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1040 Ez 2013

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1040 Ez 2013

1040 ez 2013 Other Methods of Depreciation Table of Contents Topics - This chapter discusses: Useful Items - You may want to see: How To Figure the DeductionBasis Useful Life Salvage Value Methods To UseStraight Line Method Declining Balance Method Income Forecast Method How To Change Methods DispositionsSale or exchange. 1040 ez 2013 Property not disposed of or abandoned. 1040 ez 2013 Special rule for normal retirements from item accounts. 1040 ez 2013 Abandoned property. 1040 ez 2013 Single item accounts. 1040 ez 2013 Multiple property account. 1040 ez 2013 Topics - This chapter discusses: How to figure the deduction Methods to use How to change methods Dispositions Useful Items - You may want to see: Publication 544 Sales and Other Dispositions of Assets 551 Basis of Assets 583 Starting a Business and Keeping Records 946 How To Depreciate Property Form (and Instructions) 3115 Application for Change in Accounting Method 4562 Depreciation and Amortization Schedule C (Form 1040) Profit or Loss From Business If your property is being depreciated under ACRS, you must continue to use rules for depreciation that applied when you placed the property in service. 1040 ez 2013 If your property qualified for MACRS, you must depreciate it under MACRS. 1040 ez 2013 See Publication 946. 1040 ez 2013 However, you cannot use MACRS for certain property because of special rules that exclude it from MACRS. 1040 ez 2013 Also, you can elect to exclude certain property from being depreciated under MACRS. 1040 ez 2013 Property that you cannot depreciate using MACRS includes: Intangible property, Property you can elect to exclude from MACRS that you properly depreciate under a method that is not based on a term of years, Certain public utility property, Any motion picture film or video tape, Any sound recording, and Certain real and personal property placed in service before 1987. 1040 ez 2013 Intangible property. 1040 ez 2013   You cannot depreciate intangible property under ACRS or MACRS. 1040 ez 2013 You depreciate intangible property using any other reasonable method, usually, the straight line method. 1040 ez 2013 Note. 1040 ez 2013 The cost of certain intangible property that you acquire after August 10, 1993, must be amortized over a 15-year period. 1040 ez 2013 For more information, see chapter 12 of Publication 535. 1040 ez 2013 Public utility property. 1040 ez 2013   The law excludes from MACRS any public utility property for which the taxpayer does not use a normalization method of accounting. 1040 ez 2013 This type of property is subject to depreciation under a special rule. 1040 ez 2013 Videocassettes. 1040 ez 2013   If you are in the videocassette rental business, you can depreciate those videocassettes purchased for rental. 1040 ez 2013 You can depreciate the cost less salvage value of those videocassettes that have a useful life over one year using either: The straight line method, or The income forecast method. 1040 ez 2013 The straight line method, salvage value, and useful life are discussed later under Methods To Use. 1040 ez 2013 You can deduct in the year of purchase as a business expense the cost of any cassette that has a useful life of one year or less. 1040 ez 2013 How To Figure the Deduction Two other reasonable methods can be used to figure your deduction for property not covered under ACRS or MACRS. 1040 ez 2013 These methods are straight line and declining balance. 1040 ez 2013 To figure depreciation using these methods, you must generally determine three things about the property you intend to depreciate. 1040 ez 2013 They are: The basis, The useful life, and The estimated salvage value at the end of its useful life. 1040 ez 2013 The amount of the deduction in any year also depends on which method of depreciation you choose. 1040 ez 2013 Basis To deduct the proper amount of depreciation each year, first determine your basis in the property you intend to depreciate. 1040 ez 2013 The basis used for figuring depreciation is the same as the basis that would be used for figuring the gain on a sale. 1040 ez 2013 Your original basis is usually the purchase price. 1040 ez 2013 However, if you acquire property in some other way, such as inheriting it, getting it as a gift, or building it yourself, you have to figure your original basis in a different way. 1040 ez 2013 Adjusted basis. 1040 ez 2013   Events will often change the basis of property. 1040 ez 2013 When this occurs, the changed basis is called the adjusted basis. 1040 ez 2013 Some events, such as improvements you make, increase basis. 1040 ez 2013 Events such as deducting casualty losses and depreciation decrease basis. 1040 ez 2013 If basis is adjusted, the depreciation deduction may also have to be changed, depending on the reason for the adjustment and the method of depreciation you are using. 1040 ez 2013   Publication 551 explains how to figure basis for property acquired in different ways. 1040 ez 2013 It also discusses what items increase and decrease basis, how to figure adjusted basis, and how to allocate cost if you buy several pieces of property at one time. 1040 ez 2013 Useful Life The useful life of a piece of property is an estimate of how long you can expect to use it in your trade or business, or to produce income. 1040 ez 2013 It is the length of time over which you will make yearly depreciation deductions of your basis in the property. 1040 ez 2013 It is how long it will continue to be useful to you, not how long the property will last. 1040 ez 2013 Many things affect the useful life of property, such as: Frequency of use, Age when acquired, Your repair policy, and Environmental conditions. 1040 ez 2013 The useful life can also be affected by technological improvements, progress in the arts, reasonably foreseeable economic changes, shifting of business centers, prohibitory laws, and other causes. 1040 ez 2013 Consider all these factors before you arrive at a useful life for your property. 1040 ez 2013 The useful life of the same type of property varies from user to user. 1040 ez 2013 When you determine the useful life of your property, keep in mind your own experience with similar property. 1040 ez 2013 You can use the general experience of the industry you are in until you are able to determine a useful life of your property from your own experience. 1040 ez 2013 Change in useful life. 1040 ez 2013   You base your estimate of useful life on certain facts. 1040 ez 2013 If these facts change significantly, you can adjust your estimate of the remaining useful life. 1040 ez 2013 However, you redetermine the estimated useful life only when the change is substantial and there is a clear reason for making the change. 1040 ez 2013 Salvage Value It is important for you to accurately determine the correct salvage value of the property you want to depreciate. 1040 ez 2013 You generally cannot depreciate property below a reasonable salvage value. 1040 ez 2013 Determining salvage value. 1040 ez 2013   Salvage value is the estimated value of property at the end of its useful life. 1040 ez 2013 It is what you expect to get for the property if you sell it after you can no longer use it productively. 1040 ez 2013 You must estimate the salvage value of a piece of property when you first acquire it. 1040 ez 2013   Salvage value is affected both by how you use the property and how long you use it. 1040 ez 2013 If it is your policy to dispose of property that is still in good operating condition, the salvage value can be relatively large. 1040 ez 2013 However, if your policy is to use property until it is no longer usable, its salvage value can be its junk value. 1040 ez 2013 Changing salvage value. 1040 ez 2013   Once you determine the salvage value for property, you should not change it merely because prices have changed. 1040 ez 2013 However, if you redetermine the useful life of property, as discussed earlier under Change in useful life, you can also redetermine the salvage value. 1040 ez 2013 When you redetermine the salvage value, take into account the facts that exist at the time. 1040 ez 2013 Net salvage. 1040 ez 2013   Net salvage is the salvage value of property minus what it costs to remove it when you dispose of it. 1040 ez 2013 You can choose either salvage value or net salvage when you figure depreciation. 1040 ez 2013 You must consistently use the one you choose and the treatment of the costs of removal must be consistent with the practice adopted. 1040 ez 2013 However, if the cost to remove the property is more than the estimated salvage value, then net salvage is zero. 1040 ez 2013 Your salvage value can never be less than zero. 1040 ez 2013 Ten percent rule. 1040 ez 2013   If you acquire personal property that has a useful life of 3 years or more, you can use an amount for salvage value that is less than your actual estimate. 1040 ez 2013 You can subtract from your estimate of salvage value an amount equal to 10% of your basis in the property. 1040 ez 2013 If salvage value is less than 10% of basis, you can ignore salvage value when you figure depreciation. 1040 ez 2013 Methods To Use Two methods of depreciation are the straight line and declining balance methods. 1040 ez 2013 If ACRS or MACRS does not apply, you can use one of these methods. 1040 ez 2013 The straight line and declining balance methods discussed in this section are not figured in the same way as straight line or declining balance methods under MACRS. 1040 ez 2013 Straight Line Method Before 1981, you could use any reasonable method for every kind of depreciable property. 1040 ez 2013 One of these methods was the straight line method. 1040 ez 2013 This method was also used for intangible property. 1040 ez 2013 It lets you deduct the same amount of depreciation each year. 1040 ez 2013 To figure your deduction, determine the adjusted basis of your property, its salvage value, and its estimated useful life. 1040 ez 2013 Subtract the salvage value, if any, from the adjusted basis. 1040 ez 2013 The balance is the total amount of depreciation you can take over the useful life of the property. 1040 ez 2013 Divide the balance by the number of years remaining in the useful life. 1040 ez 2013 This gives you the amount of your yearly depreciation deduction. 