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Federal Ez Tax Form 2012

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Federal Ez Tax Form 2012

Federal ez tax form 2012 3. Federal ez tax form 2012   Investment Expenses Table of Contents Topics - This chapter discusses: Useful Items - You may want to see: Limits on DeductionsPassive activity. Federal ez tax form 2012 Other income (nonpassive income). Federal ez tax form 2012 Expenses. Federal ez tax form 2012 Additional information. Federal ez tax form 2012 Interest ExpensesInvestment Interest Limit on Deduction Bond Premium AmortizationSpecial rules to determine amounts payable on a bond. Federal ez tax form 2012 Basis. Federal ez tax form 2012 How To Figure Amortization Choosing To Amortize How To Report Amortization Expenses of Producing IncomeFees to buy or sell. Federal ez tax form 2012 Including mutual fund or REMIC expenses in income. Federal ez tax form 2012 Nondeductible ExpensesUsed as collateral. Federal ez tax form 2012 Short-sale expenses. Federal ez tax form 2012 Expenses for both tax-exempt and taxable income. Federal ez tax form 2012 State income taxes. Federal ez tax form 2012 Nondeductible amount. Federal ez tax form 2012 Basis adjustment. Federal ez tax form 2012 How To Report Investment Expenses When To Report Investment Expenses Topics - This chapter discusses: Limits on Deductions , Interest Expenses , Bond Premium Amortization , Expenses of Producing Income , Nondeductible Expenses , How To Report Investment Expenses , and When To Report Investment Expenses . Federal ez tax form 2012 Useful Items - You may want to see: Publication 535 Business Expenses 925 Passive Activity and At-Risk Rules 929 Tax Rules for Children and Dependents Form (and Instructions) Schedule A (Form 1040) Itemized Deductions 4952 Investment Interest Expense Deduction See chapter 5, How To Get Tax Help , for information about getting these publications and forms. Federal ez tax form 2012 Limits on Deductions Your deductions for investment expenses may be limited by: The at-risk rules, The passive activity loss limits, The limit on investment interest, or The 2% limit on certain miscellaneous itemized deductions. Federal ez tax form 2012 The at-risk rules and passive activity rules are explained briefly in this section. Federal ez tax form 2012 The limit on investment interest is explained later in this chapter under Interest Expenses . Federal ez tax form 2012 The 2% limit is explained later in this chapter under Expenses of Producing Income . Federal ez tax form 2012 At-risk rules. Federal ez tax form 2012   Special at-risk rules apply to most income-producing activities. Federal ez tax form 2012 These rules limit the amount of loss you can deduct to the amount you risk losing in the activity. Federal ez tax form 2012 Generally, this is the cash and the adjusted basis of property you contribute to the activity. Federal ez tax form 2012 It also includes money you borrow for use in the activity if you are personally liable for repayment or if you use property not used in the activity as security for the loan. Federal ez tax form 2012 For more information, see Publication 925. Federal ez tax form 2012 Passive activity losses and credits. Federal ez tax form 2012   The amount of losses and tax credits you can claim from passive activities is limited. Federal ez tax form 2012 Generally, you are allowed to deduct passive activity losses only up to the amount of your passive activity income. Federal ez tax form 2012 Also, you can use credits from passive activities only against tax on the income from passive activities. Federal ez tax form 2012 There are exceptions for certain activities, such as rental real estate activities. Federal ez tax form 2012 Passive activity. Federal ez tax form 2012   A passive activity generally is any activity involving the conduct of any trade or business in which you do not materially participate and any rental activity. Federal ez tax form 2012 However, if you are involved in renting real estate, the activity is not a passive activity if both of the following are true. Federal ez tax form 2012 More than one-half of the personal services you perform during the year in all trades or businesses are performed in real property trades or businesses in which you materially participate. Federal ez tax form 2012 You perform more than 750 hours of services during the year in real property trades or businesses in which you materially participate. Federal ez tax form 2012  The term “trade or business” generally means any activity that involves the conduct of a trade or business, is conducted in anticipation of starting a trade or business, or involves certain research or experimental expenditures. Federal ez tax form 2012 However, it does not include rental activities or certain activities treated as incidental to holding property for investment. Federal ez tax form 2012   You are considered to materially participate in an activity if you are involved on a regular, continuous, and substantial basis in the operations of the activity. Federal ez tax form 2012 Other income (nonpassive income). Federal ez tax form 2012    Generally, you can use losses from passive activities only to offset income from passive activities. Federal ez tax form 2012 You cannot use passive activity losses to offset your other income, such as your wages or your portfolio income. Federal ez tax form 2012 Portfolio income includes gross income from interest, dividends, annuities, or royalties that is not derived in the ordinary course of a trade or business. Federal ez tax form 2012 It also includes gains or losses (not derived in the ordinary course of a trade or business) from the sale or trade of property (other than an interest in a passive activity) producing portfolio income or held for investment. Federal ez tax form 2012 This includes capital gain distributions from mutual funds (and other regulated investment companies) and real estate investment trusts. Federal ez tax form 2012   You cannot use passive activity losses to offset Alaska Permanent Fund dividends. Federal ez tax form 2012 Expenses. Federal ez tax form 2012   Do not include in the computation of your passive activity income or loss: Expenses (other than interest) that are clearly and directly allocable to your portfolio income, or Interest expense properly allocable to portfolio income. Federal ez tax form 2012 However, this interest and other expenses may be subject to other limits. Federal ez tax form 2012 These limits are explained in the rest of this chapter. Federal ez tax form 2012 Additional information. Federal ez tax form 2012   For more information about determining and reporting income and losses from passive activities, see Publication 925. Federal ez tax form 2012 Interest Expenses This section discusses interest expenses you may be able to deduct as an investor. Federal ez tax form 2012 For information on business interest, see chapter 4 of Publication 535. Federal ez tax form 2012 You cannot deduct personal interest expenses other than qualified home mortgage interest, as explained in Publication 936, Home Mortgage Interest Deduction, and interest on certain student loans, as explained in Publication 970. Federal ez tax form 2012 Investment Interest If you borrow money to buy property you hold for investment, the interest you pay is investment interest. Federal ez tax form 2012 You can deduct investment interest subject to the limit discussed later. Federal ez tax form 2012 However, you cannot deduct interest you incurred to produce tax-exempt income. Federal ez tax form 2012 See Tax-exempt income under Nondeductible Expenses, later. Federal ez tax form 2012 You also cannot deduct interest expenses on straddles discussed under Interest expense and carrying charges on straddles , later. Federal ez tax form 2012 Investment interest does not include any qualified home mortgage interest or any interest taken into account in computing income or loss from a passive activity. Federal ez tax form 2012 Investment property. Federal ez tax form 2012   Property held for investment includes property that produces interest, dividends, annuities, or royalties not derived in the ordinary course of a trade or business. Federal ez tax form 2012 It also includes property that produces gain or loss (not derived in the ordinary course of a trade or business) from the sale or trade of property producing these types of income or held for investment (other than an interest in a passive activity). Federal ez tax form 2012 Investment property also includes an interest in a trade or business activity in which you did not materially participate (other than a passive activity). Federal ez tax form 2012 Partners, shareholders, and beneficiaries. Federal ez tax form 2012   To determine your investment interest, combine your share of investment interest from a partnership, S corporation, estate, or trust with your other investment interest. Federal ez tax form 2012 Allocation of Interest Expense If you borrow money for business or personal purposes as well as for investment, you must allocate the debt among those purposes. Federal ez tax form 2012 Only the interest expense on the part of the debt used for investment purposes is treated as investment interest. Federal ez tax form 2012 The allocation is not affected by the use of property that secures the debt. Federal ez tax form 2012 Example 1. Federal ez tax form 2012 You borrow $10,000 and use $8,000 to buy stock. Federal ez tax form 2012 You use the other $2,000 to buy items for your home. Federal ez tax form 2012 Since 80% of the debt is used for, and allocated to, investment purposes, 80% of the interest on that debt is investment interest. Federal ez tax form 2012 The other 20% is nondeductible personal interest. Federal ez tax form 2012 Debt proceeds received in cash. Federal ez tax form 2012   If you receive debt proceeds in cash, the proceeds are generally not treated as investment property. Federal ez tax form 2012 Debt proceeds deposited in account. Federal ez tax form 2012   If you deposit debt proceeds in an account, that deposit is treated as investment property, regardless of whether the account bears interest. Federal ez tax form 2012 But, if you withdraw the funds and use them for another purpose, you must reallocate the debt to determine the amount considered to be for investment purposes. Federal ez tax form 2012 Example 2. Federal ez tax form 2012 Assume in Example 1 that you borrowed the money on March 1 and immediately bought the stock for $8,000. Federal ez tax form 2012 You did not buy the household items until June 1. Federal ez tax form 2012 You had deposited the $2,000 in the bank. Federal ez tax form 2012 You had no other transactions on the bank account until June. Federal ez tax form 2012 You did not sell the stock, and you made no principal payments on the debt. Federal ez tax form 2012 You paid interest from another account. Federal ez tax form 2012 The $8,000 is treated as being used for an investment purpose. Federal ez tax form 2012 The $2,000 is treated as being used for an investment purpose for the 3-month period. Federal ez tax form 2012 Your total interest expense for 3 months on this debt is investment interest. Federal ez tax form 2012 In June, when you spend the $2,000 for household items, you must begin to allocate 80% of the debt and the interest expense to investment purposes and 20% to personal purposes. Federal ez tax form 2012 Amounts paid within 30 days. Federal ez tax form 2012   If you receive loan proceeds in cash or if the loan proceeds are deposited in an account, you can treat any payment (up to the amount of the proceeds) made from any account you own, or from cash, as made from those proceeds. Federal ez tax form 2012 This applies to any payment made within 30 days before or after the proceeds are received in cash or deposited in your account. Federal ez tax form 2012   If you received the loan proceeds in cash, you can treat the payment as made on the date you received