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2011 Tax Return Turbotax

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2011 Tax Return Turbotax

2011 tax return turbotax Publication 971 - Additional Material Table of Contents How To Get Tax HelpLow Income Taxpayer Clinics (LITCs). 2011 tax return turbotax Questions & AnswersThis section answers questions commonly asked by taxpayers about innocent spouse relief. 2011 tax return turbotax . 2011 tax return turbotax What is joint and several liability? . 2011 tax return turbotax How can I get relief from joint and several liability? . 2011 tax return turbotax What are the rules for innocent spouse relief? . 2011 tax return turbotax What are erroneous items? . 2011 tax return turbotax What is an understated tax? . 2011 tax return turbotax Will I qualify for innocent spouse relief in any situation where there is an understated tax? . 2011 tax return turbotax What are the rules for separation of liability relief? . 2011 tax return turbotax Why would a request for separation of liability relief be denied? . 2011 tax return turbotax What are the rules for equitable relief? . 2011 tax return turbotax How do state community property laws affect my ability to qualify for relief? . 2011 tax return turbotax How do I request relief? . 2011 tax return turbotax When should I file Form 8857? . 2011 tax return turbotax Where should I file Form 8857? . 2011 tax return turbotax I am currently undergoing an examination of my return. 2011 tax return turbotax How do I request innocent spouse relief? . 2011 tax return turbotax What if the IRS has given me notice that it will levy my account for the tax liability and I decide to request relief? . 2011 tax return turbotax What is injured spouse relief? . 2011 tax return turbotax What is joint and several liability? When you file a joint income tax return, the law makes both you and your spouse responsible for the entire tax liability. 2011 tax return turbotax This is called joint and several liability. 2011 tax return turbotax Joint and several liability applies not only to the tax liability you show on the return but also to any additional tax liability the IRS determines to be due, even if the additional tax is due to the income, deductions, or credits of your spouse or former spouse. 2011 tax return turbotax You remain jointly and severally liable for taxes, and the IRS still can collect from you, even if you later divorce and the divorce decree states that your former spouse will be solely responsible for the tax. 2011 tax return turbotax There are three types of relief for filers of joint returns: “innocent spouse relief,” “separation of liability relief,” and “equitable relief. 2011 tax return turbotax ” Each type has different requirements. 2011 tax return turbotax They are explained separately below. 2011 tax return turbotax To qualify for innocent spouse relief, you must meet all of the following conditions. 2011 tax return turbotax You must have filed a joint return which has an understated tax. 2011 tax return turbotax The understated tax must be due to erroneous items of your spouse (or former spouse). 2011 tax return turbotax You must establish that at the time you signed the joint return, you did not know, and had no reason to know, that there was an understated tax. 2011 tax return turbotax Taking into account all of the facts and circumstances, it would be unfair to hold you liable for the understated tax. 2011 tax return turbotax You must request relief within 2 years after the date on which the IRS first began collection activity against you after July 22, 1998. 2011 tax return turbotax Erroneous items are any deductions, credits, or bases that are incorrectly stated on the return, and any income that is not properly reported on the return. 2011 tax return turbotax You have an understated tax if the IRS determined that your total tax should be more than the amount actually shown on your return. 2011 tax return turbotax For example, you reported total tax on your 2008 return of $2,500. 2011 tax return turbotax IRS determined in an audit of your 2008 return that the total tax should be $3,000. 2011 tax return turbotax You have a $500 understated tax. 2011 tax return turbotax No. 2011 tax return turbotax There are many situations in which you may owe tax that is related to your spouse (or former spouse), but not be eligible for innocent spouse relief. 2011 tax return turbotax For example, you and your spouse file a joint return on which you report $10,000 of income and deductions, but you knew that your spouse was not reporting $5,000 of dividends. 2011 tax return turbotax You are not eligible for innocent spouse relief because you have knowledge of the understated tax. 2011 tax return turbotax Under this type of relief, you allocate (separate) the understated tax (plus interest and penalties) on your joint return between you and your spouse (or former spouse). 2011 tax return turbotax The understated tax allocated to you is generally the amount you are responsible for. 2011 tax return turbotax To qualify for separation of liability relief, you must have filed a joint return and meet either of the following requirements at the time you file Form 8857. 2011 tax return turbotax You are no longer married to, or are legally separated from, the spouse with whom you filed the joint return for which you are requesting relief. 2011 tax return turbotax (Under this rule, you are no longer married if you are widowed. 2011 tax return turbotax ) You were not a member of the same household as the spouse with whom you filed the joint return at any time during the 12-month period ending on the date you file Form 8857. 2011 tax return turbotax In addition to the above requirements, you must file a Form 8857 within 2 years after the date on which the IRS first began collection activity against you after July 22, 1998. 2011 tax return turbotax Even if you meet the requirements listed earlier, a request for separation of liability relief will not be granted in the following situations. 2011 tax return turbotax The IRS proves that you and your spouse (or former spouse) transferred assets to one another as part of a fraudulent scheme. 2011 tax return turbotax The IRS proves that at the time you signed your joint return, you had actual knowledge of any erroneous items giving rise to the deficiency that are allocable to your spouse (or former spouse). 2011 tax return turbotax Your spouse (or former spouse) transferred property to you to avoid tax or the payment of tax. 2011 tax return turbotax Equitable relief is only available if you meet all of the following conditions. 2011 tax return turbotax You do not qualify for innocent spouse relief, separation of liability relief, or relief from liability arising from community property law. 2011 tax return turbotax You have an understated tax or underpaid tax. 2011 tax return turbotax See Note later. 2011 tax return turbotax You did not pay the tax. 2011 tax return turbotax However, see Refunds , earlier, for exceptions. 2011 tax return turbotax The IRS determines that it is unfair to hold you liable for the understated or underpaid tax taking into account all the facts and circumstances. 2011 tax return turbotax You and your spouse (or former spouse) did not transfer assets to one another as a part of a fraudulent scheme. 2011 tax return turbotax Your spouse (or former spouse) did not transfer property to you for the main purpose of avoiding tax or the payment of tax. 2011 tax return turbotax You did not file or fail to file your return with the intent to commit fraud. 2011 tax return turbotax The income tax liability for which you seek relief is attributable to your spouse (or former spouse) with whom you filed the joint return. 2011 tax return turbotax For exceptions to this condition, see item (8) under Conditions for Getting Equitable Relief , earlier. 2011 tax return turbotax You timely file Form 8857 as explained earlier in Exception for equitable relief under How To Request Relief. 2011 tax return turbotax Note. 2011 tax return turbotax Unlike innocent spouse relief or separation of liability relief, if you qualify for equitable relief, you can also get relief from an underpaid tax. 2011 tax return turbotax (An underpaid tax is tax that is properly shown on the return, but has not been paid. 2011 tax return turbotax ) Community property states are Arizona, California, Idaho, Louisiana, Nevada, New Mexico, Texas, Washington, and Wisconsin. 2011 tax return turbotax Generally, community property laws require you to allocate community income and expenses equally between both spouses. 2011 tax return turbotax However, community property laws are not taken into account in determining whether an item belongs to you or to your spouse (or former spouse) for purposes of requesting any relief from liability. 2011 tax return turbotax      File Form 8857, Request for Innocent Spouse Relief, to ask the IRS for relief. 2011 tax return turbotax You must file an additional Form 8857 if you are requesting relief for more than three years. 2011 tax return turbotax If you are requesting innocent spouse relief or separation of liability relief, file Form 8857 no later than two years after the date on which the IRS first began collection activities against you after July 22, 1998. 2011 tax return turbotax If you are requesting equitable relief, see Exception for equitable relief. 2011 tax return turbotax under How To Request Relief, earlier, for when to file Form 8857. 2011 tax return turbotax If you are requesting relief from liability arising from community property law, see How and When To Request Relief under Community Property Laws, earlier, for when to file Form 8857. 2011 tax return turbotax Use the address or fax number shown in the Instructions for Form 8857. 2011 tax return turbotax File Form 8857 at the address or send it to the fax number shown in the Instructions for Form 8857. 2011 tax return turbotax Do not file it with the employee assigned to examine your return. 2011 tax return turbotax Generally, the IRS has 10 years to collect an amount you owe. 2011 tax return turbotax This is the collection statute of limitations. 2011 tax return turbotax By law, the IRS is not allowed to collect from you after the 10-year period ends. 2011 tax return turbotax If you request relief for any tax year, the IRS cannot collect from you for that year while your request is pending. 2011 tax return turbotax But interest and penalties continue to accrue. 2011 tax return turbotax Your request is generally considered pending from the date the IRS receives your Form 8857 until the date your request is resolved. 2011 tax return turbotax This includes the time the Tax Court is considering your request. 2011 tax return turbotax After your case is resolved, the IRS can begin or resume collecting from you. 2011 tax return turbotax The 10-year period will be increased by the amount of time your request for relief was pending plus 60 days. 2011 tax return turbotax See Publication 594 for more information. 2011 tax return turbotax Injured spouse relief is different from innocent spouse relief. 2011 tax return turbotax When a joint return is filed and the refund is used to pay one spouse's past-due federal tax, state income tax, state unemployment compensation debts, child support, spousal support, or federal non-tax debt, such as a student loan, the other spouse may be considered an injured spouse. 2011 tax return turbotax The injured spouse can get back his or her share of the joint overpayment using Form 8379, Injured Spouse Allocation. 2011 tax return turbotax You are considered an injured spouse if: You are not legally obligated to pay the past-due amount, and You meet any of the following conditions: You made and reported tax payments (such as federal income tax withholding or estimated tax payments). 2011 tax return turbotax You had earned income (such as wages, salaries, or self-employment income) and claimed the earned income credit or the additional child tax credit. 2011 tax return turbotax You claimed a refundable tax credit, such as the health coverage tax credit or the refundable credit for prior year minimum tax. 2011 tax return turbotax Note. 2011 tax return turbotax If your residence was in a community property state at any time during the year, you may file Form 8379 even if only item (1) above applies. 2011 tax return turbotax . 2011 tax return turbotax How can I get relief from joint and several liability? There are three types of relief for filers of joint returns: “innocent spouse relief,” “separation of liability relief,” and “equitable relief. 2011 tax return turbotax ” Each type has different requirements. 2011 tax return turbotax They are explained separately below. 2011 tax return turbotax To qualify for innocent spouse relief, you must meet all of the following conditions. 2011 tax return turbotax You must have filed a joint return which has an understated tax. 2011 tax return turbotax The understated tax must be due to erroneous items of your spouse (or former spouse). 