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2012 Amended Tax Return Form

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2012 Amended Tax Return Form

2012 amended tax return form 1. 2012 amended tax return form   Overview of Depreciation Table of Contents Introduction Useful Items - You may want to see: What Property Can Be Depreciated?Property You Own Property Used in Your Business or Income-Producing Activity Property Having a Determinable Useful Life Property Lasting More Than One Year What Property Cannot Be Depreciated?Land Excepted Property When Does Depreciation Begin and End?Placed in Service Idle Property Cost or Other Basis Fully Recovered Retired From Service What Method Can You Use To Depreciate Your Property?Property You Placed in Service Before 1987 Property Owned or Used in 1986 Intangible Property Corporate or Partnership Property Acquired in a Nontaxable Transfer Election To Exclude Property From MACRS What Is the Basis of Your Depreciable Property?Cost as Basis Other Basis Adjusted Basis How Do You Treat Repairs and Improvements? Do You Have To File Form 4562? How Do You Correct Depreciation Deductions?Filing an Amended Return Changing Your Accounting Method Introduction Depreciation is an annual income tax deduction that allows you to recover the cost or other basis of certain property over the time you use the property. 2012 amended tax return form It is an allowance for the wear and tear, deterioration, or obsolescence of the property. 2012 amended tax return form This chapter discusses the general rules for depreciating property and answers the following questions. 2012 amended tax return form What property can be depreciated? What property cannot be depreciated? When does depreciation begin and end? What method can you use to depreciate your property? What is the basis of your depreciable property? How do you treat repairs and improvements? Do you have to file Form 4562? How do you correct depreciation deductions? Useful Items - You may want to see: Publication 534 Depreciating Property Placed in Service Before 1987 535 Business Expenses 538 Accounting Periods and Methods 551 Basis of Assets Form (and Instructions) Sch C (Form 1040) Profit or Loss From Business Sch C-EZ (Form 1040) Net Profit From Business 2106 Employee Business Expenses 2106-EZ Unreimbursed Employee Business Expenses 3115 Application for Change in Accounting Method 4562 Depreciation and Amortization See chapter 6 for information about getting publications and forms. 2012 amended tax return form What Property Can Be Depreciated? You can depreciate most types of tangible property (except land), such as buildings, machinery, vehicles, furniture, and equipment. 2012 amended tax return form You also can depreciate certain intangible property, such as patents, copyrights, and computer software. 2012 amended tax return form To be depreciable, the property must meet all the following requirements. 2012 amended tax return form It must be property you own. 2012 amended tax return form It must be used in your business or income-producing activity. 2012 amended tax return form It must have a determinable useful life. 2012 amended tax return form It must be expected to last more than one year. 2012 amended tax return form The following discussions provide information about these requirements. 2012 amended tax return form Property You Own To claim depreciation, you usually must be the owner of the property. 2012 amended tax return form You are considered as owning property even if it is subject to a debt. 2012 amended tax return form Example 1. 2012 amended tax return form You made a down payment to purchase rental property and assumed the previous owner's mortgage. 2012 amended tax return form You own the property and you can depreciate it. 2012 amended tax return form Example 2. 2012 amended tax return form You bought a new van that you will use only for your courier business. 2012 amended tax return form You will be making payments on the van over the next 5 years. 2012 amended tax return form You own the van and you can depreciate it. 2012 amended tax return form Leased property. 2012 amended tax return form   You can depreciate leased property only if you retain the incidents of ownership in the property (explained below). 2012 amended tax return form This means you bear the burden of exhaustion of the capital investment in the property. 2012 amended tax return form Therefore, if you lease property from someone to use in your trade or business or for the production of income, you generally cannot depreciate its cost because you do not retain the incidents of ownership. 2012 amended tax return form You can, however, depreciate any capital improvements you make to the property. 2012 amended tax return form See How Do You Treat Repairs and Improvements later in this chapter and Additions and Improvements under Which Recovery Period Applies in chapter 4. 2012 amended tax return form   If you lease property to someone, you generally can depreciate its cost even if the lessee (the person leasing from you) has agreed to preserve, replace, renew, and maintain the property. 2012 amended tax return form However, if the lease provides that the lessee is to maintain the property and return to you the same property or its equivalent in value at the expiration of the lease in as good condition and value as when leased, you cannot depreciate the cost of the property. 2012 amended tax return form Incidents of ownership. 2012 amended tax return form   Incidents of ownership in property include the following. 2012 amended tax return form The legal title to the property. 2012 amended tax return form The legal obligation to pay for the property. 2012 amended tax return form The responsibility to pay maintenance and operating expenses. 2012 amended tax return form The duty to pay any taxes on the property. 2012 amended tax return form The risk of loss if the property is destroyed, condemned, or diminished in value through obsolescence or exhaustion. 2012 amended tax return form Life tenant. 2012 amended tax return form   Generally, if you hold business or investment property as a life tenant, you can depreciate it as if you were the absolute owner of the property. 2012 amended tax return form However, see Certain term interests in property under Excepted Property, later. 2012 amended tax return form Cooperative apartments. 2012 amended tax return form   If you are a tenant-stockholder in a cooperative housing corporation and use your cooperative apartment in your business or for the production of income, you can depreciate your stock in the corporation, even though the corporation owns the apartment. 2012 amended tax return form   Figure your depreciation deduction as follows. 2012 amended tax return form Figure the depreciation for all the depreciable real property owned by the corporation in which you have a proprietary lease or right of tenancy. 2012 amended tax return form If you bought your cooperative stock after its first offering, figure the depreciable basis of this property as follows. 2012 amended tax return form Multiply your cost per share by the total number of outstanding shares, including any shares held by the corporation. 2012 amended tax return form Add to the amount figured in (a) any mortgage debt on the property on the date you bought the stock. 2012 amended tax return form Subtract from the amount figured in (b) any mortgage debt that is not for the depreciable real property, such as the part for the land. 2012 amended tax return form Subtract from the amount figured in (1) any depreciation for space owned by the corporation that can be rented but cannot be lived in by tenant-stockholders. 2012 amended tax return form Divide the number of your shares of stock by the total number of outstanding shares, including any shares held by the corporation. 2012 amended tax return form Multiply the result of (2) by the percentage you figured in (3). 2012 amended tax return form This is your depreciation on the stock. 2012 amended tax return form   Your depreciation deduction for the year cannot be more than the part of your adjusted basis in the stock of the corporation that is allocable to your business or income-producing property. 2012 amended tax return form You must also reduce your depreciation deduction if only a portion of the property is used in a business or for the production of income. 2012 amended tax return form Example. 2012 amended tax return form You figure your share of the cooperative housing corporation's depreciation to be $30,000. 2012 amended tax return form Your adjusted basis in the stock of the corporation is $50,000. 2012 amended tax return form You use one half of your apartment solely for business purposes. 2012 amended tax return form Your depreciation deduction for the stock for the year cannot be more than $25,000 (½ of $50,000). 2012 amended tax return form Change to business use. 2012 amended tax return form   If you change your cooperative apartment to business use, figure your allowable depreciation as explained earlier. 2012 amended tax return form The basis of all the depreciable real property owned by the cooperative housing corporation is the smaller of the following amounts. 2012 amended tax return form The fair market value of the property on the date you change your apartment to business use. 2012 amended tax return form This is considered to be the same as the corporation's adjusted basis minus straight line depreciation, unless this value is unrealistic. 2012 amended tax return form The corporation's adjusted basis in the property on that date. 2012 amended tax return form Do not subtract depreciation when figuring the corporation's adjusted basis. 2012 amended tax return form   If you bought the stock after its first offering, the corporation's adjusted basis in the property is the amount figured in (1), above. 2012 amended tax return form The fair market value of the property is considered to be the same as the corporation's adjusted basis figured in this way minus straight line depreciation, unless the value is unrealistic. 2012 amended tax return form   For a discussion of fair market value and adjusted basis, see Publication 551. 2012 amended tax return form Property Used in Your Business or Income-Producing Activity To claim depreciation on property, you must use it in your business or income-producing activity. 2012 amended tax return form If you use property to produce income (investment use), the income must be taxable. 2012 amended tax return form You cannot depreciate property that you use solely for personal activities. 2012 amended tax return form Partial business or investment use. 2012 amended tax return form   If you use property for business or investment purposes and for personal purposes, you can deduct depreciation based only on the business or investment use. 2012 amended tax return form For example, you cannot deduct depreciation on a car used only for commuting, personal shopping trips, family vacations, driving children to and from school, or similar activities. 2012 amended tax return form    You must keep records showing the business, investment, and personal use of your property. 2012 amended tax return form For more information on the records you must keep for listed property, such as a car, see What Records Must Be Kept in chapter 5. 2012 amended tax return form    Although you can combine business and investment use of property when figuring depreciation deductions, do not treat investment use as qualified business use when determining whether the business-use requirement for listed property is met. 2012 amended tax return form For information about qualified business use of listed property, see What Is the Business-Use Requirement in chapter 5. 2012 amended tax return form Office in the home. 2012 amended tax return form   If you use part of your home as an office, you may be able to deduct depreciation on that part based on its business use. 2012 amended tax return form For information about depreciating your home office, see Publication 587. 2012 amended tax return form Inventory. 2012 amended tax return form   You cannot depreciate inventory because it is not held for use in your business. 2012 amended tax return form Inventory is any property you hold primarily for sale to customers in the ordinary course of your business. 2012 amended tax return form   If you are a rent-to-own dealer, you may be able to treat certain property held in your business as depreciable property rather than as inventory. 2012 amended tax return form See Rent-to-own dealer under Which Property Class Applies Under GDS in chapter 4. 2012 amended tax return form   In some cases, it is not clear whether property is held for sale (inventory) or for use in your business. 2012 amended tax return form If it is unclear, examine carefully all the facts in the operation of the particular business. 2012 amended tax return form The following example shows how a careful examination of the facts in two similar situations results in different conclusions. 2012 amended tax return form Example. 2012 amended tax return form Maple Corporation is in the business of leasing cars. 2012 amended tax return form At the end of their useful lives, when the cars are no longer profitable to lease, Maple sells them. 2012 amended tax return form Maple does not have a showroom, used car lot, or individuals to sell the cars. 2012 amended tax return form Instead, it sells them through wholesalers or by similar arrangements in which a dealer's profit is not intended or considered. 2012 amended tax return form Maple can depreciate the leased cars because the cars are not held primarily for sale to customers in the ordinary course of business, but are leased. 2012 amended tax return form If Maple buys cars at wholesale prices, leases them for a short time, and then sells them at retail prices or in sales in which a dealer's profit is intended, the cars are treated as inventory and are not depreciable property. 2012 amended tax return form In this situation, the cars are held primarily for sale to customers in the ordinary course of business. 2012 amended tax return form Containers. 2012 amended tax return form   Generally, containers for the products you sell are part of inventory and you cannot depreciate them. 2012 amended tax return form However, you can depreciate containers used to ship your products if they have a life longer than one year and meet the following requirements. 2012 amended tax return form They qualify as property used in your business. 2012 amended tax return form Title to the containers does not pass to the buyer. 2012 amended tax return form   To determine if these requirements are met, consider the following questions. 