the cash instead of the date you actually made the payment. Federal ez tax form 2012 Payments on debt may require new allocation. Federal ez tax form 2012   As you repay a debt used for more than one purpose, you must reallocate the balance. Federal ez tax form 2012 You must first reduce the amount allocated to personal purposes by the repayment. Federal ez tax form 2012 You then reallocate the rest of the debt to find what part is for investment purposes. Federal ez tax form 2012 Example 3. Federal ez tax form 2012 If, in Example 2 , you repay $500 on November 1, the entire repayment is applied against the amount allocated to personal purposes. Federal ez tax form 2012 The debt balance is now allocated as $8,000 for investment purposes and $1,500 for personal purposes. Federal ez tax form 2012 Until the next reallocation is necessary, 84% ($8,000 ÷ $9,500) of the debt and the interest expense is allocated to investment. Federal ez tax form 2012 Pass-through entities. Federal ez tax form 2012   If you use borrowed funds to buy an interest in a partnership or S corporation, then the interest on those funds must be allocated based on the assets of the entity. Federal ez tax form 2012 If you contribute to the capital of the entity, you can make the allocation using any reasonable method. Federal ez tax form 2012 Additional allocation rules. Federal ez tax form 2012   For more information about allocating interest expense, see chapter 4 of Publication 535. Federal ez tax form 2012 When To Deduct Investment Interest If you use the cash method of accounting, you must pay the interest before you can deduct it. Federal ez tax form 2012 If you use an accrual method of accounting, you can deduct interest over the period it accrues, regardless of when you pay it. Federal ez tax form 2012 For an exception, see Unpaid expenses owed to related party under When To Report Investment Expenses, later in this chapter. Federal ez tax form 2012 Example. Federal ez tax form 2012 You borrowed $1,000 on August 26, 2013, payable in 90 days at 12% interest. Federal ez tax form 2012 On November 26, 2013, you paid this with a new note for $1,030, due on February 26, 2014. Federal ez tax form 2012 If you use the cash method of accounting, you cannot deduct any part of the $30 interest on your return for 2013 because you did not actually pay it. Federal ez tax form 2012 If you use an accrual method, you may be able to deduct a portion of the interest on the loans through December 31, 2013, on your return for 2013. Federal ez tax form 2012 Interest paid in advance. Federal ez tax form 2012   Generally, if you pay interest in advance for a period that goes beyond the end of the tax year, you must spread the interest over the tax years to which it belongs under the OID rules discussed in chapter 1. Federal ez tax form 2012 You can deduct in each year only the interest for that year. Federal ez tax form 2012 Interest on margin accounts. Federal ez tax form 2012   If you are a cash method taxpayer, you can deduct interest on margin accounts to buy taxable securities as investment interest in the year you paid it. Federal ez tax form 2012 You are considered to have paid interest on these accounts only when you actually pay the broker or when payment becomes available to the broker through your account. Federal ez tax form 2012 Payment may become available to the broker through your account when the broker collects dividends or interest for your account, or sells securities held for you or received from you. Federal ez tax form 2012   You cannot deduct any interest on money borrowed for personal reasons. Federal ez tax form 2012 Limit on interest deduction for market discount bonds. Federal ez tax form 2012   The amount you can deduct for interest expense you paid or accrued during the year to buy or carry a market discount bond may be limited. Federal ez tax form 2012 This limit does not apply if you accrue the market discount and include it in your income currently. Federal ez tax form 2012   Under this limit, the interest is deductible only to the extent it is more than: The total interest and OID includible in gross income for the bond for the year, plus The market discount for the number of days you held the bond during the year. Federal ez tax form 2012 Figure the amount in (2) above using the rules for figuring accrued market discount in chapter 1 under Market Discount Bonds . Federal ez tax form 2012 Interest not deducted due to limit. Federal ez tax form 2012   In the year you dispose of the bond, you can deduct any interest expense you were not allowed to deduct in earlier years because of the limit. Federal ez tax form 2012 Choosing to deduct disallowed interest expense before the year of disposition. Federal ez tax form 2012   You can choose to deduct disallowed interest expense in any year before the year you dispose of the bond, up to your net interest income from the bond during the year. Federal ez tax form 2012 The rest of the disallowed interest expense remains deductible in the year you dispose of the bond. Federal ez tax form 2012 Net interest income. Federal ez tax form 2012   This is the interest income (including OID) from the bond that you include in income for the year, minus the interest expense paid or accrued during the year to purchase or carry the bond. Federal ez tax form 2012 Limit on interest deduction for short-term obligations. Federal ez tax form 2012   If the current income inclusion rules discussed in chapter 1 under Discount on Short-Term Obligations do not apply to you, the amount you can deduct for interest expense you paid or accrued during the year to buy or carry a short-term obligation is limited. Federal ez tax form 2012   The interest is deductible only to the extent it is more than: The amount of acquisition discount or OID on the obligation for the tax year, plus The amount of any interest payable on the obligation for the year that is not included in income because of your accounting method (other than interest taken into account in determining the amount of acquisition discount or OID). Federal ez tax form 2012 The method of determining acquisition discount and OID for short-term obligations is discussed in chapter 1 under Discount on Short-Term Obligations . Federal ez tax form 2012 Interest not deducted due to limit. Federal ez tax form 2012   In the year you dispose of the obligation, or, if you choose, in another year in which you have net interest income from the obligation, you can deduct any interest expense you were not allowed to deduct for an earlier year because of the limit. Federal ez tax form 2012 Follow the same rules provided in the earlier discussion under Limit on interest deduction for market discount bonds , earlier. Federal ez tax form 2012 Limit on Deduction Generally, your deduction for investment interest expense is limited to your net investment income. Federal ez tax form 2012 You can carry over the amount of investment interest you could not deduct because of this limit to the next tax year. Federal ez tax form 2012 The interest carried over is treated as investment interest paid or accrued in that next year. Federal ez tax form 2012 You can carry over disallowed investment interest to the next tax year even if it is more than your taxable income in the year the interest was paid or accrued. Federal ez tax form 2012 Net Investment Income Determine the amount of your net investment income by subtracting your investment expenses (other than interest expense) from your investment income. Federal ez tax form 2012 Investment income. Federal ez tax form 2012   This generally includes your gross income from property held for investment (such as interest, dividends, annuities, and royalties). Federal ez tax form 2012 Investment income does not include Alaska Permanent Fund dividends. Federal ez tax form 2012 It also does not include qualified dividends or net capital gain unless you choose to include them. Federal ez tax form 2012 Choosing to include qualified dividends. Federal ez tax form 2012   Investment income generally does not include qualified dividends, discussed in chapter 1. Federal ez tax form 2012 However, you can choose to include all or part of your qualified dividends in investment income. Federal ez tax form 2012   You make this choice by completing Form 4952, line 4g, according to its instructions. Federal ez tax form 2012   If you choose to include any of your qualified dividends in investment income, you must reduce your qualified dividends that are eligible for the lower capital gains tax rates by the same amount. Federal ez tax form 2012 Choosing to include net capital gain. Federal ez tax form 2012    Investment income generally does not include net capital gain from disposing of investment property (including capital gain distributions from mutual funds). Federal ez tax form 2012 However, you can choose to include all or part of your net capital gain in investment income. Federal ez tax form 2012   You make this choice by completing Form 4952, line 4g, according to its instructions. Federal ez tax form 2012   If you choose to include any of your net capital gain in investment income, you must reduce your net capital gain that is eligible for the lower capital gains tax rates by the same amount. Federal ez tax form 2012   For more information about the capital gains rates, see Capital Gain Tax Rates in chapter 4. Federal ez tax form 2012    Before making either choice, consider the overall effect on your tax liability. Federal ez tax form 2012 Compare your tax if you make one or both of these choices with your tax if you do not. Federal ez tax form 2012 Investment income of child reported on parent's return. Federal ez tax form 2012   Investment income includes the part of your child's interest and dividend income you choose to report on your return. Federal ez tax form 2012 If the child does not have qualified dividends, Alaska Permanent Fund dividends, or capital gain distributions, this is the amount on line 6 of Form 8814. Federal ez tax form 2012 Include it on line 4a of Form 4952. Federal ez tax form 2012 Example. Federal ez tax form 2012 Your 8-year-old son has interest income of $2,200, which you choose to report on your own return. Federal ez tax form 2012 You enter $2,200 on Form 8814, lines 1a and 4, and $200 on lines 6 and 12 and complete Part II. Federal ez tax form 2012 Also enter $200 on Form 1040, line 21. Federal ez tax form 2012 Your investment income includes this $200. Federal ez tax form 2012 Child's qualified dividends. Federal ez tax form 2012   If part of the amount you report is your child's qualified dividends, that part (which is reported on Form 1040, line 9b) generally does not count as investment income. Federal ez tax form 2012 However, you can choose to include all or part of it in investment income, as explained under Choosing to include qualified dividends , earlier. Federal ez tax form 2012   Your investment income also includes the amount on Form 8814, line 12 (or, if applicable, the reduced amount figured next under Child's Alaska Permanent Fund dividends). Federal ez tax form 2012 Child's Alaska Permanent Fund dividends. Federal ez tax form 2012   If part of the amount you report is your child's Alaska Permanent Fund dividends, that part does not count as investment income. Federal ez tax form 2012 To figure the amount of your child's income that you can consider your investment income, start with the amount on Form 8814, line 6. Federal ez tax form 2012 Multiply that amount by a percentage that is equal to the Alaska Permanent Fund dividends divided by the total amount on Form 8814, line 4. Federal ez tax form 2012 Subtract the result from the amount on Form 8814, line 12. Federal ez tax form 2012 Example. Federal ez tax form 2012 Your 10-year-old child has taxable interest income of $4,000 and Alaska Permanent Fund dividends of $2,000. Federal ez tax form 2012 You choose to report this on your return. Federal ez tax form 2012 You enter $4,000 on Form 8814, line 1a, $2,000 on