Instructions for Form 1040-C |
2006 Tax Year |
This is archived information that pertains only to the 2006 Tax Year. If you are looking for information for the current tax year, go to the Tax Prep Help Area.
Joint return.
Nonresident aliens cannot file a joint return. Resident aliens can file a joint return on Form 1040-C only if both
of the following apply.
-
The alien and his or her spouse reasonably expect to be eligible to file a joint return at the close of the tax period for
which the return
is made.
-
If the tax period of the alien is terminated, the tax period of his or her spouse is terminated at the same time.
If Form 1040-C is filed as a joint return, enter both spouses' names, identification numbers, and passport or alien
registration card numbers in
the spaces provided on page 1 of the form. Also, include both spouses' income in Part III and furnish both spouses' information
in Part I of the form.
If necessary, a separate Part I should be completed for each spouse.
Identifying number.
You are generally required to enter your social security number (SSN). To apply for this number, get Form SS-5, Application
for a Social Security
Card, from your local Social Security Administration (SSA) office or call the SSA at 1-800-772-1213. You can also download
Form SS-5 from the SSA's
website at
www.socialsecurity.gov/online/ss-5.html. You must visit an SSA office in person and submit your Form SS-5 along with original
documentation showing your age, identity, immigration status, and authority to work in the United States. If you are an F-1
or M-1 student, you must
also show your Form I-20. If you are a J-1 exchange visitor, you will also need to show your Form DS-2019. Generally, you
will receive your card about
2 weeks after the SSA has all of the necessary information.
If you do not have an SSN and are not eligible to get one, you must apply for an individual taxpayer identification
number (ITIN). For details on
how to do so, see Form W-7 and its instructions. It usually takes about 4-6 weeks to get an ITIN. If you already have an ITIN,
enter it wherever your
SSN is requested on your tax return. If you are required to include another person's SSN on your return and that person does
not have and cannot get
an SSN, enter that person's ITIN.
Note.
An ITIN is for tax use only. It does not entitle you to social security benefits or change your employment or immigration
status under U.S.
law.
Line A.
If your employer is willing to furnish a letter guaranteeing that the tax will be paid, check the “ Yes” box. You only need to sign the form
and leave the remainder blank. Be sure to attach the letter from your employer to Form 1040-C. The letter should state specifically
the period and
type of tax covered.
Part I—Explanation of Status—Resident or Nonresident Alien
Generally, you are considered a resident alien if you meet either the green card test or the substantial presence test for
2007. You are considered
a nonresident alien for the year if you do not meet either of these tests. For more information on resident and nonresident
alien status, see Pub.
519.
Green card test.
You are a resident alien for tax purposes if you are a lawful permanent resident of the United States at any time
during 2007. You are a lawful
permanent resident of the United States if you have been given the privilege, under U.S. immigration laws, of residing permanently
in the United
States as an immigrant. You generally have this status if the U.S. Citizenship and Immigration Services (USCIS) or the Immigration
and Naturalization
Service (INS) has issued you an alien registration card, also known as a “ green card.”
Substantial presence test.
You are considered a resident alien for tax purposes if you meet the substantial presence test for 2007. You meet
this test if you were physically
present in the United States for at least:
-
31 days during 2007, and
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183 days during the period 2007, 2006, and 2005, counting all the days of physical presence in 2007, ⅓ of the number of days
of presence in 2006, and⅙ of the number of days in 2005.
Days of presence in the United States.
Generally, you are treated as present in the United States on any day that you are physically present in the country
at any time during the day.
However, you do not count the following days of presence in the United States for purposes of the substantial presence test.
-
Days you regularly commuted to work in the United States from a residence in Canada or Mexico.
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Days you were in the United States for less than 24 hours while you were traveling between two places outside the United States.
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Days you were temporarily present in the United States as a regular member of the crew of a foreign vessel engaged in transportation
between
the United States and a foreign country or a possession of the United States. This rule does not apply to any day you were
otherwise engaged in a
trade or business in the United States.
-
Days you intended, but were unable, to leave the United States because of a medical condition or medical problem that arose
while you were
in the United States.
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Days you were an exempt individual. In general, an exempt individual is: (a) a foreign- government-related individual, (b)
a teacher or
trainee, (c) a student, or (d) a professional athlete who is temporarily present in the United States to compete in a charitable
sports
event.
Note.