2012 amended tax return form Does your sales contract, sales invoice, or other type of order acknowledgment indicate whether you have retained title? Does your invoice treat the containers as separate items? Do any of your records state your basis in the containers? Property Having a Determinable Useful Life To be depreciable, your property must have a determinable useful life. 2012 amended tax return form This means that it must be something that wears out, decays, gets used up, becomes obsolete, or loses its value from natural causes. 2012 amended tax return form Property Lasting More Than One Year To be depreciable, property must have a useful life that extends substantially beyond the year you place it in service. 2012 amended tax return form Example. 2012 amended tax return form You maintain a library for use in your profession. 2012 amended tax return form You can depreciate it. 2012 amended tax return form However, if you buy technical books, journals, or information services for use in your business that have a useful life of one year or less, you cannot depreciate them. 2012 amended tax return form Instead, you deduct their cost as a business expense. 2012 amended tax return form What Property Cannot Be Depreciated? Certain property cannot be depreciated. 2012 amended tax return form This includes land and certain excepted property. 2012 amended tax return form Land You cannot depreciate the cost of land because land does not wear out, become obsolete, or get used up. 2012 amended tax return form The cost of land generally includes the cost of clearing, grading, planting, and landscaping. 2012 amended tax return form Although you cannot depreciate land, you can depreciate certain land preparation costs, such as landscaping costs, incurred in preparing land for business use. 2012 amended tax return form These costs must be so closely associated with other depreciable property that you can determine a life for them along with the life of the associated property. 2012 amended tax return form Example. 2012 amended tax return form You constructed a new building for use in your business and paid for grading, clearing, seeding, and planting bushes and trees. 2012 amended tax return form Some of the bushes and trees were planted right next to the building, while others were planted around the outer border of the lot. 2012 amended tax return form If you replace the building, you would have to destroy the bushes and trees right next to it. 2012 amended tax return form These bushes and trees are closely associated with the building, so they have a determinable useful life. 2012 amended tax return form Therefore, you can depreciate them. 2012 amended tax return form Add your other land preparation costs to the basis of your land because they have no determinable life and you cannot depreciate them. 2012 amended tax return form Excepted Property Even if the requirements explained in the preceding discussions are met, you cannot depreciate the following property. 2012 amended tax return form Property placed in service and disposed of in the same year. 2012 amended tax return form Determining when property is placed in service is explained later. 2012 amended tax return form Equipment used to build capital improvements. 2012 amended tax return form You must add otherwise allowable depreciation on the equipment during the period of construction to the basis of your improvements. 2012 amended tax return form See Uniform Capitalization Rules in Publication 551. 2012 amended tax return form Section 197 intangibles. 2012 amended tax return form You must amortize these costs. 2012 amended tax return form Section 197 intangibles are discussed in detail in Chapter 8 of Publication 535. 2012 amended tax return form Intangible property, such as certain computer software, that is not section 197 intangible property, can be depreciated if it meets certain requirements. 2012 amended tax return form See Intangible Property , later. 2012 amended tax return form Certain term interests. 2012 amended tax return form Certain term interests in property. 2012 amended tax return form   You cannot depreciate a term interest in property created or acquired after July 27, 1989, for any period during which the remainder interest is held, directly or indirectly, by a person related to you. 2012 amended tax return form A term interest in property means a life interest in property, an interest in property for a term of years, or an income interest in a trust. 2012 amended tax return form Related persons. 2012 amended tax return form   For a description of related persons, see Related Persons, later. 2012 amended tax return form For this purpose, however, treat as related persons only the relationships listed in items (1) through (10) of that discussion and substitute “50%” for “10%” each place it appears. 2012 amended tax return form Basis adjustments. 2012 amended tax return form   If you would be allowed a depreciation deduction for a term interest in property except that the holder of the remainder interest is related to you, you generally must reduce your basis in the term interest by any depreciation or amortization not allowed. 2012 amended tax return form   If you hold the remainder interest, you generally must increase your basis in that interest by the depreciation not allowed to the term interest holder. 2012 amended tax return form However, do not increase your basis for depreciation not allowed for periods during which either of the following situations applies. 2012 amended tax return form The term interest is held by an organization exempt from tax. 2012 amended tax return form The term interest is held by a nonresident alien individual or foreign corporation, and the income from the term interest is not effectively connected with the conduct of a trade or business in the United States. 2012 amended tax return form Exceptions. 2012 amended tax return form   The above rules do not apply to the holder of a term interest in property acquired by gift, bequest, or inheritance. 2012 amended tax return form They also do not apply to the holder of dividend rights that were separated from any stripped preferred stock if the rights were purchased after April 30, 1993, or to a person whose basis in the stock is determined by reference to the basis in the hands of the purchaser. 2012 amended tax return form When Does Depreciation Begin and End? You begin to depreciate your property when you place it in service for use in your trade or business or for the production of income. 2012 amended tax return form You stop depreciating property either when you have fully recovered your cost or other basis or when you retire it from service, whichever happens first. 2012 amended tax return form Placed in Service You place property in service when it is ready and available for a specific use, whether in a business activity, an income-producing activity, a tax-exempt activity, or a personal activity. 2012 amended tax return form Even if you are not using the property, it is in service when it is ready and available for its specific use. 2012 amended tax return form Example 1. 2012 amended tax return form Donald Steep bought a machine for his business. 2012 amended tax return form The machine was delivered last year. 2012 amended tax return form However, it was not installed and operational until this year. 2012 amended tax return form It is considered placed in service this year. 2012 amended tax return form If the machine had been ready and available for use when it was delivered, it would be considered placed in service last year even if it was not actually used until this year. 2012 amended tax return form Example 2. 2012 amended tax return form On April 6, Sue Thorn bought a house to use as residential rental property. 2012 amended tax return form She made several repairs and had it ready for rent on July 5. 2012 amended tax return form At that time, she began to advertise it for rent in the local newspaper. 2012 amended tax return form The house is considered placed in service in July when it was ready and available for rent. 2012 amended tax return form She can begin to depreciate it in July. 2012 amended tax return form Example 3. 2012 amended tax return form James Elm is a building contractor who specializes in constructing office buildings. 2012 amended tax return form He bought a truck last year that had to be modified to lift materials to second-story levels. 2012 amended tax return form The installation of the lifting equipment was completed and James accepted delivery of the modified truck on January 10 of this year. 2012 amended tax return form The truck was placed in service on January 10, the date it was ready and available to perform the function for which it was bought. 2012 amended tax return form Conversion to business use. 2012 amended tax return form   If you place property in service in a personal activity, you cannot claim depreciation. 2012 amended tax return form However, if you change the property's use to use in a business or income-producing activity, then you can begin to depreciate it at the time of the change. 2012 amended tax return form You place the property in service in the business or income-producing activity on the date of the change. 2012 amended tax return form Example. 2012 amended tax return form You bought a home and used it as your personal home several years before you converted it to rental property. 2012 amended tax return form Although its specific use was personal and no depreciation was allowable, you placed the home in service when you began using it as your home. 2012 amended tax return form You can begin to claim depreciation in the year you converted it to rental property because its use changed to an income-producing use at that time. 2012 amended tax return form Idle Property Continue to claim a deduction for depreciation on property used in your business or for the production of income even if it is temporarily idle (not in use). 2012 amended tax return form For example, if you stop using a machine because there is a temporary lack of a market for a product made with that machine, continue to deduct depreciation on the machine. 2012 amended tax return form Cost or Other Basis Fully Recovered You stop depreciating property when you have fully recovered your cost or other basis. 2012 amended tax return form You recover your basis when your section 179 and allowed or allowable depreciation deductions equal your cost or investment in the property. 2012 amended tax return form See What Is the Basis of Your Depreciable Property , later. 2012 amended tax return form Retired From Service You stop depreciating property when you retire it from service, even if you have not fully recovered its cost or other basis. 2012 amended tax return form You retire property from service when you permanently withdraw it from use in a trade or business or from use in the production of income because of any of the following events. 2012 amended tax return form You sell or exchange the property. 2012 amended tax return form You convert the property to personal use. 2012 amended tax return form You abandon the property. 2012 amended tax return form You transfer the property to a supplies or scrap account. 2012 amended tax return form The property is destroyed. 2012 amended tax return form If you included the property in a general asset account, see How Do You Use General Asset Accounts in chapter 4 for the rules that apply when you dispose of that property. 2012 amended tax return form What Method Can You Use To Depreciate Your Property? You must use the Modified Accelerated Cost Recovery System (MACRS) to depreciate most property. 2012 amended tax return form MACRS is discussed in chapter 4. 2012 amended tax return form You cannot use MACRS to depreciate the following property. 2012 amended tax return form Property you placed in service before 1987. 2012 amended tax return form Certain property owned or used in 1986. 2012 amended tax return form Intangible property. 2012 amended tax return form Films, video tapes, and recordings. 2012 amended tax return form Certain corporate or partnership property acquired in a nontaxable transfer. 2012 amended tax return form Property you elected to exclude from MACRS. 2012 amended tax return form The following discussions describe the property listed above and explain what depreciation method should be used. 2012 amended tax return form Property You Placed in Service Before 1987 You cannot use MACRS for property you placed in service before 1987 (except property you placed in service after July 31, 1986, if MACRS was elected). 2012 amended tax return form Property placed in service before 1987 must be depreciated under the methods discussed in Publication 534. 2012 amended tax return form For a discussion of when property is placed in service, see When Does Depreciation Begin and End , earlier. 2012 amended tax return form Use of real property changed. 2012 amended tax return form   You generally must use MACRS to depreciate real property that you acquired for personal use before 1987 and changed to business or income-producing use after 1986. 2012 amended tax return form Improvements made after 1986. 2012 amended tax return form   You must treat an improvement made after 1986 to property you placed in service before 1987 as separate depreciable property. 2012 amended tax return form Therefore, you can depreciate that improvement as separate property under MACRS if it is the type of property that otherwise qualifies for MACRS depreciation. 2012 amended tax return form For more information about improvements, see How Do You Treat Repairs and Improvements , later and Additions and Improvements under Which Recovery Period Applies in chapter 4. 2012 amended tax return form Property Owned or Used in 1986 You may not be able to use MACRS for property you acquired and placed in service after 1986 if any of the situations described below apply. 2012 amended tax return form If you cannot use MACRS, the property must be depreciated under the methods discussed in Publication 534. 2012 amended tax return form For the following discussions, do not treat property as owned before you placed it in service. 2012 amended tax return form If you owned property in 1986 but did not place it in service until 1987, you do not treat it as owned in 1986. 2012 amended tax return form Personal property. 2012 amended tax return form   You cannot use MACRS for personal property (section 1245 property) in any of the following situations. 2012 amended tax return form You or someone related to you owned or used the property in 1986. 2012 amended tax return form You acquired the property from a person who owned it in 1986 and as part of the transaction the user of the property did not change. 2012 amended tax return form You lease the property to a person (or someone related to this person) who owned or used the property in 1986. 2012 amended tax return form You acquired the property in a transaction in which: The user of the property did not change, and The property was not MACRS property in the hands of the person from whom you acquired it because of (2) or (3) above. 2012 amended tax return form Real property. 