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Form To Amend Taxes

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Form to amend taxes 4. Form to amend taxes   Filing U. Form to amend taxes S. Form to amend taxes Tax Returns Table of Contents Who Must FileFiling Requirement if Possession Income Is Excluded When To FileExtension of Time To File Where To File Special Rules for Completing Your U. Form to amend taxes S. Form to amend taxes Tax ReturnU. Form to amend taxes S. Form to amend taxes Armed Forces. Form to amend taxes Deductions if Possession Income Is Excluded Foreign Tax Credit if Possession Income Is Excluded Self-Employment Tax Additional Medicare Tax Net Investment Income Tax Paying Your TaxesEstimated Tax Double TaxationCompetent Authority Assistance The information in chapter 3 will tell you if a U. Form to amend taxes S. Form to amend taxes income tax return is required for your situation. Form to amend taxes If a U. Form to amend taxes S. Form to amend taxes return is required, your next step is to see if you meet the filing requirements. Form to amend taxes If you do meet the filing requirements, the information presented in this chapter will help you understand the special procedures involved. Form to amend taxes This chapter discusses: Filing requirements, When to file your return, Where to send your return, How to adjust your deductions and credits if you are excluding income from American Samoa or Puerto Rico, How to make estimated tax payments and pay self-employment tax, and How to request assistance in resolving instances of double taxation. Form to amend taxes Who Must File If you are not required to file a possession tax return that includes your worldwide income, you must generally file a U. Form to amend taxes S. Form to amend taxes income tax return if your gross income is at least the amount shown in Table 4-1, later, for your filing status and age. Form to amend taxes If you were a bona fide resident of American Samoa or Puerto Rico and are able to exclude your possession income from your U. Form to amend taxes S. Form to amend taxes tax return, your filing requirement may be less than the amount in Table 4-1. Form to amend taxes For details, see the information under Filing Requirement if Possession Income Is Excluded , later. Form to amend taxes Some individuals (such as those who can be claimed as a dependent on another person's return or who owe certain taxes, such as self-employment tax) must file a tax return even though the gross income is less than the amount shown in Table 4-1 for their filing status and age. Form to amend taxes For more information, see the Form 1040 instructions. Form to amend taxes Filing Requirement if Possession Income Is Excluded If you were a bona fide resident of American Samoa or Puerto Rico and qualify to exclude possession income on your U. Form to amend taxes S. Form to amend taxes tax return, you must determine your adjusted filing requirement. Form to amend taxes Generally, your filing requirement is based on the total of your (and your spouse's if filing a joint return) personal exemption(s) plus your standard deduction. Form to amend taxes Personal exemption. Form to amend taxes   When figuring your filing requirement, your personal exemption is allowed in full. Form to amend taxes Do not reduce it for this purpose. Form to amend taxes Do not include exemptions for your dependents. Form to amend taxes Allowable standard deduction. Form to amend taxes   Unless your filing status is married filing separately, the minimum income level at which you must file a return is based, in part, on the standard deduction for your filing status and age. Form to amend taxes Because the standard deduction applies to all types of income, it must be divided between your excluded income and income from other sources. Form to amend taxes Multiply the regular standard deduction for your filing status and age (this is zero if you are married filing a separate return; all others, see Form 1040 instructions) by the following fraction:      Gross income subject to U. Form to amend taxes S. Form to amend taxes income tax     Gross income from all sources (including excluded possession income)   Example. Form to amend taxes Barbara Spruce, a U. Form to amend taxes S. Form to amend taxes citizen, is single, under 65, and a bona fide resident of American Samoa. Form to amend taxes During 2013, she received $20,000 of income from American Samoa sources (qualifies for exclusion) and $8,000 of income from sources outside the possession (subject to U. Form to amend taxes S. Form to amend taxes income tax). Form to amend taxes Her allowable standard deduction for 2013 is figured as follows:   $8,000 $28,000 × $6,100 (regular standard deduction) = $1,743   Adjusted filing requirement. Form to amend taxes   Figure your adjusted filing requirement by adding the amount of your allowable standard deduction to the amount of your personal exemption. Form to amend taxes You must file a U. Form to amend taxes S. Form to amend taxes income tax return if your gross income is at least the amount shown on line 3 of the following worksheet. Form to amend taxes    1. Form to amend taxes Enter the allowable standard deduction you figured earlier under Allowable standard deduction . Form to amend taxes If your filing status is married filing separately, enter -0-   2. Form to amend taxes Personal exemption. Form to amend taxes If your filing status is married filing jointly, enter $7,800; if someone can claim you as a dependent, enter -0-; otherwise, enter $3,900   3. Form to amend taxes Add lines 1 and 2. Form to amend taxes You must file a U. Form to amend taxes S. Form to amend taxes income tax return if your gross income from sources outside the relevant possession is at least this amount   Table 4-1. Form to amend taxes 2013 Filing Requirements Chart for Most Taxpayers IF your filing status is. Form to amend taxes . Form to amend taxes . Form to amend taxes AND at the end of 2013 you were*. Form to amend taxes . Form to amend taxes . Form to amend taxes THEN file a return if your gross income** was at least. Form to amend taxes . Form to amend taxes . Form to amend taxes single under 65 $10,000 65 or older $11,500 married filing jointly*** under 65 (both spouses) $20,000 65 or older (one spouse) $21,200 65 or older (both spouses) $22,400 married filing separately any age $3,900 head of household under 65 $12,850 65 or older $14,350 qualifying widow(er)  with dependent child under 65 $16,100 65 or older $17,300 * If you were born on January 1, 1949, you are considered to be age 65 at the end of 2013. Form to amend taxes ** Gross income means all income you received in the form of money, goods, property, and services that is not exempt from tax, including any income from sources outside the United States (even if you can exclude part or all of it). Form to amend taxes Do not include social security benefits unless (a) you are married filing a separate return and you lived with your spouse at any time during 2013, or (b) one-half of your social security benefits plus your other gross income is more than $25,000 ($32,000 if married filing jointly). Form to amend taxes If (a) or (b) applies, see the instructions for Form 1040 or Publication 915, Social Security and Equivalent Railroad Retirement Benefits, to figure the taxable part of social security benefits you must include in gross income. Form to amend taxes *** If you did not live with your spouse at the end of 2013 (or on the date your spouse died) and your gross income was at least $3,900 you must file a return regardless of your age. Form to amend taxes Example 1. Form to amend taxes James and Joan Thompson, one over 65, are U. Form to amend taxes S. Form to amend taxes citizens and bona fide residents of Puerto Rico during the entire tax year. Form to amend taxes They file a joint income tax return. Form to amend taxes During 2013, they received $35,000 of income from Puerto Rico sources (qualifies for exclusion) and $6,000 of income from sources outside Puerto Rico (subject to U. Form to amend taxes S. Form to amend taxes income tax). Form to amend taxes Their allowable standard deduction for 2013 is figured as follows:   $6,000 $41,000 × $13,400 ( standard deduction for 65 or older (one spouse) ) = $1,961   The Thompsons do not have to file a U. Form to amend taxes S. Form to amend taxes income tax return because their gross income subject to U. Form to amend taxes S. Form to amend taxes tax ($6,000) is less than their allowable standard deduction plus their personal exemptions ($1,961+ $7,800= $9,761). Form to amend taxes Example 2. Form to amend taxes Barbara Spruce (see Example under Allowable standard deduction, earlier), however, must file a U. Form to amend taxes S. Form to amend taxes income tax return because her gross income subject to U. Form to amend taxes S. Form to amend taxes tax ($8,000) is more than her allowable standard deduction plus her personal exemption ($1,743 + $3,900 = $5,643). Form to amend taxes If you must file a U. Form to amend taxes S. Form to amend taxes income tax return, you may be able to file a paperless return using IRS e-file. Form to amend taxes See your form instructions or visit our website at IRS. Form to amend taxes gov. Form to amend taxes When To File If you file on a calendar year basis, the due date for filing your U. Form to amend taxes S. Form to amend taxes income tax return is April 15 following the end of your tax year. Form to amend taxes If you use a fiscal year (a year ending on the last day of a month other than December), the due date is the 15th day of the 4th month after the end of your fiscal year. Form to amend taxes If any due date falls on a Saturday, Sunday, or legal holiday, your tax return is due on the next business day. Form to amend taxes For your 2013 tax return, the due date is April 15, 2014. Form to amend taxes If you mail your federal tax return, it is considered timely if it bears an official postmark dated on or before the due date, including any extensions. Form to amend taxes If you use a private delivery service designated by the IRS, generally the postmark date is the date the private delivery service records in its database or marks on the mailing label. Form to amend taxes See your form instructions for a list of designated private delivery services. Form to amend taxes Extension of Time To File You can get an extension of time to file your U. Form to amend taxes S. Form to amend taxes income tax return. Form to amend taxes Special rules apply for those living outside the United States. Form to amend taxes Automatic 6-Month Extension If you cannot file your 2013 return by the due date, you can get an automatic 6-month extension of time to file. Form to amend taxes Example. Form to amend taxes If your return must be filed by April 15, 2014, you will have until October 15, 2014, to file. Form to amend taxes Although you are not required to make a payment of the tax you estimate as due, Form 4868 does not extend the time to pay taxes. Form to amend taxes If you do not pay the amount due by the regular due date (generally April 15), you will owe interest on any unpaid tax from the original due date to the date you pay the tax. Form to amend taxes You may also be charged penalties (see the Instructions for Form 4868). Form to amend taxes How to get the automatic extension. Form to amend taxes   You can get the automatic 6-month extension if you do one of the following by the due date for filing your return. Form to amend taxes E-file Form 4868 using your personal computer or a tax professional. Form to amend taxes E-file and pay by credit or debit card. Form to amend taxes Your payment must be at least $1. Form to amend taxes You may pay by phone or over the Internet. Form to amend taxes Do not file Form 4868. Form to amend taxes File a paper Form 4868. Form to amend taxes If you are a fiscal year taxpayer, you must file a paper Form 4868. Form to amend taxes See Form 4868 for information on getting an extension using these options. Form to amend taxes When to file. Form to amend taxes   You must request the automatic extension by the due date for your return. Form to amend taxes You can file your return any time before the 6-month extension period ends. Form to amend taxes When you file your return. Form to amend taxes   Enter any payment you made related to the extension of time to file on Form 1040, line 68. Form to amend taxes If you file Form 1040A, U. Form to amend taxes S. Form to amend taxes Individual Income Tax Return, or Form 1040EZ, Income Tax Return for Single and Joint Filers With No Dependents, include that payment in your total payments on Form 1040A, line 41, or Form 1040EZ, line 9. Form to amend taxes Also enter “Form 4868” and the amount paid in the space to the left of the entry space for line 41 or line 9. Form to amend taxes You cannot ask the Internal Revenue Service to figure your tax if you use the extension of time to file. Form to amend taxes Individuals Outside the United States and Puerto Rico You are allowed an automatic 2-month extension (until June 16, 2014, if you use the calendar year) to file your 2013 return and pay any federal income tax due if: You are a U. Form to amend taxes S. Form to amend taxes citizen or resident, and On the due date of your return: You are living outside of the United States and Puerto Rico, and your main place of business or post of duty is outside the United States and Puerto Rico, or You are in military or naval service on duty outside the United States and Puerto Rico. Form to amend taxes However, if you pay the tax due after the regular due date (generally April 15), interest will be charged from April 15 until the date the tax is paid. Form to amend taxes If you serve in a combat zone or qualified hazardous duty area, you may be eligible for a longer extension of time to file. Form to amend taxes For more information, see Publication 3, Armed Forces' Tax Guide. Form to amend taxes Married taxpayers. Form to amend taxes   If you file a joint return, only one spouse has to qualify for this automatic extension. Form to amend taxes However, if you and your spouse file separate returns, this automatic extension applies only to the spouse who qualifies. Form to amend taxes How to get the extension. Form to amend taxes   To use this special automatic extension, you must attach a statement to your return explaining what situation qualified you for the extension. Form to amend taxes (See the situations listed under (2), earlier. Form to amend taxes ) Extension beyond 2 months. Form to amend taxes   If you cannot file your 2013 return within the automatic 2-month extension period, you can get an additional 4-month extension, for a total of 6 months. Form to amend taxes File Form 4868 by the end of the automatic extension period (June 16, 2014 for calendar year taxpayers). Form to amend taxes Be sure to check the box on Form 4868, line 8, if appropriate. Form to amend taxes   In addition to this 6-month extension, taxpayers who are out of the country (as defined under (2) earlier) can request a discretionary 2-month additional extension of time to file their returns (to December 15 for calendar year taxpayers). Form to amend taxes   To request this extension, you must send the IRS a letter explaining the reasons why you need the additional 2 months. Form to amend taxes Send the letter by the extended due date (October 15 for calendar year taxpayers) to:  Department of the Treasury Internal Revenue Service Austin, TX 73301-0215 USA   You will not receive any notification from the IRS unless your request is denied for being untimely. Form to amend taxes Where To File Use the addresses listed below if you have to file Form 1040 with the United States and you are excluding possession income from American Samoa or Puerto Rico. Form to amend taxes If you are not including a check or a money order, send your U. Form to amend taxes S. Form to amend taxes tax return and all attachments to:   Department of the Treasury Internal Revenue Service Austin, TX 73301-0215 USA If you are including a check or