The purpose of this section is to provide guidance when working international balance due accounts, including those for taxpayers in U.S. territories, for both Individual Master File (IMF) and Business Master File (BMF) as well as working delinquent return (DelRet) cases.

Assisting taxpayers in resolving their balance due or DelRet is the responsibility of all campus collection representatives or tax examiners, whether speaking with a taxpayer or responding to taxpayer correspondence.

A balance due, or Tax Delinquent Account (TDA), account occurs when the taxpayer has an outstanding liability for taxes, penalties and/or interest.

A DelRet, or Tax Delinquent Investigation (TDI), occurs when the taxpayer has an outstanding tax return(s).

Be sure to prevent unauthorized disclosures of taxpayer information at all times. For additional guidance see IRM 5.19.1.2.3, Disclosure Overview: Verifying Identity of Contact Party.

All actions taken on taxpayer accounts and/or actions promised by the taxpayer must be documented on AMS. For additional guidance see IRM 5.19.1.2.4, Documenting Account Actions.

For additional information regarding acronyms, abbreviations used throughout various IRMs, see IRM 5.19.1-1, Acronyms and Explanations for IRM 5.19.1.

When referring or redirecting accounts to other functions or areas, follow IRM 5.19.1.3, Referrals or Redirects.

For non toll free telephone numbers to be provided to international taxpayers living abroad ONLY, use the table below:

For information regarding account actions on referrals/redirects refer to IRM 5.19.1.4.1, Account Actions on Referral/Redirects.

For information regarding taxpayer information refer to IRM 5.19.1.4.2, Taxpayer Information.

For ACS employees see IRM 5.19.18.4, FERDI General Case Processing, for information on Federal Employee/Retiree Delinquency Initiative (FERDI) account transfer to the FERDI unit in the ACS Call Site in Jacksonville, Florida. Use telephone transfer number 1082, or if prior to 8 a.m. EST complete a Form 4442, Inquiry Referral, and fax to the Jacksonville FERDI unit. See IRM 5.19.18.2, Identifying FERDI Cases, for information on how to identify a FERDI taxpayer.

Identity theft occurs when someone illegally uses another person’s information such as their name, social security number, or other identifying information to file tax returns or derive other financial benefits by posing as the legitimate information owner.

If an international taxpayer makes an allegation of identity theft, or if an employee suspects that identity theft has occurred, follow the guidance in IRM 5.19.21, Campus Procedures for Handling Identity Theft:

When considering inputting address changes, refer to IRM 3.13.5.29, Oral Statements/Telephone Contact Address Change Requirements, and IRM 3.13.5.51, Information Required to Complete Address Changes. Once it is determined that the taxpayer resides overseas and the address is validated, update CC ENTITY to reflect the foreign address and location code. Input transaction code (TC) 030 with Document Code 63 on CC ENREQ to identify the taxpayer as living outside the U.S.

The format of a foreign address will differ depending on the postal system of the country. In general, a foreign address consists of a street address, city or town name, other administrative divisions and postal code. A postal code can be a series of letters, digits, or a combination of letters and digits depending on the postal system. Due to limitation of characters, the address may need to be altered so that the mail can still be delivered.

File Location Codes 21, 66, and 78 contain all returns with a U.S. territory address with a 5-digit zip code, which include Puerto Rico, American Samoa, Guam, U.S. Virgin Islands, and the Commonwealth of the Northern Mariana Islands.

File Location Codes 20, 60, and 98 are used for returns with:

Abbreviation for U.S. territories and countries that have entered compacts of free association with the United States.

This section provides additional guidance for conducting financial analysis on international accounts. Refer to IRM 5.19.13, Campus Procedures for Securing Financial Information, for general guidance when conducting financial analysis.

Before closing accounts as CNC or granting an IA, you must secure financial information.

Secure substantiation on expenses that are questionable.

