Filing Tax Returns

If you do not qualify for the possession exclusion, you must generally file a U.S. income tax return if your gross income was at least the amount shown below.

If you were age 65 or over at the end of 2001, and you do not qualify for the possession exclusion, the minimum income levels for filing a return are higher. For these amounts, see the instructions for Form 1040.

Some persons (such as those who can be claimed as a dependent on another person's return) must file a tax return even though their gross income is less than the amount shown above for their filing status. For more information, see the instructions for Form 1040.

Bona fide residents of American Samoa. If you qualify for the possession exclusion and all of your income is from sources in American Samoa, Guam, or the CNMI, or is effectively connected with your trade or business in these possessions, you do not have to file a U.S. income tax return.

If you qualify for the possession exclusion and you have income from sources outside American Samoa, Guam, or the CNMI, you must file a U.S. income tax return if your gross income is at least the amount shown on line 3 of the following worksheet.

Example. Regina Gray, a U.S. citizen, uses a calendar tax year. She was employed in American Samoa from July 2, 2000, to January 1, 2002. Her 2001 income consisted of her salary from her job plus interest of $500 on deposits in a U.S. bank.

Regina does not have to file a U.S. income tax return for 2001 because she can claim the possession exclusion, and her U.S. income is below the amount that would require her to file a U.S. tax return.

Form 4563. If you must file a U.S. income tax return and you qualify for the possession exclusion, claim the exclusion by attaching Form 4563 to Form 1040. Form 4563 cannot be filed by itself. There is an example of a filled-in Form 4563 near the end of this publication.

When and Where To File

If you file on a calendar year basis, the due date for filing your U.S. income tax return is April 15 following the end of your tax year. If you use a fiscal year (a year ending on the last day of a month other than December), the due date is the 15th day of the 4th month after the end of your fiscal year. If any due date falls on a Saturday, Sunday, or legal holiday, your tax return is due on the next business day.

Federal tax returns mailed by taxpayers in foreign countries are filed on time if they bear an official postmark dated by midnight of the due date, including any extensions. The postmark can be foreign.

Extensions of time to file. If you live outside the United States and Puerto Rico and have your main place of business or post of duty outside the United States and Puerto Rico on the regular due date of your return, you are automatically granted a 2-month extension to file your return. If you file on a calendar year basis, you have until June 15. This extension is also available if you are on military duty outside the United States and Puerto Rico. Your assigned tour of duty outside the United States and Puerto Rico must include the entire due date of your return.

If you use this automatic 2-month extension, you must attach a statement to your return showing that you qualify for it. You must pay interest on any unpaid tax from the original due date (April 15 if you file a calendar year return) to the date you pay the tax.

Married persons. If you and your spouse file a joint return, only one of you needs to meet the qualifications discussed above to take advantage of the automatic extension to June 15 for filing your tax return.

If you file separate returns instead of a joint return, only the spouse who meets the qualifications can use the automatic extension.

4-month extensions. You can get an automatic 4-month extension of time to file your tax return by doing one of the following.

• File a paper Form 4868.
• File Form 4868 electronically. You can, but do not have to, make a payment by authorizing a direct debit from your checking or savings account.
• Make a credit card payment by phone or on the Internet. You do not need to file Form 4868.
• Call a special phone line for extension requests (1-888-796-1074).

This 4-month extension is not in addition to the automatic 2-month extension explained earlier. The 4 months and the 2 months both begin on April 15. You must file Form 4868 or make an electronic payment by the due date for filing your return. If you qualify for the 2-month automatic extension, you do not have to file Form 4868 until June 15. Print "Taxpayer Abroad" across the top of Form 4868.

In filling out Form 4868, you must estimate your tax liability for the year and you should pay any balance due with the application. You will be charged interest on any tax not paid by the regular due date of your return, and you may be charged a penalty for the late payment.

Any payment you made with the application for extension should be entered on line 64 of Form 1040.

U.S. citizens or residents living outside the United States. If you live outside the United States and Puerto Rico and you qualify for an automatic 2-month extension, you can file a paper Form 4868 by June 15 to get an additional two months to file. You cannot request this extension by phone or computer.

Note. You cannot ask the Internal Revenue Service to figure your tax if you use the extension of time to file.

Extension beyond 4 months. Further extensions of the time to file are granted only under very unusual circumstances. If you need additional time to file, apply for the extension either in a letter or by filing Form 2688. Extensions beyond the 4-month automatic extension are not granted as a matter of course. You must show reasonable cause.

Except in undue hardship cases, an application for extension on Form 2688 will not be accepted until you have taken advantage of the automatic 4-month extension.

Where to file. If you have to file Form 1040 with the United States, and you use Form 4563 to exclude income from American Samoa, Guam, and the CNMI, file your return with the Internal Revenue Service Center, Philadelphia, PA 19255-0215. If you do not qualify for the possession exclusion, mail your return to the address shown for the possession or state in which you reside in the Form 1040 instructions.

Self-Employment Tax

A U.S. citizen who is self-employed must pay self-employment tax on net self-employment earnings of $400 or more. This rule applies whether or not the earnings are excludable from gross income (or whether or not a U.S. income tax return must otherwise be filed).

