Category Archives: Tax Treaty

Substantial Presence Test, Treaty Income Exclusion and Covid-19

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IRS has issued a revenue procedure that allows the use of the medical condition exception on Form 8843 to except 60 consecutive days spent in the U.S.  from counting towards presence in the U.S.  during the “COVID-19 Emergency Period”. The sixty-day time period that may be excepted may start on a date of the individual’s choice during a time period between February 1, 2020, and on or before April 1, 2020.

The same procedure provides for an individual to exclude those days of presence in order to claim benefits under an income tax treaty with respect to services income.

This revenue procedure, Rev. Proc. 2020-20 will be published in Internal Revenue Bulletin to be issued on May 11, 2020.

This might affect withholding for 2020, the income tax form to be filed for 2020 (1040NR or 1040).  As appropriate, individuals may want to adjust their tax planning and notify employers. Some individuals are eager to meet the SPT and file on Form 1040, others prefer not to become tax residents filing on Form 1040 any sooner than required.

2019 Versions of Case Studies (Sample Returns) by Jean Mammen, EA

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Now available on website http://www.1040nror1040.com are the three case studies, on the 2019 forms.

On the website, click on the tab labelled Sample Returns.

2017 forms: The upper entries bring up the 2017 versions of the case studies.

2019 forms: The lower entry brings up the 2019 versions of the case studies.

For 2019, Schedule 1 of Form 1040, used in the tax return of Josef Masaryk, is new and changed from 2018 (not illustrated).  The 2018 form introduced Schedule 1, but the treaty tax exclusion was still subtracted on Line 21. In 2019, Schedule 1, Line 8 is where “Other Income”, or income changes, are entered. They carry to Form 1040, Line 7a.

Beginning with 2018 tax returns, generally TCJA and other tax law changes affected both Form 1040 and Form 1040NR in the same way. These included restrictions on deducting state and local income tax payments, suspending deductions for personal exemptions, and disallowing job-related deductions for employees.

Compare the bottom line on each Case Study  for 2017 and 2019!

 

6th Edition – Available Now

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The 6th edition of 1040NR? or 1040?  U.S. Income Tax Returns for Visa Holders   +   International Organization and Foreign Embassy Employees is available for ordering now.

The Sixth presents   new information on

-things to check for when deciding if a treaty provision applies in a specific situation, especially for those consulting Table 2

-Competent Authority Agreements

-Competent Authority determinations and ruling letters

And the new updated charts on:

-1042-S codes.

-Comparison of Form 8938 and FBAR requirements

-and more…

Ordering sites:

On the Amazon website, US and Europe

http://https//www.amazon.com/dp/1543050948,

on the CreateSpace estore at

https://www.createspace.com/6926188

When ordering on Amazon, choose carefully so that you order the 6th edition. It is now the first edition listed among the various editions.

The rosette is in the upper left-hand corner. Its color is like the sky when the sun is near the horizon, at dawn or dusk.

Next year I hope the IRS will post final versions of forms and instructions earlier, so the the next edition will be available to you before the start of filing season.

Determining Treaty Benefits, by Jean Mammen, EA

 
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In September, 2016, the IRS issued an updated Publication 901, U.S. Tax Treaties.

It contains the narrative information traditionally present in this publication, but not the list of countries with which the U.S. has tax treaties, nor the usual tables.

That list of income tax treaty countries, the traditional tables, and a new Table 4 on Limitation on Benefits (LOB) are now best reached through clicking in a new, extensive article titled ‘Tax Treaty Tables’.

On the www.irs.gov website, enter the search term: Tax Treaty Tables. This will take you to the article.

NOTE: The links in this blogpost are not live. Please do this by hand on your own computer. I am showing the links for information purposes only. Right now, hackers are just too active!

https://www.irs.gov/individuals/international-taxpayers/tax-treaty-tables?_ga=1.241664642.1464907806.1433460939

The article states that the tables were moved out of Publication 901 in order to make it easier to update them. Note that Publication 901 had not been issued since 2013. Also note that the U.S. Senate has not acted upon bilateral income tax treaties for a number of years.  There are a half-dozen or more awaiting Senate action.

Note: The heading for each table states: You must meet all of the treaty requirements before the item of income can be exempt from U.S. income tax.