If you qualify to exclude days of presence in the United States because you are an exempt individual (other than a foreign-government-
related
individual) or because of a medical condition or problem, file Form 8843, Statement for Exempt Individuals and Individuals
With a Medical Condition,
with your final income tax return.
Closer connection to a foreign country exception.
Even though you would otherwise meet the substantial presence test, you are not treated as having met that test for
2007 if you: (a) were present
in the United States for fewer than 183 days during 2007, (b) establish that during 2007 you had a tax home in a foreign country,
and (c) establish
that during 2007 you had a closer connection to one foreign country in which you had a tax home than to the United States
unless you had a closer
connection to two foreign countries.
Note.
If you meet this exception, file Form 8840, Closer Connection Exception Statement for Aliens, with your final income tax return
.
Residence determined by tax treaty.
Even though you would otherwise meet the substantial presence test, you are not treated as having met that test if
you qualify as a resident of
another country within the meaning of the tax treaty between the United States and that other country.
Dual-status tax year.
Generally, if you are a resident alien and you leave the United States during the year with no intent to return, you
have a dual-status tax year
and are subject to dual-status restrictions in completing Form 1040-C. A dual-status tax year is one in which you have been
both a resident alien and
a nonresident alien. In figuring your income tax liability, different U.S. income tax rules apply to each status. See the
Form 1040NR instructions for
details.
Note.
Certain resident aliens who leave the United States during the year with no intent to return may owe tax under section 877.
These resident
aliens must take into account any amounts due for 2007 under section 877 when completing Form 1040-C. See Expatriation Tax in Pub. 519 for
more information .
Income effectively connected with a U.S. trade or business—nonresident aliens.
If you are a nonresident alien, the tax on your income depends on whether the income is or is not effectively connected
with a U.S. trade or
business.
Income effectively connected with a U.S. trade or business (including wages earned by an employee) is taxed at the
graduated rates that apply to
U.S. citizens and resident aliens. Income you receive as a partner in a partnership or as a beneficiary of an estate or trust
is considered
effectively connected with a U.S. trade or business if the partnership, estate, or trust conducts a U.S. trade or business.
Income from U.S. sources that is not effectively connected with a U.S. trade or business is generally taxed at 30%.
Your rate may be lower if the
country of which you are a resident and the United States have a treaty setting lower rates. See Pub. 901 for more details.
For a list of the types of income not considered effectively connected with a U.S. trade or business, see the instructions
for Schedules A and B
beginning on page 5. If you are a nonresident alien in the United States to study or train, see Pub. 519.
If you are a resident alien, you can claim the same exemptions allowed U.S. citizens on Form 1040.
If you are a nonresident alien engaged in a trade or business in the United States and you are a U.S. national (American Samoan
or a Northern
Mariana Islander who chose to be a U.S. national) or a resident of Canada, India, Mexico, or the Republic of Korea (South
Korea), you can claim the
same number of exemptions you are entitled to on Form 1040NR. All other nonresident aliens engaged in a U.S. trade or business
can claim only one
exemption. For more details, see Pub. 519 or the Form 1040NR instructions.
If you are a nonresident alien not engaged in a trade or business in the United States, you cannot claim any personal exemptions
for income that is
not effectively connected with a U.S. trade or business.
Line 14c, column (2).
You must enter each dependent's SSN or ITIN. See Identifying number on page 3.
Line 14c, column (4).
Check the box in this column if your dependent is a qualifying child for the child tax credit. See Pub. 501 to find
out who is a qualifying child.
Part III—Figuring Your Income Tax
Read the descriptions on line 1 of Form 1040-C for Groups I, II, and III to see which group(s) applies to you. If Group I
or II applies, use lines
15-22 to figure your tax. If Group III applies, use lines 23 and 24 to figure your tax. If you are a nonresident alien to
which both Groups II and III
apply, use lines 15-24 to figure your tax.
Line 16. Adjustments.
If you are a resident alien, you can take the adjustments allowed on Form 1040. The Form 1040 instructions have information
on adjustments you can
take. Be sure to consider the tax law changes noted on page 1.
If you are a nonresident alien and have income effectively connected with a U.S. trade or business, you can take the
adjustments allowed on Form
1040NR. See the Form 1040NR instructions. Be sure to consider the tax law changes noted on page 1.
If you are a nonresident alien and all your income is not effectively connected with a U.S. trade or business, you
cannot take any adjustments.
Line 19. Credits.
