Publication 54: Tax Guide for U.S. Citizens and Resident Aliens Abroad; Introductory Material

This is archived information that pertains only to the 2004 Tax Year. If you
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Table of Contents

Reminders

Social security numbers for dependents. You generally must list on Form 1040 or Form 1040A the social security number (SSN) of any person for whom you claim an exemption. See Social security number under Exemptions in chapter 5.

Form 2555-EZ. Instead of the longer Form 2555, Foreign Earned Income, you may be able to file Form 2555-EZ, Foreign Earned Income Exclusion, if:

Your foreign earned income for the year was $80,000 or less, and
Your return is not for a short year.

Form 2555-EZ has fewer lines than Form 2555. For more information, see Form 2555-EZ in chapter 4.

Foreign income tax withheld. If your employer withheld foreign taxes from your pay, you cannot claim those taxes on your U.S. income tax return as federal income tax withheld. You may be able to claim a foreign tax credit or a foreign tax deduction based on the amount withheld and paid to a foreign tax authority. For more information about foreign taxes, see Taxes of Foreign Countries and U.S. Possessions in chapter 5.

Change of address. If you change your mailing address, be sure to notify the Internal Revenue Service using Form 8822, Change of Address. If you are changing both your home and business addresses, you need to complete two forms.

Photographs of missing children. The Internal Revenue Service is a proud partner with the National Center for Missing and Exploited Children. Photographs of missing children selected by the Center may appear in this publication on pages that would otherwise be blank. You can help bring these children home by looking at the photographs and calling 1-800-THE-LOST (1-800-843-5678) if you recognize a child.

Introduction

This publication discusses special tax rules for U.S. citizens and resident aliens who work abroad or who have income earned in foreign countries. As a U.S. citizen or resident alien, your worldwide income generally is subject to U.S. income tax, regardless of where you are living. Also, you are subject to the same income tax filing requirements that apply to U.S. citizens or residents living in the United States.

Resident alien. A resident alien is an individual that is not a citizen or national of the United States and who meets either the green card test or the substantial presence test for the calendar year.

Green card test. You are a U.S. resident if you were a lawful permanent resident of the United States at any time during the calendar year. This is known as the green card test because resident aliens hold immigrant visas (also known as green cards).
Substantial presence test. You are considered a U.S. resident if you meet the substantial presence test for the calendar year. Under this test, you must be physically present in the United States on at least:

31 days during the current calendar year, and
183 days during the current year and the 2 preceding years, counting all the days of physical presence in the current year, but only ⅙ the number of days of presence in the first preceding year, and only ⅙ the number of days in the second preceding year.

For more information on resident and nonresident status, the tests for residence, and the exceptions to them, see Publication 519.

Filing information. Chapter 1 contains general filing information, such as:

Whether you must file a U.S. tax return,
When and where to file your return,
How to report your income if it is paid in foreign currency,
How to determine your filing status if your spouse is a nonresident alien, and
Whether you must pay estimated tax.

Withholding tax. Chapter 2 discusses the withholding of income, social security, and Medicare taxes from the pay of U.S. citizens and resident aliens. It will help you determine if the correct amounts of taxes are being withheld and how to adjust your withholding if too much or too little is being withheld.

Self-employment tax. Chapter 3 discusses who must pay self-employment tax.

Foreign earned income exclusion and housing exclusion and deduction. Chapter 4 discusses income tax benefits that apply if you meet certain requirements while living abroad. You may qualify to treat up to $80,000 of your income as not taxable by the United States. You may also be able to either deduct part of your housing expenses from your income or treat a limited amount of income used for housing expenses as not taxable by the United States. These benefits are called the foreign earned income exclusion and the foreign housing deduction and exclusion.

To qualify for either of the exclusions or the deduction, you must have a tax home in a foreign country and earn income from personal services performed in a foreign country. These rules are explained in chapter 4.

If you are going to exclude or deduct your income as discussed above, you must file Form 2555 or Form 2555-EZ. You will find an example with filled-in Forms 2555 and 2555-EZ in chapter 4.

Exemptions, deductions, and credits. Chapter 5 discusses exemptions, deductions, and credits you may be able to claim on your return. These are generally the same as if you were living in the United States. However, if you choose to exclude foreign earned income or housing amounts, you cannot deduct or exclude any item or take a credit for any item that is related to the amounts you exclude. Among the topics discussed in chapter 5 are:

Exemptions you can claim,
Contributions you can deduct,
Moving expenses you can deduct, and
Foreign taxes you can either deduct or take a credit for.

Tax treaty benefits. Chapter 6 discusses some benefits that are common to most tax treaties and explains how to get help if you think you are not receiving a treaty benefit to which you are entitled. It also explains how to get copies of tax treaties.

How to get tax help. Chapter 7 is an explanation of how to get information and assistance from the IRS.

Questions and answers. Frequently asked questions and answers to those questions are presented in the back of the publication.

Comments and suggestions. We welcome your comments about this publication and your suggestions for future editions.

You can write to us at the following address:

Internal Revenue Service
Individual Forms and Publications Branch
SE:W:CAR:MP:T:I
1111 Constitution Ave. NW
Washington, DC 20224

We respond to many letters by telephone. Therefore, it would be helpful if you would include your daytime phone number, including the area code, in your correspondence.

You can email us at *[email protected]. (The asterisk must be included in the address.) Please put “Publications Comment” on the subject line. Although we cannot respond individually to each email, we do appreciate your feedback and will consider your comments as we revise our tax products.

Tax questions. If you have a tax question, visit www.irs.gov or call 1-800-829-1040. We cannot answer tax questions at either of the addresses listed above.

Ordering forms and publications. Visit www.irs.gov/formspubs to download forms and publications, call 1-800-829-3676, or write to one of the three addresses shown under How To Get Tax Help in the back of this publication.

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