2011 tax return turbotax You must establish that at the time you signed the joint return, you did not know, and had no reason to know, that there was an understated tax. 2011 tax return turbotax Taking into account all of the facts and circumstances, it would be unfair to hold you liable for the understated tax. 2011 tax return turbotax You must request relief within 2 years after the date on which the IRS first began collection activity against you after July 22, 1998. 2011 tax return turbotax Erroneous items are any deductions, credits, or bases that are incorrectly stated on the return, and any income that is not properly reported on the return. 2011 tax return turbotax You have an understated tax if the IRS determined that your total tax should be more than the amount actually shown on your return. 2011 tax return turbotax For example, you reported total tax on your 2008 return of $2,500. 2011 tax return turbotax IRS determined in an audit of your 2008 return that the total tax should be $3,000. 2011 tax return turbotax You have a $500 understated tax. 2011 tax return turbotax No. 2011 tax return turbotax There are many situations in which you may owe tax that is related to your spouse (or former spouse), but not be eligible for innocent spouse relief. 2011 tax return turbotax For example, you and your spouse file a joint return on which you report $10,000 of income and deductions, but you knew that your spouse was not reporting $5,000 of dividends. 2011 tax return turbotax You are not eligible for innocent spouse relief because you have knowledge of the understated tax. 2011 tax return turbotax Under this type of relief, you allocate (separate) the understated tax (plus interest and penalties) on your joint return between you and your spouse (or former spouse). 2011 tax return turbotax The understated tax allocated to you is generally the amount you are responsible for. 2011 tax return turbotax To qualify for separation of liability relief, you must have filed a joint return and meet either of the following requirements at the time you file Form 8857. 2011 tax return turbotax You are no longer married to, or are legally separated from, the spouse with whom you filed the joint return for which you are requesting relief. 2011 tax return turbotax (Under this rule, you are no longer married if you are widowed. 2011 tax return turbotax ) You were not a member of the same household as the spouse with whom you filed the joint return at any time during the 12-month period ending on the date you file Form 8857. 2011 tax return turbotax In addition to the above requirements, you must file a Form 8857 within 2 years after the date on which the IRS first began collection activity against you after July 22, 1998. 2011 tax return turbotax Even if you meet the requirements listed earlier, a request for separation of liability relief will not be granted in the following situations. 2011 tax return turbotax The IRS proves that you and your spouse (or former spouse) transferred assets to one another as part of a fraudulent scheme. 2011 tax return turbotax The IRS proves that at the time you signed your joint return, you had actual knowledge of any erroneous items giving rise to the deficiency that are allocable to your spouse (or former spouse). 2011 tax return turbotax Your spouse (or former spouse) transferred property to you to avoid tax or the payment of tax. 2011 tax return turbotax Equitable relief is only available if you meet all of the following conditions. 2011 tax return turbotax You do not qualify for innocent spouse relief, separation of liability relief, or relief from liability arising from community property law. 2011 tax return turbotax You have an understated tax or underpaid tax. 2011 tax return turbotax See Note later. 2011 tax return turbotax You did not pay the tax. 2011 tax return turbotax However, see Refunds , earlier, for exceptions. 2011 tax return turbotax The IRS determines that it is unfair to hold you liable for the understated or underpaid tax taking into account all the facts and circumstances. 2011 tax return turbotax You and your spouse (or former spouse) did not transfer assets to one another as a part of a fraudulent scheme. 2011 tax return turbotax Your spouse (or former spouse) did not transfer property to you for the main purpose of avoiding tax or the payment of tax. 2011 tax return turbotax You did not file or fail to file your return with the intent to commit fraud. 2011 tax return turbotax The income tax liability for which you seek relief is attributable to your spouse (or former spouse) with whom you filed the joint return. 2011 tax return turbotax For exceptions to this condition, see item (8) under Conditions for Getting Equitable Relief , earlier. 2011 tax return turbotax You timely file Form 8857 as explained earlier in Exception for equitable relief under How To Request Relief. 2011 tax return turbotax Note. 2011 tax return turbotax Unlike innocent spouse relief or separation of liability relief, if you qualify for equitable relief, you can also get relief from an underpaid tax. 2011 tax return turbotax (An underpaid tax is tax that is properly shown on the return, but has not been paid. 2011 tax return turbotax ) Community property states are Arizona, California, Idaho, Louisiana, Nevada, New Mexico, Texas, Washington, and Wisconsin. 2011 tax return turbotax Generally, community property laws require you to allocate community income and expenses equally between both spouses. 2011 tax return turbotax However, community property laws are not taken into account in determining whether an item belongs to you or to your spouse (or former spouse) for purposes of requesting any relief from liability. 2011 tax return turbotax      File Form 8857, Request for Innocent Spouse Relief, to ask the IRS for relief. 2011 tax return turbotax You must file an additional Form 8857 if you are requesting relief for more than three years. 2011 tax return turbotax If you are requesting innocent spouse relief or separation of liability relief, file Form 8857 no later than two years after the date on which the IRS first began collection activities against you after July 22, 1998. 2011 tax return turbotax If you are requesting equitable relief, see Exception for equitable relief. 2011 tax return turbotax under How To Request Relief, earlier, for when to file Form 8857. 2011 tax return turbotax If you are requesting relief from liability arising from community property law, see How and When To Request Relief under Community Property Laws, earlier, for when to file Form 8857. 2011 tax return turbotax Use the address or fax number shown in the Instructions for Form 8857. 2011 tax return turbotax File Form 8857 at the address or send it to the fax number shown in the Instructions for Form 8857. 2011 tax return turbotax Do not file it with the employee assigned to examine your return. 2011 tax return turbotax Generally, the IRS has 10 years to collect an amount you owe. 2011 tax return turbotax This is the collection statute of limitations. 2011 tax return turbotax By law, the IRS is not allowed to collect from you after the 10-year period ends. 2011 tax return turbotax If you request relief for any tax year, the IRS cannot collect from you for that year while your request is pending. 2011 tax return turbotax But interest and penalties continue to accrue. 2011 tax return turbotax Your request is generally considered pending from the date the IRS receives your Form 8857 until the date your request is resolved. 2011 tax return turbotax This includes the time the Tax Court is considering your request. 2011 tax return turbotax After your case is resolved, the IRS can begin or resume collecting from you. 2011 tax return turbotax The 10-year period will be increased by the amount of time your request for relief was pending plus 60 days. 2011 tax return turbotax See Publication 594 for more information. 2011 tax return turbotax Injured spouse relief is different from innocent spouse relief. 2011 tax return turbotax When a joint return is filed and the refund is used to pay one spouse's past-due federal tax, state income tax, state unemployment compensation debts, child support, spousal support, or federal non-tax debt, such as a student loan, the other spouse may be considered an injured spouse. 2011 tax return turbotax The injured spouse can get back his or her share of the joint overpayment using Form 8379, Injured Spouse Allocation. 2011 tax return turbotax You are considered an injured spouse if: You are not legally obligated to pay the past-due amount, and You meet any of the following conditions: You made and reported tax payments (such as federal income tax withholding or estimated tax payments). 2011 tax return turbotax You had earned income (such as wages, salaries, or self-employment income) and claimed the earned income credit or the additional child tax credit. 2011 tax return turbotax You claimed a refundable tax credit, such as the health coverage tax credit or the refundable credit for prior year minimum tax. 2011 tax return turbotax Note. 2011 tax return turbotax If your residence was in a community property state at any time during the year, you may file Form 8379 even if only item (1) above applies. 2011 tax return turbotax . 2011 tax return turbotax What are the rules for innocent spouse relief? To qualify for innocent spouse relief, you must meet all of the following conditions. 2011 tax return turbotax You must have filed a joint return which has an understated tax. 2011 tax return turbotax The understated tax must be due to erroneous items of your spouse (or former spouse). 2011 tax return turbotax You must establish that at the time you signed the joint return, you did not know, and had no reason to know, that there was an understated tax. 2011 tax return turbotax Taking into account all of the facts and circumstances, it would be unfair to hold you liable for the understated tax. 2011 tax return turbotax You must request relief within 2 years after the date on which the IRS first began collection activity against you after July 22, 1998. 2011 tax return turbotax Erroneous items are any deductions, credits, or bases that are incorrectly stated on the return, and any income that is not properly reported on the return. 2011 tax return turbotax You have an understated tax if the IRS determined that your total tax should be more than the amount actually shown on your return. 2011 tax return turbotax For example, you reported total tax on your 2008 return of $2,500. 2011 tax return turbotax IRS determined in an audit of your 2008 return that the total tax should be $3,000. 2011 tax return turbotax You have a $500 understated tax. 2011 tax return turbotax No. 2011 tax return turbotax There are many situations in which you may owe tax that is related to your spouse (or former spouse), but not be eligible for innocent spouse relief. 2011 tax return turbotax For example, you and your spouse file a joint return on which you report $10,000 of income and deductions, but you knew that your spouse was not reporting $5,000 of dividends. 2011 tax return turbotax You are not eligible for innocent spouse relief because you have knowledge of the understated tax. 2011 tax return turbotax Under this type of relief, you allocate (separate) the understated tax (plus interest and penalties) on your joint return between you and your spouse (or former spouse). 2011 tax return turbotax The understated tax allocated to you is generally the amount you are responsible for. 2011 tax return turbotax To qualify for separation of liability relief, you must have filed a joint return and meet either of the following requirements at the time you file Form 8857. 2011 tax return turbotax You are no longer married to, or are legally separated from, the spouse with whom you filed the joint return for which you are requesting relief. 2011 tax return turbotax (Under this rule, you are no longer married if you are widowed. 2011 tax return turbotax ) You were not a member of the same household as the spouse with whom you filed the joint return at any time during the 12-month period ending on the date you file Form 8857. 2011 tax return turbotax In addition to the above requirements, you must file a Form 8857 within 2 years after the date on which the IRS first began collection activity against you after July 22, 1998. 2011 tax return turbotax Even if you meet the requirements listed earlier, a request for separation of liability relief will not be granted in the following situations. 2011 tax return turbotax The IRS proves that you and your spouse (or former spouse) transferred assets to one another as part of a fraudulent scheme. 2011 tax return turbotax The IRS proves that at the time you signed your joint return, you had actual knowledge of any erroneous items giving rise to the deficiency that are allocable to your spouse (or former spouse). 2011 tax return turbotax Your spouse (or former spouse) transferred property to you to avoid tax or the payment of tax. 2011 tax return turbotax Equitable relief is only available if you meet all of the following conditions. 2011 tax return turbotax You do not qualify for innocent spouse relief, separation of liability relief, or relief from liability arising from community property law. 2011 tax return turbotax You have an understated tax or underpaid tax. 2011 tax return turbotax See Note later. 2011 tax return turbotax You did not pay the tax. 2011 tax return turbotax However, see Refunds , earlier, for exceptions. 