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

Social Security Tax

3) I am a U.S. citizen residing

4) What types of foreign taxes

ment and my wife does the cook-

overseas, and I receive dividend

are deductible?

and Self-Employment Tax

ing?

and interest income from U.S.

sources from which tax is being

Generally, real estate and foreign

Keep a day-to-day record of ex-

1) I am a minister with earned

withheld at a rate of 30%. How

income taxes are deductible as

penses, with receipts where possi-

income from abroad and expect

can I have this situation cor-

itemized deductions. Foreign in-

to qualify for the foreign earned

ble. Allocate meals by dividing the

rected?

come taxes are deductible only if

income exclusion. How do I pay

total expense by the number in

you do not claim the foreign tax

my self-employment tax?

your family and take your propor-

File Form W – 9 (indicating that you

credit. Foreign income taxes paid

tionate share. Generally, your de-

are a U.S. citizen) with the with-

on excluded income are not de-

File a Form 1040 with Schedule SE

duction for rent will be limited to the

holding agents who are paying you

ductible as an itemized deduction.

and

Form 2555. Figure your

amount you would have paid had

the dividends and interest. This is

self-employment tax on Schedule

Note. Foreign income taxes are

you been abroad alone.

their authority to stop withholding

SE and enter it on Form 1040 as

usually claimed under the credit

the 30% income tax at the source

the tax due with the return.

General Tax Questions

provisions, if they apply, because

on payments due you.

this is more advantageous in most

2) Because I expect to qualify for

cases.

1) Will the Internal Revenue Ser-

4) As a U.S. citizen receiving div-

the foreign earned income exclu-

vice representatives at the Em-

idend and interest income from

sion, I have requested and re-

5) I rented an apartment in the

bassies answer questions about

the United States from which tax

ceived an extension of time until

United Kingdom and had to pay

tax laws of our home state and

has been withheld, do I report

January 30, 2003, to file my 2001

a local tax called a “general

the laws of the foreign country

the net dividend and interest in-

rates” tax, which is based on oc-

return. However, since I will be

come on my return, or do I report

where we reside as well as U.S.

cupancy of the apartment. Can I

paying self-employment tax on

the gross amount and take credit

federal income tax laws?

deduct this tax as a foreign real

my spouse’s income, should I

for the tax withheld?

estate tax?

file a 2001 return when due, pay

No. The IRS representatives are

the self-employment tax, and

You must report the gross amount

authorized only to answer tax

No. This tax does not qualify as a

then file another return when I

of the income received and take a

questions on U.S. federal income

real estate tax since it is levied on

qualify for the exclusion?

tax credit for the tax withheld. This

tax. You should write your home

the occupant of the premises rather

is to your advantage since the tax

state’s tax office for state tax infor-

than on the owner of the property.

No. You do not need to file a 2001

withheld is deducted in full from the

mation and contact the tax officials

tax due. It is also advisable to at-

Form 1040 (the regular income tax

of the country where you reside for

Scholarship and

tach a statement to your return ex-

return) when due if you have re-

information regarding their taxes.

Fellowship Grantees

plaining this tax credit so there will

ceived an extension. To stop inter-

be no question as to the amount of

e s t f r o m a c c r u i n g o n t h e

2) Can Internal Revenue Service

1) I am a Fulbright grantee. What

credit allowable.

self-employment tax due for 2001,

personnel recommend tax prac-

documentation must I attach to

titioners who prepare returns?

you can pay enough estimated tax

my return?

Deductions

to cover the self-employment tax

No. IRS employees are not permit-

and any income tax that would be

a) There are no special tax forms

1) Can I claim a foreign tax credit

ted to recommend tax practitioners

due after taking out the amount of

for Fulbright grantees. File on a

even though I do not itemize de-

who prepare income tax returns.

excludable income.

regular Form 1040.

ductions?

b) If you claim exemption as a

3) I just filed my return. How long

Income Tax Withholding

Yes. You can claim the foreign tax

scholarship or fellowship grantee,

will it take to get my refund?

credit even though you do not item-

submit brochures and correspon-

1) How can I get my employer to

ize deductions.

dence describing the grant and

It may take up to 10 weeks to issue

stop withholding federal income

your duties.

a refund on a return that is properly

taxes from wages while I am

2) I had to pay customs duty on a

made out. A refund may take

overseas and eligible for the for-

c) If you are located in a foreign

few things I brought back with

longer than that if the return is filed

eign earned income exclusion?

country and wish to pay tax in for-

me from Europe last summer.

just before the filing deadline.

Can I include customs fees with

eign currency, you should submit a

File a statement in duplicate with

An error on the return will also

my other deductible taxes?

certified statement showing that

your employer stating that with-

you were a Fulbright grantee and at

delay the refund. Among the most

holding should be reduced be-

No. Customs duties, like federal

least 70% of the grant was paid in

common causes of delay in receiv-

cause you meet the bona fide

excise taxes, are not deductible.

nonconvertible foreign currency

ing refunds are unsigned returns

residence test or physical presence

(see Publication 520).

and incorrect social security num-

3) Some taxes paid in the United

test. See also the following ques-

bers.

States are not deductible if I

2) I taught and lectured abroad

tion.

itemize my deductions. Which

under taxable grants. What ex-

4) I have not received my refund

ones are they?

penses can I deduct?

2) Does the Internal Revenue

from last year’s return. Can I

Service provide forms to be

claim the credit against this

Sales taxes, as well as the state

You may be able to deduct your

used by employees requesting

year’s tax?

and local taxes levied specifically

travel, meals, and lodging ex-

employers to stop withholding

on cigarettes, tobacco, and alco-

penses if you are temporarily ab-

income tax from wages they ex-

No. That would cause problems to

holic beverages are not deductible.

sent from your regular place of

pect to be excluded as income

both years’ returns. If your last

In addition, no deduction can be

employment. For more information

earned abroad?

year’s refund is overdue, write to

taken for drivers’ licenses or gaso-

about deducting travel, meals, and

the Internal Revenue Service

line taxes. Auto registration fees

lodging expenses, get Publication

Yes. Form 673 is a sample state-

Center where you filed your return

cannot be deducted except when

463.

ment that can be used by individu-

and ask about the status of the re-

they qualify as personal property

als who expect to qualify under the

fund. Be sure to include your social

3) I am a professor who is teach-

taxes. To qualify as personal prop-

bona fide residence test or the

security number (or individual tax-

ing abroad while on sabbatical

erty taxes they must be based on

physical presence test. A copy of

payer identification number) in the

leave from my position in the

the value of the auto.

this form is displayed in chapter 2.

letter.

United States. What records am I

You can get this form by writing to

Some state and local taxes are

required to keep to prove my ex-

the Internal Revenue Service, In-

deductible, such as those on per-

5) I forgot to include interest in-

penses? How do I allocate my

ternational Section, P.O. Box 920,

sonal property, real estate, and in-

come when I filed my return last

meals and lodging if my wife and

Bensalem, PA 19020-8518.

come.

children live with me in an apart-

week. What should I do?

Page 40

Chapter 7 How To Get Tax Help

Publication 54 - Tax Guide For U.s. Citizens And U.s. Citizens Abroad - 2001 Page 40

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