you can file
grant is located. with the appropriate address listed above.
However, if you have income from sources
However, you should not file with the ad- within the CNMI and you are a U.S. citizen or
Estimated tax installments. You can ei- dresses listed above if you are a bona fide resi-
ther deposit the full estimated tax amount be- resident alien, but not a bona fide resident of
dent of the U.S. Virgin Islands, Guam, or the the CNMI during the entire tax year, you should
fore the first installment due date or make four Commonwealth of the Northern Mariana Islands
equal payments before the installment due file a return with the United States. Send your
during your entire tax year. return to the address listed under Where To
dates. See Estimated Tax, later.
File, earlier.
Resident of the U.S. Virgin Islands (USVI).
If you are a bona fide resident of the USVI dur-
Page 6 Chapter 1 Filing InformationSee Pub. 570 for information about filing If you do not choose to treat your non- Suspending the Choice
CNMI returns. TIP resident alien spouse as a U.S. resi-
dent, you may be able to use head of The choice to be treated as a resident alien
Note. Puerto Rico and American Samoa have household filing status. To use this status, you does not apply to any later tax year if neither of
their own separate and independent tax sys- must pay more than half the cost of maintaining you is a U.S. citizen or resident alien at any time
tems. Although their tax laws are modeled on a household for certain dependents or relatives during the later tax year.
the U.S. Internal Revenue Code, there are cer- other than your nonresident alien spouse. For
tain differences in law and tax rates. See Pub. more information, see Pub. 501. Example. Dick Brown was a resident alien
DRAFT AS OF
570 for information about tax obligations in Pu- on December 31, 2018, and married to Judy, a
erto Rico and American Samoa. nonresident alien. They chose to treat Judy as a
Social Security Number resident alien and filed joint income tax returns
(SSN) for 2018 and 2019. On January 10, 2020, Dick
Nonresident Alien became a nonresident alien. Judy had re-
Spouse Treated as a If you choose to treat your nonresident alien mained a nonresident alien. Because Dick was
a resident alien during part of 2020, Dick and
January 21, 2022
spouse as a U.S. resident, your spouse must
Resident have either an SSN or an individual taxpayer Judy can file joint or separate returns for that
year. Neither Dick nor Judy was a resident alien
identification number (ITIN).
If, at the end of your tax year, you are married at any time during 2021 and their choice is sus-
and one spouse is a U.S. citizen or a resident To get an SSN for a nonresident alien pended for that year. For 2021, both are treated
alien and the other is a nonresident alien, you spouse, apply at an office of the U.S. Social Se- as nonresident aliens. If Dick becomes a resi-
can choose to treat the nonresident as a U.S. curity Administration (SSA) or U.S. consulate. dent alien again in 2022, their choice is no lon-
resident. This election includes situations in You must complete Form SS-5, available at ger suspended and both are treated as resident
which one of you is a nonresident alien at the SSA.gov or by calling 800-772-1213. You must aliens.
beginning of the tax year and a resident alien at also provide original or certified copies of docu-
the end of the year and the other is a nonresi- ments to verify that spouse's age, identity, and Ending the Choice
dent alien at the end of the year. citizenship.
Once made, the choice to be treated as a resi-
If you make this choice, the following two If the nonresident alien spouse is not eligible dent applies to all later years unless suspended
rules apply. to get an SSN, he or she can file Form W-7 with (as explained earlier) or ended in one of the
• You and your spouse are treated, for in- the IRS to apply for an ITIN when you timely file ways shown in Table 1-1.
come tax purposes and purposes of wage the joint return on which you choose to treat
withholding, as U.S. residents for the tax your nonresident alien spouse as a U.S. resi- If the choice is ended for any of the reasons
year in which the election is made and all dent. Follow the Instructions for Form W-7 to listed in Table 1-1, neither spouse can make a
future tax years until the election is termi- submit your Form W-7 and file your return. choice in any later tax year.
nated or suspended because neither
spouse is a citizen or resident of the United Individual taxpayer identification number
States at any time during a year. (ITIN) renewal. Your spouse may need to re- Estimated Tax
• You must file a joint income tax return for new his or her ITIN. For more information, go to
the year you make the choice and attach a IRS.gov/ITIN. The requirements for determining who must pay
statement as described under How To estimated tax are the same for a U.S. citizen or
Make the Choice, later.
How To Make the Choice resident abroad as for a taxpayer in the United
This means that neither of you can claim under States. For current instructions on making esti-
any tax treaty not to be a U.S. resident for a tax mated tax payments, see Form 1040-ES.