You can find the treaty text and its technical explanation by going to the www.irs.gov website, entering into the search box: (country name) tax treaty, and clicking through to the list of texts of treaties, protocols, and technical explanations for the bilateral income tax treaty(ies) between the U.S. and that country,

Table 1. Withholding Tax Rates on Income Other Than Personal Services Income Under Chapter 3, Internal Revenue Code and Income Tax Treaties

Income tax and withholding rates including rates for interest, dividends, royalties, pensions and annuities, and social security payments.

Table 2. Compensation for Personal Services Performed in United States Exempt from U.S. Income Tax Under Income Tax Treaties.

This table lists the different kinds of personal service income that may be fully or partly exempt from U.S. income tax. You must meet all of the treaty requirements before the item of income can be exempt from U.S. income tax, including the requirement that the income be remitted to your country of residence, if that is a requirement under your treaty with the United States.

Table 3. List of Tax Treaties

Updated through October 31, 2015.

Table 4. Limitation on Benefits (LOB)

The ‘Limitation on Benefits’ article is an anti-treaty-shopping provision intended to prevent residents of third countries from obtaining benefits under a treaty that were not intended for them.

Table 4 indicates treaty provisions  where there may be safe harbors or restrictions related to benefits for Publicly Traded Companies, Tax Exempt Organizations and Pension Funds, Stock Ownership and Base Erosion Test, Active Business, Discretionary Determination, Derivative Benefits, “Other”,  and Triangular Provision.

Enjoy!

Answering the New Q on Form 1040NR Schedule OI, Line 3, By Jean Mammen, EA

 
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Line 3 on Schedule OI asks:

Are you claiming treaty benefits pursuant to a Competent Authority determination? Y/N
If “Yes”, attach a copy of the Competent Authority determination letter to your return.

“No” is most likely going to be your answer. But a Competent Authority Agreement (CAA), which sounds similar, just might have been a factor. If so, it could be helpful to attach a statement explaining the facts and circumstances. See China example, below.

If “Yes” is your answer, attach the determination letter. This will have been provided in answer to a request for competent authority assistance, perhaps a ruling, by a taxpayer resident in a country covered by a bilateral income tax treaty. The determination took many months and much effort to obtain. The taxpayer will have the letter.

A U.S. taxpayer would request assistance from the U.S. Competent Authority or the Competent Authority of a treaty country, if they thought that the actions of the U.S., a treaty country, or both, cause or will cause a tax situation (such as harm to the taxpayer) not intended by the treaty between the two countries. The U.S. Competent Authority representative is the Deputy Commissioner (International) of the IRS’ Large Business and International Division. The Deputy Commissioner may delegate action to another official. For how a taxpayer requests assistance, see IRS Rev. Proc. 2015-40, dated August 31, 2015.

A list of tax authorities with CAA with the U.S., and hyperlinks to the text of each CAA is posted on the IRS website under Competent Authority Agreements.  See list of countries below. Each tax authority designates an office or individual to whom questions may be addressed, and from whom specific determinations or rulings may be sought.

A Competent Authority Agreement (CAA) might be negotiated to:

– set a general framework for addressing tax treaty issues, including the interaction with treaty articles on Mutual Agreement Procedures (MAP) and arbitration,

– specify how an Intergovernmental Agreement (IGA) on information exchanges that meet the provisions of FATCA (Foreign Account Tax Compliance Act) will be implemented,

– give a general answer on an issue that comes up repeatedly about an article in a bilateral tax treaty, as some issues on fellowships, scholarships, pensions, and exempt/exclusion periods. These situations might benefit from a statement attached to the income tax return that explains how the general explanation in the CAA applies to the taxpayer’s situation.

Examples of situations where a statement linking the CAA to the taxpayer’s situation could be helpful:

The U.S.-China CAA concerns Professors and Teachers covered by Article 19. If they meet the conditions, their remuneration for teaching, lectures, and research is exempt from taxation for three years from their date of arrival in the host country. The CAA specifies that the three-year exemption period may be interrupted by a suspension if the individual discontinues the activity and departs the host state; if the individual then returns and again meets the conditions, the suspension ends and the three-year exemption period continues to run.

An attached statement might cite the CAA and the Article (19) it clarifies, and then present the dates: The date the exemption period started and the date it would have ended three years later. The dates between which the three-year period was suspended because the individual had departed the U.S. and ceased the activity. The new scheduled end date for the exemption period, that is, the date reached when the suspended days are added to the original end date.

The U.S.- Belgium CAA on fellowship payments seeks to clarify which treaty article applies to tax treatment of the payments.

The U.S. – Austria CAA on scholarships seeks to clarify what rules apply to determining if a treaty exemption applies.