line 2a, and $6,000 on line 4. Federal ez tax form 2012 You then enter $4,000 on Form 8814, lines 6 and 12, and Form 1040, line 21. Federal ez tax form 2012 You figure the amount of your child's income that you can consider your investment income as follows: $4,000 − ($4,000 × ($2,000 ÷ $6,000)) = $2,667 You include the result, $2,667, on Form 4952, line 4a. Federal ez tax form 2012 Child's capital gain distributions. Federal ez tax form 2012   If part of the amount you report is your child's capital gain distributions, that part (which is reported on Schedule D (Form 1040), line 13, or Form 1040, line 13) generally does not count as investment income. Federal ez tax form 2012 However, you can choose to include all or part of it in investment income, as explained in Choosing to include net capital gain , earlier. Federal ez tax form 2012   Your investment income also includes the amount on Form 8814, line 12 (or, if applicable, the reduced amount figured under Child's Alaska Permanent Fund dividends , earlier). Federal ez tax form 2012 Investment expenses. Federal ez tax form 2012   Investment expenses are your allowed deductions (other than interest expense) directly connected with the production of investment income. Federal ez tax form 2012 Investment expenses that are included as a miscellaneous itemized deduction on Schedule A (Form 1040) are allowable deductions after applying the 2% limit that applies to miscellaneous itemized deductions. Federal ez tax form 2012 Use the smaller of: The investment expenses included on Schedule A (Form 1040), line 23, or The amount on Schedule A (Form 1040), line 27. Federal ez tax form 2012 See Expenses of Producing Income , later, for a discussion of the 2% limit. Federal ez tax form 2012 Losses from passive activities. Federal ez tax form 2012   Income or expenses that you used in computing income or loss from a passive activity are not included in determining your investment income or investment expenses (including investment interest expense). Federal ez tax form 2012 See Publication 925 for information about passive activities. Federal ez tax form 2012 Example. Federal ez tax form 2012 Ted is a partner in a partnership that operates a business. Federal ez tax form 2012 However, he does not materially participate in the partnership's business. Federal ez tax form 2012 Ted's interest in the partnership is considered a passive activity. Federal ez tax form 2012 Ted's investment income from interest and dividends (other than qualified dividends) is $10,000. Federal ez tax form 2012 His investment expenses (other than interest) are $3,200 after taking into account the 2% limit on miscellaneous itemized deductions. Federal ez tax form 2012 His investment interest expense is $8,000. Federal ez tax form 2012 Ted also has income from the partnership of $2,000. Federal ez tax form 2012 Ted figures his net investment income and the limit on his investment interest expense deduction in the following way: Total investment income $10,000 Minus: Investment expenses (other than interest) 3,200 Net investment income $6,800 Deductible investment interest expense for the year $6,800 The $2,000 of income from the passive activity is not used in determining Ted's net investment income. Federal ez tax form 2012 His investment interest deduction for the year is limited to $6,800, the amount of his net investment income. Federal ez tax form 2012 Form 4952 Use Form 4952 to figure your deduction for investment interest. Federal ez tax form 2012 See Form 4952 for more information. Federal ez tax form 2012 Exception to use of Form 4952. Federal ez tax form 2012   You do not have to complete Form 4952 or attach it to your return if you meet all of the following tests. Federal ez tax form 2012 Your investment interest expense is not more than your investment income from interest and ordinary dividends minus any qualified dividends. Federal ez tax form 2012 You do not have any other deductible investment expenses. Federal ez tax form 2012 You have no carryover of investment interest expense from 2012. Federal ez tax form 2012   If you meet all of these tests, you can deduct all of your investment interest. Federal ez tax form 2012    Bond Premium Amortization If you pay a premium to buy a bond, the premium is part of your basis in the bond. Federal ez tax form 2012 If the bond yields taxable interest, you can choose to amortize the premium. Federal ez tax form 2012 This generally means that each year, over the life of the bond, you use a part of the premium to reduce the amount of interest includible in your income. Federal ez tax form 2012 If you make this choice, you must reduce your basis in the bond by the amortization for the year. Federal ez tax form 2012 If the bond yields tax-exempt interest, you must amortize the premium. Federal ez tax form 2012 This amortized amount is not deductible in determining taxable income. Federal ez tax form 2012 However, each year you must reduce your basis in the bond (and tax-exempt interest otherwise reportable on Form 1040, line 8b) by the amortization for the year. Federal ez tax form 2012 Bond premium. Federal ez tax form 2012   Bond premium is the amount by which your basis in the bond right after you get it is more than the total of all amounts payable on the bond after you get it (other than payments of qualified stated interest). Federal ez tax form 2012 For example, a bond with a maturity value of $1,000 generally would have a $50 premium if you buy it for $1,050. Federal ez tax form 2012 Special rules to determine amounts payable on a bond. Federal ez tax form 2012   For special rules that apply to determine the amounts payable on a variable rate bond, an inflation-indexed debt instrument, a bond that provides for certain alternative payment schedules (for example, a bond callable prior to the stated maturity date of the bond), or a bond that provides for remote or incidental contingencies, see Regulations section 1. Federal ez tax form 2012 171-3. Federal ez tax form 2012 Basis. Federal ez tax form 2012   In general, your basis for figuring bond premium amortization is the same as your basis for figuring any loss on the sale of the bond. Federal ez tax form 2012 However, you may need to use a different basis for: Convertible bonds, Bonds you got in a trade, and Bonds whose basis has to be determined using the basis of the person who transferred the bond to you. Federal ez tax form 2012 See Regulations section 1. Federal ez tax form 2012 171-1(e). Federal ez tax form 2012 Dealers. Federal ez tax form 2012   A dealer in taxable bonds (or anyone who holds them mainly for sale to customers in the ordinary course of a trade or business or who would properly include bonds in inventory at the close of the tax year) cannot claim a deduction for amortizable bond premium. Federal ez tax form 2012   See section 75 of the Internal Revenue Code for the treatment of bond premium by a dealer in tax-exempt bonds. Federal ez tax form 2012 How To Figure Amortization For bonds issued after September 27, 1985, you must amortize bond premium using a constant yield method on the basis of the bond's yield to maturity, determined by using the bond's basis and compounding at the close of each accrual period. Federal ez tax form 2012 Constant yield method. Federal ez tax form 2012   Figure the bond premium amortization for each accrual period as follows. Federal ez tax form 2012 Step 1: Determine your yield. Federal ez tax form 2012   Your yield is the discount rate that, when used in figuring the present value of all remaining payments to be made on the bond (including payments of qualified stated interest), produces an amount equal to your basis in the bond. Federal ez tax form 2012 Figure the yield as of the date you got the bond. Federal ez tax form 2012 It must be constant over the term of the bond and must be figured to at least two decimal places when expressed as a percentage. Federal ez tax form 2012   If you do not know the yield, consult your broker or tax advisor. Federal ez tax form 2012 Databases available to them are likely to show the yield at the date of purchase. Federal ez tax form 2012 Step 2: Determine the accrual periods. Federal ez tax form 2012   You can choose the accrual periods to use. Federal ez tax form 2012 They may be of any length and may vary in length over the term of the bond, but each accrual period can be no longer than 1 year and each scheduled payment of principal or interest must occur either on the first or the final day of an accrual period. Federal ez tax form 2012 The computation is simplest if accrual periods are the same as the intervals between interest payment dates. Federal ez tax form 2012 Step 3: Determine the bond premium for the accrual period. Federal ez tax form 2012   To do this, multiply your adjusted acquisition price at the beginning of the accrual period by your yield. Federal ez tax form 2012 Then subtract the result from the qualified stated interest for the period. Federal ez tax form 2012   Your adjusted acquisition price at the beginning of the first accrual period is the same as your basis. Federal ez tax form 2012 After that, it is your basis decreased by the amount of bond premium amortized for earlier periods and the amount of any payment previously made on the bond other than a payment of qualified stated interest. Federal ez tax form 2012 Example. Federal ez tax form 2012 On February 1, 2012, you bought a taxable bond for $110,000. Federal ez tax form 2012 The bond has a stated principal amount of $100,000, payable at maturity on February 1, 2019, making your premium $10,000 ($110,000 − $100,000). Federal ez tax form 2012 The bond pays qualified stated interest of $10,000 on February 1 of each year. Federal ez tax form 2012 Your yield is 8. Federal ez tax form 2012 07439% compounded annually. Federal ez tax form 2012 You choose to use annual accrual periods ending on February 1 of each year. Federal ez tax form 2012 To find your bond premium amortization for the accrual period ending on February 1, 2013, you multiply the adjusted acquisition price at the beginning of the period ($110,000) by your yield. Federal ez tax form 2012 When you subtract the result ($8,881. Federal ez tax form 2012 83) from the qualified stated interest for the period ($10,000), you find that your bond premium amortization for the period is $1,118. Federal ez tax form 2012 17. Federal ez tax form 2012 Special rules to figure amortization. Federal ez tax form 2012   For special rules to figure the bond premium amortization on a variable rate bond, an inflation-indexed debt instrument, a bond that provides for certain alternative payment schedules (for example, a bond callable prior to the stated maturity date of the bond), or a bond that provides for remote or incidental contingencies, see Regulations section 1. Federal ez tax form 2012 171-3. Federal ez tax form 2012 Bonds Issued Before September 28, 1985 For these bonds, you can amortize bond premium using any reasonable method. Federal ez tax form 2012 Reasonable methods include: The straight-line method, and The Revenue Ruling 82-10 method. Federal ez tax form 2012 Straight-line method. Federal ez tax form 2012   Under this method, the amount of your bond premium amortization is the same each month. Federal ez tax form 2012 Divide the number of months you held the bond during the year by the number of months from the beginning of the tax year (or, if later, the date of acquisition) to the date of maturity or earlier call date. Federal ez tax form 2012 Then multiply the result by the bond premium (reduced by any bond premium amortization claimed in earlier years). Federal ez tax form 2012 This gives you your bond premium amortization for the year. Federal ez tax form 2012 Revenue Ruling 82-10 method. Federal ez tax form 2012   Under this method, the amount of your bond premium amortization increases each month over the life of the bond. Federal ez tax form 2012 This method is explained in Revenue Ruling 82-10, 1982-1 C. Federal ez tax form 