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1040x Efile

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1040x Efile

1040x efile 1. 1040x efile   Bona Fide Residence Table of Contents Presence TestDays of Presence in the United States or Relevant Possession Significant Connection Tax HomeExceptions Closer ConnectionException for Year of Move Special Rules in the Year of a MoveYear of Moving to a Possession Year of Moving From a Possession Reporting a Change in Bona Fide ResidenceWho Must File Penalty for Not Filing Form 8898 In order to qualify for certain tax benefits (see chapter 3), you must be a bona fide resident of American Samoa, the CNMI, Guam, Puerto Rico, or the USVI for the entire tax year. 1040x efile Generally, you are a bona fide resident of one of these possessions (the relevant possession) if, during the tax year, you: Meet the presence test, Do not have a tax home outside the relevant possession, and Do not have a closer connection to the United States or to a foreign country than to the relevant possession. 1040x efile Special rule for members of the U. 1040x efile S. 1040x efile Armed Forces. 1040x efile   If you are a member of the U. 1040x efile S. 1040x efile Armed Forces who qualified as a bona fide resident of the relevant possession in an earlier tax year, your absence from that possession during the current tax year in compliance with military orders will not affect your status as a bona fide resident. 1040x efile Likewise, being in a possession solely in compliance with military orders will not qualify you for bona fide residency. 1040x efile Also see the special income source rule for members of the U. 1040x efile S. 1040x efile Armed Forces in chapter 2, under Compensation for Labor or Personal Services . 1040x efile Special rule for civilian spouse of active duty member of the U. 1040x efile S. 1040x efile Armed Forces. 1040x efile   If you are the civilian spouse of an active duty servicemember, under Military Spouses Residency Relief Act (MSRRA) you can choose to keep your prior residence or domicile for tax purposes (tax residence) when accompanying the servicemember spouse, who is relocating under military orders, to a new military duty station in one of the 50 states, the District of Columbia, or a U. 1040x efile S. 1040x efile possession. 1040x efile Before relocating, you and your spouse must have the same tax residence. 1040x efile If you are a civilian spouse and choose to keep your prior tax residence after such relocation, the source of income for services performed (for example, wages, salaries, tips, or self-employment) by you is considered to be (the jurisdiction of) the prior tax residence. 1040x efile As a result, the amount of income tax withholding (from Form(s) W-2, Wage and Tax Statement) that you are able to claim on your federal return, as well as the need to file a state or U. 1040x efile S. 1040x efile possession return, may be affected. 1040x efile For more information, consult with state, local, or U. 1040x efile S. 1040x efile possession tax authorities regarding your tax obligations under MSRRA. 1040x efile Presence Test If you are a U. 1040x efile S. 1040x efile citizen or resident alien, you will satisfy the presence test for the entire tax year if you meet one of the following conditions. 1040x efile You were present in the relevant possession for at least 183 days during the tax year. 1040x efile You were present in the relevant possession for at least 549 days during the 3-year period that includes the current tax year and the 2 immediately preceding tax years. 1040x efile During each year of the 3-year period, you must be present in the relevant possession for at least 60 days. 1040x efile You were present in the United States for no more than 90 days during the tax year. 1040x efile You had earned income in the United States of no more than a total of $3,000 and were present for more days in the relevant possession than in the United States during the tax year. 1040x efile Earned income is pay for personal services performed, such as wages, salaries, or professional fees. 1040x efile You had no significant connection to the United States during the tax year. 1040x efile Special rule for nonresident aliens. 1040x efile   Conditions (1) through (5) above do not apply to nonresident aliens of the United States. 1040x efile Instead, nonresident aliens must meet the substantial presence test discussed in chapter 1 of Publication 519. 1040x efile In that discussion, substitute the name of the possession for “United States” and “U. 1040x efile S. 1040x efile ” wherever they appear. 1040x efile Disregard the discussion in that chapter about a Closer Connection to a Foreign Country. 1040x efile Days of Presence in the United States or Relevant Possession Generally, you are treated as being present in the United States or in the relevant possession on any day that you are physically present in that location at any time during the day. 1040x efile Days of presence in a possession. 1040x efile   You are considered to be present in the relevant possession on any of the following days. 1040x efile Any day you are physically present in that possession at any time during the day. 1040x efile Any day you are outside of the relevant possession in order to receive, or to accompany any of the following family members to receive, qualifying medical treatment (see Qualifying Medical Treatment , later). 1040x efile Your parent. 1040x efile Your spouse. 1040x efile Your child, who is your son, daughter, stepson, or stepdaughter. 1040x efile This includes an adopted child or child lawfully placed with you for legal adoption. 1040x efile This also includes a foster child who is placed with you by an authorized placement agency or by judgment, decree, or other order of any court of competent jurisdiction. 