1040 ez 2013 Unless there is a big change in adjusted basis, or useful life, this amount will stay the same throughout the time you depreciate the property. 1040 ez 2013 If, in the first year, you use the property for less than a full year, you must prorate your depreciation deduction for the number of months in use. 1040 ez 2013 Example. 1040 ez 2013 In April 1994, Frank bought a franchise for $5,600. 1040 ez 2013 It expires in 10 years. 1040 ez 2013 This property is intangible property that cannot be depreciated under MACRS. 1040 ez 2013 Frank depreciates the franchise under the straight line method, using a 10-year useful life and no salvage value. 1040 ez 2013 He takes the $5,600 basis and divides that amount by 10 years ($5,600 ÷ 10 = $560, a full year's use). 1040 ez 2013 He must prorate the $560 for his 9 months of use in 1994. 1040 ez 2013 This gives him a deduction of $420 ($560 ÷ 9/12). 1040 ez 2013 In 1995, Frank can deduct $560 for the full year. 1040 ez 2013 Declining Balance Method The declining balance method allows you to recover a larger amount of the cost of the property in the early years of your use of the property. 1040 ez 2013 The rate cannot be more than twice the straight line rate. 1040 ez 2013 Rate of depreciation. 1040 ez 2013   Under this method, you must determine your declining balance rate of depreciation. 1040 ez 2013 The initial step is to: Divide the number 1 by the useful life of your property to get a straight line rate. 1040 ez 2013 (For example, if property has a useful life of 5 years, its normal straight line rate of depreciation is ⅕, or 20%. 1040 ez 2013 ) Multiply this straight line rate by a number that is more than 1 but not more than 2 to determine the declining balance rate. 1040 ez 2013 Unless there is a change in the useful life during the time you depreciate the property, the rate of depreciation generally will not change. 1040 ez 2013 Depreciation deductions. 1040 ez 2013   After you determine the rate of depreciation, multiply the adjusted basis of the property by it. 1040 ez 2013 This gives you the amount of your deduction. 1040 ez 2013 For example, if your adjusted basis at the beginning of the first year is $10,000, and your declining balance rate is 20%, your depreciation deduction for the first year is $2,000 ($10,000 ÷ 20%). 1040 ez 2013 To figure your depreciation deduction in the second year, you must first adjust the basis for the amount of depreciation you deducted in the first year. 1040 ez 2013 Subtract the previous year's depreciation from your basis ($10,000 - $2,000 = $8,000). 1040 ez 2013 Multiply this amount by the rate of depreciation ($8,000 ÷ 20% = $1,600). 1040 ez 2013 Your depreciation deduction for the second year is $1,600. 1040 ez 2013   As you can see from this example, your adjusted basis in the property gets smaller each year. 1040 ez 2013 Also, under this method, deductions are larger in the earlier years and smaller in the later years. 1040 ez 2013 You can make a change to the straight line method without consent. 1040 ez 2013 Salvage value. 1040 ez 2013   Do not subtract salvage value when you figure your yearly depreciation deductions under the declining balance method. 1040 ez 2013 However, you cannot depreciate the property below its reasonable salvage value. 1040 ez 2013 Determine salvage value using the rules discussed earlier, including the special 10% rule. 1040 ez 2013 Example. 1040 ez 2013 If your adjusted basis has been decreased to $1,000 and the rate of depreciation is 20%, your depreciation deduction should be $200. 1040 ez 2013 But if your estimate of salvage value was $900, you can only deduct $100. 1040 ez 2013 This is because $100 is the amount that would lower your adjusted basis to equal salvage value. 1040 ez 2013 Income Forecast Method The income forecast method requires income projections for each videocassette or group of videocassettes. 1040 ez 2013 You can group the videocassettes by title for making this projection. 1040 ez 2013 You determine the depreciation by applying a fraction to the cost less salvage value of the cassette. 1040 ez 2013 The numerator is the income from the videocassette for the tax year and the denominator is the total projected income for the cassette. 1040 ez 2013 For more information on the income forecast method, see Revenue Ruling 60-358 in Cumulative Bulletin 1960, Volume 2, on page 68. 1040 ez 2013 How To Change Methods In some cases, you may change your method of depreciation for property depreciated under a reasonable method. 1040 ez 2013 If you change your method of depreciation, it is generally a change in your method of accounting. 1040 ez 2013 You must get IRS consent before making the change. 1040 ez 2013 However, you do not need permission for certain changes in your method of depreciation. 1040 ez 2013 The rules discussed in this section do not apply to property depreciated under ACRS or MACRS. 1040 ez 2013 For information on ACRS elections,see Revocation of election, in chapter 1 under Alternate ACRS Method. 1040 ez 2013 Change to the straight line method. 1040 ez 2013   You can change from the declining balance method to the straight line method at any time during the useful life of your property without IRS consent. 1040 ez 2013 However, if you have a written agreement with the IRS that prohibits a change, you must first get IRS permission. 1040 ez 2013 When the change is made, figure depreciation based on your adjusted basis in the property at that time. 1040 ez 2013 Your adjusted basis takes into account all previous depreciation deductions. 1040 ez 2013 Use the estimated remaining useful life of your property at the time of change and its estimated salvage value. 1040 ez 2013   You can change from the declining balance method to straight line only on the original tax return for the year you first use the straight line method. 1040 ez 2013 You cannot make the change on an amended return filed after the due date of the original return (including extensions). 1040 ez 2013   When you make the change, attach a statement to your tax return showing: When you acquired the property, Its original cost or other original basis, The total amount claimed for depreciation and other allowances since you acquired it, Its salvage value and remaining useful life, and A description of the property and its use. 1040 ez 2013   After you change to straight line, you cannot change back to the declining balance method or to any other method for a period of 10 years without written permission from the IRS. 1040 ez 2013 Changes that require permission. 1040 ez 2013   For most other changes in method of depreciation, you must get permission from the IRS. 1040 ez 2013 To request a change in method of depreciation, file Form 3115. 1040 ez 2013 File the application within the first 180 days of the tax year the change is to become effective. 1040 ez 2013 In most cases, there is a user fee that must accompany Form 3115. 1040 ez 2013 See the instructions for Form 3115 to determine if a fee is required. 1040 ez 2013 Changes granted automatically. 1040 ez 2013   The IRS automatically approves certain changes of a method of depreciation. 1040 ez 2013 But, you must file Form 3115 for these automatic changes. 1040 ez 2013   However, IRS can deny permission if Form 3115 is not filed on time. 1040 ez 2013 For more information on automatic changes, see Revenue Procedure 74-11, 1974-1 C. 1040 ez 2013 B. 1040 ez 2013 420. 1040 ez 2013 Changes for which approval is not automatic. 1040 ez 2013   The automatic change procedures do not apply to: Property or an account where you made a change in depreciation within the last 10 tax years (unless the change was made under the Class Life System), Class Life Asset Depreciation Range System, and Public utility property. 1040 ez 2013   You must request and receive permission for these changes. 1040 ez 2013 To make the request, file Form 3115 during the first 180 days of the tax year for which you want the change to be effective. 1040 ez 2013 Change from an improper method. 1040 ez 2013   If the IRS disallows the method you are using, you do not need permission to change to a proper method. 1040 ez 2013 You can adopt the straight line method, or any other method that would have been permitted if you had used it from the beginning. 1040 ez 2013 If you file your tax return using an improper method, but later file an amended return, you can use a proper method on the amended return without getting IRS permission. 1040 ez 2013 However, you must file the amended return before the filing date for the next tax year. 1040 ez 2013 Dispositions Retirement is the permanent withdrawal of depreciable property from use in your trade or business or for the production of income. 1040 ez 2013 You can do this by selling, exchanging, or abandoning the item of property. 1040 ez 2013 You can also withdraw it from use without disposing of it. 1040 ez 2013 For example, you could place it in a supplies or scrap account. 1040 ez 2013 Retirements can be either normal or abnormal depending on all facts and circumstances. 1040 ez 2013 The rules discussed next do not apply to MACRS and ACRS property. 1040 ez 2013 Normal retirement. 1040 ez 2013   A normal retirement is a permanent withdrawal of depreciable property from use if the following apply: The retirement is made within the useful life you estimated originally, and The property has reached a condition at which you customarily retire or would retire similar property from use. 1040 ez 2013 A retirement is generally considered normal unless you can show that you retired the property because of a reason you did not consider when you originally estimated the useful life of the property. 1040 ez 2013 Abnormal retirement. 1040 ez 2013   A retirement can be abnormal if you withdraw the property early or under other circumstances. 1040 ez 2013 For example, if the property is damaged by a fire or suddenly becomes obsolete and is now useless. 1040 ez 2013 Gain or loss on retirement. 1040 ez 2013   There are special rules for figuring the gain or loss on retirement of property. 1040 ez 2013 The gain or loss will depend on several factors. 1040 ez 2013 These include the type of withdrawal, if the withdrawal was from a single property or multiple property account, and if the retirement was normal or abnormal. 