Publication 54 - Tax Guide For U.s. Citizens And Resident Aliens Abroad - 2006 Page 42
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44Yes. Form 673 is a sample state-
on excluded income are not de-
2) Can Internal Revenue Service
is exempt from U.S. tax because of
personnel recommend tax prac-
ductible as an itemized deduction.
ment that can be used by individu-
the foreign earned income exclu-
titioners who prepare returns?
als who expect to qualify under the
Note. Foreign income taxes are
sion.
bona fide residence test or the
usually claimed under the credit
No. IRS employees are not permit-
7) I am a U.S. citizen stationed
physical presence test. A copy of
provisions, if they apply, because
ted to recommend tax practitioners
abroad. I made a personal loan
this form is displayed in chapter 2.
this is more advantageous in most
to a nonresident alien who later
who prepare income tax returns.
cases.
You can get this form on the In-
went bankrupt. Can I claim a bad
ternet at or by writing
3) I just filed my return. How long
debt loss for this money?
4) I rented an apartment in the
to the Internal Revenue Service,
will it take to get my refund?
United Kingdom and had to pay
International Section, P.O. Box
Yes. The loss should be reported
a local tax called a “general
920, Bensalem, PA 19020-8518.
It may take up to 10 weeks to issue
rates” tax, which is based on oc-
as a short-term capital loss on
cupancy of the apartment. Can I
a refund on a return that is properly
Schedule D (Form 1040). You have
3) I am a U.S. citizen residing
deduct this tax as a foreign real
made out. A refund may take
the burden of proving the validity of
overseas, and I receive dividend
estate tax?
longer than that if the return is filed
the loan, the subsequent bank-
and interest income from U.S.
just before the filing deadline.
ruptcy, and the recovery or
sources from which tax is being
No. This tax does not qualify as a
withheld at a rate of 30%. How
nonrecovery from the loan.
An error on the return will also
real estate tax since it is levied on
can I have this situation cor-
delay the refund. Among the most
the occupant of the premises rather
8) With which countries does the
rected?
common causes of delay in receiv-
than on the owner of the property.
United States have tax treaties?
ing refunds are unsigned returns
File Form W-9 (indicating that you
and incorrect social security num-
Scholarship and
Table 6-1, at the end of chapter 6,
are a U.S. citizen) with the with-
bers.
Fellowship Grantees
lists those countries with which the
holding agents who are paying you
United States has income tax trea-
the dividends and interest. This is
4) I have not received my refund
1) I am a Fulbright grantee. What
ties.
their authority to stop withholding
from last year’s return. Can I
documentation must I attach to
claim the credit against this
the 30% income tax at the source
my return?
9) I am a retired U.S. citizen living
year’s tax?
on payments due you.
in Europe. My only income is
from U.S. sources on which I pay
a) There are no special tax
4) As a U.S. citizen receiving div-
No. That would cause problems to
U.S. taxes. I am taxed on the
forms for Fulbright grantees. File
idend and interest income from
both years’ returns. If your last
same income in the foreign
on a regular Form 1040.
the United States from which tax
year’s refund is overdue, contact
country where I reside. How do I
b) If you claim exemption as a
has been withheld, do I report
the IRS and ask about the status of
avoid double taxation?
the net dividend and interest in-
scholarship or fellowship grantee,
the refund. If you are outside the
come on my return, or do I report
submit brochures and correspond-
United States, call or write the
If you reside in a country that has
the gross amount and take credit
ence describing the grant and your
nearest IRS office. Otherwise, call
an income tax treaty with the
for the tax withheld?
duties.
or write your local U.S. IRS office. If
United States, the treaty will gener-
c) If you are located in a foreign
you write to the IRS, be sure to
ally contain provisions to eliminate
You must report the gross amount
country and wish to pay tax in for-
include your social security number
of the income received and take a
double taxation. Many treaties will
eign currency, you should submit a
(or individual taxpayer identifica-
tax credit for the tax withheld. This
provide reduced rates for various
certified statement showing that
tion number) in the letter.
types of income. Treaties often pro-
is to your advantage since the tax
you were a Fulbright grantee and at
vide reciprocal credits in one coun-
withheld is deducted in full from the
least 70% of the grant was paid in
5) I forgot to include interest in-
try for the tax paid to the other
tax due. It is also advisable to at-
nonconvertible foreign currency.
come when I filed my return last
country. Nontreaty countries, de-
tach a statement to your return ex-
week. What should I do?
plaining this tax credit so there will
2) I taught and lectured abroad
pending on their laws, may give the
under taxable grants. What ex-
same type of credit.
be no question as to the amount of
To correct a mistake of this sort,
penses can I deduct?
credit allowable.
If double taxation with a treaty
you should prepare Form 1040X.
country exists and you cannot re-
Include the omitted interest in-
You may be able to deduct your
Deductions
solve the problem with the tax au-
come, refigure the tax, and send
travel, meals, and lodging ex-
thorities of the foreign country, you
the form as soon as possible along
penses if you are temporarily ab-
1) Can I claim a foreign tax credit
can contact the U.S. competent au-
with any additional tax due to the
sent from your regular place of
even though I do not itemize de-
Internal Revenue Service Center
thority for assistance. See chapter
employment. For more information
ductions?
where you filed your return. Form
6 for information on requesting
about deducting travel, meals, and
1040X can be used to correct an
consideration.
lodging expenses, get Publication
Yes. You can claim the foreign tax
individual Form 1040 income tax
463, Travel, Entertainment, Gift,
credit even though you do not item-
10) My total income after claim-
return filed for any year for which
and Car Expenses.
ize deductions.
ing the foreign earned income
the period of limitation has not ex-
and housing exclusions con-
pired (usually 3 years after the due
2) I had to pay customs duty on a
General Tax Questions
sists of $5,000 taxable wages.
date of the return filed, or 2 years
few things I brought back with
Am I entitled to claim the earned
after the tax was paid, whichever is
me from Europe last summer.
income credit?
1) Will the Internal Revenue
later).
Can I include customs fees with
Service representatives at the
my other deductible taxes?
Embassies answer questions
No. If you claim the foreign earned
6) I am a U.S. citizen and, be-
about tax laws of our home state
income exclusion, the foreign
cause I expect to qualify for the
No. Customs duties, like federal
and the laws of the foreign coun-
housing exclusion, or the foreign
foreign earned income exclu-
try where we reside as well as
excise taxes, are not deductible.
sion, all my foreign income
housing deduction, you cannot
U.S. federal income tax laws?
(which consists solely of salary)
claim the earned income credit.
3) What types of foreign taxes
will be exempt from U.S. tax. Do I
are deductible?
No. The IRS representatives are
get any tax benefit from income
11) Last May my employer trans-
authorized only to answer tax
tax I paid on this salary to a for-
ferred me to our office in Puerto
Generally, real estate and foreign
questions on U.S. federal income
eign country during the tax
Rico. I understand that my salary
income taxes are deductible as
tax. You should write your home
year?
earned in Puerto Rico is tax ex-
itemized deductions. Foreign in-
state’s tax office for state tax infor-
empt. Is this correct?
come taxes are deductible only if
mation and contact the tax officials
No. You cannot take either a tax
you do not claim the foreign tax
of the country where you reside for
credit or a tax deduction for foreign
As long as your employer is not the
credit. Foreign income taxes paid
information regarding their taxes.
income taxes paid on income that
U.S. Government, all income from
Page 42
Publication 54 (2006)
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