2012 amended tax return form   You generally cannot use MACRS for real property (section 1250 property) in any of the following situations. 2012 amended tax return form You or someone related to you owned the property in 1986. 2012 amended tax return form You lease the property to a person who owned the property in 1986 (or someone related to that person). 2012 amended tax return form You acquired the property in a like-kind exchange, involuntary conversion, or repossession of property you or someone related to you owned in 1986. 2012 amended tax return form MACRS applies only to that part of your basis in the acquired property that represents cash paid or unlike property given up. 2012 amended tax return form It does not apply to the carried-over part of the basis. 2012 amended tax return form Exceptions. 2012 amended tax return form   The rules above do not apply to the following. 2012 amended tax return form Residential rental property or nonresidential real property. 2012 amended tax return form Any property if, in the first tax year it is placed in service, the deduction under the Accelerated Cost Recovery System (ACRS) is more than the deduction under MACRS using the half-year convention. 2012 amended tax return form For information on how to figure depreciation under ACRS, see Publication 534. 2012 amended tax return form Property that was MACRS property in the hands of the person from whom you acquired it because of (2) above. 2012 amended tax return form Related persons. 2012 amended tax return form   For this purpose, the following are related persons. 2012 amended tax return form An individual and a member of his or her family, including only a spouse, child, parent, brother, sister, half-brother, half-sister, ancestor, and lineal descendant. 2012 amended tax return form A corporation and an individual who directly or indirectly owns more than 10% of the value of the outstanding stock of that corporation. 2012 amended tax return form Two corporations that are members of the same controlled group. 2012 amended tax return form A trust fiduciary and a corporation if more than 10% of the value of the outstanding stock is directly or indirectly owned by or for the trust or grantor of the trust. 2012 amended tax return form The grantor and fiduciary, and the fiduciary and beneficiary, of any trust. 2012 amended tax return form The fiduciaries of two different trusts, and the fiduciaries and beneficiaries of two different trusts, if the same person is the grantor of both trusts. 2012 amended tax return form A tax-exempt educational or charitable organization and any person (or, if that person is an individual, a member of that person's family) who directly or indirectly controls the organization. 2012 amended tax return form Two S corporations, and an S corporation and a regular corporation, if the same persons own more than 10% of the value of the outstanding stock of each corporation. 2012 amended tax return form A corporation and a partnership if the same persons own both of the following. 2012 amended tax return form More than 10% of the value of the outstanding stock of the corporation. 2012 amended tax return form More than 10% of the capital or profits interest in the partnership. 2012 amended tax return form The executor and beneficiary of any estate. 2012 amended tax return form A partnership and a person who directly or indirectly owns more than 10% of the capital or profits interest in the partnership. 2012 amended tax return form Two partnerships, if the same persons directly or indirectly own more than 10% of the capital or profits interest in each. 2012 amended tax return form The related person and a person who is engaged in trades or businesses under common control. 2012 amended tax return form See section 52(a) and 52(b) of the Internal Revenue Code. 2012 amended tax return form When to determine relationship. 2012 amended tax return form   You must determine whether you are related to another person at the time you acquire the property. 2012 amended tax return form   A partnership acquiring property from a terminating partnership must determine whether it is related to the terminating partnership immediately before the event causing the termination. 2012 amended tax return form For this rule, a terminating partnership is one that sells or exchanges, within 12 months, 50% or more of its total interest in partnership capital or profits. 2012 amended tax return form Constructive ownership of stock or partnership interest. 2012 amended tax return form   To determine whether a person directly or indirectly owns any of the outstanding stock of a corporation or an interest in a partnership, apply the following rules. 2012 amended tax return form Stock or a partnership interest directly or indirectly owned by or for a corporation, partnership, estate, or trust is considered owned proportionately by or for its shareholders, partners, or beneficiaries. 2012 amended tax return form However, for a partnership interest owned by or for a C corporation, this applies only to shareholders who directly or indirectly own 5% or more of the value of the stock of the corporation. 2012 amended tax return form An individual is considered to own the stock or partnership interest directly or indirectly owned by or for the individual's family. 2012 amended tax return form An individual who owns, except by applying rule (2), any stock in a corporation is considered to own the stock directly or indirectly owned by or for the individual's partner. 2012 amended tax return form For purposes of rules (1), (2), or (3), stock or a partnership interest considered to be owned by a person under rule (1) is treated as actually owned by that person. 2012 amended tax return form However, stock or a partnership interest considered to be owned by an individual under rule (2) or (3) is not treated as owned by that individual for reapplying either rule (2) or (3) to make another person considered to be the owner of the same stock or partnership interest. 2012 amended tax return form Intangible Property Generally, if you can depreciate intangible property, you usually use the straight line method of depreciation. 2012 amended tax return form However, you can choose to depreciate certain intangible property under the income forecast method (discussed later). 2012 amended tax return form You cannot depreciate intangible property that is a section 197 intangible or that otherwise does not meet all the requirements discussed earlier under What Property Can Be Depreciated. 2012 amended tax return form Straight Line Method This method lets you deduct the same amount of depreciation each year over the useful life of the property. 2012 amended tax return form To figure your deduction, first determine the adjusted basis, salvage value, and estimated useful life of your property. 2012 amended tax return form Subtract the salvage value, if any, from the adjusted basis. 2012 amended tax return form The balance is the total depreciation you can take over the useful life of the property. 2012 amended tax return form Divide the balance by the number of years in the useful life. 2012 amended tax return form This gives you your yearly depreciation deduction. 2012 amended tax return form Unless there is a big change in adjusted basis or useful life, this amount will stay the same throughout the time you depreciate the property. 2012 amended tax return form If, in the first year, you use the property for less than a full year, you must prorate your depreciation deduction for the number of months in use. 2012 amended tax return form Example. 2012 amended tax return form In April, Frank bought a patent for $5,100 that is not a section 197 intangible. 2012 amended tax return form He depreciates the patent under the straight line method, using a 17-year useful life and no salvage value. 2012 amended tax return form He divides the $5,100 basis by 17 years to get his $300 yearly depreciation deduction. 2012 amended tax return form He only used the patent for 9 months during the first year, so he multiplies $300 by 9/12 to get his deduction of $225 for the first year. 2012 amended tax return form Next year, Frank can deduct $300 for the full year. 2012 amended tax return form Patents and copyrights. 2012 amended tax return form   If you can depreciate the cost of a patent or copyright, use the straight line method over the useful life. 2012 amended tax return form The useful life of a patent or copyright is the lesser of the life granted to it by the government or the remaining life when you acquire it. 2012 amended tax return form However, if the patent or copyright becomes valueless before the end of its useful life, you can deduct in that year any of its remaining cost or other basis. 2012 amended tax return form Computer software. 2012 amended tax return form   Computer software is generally a section 197 intangible and cannot be depreciated if you acquired it in connection with the acquisition of assets constituting a business or a substantial part of a business. 2012 amended tax return form   However, computer software is not a section 197 intangible and can be depreciated, even if acquired in connection with the acquisition of a business, if it meets all of the following tests. 2012 amended tax return form It is readily available for purchase by the general public. 2012 amended tax return form It is subject to a nonexclusive license. 2012 amended tax return form It has not been substantially modified. 2012 amended tax return form   If the software meets the tests above, it may also qualify for the section 179 deduction and the special depreciation allowance, discussed later. 2012 amended tax return form If you can depreciate the cost of computer software, use the straight line method over a useful life of 36 months. 2012 amended tax return form    Tax-exempt use property subject to a lease. 2012 amended tax return form   The useful life of computer software leased under a lease agreement entered into after March 12, 2004, to a tax-exempt organization, governmental unit, or foreign person or entity (other than a partnership), cannot be less than 125% of the lease term. 2012 amended tax return form Certain created intangibles. 2012 amended tax return form   You can amortize certain intangibles created on or after December 31, 2003, over a 15-year period using the straight line method and no salvage value, even though they have a useful life that cannot be estimated with reasonable accuracy. 2012 amended tax return form For example, amounts paid to acquire memberships or privileges of indefinite duration, such as a trade association membership, are eligible costs. 2012 amended tax return form   The following are not eligible. 2012 amended tax return form Any intangible asset acquired from another person. 2012 amended tax return form Created financial interests. 2012 amended tax return form Any intangible asset that has a useful life that can be estimated with reasonable accuracy. 2012 amended tax return form Any intangible asset that has an amortization period or limited useful life that is specifically prescribed or prohibited by the Code, regulations, or other published IRS guidance. 2012 amended tax return form Any amount paid to facilitate an acquisition of a trade or business, a change in the capital structure of a business entity, and certain other transactions. 2012 amended tax return form   You must also increase the 15-year safe harbor amortization period to a 25-year period for certain intangibles related to benefits arising from the provision, production, or improvement of real property. 2012 amended tax return form For this purpose, real property includes property that will remain attached to the real property for an indefinite period of time, such as roads, bridges, tunnels, pavements, and pollution control facilities. 2012 amended tax return form Income Forecast Method You can choose to use the income forecast method instead of the straight line method to depreciate the following depreciable intangibles. 2012 amended tax return form Motion picture films or video tapes. 2012 amended tax return form Sound recordings. 2012 amended tax return form Copyrights. 2012 amended tax return form Books. 2012 amended tax return form Patents. 2012 amended tax return form Under the income forecast method, each year's depreciation deduction is equal to the cost of the property, multiplied by a fraction. 2012 amended tax return form The numerator of the fraction is the current year's net income from the property, and the denominator is the total income anticipated from the property through the end of the 10th taxable year following the taxable year the property is placed in service. 2012 amended tax return form For more information, see section 167(g) of the Internal Revenue Code. 2012 amended tax return form Films, video tapes, and recordings. 2012 amended tax return form   You cannot use MACRS for motion picture films, video tapes, and sound recordings. 2012 amended tax return form For this purpose, sound recordings are discs, tapes, or other phonorecordings resulting from the fixation of a series of sounds. 2012 amended tax return form You can depreciate this property using either the straight line method or the income forecast method. 2012 amended tax return form Participations and residuals. 2012 amended tax return form   You can include participations and residuals in the adjusted basis of the property for purposes of computing your depreciation deduction under the income forecast method. 2012 amended tax return form The participations and residuals must relate to income to be derived from the property before the end of the 10th taxable year after the property is placed in service. 2012 amended tax return form For this purpose, participations and residuals are defined as costs which by contract vary with the amount of income earned in connection with the property. 2012 amended tax return form   Instead of including these amounts in the adjusted basis of the property, you can deduct the costs in the taxable year that they are paid. 2012 amended tax return form Videocassettes. 2012 amended tax return form   If you are in the business of renting videocassettes, you can depreciate only those videocassettes bought for rental. 2012 amended tax return form If the videocassette has a useful life of one year or less, you can currently deduct the cost as a business expense. 2012 amended tax return form Corporate or Partnership Property Acquired in a Nontaxable Transfer MACRS does not apply to property used before 1987 and transferred after 1986 to a corporation or partnership (except property the transferor placed in service after July 31, 1986, if MACRS was elected) to the extent its basis is carried over from the property's adjusted basis in the transferor's hands. 2012 amended tax return form You must continue to use the same depreciation method as the transferor and figure depreciation as if the transfer had not occurred. 