1040 ez 2013 A single property account contains only one item of property. 1040 ez 2013 A multiple property account is one in which several items have been combined with a single rate of depreciation assigned to the entire account. 1040 ez 2013 Sale or exchange. 1040 ez 2013   If property is retired by sale or exchange, you figure gain or loss by the usual rules that apply to sales or other dispositions of property. 1040 ez 2013 See Publication 544. 1040 ez 2013 Property not disposed of or abandoned. 1040 ez 2013   If property is retired permanently, but not disposed of or physically abandoned, you do not recognize gain. 1040 ez 2013 You are allowed a loss in such a case, but only if the retirement is: An abnormal retirement, A normal retirement from a single property account in which you determined the life of each item of property separately, or A normal retirement from a multiple property account in which the depreciation rate is based on the maximum expected life of the longest lived item of property and the loss occurs before the expiration of the full useful life. 1040 ez 2013 However, you are not allowed a loss if the depreciation rate is based on the average useful life of the items of property in the account. 1040 ez 2013   To figure your loss, subtract the estimated salvage or fair market value of the property at the date of retirement, whichever is more, from its adjusted basis. 1040 ez 2013 Special rule for normal retirements from item accounts. 1040 ez 2013   You can generally deduct losses upon retirement of a few depreciable items of property with similar useful lives, if: You account for each one in a separate account, and You use the average useful life to figure depreciation. 1040 ez 2013 However, you cannot deduct losses if you use the average useful life to figure depreciation and they have a wide range of useful lives. 1040 ez 2013   If you have a large number of depreciable property items and use average useful lives to figure depreciation, you cannot deduct the losses upon normal retirements from these accounts. 1040 ez 2013 Abandoned property. 1040 ez 2013   If you physically abandon property, you can deduct as a loss the adjusted basis of the property at the time of its abandonment. 1040 ez 2013 However, your intent must be to discard the property so that you will not use it again or retrieve it for sale, exchange, or other disposition. 1040 ez 2013 Basis of property retired. 1040 ez 2013   The basis for figuring gain or loss on the retirement of property is its adjusted basis at the time of retirement, as determined in the following discussions. 1040 ez 2013 Single item accounts. 1040 ez 2013   If an item of property is accounted for in a single item account, the adjusted basis is the basis you would use to figure gain or loss for a sale or exchange of the property. 1040 ez 2013 This is generally the cost or other basis of the item of property less depreciation. 1040 ez 2013 See Publication 551. 1040 ez 2013 Multiple property account. 1040 ez 2013   For a normal retirement from a multiple property account, if you figured depreciation using the average expected useful life, the adjusted basis is the salvage value estimated for the item of property when it was originally acquired. 1040 ez 2013 If you figured depreciation using the maximum expected useful life of the longest lived item of property in the account, you must use the depreciation method used for the multiple property account and a rate based on the maximum expected useful life of the item of property retired. 1040 ez 2013   You make the adjustment for depreciation for an abnormal retirement from a multiple property account at the rate that would be proper if the item of property was depreciated in a single property account. 1040 ez 2013 The method of depreciation used for the multiple property account is used. 1040 ez 2013 You base the rate on either the average expected useful life or the maximum expected useful life of the retired item of property, depending on the method used to determine the depreciation rate for the multiple property account. 1040 ez 2013 Prev  Up  Next   Home   More Online Publications
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The 1040 Ez 2013

1040 ez 2013 Publication 555 - Main Content Table of Contents Domicile Community or Separate Property and Income Identifying Income, Deductions, and CreditsIncome Exemptions Deductions Credits, Taxes, and Payments Community Property Laws DisregardedRequesting relief. 1040 ez 2013 Equitable relief. 1040 ez 2013 Earned income. 1040 ez 2013 Trade or business income. 1040 ez 2013 Partnership income or loss. 1040 ez 2013 Separate property income. 1040 ez 2013 Social security benefits. 1040 ez 2013 Other income. 1040 ez 2013 End of the Community Preparing a Federal Income Tax ReturnJoint Return Versus Separate Returns Separate Return Preparation How To Get Tax HelpLow Income Taxpayer Clinics Domicile Whether you have community property and community income depends on the state where you are domiciled. 1040 ez 2013 If you and your spouse (or your registered domestic partner) have different domiciles, check the laws of each to see whether you have community property or community income. 1040 ez 2013 You have only one domicile even if you have more than one home. 1040 ez 2013 Your domicile is a permanent legal home that you intend to use for an indefinite or unlimited period, and to which, when absent, you intend to return. 1040 ez 2013 The question of your domicile is mainly a matter of your intention as indicated by your actions. 1040 ez 2013 You must be able to show that you intend a given place or state to be your permanent home. 1040 ez 2013 If you move into or out of a community property state during the year, you may or may not have community income. 1040 ez 2013 Factors considered in determining domicile include: Where you pay state income tax, Where you vote, Location of property you own, Your citizenship, Length of residence, and Business and social ties to the community. 1040 ez 2013 Amount of time spent. 1040 ez 2013    The amount of time spent in one place does not always explain the difference between home and domicile. 1040 ez 2013 A temporary home or residence may continue for months or years while a domicile may be established the first moment you occupy the property. 1040 ez 2013 Your intent is the determining factor in proving where you have your domicile. 1040 ez 2013    Note. 1040 ez 2013 When this publication refers to where you live, it means your domicile. 1040 ez 2013 Community or Separate Property and Income If you file a federal tax return separately from your spouse, you must report half of all community income and all of your separate income. 1040 ez 2013 Likewise, a registered domestic partner must report half of all community income and all of his or her separate income on his or her federal tax return. 1040 ez 2013 You each must attach your Form 8958 to your Form 1040 showing how you figured the amount you are reporting on your return. 1040 ez 2013 Generally, the laws of the state in which you are domiciled govern whether you have community property and community income or separate property and separate income for federal tax purposes. 1040 ez 2013 The following is a summary of the general rules. 1040 ez 2013 These rules are also shown in Table 1. 1040 ez 2013 Community property. 1040 ez 2013    Generally, community property is property: That you, your spouse (or your registered domestic partner), or both acquire during your marriage (or registered domestic partnership) while you and your spouse (or your registered domestic partner) are domiciled in a community property state. 1040 ez 2013 That you and your spouse (or your registered domestic partner) agreed to convert from separate to community property. 1040 ez 2013 That cannot be identified as separate property. 1040 ez 2013 Community income. 1040 ez 2013    Generally, community income is income from: Community property. 1040 ez 2013 Salaries, wages, and other pay received for the services performed by you, your spouse (or your registered domestic partner), or both during your marriage (or registered domestic partnership) while domiciled in a community property state. 1040 ez 2013 Real estate that is treated as community property under the laws of the state where the property is located. 1040 ez 2013 Note Separate property. 1040 ez 2013    Generally, separate property is: Property that you or your spouse (or your registered domestic partner) owned separately before your marriage (or registered domestic partnership). 1040 ez 2013 Money earned while domiciled in a noncommunity property state. 1040 ez 2013 Property that you or your spouse (or your registered domestic partner) received separately as a gift or inheritance during your marriage (or registered domestic partnership). 1040 ez 2013 Property that you or your spouse (or your registered domestic partner) bought with separate funds, or acquired in exchange for separate property, during your marriage (or registered domestic partnership). 1040 ez 2013 Property that you and your spouse (or your registered domestic partner) converted from community property to separate property through an agreement valid under state law. 1040 ez 2013 The part of property bought with separate funds, if part was bought with community funds and part with separate funds. 1040 ez 2013 Separate income. 1040 ez 2013    Generally, income from separate property is the separate income of the spouse (or the registered domestic partner) who owns the property. 1040 ez 2013    In Idaho, Louisiana, Texas, and Wisconsin, income from most separate property is community income. 1040 ez 2013 Table 1. 1040 ez 2013 General Rules — Property and Income: Community or Separate? Community property is property: That you, your spouse (or your registered domestic partner), or both acquire during your marriage (or registered domestic partnership) while you and your spouse (or your registered domestic partner) are domiciled in a community property state. 1040 ez 2013 (Includes the part of property bought with community property funds if part was bought with community funds and part with separate funds. 1040 ez 2013 ) That you and your spouse (or your registered domestic partner) agreed to convert from separate to community property. 