1040x efile Any day you are outside the relevant possession because you leave or are unable to return to the relevant possession during any: 14-day period within which a major disaster occurs in the relevant possession for which a Federal Emergency Management Agency (FEMA) notice of a federal declaration of a major disaster is issued in the Federal Register, or Period for which a mandatory evacuation order is in effect for the geographic area in the relevant possession in which your main home is located. 1040x efile   If, during a single day, you are physically present: In the United States and in the relevant possession, that day is considered a day of presence in the relevant possession; or In two possessions, that day is considered a day of presence in the possession where your tax home is located (see Tax Home , later). 1040x efile Days of presence in the United States. 1040x efile   You are considered to be present in the United States on any day that you are physically present in the United States at any time during the day. 1040x efile However, do not count the following days as days of presence in the United States. 1040x efile Any day you are temporarily present in the United States in order to receive, or to accompany a parent, spouse, or child who is receiving, qualifying medical treatment. 1040x efile “Child” is defined under item 2c earlier. 1040x efile “Qualifying medical treatment” is defined later. 1040x efile Any day you are temporarily present in the United States because you leave or are unable to return to the relevant possession during any: 14-day period within which a major disaster occurs in the relevant possession for which a Federal Emergency Management Agency (FEMA) notice of a federal declaration of a major disaster is issued in the Federal Register, or Period for which a mandatory evacuation order is in effect for the geographic area in the relevant possession in which your main home is located. 1040x efile Any day you are in the United States for less than 24 hours when you are traveling between two places outside the United States. 1040x efile Any day you are temporarily present in the United States as a professional athlete to compete in a charitable sports event (defined later). 1040x efile Any day you are temporarily in the United States as a student (defined later). 1040x efile Any day you are in the United States serving as an elected representative of the relevant possession, or serving full time as an elected or appointed official or employee of the government of that possession (or any of its political subdivisions). 1040x efile Qualifying Medical Treatment Such treatment is generally provided by (or under the supervision of) a physician for an illness, injury, impairment, or physical or mental condition. 1040x efile The treatment generally involves: Any period of inpatient care that requires an overnight stay in a hospital or hospice, and any period immediately before or after that inpatient care to the extent it is medically necessary, or Any temporary period of inpatient care in a residential medical care facility for medically necessary rehabilitation services. 1040x efile With respect to each qualifying medical treatment, you must prepare (or obtain) and maintain documentation supporting your claim that such treatment meets the criteria to be considered days of presence in the relevant possession. 1040x efile You must be able to produce this documentation within 30 days if requested by the IRS or tax administrator for the relevant possession. 1040x efile You must keep the following documentation. 1040x efile Records that provide: The patient's name and relationship to you (if the medical treatment is provided to a person you accompany); The name and address of the hospital, hospice, or residential medical care facility where the medical treatment was provided; The name, address, and telephone number of the physician who provided the medical treatment; The date(s) on which the medical treatment was provided; and Receipt(s) of payment for the medical treatment. 1040x efile Signed certification by the providing or supervising physician that the medical treatment met the requirements for being qualified medical treatment, and setting forth: The patient's name, A reasonably detailed description of the medical treatment provided by (or under the supervision of) the physician, The dates on which the medical treatment was provided, and The medical facts that support the physician's certification and determination that the treatment was medically necessary. 1040x efile Charitable Sports Event A charitable sports event is one that meets all of the following conditions. 1040x efile The main purpose is to benefit a qualified charitable organization. 1040x efile The entire net proceeds go to charity. 1040x efile Volunteers perform substantially all the work. 1040x efile In figuring the days of presence in the United States, you can exclude only the days on which you actually competed in the charitable sports event. 1040x efile You cannot exclude the days on which you were in the United States to practice for the event, to perform promotional or other activities related to the event, or to travel between events. 1040x efile Student To qualify as a student, you must be, during some part of each of any 5 calendar months during the calendar year: A full-time student at a school that has a regular teaching staff, course of study, and regularly enrolled body of students in attendance, or A student taking a full-time, on-farm training course given by a school described in (1) above or by a state, county, or local government agency. 1040x efile The 5 calendar months do not have to be consecutive. 1040x efile Full-time student. 1040x efile   A full-time student is a person who is enrolled for the number of hours or courses the school considers to be full-time attendance. 