If you are a resident alien, you can claim the same credits as on Form 1040. If you are a nonresident alien with income
effectively connected with
a U.S. trade or business, you can generally claim the same credits as on Form 1040NR.
Line 21. Other taxes.
Enter on line 21 any other taxes such as those listed below. See the instructions for Form 1040 or Form 1040NR for
information on the additional
taxes to include on this line.
-
Self-employment tax. This tax applies only to resident aliens. Use Schedule SE (Form 1040), Form 1040-PR, or Form 1040-SS to
figure your self-employment tax. The self-employment tax rate for 2007 is 15.3%. This includes a 2.9% Medicare tax and a 12.4%
social security tax.
For 2007, the maximum amount of self-employment income subject to social security tax is $97,500. There is no limit on the
amount of self-employment
income subject to the Medicare tax.
-
Social security and Medicare tax on tip income not reported to employer. If you received tips of $20 or more in any month and you
did not report the full amount to your employer, you must generally pay this tax. See the Form 1040 instructions or the Form
1040NR
instructions.
-
Additional tax on IRAs, other qualified retirement plans, etc. If you received a distribution from or made an excess contribution
to one of these plans, you may owe this tax. See the Form 1040 instructions or the Form 1040NR instructions.
-
Household employment taxes. If you pay cash wages to any one household employee in 2007, you may owe this tax. See the Form 1040
instructions or the Form 1040NR instructions.
-
Tax on accumulation distribution of trusts. Use Form 4970 to figure the tax.
-
Tax from recapture of investment credit. Use Form 4255 to figure the tax.
-
Tax from recapture of low-income housing credit. Use Form 8611 to figure the tax.
-
Tax from recapture of federal mortgage subsidy. Use Form 8828 to figure the tax.
-
Tax from recapture of qualified electric vehicle credit. For details on how to figure the tax, see Pub. 535, Business
Expenses.
Line 24. Tax.
You must generally enter 30% of the amount on line 23. However, if you are entitled to a lower rate or an exemption
from tax because of a treaty
between your country and the United States, attach a statement showing your computation. Also include the applicable treaty
and article(s).
Line 28. Other payments.
Include on line 28 any of the following payments. See the instructions for Form 1040 or Form 1040NR for details on
other payments to include on
this line.
-
Earned income credit (EIC). This credit applies only to resident aliens. Enter any EIC that is due to you.
-
Additional child tax credit to which you are entitled.
-
U.S. income tax paid at previous departure during the tax period. Enter any tax you paid if you previously departed the United
States during this tax period.
-
Excess social security and RRTA tax withheld. If you had two or more employers in 2007 who together paid you more than $97,500 in
wages, too much social security tax and tier 1 railroad retirement (RRTA) tax may have been withheld. See Pub. 505, Tax Withholding
and Estimated Tax.
For 2007, the maximum social security tax and
tier 1 RRTA tax is $6,045.
-
Credit for federal tax paid on fuels. Use Form 4136 to figure the credit.
Form 1040-C is not considered a valid return unless you sign it. You may have an agent in the United States prepare and sign
your return if you are
sick or otherwise unable to sign. However, you must have IRS approval to use an agent. To obtain approval, file a statement
with the IRS office where
you file Form 1040-C explaining why you cannot sign.
If an agent (including your spouse) signs for you, your authorization of the signature must be filed with the return.
Paid preparers must sign.
Generally, anyone you pay to prepare your return must sign it in the space provided. The preparer must also give you
a copy of the return for your
records. Someone who prepares your return but does not charge you should not sign your return.
If you have questions about whether a preparer is required to sign your return, please contact an IRS office.
Line 1, column (c).
Enter amounts shown as federal income tax withheld on your Forms W-2, 1099, 1042-S, etc. Be sure to enter the amount
withheld on the same line on
which the related income is reported.
Line 1, column (d).
Resident aliens should include income that would be included on Form 1040, such as wages, salaries, interest, dividends,
rents, alimony, etc.
Line 1, column (e).
Enter nonresident alien income effectively connected with a U.S. trade or business. Nonresident aliens should include
income that would be included
on page 1 of Form 1040NR or Form 1040NR-EZ. This includes:
-
Salaries and wages (generally shown in box 1 of Form W-2),
-
The taxable part of a scholarship or fellowship grant,
-
Business income or loss (income that would be included on Schedule C (Form 1040) or Schedule C-EZ
(Form 1040) as an attachment to Form 1040NR), and
-
Any other income considered to be effectively connected with a U.S. trade or business. See the Instructions for Form 1040NR
for
details.
