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IRS Publication 54: Tax Guide for U.S. Citizens and Resident Aliens Abroad

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IRS Publication 54: Tax Guide for U.S. Citizens and Resident Aliens Abroad Userid: CPM Schema: tipx Leadpct: 100% Pt. size: 8 Draft Ok to Print AH XSL/XML Fileid: … ations/P54/2020/A/XML/Cycle08/source (Init. & Date) _______ Page 1 of 36 6:32 - 16-Dec-2020 The type and rule above prints on all proofs including departmental reproduction proofs. MUST be removed before printing. Publication 54 Cat. No. 14999E Contents What's New .................. 2 Department of the Tax Guide for Reminders ................... 2 Treasury Internal Introduction .................. 2 Revenue U.S. Citizens Service Chapter 1. Filing Information ....... 3 Filing Requirements ........... 3 and Resident Nonresident Alien Spouse Treated as a Resident ........ 7 Estimated Tax .............. 8 Aliens Abroad Other Forms You May Have To File ................... 8 Chapter 2. Withholding Tax ........ 8 For use in preparing Income Tax Withholding ........ 8 30% Flat Rate Withholding ....... 9 Social Security and Medicare 2020 Returns Taxes ................. 9 Chapter 3. Self-Employment Tax .... 11 Who Must Pay Self-Employment Tax? ................. 11 Exemption From Dual-Country Social Security and Medicare Taxes .......... 11 COVID-19 Emergency Relief for Self-Employed Individuals ..... 12 Chapter 4. Foreign Earned Income and Housing: Exclusion – Deduction ............... 12 Who Qualifies for the Exclusions and the Deduction? ........ 12 Requirements .............. 12 Waiver of Time Requirements .... 16 COVID-19 Emergency Relief ..... 16 Foreign Earned Income Exclusion .............. 20 Foreign Housing Exclusion and Deduction .............. 22 Form 2555 ............... 23 Chapter 5. Deductions and Credits .............. 24 Items Related to Excluded Income ............... 24 Contributions to Foreign Charitable Organizations ..... 24 Contributions to Individual Retirement Arrangements ..... 24 Taxes of Foreign Countries and U.S. Territories ........... 24 How To Report Deductions ...... 26 Chapter 6. Tax Treaty Benefits ..... 26 Purpose of Tax Treaties ........ 27 Common Benefits ........... 27 Competent Authority Assistance ... 27 Obtaining Copies of Tax Treaties ... 27 Chapter 7. How To Get Tax Help .... 27 Index ..................... 35 Get forms and other information faster and easier at: • IRS.gov (English) • IRS.gov/Korean (한국어) • IRS.gov/Spanish (Español) • IRS.gov/Russian (Pусский) • IRS.gov/Chinese (中文) • IRS.gov/Vietnamese (TiếngViệt) Dec 16, 2020 Page 2 of 36 Fileid: … ations/P54/2020/A/XML/Cycle08/source 6:32 - 16-Dec-2020 The type and rule above prints on all proofs including departmental reproduction proofs. MUST be removed before printing. part of the self-employment tax has increased to $137,700. All net earnings are subject to the Introduction Future Developments Medicare part of the tax. For more information, This publication discusses special tax rules for For the latest information about developments see chapter 3. U.S. citizens and resident aliens who work related to Pub. 54, such as legislation enacted IRA limitations for 2020. You may be able to abroad or who have income earned in foreign after it was published, go to IRS.gov/Pub54. take an IRA deduction if you were covered by a countries. retirement plan and your 2020 modified adjus- If you are a U.S. citizen or resident alien, ted gross income (MAGI) is less than $75,000 your worldwide income is generally subject to ($124,000 if married filing jointly or a qualifying U.S. income tax, regardless of where you are What's New widow(er)). These limits are increased from living. Also, you are subject to the same income COVID-19 waiver of time requirements. Due 2019. If your spouse was covered by a retire- tax filing requirements that apply to U.S. citi- to the global health emergency caused by ment plan, but you were not, you may be able to zens or resident aliens living in the United COVID-19, you may be eligible for a waiver of take an IRA deduction if your 2020 MAGI is less States. Expatriation tax provisions apply to U.S. the minimum time requirements necessary to than $206,000. See the Instructions for Forms citizens who have renounced their citizenship meet the bona fide residence test or physical 1040 and 1040-SR for details and exceptions. and long-term residents who have ended their presence test for the foreign earned income ex- residency. These provisions are discussed in clusion claimed on Form 2555. See COVID-19 chapter 4 of Pub. 519, U.S. Tax Guide for Ali- Emergency Relief, under Requirements, in ens. chapter 4, later. Reminders Resident alien. A resident alien is an individ- Coronavirus tax relief for self-employed in- Denial or revocation of U.S. passport. The ual who is not a citizen or national of the United dividuals paying estimated taxes. The