Attach a statement, signed by both spouses, to
year for which the choice is in effect.
your joint return for the first tax year for which If you had a tax liability for 2021, you may
the choice applies. It should contain the follow- have to pay estimated tax for 2022. Generally,
Example 1. Pat Smith, a U.S. citizen, is
ing. you must make estimated tax payments for
married to Norman, a nonresident alien. Pat
and Norman make the choice to treat Norman
• A declaration that one spouse was a non- 2022 if you expect to owe at least $1,000 in tax
resident alien and the other spouse a U.S. for 2022 after subtracting your withholding and
as a resident alien by attaching a statement to
citizen or resident alien on the last day of credits and you expect your withholding and
their joint return. Pat and Norman must report
your tax year and that you choose to be credits to be less than the smaller of:
their worldwide income for the year they make
treated as U.S. residents for the entire tax
the choice and for all later years unless the 1. 90% of the tax to be shown on your 2022
year.
choice is ended or suspended. Although Pat tax return, or
and Norman must file a joint return for the year
• The name, address, and SSN (or ITIN) of
each spouse. (If one spouse died, include 2. 100% of the tax shown on your 2021 tax
they make the choice, they can file either joint
the name and address of the person mak- return. (The return must cover all 12
or separate returns for later years.
ing the choice for the deceased spouse.) months.)
Example 2. When Bob and Sharon Wil- If less than two-thirds of your gross income for
You generally make this choice when you
liams got married, both were nonresident ali- 2021 and 2022 is from farming or fishing and
file your joint return. However, you can also
ens. In June of last year, Bob became a resi- your adjusted gross income for 2021 is more
make the choice by filing a joint amended return
dent alien and remained a resident for the rest than $150,000 ($75,000 if you are married and
on Form 1040-X. Attach Form 1040 or 1040-SR
of the year. Bob and Sharon both choose to be file separately), substitute 110% for 100% in (2)
and enter “Amended” across the top of the
treated as resident aliens by attaching a state- earlier. See Pub. 505 for more information.
amended return. If you make the choice with an
ment to their joint return for last year. Bob and
amended return, you and your spouse must
Sharon must report their worldwide income for The first installment of estimated tax is due
also amend any returns that you may have filed
last year and all later years unless the choice is on April 15, 2022. For more information about
after the year for which you made the choice.
ended or suspended. Bob and Sharon must file figuring your estimated tax, see Pub. 505.
a joint return for last year, but they can file either
You must generally file the amended joint
joint or separate returns for later years. Foreign earned income exclusion. When
return within 3 years from the date you filed
figuring your estimated gross income, subtract
your original U.S. income tax return or 2 years
amounts you expect to exclude under the for-
from the date you paid your income tax for that
eign earned income exclusion and the foreign
year, whichever is later.
housing exclusion. In addition, you can reduce
your income by your estimated foreign housing
Chapter 1 Filing Information Page 7deduction. However, you must estimate tax on rency or monetary instruments must also file
your nonexcluded income using the tax rates FinCEN Form 105.
that will apply had you not excluded the income.
If the actual amount of the exclusion or deduc-
More information about the filing of FinCEN
Form 105 can be found in the instructions on
2.
tion is less than you estimate, you may have to the back of the form, available at fincen.gov/
pay a penalty for underpayment of estimated sites/default/files/shared/fin105_cmir.pdf.
tax.
For more information, see the Instructions Form 8938. You must file Form 8938 to report
Withholding Tax
DRAFT AS OF
for Form 2555. the ownership of specified foreign financial as-
sets if the total value of those assets exceeds Topics
an applicable threshold amount (the “reporting This chapter discusses:
Other Forms You May threshold”). The reporting threshold varies de-
pending on whether you live in the United
Have To File States, are married, or file a joint income tax re-
• Withholding income tax from the pay of
U.S. citizens,
turn with your spouse. Specified foreign finan-
• Withholding tax at a flat rate, and
January 21, 2022
FinCEN Form 114. You must file FinCEN cial assets include any financial account main-
Form 114, Report of Foreign Bank and Finan- tained by a foreign financial institution and, to
• Social security and Medicare taxes.
cial Accounts (FBAR), if you had any financial the extent held for investment, any stock, secur-
interest in, or signature or other authority over, a ities, or any other interest in a foreign entity and Useful Items
bank, securities, or other financial account in a any financial instrument or contract with an is- You may want to see:
foreign country. You do not need to file the re- suer or counterparty that is not a U.S. person.
port if the assets are with a U.S. military bank- You may have to pay penalties if you are re- Publication
ing facility operated by a financial institution or if quired to file Form 8938 and fail to do so, or if
505 Tax Withholding and Estimated Tax
the combined assets in the account(s) are you have an understatement of tax due to any
505
$10,000 or less during the entire year. transaction involving an undisclosed foreign fi- Form (and Instructions)
FinCEN Form 114 is filed electronically with nancial asset.