a money order, send your U. Form to amend taxes S. Form to amend taxes tax return and all attachments to:  Internal Revenue Service P. Form to amend taxes O. Form to amend taxes Box 1303 Charlotte, NC 28201-1303 USA Also send your U. Form to amend taxes S. Form to amend taxes return to these addresses if you are attaching Form 5074 or Form 8689. Form to amend taxes If you are not in either of the above categories, send your return to the address shown in the Form 1040 instructions for the possession or state in which you reside. Form to amend taxes Special Rules for Completing Your U. Form to amend taxes S. Form to amend taxes Tax Return If you are not excluding possession income from your U. Form to amend taxes S. Form to amend taxes tax return, follow the instructions for the specific forms you file. Form to amend taxes However, you may not qualify to claim the earned income credit (EIC). Form to amend taxes Earned income credit. Form to amend taxes   Even if you maintain a household in one of the possessions discussed in this publication that is your main home and the home of your qualifying child, you cannot claim the earned income credit on your U. Form to amend taxes S. Form to amend taxes tax return. Form to amend taxes This credit is available only if you maintain the household in the United States or you are serving on extended active duty in the U. Form to amend taxes S. Form to amend taxes Armed Forces. Form to amend taxes U. Form to amend taxes S. Form to amend taxes Armed Forces. Form to amend taxes   U. Form to amend taxes S. Form to amend taxes military personnel stationed outside the United States on extended active duty are considered to live in the United States during that duty period for purposes of the EIC. Form to amend taxes Extended active duty means you are called or ordered to duty for an indefinite period or for a period of more than 90 days. Form to amend taxes Once you begin serving your extended active duty, you are still considered to have been on extended active duty even if you do not serve more than 90 days. Form to amend taxes Income from American Samoa or Puerto Rico excluded. Form to amend taxes   You will not be allowed to take deductions and credits that apply to the excluded income. Form to amend taxes The additional information you need follows. Form to amend taxes Deductions if Possession Income Is Excluded Deductions that specifically apply to your excluded possession income, such as employee business expenses, are not allowable on your U. Form to amend taxes S. Form to amend taxes income tax return. Form to amend taxes Deductions that do not specifically apply to any particular type of income must be divided between your excluded income from sources in the relevant possession and income from all other sources to find the part that you can deduct on your U. Form to amend taxes S. Form to amend taxes tax return. Form to amend taxes Examples of such deductions are alimony payments, the standard deduction, and certain itemized deductions (such as medical expenses, charitable contributions, real estate taxes, and mortgage interest on your home). Form to amend taxes Figuring the deduction. Form to amend taxes   To find the part of a deduction that is allowable, multiply the deduction by the following fraction. Form to amend taxes   Gross income subject to U. Form to amend taxes S. Form to amend taxes income tax     Gross income from all sources (including excluded possession income)   Adjustments to Income Your adjusted gross income equals your gross income minus certain deductions (adjustments). Form to amend taxes Moving expense deduction. Form to amend taxes   Generally, expenses of a move to a possession are directly attributable to wages, salaries, and other earned income from that possession. Form to amend taxes Likewise, the expenses of a move back to the United States are generally attributable to U. Form to amend taxes S. Form to amend taxes earned income. Form to amend taxes   If you are claiming expenses for a move to a relevant possession, how and where you will deduct the expenses depends on your status as a bona fide resident and if any of your possession income is excluded on your U. Form to amend taxes S. Form to amend taxes tax return. Form to amend taxes For more information, see Moving expense deduction in chapter 3 under the name of the relevant possession. Form to amend taxes   If you are claiming expenses for a move from a U. Form to amend taxes S. Form to amend taxes possession to the United States, use Form 3903 to figure your deductible expenses and enter the amount on Form 1040, line 26. Form to amend taxes For purposes of deducting moving expenses, the possessions are considered part of the United States. Form to amend taxes See Publication 521, Moving Expenses, for information about what expenses are deductible. Form to amend taxes Self-employment tax deduction. Form to amend taxes   Generally, if you are reporting self-employment income on your U. Form to amend taxes S. Form to amend taxes return, you can include the deductible part of your self-employment tax on Form 1040, line 27. Form to amend taxes This is an income tax deduction only; it is not a deduction in figuring net earnings from self-employment (for self-employment tax). Form to amend taxes   However, if you are a bona fide resident of American Samoa or Puerto Rico and you exclude all of your self-employment income from gross income, you cannot take the deduction on Form 1040, line 27, because the deduction is related to excluded income. Form to amend taxes   If only part of your self-employment income is excluded, the part of the deduction that is based on the nonexcluded income is allowed. Form to amend taxes This would happen if, for instance, you have two businesses and only the income from one of them is excludable. Form to amend taxes   For purposes of the deduction only, figure the self-employment tax on the nonexcluded income by multiplying your total self-employment tax (from Schedule SE (Form 1040)), Self-Employment Tax) by the following fraction. Form to amend taxes   Self-employment income subject to U. Form to amend taxes S. Form to amend taxes income tax     Total self-employment income (including excluded possession income)   The result is your self-employment tax on nonexcluded income. Form to amend taxes Include the deductible part of this amount on Form 1040, line 27. Form to amend taxes Individual retirement arrangement (IRA) deduction. Form to amend taxes   Do not take excluded income into account when figuring your deductible IRA contribution. Form to amend taxes Standard Deduction The standard deduction is composed of the regular standard deduction amount and the additional standard deduction for taxpayers who are blind or age 65 or over. Form to amend taxes To find the amount you can claim on Form 1040, line 40, first figure your full standard deduction according to the Instructions for Form 1040. Form to amend taxes Then multiply your full standard deduction by the following fraction. Form to amend taxes   Gross income subject to U. Form to amend taxes S. Form to amend taxes income tax     Gross income from all sources (including excluded possession income)   In the space above line 40, enter “Standard deduction modified due to income excluded under section 931 (if American Samoa) or section 933 (if Puerto Rico). Form to amend taxes ” This calculation may not be the same as the one you used to determine if you need to file a U. Form to amend taxes S. Form to amend taxes tax return. Form to amend taxes Itemized Deductions Most itemized deductions do not apply to a particular type of income. Form to amend taxes However, itemized deductions can be divided into three categories. Form to amend taxes Those that apply specifically to excluded income, such as employee business expenses, are not deductible. Form to amend taxes Those that apply specifically to income subject to U. Form to amend taxes S. Form to amend taxes income tax, which might also be employee business expenses, are fully allowable under the Instructions