Some CAA on pensions are of interest mainly to the pension plans, rather than individuals. The U.S. – U.K. CAA discusses U.K. plans where certain dividends received by the plan qualify for tax exemption. A U.S. – Belgium CAA names certain types of Belgian retirement plans which correspond to certain U.S. plan types, and thus would have the same tax treatment in the U.S. on contributions to the plan, or distributions from the plan. Specific non-U.S. pension plans may have applied for and received a letter of determination. If they have one, they might so inform members of their retirement plan.

Countries/Entities which have a CAA with the U.S. in January 2016
Note: There are many fewer CAA than bilateral income tax treaties. The number of CAA will grow as more countries and entities negotiate a CAA on the operations of a FATCA-related IGA.

Australia, Austria, Belgium, Canada, Cayman Islands, China, Czech Republic, Denmark, Finland, Germany, Gibraltar, Guernsey, Hungary, Iceland, India, Ireland, Isle of Man, Jamaica, Japan, Latvia, Liechtenstein, Luxembourg, Malta, Mauritius, Mexico, Netherlands, New Zealand, Norway, Republic of Estonia, Slovenia, Spain, South Africa, Sweden, Switzerland, United Kingdom.

Green Cards and Wages from an Embassy or International Organization: U.S. Tax Court Explains It All , by Jean Mammen, EA

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Sole Abrahamsen, a green card holder, and her husband, Clifford Abrahamsen were the Petitioners in 142 T.C. No. 22, decided on June 9, 2014.

This green card holder and her husband had not declared her wages from work at the Finnish Mission to the United Nations on several years of tax returns. When queried, they claimed the wages were exempt from U.S. income tax under one or another exception.

Green cards holders (resident aliens) are taxed the same as U.S. citizens: gross income “from whatever source derived”, IRC 61(a), minus exemptions, adjustments, deductions, credits or other items allowed in the tax code to determine taxable income and tax liability, as provided in IRC 62, 63, 67, and 68, code sections on credits, and treaties that provide for exemptions. The tax code recognizes treaties as equivalent authority by IRC 894 and IRC 7852(d).

The plaintiffs cited several reasons why the wife’s wages were not taxable:

  • The U.S. tax code:  IRC 893(a) or 7701(b)(5)(B). Taxpayers often must show that the other country could and would offer equivalent tax treatment to a U.S. citizen or resident.
  • Three treaties:
    • The U.S.- Finland Tax Treaty
    • The Vienna Convention on Diplomatic Relations
    • The Vienna Conventions on Consular Relations
  • And the International Organizations and Immunities Act

The June 9, 2014, U.S. Tax Court ruling analyzed the petitioners’ arguments and dismissed each one as not applicable.

The court summarized its ruling:

Held: I.R.C. sec. 893 does not apply to wages P-W (plaintiff’s wife) received from the Mission during 2004-09 because she had previously executed a valid waiver of rights, privileges, exemptions, and immunities.

Held, further, neither the U.S.-Finland tax treaty, the Vienna Convention on Diplomatic Relations, the Vienna Convention on Consular Relations, nor the International Organizations Immunities Act provides an income tax exemption to permanent U.S. residents working in nondiplomatic positions for international organizations.

Click below for the full text of the Tax Court ruling: https://www.ustaxcourt.gov/InOpHistoric/AbrahamsenDiv.Lauber.TC.WPD.pdf

The court explained its ruling on the various claims as follows:

IRC Section 893: It sets the criteria for excluding foreign government and international organization compensation from U.S. taxation. Taxpayers often must show that the other treaty signatory country could and would offer equivalent tax treatment to a U.S. citizen or resident.

The IRS produced a copy of the original I-508 waiver signed by the plaintiff.  By signing the waiver, an individual working in the U.S. under visa A, G or E (treaty trader or investor) states that they wish to become a lawful permanent resident alien and so are giving up any rights, privileges and exemptions associated with that work status.

The court ruling stated:

“petitioners cite no statute or judicial precedent to support their assertion that we can ignore a validly executed waiver. We accordingly conclude that the waiver was effective as of January 29, 1992. All income that Ms. Abrahamsen received from the Mission after that date is ineligible for the section 893 exemption and is subject to Federal income tax unless some other exemption applies. See Ying v. Commissioner, 99 T.C. 273, 293 (1992)”

U.S. – Finland Treaty

The savings clause in the treaty made the wages paid by the Finnish mission to the plaintiff’s wife taxable by the country where the petitioner was resident, despite the provisions of any other treaty article, such as the one on government work.