the Financial Crimes Enforcement Network More information about the filing of Form 673 Statement for Claiming Exemption
673
(FinCEN). The due date for FBAR filings is April 8938 can be found in the separate Instructions From Withholding on Foreign Earned
15. FinCEN will grant an automatic extension to for Form 8938. Income Eligible for the Exclusion
October 15 if you are unable to meet the FBAR Provided by Section 911
annual due date of April 15. The FBAR due date W-4 Employee's Withholding Allowance
for foreign financial accounts maintained during
W-4
Certificate
calendar year 2021 is April 15, 2022, to coin-
cide with the filing date for the 2021 Form 1040 W-9 Request for Taxpayer Identification
W-9
or 1040-SR. For more information, go to Number and Certification
bsaefiling.fincen.treas.gov/main.html. See chapter 7 for information about getting this
publication and these forms.
FinCEN Form 105. You must file FinCEN
Form 105, Report of International Transporta-
tion of Currency or Monetary Instruments, if you
physically transport, mail, ship, or cause to be Income Tax Withholding
physically transported, mailed, or shipped, into
or out of the United States, currency or other U.S. employers must generally withhold U.S. in-
monetary instruments totaling more than come tax from the pay of U.S. citizens working
$10,000 at one time. Certain recipients of cur- abroad unless the employer is required by
foreign law to withhold foreign income tax.
Table 1-1. Options for Ending the Choice To Treat Nonresident Alien Spouse as a Resident
Options for ending the choice to treat nonresident alien spouse as a resident
Revocation Either spouse can revoke the choice for any tax year.
The revocation must be made by the due date for filing the tax return for that tax year.
The spouse who revokes the choice must attach a signed statement declaring that the choice is being revoked. The statement
revoking the choice must include the following.
• The name, address, and SSN (or TIN) of each spouse.
• The name and address of any person who is revoking the choice for a deceased spouse.
• A list of any states, foreign countries, and U.S. territories that have community property laws in which either spouse is
domiciled or where real property is located from which either spouse receives income.
If the spouse revoking the choice does not have to file a return and does not file a claim for refund, send the statement to the
Internal Revenue Service Center where the last joint return was filed.
Death The death of either spouse ends the choice, beginning with the first tax year following the year in which the spouse died.
If the surviving spouse is a U.S. citizen or resident alien and is entitled to the joint tax rates as a surviving spouse, the choice will not
end until the close of the last year for which these joint rates may be used.
If both spouses die in the same tax year, the choice ends on the first day after the close of the tax year in which the spouses died.
Divorce or legal A divorce or legal separation ends the choice as of the beginning of the tax year in which the legal separation occurs.
separation
Inadequate records The IRS can end the choice for any tax year that either spouse has failed to keep adequate books, records, and other
information necessary to determine the correct income tax liability, or to provide adequate access to those records.
Page 8 Chapter 2 Withholding TaxForeign earned income exclusion. Your 2. The service is designated as employment
employer does not have to withhold U.S. in-
come taxes from wages you earn abroad if it is 30% Flat Rate for U.S. social security and Medicare tax
purposes under a bilateral (totalization)
reasonable to believe that you will exclude them
from income under the foreign earned income
Withholding social security agreement (discussed
later).
exclusion or the foreign housing exclusion.
Generally, U.S. source gross income that is not 3. You are working for an American employer
Your employer should withhold taxes from (defined later).
effectively connected to a U.S. trade or busi-
any wages you earn for working in the United ness, such as U.S. source dividends and royal-
DRAFT AS OF
States. 4. You are working for a foreign affiliate (de-
ties, is subject to withholding tax at a flat 30%
fined later) of an American employer un-
Statement. You can give a statement to (or lower treaty) rate if paid to nonresident ali-
der a voluntary agreement entered into
your employer indicating that you expect to ens. If you are a U.S. citizen or resident alien
between the American employer and the
qualify for the foreign earned income exclusion and this tax is withheld in error from payments
U.S. Department of the Treasury.
under either the bona fide residence test or the to you because you have a foreign address, you
physical presence test and indicating your esti- should notify the payer of the income to stop the
American vessel or aircraft. An American
January 21, 2022
mated housing cost exclusion. withholding. Use Form W-9 to notify the payer.
vessel is any vessel documented or numbered
Form 673 is an acceptable statement. You under the laws of the United States and any
You can claim the tax withheld in error as a
can use Form 673 only if you are a U.S. citizen. other vessel whose crew is employed solely by
withholding credit on your tax return if the
You do not have to use the form and can pre- one or more U.S. citizens, residents, or corpo-
amount isn’t adjusted by the payer. See the
pare your own statement. For more information, rations. An American aircraft is an aircraft regis-
Instructions for Form 1040 for how to claim the
go to IRS.gov/Form 673. tered under the laws of the United States.
credit.