2012 B. Federal ez tax form 2012 46. Federal ez tax form 2012 Choosing To Amortize You choose to amortize the premium on taxable bonds by reporting the amortization for the year on your income tax return for the first tax year you want the choice to apply. Federal ez tax form 2012 You should attach a statement to your return that you are making this choice under section 171. Federal ez tax form 2012 See How To Report Amortization, next. Federal ez tax form 2012 This choice is binding for the year you make it and for later tax years. Federal ez tax form 2012 It applies to all taxable bonds you own in the year you make the choice and also to those you acquire in later years. Federal ez tax form 2012 You can change your decision to amortize bond premium only with the written approval of the IRS. Federal ez tax form 2012 To request approval, use Form 3115. Federal ez tax form 2012 For more information on requesting approval, see section 5 of the Appendix to Revenue Procedure 2011-14 in Internal Revenue Bulletin 2011-4. Federal ez tax form 2012 You can find Revenue Procedure 2011-14 at www. Federal ez tax form 2012 irs. Federal ez tax form 2012 gov/irb/2011-04_IRB/ar08. Federal ez tax form 2012 html. Federal ez tax form 2012 How To Report Amortization Subtract the bond premium amortization from your interest income from these bonds. Federal ez tax form 2012 Report the bond's interest on Schedule B (Form 1040A or 1040), line 1. Federal ez tax form 2012 Under your last entry on line 1, put a subtotal of all interest listed on line 1. Federal ez tax form 2012 Below this subtotal, print “ABP Adjustment,” and the total interest you received. Federal ez tax form 2012 Subtract this amount from the subtotal, and enter the result on line 2. Federal ez tax form 2012 Bond premium amortization more than interest. Federal ez tax form 2012   If the amount of your bond premium amortization for an accrual period is more than the qualified stated interest for the period, you can deduct the difference as a miscellaneous itemized deduction on Schedule A (Form 1040), line 28. Federal ez tax form 2012    But your deduction is limited to the amount by which your total interest inclusions on the bond in prior accrual periods is more than your total bond premium deductions on the bond in prior periods. Federal ez tax form 2012 Any amount you cannot deduct because of this limit can be carried forward to the next accrual period. Federal ez tax form 2012 Pre-1998 election to amortize bond premium. Federal ez tax form 2012   Generally, if you first elected to amortize bond premium before 1998, the above treatment of the premium does not apply to bonds you acquired before 1988. Federal ez tax form 2012 Bonds acquired before October 23, 1986. Federal ez tax form 2012   The amortization of the premium on these bonds is a miscellaneous itemized deduction not subject to the 2%-of-adjusted-gross-income limit. Federal ez tax form 2012 Bonds acquired after October 22, 1986, but before 1988. Federal ez tax form 2012    The amortization of the premium on these bonds is investment interest expense subject to the investment interest limit, unless you choose to treat it as an offset to interest income on the bond. Federal ez tax form 2012 Expenses of Producing Income You deduct investment expenses (other than interest expenses) as miscellaneous itemized deductions on Schedule A (Form 1040). Federal ez tax form 2012 To be deductible, these expenses must be ordinary and necessary expenses paid or incurred: To produce or collect income, or To manage property held for producing income. Federal ez tax form 2012 The expenses must be directly related to the income or income-producing property, and the income must be taxable to you. Federal ez tax form 2012 The deduction for most income-producing expenses is subject to a 2% limit that also applies to certain other miscellaneous itemized deductions. Federal ez tax form 2012 The amount deductible is limited to the total of these miscellaneous deductions that is more than 2% of your adjusted gross income. Federal ez tax form 2012 For information on how to report expenses of producing income, see How To Report Investment Expenses , later. Federal ez tax form 2012 Attorney or accounting fees. Federal ez tax form 2012   You can deduct attorney or accounting fees that are necessary to produce or collect taxable income. Federal ez tax form 2012 However, in some cases, attorney or accounting fees are part of the basis of property. Federal ez tax form 2012 See Basis of Investment Property in chapter 4. Federal ez tax form 2012 Automatic investment service and dividend reinvestment plans. Federal ez tax form 2012   A bank may offer its checking account customers an automatic investment service so that, for a charge, each customer can choose to invest a part of the checking account each month in common stock. Federal ez tax form 2012 Or a bank that is a dividend disbursing agent for a number of publicly-owned corporations may set up an automatic dividend reinvestment service. Federal ez tax form 2012 Through that service, cash dividends are reinvested in more shares of stock after the bank deducts a service charge. Federal ez tax form 2012   A corporation in which you own stock also may have a dividend reinvestment plan. Federal ez tax form 2012 This plan lets you choose to use your dividends to buy more shares of stock in the corporation instead of receiving the dividends in cash. Federal ez tax form 2012   You can deduct the monthly service charge you pay to a bank to participate in an automatic investment service. Federal ez tax form 2012 If you participate in a dividend reinvestment plan, you can deduct any service charge subtracted from your cash dividends before the dividends are used to buy more shares of stock. Federal ez tax form 2012 Deduct the charges in the year you pay them. Federal ez tax form 2012 Clerical help and office rent. Federal ez tax form 2012   You can deduct office expenses, such as rent and clerical help, you incurred in connection with your investments and collecting the taxable income on your investments. Federal ez tax form 2012 Cost of replacing missing securities. Federal ez tax form 2012   To replace your taxable securities that are mislaid, lost, stolen, or destroyed, you may have to post an indemnity bond. Federal ez tax form 2012 You can deduct the premium you pay to buy the indemnity bond and the related incidental expenses. Federal ez tax form 2012   You may, however, get a refund of part of the bond premium if the missing securities are recovered within a specified time. Federal ez tax form 2012 Under certain types of insurance policies, you can recover some of the expenses. Federal ez tax form 2012   If you receive the refund in the tax year you pay the amounts, you can deduct only the difference between the expenses paid and the amount refunded. Federal ez tax form 2012 If the refund is made in a later tax year, you must include the refund in income in the year you received it, but only to the extent that the expenses decreased your tax in the year you deducted them. Federal ez tax form 2012 Fees to collect income. Federal ez tax form 2012   You can deduct fees you pay to a broker, bank, trustee, or similar agent to collect investment income, such as your taxable bond or mortgage interest, or your dividends on shares of stock. Federal ez tax form 2012 Fees to buy or sell. Federal ez tax form 2012   You cannot deduct a fee you pay to a broker to acquire investment property, such as stocks or bonds. Federal ez tax form 2012 You must add the fee to the cost of the property. Federal ez tax form 2012 See Basis of Investment Property in chapter 4. Federal ez tax form 2012    You cannot deduct any broker's fees, commissions, or option premiums you pay (or that were netted out) in connection with the sale of investment property. Federal ez tax form 2012 They can be used only to figure gain or loss from the sale. Federal ez tax form 2012 See Reporting Capital Gains and Losses , in chapter 4, for more information about the treatment of these sale expenses. Federal ez tax form 2012 Investment counsel and advice. Federal ez tax form 2012   You can deduct fees you pay for counsel and advice about investments that produce taxable income. Federal ez tax form 2012 This includes amounts you pay for investment advisory services. Federal ez tax form 2012 Safe deposit box rent. Federal ez tax form 2012   You can deduct rent you pay for a safe deposit box if you use the box to store taxable income-producing stocks, bonds, or other investment-related papers and documents. Federal ez tax form 2012 If you also use the box to store tax-exempt securities or personal items, you can deduct only part of the rent. Federal ez tax form 2012 See Tax-exempt income under Nondeductible Expenses, later, to figure what part you can deduct. Federal ez tax form 2012 State and local transfer taxes. Federal ez tax form 2012   You cannot deduct the state and local transfer taxes you pay when you buy or sell securities. Federal ez tax form 2012 If you pay these transfer taxes when you buy securities, you must treat them as part of the cost of the property. Federal ez tax form 2012 If you pay these transfer taxes when you sell securities, you must treat them as a reduction in the amount realized. Federal ez tax form 2012 Trustee's commissions for revocable trust. Federal ez tax form 2012   If you set up a revocable trust and have its income distributed to you, you can deduct the commission you pay the trustee for managing the trust to the extent it is to produce or collect taxable income or to manage property. Federal ez tax form 2012 However, you cannot deduct any part of the commission used for producing or collecting tax-exempt income or for managing property that produces tax-exempt income. Federal ez tax form 2012   If you are a cash-basis taxpayer and pay the commissions for several years in advance, you must deduct a part of the commission each year. Federal ez tax form 2012 You cannot deduct the entire amount in the year you pay it. Federal ez tax form 2012 Investment expenses from pass-through entities. Federal ez tax form 2012   If you hold an interest in a partnership, S corporation, real estate mortgage investment conduit (REMIC), or a nonpublicly offered mutual fund, you can deduct your share of that entity's investment expenses. Federal ez tax form 2012 A partnership or S corporation will show your share of these expenses on your Schedule K-1 (Form 1065) or Schedule K-1 (Form 1120S). Federal ez tax form 2012 A nonpublicly offered mutual fund will indicate your share of these expenses in box 5 of Form 1099-DIV (or substitute statement). Federal ez tax form 2012 Publicly-offered mutual funds are discussed later. Federal ez tax form 2012   If you hold an interest in a REMIC, any expenses relating to your residual interest investment will be shown on Schedule Q (Form 1066), line 3b. Federal ez tax form 2012 Any expenses relating to your regular interest investment will appear in box 5 of Form 1099-INT (or substitute statement) or box 9 of Form 1099-OID (or substitute statement). Federal ez tax form 2012   Report your share of these investment expenses on Schedule A (Form 1040), subject to the 2% limit, in the same manner as your other investment expenses. Federal ez tax form 2012 Including mutual fund or REMIC expenses in income. Federal ez tax form 2012   Your share of the investment expenses of a REMIC or a nonpublicly offered mutual fund, as described above, are considered to be indirect deductions through that pass-through entity. Federal ez tax form 2012 You must include in your gross income an amount equal to the expenses allocated to you, whether or not you are able to claim a deduction for those expenses. Federal ez tax form 2012 If you are a shareholder in a nonpublicly offered mutual fund, you must include on your return the full amount of ordinary dividends or other distributions of stock, as shown in box 1a of Form 1099-DIV (or substitute statement). Federal ez tax form 