Publication 54 - Tax Guide For U.s. Citizens And Resident Aliens Abroad - 2006 Page 41
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44country has its source in that coun-
and meet either the bona fide resi-
year. The other tests of depen-
RRB-1099, Payments by the Rail-
try. The foreign earned income ex-
dency also must be met.
road Retirement Board, that you re-
dence test or the physical presence
clusion and the foreign housing
ceive from the Railroad Retirement
test.
3) Should I prorate my own per-
exclusion or deduction are limited
Board. The taxable amounts of the
sonal exemption and the exemp-
4) My wife and I are both em-
to earned income from sources
non-social security equivalent part
tions for my spouse and
ployed, reside together, and file
within foreign countries.
of tier 1, tier 2, vested dual benefits,
dependents, since I expect to ex-
a joint return. We meet the quali-
and supplemental annuities are
clude part of my income?
fications for claiming the foreign
Foreign Earned
shown on the Form RRB-1099-R,
earned income exclusion. Do we
Income Exclusion
Annuities or Pensions by the Rail-
each figure a separate foreign
No. Do not prorate exemptions for
road Retirement Board, that you re-
earned income exclusion and
yourself, your spouse, and your de-
1) I qualify for the foreign earned
ceive from the Railroad Retirement
foreign housing exclusion?
pendents. Claim the full amount for
income exclusion and earned
Board.
each exemption permitted.
more than $82,400 during the
You figure your foreign earned in-
year. Am I entitled to the maxi-
Social Security Tax
come exclusion separately since
Social Security and
mum $82,400 exclusion?
and Self-Employment Tax
you both have foreign earned in-
Railroad Retirement
come. The amount of the exclusion
Benefits
Not necessarily. Although you
1) I am a minister with earned
for each of you cannot exceed your
qualify for the foreign earned in-
income from abroad and expect
separate foreign earned incomes.
come exclusion, you may not have
1) Are U.S. social security bene-
to qualify for the foreign earned
You must figure your housing
fits taxable?
met either the bona fide residence
income exclusion. How do I pay
exclusion jointly. See Married
test or the physical presence test
my self-employment tax?
Couples in chapter 4 for further de-
Benefits received by U.S. citizens
for your entire tax year. If you did
tails.
and resident aliens may be taxable,
not meet either of these tests for
File a Form 1040 with Schedule SE
depending on the total amount of
your entire tax year, you must pro-
and Form 2555. Figure your
Exemptions and
income and the filing status of the
rate the $82,400 maximum exclu-
self-employment tax on Schedule
Dependency Allowances
taxpayer. Under certain treaties,
sion based on the number of days
SE and enter it on Form 1040 as
U.S. social security benefits are ex-
that you did meet either test during
the tax due with the return.
1) I am a U.S. citizen married to a
empt from U.S. tax if taxed by the
the year.
nonresident alien who has no in-
country of residence.
2) Because I expect to qualify for
come from U.S. sources. Can I
the foreign earned income exclu-
2) How do I qualify for the foreign
Benefits similar to social secur-
claim an exemption for my
sion, I have requested and re-
earned income exclusion?
ity received from other countries by
spouse on my U.S. tax return?
ceived an extension of time until
U.S. citizens or residents may be
January 30, 2008, to file my 2006
To be eligible, you must have a tax
taxable. (Refer to our tax treaties
return. However, since I will be
Yes. If you file a joint return, you
home in a foreign country and be a
with various countries for any ben-
paying self-employment tax on
can claim an exemption for your
U.S. citizen or resident alien. You
efit granted by the treaty.)
my spouse’s income, should I
nonresident alien spouse. If you do
must be either a bona fide resident
file a 2006 return when due, pay
not file a joint return, you can claim
of a foreign country or countries for
2) As a U.S. citizen or resident
the self-employment tax, and
an exemption for your nonresident
an uninterrupted period that in-
alien, how do I figure the amount
then file another return when I
alien spouse only if your spouse
of my U.S. social security bene-
cludes an entire tax year, or you
qualify for the exclusion?