Coro- IRS is required to notify the State Department of States and who meets either the green card test navirus Aid, Relief, and Economic Security taxpayers certified as owing a seriously delin- or the substantial presence test for the calendar (CARES) Act permits self-employed individuals quent tax debt. The State Department is gener- year. to defer the payment of 50% of the social secur- ally prohibited from issuing or renewing a pass- ity tax on net earnings from self-employment port to a taxpayer with seriously delinquent tax 1. Green card test. You are a U.S. resident imposed for the period beginning on March 27, debt. if you were a lawful permanent resident of 2020, and ending December 31, 2020. For If you currently have a valid passport, the the United States at any time during the more information, see chapter 3, later. State Department may revoke your passport or calendar year. This is known as the green Credits for certain self-employed individu- limit your ability to travel. Additional information card test because resident aliens hold im- als. New refundable income tax credits are on passport certification is available at IRS.gov/ migrant visas (also known as green available for certain self-employed individuals Passports. cards). impacted by COVID-19. For more information, see chapter 3, later. Also, see Form 7202 and Individual taxpayer identification number 2. Substantial presence test. You are con- its instructions. (ITIN) renewal. An ITIN for a nonresident alien sidered a U.S. resident if you meet the Standard deduction amount increased. For spouse or dependent used on a prior year in- substantial presence test for the calendar 2020, the standard deduction amount has been come tax return may require renewal. For more year. To meet this test, you must be physi- increased for all filers. The amounts are: information, go to IRS.gov/ITIN. cally present in the United States on at • Single or Married Filing Sepa- Figuring tax on income not excluded. If you least: rately—$12,400; claim the foreign earned income exclusion, the a. 31 days during the current calendar • Married Filing Jointly or Qualifying housing exclusion, or both, you must figure the year; and Widow(er)—$24,800; and tax on your nonexcluded income using the tax • Head of Household—$18,650. rates that would have applied had you not b. A total of 183 days during the current claimed the exclusions. See the Instructions for year and the 2 preceding years, Due to the increase in the standard de- Forms 1040 and 1040-SR and complete the counting all the days of physical pres- duction, you may be required to file a 1 Foreign Earned Income Worksheet to figure the ence in the current year, but only /3 new Form W-4. For more information, amount of tax to enter on Form 1040 or the number of days of presence in the go to IRS.gov/Payments/Tax-Withholding. 1 1040-SR, line 16. If you must attach Form 6251 first preceding year, and only /6 the to your return, use the Foreign Earned Income number of days in the second preced- Exclusion amount. The maximum foreign ing year. earned income exclusion is adjusted annually Tax Worksheet provided in the Instructions for Form 6251. for inflation. For 2020, the maximum exclusion Example. You were physically present in has increased to $107,600. See Limit on Ex- Moving expenses suspended. The deduc- the United States on 120 days in each of the cludable Amount under Foreign Earned Income tion for moving expenses is suspended unless years 2018, 2019, and 2020. To determine if Exclusion in chapter 4. you are a member of the U.S. Armed Forces you meet the substantial presence test for Housing expenses—base amount. The who moves pursuant to a military order and inci- 2020, count the full 120 days of presence in computation of the base housing amount (line dent to a permanent change of station. 2020, 40 days in 2019 (1/3 of 120), and 20 days 32 of Form 2555) is tied to the maximum foreign Tax home for individuals serving in a com- in 2018 (1/6 of 120). Because the total for the earned income exclusion. The amount is 16% bat zone. New rules apply for certain individu- 3-year period is 180 days, you are not consid- of the exclusion amount (figured on a daily ba- als serving in a combat zone in support of the ered a resident under the substantial presence sis), multiplied by the number of days in your U.S. Armed Forces. For more information, see test for 2020. qualifying period that fall within your 2020 tax Tax Home in chapter 4. Even if you do not meet either of these tests, year. For 2020, this amount is $47.04 per day you may be able to choose to be treated as a Form 8938. If you had foreign financial assets ($17,216 per year). See Housing Amount under U.S. resident for part of the year under the in 2020, you may have to file Form 8938 with Foreign Housing Exclusion and Deduction in First-Year choice test, discussed in Pub. 519. chapter 4.
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