2012 If you are a residual interest holder in a REMIC, you must report as ordinary income on Schedule E (Form 1040) the total amounts shown on Schedule Q (Form 1066), lines 1b and 3b. Federal ez tax form 2012 If you are a REMIC regular interest holder, you must include the amount of any expense allocation you received on Form 1040, line 8a. Federal ez tax form 2012 Publicly-offered mutual funds. Federal ez tax form 2012   Most mutual funds are publicly offered. Federal ez tax form 2012 These mutual funds, generally, are traded on an established securities exchange. Federal ez tax form 2012 These funds do not pass investment expenses through to you. Federal ez tax form 2012 Instead, the dividend income they report to you in box 1a of Form 1099-DIV (or substitute statement) is already reduced by your share of investment expenses. Federal ez tax form 2012 As a result, you cannot deduct the expenses on your return. Federal ez tax form 2012   Include the amount from box 1a of Form 1099-DIV (or substitute statement) in your income. Federal ez tax form 2012    A publicly offered mutual fund is one that: Is continuously offered pursuant to a public offering, Is regularly traded on an established securities market, and Is held by or for no fewer than 500 persons at any time during the year. Federal ez tax form 2012 Contact your mutual fund if you are not sure whether it is publicly offered. Federal ez tax form 2012 Nondeductible Expenses Some expenses that you incur as an investor are not deductible. Federal ez tax form 2012 Stockholders' meetings. Federal ez tax form 2012   You cannot deduct transportation and other expenses you pay to attend stockholders' meetings of companies in which you have no interest other than owning stock. Federal ez tax form 2012 This is true even if your purpose in attending is to get information that would be useful in making further investments. Federal ez tax form 2012 Investment-related seminar. Federal ez tax form 2012   You cannot deduct expenses for attending a convention, seminar, or similar meeting for investment purposes. Federal ez tax form 2012 Single-premium life insurance, endowment, and annuity contracts. Federal ez tax form 2012   You cannot deduct interest on money you borrow to buy or carry a single-premium life insurance, endowment, or annuity contract. Federal ez tax form 2012 Used as collateral. Federal ez tax form 2012   If you use a single premium annuity contract as collateral to obtain or continue a mortgage loan, you cannot deduct any interest on the loan that is collateralized by the annuity contract. Federal ez tax form 2012 Figure the amount of interest expense disallowed by multiplying the current interest rate on the mortgage loan by the lesser of the amount of the annuity contract used as collateral or the amount of the loan. Federal ez tax form 2012 Borrowing on insurance. Federal ez tax form 2012   Generally, you cannot deduct interest on money you borrow to buy or carry a life insurance, endowment, or annuity contract if you plan to systematically borrow part or all of the increases in the cash value of the contract. Federal ez tax form 2012 This rule applies to the interest on the total amount borrowed to buy or carry the contract, not just the interest on the borrowed increases in the cash value. Federal ez tax form 2012 Tax-exempt income. Federal ez tax form 2012   You cannot deduct expenses you incur to produce tax-exempt income. Federal ez tax form 2012 Nor can you deduct interest on money you borrow to buy tax-exempt securities or shares in a mutual fund or other regulated investment company that distributes only exempt-interest dividends. Federal ez tax form 2012 Short-sale expenses. Federal ez tax form 2012   The rule disallowing a deduction for interest expenses on tax-exempt securities applies to amounts you pay in connection with personal property used in a short sale or amounts paid by others for the use of any collateral in connection with the short sale. Federal ez tax form 2012 However, it does not apply to the expenses you incur if you deposit cash as collateral for the property used in the short sale and the cash does not earn a material return during the period of the sale. Federal ez tax form 2012 Short sales are discussed in Short Sales in chapter 4. Federal ez tax form 2012 Expenses for both tax-exempt and taxable income. Federal ez tax form 2012   You may have expenses that are for both tax-exempt and taxable income. Federal ez tax form 2012 If you cannot specifically identify what part of the expenses is for each type of income, you can divide the expenses, using reasonable proportions based on facts and circumstances. Federal ez tax form 2012 You must attach a statement to your return showing how you divided the expenses and stating that each deduction claimed is not based on tax-exempt income. Federal ez tax form 2012   One accepted method for dividing expenses is to do it in the same proportion that each type of income is to the total income. Federal ez tax form 2012 If the expenses relate in part to capital gains and losses, include the gains, but not the losses, in figuring this proportion. Federal ez tax form 2012 To find the part of the expenses that is for the tax-exempt income, divide your tax-exempt income by the total income and multiply your expenses by the result. Federal ez tax form 2012 Example. Federal ez tax form 2012 You received $6,000 interest; $4,800 was tax-exempt and $1,200 was taxable. Federal ez tax form 2012 In earning this income, you had $500 of expenses. Federal ez tax form 2012 You cannot specifically identify the amount of each expense item that is for each income item, so you must divide your expenses. Federal ez tax form 2012 80% ($4,800 tax-exempt interest divided by $6,000 total interest) of your expenses is for the tax-exempt income. Federal ez tax form 2012 You cannot deduct $400 (80% of $500) of the expenses. Federal ez tax form 2012 You can deduct $100 (the rest of the expenses) because they are for the taxable interest. Federal ez tax form 2012 State income taxes. Federal ez tax form 2012   If you itemize your deductions, you can deduct, as taxes, state income taxes on interest income that is exempt from federal income tax. Federal ez tax form 2012 But you cannot deduct, as either taxes or investment expenses, state income taxes on other exempt income. Federal ez tax form 2012 Interest expense and carrying charges on straddles. Federal ez tax form 2012   You cannot deduct interest and carrying charges allocable to personal property that is part of a straddle. Federal ez tax form 2012 The nondeductible interest and carrying charges are added to the basis of the straddle property. Federal ez tax form 2012 However, this treatment does not apply if: All the offsetting positions making up the straddle either consist of one or more qualified covered call options and the optioned stock, or consist of section 1256 contracts (and the straddle is not part of a larger straddle); or The straddle is a hedging transaction. Federal ez tax form 2012  For information about straddles, including definitions of the terms used in this discussion, see Straddles in chapter 4. Federal ez tax form 2012   Interest includes any amount you pay or incur in connection with personal property used in a short sale. Federal ez tax form 2012 However, you must first apply the rules discussed in Payments in lieu of dividends under Short Sales in chapter 4. Federal ez tax form 2012   To determine the interest on market discount bonds and short-term obligations that are part of a straddle, you must first apply the rules discussed under Limit on interest deduction for market discount bonds and Limit on interest deduction for short-term obligations (both under Interest Expenses, earlier). Federal ez tax form 2012 Nondeductible amount. Federal ez tax form 2012   Figure the nondeductible interest and carrying charges on straddle property as follows. Federal ez tax form 2012 Add: Interest on indebtedness incurred or continued to buy or carry the personal property, and All other amounts (including charges to insure, store, or transport the personal property) paid or incurred to carry the personal property. Federal ez tax form 2012 Subtract from the amount in (1): Interest (including OID) includible in gross income for the year on the personal property, Any income from the personal property treated as ordinary income on the disposition of short-term government obligations or as ordinary income under the market discount and short-term bond provisions — see Discount on Debt Instruments in chapter 1, The dividends includible in gross income for the year from the personal property, and Any payment on a loan of the personal property for use in a short sale that is includible in gross income. Federal ez tax form 2012 Basis adjustment. Federal ez tax form 2012   Add the nondeductible amount to the basis of your straddle property. Federal ez tax form 2012 How To Report Investment Expenses To deduct your investment expenses, you must itemize deductions on Schedule A (Form 1040). Federal ez tax form 2012 Enter your deductible investment interest expense on Schedule A (Form1040), line 14. Federal ez tax form 2012 Include any deductible short sale expenses. Federal ez tax form 2012 (See Short Sales in chapter 4 for information on these expenses. Federal ez tax form 2012 ) Also attach a completed Form 4952 if you used that form to figure your investment interest expense. Federal ez tax form 2012 Enter the total amount of your other investment expenses (other than interest expenses) on Schedule A (Form 1040), line 23. Federal ez tax form 2012 List the type and amount of each expense on the dotted lines next to line 23. Federal ez tax form 2012 (If necessary, you can show the required information on an attached statement. Federal ez tax form 2012 ) For information on how to report amortizable bond premium, see Bond Premium Amortization , earlier in this chapter. Federal ez tax form 2012 When To Report Investment Expenses If you use the cash method to report income and expenses, you generally deduct your expenses, except for certain prepaid interest, in the year you pay them. Federal ez tax form 2012 If you use an accrual method, you generally deduct your expenses when you incur a liability for them, rather than when you pay them. Federal ez tax form 2012 Also see When To Deduct Investment Interest , earlier in this chapter. Federal ez tax form 2012 Unpaid expenses owed to related party. Federal ez tax form 2012   If you use an accrual method, you cannot deduct interest and other expenses owed to a related cash-basis person until payment is made and the amount is includible in the gross income of that person. Federal ez tax form 2012 The relationship, for purposes of this rule, is determined as of the end of the tax year for which the interest or expense would otherwise be deductible. Federal ez tax form 2012 If a deduction is denied under this rule, this rule will continue to apply even if your relationship with the person ceases to exist before the amount is includible in the gross income of that person. Federal ez tax form 2012   This rule generally applies to those relationships listed in chapter 4 under Related Party Transactions . Federal ez tax form 2012 It also applies to accruals by partnerships to partners, partners to partnerships, shareholders to S corporations, and S corporations to shareholders. Federal ez tax form 2012   The postponement of deductions for unpaid expenses and interest under the related party rule does not apply to OID, regardless of when payment is made. Federal ez tax form 2012 This rule also does not apply to loans with below-market interest rates or to certain payments for the use of property and services when the lender or recipient has to include payments periodically in income, even if a payment has not been made. Federal ez tax form 2012 Prev  Up  Next   Home   More Online Publications
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Contact My Local Office in New Hampshire