Line 1, column (f).
Enter nonresident alien income from U.S. sources that is not effectively connected with a U.S. trade or business,
including:
-
Interest, dividends, rents, salaries, wages, premiums, annuities, compensation, remuneration, and other fixed or determinable
annual or
periodic gains, profits, and income.
-
Prizes, awards, and certain gambling winnings. Proceeds from lotteries, raffles, etc., are gambling winnings. You must report
the full
amount of your winnings. You cannot offset losses against winnings and report the difference.
-
85% of the U.S. social security benefits you receive. This amount is treated as U.S. source income not effectively connected
with a U.S.
trade or business and is subject to the 30% tax rate, unless exempt or taxed at a reduced rate under a U.S. tax treaty. Social
security benefits
include any monthly benefit under Title II of the Social Security Act or part of a tier 1 railroad retirement benefit treated
as a social security
benefit. They do not include any supplemental security income (SSI) payments.
Line 5.
Include on line 5, column (d), (e), or (f), all income you received during the year that is exempt by Code (see examples
below). Also include on
line 5 income that is exempt by treaty, but only if the income is reportable in column (d) or (e). Attach a statement that
shows the basis for the
treaty exemption (including treaty and article(s)).
Note.
Do not include on line 5 income reportable in column (f) that is exempt by treaty. Instead report these amounts on line 1
of column (f) and
explain on the statement required for Part III, line 24, the basis for the reduced rate or exemption (see page 5) .
Be sure to include on line 5, column (c), any amount withheld on exempt income you are reporting on line 5, column
(d), (e), or (f). For example,
include amounts that were withheld by a withholding agent that was required to withhold due to lack of documentation. However,
do not include amounts
reimbursed by the withholding agent.
Do not include on lines 1 through 4 any amount that is reportable on line 5.
Exempt income for nonresident aliens.
The following income received by nonresident aliens is exempt from U.S. tax.
-
Interest on bank deposits or withdrawable accounts with savings and loan associations or credit unions that are chartered
and supervised
under federal or state law, or amounts held by an insurance company under an agreement to pay interest on them, if the income
is not effectively
connected with a U.S. trade or business. Certain portfolio interest on obligations issued after July 18, 1984, is also exempt
income.
-
Your personal service income if:
-
You were in the United States 90 days or less during the tax year,
-
You received $3,000 or less for your services, and
-
You performed the services as an employee of or under contract with a nonresident alien individual, foreign partnership, or
foreign
corporation not engaged in a U.S. trade or business; or for a foreign office of a U.S. partnership, corporation, citizen,
or resident.
-
Capital gains not effectively connected with a U.S. trade or business if you were in the United States fewer than 183 days
during the tax
year. Exception: Gain or loss on the disposition of a U.S. real property interest is not exempt.
-
U.S. bond income. Your income from series E, EE, H, or HH U.S. savings bonds that you bought while a resident of the Ryukyu
Islands
(including Okinawa) or the Trust Territory of the Pacific Islands (Caroline and Marshall Islands).
-
Annuities you received from qualified annuity plans or trusts if both of the following conditions apply:
-
The work that entitles you to the annuity was performed either (1) in the United States for a foreign employer and you met
the conditions
under 2 earlier, or (2) outside the United States, and
-
When the first amount was paid as an annuity, at least 90% of the employees covered by the plan (or by the plan or plans that
included the
trust) were U.S. citizens or residents.
-
The following dividends from a mutual fund if they are not effectively connected with your U.S. trade or business.
-
Interest-related dividends.
-
Short-term capital gain dividends if you are present in the United States for less than 183 days during the tax year.
-
U.S. source dividends paid by certain foreign corporations if they are not effectively connected with your U.S. trade or business.
See
Second exception under Dividends in chapter 2 of Pub. 519 for the definition of foreign corporation and how to figure the amount
of excludable dividends.
Certain items of income may be exempt from federal tax under a tax treaty. For more details, see
Pub. 901.
Schedule B—Certain Gains and Losses From Sales or Exchanges of Nonresidents' Property Not Effectively Connected With a U.S.
Trade or Business
If you are a nonresident alien, use Schedule B to figure your gain or loss from the sale or exchange of property not effectively
connected with a
U.S. trade or business. Include the following types of income. For more information on these types of income, see Pub. 519
and the Instructions for
Form 1040NR.