1040x efile However, school attendance exclusively at night is not considered full-time attendance. 1040x efile School. 1040x efile   The term “school” includes elementary schools, middle schools, junior and senior high schools, colleges, universities, and technical, trade, and mechanical schools. 1040x efile It does not include on-the-job training courses, correspondence schools, and schools offering courses only through the Internet. 1040x efile Significant Connection One way in which you can meet the presence test is to have no significant connection to the United States during the tax year. 1040x efile This section looks at the factors that determine if a significant connection exists. 1040x efile You are treated as having a significant connection to the United States if you: Have a permanent home in the United States, Are currently registered to vote in any political subdivision of the United States, or Have a spouse or child (see item 2c under Days of presence in a possession , earlier) who is under age 18 whose main home is in the United States, other than: A child who is in the United States because he or she is the child of divorced or legally separated parents and is living with a custodial parent under a custodial decree or multiple support agreement, or A child who is in the United States as a student. 1040x efile For the purpose of determining if you have a significant connection to the United States, the term “spouse” does not include a spouse from whom you are legally separated under a decree of divorce or separate maintenance. 1040x efile Permanent home. 1040x efile   A permanent home generally includes an accommodation such as a house, an apartment, or a furnished room that is either owned or rented by you or your spouse. 1040x efile The dwelling unit must be available at all times, continuously, not only for short stays. 1040x efile Exception for rental property. 1040x efile   If you or your spouse own the dwelling unit and at any time during the tax year it is rented to someone else at fair rental value, it will be considered your permanent home only if you or your spouse use that property for personal purposes for more than the greater of: 14 days, or 10% of the number of days during that tax year that the property is rented to others at a fair rental value. 1040x efile   You are treated as using rental property for personal purposes on any day the property is not being rented to someone else at fair rental value for the entire day. 1040x efile   A day of personal use of a dwelling unit is also any day that the unit is used by any of the following persons. 1040x efile You or any other person who has an interest in it, unless you rent it to another owner as his or her main home under a shared equity financing agreement. 1040x efile A member of your family or a member of the family of any other person who has an interest in it, unless the family member uses the dwelling unit as his or her main home and pays a fair rental price. 1040x efile Family includes only brothers and sisters, half-brothers and half-sisters, spouses, ancestors (parents, grandparents, etc. 1040x efile ), and lineal descendants (children, grandchildren, etc. 1040x efile ). 1040x efile Anyone under an arrangement that lets you use some other dwelling unit. 1040x efile Anyone at less than a fair rental price. 1040x efile   However, any day you spend working substantially full time repairing and maintaining (not improving) your property is not counted as a day of personal use. 1040x efile Whether your property is used mainly for this purpose is determined in light of all the facts and circumstances, such as: The amount of time you devote to repair and maintenance work, How often during the tax year you perform repair and maintenance work on this property, and The presence and activities of companions. 1040x efile   See Publication 527, Residential Rental Property, for more information about personal use of a dwelling unit. 1040x efile Example—significant connection. 1040x efile Ann Green, a U. 1040x efile S. 1040x efile citizen, is a sales representative for a company based in Guam. 1040x efile Ann lives with her spouse and young children in their house in Guam, where she is also registered to vote. 1040x efile Her business travel requires her to spend 120 days in the United States and another 120 days in foreign countries. 1040x efile When traveling on business, Ann generally stays at hotels but sometimes stays with her brother, who lives in the United States. 1040x efile Ann's stays are always of short duration and she asks her brother's permission to stay with him. 1040x efile Her brother's house is not her permanent home, nor does she have any other accommodations in the United States that would be considered her permanent home. 1040x efile Ann satisfies the presence test because she has no significant connection to the United States. 1040x efile Example—presence test. 1040x efile Eric and Wanda Brown live for part of the year in a condominium, which they own, in the CNMI. 1040x efile They also own a house in Maine where they live for 120 days every year to be near their grown children and grandchildren. 1040x efile The Browns are retired and their only income is from pension payments, dividends, interest, and social security benefits. 1040x efile In 2013, they spent only 175 days in the CNMI because of a 70-day vacation to Europe and Asia. 1040x efile Thus, in 2013, the Browns were not present in the CNMI for at least 183 days, were present in the United States for more than 90 days, and had a significant connection to the United States because of their permanent home. 1040x efile However, the Browns still satisfied the presence test with respect to the CNMI because they had no earned income in the United States and were physically present for more days in the CNMI than in the United States. 