Generally, your employer can stop the with-
holding once you submit the statement that in- Social security benefits paid to residents. If American employer. An American employer
cludes a declaration that the statement is made you are a lawful permanent resident (green card includes any of the following.
under penalties of perjury. However, if your em- holder) and a flat 30% tax was withheld in error • The U.S. Government or any of its instru-
ployer has reason to believe that you will not on your social security benefits, you must file a mentalities.
qualify for either the foreign earned income or Form 1040 or 1040-SR with the Internal Reve- • An individual who is a resident of the Uni-
the foreign housing exclusion, your employer nue Service Center at the address listed under ted States.
must continue to withhold. Where To File, earlier, to determine if you are • A partnership of which at least two-thirds of
Your employer must consider any informa- entitled to a refund. The following information the partners are U.S. residents.
tion about pay you received from any other must be submitted with your Form 1040 or • A trust of which all the trustees are U.S.
source outside the United States in determining 1040-SR. residents.
whether your foreign earned income is more • A copy of Form SSA-1042S, Social Secur- • A corporation organized under the laws of
than the limit on either the foreign earned in- ity Benefit Statement. the United States, any U.S. state, or the
come exclusion or the foreign housing exclu- • A copy of your “green card.” District of Columbia, Puerto Rico, the U.S.
sion. • A signed declaration that includes the fol- Virgin Islands, Guam, or American Samoa.
lowing statements. An American employer also includes any
Foreign tax credit. If you plan to take a for-
“I am a U.S. lawful permanent resident and foreign person with an employee who is per-
eign tax credit, you may be able to adjust your
my green card has been neither revoked forming services in connection with a contract
withholding on Form W-4. You can take these
nor administratively or judicially deter- between the U.S. Government (or any instru-
additional tax credits only for foreign tax credits
mined to have been abandoned. I am filing mentality thereof) and a member of a domesti-
attributable to taxable salary or wage income.
a U.S. income tax return for the tax year as cally controlled group of entities which includes
For more information, see the instructions for
a resident alien reporting all of my world- such foreign person.
Step 3 of Form W-4.
wide income. I have not claimed benefits
for the tax year under an income tax treaty Foreign affiliate. A foreign affiliate of an
Withholding from pension payments. U.S.
as a nonresident alien.” American employer is any foreign entity in
payers of benefits from employer-deferred com-
pensation plans, individual retirement plans, which the American employer has at least a
10% interest, directly or through one or more
and commercial annuities must generally with-
hold income tax from payments delivered out- Social Security and entities. For a corporation, the 10% interest
side of the United States. You can choose ex-
emption from withholding if you:
Medicare Taxes must be in its voting stock. For any other entity,
the 10% interest must be in its profits.
• Provide the payer of the benefits with a Form 2032 is used by American employers
Social security and Medicare taxes may apply to extend social security coverage to U.S. citi-
residence address in the United States or
to wages paid to an employee regardless of zens and resident aliens working abroad for for-
a U.S. territory, or where the services are performed. eign affiliates of American employers. Once you
• Certify to the payer that you are not a U.S.
citizen or resident alien or someone who enter into an agreement, coverage cannot be
left the United States to avoid tax. General Information terminated.
Check your withholding. Before you report In general, U.S. social security and Medicare Excludable meals and lodging. Social secur-
U.S. income tax withholding on your tax return, taxes do not apply to wages for services you ity tax doesn’t apply to the value of meals and
you should carefully review all information perform as an employee outside the United lodging provided to you for the convenience of
documents, such as Form W-2 and the Form States unless one of the following exceptions your employer if it is reasonable to believe that
1099 information returns. Compare other re- applies. you will be able to exclude the value from your
cords, such as final pay records or bank state- income.
1. You perform the services on or in connec-
ments, with Form W-2 or Form 1099 to verify
tion with an American vessel or aircraft
the withholding on these forms. Check your
(defined later) and either: Bilateral Social Security
U.S. income tax withholding even if you pay
someone else to prepare your tax return. You a. You entered into your employment
(Totalization) Agreements
may be assessed penalties and interest if you contract within the United States, or
claim more than your correct amount of with- The United States has entered into agreements
b. The vessel or aircraft touches at a with some foreign countries to coordinate social
holding allowances.
U.S. port while you are employed on security coverage and taxation of workers who
it. are employed in those countries. These agree-
ments are commonly referred to as “totalization
Chapter 2 Withholding Tax Page 9You can also read