has no income from sources within
fits to include in gross income?
must be physically present in a for-
the United States and is not the
eign country or countries for at
No. You do not need to file a 2006
dependent of another U.S. tax-
See Publication 915, Social Secur-
least 330 full days during any pe-
Form 1040 (the regular income tax
payer.
ity and Equivalent Railroad Retire-
riod of 12 consecutive months.
return) when due if you have re-
ment Benefits, to figure if any of
You must use the married filing
U.S. citizens may qualify under ei-
ceived an extension. To stop inter-
your benefits are includible in in-
separately column in the Tax Table
ther test. The physical presence
e s t f r o m a c c r u i n g o n t h e
come.
or section C of the Tax Computa-
test applies to all resident aliens,
self-employment tax due for 2006,
tion Worksheet, unless you qualify
while the bona fide residence test
you can pay enough estimated tax
3) How are railroad retirement
as a head of household. (Also see
applies to resident aliens who are
to cover the self-employment tax
benefits taxed?
citizens or nationals of a country
Question 12 under General Tax
and any income tax that would be
with which the United States has an
Questions, later.)
due after taking out the amount of
The part of a tier 1 railroad retire-
income tax treaty in effect.
A U.S. citizen or resident alien
excludable income.
ment benefit that is equivalent to
Your tax home must be in the
married to a nonresident alien also
the social security benefit you
foreign country or countries
can choose to treat the nonresident
Income Tax Withholding
would have been entitled to receive
throughout your period of resi-
alien as a U.S. resident for all fed-
if the railroad employee’s work had
dence or presence. For this pur-
eral income tax purposes. This al-
1) How can I get my employer to
been covered under the social se-
pose, your period of physical
lows you to file a joint return, but
stop withholding federal income
curity system rather than the rail-
presence is the 330 full days during
also subjects the alien’s worldwide
taxes from wages while I am
road retirement system is treated
which you are present in a foreign
income to U.S. income tax.
overseas and eligible for the for-
the same as a social security bene-
country, not the 12 consecutive
eign earned income exclusion?
fit, discussed above.
2) I support my parents who live
months during which those days
The other part of a tier 1 benefit
in Italy. I am sure that I provide
occur.
File a statement in duplicate with
that is not considered a social se-
the bulk of their support. Can I
your employer stating that with-
curity equivalent benefit is treated
claim exemptions for them?
3) Is it true that my foreign
holding should be reduced be-
like a private pension or annuity, as
earned income exclusion cannot
cause you meet the bona fide
are tier 2 railroad retirement bene-
exceed my foreign earned in-
It depends on whether they are
residence test or physical presence
fits. Pensions and annuities are ex-
come?
U.S. citizens or U.S residents. If
test. See also the following ques-
plained in chapter 4 under Earned
your parents are not U.S. citizens
tion.
and Unearned Income. Vested
Yes. The amount of the exclusion is
or U.S. residents, you cannot claim
dual benefits and supplemental an-
limited each year to the amount of
exemptions for them even if you
2) Does the Internal Revenue
nuities are also treated like private
your foreign earned income after
provide most of their support. To
Service provide forms to be
pensions, but are fully taxable.
reducing that income by the foreign
qualify as a dependent, a person
used by employees requesting
housing exclusion. The foreign
generally must be either a U.S. citi-
The proper amounts of the so-
employers to stop withholding
earned income must be earned
zen, U.S. national, U.S. resident
cial security equivalent part of tier 1
income tax from wages they ex-
during the part of the tax year that
alien, or a resident of Canada or
benefits and any special guaranty
pect to be excluded as income
you have your tax home abroad
Mexico for some part of the tax
benefits are shown on the Form
earned abroad?
Publication 54 (2006)
Page 41
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