2011 tax return turbotax The IRS determines that it is unfair to hold you liable for the understated or underpaid tax taking into account all the facts and circumstances. 2011 tax return turbotax You and your spouse (or former spouse) did not transfer assets to one another as a part of a fraudulent scheme. 2011 tax return turbotax Your spouse (or former spouse) did not transfer property to you for the main purpose of avoiding tax or the payment of tax. 2011 tax return turbotax You did not file or fail to file your return with the intent to commit fraud. 2011 tax return turbotax The income tax liability for which you seek relief is attributable to your spouse (or former spouse) with whom you filed the joint return. 2011 tax return turbotax For exceptions to this condition, see item (8) under Conditions for Getting Equitable Relief , earlier. 2011 tax return turbotax You timely file Form 8857 as explained earlier in Exception for equitable relief under How To Request Relief. 2011 tax return turbotax Note. 2011 tax return turbotax Unlike innocent spouse relief or separation of liability relief, if you qualify for equitable relief, you can also get relief from an underpaid tax. 2011 tax return turbotax (An underpaid tax is tax that is properly shown on the return, but has not been paid. 2011 tax return turbotax ) Community property states are Arizona, California, Idaho, Louisiana, Nevada, New Mexico, Texas, Washington, and Wisconsin. 2011 tax return turbotax Generally, community property laws require you to allocate community income and expenses equally between both spouses. 2011 tax return turbotax However, community property laws are not taken into account in determining whether an item belongs to you or to your spouse (or former spouse) for purposes of requesting any relief from liability. 2011 tax return turbotax      File Form 8857, Request for Innocent Spouse Relief, to ask the IRS for relief. 2011 tax return turbotax You must file an additional Form 8857 if you are requesting relief for more than three years. 2011 tax return turbotax If you are requesting innocent spouse relief or separation of liability relief, file Form 8857 no later than two years after the date on which the IRS first began collection activities against you after July 22, 1998. 2011 tax return turbotax If you are requesting equitable relief, see Exception for equitable relief. 2011 tax return turbotax under How To Request Relief, earlier, for when to file Form 8857. 2011 tax return turbotax If you are requesting relief from liability arising from community property law, see How and When To Request Relief under Community Property Laws, earlier, for when to file Form 8857. 2011 tax return turbotax Use the address or fax number shown in the Instructions for Form 8857. 2011 tax return turbotax File Form 8857 at the address or send it to the fax number shown in the Instructions for Form 8857. 2011 tax return turbotax Do not file it with the employee assigned to examine your return. 2011 tax return turbotax Generally, the IRS has 10 years to collect an amount you owe. 2011 tax return turbotax This is the collection statute of limitations. 2011 tax return turbotax By law, the IRS is not allowed to collect from you after the 10-year period ends. 2011 tax return turbotax If you request relief for any tax year, the IRS cannot collect from you for that year while your request is pending. 2011 tax return turbotax But interest and penalties continue to accrue. 2011 tax return turbotax Your request is generally considered pending from the date the IRS receives your Form 8857 until the date your request is resolved. 2011 tax return turbotax This includes the time the Tax Court is considering your request. 2011 tax return turbotax After your case is resolved, the IRS can begin or resume collecting from you. 2011 tax return turbotax The 10-year period will be increased by the amount of time your request for relief was pending plus 60 days. 2011 tax return turbotax See Publication 594 for more information. 2011 tax return turbotax Injured spouse relief is different from innocent spouse relief. 2011 tax return turbotax When a joint return is filed and the refund is used to pay one spouse's past-due federal tax, state income tax, state unemployment compensation debts, child support, spousal support, or federal non-tax debt, such as a student loan, the other spouse may be considered an injured spouse. 2011 tax return turbotax The injured spouse can get back his or her share of the joint overpayment using Form 8379, Injured Spouse Allocation. 2011 tax return turbotax You are considered an injured spouse if: You are not legally obligated to pay the past-due amount, and You meet any of the following conditions: You made and reported tax payments (such as federal income tax withholding or estimated tax payments). 2011 tax return turbotax You had earned income (such as wages, salaries, or self-employment income) and claimed the earned income credit or the additional child tax credit. 2011 tax return turbotax You claimed a refundable tax credit, such as the health coverage tax credit or the refundable credit for prior year minimum tax. 2011 tax return turbotax Note. 2011 tax return turbotax If your residence was in a community property state at any time during the year, you may file Form 8379 even if only item (1) above applies. 2011 tax return turbotax . 2011 tax return turbotax What are “erroneous items”? Erroneous items are any deductions, credits, or bases that are incorrectly stated on the return, and any income that is not properly reported on the return. 2011 tax return turbotax You have an understated tax if the IRS determined that your total tax should be more than the amount actually shown on your return. 2011 tax return turbotax For example, you reported total tax on your 2008 return of $2,500. 2011 tax return turbotax IRS determined in an audit of your 2008 return that the total tax should be $3,000. 2011 tax return turbotax You have a $500 understated tax. 2011 tax return turbotax No. 2011 tax return turbotax There are many situations in which you may owe tax that is related to your spouse (or former spouse), but not be eligible for innocent spouse relief. 2011 tax return turbotax For example, you and your spouse file a joint return on which you report $10,000 of income and deductions, but you knew that your spouse was not reporting $5,000 of dividends. 2011 tax return turbotax You are not eligible for innocent spouse relief because you have knowledge of the understated tax. 2011 tax return turbotax Under this type of relief, you allocate (separate) the understated tax (plus interest and penalties) on your joint return between you and your spouse (or former spouse). 2011 tax return turbotax The understated tax allocated to you is generally the amount you are responsible for. 2011 tax return turbotax To qualify for separation of liability relief, you must have filed a joint return and meet either of the following requirements at the time you file Form 8857. 2011 tax return turbotax You are no longer married to, or are legally separated from, the spouse with whom you filed the joint return for which you are requesting relief. 2011 tax return turbotax (Under this rule, you are no longer married if you are widowed. 2011 tax return turbotax ) You were not a member of the same household as the spouse with whom you filed the joint return at any time during the 12-month period ending on the date you file Form 8857. 2011 tax return turbotax In addition to the above requirements, you must file a Form 8857 within 2 years after the date on which the IRS first began collection activity against you after July 22, 1998. 2011 tax return turbotax Even if you meet the requirements listed earlier, a request for separation of liability relief will not be granted in the following situations. 2011 tax return turbotax The IRS proves that you and your spouse (or former spouse) transferred assets to one another as part of a fraudulent scheme. 2011 tax return turbotax The IRS proves that at the time you signed your joint return, you had actual knowledge of any erroneous items giving rise to the deficiency that are allocable to your spouse (or former spouse). 2011 tax return turbotax Your spouse (or former spouse) transferred property to you to avoid tax or the payment of tax. 2011 tax return turbotax Equitable relief is only available if you meet all of the following conditions. 2011 tax return turbotax You do not qualify for innocent spouse relief, separation of liability relief, or relief from liability arising from community property law. 2011 tax return turbotax You have an understated tax or underpaid tax. 2011 tax return turbotax See Note later. 2011 tax return turbotax You did not pay the tax. 2011 tax return turbotax However, see Refunds , earlier, for exceptions. 2011 tax return turbotax The IRS determines that it is unfair to hold you liable for the understated or underpaid tax taking into account all the facts and circumstances. 2011 tax return turbotax You and your spouse (or former spouse) did not transfer assets to one another as a part of a fraudulent scheme. 2011 tax return turbotax Your spouse (or former spouse) did not transfer property to you for the main purpose of avoiding tax or the payment of tax. 2011 tax return turbotax You did not file or fail to file your return with the intent to commit fraud. 2011 tax return turbotax The income tax liability for which you seek relief is attributable to your spouse (or former spouse) with whom you filed the joint return. 2011 tax return turbotax For exceptions to this condition, see item (8) under Conditions for Getting Equitable Relief , earlier. 2011 tax return turbotax You timely file Form 8857 as explained earlier in Exception for equitable relief under How To Request Relief. 2011 tax return turbotax Note. 2011 tax return turbotax Unlike innocent spouse relief or separation of liability relief, if you qualify for equitable relief, you can also get relief from an underpaid tax. 2011 tax return turbotax (An underpaid tax is tax that is properly shown on the return, but has not been paid. 2011 tax return turbotax ) Community property states are Arizona, California, Idaho, Louisiana, Nevada, New Mexico, Texas, Washington, and Wisconsin. 2011 tax return turbotax Generally, community property laws require you to allocate community income and expenses equally between both spouses. 2011 tax return turbotax However, community property laws are not taken into account in determining whether an item belongs to you or to your spouse (or former spouse) for purposes of requesting any relief from liability. 2011 tax return turbotax      File Form 8857, Request for Innocent Spouse Relief, to ask the IRS for relief. 2011 tax return turbotax You must file an additional Form 8857 if you are requesting relief for more than three years. 2011 tax return turbotax If you are requesting innocent spouse relief or separation of liability relief, file Form 8857 no later than two years after the date on which the IRS first began collection activities against you after July 22, 1998. 2011 tax return turbotax If you are requesting equitable relief, see Exception for equitable relief. 2011 tax return turbotax under How To Request Relief, earlier, for when to file Form 8857. 2011 tax return turbotax If you are requesting relief from liability arising from community property law, see How and When To Request Relief under Community Property Laws, earlier, for when to file Form 8857. 2011 tax return turbotax Use the address or fax number shown in the Instructions for Form 8857. 2011 tax return turbotax File Form 8857 at the address or send it to the fax number shown in the Instructions for Form 8857. 2011 tax return turbotax Do not file it with the employee assigned to examine your return. 2011 tax return turbotax Generally, the IRS has 10 years to collect an amount you owe. 2011 tax return turbotax This is the collection statute of limitations. 2011 tax return turbotax By law, the IRS is not allowed to collect from you after the 10-year period ends. 2011 tax return turbotax If you request relief for any tax year, the IRS cannot collect from you for that year while your request is pending. 2011 tax return turbotax But interest and penalties continue to accrue. 2011 tax return turbotax Your request is generally considered pending from the date the IRS receives your Form 8857 until the date your request is resolved. 2011 tax return turbotax This includes the time the Tax Court is considering your request. 2011 tax return turbotax After your case is resolved, the IRS can begin or resume collecting from you. 2011 tax return turbotax The 10-year period will be increased by the amount of time your request for relief was pending plus 60 days. 2011 tax return turbotax See Publication 594 for more information. 2011 tax return turbotax Injured spouse relief is different from innocent spouse relief. 2011 tax return turbotax When a joint return is filed and the refund is used to pay one spouse's past-due federal tax, state income tax, state unemployment compensation debts, child support, spousal support, or federal non-tax debt, such as a student loan, the other spouse may be considered an injured spouse. 