1040x efile Tax Home You will have met the tax home test if you did not have a tax home outside the relevant possession during any part of the tax year. 1040x efile Your tax home is your regular or main place of business, employment, or post of duty regardless of where you maintain your family home. 1040x efile If you do not have a regular or main place of business because of the nature of your work, then your tax home is the place where you regularly live. 1040x efile If you do not fit either of these categories, you are considered an itinerant and your tax home is wherever you work. 1040x efile Exceptions There are some special rules regarding tax home that provide exceptions to the general rule stated above. 1040x efile Students and Government Officials Disregard the following days when determining whether you have a tax home outside the relevant possession. 1040x efile Days you were temporarily in the United States as a student (see Student under Days of Presence in the United States or Relevant Possession, earlier). 1040x efile Days you were in the United States serving as an elected representative of the relevant possession, or serving full time as an elected or appointed official or employee of the government of that possession (or any of its political subdivisions). 1040x efile Seafarers You will not be considered to have a tax home outside the relevant possession solely because you are employed on a ship or other seafaring vessel that is predominantly used in local and international waters. 1040x efile For this purpose, a vessel is considered to be predominantly used in local and international waters if, during the tax year, the total amount of time it is used in international waters and in the waters within 3 miles of the relevant possession exceeds the total amount of time it is used in the territorial waters of the United States, another possession, or any foreign country. 1040x efile Example. 1040x efile In 2013, Sean Silverman, a U. 1040x efile S. 1040x efile citizen, was employed by a fishery and spent 250 days at sea on a fishing vessel. 1040x efile When not at sea, Sean lived with his spouse at a house they own in American Samoa. 1040x efile The fishing vessel on which Sean works departs and arrives at various ports in American Samoa, other possessions, and foreign countries, but was in international or American Samoa's local waters for 225 days. 1040x efile For purposes of determining bona fide residency of American Samoa, Sean will not be considered to have a tax home outside that possession solely because of his employment on board the fishing vessel. 1040x efile Year of Move If you are moving to or from a possession during the year, you may still be able to meet the tax home test for that year. 1040x efile See Special Rules in the Year of a Move , later in this chapter. 1040x efile Closer Connection You will have met the closer connection test if, during any part of the tax year, you do not have a closer connection to the United States or a foreign country than to the relevant U. 1040x efile S. 1040x efile possession. 1040x efile You will be considered to have a closer connection to a possession than to the United States or to a foreign country if you have maintained more significant contacts with the possession(s) than with the United States or foreign country. 1040x efile In determining if you have maintained more significant contacts with the relevant possession, the facts and circumstances to be considered include, but are not limited to, the following. 1040x efile The location of your permanent home. 1040x efile The location of your family. 1040x efile The location of personal belongings, such as automobiles, furniture, clothing, and jewelry owned by you and your family. 1040x efile The location of social, political, cultural, professional, or religious organizations with which you have a current relationship. 1040x efile The location where you conduct your routine personal banking activities. 1040x efile The location where you conduct business activities (other than those that go into determining your tax home). 1040x efile The location of the jurisdiction in which you hold a driver's license. 1040x efile The location of the jurisdiction in which you vote. 1040x efile The location of charitable organizations to which you contribute. 1040x efile The country of residence you designate on forms and documents. 1040x efile The types of official forms and documents you file, such as Form W-8BEN, Certificate of Foreign Status of Beneficial Owner for United States Tax Withholding and Reporting (Individuals), or Form W-9, Request for Taxpayer Identification Number and Certification. 1040x efile Your connections to the relevant possession will be compared to the total of your connections with the United States and foreign countries. 1040x efile Your answers to the questions on Form 8898, Part III, will help establish the jurisdiction to which you have a closer connection. 1040x efile Example—closer connection to the United States. 1040x efile Marcos Reyes, a U. 1040x efile S. 1040x efile citizen, moved to Puerto Rico in 2013 to start an investment consulting and venture capital business. 1040x efile His spouse and two teenage children remained in California to allow the children to complete high school. 1040x efile He traveled back to the United States regularly to see his spouse and children, to engage in business activities, and to take vacations. 1040x efile Marcos had an apartment available for his full-time use in Puerto Rico, but remained a joint owner of the residence in California where his spouse and children lived. 1040x efile Marcos and his family had automobiles and personal belongings such as furniture, clothing, and jewelry located at both residences. 