2012 amended tax return form However, if MACRS would otherwise apply, you can use it to depreciate the part of the property's basis that exceeds the carried-over basis. 2012 amended tax return form The nontaxable transfers covered by this rule include the following. 2012 amended tax return form A distribution in complete liquidation of a subsidiary. 2012 amended tax return form A transfer to a corporation controlled by the transferor. 2012 amended tax return form An exchange of property solely for corporate stock or securities in a reorganization. 2012 amended tax return form A contribution of property to a partnership in exchange for a partnership interest. 2012 amended tax return form A partnership distribution of property to a partner. 2012 amended tax return form Election To Exclude Property From MACRS If you can properly depreciate any property under a method not based on a term of years, such as the unit-of-production method, you can elect to exclude that property from MACRS. 2012 amended tax return form You make the election by reporting your depreciation for the property on line 15 in Part II of Form 4562 and attaching a statement as described in the instructions for Form 4562. 2012 amended tax return form You must make this election by the return due date (including extensions) for the tax year you place your property in service. 2012 amended tax return form However, if you timely filed your return for the year without making the election, you can still make the election by filing an amended return within six months of the due date of the return (excluding extensions). 2012 amended tax return form Attach the election to the amended return and write “Filed pursuant to section 301. 2012 amended tax return form 9100-2” on the election statement. 2012 amended tax return form File the amended return at the same address you filed the original return. 2012 amended tax return form Use of standard mileage rate. 2012 amended tax return form   If you use the standard mileage rate to figure your tax deduction for your business automobile, you are treated as having made an election to exclude the automobile from MACRS. 2012 amended tax return form See Publication 463 for a discussion of the standard mileage rate. 2012 amended tax return form What Is the Basis of Your Depreciable Property? To figure your depreciation deduction, you must determine the basis of your property. 2012 amended tax return form To determine basis, you need to know the cost or other basis of your property. 2012 amended tax return form Cost as Basis The basis of property you buy is its cost plus amounts you paid for items such as sales tax (see Exception , below), freight charges, and installation and testing fees. 2012 amended tax return form The cost includes the amount you pay in cash, debt obligations, other property, or services. 2012 amended tax return form Exception. 2012 amended tax return form   You can elect to deduct state and local general sales taxes instead of state and local income taxes as an itemized deduction on Schedule A (Form 1040). 2012 amended tax return form If you make that choice, you cannot include those sales taxes as part of your cost basis. 2012 amended tax return form Assumed debt. 2012 amended tax return form   If you buy property and assume (or buy subject to) an existing mortgage or other debt on the property, your basis includes the amount you pay for the property plus the amount of the assumed debt. 2012 amended tax return form Example. 2012 amended tax return form You make a $20,000 down payment on property and assume the seller's mortgage of $120,000. 2012 amended tax return form Your total cost is $140,000, the cash you paid plus the mortgage you assumed. 2012 amended tax return form Settlement costs. 2012 amended tax return form   The basis of real property also includes certain fees and charges you pay in addition to the purchase price. 2012 amended tax return form These generally are shown on your settlement statement and include the following. 2012 amended tax return form Legal and recording fees. 2012 amended tax return form Abstract fees. 2012 amended tax return form Survey charges. 2012 amended tax return form Owner's title insurance. 2012 amended tax return form Amounts the seller owes that you agree to pay, such as back taxes or interest, recording or mortgage fees, charges for improvements or repairs, and sales commissions. 2012 amended tax return form   For fees and charges you cannot include in the basis of property, see Real Property in Publication 551. 2012 amended tax return form Property you construct or build. 2012 amended tax return form   If you construct, build, or otherwise produce property for use in your business, you may have to use the uniform capitalization rules to determine the basis of your property. 2012 amended tax return form For information about the uniform capitalization rules, see Publication 551 and the regulations under section 263A of the Internal Revenue Code. 2012 amended tax return form Other Basis Other basis usually refers to basis that is determined by the way you received the property. 2012 amended tax return form For example, your basis is other than cost if you acquired the property in exchange for other property, as payment for services you performed, as a gift, or as an inheritance. 2012 amended tax return form If you acquired property in this or some other way, see Publication 551 to determine your basis. 2012 amended tax return form Property changed from personal use. 2012 amended tax return form   If you held property for personal use and later use it in your business or income-producing activity, your depreciable basis is the lesser of the following. 2012 amended tax return form The fair market value (FMV) of the property on the date of the change in use. 2012 amended tax return form Your original cost or other basis adjusted as follows. 2012 amended tax return form Increased by the cost of any permanent improvements or additions and other costs that must be added to basis. 2012 amended tax return form Decreased by any deductions you claimed for casualty and theft losses and other items that reduced your basis. 2012 amended tax return form Example. 2012 amended tax return form Several years ago, Nia paid $160,000 to have her home built on a lot that cost her $25,000. 2012 amended tax return form Before changing the property to rental use last year, she paid $20,000 for permanent improvements to the house and claimed a $2,000 casualty loss deduction for damage to the house. 2012 amended tax return form Land is not depreciable, so she includes only the cost of the house when figuring the basis for depreciation. 2012 amended tax return form Nia's adjusted basis in the house when she changed its use was $178,000 ($160,000 + $20,000 − $2,000). 2012 amended tax return form On the same date, her property had an FMV of $180,000, of which $15,000 was for the land and $165,000 was for the house. 2012 amended tax return form The basis for depreciation on the house is the FMV on the date of change ($165,000), because it is less than her adjusted basis ($178,000). 2012 amended tax return form Property acquired in a nontaxable transaction. 2012 amended tax return form   Generally, if you receive property in a nontaxable exchange, the basis of the property you receive is the same as the adjusted basis of the property you gave up. 2012 amended tax return form Special rules apply in determining the basis and figuring the MACRS depreciation deduction and special depreciation allowance for property acquired in a like-kind exchange or involuntary conversion. 2012 amended tax return form See Like-kind exchanges and involuntary conversions. 2012 amended tax return form under How Much Can You Deduct? in chapter 3 and Figuring the Deduction for Property Acquired in a Nontaxable Exchange in chapter 4. 2012 amended tax return form   There are also special rules for determining the basis of MACRS property involved in a like-kind exchange or involuntary conversion when the property is contained in a general asset account. 2012 amended tax return form See How Do You Use General Asset Accounts in chapter 4. 2012 amended tax return form Adjusted Basis To find your property's basis for depreciation, you may have to make certain adjustments (increases and decreases) to the basis of the property for events occurring between the time you acquired the property and the time you placed it in service. 2012 amended tax return form These events could include the following. 2012 amended tax return form Installing utility lines. 2012 amended tax return form Paying legal fees for perfecting the title. 2012 amended tax return form Settling zoning issues. 2012 amended tax return form Receiving rebates. 2012 amended tax return form Incurring a casualty or theft loss. 2012 amended tax return form For a discussion of adjustments to the basis of your property, see Adjusted Basis in Publication 551. 2012 amended tax return form If you depreciate your property under MACRS, you also may have to reduce your basis by certain deductions and credits with respect to the property. 2012 amended tax return form For more information, see What Is the Basis for Depreciation in chapter 4. 2012 amended tax return form . 2012 amended tax return form Basis adjustment for depreciation allowed or allowable. 2012 amended tax return form   You must reduce the basis of property by the depreciation allowed or allowable, whichever is greater. 2012 amended tax return form Depreciation allowed is depreciation you actually deducted (from which you received a tax benefit). 2012 amended tax return form Depreciation allowable is depreciation you are entitled to deduct. 2012 amended tax return form   If you do not claim depreciation you are entitled to deduct, you must still reduce the basis of the property by the full amount of depreciation allowable. 2012 amended tax return form   If you deduct more depreciation than you should, you must reduce your basis by any amount deducted from which you received a tax benefit (the depreciation allowed). 2012 amended tax return form How Do You Treat Repairs and Improvements? If you improve depreciable property, you must treat the improvement as separate depreciable property. 2012 amended tax return form Improvement means an addition to or partial replacement of property that adds to its value, appreciably lengthens the time you can use it, or adapts it to a different use. 2012 amended tax return form You generally deduct the cost of repairing business property in the same way as any other business expense. 2012 amended tax return form However, if a repair or replacement increases the value of your property, makes it more useful, or lengthens its life, you must treat it as an improvement and depreciate it. 2012 amended tax return form Example. 2012 amended tax return form You repair a small section on one corner of the roof of a rental house. 2012 amended tax return form You deduct the cost of the repair as a rental expense. 2012 amended tax return form However, if you completely replace the roof, the new roof is an improvement because it increases the value and lengthens the life of the property. 2012 amended tax return form You depreciate the cost of the new roof. 2012 amended tax return form Improvements to rented property. 2012 amended tax return form   You can depreciate permanent improvements you make to business property you rent from someone else. 2012 amended tax return form Do You Have To File Form 4562? Use Form 4562 to figure your deduction for depreciation and amortization. 2012 amended tax return form Attach Form 4562 to your tax return for the current tax year if you are claiming any of the following items. 2012 amended tax return form A section 179 deduction for the current year or a section 179 carryover from a prior year. 2012 amended tax return form See chapter 2 for information on the section 179 deduction. 2012 amended tax return form Depreciation for property placed in service during the current year. 2012 amended tax return form Depreciation on any vehicle or other listed property, regardless of when it was placed in service. 2012 amended tax return form See chapter 5 for information on listed property. 2012 amended tax return form A deduction for any vehicle if the deduction is reported on a form other than Schedule C (Form 1040) or Schedule C-EZ (Form 1040). 2012 amended tax return form Amortization of costs if the current year is the first year of the amortization period. 2012 amended tax return form Depreciation or amortization on any asset on a corporate income tax return (other than Form 1120S, U. 2012 amended tax return form S. 2012 amended tax return form Income Tax Return for an S Corporation) regardless of when it was placed in service. 2012 amended tax return form You must submit a separate Form 4562 for each business or activity on your return for which a Form 4562 is required. 2012 amended tax return form Table 1-1 presents an overview of the purpose of the various parts of Form 4562. 2012 amended tax return form Employee. 2012 amended tax return form   Do not use Form 4562 if you are an employee and you deduct job-related vehicle expenses using either actual expenses (including depreciation) or the standard mileage rate. 2012 amended tax return form Instead, use either Form 2106 or Form 2106-EZ. 2012 amended tax return form Use Form 2106-EZ if you are claiming the standard mileage rate and you are not reimbursed by your employer for any expenses. 2012 amended tax return form How Do You Correct Depreciation Deductions? If you deducted an incorrect amount of depreciation in any year, you may be able to make a correction by filing an amended return for that year. 2012 amended tax return form See Filing an Amended Return , next. 2012 amended tax return form If you are not allowed to make the correction on an amended return, you may be able to change your accounting method to claim the correct amount of depreciation. 2012 amended tax return form See Changing Your Accounting Method , later. 2012 amended tax return form Filing an Amended Return You can file an amended return to correct the amount of depreciation claimed for any property in any of the following situations. 2012 amended tax return form You claimed the incorrect amount because of a mathematical error made in any year. 2012 amended tax return form You claimed the incorrect amount because of a posting error made in any year. 2012 amended tax return form You have not adopted a method of accounting for property placed in service by you in tax years ending after December 29, 2003. 2012 amended tax return form You claimed the incorrect amount on property placed in service by you in tax years ending before December 30, 2003. 2012 amended tax return form Adoption of accounting method defined. 2012 amended tax return form   Generally, you adopt a method of accounting for depreciation by using a permissible method of determining depreciation when you file your first tax return, or by using the same impermissible method of determining depreciation in two or more consecutively filed tax returns. 