Any verbal/internal verification or paper substantiation received from the taxpayer must be clearly documented. Substantiation of income and/or expenses can include, but is not limited to:

Form 1040NR is filed by nonresident aliens who have U.S. source income. The Master File Tax (MFT) code is 30, and the document locator number (DLN) will start with 20, and contains document code 72 or 73. Form 1040NR, U.S. Nonresident Alien Income Tax Return, is used by all nonresident alien individuals whether or not engaged in trade or business within the United States; it is required for filing nonresident alien fiduciary (estates and trusts) returns.

Special filing requirements apply to taxpayers who reside in and/or earn income in any U.S. territory.

The types of tax return(s) and other tax forms a territorial resident must file depends upon several factors:

If the taxpayer has income from a territory, the taxpayer may either have to file a U.S. tax return or territorial tax return or both.

In order to determine whether a taxpayer is a bona fide resident of a U.S. territory, the taxpayer must satisfy the following three tests:

Territorial residents may not use Form 2555 to claim foreign earned income exclusion of territorial income.

EITC may not be claimed on a U.S. income tax return by a taxpayer whose main home, and the home of the qualifying child, is in a territory.

All employers in the territories pay their social security tax and Medicare tax to the U.S. government on Form 941-SS, Employer's QUARTERLY Federal Tax Return (American Samoa, Guam, the Commonwealth of Northern Mariana Islands, and the U.S. Virgin Islands), Form 941-PR, Employer's Quarterly Federal Tax Return (Puerto Rico Version), or Form 944, Employer's Annual Federal Tax Return. See Pub 80, Federal Tax Guide for Employers in US Virgin Islands, Guam, American Samoa, and the Commonwealth of the Northern Mariana Islands.

American Samoa has its own separate and independent tax system. American Samoa’s income tax system is based partly on the same income tax laws and tax rates that apply to the United States.

If the taxpayer is a U.S. citizen or resident alien and a bona fide resident of American Samoa during the entire tax year, they generally must file the following returns:

Amounts received for services performed as an employee of the U.S. or any of its agencies cannot be excluded and is deemed U.S.-source income.

To exclude American Samoa source income attach a completed Form 4563, Exclusion of Income for Bona Fide Residents of American Samoa, to the U.S. tax return.

Taxpayers filing a U.S. income tax return and excluding American Samoa source income will not be allowed any deductions from gross income or credits against tax that directly or indirectly relate to excluded income.

If the taxpayer is a bona fide resident of American Samoa during the entire tax year, but a nonresident alien of the U.S., they must file the following returns:

Special rules apply to certain types of income and employment connected with American Samoa:

If the taxpayer is not required to file a U.S. tax return but has income that is effectively connected with a trade or business in American Samoa, they must file Form 1040-SS with the U.S.

Form 1040-SS, U.S. Self-Employment Tax Return, will be used to report their self-employment income to the U.S. and pay self-employment tax.

Procedures to settle cases of double taxation are provided in bilateral agreements between the U.S. and the territories. See Pub 570, Tax Guide for Individuals with Income from U.S. Possessions.

To determine whether certain pensions, annuities, etc. are taxed and at what rate, see IRM 21.5, Account Resolution.

The CNMI has its own separate and independent tax system based partly on the same laws and tax rates that apply to the U.S. and partly on local taxes imposed by the CNMI government.

U.S. citizens who are bona fide residents of CNMI during the entire tax year must report their gross income from worldwide sources on their Northern Mariana Islands tax returns.

If the taxpayer is a U.S. citizen, resident alien or nonresident alien and a bona fide resident of CNMI during the entire tax year, they must file their tax return with CNMI.

If the taxpayer properly files their return with, and fully pays their income tax to CNMI, then they are not liable for filing an income tax return with, or for paying to the U.S. for the tax year.