1040x efile Although Marcos was a member of the Puerto Rico Chamber of Commerce, he also belonged to and had current relationships with social, political, cultural, and religious organizations in California. 1040x efile Marcos received mail in California, including bank and brokerage statements and credit card bills. 1040x efile He conducted his personal banking activities in California. 1040x efile He held a California driver's license and was also registered to vote there. 1040x efile Based on all of the particular facts and circumstances pertaining to Marcos, he was not a bona fide resident of Puerto Rico in 2013 because he had a closer connection to the United States than to Puerto Rico. 1040x efile Closer connection to another possession. 1040x efile   Generally, possessions are not treated as foreign countries. 1040x efile Therefore, a closer connection to a possession other than the relevant possession will not be treated as a closer connection to a foreign country. 1040x efile Example—tax home and closer connection to possession. 1040x efile Pearl Blackmon, a U. 1040x efile S. 1040x efile citizen, is a permanent employee of a hotel in Guam, but works only during the tourist season. 1040x efile For the remainder of each year, Pearl lives with her spouse and children in the CNMI, where she has no outside employment. 1040x efile Most of Pearl's personal belongings, including her automobile, are located in the CNMI. 1040x efile She is registered to vote in, and has a driver's license issued by, the CNMI. 1040x efile She does her personal banking in the CNMI and routinely lists her CNMI address as her permanent address on forms and documents. 1040x efile Pearl satisfies the presence test with respect to both Guam and the CNMI. 1040x efile She satisfies the tax home test with respect to Guam, because her regular place of business is in Guam. 1040x efile Pearl satisfies the closer connection test with respect to both Guam and the CNMI, because she does not have a closer connection to the United States or to any foreign country. 1040x efile Pearl is considered a bona fide resident of Guam, the location of her tax home. 1040x efile Exception for Year of Move If you are moving to or from a possession during the year, you may still be able to meet the closer connection test for that year. 1040x efile See Special Rules in the Year of a Move , next. 1040x efile Special Rules in the Year of a Move If you are moving to or from a possession during the year, you may still be able to meet the tax home and closer connection tests for that year. 1040x efile Year of Moving to a Possession You will satisfy the tax home and closer connection tests in the tax year of changing your residence to the relevant possession if you meet all of the following. 1040x efile You have not been a bona fide resident of the relevant possession in any of the 3 tax years immediately preceding your move. 1040x efile In the year of the move, you do not have a tax home outside the relevant possession or a closer connection to the United States or a foreign country than to the relevant possession during any of the last 183 days of the tax year. 1040x efile You are a bona fide resident of the relevant possession for each of the 3 tax years immediately following your move. 1040x efile Example. 1040x efile Dwight Wood, a U. 1040x efile S. 1040x efile citizen, files returns on a calendar year basis. 1040x efile He lived in the United States from January 2007 through May 2013. 1040x efile In June 2013 he moved to the USVI, purchased a house, and accepted a permanent job with a local employer. 1040x efile From July 1 through December 31, 2013 (more than 183 days), Dwight's principal place of business was in the USVI and, during that time, he did not have a closer connection to the United States or a foreign country than to the USVI. 1040x efile If he is a bona fide resident of the USVI during all of 2014 through 2016, he will satisfy the tax home and closer connection tests for 2013. 1040x efile If Dwight also satisfies the presence test in 2013, he will be considered a bona fide resident of the USVI for the entire 2013 tax year. 1040x efile Year of Moving From a Possession In the year you cease to be a bona fide resident of American Samoa, the CNMI, Guam, or the USVI, you will satisfy the tax home and closer connection tests with respect to the relevant possession if you meet all of the following. 1040x efile You have been a bona fide resident of the relevant possession for each of the 3 tax years immediately preceding your change of residence. 1040x efile In the year of the move, you do not have a tax home outside the relevant possession or a closer connection to the United States or a foreign country than to the relevant possession during any of the first 183 days of the tax year. 1040x efile You are not a bona fide resident of the relevant possession for any of the 3 tax years immediately following your move. 1040x efile Example. 1040x efile Jean Aspen, a U. 1040x efile S. 1040x efile citizen, files returns on a calendar year basis. 1040x efile From January 2010 through December 2012, Jean was a bona fide resident of American Samoa. 1040x efile Jean continued to live there until September 6, 2013, when she accepted new employment and moved to Hawaii. 1040x efile Jean's principal place of business from January 1 through September 5, 2013 (more than 183 days), was in American Samoa, and during that period Jean did not have a closer connection to the United States or a foreign country than to American Samoa. 1040x efile If Jean continues to live and work in Hawaii for the rest of 2013 and throughout years 2014 through 2016, she will satisfy the tax home and closer connection tests for 2013 with respect to American Samoa. 