for Schedule A (Form 1040), Itemized Deductions. Form to amend taxes Those that do not apply to specific income must be allocated between your gross income subject to U. Form to amend taxes S. Form to amend taxes income tax and your total gross income from all sources. Form to amend taxes The example given later shows how to figure the deductible part of each type of expense that is not related to specific income. Form to amend taxes Example. Form to amend taxes In 2013, you and your spouse are both under 65 and U. Form to amend taxes S. Form to amend taxes citizens who are bona fide residents of Puerto Rico during the entire tax year. Form to amend taxes You file a joint income tax return. Form to amend taxes During 2013, you earned $20,000 from Puerto Rican sources (excluded from U. Form to amend taxes S. Form to amend taxes gross income) and your spouse earned $60,000 from the U. Form to amend taxes S. Form to amend taxes Government. Form to amend taxes You have $16,000 of itemized deductions that do not apply to any specific type of income. Form to amend taxes These are medical expenses of $4,000, real estate taxes of $5,000, home mortgage interest of $6,000, and charitable contributions of $1,000 (cash contributions). Form to amend taxes You determine the amount of each deduction that you can claim on your Schedule A (Form 1040), Itemized Deductions, by multiplying the deduction by the fraction shown under Figuring the deduction , earlier under Deductions if Possession Income is Excluded. Form to amend taxes   Medical Expenses   $60,000$80,000 × $4,000 = $3,000  (enter on line 1  of Schedule A)     Real Estate Taxes   $60,000$80,000 × $5,000 = $3,750  (enter on line 6  of Schedule A)     Home Mortgage Interest   $60,000$80,000 × $6,000 = $4,500  (enter on line 10 or 11 of  Schedule A)     Charitable Contributions (cash contributions)   $60,000$80,000 × $1,000 = $750  (enter on line 16 of Schedule A)   Enter on Schedule A (Form 1040) only the allowable portion of each deduction. Form to amend taxes Overall limitation on itemized deductions. Form to amend taxes   If your adjusted gross income (discussed earlier) is over $300,000 if married filing jointly or qualifying widow(er); $275,000 if head of household; $250,000 if single; or $150,000 if married filing separately; see the Itemized Deductions Worksheet in the Instructions for Schedule A (Form 1040), to figure your itemized deductions. Form to amend taxes Personal Exemptions Personal exemptions are allowed in full even if excluding possession income. Form to amend taxes However, depending upon your adjusted gross income and filing status, the amount you can deduct may be reduced. Form to amend taxes See the Deduction for Exemptions Worksheet—Line 42 in the instructions for Form 1040. Form to amend taxes Foreign Tax Credit if Possession Income Is Excluded If you must report American Samoa or Puerto Rico source income on your U. Form to amend taxes S. Form to amend taxes tax return, you can claim a foreign tax credit for income taxes paid to the possession on that income. Form to amend taxes However, you cannot claim a foreign tax credit for taxes paid on possession income that is excluded on your U. Form to amend taxes S. Form to amend taxes tax return. Form to amend taxes The foreign tax credit is generally figured on Form 1116. Form to amend taxes If you have income, such as U. Form to amend taxes S. Form to amend taxes Government wages, that is not excludable, and you also have possession source income that is excludable, you must figure the credit by reducing your foreign taxes paid or accrued by the taxes based on the excluded income. Form to amend taxes You make this reduction for each separate income category. Form to amend taxes To find the amount of this reduction, use the following formula for each income category. Form to amend taxes Excluded income from possession sources less deductible expenses based on that income x Tax paid or accrued to the possession = Reduction in foreign taxes Total income subject to possession tax less deductible expenses based on that income Enter the amount of the reduction on Form 1116, line 12. Form to amend taxes For more information on the foreign tax credit, see Publication 514. Form to amend taxes Example. Form to amend taxes Jason and Lynn Reddy are U. Form to amend taxes S. Form to amend taxes citizens who were bona fide residents of Puerto Rico during all of 2013. Form to amend taxes They file a joint tax return. Form to amend taxes The following table shows their excludable and taxable income for U. Form to amend taxes S. Form to amend taxes federal income tax purposes. Form to amend taxes   Taxable   Excludable Jason's wages from  U. Form to amend taxes S. Form to amend taxes Government $25,000     Lynn's wages from Puerto Rico  corp. Form to amend taxes     $15,000 Dividend from Puerto Rico corp. Form to amend taxes doing business in Puerto Rico     200 Dividend from U. Form to amend taxes S. Form to amend taxes  corp. Form to amend taxes doing business  in U. Form to amend taxes S. Form to amend taxes * 1,000     Totals $26,000   $15,200 * Income from sources outside Puerto Rico is taxable. Form to amend taxes   Jason and Lynn must file 2013 income tax returns with both Puerto Rico and the United States. Form to amend taxes They have gross income of $26,000 for U. Form to amend taxes S. Form to amend taxes tax purposes. Form to amend taxes They paid taxes to Puerto Rico of $4,000 ($3,980 on their wages and $20 on the dividend from the Puerto Rico corporation). Form to amend taxes They figure their foreign tax credit on two Forms 1116, which they must attach to their U. Form to amend taxes S. Form to amend taxes return. Form to amend taxes They fill out one Form 1116 for wages and one Form 1116 for the dividend. Form to amend taxes Jason and Lynn figure the Puerto Rico taxes on excluded income as follows. Form to amend taxes   Wages: ($15,000 ÷ $40,000) × $3,980 = $1,493   Dividend: ($200 ÷ $200) × $20 = $20 They enter $1,493 on Form 1116, line 12, for wages and $20 on the second Form 1116, line 12, for the dividend. Form to amend taxes Self-Employment Tax Self-employment tax includes both social security and Medicare taxes for individuals who are self-employed. Form to amend taxes A U. Form to amend taxes S. Form to amend taxes citizen or resident alien who is self-employed must pay self-employment tax on net self-employment earnings of $400 or more. Form to amend taxes This rule applies whether or not the earnings are excludable from gross income (or whether or not a U. Form to amend taxes S. Form to amend taxes income tax return must otherwise be filed). Form to amend taxes Bona fide residents of the possessions discussed in this publication are considered U. Form to amend taxes S. Form to amend taxes residents for this purpose and are subject to the self-employment tax. Form to amend taxes Forms to file. Form to amend taxes   If you have net self-employment income and are subject to self-employment tax, file one of the following with the United States. Form to amend taxes If you are required to file Form 1040 with the United States, complete Schedule SE (Form 1040) and attach it to your Form 1040. Form to amend taxes If you are not required to file Form 1040 with the United States and you are a bona fide resident of American Samoa, the CNMI, Guam, Puerto Rico, or the USVI, file Form 1040-SS. Form to amend taxes If you are a resident of Puerto Rico, you can file the Spanish-language Form 1040-PR instead. Form to amend taxes Do not file forms 1040-SS or 1040-PR with Form 1040. Form to amend taxes If you are required to pay Additional Medicare Tax (discussed later) on your self-employment income, attach Form 8959, Additional Medicare Tax to Form 1040, Form 1040-SS, or Form 1040-PR, as applicable. Form to amend taxes Chapter 11 Bankruptcy cases. Form to amend taxes   While you are a debtor in a chapter 11 bankruptcy case, your net profit or loss from self-employment will be included on the income tax return (Form 1041, U. Form to amend taxes S. Form