1040 ez 2013 That cannot be identified as separate property. 1040 ez 2013 Separate property is: Property that you or your spouse (or your registered domestic partner) owned separately before your marriage (or registered domestic partnership). 1040 ez 2013 Money earned while domiciled in a noncommunity property state. 1040 ez 2013 Property either of you received as a gift or inherited separately during your marriage (or registered domestic partnership). 1040 ez 2013 Property bought with separate funds, or exchanged for separate property, during your marriage (or registered domestic partnership). 1040 ez 2013 Property that you and your spouse (or your registered domestic partner) agreed to convert from community to separate property through an agreement valid under state law. 1040 ez 2013 The part of property bought with separate funds, if part was bought with community funds and part with separate funds. 1040 ez 2013 Community income 1,2,3 is income from: Community property. 1040 ez 2013 Salaries, wages, or pay for services of you, your spouse (or your registered domestic partner), or both during your marriage (or registered domestic partnership) while domiciled in a community property state. 1040 ez 2013 Real estate that is treated as community property under the laws of the state where the property is located. 1040 ez 2013 Separate income 1,2 is income from: Separate property which belongs to the spouse (or registered domestic partner) who owns the property. 1040 ez 2013 1In Idaho, Louisiana, Texas, and Wisconsin, income from most separate property is community income. 1040 ez 2013 2Check your state law if you are separated but do not meet the conditions discussed in Spouses living apart all year , later. 1040 ez 2013 In some states, the income you earn after you are separated and before a divorce decree is issued continues to be community income. 1040 ez 2013 In other states, it is separate income. 1040 ez 2013 3Under special rules, income that can otherwise be characterized as community income may not be treated as community income for federal income tax purposes in certain situations. 1040 ez 2013 See Community Property Laws Disregarded , later. 1040 ez 2013 Identifying Income, Deductions, and Credits If you file separate returns, you and your spouse (or your registered domestic partner) each must attach your Form 8958 to your Form 1040 to identify your community and separate income, deductions, credits, and other return amounts according to the laws of your state. 1040 ez 2013 Under special rules, income that can otherwise be characterized as community income may not be treated as community income for federal income tax purposes in certain situations. 1040 ez 2013 See Community Property Laws Disregarded, later. 1040 ez 2013 Check your state law if you are separated but do not meet the conditions discussed in Spouses living apart all year, later. 1040 ez 2013 In some states, the income you earn after you are separated and before a divorce decree is issued continues to be community income. 1040 ez 2013 In other states, it is separate income. 1040 ez 2013 Income The following is a discussion of the general effect of community property laws on the federal income tax treatment of certain items of income. 1040 ez 2013 Wages, earnings, and profits. 1040 ez 2013    A spouse's (or your registered domestic partner's) wages, earnings, and net profits from a sole proprietorship are community income and must be evenly split. 1040 ez 2013 Dividends, interest, and rents. 1040 ez 2013    Dividends, interest, and rents from community property are community income and must be evenly split. 1040 ez 2013 Dividends, interest, and rents from separate property are characterized in accordance with the discussion under Income from separate property , later. 1040 ez 2013 Example. 1040 ez 2013 If you and your spouse (or your registered domestic partner) buy a bond that is considered community property under your state laws, half the bond interest belongs to you and half belongs to your spouse. 1040 ez 2013 You each must show the bond interest and the split of that interest on your Form 8958, and report half the interest on your Form 1040. 1040 ez 2013 Attach your Form 8958 to your Form 1040. 1040 ez 2013 Alimony received. 1040 ez 2013    Alimony or separate maintenance payments made prior to divorce are taxable to the payee spouse only to the extent they exceed 50% (his or her share) of the reportable community income. 1040 ez 2013 This is so because the payee spouse is already required to report half of the community income. 1040 ez 2013 See also Alimony paid , later. 1040 ez 2013 Gains and losses. 1040 ez 2013    Gains and losses are classified as separate or community depending on how the property is held. 1040 ez 2013 For example, a loss on separate property, such as stock held separately, is a separate loss. 1040 ez 2013 On the other hand, a loss on community property, such as a casualty loss to your home held as community property, is a community loss. 1040 ez 2013 See Publication 544, Sales and Other Dispositions of Assets, for information on gains and losses. 1040 ez 2013 See Publication 547, Casualties, Disasters, and Thefts, for information on losses due to a casualty or theft. 1040 ez 2013 Withdrawals from individual retirement arrangements (IRAs) and Coverdell Education Savings Accounts (ESAs). 1040 ez 2013    There are several kinds of individual retirement arrangements (IRAs). 1040 ez 2013 They are traditional IRAs (including SEP-IRAs), SIMPLE IRAs, and Roth IRAs. 1040 ez 2013 IRAs and ESAs by law are deemed to be separate property. 1040 ez 2013 Therefore, taxable IRA and ESA distributions are separate property, even if the funds in the account would otherwise be community property. 1040 ez 2013 These distributions are wholly taxable to the spouse (or registered domestic partner) whose name is on the account. 1040 ez 2013 That spouse (or registered domestic partner) is also liable for any penalties and additional taxes on the distributions. 1040 ez 2013 Pensions. 1040 ez 2013    Generally, distributions from pensions will be characterized as community or separate income depending on the respective periods of participation in the pension while married (or during the registered domestic partnership) and domiciled in a community property state or in a noncommunity property state during the total period of participation in the pension. 1040 ez 2013 See the example under Civil service retirement , later. 1040 ez 2013 These rules may vary between states. 1040 ez 2013 Check your state law. 1040 ez 2013 Lump-sum distributions. 1040 ez 2013    If you were born before January 2, 1936, and receive a lump-sum distribution from a qualified retirement plan, you may be able to choose an optional method of figuring the tax on the distribution. 1040 ez 2013 For the 10-year tax option, you must disregard community property laws. 1040 ez 2013 For more information, see Publication 575, Pension and Annuity Income, and Form 4972, Tax on Lump-Sum Distributions. 1040 ez 2013 Civil service retirement. 1040 ez 2013    For income tax purposes, community property laws apply to annuities payable under the Civil Service Retirement Act (CSRS) or Federal Employee Retirement System (FERS). 1040 ez 2013   Whether a civil service annuity is separate or community income depends on your marital status (or your status as a registered domestic partner) and domicile of the employee when the services were performed for which the annuity is paid. 1040 ez 2013 Even if you now live in a noncommunity property state and you receive a civil service annuity, it may be community income if it is based on services you performed while married (or during the registered domestic partnership) and domiciled in a community property state. 1040 ez 2013   If a civil service annuity is a mixture of community income and separate income, it must be divided between the two kinds of income. 1040 ez 2013 The division is based on the employee's domicile and marital status (or registered domestic partnership) in community and noncommunity property states during his or her periods of service. 1040 ez 2013 Example. 1040 ez 2013 Henry Wright retired this year after 30 years of civil service. 1040 ez 2013 He and his wife were domiciled in a community property state during the past 15 years. 1040 ez 2013 Since half the service was performed while the Wrights were married and domiciled in a community property state, half the civil service retirement pay is considered to be community income. 1040 ez 2013 If Mr. 1040 ez 2013 Wright receives $1,000 a month in retirement pay, $500 is considered community income—half ($250) is his income and half ($250) is his wife's. 1040 ez 2013 Military retirement pay. 1040 ez 2013    State community property laws apply to military retirement pay. 1040 ez 2013 Generally, the pay is either separate or community income based on the marital status and domicile of the couple while the member of the Armed Forces was in active military service. 1040 ez 2013 For example, military retirement pay for services performed during marriage and domicile in a community property state is community income. 1040 ez 2013   Active military pay earned while married and domiciled in a community property state is also community income. 1040 ez 2013 This income is considered to be received half by the member of the Armed Forces and half by the spouse. 1040 ez 2013 Partnership income. 1040 ez 2013    If an interest is held in a partnership, and income from the partnership is attributable to the efforts of either spouse (or registered domestic partner), the partnership income is community property. 1040 ez 2013 If it is merely a passive investment in a separate property partnership, the partnership income will be characterized in accordance with the discussion under Income from separate property , later. 1040 ez 2013 Tax-exempt income. 1040 ez 2013    For spouses, community income exempt from federal tax generally keeps its exempt status for both spouses. 1040 ez 2013 For example, under certain circumstances, income earned outside the United States is tax exempt. 1040 ez 2013 If you earned income and met the conditions that made it exempt, the income is also exempt for your spouse even though he or she may not have met the conditions. 