The Tax Court opinion stated:

“Specifically, petitioners contend that tax exemption is afforded by article 19 of the Treaty, which concerns remuneration received for “Government Service.” “Article 1, paragraph 3 of the Treaty contains a “saving clause” that over-rides certain of its other provisions. This saving clause provides that “[n]otwithstanding any provision of the [Treaty] except paragraph 4, a Contracting State may tax a person who is treated as a resident under its taxation laws.” Treaty, Tax Treaties (CCH) para. 2945.01, at 73,011. Article 1, paragraph 4 states that benefits conferred under article 19, dealing with government service, are unaffected by the saving clause, but only in the case of “individuals who are neither citizens of, nor lawful permanent residents in, that State.” Ibid.

 “During the years at issue Ms. Abrahamsen was a “lawful permanent resident in” the United States, and the exclusion set forth in article 1, paragraph 4, does not apply. The saving clause is thus operative, and it authorizes the United States to tax any person “who is treated as a resident under its taxation laws.” As a permanent resident, Ms. Abrahamsen was a “resident” for U.S. tax purposes. See sec. 7701(b)(1)(A)(i). Thus, regardless whether her compensation from the Mission was derived from “Government Service” within the meaning of article 19, her wages were subject to Federal income tax under the saving clause. 3

3 The Treaty was amended in 2006. See 2006 Protocol to the 1989 U.S.-Fin. Income Tax Treaty, May 31, 2006, Tax Treaties (CCH) para. 2946. This amendment, which applies to petitioners’ Federal income tax liabilities for 2008-09, see id. art. IX, does not affect the analysis. Under the 2006 amendment, the United States may tax Ms. Abrahamsen as a “resident.” See id. arts. I and II. Because she was a U.S. permanent resident during 2008-09, she is covered by the saving clause. See id. art. I(4) and (5).

Diplomatic Status

The Vienna Conventions provide many protections for diplomats and consuls. The Court found that Ms. Abrahamsen was neither one.

“Petitioners argue that Ms. Abrahamsen’s wages were exempt from taxation pursuant to other provisions of international law. Central to these arguments is the assertion that Ms. Abrahamsen held diplomatic status for the years at issue. Petitioners provide no support for this assertion. Rather, they simply describe her duties and conclude that her “position with the Mission is clearly diplomatic in nature.”

“The evidence respondent provided shows this assertion to be incorrect, at least for U.S. tax purposes. During the relevant period Ms. Abrahamsen was employed by the Mission as either an adviser or an attaché. The United Nations did not notify the United States that she held a diplomatic title with regard to either position, and her name did not appear on the List of Officers Entitled to Diplomatic Privileges and Immunities maintained by the U.S. Mission to the United Nations. Concluding as we do that Ms. Abrahamsen did not have diplomatic status or rank, we address petitioners’ arguments briefly.

Petitioners posit that article 34 of the Vienna Convention on Diplomatic Relations (VCDR) exempts Ms. Abrahamsen’s wages from taxation. Convention on Diplomatic Relations and Optional Protocol on Disputes, U.S.-Vienna, Apr. 18, 1961, 23 U.S.T. 3227. However, article 34 applies only to a “diplomatic agent.” Article 1 of the VCDR defines a “diplomatic agent” as a “head of the mission or a member of the diplomatic staff of the mission.” “Diplomatic staff” is defined to mean “the members of the staff of the mission having diplomatic rank.” Because Ms. Abrahamsen did not have diplomatic rank, she was not a “diplomatic agent” under the VCDR, and article 34 therefore did not exempt her wages from taxation. 4

4 There is no merit to petitioners’ suggestion that article 49 of the Vienna Convention on Consular Relations (VCCR) exempts Ms. Abrahamsen’s wages from U.S. tax. The VCCR does not apply to the Mission. See City of New York v. Permanent Mission of India to United Nations, 533 F. Supp. 2d 457, 460 (S.D.N.Y. 2008) (holding that “[t]he tax status of the consular portions of the premises is controlled by Article 32 of the Vienna Convention on Consular Relations” and that “[t]he tax status of the U.N. Mission portions of the premises is controlled by the Vienna Convention on Diplomatic Relations”), rev’d on other grounds, 618 F.3d 172 (2d Cir. 2010).

International Organization and Immunities Act This U.S. law provides for the rights, privileges and immunities, including exemptions from certain taxes, enjoyed by international organizations and their staff members who are not residents, and/or, in a few case, not citizens, of the country where they are located. These are similar to the rights, privileges, and immunities accorded to foreign government officials.

