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Easy 1040

How Do I Amend My 2012 Taxes2012 Amended Tax FormFile An Amended Return OnlineIrs Form1040Free Fillable FormsWhere Can I File My 2010 Taxes For Free1040 Ez E FileFiling Free State Taxes OnlineMilitary Tax Return CalculatorWww Freefilefillableforms Com Ffa Freefileforms HtmFree Irs Tax FilingFile 2011 Taxes FreeFile 2012 Taxes ElectronicallyHr Block TaxesTax Amendment Form 2010I Need To Print A Free 1040x FormAmending Federal Tax Return2011 Ez FormFile 1040ez FreeIrs Forms 1040 EzFreefile Irs GovAmend 2009 Tax Return OnlineAmend Federal Tax ReturnAmend 2011 Tax Return OnlineFree 1040x SoftwareWww Mifastfile Org2012 Tax Forms 1040ezFree State Income Tax Forms Online2012 Irs Tax FormsEfile 2012H And R Block Online TaxesHow Do I Amend My 2012 Tax Return1040 FormH And R Block EfileH&r Block Online Taxes2011 Form 1040Taxact Online 2011Efile 2011 TaxAmend 2012 Tax ReturnAmended 1040 Form

Easy 1040

Easy 1040 Publication 938 - Introductory Material Table of Contents Introduction Introduction Section references are to the Internal Revenue Code unless otherwise noted. Easy 1040 This publication contains directories relating to real estate mortgage investment conduits (REMICs) and collateralized debt obligations (CDOs). Easy 1040 The directory for each calendar quarter is based on information submitted to the IRS during that quarter. Easy 1040 For each quarter, there is a directory of new REMICs and CDOs and, if required, a section containing amended listings. Easy 1040 You can use the directory to find the representative of the REMIC or the issuer of the CDO from whom you can request tax information. Easy 1040 The amended listing section shows changes to previously listed REMICs and CDOs. Easy 1040 The update for each calendar quarter will be added to this publication approximately six weeks after the end of the quarter. Easy 1040 Publication 938 is only available on the Internet. Easy 1040 To get Publication 938, including prior issues, visit IRS. Easy 1040 gov. Easy 1040 Future developments. Easy 1040   The IRS has created a page on IRS. Easy 1040 gov that includes information about Publication 938 at www. Easy 1040 irs. Easy 1040 gov/pub938. Easy 1040 Information about any future developments affecting Publication 938 (such as legislation enacted after we release it) will be posted on that page. Easy 1040 Other information. Easy 1040   Publication 550, Investment Income and Expenses, discusses the tax treatment that applies to holders of these investment products. Easy 1040 For other information about REMICs, see sections 860A through 860G and the regulations issued under those sections. Easy 1040 Prev  Up  Next   Home   More Online Publications
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Limits of Free File Fillable Forms

Free File Fillable Forms is a good tool for many taxpayers, especially those who like to do their own taxes and want to take advantage of a free offer. Depending on the forms you must file and the information you need to provide, you may not be able to use Free File Fillable Forms to complete, and e-file your return. Below we list circumstances that will prevent you from filing your return electronically using Fillable Forms. If these apply to you, you can still use Fillable Forms, but you won't be able to e-file.  

  • You need to use one of the few forms and/or schedules that is not supported by e-file.
  • Free File Fillable Forms does not accept miscellaneous pdf attachments and you are required to attach a statement to your return. 
  • You cannot use Free File Fillable Forms to prepare and e-file your state income tax return. If your income is $58,000 or less, you may want to use Free File.
  • The program supports the use of only one six-digit Identity Protection Personal Identification Number (IP PIN). On Married filing jointly returns, the person who has been issued the IP PIN must be listed as the first (or Primary) taxpayer on the return. You will not be able to use Free File Fillable Forms to e-file your return if you and your spouse are filing jointly and you each have a unique six-digit Identity Protection Personal Identification Number (IP PIN). There is no place to enter a second IP PIN.
  • You will not be able to e-file if you have more than 30W-2s or W2-Gs.

Below is the list of unsupported forms in numerical order, a few unsupported schedules, and a couple of other issues you should know about before you start.   

Forms

  • Form 4562, Depreciation and Amortization (Including Information on Listed Property): Form 4562 is not available from the “Add/View Forms” menu. This form is an attachment to Schedule C and Schedule E. The form is selected from the “Add” button directly from Schedule C and Schedule E. If you need to associate more than one Form 4562 to a Schedule C or Schedule E, you must create another Schedule C or Schedule E to associate with the additional Form 4562. The asset shown on Form 4562 must be listed on its “parent” Schedule C or Schedule E.
  • Form 6198, At Risk Limitations: Form 6198 is not available from the “Add/View Forms” menu.  You can add this form only from Schedule C. You may only associate one Form 6198 to a Schedule C. If you need to associate more than one Form 6198 to a Schedule C, create another Schedule C’s for the same business. Associate one form 6198 to one Schedule C and the other form 6198 to the second Schedule C (properly allocating all other income and expense items).
  • Form 8283, Noncash Charitable Contributions with 1098C: Contributions of Motor Vehicles, Boats and Airplanes: Taxpayers are required to submit Form 1098C with Form 8283 if they donate a vehicle valued at $500 or more. Form 1098C is not supported; therefore, the taxpayer must mail in the return with the Form 1098C attached. The program restricts the user to attaching no more than four (4) 8283 Forms.
  • Form 8829, Expense for Business Use of Home: This form is not available from the “Add/View Forms” menu. You can only attach Form 8829 by first opening the associated Schedule C. You may only associate one Form 8829 to a Schedule C. If you need to associate more than one Form 8829 to a Schedule C, create another  Schedule C’s for the same business – associate one form 8829 to one Schedule C and the other form 8829 to the second Schedule C (properly allocating all other income and expense items).
  • Form 8889, Health Savings Accounts (HSAs):  If the Death of Account Beneficiary provision applies to you and you are not required to complete Part I, you will not be able to e-file your return with form 8889. You may complete your return, using Form 8889 and mail in your return.
  • Form 8936, Qualified Plug-in Electric Drive Motor Vehicle Credit: This form will only support one qualifying vehicle. If you are trying to claim more than one qualifying vehicle, you will not be able to use this form and e-file your return.
  • Form 8938, Statement of Foreign Financial Assets: Taxpayers may only attach one of these forms to their return.
  • Form 8949, Sales and Other Dispositions of Capital Assets: This form does not support text (e.g., “VARIOUS” or “INHERITED”) in columns used for dates (numbers).
  • Temporary Limitation for Form 8959, Additional Medicare Tax: If you are attaching this form and Form 8960, you will not be able to successfully e-file your return until after March 27.
  • Temporary Limitation for Form 8960, Net Investment Income Tax Individuals, Estates and Trusts: If you are attaching this form and Form 8959, you will not be able to successfully e-file your return until after March 27.

Schedules

  • Schedule 8812, Child Tax Credit (Special Circumstances): For each child that meets the Special Circumstances described in the instructions, you must only select the “No” box, for the applicable lines A – D, in Part 1. Do not select both boxes, per the instructions for the schedule. Presently, Schedule 8812 will not accept more than four (4) qualifying children and you are not able to add more than one (1) Schedule 8812 to a return. If you have more than four (4) qualifying children to add to Schedule 8812, you will not be able to e-file the return.
  • Schedule C, Profit or Loss from Business: The form does not support the Simplified Method for calculating expenses for business use of your home. You must use Form 8829 to calculate the expense.
  • Schedule D, Capital Gains and Losses: Does not support text (e.g., “EXPIRED” or “WORTHLESS”) in columns used for dates (numbers)
  • Schedule E, Supplemental Income and Loss: The program does not support multiple copies of page 2 of Schedule E. Taxpayers who need to list more entities than Parts II, III and IV allow will not be able to use this program to complete their tax return.
  • W-2 and W2-G: The program will not allow the user to add more than thirty (30) W-2s or thirty (30) W2-Gs.

Additional Issues

  • Tax Literals: We use "tax literals" to describe information that taxpayers sometimes enter in small grey boxes located to the left of the input field on tax forms. The program only supports one tax literal on any single line for forms 1040, 1040A and 1040EZ. Generally, a tax literal will consist of two grey boxes, the first box is for the description (text) and the second is for the related amount. Where lines have one tax literal box, only the description can be entered in the field. If your return requires multiple literals on a single line (either multiple text only fields or multiple text and amount fields) or if you have a literal that is required on a form other than forms 1040, 1040A and 1040EZ, you may not be able to e-file using this program. Additionally, if you need to enter a tax literal, you must type in the tax literal exactly as written in the instructions. Incorrect capitalization and/or spelling of tax literals will result in a rejected return.
  • International (Foreign) Filers: Taxpayers who need to file a Foreign Employer Compensation Record (FEC) will not be able to e-file their return using Fillable Forms. Additionally, taxpayers with a foreign address, a spouse or a child who needs to be identified on the return, and a spouse or dependent without a SSN or an ITIN may not be able to e-file using Fillable Forms.
    • Foreign phone numbers are not supported on 1040 forms or on Step 2 Section 5- Payment. 
    • Direct Debits for payments on a balance due:  International filers that have a U.S. bank should use that bank to debit funds from their account. If there is no U.S. bank account, international filers should contact their foreign bank and find out if the bank has a U.S. affiliate. If there is a U.S. affiliate bank, international taxpayers should use the affiliate bank's (domestic) RTN in any payment request submitted to IRS.
    • Direct deposit of refund into foreign bank: You cannot direct deposit a refund into a foreign bank account. Direct deposit is only available for bank accounts located in the United States.