1040 ez 2013 Registered domestic partners should consult the particular exclusion provision to see if the exempt status applies to both. 1040 ez 2013 Income from separate property. 1040 ez 2013    In some states, income from separate property is separate income. 1040 ez 2013 These states include Arizona, California, Nevada, New Mexico, and Washington. 1040 ez 2013 Other states characterize income from separate property as community income. 1040 ez 2013 These states include Idaho, Louisiana, Texas, and Wisconsin. 1040 ez 2013 Exemptions When you file separate returns, you must claim your own exemption amount for that year. 1040 ez 2013 (See your tax return instructions. 1040 ez 2013 ) You cannot divide the amount allowed as an exemption for a dependent between you and your spouse (or your registered domestic partner). 1040 ez 2013 When community funds provide support for more than one person, each of whom otherwise qualifies as a dependent, you and your spouse (or your registered domestic partner) may divide the number of dependency exemptions as explained in the following example. 1040 ez 2013 Example. 1040 ez 2013 Ron and Diane White have three dependent children and live in Nevada. 1040 ez 2013 If Ron and Diane file separately, only Ron can claim his own exemption, and only Diane can claim her own exemption. 1040 ez 2013 Ron and Diane can agree that one of them will claim the exemption for one, two, or all of their children and the other will claim any remaining exemptions. 1040 ez 2013 They cannot each claim half of the total exemption amount for their three children. 1040 ez 2013 Deductions If you file separate returns, your deductions generally depend on whether the expenses involve community or separate income. 1040 ez 2013 Business and investment expenses. 1040 ez 2013    If you file separate returns, expenses incurred to earn or produce community business or investment income are generally divided equally between you and your spouse (or your registered domestic partner). 1040 ez 2013 Each of you is entitled to deduct one-half of the expenses on your separate returns. 1040 ez 2013 Expenses incurred by a spouse (or registered domestic partner) to produce separate business or investment income is deductible by the spouse (or the registered domestic partner) who earns the corresponding separate business or investment income. 1040 ez 2013    Other limits may also apply to business and investment expenses. 1040 ez 2013 For more information, see Publication 535, Business Expenses, and Publication 550, Investment Income and Expenses. 1040 ez 2013 Alimony paid. 1040 ez 2013    Payments that may otherwise qualify as alimony are not deductible by the payer if they are the recipient spouse's part of community income. 1040 ez 2013 They are deductible as alimony only to the extent they are more than that spouse's part of community income. 1040 ez 2013 Example. 1040 ez 2013 You live in a community property state. 1040 ez 2013 You are separated but the special rules explained later under Spouses living apart all year do not apply. 1040 ez 2013 Under a written agreement, you pay your spouse $12,000 of your $20,000 total yearly community income. 1040 ez 2013 Your spouse receives no other community income. 1040 ez 2013 Under your state law, earnings of a spouse living separately and apart from the other spouse continue as community property. 1040 ez 2013 On your separate returns, each of you must report $10,000 of the total community income. 1040 ez 2013 In addition, your spouse must report $2,000 as alimony received. 1040 ez 2013 You can deduct $2,000 as alimony paid. 1040 ez 2013 IRA deduction. 1040 ez 2013    Deductions for IRA contributions cannot be split between spouses (or registered domestic partners). 1040 ez 2013 The deduction for each spouse (or each registered domestic partner) is figured separately and without regard to community property laws. 1040 ez 2013 Personal expenses. 1040 ez 2013   Expenses that are paid out of separate funds, such as medical expenses, are deductible by the spouse who pays them. 1040 ez 2013 If these expenses are paid from community funds, divide the deduction equally between you and your spouse. 1040 ez 2013 Credits, Taxes, and Payments The following is a discussion of the general effect of community property laws on the treatment of certain credits, taxes, and payments on your separate return. 1040 ez 2013 Child tax credit. 1040 ez 2013    You may be entitled to a child tax credit for each of your qualifying children. 1040 ez 2013 You must provide the name and identification number (usually the social security number) of each qualifying child on your return. 1040 ez 2013 See your tax return instructions for the maximum amount of the credit you can claim for each qualifying child. 1040 ez 2013 Limit on credit. 1040 ez 2013    The credit is limited if your modified adjusted gross income (modified AGI) is above a certain amount. 1040 ez 2013 The amount at which the limitation (phaseout) begins depends on your filing status. 1040 ez 2013 Generally, your credit is limited to your tax liability unless you have three or more qualifying children. 1040 ez 2013 See your tax return instructions for more information. 1040 ez 2013 Self-employment tax. 1040 ez 2013    For the effect of community property laws on the income tax treatment of income from a sole proprietorship and partnerships, see Wages, earnings, and profits and Partnership income , earlier. 1040 ez 2013 The following rules only apply to persons married for federal tax purposes. 1040 ez 2013 Registered domestic partners report community income for self-employment tax purposes the same way they do for income tax purposes. 1040 ez 2013 Sole proprietorship. 1040 ez 2013    With regard to net income from a trade or business (other than a partnership) that is community income, self-employment tax is imposed on the spouse carrying on the trade or business. 1040 ez 2013 Partnerships. 1040 ez 2013    All of the distributive share of a married partner's income or loss from a partnership trade or business is attributable to the partner for computing any self-employment tax, even if a portion of the partner's distributive share of income or loss is community income or loss that is otherwise attributable to the partner's spouse for income tax purposes. 1040 ez 2013 If both spouses are partners, any self-employment tax is allocated based on their distributive shares. 1040 ez 2013 Federal income tax withheld. 1040 ez 2013    Report the credit for federal income tax withheld on community wages in the same manner as your wages. 1040 ez 2013 If you and your spouse file separate returns on which each of you reports half the community wages, each of you is entitled to credit for half the income tax withheld on those wages. 1040 ez 2013 Likewise, each registered domestic partner is entitled to credit for half the income tax withheld on those wages. 1040 ez 2013 Estimated tax payments. 1040 ez 2013    In determining whether you must pay estimated tax, apply the estimated tax rules to your estimated income. 1040 ez 2013 These rules are explained in Publication 505. 1040 ez 2013   If you think you may owe estimated tax and want to pay the tax separately (registered domestic partners must pay the tax separately), determine whether you must pay it by taking into account: Half the community income and deductions, All of your separate income and deductions, and Your own exemption and any exemptions for dependents that you may claim. 1040 ez 2013   Whether you and your spouse pay estimated tax jointly or separately will not affect your choice of filing joint or separate income tax returns. 1040 ez 2013   If you and your spouse paid estimated tax jointly but file separate income tax returns, either of you can claim all of the estimated tax paid, or you may divide it between you in any way that you agree upon. 1040 ez 2013   If you cannot agree on how to divide it, the estimated tax you can claim equals the total estimated tax paid times the tax shown on your separate return, divided by the total of the tax shown on your return and your spouse's return. 1040 ez 2013   If you paid your estimated taxes separately, you get credit for only the estimated taxes you paid. 1040 ez 2013 Earned income credit. 1040 ez 2013    You may be entitled to an earned income credit (EIC). 1040 ez 2013 You cannot claim this credit if your filing status is married filing separately. 1040 ez 2013   If you are married, but qualify to file as head of household under rules for married taxpayers living apart (see Publication 501, Exemptions, Standard Deduction, and Filing Information), and live in a state that has community property laws, your earned income for the EIC does not include any amount earned by your spouse that is treated as belonging to you under community property laws. 1040 ez 2013 That amount is not earned income for the EIC, even though you must include it in your gross income on your income tax return. 1040 ez 2013 Your earned income includes the entire amount you earned, even if part of it is treated as belonging to your spouse under your state's community property laws. 1040 ez 2013 The same rule applies to registered domestic partners. 1040 ez 2013    This rule does not apply when determining your adjusted gross income (AGI) for the EIC. 1040 ez 2013 Your AGI includes that part of both your and your spouse's (or your registered domestic partner's) wages that you are required to include in gross income shown on your tax return. 1040 ez 2013   For more information about the EIC, see Publication 596, Earned Income Credit (EIC). 1040 ez 2013 Overpayments. 1040 ez 2013    The amount of an overpayment on a joint return is allocated under the community property laws of the state in which you are domiciled. 1040 ez 2013 If, under the laws of your state, community property is subject to premarital or other separate debts of either spouse, the full joint overpayment may be used to offset the obligation. 1040 ez 2013 If, under the laws of your state, community property is not subject to premarital or other separate debts of either spouse, only the portion of the joint overpayment allocated to the spouse liable for the obligation can be used to offset that liability. 1040 ez 2013 The portion allocated to the other spouse can be refunded. 