Face-to-face Tax Help

IRS Taxpayer Assistance Centers (TACs) are your source for personal tax help when you believe your tax issue can only be handled face-to-face. No appointment is necessary.

Keep in mind, many questions can be resolved online without waiting in line. Through IRS.gov you can:
• Set up a payment plan.
• Get a transcript of your tax return.
• Make a payment.
• Check on your refund.
• Find answers to many of your tax questions.

We are now referring all requests for tax return preparation services to other available resources. You can take advantage of free tax preparation through Free File, Free File Fillable Forms or through a volunteer site in your community. To find the nearest volunteer site location or to get more information about Free File, go to the top of the page and enter “Free Tax Help” in the Search box.

If you have a tax account issues and feel that it requires talking with someone face-to-face, visit your local TAC.

Caution:  Many of our offices are located in Federal Office Buildings. These buildings may not allow visitors to bring in cell phones with camera capabilities.

Multilingual assistance is available in every office. Hours of operation are subject to change.

Before visiting your local office click on "Services Provided" in the chart below to see what services are available. Services are limited and not all services are available at every TAC office and may vary from site to site. You can get these services on a walk-in basis.

City  Street Address  Days/Hours of Service  Telephone* 
Manchester  1000 Elm St. 9th Floor
Manchester, NH 03101 

Monday-Friday - 8:30 a.m. - 4:30 p.m.

 

Services Provided

(603) 668-6763 
Nashua  410 Amherst St.
Nashua, NH 03063 

Monday-Friday - 8:30 a.m. - 4:30 p.m.
(Closed for lunch 1:00 p.m. - 2:00 p.m.)

 

Services Provided

(603) 594-8370 
Portsmouth  80 Daniel St.
Portsmouth, NH 03801 

Monday-Friday - 8:30 a.m. - 4:30 p.m.
(Closed for lunch 1:00 p.m. - 2:00 p.m.)
 

Services Provided

(603) 430-9598 

* Note: The phone numbers in the chart above are not toll-free for all locations. When you call, you will reach a recorded business message with information about office hours, locations and services provided in that office. If face-to-face assistance is not a priority for you, you may also get help with IRS letters or resolve tax account issues by phone, toll free at 1-800-829-1040 (individuals) or 1-800-829-4933 (businesses). 

For information on where to file your tax return please see Where to File Addresses

The Taxpayer Advocate Service: Call (603)433-0571 in Portsmouth or 1-877-777-4778 elsewhere, or see  Publication 1546, The Taxpayer Advocate Service of the IRS.

For further information, see Tax Topic 104

Partnerships

IRS and organizations all over the country are partnering to assist taxpayers. Through these partnerships, organizations are also achieving their own goals. These mutually beneficial partnerships are strengthening outreach efforts and bringing education and assistance to millions.

For more information about these programs for individuals and families, contact the Stakeholder Partnerships, Education and Communication Office at:

Internal Revenue Service
1000 Elm St., Suite 900
Manchester, NH  03101

For more information about these programs for businesses, your local Stakeholder Liaison office establishes relationships with organizations representing small business and self-employed taxpayers. They provide information about the policies, practices and procedures the IRS uses to ensure compliance with the tax laws. To establish a relationship with us, use this list to find a contact in your state:

Stakeholder Liaison (SL) Phone Numbers for Organizations Representing Small Businesses and Self-employed Taxpayers.