2011 tax return turbotax The injured spouse can get back his or her share of the joint overpayment using Form 8379, Injured Spouse Allocation. 2011 tax return turbotax You are considered an injured spouse if: You are not legally obligated to pay the past-due amount, and You meet any of the following conditions: You made and reported tax payments (such as federal income tax withholding or estimated tax payments). 2011 tax return turbotax You had earned income (such as wages, salaries, or self-employment income) and claimed the earned income credit or the additional child tax credit. 2011 tax return turbotax You claimed a refundable tax credit, such as the health coverage tax credit or the refundable credit for prior year minimum tax. 2011 tax return turbotax Note. 2011 tax return turbotax If your residence was in a community property state at any time during the year, you may file Form 8379 even if only item (1) above applies. 2011 tax return turbotax . 2011 tax return turbotax What is an “understated tax”? You have an understated tax if the IRS determined that your total tax should be more than the amount actually shown on your return. 2011 tax return turbotax For example, you reported total tax on your 2008 return of $2,500. 2011 tax return turbotax IRS determined in an audit of your 2008 return that the total tax should be $3,000. 2011 tax return turbotax You have a $500 understated tax. 2011 tax return turbotax No. 2011 tax return turbotax There are many situations in which you may owe tax that is related to your spouse (or former spouse), but not be eligible for innocent spouse relief. 2011 tax return turbotax For example, you and your spouse file a joint return on which you report $10,000 of income and deductions, but you knew that your spouse was not reporting $5,000 of dividends. 2011 tax return turbotax You are not eligible for innocent spouse relief because you have knowledge of the understated tax. 2011 tax return turbotax Under this type of relief, you allocate (separate) the understated tax (plus interest and penalties) on your joint return between you and your spouse (or former spouse). 2011 tax return turbotax The understated tax allocated to you is generally the amount you are responsible for. 2011 tax return turbotax To qualify for separation of liability relief, you must have filed a joint return and meet either of the following requirements at the time you file Form 8857. 2011 tax return turbotax You are no longer married to, or are legally separated from, the spouse with whom you filed the joint return for which you are requesting relief. 2011 tax return turbotax (Under this rule, you are no longer married if you are widowed. 2011 tax return turbotax ) You were not a member of the same household as the spouse with whom you filed the joint return at any time during the 12-month period ending on the date you file Form 8857. 2011 tax return turbotax In addition to the above requirements, you must file a Form 8857 within 2 years after the date on which the IRS first began collection activity against you after July 22, 1998. 2011 tax return turbotax Even if you meet the requirements listed earlier, a request for separation of liability relief will not be granted in the following situations. 2011 tax return turbotax The IRS proves that you and your spouse (or former spouse) transferred assets to one another as part of a fraudulent scheme. 2011 tax return turbotax The IRS proves that at the time you signed your joint return, you had actual knowledge of any erroneous items giving rise to the deficiency that are allocable to your spouse (or former spouse). 2011 tax return turbotax Your spouse (or former spouse) transferred property to you to avoid tax or the payment of tax. 2011 tax return turbotax Equitable relief is only available if you meet all of the following conditions. 2011 tax return turbotax You do not qualify for innocent spouse relief, separation of liability relief, or relief from liability arising from community property law. 2011 tax return turbotax You have an understated tax or underpaid tax. 2011 tax return turbotax See Note later. 2011 tax return turbotax You did not pay the tax. 2011 tax return turbotax However, see Refunds , earlier, for exceptions. 2011 tax return turbotax The IRS determines that it is unfair to hold you liable for the understated or underpaid tax taking into account all the facts and circumstances. 2011 tax return turbotax You and your spouse (or former spouse) did not transfer assets to one another as a part of a fraudulent scheme. 2011 tax return turbotax Your spouse (or former spouse) did not transfer property to you for the main purpose of avoiding tax or the payment of tax. 2011 tax return turbotax You did not file or fail to file your return with the intent to commit fraud. 2011 tax return turbotax The income tax liability for which you seek relief is attributable to your spouse (or former spouse) with whom you filed the joint return. 2011 tax return turbotax For exceptions to this condition, see item (8) under Conditions for Getting Equitable Relief , earlier. 2011 tax return turbotax You timely file Form 8857 as explained earlier in Exception for equitable relief under How To Request Relief. 2011 tax return turbotax Note. 2011 tax return turbotax Unlike innocent spouse relief or separation of liability relief, if you qualify for equitable relief, you can also get relief from an underpaid tax. 2011 tax return turbotax (An underpaid tax is tax that is properly shown on the return, but has not been paid. 2011 tax return turbotax ) Community property states are Arizona, California, Idaho, Louisiana, Nevada, New Mexico, Texas, Washington, and Wisconsin. 2011 tax return turbotax Generally, community property laws require you to allocate community income and expenses equally between both spouses. 2011 tax return turbotax However, community property laws are not taken into account in determining whether an item belongs to you or to your spouse (or former spouse) for purposes of requesting any relief from liability. 2011 tax return turbotax      File Form 8857, Request for Innocent Spouse Relief, to ask the IRS for relief. 2011 tax return turbotax You must file an additional Form 8857 if you are requesting relief for more than three years. 2011 tax return turbotax If you are requesting innocent spouse relief or separation of liability relief, file Form 8857 no later than two years after the date on which the IRS first began collection activities against you after July 22, 1998. 2011 tax return turbotax If you are requesting equitable relief, see Exception for equitable relief. 2011 tax return turbotax under How To Request Relief, earlier, for when to file Form 8857. 2011 tax return turbotax If you are requesting relief from liability arising from community property law, see How and When To Request Relief under Community Property Laws, earlier, for when to file Form 8857. 2011 tax return turbotax Use the address or fax number shown in the Instructions for Form 8857. 2011 tax return turbotax File Form 8857 at the address or send it to the fax number shown in the Instructions for Form 8857. 2011 tax return turbotax Do not file it with the employee assigned to examine your return. 2011 tax return turbotax Generally, the IRS has 10 years to collect an amount you owe. 2011 tax return turbotax This is the collection statute of limitations. 2011 tax return turbotax By law, the IRS is not allowed to collect from you after the 10-year period ends. 2011 tax return turbotax If you request relief for any tax year, the IRS cannot collect from you for that year while your request is pending. 2011 tax return turbotax But interest and penalties continue to accrue. 2011 tax return turbotax Your request is generally considered pending from the date the IRS receives your Form 8857 until the date your request is resolved. 2011 tax return turbotax This includes the time the Tax Court is considering your request. 2011 tax return turbotax After your case is resolved, the IRS can begin or resume collecting from you. 2011 tax return turbotax The 10-year period will be increased by the amount of time your request for relief was pending plus 60 days. 2011 tax return turbotax See Publication 594 for more information. 2011 tax return turbotax Injured spouse relief is different from innocent spouse relief. 2011 tax return turbotax When a joint return is filed and the refund is used to pay one spouse's past-due federal tax, state income tax, state unemployment compensation debts, child support, spousal support, or federal non-tax debt, such as a student loan, the other spouse may be considered an injured spouse. 2011 tax return turbotax The injured spouse can get back his or her share of the joint overpayment using Form 8379, Injured Spouse Allocation. 2011 tax return turbotax You are considered an injured spouse if: You are not legally obligated to pay the past-due amount, and You meet any of the following conditions: You made and reported tax payments (such as federal income tax withholding or estimated tax payments). 2011 tax return turbotax You had earned income (such as wages, salaries, or self-employment income) and claimed the earned income credit or the additional child tax credit. 2011 tax return turbotax You claimed a refundable tax credit, such as the health coverage tax credit or the refundable credit for prior year minimum tax. 2011 tax return turbotax Note. 2011 tax return turbotax If your residence was in a community property state at any time during the year, you may file Form 8379 even if only item (1) above applies. 2011 tax return turbotax . 2011 tax return turbotax Will I qualify for innocent spouse relief in any situation where there is an understated tax? No. 2011 tax return turbotax There are many situations in which you may owe tax that is related to your spouse (or former spouse), but not be eligible for innocent spouse relief. 2011 tax return turbotax For example, you and your spouse file a joint return on which you report $10,000 of income and deductions, but you knew that your spouse was not reporting $5,000 of dividends. 2011 tax return turbotax You are not eligible for innocent spouse relief because you have knowledge of the understated tax. 2011 tax return turbotax Under this type of relief, you allocate (separate) the understated tax (plus interest and penalties) on your joint return between you and your spouse (or former spouse). 2011 tax return turbotax The understated tax allocated to you is generally the amount you are responsible for. 2011 tax return turbotax To qualify for separation of liability relief, you must have filed a joint return and meet either of the following requirements at the time you file Form 8857. 2011 tax return turbotax You are no longer married to, or are legally separated from, the spouse with whom you filed the joint return for which you are requesting relief. 2011 tax return turbotax (Under this rule, you are no longer married if you are widowed. 2011 tax return turbotax ) You were not a member of the same household as the spouse with whom you filed the joint return at any time during the 12-month period ending on the date you file Form 8857. 2011 tax return turbotax In addition to the above requirements, you must file a Form 8857 within 2 years after the date on which the IRS first began collection activity against you after July 22, 1998. 2011 tax return turbotax Even if you meet the requirements listed earlier, a request for separation of liability relief will not be granted in the following situations. 2011 tax return turbotax The IRS proves that you and your spouse (or former spouse) transferred assets to one another as part of a fraudulent scheme. 2011 tax return turbotax The IRS proves that at the time you signed your joint return, you had actual knowledge of any erroneous items giving rise to the deficiency that are allocable to your spouse (or former spouse). 2011 tax return turbotax Your spouse (or former spouse) transferred property to you to avoid tax or the payment of tax. 2011 tax return turbotax Equitable relief is only available if you meet all of the following conditions. 2011 tax return turbotax You do not qualify for innocent spouse relief, separation of liability relief, or relief from liability arising from community property law. 2011 tax return turbotax You have an understated tax or underpaid tax. 2011 tax return turbotax See Note later. 2011 tax return turbotax You did not pay the tax. 2011 tax return turbotax However, see Refunds , earlier, for exceptions. 2011 tax return turbotax The IRS determines that it is unfair to hold you liable for the understated or underpaid tax taking into account all the facts and circumstances. 2011 tax return turbotax You and your spouse (or former spouse) did not transfer assets to one another as a part of a fraudulent scheme. 2011 tax return turbotax Your spouse (or former spouse) did not transfer property to you for the main purpose of avoiding tax or the payment of tax. 2011 tax return turbotax You did not file or fail to file your return with the intent to commit fraud. 2011 tax return turbotax The income tax liability for which you seek relief is attributable to your spouse (or former spouse) with whom you filed the joint return. 