1040x efile If Jean also satisfies the presence test in 2013, she will be considered a bona fide resident for the entire 2013 tax year. 1040x efile Puerto Rico You will be considered a bona fide resident of Puerto Rico for the part of the tax year preceding the date on which you move if you: Are a U. 1040x efile S. 1040x efile citizen, Are a bona fide resident of Puerto Rico for at least 2 tax years immediately preceding the tax year of the move, Cease to be a bona fide resident of Puerto Rico during the tax year, Cease to have a tax home in Puerto Rico during the tax year, and Have a closer connection to Puerto Rico than to the United States or a foreign country throughout the part of the tax year preceding the date on which you cease to have a tax home in Puerto Rico. 1040x efile Example. 1040x efile Randy White, a U. 1040x efile S. 1040x efile citizen, files returns on a calendar year basis. 1040x efile For all of 2011 and 2012, Randy was a bona fide resident of Puerto Rico. 1040x efile From January through April 2013, Randy continued to reside and maintain his principal place of business in and closer connection to Puerto Rico. 1040x efile On May 5, 2013, Randy moved and changed his tax home to Nevada. 1040x efile Later that year he established a closer connection to the United States than to Puerto Rico. 1040x efile Randy did not satisfy the presence test for 2013 with respect to Puerto Rico, nor the tax home or closer connection tests. 1040x efile However, because Randy was a bona fide resident of Puerto Rico for at least 2 tax years before he moved to Nevada in 2013, he was a bona fide resident of Puerto Rico from January 1 through May 4, 2013. 1040x efile Reporting a Change in Bona Fide Residence If you became or ceased to be a bona fide resident of a U. 1040x efile S. 1040x efile possession, you may need to file Form 8898. 1040x efile This applies to the U. 1040x efile S. 1040x efile possessions of American Samoa, the CNMI, Guam, Puerto Rico, and the USVI. 1040x efile Who Must File You must file Form 8898 for the tax year in which you meet both of the following conditions. 1040x efile Your worldwide gross income (defined below) in that tax year is more than $75,000. 1040x efile You meet one of the following. 1040x efile You take a position for U. 1040x efile S. 1040x efile tax purposes that you became a bona fide resident of a U. 1040x efile S. 1040x efile possession after a tax year for which you filed a U. 1040x efile S. 1040x efile income tax return as a citizen or resident alien of the United States but not as a bona fide resident of the possession. 1040x efile You are a citizen or resident alien of the United States who takes the position for U. 1040x efile S. 1040x efile tax purposes that you ceased to be a bona fide resident of a U. 1040x efile S. 1040x efile possession after a tax year for which you filed an income tax return (with the IRS, the possession tax authority, or both) as a bona fide resident of the possession. 1040x efile You take the position for U. 1040x efile S. 1040x efile tax purposes that you became a bona fide resident of Puerto Rico or American Samoa after a tax year for which you were required to file an income tax return as a bona fide resident of the CNMI, Guam, or the USVI. 1040x efile Worldwide gross income. 1040x efile   Worldwide gross income means all income you received in the form of money, goods, property, and services, including any income from sources outside the United States (even if you can exclude part or all of it) and before any deductions, credits, or rebates. 1040x efile Example. 1040x efile You are a U. 1040x efile S. 1040x efile citizen who moved to the CNMI in December 2012, but did not become a bona fide resident of that possession until the 2013 tax year. 1040x efile You must file Form 8898 for the 2013 tax year if your worldwide gross income for that year was more than $75,000. 1040x efile Penalty for Not Filing Form 8898 If you are required to file Form 8898 for any tax year and you fail to file it, you may owe a penalty of $1,000. 1040x efile You may also owe this penalty if you do not include all the information required by the form or the form includes incorrect information. 1040x efile In either case, you will not owe this penalty if you can show that such failure is due to reasonable cause and not willful neglect. 1040x efile This is in addition to any criminal penalty that may be imposed. 1040x efile Prev  Up  Next   Home   More Online Publications
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The 1040x Efile

1040x efile 1. 1040x efile   Importance of Records Table of Contents Introduction Topics - This chapter discusses: Useful Items - You may want to see: Benefits of Recordkeeping Kinds of Records To Keep How Long To Keep Records Introduction A farmer, like other taxpayers, must keep records to prepare an accurate income tax return and determine the correct amount of tax. 1040x efile This chapter explains the benefits of keeping records, what kinds of records you must keep, and how long you must keep them for federal tax purposes. 1040x efile Tax records are not the only type of records you need to keep for your farming business. 1040x efile You should also keep records that measure your farm's financial performance. 1040x efile This publication only discusses tax records. 1040x efile The Farm Financial Standards Council has produced a publication that provides a detailed explanation of the recommendations of the Council for financial reporting and analysis. 1040x efile For information on recordkeeping, you can purchase and download Financial Guidelines for Agricultural Producers at www. 1040x efile ffsc. 1040x efile org. 1040x efile For more information, contact Countryside Marketing, Inc. 1040x efile in the following manner. 1040x efile Call 262-253-6902. 1040x efile Send a fax to 262-253-6903. 1040x efile Write to: Farm Financial Standards Council N78 W14573 Appleton Ave. 1040x efile , #287 Menomonee Falls, WI 53051. 