Page Last Reviewed or Updated: 28-Mar-2014

The Federal Ez Tax Form 2012

Federal ez tax form 2012 5. Federal ez tax form 2012   Recordkeeping Table of Contents How To Prove ExpensesWhat Are Adequate Records? What If I Have Incomplete Records? Separating and Combining Expenses How Long To Keep Records and Receipts Examples of Records If you deduct travel, entertainment, gift, or transportation expenses, you must be able to prove (substantiate) certain elements of expense. Federal ez tax form 2012 This chapter discusses the records you need to keep to prove these expenses. Federal ez tax form 2012 If you keep timely and accurate records, you will have support to show the IRS if your tax return is ever examined. Federal ez tax form 2012 You will also have proof of expenses that your employer may require if you are reimbursed under an accountable plan. Federal ez tax form 2012 These plans are discussed in chapter 6 under Reimbursements . Federal ez tax form 2012 How To Prove Expenses Table 5-1 is a summary of records you need to prove each expense discussed in this publication. Federal ez tax form 2012 You must be able to prove the elements listed across the top portion of the chart. Federal ez tax form 2012 You prove them by having the information and receipts (where needed) for the expenses listed in the first column. Federal ez tax form 2012 You cannot deduct amounts that you approximate or estimate. Federal ez tax form 2012 You should keep adequate records to prove your expenses or have sufficient evidence that will support your own statement. Federal ez tax form 2012 You must generally prepare a written record for it to be considered adequate. Federal ez tax form 2012 This is because written evidence is more reliable than oral evidence alone. Federal ez tax form 2012 However, if you prepare a record on a computer, it is considered an adequate record. Federal ez tax form 2012 What Are Adequate Records? You should keep the proof you need in an account book, diary, log, statement of expense, trip sheets, or similar record. Federal ez tax form 2012 You should also keep documentary evidence that, together with your record, will support each element of an expense. Federal ez tax form 2012 Documentary evidence. Federal ez tax form 2012   You generally must have documentary evidence, such as receipts, canceled checks, or bills, to support your expenses. Federal ez tax form 2012 Exception. Federal ez tax form 2012   Documentary evidence is not needed if any of the following conditions apply. Federal ez tax form 2012 You have meals or lodging expenses while traveling away from home for which you account to your employer under an accountable plan, and you use a per diem allowance method that includes meals and/or lodging. Federal ez tax form 2012 ( Accountable plans and per diem allowances are discussed in chapter 6. Federal ez tax form 2012 ) Your expense, other than lodging, is less than $75. Federal ez tax form 2012 You have a transportation expense for which a receipt is not readily available. Federal ez tax form 2012 Adequate evidence. Federal ez tax form 2012   Documentary evidence ordinarily will be considered adequate if it shows the amount, date, place, and essential character of the expense. Federal ez tax form 2012   For example, a hotel receipt is enough to support expenses for business travel if it has all of the following information. Federal ez tax form 2012 The name and location of the hotel. Federal ez tax form 2012 The dates you stayed there. Federal ez tax form 2012 Separate amounts for charges such as lodging, meals, and telephone calls. Federal ez tax form 2012   A restaurant receipt is enough to prove an expense for a business meal if it has all of the following information. Federal ez tax form 2012 The name and location of the restaurant. Federal ez tax form 2012 The number of people served. Federal ez tax form 2012 The date and amount of the expense. Federal ez tax form 2012 If a charge is made for items other than food and beverages, the receipt must show that this is the case. Federal ez tax form 2012 Canceled check. Federal ez tax form 2012   A canceled check, together with a bill from the payee, ordinarily establishes the cost. Federal ez tax form 2012 However, a canceled check by itself does not prove a business expense without other evidence to show that it was for a business purpose. Federal ez tax form 2012 Duplicate information. Federal ez tax form 2012   You do not have to record information in your account book or other record that duplicates information shown on a receipt as long as your records and receipts complement each other in an orderly manner. Federal ez tax form 2012   You do not have to record amounts your employer pays directly for any ticket or other travel item. Federal ez tax form 2012 However, if you charge these items to your employer, through a credit card or otherwise, you must keep a record of the amounts you spend. Federal ez tax form 2012 Timely-kept records. Federal ez tax form 2012   You should record the elements of an expense or of a business use at or near the time of the expense or use and support it with sufficient documentary evidence. Federal ez tax form 2012 A timely-kept record has more value than a statement prepared later when generally there is a lack of accurate recall. Federal ez tax form 2012   You do not need to write down the elements of every expense on the day of the expense. Federal ez tax form 2012 If you maintain a log on a weekly basis that accounts for use during the week, the log is considered a timely-kept record. Federal ez tax form 2012   If you give your employer, client, or customer an expense account statement, it can also be considered a timely-kept record. Federal ez tax form 2012 This is true if you copy it from your account book, diary, log, statement of expense, trip sheets, or similar record. Federal ez tax form 2012 Proving business purpose. Federal ez tax form 2012   You must generally provide a written statement of the business purpose of an expense. Federal ez tax form 2012 However, the degree of proof varies according to the circumstances in each case. Federal ez tax form 2012 If the business purpose of an expense is clear from the surrounding circumstances, then you do not need to give a written explanation. Federal ez tax form 2012 Example. Federal ez tax form 2012 If you are a sales representative who calls on customers on an established sales route, you do not have to give a written explanation of the business purpose for traveling that route. Federal ez tax form 2012 You can satisfy the requirements by recording the length of the delivery route once, the date of each trip at or near the time of the trips, and the total miles you drove the car during the tax year. Federal ez tax form 2012 You could also establish the date of each trip with a receipt, record of delivery, or other documentary evidence. Federal ez tax form 2012 Confidential information. Federal ez tax form 2012   You do not need to put confidential information relating to an element of a deductible expense (such as the place, business purpose, or business relationship) in your account book, diary, or other record. Federal ez tax form 2012 However, you do have to record the information elsewhere at or near the time of the expense and have it available to fully prove that element of the expense. Federal ez tax form 2012 What If I Have Incomplete Records? If you do not have complete records to prove an element of an expense, then you must prove the element with: Your own written or oral statement containing specific information about the element, and Other supporting evidence that is sufficient to establish the element. Federal ez tax form 2012 If the element is the description of a gift, or the cost, time, place, or date of an expense, the supporting evidence must be either direct evidence or documentary evidence. Federal ez tax form 2012 Direct evidence can be written statements or the oral testimony of your guests or other witnesses setting forth detailed information about the element. Federal ez tax form 2012 Documentary evidence can be receipts, paid bills, or similar evidence. Federal ez tax form 2012 If the element is either the business relationship of your guests or the business purpose of the amount spent, the supporting evidence can be circumstantial rather than direct. Federal ez tax form 2012 For example, the nature of your work, such as making deliveries, provides circumstantial evidence of the use of your car for business purposes. Federal ez tax form 2012 Invoices of deliveries establish when you used the car for business. Federal ez tax form 2012 Table 5-1. Federal ez tax form 2012 How To Prove Certain Business Expenses IF you have expenses for . Federal ez tax form 2012 . Federal ez tax form 2012 THEN you must keep records that show details of the following elements . Federal ez tax form 2012 . Federal ez tax form 2012 . Federal ez tax form 2012   Amount Time Place or  Description Business Purpose Business Relationship Travel Cost of each separate expense for travel, lodging, and meals. Federal ez tax form 2012 Incidental expenses may be totaled in reasonable categories such as taxis, fees and tips, etc. Federal ez tax form 2012 Dates you left and returned for each trip and number of days spent on business. Federal ez tax form 2012 Destination or area of your travel (name of city, town, or other designation). Federal ez tax form 2012 Purpose: Business purpose for the expense or the business benefit gained or expected to be gained. Federal ez tax form 2012    Relationship: N/A Entertainment Cost of each separate expense. Federal ez tax form 2012 Incidental expenses such as taxis, telephones, etc. Federal ez tax form 2012 , may be totaled on a daily basis. Federal ez tax form 2012 Date of entertainment. Federal ez tax form 2012 (Also see Business Purpose. Federal ez tax form 2012 ) Name and address or location of place of entertainment. Federal ez tax form 2012 Type of entertainment if not otherwise apparent. Federal ez tax form 2012 (Also see Business Purpose. Federal ez tax form 2012 ) Purpose: Business purpose for the expense or the business benefit gained or expected to be gained. Federal ez tax form 2012  For entertainment, the nature of the business discussion or activity. Federal ez tax form 2012 If the entertainment was directly before or after a business discussion: the date, place, nature, and duration of the business discussion, and the identities of the persons who took part in both the business discussion and the entertainment activity. Federal ez tax form 2012    Relationship: Occupations or other information (such as names, titles, or other designations) about the recipients that shows their business relationship to you. Federal ez tax form 2012  For entertainment, you must also prove that you or your employee was present if the entertainment was a business meal. Federal ez tax form 2012 Gifts Cost of the gift. Federal ez tax form 2012 Date of the gift. Federal ez tax form 2012 Description of the gift. Federal ez tax form 2012   Transportation Cost of each separate expense. Federal ez tax form 2012 For car expenses, the cost of the car and any improvements, the date you started using it for business, the mileage for each business use, and the total miles for the year. Federal ez tax form 2012 Date of the expense. Federal ez tax form 2012 For car expenses, the date of the use of the car. Federal ez tax form 2012 Your business