 

Page Last Reviewed or Updated: 25-Mar-2014

The Easy 1040

Easy 1040 1. Easy 1040   Investment Income Table of Contents Topics - This chapter discusses: Useful Items - You may want to see: General InformationSSN for joint account. Easy 1040 Custodian account for your child. Easy 1040 Penalty for failure to supply SSN. Easy 1040 Certification. Easy 1040 Underreported interest and dividends. Easy 1040 How to stop backup withholding due to underreporting. Easy 1040 How to stop backup withholding due to an incorrect identification number. Easy 1040 Reporting backup withholding. Easy 1040 Nonresident aliens. Easy 1040 Penalties. Easy 1040 Savings account with parent as trustee. Easy 1040 Interest IncomeInterest not reported on Form 1099-INT. Easy 1040 Nominees. Easy 1040 Incorrect amount. Easy 1040 Information reporting requirement. Easy 1040 Taxable Interest — General Below-Market Loans U. Easy 1040 S. Easy 1040 Savings Bonds U. Easy 1040 S. Easy 1040 Treasury Bills, Notes, and Bonds Bonds Sold Between Interest Dates Insurance State or Local Government Obligations Discount on Debt InstrumentsOriginal Issue Discount (OID) Market Discount Bonds Discount on Short-Term Obligations Election To Report All Interest as OID When To Report Interest IncomeConstructive receipt. Easy 1040 How To Report Interest IncomeSchedule B (Form 1040A or 1040). Easy 1040 Worksheet for savings bonds distributed from a retirement or profit-sharing plan. Easy 1040 File Form 1099-INT with the IRS. Easy 1040 Dividends and Other DistributionsDividends not reported on Form 1099-DIV. Easy 1040 Nominees. Easy 1040 Ordinary Dividends Capital Gain Distributions Nondividend Distributions Liquidating Distributions Distributions of Stock and Stock Rights Other Distributions How To Report Dividend IncomeElection. Easy 1040 Independent contractor. Easy 1040 Investment interest deducted. Easy 1040 Exception 1. Easy 1040 Exception 2. Easy 1040 Undistributed capital gains. Easy 1040 File Form 1099-DIV with the IRS. Easy 1040 Stripped Preferred Stock REMICs, FASITs, and Other CDOsREMICs Collateralized Debt Obligations (CDOs) FASITs S CorporationsLimit on losses and deductions. Easy 1040 Passive activity losses. Easy 1040 Form 8582. Easy 1040 Investment ClubsInvestments in name of member. Easy 1040 Tax Treatment of the Club Topics - This chapter discusses: Interest Income , Discount on Debt Instruments , When To Report Interest Income , How To Report Interest Income , Dividends and Other Distributions , How To Report Dividend Income , Stripped Preferred Stock , Real estate mortgage investment conduits (REMICs), financial asset securitization investment trusts (FASITs), and other collateralized debt obligations (CDOs) , S Corporations , and Investment Clubs . Easy 1040 Useful Items - You may want to see: Publication 525 Taxable and Nontaxable Income 537 Installment Sales 590 Individual Retirement Arrangements (IRAs) 925 Passive Activity and At-Risk Rules 1212 Guide to Original Issue Discount (OID) Instruments Form (and Instructions) Schedule B (Form 1040A or 1040) Interest and Ordinary Dividends Schedule D (Form 1040) Capital Gains and Losses 1040 U. Easy 1040 S. Easy 1040 Individual Income Tax Return 1040A U. Easy 1040 S. Easy 1040 Individual Income Tax Return 1040EZ Income Tax Return for Single and Joint Filers With No Dependents 1099 General Instructions for Certain Information Returns 2439 Notice to Shareholder of Undistributed Long-Term Capital Gains 3115 Application for Change in Accounting Method 6251 Alternative Minimum Tax — Individuals 8582 Passive Activity Loss Limitations 8615 Tax for Certain Children Who Have Unearned Income 8814 Parents' Election To Report Child's Interest and Dividends 8815 Exclusion of Interest From Series EE and I U. Easy 1040 S. Easy 1040 Savings Bonds Issued After 1989 8818 Optional Form To Record Redemption of Series EE and I U. Easy 1040 S. Easy 1040 Savings Bonds Issued After 1989 8824 Like-Kind Exchanges 8949 Sales and Other Dispositions of Capital Assets 8960 Net Investment Income Tax—Individuals, Estates, and Trusts See chapter 5, How To Get Tax Help , for information about getting these publications and forms. Easy 1040 General Information A few items of general interest are covered here. Easy 1040 Recordkeeping. Easy 1040 You should keep a list showing sources and investment income amounts you receive during the year. Easy 1040 Also keep the forms you receive showing your investment income (Forms 1099-INT, Interest Income, and 1099-DIV, Dividends and Distributions, for example) as an important part of your records. Easy 1040 Net investment income tax (NIIT). Easy 1040   Beginning in 2013, you may be subject to the NIIT. Easy 1040 The NIIT is a 3. Easy 1040 8% tax on the lesser of your net investment income or the amount of your modified adjusted gross income (MAGI) that is over a threshold amount based on your filing status. Easy 1040    Filing Status Threshold Amount Married filing jointly $250,000 Married filing separately $125,000 Single $200,000 Head of household (with qualifying person) $200,000 Qualifying Widow(er) with dependent child $250,000    For more information, see Form 8960 and Instructions for Form 8960. Easy 1040 Tax on unearned income of certain children. Easy 1040   Part of a child's 2013 unearned income may be taxed at the parent's tax rate. Easy 1040 This may happen if all of the following are true. Easy 1040 The child had more than $2,000 of unearned income. Easy 1040 The child is required to file a tax return. Easy 1040 The child was: Under age 18 at the end of 2013, Age 18 at the end of 2013 and did not have earned income that was more than half of the child's support, or A full-time student over age 18 and under age 24 at the end of 2013 and did not have earned income that was more than half of the child's support. Easy 1040 At least one of the child's parents was alive at the end of 2013. Easy 1040 The child does not file a joint return for 2013. Easy 1040 A child born on January 1, 1996, is considered to be age 18 at the end of 2013; a child born on January 1, 1995, is considered to be age 19 at the end of 2013; a child born on January 1, 1990, is considered to be age 24 at the end of 2013. Easy 1040   If all of these statements are true, Form 8615 must be completed and attached to the child's tax return. Easy 1040 If any of these statements is not true, Form 8615 is not required and the child's income is taxed at his or her own tax rate. Easy 1040    However, the parent can choose to include the child's interest and dividends on the parent's return if certain requirements are met. Easy 1040 Use Form 8814 for this purpose. Easy 1040   For more information about the tax on unearned income of children and the parents' election, see Publication 929, Tax Rules for Children and Dependents. Easy 1040 Beneficiary of an estate or trust. Easy 1040   Interest, dividends, and other investment income you receive as a beneficiary of an estate or trust is generally taxable income. Easy 1040 You should receive a Schedule K-1 (Form 1041), Beneficiary's Share of Income, Deductions, Credits, etc. Easy 1040 , from the fiduciary. Easy 1040 Your copy of Schedule K-1 (Form 1041) and its instructions will tell you where to report the income on your Form 1040. Easy 1040 Social security number (SSN). Easy 1040   You must give your name and SSN or individual tax identification number (ITIN) to any person required by federal tax law to make a return, statement, or other document that relates to you. Easy 1040 This includes payers of interest and dividends. Easy 1040 If you do not give your SSN or ITIN to the payer of interest, you may have to pay a penalty. Easy 1040 SSN for joint account. Easy 1040   If the funds in a joint account belong to one person, list that person's name first on the account and give that person's SSN to the payer. Easy 1040 (For information on who owns the funds in a joint account, see Joint accounts , later. Easy 1040 ) If the joint account contains combined funds, give the SSN of the person whose name is listed first on the account. Easy 1040 This is because only one name and SSN can be shown on Form 1099. Easy 1040   These rules apply both to joint ownership by a married couple and to joint ownership by other individuals. Easy 1040 For example, if you open a joint savings account with your child using funds belonging to the child, list the child's name first on the account and give the child's SSN. Easy 1040 Custodian account for your child. Easy 1040   If your child is the actual owner of an account that is recorded in your name as custodian for the child, give the child's SSN to the payer. Easy 1040 For example, you must give your child's SSN to the payer of dividends on stock owned by your child, even though the dividends are paid to you as custodian. Easy 1040 Penalty for failure to supply SSN. Easy 1040   You will be subject to a penalty if, when required, you fail to: Include your SSN on any return, statement, or other document, Give your SSN to another person who must include it on any return, statement, or other document, or Include the SSN of another person on any return, statement, or other document. Easy 1040 The penalty is $50 for each failure up to a maximum penalty of $100,000 for any calendar year. Easy 1040   You will not be subject to this penalty if you can show that your failure to provide the SSN was due to reasonable cause and not to willful neglect. Easy 1040   If you fail to supply an SSN, you may also be subject to backup withholding. Easy 1040 Backup withholding. Easy 1040   Your investment income is generally not subject to regular withholding. Easy 1040 However, it may be subject to backup withholding to ensure that income tax is collected on the income. Easy 1040 Under backup withholding, the bank, broker, or other payer of interest, original issue discount (OID), dividends, cash patronage dividends, or royalties must withhold, as income tax, on the amount you are paid, applying the appropriate withholding rate. Easy 1040   Backup withholding applies if: You do not give the payer your identification number (either a social security number or an employer