2012 amended tax return form   For an exception to this 2-year rule, see Revenue Procedure 2011-14 on page 330 of the Internal Revenue Bulletin 2011-4, available at www. 2012 amended tax return form irs. 2012 amended tax return form gov/pub/irs-irbs/irb11-04. 2012 amended tax return form pdf. 2012 amended tax return form (Note. 2012 amended tax return form Revenue Procedure 2011-14 is clarified and modified by Revenue Procedure 2012-20. 2012 amended tax return form For more information, see Revenue Procedure 2012-20 on page 700 of the Internal Revenue Bulletin 2012-14, available at www. 2012 amended tax return form irs. 2012 amended tax return form gov/pub/irs-irbs/irb12-14. 2012 amended tax return form pdf. 2012 amended tax return form )   For a safe harbor method of accounting to treat rotable spare parts as depreciable assets and procedures to obtain automatic consent to change to the safe harbor method of accounting, see Revenue Procedure 2007-48 on page 110 of Internal Revenue Bulletin 2007-29, available at www. 2012 amended tax return form irs. 2012 amended tax return form gov/pub/irs-irbs/irb07-29. 2012 amended tax return form pdf. 2012 amended tax return form When to file. 2012 amended tax return form   If an amended return is allowed, you must file it by the later of the following. 2012 amended tax return form 3 years from the date you filed your original return for the year in which you did not deduct the correct amount. 2012 amended tax return form A return filed before an unextended due date is considered filed on that due date. 2012 amended tax return form 2 years from the time you paid your tax for that year. 2012 amended tax return form Changing Your Accounting Method Generally, you must get IRS approval to change your method of accounting. 2012 amended tax return form You generally must file Form 3115, Application for Change in Accounting Method, to request a change in your method of accounting for depreciation. 2012 amended tax return form The following are examples of a change in method of accounting for depreciation. 2012 amended tax return form A change from an impermissible method of determining depreciation for depreciable property, if the impermissible method was used in two or more consecutively filed tax returns. 2012 amended tax return form A change in the treatment of an asset from nondepreciable to depreciable or vice versa. 2012 amended tax return form A change in the depreciation method, period of recovery, or convention of a depreciable asset. 2012 amended tax return form A change from not claiming to claiming the special depreciation allowance if you did not make the election to not claim any special allowance. 2012 amended tax return form A change from claiming a 50% special depreciation allowance to claiming a 30% special depreciation allowance for qualified property (including property that is included in a class of property for which you elected a 30% special allowance instead of a 50% special allowance). 2012 amended tax return form Changes in depreciation that are not a change in method of accounting (and may only be made on an amended return) include the following. 2012 amended tax return form An adjustment in the useful life of a depreciable asset for which depreciation is determined under section 167. 2012 amended tax return form A change in use of an asset in the hands of the same taxpayer. 2012 amended tax return form Making a late depreciation election or revoking a timely valid depreciation election (including the election not to deduct the special depreciation allowance). 2012 amended tax return form If you elected not to claim any special allowance, a change from not claiming to claiming the special allowance is a revocation of the election and is not an accounting method change. 2012 amended tax return form Generally, you must get IRS approval to make a late depreciation election or revoke a depreciation election. 2012 amended tax return form You must submit a request for a letter ruling to make a late election or revoke an election. 2012 amended tax return form Any change in the placed in service date of a depreciable asset. 2012 amended tax return form See section 1. 2012 amended tax return form 446-1(e)(2)(ii)(d) of the regulations for more information and examples. 2012 amended tax return form IRS approval. 2012 amended tax return form   In some instances, you may be able to get approval from the IRS to change your method of accounting for depreciation under the automatic change request procedures generally covered in Revenue Procedure 2011-14. 2012 amended tax return form If you do not qualify to use the automatic procedures to get approval, you must use the advance consent request procedures generally covered in Revenue Procedure 97-27, 1997-1 C. 2012 amended tax return form B. 2012 amended tax return form 680. 2012 amended tax return form Also see the Instructions for Form 3115 for more information on getting approval, including lists of scope limitations and automatic accounting method changes. 2012 amended tax return form Additional guidance. 2012 amended tax return form    For additional guidance and special procedures for changing your accounting method, automatic change procedures, amending your return, and filing Form 3115, see Revenue Procedure 2011-14 on page 330 of the Internal Revenue Bulletin 2011-4, available at www. 2012 amended tax return form irs. 2012 amended tax return form gov/pub/irs-irbs/irb11-04. 2012 amended tax return form pdf. 2012 amended tax return form (Note. 2012 amended tax return form Revenue Procedure 2011-14 is clarified and modified by Revenue Procedure 2012-20. 2012 amended tax return form For more information, see Revenue Procedure 2012-20 on page 700 of the Internal Revenue Bulletin 2012-14, available at www. 2012 amended tax return form irs. 2012 amended tax return form gov/pub/irs-irbs/irb12-14. 2012 amended tax return form pdf. 2012 amended tax return form )   For a safe harbor method of accounting to treat rotable spare parts as depreciable assets, see Revenue Procedure 2007-48 on page 110 of Internal Revenue Bulletin 2007-29, available at www. 2012 amended tax return form irs. 2012 amended tax return form gov/pub/irs-irbs/irb07-29. 2012 amended tax return form pdf. 2012 amended tax return form Table 1-1. 2012 amended tax return form Purpose of Form 4562 This table describes the purpose of the various parts of Form 4562. 2012 amended tax return form For more information, see Form 4562 and its instructions. 2012 amended tax return form Part Purpose I • Electing the section 179 deduction • Figuring the maximum section 179 deduction for the current year • Figuring any section 179 deduction carryover to the next year II • Reporting the special depreciation allowance for property (other than listed property) placed in service during the tax year • Reporting depreciation deductions on property being depreciated under any method other than Modified Accelerated Cost Recovery System (MACRS) III • Reporting MACRS depreciation deductions for property placed in service before this year • Reporting MACRS depreciation deductions for property (other than listed property) placed in service during the current year IV • Summarizing other parts V • Reporting the special depreciation allowance for automobiles and other listed property • Reporting MACRS depreciation on automobiles and other listed property • Reporting the section 179 cost elected for automobiles and other listed property • Reporting information on the use of automobiles and other transportation vehicles VI • Reporting amortization deductions Section 481(a) adjustment. 2012 amended tax return form   If you file Form 3115 and change from an impermissible method to a permissible method of accounting for depreciation, you can make a section 481(a) adjustment for any unclaimed or excess amount of allowable depreciation. 2012 amended tax return form The adjustment is the difference between the total depreciation actually deducted for the property and the total amount allowable prior to the year of change. 2012 amended tax return form If no depreciation was deducted, the adjustment is the total depreciation allowable prior to the year of change. 2012 amended tax return form A negative section 481(a) adjustment results in a decrease in taxable income. 2012 amended tax return form It is taken into account in the year of change and is reported on your business tax returns as “other expenses. 2012 amended tax return form ” A positive section 481(a) adjustment results in an increase in taxable income. 2012 amended tax return form It is generally taken into account over 4 tax years and is reported on your business tax returns as “other income. 2012 amended tax return form ” However, you can elect to use a one-year adjustment period and report the adjustment in the year of change if the total adjustment is less than $25,000. 2012 amended tax return form Make the election by completing the appropriate line on Form 3115. 2012 amended tax return form   If you file a Form 3115 and change from one permissible method to another permissible method, the section 481(a) adjustment is zero. 2012 amended tax return form Prev  Up  Next   Home   More Online Publications
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The 2012 Amended Tax Return Form

2012 amended tax return form 13. 2012 amended tax return form   Employment Taxes Table of Contents What's New for 2013 What's New for 2014 Reminders Important Dates for 2014 Introduction Topics - This chapter discusses: Useful Items - You may want to see: Farm Employment Family Employees Crew Leaders Social Security and Medicare TaxesReligious exemption. 2012 amended tax return form Wage limit. 2012 amended tax return form Federal Income Tax WithholdingNew Form W-4 for 2014. 2012 amended tax return form Required Notice to Employees About Earned Income Credit (EIC) Reporting and Paying Social Security, Medicare, and Withheld Federal Income TaxesElectronic deposit requirement. 2012 amended tax return form Federal Unemployment (FUTA) TaxReporting and Paying FUTA Tax What's New for 2013 Social security and Medicare tax for 2013. 2012 amended tax return form  The employee tax rate for social security is 6. 2012 amended tax return form 2%. 2012 amended tax return form Previously, the employee tax rate for social security was 4. 2012 amended tax return form 2%. 2012 amended tax return form The employer tax rate for social security remains unchanged at 6. 2012 amended tax return form 2%. 2012 amended tax return form The social security wage base limit is $113,700. 2012 amended tax return form The Medicare tax rate is 1. 2012 amended tax return form 45% each for the employee and employer, unchanged from 2012. 2012 amended tax return form There is no wage base limit for Medicare tax. 2012 amended tax return form Additional Medicare Tax. 2012 amended tax return form  In addition to withholding Medicare tax at 1. 2012 amended tax return form 45%, you must withhold a 0. 2012 amended tax return form 9% Additional Medicare Tax from wages you pay to an employee in excess of $200,000 in a calendar year. 2012 amended tax return form You are required to begin withholding Additional Medicare Tax in the pay period in which you pay wages in excess of $200,000 to an employee and continue to withhold it each pay period until the end of the calendar year. 2012 amended tax return form Additional Medicare Tax is only imposed on the employee. 2012 amended tax return form There is no employer share of Additional Medicare Tax. 2012 amended tax return form All wages that are subject to Medicare tax are subject to Additional Medicare Tax withholding if paid in excess of the $200,000 threshold. 2012 amended tax return form For more information on what wages are subject to Medicare tax, see the chart, Special Rules for Various Types of Services and Payments, in section 15 of Publication 15 (Circular E), Employer's Tax Guide. 2012 amended tax return form For more information on Additional Medicare Tax, visit IRS. 2012 amended tax return form gov and enter “Additional Medicare Tax” in the search box. 2012 amended tax return form Leave-based donation programs to aid victims of Hurricane Sandy. 2012 amended tax return form  Under these programs, employees may donate their vacation, sick, or personal leave in exchange for employer cash payments made before January 1, 2014, to qualified tax-exempt organizations providing relief for the victims of Hurricane Sandy. 2012 amended tax return form The donated leave will not be included in the income or wages of the employee. 2012 amended tax return form The employer may deduct the cash payments as business expenses or charitable contributions. 2012 amended tax return form For more information, see Notice 2012-69, 2012-51 I. 2012 amended tax return form R. 2012 amended tax return form B. 2012 amended tax return form 712, available at www. 2012 amended tax return form irs. 2012 amended tax return form gov/irb/2012-51_IRB/ar09. 2012 amended tax return form html. 2012 amended tax return form Work opportunity tax credit for qualified tax-exempt organizations hiring qualified veterans extended. 2012 amended tax return form  The work opportunity tax credit is now available for eligible unemployed veterans who begin work before January 1, 2014. 2012 amended tax return form Previously, the credit was available for unemployed veterans who began work on or after November 22, 2011, and before January 1, 2013. 2012 amended tax return form Qualified tax-exempt organizations that hire eligible unemployed veterans can claim the work opportunity tax credit against their payroll tax liability using Form 5884-C, Work Opportunity Credit for Qualified Tax-Exempt Organizations Hiring Qualified Veterans. 2012 amended tax return form For more information, visit IRS. 2012 amended tax return form gov and enter “work opportunity credit” in the search box. 2012 amended tax return form What's New for 2014 Social security and Medicare tax for 2014. 2012 amended tax return form  The employee and employer tax rates for social security and the maximum amount of wages subject to social security tax for 2014 will be discussed in Publication 51 (Circular A), Agricultural Employer's Tax Guide (For use in 2014). 2012 amended tax return form The Medicare tax rate for 2014 will also be discussed in Publication 51 (Circular A) (For use in 2014). 2012 amended tax return form There is no limit on the amount of wages subject to Medicare tax. 2012 amended tax return form Reminders Additional employment tax information for farmers. 2012 amended tax return form  See Publication 51 (Circular A) for more detailed guidance on employment taxes. 2012 amended tax return form For the latest information about employment tax developments impacting farmers, go to www. 2012 amended tax return form irs. 2012 amended tax return form gov/pub51. 