1040x efile Topics - This chapter discusses: Benefits of recordkeeping Kinds of records to keep How long to keep records Useful Items - You may want to see: Publication 51 (Circular A), Agricultural Employer's Tax Guide 463 Travel, Entertainment, Gift, and Car Expenses See chapter 16 for information about getting publications. 1040x efile Benefits of Recordkeeping Everyone in business, including farmers, must keep appropriate records. 1040x efile Recordkeeping will help you do the following. 1040x efile Monitor the progress of your farming business. 1040x efile   You need records to monitor the progress of your farming business. 1040x efile Records can show whether your business is improving, which items are selling, or what changes you need to make. 1040x efile Records can help you make better decisions that may increase the likelihood of business success. 1040x efile Prepare your financial statements. 1040x efile   You need records to prepare accurate financial statements. 1040x efile These include income (profit and loss) statements and balance sheets. 1040x efile These statements can help you in dealing with your bank or creditors and help you to manage your farm business. 1040x efile Identify source of receipts. 1040x efile   You will receive money or property from many sources. 1040x efile Your records can identify the source of your receipts. 1040x efile You need this information to separate farm from nonfarm receipts and taxable from nontaxable income. 1040x efile Keep track of deductible expenses. 1040x efile   You may forget expenses when you prepare your tax return unless you record them when they occur. 1040x efile Prepare your tax returns. 1040x efile   You need records to prepare your tax return. 1040x efile For example, your records must support the income, expenses, and credits you report. 1040x efile Generally, these are the same records you use to monitor your farming business and prepare your financial statements. 1040x efile Support items reported on tax returns. 1040x efile   You must keep your business records available at all times for inspection by the IRS. 1040x efile If the IRS examines any of your tax returns, you may be asked to explain the items reported. 1040x efile A complete set of records will speed up the examination. 1040x efile Kinds of Records To Keep Except in a few cases, the law does not require any specific kind of records. 1040x efile You can choose any recordkeeping system suited to your farming business that clearly shows, for example, your income and expenses. 1040x efile You should set up your recordkeeping system using an accounting method that clearly shows your income for your tax year. 1040x efile See  chapter 2. 1040x efile If you are in more than one business, you should keep a complete and separate set of records for each business. 1040x efile A corporation should keep minutes of board of directors' meetings. 1040x efile Your recordkeeping system should include a summary of your business transactions. 1040x efile This summary is ordinarily made in accounting journals and ledgers. 1040x efile For example, they must show your gross income, as well as your deductions and credits. 1040x efile In addition, you must keep supporting documents. 1040x efile Purchases, sales, payroll, and other transactions you have in your business generate supporting documents such as invoices and receipts. 1040x efile These documents contain the information you need to record in your journals and ledgers. 1040x efile It is important to keep these documents because they support the entries in your journals and ledgers and on your tax return. 1040x efile Keep them in an orderly fashion and in a safe place. 1040x efile For instance, organize them by year and type of income or expense. 1040x efile Electronic records. 1040x efile   All requirements that apply to hard copy books and records also apply to electronic storage systems that maintain tax books and records. 1040x efile When you replace hard copy books and records, you must maintain the electronic storage systems for as long as they are material to the administration of tax law. 1040x efile An electronic storage system is any system for preparing or keeping your records either by electronic imaging or by transfer to an electronic storage media. 1040x efile The electronic storage system must index, store, preserve, retrieve and reproduce the electronically stored books and records in legible format. 1040x efile All electronic storage systems must provide a complete and accurate record of your data that is accessible to the IRS. 1040x efile Electronic storage systems are also subject to the same controls and retention guidelines as those imposed on your original hard copy books and records. 1040x efile The original hard copy books and records may be destroyed provided that the electronic storage system has been tested to establish that the hard copy books and records are being reproduced in compliance with IRS requirements for an electronic storage system and procedures are established to ensure continued compliance with all applicable rules and regulations. 1040x efile You still have the responsibility of retaining any other books and records that are required to be retained. 1040x efile The IRS may test your electronic storage system, including the equipment used, indexing methodology, software and retrieval capabilities. 1040x efile This test is not considered an examination and the results must be shared with you. 1040x efile If your electronic storage system meets the requirements mentioned earlier, you will be in compliance. 1040x efile If not, you may be subject to penalties for non-compliance, unless you continue to maintain your original hard copybooks and records in a manner that allows you and the IRS to determine your correct tax. 1040x efile For details on electronic storage system requirements, see Rev. 1040x efile Proc. 1040x efile 97-22. 