destination. Federal ez tax form 2012 Purpose: Business purpose for the expense. Federal ez tax form 2012    Relationship: N/A Sampling. Federal ez tax form 2012   You can keep an adequate record for parts of a tax year and use that record to prove the amount of business or investment use for the entire year. Federal ez tax form 2012 You must demonstrate by other evidence that the periods for which an adequate record is kept are representative of the use throughout the tax year. Federal ez tax form 2012 Example. Federal ez tax form 2012 You use your car to visit the offices of clients, meet with suppliers and other subcontractors, and pick up and deliver items to clients. Federal ez tax form 2012 There is no other business use of the car, but you and your family use the car for personal purposes. Federal ez tax form 2012 You keep adequate records during the first week of each month that show that 75% of the use of the car is for business. Federal ez tax form 2012 Invoices and bills show that your business use continues at the same rate during the later weeks of each month. Federal ez tax form 2012 Your weekly records are representative of the use of the car each month and are sufficient evidence to support the percentage of business use for the year. Federal ez tax form 2012 Exceptional circumstances. Federal ez tax form 2012   You can satisfy the substantiation requirements with other evidence if, because of the nature of the situation in which an expense is made, you cannot get a receipt. Federal ez tax form 2012 This applies if all the following are true. Federal ez tax form 2012 You were unable to obtain evidence for an element of the expense or use that completely satisfies the requirements explained earlier under What Are Adequate Records . Federal ez tax form 2012 You are unable to obtain evidence for an element that completely satisfies the two rules listed earlier under What If I Have Incomplete Records . Federal ez tax form 2012 You have presented other evidence for the element that is the best proof possible under the circumstances. Federal ez tax form 2012 Destroyed records. Federal ez tax form 2012   If you cannot produce a receipt because of reasons beyond your control, you can prove a deduction by reconstructing your records or expenses. Federal ez tax form 2012 Reasons beyond your control include fire, flood, and other casualties. Federal ez tax form 2012    Table 5-2. Federal ez tax form 2012 Daily Business Mileage and Expense Log Name:       Odometer Readings Expenses Date Destination  (City, Town, or Area) Business Purpose Start Stop Miles  this trip Type  (Gas, oil, tolls, etc. Federal ez tax form 2012 ) Amount                                                                                                                   Weekly  Total             Total Year-to-Date             Separating and Combining Expenses This section explains when expenses must be kept separate and when expenses can be combined. Federal ez tax form 2012 Separating expenses. Federal ez tax form 2012   Each separate payment is generally considered a separate expense. Federal ez tax form 2012 For example, if you entertain a customer or client at dinner and then go to the theater, the dinner expense and the cost of the theater tickets are two separate expenses. Federal ez tax form 2012 You must record them separately in your records. Federal ez tax form 2012 Season or series tickets. Federal ez tax form 2012   If you buy season or series tickets for business use, you must treat each ticket in the series as a separate item. Federal ez tax form 2012 To determine the cost of individual tickets, divide the total cost (but not more than face value) by the number of games or performances in the series. Federal ez tax form 2012 You must keep records to show whether you use each ticket as a gift or entertainment. Federal ez tax form 2012 Also, you must be able to prove the cost of nonluxury box seat tickets if you rent a skybox or other private luxury box for more than one event. Federal ez tax form 2012 See Entertainment tickets in chapter 2. Federal ez tax form 2012 Combining items. Federal ez tax form 2012   You can make one daily entry in your record for reasonable categories of expenses. Federal ez tax form 2012 Examples are taxi fares, telephone calls, or other incidental travel costs. Federal ez tax form 2012 Meals should be in a separate category. Federal ez tax form 2012 You can include tips for meal-related services with the costs of the meals. Federal ez tax form 2012   Expenses of a similar nature occurring during the course of a single event are considered a single expense. Federal ez tax form 2012 For example, if during entertainment at a cocktail lounge, you pay separately for each serving of refreshments, the total expense for the refreshments is treated as a single expense. Federal ez tax form 2012 Car expenses. Federal ez tax form 2012   You can account for several uses of your car that can be considered part of a single use, such as a round trip or uninterrupted business use, with a single record. Federal ez tax form 2012 Minimal personal use, such as a stop for lunch on the way between two business stops, is not an interruption of business use. Federal ez tax form 2012 Example. Federal ez tax form 2012 You make deliveries at several different locations on a route that begins and ends at your employer's business premises and that includes a stop at the business premises between two deliveries. Federal ez tax form 2012 You can account for these using a single record of miles driven. Federal ez tax form 2012 Gift expenses. Federal ez tax form 2012   You do not always have to record the name of each recipient of a gift. Federal ez tax form 2012 A general listing will be enough if it is evident that you are not trying to avoid the $25 annual limit on the amount you can deduct for gifts to any one person. Federal ez tax form 2012 For example, if you buy a large number of tickets to local high school basketball games and give one or two tickets to each of many customers, it is usually enough to record a general description of the recipients. Federal ez tax form 2012 Allocating total cost. Federal ez tax form 2012   If you can prove the total cost of travel or entertainment but you cannot prove how much it cost for each person who participated in the event, you may have to allocate the total cost among you and your guests on a pro rata basis. Federal ez tax form 2012 To do so, you must establish the number of persons who participated in the event. Federal ez tax form 2012   An allocation would be needed, for example, if you did not have a business relationship with all of your guests. Federal ez tax form 2012 See Allocating between business and nonbusiness in chapter 2. Federal ez tax form 2012 If your return is examined. Federal ez tax form 2012    If your return is examined, you may have to provide additional information to the IRS. Federal ez tax form 2012 This information could be needed to clarify or to establish the accuracy or reliability of information contained in your records, statements, testimony, or documentary evidence before a deduction is allowed. Federal ez tax form 2012    THIS IS NOT AN OFFICIAL INTERNAL REVENUE FORM Table 5-3. Federal ez tax form 2012 Weekly Traveling Expense and Entertainment Record From: To: Name: Expenses Sunday Monday Tuesday Wednesday Thursday Friday Saturday Total 1. Federal ez tax form 2012 Travel Expenses: Airlines                                 Excess Baggage                                 Bus – Train                                 Cab and Limousine                                 Tips                                 Porter                                 2. Federal ez tax form 2012 Meals and Lodging:  Breakfast                                 Lunch                                 Dinner                                 Hotel and Motel  (Detail in Schedule B)                                 3. Federal ez tax form 2012 Entertainment  (Detail in Schedule C)                                 4. Federal ez tax form 2012 Other Expenses:  Postage                                 Telephone & Telegraph                                 Stationery & Printing                                 Stenographer                                 Sample Room                                 Advertising                                 Assistant(s)                                 Trade Shows                                 5. Federal ez tax form 2012 Car Expenses: (List all car expenses - the division between business and personal expenses may be made at the end of the year. Federal ez tax form 2012 ) (Detail mileage in Schedule A. Federal ez tax form 2012 ) Gas, oil, lube, wash                                 Repairs, parts                                 Tires, supplies                                 Parking fees, tolls                                 6. Federal ez tax form 2012 Other (Identify)                                 Total                                 Note: Attach receipted bills for (1) ALL lodging and (2) any other expenses of $75. Federal ez tax form 2012 00 or more. Federal ez tax form 2012 Schedule A – Car Mileage: End                 Start                 Total                 Business Mileage                 Schedule B – Lodging Hotel or Motel Name                 City                 Schedule C – Entertainment Date Item Place Amount Business Purpose Business Relationship                                             WEEKLY REIMBURSEMENTS:     Travel and transportation expenses     Other reimbursements     TOTAL   How Long To Keep Records and Receipts You must keep records as long as they may be needed for the administration of any provision of the Internal Revenue Code. Federal ez tax form 2012 Generally, this means you must keep records that support your deduction (or an item of income) for 3 years from the date you file the income tax return on which the deduction is claimed. Federal ez tax form 2012 A return filed early is considered filed on the due date. Federal ez tax form 2012 For a more complete explanation of how long to keep records, see Publication 583, Starting a Business and Keeping Records. Federal ez tax form 2012 You must keep records of the business use of your car for each year of the recovery period. Federal ez tax form 2012 See More-than-50%-use test in chapter 4 under Depreciation Deduction. Federal ez tax form 2012 Reimbursed for expenses. Federal ez tax form 2012   Employees who give their records and documentation to their employers and are reimbursed for their expenses generally do not have to keep copies of this information. Federal ez tax form 2012 However, you may have to prove your expenses if any of the following conditions apply. Federal ez tax form 2012 You claim deductions for expenses that are more than reimbursements. Federal ez tax form 2012 Your expenses are reimbursed under a nonaccountable plan. Federal ez tax form 2012 Your employer does not use adequate accounting procedures to verify expense accounts. Federal ez tax form 2012 You are related to your employer as defined under Per Diem and Car Allowances , in chapter 6. Federal ez tax form 2012 Reimbursements , adequate accounting , and nonaccountable plans are discussed in chapter 6. Federal ez tax form 2012 Examples of Records Table 5-2 and Table 5-3 are examples of worksheets which can be used for tracking business expenses. Federal ez tax form 2012 Prev  Up  Next   Home   More Online Publications