to amend taxes Income Tax Return for Estates and Trusts) of the bankruptcy estate. Form to amend taxes However, you—not the bankruptcy estate—are responsible for paying self-employment tax on your net earnings from self-employment. Form to amend taxes   Use Schedule SE (Form 1040), Form 1040-SS, or Form 1040-PR, as determined above, to figure your correct amount of self-employment tax. Form to amend taxes   For other reporting requirements, see Chapter 11 Bankruptcy Cases in the Instructions for Form 1040. Form to amend taxes Additional Medicare Tax Beginning in 2013, a 0. Form to amend taxes 9% Additional Medicare Tax applies to Medicare wages, railroad retirement (RRTA) compensation, and self-employment income that are more than: $125,000 if married filing separately, $250,000 if married filing jointly, or $200,000 if single, head of household, or qualifying widow(er). Form to amend taxes Medicare wages and self-employment income are combined to determine if income exceeds the threshold. Form to amend taxes A self-employment loss should not be considered for purposes of this tax. Form to amend taxes RRTA compensation should be separately compared to the threshold. Form to amend taxes Your employer is responsible for withholding the 0. Form to amend taxes 9% Additional Medicare Tax on Medicare wages or RRTA compensation it pays to you in excess of $200,000. Form to amend taxes You should consider this withholding, if applicable, in determining whether you need to make estimated tax payments. Form to amend taxes There are no special rules for U. Form to amend taxes S. Form to amend taxes citizens and nonresident aliens living abroad for purposes of this provision. Form to amend taxes Wages, RRTA compensation, and self-employment income that are subject to Medicare tax will also be subject to Additional Medicare Tax if in excess of the applicable threshold. Form to amend taxes For more information, see Form 8959, Additional Medicare Tax, and its instructions or visit www. Form to amend taxes irs. Form to amend taxes gov and enter the following words in the search box: Additional Medicare Tax. Form to amend taxes You cannot include the Additional Medicare Tax as a deductible part of your self-employment tax. Form to amend taxes Net Investment Income Tax Beginning in 2013, the Net Investment Income Tax (NIIT) imposes a 3. Form to amend taxes 8% tax on the lesser of an individual’s net investment income or the excess of the individual’s modified adjusted gross income over a specified threshold amount. Form to amend taxes Bona fide residents of Puerto Rico and American Samoa who may have a federal income tax return filing obligation may be liable for the NIIT if the taxpayer’s modified adjusted gross income from non-territory sources exceeds a specified threshold amount. Form to amend taxes The NIIT does not apply to any individual who is a nonresident alien with respect to the United States. Form to amend taxes Bona fide residents must take into account any additional tax liability associated with the NIIT when calculating your estimated tax payments. Form to amend taxes Forms to file. Form to amend taxes   If you are a bona fide resident of American Samoa and Puerto Rico and you are required to pay the NIIT, you must file Form 1040 with the United States and attach Form 8960, Net Investment Income Tax—Individuals, Estates, and Trusts. Form to amend taxes For more information, see Form 8960 and its instructions. Form to amend taxes Paying Your Taxes You may find that not all of your income tax has been paid through withholding by either the United States or the possession. Form to amend taxes This is often true if you have income that is not subject to withholding, such as self-employment, interest, or rental income. Form to amend taxes In this situation, you may need to make estimated tax payments. Form to amend taxes Estimated Tax If your estimated income tax obligation is to the United States, use the worksheet in the Form 1040-ES package to figure your estimated tax, including self-employment tax. Form to amend taxes Include the Additional Medicare Tax and Net Investment Income Tax if applicable. Form to amend taxes If you are paying by check or money order, use the payment vouchers in the Form 1040-ES package. Form to amend taxes Or, you can make your payments electronically and not have to file any paper forms. Form to amend taxes See the Form 1040-ES instructions for information on making payments. Form to amend taxes Double Taxation Mutual agreement procedures exist to settle issues where there is inconsistent tax treatment between the IRS and the taxing authorities of the following possessions. Form to amend taxes American Samoa. Form to amend taxes The Commonwealth of Puerto Rico. Form to amend taxes The Commonwealth of the Northern Mariana Islands. Form to amend taxes Guam. Form to amend taxes The U. Form to amend taxes S. Form to amend taxes Virgin Islands. Form to amend taxes These issues usually involve allocations of income, deductions, credits, or allowances between related persons; determinations of residency; and determinations of the source of income and related expenses. Form to amend taxes Competent Authority Assistance The tax coordination agreements between the United States and the possession tax departments contain provisions allowing the competent authorities of the United States and the relevant possession to resolve, by mutual agreement, inconsistent tax treatment by the two jurisdictions. Form to amend taxes How to make your request. Form to amend taxes   Your request for competent authority assistance must include all the information listed in Revenue Procedure 2006-23, 2006-20 I. Form to amend taxes R. Form to amend taxes B. Form to amend taxes 900 available at www. Form to amend taxes irs. Form to amend taxes gov/pub/irs-irbs/irb06-49. Form to amend taxes pdf. Form to amend taxes    Also, see Notice 2013-78, which provides proposed updates to the procedures for requesting U. Form to amend taxes S. Form to amend taxes competent authority assistance under tax treaties. Form to amend taxes As noted, an update to Revenue Procedure 2006-23 will be published in the future. Form to amend taxes   Your request must be in the form of a letter addressed to the Deputy Commissioner (International) LB&I. Form to amend taxes It must contain a statement that competent authority assistance is requested under the mutual agreement procedure with the possession. Form to amend taxes You (or a person having authority to sign your federal return) must sign and date the request. Form to amend taxes    Send your written request for U. Form to amend taxes S. Form to amend taxes assistance under this procedure to:   Deputy Commissioner (International) Large Business and International Division Internal Revenue Service 1111 Constitution Avenue, N. Form to amend taxes W. Form to amend taxes  Routing: M4-365 Washington, DC 20224 (Attention: TAIT) Nonresident aliens generally must present their initial request for assistance to the relevant possession tax agency. Form to amend taxes Credit or Refund In addition to the tax assistance request, if you seek a credit or refund of any overpayment of U. Form to amend taxes S. Form to amend taxes tax paid on the income in question, you should file a claim on Form 1040X, Amended U. Form to amend taxes S. Form to amend taxes Individual Income Tax Return. Form to amend taxes Indicate on the form that a request for assistance under the mutual agreement procedure with the possession has been filed. Form to amend taxes Attach a copy of the request to the form. Form to amend taxes Also, you should take whatever steps must be taken under the possession tax code to prevent the expiration of the statutory period for filing a claim for credit or refund of a possession tax. Form to amend taxes See Revenue Procedure 2006-54 (or its successor), section 9, for complete information. Form to amend taxes Prev  Up  Next   Home   More Online Publications
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Understanding Your CP237 Notice