1040x efile You can find Rev. 1040x efile Proc. 1040x efile 97-22 on page 9 of Internal Revenue Bulletin 1997-13 at  www. 1040x efile irs. 1040x efile gov/pub/irs-irbs/irb97-13. 1040x efile pdf. 1040x efile Travel, transportation, entertainment, and gift expenses. 1040x efile   Specific recordkeeping rules apply to these expenses. 1040x efile For more information, see Publication 463. 1040x efile Employment taxes. 1040x efile   There are specific employment tax records you must keep. 1040x efile For a list, see Publication 51 (Circular A). 1040x efile Excise taxes. 1040x efile   See How To Claim a Credit or Refund in chapter 14 for the specific records you must keep to verify your claim for credit or refund of excise taxes on certain fuels. 1040x efile Assets. 1040x efile   Assets are the property, such as machinery and equipment, you own and use in your business. 1040x efile You must keep records to verify certain information about your business assets. 1040x efile You need records to figure your annual depreciation deduction and the gain or (loss) when you sell the assets. 1040x efile Your records should show all the following. 1040x efile When and how you acquired the asset. 1040x efile Purchase price. 1040x efile Cost of any improvements. 1040x efile Section 179 deduction taken. 1040x efile Deductions taken for depreciation. 1040x efile Deductions taken for casualty losses, such as losses resulting from fires or storms. 1040x efile How you used the asset. 1040x efile When and how you disposed of the asset. 1040x efile Selling price. 1040x efile Expenses of sale. 1040x efile   The following are examples of records that may show this information. 1040x efile Purchase and sales invoices. 1040x efile Real estate closing statements. 1040x efile Canceled checks. 1040x efile Bank statements. 1040x efile Financial account statements as proof of payment. 1040x efile   If you do not have a canceled check, you may be able to prove payment with certain financial account statements prepared by financial institutions. 1040x efile These include account statements prepared for the financial institution by a third party. 1040x efile These account statements must be legible. 1040x efile The following table lists acceptable account statements. 1040x efile IF payment is by. 1040x efile . 1040x efile . 1040x efile THEN the statement must show the. 1040x efile . 1040x efile . 1040x efile Check Check number. 1040x efile Amount. 1040x efile Payee's name. 1040x efile Date the check amount was posted to the account by the financial institution. 1040x efile Electronic funds  transfer Amount transferred. 1040x efile Payee's name. 1040x efile Date the transfer was posted to the account by the financial institution. 1040x efile Credit card Amount charged. 1040x efile Payee's name. 1040x efile Transaction date. 1040x efile    Proof of payment of an amount, by itself, does not establish you are entitled to a tax deduction. 1040x efile You should also keep other documents, such as credit card sales slips and invoices, to show that you also incurred the cost. 1040x efile Tax returns. 1040x efile   Keep copies of your filed tax returns. 1040x efile They help in preparing future tax returns and making computations if you file an amended return. 1040x efile Keep copies of your information returns such as Form 1099, Schedule K-1, and Form W-2. 1040x efile How Long To Keep Records You must keep your records as long as they may be needed for the administration of any provision of the Internal Revenue Code. 1040x efile Keep records that support an item of income or a deduction appearing on a return until the period of limitations for the return runs out. 1040x efile A period of limitations is the period of time after which no legal action can be brought. 1040x efile Generally, that means you must keep your records for at least 3 years from when your tax return was due or filed or within 2 years of the date the tax was paid, whichever is later. 1040x efile However, certain records must be kept for a longer period of time, as discussed below. 1040x efile Employment taxes. 1040x efile   If you have employees, you must keep all employment tax records for at least 4 years after the date the tax becomes due or is paid, whichever is later. 1040x efile Assets. 1040x efile   Keep records relating to property until the period of limitations expires for the year in which you dispose of the property in a taxable disposition. 1040x efile You must keep these records to figure any depreciation, amortization, or depletion deduction and to figure your basis for computing gain or (loss) when you sell or otherwise dispose of the property. 1040x efile   You may need to keep records relating to the basis of property longer than the period of limitation. 1040x efile Keep those records as long as they are important in figuring the basis of the original or replacement property. 1040x efile Generally, this means as long as you own the property and, after you dispose of it, for the period of limitations that applies to you. 1040x efile For example, if you received property in a nontaxable exchange, you must keep the records for the old property, as well as for the new property, until the period of limitations expires for the year in which you dispose of the new property in a taxable disposition. 1040x efile For more information on basis, see chapter 6. 1040x efile Records for nontax purposes. 1040x efile   When your records are no longer needed for tax purposes, do not discard them until you check to see if you have to keep them longer for other purposes. 1040x efile For example, your insurance company or creditors may require you to keep them longer than the IRS does. 1040x efile Prev  Up  Next   Home   More Online Publications