If the taxpayer is a bona fide resident of CNMI for the entire year, they should send their CNMI income tax return to:

If the taxpayer has income sources with CNMI and is a U.S. citizen or resident alien, but they are not a bona fide resident of CNMI during the entire tax year, they must file their income tax return with the U.S. The taxpayer will not be liable for filing an income tax return with, or paying tax to CNMI for the tax year. The taxpayer must send his or her U.S. income tax return to:

The taxpayer may also be required to attach Form 5074, Allocation of Individual Income Tax to Guam or the Commonwealth of the Northern Mariana Islands, to the income tax return filed with the United States, if the taxpayer has income sourced in the CNMI.

If the taxpayer has no U.S. filing requirement, but has income that is effectively connected with a trade or business in CNMI, they must file Form 1040-SS with the U.S. to report their self-employment income and, if necessary, pay self-employment tax.

If the taxpayer must pay estimated tax, they should make their payment to the jurisdiction where they would file their income tax return if their tax year were to end on the date when their estimated tax payment is first due.

The remaining quarterly payments of estimated tax are to be made where they made their first payment.

Joint payments of estimated tax are made to the jurisdiction where the spouse who has the greater estimated adjusted gross income would have to pay (if a separate payment were made).

If the taxpayer makes their first payment early, follow the rules above to determine where to send it. If they sent it to the wrong jurisdiction, all later payments must be made to the jurisdiction to which the first payment should have been sent.

Credit for income taxes withheld at the source (estimated tax payments and withholding credits) are to be taken into account in determining if the return results in a balance due or overpayment regardless of the jurisdiction in which they were received.

Once payments have been verified, credit the taxpayer’s account for the substantiated amount using TC766.

Mutual agreement procedures exist to settle issues where there is inconsistent tax treatment between the IRS and the taxing authorities of CNMI. The tax coordination agreements contain provisions allowing the competent authorities of the U.S. and the relevant territory to resolve, by mutual agreement, inconsistent tax treatment by the two jurisdictions. See Pub 570, Tax Guide for Individuals with Income from U.S. Possessions.

Guam has its own tax system based on the same tax laws and tax rates that apply in the U.S. Bona fide residents of Guam are subject to special U.S. tax rules. In general, all individuals with income from Guam will file only one return, either to Guam or the U.S.

If a taxpayer is a bona fide resident of Guam during the entire tax year, they file their income tax return with Guam. This applies to all bona fide residents who are citizens, resident aliens, or nonresident aliens of the U.S.

If a taxpayer properly files their return and fully pays their income tax to Guam, then they are not liable for filing an income tax return with, or paying tax to the U.S. on their income, other than self employment tax.

If a taxpayer has income from sources within Guam and is a U.S. citizen or resident alien, and not a bona fide resident of Guam during the entire tax year:

If the taxpayer is a nonresident alien of the U.S., who does not qualify as a bona fide resident of Guam for the entire tax year, they must file the following returns:

Puerto Rico is a self-governing commonwealth in association with the United States. The major difference between Puerto Rico and the 50 states is that a bona fide resident of Puerto Rico is generally exempt from U.S. income tax on Puerto Rico source income.

Puerto Rico's tax system is patterned after the U.S. tax system with the exception of differences to their tax rates and laws. See IRM 21.8.1.6, Puerto Rico. For additional guidance refer to Publication 570, Tax Guide for Individuals With Income From U.S. Possessions.

U.S. citizens who are also bona fide residents of Puerto Rico for the entire tax year generally must include income from worldwide sources on their Puerto Rico return.

U.S. citizens who are also bona fide residents of Puerto Rico who receive wages paid by the U.S. government for working in Puerto Rico are subject to Puerto Rico tax and U.S. tax. These individuals are required to file both Puerto Rico and U.S. tax returns. However, since wages paid by the U.S. government for working in Puerto Rico are considered Puerto Rico sourced, these individuals will be able to claim a foreign tax credit on their U.S. tax return for income taxes paid to Puerto Rico.