2011 tax return turbotax For exceptions to this condition, see item (8) under Conditions for Getting Equitable Relief , earlier. 2011 tax return turbotax You timely file Form 8857 as explained earlier in Exception for equitable relief under How To Request Relief. 2011 tax return turbotax Note. 2011 tax return turbotax Unlike innocent spouse relief or separation of liability relief, if you qualify for equitable relief, you can also get relief from an underpaid tax. 2011 tax return turbotax (An underpaid tax is tax that is properly shown on the return, but has not been paid. 2011 tax return turbotax ) Community property states are Arizona, California, Idaho, Louisiana, Nevada, New Mexico, Texas, Washington, and Wisconsin. 2011 tax return turbotax Generally, community property laws require you to allocate community income and expenses equally between both spouses. 2011 tax return turbotax However, community property laws are not taken into account in determining whether an item belongs to you or to your spouse (or former spouse) for purposes of requesting any relief from liability. 2011 tax return turbotax      File Form 8857, Request for Innocent Spouse Relief, to ask the IRS for relief. 2011 tax return turbotax You must file an additional Form 8857 if you are requesting relief for more than three years. 2011 tax return turbotax If you are requesting innocent spouse relief or separation of liability relief, file Form 8857 no later than two years after the date on which the IRS first began collection activities against you after July 22, 1998. 2011 tax return turbotax If you are requesting equitable relief, see Exception for equitable relief. 2011 tax return turbotax under How To Request Relief, earlier, for when to file Form 8857. 2011 tax return turbotax If you are requesting relief from liability arising from community property law, see How and When To Request Relief under Community Property Laws, earlier, for when to file Form 8857. 2011 tax return turbotax Use the address or fax number shown in the Instructions for Form 8857. 2011 tax return turbotax File Form 8857 at the address or send it to the fax number shown in the Instructions for Form 8857. 2011 tax return turbotax Do not file it with the employee assigned to examine your return. 2011 tax return turbotax Generally, the IRS has 10 years to collect an amount you owe. 2011 tax return turbotax This is the collection statute of limitations. 2011 tax return turbotax By law, the IRS is not allowed to collect from you after the 10-year period ends. 2011 tax return turbotax If you request relief for any tax year, the IRS cannot collect from you for that year while your request is pending. 2011 tax return turbotax But interest and penalties continue to accrue. 2011 tax return turbotax Your request is generally considered pending from the date the IRS receives your Form 8857 until the date your request is resolved. 2011 tax return turbotax This includes the time the Tax Court is considering your request. 2011 tax return turbotax After your case is resolved, the IRS can begin or resume collecting from you. 2011 tax return turbotax The 10-year period will be increased by the amount of time your request for relief was pending plus 60 days. 2011 tax return turbotax See Publication 594 for more information. 2011 tax return turbotax Injured spouse relief is different from innocent spouse relief. 2011 tax return turbotax When a joint return is filed and the refund is used to pay one spouse's past-due federal tax, state income tax, state unemployment compensation debts, child support, spousal support, or federal non-tax debt, such as a student loan, the other spouse may be considered an injured spouse. 2011 tax return turbotax The injured spouse can get back his or her share of the joint overpayment using Form 8379, Injured Spouse Allocation. 2011 tax return turbotax You are considered an injured spouse if: You are not legally obligated to pay the past-due amount, and You meet any of the following conditions: You made and reported tax payments (such as federal income tax withholding or estimated tax payments). 2011 tax return turbotax You had earned income (such as wages, salaries, or self-employment income) and claimed the earned income credit or the additional child tax credit. 2011 tax return turbotax You claimed a refundable tax credit, such as the health coverage tax credit or the refundable credit for prior year minimum tax. 2011 tax return turbotax Note. 2011 tax return turbotax If your residence was in a community property state at any time during the year, you may file Form 8379 even if only item (1) above applies. 2011 tax return turbotax . 2011 tax return turbotax What are the rules for separation of liability relief? Under this type of relief, you allocate (separate) the understated tax (plus interest and penalties) on your joint return between you and your spouse (or former spouse). 2011 tax return turbotax The understated tax allocated to you is generally the amount you are responsible for. 2011 tax return turbotax To qualify for separation of liability relief, you must have filed a joint return and meet either of the following requirements at the time you file Form 8857. 2011 tax return turbotax You are no longer married to, or are legally separated from, the spouse with whom you filed the joint return for which you are requesting relief. 2011 tax return turbotax (Under this rule, you are no longer married if you are widowed. 2011 tax return turbotax ) You were not a member of the same household as the spouse with whom you filed the joint return at any time during the 12-month period ending on the date you file Form 8857. 2011 tax return turbotax In addition to the above requirements, you must file a Form 8857 within 2 years after the date on which the IRS first began collection activity against you after July 22, 1998. 2011 tax return turbotax Even if you meet the requirements listed earlier, a request for separation of liability relief will not be granted in the following situations. 2011 tax return turbotax The IRS proves that you and your spouse (or former spouse) transferred assets to one another as part of a fraudulent scheme. 2011 tax return turbotax The IRS proves that at the time you signed your joint return, you had actual knowledge of any erroneous items giving rise to the deficiency that are allocable to your spouse (or former spouse). 2011 tax return turbotax Your spouse (or former spouse) transferred property to you to avoid tax or the payment of tax. 2011 tax return turbotax Equitable relief is only available if you meet all of the following conditions. 2011 tax return turbotax You do not qualify for innocent spouse relief, separation of liability relief, or relief from liability arising from community property law. 2011 tax return turbotax You have an understated tax or underpaid tax. 2011 tax return turbotax See Note later. 2011 tax return turbotax You did not pay the tax. 2011 tax return turbotax However, see Refunds , earlier, for exceptions. 2011 tax return turbotax The IRS determines that it is unfair to hold you liable for the understated or underpaid tax taking into account all the facts and circumstances. 2011 tax return turbotax You and your spouse (or former spouse) did not transfer assets to one another as a part of a fraudulent scheme. 2011 tax return turbotax Your spouse (or former spouse) did not transfer property to you for the main purpose of avoiding tax or the payment of tax. 2011 tax return turbotax You did not file or fail to file your return with the intent to commit fraud. 2011 tax return turbotax The income tax liability for which you seek relief is attributable to your spouse (or former spouse) with whom you filed the joint return. 2011 tax return turbotax For exceptions to this condition, see item (8) under Conditions for Getting Equitable Relief , earlier. 2011 tax return turbotax You timely file Form 8857 as explained earlier in Exception for equitable relief under How To Request Relief. 2011 tax return turbotax Note. 2011 tax return turbotax Unlike innocent spouse relief or separation of liability relief, if you qualify for equitable relief, you can also get relief from an underpaid tax. 2011 tax return turbotax (An underpaid tax is tax that is properly shown on the return, but has not been paid. 2011 tax return turbotax ) Community property states are Arizona, California, Idaho, Louisiana, Nevada, New Mexico, Texas, Washington, and Wisconsin. 2011 tax return turbotax Generally, community property laws require you to allocate community income and expenses equally between both spouses. 2011 tax return turbotax However, community property laws are not taken into account in determining whether an item belongs to you or to your spouse (or former spouse) for purposes of requesting any relief from liability. 2011 tax return turbotax      File Form 8857, Request for Innocent Spouse Relief, to ask the IRS for relief. 2011 tax return turbotax You must file an additional Form 8857 if you are requesting relief for more than three years. 2011 tax return turbotax If you are requesting innocent spouse relief or separation of liability relief, file Form 8857 no later than two years after the date on which the IRS first began collection activities against you after July 22, 1998. 2011 tax return turbotax If you are requesting equitable relief, see Exception for equitable relief. 2011 tax return turbotax under How To Request Relief, earlier, for when to file Form 8857. 2011 tax return turbotax If you are requesting relief from liability arising from community property law, see How and When To Request Relief under Community Property Laws, earlier, for when to file Form 8857. 2011 tax return turbotax Use the address or fax number shown in the Instructions for Form 8857. 2011 tax return turbotax File Form 8857 at the address or send it to the fax number shown in the Instructions for Form 8857. 2011 tax return turbotax Do not file it with the employee assigned to examine your return. 2011 tax return turbotax Generally, the IRS has 10 years to collect an amount you owe. 2011 tax return turbotax This is the collection statute of limitations. 2011 tax return turbotax By law, the IRS is not allowed to collect from you after the 10-year period ends. 2011 tax return turbotax If you request relief for any tax year, the IRS cannot collect from you for that year while your request is pending. 2011 tax return turbotax But interest and penalties continue to accrue. 2011 tax return turbotax Your request is generally considered pending from the date the IRS receives your Form 8857 until the date your request is resolved. 2011 tax return turbotax This includes the time the Tax Court is considering your request. 2011 tax return turbotax After your case is resolved, the IRS can begin or resume collecting from you. 2011 tax return turbotax The 10-year period will be increased by the amount of time your request for relief was pending plus 60 days. 2011 tax return turbotax See Publication 594 for more information. 2011 tax return turbotax Injured spouse relief is different from innocent spouse relief. 2011 tax return turbotax When a joint return is filed and the refund is used to pay one spouse's past-due federal tax, state income tax, state unemployment compensation debts, child support, spousal support, or federal non-tax debt, such as a student loan, the other spouse may be considered an injured spouse. 2011 tax return turbotax The injured spouse can get back his or her share of the joint overpayment using Form 8379, Injured Spouse Allocation. 2011 tax return turbotax You are considered an injured spouse if: You are not legally obligated to pay the past-due amount, and You meet any of the following conditions: You made and reported tax payments (such as federal income tax withholding or estimated tax payments). 2011 tax return turbotax You had earned income (such as wages, salaries, or self-employment income) and claimed the earned income credit or the additional child tax credit. 2011 tax return turbotax You claimed a refundable tax credit, such as the health coverage tax credit or the refundable credit for prior year minimum tax. 2011 tax return turbotax Note. 2011 tax return turbotax If your residence was in a community property state at any time during the year, you may file Form 8379 even if only item (1) above applies. 2011 tax return turbotax . 2011 tax return turbotax Why would a request for separation of liability relief be denied? Even if you meet the requirements listed earlier, a request for separation of liability relief will not be granted in the following situations. 2011 tax return turbotax The IRS proves that you and your spouse (or former spouse) transferred assets to one another as part of a fraudulent scheme. 2011 tax return turbotax The IRS proves that at the time you signed your joint return, you had actual knowledge of any erroneous items giving rise to the deficiency that are allocable to your spouse (or former spouse). 2011 tax return turbotax Your spouse (or former spouse) transferred property to you to avoid tax or the payment of tax. 2011 tax return turbotax Equitable relief is only available if you meet all of the following conditions. 