identification number) in the required manner, The IRS notifies the payer that you gave an incorrect identification number, The IRS notifies the payer that you are subject to backup withholding on interest or dividends because you have underreported interest or dividends on your income tax return, or You are required, but fail, to certify that you are not subject to backup withholding for the reason described in (3). Easy 1040 Certification. Easy 1040   For new accounts paying interest or dividends, you must certify under penalties of perjury that your SSN is correct and that you are not subject to backup withholding. Easy 1040 Your payer will give you a Form W-9, Request for Taxpayer Identification Number and Certification, or similar form, to make this certification. Easy 1040 If you fail to make this certification, backup withholding may begin immediately on your new account or investment. Easy 1040 Underreported interest and dividends. Easy 1040   You will be considered to have underreported your interest and dividends if the IRS has determined for a tax year that: You failed to include any part of a reportable interest or dividend payment required to be shown on your return, or You were required to file a return and to include a reportable interest or dividend payment on that return, but you failed to file the return. Easy 1040 How to stop backup withholding due to underreporting. Easy 1040   If you have been notified that you underreported interest or dividends, you can request a determination from the IRS to prevent backup withholding from starting or to stop backup withholding once it has begun. Easy 1040 You must show that at least one of the following situations applies. Easy 1040 No underreporting occurred. Easy 1040 You have a bona fide dispute with the IRS about whether underreporting occurred. Easy 1040 Backup withholding will cause or is causing an undue hardship, and it is unlikely that you will underreport interest and dividends in the future. Easy 1040 You have corrected the underreporting by filing a return if you did not previously file one and by paying all taxes, penalties, and interest due for any underreported interest or dividend payments. Easy 1040   If the IRS determines that backup withholding should stop, it will provide you with a certification and will notify the payers who were sent notices earlier. Easy 1040 How to stop backup withholding due to an incorrect identification number. Easy 1040   If you have been notified by a payer that you are subject to backup withholding because you have provided an incorrect SSN or employer identification number, you can stop it by following the instructions the payer gives you. Easy 1040 Reporting backup withholding. Easy 1040   If backup withholding is deducted from your interest or dividend income or other reportable payment, the bank or other business must give you an information return for the year (for example, a Form 1099-INT) indicating the amount withheld. Easy 1040 The information return will show any backup withholding as “Federal income tax withheld. Easy 1040 ” Nonresident aliens. Easy 1040    Generally, payments made to nonresident aliens are not subject to backup withholding. Easy 1040 You can use Form W-8BEN, Certificate of Foreign Status of Beneficial Owner for United States Tax Withholding, to certify exempt status. Easy 1040 However, this does not exempt you from the 30% (or lower treaty) withholding rate that may apply to your investment income. Easy 1040 For information on the 30% rate, see Publication 519, U. Easy 1040 S. Easy 1040 Tax Guide for Aliens. Easy 1040 Penalties. Easy 1040   There are civil and criminal penalties for giving false information to avoid backup withholding. Easy 1040 The civil penalty is $500. Easy 1040 The criminal penalty, upon conviction, is a fine of up to $1,000, or imprisonment of up to 1 year, or both. Easy 1040 Where to report investment income. Easy 1040   Table 1-1 gives an overview of the forms and schedules to use to report some common types of investment income. Easy 1040 But see the rest of this publication for detailed information about reporting investment income. Easy 1040 Joint accounts. Easy 1040   If two or more persons hold property (such as a savings account, bond, or stock) as joint tenants, tenants by the entirety, or tenants in common, each person's share of any interest or dividends from the property is determined by local law. Easy 1040 Community property states. Easy 1040   If you are married and receive a distribution that is community income, one-half of the distribution is generally considered to be received by each spouse. Easy 1040 If you file separate returns, you must each report one-half of any taxable distribution. Easy 1040 See Publication 555, Community Property, for more information on community income. Easy 1040   If the distribution is not considered community property and you and your spouse file separate returns, each of you must report your separate taxable distributions. Easy 1040 Example. Easy 1040 You and your spouse have a joint money market account. Easy 1040 Under state law, half the income from the account belongs to you, and half belongs to your spouse. Easy 1040 If you file separate returns, you each report half the income. Easy 1040 Income from property given to a child. Easy 1040   Property you give as a parent to your child under the Model Gifts of Securities to Minors Act, the Uniform Gifts to Minors Act, or any similar law becomes the child's property. Easy 1040   Income from the property is taxable to the child, except that any part used to satisfy a legal obligation to support the child is taxable to the parent or guardian having that legal obligation. Easy 1040 Savings account with parent as trustee. Easy 1040   Interest income from a savings account opened for a minor child, but placed in the name and subject to the order of the parents as trustees, is taxable to the child if, under the law of the state in which the child resides, both of the following are true. Easy 1040 The savings account legally belongs to the child. Easy 1040 The parents are not legally permitted to use any of the funds to support the child. Easy 1040 Table 1-1. Easy 1040 Where To Report Common Types of Investment Income (For detailed information about reporting investment income, see the rest of this publication, especially How To Report Interest Income and How To Report Dividend Income in chapter 1. Easy 1040 ) Type of Income If you file Form 1040, report on . Easy 1040 . Easy 1040 . Easy 1040 If you can file Form 1040A, report on . Easy 1040 . Easy 1040 . Easy 1040 If you can file Form 1040EZ, report on . Easy 1040 . Easy 1040 . Easy 1040 Tax-exempt interest (Form 1099-INT, box 8) Line 8b Line 8b Space to the left of line 2 (enter “TEI” and the amount) Taxable interest that totals $1,500 or less Line 8a (You may need to file Schedule B as well. Easy 1040 ) Line 8a (You may need to file Schedule B as well. Easy 1040 ) Line 2 Taxable interest that totals more than $1,500 Line 8a; also use Schedule B, line 1 Line 8a; also use Schedule B, line 1   Savings bond interest you will exclude because of higher education expenses Schedule B; also use Form 8815 Schedule B; also use Form 8815   Ordinary dividends that total $1,500 or less Line 9a (You may need to file Schedule B as well. Easy 1040 ) Line 9a (You may need to file Schedule B as well. Easy 1040 )   Ordinary dividends that total more than $1,500 Line 9a; also use Schedule B, line 5 Line 9a; also use Schedule B, line 5   Qualified dividends (if you do not have to file Schedule D) Line 9b; also use the Qualified Dividends and Capital Gain Tax Worksheet, line 2 Line 9b; also use the Qualified Dividends and Capital Gain Tax Worksheet, line 2   Qualified dividends (if you have to file Schedule D) Line 9b; also use the Qualified Dividends and Capital Gain Tax Worksheet or the Schedule D Tax Worksheet, line 2 You cannot use Form 1040A    You cannot use Form 1040EZ Capital gain distributions (if you do not have to file Schedule D) Line 13; also use the Qualified Dividends and Capital Gain Tax Worksheet, line 3 Line 10; also use the Qualified Dividends and Capital Gain Tax Worksheet, line 3   Capital gain distributions (if you have to file Schedule D) Schedule D, line 13; also use the Qualified Dividends and Capital Gain Tax Worksheet or the Schedule D Tax Worksheet     Section 1250, 1202, or collectibles gain (Form 1099-DIV, box 2b, 2c, or 2d) Form 8949 and Schedule D     Nondividend distributions (Form 1099-DIV, box 3) Generally not reported*     Undistributed capital gains (Form 2439, boxes 1a - 1d) Schedule D     Gain or loss from sales of stocks or bonds Line 13; also use Form 8949, Schedule D, and the Qualified Dividends and Capital Gain Tax Worksheet or the Schedule D Tax Worksheet You cannot use Form 1040A   Gain or loss from exchanges of like-kind investment property Line 13; also use Schedule D, Form 8824, and the Qualified Dividends and Capital Gain Tax Worksheet or the Schedule D Tax Worksheet     *Report any amounts in excess of your basis in your mutual fund shares on Form 8949. Easy 1040 Use Part II if you held the shares more than 1 year. Easy 1040 Use Part I if you held your mutual fund shares 1 year or less. Easy 1040 For details on Form 8949, see Reporting Capital Gains and Losses in chapter 4, and the Instructions for Form 8949. Easy 1040 Accuracy-related penalty. Easy 1040   An accuracy-related penalty of 20% can be charged for underpayments of tax due to negligence or disregard of rules or regulations or substantial understatement of tax. Easy 1040 For information on the penalty and any interest that applies, see Penalties in chapter 2. Easy 1040 Interest Income This section discusses the tax treatment of different types of interest income. Easy 1040 In general, any interest that you receive or that is credited to your account and can be withdrawn is taxable income. Easy 1040 (It does not have to be entered in your passbook. Easy 1040 ) Exceptions to this rule are discussed later. Easy 1040 Form 1099-INT. Easy 1040   Interest income is generally reported to you on Form 1099-INT, or a similar statement, by