Puerto Rican citizens and residents with income from a trade or business from sources within Puerto Rico who do not file Form 1040, must file Form 1040PR to report their self-employment (SE) income and pay self-employment tax, if applicable. Form 1040PR is filed to:

Taxpayers who need to pay household employment taxes need to file Form 1040, Schedule H, Household Employment Taxes, or Schedule H (PR), Household Employment Tax (Puerto Rican Version).

U.S. government employees in Puerto Rico are allowed to claim the Child Tax Credit (CTC) and the Additional Child Tax Credit on their U.S. income tax return.

Non U.S. government employees are able to claim the Additional Child Tax Credit only.

IRC 933 allows individuals who are bona fide residents of Puerto Rico for an entire tax year to exclude their Puerto Rico sourced income (except wages paid by the U.S. government for working in Puerto Rico) from their U.S. tax return.

IRC 933 allows the same exclusion to those individuals who have been bona fide residents of Puerto Rico for at least two years and later change their residence from Puerto Rico during a tax year.

Under IRC 933 , income received from Puerto Rico sources during residency in Puerto Rico is exempt from U.S. tax. However, income received for services performed in Puerto Rico as an employee of the U.S. government is not exempt from U.S. tax.

Individuals who are bona fide residents of Puerto Rico for an entire tax year and only have Puerto Rico sourced income are not required to file a tax return in the U.S.

Individuals who are bona fide residents of Puerto Rico during the entire tax year, but a nonresident alien of the U.S. must file the following returns:

There is no amended return for a Form 1040PR return. If the taxpayer needs to amend Form 1040PR, they can do so by sending in a corrected Form 1040PR with a notation across the top "CORRECTION" .

Non U.S. government employees are able to claim ACTC only. The ACTC is a refundable credit, claimed on Form 8812, Additional Child Tax Credit .

The CTC is a credit against tax and claimed on Form 1040.

EITC may not be claimed by a taxpayer whose main home, and the home of the qualifying child, is in a territory.

Territorial residents may not use Form 2555 to claim a foreign income exclusion of territorial income.

For BMF international taxpayers: Employers in the territories pay their Social Security tax and Medicare tax to the U.S. government using Form 941PR or Form 944 PR. See IRM 21.8.1.6.4, Self-Employment Tax - Puerto Rico.

The U.S. Virgin Islands (USVI) has its own separate and independent tax system based partly on the same laws and tax rates that apply to the United States and partly on local taxes imposed by the USVI government.

IRC 932(c) allows a U.S. citizen who has been a bona fide resident of the Virgin Islands for the entire year to file an annual tax return and pay the entire tax liability to the Virgin Islands.

Taxpayers who are U.S. citizens/residents but not bona fide residents of the USVI during the entire year, and have income from sources in the Virgin Islands or income effectively connected with the conduct of a trade of business in the Virgin Islands are required to file identical returns in both the U.S. and the Virgin Islands. Taxpayers must complete Form 8689 to determine the amount of tax payable to the Virgin Islands when it is determined they need to file both returns.

Self-employed individuals are subject to federal SE tax, whether they file Form 1040 with the IRS or not. If the taxpayer is not required to file U.S. Form 1040 with the IRS, they must still file Form 1040-SS with the IRS to report and pay tax on self-employment income earned worldwide. The Form 1040-SS is a combination of Form 1040 Schedules C, F, SE, and Form 8812. Citizens and residents of the U.S. Virgin Islands do not pay income tax to the U.S. on earned income while they are in the U.S.

In addition, USVI taxpayers are not entitled to the Additional Child Tax Credit (ACTC).

Individual taxpayers may claim estimated tax payments or credit elect on the return they are required to file, regardless of the jurisdiction (U.S. or Virgin Islands) in which the return was filed. See IRM 5.19.19.3.3.6.3, U.S. Virgin Island Cover Over, for additional information on "cover over" .

The U.S. Congress has ratified many income tax treaties with foreign countries. These treaties may reduce or exempt U.S. source income from taxation for the nonresident alien who is a citizen of the treaty country. Most income tax treaties provide at least a partial exemption from tax for compensation for personal services, both independent and dependent, performed in the U.S. by a qualifying individual. Refer to Publication 901, U.S. Tax Treaties.