1040 ez 2013 Community Property Laws Disregarded The following discussions are situations where special rules apply to community property and community income for spouses. 1040 ez 2013 These rules do not apply to registered domestic partners. 1040 ez 2013 Certain community income not treated as community income by one spouse. 1040 ez 2013    Community property laws may not apply to an item of community income that you received but did not treat as community income. 1040 ez 2013 You are responsible for reporting all of that income item if: You treat the item as if only you are entitled to the income, and You do not notify your spouse of the nature and amount of the income by the due date for filing the return (including extensions). 1040 ez 2013 Relief from liability arising from community property law. 1040 ez 2013    You are not responsible for the tax relating to an item of community income if all the following conditions are met. 1040 ez 2013 You did not file a joint return for the tax year. 1040 ez 2013 You did not include an item of community income in gross income. 1040 ez 2013 The item of community income you did not include is one of the following: Wages, salaries, and other compensation your spouse (or former spouse) received for services he or she performed as an employee. 1040 ez 2013 Income your spouse (or former spouse) derived from a trade or business he or she operated as a sole proprietor. 1040 ez 2013 Your spouse's (or former spouse's) distributive share of partnership income. 1040 ez 2013 Income from your spouse's (or former spouse's) separate property (other than income described in (a), (b), or (c)). 1040 ez 2013 Use the appropriate community property law to determine what is separate property. 1040 ez 2013 Any other income that belongs to your spouse (or former spouse) under community property law. 1040 ez 2013 You establish that you did not know of, and had no reason to know of, that community income. 1040 ez 2013 Under all facts and circumstances, it would not be fair to include the item of community income in your gross income. 1040 ez 2013 Requesting relief. 1040 ez 2013    For information on how and when to request relief from liabilities arising from community property laws, see Community Property Laws in Publication 971, Innocent Spouse Relief. 1040 ez 2013 Equitable relief. 1040 ez 2013    If you do not qualify for the relief discussed earlier under Relief from liability arising from community property law and are now liable for an underpaid or understated tax you believe should be paid only by your spouse (or former spouse), you may request equitable relief. 1040 ez 2013 To request equitable relief, you must file Form 8857, Request for Innocent Spouse Relief. 1040 ez 2013 Also see Publication 971. 1040 ez 2013 Spousal agreements. 1040 ez 2013    In some states a married couple may enter into an agreement that affects the status of property or income as community or separate property. 1040 ez 2013 Check your state law to determine how it affects you. 1040 ez 2013 Nonresident alien spouse. 1040 ez 2013    If you are a U. 1040 ez 2013 S. 1040 ez 2013 citizen or resident alien and you choose to treat your nonresident alien spouse as a U. 1040 ez 2013 S. 1040 ez 2013 resident for tax purposes and you are domiciled in a community property state or country, use the community property rules. 1040 ez 2013 You must file a joint return for the year you make the choice. 1040 ez 2013 You can file separate returns in later years. 1040 ez 2013 For details on making this choice, see Publication 519, U. 1040 ez 2013 S. 1040 ez 2013 Tax Guide for Aliens. 1040 ez 2013   If you are a U. 1040 ez 2013 S. 1040 ez 2013 citizen or resident alien and do not choose to treat your nonresident alien spouse as a U. 1040 ez 2013 S. 1040 ez 2013 resident for tax purposes, treat your community income as explained next under Spouses living apart all year. 1040 ez 2013 However, you do not have to meet the four conditions discussed there. 1040 ez 2013 Spouses living apart all year. 1040 ez 2013    If you are married at any time during the calendar year, special rules apply for reporting certain community income. 1040 ez 2013 You must meet all the following conditions for these special rules to apply. 1040 ez 2013 You and your spouse lived apart all year. 1040 ez 2013 You and your spouse did not file a joint return for a tax year beginning or ending in the calendar year. 1040 ez 2013 You and/or your spouse had earned income for the calendar year that is community income. 1040 ez 2013 You and your spouse have not transferred, directly or indirectly, any of the earned income in condition (3) above between yourselves before the end of the year. 1040 ez 2013 Do not take into account transfers satisfying child support obligations or transfers of very small amounts or value. 1040 ez 2013 If all these conditions are met, you and your spouse must report your community income as discussed next. 1040 ez 2013 See also Certain community income not treated as community income by one spouse , earlier. 1040 ez 2013 Earned income. 1040 ez 2013    Treat earned income that is not trade or business or partnership income as the income of the spouse who performed the services to earn the income. 1040 ez 2013 Earned income is wages, salaries, professional fees, and other pay for personal services. 1040 ez 2013   Earned income does not include amounts paid by a corporation that are a distribution of earnings and profits rather than a reasonable allowance for personal services rendered. 1040 ez 2013 Trade or business income. 1040 ez 2013    Treat income and related deductions from a trade or business that is not a partnership as those of the spouse carrying on the trade or business. 1040 ez 2013 Partnership income or loss. 1040 ez 2013    Treat income or loss from a trade or business carried on by a partnership as the income or loss of the spouse who is the partner. 1040 ez 2013 Separate property income. 1040 ez 2013    Treat income from the separate property of one spouse as the income of that spouse. 1040 ez 2013 Social security benefits. 1040 ez 2013    Treat social security and equivalent railroad retirement benefits as the income of the spouse who receives the benefits. 1040 ez 2013 Other income. 1040 ez 2013    Treat all other community income, such as dividends, interest, rents, royalties, or gains, as provided under your state's community property law. 1040 ez 2013 Example. 1040 ez 2013 George and Sharon were married throughout the year but did not live together at any time during the year. 1040 ez 2013 Both domiciles were in a community property state. 1040 ez 2013 They did not file a joint return or transfer any of their earned income between themselves. 1040 ez 2013 During the year their incomes were as follows:   George Sharon Wages $20,000 $22,000 Consulting business 5,000   Partnership   10,000 Dividends from separate property 1,000 2,000 Interest from community property 500 500 Total $26,500 $34,500 Under the community property law of their state, all the income is considered community income. 1040 ez 2013 (Some states treat income from separate property as separate income—check your state law. 1040 ez 2013 ) Sharon did not take part in George's consulting business. 1040 ez 2013 Ordinarily, on their separate returns they would each report $30,500, half the total community income of $61,000 ($26,500 + $34,500). 1040 ez 2013 But because they meet the four conditions listed earlier under Spouses living apart all year , they must disregard community property law in reporting all their income (except the interest income) from community property. 1040 ez 2013 They each report on their returns only their own earnings and other income, and their share of the interest income from community property. 1040 ez 2013 George reports $26,500 and Sharon reports $34,500. 1040 ez 2013 Other separated spouses. 1040 ez 2013    If you and your spouse are separated but do not meet the four conditions discussed earlier under Spouses living apart all year , you must treat your income according to the laws of your state. 1040 ez 2013 In some states, income earned after separation but before a decree of divorce continues to be community income. 1040 ez 2013 In other states, it is separate income. 1040 ez 2013 End of the Community The marital community may end in several ways. 1040 ez 2013 When the marital community ends, the community assets (money and property) are divided between the spouses. 1040 ez 2013 Similarly, a registered domestic partnership may end in several ways and the community assets must be divided between the registered domestic partners. 1040 ez 2013 Death of spouse. 1040 ez 2013    If you own community property and your spouse dies, the total fair market value (FMV) of the community property, including the part that belongs to you, generally becomes the basis of the entire property. 1040 ez 2013 For this rule to apply, at least half the value of the community property interest must be includible in your spouse's gross estate, whether or not the estate must file a return (this rule does not apply to registered domestic partners). 1040 ez 2013 Example. 1040 ez 2013 Bob and Ann owned community property that had a basis of $80,000. 1040 ez 2013 When Bob died, his and Ann's community property had an FMV of $100,000. 1040 ez 2013 One-half of the FMV of their community interest was includible in Bob's estate. 1040 ez 2013 The basis of Ann's half of the property is $50,000 after Bob died (half of the $100,000 FMV). 1040 ez 2013 The basis of the other half to Bob's heirs is also $50,000. 1040 ez 2013   For more information about the basis of assets, see Publication 551, Basis of Assets. 1040 ez 2013    The above basis rule does not apply if your spouse died in 2010 and the spouse's executor elected out of the estate tax, in which case section 1022 will apply. 1040 ez 2013 See Publication 4895, Tax Treatment of Property Acquired From a Decedent Dying in 2010, for additional information. 1040 ez 2013 Divorce or separation. 1040 ez 2013    If spouses divorce or separate, the (equal or unequal) division of community property in connection with the divorce or property settlement does not result in a gain or loss. 1040 ez 2013 For registered domestic partners, an unequal division of community property in a property settlement may result in a gain or loss. 1040 ez 2013 For information on the tax consequences of the division of property under a property settlement or divorce decree, see Publication 504. 1040 ez 2013   Each spouse (or each registered domestic partner) is taxed on half the community income for the part of the year before the community ends. 1040 ez 2013 However, see Spouses living apart all year , earlier. 1040 ez 2013 Any income received after the community ends is separate income. 1040 ez 2013 This separate income is taxable only to the spouse (or the registered domestic partner) to whom it belongs. 1040 ez 2013   An absolute decree of divorce or annulment ends the marital community in all community property states. 1040 ez 2013 A decree of annulment, even though it holds that no valid marriage ever existed, usually does not nullify community property rights arising during the “marriage. 1040 ez 2013 ” However, you should check your state law for exceptions. 1040 ez 2013   A decree of legal separation or of separate maintenance may or may not end the marital community. 1040 ez 2013 The court issuing the decree may terminate the marital community and divide the property between the spouses. 1040 ez 2013   A separation agreement may divide the community property between you and your spouse. 1040 ez 2013 It may provide that this property, along with future earnings and property acquired, will be separate property. 1040 ez 2013 This agreement may end the community. 1040 ez 2013   In some states, the marital community ends when the spouses permanently separate, even if there is no formal agreement. 1040 ez 2013 Check your state law. 1040 ez 2013   If you are a registered domestic partner, you should check your state law to determine when the community ends. 1040 ez 2013 Preparing a Federal Income Tax Return The following discussion does not apply to spouses who meet the conditions under Spouses living apart all year , discussed earlier. 1040 ez 2013 Those spouses must report their community income as explained in that discussion. 1040 ez 2013 Joint Return Versus Separate Returns Ordinarily, filing a joint return will give you a greater tax advantage than filing a separate return. 1040 ez 2013 But in some cases, your combined income tax on separate returns may be less than it would be on a joint return. 1040 ez 2013 This discussion concerning joint versus separate returns does not apply to registered domestic partners. 1040 ez 2013 The following rules apply if your filing status is married filing separately. 1040 ez 2013 You should itemize deductions if your spouse itemizes deductions, because you cannot claim the standard deduction. 1040 ez 2013 You cannot take the credit for child and dependent care expenses in most instances. 1040 ez 2013 You cannot take the earned income credit. 1040 ez 2013 You cannot exclude any interest income from qualified U. 1040 ez 2013 S. 1040 ez 2013 savings bonds that you used for higher education expenses. 1040 ez 2013 You cannot take the credit for the elderly or the disabled unless you lived apart from your spouse all year. 1040 ez 2013 You may have to include in income more of any social security benefits (including any equivalent railroad retirement benefits) you received during the year than you would on a joint return. 1040 ez 2013 You cannot deduct interest paid on a qualified student loan. 1040 ez 2013 You cannot take the education credits. 1040 ez 2013 You may have a smaller child tax credit than you would on a joint return. 1040 ez 2013 You cannot take the exclusion or credit for adoption expenses in most instances. 1040 ez 2013 Figure your tax both on a joint return and on separate returns under the community property laws of your state. 1040 ez 2013 You can then compare the tax figured under both methods and use the one that results in less tax. 1040 ez 2013 Separate Return Preparation If you file separate returns, you and your spouse must each report half of your combined community income and deductions in addition to your separate income and deductions. 1040 ez 2013 Each of you must complete and attach Form 8958 to your Form 1040 showing how you figured the amount you are reporting on your return. 1040 ez 2013 On the appropriate lines of your separate Form 1040, list only your share of the income and deductions on the appropriate lines of your separate tax returns (wages, interest, dividends, etc. 1040 ez 2013 ). 1040 ez 2013 The same reporting rule applies to registered domestic partners. 1040 ez 2013 For a discussion of the effect of community property laws on certain items of income, deductions, credits, and other return amounts, see Identifying Income, Deductions, and Credits , earlier. 1040 ez 2013 Attach your Form 8958 to your separate return showing how you figured the income, deductions, and federal income tax withheld that each of you reported. 1040 ez 2013 Form 8958 is used for married spouses in community property states who choose to file married filing separately. 1040 ez 2013 Form 8958 is also used for registered domestic partners who are domiciled in Nevada, Washington, or California. 1040 ez 2013 A registered domestic partner in Nevada, Washington, or California must follow state community property laws and report half the combined community income of the individual and his or her registered domestic partner. 1040 ez 2013 Extension of time to file. 1040 ez 2013    An extension of time for filing your separate return does not extend the time for filing your spouse's (or your registered domestic partner's) separate return. 1040 ez 2013 If you and your spouse file a joint return, you cannot file separate returns after the due date for filing either separate return has passed. 1040 ez 2013 How To Get Tax Help Whether it's help with a tax issue, preparing your tax return or a need for a free publication or form, get the help you need the way you want it: online, use a smart phone, call or walk in to an IRS office or volunteer site near you. 1040 ez 2013 Free help with your tax return. 1040 ez 2013    You can get free help preparing your return nationwide from IRS-certified volunteers. 1040 ez 2013 The Volunteer Income Tax Assistance (VITA) program helps low-to-moderate income, elderly, people with disabilities, and limited English proficient taxpayers. 1040 ez 2013 The Tax Counseling for the Elderly (TCE) program helps taxpayers age 60 and older with their tax returns. 1040 ez 2013 Most VITA and TCE sites offer free electronic filing and all volunteers will let you know about credits and deductions you may be entitled to claim. 1040 ez 2013 In addition, some VITA and TCE sites provide taxpayers the opportunity to prepare their own return with help from an IRS-certified volunteer. 1040 ez 2013 To find the nearest VITA or TCE site, you can use the VITA Locator Tool on IRS. 1040 ez 2013 gov, download the IRS2Go app, or call 1-800-906-9887. 1040 ez 2013   As part of the TCE program, AARP offers the Tax-Aide counseling program. 1040 ez 2013 To find the nearest AARP Tax-Aide site, visit AARP's website at www. 1040 ez 2013 aarp. 1040 ez 2013 org/money/taxaide or call 1-888-227-7669. 1040 ez 2013 For more information on these programs, go to IRS. 1040 ez 2013 gov and enter “VITA” in the search box. 1040 ez 2013 Internet. 1040 ez 2013    IRS. 1040 ez 2013 gov and IRS2Go are ready when you are —24 hours a day, 7 days a week. 1040 ez 2013 Download the free IRS2Go app from the iTunes app store or from Google Play. 1040 ez 2013 Use it to check your refund status, order transcripts of your tax returns or tax account, watch the IRS YouTube channel, get IRS news as soon as it's released to the public, subscribe to filing season updates or daily tax tips, and follow the IRS Twitter news feed, @IRSnews, to get the latest federal tax news, including information about tax law changes and important IRS programs. 1040 ez 2013 Check the status of your 2013 refund with the Where's My Refund? application on IRS. 1040 ez 2013 gov or download the IRS2Go app and select the Refund Status option. 1040 ez 2013 The IRS issues more than 9 out of 10 refunds in less than 21 days. 1040 ez 2013 Using these applications, you can start checking on the status of your return within 24 hours after we receive your e-filed return or 4 weeks after you mail a paper return. 1040 ez 2013 You will also be given a personalized refund date as soon as the IRS processes your tax return and approves your refund. 1040 ez 2013 The IRS updates Where's My Refund? every 24 hours, usually overnight, so you only need to check once a day. 1040 ez 2013 Use the Interactive Tax Assistant (ITA) to research your tax questions. 1040 ez 2013 No need to wait on the phone or stand in line. 1040 ez 2013 The ITA is available 24 hours a day, 7 days a week, and provides you with a variety of tax information related to general filing topics, deductions, credits, and income. 1040 ez 2013 When you reach the response screen, you can print the entire interview and the final response for your records. 1040 ez 2013 New subject areas are added on a regular basis. 1040 ez 2013  Answers not provided through ITA may be found in Tax Trails, one of the Tax Topics on IRS. 1040 ez 2013 gov which contain general individual and business tax information or by searching the IRS Tax Map, which includes an international subject index. 1040 ez 2013 You can use the IRS Tax Map, to search publications and instructions by topic or keyword. 1040 ez 2013 The IRS Tax Map integrates forms and publications into one research tool and provides single-point access to tax law information by subject. 1040 ez 2013 When the user searches the IRS Tax Map, they will be provided with links to related content in existing IRS publications, forms and instructions, questions and answers, and Tax Topics. 1040 ez 2013 Coming this filing season, you can immediately view and print for free all 5 types of individual federal tax transcripts (tax returns, tax account, record of account, wage and income statement, and certification of non-filing) using Get Transcript. 1040 ez 2013 You can also ask the IRS to mail a return or an account transcript to you. 1040 ez 2013 Only the mail option is available by choosing the Tax Records option on the IRS2Go app by selecting Mail Transcript on IRS. 1040 ez 2013 gov or by calling 1-800-908-9946. 1040 ez 2013 Tax return and tax account transcripts are generally available for the current year and the past three years. 1040 ez 2013 Determine if you are eligible for the EITC and estimate the amount of the credit with the Earned Income Tax Credit (EITC) Assistant. 1040 ez 2013 Visit Understanding Your IRS Notice or Letter to get answers to questions about a notice or letter you received from the IRS. 1040 ez 2013 If you received the First Time Homebuyer Credit, you can use the First Time Homebuyer Credit Account Look-up tool for information on your repayments and account balance. 1040 ez 2013 Check the status of your amended return using Where's My Amended Return? Go to IRS. 1040 ez 2013 gov and enter Where's My Amended Return? in the search box. 1040 ez 2013 You can generally expect your amended return to be processed up to 12 weeks from the date we receive it. 1040 ez 2013 It can take up to 3 weeks from the date you mailed it to show up in our system. 1040 ez 2013 Make a payment using one of several safe and convenient electronic payment options available on IRS. 1040 ez 2013 gov. 1040 ez 2013 Select the Payment tab on the front page of IRS. 1040 ez 2013 gov for more information. 1040 ez 2013 Determine if you are eligible and apply for an online payment agreement, if you owe more tax than you can pay today. 1040 ez 2013 Figure your income tax withholding with the IRS Withholding Calculator on IRS. 1040 ez 2013 gov. 1040 ez 2013 Use it if you've had too much or too little withheld, your personal situation has changed, you're starting a new job or you just want to see if you're having the right amount withheld. 1040 ez 2013 Determine if you might be subject to the Alternative Minimum Tax by using the Alternative Minimum Tax Assistant on IRS. 1040 ez 2013 gov. 1040 ez 2013 Request an Electronic Filing PIN by going to IRS. 1040 ez 2013 gov and entering Electronic Filing PIN in the search box. 1040 ez 2013 Download forms, instructions and publications, including accessible versions for people with disabilities. 1040 ez 2013 Locate the nearest Taxpayer Assistance Center (TAC) using the Office Locator tool on IRS. 1040 ez 2013 gov, or choose the Contact Us option on the IRS2Go app and search Local Offices. 1040 ez 2013 An employee can answer questions about your tax account or help you set up a payment plan. 1040 ez 2013 Before you visit, check the Office Locator on IRS. 1040 ez 2013 gov, or Local Offices under Contact Us on IRS2Go to confirm the address, phone number, days and hours of operation, and the services provided. 1040 ez 2013 If you have a special need, such as a disability, you can request an appointment. 1040 ez 2013 Call the local number listed in the Office Locator, or look in the phone book under United States Government, Internal Revenue Service. 1040 ez 2013 Apply for an Employer Identification Number (EIN). 1040 ez 2013 Go to IRS. 1040 ez 2013 gov and enter Apply for an EIN in the search box. 1040 ez 2013 Read the Internal Revenue Code, regulations, or other official guidance. 1040 ez 2013 Read Internal Revenue Bulletins. 1040 ez 2013 Sign up to receive local and national tax news and more by email. 1040 ez 2013 Just click on “subscriptions” above the search box on IRS. 1040 ez 2013 gov and choose from a variety of options. 1040 ez 2013    Phone. 1040 ez 2013 You can call the IRS, or you can carry it in your pocket with the IRS2Go app on your smart phone or tablet. 1040 ez 2013 Download the free IRS2Go app from the iTunes app store or from Google Play. 1040 ez 2013 Call to locate the nearest volunteer help site, 1-800-906-9887 or you can use the VITA Locator Tool on IRS. 1040 ez 2013 gov, or download the IRS2Go app. 1040 ez 2013 Low-to-moderate income, elderly, people with disabilities, and limited English proficient taxpayers can get free help with their tax return from the nationwide Volunteer Income Tax Assistance (VITA) program. 1040 ez 2013 The Tax Counseling for the Elderly (TCE) program helps taxpayers age 60 and older with their tax returns. 1040 ez 2013 Most VITA and TCE sites offer free electronic filing. 1040 ez 2013 Some VITA and TCE sites provide IRS-certified volunteers who can help prepare your tax return. 1040 ez 2013 Through the TCE program, AARP offers the Tax-Aide counseling program; call 1-888-227-7669 to find the nearest Tax-Aide location. 1040 ez 2013 Call the automated Where's My Refund? information hotline to check the status of your 2013 refund 24 hours a day, 7 days a week at 1-800-829-1954. 1040 ez 2013 If you e-file, you can start checking on the status of your return within 24 hours after the IRS receives your tax return or 4 weeks after you've mailed a paper return. 1040 ez 2013 The IRS issues more than 9 out of 10 refunds in less than 21 days. 1040 ez 2013 Where's My Refund? will give you a personalized refund date as soon as the IRS processes your tax return and approves your refund. 1040 ez 2013 Before you call this automated hotline, have your 2013 tax return handy so you can enter your social security number, your filing status, and the exact whole dollar amount of your refund. 1040 ez 2013 The IRS updates Where's My Refund? every 24 hours, usually overnight, so you only need to check once a day. 1040 ez 2013 Note, the above information is for our automated hotline. 1040 ez 2013 Our live phone and walk-in assistors can research the status of your refund only if it's been 21 days or more since you filed electronically or more than 6 weeks since you mailed your paper return. 1040 ez 2013 Call the Amended Return Hotline, 1-866-464-2050, to check the status of your amended return. 1040 ez 2013 You can generally expect your amended return to be processed up to 12 weeks from the date we receive it. 1040 ez 2013 It can take up to 3 weeks from the date you mailed it to show up in our system. 1040 ez 2013 Call 1-800-TAX-FORM (1-800-829-3676) to order current-year forms, instructions, publications, and prior-year forms and instructions (limited to 5 years). 1040 ez 2013 You should receive your order within 10 business days. 1040 ez 2013 Call TeleTax, 1-800-829-4477, to listen to pre-recorded messages covering general and business tax information. 1040 ez 2013 If, between January and April 15, you still have questions about the Form 1040, 1040A, or 1040EZ (like filing requirements, dependents, credits, Schedule D, pensions and IRAs or self-employment taxes), call 1-800-829-1040. 1040 ez 2013 Call using TTY/TDD equipment, 1-800-829-4059 to ask tax questions or order forms and publications. 1040 ez 2013 The TTY/TDD telephone number is for people who are deaf, hard of hearing, or have a speech disability. 1040 ez 2013 These individuals can also contact the IRS through relay services such as the Federal Relay Service. 1040 ez 2013    Walk-in. 1040 ez 2013 You can find a selection of forms, publications and services — in-person. 1040 ez 2013 Products. 1040 ez 2013 You can walk in to some post offices, libraries, and IRS offices to pick up certain forms, instructions, and publications. 1040 ez 2013 Some IRS offices, libraries, and city and county government offices have a collection of products available to photocopy from reproducible proofs. 1040 ez 2013 Services. 1040 ez 2013 You can walk in to your local TAC for face-to-face tax help. 1040 ez 2013 An employee can answer questions about your tax account or help you set up a payment plan. 1040 ez 2013 Before visiting, use the Office Locator tool on IRS. 1040 ez 2013 gov, or choose the Contact Us option on the IRS2Go app and search Local Offices for days and hours of operation, and services provided. 1040 ez 2013    Mail. 1040 ez 2013 You can send your order for forms, instructions, and publications to the address below. 1040 ez 2013 You should receive a response within 10 business days after your request is received. 1040 ez 2013 Internal Revenue Service 1201 N. 1040 ez 2013 Mitsubishi Motorway Bloomington, IL 61705-6613   The Taxpayer Advocate Service Is Here to Help You. 1040 ez 2013 The Taxpayer Advocate Service (TAS) is your voice at the IRS. 1040 ez 2013 Our job is to ensure that every taxpayer is treated fairly and that you know and understand your rights. 1040 ez 2013   What can TAS do for you? We can offer you free help with IRS problems that you can't resolve on your own. 1040 ez 2013 We know this process can be confusing, but the worst thing you can do is nothing at all! TAS can help if you can't resolve your tax problem and: Your problem is causing financial difficulties for you, your family, or your business. 1040 ez 2013 You face (or your business is facing) an immediate threat of adverse action. 1040 ez 2013 You've tried repeatedly to contact the IRS but no one has responded, or the IRS hasn't responded by the date promised. 1040 ez 2013   If you qualify for our help, you'll be assigned to one advocate who'll be with you at every turn and will do everything possible to resolve your problem. 1040 ez 2013 Here's why we can help: TAS is an independent organization within the IRS. 1040 ez 2013 Our advocates know how to work with the IRS. 1040 ez 2013 Our services are free and tailored to meet your needs. 1040 ez 2013 We have offices in every state, the District of Columbia, and Puerto Rico. 1040 ez 2013   How can you reach us? If you think TAS can help you, call your local advocate, whose number is in your local directory and at www. 1040 ez 2013 irs. 1040 ez 2013 gov/advocate, or call us toll-free at 1-877-777-4778. 1040 ez 2013   How else does TAS help taxpayers?  TAS also works to resolve large-scale, systemic problems that affect many taxpayers. 1040 ez 2013 If you know of one of these broad issues, please report it to us through our Systemic Advocacy Management System at www. 1040 ez 2013 irs. 1040 ez 2013 gov/sams. 1040 ez 2013 Low Income Taxpayer Clinics Low Income Taxpayer Clinics (LITCs) serve individuals whose income is below a certain level and need to resolve tax problems such as audits, appeals and tax collection disputes. 1040 ez 2013 Some clinics can provide information about taxpayer rights and responsibilities in different languages for individuals who speak English as a second language. 1040 ez 2013 Visit www. 1040 ez 2013 irs. 1040 ez 2013 gov/litc or see IRS Publication 4134, Low Income Taxpayer Clinic List. 1040 ez 2013 Prev  Up  Next   Home   More Online Publications