2012 amended tax return form Correcting a previously filed Form 943. 2012 amended tax return form  If you discover an error on a previously filed Form 943, Employer's Annual Federal Tax Return for Agricultural Employees, make the correction using Form 943-X, Adjusted Employer's Annual Federal Tax Return for Agricultural Employees or Claim for Refund. 2012 amended tax return form Form 943-X is filed separately from Form 943. 2012 amended tax return form For more information on correcting Form 943, see the Instructions for Form 943-X. 2012 amended tax return form Federal tax deposits must be made by electronic funds transfer. 2012 amended tax return form  You must use electronic funds transfer to make all federal tax deposits. 2012 amended tax return form Generally, electronic funds transfers are made using the Electronic Federal Tax Payment System (EFTPS). 2012 amended tax return form If you do not want to use EFTPS, you can arrange for your tax professional, financial institution, payroll service, or other trusted third party to make electronic deposits on your behalf. 2012 amended tax return form Also, you may arrange for your financial institution to initiate a same-day wire payment on your behalf. 2012 amended tax return form EFTPS is a free service provided by the Department of Treasury. 2012 amended tax return form Services provided by your tax professional, financial institution, payroll service, or other third party may have a fee. 2012 amended tax return form For more information on making federal tax deposits, see section 7 of Publication 51 (Circular A). 2012 amended tax return form To get more information about EFTPS or to enroll in EFTPS, visit www. 2012 amended tax return form eftps. 2012 amended tax return form gov or call 1-800-555-4477 or 1-800-733-4829 (TDD). 2012 amended tax return form Additional information about EFTPS is also available in Publication 966, Electronic Federal Tax Payment System: A Guide To Getting Started. 2012 amended tax return form Important Dates for 2014 You should take the action indicated by the dates listed. 2012 amended tax return form See By February 15 and On February 16 for Form W-4, Employee's Withholding Allowance Certificate, information. 2012 amended tax return form Due dates for deposits of withheld federal income taxes, social security taxes, and Medicare taxes are not listed here. 2012 amended tax return form For these dates, see Publication 509, Tax Calendars (For use in 2014). 2012 amended tax return form Note. 2012 amended tax return form  If any date shown below for filing a return, furnishing a form, or depositing taxes falls on a Saturday, Sunday, or legal holiday, the due date is the next business day. 2012 amended tax return form A statewide legal holiday delays a filing or furnishing due date only if the IRS office where you are required to file a return or furnish a form is located in that state. 2012 amended tax return form For any due date, you will meet the “file” or “furnish” date requirement if the envelope containing the tax return or form is properly addressed, contains sufficient postage, and is postmarked by the U. 2012 amended tax return form S. 2012 amended tax return form Postal Service by the due date, or sent by an IRS-designated delivery service by the due date. 2012 amended tax return form See Private delivery services in Publication 51 (Circular A). 2012 amended tax return form Federal tax deposits can only be made by electronic funds transfer and are governed by legal holidays in the District of Columbia. 2012 amended tax return form Statewide holidays no longer apply. 2012 amended tax return form For a list of legal holidays that delay the due date of a federal tax deposit, see section 7 of Publication 51 (Circular A). 2012 amended tax return form Fiscal year taxpayers. 2012 amended tax return form  The due dates listed below apply whether you use a calendar or a fiscal year. 2012 amended tax return form By January 31. 2012 amended tax return form   File Form 943 with the IRS. 2012 amended tax return form If you deposited all Form 943 taxes when due, you have 10 additional days to file. 2012 amended tax return form Furnish each employee with a completed Form W-2, Wage and Tax Statement. 2012 amended tax return form Furnish each recipient to whom you paid $600 or more in nonemployee compensation with a completed Form 1099 (for example, Form 1099-MISC). 2012 amended tax return form File Form 940, Employer's Annual Federal Unemployment (FUTA) Tax Return, with the IRS. 2012 amended tax return form If you deposited all the FUTA tax when due, you have 10 additional days to file. 2012 amended tax return form File Form 945, Annual Return of Withheld Federal Income Tax, with the IRS to report any nonpayroll income tax withheld during 2013. 2012 amended tax return form If you deposited all Form 945 taxes when due, you have 10 additional days to file. 2012 amended tax return form By February 15. 2012 amended tax return form  Ask for a new Form W-4 or Formulario W-4(SP), Certificado de Exención de Retenciones del Empleado, from each employee who claimed exemption from federal income tax withholding last year. 2012 amended tax return form On February 16. 2012 amended tax return form  Any Form W-4 claiming exemption from withholding for the previous year has now expired. 2012 amended tax return form Begin withholding for any employee who previously claimed exemption from withholding but has not given you a new Form W-4 for the current year. 2012 amended tax return form If the employee does not give you a new Form W-4, withhold taxes based on the last valid Form W-4 you have for the employee that does not claim exemption from withholding or, if one does not exist, as if he or she is single with zero withholding allowances. 2012 amended tax return form If the employee furnishes a new Form W-4 claiming exemption from withholding after February 15, you may apply the exemption to future wages, but do not refund taxes withheld while the exempt status was not in place. 2012 amended tax return form By February 28. 2012 amended tax return form   File paper Forms 1099 and 1096. 2012 amended tax return form File Copy A of all paper Forms 1099 with Form 1096, Annual Summary and Transmittal of U. 2012 amended tax return form S. 2012 amended tax return form Information Returns, with the IRS. 2012 amended tax return form For electronically filed returns, see By March 31 below. 2012 amended tax return form File paper Forms W-2 and W-3. 2012 amended tax return form File Copy A of all paper Forms W-2 with Form W-3, Transmittal of Wage and Tax Statements, with the Social Security Administration (SSA). 2012 amended tax return form For electronically filed returns, see By March 31 below. 2012 amended tax return form By March 31. 2012 amended tax return form   File electronic Forms W-2 and 1099. 2012 amended tax return form File electronic Forms W-2 with the SSA and Forms 1099 with the IRS. 2012 amended tax return form For more information on reporting Form W-2 information to the SSA electronically, visit the SSA's Employer W-2 Filing Instructions & Information webpage at www. 2012 amended tax return form socialsecurity. 2012 amended tax return form gov/employer. 2012 amended tax return form For information on filing information returns electronically with the IRS, see Publication 1220, Specifications for Filing Forms 1097, 1098, 1099, 3921, 3922, 5498, 8935, and W-2G Electronically. 2012 amended tax return form By April 30, July 31, October 31, and January 31. 2012 amended tax return form   Deposit FUTA taxes. 2012 amended tax return form Deposit FUTA tax due if it is more than $500. 2012 amended tax return form Before December 1. 2012 amended tax return form  Remind employees to submit a new Form W-4 if their withholding allowances have changed or will change for the next year. 2012 amended tax return form Introduction You are generally required to withhold federal income tax from the wages of your employees. 2012 amended tax return form You may also be subject to social security and Medicare taxes under the Federal Insurance Contributions Act (FICA) and federal unemployment tax under the Federal Unemployment Tax Act (FUTA). 2012 amended tax return form You must also withhold Additional Medicare Tax from wages you pay to an employee in excess of $200,000 in a calendar year. 2012 amended tax return form This chapter includes information about these taxes. 2012 amended tax return form You must also pay self-employment tax on your net earnings from farming. 2012 amended tax return form See chapter 12 for information on self-employment tax. 2012 amended tax return form Topics - This chapter discusses: Farm employment, Family employees, Crew leaders, Social security and Medicare taxes, Additional Medicare Tax withholding, Federal income tax withholding, Reporting and paying social security, Medicare, and withheld federal income taxes, and FUTA tax. 2012 amended tax return form Useful Items - You may want to see: Publication 15 (Circular E), Employer's Tax Guide 15-A Employer's Supplemental Tax Guide 15-B Employer's Tax Guide to Fringe Benefits 51 (Circular A), Agricultural Employer's Tax Guide 926 Household Employer's Tax Guide Form (and Instructions) W-2 Wage and Tax Statement W-4 Employee's Withholding Allowance Certificate W-9 Request for Taxpayer Identification Number and Certification 940 Employer's Annual Federal Unemployment (FUTA) Tax Return 943 Employer's Annual Federal Tax Return for Agricultural Employees 943-X Adjusted Employer's Annual Federal Tax Return for Agricultural Employees or Claim for Refund See chapter 16 for information about getting publications and forms. 2012 amended tax return form Farm Employment In general, you are an employer of farmworkers if your employees do any of the following types of work. 2012 amended tax return form Raising or harvesting agricultural or horticultural products on a farm, including raising and feeding of livestock. 2012 amended tax return form Operating, managing, conserving, improving, or maintaining your farm and its tools and equipment. 2012 amended tax return form Services performed in salvaging timber, or clearing land of brush and other debris, left by a hurricane (also known as hurricane labor). 2012 amended tax return form Handling, processing, or packaging any agricultural or horticultural commodity if you produced more than half of the commodity (for a group of up to 20 unincorporated operators, all of the commodity). 2012 amended tax return form Work related to cotton ginning, turpentine, gum resin products, or the operation and maintenance of irrigation facilities. 2012 amended tax return form For more information, see Publication 51 (Circular A). 2012 amended tax return form Generally, a worker who performs services for you is your employee if you have the right to control what will be done and how it will be done. 2012 amended tax return form This is so even when you give the employee freedom of action. 2012 amended tax return form What matters is that you have the right to control the details of how the services are performed. 2012 amended tax return form You are responsible for withholding and paying employment taxes for your employees. 2012 amended tax return form You are also required to file employment tax returns. 2012 amended tax return form These requirements do not apply to amounts that you pay to independent contractors. 2012 amended tax return form See Publication 15-A for more information on how to determine whether an individual providing services is an independent contractor or an employee. 2012 amended tax return form If you employ a family of workers, each worker subject to your control (not just the head of the family) is an employee. 2012 amended tax return form Special rules apply to crew leaders. 2012 amended tax return form See Crew Leaders , later. 2012 amended tax return form Employer identification number (EIN). 2012 amended tax return form   If you have employees, you must have an EIN. 2012 amended tax return form If you do not have an EIN, you may apply for one online. 2012 amended tax return form Go to IRS. 2012 amended tax return form gov and click on the Apply for an EIN Online link under Tools. 2012 amended tax return form You may also apply for an EIN by calling 1-800-829-4933 or 1-800-829-4059 (TDD/TTY for persons who are deaf, hard of hearing, or have a speech disability). 2012 amended tax return form The hours of operation for both numbers are Monday–Friday form 7:00 a. 2012 amended tax return form m. 2012 amended tax return form –7:00 p. 2012 amended tax return form m. 2012 amended tax return form local time (Alaska and Hawaii follow Pacific time). 2012 amended tax return form You can also fax or mail Form SS-4, Application for Employer Identification Number, to the IRS. 2012 amended tax return form Employee's social security number (SSN). 2012 amended tax return form   An employee who does not have an SSN should submit Form SS-5, Application for a Social Security Card, to the Social Security Administration (SSA). 2012 amended tax return form Form SS-5 is available from any SSA office or by calling 1-800-772-1213 (operates 24 hours per day). 2012 amended tax return form It is also available from the SSA's website at www. 2012 amended tax return form socialsecurity. 2012 amended tax return form gov. 2012 amended tax return form   The employee must furnish evidence of age, identity, and U. 2012 amended tax return form S. 2012 amended tax return form citizenship or lawful immigration status permitting employment with the Form SS-5. 2012 amended tax return form An employee who is age 18 or older must appear in person with this evidence at an SSA office. 2012 amended tax return form Form I-9. 2012 amended tax return form    You must verify that each new employee is legally eligible to work in the United States. 2012 amended tax return form This includes completing the Form I-9, Employment Eligibility Verification. 2012 amended tax return form Form I-9 is available from the U. 2012 amended tax return form S. 2012 amended tax return form Citizenship and Immigration Services (USCIS) offices or by calling the Bureau of Citizenship and Immigration Services Forms Request Line at 1-800-870-3676. 2012 amended tax return form Form I-9 is also available from the USCIS website at www. 2012 amended tax return form uscis. 2012 amended tax return form gov. 2012 amended tax return form You can also contact the USCIS at 1-800-375-5283 for more information. 2012 amended tax return form New hire reporting. 2012 amended tax return form   You are required to report any new employee to a designated state new hire registry. 2012 amended tax return form Many states accept a copy of Form W-4 with employer information added. 2012 amended tax return form Visit the Office of Child Support Enforcement website at www. 2012 amended tax return form acf. 2012 amended tax return form hhs. 2012 amended tax return form gov/programs/cse/newhire for more information. 