The primary purposes of the tax treaties between the U.S. and another country is to avoid international double taxation and prevent tax avoidance and evasion.

Treaties define:

Refer to https://www.irs.gov/Businesses/International-Businesses/United-States-Income-Tax-Treaties---A-to-Z for additional information and links to tax treaties between the U.S. and particular countries.

All U.S. citizens and resident aliens living in foreign countries are subject to the same U.S. tax laws as persons living in the U.S. These taxpayers may elect to exclude some or all of their income earned in the foreign country if they meet the qualifications. Listed below are five important facts:

Refer to the instructions of Form 2555 for the amount of foreign income that may be excluded for the given tax year.

Taxpayers who paid or accrued foreign taxes to a foreign country on foreign source income, and are subject to U.S. tax on the same income may be able to take either a credit or an itemized deduction for those taxes. If taken as a deduction, foreign income taxes reduce U.S. taxable income; if taken as a credit, foreign income taxes reduces the tax liability.

In some instances nonresident aliens may also claim a credit for income tax paid to a foreign country on foreign source income that is effectively connected with a trade or business in the U.S., using Form 1116 and Form 1040NR.

U.S. citizens or resident aliens avoid double taxation by electing, under IRC 901(a), to claim the foreign tax credits using Form 1116.

IRC 164(A)(3) allows a U.S. citizen or resident alien who itemizes to claim a deduction on Schedule A for foreign income taxes paid or accrued instead of taking the foreign tax credit.

Taxpayers excluding income from sources within certain territories of the U.S. may not take the foreign tax credit on Form 1116. If a taxpayer is a bona fide resident of American Samoa and excludes income from sources in American Samoa, Guam or CNMI, he/she cannot take a credit for the taxes paid or accrued on the excluded income. Refer to Publication 514, Foreign Tax Credit for Individuals.

Generally, under IRC 1401 and IRC 1402, U.S. citizens and resident aliens, including those living abroad, must pay self-employment tax on their net earnings from self-employment of $400 or more. Residents of the territories who are not U.S. citizens are also subject to self-employment tax.

The U.S. has social security agreements (“Totalization Agreements”) with many countries to eliminate taxes due under two social security systems. Under IRC 1401(c) self-employment income is exempt from self-employment tax by operation of a Totalization Agreement if such self-employment income is subject to the social security system of a foreign country. Under a Totalization Agreement, a worker generally pays social security and Medicare taxes only to the country in which he or she is working.

U.S. citizens and residents of Puerto Rico working in the U.S. or in a U.S. territory as employees of a foreign government, an instrumentality wholly owned by a foreign government, or an international organization, are also subject to self-employment tax on their compensation. However, if the taxpayer also worked outside of the U.S. and the territories as an employee of a foreign government, an instrumentality of such government, or an international organization, only the portion of the income earned in the U.S. (or in the territories) is subject to self-employment tax.

Ministers and members of religious orders who have not taken a vow of poverty are also subject to self-employment tax on the income they earn for ministerial services, unless the Service grants an exemption or the taxpayer is subject to the social security laws of a foreign country under a Totalization Agreement.

To identify the types of income subject to withholding at the source, who is responsible for withholding the tax and at the correct tax rate, refer to the following:

Corporate Tax Returns - every foreign corporation must file Form 1120-F, U.S. Income Tax Return of a Foreign Corporation, or Form 1120-FSC, U.S. Income Tax Return of a Foreign Sales Corporation, if the corporation:

Form 1065, U.S. Return of Partnership Income, is information only. There is no tax reported on this form. Income, losses, expenses, and operation of a partnership are reported on this form.

Form 3520, Annual Return to Report Transactions with Foreign Trusts and Receipt of Certain Foreign Gifts, is filed by a U.S. person on trust activities and operations to report certain activities, operations or transactions with foreign trusts such as: