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1040ez 2012 Worksheet

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1040ez 2012 Worksheet

1040ez 2012 worksheet 3. 1040ez 2012 worksheet   Reporting Rental Income, Expenses, and Losses Table of Contents Which Forms To UseSchedule E (Form 1040) Schedule C (Form 1040), Profit or Loss From Business Qualified Joint Venture Limits on Rental LossesAt-Risk Rules Passive Activity Limits Casualties and Thefts Example Figuring the net income or loss for a residential rental activity may involve more than just listing the income and deductions on Schedule E (Form 1040). 1040ez 2012 worksheet There are activities which do not qualify to use Schedule E, such as when the activity is not engaged in to make a profit or when you provide substantial services in conjunction with the property. 1040ez 2012 worksheet There are also the limitations which may need to be applied if you have a net loss on Schedule E. 1040ez 2012 worksheet There are two: (1) the limitation based on the amount of investment you have at risk in your rental activity, and (2) the special limits imposed on passive activities. 1040ez 2012 worksheet You may also have a gain or loss related to your rental property from a casualty or theft. 1040ez 2012 worksheet This is considered separately from the income and expense information you report on Schedule E. 1040ez 2012 worksheet Which Forms To Use The basic form for reporting residential rental income and expenses is Schedule E (Form 1040). 1040ez 2012 worksheet However, do not use that schedule to report a not-for-profit activity. 1040ez 2012 worksheet See Not Rented for Profit , in chapter 4. 1040ez 2012 worksheet There are also other rental situations in which forms other than Schedule E would be used. 1040ez 2012 worksheet Schedule E (Form 1040) If you rent buildings, rooms, or apartments, and provide basic services such as heat and light, trash collection, etc. 1040ez 2012 worksheet , you normally report your rental income and expenses on Schedule E, Part I. 1040ez 2012 worksheet List your total income, expenses, and depreciation for each rental property. 1040ez 2012 worksheet Be sure to enter the number of fair rental and personal use days on line 2. 1040ez 2012 worksheet If you have more than three rental or royalty properties, complete and attach as many Schedules E as are needed to list the properties. 1040ez 2012 worksheet Complete lines 1 and 2 for each property. 1040ez 2012 worksheet However, fill in lines 23a through 26 on only one Schedule E. 1040ez 2012 worksheet On Schedule E, page 1, line 18, enter the depreciation you are claiming for each property. 1040ez 2012 worksheet To find out if you need to attach Form 4562, see Form 4562 , later. 1040ez 2012 worksheet If you have a loss from your rental real estate activity, you also may need to complete one or both of the following forms. 1040ez 2012 worksheet Form 6198, At-Risk Limitations. 1040ez 2012 worksheet See At-Risk Rules , later. 1040ez 2012 worksheet Also see Publication 925. 1040ez 2012 worksheet Form 8582, Passive Activity Loss Limitations. 1040ez 2012 worksheet See Passive Activity Limits , later. 1040ez 2012 worksheet Page 2 of Schedule E is used to report income or loss from partnerships, S corporations, estates, trusts, and real estate mortgage investment conduits. 1040ez 2012 worksheet If you need to use page 2 of Schedule E, be sure to use page 2 of the same Schedule E you used to enter your rental activity on page 1. 1040ez 2012 worksheet Also, include the amount from line 26 (Part I) in the “Total income or (loss)” on line 41 (Part V). 1040ez 2012 worksheet Form 4562. 1040ez 2012 worksheet   You must complete and attach Form 4562 for rental activities only if you are claiming: Depreciation, including the special depreciation allowance, on property placed in service during 2013; Depreciation on listed property (such as a car), regardless of when it was placed in service; or Any other car expenses, including the standard mileage rate or lease expenses. 1040ez 2012 worksheet Otherwise, figure your depreciation on your own worksheet. 1040ez 2012 worksheet You do not have to attach these computations to your return, but you should keep them in your records for future reference. 1040ez 2012 worksheet   See Publication 946 for information on preparing Form 4562. 1040ez 2012 worksheet Schedule C (Form 1040), Profit or Loss From Business Generally, Schedule C is used when you provide substantial services in conjunction with the property or the rental is part of a trade or business as a real estate dealer. 1040ez 2012 worksheet Providing substantial services. 1040ez 2012 worksheet   If you provide substantial services that are primarily for your tenant's convenience, such as regular cleaning, changing linen, or maid service, you report your rental income and expenses on Schedule C (Form 1040), Profit or Loss From Business, or Schedule C-EZ (Form 1040), Net Profit From Business. 1040ez 2012 worksheet Use Form 1065, U. 1040ez 2012 worksheet S. 1040ez 2012 worksheet Return of Partnership Income, if your rental activity is a partnership (including a partnership with your spouse unless it is a qualified joint venture). 1040ez 2012 worksheet Substantial services do not include the furnishing of heat and light, cleaning of public areas, trash collection, etc. 1040ez 2012 worksheet For information, see Publication 334, Tax Guide for Small Business. 1040ez 2012 worksheet Also, you may have to pay self-employment tax on your rental income using Schedule SE (Form 1040), Self-Employment Tax. 1040ez 2012 worksheet For a discussion of “substantial services,” see Real Estate Rents in Publication 334, chapter 5. 1040ez 2012 worksheet Qualified Joint Venture If you and your spouse each materially participate (see Material participation under Passive Activity Limits, later) as the only members of a jointly owned and operated real estate business, and you file a joint return for the tax year, you can make a joint election to be treated as a qualified joint venture instead of a partnership. 1040ez 2012 worksheet This election, in most cases, will not increase the total tax owed on the joint return, but it does give each of you credit for social security earnings on which retirement benefits are based and for Medicare coverage if your rental income is subject to self-employment tax. 1040ez 2012 worksheet If you make this election, you must report rental real estate income on Schedule E (or Schedule C if you provide substantial services). 1040ez 2012 worksheet You will not be required to file Form 1065 for any year the election is in effect. 1040ez 2012 worksheet Rental real estate income generally is not included in net earnings from self-employment subject to self-employment tax and generally is subject to the passive activity limits. 1040ez 2012 worksheet If you and your spouse filed a Form 1065 for the year prior to the election, the partnership terminates at the end of the tax year immediately preceding the year the election takes effect. 1040ez 2012 worksheet For more information on qualified joint ventures, go to IRS. 1040ez 2012 worksheet gov and enter “qualified joint venture” in the search box. 1040ez 2012 worksheet Limits on Rental Losses If you have a loss from your rental real estate activity, two sets of rules may limit the amount of loss you can deduct. 1040ez 2012 worksheet You must consider these rules in the order shown below. 1040ez 2012 worksheet Both are discussed in this section. 1040ez 2012 worksheet At-risk rules. 1040ez 2012 worksheet These rules are applied first if there is investment in your rental real estate activity for which you are not at risk. 1040ez 2012 worksheet This applies only if the real property was placed in service after 1986. 1040ez 2012 worksheet Passive activity limits. 1040ez 2012 worksheet Generally, rental real estate activities are considered passive activities and losses are not deductible unless you have income from other passive activities to offset them. 1040ez 2012 worksheet However, there are exceptions. 1040ez 2012 worksheet At-Risk Rules You may be subject to the at-risk rules if you have: A loss from an activity carried on as a trade or business or for the production of income, and Amounts invested in the activity for which you are not fully at risk. 1040ez 2012 worksheet Losses from holding real property (other than mineral property) placed in service before 1987 are not subject to the at-risk rules. 1040ez 2012 worksheet In most cases, any loss from an activity subject to the at-risk rules is allowed only to the extent of the total amount you have at risk in the activity at the end of the tax year. 1040ez 2012 worksheet You are considered at risk in an activity to the extent of cash and the adjusted basis of other property you contributed to the activity and certain amounts borrowed for use in the activity. 1040ez 2012 worksheet Any loss that is disallowed because of the at-risk limits is treated as a deduction from the same activity in the next tax year. 1040ez 2012 worksheet See Publication 925 for a discussion of the at-risk rules. 1040ez 2012 worksheet Form 6198. 1040ez 2012 worksheet   If you are subject to the at-risk rules, file Form 6198, At-Risk Limitations, with your tax return. 1040ez 2012 worksheet Passive Activity Limits In most cases, all rental real estate activities (except those of certain real estate professionals, discussed later) are passive activities. 1040ez 2012 worksheet For this purpose, a rental activity is an activity from which you receive income mainly for the use of tangible property, rather than for services. 1040ez 2012 worksheet For a discussion of activities that are not considered rental activities, see Rental Activities in Publication 925. 1040ez 2012 worksheet Deductions or losses from passive activities are limited. 1040ez 2012 worksheet You generally cannot offset income, other than passive income, with losses from passive activities. 1040ez 2012 worksheet Nor can you offset taxes on income, other than passive income, with credits resulting from passive activities. 1040ez 2012 worksheet Any excess loss or credit is carried forward to the next tax year. 1040ez 2012 worksheet Exceptions to the rules for figuring passive activity limits for personal use of a dwelling unit and for rental real estate with active participation are discussed later. 1040ez 2012 worksheet For a detailed discussion of these rules, see Publication 925. 1040ez 2012 worksheet Real estate professionals. 1040ez 2012 worksheet   If you are a real estate professional, complete line 43 of Schedule E. 1040ez 2012 worksheet      You qualify as a real estate professional for the tax year if you meet both of the following requirements. 1040ez 2012 worksheet More than half of the personal services you perform in all trades or businesses during the tax year are performed in real property trades or businesses in which you materially participate. 1040ez 2012 worksheet You perform more than 750 hours of services during the tax year in real property trades or businesses in which you materially participate. 1040ez 2012 worksheet If you qualify as a real estate professional, rental real estate activities in which you materially participated are not passive activities. 1040ez 2012 worksheet For purposes of determining whether you materially participated in your rental real estate activities, each interest in rental real estate is a separate activity unless you elect to treat all your interests in rental real estate as one activity. 1040ez 2012 worksheet   Do not count personal services you perform as an employee in real property trades or businesses unless you are a 5% owner of your employer. 1040ez 2012 worksheet You are a 5% owner if you own (or are considered to own) more than 5% of your employer's outstanding stock, or capital or profits interest. 1040ez 2012 worksheet   Do not count your spouse's personal services to determine whether you met the requirements listed earlier to qualify as a real estate professional. 1040ez 2012 worksheet However, you can count your spouse's participation in an activity in determining if you materially participated. 1040ez 2012 worksheet Real property trades or businesses. 1040ez 2012 worksheet   A real property trade or business is a trade or business that does any of the following with real property. 1040ez 2012 worksheet Develops or redevelops it. 1040ez 2012 worksheet Constructs or reconstructs it. 1040ez 2012 worksheet Acquires it. 1040ez 2012 worksheet Converts it. 1040ez 2012 worksheet Rents or leases it. 1040ez 2012 worksheet Operates or manages it. 1040ez 2012 worksheet Brokers it. 1040ez 2012 worksheet Choice to treat all interests as one activity. 1040ez 2012 worksheet   If you were a real estate professional and had more than one rental real estate interest during the year, you can choose to treat all the interests as one activity. 1040ez 2012 worksheet You can make this choice for any year that you qualify as a real estate professional. 1040ez 2012 worksheet If you forgo making the choice for one year, you can still make it for a later year. 1040ez 2012 worksheet   If you make the choice, it is binding for the tax year you make it and for any later year that you are a real estate professional. 1040ez 2012 worksheet This is true even if you are not a real estate professional in any intervening year. 1040ez 2012 worksheet (For that year, the exception for real estate professionals will not apply in determining whether your activity is subject to the passive activity rules. 1040ez 2012 worksheet )   See the Instructions for Schedule E for information about making this choice. 1040ez 2012 worksheet Material participation. 1040ez 2012 worksheet   Generally, you materially participated in an activity for the tax year if you were involved in its operations on a regular, continuous, and substantial basis during the year. 1040ez 2012 worksheet For details, see Publication 925 or the Instructions for Schedule C. 1040ez 2012 worksheet Participating spouse. 1040ez 2012 worksheet   If you are married, determine whether you materially participated in an activity by also counting any participation in the activity by your spouse during the year. 1040ez 2012 worksheet Do this even if your spouse owns no interest in the activity or files a separate return for the year. 1040ez 2012 worksheet Form 8582. 1040ez 2012 worksheet    You may have to complete Form 8582 to figure the amount of any passive activity loss for the current tax year for all activities and the amount of the passive activity loss allowed on your tax return. 1040ez 2012 worksheet See Form 8582 not required , later in this chapter, to determine if you must complete Form 8582. 1040ez 2012 worksheet   If you are required to complete Form 8582 and are also subject to the at-risk rules, include the amount from Form 6198, line 21 (deductible loss) in column (b) of Form 8582, Worksheet 1 or 3, as required. 1040ez 2012 worksheet Exception for Personal Use of Dwelling Unit If you used the rental property as a home during the year, any income, deductions, gain, or loss allocable to such use shall not be taken into account for purposes of the passive activity loss limitation. 1040ez 2012 worksheet Instead, follow the rules explained in chapter 5, Personal Use of Dwelling Unit (Including Vacation Home). 1040ez 2012 worksheet Exception for Rental Real Estate With Active Participation If you or your spouse actively participated in a passive rental real estate activity, you may be able to deduct up to $25,000 of loss from the activity from your nonpassive income. 1040ez 2012 worksheet This special allowance is an exception to the general rule disallowing losses in excess of income from passive activities. 1040ez 2012 worksheet Similarly, you may be able to offset credits from the activity against the tax on up to $25,000 of nonpassive income after taking into account any losses allowed under this exception. 1040ez 2012 worksheet Example. 1040ez 2012 worksheet Jane is single and has $40,000 in wages, $2,000 of passive income from a limited partnership, and $3,500 of passive loss from a rental real estate activity in which she actively participated. 1040ez 2012 worksheet $2,000 of Jane's $3,500 loss offsets her passive income. 1040ez 2012 worksheet The remaining $1,500 loss can be deducted from her $40,000 wages. 1040ez 2012 worksheet The special allowance is not available if you were married, lived with your spouse at any time during the year, and are filing a separate return. 1040ez 2012 worksheet Active participation. 1040ez 2012 worksheet   You actively participated in a rental real estate activity if you (and your spouse) owned at least 10% of the rental property and you made management decisions or arranged for others to provide services (such as repairs) in a significant and bona fide sense. 1040ez 2012 worksheet Management decisions that may count as active participation include approving new tenants, deciding on rental terms, approving expenditures, and other similar decisions. 1040ez 2012 worksheet Example. 1040ez 2012 worksheet Mike is single and had the following income and losses during the tax year:   Salary $42,300     Dividends 300     Interest 1,400     Rental loss (4,000)   The rental loss was from the rental of a house Mike owned. 1040ez 2012 worksheet Mike had advertised and rented the house to the current tenant himself. 1040ez 2012 worksheet He also collected the rents, which usually came by mail. 1040ez 2012 worksheet All repairs were either made or contracted out by Mike. 1040ez 2012 worksheet Although the rental loss is from a passive activity, because Mike actively participated in the rental property management he can use the entire $4,000 loss to offset his other income. 1040ez 2012 worksheet Maximum special allowance. 1040ez 2012 worksheet   The maximum special allowance is: $25,000 for single individuals and married individuals filing a joint return for the tax year, $12,500 for married individuals who file separate returns for the tax year and lived apart from their spouses at all times during the tax year, and $25,000 for a qualifying estate reduced by the special allowance for which the surviving spouse qualified. 1040ez 2012 worksheet   If your modified adjusted gross income (MAGI) is $100,000 or less ($50,000 or less if married filing separately), you can deduct your loss up to the amount specified above. 1040ez 2012 worksheet If your MAGI is more than $100,000 (more than $50,000 if married filing separately), your special allowance is limited to 50% of the difference between $150,000 ($75,000 if married filing separately) and your MAGI. 1040ez 2012 worksheet   Generally, if your MAGI is $150,000 or more ($75,000 or more if you are married filing separately), there is no special allowance. 1040ez 2012 worksheet Modified adjusted gross income (MAGI). 1040ez 2012 worksheet   This is your adjusted gross income from Form 1040, U. 1040ez 2012 worksheet S. 1040ez 2012 worksheet Individual Income Tax Return, line 38, or Form 1040NR, U. 1040ez 2012 worksheet S. 1040ez 2012 worksheet Nonresident Alien Income Tax Return, line 37, figured without taking into account: The taxable amount of social security or equivalent tier 1 railroad retirement benefits, The deductible contributions to traditional individual retirement accounts (IRAs) and section 501(c)(18) pension plans, The exclusion from income of interest from Series EE and I U. 1040ez 2012 worksheet S. 1040ez 2012 worksheet savings bonds used to pay higher educational expenses, The exclusion of amounts received under an employer's adoption assistance program, Any passive activity income or loss included on Form 8582, Any rental real estate loss allowed to real estate professionals, Any overall loss from a publicly traded partnership (see Publicly Traded Partnerships (PTPs) in the Instructions for Form 8582), The deduction allowed for one-half of self-employment tax, The deduction allowed for interest paid on student loans, The deduction for qualified tuition and related fees, and The domestic production activities deduction (see the Instructions for Form 8903). 1040ez 2012 worksheet Form 8582 not required. 1040ez 2012 worksheet   Do not complete Form 8582 if you meet all of the following conditions. 1040ez 2012 worksheet Your only passive activities were rental real estate activities in which you actively participated. 1040ez 2012 worksheet Your overall net loss from these activities is $25,000 or less ($12,500 or less if married filing separately and you lived apart from your spouse all year). 1040ez 2012 worksheet If married filing separately, you lived apart from your spouse all year. 1040ez 2012 worksheet You have no prior year unallowed losses from these (or any other passive) activities. 1040ez 2012 worksheet You have no current or prior year unallowed credits from passive activities. 1040ez 2012 worksheet Your MAGI is $100,000 or less ($50,000 or less if married filing separately and you lived apart from your spouse all year). 1040ez 2012 worksheet You do not hold any interest in a rental real estate activity as a limited partner or as a beneficiary of an estate or a trust. 1040ez 2012 worksheet   If you meet all of the conditions listed above, your rental real estate activities are not limited by the passive activity rules and you do not have to complete Form 8582. 1040ez 2012 worksheet On lines 23a through 23e of your Schedule E, enter the applicable amounts. 1040ez 2012 worksheet Casualties and Thefts As a result of a casualty or theft, you may have a loss related to your rental property. 1040ez 2012 worksheet You may be able to deduct the loss on your income tax return. 1040ez 2012 worksheet Casualty. 1040ez 2012 worksheet   This is the damage, destruction, or loss of property resulting from an identifiable event that is sudden, unexpected, or unusual. 1040ez 2012 worksheet Such events include a storm, fire, or earthquake. 1040ez 2012 worksheet Theft. 1040ez 2012 worksheet   This is defined as the unlawful taking and removing of your money or property with the intent to deprive you of it. 1040ez 2012 worksheet Gain from casualty or theft. 1040ez 2012 worksheet   It is also possible to have a gain from a casualty or theft if you receive money, including insurance, that is more than your adjusted basis in the property. 1040ez 2012 worksheet Generally, you must report this gain. 1040ez 2012 worksheet However, under certain circumstances, you may defer paying tax by choosing to postpone reporting the gain. 1040ez 2012 worksheet To do this, you generally must buy replacement property within 2 years after the close of the first tax year in which any part of your gain is realized. 1040ez 2012 worksheet In certain circumstances, the replacement period can be greater than 2 years; see Replacement Period in Publication 547 for more information. 1040ez 2012 worksheet The cost of the replacement property must be equal to or more than the net insurance or other payment you received. 1040ez 2012 worksheet More information. 1040ez 2012 worksheet   For information on business and nonbusiness casualty and theft losses, see Publication 547. 1040ez 2012 worksheet How to report. 1040ez 2012 worksheet    If you had a casualty or theft that involved property used in your rental activity, figure the net gain or loss in Section B of Form 4684, Casualties and Thefts. 1040ez 2012 worksheet Follow the Instructions for Form 4684 for where to carry your net gain or loss. 1040ez 2012 worksheet Example In February 2008, Marie Pfister bought a rental house for $135,000 (house $120,000 and land $15,000) and immediately began renting it out. 1040ez 2012 worksheet In 2013, she rented it all 12 months for a monthly rental fee of $1,125. 1040ez 2012 worksheet In addition to her rental income of $13,500 (12 x $1,125), Marie had the following expenses. 1040ez 2012 worksheet Mortgage interest $8,000 Fire insurance (1-year policy) 250 Miscellaneous repairs 400 Real estate taxes imposed and paid 500 Maintenance 200 Marie depreciates the residential rental property under MACRS GDS. 1040ez 2012 worksheet This means using the straight line method over a recovery period of 27. 1040ez 2012 worksheet 5 years. 1040ez 2012 worksheet She uses Table 2-2d to find her depreciation percentage. 1040ez 2012 worksheet Because she placed the property in service in February 2008, she continues to use that row of Table 2-2d. 1040ez 2012 worksheet For year 6, the rate is 3. 1040ez 2012 worksheet 636%. 1040ez 2012 worksheet Marie figures her net rental income or loss for the house as follows: Total rental income received  ($1,125 × 12) $13,500 Minus: Expenses     Mortgage interest $8,000   Fire insurance 250   Miscellaneous repairs 400   Real estate taxes 500   Maintenance 200   Total expenses 9,350 Balance $4,150 Minus: Depreciation ($120,000 x 3. 1040ez 2012 worksheet 636%) 4,363 Net rental (loss) for house ($213)       Marie had a net loss for the year. 1040ez 2012 worksheet Because she actively participated in her passive rental real estate activity and her loss was less than $25,000, she can deduct the loss on her return. 1040ez 2012 worksheet Marie also meets all of the requirements for not having to file Form 8582. 1040ez 2012 worksheet She uses Schedule E, Part I, to report her rental income and expenses. 1040ez 2012 worksheet She enters her income, expenses, and depreciation for the house in the column for Property A and enters her loss on line 22. 1040ez 2012 worksheet Form 4562 is not required. 1040ez 2012 worksheet Prev  Up  Next   Home   More Online Publications
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Understanding Your CP267B Notice

You received a CP267B notice because you overpaid your Insurance Provider Fee under Section 9010 of ACA.


What you need to do

  • Call us within 30 days of the notice date between 8:00 a.m. and 4:30 p.m. Eastern Time at the number on your notice.
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Answers to Common Questions

Q. Why am I getting this Notice?

A. We're sending you this notice because our records indicate you overpaid your Insurance Provider Fee. We need you to confirm that your payment was intended for another fee year or inform us where you want to apply the overpayment.

Q. What is an “overpayment” and how is that different from a “refund”?

A. An “overpayment” occurs when you pay more in fees during the year than what you owe. This can either be refunded to you or applied to other taxes.

 

 

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The 1040ez 2012 Worksheet

1040ez 2012 worksheet 8. 1040ez 2012 worksheet   Business Expenses Table of Contents Introduction Useful Items - You may want to see: Bad DebtsAccrual method. 1040ez 2012 worksheet Cash method. 1040ez 2012 worksheet Car and Truck ExpensesOffice in the home. 1040ez 2012 worksheet Methods for Deducting Car and Truck Expenses Reimbursing Your Employees for Expenses Depreciation Employees' PayFringe benefits. 1040ez 2012 worksheet InsuranceHow to figure the deduction. 1040ez 2012 worksheet Interest Legal and Professional FeesTax preparation fees. 1040ez 2012 worksheet Pension Plans Rent Expense Taxes Travel, Meals, and EntertainmentTransportation. 1040ez 2012 worksheet Taxi, commuter bus, and limousine. 1040ez 2012 worksheet Baggage and shipping. 1040ez 2012 worksheet Car or truck. 1040ez 2012 worksheet Meals and lodging. 1040ez 2012 worksheet Cleaning. 1040ez 2012 worksheet Telephone. 1040ez 2012 worksheet Tips. 1040ez 2012 worksheet More information. 1040ez 2012 worksheet Business Use of Your HomeExceptions to exclusive use. 1040ez 2012 worksheet Other Expenses You Can Deduct Expenses You Cannot Deduct Introduction You can deduct the costs of operating your business. 1040ez 2012 worksheet These costs are known as business expenses. 1040ez 2012 worksheet These are costs you do not have to capitalize or include in the cost of goods sold but can deduct in the current year. 1040ez 2012 worksheet To be deductible, a business expense must be both ordinary and necessary. 1040ez 2012 worksheet An ordinary expense is one that is common and accepted in your field of business. 1040ez 2012 worksheet A necessary expense is one that is helpful and appropriate for your business. 1040ez 2012 worksheet An expense does not have to be indispensable to be considered necessary. 1040ez 2012 worksheet For more information about the general rules for deducting business expenses, see chapter 1 in Publication 535, Business Expenses. 1040ez 2012 worksheet If you have an expense that is partly for business and partly personal, separate the personal part from the business part. 1040ez 2012 worksheet The personal part is not deductible. 1040ez 2012 worksheet Useful Items - You may want to see: Publication 463 Travel, Entertainment, Gift, and Car Expenses 535 Business Expenses 946 How To Depreciate Property See chapter 12 for information about getting publications and forms. 1040ez 2012 worksheet Bad Debts If someone owes you money you cannot collect, you have a bad debt. 1040ez 2012 worksheet There are two kinds of bad debts, business bad debts and nonbusiness bad debts. 1040ez 2012 worksheet A business bad debt is generally one that comes from operating your trade or business. 1040ez 2012 worksheet You may be able to deduct business bad debts as an expense on your business tax return. 1040ez 2012 worksheet Business bad debt. 1040ez 2012 worksheet   A business bad debt is a loss from the worthlessness of a debt that was either of the following. 1040ez 2012 worksheet Created or acquired in your business. 1040ez 2012 worksheet Closely related to your business when it became partly or totally worthless. 1040ez 2012 worksheet A debt is closely related to your business if your primary motive for incurring the debt is a business reason. 1040ez 2012 worksheet   Business bad debts are mainly the result of credit sales to customers. 1040ez 2012 worksheet They can also be the result of loans to suppliers, clients, employees, or distributors. 1040ez 2012 worksheet Goods and services customers have not paid for are shown in your books as either accounts receivable or notes receivable. 1040ez 2012 worksheet If you are unable to collect any part of these accounts or notes receivable, the uncollectible part is a business bad debt. 1040ez 2012 worksheet    You can take a bad debt deduction for these accounts and notes receivable only if the amount you were owed was included in your gross income either for the year the deduction is claimed or for a prior year. 1040ez 2012 worksheet Accrual method. 1040ez 2012 worksheet   If you use an accrual method of accounting, you normally report income as you earn it. 1040ez 2012 worksheet You can take a bad debt deduction for an uncollectible receivable if you have included the uncollectible amount in income. 1040ez 2012 worksheet Cash method. 1040ez 2012 worksheet   If you use the cash method of accounting, you normally report income when you receive payment. 1040ez 2012 worksheet You cannot take a bad debt deduction for amounts owed to you that you have not received and cannot collect if you never included those amounts in income. 1040ez 2012 worksheet More information. 1040ez 2012 worksheet   For more information about business bad debts, see chapter 10 in Publication 535. 1040ez 2012 worksheet Nonbusiness bad debts. 1040ez 2012 worksheet   All other bad debts are nonbusiness bad debts and are deductible as short-term capital losses on Form 8949 and Schedule D (Form 1040). 1040ez 2012 worksheet For more information on nonbusiness bad debts, see Publication 550, Investment Income and Expenses. 1040ez 2012 worksheet Car and Truck Expenses If you use your car or truck in your business, you may be able to deduct the costs of operating and maintaining your vehicle. 1040ez 2012 worksheet You also may be able to deduct other costs of local transportation and traveling away from home overnight on business. 1040ez 2012 worksheet You may qualify for a tax credit for qualified plug-in electric vehicles, qualified plug-in electric drive motor vehicles, and alternative motor vehicles you place in service during the year. 1040ez 2012 worksheet See Form 8936 and Form 8910 for more information. 1040ez 2012 worksheet Local transportation expenses. 1040ez 2012 worksheet   Local transportation expenses include the ordinary and necessary costs of all the following. 1040ez 2012 worksheet Getting from one workplace to another in the course of your business or profession when you are traveling within the city or general area that is your tax home. 1040ez 2012 worksheet Tax home is defined later. 1040ez 2012 worksheet Visiting clients or customers. 1040ez 2012 worksheet Going to a business meeting away from your regular workplace. 1040ez 2012 worksheet Getting from your home to a temporary workplace when you have one or more regular places of work. 1040ez 2012 worksheet These temporary workplaces can be either within the area of your tax home or outside that area. 1040ez 2012 worksheet Local business transportation does not include expenses you have while traveling away from home overnight. 1040ez 2012 worksheet Those expenses are deductible as travel expenses and are discussed later under Travel, Meals, and Entertainment. 1040ez 2012 worksheet However, if you use your car while traveling away from home overnight, use the rules in this section to figure your car expense deduction. 1040ez 2012 worksheet   Generally, your tax home is your regular place of business, regardless of where you maintain your family home. 1040ez 2012 worksheet It includes the entire city or general area in which your business or work is located. 1040ez 2012 worksheet Example. 1040ez 2012 worksheet You operate a printing business out of rented office space. 1040ez 2012 worksheet You use your van to deliver completed jobs to your customers. 1040ez 2012 worksheet You can deduct the cost of round-trip transportation between your customers and your print shop. 1040ez 2012 worksheet    You cannot deduct the costs of driving your car or truck between your home and your main or regular workplace. 1040ez 2012 worksheet These costs are personal commuting expenses. 1040ez 2012 worksheet Office in the home. 1040ez 2012 worksheet   Your workplace can be your home if you have an office in your home that qualifies as your principal place of business. 1040ez 2012 worksheet For more information, see Business Use of Your Home, later. 1040ez 2012 worksheet Example. 1040ez 2012 worksheet You are a graphics designer. 1040ez 2012 worksheet You operate your business out of your home. 1040ez 2012 worksheet Your home qualifies as your principal place of business. 1040ez 2012 worksheet You occasionally have to drive to your clients to deliver your completed work. 1040ez 2012 worksheet You can deduct the cost of the round-trip transportation between your home and your clients. 1040ez 2012 worksheet Methods for Deducting Car and Truck Expenses For local transportation or overnight travel by car or truck, you generally can use one of the following methods to figure your expenses. 1040ez 2012 worksheet Standard mileage rate. 1040ez 2012 worksheet Actual expenses. 1040ez 2012 worksheet Standard mileage rate. 1040ez 2012 worksheet   You may be able to use the standard mileage rate to figure the deductible costs of operating your car, van, pickup, or panel truck for business purposes. 1040ez 2012 worksheet For 2013, the standard mileage rate is 56. 1040ez 2012 worksheet 5 cents per mile. 1040ez 2012 worksheet    If you choose to use the standard mileage rate for a year, you cannot deduct your actual expenses for that year except for business-related parking fees and tolls. 1040ez 2012 worksheet Choosing the standard mileage rate. 1040ez 2012 worksheet   If you want to use the standard mileage rate for a car or truck you own, you must choose to use it in the first year the car is available for use in your business. 1040ez 2012 worksheet In later years, you can choose to use either the standard mileage rate or actual expenses. 1040ez 2012 worksheet   If you use the standard mileage rate for a car you lease, you must choose to use it for the entire lease period (including renewals). 1040ez 2012 worksheet Standard mileage rate not allowed. 1040ez 2012 worksheet   You cannot use the standard mileage rate if you: Operate five or more cars at the same time, Claimed a depreciation deduction using any method other than straight line, for example, ACRS or MACRS, Claimed a section 179 deduction on the car, Claimed the special depreciation allowance on the car, Claimed actual car expenses for a car you leased, or Are a rural mail carrier who received a qualified reimbursement. 1040ez 2012 worksheet Parking fees and tolls. 1040ez 2012 worksheet   In addition to using the standard mileage rate, you can deduct any business-related parking fees and tolls. 1040ez 2012 worksheet (Parking fees you pay to park your car at your place of work are nondeductible commuting expenses. 1040ez 2012 worksheet ) Actual expenses. 1040ez 2012 worksheet   If you do not choose to use the standard mileage rate, you may be able to deduct your actual car or truck expenses. 1040ez 2012 worksheet    If you qualify to use both methods, figure your deduction both ways to see which gives you a larger deduction. 1040ez 2012 worksheet   Actual car expenses include the costs of the following items. 1040ez 2012 worksheet Depreciation Lease payments Registration Garage rent Licenses Repairs Gas Oil Tires Insurance Parking fees Tolls   If you use your vehicle for both business and personal purposes, you must divide your expenses between business and personal use. 1040ez 2012 worksheet You can divide your expenses based on the miles driven for each purpose. 1040ez 2012 worksheet Example. 1040ez 2012 worksheet You are the sole proprietor of a flower shop. 1040ez 2012 worksheet You drove your van 20,000 miles during the year. 1040ez 2012 worksheet 16,000 miles were for delivering flowers to customers and 4,000 miles were for personal use (including commuting miles). 1040ez 2012 worksheet You can claim only 80% (16,000 ÷ 20,000) of the cost of operating your van as a business expense. 1040ez 2012 worksheet More information. 1040ez 2012 worksheet   For more information about the rules for claiming car and truck expenses, see Publication 463. 1040ez 2012 worksheet Reimbursing Your Employees for Expenses You generally can deduct the amount you reimburse your employees for car and truck expenses. 1040ez 2012 worksheet The reimbursement you deduct and the manner in which you deduct it depend in part on whether you reimburse the expenses under an accountable plan or a nonaccountable plan. 1040ez 2012 worksheet For details, see chapter 11 in Publication 535. 1040ez 2012 worksheet That chapter explains accountable and nonaccountable plans and tells you whether to report the reimbursement on your employee's Form W-2, Wage and Tax Statement. 1040ez 2012 worksheet Depreciation If property you acquire to use in your business is expected to last more than 1 year, you generally cannot deduct the entire cost as a business expense in the year you acquire it. 1040ez 2012 worksheet You must spread the cost over more than 1 tax year and deduct part of it each year on Schedule C. 1040ez 2012 worksheet This method of deducting the cost of business property is called depreciation. 1040ez 2012 worksheet The discussion here is brief. 1040ez 2012 worksheet You will find more information about depreciation in Publication 946. 1040ez 2012 worksheet What property can be depreciated?   You can depreciate property if it meets all the following requirements. 1040ez 2012 worksheet It must be property you own. 1040ez 2012 worksheet It must be used in business or held to produce income. 1040ez 2012 worksheet You never can depreciate inventory (explained in chapter 2) because it is not held for use in your business. 1040ez 2012 worksheet It must have a useful life that extends substantially beyond the year it is placed in service. 1040ez 2012 worksheet It must have a determinable useful life, which means that it must be something that wears out, decays, gets used up, becomes obsolete, or loses its value from natural causes. 1040ez 2012 worksheet You never can depreciate the cost of land because land does not wear out, become obsolete, or get used up. 1040ez 2012 worksheet It must not be excepted property. 1040ez 2012 worksheet This includes property placed in service and disposed of in the same year. 1040ez 2012 worksheet Repairs. 1040ez 2012 worksheet    You cannot depreciate repairs and replacements that do not increase the value of your property, make it more useful, or lengthen its useful life. 1040ez 2012 worksheet You can deduct these amounts on line 21 of Schedule C or line 2 of Schedule C-EZ. 1040ez 2012 worksheet Depreciation method. 1040ez 2012 worksheet   The method for depreciating most business and investment property placed in service after 1986 is called the Modified Accelerated Cost Recovery System (MACRS). 1040ez 2012 worksheet MACRS is discussed in detail in Publication 946. 1040ez 2012 worksheet Section 179 deduction. 1040ez 2012 worksheet   You can elect to deduct a limited amount of the cost of certain depreciable property in the year you place the property in service. 1040ez 2012 worksheet This deduction is known as the “section 179 deduction. 1040ez 2012 worksheet ” The maximum amount you can elect to deduct during 2013 is generally $500,000 (higher limits apply to certain property). 1040ez 2012 worksheet See IRC 179(e). 1040ez 2012 worksheet   This limit is generally reduced by the amount by which the cost of the property placed in service during the tax year exceeds $2 million. 1040ez 2012 worksheet The total amount of depreciation (including the section 179 deduction) you can take for a passenger automobile you use in your business and first place in service in 2013 is $3,160 ($11,160 if you take the special depreciation allowance for qualified passenger automobiles placed in service in 2013). 1040ez 2012 worksheet Special rules apply to trucks and vans. 1040ez 2012 worksheet For more information, see Publication 946. 1040ez 2012 worksheet It explains what property qualifies for the deduction, what limits apply to the deduction, and when and how to recapture the deduction. 1040ez 2012 worksheet    Your section 179 election for the cost of any sport utility vehicle (SUV) and certain other vehicles is limited to $25,000. 1040ez 2012 worksheet For more information, see the Instructions for Form 4562 or Publication 946. 1040ez 2012 worksheet Listed property. 1040ez 2012 worksheet   You must follow special rules and recordkeeping requirements when depreciating listed property. 1040ez 2012 worksheet Listed property is any of the following. 1040ez 2012 worksheet Most passenger automobiles. 1040ez 2012 worksheet Most other property used for transportation. 1040ez 2012 worksheet Any property of a type generally used for entertainment, recreation, or amusement. 1040ez 2012 worksheet Certain computers and related peripheral equipment. 1040ez 2012 worksheet   For more information about listed property, see Publication 946. 1040ez 2012 worksheet Form 4562. 1040ez 2012 worksheet   Use Form 4562, Depreciation and Amortization, if you are claiming any of the following. 1040ez 2012 worksheet Depreciation on property placed in service during the current tax year. 1040ez 2012 worksheet A section 179 deduction. 1040ez 2012 worksheet Depreciation on any listed property (regardless of when it was placed in service). 1040ez 2012 worksheet    If you have to use Form 4562, you must file Schedule C. 1040ez 2012 worksheet You cannot use Schedule C-EZ. 1040ez 2012 worksheet   Employees' Pay You can generally deduct on Schedule C the pay you give your employees for the services they perform for your business. 1040ez 2012 worksheet The pay may be in cash, property, or services. 1040ez 2012 worksheet To be deductible, your employees' pay must be an ordinary and necessary expense and you must pay or incur it in the tax year. 1040ez 2012 worksheet In addition, the pay must meet both the following tests. 1040ez 2012 worksheet The pay must be reasonable. 1040ez 2012 worksheet The pay must be for services performed. 1040ez 2012 worksheet Chapter 2 in Publication 535 explains and defines these requirements. 1040ez 2012 worksheet You cannot deduct your own salary or any personal withdrawals you make from your business. 1040ez 2012 worksheet As a sole proprietor, you are not an employee of the business. 1040ez 2012 worksheet If you had employees during the year, you must use Schedule C. 1040ez 2012 worksheet You cannot use Schedule C-EZ. 1040ez 2012 worksheet Kinds of pay. 1040ez 2012 worksheet   Some of the ways you may provide pay to your employees are listed below. 1040ez 2012 worksheet For an explanation of each of these items, see chapter 2 in Publication 535. 1040ez 2012 worksheet Awards. 1040ez 2012 worksheet Bonuses. 1040ez 2012 worksheet Education expenses. 1040ez 2012 worksheet Fringe benefits (discussed later). 1040ez 2012 worksheet Loans or advances you do not expect the employee to repay if they are for personal services actually performed. 1040ez 2012 worksheet Property you transfer to an employee as payment for services. 1040ez 2012 worksheet Reimbursements for employee business expenses. 1040ez 2012 worksheet Sick pay. 1040ez 2012 worksheet Vacation pay. 1040ez 2012 worksheet Fringe benefits. 1040ez 2012 worksheet   A fringe benefit is a form of pay for the performance of services. 1040ez 2012 worksheet The following are examples of fringe benefits. 1040ez 2012 worksheet Benefits under qualified employee benefit programs. 1040ez 2012 worksheet Meals and lodging. 1040ez 2012 worksheet The use of a car. 1040ez 2012 worksheet Flights on airplanes. 1040ez 2012 worksheet Discounts on property or services. 1040ez 2012 worksheet Memberships in country clubs or other social clubs. 1040ez 2012 worksheet Tickets to entertainment or sporting events. 1040ez 2012 worksheet   Employee benefit programs include the following. 1040ez 2012 worksheet Accident and health plans. 1040ez 2012 worksheet Adoption assistance. 1040ez 2012 worksheet Cafeteria plans. 1040ez 2012 worksheet Dependent care assistance. 1040ez 2012 worksheet Educational assistance. 1040ez 2012 worksheet Group-term life insurance coverage. 1040ez 2012 worksheet Welfare benefit funds. 1040ez 2012 worksheet   You can generally deduct the cost of fringe benefits you provide on your Schedule C in whatever category the cost falls. 1040ez 2012 worksheet For example, if you allow an employee to use a car or other property you lease, deduct the cost of the lease as a rent or lease expense. 1040ez 2012 worksheet If you own the property, include your deduction for its cost or other basis as a section 179 deduction or a depreciation deduction. 1040ez 2012 worksheet    You may be able to exclude all or part of the fringe benefits you provide from your employees' wages. 1040ez 2012 worksheet For more information about fringe benefits and the exclusion of benefits, see Publication 15-B, Employer's Tax Guide to Fringe Benefits. 1040ez 2012 worksheet Insurance You can generally deduct premiums you pay for the following kinds of insurance related to your business. 1040ez 2012 worksheet Fire, theft, flood, or similar insurance. 1040ez 2012 worksheet Credit insurance that covers losses from business bad debts. 1040ez 2012 worksheet Group hospitalization and medical insurance for employees, including long-term care insurance. 1040ez 2012 worksheet Liability insurance. 1040ez 2012 worksheet Malpractice insurance that covers your personal liability for professional negligence resulting in injury or damage to patients or clients. 1040ez 2012 worksheet Workers' compensation insurance set by state law that covers any claims for bodily injuries or job-related diseases suffered by employees in your business, regardless of fault. 1040ez 2012 worksheet Contributions to a state unemployment insurance fund are deductible as taxes if they are considered taxes under state law. 1040ez 2012 worksheet Overhead insurance that pays for business overhead expenses you have during long periods of disability caused by your injury or sickness. 1040ez 2012 worksheet Car and other vehicle insurance that covers vehicles used in your business for liability, damages, and other losses. 1040ez 2012 worksheet If you operate a vehicle partly for personal use, deduct only the part of the insurance premium that applies to the business use of the vehicle. 1040ez 2012 worksheet If you use the standard mileage rate to figure your car expenses, you cannot deduct any car insurance premiums. 1040ez 2012 worksheet Life insurance covering your employees if you are not directly or indirectly the beneficiary under the contract. 1040ez 2012 worksheet Business interruption insurance that pays for lost profits if your business is shut down due to a fire or other cause. 1040ez 2012 worksheet Nondeductible premiums. 1040ez 2012 worksheet   You cannot deduct premiums on the following kinds of insurance. 1040ez 2012 worksheet Self-insurance reserve funds. 1040ez 2012 worksheet You cannot deduct amounts credited to a reserve set up for self-insurance. 1040ez 2012 worksheet This applies even if you cannot get business insurance coverage for certain business risks. 1040ez 2012 worksheet However, your actual losses may be deductible. 1040ez 2012 worksheet For more information, see Publication 547, Casualties, Disasters, and Thefts. 1040ez 2012 worksheet Loss of earnings. 1040ez 2012 worksheet You cannot deduct premiums for a policy that pays for your lost earnings due to sickness or disability. 1040ez 2012 worksheet However, see item (8) in the previous list. 1040ez 2012 worksheet Certain life insurance and annuities. 1040ez 2012 worksheet For contracts issued before June 9, 1997, you cannot deduct the premiums on a life insurance policy covering you, an employee, or any person with a financial interest in your business if you are directly or indirectly a beneficiary of the policy. 1040ez 2012 worksheet You are included among possible beneficiaries of the policy if the policy owner is obligated to repay a loan from you using the proceeds of the policy. 1040ez 2012 worksheet A person has a financial interest in your business if the person is an owner or part owner of the business or has lent money to the business. 1040ez 2012 worksheet For contracts issued after June 8, 1997, you generally cannot deduct the premiums on any life insurance policy, endowment contract, or annuity contract if you are directly or indirectly a beneficiary. 1040ez 2012 worksheet The disallowance applies without regard to whom the policy covers. 1040ez 2012 worksheet Insurance to secure a loan. 1040ez 2012 worksheet If you take out a policy on your life or on the life of another person with a financial interest in your business to get or protect a business loan, you cannot deduct the premiums as a business expense. 1040ez 2012 worksheet Nor can you deduct the premiums as interest on business loans or as an expense of financing loans. 1040ez 2012 worksheet In the event of death, the proceeds of the policy are not taxed as income even if they are used to liquidate the debt. 1040ez 2012 worksheet Self-employed health insurance deduction. 1040ez 2012 worksheet   You may be able to deduct the amount you paid for medical and dental insurance and qualified long-term care insurance for you and your family. 1040ez 2012 worksheet How to figure the deduction. 1040ez 2012 worksheet   Generally, you can use the worksheet in the Form 1040 instructions to figure your deduction. 1040ez 2012 worksheet However, if any of the following apply, you must use the worksheet in chapter 6 of Publication 535. 1040ez 2012 worksheet You have more than one source of income subject to self-employment tax. 1040ez 2012 worksheet You file Form 2555 or Form 2555-EZ (relating to foreign earned income). 1040ez 2012 worksheet You are using amounts paid for qualified long-term care insurance to figure the deduction. 1040ez 2012 worksheet Prepayment. 1040ez 2012 worksheet   You cannot deduct expenses in advance, even if you pay them in advance. 1040ez 2012 worksheet This rule applies to any expense paid far enough in advance to, in effect, create an asset with a useful life extending substantially beyond the end of the current tax year. 1040ez 2012 worksheet Example. 1040ez 2012 worksheet In 2013, you signed a 3-year insurance contract. 1040ez 2012 worksheet Even though you paid the premiums for 2013, 2014, and 2015 when you signed the contract, you can only deduct the premium for 2013 on your 2013 tax return. 1040ez 2012 worksheet You can deduct in 2014 and 2015 the premium allocable to those years. 1040ez 2012 worksheet More information. 1040ez 2012 worksheet   For more information about deducting insurance, see chapter 6 in Publication 535. 1040ez 2012 worksheet Interest You can generally deduct as a business expense all interest you pay or accrue during the tax year on debts related to your business. 1040ez 2012 worksheet Interest relates to your business if you use the proceeds of the loan for a business expense. 1040ez 2012 worksheet It does not matter what type of property secures the loan. 1040ez 2012 worksheet You can deduct interest on a debt only if you meet all of the following requirements. 1040ez 2012 worksheet You are legally liable for that debt. 1040ez 2012 worksheet Both you and the lender intend that the debt be repaid. 1040ez 2012 worksheet You and the lender have a true debtor-creditor relationship. 1040ez 2012 worksheet You cannot deduct on Schedule C or C-EZ the interest you paid on personal loans. 1040ez 2012 worksheet If a loan is part business and part personal, you must divide the interest between the personal part and the business part. 1040ez 2012 worksheet Example. 1040ez 2012 worksheet In 2013, you paid $600 interest on a car loan. 1040ez 2012 worksheet During 2013, you used the car 60% for business and 40% for personal purposes. 1040ez 2012 worksheet You are claiming actual expenses on the car. 1040ez 2012 worksheet You can only deduct $360 (60% × $600) for 2013 on Schedule C or C-EZ. 1040ez 2012 worksheet The remaining interest of $240 is a nondeductible personal expense. 1040ez 2012 worksheet More information. 1040ez 2012 worksheet   For more information about deducting interest, see chapter 4 in Publication 535. 1040ez 2012 worksheet That chapter explains the following items. 1040ez 2012 worksheet Interest you can deduct. 1040ez 2012 worksheet Interest you cannot deduct. 1040ez 2012 worksheet How to allocate interest between personal and business use. 1040ez 2012 worksheet When to deduct interest. 1040ez 2012 worksheet The rules for a below-market interest rate loan. 1040ez 2012 worksheet (This is generally a loan on which no interest is charged or on which interest is charged at a rate below the applicable federal rate. 1040ez 2012 worksheet ) Legal and Professional Fees Legal and professional fees, such as fees charged by accountants, that are ordinary and necessary expenses directly related to operating your business are deductible on Schedule C or C-EZ. 1040ez 2012 worksheet However, you usually cannot deduct legal fees you pay to acquire business assets. 1040ez 2012 worksheet Add them to the basis of the property. 1040ez 2012 worksheet If the fees include payments for work of a personal nature (such as making a will), you can take a business deduction only for the part of the fee related to your business. 1040ez 2012 worksheet The personal part of legal fees for producing or collecting taxable income, doing or keeping your job, or for tax advice may be deductible on Schedule A (Form 1040) if you itemize deductions. 1040ez 2012 worksheet For more information, see Publication 529, Miscellaneous Deductions. 1040ez 2012 worksheet Tax preparation fees. 1040ez 2012 worksheet   You can deduct on Schedule C or C-EZ the cost of preparing that part of your tax return relating to your business as a sole proprietor or statutory employee. 1040ez 2012 worksheet You can deduct the remaining cost on Schedule A (Form 1040) if you itemize your deductions. 1040ez 2012 worksheet   You can also deduct on Schedule C or C-EZ the amount you pay or incur in resolving asserted tax deficiencies for your business as a sole proprietor or statutory employee. 1040ez 2012 worksheet Pension Plans You can set up and maintain the following small business retirement plans for yourself and your employees. 1040ez 2012 worksheet SEP (Simplified Employee Pension) plans. 1040ez 2012 worksheet SIMPLE (Savings Incentive Match Plan for Employees) plans. 1040ez 2012 worksheet Qualified plans (including Keogh or H. 1040ez 2012 worksheet R. 1040ez 2012 worksheet 10 plans). 1040ez 2012 worksheet SEP, SIMPLE, and qualified plans offer you and your employees a tax favored way to save for retirement. 1040ez 2012 worksheet You can deduct contributions you make to the plan for your employees on line 19 of Schedule C. 1040ez 2012 worksheet If you are a sole proprietor, you can deduct contributions you make to the plan for yourself on line 28 of Form 1040. 1040ez 2012 worksheet You can also deduct trustees' fees if contributions to the plan do not cover them. 1040ez 2012 worksheet Earnings on the contributions are generally tax free until you or your employees receive distributions from the plan. 1040ez 2012 worksheet You may also be able to claim a tax credit of 50% of the first $1,000 of qualified startup costs if you begin a new qualified defined benefit or defined contribution plan (including a 401(k) plan), SIMPLE plan, or simplified employee pension. 1040ez 2012 worksheet Under certain plans, employees can have you contribute limited amounts of their before-tax pay to a plan. 1040ez 2012 worksheet These amounts (and earnings on them) are generally tax free until your employees receive distributions from the plan. 1040ez 2012 worksheet For more information on retirement plans for small business, see Publication 560, Retirement Plans for Small Business (SEP, SIMPLE, and Qualified Plans). 1040ez 2012 worksheet Publication 590, Individual Retirement Arrangements (IRAs), discusses other tax favored ways to save for retirement. 1040ez 2012 worksheet Rent Expense Rent is any amount you pay for the use of property you do not own. 1040ez 2012 worksheet In general, you can deduct rent as a business expense only if the rent is for property you use in your business. 1040ez 2012 worksheet If you have or will receive equity in or title to the property, you cannot deduct the rent. 1040ez 2012 worksheet Unreasonable rent. 1040ez 2012 worksheet   You cannot take a rental deduction for unreasonable rents. 1040ez 2012 worksheet Ordinarily, the issue of reasonableness arises only if you and the lessor are related. 1040ez 2012 worksheet Rent paid to a related person is reasonable if it is the same amount you would pay to a stranger for use of the same property. 1040ez 2012 worksheet Rent is not unreasonable just because it is figured as a percentage of gross receipts. 1040ez 2012 worksheet   Related persons include members of your immediate family, including only brothers and sisters (either whole or half), your spouse, ancestors, and lineal descendants. 1040ez 2012 worksheet For a list of the other related persons, see section 267 of the Internal Revenue Code. 1040ez 2012 worksheet Rent on your home. 1040ez 2012 worksheet   If you rent your home and use part of it as your place of business, you may be able to deduct the rent you pay for that part. 1040ez 2012 worksheet You must meet the requirements for business use of your home. 1040ez 2012 worksheet For more information, see Business Use of Your Home , later. 1040ez 2012 worksheet Rent paid in advance. 1040ez 2012 worksheet   Generally, rent paid in your business is deductible in the year paid or accrued. 1040ez 2012 worksheet If you pay rent in advance, you can deduct only the amount that applies to your use of the rented property during the tax year. 1040ez 2012 worksheet You can deduct the rest of your payment only over the period to which it applies. 1040ez 2012 worksheet More information. 1040ez 2012 worksheet   For more information about rent, see chapter 3 in Publication 535. 1040ez 2012 worksheet Taxes You can deduct on Schedule C or C-EZ various federal, state, local, and foreign taxes directly attributable to your business. 1040ez 2012 worksheet Income taxes. 1040ez 2012 worksheet   You can deduct on Schedule C or C-EZ a state tax on gross income (as distinguished from net income) directly attributable to your business. 1040ez 2012 worksheet You can deduct other state and local income taxes on Schedule A (Form 1040) if you itemize your deductions. 1040ez 2012 worksheet Do not deduct federal income tax. 1040ez 2012 worksheet Employment taxes. 1040ez 2012 worksheet   You can deduct the social security, Medicare, and federal unemployment (FUTA) taxes you paid out of your own funds as an employer. 1040ez 2012 worksheet Employment taxes are discussed briefly in chapter 1. 1040ez 2012 worksheet You can also deduct payments you made as an employer to a state unemployment compensation fund or to a state disability benefit fund. 1040ez 2012 worksheet Deduct these payments as taxes. 1040ez 2012 worksheet Self-employment tax. 1040ez 2012 worksheet   You can deduct one-half of your self-employment tax on line 27 of Form 1040. 1040ez 2012 worksheet Self-employment tax is discussed in chapters 1 and 10. 1040ez 2012 worksheet Personal property tax. 1040ez 2012 worksheet   You can deduct on Schedule C or C-EZ any tax imposed by a state or local government on personal property used in your business. 1040ez 2012 worksheet   You can also deduct registration fees for the right to use property within a state or local area. 1040ez 2012 worksheet Example. 1040ez 2012 worksheet May and Julius Winter drove their car 7,000 business miles out of a total of 10,000 miles. 1040ez 2012 worksheet They had to pay $25 for their annual state license tags and $20 for their city registration sticker. 1040ez 2012 worksheet They also paid $235 in city personal property tax on the car, for a total of $280. 1040ez 2012 worksheet They are claiming their actual car expenses. 1040ez 2012 worksheet Because they used the car 70% for business, they can deduct 70% of the $280, or $196, as a business expense. 1040ez 2012 worksheet Real estate taxes. 1040ez 2012 worksheet   You can deduct on Schedule C or C-EZ the real estate taxes you pay on your business property. 1040ez 2012 worksheet Deductible real estate taxes are any state, local, or foreign taxes on real estate levied for the general public welfare. 1040ez 2012 worksheet The taxing authority must base the taxes on the assessed value of the real estate and charge them uniformly against all property under its jurisdiction. 1040ez 2012 worksheet   For more information about real estate taxes, see chapter 5 in Publication 535. 1040ez 2012 worksheet That chapter explains special rules for deducting the following items. 1040ez 2012 worksheet Taxes for local benefits, such as those for sidewalks, streets, water mains, and sewer lines. 1040ez 2012 worksheet Real estate taxes when you buy or sell property during the year. 1040ez 2012 worksheet Real estate taxes if you use an accrual method of accounting and choose to accrue real estate tax related to a definite period ratably over that period. 1040ez 2012 worksheet Sales tax. 1040ez 2012 worksheet   Treat any sales tax you pay on a service or on the purchase or use of property as part of the cost of the service or property. 1040ez 2012 worksheet If the service or the cost or use of the property is a deductible business expense, you can deduct the tax as part of that service or cost. 1040ez 2012 worksheet If the property is merchandise bought for resale, the sales tax is part of the cost of the merchandise. 1040ez 2012 worksheet If the property is depreciable, add the sales tax to the basis for depreciation. 1040ez 2012 worksheet For information on the basis of property, see Publication 551, Basis of Assets. 1040ez 2012 worksheet    Do not deduct state and local sales taxes imposed on the buyer that you must collect and pay over to the state or local government. 1040ez 2012 worksheet Do not include these taxes in gross receipts or sales. 1040ez 2012 worksheet Excise taxes. 1040ez 2012 worksheet   You can deduct on Schedule C or C-EZ all excise taxes that are ordinary and necessary expenses of carrying on your business. 1040ez 2012 worksheet Excise taxes are discussed briefly in chapter 1. 1040ez 2012 worksheet Fuel taxes. 1040ez 2012 worksheet   Taxes on gasoline, diesel fuel, and other motor fuels you use in your business are usually included as part of the cost of the fuel. 1040ez 2012 worksheet Do not deduct these taxes as a separate item. 1040ez 2012 worksheet   You may be entitled to a credit or refund for federal excise tax you paid on fuels used for certain purposes. 1040ez 2012 worksheet For more information, see Publication 510, Excise Taxes. 1040ez 2012 worksheet Travel, Meals, and Entertainment This section briefly explains the kinds of travel and entertainment expenses you can deduct on Schedule C or C-EZ. 1040ez 2012 worksheet Table 8-1. 1040ez 2012 worksheet When Are Entertainment Expenses Deductible? (Note. 1040ez 2012 worksheet The following is a summary of the rules for deducting entertainment expenses. 1040ez 2012 worksheet For more details about these rules, see Publication 463. 1040ez 2012 worksheet ) General rule You can deduct ordinary and necessary expenses to entertain a client, customer, or employee if the expenses meet the directly-related test or the associated test. 1040ez 2012 worksheet Definitions Entertainment includes any activity generally considered to provide entertainment, amusement, or recreation, and includes meals provided to a customer or client. 1040ez 2012 worksheet An ordinary expense is one that is common and accepted in your field of business, trade, or profession. 1040ez 2012 worksheet A necessary expense is one that is helpful and appropriate, although not necessarily required, for your business. 1040ez 2012 worksheet Tests to be met Directly-related test Entertainment took place in a clear business setting, or Main purpose of entertainment was the active conduct of business, and You did engage in business with the person during the entertainment period, and You had more than a general expectation of getting income or some other specific business benefit. 1040ez 2012 worksheet   Associated test Entertainment is associated with your trade or business, and Entertainment directly precedes or follows a substantial business discussion. 1040ez 2012 worksheet Other rules You cannot deduct the cost of your meal as an entertainment expense if you are claiming the meal as a travel expense. 1040ez 2012 worksheet You cannot deduct expenses that are lavish or extravagant under the circumstances. 1040ez 2012 worksheet You generally can deduct only 50% of your unreimbursed entertainment expenses. 1040ez 2012 worksheet Travel expenses. 1040ez 2012 worksheet   These are the ordinary and necessary expenses of traveling away from home for your business. 1040ez 2012 worksheet You are traveling away from home if both the following conditions are met. 1040ez 2012 worksheet Your duties require you to be away from the general area of your tax home (defined later) substantially longer than an ordinary day's work. 1040ez 2012 worksheet You need to get sleep or rest to meet the demands of your work while away from home. 1040ez 2012 worksheet Generally, your tax home is your regular place of business, regardless of where you maintain your family home. 1040ez 2012 worksheet It includes the entire city or general area in which your business is located. 1040ez 2012 worksheet See Publication 463 for more information. 1040ez 2012 worksheet   The following is a brief discussion of the expenses you can deduct. 1040ez 2012 worksheet Transportation. 1040ez 2012 worksheet   You can deduct the cost of travel by airplane, train, bus, or car between your home and your business destination. 1040ez 2012 worksheet Taxi, commuter bus, and limousine. 1040ez 2012 worksheet   You can deduct fares for these and other types of transportation between the airport or station and your hotel, or between the hotel and your work location away from home. 1040ez 2012 worksheet Baggage and shipping. 1040ez 2012 worksheet   You can deduct the cost of sending baggage and sample or display material between your regular and temporary work locations. 1040ez 2012 worksheet Car or truck. 1040ez 2012 worksheet   You can deduct the costs of operating and maintaining your vehicle when traveling away from home on business. 1040ez 2012 worksheet You can deduct actual expenses or the standard mileage rate (discussed earlier under Car and Truck Expenses), as well as business-related tolls and parking. 1040ez 2012 worksheet If you rent a car while away from home on business, you can deduct only the business-use portion of the expenses. 1040ez 2012 worksheet Meals and lodging. 1040ez 2012 worksheet   You can deduct the cost of meals and lodging if your business trip is overnight or long enough that you need to stop for sleep or rest to properly perform your duties. 1040ez 2012 worksheet In most cases, you can deduct only 50% of your meal expenses. 1040ez 2012 worksheet Cleaning. 1040ez 2012 worksheet   You can deduct the costs of dry cleaning and laundry while on your business trip. 1040ez 2012 worksheet Telephone. 1040ez 2012 worksheet   You can deduct the cost of business calls while on your business trip, including business communication by fax machine or other communication devices. 1040ez 2012 worksheet Tips. 1040ez 2012 worksheet   You can deduct the tips you pay for any expense in this list. 1040ez 2012 worksheet More information. 1040ez 2012 worksheet   For more information about travel expenses, see Publication 463. 1040ez 2012 worksheet Entertainment expenses. 1040ez 2012 worksheet   You may be able to deduct business-related entertainment expenses for entertaining a client, customer, or employee. 1040ez 2012 worksheet In most cases, you can deduct only 50% of these expenses. 1040ez 2012 worksheet   The following are examples of entertainment expenses. 1040ez 2012 worksheet Entertaining guests at nightclubs, athletic clubs, theaters, or sporting events. 1040ez 2012 worksheet Providing meals, a hotel suite, or a car to business customers or their families. 1040ez 2012 worksheet To be deductible, the expenses must meet the rules listed in Table 8-1. 1040ez 2012 worksheet For details about these rules, see Publication 463. 1040ez 2012 worksheet Reimbursing your employees for expenses. 1040ez 2012 worksheet   You generally can deduct the amount you reimburse your employees for travel and entertainment expenses. 1040ez 2012 worksheet The reimbursement you deduct and the manner in which you deduct it depend in part on whether you reimburse the expenses under an accountable plan or a nonaccountable plan. 1040ez 2012 worksheet For details, see chapter 11 in Publication 535. 1040ez 2012 worksheet That chapter explains accountable and nonaccountable plans and tells you whether to report the reimbursement on your employee's Form W-2, Wage and Tax Statement. 1040ez 2012 worksheet Business Use of Your Home To deduct expenses related to the part of your home used for business, you must meet specific requirements. 1040ez 2012 worksheet Even then, your deduction may be limited. 1040ez 2012 worksheet To qualify to claim expenses for business use of your home, you must meet the following tests. 1040ez 2012 worksheet Your use of the business part of your home must be: Exclusive (however, see Exceptions to exclusive use , later), Regular, For your business, and The business part of your home must be one of the following: Your principal place of business (defined later), A place where you meet or deal with patients, clients, or customers in the normal course of your business, or A separate structure (not attached to your home) you use in connection with your business. 1040ez 2012 worksheet Exclusive use. 1040ez 2012 worksheet   To qualify under the exclusive use test, you must use a specific area of your home only for your trade or business. 1040ez 2012 worksheet The area used for business can be a room or other separately identifiable space. 1040ez 2012 worksheet The space does not need to be marked off by a permanent partition. 1040ez 2012 worksheet   You do not meet the requirements of the exclusive use test if you use the area in question both for business and for personal purposes. 1040ez 2012 worksheet Example. 1040ez 2012 worksheet You are an attorney and use a den in your home to write legal briefs and prepare clients' tax returns. 1040ez 2012 worksheet Your family also uses the den for recreation. 1040ez 2012 worksheet The den is not used exclusively in your profession, so you cannot claim a business deduction for its use. 1040ez 2012 worksheet Exceptions to exclusive use. 1040ez 2012 worksheet   You do not have to meet the exclusive use test if you use part of your home in either of the following ways. 1040ez 2012 worksheet For the storage of inventory or product samples. 1040ez 2012 worksheet As a daycare facility. 1040ez 2012 worksheet For an explanation of these exceptions, see Publication 587, Business Use of Your Home (Including Use by Daycare Providers). 1040ez 2012 worksheet Regular use. 1040ez 2012 worksheet   To qualify under the regular use test, you must use a specific area of your home for business on a continuing basis. 1040ez 2012 worksheet You do not meet the test if your business use of the area is only occasional or incidental, even if you do not use that area for any other purpose. 1040ez 2012 worksheet Principal place of business. 1040ez 2012 worksheet   You can have more than one business location, including your home, for a single trade or business. 1040ez 2012 worksheet To qualify to deduct the expenses for the business use of your home under the principal place of business test, your home must be your principal place of business for that business. 1040ez 2012 worksheet To determine your principal place of business, you must consider all the facts and circumstances. 1040ez 2012 worksheet   Your home office will qualify as your principal place of business for deducting expenses for its use if you meet the following requirements. 1040ez 2012 worksheet You use it exclusively and regularly for administrative or management activities of your business. 1040ez 2012 worksheet You have no other fixed location where you conduct substantial administrative or management activities of your business. 1040ez 2012 worksheet   Alternatively, if you use your home exclusively and regularly for your business, but your home office does not qualify as your principal place of business based on the previous rules, you determine your principal place of business based on the following factors. 1040ez 2012 worksheet The relative importance of the activities performed at each location. 1040ez 2012 worksheet If the relative importance factor does not determine your principal place of business, you can also consider the time spent at each location. 1040ez 2012 worksheet   If, after considering your business locations, your home cannot be identified as your principal place of business, you cannot deduct home office expenses. 1040ez 2012 worksheet However, for other ways to qualify to deduct home office expenses, see Publication 587. 1040ez 2012 worksheet Deduction limit. 1040ez 2012 worksheet   If your gross income from the business use of your home equals or exceeds your total business expenses (including depreciation), you can deduct all your business expenses related to the use of your home. 1040ez 2012 worksheet If your gross income from the business use is less than your total business expenses, your deduction for certain expenses for the business use of your home is limited. 1040ez 2012 worksheet   Your deduction of otherwise nondeductible expenses, such as insurance, utilities, and depreciation (with depreciation taken last), allocable to the business is limited to the gross income from the business use of your home minus the sum of the following. 1040ez 2012 worksheet The business part of expenses you could deduct even if you did not use your home for business (such as mortgage interest, real estate taxes, and casualty and theft losses that are allowable as itemized deductions on Schedule A (Form 1040)). 1040ez 2012 worksheet The business expenses that relate to the business activity in the home (for example, business phone, supplies, and depreciation on equipment), but not to the use of the home itself. 1040ez 2012 worksheet Do not include in (2) above your deduction for one-half of your self-employment tax. 1040ez 2012 worksheet   Use Form 8829, Expenses for Business Use of Your Home, to figure your deduction. 1040ez 2012 worksheet New simplified method. 1040ez 2012 worksheet    The IRS now provides a simplified method to determine your expenses for business use of your home. 1040ez 2012 worksheet The simplified method is an alternative to calculating and substantiating actual expenses. 1040ez 2012 worksheet In most cases, you will figure your deduction by multiplying $5 by the area of your home used for a qualified business use. 1040ez 2012 worksheet The area you use to figure your deduction is limited to 300 square feet. 1040ez 2012 worksheet For more information, see the Instructions for Schedule C. 1040ez 2012 worksheet More information. 1040ez 2012 worksheet   For more information on deducting expenses for the business use of your home, see Publication 587. 1040ez 2012 worksheet Other Expenses You Can Deduct You may also be able to deduct the following expenses. 1040ez 2012 worksheet See Publication 535 to find out whether you can deduct them. 1040ez 2012 worksheet Advertising. 1040ez 2012 worksheet Bank fees. 1040ez 2012 worksheet Donations to business organizations. 1040ez 2012 worksheet Education expenses. 1040ez 2012 worksheet Energy efficient commercial buildings deduction expenses. 1040ez 2012 worksheet Impairment-related expenses. 1040ez 2012 worksheet Interview expense allowances. 1040ez 2012 worksheet Licenses and regulatory fees. 1040ez 2012 worksheet Moving machinery. 1040ez 2012 worksheet Outplacement services. 1040ez 2012 worksheet Penalties and fines you pay for late performance or nonperformance of a contract. 1040ez 2012 worksheet Repairs that keep your property in a normal efficient operating condition. 1040ez 2012 worksheet Repayments of income. 1040ez 2012 worksheet Subscriptions to trade or professional publications. 1040ez 2012 worksheet Supplies and materials. 1040ez 2012 worksheet Utilities. 1040ez 2012 worksheet Expenses You Cannot Deduct You usually cannot deduct the following as business expenses. 1040ez 2012 worksheet For more information, see Publication 535. 1040ez 2012 worksheet Bribes and kickbacks. 1040ez 2012 worksheet Charitable contributions. 1040ez 2012 worksheet Demolition expenses or losses. 1040ez 2012 worksheet Dues to business, social, athletic, luncheon, sporting, airline, and hotel clubs. 1040ez 2012 worksheet Lobbying expenses. 1040ez 2012 worksheet Penalties and fines you pay to a governmental agency or instrumentality because you broke the law. 1040ez 2012 worksheet Personal, living, and family expenses. 1040ez 2012 worksheet Political contributions. 1040ez 2012 worksheet Repairs that add to the value of your property or significantly increase its life. 1040ez 2012 worksheet Prev  Up  Next   Home   More Online Publications