The court ruling states:

“Petitioners next argue that Ms. Abrahamsen’s wages are exempt from tax pursuant to the International Organizations Immunities Act (IOIA). See 22 U.S.C. sec. 288d (2006). Even if the IOIA applied to Ms. Abrahamsen, which respondent disputes, the law does not confer the benefits petitioners claim. Under the IOIA, employees of foreign governments and international organizations are “immune from suit and legal process relating to acts performed by them in their official capacity and falling within their functions as such representatives, officers, or employees.” 22 U.S.C. sec. 288d(b). This case arises from Ms. Abrahamsen’s earning income within the United States as a permanent resident of the United States. She is not being subjected to liability for any act performed in her official capacity, and the earning of income is not part of her official function as a representative of Finland to the United Nations. Therefore, the IOIA does not exempt her wages from Federal income tax. See United States v. Coplon, 84 F. Supp. 472, 474 (S.D.N.Y. 1949) (IOIA “does not confer general diplomatic status immunity” but confers immunity on U.N. officers and employees only “for the category of acts performed by them in their official capacity and falling within their functions as such officers or employees”); sec. 1.893-1(b)(3), Income Tax Regs. (quoting the relevant provisions of the IOIA, including that “[n]o person shall, by reason of the provisions of this title, be considered as receiving diplomatic status * * * other than such as are specifically set forth herein”).

Note: Revenue Ruling 2007-60 is not cited by the court and would not apply. It states that a treaty-based tax exemption continues to exist after an IRC section 247(b) waiver is signed that makes someone subject to the tax code and unable to claim income exclusion under the tax code.

The court held that the U.S.- Finland Treaty did not exempt the wages paid to the plaintiff’s wife from U.S. taxation.

The treaty founding the United Nations does not include an exemption from U.S. taxation on U.N. wages for green card holders (non-citizen U.S. residents), unlike the founding treaties of the IMF, IBRD, and IADB.

The I-508 Waiver: Revenue Ruling 2007-60 states:

Alien individuals employed by a foreign government or international organization in the United States, who file the waiver provided by section 247(b) of the Immigration and Nationality Act (USCIS Form I-508) will be entitled to any tax exemption conferred under the provisions of an applicable income tax treaty, consular agreement, or international agreement that is still in force, to the extent the application of the exemption is not dependent upon the Internal revenue laws of the United States.

References cited

https://www.ustaxcourt.gov/InOpHistoric/AbrahamsenDiv.Lauber.TC.WPD.pdf

IRC 61          Gross income

IRC 62          Adjusted Gross Income

IRC 63          Taxable Income

Standard deduction, personal exemptions,   itemized  deductions

IRC 67          Miscellaneous Itemized deductions, and other Schedule A deductions

IRC 68          Overall Limitation on Itemized Deductions

Credits           Look up specific credit in the tax code

IRC 7701(b)(1)(A)(i) Resident of the U.S.

IRC 893(a) or 7701(b)(5)(8) Non-taxability of foreign government wages

IRC 894, 7852(d)    Tax Treaty provisions equivalent to tax code

Rev. Rul. 2007-60    Provisions of a treaty are not affected by I-508 waiver

The Vienna Conventions on Diplomatic and Consular Relations

The International Organization Immunities Act  Public Law 291, 12/29/1945

22 U.S.C, section 288(d)

E.O. 9698     Lists the public international organizations entitled to enjoy certain                               privileges, exemptions and immunities

List is available as:

State Department 9 FAM 41.24 Exhibit I, and

National Archives list found by searching on “E.O. 9698”

 

READ THE VISA FOR HELP WITH TAX TREATMENT, by Jean Mammen, EA

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The schematic of a U.S. entry visa (below) shows where to find information useful in determining the correct tax treatment of the visa holder. (Illustration from the U.S. Department of State website, visa FAQ)

how-to-read-a-visa  First, a puzzling entry: the letter ‘R’ printed below the words ‘Visa Type/ Class.  It does not speak about the visa.  It says the passport is a Regular passport, not one for someone travelling as an Official, or a Diplomat, or a family member of an official or diplomatic traveler. Visa Type/Class is shown to the right of the passport indicator (usually R),  and below the words Type/Class.

The passport in which the visa has been stamped will likely be from the country of citizenship of the visa holder. The location where the visa was issued – top, just to the right of the individual’s photo – is likely to be in the country where the visa holder was resident when the visa was issued.

