Irs Publication 54 - Tax Guide For U.s. Citizens And Resident Aliens Abroad

7) What is the source of earned

Yes. The amount of the exclusion is

or U.S. residents, you cannot claim

dual benefits and supplemental an-

income?

limited each year to the amount of

exemptions for them even if you

nuities are also treated like private

your foreign earned income after

provide most of their support. To

pensions, but are fully taxable.

The source of earned income is the

reducing that income by the foreign

qualify as a dependent, a person

The proper amounts of the so-

place where the work or personal

housing exclusion. The foreign

generally must be either a U.S. citi-

cial security equivalent part of tier 1

services that produce the income

earned income must be earned

zen, U.S. national, U.S. resident

benefits and any special guaranty

are performed. In other words, in-

during the part of the tax year that

alien, or a resident of Canada or

benefits are shown on the Form

come received for work in a foreign

you have your tax home abroad

Mexico for some part of the tax

RRB-1099, Payments by the Rail-

and meet either the bona fide resi-

year. The other tests of depen-

road Retirement Board, that you re-

country has its source in that coun-

dence test or the physical presence

dency also must be met.

ceive from the Railroad Retirement

try. The foreign earned income ex-

Board. The taxable amounts of the

test.

clusion and the foreign housing

3) Should I prorate my own per-

non-social security equivalent part

exclusion or deduction are limited

4) My wife and I are both em-

sonal exemption and the exemp-

of tier 1, tier 2, vested dual benefits,

to earned income from sources

tions for my spouse and

ployed, reside together, and file

and supplemental annuities are

within foreign countries.

dependents, since I expect to ex-

a joint return. We meet the quali-

shown on the Form RRB-1099-R,

clude part of my income?

fications for claiming the foreign

Annuities or Pensions by the Rail-

Foreign Earned

earned income exclusion. Do we

road Retirement Board, that you re-

Income Exclusion

each figure a separate foreign

No. Do not prorate exemptions.

ceive from the Railroad Retirement

earned income exclusion and

Claim the full amount for each ex-

Board.

1) I qualify for the foreign earned

foreign housing exclusion?

emption permitted.

income exclusion and earned

Social Security Tax

more than $87,600 during 2008.

You figure your foreign earned in-

Social Security and

and Self-Employment Tax

Am I entitled to the maximum

come exclusion separately since

Railroad Retirement

$87,600 exclusion?

you both have foreign earned in-

Benefits

1) I am a minister with earned

come. The amount of the exclusion

income from abroad and expect

Not necessarily. Although you

for each of you cannot exceed your

1) Are U.S. social security bene-

to qualify for the foreign earned

qualify for the foreign earned in-

separate foreign earned incomes.

fits taxable?

income exclusion. How do I pay

come exclusion, you may not have

You must figure your housing

my self-employment tax?

met either the bona fide residence

exclusion jointly. See Married

Benefits received by U.S. citizens

test or the physical presence test

Couples in chapter 4 for further de-

and resident aliens may be taxable,

File a Form 1040 with Schedule SE

for your entire tax year. If you did

tails.

depending on the total amount of

and Form 2555. Figure your

not meet either of these tests for

income and the filing status of the

self-employment tax on Schedule

Exemptions and

your entire tax year, you must pro-

SE and enter it on Form 1040 as

taxpayer. Under certain treaties,

Dependency Allowances

rate the maximum exclusion based

the tax due with the return.

U.S. social security benefits are ex-

on the number of days that you did

empt from U.S. tax if taxed by the

2) Because I expect to qualify for

meet either test during the year.

1) I am a U.S. citizen married to a

country of residence.

the foreign earned income exclu-

nonresident alien who has no in-

Benefits similar to social secur-

sion, I have requested and re-

2) How do I qualify for the foreign

come from U.S. sources. Can I

ity received from other countries by

ceived an extension of time until

earned income exclusion?

claim an exemption for my

U.S. citizens or residents may be

January 30, 2010, to file my 2008

spouse on my U.S. tax return?

taxable. (Refer to our tax treaties

return. However, since I will be

To be eligible, you must have a tax

with various countries for any ben-

paying self-employment tax on

Yes. If you file a joint return, you

home in a foreign country and be a

efit granted by the treaty.)

my spouse’s income, should I

can claim an exemption for your

U.S. citizen or resident alien. You

file a 2008 return when due, pay

nonresident alien spouse. If you do

must be either a bona fide resident

2) As a U.S. citizen or resident

the self-employment tax, and

not file a joint return, you can claim

of a foreign country or countries for

alien, how do I figure the amount

then file another return when I

an exemption for your nonresident

an uninterrupted period that in-

of my U.S. social security bene-

qualify for the exclusion?

alien spouse only if your spouse

fits to include in gross income?

cludes an entire tax year, or you

has no income from sources within

must be physically present in a for-

No. You do not need to file a 2008

the United States and is not the

See Publication 915, Social Secur-

eign country or countries for at

Form 1040 (the regular income tax

dependent of another U.S. tax-

ity and Equivalent Railroad Retire-

least 330 full days during any pe-

return) when due if you have re-

payer.

ment Benefits, to figure if any of

riod of 12 consecutive months.

ceived an extension. Instead, you

You must use the married filing

your benefits are includible in in-

should pay enough estimated tax

U.S. citizens may qualify under ei-

come.

separately column in the Tax Table

to cover the self-employment tax

ther test. The physical presence

or section C of the Tax Computa-

and any income tax that would be

test applies to all resident aliens,

3) How are railroad retirement

tion Worksheet, unless you qualify

due after taking out the amount of

while the bona fide residence test

benefits taxed?

as a head of household. (Also see

excludable income.

applies to resident aliens who are

Question 12 under General Tax

citizens or nationals of a country

The part of a tier 1 railroad retire-

Questions, later.)

Income Tax Withholding

with which the United States has an

ment benefit that is equivalent to

A U.S. citizen or resident alien

income tax treaty in effect.

the social security benefit you

married to a nonresident alien also

1) How can I get my employer to

Your tax home must be in the

would have been entitled to receive

can choose to treat the nonresident

stop withholding federal income

foreign country or countries

if the railroad employee’s work had

alien as a U.S. resident for all fed-

taxes from wages while I am

throughout your period of resi-

been covered under the social se-

overseas and eligible for the for-

eral income tax purposes. This al-

dence or presence. For this pur-

curity system rather than the rail-

eign earned income exclusion?

lows you to file a joint return, but

road retirement system is treated

pose, your period of physical

also subjects the alien’s worldwide

the same as a social security bene-

presence is the 330 full days during

File a statement in duplicate with

income to U.S. income tax.

fit, discussed above.

which you are present in a foreign

your employer stating that with-

The other part of a tier 1 benefit

country, not the 12 consecutive

2) I support my parents who live

holding should be reduced be-

that is not considered a social se-

in Italy. I am sure that I provide

months during which those days

cause you meet the bona fide

the bulk of their support. Can I

curity equivalent benefit is treated

occur.

residence test or physical presence

claim exemptions for them?

like a private pension or annuity, as

test. See also the following ques-

3) Is it true that my foreign

are tier 2 railroad retirement bene-

tion.

earned income exclusion cannot

It depends on whether they are

fits. Pensions and annuities are ex-

exceed my foreign earned in-

U.S. citizens or U.S residents. If

plained in chapter 4 under Earned

2) Does the Internal Revenue

come?

your parents are not U.S. citizens

and Unearned Income. Vested

Service provide forms to be

Publication 54 (2008)

Page 41

Irs Publication 54 - Tax Guide For U.s. Citizens And Resident Aliens Abroad - 2008 Page 41

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