banks, savings and loans, and other payers of interest. Easy 1040 This form shows you the interest you received during the year. Easy 1040 Keep this form for your records. Easy 1040 You do not have to attach it to your tax return. Easy 1040   Report on your tax return the total interest income you receive for the tax year. Easy 1040 Interest not reported on Form 1099-INT. Easy 1040   Even if you do not receive Form 1099-INT, you must still report all of your interest income. Easy 1040 For example, you may receive distributive shares of interest from partnerships or S corporations. Easy 1040 This interest is reported to you on Schedule K-1 (Form 1065), Partner's Share of Income, Deductions, Credits, etc. Easy 1040 , and Schedule K-1 (Form 1120S), Shareholder's Share of Income, Deductions, Credits, etc. Easy 1040 Nominees. Easy 1040   Generally, if someone receives interest as a nominee for you, that person must give you a Form 1099-INT showing the interest received on your behalf. Easy 1040   If you receive a Form 1099-INT that includes amounts belonging to another person, see the discussion on Nominee distributions , later, under How To Report Interest Income. Easy 1040 Incorrect amount. Easy 1040   If you receive a Form 1099-INT that shows an incorrect amount (or other incorrect information), you should ask the issuer for a corrected form. Easy 1040 The new Form 1099-INT you receive will be marked “Corrected. Easy 1040 ” Form 1099-OID. Easy 1040   Reportable interest income also may be shown on Form 1099-OID, Original Issue Discount. Easy 1040 For more information about amounts shown on this form, see Original Issue Discount (OID) , later in this chapter. Easy 1040 Exempt-interest dividends. Easy 1040   Exempt-interest dividends you receive from a mutual fund or other regulated investment company, including those received from a qualified fund of funds in any tax year beginning after December 22, 2010, are not included in your taxable income. Easy 1040 (However, see Information reporting requirement , next. Easy 1040 ) Exempt-interest dividends should be shown in box 10 of Form 1099-DIV. Easy 1040 You do not reduce your basis for distributions that are exempt-interest dividends. Easy 1040 Information reporting requirement. Easy 1040   Although exempt-interest dividends are not taxable, you must show them on your tax return if you have to file. Easy 1040 This is an information reporting requirement and does not change the exempt-interest dividends into taxable income. Easy 1040 See How To Report Interest Income , later. Easy 1040 Note. Easy 1040 Exempt-interest dividends paid from specified private activity bonds may be subject to the alternative minimum tax. Easy 1040 The exempt-interest dividends subject to the alternative minimum tax are shown in box 11 of Form 1099-DIV. Easy 1040 See Form 6251 and its instructions for more information about this tax. Easy 1040 Private activity bonds are discussed later under State or Local Government Obligations. Easy 1040 Interest on VA dividends. Easy 1040   Interest on insurance dividends left on deposit with the Department of Veterans Affairs (VA) is not taxable. Easy 1040 This includes interest paid on dividends on converted United States Government Life Insurance policies and on National Service Life Insurance policies. Easy 1040 Individual retirement arrangements (IRAs). Easy 1040   Interest on a Roth IRA generally is not taxable. Easy 1040 Interest on a traditional IRA is tax deferred. Easy 1040 You generally do not include it in your income until you make withdrawals from the IRA. Easy 1040 See Publication 590 for more information. Easy 1040 Taxable Interest — General Taxable interest includes interest you receive from bank accounts, loans you make to others, and other sources. Easy 1040 The following are some sources of taxable interest. Easy 1040 Dividends that are actually interest. Easy 1040   Certain distributions commonly called dividends are actually interest. Easy 1040 You must report as interest so-called “dividends” on deposits or on share accounts in: Cooperative banks, Credit unions, Domestic building and loan associations, Domestic savings and loan associations, Federal savings and loan associations, and Mutual savings banks. Easy 1040  The “dividends” will be shown as interest income on Form 1099-INT. Easy 1040 Money market funds. Easy 1040   Money market funds are offered by nonbank financial institutions such as mutual funds and stock brokerage houses, and pay dividends. Easy 1040 Generally, amounts you receive from money market funds should be reported as dividends, not as interest. Easy 1040 Certificates of deposit and other deferred interest accounts. Easy 1040   If you open any of these accounts, interest may be paid at fixed intervals of 1 year or less during the term of the account. Easy 1040 You generally must include this interest in your income when you actually receive it or are entitled to receive it without paying a substantial penalty. Easy 1040 The same is true for accounts that mature in 1 year or less and pay interest in a single payment at maturity. Easy 1040 If interest is deferred for more than 1 year, see Original Issue Discount (OID) , later. Easy 1040 Interest subject to penalty for early withdrawal. Easy 1040   If you withdraw funds from a deferred interest account before maturity, you may have to pay a penalty. Easy 1040 You must report the total amount of interest paid or credited to your account during the year, without subtracting the penalty. Easy 1040 See Penalty on early withdrawal of savings under How To Report Interest Income, later, for more information on how to report the interest and deduct the penalty. Easy 1040 Money borrowed to invest in certificate of deposit. Easy 1040   The interest you pay on money borrowed from a bank or savings institution to meet the minimum deposit required for a certificate of deposit from the institution and the interest you earn on the certificate are two separate items. Easy 1040 You must report the total interest you earn on the certificate in your income. Easy 1040 If you itemize deductions, you can deduct the interest you pay as investment interest, up to the amount of your net investment income. Easy 1040 See Interest Expenses in chapter 3. Easy 1040 Example. Easy 1040 You deposited $5,000 with a bank and borrowed $5,000 from the bank to make up the $10,000 minimum deposit required to buy a 6-month certificate of deposit. Easy 1040 The certificate earned $575 at maturity in 2013, but you received only $265, which represented the $575 you earned minus $310 interest charged on your $5,000 loan. Easy 1040 The bank gives you a Form 1099-INT for 2013 showing the $575 interest you earned. Easy 1040 The bank also gives you a statement showing that you paid $310 interest for 2013. Easy 1040 You must include the $575 in your income. Easy 1040 If you itemize your deductions on Schedule A (Form 1040), Itemized Deductions, you can deduct $310, subject to the net investment income limit. Easy 1040 Gift for opening account. Easy 1040   If you receive noncash gifts or services for making deposits or for opening an account in a savings institution, you may have to report the value as interest. Easy 1040   For deposits of less than $5,000, gifts or services valued at more than $10 must be reported as interest. Easy 1040 For deposits of $5,000 or more, gifts or services valued at more than $20 must be reported as interest. Easy 1040 The value is determined by the cost to the financial institution. Easy 1040 Example. Easy 1040 You open a savings account at your local bank and deposit $800. Easy 1040 The account earns $20 interest. Easy 1040 You also receive a $15 calculator. Easy 1040 If no other interest is credited to your account during the year, the Form 1099-INT you receive will show $35 interest for the year. Easy 1040 You must report $35 interest income on your tax return. Easy 1040 Interest on insurance dividends. Easy 1040   Interest on insurance dividends left on deposit with an insurance company that can be withdrawn annually is taxable to you in the year it is credited to your account. Easy 1040 However, if you can withdraw it only on the anniversary date of the policy (or other specified date), the interest is taxable in the year that date occurs. Easy 1040 Prepaid insurance premiums. Easy 1040   Any increase in the value of prepaid insurance premiums, advance premiums, or premium deposit funds is interest if it is applied to the payment of premiums due on insurance policies or made available for you to withdraw. Easy 1040 U. Easy 1040 S. Easy 1040 obligations. Easy 1040   Interest on U. Easy 1040 S. Easy 1040 obligations, such as U. Easy 1040 S. Easy 1040 Treasury bills, notes, and bonds, issued by any agency or instrumentality of the United States is taxable for federal income tax purposes. Easy 1040 Interest on tax refunds. Easy 1040   Interest you receive on tax refunds is taxable income. Easy 1040 Interest on condemnation award. Easy 1040   If the condemning authority pays you interest to compensate you for a delay in payment of an award, the interest is taxable. Easy 1040 Installment sale payments. Easy 1040   If a contract for the sale or exchange of property provides for deferred payments, it also usually provides for interest payable with the deferred payments. Easy 1040 That interest is taxable when you receive it. Easy 1040 If little or no interest is provided for in a deferred payment contract, part of each payment may be treated as interest. Easy 1040 See Unstated Interest and Original Issue Discount (OID) in Publication 537. Easy 1040 Interest on annuity contract. Easy 1040   Accumulated interest on an annuity contract you sell before its maturity date is taxable. Easy 1040 Usurious interest. Easy 1040   Usurious interest is interest charged at an illegal rate. Easy 1040 This is taxable as interest unless state law automatically changes it to a payment on the principal. Easy 1040 Interest income on frozen deposits. Easy 1040   Exclude from your gross income interest on frozen deposits. Easy 1040 A deposit is frozen if, at the end of the year, you cannot withdraw any part