2012 amended tax return form Family Employees Generally, the wages you pay to family members who are your employees are subject to employment taxes. 2012 amended tax return form However, certain exemptions may apply to wages paid to your child, spouse, or parent. 2012 amended tax return form Exemptions for your child. 2012 amended tax return form   Payments for the services of your child under age 18 who works for you in your trade or business (including a farm) are not subject to social security and Medicare taxes. 2012 amended tax return form However, see Nonexempt services of a child or spouse , later. 2012 amended tax return form Payments for the services of your child under age 21 employed by you in other than a trade or business, such as payments for household services in your home, are also not subject to social security or Medicare taxes. 2012 amended tax return form Payments for the services of your child under age 21 employed by you, whether or not in your trade or business, are not subject to FUTA tax. 2012 amended tax return form Although not subject to social security, Medicare, or FUTA tax, the child's wages still may be subject to federal income tax withholding. 2012 amended tax return form Exemptions for your spouse. 2012 amended tax return form   Payments for the services of your spouse who works for you in your trade or business are subject to federal income tax withholding and social security and Medicare taxes, but not FUTA tax. 2012 amended tax return form   Payments for the services of your spouse employed by you in other than a trade or business, such as payments for household services in your home, are not subject to social security, Medicare, or FUTA taxes. 2012 amended tax return form Nonexempt services of a child or spouse. 2012 amended tax return form   Payments for the services of your child or spouse are subject to federal income tax withholding as well as social security, Medicare, and FUTA taxes if he or she works for any of the following entities. 2012 amended tax return form A corporation, even if it is controlled by you. 2012 amended tax return form A partnership, even if you are a partner. 2012 amended tax return form This does not apply to wages paid to your child if each partner is a parent of the child. 2012 amended tax return form An estate or trust, even if it is the estate of a deceased parent. 2012 amended tax return form In these situations, the child or spouse is considered to work for the corporation, partnership, or estate, not you. 2012 amended tax return form Exemptions for your parent. 2012 amended tax return form   Payments for the services of your parent employed by you in your trade or business are subject to federal income tax withholding and social security and Medicare taxes. 2012 amended tax return form Social security and Medicare taxes do not apply to wages paid to your parent for services not in your trade or business, but they do apply to payments for household services in your home if both the following conditions are satisfied. 2012 amended tax return form You have a child living in your home who is under age 18 or has a physical or mental condition that requires care by an adult for at least 4 continuous weeks in a calendar quarter. 2012 amended tax return form You are a widow or widower; or divorced and not remarried; or have a spouse in the home who, because of a physical or mental condition, cannot care for your child for at least 4 continuous weeks in the quarter. 2012 amended tax return form   Wages you pay to your parent are not subject to FUTA tax, regardless of the type of services provided. 2012 amended tax return form Qualified joint venture. 2012 amended tax return form   If spouses elect to be treated as a qualified joint venture instead of a partnership, either spouse may report and pay the employment taxes due on the wages paid to employees using the EIN of that spouse's sole proprietorship. 2012 amended tax return form For more information about qualified joint ventures, see chapter 12. 2012 amended tax return form Crew Leaders If farmworkers are provided by a crew leader, the crew leader may be the employer of the workers. 2012 amended tax return form Social security and Medicare taxes. 2012 amended tax return form   For social security and Medicare tax purposes, the crew leader is the employer of the workers if both of the following requirements are met. 2012 amended tax return form The crew leader pays (either on his or her own behalf or on behalf of the farmer) the workers for their farm labor. 2012 amended tax return form The crew leader has not entered into a written agreement with the farmer under which the crew leader is designated as an employee of the farmer. 2012 amended tax return form Federal income tax withholding. 2012 amended tax return form   If the crew leader is the employer for social security and Medicare tax purposes, the crew leader is the employer for federal income tax withholding purposes. 2012 amended tax return form Federal unemployment (FUTA) tax. 2012 amended tax return form   For FUTA tax purposes, the crew leader is the employer of the workers if, in addition to the earlier requirements, either of the following requirements are met. 2012 amended tax return form The crew leader is registered under the Migrant and Seasonal Agricultural Worker Protection Act. 2012 amended tax return form Substantially all crew members operate or maintain mechanized equipment provided by the crew leader as part of the service to the farmer. 2012 amended tax return form   The farmer is the employer of workers furnished by a crew leader in all other situations. 2012 amended tax return form In addition, the farmer is the employer of workers furnished by a registered crew leader if the workers are the employees of the farmer under the common-law test. 2012 amended tax return form For example, some farmers employ individuals to recruit farmworkers exclusively for them. 2012 amended tax return form Although these individuals may be required to register under the Migrant and Seasonal Agricultural Worker Protection Act, the workers are employed directly by the farmer. 2012 amended tax return form The farmer is the employer in these cases. 2012 amended tax return form For information about common-law employees, see section 1 of Publication 15-A. 2012 amended tax return form For information about crew leaders, see the Department of Labor website at www. 2012 amended tax return form dol. 2012 amended tax return form gov/whd/regs/compliance/whdfs49. 2012 amended tax return form htm. 2012 amended tax return form Social Security and Medicare Taxes All cash wages you pay to an employee during the year for farmwork are subject to social security and Medicare taxes if you meet either of the following tests. 2012 amended tax return form You pay the employee $150 or more in cash wages (count all wages paid on a time, piecework, or other basis) during the year for farmwork (the $150 test). 2012 amended tax return form The $150 test applies separately to each farmworker that you employ. 2012 amended tax return form If you employ a family of workers, each member is treated separately. 2012 amended tax return form Do not count wages paid by other employers. 2012 amended tax return form You pay cash and noncash wages of $2,500 or more during the year to all your employees for farmwork (the $2,500 test). 2012 amended tax return form If the $2,500 test for the group is not met, the $150 test for an employee still applies. 2012 amended tax return form Exceptions. 2012 amended tax return form   Annual cash wages of less than $150 you pay to a seasonal farmworker are not subject to social security and Medicare taxes, even if you pay $2,500 or more to all your farmworkers. 2012 amended tax return form However, these wages count toward the $2,500 test for determining whether other farmworkers' wages are subject to social security and Medicare taxes. 2012 amended tax return form   A seasonal farmworker is a worker who: Works as a hand-harvest laborer, Is paid piece rates in an operation usually paid on this basis in the region of employment, Commutes daily from his or her permanent home to the farm, and Worked in agriculture less than 13 weeks in the preceding calendar year. 2012 amended tax return form   See Family Employees , earlier, for certain exemptions from social security and Medicare taxes that apply to your child, spouse, and parent. 2012 amended tax return form Religious exemption. 2012 amended tax return form   An exemption from social security and Medicare taxes is available to members of a recognized religious group or division opposed to public insurance. 2012 amended tax return form This exemption is available only if both the employee and the employer are members of the group or division. 2012 amended tax return form   For more information, see Publication 517, Social Security and Other Information for Members of the Clergy and Religious Workers. 2012 amended tax return form Cash wages. 2012 amended tax return form   Only cash wages paid to farmworkers are subject to social security and Medicare taxes. 2012 amended tax return form Cash wages include checks, money orders, and any kind of money or cash. 2012 amended tax return form   Only cash wages subject to social security and Medicare taxes are credited to your employees for social security benefit purposes. 2012 amended tax return form Payments not subject to these taxes, such as commodity wages, do not contribute to your employees' social security coverage. 2012 amended tax return form For information about social security benefits, contact the SSA at 1-800-772-1213 or online at www. 2012 amended tax return form socialsecurity. 2012 amended tax return form gov. 2012 amended tax return form Noncash wages. 2012 amended tax return form    Noncash wages include food, lodging, clothing, transportation passes, and other goods and services. 2012 amended tax return form Noncash wages paid to farmworkers, including commodity wages, are not subject to social security and Medicare taxes. 2012 amended tax return form However, they are subject to these taxes if the substance of the transaction is a cash payment. 2012 amended tax return form For information on lodging provided as a condition of employment, see Publication 15-B. 2012 amended tax return form   Report the value of noncash wages in box 1 of Form W-2 together with cash wages. 2012 amended tax return form Do not show noncash wages in box 3 or in box 5, (unless the substance of the transaction is a cash payment). 2012 amended tax return form Tax rates and social security wage limit. 2012 amended tax return form   For 2013, the employer and the employee will pay the following taxes. 2012 amended tax return form The employer and employee each pay 6. 2012 amended tax return form 2% of cash wages for social security tax (old-age, survivors, and disability insurance). 2012 amended tax return form The employer and employee each pay 1. 2012 amended tax return form 45% of cash wages for Medicare tax (hospital insurance). 2012 amended tax return form The employee pays 0. 2012 amended tax return form 9% of cash wages in excess of $200,000 for Additional Medicare Tax. 2012 amended tax return form Wage limit. 2012 amended tax return form   The limit on wages subject to the social security tax for 2013 is $113,700. 2012 amended tax return form There is no limit on wages subject to the Medicare tax. 2012 amended tax return form All covered wages are subject to the Medicare tax. 2012 amended tax return form Additionally, all wages in excess of $200,000 are subject to Additional Medicare Tax withholding. 2012 amended tax return form Paying employee's share. 2012 amended tax return form   If you would rather pay the employee's share of social security and Medicare taxes without deducting it from his or her wages, you may do so. 2012 amended tax return form It is additional income to the employee. 2012 amended tax return form You must include it in box 1 of the employee's Form W-2, but do not count it as social security and Medicare wages (boxes 3 and 5 on Form W-2) or as wages for federal unemployment (FUTA) tax purposes. 2012 amended tax return form Example. 2012 amended tax return form Jane operates a small family fruit farm. 2012 amended tax return form She employs day laborers in the picking season to enable her to timely get her crop to market. 2012 amended tax return form She does not deduct the employees' share of social security and Medicare taxes from their pay; instead, she pays it on their behalf. 2012 amended tax return form When her accountant, Susan, prepares the employees' Forms W-2, she adds each employee's share of social security and Medicare taxes paid by Jane to the employee's wage income (box 1 of Form W-2), but does not include it in box 3 (social security wages) or box 5 (Medicare wages and tips). 2012 amended tax return form For 2013, Jane paid Mary $1,000 during the year. 2012 amended tax return form Susan enters $1,076. 2012 amended tax return form 50 in box 1 of Mary's Form W-2 ($1,000 wages plus $76. 2012 amended tax return form 50 social security and Medicare taxes paid for Mary). 2012 amended tax return form She enters $1,000 in boxes 3 and 5 of Mary's Form W-2. 2012 amended tax return form Additional Medicare Tax. 2012 amended tax return form   In addition to withholding Medicare tax at 1. 2012 amended tax return form 45%, you must withhold a 0. 2012 amended tax return form 9% Additional Medicare Tax from wages you pay to an employee in excess of $200,000 in a calendar year. 2012 amended tax return form You are required to begin withholding Additional Medicare Tax in the pay period in which you pay wages in excess of $200,000 to an employee and continue to withhold it each pay period until the end of the calendar year. 2012 amended tax return form Additional Medicare Tax is only imposed on the employee. 2012 amended tax return form There is no employer share of Additional Medicare Tax. 2012 amended tax return form All wages that are subject to Medicare tax are subject to Additional Medicare Tax withholding if paid in excess of the $200,000 threshold. 2012 amended tax return form   For more information on what wages are subject to Medicare tax, see the chart, Special Rules for Various Types of Services and Payments, in section 15 of Publication 15 (Circular E). 2012 amended tax return form For more information on Additional Medicare Tax, visit IRS. 2012 amended tax return form gov and enter “Additional Medicare Tax” in the search box. 2012 amended tax return form Federal Income Tax Withholding If the cash wages you pay to farmworkers are subject to social security and Medicare taxes, they are also subject to federal income tax withholding. 2012 amended tax return form Although noncash wages are subject to federal income tax, withhold income tax only if you and the employee agree to do so. 2012 amended tax return form The amount to withhold is figured on gross wages without taking out social security and Medicare taxes, union dues, insurance, etc. 2012 amended tax return form Form W-4. 