2011 tax return turbotax You do not qualify for innocent spouse relief, separation of liability relief, or relief from liability arising from community property law. 2011 tax return turbotax You have an understated tax or underpaid tax. 2011 tax return turbotax See Note later. 2011 tax return turbotax You did not pay the tax. 2011 tax return turbotax However, see Refunds , earlier, for exceptions. 2011 tax return turbotax The IRS determines that it is unfair to hold you liable for the understated or underpaid tax taking into account all the facts and circumstances. 2011 tax return turbotax You and your spouse (or former spouse) did not transfer assets to one another as a part of a fraudulent scheme. 2011 tax return turbotax Your spouse (or former spouse) did not transfer property to you for the main purpose of avoiding tax or the payment of tax. 2011 tax return turbotax You did not file or fail to file your return with the intent to commit fraud. 2011 tax return turbotax The income tax liability for which you seek relief is attributable to your spouse (or former spouse) with whom you filed the joint return. 2011 tax return turbotax For exceptions to this condition, see item (8) under Conditions for Getting Equitable Relief , earlier. 2011 tax return turbotax You timely file Form 8857 as explained earlier in Exception for equitable relief under How To Request Relief. 2011 tax return turbotax Note. 2011 tax return turbotax Unlike innocent spouse relief or separation of liability relief, if you qualify for equitable relief, you can also get relief from an underpaid tax. 2011 tax return turbotax (An underpaid tax is tax that is properly shown on the return, but has not been paid. 2011 tax return turbotax ) Community property states are Arizona, California, Idaho, Louisiana, Nevada, New Mexico, Texas, Washington, and Wisconsin. 2011 tax return turbotax Generally, community property laws require you to allocate community income and expenses equally between both spouses. 2011 tax return turbotax However, community property laws are not taken into account in determining whether an item belongs to you or to your spouse (or former spouse) for purposes of requesting any relief from liability. 2011 tax return turbotax      File Form 8857, Request for Innocent Spouse Relief, to ask the IRS for relief. 2011 tax return turbotax You must file an additional Form 8857 if you are requesting relief for more than three years. 2011 tax return turbotax If you are requesting innocent spouse relief or separation of liability relief, file Form 8857 no later than two years after the date on which the IRS first began collection activities against you after July 22, 1998. 2011 tax return turbotax If you are requesting equitable relief, see Exception for equitable relief. 2011 tax return turbotax under How To Request Relief, earlier, for when to file Form 8857. 2011 tax return turbotax If you are requesting relief from liability arising from community property law, see How and When To Request Relief under Community Property Laws, earlier, for when to file Form 8857. 2011 tax return turbotax Use the address or fax number shown in the Instructions for Form 8857. 2011 tax return turbotax File Form 8857 at the address or send it to the fax number shown in the Instructions for Form 8857. 2011 tax return turbotax Do not file it with the employee assigned to examine your return. 2011 tax return turbotax Generally, the IRS has 10 years to collect an amount you owe. 2011 tax return turbotax This is the collection statute of limitations. 2011 tax return turbotax By law, the IRS is not allowed to collect from you after the 10-year period ends. 2011 tax return turbotax If you request relief for any tax year, the IRS cannot collect from you for that year while your request is pending. 2011 tax return turbotax But interest and penalties continue to accrue. 2011 tax return turbotax Your request is generally considered pending from the date the IRS receives your Form 8857 until the date your request is resolved. 2011 tax return turbotax This includes the time the Tax Court is considering your request. 2011 tax return turbotax After your case is resolved, the IRS can begin or resume collecting from you. 2011 tax return turbotax The 10-year period will be increased by the amount of time your request for relief was pending plus 60 days. 2011 tax return turbotax See Publication 594 for more information. 2011 tax return turbotax Injured spouse relief is different from innocent spouse relief. 2011 tax return turbotax When a joint return is filed and the refund is used to pay one spouse's past-due federal tax, state income tax, state unemployment compensation debts, child support, spousal support, or federal non-tax debt, such as a student loan, the other spouse may be considered an injured spouse. 2011 tax return turbotax The injured spouse can get back his or her share of the joint overpayment using Form 8379, Injured Spouse Allocation. 2011 tax return turbotax You are considered an injured spouse if: You are not legally obligated to pay the past-due amount, and You meet any of the following conditions: You made and reported tax payments (such as federal income tax withholding or estimated tax payments). 2011 tax return turbotax You had earned income (such as wages, salaries, or self-employment income) and claimed the earned income credit or the additional child tax credit. 2011 tax return turbotax You claimed a refundable tax credit, such as the health coverage tax credit or the refundable credit for prior year minimum tax. 2011 tax return turbotax Note. 2011 tax return turbotax If your residence was in a community property state at any time during the year, you may file Form 8379 even if only item (1) above applies. 2011 tax return turbotax . 2011 tax return turbotax What are the rules for equitable relief? Equitable relief is only available if you meet all of the following conditions. 2011 tax return turbotax You do not qualify for innocent spouse relief, separation of liability relief, or relief from liability arising from community property law. 2011 tax return turbotax You have an understated tax or underpaid tax. 2011 tax return turbotax See Note later. 2011 tax return turbotax You did not pay the tax. 2011 tax return turbotax However, see Refunds , earlier, for exceptions. 2011 tax return turbotax The IRS determines that it is unfair to hold you liable for the understated or underpaid tax taking into account all the facts and circumstances. 2011 tax return turbotax You and your spouse (or former spouse) did not transfer assets to one another as a part of a fraudulent scheme. 2011 tax return turbotax Your spouse (or former spouse) did not transfer property to you for the main purpose of avoiding tax or the payment of tax. 2011 tax return turbotax You did not file or fail to file your return with the intent to commit fraud. 2011 tax return turbotax The income tax liability for which you seek relief is attributable to your spouse (or former spouse) with whom you filed the joint return. 2011 tax return turbotax For exceptions to this condition, see item (8) under Conditions for Getting Equitable Relief , earlier. 2011 tax return turbotax You timely file Form 8857 as explained earlier in Exception for equitable relief under How To Request Relief. 2011 tax return turbotax Note. 2011 tax return turbotax Unlike innocent spouse relief or separation of liability relief, if you qualify for equitable relief, you can also get relief from an underpaid tax. 2011 tax return turbotax (An underpaid tax is tax that is properly shown on the return, but has not been paid. 2011 tax return turbotax ) Community property states are Arizona, California, Idaho, Louisiana, Nevada, New Mexico, Texas, Washington, and Wisconsin. 2011 tax return turbotax Generally, community property laws require you to allocate community income and expenses equally between both spouses. 2011 tax return turbotax However, community property laws are not taken into account in determining whether an item belongs to you or to your spouse (or former spouse) for purposes of requesting any relief from liability. 2011 tax return turbotax      File Form 8857, Request for Innocent Spouse Relief, to ask the IRS for relief. 2011 tax return turbotax You must file an additional Form 8857 if you are requesting relief for more than three years. 2011 tax return turbotax If you are requesting innocent spouse relief or separation of liability relief, file Form 8857 no later than two years after the date on which the IRS first began collection activities against you after July 22, 1998. 2011 tax return turbotax If you are requesting equitable relief, see Exception for equitable relief. 2011 tax return turbotax under How To Request Relief, earlier, for when to file Form 8857. 2011 tax return turbotax If you are requesting relief from liability arising from community property law, see How and When To Request Relief under Community Property Laws, earlier, for when to file Form 8857. 2011 tax return turbotax Use the address or fax number shown in the Instructions for Form 8857. 2011 tax return turbotax File Form 8857 at the address or send it to the fax number shown in the Instructions for Form 8857. 2011 tax return turbotax Do not file it with the employee assigned to examine your return. 2011 tax return turbotax Generally, the IRS has 10 years to collect an amount you owe. 2011 tax return turbotax This is the collection statute of limitations. 2011 tax return turbotax By law, the IRS is not allowed to collect from you after the 10-year period ends. 2011 tax return turbotax If you request relief for any tax year, the IRS cannot collect from you for that year while your request is pending. 2011 tax return turbotax But interest and penalties continue to accrue. 2011 tax return turbotax Your request is generally considered pending from the date the IRS receives your Form 8857 until the date your request is resolved. 2011 tax return turbotax This includes the time the Tax Court is considering your request. 2011 tax return turbotax After your case is resolved, the IRS can begin or resume collecting from you. 2011 tax return turbotax The 10-year period will be increased by the amount of time your request for relief was pending plus 60 days. 2011 tax return turbotax See Publication 594 for more information. 2011 tax return turbotax Injured spouse relief is different from innocent spouse relief. 2011 tax return turbotax When a joint return is filed and the refund is used to pay one spouse's past-due federal tax, state income tax, state unemployment compensation debts, child support, spousal support, or federal non-tax debt, such as a student loan, the other spouse may be considered an injured spouse. 2011 tax return turbotax The injured spouse can get back his or her share of the joint overpayment using Form 8379, Injured Spouse Allocation. 2011 tax return turbotax You are considered an injured spouse if: You are not legally obligated to pay the past-due amount, and You meet any of the following conditions: You made and reported tax payments (such as federal income tax withholding or estimated tax payments). 2011 tax return turbotax You had earned income (such as wages, salaries, or self-employment income) and claimed the earned income credit or the additional child tax credit. 2011 tax return turbotax You claimed a refundable tax credit, such as the health coverage tax credit or the refundable credit for prior year minimum tax. 2011 tax return turbotax Note. 2011 tax return turbotax If your residence was in a community property state at any time during the year, you may file Form 8379 even if only item (1) above applies. 2011 tax return turbotax . 2011 tax return turbotax How do state community property laws affect my ability to qualify for relief? Community property states are Arizona, California, Idaho, Louisiana, Nevada, New Mexico, Texas, Washington, and Wisconsin. 2011 tax return turbotax Generally, community property laws require you to allocate community income and expenses equally between both spouses. 2011 tax return turbotax However, community property laws are not taken into account in determining whether an item belongs to you or to your spouse (or former spouse) for purposes of requesting any relief from liability. 2011 tax return turbotax      File Form 8857, Request for Innocent Spouse Relief, to ask the IRS for relief. 2011 tax return turbotax You must file an additional Form 8857 if you are requesting relief for more than three years. 2011 tax return turbotax If you are requesting innocent spouse relief or separation of liability relief, file Form 8857 no later than two years after the date on which the IRS first began collection activities against you after July 22, 1998. 2011 tax return turbotax If you are requesting equitable relief, see Exception for equitable relief. 2011 tax return turbotax under How To Request Relief, earlier, for when to file Form 8857. 2011 tax return turbotax If you are requesting relief from liability arising from community property law, see How and When To Request Relief under Community Property Laws, earlier, for when to file Form 8857. 2011 tax return turbotax Use the address or fax number shown in the Instructions for Form 8857. 2011 tax return turbotax File Form 8857 at the address or send it to the fax number shown in the Instructions for Form 8857. 2011 tax return turbotax Do not file it with the employee assigned to examine your return. 2011 tax return turbotax Generally, the IRS has 10 years to collect an amount you owe. 2011 tax return turbotax This is the collection statute of limitations. 2011 tax return turbotax By law, the IRS is not allowed to collect from you after the 10-year period ends. 2011 tax return turbotax If you request relief for any tax year, the IRS cannot collect from you for that year while your request is pending. 2011 tax return turbotax But interest and penalties continue to accrue. 2011 tax return turbotax Your request is generally considered pending from the date the IRS receives your Form 8857 until the date your request is resolved. 2011 tax return turbotax This includes the time the Tax Court is considering your request. 2011 tax return turbotax After your case is resolved, the IRS can begin or
 
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Page Last Reviewed or Updated: 11-Mar-2014

The 2011 Tax Return Turbotax

2011 tax return turbotax 5. 2011 tax return turbotax   Soil and Water Conservation Expenses Table of Contents Introduction Topics - This chapter discusses: Business of Farming Plan Certification Conservation ExpensesWater well. 2011 tax return turbotax Assessment by Conservation DistrictAssessment for Depreciable Property 25% Limit on DeductionNet operating loss. 2011 tax return turbotax When to Deduct or Capitalize Sale of a Farm Introduction If you are in the business of farming, you can choose to deduct certain expenses for: Soil or water conservation, Prevention of erosion of land used in farming, or Endangered species recovery. 2011 tax return turbotax Otherwise, these are capital expenses that must be added to the basis of the land. 2011 tax return turbotax (See chapter 6 for information on determining basis. 2011 tax return turbotax ) Conservation expenses for land in a foreign country do not qualify for this special treatment. 2011 tax return turbotax The deduction for conservation expenses cannot be more than 25% of your gross income from farming. 2011 tax return turbotax See 25% Limit on Deduction , later. 2011 tax return turbotax Although some expenses are not deductible as soil and water conservation expenses, they may be deductible as ordinary and necessary farm expenses. 2011 tax return turbotax These include interest and taxes, the cost of periodically clearing brush from productive land, the regular removal of sediment from a drainage ditch, and expenses paid or incurred primarily to produce an agricultural crop that may also conserve soil. 2011 tax return turbotax You must include in income most government payments for approved conservation practices. 2011 tax return turbotax However, you can exclude some payments you receive under certain cost-sharing conservation programs. 2011 tax return turbotax For more information, see Agricultural Program Payments in chapter 3. 2011 tax return turbotax To get the full deduction to which you are entitled, you should maintain your records to clearly distinguish between your ordinary and necessary farm business expenses and your soil and water conservation expenses. 2011 tax return turbotax Topics - This chapter discusses: Business of farming Plan certification Conservation expenses Assessment by conservation district 25% limit on deduction When to deduct or capitalize Sale of a farm Business of Farming For purposes of soil and water conservation expenses, you are in the business of farming if you cultivate, operate, or manage a farm for profit, either as an owner or a tenant. 2011 tax return turbotax You are not in the business of farming if you cultivate or operate a farm for recreation or pleasure, rather than for profit. 2011 tax return turbotax You are not farming if you are engaged only in forestry or the growing of timber. 2011 tax return turbotax Farm defined. 2011 tax return turbotax   A farm includes livestock, dairy, poultry, fish, fruit, and truck farms. 2011 tax return turbotax It also includes plantations, ranches, ranges, and orchards. 2011 tax return turbotax A fish farm is an area where fish and other marine animals are grown or raised and artificially fed, protected, etc. 2011 tax return turbotax It does not include an area where they are merely caught or harvested. 2011 tax return turbotax A plant nursery is a farm for purposes of deducting soil and water conservation expenses. 2011 tax return turbotax Farm rental. 2011 tax return turbotax   If you own a farm and receive farm rental payments based on farm production, either in cash or crop shares, you are in the business of farming. 2011 tax return turbotax If you get cash rental for a farm you own that is not used in farm production, you cannot deduct soil and water conservation expenses for that farm. 2011 tax return turbotax   If you receive a fixed rental payment that is not based on farm production, you are in the business of farming only if you materially participate in operating or managing the farm. 2011 tax return turbotax Example. 2011 tax return turbotax You own a farm in Iowa and live in California. 2011 tax return turbotax You rent the farm for $175 in cash per acre and do not materially participate in producing or managing production of the crops grown on the farm. 2011 tax return turbotax You cannot deduct your soil conservation expenses for this farm. 2011 tax return turbotax You must capitalize the expenses and add them to the basis of the land. 2011 tax return turbotax     For more information, see Material participation for landlords under Landlord Participation in Farming in chapter 12. 2011 tax return turbotax Plan Certification You can deduct soil and water conservation expenses only if they are consistent with a plan approved by the Natural Resources Conservation Service (NRCS) of the Department of Agriculture. 2011 tax return turbotax If no such plan exists, the expenses must be consistent with a soil conservation plan of a comparable state agency. 2011 tax return turbotax Keep a copy of the plan with your books and records to support your deductions. 2011 tax return turbotax Conservation plan. 2011 tax return turbotax   A conservation plan includes the farming conservation practices approved for the area where your farmland is located. 2011 tax return turbotax There are three types of approved plans. 2011 tax return turbotax NRCS individual site plans. 2011 tax return turbotax These plans are issued individually to farmers who request assistance from NRCS to develop a conservation plan designed specifically for their farmland. 2011 tax return turbotax NRCS county plans. 2011 tax return turbotax These plans include a listing of farm conservation practices approved for the county where the farmland is located. 2011 tax return turbotax You can deduct expenses for conservation practices not included on the NRCS county plans only if the practice is a part of an individual site plan. 2011 tax return turbotax Comparable state agency plans. 2011 tax return turbotax These plans are approved by state agencies and can be approved individual site plans or county plans. 2011 tax return turbotax   A list of NRCS conservation programs is available at www. 2011 tax return turbotax nrcs. 2011 tax return turbotax usda. 2011 tax return turbotax gov/programs. 2011 tax return turbotax Individual site plans can be obtained from NRCS offices and the comparable state agencies. 2011 tax return turbotax Conservation Expenses You can deduct conservation expenses only for land you or your tenant are using, or have used in the past, for farming. 2011 tax return turbotax These expenses include, but are not limited to, the following. 2011 tax return turbotax The treatment or movement of earth, such as: Leveling, Conditioning, Grading, Terracing, Contour furrowing, and Restoration of soil fertility. 2011 tax return turbotax The construction, control, and protection of: Diversion channels, Drainage ditches, Irrigation ditches, Earthen dams, and Watercourses, outlets, and ponds. 2011 tax return turbotax The eradication of brush. 2011 tax return turbotax The planting of windbreaks. 2011 tax return turbotax You cannot deduct expenses to drain or fill wetlands, or to prepare land for center pivot irrigation systems, as soil and water conservation expenses. 2011 tax return turbotax These expenses are added to the basis of the land. 2011 tax return turbotax If you choose to deduct soil and water conservation expenses, you cannot exclude from gross income any cost-sharing payments you receive for those expenses. 2011 tax return turbotax See chapter 3 for information about payments eligible for the cost-sharing exclusion. 2011 tax return turbotax New farm or farmland. 2011 tax return turbotax   If you acquire a new farm or new farmland from someone who was using it in farming immediately before you acquired the land, soil and water conservation expenses you incur on it will be treated as made on land used in farming at the time the expenses were paid or incurred. 2011 tax return turbotax You can deduct soil and water conservation expenses for this land if your use of it is substantially a continuation of its use in farming. 2011 tax return turbotax The new farming activity does not have to be the same as the old farming activity. 2011 tax return turbotax For example, if you buy land that was used for grazing cattle and then prepare it for use as an apple orchard, you can deduct your conservation expenses. 2011 tax return turbotax Land not used for farming. 2011 tax return turbotax   If your conservation expenses benefit both land that does not qualify as land used for farming and land that does qualify, you must allocate the expenses between the two types of land. 2011 tax return turbotax For example, if the expenses benefit 200 acres of your land, but only 120 acres of this land are used for farming, then you can deduct 60% (120 ÷ 200) of the expenses. 2011 tax return turbotax You can use another method to allocate these expenses if you can clearly show that your method is more reasonable. 2011 tax return turbotax Depreciable conservation assets. 2011 tax return turbotax   You generally cannot deduct your expenses for depreciable conservation assets. 2011 tax return turbotax However, you can deduct certain amounts you pay or incur for an assessment for depreciable property that a soil and water conservation or drainage district levies against your farm. 2011 tax return turbotax See Assessment for Depreciable Property , later. 2011 tax return turbotax   You must capitalize expenses to buy, build, install, or improve depreciable structures or facilities. 2011 tax return turbotax These expenses include those for materials, supplies, wages, fuel, hauling, and moving dirt when making structures such as tanks, reservoirs, pipes, culverts, canals, dams, wells, or pumps composed of masonry, concrete, tile, metal, or wood. 2011 tax return turbotax You recover your capital investment through annual allowances for depreciation. 2011 tax return turbotax   You can deduct soil and water conservation expenses for nondepreciable earthen items. 2011 tax return turbotax Nondepreciable earthen items include certain dams, ponds, and terraces described under Property Having a Determinable Useful Life in chapter 7. 2011 tax return turbotax Water well. 2011 tax return turbotax   You cannot deduct the cost of drilling a water well for irrigation and other agricultural purposes as a soil and water conservation expense. 2011 tax return turbotax It is a capital expense. 2011 tax return turbotax You recover your cost through depreciation. 2011 tax return turbotax You also must capitalize your cost for drilling a test hole. 2011 tax return turbotax If the test hole produces no water and you continue drilling, the cost of the test hole is added to the cost of the producing well. 2011 tax return turbotax You can recover the total cost through depreciation deductions. 2011 tax return turbotax   If a test hole, dry hole, or dried-up well (resulting from prolonged lack of rain, for instance) is abandoned, you can deduct your unrecovered cost in the year of abandonment. 2011 tax return turbotax Abandonment means that all economic benefits from the well are terminated. 2011 tax return turbotax For example, filling or sealing a well excavation or casing so that all economic benefits from the well are terminated constitutes an abandonment. 2011 tax return turbotax Endangered species recovery expenses. 2011 tax return turbotax   If you are in the business of farming and meet other specific requirements, you can choose to deduct the conservation expenses discussed earlier as endangered species recovery expenses. 2011 tax return turbotax Otherwise, these are capital expenses that must be added to the basis of the land. 2011 tax return turbotax   The expenses must be paid or incurred for the purpose of achieving site-specific management actions recommended in a recovery plan approved under section 4(f) of the Endangered Species Act of 1973. 2011 tax return turbotax See Internal Revenue Code section 175 for more information. 2011 tax return turbotax Assessment by Conservation District In some localities, a soil or water conservation or drainage district incurs expenses for soil or water conservation and levies an assessment against the farmers who benefit from the expenses. 