Your payments of self-employment tax contribute to your coverage under the social security system. Social security coverage provides you with old age, survivor, and disability benefits and hospital insurance.

The self-employment tax rate is 15.3% (12.4% social security tax plus 2.9% Medicare tax). The maximum amount of earnings subject to social security (old age, survivor, and disability insurance) tax is $80,400 for 2001. All earnings are subject to Medicare (hospital insurance) tax.

Self-employment tax form. If you have to file Form 1040 with the United States, figure your self-employment tax on Schedule SE (Form 1040) and attach it to Form 1040.

If you are a resident of American Samoa, Guam, the CNMI, Puerto Rico, or the Virgin Islands who has net self-employment income, and you do not have to file Form 1040 with the United States, use Form 1040-SS to figure your self-employment tax.

If you are a resident of Puerto Rico, you can file Form 1040-PR instead of Form 1040-SS. Form 1040-PR is the Spanish-language version of Form 1040-SS.

These forms must be filed with the Internal Revenue Service Center, Philadelphia, PA 19255.

Self-employment tax deduction. You can deduct one-half of your self-employment tax on line 27 of Form 1040 in figuring adjusted gross income. This is an income tax deduction only; it is not a deduction in figuring net earnings from self-employment.

If you are a bona fide resident of American Samoa or Puerto Rico, and you exclude your self-employment income from gross income, you cannot take the deduction on line 27 of Form 1040 because the deduction is related to excluded income.

If part of your self-employment income is excluded, only the part of the deduction that is based on the nonexcluded income is allowed. This would happen if, for instance, you have two businesses, and only the income from one of them is excludable.

Figure the tax on the nonexcluded income by multiplying your total self-employment tax (from Schedule SE) by the following fraction.

The result is your self-employment tax on nonexcluded income. You can deduct one-half of this amount on line 27 of Form 1040.

Credit for Excess FICA Employee Tax Withheld

If you had more than one employer for 2001, and your total wages were over $80,400, your employers may have withheld too much social security tax. If so, you can take a credit for the excess amount on line 62 of Form 1040.

If you do not file Form 1040, you can claim a refund of the excess amount withheld by filing Form 843, Claim for Refund and Request for Abatement. Residents of Puerto Rico, the Virgin Islands, American Samoa, Guam, and the CNMI should file Form 843 with the Internal Revenue Service Center, Philadelphia, PA 19255.

If any one employer withheld more than $4,984.80 of social security tax, you must ask your employer to refund the excess to you. You cannot claim it on your return.

Double Taxation

A mutual agreement procedure exists to settle issues where there is an inconsistency between the tax treatment by the IRS and the taxing authorities of the following possessions.

• American Samoa.
• Guam.
• Puerto Rico.
• The Virgin Islands.

These issues usually involve allocations of income, deductions, credits, or allowances between related persons, determinations of residency, and determinations of the source of income and related expenses.

Send your written request for assistance under this procedure to: Internal Revenue Service Director, International Attn: Tax Treaty P.O. Box 23598 Washington, DC 20026-3598.

Your request must contain a statement that assistance is requested under the mutual agreement procedure with the possession. It must also contain all the facts and circumstances relating to your particular case. It must be signed and dated. To avoid unnecessary delays, make sure you include all of the following information.

1. Your name, address, and social security number.
2. The name, address, and social security number of the related person in the possession (if one is involved).
3. The tax year(s) in question and the Internal Revenue Service Center where your return was filed.
4. If income tax is involved, the type of income, a description of the transaction, activities, or other pertinent circumstances, and the positions taken by you and the possession tax agency.
5. The amount of the item (income, deduction, or credit) involved and the amount of tax the possession assessed or proposed to assess.
6. A description of the control and business relationships between you and the related person in the possession, if that applies.
7. The status of your tax liability for the year(s) in question and, if it applies, the status of the tax liability of the related person in the possession.
8. Whether you or the related person, if one is involved, is entitled to any possession tax incentive or subsidy program benefits for the year(s) in question.
9. Copies of any correspondence received from the possession tax agency and copies of any material you provided to them.
10. Copy of the possession tax return(s) for the year(s) in question.
11. Whether a foreign tax credit was claimed on your federal tax return for all or part of the possession tax paid or accrued on the item in question.
12. Whether your federal return or the return of the related person, if there is one, was examined, or is being examined.
13. A separate document signed and dated by you that you consent to the disclosure to the designated possession tax official of any or all of the items of information set forth in, or enclosed with, the request for assistance under this procedure.

Credit or refund. In addition to the tax assistance request, if you seek a credit or refund of any overpayment of United States tax paid on the income in question, you should file a claim on Form 1040X, Amended U.S. Individual Income Tax Return. Indicate on the form that a request for assistance under the mutual agreement procedure with the possession has been filed. Attach a copy of the request to the form.

You should take whatever steps must be taken under the possession tax code to prevent the expiration of the statutory period for filing a claim for credit or refund of a possession tax.

Previous| First | Next

Publication Index | IRS-Forms Main | Home