of the deposit because: The financial institution is bankrupt or insolvent, or The state in which the institution is located has placed limits on withdrawals because other financial institutions in the state are bankrupt or insolvent. Easy 1040   The amount of interest you must exclude is the interest that was credited on the frozen deposits minus the sum of: The net amount you withdrew from these deposits during the year, and The amount you could have withdrawn as of the end of the year (not reduced by any penalty for premature withdrawals of a time deposit). Easy 1040 If you receive a Form 1099-INT for interest income on deposits that were frozen at the end of 2013, see Frozen deposits under How To Report Interest Income for information about reporting this interest income exclusion on your tax return. Easy 1040   The interest you exclude is treated as credited to your account in the following year. Easy 1040 You must include it in income in the year you can withdraw it. Easy 1040 Example. Easy 1040 $100 of interest was credited on your frozen deposit during the year. Easy 1040 You withdrew $80 but could not withdraw any more as of the end of the year. Easy 1040 You must include $80 in your income and exclude $20 from your income for the year. Easy 1040 You must include the $20 in your income for the year you can withdraw it. Easy 1040 Bonds traded flat. Easy 1040    If you buy a bond at a discount when interest has been defaulted or when the interest has accrued but has not been paid, the transaction is described as trading a bond flat. Easy 1040 The defaulted or unpaid interest is not income and is not taxable as interest if paid later. Easy 1040 When you receive a payment of that interest, it is a return of capital that reduces the remaining cost basis of your bond. Easy 1040 Interest that accrues after the date of purchase, however, is taxable interest income for the year received or accrued. Easy 1040 See Bonds Sold Between Interest Dates , later in this chapter. Easy 1040 Below-Market Loans If you make a below-market gift or demand loan, you must report as interest income any forgone interest (defined later) from that loan. Easy 1040 The below-market loan rules and exceptions are described in this section. Easy 1040 For more information, see section 7872 of the Internal Revenue Code and its regulations. Easy 1040 If you receive a below-market loan, you may be able to deduct the forgone interest as well as any interest you actually paid, but not if it is personal interest. Easy 1040 Loans subject to the rules. Easy 1040   The rules for below-market loans apply to: Gift loans, Pay-related loans, Corporation-shareholder loans, Tax avoidance loans, and Certain loans made to qualified continuing care facilities under a continuing care contract. Easy 1040 A pay-related loan is any below-market loan between an employer and an employee or between an independent contractor and a person for whom the contractor provides services. Easy 1040 A tax avoidance loan is any below-market loan where the avoidance of federal tax is one of the main purposes of the interest arrangement. Easy 1040 Forgone interest. Easy 1040   For any period, forgone interest is: The amount of interest that would be payable for that period if interest accrued on the loan at the applicable federal rate and was payable annually on December 31, minus Any interest actually payable on the loan for the period. Easy 1040 Applicable federal rate. Easy 1040   Applicable federal rates are published by the IRS each month in the Internal Revenue Bulletin. Easy 1040 Some IRS offices have these bulletins available for research. Easy 1040 See chapter 5, How To Get Tax Help , for other ways to get this information. Easy 1040 Rules for below-market loans. Easy 1040   The rules that apply to a below-market loan depend on whether the loan is a gift loan, demand loan, or term loan. Easy 1040 Gift and demand loans. Easy 1040   A gift loan is any below-market loan where the forgone interest is in the nature of a gift. Easy 1040   A demand loan is a loan payable in full at any time upon demand by the lender. Easy 1040 A demand loan is a below-market loan if no interest is charged or if interest is charged at a rate below the applicable federal rate. Easy 1040   A demand loan or gift loan that is a below-market loan is generally treated as an arm's-length transaction in which the lender is treated as having made: A loan to the borrower in exchange for a note that requires the payment of interest at the applicable federal rate, and An additional payment to the borrower in an amount equal to the forgone interest. Easy 1040 The borrower is generally treated as transferring the additional payment back to the lender as interest. Easy 1040 The lender must report that amount as interest income. Easy 1040   The lender's additional payment to the borrower is treated as a gift, dividend, contribution to capital, pay for services, or other payment, depending on the substance of the transaction. Easy 1040 The borrower may have to report this payment as taxable income, depending on its classification. Easy 1040 These transfers are considered to occur annually, generally on December 31. Easy 1040 Term loans. Easy 1040   A term loan is any loan that is not a demand loan. Easy 1040 A term loan is a below-market loan if the amount of the loan is more than the present value of all payments due under the loan. Easy 1040   A lender who makes a below-market term loan other than a gift loan is treated as transferring an additional lump-sum cash payment to the borrower (as a dividend, contribution to capital, etc. Easy 1040 ) on the date the loan is made. Easy 1040 The amount of this payment is the amount of the loan minus the present value, at the applicable federal rate, of all payments due under the loan. Easy 1040 An equal amount is treated as original issue discount (OID). Easy 1040 The lender must report the annual part of the OID as interest income. Easy 1040 The borrower may be able to deduct the OID as interest expense. Easy 1040 See Original Issue Discount (OID) , later. Easy 1040 Exceptions to the below-market loan rules. Easy 1040   Exceptions to the below-market loan rules are discussed here. Easy 1040 Exception for loans of $10,000 or less. Easy 1040   The rules for below-market loans do not apply to any day on which the total outstanding amount of loans between the borrower and lender is $10,000 or less. Easy 1040 This exception applies only to: Gift loans between individuals if the gift loan is not directly used to buy or carry income-producing assets, and Pay-related loans or corporation-shareholder loans if the avoidance of federal tax is not a principal purpose of the interest arrangement. Easy 1040 This exception does not apply to a term loan described in (2) earlier that previously has been subject to the below-market loan rules. Easy 1040 Those rules will continue to apply even if the outstanding balance is reduced to $10,000 or less. Easy 1040 Exception for loans to continuing care facilities. Easy 1040   Loans to qualified continuing care facilities under continuing care contracts are not subject to the rules for below-market loans for the calendar year if the lender or the lender's spouse is age 62 or older at the end of the year. Easy 1040 For the definitions of qualified continuing care facility and continuing care contract, see Internal Revenue Code section 7872(h). Easy 1040 Exception for loans without significant tax effect. Easy 1040   Loans are excluded from the below-market loan rules if their interest arrangements do not have a significant effect on the federal tax liability of the borrower or the lender. Easy 1040 These loans include: Loans made available by the lender to the general public on the same terms and conditions that are consistent with the lender's customary business practice; Loans subsidized by a federal, state, or municipal government that are made available under a program of general application to the public; Certain employee-relocation loans; Certain loans from a foreign person, unless the interest income would be effectively connected with the conduct of a U. Easy 1040 S. Easy 1040 trade or business and would not be exempt from U. Easy 1040 S. Easy 1040 tax under an income tax treaty; Gift loans to a charitable organization, contributions to which are deductible, if the total outstanding amount of loans between the organization and lender is $250,000 or less at all times during the tax year; and Other loans on which the interest arrangement can be shown to have no significant effect on the federal tax liability of the lender or the borrower. Easy 1040 For a loan described in (6) above, all the facts and circumstances are used to determine if the interest arrangement has a significant effect on the federal tax liability of the lender or borrower. Easy 1040 Some factors to be considered are: Whether items of income and deduction generated by the loan offset each other; The amount of these items; The cost to you of complying with the below-market loan rules, if they were to apply; and Any reasons other than taxes for structuring the transaction as a below-market loan. Easy 1040 If you structure a transaction to meet this exception and one of the principal purposes of that structure is the avoidance of federal tax, the loan will be considered a tax-avoidance loan, and this exception will not apply. Easy 1040 Limit on forgone interest for gift loans of $100,000 or less. Easy 1040   For gift loans between individuals, if the outstanding loans between the lender and borrower total $100,000 or less, the forgone interest to be included in income by the lender and deducted by the borrower is limited to the amount of the borrower's net investment income for the year. Easy 1040 If the borrower's net investment income is $1,000 or less, it is treated as zero. Easy 1040 This limit does not apply to a loan if the avoidance of federal tax is one of the main purposes of the interest arrangement. Easy 1040 Effective dates. Easy 1040    These rules apply to term loans made after June 6, 1984, and to demand loans outstanding after that date. Easy 1040 U. Easy 1040 S. Easy 1040 Savings Bonds This section provides tax information on U. Easy 1040 S. Easy 1040 savings bonds. Easy 1040 It explains how to report the interest income on these bonds and how to treat transfers of these bonds. Easy 1040 U. Easy 1040 S. Easy 1040 savings bonds currently offered to individuals include Series EE bonds and Series I bonds. Easy 1040 For other information on U. Easy 1040 S. Easy 1040 savings bonds, write to:  For Series HH/H: Bureau of the Fiscal Service Division of Customer Assistance P. Easy 1040 O. Easy 1040 Box 2186 Parkersburg, WV 26106-2186  For Series EE and I paper savings bonds: Bureau of the Fiscal Service Division of Customer Assistance P. Easy 1040 O. Easy 1040 Box 7012 Parkersburg, WV 26106-7012  For Series EE and I electronic bonds: Bureau of the Fiscal Service  Division of Customer Assistance P. Easy 1040 O. Easy 1040 Box 7015 Parkersburg, WV 26106-7015 Or, on the Internet, visit: www. Easy 1040 treasurydirect. Easy 1040 gov/indiv/indiv. Easy 1040 htm. Easy 1040 Accrual method taxpayers. Easy 1040   If you use an accrual method of accounting, you must report interest on U. Easy 1040 S. Easy 1040 savings bonds each year as it accrues. Easy 1040 You cannot postpone reporting interest until you receive it or until the bonds mature. Easy 1040 Cash method taxpayers. Easy 1040   If you use the cash method of accounting, as most individual taxpayers do, you generally report the interest on U. Easy 1040 S. Easy 1040 savings bonds when you receive it. Easy 1040 But see Reporting options for cash method taxpayers , later. Easy 1040 Series HH bonds. Easy 1040   These bonds were issued at face value. Easy 1040 Interest is paid twice a year by direct deposit to your bank account. Easy 1040 If you are a cash method taxpayer, you must report interest on these bonds as income in the year you receive it. Easy 1040   Series HH bonds were first offered in 1980 and last offered in August 2004. Easy 1040 Before 1980, series H bonds were issued. Easy 1040 Series H bonds are treated the same as series HH bonds. Easy 1040 If you are a cash method taxpayer, you must report the interest when you receive it. Easy 1040   Series H bonds have a maturity period of 30 years. Easy 1040 Series HH bonds mature in 20 years. Easy 1040 The last series H bonds matured in 2009. Easy 1040 The last series HH bonds will mature in 2024. Easy 1040 Series EE and series I bonds. Easy 1040   Interest on these bonds is payable when you redeem the bonds. Easy 1040 The difference between the purchase price and the redemption value is taxable interest. Easy 1040 Series EE bonds. Easy 1040   Series EE bonds were first offered in January 1980 and have a maturity period of 30 years. Easy 1040 Before July 1980, series E bonds were issued. Easy 1040 The original 10-year maturity period of series E bonds has been extended to 40 years for bonds issued before December 1965 and 30 years for bonds issued after November 1965. Easy 1040 Paper series EE and series E bonds are issued at a discount. Easy 1040 The face value is payable to you at maturity. Easy 1040 Electronic series EE bonds are issued at their face value. Easy 1040 The face value plus accrued interest is payable to you at maturity. Easy 1040 As of January 1, 2012, paper savings bonds were no longer sold at financial institutions. Easy 1040    Owners of paper series EE bonds can convert them to electronic bonds. Easy 1040 These converted bonds do not retain the denomination listed on the paper certificate but are posted at their purchase price (with accrued interest). Easy 1040 Series I bonds. Easy 1040   Series I bonds were first offered in 1998. Easy 1040 These are inflation-indexed bonds issued at their face amount with a maturity period of 30 years. Easy 1040 The face value plus all accrued interest is payable to you at maturity. Easy 1040 Reporting options for cash method taxpayers. Easy 1040   If you use the cash method of reporting income, you can report the interest on series EE, series E, and series I bonds in either of the following ways. Easy 1040 Method 1. Easy 1040 Postpone reporting the interest until the earlier of the year you cash or dispose of the bonds or the year in which they mature. Easy 1040 (However, see Savings bonds traded , later. Easy 1040 )  Note. Easy 1040 Series EE bonds issued in 1983 matured in 2013. Easy 1040 If you have used method 1, you generally must report the interest on these bonds on your 2013 return. Easy 1040 The last series E bonds were issued in 1980 and matured in 2010. Easy 1040 If you used method 1, you generally should have reported the interest on these bonds on your 2010 return. Easy 1040 Method 2. Easy 1040 Choose to report the increase in redemption value as interest each year. Easy 1040  You must use the same method for all series EE, series E, and series I bonds you own. Easy 1040 If you do not choose method 2 by reporting the increase in redemption value as interest each year, you must use method 1. Easy 1040 If you plan to cash your bonds in the same year you will pay for higher educational expenses, you may want to use method 1 because you may be able to exclude the interest from your income. Easy 1040 To learn how, see Education Savings Bond Program, later. Easy 1040 Change from method 1. Easy 1040   If you want to change your method of reporting the interest from method 1 to method 2, you can do so without permission from the IRS. Easy 1040 In the year of change, you must report all interest accrued to date and not previously reported for all your bonds. Easy 1040   Once you choose to report the interest each year, you must continue to do so for all series EE, series E, and series I bonds you own and for any you get later, unless you request permission to change, as explained next. Easy 1040 Change from method 2. Easy 1040   To change from method 2 to method 1, you must request permission from the IRS. Easy 1040 Permission for the change is automatically granted if you send the IRS a statement that meets all the following requirements. Easy 1040 You have typed or printed the following number at the top: “131. Easy 1040 ” It includes your name and social security number under “131. Easy 1040 ” It includes the year of change (both the beginning and ending dates). Easy 1040 It identifies the savings bonds for which you are requesting this change. Easy 1040 It includes your agreement to: Report all interest on any bonds acquired during or after the year of change when the interest is realized upon disposition, redemption, or final maturity, whichever is earliest; and Report all interest on the bonds acquired before the year of change when the interest is realized upon disposition, redemption, or final maturity, whichever is earliest, with the exception of the interest reported in prior tax years. Easy 1040   You must attach this statement to your tax return for the year of change, which you must file by the due date (including extensions). Easy 1040   You can have an automatic extension of 6 months from the due date of your return for the year of change (excluding extensions) to file the statement with an amended return. Easy 1040 On the statement, type or print “Filed pursuant to section 301. Easy 1040 9100-2. Easy 1040 ” To get this extension, you must have filed your original return for the year of the change by the due date (including extensions). Easy 1040    By the date you file the original statement with your return, you must also send a signed copy to the address below. Easy 1040    Internal Revenue Service Attention: CC:IT&A (Automatic Rulings Branch) P. Easy 1040 O. Easy 1040 Box 7604 Benjamin Franklin Station Washington, DC 20044   If you use a private delivery service, send the signed copy to the address below. Easy 1040 Internal Revenue Service Attention: CC:IT&A  (Automatic Rulings Branch) Room 5336 1111 Constitution Avenue, NW Washington, DC 20224    Instead of filing this statement, you can request permission to change from method 2 to method 1 by filing Form 3115. Easy 1040 In that case, follow the form instructions for an automatic change. Easy 1040 No user fee is required. Easy 1040 Co-owners. Easy 1040   If a U. Easy 1040 S. Easy 1040 savings bond is issued in the names of co-owners, such as you and your child or you and your spouse, interest on the bond is generally taxable to the co-owner who bought the bond. Easy 1040 One co-owner's funds used. Easy 1040   If you used your funds to buy the bond, you must pay the tax on the interest. Easy 1040 This is true even if you let the other co-owner redeem the bond and keep all the proceeds. Easy 1040 Under these circumstances, the co-owner who redeemed the bond will receive a Form 1099-INT at the time of redemption and must provide you with another Form 1099-INT showing the amount of interest from the bond taxable to you. Easy 1040 The co-owner who redeemed the bond is a “nominee. Easy 1040 ” See Nominee distributions under How To Report Interest Income, later, for more information about how a person who is a nominee reports interest income belonging to another person. Easy 1040 Both co-owners' funds used. Easy 1040   If you and the other co-owner each contribute part of the bond's purchase price, the interest is generally taxable to each of you, in proportion to the amount each of you paid. Easy 1040 Community property. Easy 1040   If you and your spouse live in a community property state and hold bonds as community property, one-half of the interest is considered received by each of you. Easy 1040 If you file separate returns, each of you generally must report one-half of the bond interest. Easy 1040 For more information about community property, see Publication 555. Easy 1040 Table 1-2. Easy 1040   These rules are also shown in Table 1-2. Easy 1040 Child as only owner. Easy 1040   Interest on U. Easy 1040 S. Easy 1040 savings bonds bought for and registered only in the name of your child is income to your child, even if you paid for the bonds and are named as beneficiary. Easy 1040 If the bonds are series EE, series E, or series I bonds, the interest on the bonds is income to your child in the earlier of the year the bonds are cashed or disposed of or the year the bonds mature, unless your child chooses to report the interest income each year. Easy 1040 Choice to report interest each year. Easy 1040   The choice to report the accrued interest each year can be made either by your child or by you for your child. Easy 1040 This choice is made by filing an income tax return that shows all the interest earned to date, and by stating on the return that your child chooses to report the interest each year. Easy 1040 Either you or your child should keep a copy of this return. Easy 1040   Unless your child is otherwise required to file a tax return for any year after making this choice, your child does not have to file a return only to report the annual accrual of U. Easy 1040 S. Easy 1040 savings bond interest under this choice. Easy 1040 However, see Tax on unearned income of certain children , earlier, under General Information. Easy 1040 Neither you nor your child can change the way you report the interest unless you request permission from the IRS, as discussed earlier under Change from method 2 . Easy 1040 Ownership transferred. Easy 1040   If you bought series E, series EE, or series I bonds entirely with your own funds and had them reissued in your co-owner's name or beneficiary's name alone, you must include in your gross income for the year of reissue all interest that you earned on these bonds and have not previously reported. Easy 1040 But, if the bonds were reissued in your name alone, you do not have to report the interest accrued at that time. Easy 1040   This same rule applies when bonds (other than bonds held as community property) are transferred between spouses or incident to divorce. Easy 1040 Example. Easy 1040 You bought series EE bonds entirely with your own funds. Easy 1040 You did not choose to report the accrued interest each year. Easy 1040 Later, you transfer the bonds to your former spouse under a divorce agreement. Easy 1040 You must include the deferred accrued interest, from the date of the original issue of the bonds to the date of transfer, in your income in the year of transfer. Easy 1040 Your former spouse includes in income the interest on the bonds from the date of transfer to the date of redemption. Easy 1040 Table 1-2. Easy 1040 Who Pays the Tax on U. Easy 1040 S. Easy 1040 Savings Bond Interest IF . Easy 1040 . Easy 1040 . Easy 1040 THEN the interest must be reported by . Easy 1040 . Easy 1040 . Easy 1040 you buy a bond in your name and the name of another person as co-owners, using only your own funds you. Easy 1040 you buy a bond in the name of another person, who is the sole owner of the bond the person for whom you bought the bond. Easy 1040 you and another person buy a bond as co-owners, each contributing part of the purchase price both you and the other co-owner, in proportion to the amount each paid for the bond. Easy 1040 you and your spouse, who live in a community property state, buy a bond that is community property you and your spouse. Easy 1040 If you file separate returns, both you and your spouse generally report one-half of the interest. Easy 1040 Purchased jointly. Easy 1040   If you and a co-owner each contributed funds to buy series E, series EE, or series I bonds jointly and later have the bonds reissued in the co-owner's name alone, you must include in your gross income for the year of reissue your share of all the interest earned on the bonds that you have not previously reported. Easy 1040 The former co-owner does not have to include in gross income at the time of reissue his or her share of the interest earned that was not reported before the transfer. Easy 1040 This interest, however, as well as all interest earned after the reissue, is income to the former co-owner. Easy 1040   This income-reporting rule also applies when the bonds are reissued in the name of your former co-owner and a new co-owner. Easy 1040 But the new co-owner will report only his or her share of the interest earned after the transfer. Easy 1040   If bonds that you and a co-owner bought jointly are reissued to each of you separately in the same proportion as your contribution to the purchase price, neither you nor your co-owner has to report at that time the interest earned before the bonds were reissued. Easy 1040 Example 1. Easy 1040 You and your spouse each spent an equal amount to buy a $1,000 series EE savings bond. Easy 1040 The bond was issued to you and your spouse as co-owners. Easy 1040 You both postpone reporting interest on the bond. Easy 1040 You later have the bond reissued as two $500 bonds, one in your name and one in your spouse's name. Easy 1040 At that time neither you nor your spouse has to report the interest earned to the date of reissue. Easy 1040 Example 2. Easy 1040 You bought a $1,000 series EE savings bond entirely with your own funds. Easy 1040 The bond was issued to you and your spouse as co-owners. Easy 1040 You both postponed reporting interest on the bond. Easy 1040 You later have the bond reissued as two $500 bonds, one in your name and one in your spouse's name. Easy 1040 You must report half the interest earned to the date of reissue. Easy 1040 Transfer to a trust. Easy 1040   If you own series E, series EE, or series I bonds and transfer them to a trust, giving up all rights of ownership, you must include in your income for that year the interest earned to the date of transfer if you have not already reported it. Easy 1040 However, if you are considered the owner of the trust and if the increase in value both before and after the transfer continues to be taxable to you, you can continue to defer reporting the interest earned each year. Easy 1040 You must include the total interest in your income in the year you cash or dispose of the bonds or the year the bonds finally mature, whichever is earlier. Easy 1040   The same rules apply to previously unreported interest on series EE or series E bonds if the transfer to a trust consisted of series HH or series H bonds you acquired in a trade for the series EE or series E bonds. Easy 1040 See Savings bonds traded , later. Easy 1040 Decedents. Easy 1040   The manner of reporting interest income on series E, series EE, or series I bonds, after the death of the owner (decedent), depends on the accounting and income-reporting methods previously used by the decedent. Easy 1040 Decedent who reported interest each year. Easy 1040   If the bonds transferred because of death were owned by a person who used an accrual method, or who used the cash method and had chosen to report the interest each year, the interest earned in the year of death up to the date of death must be reported on that person's final return. Easy 1040 The person who acquires the bonds includes in income only interest earned after the date of death. Easy 1040 Decedent who postponed reporting interest. Easy 1040   If the transferred bonds were owned by a decedent who had used the cash method and had not chosen to report the interest each year, and who had bought the bonds entirely with his or her own funds, all interest earned before death must be reported in one of the following ways. Easy 1040 The surviving spouse or personal representative (executor, administrator, etc. Easy 1040 ) who files the final income tax return of the decedent can choose to include on that return all interest earned on the bonds before the decedent's death. Easy 1040 The person who acquires the bonds then includes in income only interest earned after the date of death. Easy 1040 If the choice in (1) is not made, the interest earned up to the date of death is income in respect of the decedent and should not be included in the decedent's final return. Easy 1040 All interest earned both before and after the decedent's death (except any part reported by the estate on its income tax return) is income to the person who acquires the bonds. Easy 1040 If that person uses the cash method and does not choose to report the interest each year, he or she can postpone reporting it until the year the bonds are cashed or disposed of or the year they mature, whichever is earlier. Easy 1040 In the year that person reports the interest, he or she can claim a deduction for any federal estate tax paid on the part of the interest included in the decedent's estate. Easy 1040 For more information on income in respect of a decedent, see Publication 559, Survivors, Executors, and Administrators. Easy 1040 Example 1. Easy 1040 Your uncle, a cash method taxpayer, died and left you a $1,000 series EE bond. Easy 1040 He had bought the bond for $500 and had not chosen to report the interest each year. Easy 1040 At the date of death, interest of $200 had accrued on the bond, and its value of $700 was included in your uncle's estate. Easy 1040 Your uncle's executor chose not to include the $200 accrued interest in your uncle's final income tax return. Easy 1040 The $200 is income in respect of the decedent. Easy 1040 You are a cash method taxpayer and do not choose to report the interest each year as it is earned. Easy 1040 If you cash the bond when it reaches maturity value of $1,000, you report $500 interest income—the difference between maturity value of $1,000 and the original cost of $500. Easy 1040 For that year, you can deduct (as a miscellaneous itemized deduction not subject to the 2%-of-adjusted-gross-income limit) any federal estate tax paid because the $200 interest was included in your uncle's estate. Easy 1040 Example 2. Easy 1040 If, in Example 1 , the executor had chosen to include the $200 accrued interest in your uncle's final return, you would report only $300 as interest when you cashed the bond at maturity. Easy 1040 $300 is the interest earned after your uncle's death. Easy 1040 Example 3. Easy 1040 If, in Example 1 , you make or have made the choice to report the increase in redemption value as interest each year, you include in gross income for the year you acquire the bond all of the unreported increase in value of all series E, series EE, and series I bonds you hold, including the $200 on the bond you inherited from your uncle. Easy 1040 Example 4. Easy 1040 When your aunt died, she owned series HH bonds that she had acquired in a trade for series EE bonds. Easy 1040 You were the beneficiary of these bonds. Easy 1040 Your aunt used the cash method and did not choose to report the interest on the series EE bonds each year as it accrued. Easy 1040 Your aunt's executor chose not to include any interest earned before your aunt's death on her final return. Easy 1040 The income in respect of the decedent is the sum of the unreported interest on the series EE bonds and the interest, if any, payable on the series HH bonds but not received as of the date of your aunt's death. Easy 1040 You must report any interest received during the year as income on your return. Easy 1040 The part of the interest payable but not received before your aunt's death is income in respect of the decedent and may qualify for the estate tax deduction. Easy 1040 For information on when to report the interest on the series EE bonds traded, see Savings bonds traded , later. Easy 1040 Savings bonds distributed from a retirement or profit-sharing plan. Easy 1040   If you acquire a U. Easy 1040 S. Easy 1040 savings bond in a taxable distribution from a retirement or profit-sharing plan, your income for the year of distribution includes the bond's redemption value (its cost plus the interest accrued before the distribution). Easy 1040 When you redeem the bond (whether in the year of distribution or later), your interest income includes only the interest accrued after the bond was distributed. Easy 1040 To figure the interest reported as a taxable distribution and your interest income when you redeem the bond, see Worksheet for savings bonds distributed from a retirement or profit-sharing plan under How To Report Interest Income, later. Easy 1040 Savings bonds traded. Easy 1040   If you postponed reporting the interest on your series EE or series E bonds, you did not recognize taxable income when you traded the bonds for series HH or series H bonds, unless you received cash in the trade. Easy 1040 (You cannot trade series I bonds for series HH bonds. Easy 1040 After August 31, 2004, you cannot trade any other series of bonds for series HH bonds. Easy 1040 ) Any cash you received is income up to the amount of the interest earned on the bonds traded. Easy 1040 When your series HH or series H bonds mature, or if you dispose of them before maturity, you report as interest the difference between their redemption value and your cost. Easy 1040 Your cost is the sum of the amount you paid for the traded series EE or series E bonds plus any amount you had to pay at the time of the trade. Easy 1040 Example. Easy 1040 You traded series EE bonds (on which you postponed reporting the interest) for $2,500 in series HH bonds and $223 in cash. Easy 1040 You reported the $223 as taxable income on your tax return. Easy 1040 At the time of the trade, the series EE bonds had accrued interest of $523 and a redemption value of $2,723. Easy 1040 You hold the series HH bonds until maturity, when you receive $2,500. Easy 1040 You must report $300 as interest income in the year of maturity. Easy 1040 This is the difference between their redemption value, $2,500, and your cost, $2,200 (the amount you paid for the series EE bonds). Easy 1040 (It is also the difference between the accrued interest of $523 on the series EE bonds and the $223 cash received on the trade. Easy 1040 ) Choice to report interest in year of trade. Easy 1040   You could have chosen to treat all of the previously unreported accrued interest on series EE or series E bonds traded for series HH bonds as income in the year of the trade. Easy 1040 If you made this choice, it is treated as a change from method 1. Easy 1040 See Change from method 1 under Series EE and series I bonds, earlier. Easy 1040 Form 1099-INT for U. Easy 1040 S. Easy 1040 savings bond interest. Easy 1040   When you cash a bond, the bank or other payer that redeems it must give you a Form 1099-INT if the interest part of the payment you receive is $10 or more. Easy 1040 Box 3 of your Form 1099-INT should show the interest as the difference between the amount you received and the amount paid for the bond. Easy 1040 However, your Form 1099-INT may show more interest than you have to include on your income tax return. Easy 1040 For example, this may happen if any of the following are true. Easy 1040 You chose to report the increase in the redemption value of the bond each year. Easy 1040 The interest shown on your Form 1099-INT will not be reduced by amounts previously included in income. Easy 1040 You received the bond from a decedent. Easy 1040 The interest shown on your Form 1099-INT will not be reduced by any interest reported by the decedent before death, or on the decedent's final return, or by the estate on the estate's income tax return. Easy 1040 Ownership of the bond was transferred. Easy 1040 The interest shown on your Form 1099-INT will not be reduced by interest that accrued before the transfer. Easy 1040 You were named as a co-owner, and the other co-owner contributed funds to buy the bond. Easy 1040 The interest shown on your Form 1099-INT will not be reduced by the amount you received as nominee for the other co-owner. Easy 1040 (See Co-owners , earlier in this section, for more information about the reporting requirements. Easy 1040 ) You received the bond in a taxable distribution from a retirement or profit-sharing plan. Easy 1040 The interest shown on your Form 1099-INT will not be reduced by the interest portion of the amount taxable as a distribution from the plan and not taxable as interest. Easy 1040 (This amount is generally shown on Form 1099-R, Distributions From Pensions, Annuities, Retirement or Profit-Sharing Plans, IRAs, Insurance Contracts, etc. Easy 1040 , for the year of distribution. Easy 1040 )   For more information on including the correct amount of interest on your return, see U. Easy 1040 S. Easy 1040 savings bond interest previously reported or Nominee distributions under How To Report Interest Income, later. Easy 1040    Interest on U. Easy 1040 S. Easy 1040 savings bonds is exempt from state and local taxes. Easy 1040 The Form 1099-INT you receive will indicate the amount that is for U. Easy 1040 S. Easy 1040 savings bonds interest in box 3. Easy 1040 Do not include this income on your state or local income tax return. Easy 1040 Education Savings Bond Program You may be able to exclude from income all or part of the interest you receive on the redemption of qualified U. Easy 1040 S. Easy 1040 savings bonds during the year if you pay qualified higher educational expenses during the same year. Easy 1040 This exclusion is known as the Education Savings Bond Program. Easy 1040 You do not qualify for this exclusion if your filing status is married filing separately. Easy 1040 Form 8815. Easy 1040   Use Form 8815 to figure your exclusion. Easy 1040 Attach the form to your Form 1040 or Form 1040A. Easy 1040 Qualified U. Easy 1040 S. Easy 1040 savings bonds. Easy 1040   A qualified U. Easy 1040 S. Easy 1040 savings bond is a series EE bond issued after 1989 or a series I bond. Easy 1040 The bond must be issued either in your name (sole owner) or in your and your spouse's names (co-owners). Easy 1040 You must be at least 24 years old before the bond's issue date. Easy 1040 For example, a bond bought by a parent and issued in the name of his or her child under age 24 does not qualify for the exclusion by the parent or child. Easy 1040    The issue date of a bond may be earlier than the date the bond is purchased because the issue date assigned to a bond is the first day of the month in which it is purchased. Easy 1040 Beneficiary. Easy 1040   You can designate any individual (including a child) as a beneficiary of the bond. Easy 1040 Verification by IRS. Easy 1040   If you claim the exclusion, the IRS will check it by using bond redemption information from the Department of Treasury. Easy 1040 Qualified expenses. Easy 1040   Qualified higher educational expenses are tuition and fees required for you, your spouse, or your dependent (for whom you claim an exemption) to attend an eligible educational institution. Easy 1040   Qualified expenses include any contribution you make to a qualified tuition program or to a Coverdell education savings account. Easy 1040 For information about these programs, see Publication 970, Tax Benefits for Education. Easy 1040   Qualified expenses do not include expenses for room and board or for courses involving sports, games, or hobbies that are not part of a degree or certificate granting program. Easy 1040 Eligible educational institutions. Easy 1040   These institutions include most public, private, and nonprofit universities, colleges, and vocational schools that are accredited and eligible to participate in student aid programs run by the Department of Education. Easy 1040 Reduction for certain benefits. Easy 1040   You must reduce your qualified higher educational expenses by all of the following tax-free benefits. Easy 1040 Tax-free part of scholarships and fellowships. Easy 1040 Expenses used to figure the tax-free portion of distributions from a Coverdell ESA. Easy 1040 Expenses used to figure the tax-free portion of distributions from a qualified tuition program. Easy 1040 Any tax-free payments (other than gifts or inheritances) received as educational assistance, such as: Veterans' educational assistance benefits, Qualified tuition reductions, or Employer-provided educational assistance. Easy 1040 Any expense used in figuring the American Opportunity and lifetime learning credits. Easy 1040 For information about these benefits, see Publication 970. Easy 1040 Amount excludable. Easy 1040   If the total proceeds (interest and principal) from the qualified U. Easy 1040 S. Easy 1040 savings bonds you redeem during the year are not more than your adjusted qualified higher educational expenses for the year, you may be able to exclude all of the interest. Easy 1040 If the proceeds are more than the expenses, you may be able to exclude only part of the interest. Easy 1040   To determine the excludable amount, multiply the interest part of the proceeds by a fraction. Easy 1040 The numer