1. Capital gains.
Capital gains in excess of capital losses if you were in the United States at least 183 days during the year.
Note.
The gain or loss on the disposition of a U.S. real property interest is considered effectively connected and should be shown
in Schedule A,
column (e).
2. Income other than capital gains.
-
Gains on the disposal of timber, coal, or U.S. iron ore with a retained economic interest.
-
Gains from the sale or exchange of patents, copyrights, secret processes and formulas, goodwill, trademarks, trade brands,
franchises, and
other like property, or of any interest in any such property. The gains must result from payments for the productivity, use,
or disposition of the
property or interest.
Original issue discount (OID).
If you sold or exchanged the obligation, include only the OID that accrued while you held the obligation minus the
amount previously included in
income. If you received a payment on the obligation, see Pub. 519.
Schedule C—Itemized Deductions
If you are a resident alien, you can take the deductions allowed on Schedule A of Form 1040. See the Schedule A (Form 1040)
instructions. Be sure
to consider the tax law changes noted on page 1.
If you are a nonresident alien and have income effectively connected with a U.S. trade or business, you can take the deductions
allowed on Schedule
A of Form 1040NR. See the Schedule A (Form 1040NR) instructions. If you do not have income effectively connected with a U.S.
trade or business, you
cannot take any deductions.
Note.
Residents of India who were students or business apprentices may be able to take the standard deduction. See Pub. 519 for
details.
Line 2.
If the amount on
Form 1040-C, line 17, is over $156,400 ($78,200 if married filing separately), use the worksheet on page 7 to figure the amount
to enter on line 2.
Schedule D—Tax Computation
Standard Deduction (Group I only)
If you do not itemize your deductions, you can take the 2007 standard deduction listed below for your filing status.
Filing
Status |
Standard
Deduction |
Married filing jointly or
Qualifying widow(er)
|
$10,700*
|
Head of household
|
$7,850*
|
Single or Married filing separately
|
$5,350*
|
*To these amounts, add the additional amount shown next.
|
Additional amount for the elderly or the blind.
An additional standard deduction amount of $1,050 is allowed for a married individual (whether filing jointly or separately)
or a qualifying
widow(er) who is age 65 or older or blind in 2007 ($2,100 if the individual is both age 65 or older and blind, $4,200 if both
spouses are age 65 or
older and blind). An additional standard deduction amount of $1,300 is allowed for an unmarried individual (single or head
of household) who is age 65
or older or blind ($2,600 if the individual is both age 65 or older and blind).
Note.
If you were born before January 2, 1943, you are considered to be age 65 or older in 2007.
Limited standard deduction for dependents.
If you can be claimed as a dependent on another person's 2007 return, your standard deduction is the greater of:
To this amount add any additional amount for the elderly or the blind.
Include in the total on line 6 or line 14, whichever applies, any tax from Form 4972, Tax on Lump-Sum Distributions, and Form
8814, Parents'
Election To Report Child's Interest and Dividends.
Itemized Deduction Worksheet (keep for your records)
|
1.
|
Add the amounts in columns (b) and (d) of Schedule C, line 1.
|
1.
|
|
2.
|
Enter the total amount included on line 1 above for medical and dental expenses, investment interest
expense, casualty or theft losses of personal use property, casualty and theft losses from income-producing property, and
gambling losses
|
2.
|
|
3.
|
Subtract line 2 from line 1. If zero or less, stop here; enter the amount from line 1 above on
Schedule C, line 2
|
3.
|
|
4.
|
Multiply line 3 above by 80% (.80)
|
4.
|
|
|
|
5.
|
Enter the amount from Form 1040-C, line 17
|
5.
|
|
|
|
6.
|
Enter: $156,400 ($78,200 if married filing separately)
|
6.
|
|
|
|
7.
|
Subtract line 6 from line 5. If zero or less, stop here; enter the amount from line 1 above on Schedule C, line 2
|
7.
|
|
|
|
8.
|
Multiply line 7 above by 3% (.03)
|
8.
|
|
|
|
9.
|
Enter the smaller of line 4 or line 8
|
9.
|
|
10.
|
Divide line 9 by 3.0
|
10.
|
|
11.
|
Subtract line 10 from line 9
|
11.
|
|
12.
|
Total itemized deductions. Subtract line 11 from line 1. Enter the result here and on Schedule
C, line 2
|
12.
|
|
Enter on line 7 or 15, whichever applies, any tax from Form 6251, Alternative Minimum Tax—Individuals.
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