Benefits in bilateral income tax treaties often apply to anyone who was a resident of one of the two countries immediately before the person entered the other country. Some treaties do not state ‘immediately before’. Some treaties apply only to citizens, in some cases without regard to residence.

Knowing the location where the visa was issued, the date the visa was issued, and the date the person entered the U.S., helps clarify whether a visa holder may claim a treaty benefit. The date the person entered the US is often stamped on the passport page facing the visa. It is also important to know if the visa holder had earlier visas, perhaps in another passport, and to know the visa type  and date issued and the purpose of the visit.

Using this information, check the treaty or tables in Publication 901 for:

-potential treaty benefits for the visa holder, and

-if the visa holder qualifies now for the treaty benefit, or,

-if the visa holder does not now meet all the qualifications  for a benefit   — –

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Which Form 1040NR income tax filers may claim a spouse or dependent? by Jean Mammen, EA

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A look at form 1040NR shows that it must be possible for some nonresident taxpayers to claim a spouse or dependents. The section labelled Exemptions has boxes to check and lines to complete for  7b Spouse, and 7c Dependents, as well as 7a, Yourself.

If you have heard that non-residents must file alone, whether as single or ‘other married’ (treated as married filing separately), these lines are puzzling. And perhaps tax software seems not to let you place a spouse or child on the completed 1040NR return.

The answer lies partly in the U.S. tax code, and partly in bilateral tax treaties.

Look above Exemptions at the Filing Status section of 1040NR. Three choices list ‘resident’ of a specific country, or a personal status (QW- qualifying widow/er). The countries are Canada, Mexico, or U.S. national, and South Korea.  Residents of those countries may be able to claim a spouse or dependent.  A resident of India who is a student or business apprentice may also be able to claim a spouse or dependents on the tax return.

(A U.S. national, for tax purposes, is someone who owes sole allegiance to the U.S., was born in American Samoa or the Commonwealth of the Northern Mariana Islands, and elected (chose) to be treated as a U.S. national and not a U.S. citizen.)

Some conditions apply equally to each of these situations and some are specific to only one situation.

All people for whom a personal exemption will be claimed on Form 1040NR:

Must have a social security number, or other Individual Taxpayer Identification Number (ITIN), or have a W-7 ITIN application attached to the tax return.

A spouse must not have any U.S. source gross income.

A spouse must not be claimed on another U.S. income tax return. This would disqualify a spouse who is under age 19, or under age 24 and a full-time student, and has been claimed as a dependent on a family member’s tax return.

Most spouses are shown on the last line in the Filing Status section, below the numbered boxes. That line is divided into i, ii, and iii, for first name, last name, and either SSN, ITIN, or a literal (letters) such as NRA.

An Indian spouse is shown in the Dependents section.

A potential dependent must be a U.S. citizen, or a resident of the U.S., Canada, or Mexico. The tax code wording is: a resident of the United States or a country contiguous to the United States. IRC 152(b)(3)(A).   I refer to these three countries as North America.  The first dictionary definition of ‘contiguous’ is touching, in contact. A country contiguous to the U.S. shares a common land border with the U.S.

Country-specific requirements:

South Korea residents: A claimable spouse or dependent must have lived in the U.S. in the same household as the taxpayer for some of the tax year. The amount of the personal exemption that may be claimed is pro-rated according to the ratio of U.S. source income effectively connected to a U.S. trade or business as defined in IRC 864( c ), over total worldwide income.  See Article 4(7) of the U.S. Korea treaty.

Indian Students and Business Apprentices:

A claimable spouse or dependent must meet the conditions in the U.S. – India Treaty article 21(2).  The spouse is claimed on a line for Filing Status 7c, Dependents, not by checking 7b, spouse. Dependents must not have entered the U.S. on an F-2, J-2, or M-2 visa.

The U.S. –  India tax treaty also allows Indian students and business apprentices to claim the standard deduction instead of itemizing deductions, if that is more advantageous.  There is a special worksheet for comparing and making the choice of standard vs itemized deductions.

See worksheet 5.1 in Publication 519.  Specialized tax software will make this calculation and enter the appropriate choice according to the tax rules.

What are the keys to having an eligible spouse or dependents appear on the tax return?

–entering the country of residence or citizenship into tax software usually invokes the rules that may apply

-additional pop-ups appear at key points, such as choice of filing status,  to allow the entry of a spouse or dependents

Go slowly, or you may go right past an entry point!

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