For tax purposes, an alien is an individual who is not a U.S. citizen. Aliens are classified as nonresident aliens and resident aliens. This publication will help you determine your status and give you information you will need to file your U.S. tax return. Resident aliens generally are taxed on their worldwide income, the same as U.S. citizens. Nonresident aliens are taxed only on their income from sources within the United States and on certain income connected with the conduct of a trade or business in the United States.

Table A, What You Need To Know About U.S. Taxes, provides a list of questions and the chapter or chapters in this publication where you will find the related discussion.

Answers to frequently asked questions are presented in the back of the publication.

The information in this publication is not as comprehensive for resident aliens as it is for nonresident aliens. Resident aliens are generally treated the same as U.S. citizens and can find more information in other IRS publications.

New exception from the filing requirement for nonresident alien individuals. Generally, the requirement to file a return has been eliminated for nonresident aliens who earn wages effectively connected with a U.S. trade or business that are less than the amount of one personal exemption ($3,300 for 2006). For more information, see Nonresident Aliens in chapter 7.

Source of compensation for labor or personal services. New rules apply in determining the source of compensation for labor or personal services performed as an employee. Under the new rules, compensation (other than fringe benefits) is sourced on a time basis. Fringe benefits (such as housing and education) are sourced on a geographical basis. For more information, see Personal Services in chapter 2.

Personal exemption and itemized deduction phaseouts reduced. Taxpayers with adjusted gross income above a certain amount may lose part of their deduction for personal exemptions and itemized deductions. The amount by which these deductions are reduced in 2006 is only ⅔ of the amount of the reduction that otherwise would have applied.

IRA deduction expanded. . If you were covered by a retirement plan, you may be able to take an IRA deduction if your 2006 modified adjusted gross income (AGI) is less than $85,000 if married filing jointly or a qualifying widow(er). You and your spouse, if filing jointly, may each be able to deduct up to $5,000 if age 50 or over at the end of 2006.

Educator expense deduction extended. . The deduction from AGI for certain expenses of elementary and secondary school teachers has been extended through 2007.

Gifts to charity. The following list highlights some of the new rules that apply to certain gifts to charity.

For more information, see Publication 526.

Credit for federal telephone excise tax. .  If you paid the federal excise tax on your long distance or bundled telephone service, you may be able to request a credit. See the instructions for your income tax. return. If you are not required to and do not file an income tax return, you must file Form 1040EZ-T, Request for Refund of Federal Telephone Excise Tax, to request the credit.

U.S. real property interests. New rules apply to certain distributions nonresident aliens receive from qualified investment entities (QIEs). A QIE is any real estate investment trust (REIT) or any regulated investment company (RIC) that is a U.S. real property holding corporation. See Qualified investment entities under Real Property Gain or Loss in chapter 4.

IRA deduction expanded for certain people. If you were covered by a retirement plan, you may be able to take an IRA deduction if your 2007 modified AGI is less than $62,000 ($103,000 if married filing jointly or a qualifying widow(er)).

New recordkeeping requirements for contributions of money. .  For charitable contributions of money, regardless of the amount, you must maintain as a record of the contribution a bank record (such as a cancelled check) or a written record from the charity. The written record must include the name of the charity, date, and amount of the contribution.

Capital gains treatment for certain self-created musical works. Musical compositions and copyrights in musical works are generally not capital assets. However, you can elect to treat these types of property as capital assets if you sell or exchange them in tax years beginning after May 17, 2006, and:

Third party designee. You can check the “Yes” box in the “Third Party Designee” area of your return to authorize the IRS to discuss your return with a friend, family member, or any other person you choose. This allows the IRS to call the person you identified as your designee to answer any questions that may arise during the processing of your return. It also allows your designee to perform certain actions such as asking the IRS for copies of notices or transcripts related to your return. Also, the authorization can be revoked. See your income tax package for details.

Change of address. If you change your mailing address, be sure to notify the Internal Revenue Service using Form 8822, Change of Address. Nonresident aliens who filed Form 1040NR or Form 1040NR-EZ with the Internal Revenue Service Center, Austin, TX 73301-0215, should send the form there. Resident aliens should send the form to the Internal Revenue Service Center for their old address (addresses for the service centers are on the back of the form).

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.