2012 amended tax return form   Generally, the amount of federal income tax you withhold is based on the employee's marital status and withholding allowances claimed on the employee's Form W-4. 2012 amended tax return form In general, an employee can claim withholding allowances on Form W-4 equal to the number of exemptions the employee will be entitled to claim on his or her tax return. 2012 amended tax return form An employee may also be able to claim a special withholding allowance and allowances for estimated deductions and credits. 2012 amended tax return form   Do not withhold federal income tax from the wages of an employee who, by filing Form W-4, certifies that he or she had no federal income tax liability last year and anticipates no liability for the current year. 2012 amended tax return form   You should give each new employee a Form W-4 as soon as you hire the employee. 2012 amended tax return form For Spanish-speaking employees, you may use Formulario W-4(SP) which is the Spanish translation of Form W-4. 2012 amended tax return form Have the employee complete and return the form to you before the first payday. 2012 amended tax return form If the employee does not return the completed form, you must withhold federal income tax as if the employee is single and claims no withholding allowances. 2012 amended tax return form New Form W-4 for 2014. 2012 amended tax return form   You should make the 2014 Form W-4 available to your employees and encourage them to check their income tax withholding for 2014. 2012 amended tax return form Those employees who owed a large amount of tax or received a large refund for 2013 may want to submit a new Form W-4. 2012 amended tax return form You cannot accept substitute Forms W-4 developed by employees. 2012 amended tax return form How to figure withholding. 2012 amended tax return form   You can use one of several methods to determine the amount to withhold. 2012 amended tax return form The methods are described in Publication 51 (Circular A), which contains tables showing the correct amount of federal income tax you should withhold. 2012 amended tax return form Publication 51 (Circular A) also contains additional information about federal income tax withholding. 2012 amended tax return form Nonemployee compensation. 2012 amended tax return form   Generally, you do not have to withhold federal income tax on payments for services to individuals who are not your employees. 2012 amended tax return form However, you may be required to report these payments on Form 1099-MISC, Miscellaneous Income, and to withhold under the backup withholding rules. 2012 amended tax return form For more information, see the Instructions for Form 1099-MISC. 2012 amended tax return form Required Notice to Employees About Earned Income Credit (EIC) You must provide notification about EIC to each employee who worked for you at any time during the year and from whom you did not withhold any federal income tax. 2012 amended tax return form However, you do not have to notify employees who claim exemption from federal income tax withholding on Form W-4. 2012 amended tax return form You meet the notification requirement by giving each employee any of the following. 2012 amended tax return form Form W-2, which contains EIC notification on the back of Copy B. 2012 amended tax return form A substitute Form W-2 with the exact EIC wording shown on the back of copy B of Form W-2. 2012 amended tax return form Notice 797, Possible Federal Tax Refund Due to the Earned Income Credit (EIC). 2012 amended tax return form Your own written statement with the exact wording of Notice 797. 2012 amended tax return form For more information, see Publication 51 (Circular A). 2012 amended tax return form Reporting and Paying Social Security, Medicare, and Withheld Federal Income Taxes You must withhold federal income, social security, and Medicare taxes required to be withheld from the salaries and wages of your employees. 2012 amended tax return form You are liable for the payment of these taxes to the federal government whether or not you collect them from your employees. 2012 amended tax return form If, for example, you withhold less than the correct tax from an employee's wages, you are still liable for the full amount. 2012 amended tax return form You must also pay the employer's share of social security and Medicare taxes. 2012 amended tax return form There is no employer share of Additional Medicare Tax. 2012 amended tax return form Form 943. 2012 amended tax return form   Report withheld federal income tax, social security tax, and Medicare tax on Form 943. 2012 amended tax return form Your 2013 Form 943 is due by January 31, 2014 (or February 10, 2014, if you made deposits on time in full payment of the taxes due for the year). 2012 amended tax return form Deposits. 2012 amended tax return form   Generally, you must deposit both the employer and employee shares of social security and Medicare taxes and federal income tax withheld during the year. 2012 amended tax return form However, you may make payments with Form 943 instead of depositing them if you accumulate less than a $2,500 tax liability (“Total taxes after adjustments” line on Form 943) during the year and you pay in full with a timely filed return. 2012 amended tax return form   For more information on deposit rules, see Publication 51 (Circular A). 2012 amended tax return form Electronic deposit requirement. 2012 amended tax return form   You must use electronic funds transfer to make all federal tax deposits. 2012 amended tax return form Generally, electronic funds transfers are made using EFTPS. 2012 amended tax return form If you do not want to use EFTPS, you can arrange for your tax professional, financial institution, payroll service, or other trusted third party to make electronic deposits on your behalf. 2012 amended tax return form Also, you may arrange for your financial institution to initiate a same-day wire payment on your behalf. 2012 amended tax return form EFTPS is a free service provided by the Department of Treasury. 2012 amended tax return form Services provided by your tax professional, financial institution, payroll service, or other third party may have a fee. 2012 amended tax return form   For more information on making federal tax deposits, see section 7 of Publication 51 (Circular A). 2012 amended tax return form To get more information about EFTPS or to enroll in EFTPS, visit www. 2012 amended tax return form eftps. 2012 amended tax return form gov or call 1-800-555-4477 or 1-800-733-4829 (TDD). 2012 amended tax return form Additional information about EFTPS is also available in Publication 966. 2012 amended tax return form Form W-2. 2012 amended tax return form   By January 31, you must furnish each employee a Form W-2 showing total wages for the previous year and total federal income tax, social security tax, and Medicare tax withheld. 2012 amended tax return form However, if an employee stops working for you and requests the form earlier, you must give it to the employee within 30 days of the later of the following dates. 2012 amended tax return form The date the employee requests the form. 2012 amended tax return form The date you make your final payment of wages to the employee. 2012 amended tax return form Compensation paid to H-2A visa holders. 2012 amended tax return form   Report compensation of $600 or more paid to foreign agricultural workers who entered the country on H-2A visas in box 1 of Form W-2. 2012 amended tax return form Compensation paid to H-2A workers for agricultural labor performed in connection with this visa is not subject to social security and Medicare taxes, and therefore should not be reported as wages subject to social security tax (line 2), Medicare tax (line 4), or Additional Medicare Tax (line 6) on Form 943, and should not be reported as social security wages (box 3) or Medicare wages (box 5) on Form W-2. 2012 amended tax return form   An employer is not required to withhold federal income tax from compensation it pays to an H-2A worker for agricultural labor performed in connection with this visa unless the worker asks for withholding and the employer agrees. 2012 amended tax return form In this case, the worker must give the employer a completed Form W-4. 2012 amended tax return form Federal income tax withheld should be reported on Form 943, line 8, and in box 2 of Form W-2. 2012 amended tax return form   These reporting rules apply when the H-2A worker provides his or her taxpayer identification number (TIN) to the employer. 2012 amended tax return form For the rules relating to backup withholding and reporting when the H-2A worker does not provide a TIN, see the Instructions for Form 1099-MISC and the Instructions for Form 945. 2012 amended tax return form Trust fund recovery penalty. 2012 amended tax return form   If you are responsible for withholding, accounting for, depositing, or paying federal withholding taxes and willfully fail to do so, you can be held liable for a penalty equal to the withheld tax not paid. 2012 amended tax return form A responsible person can be an officer of a corporation, a partner, a sole proprietor, or an employee of any form of business. 2012 amended tax return form A trustee or agent with authority over the funds of the business can also be held responsible for the penalty. 2012 amended tax return form   Willfully means voluntarily, consciously, and intentionally. 2012 amended tax return form Paying other expenses of the business instead of the taxes due is acting willfully. 2012 amended tax return form Consequences of treating an employee as an independent contractor. 2012 amended tax return form   If you classify an employee as an independent contractor and you have no reasonable basis for doing so, you may be held liable for employment taxes for that worker. 2012 amended tax return form See Publication 15-A for more information. 2012 amended tax return form Federal Unemployment (FUTA) Tax You must pay FUTA tax if you meet either of the following tests. 2012 amended tax return form You paid cash wages of $20,000 or more to farmworkers in any calendar quarter during the current or preceding calendar year. 2012 amended tax return form You employed 10 or more farmworkers for some part of at least 1 day during any 20 or more different calendar weeks during the current or preceding calendar year. 2012 amended tax return form These rules do not apply to exempt services of your spouse, your parents, or your children under age 21. 2012 amended tax return form See Family Employees , earlier. 2012 amended tax return form Alien farmworkers. 2012 amended tax return form   Wages paid to aliens admitted on a temporary basis to the United States to perform farmwork (also known as “H-2A visa workers”) are exempt from FUTA tax. 2012 amended tax return form However, include your employment of these workers and the wages you paid them to determine whether you meet either of the above tests. 2012 amended tax return form Commodity wages. 2012 amended tax return form   Payments in kind for farm labor are not cash wages. 2012 amended tax return form Do not count them to figure whether you are subject to FUTA tax or to figure how much tax you owe. 2012 amended tax return form Tax rate and credit. 2012 amended tax return form   The gross FUTA tax rate is 6. 2012 amended tax return form 0% of the first $7,000 cash wages you pay to each employee during the year. 2012 amended tax return form However, you are given a credit of up to 5. 2012 amended tax return form 4% of the first $7,000 cash wages you pay to each employee for the state unemployment tax you pay. 2012 amended tax return form If your state tax rate (experience rate) is less than 5. 2012 amended tax return form 4%, you may still be allowed the full 5. 2012 amended tax return form 4% credit. 2012 amended tax return form   If you do not pay the state tax, you cannot take the credit. 2012 amended tax return form If you are exempt from state unemployment tax for any reason, the full 6. 2012 amended tax return form 0% rate applies. 2012 amended tax return form See the Instructions for Form 940 for additional information. 2012 amended tax return form More information. 2012 amended tax return form   For more information on FUTA tax, see Publication 51 (Circular A). 2012 amended tax return form Reporting and Paying FUTA Tax The FUTA tax is imposed on you as the employer. 2012 amended tax return form It must not be collected or deducted from the wages of your employees. 2012 amended tax return form Form 940. 2012 amended tax return form   Report FUTA tax on Form 940. 2012 amended tax return form The 2013 Form 940 is due January 31, 2014 (or February 10, 2014, if you timely deposited the full amount of your 2013 FUTA tax). 2012 amended tax return form Deposits. 2012 amended tax return form   If at the end of any calendar quarter you owe, but have not yet deposited, more than $500 in FUTA tax for the year, you must make a deposit by the end of the following month. 2012 amended tax return form If the undeposited tax is $500 or less at the end of a quarter, you do not have to deposit it. 2012 amended tax return form You can add it to the tax for the next quarter. 2012 amended tax return form If the total undeposited tax is more than $500 at the end of the next quarter, a deposit will be required. 2012 amended tax return form If the total undeposited tax at the end of the 4th quarter is $500 or less, you can either make a deposit or pay it with your return by the January 31, 2014, due date. 2012 amended tax return form Electronic deposit requirement. 2012 amended tax return form   You must use electronic funds transfer to make all federal tax deposits. 2012 amended tax return form Generally, electronic funds transfers are made using EFTPS. 2012 amended tax return form If you do not want to use EFTPS, you can arrange for your tax professional, financial institution, payroll service, or other trusted third party to make electronic deposits on your behalf. 2012 amended tax return form Also, you may arrange for your financial institution to initiate a same-day wire payment on your behalf. 2012 amended tax return form EFTPS is a free service provided by the Department of Treasury. 2012 amended tax return form Services provided by your tax professional, financial institution, payroll service, or other third party may have a fee. 2012 amended tax return form   For more information on making federal tax deposits, see section 7 of Publication 51 (Circular A). 2012 amended tax return form To get more information about EFTPS or to enroll in EFTPS, visit www. 2012 amended tax return form eftps. 2012 amended tax return form gov or call 1-800-555-4477 or 1-800-733-4829 (TDD). 2012 amended tax return form Additional information about EFTPS is also available in Publication 966. 2012 amended tax return form Prev  Up  Next   Home   More Online Publications