2011 tax return turbotax You can deduct as a conservation expense amounts you pay or incur for the part of an assessment that: Covers expenses you could deduct if you had paid them directly, or Covers expenses for depreciable property used in the district's business. 2011 tax return turbotax Assessment for Depreciable Property You generally can deduct as a conservation expense amounts you pay or incur for the part of a conservation or drainage district assessment that covers expenses for depreciable property. 2011 tax return turbotax This includes items such as pumps, locks, concrete structures (including dams and weir gates), draglines, and similar equipment. 2011 tax return turbotax The depreciable property must be used in the district's soil and water conservation activities. 2011 tax return turbotax However, the following limits apply to these assessments. 2011 tax return turbotax The total assessment limit. 2011 tax return turbotax The yearly assessment limit. 2011 tax return turbotax After you apply these limits, the amount you can deduct is added to your other conservation expenses for the year. 2011 tax return turbotax The total for these expenses is then subject to the 25% of gross income from farming limit on the deduction, discussed later. 2011 tax return turbotax See Table 5-1 for a brief summary of these limits. 2011 tax return turbotax Table 5-1. 2011 tax return turbotax Limits on Deducting an Assessment by a Conservation District for Depreciable Property Total Limit on Deduction for Assessment for Depreciable Property Yearly Limit on Deduction for Assessment for Depreciable Property Yearly Limit for All Conservation Expenses 10% of: $500 + 10% of: 25% of: Total assessment against all members of the district for the property. 2011 tax return turbotax Your deductible share of the cost to the district for the property. 2011 tax return turbotax Your gross income from farming. 2011 tax return turbotax No one taxpayer can deduct more than 10% of the total assessment. 2011 tax return turbotax Any amount over 10% is a capital expense and is added to the basis of your land. 2011 tax return turbotax If an assessment is paid in installments, each payment must be prorated between the conservation expense and the capital expense. 2011 tax return turbotax If the amount you pay or incur for any year is more than the limit, you can deduct for that year only 10% of your deductible share of the cost. 2011 tax return turbotax You can deduct the remainder in equal amounts over the next 9 tax years. 2011 tax return turbotax Limit for all conservation expenses, including assessments for depreciable property. 2011 tax return turbotax Amounts greater than 25% can be carried to the following year and added to that year's expenses. 2011 tax return turbotax The total is then subject to the 25% of gross income from farming limit in that year. 2011 tax return turbotax To ensure your deduction is within the deduction limits, keep records to show the following. 2011 tax return turbotax The total assessment against all members of the district for the depreciable property. 2011 tax return turbotax Your deductible share of the cost to the district for the depreciable property. 2011 tax return turbotax Your gross income from farming. 2011 tax return turbotax Total assessment limit. 2011 tax return turbotax   You cannot deduct more than 10% of the total amount assessed to all members of the conservation or drainage district for the depreciable property. 2011 tax return turbotax This applies whether you pay the assessment in one payment or in installments. 2011 tax return turbotax If your assessment is more than 10% of the total amount assessed, both the following rules apply. 2011 tax return turbotax The amount over 10% is a capital expense and is added to the basis of your land. 2011 tax return turbotax If the assessment is paid in installments, each payment must be prorated between the conservation expense and the capital expense. 2011 tax return turbotax Yearly assessment limit. 2011 tax return turbotax   The maximum amount you can deduct in any one year is the total of 10% of your deductible share of the cost as explained earlier, plus $500. 2011 tax return turbotax If the amount you pay or incur is equal to or less than the maximum amount, you can deduct it in the year it is paid or incurred. 2011 tax return turbotax If the amount you pay or incur is more, you can deduct in that year only 10% of your deductible share of the cost. 2011 tax return turbotax You can deduct the remainder in equal amounts over the next 9 tax years. 2011 tax return turbotax Your total conservation expense deduction for each year is also subject to the 25% of gross income from farming limit on the deduction, discussed later. 2011 tax return turbotax Example 1. 2011 tax return turbotax This year, the soil conservation district levies and you pay an assessment of $2,400 against your farm. 2011 tax return turbotax Of the assessment, $1,500 is for digging drainage ditches. 2011 tax return turbotax You can deduct this part as a soil or conservation expense as if you had paid it directly. 2011 tax return turbotax The remaining $900 is for depreciable equipment to be used in the district's irrigation activities. 2011 tax return turbotax The total amount assessed by the district against all its members for the depreciable equipment is $7,000. 2011 tax return turbotax The total amount you can deduct for the depreciable equipment is limited to 10% of the total amount assessed by the district against all its members for depreciable equipment, or $700. 2011 tax return turbotax The $200 excess ($900 − $700) is a capital expense you must add to the basis of your farm. 2011 tax return turbotax To figure the maximum amount you can deduct for the depreciable equipment this year, multiply your deductible share of the total assessment ($700) by 10%. 2011 tax return turbotax Add $500 to the result for a total of $570. 2011 tax return turbotax Your deductible share, $700, is greater than the maximum amount deductible in one year, so you can deduct only $70 of the amount you paid or incurred for depreciable property this year (10% of $700). 2011 tax return turbotax You can deduct the balance at the rate of $70 a year over the next 9 years. 2011 tax return turbotax You add $70 to the $1,500 portion of the assessment for drainage ditches. 2011 tax return turbotax You can deduct $1,570 of the $2,400 assessment as a soil and water conservation expense this year, subject to the 25% of gross income from farming limit on the deduction, discussed later. 2011 tax return turbotax Example 2. 2011 tax return turbotax Assume the same facts in Example 1 except that $1,850 of the $2,400 assessment is for digging drainage ditches and $550 is for depreciable equipment. 2011 tax return turbotax The total amount assessed by the district against all its members for depreciable equipment is $5,500. 2011 tax return turbotax The total amount you can deduct for the depreciable equipment is limited to 10% of this amount, or $550. 2011 tax return turbotax The maximum amount you can deduct this year for the depreciable equipment is $555 (10% of your deductible share of the total assessment, $55, plus $500). 2011 tax return turbotax Since your deductible share is less than the maximum amount deductible in one year, you can deduct the entire $550 this year. 2011 tax return turbotax You can deduct the entire assessment, $2,400, as a soil and water conservation expense this year, subject to the 25% of gross income from farming limit on the deduction, discussed below. 2011 tax return turbotax Sale or other disposal of land during 9-year period. 2011 tax return turbotax   If you dispose of the land during the 9-year period for deducting conservation expenses subject to the yearly limit, any amounts you have not yet deducted because of this limit are added to the basis of the property. 2011 tax return turbotax Death of farmer during 9-year period. 2011 tax return turbotax   If a farmer dies during the 9-year period, any remaining amounts not yet deducted are deducted in the year of death. 2011 tax return turbotax 25% Limit on Deduction The total deduction for conservation expenses in any tax year is limited to 25% of your gross income from farming for the year. 2011 tax return turbotax Gross income from farming. 2011 tax return turbotax   Gross income from farming is the income you derive in the business of farming from the production of crops, fish, fruits, other agricultural products, or livestock. 2011 tax return turbotax Gains from sales of draft, breeding, or dairy livestock are included. 2011 tax return turbotax Gains from sales of assets such as farm machinery, or from the disposition of land, are not included. 2011 tax return turbotax Carryover of deduction. 2011 tax return turbotax   If your deductible conservation expenses in any year are more than 25% of your gross income from farming for that year, you can carry the unused deduction over to later years. 2011 tax return turbotax However, the deduction in any later year is limited to 25% of the gross income from farming for that year as well. 2011 tax return turbotax Example. 2011 tax return turbotax In 2012, you have gross income of $32,000 from two farms. 2011 tax return turbotax During the year, you incurred $10,000 of deductible soil and water conservation expenses for one of the farms. 2011 tax return turbotax However, your deduction is limited to 25% of $32,000, or $8,000. 2011 tax return turbotax The $2,000 excess ($10,000 − $8,000) is carried over to 2013 and added to deductible soil and water conservation expenses made in that year. 2011 tax return turbotax The total of the 2012 carryover plus 2013 expenses is deductible in 2013, subject to the limit of 25% of your gross income from farming in 2013. 2011 tax return turbotax Any expenses over the limit in that year are carried to 2014 and later years. 2011 tax return turbotax Net operating loss. 2011 tax return turbotax   The deduction for soil and water conservation expenses, after applying the 25% limit, is included when figuring a net operating loss (NOL) for the year. 2011 tax return turbotax If the NOL is carried to another year, the soil and water conservation deduction included in the NOL is not subject to the 25% limit in the year to which it is carried. 2011 tax return turbotax When to Deduct or Capitalize If you choose to deduct soil and water conservation expenses, you must deduct the total allowable amount on your tax return for the first year you pay or incur these expenses. 2011 tax return turbotax If you do not choose to deduct the expenses, you must capitalize them. 2011 tax return turbotax Change of method. 2011 tax return turbotax   If you want to change your method for the treatment of soil and water conservation expenses, or you want to treat the expenses for a particular project or a single farm in a different manner, you must get the approval of the IRS. 2011 tax return turbotax To get this approval, submit a written request by the due date of your return for the first tax year you want the new method to apply. 2011 tax return turbotax You or your authorized representative must sign the request. 2011 tax return turbotax   The request must include the following information. 2011 tax return turbotax Your name and address. 2011 tax return turbotax The first tax year the method or change of method is to apply. 2011 tax return turbotax Whether the method or change of method applies to all your soil and water conservation expenses or only to those for a particular project or farm. 2011 tax return turbotax If the method or change of method does not apply to all your expenses, identify the project or farm to which the expenses apply. 2011 tax return turbotax The total expenses you paid or incurred in the first tax year the method or change of method is to apply. 2011 tax return turbotax A statement that you will account separately in your books for the expenses to which this method or change of method relates. 2011 tax return turbotax Send your request to the following  address. 2011 tax return turbotax  Department of the Treasury Internal Revenue Service Center Cincinnati, OH 45999  For more information, see Change in  Accounting Method in chapter 2. 2011 tax return turbotax Sale of a Farm If you sell your farm, you cannot adjust the basis of the land at the time of the sale for any unused carryover of soil and water conservation expenses (except for deductions of assessments for depreciable property, discussed earlier). 2011 tax return turbotax However, if you acquire another farm and return to the business of farming, you can start taking deductions again for the unused carryovers. 2011 tax return turbotax Gain on sale of farmland. 2011 tax return turbotax   If you held the land 5 years or less before you sold it, gain on the sale of the land is treated as ordinary income up to the amount you previously deducted for soil and water conservation expenses. 2011 tax return turbotax If you held the land less than 10 but more than 5 years, the gain is treated as ordinary income up to a specified percentage of the previous deductions. 2011 tax return turbotax See Section 1252 property under Other Gains in chapter 9. 2011 tax return turbotax Prev  Up  Next   Home   More Online Publications