We sent you a replacement refund check.


What you need to do

  • If you have the expired check, please destroy it.
  • When you receive the new check, remember to cash it.

You may want to...

  • Call 1-800-829-3676 (1-800-TAX-FORM) to order forms and publications.

Answers to Common Questions

 

When will I receive my replacement check?
You should receive the replacement check within 30 days.

Can I request that you mail my refund check to an alternate address?
Refund checks are mailed only to the address of record, which is the address provided on the tax return or the result of a permanent address change request submitted after the return is filed.


Tips for next year

Consider filing your taxes electronically. Filing online can help you avoid mistakes and find credits and deductions that you may qualify for. In many cases you can file for free. Learn more about e-file.


Understanding your notice

Your notice may look different from the sample because the information contained in your notice is tailored to your situation.

Notice CP237, Page 1

Page Last Reviewed or Updated: 07-Aug-2013

Printable samples of this notice (PDF)

 

 

How to get help

  • Call the 1-800 number listed on the top right corner of your notice.
  • Authorize someone (e.g., accountant) to contact the IRS on your behalf using Form 2848.
  • See if you qualify for help from a Low Income Taxpayer Clinic.
     

The Form To Amend Taxes

Form to amend taxes 4. Form to amend taxes   Detailed Examples Table of Contents These examples use actual forms to help you prepare your income tax return. Form to amend taxes However, the information shown on the filled-in forms is not from any actual person or scenario. Form to amend taxes Example 1—Mortgage loan modification. Form to amend taxes    In 2007, Nancy Oak bought a main home for $435,000. Form to amend taxes Nancy took out a $420,000 mortgage loan to buy the home and made a down payment of $15,000. Form to amend taxes The loan was secured by the home. Form to amend taxes The mortgage loan was a recourse debt, meaning that Nancy was personally liable for the debt. Form to amend taxes In 2008, Nancy took out a second mortgage loan (also a recourse debt) in the amount of $30,000 that was used to substantially improve her kitchen. Form to amend taxes    In 2011, when the outstanding principal of the first and second mortgage loans was $440,000, Nancy refinanced the two recourse loans into one recourse loan in the amount of $475,000. Form to amend taxes The FMV of Nancy's home at the time of the refinancing was $500,000. Form to amend taxes Nancy used the additional $35,000 debt ($475,000 new mortgage loan minus $440,000 outstanding principal of Nancy's first and second mortgage loans immediately before the refinancing) to pay off personal credit cards and to pay college tuition for her son. Form to amend taxes After the refinancing, Nancy has qualified principal residence indebtedness in the amount of $440,000 because the refinanced debt is qualified principal residence indebtedness only to the extent the amount of debt is not more than the old mortgage principal just before the refinancing. Form to amend taxes   In 2013, Nancy was unable to make her mortgage loan payments. Form to amend taxes On August 31, 2013, when the outstanding balance of her refinanced mortgage loan was still $475,000 and the FMV of the property was $425,000, Nancy's bank agreed to a loan modification (a “workout”) that resulted in a $40,000 reduction in the principal balance of her loan. Form to amend taxes Nancy was neither insolvent nor in bankruptcy at the time of the loan modification. Form to amend taxes   Nancy received a 2013 Form 1099-C from her bank in January 2014 showing canceled debt of $40,000 in box 2. Form to amend taxes Identifiable event code "F" appears in box 6. Form to amend taxes This box shows the reason the creditor has filed Form 1099-C. Form to amend taxes To determine if she must include the canceled debt in her income, Nancy must determine whether she meets any of the exceptions or exclusions that apply to canceled debts. Form to amend taxes Nancy determines that the only exception or exclusion that applies to her is the qualified principal residence indebtedness exclusion. Form to amend taxes   Next, Nancy determines the amount, if any, of the $40,000 of canceled debt that was qualified principal residence indebtedness. Form to amend taxes Although Nancy has $440,000 of qualified principal residence indebtedness, part of her loan ($35,000) was not qualified principal residence indebtedness because it was used to pay off personal credit cards and college tuition for her son. Form to amend taxes Applying the ordering rule, the qualified principal residence indebtedness exclusion applies only to the extent the amount canceled is more than the amount of the debt (immediately before the cancellation) that is not qualified principal residence indebtedness. Form to amend taxes Thus, Nancy can exclude only $5,000 of the canceled debt as qualified principal residence indebtedness ($40,000 amount canceled minus $35,000 nonqualified debt). Form to amend taxes   Because Nancy does not meet any other exception or exclusion, she checks only the box on line 1e of Form 982 and enters $5,000 on line 2. Form to amend taxes Nancy must also enter $5,000 on line 10b and reduce the basis of her main home by the $5,000 she excluded from income, bringing the adjusted basis in her home to $460,000 ($435,000 purchase price plus $30,000 substantial improvement minus $5,000). Form to amend taxes Nancy must also include the $35,000 nonqualified debt portion in income on Form 1040, line 21. Form to amend taxes You can see Nancy's Form 1099-C and a portion of her Form 1040 below. Form to amend taxes Nancy's 2013 Form 1099-C, Cancellation of Debt This image is too large to be displayed in the current screen. Form to amend taxes Please click the link to view the image. Form to amend taxes Form 1099-C, Cancellation of Debt Nancy's 2013 Form 1040 This image is too large to be displayed in the current screen. Form to amend taxes Please click the link to view the image. Form to amend taxes Form 1040, U. Form to amend taxes S. Form to amend taxes Individual Income Tax Nancy's Form 982 This image is too large to be displayed in the current screen. Form to amend taxes Please click the link to view the image. Form to amend taxes Form 982 Reduction of Tax Attributes Due to Discharge of Indebtedness (and Section 1082 Basis Adjustment)              Example 2—Mortgage loan foreclosure. Form to amend taxes    In 2005, John and Mary Elm bought a main home for $335,000. Form to amend taxes John and Mary took out a $320,000 mortgage loan to buy the home and made a down payment of $15,000. Form to amend taxes The loan was secured by the home and is a recourse debt, meaning John and Mary are personally liable for the debt. Form to amend taxes   John and Mary became unable to make their mortgage loan payments and on March 1, 2013, when the outstanding balance of the mortgage loan was $315,000 and the FMV of the property was $290,000, the bank foreclosed on the property and simultaneously canceled the remaining mortgage debt. Form to amend taxes Immediately before the foreclosure, John and Mary's only other assets and liabilities were a checking account with a balance of $6,000, retirement savings of $13,000, and credit card debt of $5,500. Form to amend taxes   John and Mary received a 2013 Form 1099-C showing canceled debt of $25,000 in box 2 ($315,000 outstanding balance minus $290,000 FMV) and an FMV of $290,000 in box 7. Form to amend taxes Identifiable event code "D" appears in box 6. Form to amend taxes This box shows the reason the creditor has filed Form 1099-C. Form to amend taxes In order to determine if John and Mary must include the canceled debt in income, they must first determine whether they meet any of the exceptions or exclusions that apply to canceled debts. Form to amend taxes In this example, John and Mary meet both the insolvency and qualified principal residence indebtedness exclusions. Form to amend taxes Their sample Form 1099-C is shown on this page. Form to amend taxes   John and Mary complete the insolvency worksheet and determine that they were insolvent immediately before the cancellation because at that time their liabilities exceeded the FMV of their assets by $11,500 ($320,500 total liabilities minus $309,000 FMV of total assets). Form to amend taxes However, because the entire debt canceled is qualified principal residence indebtedness, the insolvency exclusion only applies if John and Mary elect to apply the insolvency exclusion instead of the qualified principal residence exclusion. Form to amend taxes   John and Mary do not elect to apply the insolvency exclusion instead of the qualified principal residence exclusion because under the insolvency exclusion their exclusion would be limited to the amount by which they were insolvent ($11,500). Form to amend taxes Instead, John and Mary check box 1e of Form 982 to exclude the canceled debt under the qualified principal residence exclusion. Form to amend taxes Under the qualified principal residence exclusion, the amount that John and Mary can exclude is not limited because their qualified principal residence indebtedness is not more than $2 million and no portion of the loan was nonqualified debt. Form to amend taxes As a result, John and Mary enter the full $25,000 of canceled debt on line 2 of Form 982. Form to amend taxes Because John and Mary no longer own the home due to the foreclosure, John and Mary have no remaining basis in the home at the time of the debt cancellation. Form to amend taxes Thus, John and Mary leave line 10b of Form 982 blank. Form to amend taxes   John and Mary must also determine whether they have a gain or loss from the foreclosure. Form to amend taxes John and Mary complete Table 1-1 (shown below) and find that they have a $45,000 loss from the foreclosure. Form to amend taxes Because this loss relates to their home, it is a nondeductible loss. Form to amend taxes   John and Mary's Form 1099-C, Insolvency Worksheet, and Form 982 follow. Form to amend taxes John and Mary's 2013 Form 1099-C, Cancellation of Debt This image is too large to be displayed in the current screen. Form to amend taxes Please click the link to view the image. Form to amend taxes Form 1099-C, Cancellation of Debt Table 1-1. Form to amend taxes Worksheet for Foreclosures and Repossessions (for John and Mary Elm) Part 1. Form to amend taxes Complete Part 1 only if you were personally liable for the debt (even if none of the debt was canceled). Form to amend taxes Otherwise, go to Part 2. Form to amend taxes 1. Form to amend taxes Enter the amount of outstanding debt immediately before the transfer of property reduced by any amount for which you remain personally liable immediately after the transfer of property $315,000. Form to amend taxes 00 2. Form to amend taxes Enter the fair market value of the transferred property $290,000. Form to amend taxes 00 3. Form to amend taxes Ordinary income from the cancellation of debt upon foreclosure or repossession. Form to amend taxes * Subtract line 2 from line 1. Form to amend taxes If less than zero, enter zero. Form to amend taxes Next, go to Part 2 $ 25,000. Form to amend taxes 00 Part 2. Form to amend taxes Gain or loss from foreclosure or repossession. Form to amend taxes   4. Form to amend taxes Enter the smaller of line 1 or line 2. Form to amend taxes If you did not complete Part 1 (because you were not personally liable for the debt), enter the amount of outstanding debt immediately before the transfer of property $290,000. Form to amend taxes 00 5. Form to amend taxes Enter any proceeds you received from the foreclosure sale   6. Form to amend taxes Add line 4 and line 5 $290,000. Form to amend taxes 00 7. Form to amend taxes Enter the adjusted basis of the transferred property $335,000. Form to amend taxes 00 8. Form to amend taxes Gain or loss from foreclosure or repossession. Form to amend taxes Subtract line 7 from line 6 ($ 45,000. Form to amend taxes 00) * The income may not be taxable. Form to amend taxes See chapter 1 for more details. Form to amend taxes Insolvency Worksheet—John and Mary Elm Date debt was canceled (mm/dd/yy) 03/01/13 Part I. Form to amend taxes Total liabilities immediately before the cancellation (do not include the same liability in more than one category) Liabilities (debts) Amount Owed Immediately Before the Cancellation 1. Form to amend taxes Credit card debt $ 5,500 2. Form to amend taxes Mortgage(s) on real property (including first and second mortgages and home equity loans) (mortgage(s) can be on personal residence, any additional residence, or property held for investment or used in a trade or business) $ 315,000 3. Form to amend taxes Car and other vehicle loans $ 4. Form to amend taxes Medical bills owed $ 5. Form to amend taxes Student loans $ 6. Form to amend taxes Accrued or past-due mortgage interest $ 7. Form to amend taxes Accrued or past-due real estate taxes $ 8. Form to amend taxes Accrued or past-due utilities (water, gas, electric) $ 9. Form to amend taxes Accrued or past-due child care costs $ 10. Form to amend taxes Federal or state income taxes remaining due (for prior tax years) $ 11. Form to amend taxes Judgments $ 12. Form to amend taxes Business debts (including those owed as a sole proprietor or partner) $ 13. Form to amend taxes Margin debt on stocks and other debt to purchase or secured by investment assets other than real property $ 14. Form to amend taxes Other liabilities (debts) not included above $ 15. Form to amend taxes Total liabilities immediately before the cancellation. Form to amend taxes Add lines 1 through 14. Form to amend taxes $ 320,500 Part II. Form to amend taxes Fair market value (FMV) of assets owned immediately before the cancellation (do not include the FMV of the same asset in more than one category) Assets FMV Immediately Before  the Cancellation 16. Form to amend taxes Cash and bank account balances $ 6,000 17. Form to amend taxes Real property, including the value of land (can be main home, any additional home, or property held for investment or used in a trade or business) $ 290,000 18. Form to amend taxes Cars and other vehicles $ 19. Form to amend taxes Computers $ 20. Form to amend taxes Household goods and furnishings (for example, appliances, electronics, furniture, etc. Form to amend taxes ) $ 21. Form to amend taxes Tools $ 22. Form to amend taxes Jewelry $ 23. Form to amend taxes Clothing $ 24. Form to amend taxes Books $ 25. Form to amend taxes Stocks and bonds $ 26. Form to amend taxes Investments in coins, stamps, paintings, or other collectibles $ 27. Form to amend taxes Firearms, sports, photographic, and other hobby equipment $ 28. Form to amend taxes Interest in retirement accounts (IRA accounts, 401(k) accounts, and other retirement accounts) $ 13,000 29. Form to amend taxes Interest in a pension plan $ 30. Form to amend taxes Interest in education accounts $ 31. Form to amend taxes Cash value of life insurance $ 32. Form to amend taxes Security deposits with landlords, utilities, and others $ 33. Form to amend taxes Interests in partnerships $ 34. Form to amend taxes Value of investment in a business $ 35. Form to amend taxes Other investments (for example, annuity contracts, guaranteed investment contracts, mutual funds, commodity accounts, interests in hedge funds, and options) $ 36. Form to amend taxes Other assets not included above $ 37. Form to amend taxes FMV of total assets immediately before the cancellation. Form to amend taxes Add lines 16 through 36. Form to amend taxes $ 309,000 Part III. Form to amend taxes Insolvency 38. Form to amend taxes Amount of Insolvency. Form to amend taxes Subtract line 37 from line 15. Form to amend taxes If zero or less, you are not insolvent. Form to amend taxes $ 11,500 John and Mary's Form 982 This image is too large to be displayed in the current screen. Form to amend taxes Please click the link to view the image. Form to amend taxes Form 982, Reduction of Tax Attributes Due to Discharge of Indebtedness (and Section 1082 Basis Adjustment)          Example 3—Mortgage loan foreclosure with debt exceeding $2 million limit. Form to amend taxes    In 2011, Kathy and Frank Willow got married and entered into a contract with Hive Construction Corporation to build a house for $3,000,000 to be used as their main home. Form to amend taxes Kathy and Frank made a $400,000 down payment and took out a $2,600,000 mortgage to finance the remaining cost of the house. Form to amend taxes Kathy and Frank are personally liable for the mortgage loan, which is secured by the home. Form to amend taxes   In November 2013, when the outstanding principal balance on the mortgage loan was $2,500,000, the FMV of the property fell to $1,750,000 and Kathy and Frank abandoned the property by permanently moving out. Form to amend taxes The lender foreclosed on the property and, on December 5, 2013, sold the property to another buyer for $1,750,000. Form to amend taxes On December 26, 2013, the lender canceled the remaining debt. Form to amend taxes Kathy and Frank have no tax attributes other than basis of personal-use property. Form to amend taxes   The lender issued a 2013 Form 1099-C to Kathy and Frank showing canceled debt of $750,000 in box 2 (the remaining balance on the $2,500,000 mortgage debt after application of the foreclosure sale proceeds) and $1,750,000 in box 7 (FMV of the property). Form to amend taxes Identifiable event code "D" appears in box 6. Form to amend taxes This box shows the reason the creditor has filed Form 1099-C. Form to amend taxes Although Kathy and Frank abandoned the property, the lender did not need to also file a Form 1099-A because the lender canceled the debt in connection with the foreclosure in the same calendar year. Form to amend taxes Kathy and Frank are filing a joint return for 2013. Form to amend taxes   Because the foreclosure occurred prior to the debt cancellation, Kathy and Frank first calculate their gain or loss from the foreclosure using Table 1-1. Form to amend taxes Because Kathy and Frank remained personally liable for the $750,000 debt remaining after the foreclosure ($2,500,000 outstanding debt immediately before the foreclosure minus $1,750,000 satisfied through the sale of the home), Kathy and Frank enter $1,750,000 on line 1 of Table 1-1 ($2,500,000 outstanding debt immediately before the foreclosure minus the $750,000 for which they remained liable). Form to amend taxes Completing Table 1-1, Kathy and Frank find that they have no ordinary income from the cancellation of debt upon foreclosure and that they have a $1,250,000 loss. Form to amend taxes Because this loss relates to their home, it is a nondeductible loss. Form to amend taxes   Because the lender later canceled the remaining amount of the debt, Kathy and Frank must also determine whether that canceled debt is taxable. Form to amend taxes Immediately before the cancellation, Kathy and Frank had $15,000 in a savings account, household furnishings with an FMV of $17,000, a car with an FMV of $10,000, and $18,000 in credit card debt. Form to amend taxes Kathy and Frank also had the $750,000 remaining balance on the mortgage loan at that time. Form to amend taxes The household furnishings originally cost $30,000. Form to amend taxes The car had been fully paid off (so there was no related outstanding debt) and was originally purchased for $16,000. Form to amend taxes Kathy and Frank had no adjustments to the cost basis of the car. Form to amend taxes Kathy and Frank had no other assets or liabilities at the time of the cancellation. Form to amend taxes Kathy and Frank complete the insolvency worksheet to calculate that they were insolvent to the extent of $726,000 immediately before the cancellation ($768,000 of total liabilities minus $42,000 FMV of total assets). Form to amend taxes   At the beginning of 2014, Kathy and Frank had $9,000 in their savings account and $15,000 in credit card debt. Form to amend taxes Kathy and Frank also owned the same car at that time (still with an FMV of $10,000 and basis of $16,000) and the same household furnishings (still with an FMV of $17,000 and a basis of $30,000). Form to amend taxes Kathy and Frank had no other assets or liabilities at that time. Form to amend taxes Kathy and Frank no longer own the home because the lender foreclosed on it in 2013. Form to amend taxes   Because the canceled debt is qualified principal residence indebtedness, the insolvency exclusion does not apply unless Kathy and Frank elect to apply the insolvency exclusion instead of the qualified principal residence indebtedness exclusion. Form to amend taxes The maximum amount that Kathy and Frank can treat as qualified principal residence indebtedness is $2,000,000. Form to amend taxes The remaining $500,000 ($2,500,000 outstanding mortgage loan minus $2,000,000 limit on qualified principal residence indebtedness) is not qualified principal residence indebtedness. Form to amend taxes Because only a part of the loan is qualified principal residence indebtedness, Kathy and Frank must apply the ordering rule to the canceled debt. Form to amend taxes Under the ordering rule, the qualified principal residence indebtedness exclusion applies only to the extent that the amount canceled ($750,000) exceeds the amount of the loan (immediately before the cancellation) that is not qualified principal residence indebtedness ($500,000). Form to amend taxes This means that Kathy and Frank can only exclude $250,000 ($750,000 amount canceled minus $500,000 nonqualified debt) under the qualified principal residence indebtedness exclusion. Form to amend taxes   Kathy and Frank do not elect to have the insolvency exclusion apply instead of the qualified principal residence exclusion. Form to amend taxes Nonetheless, they can still apply the insolvency exclusion to the $500,000 nonqualified debt because it is not qualified principal residence indebtedness. Form to amend taxes Kathy and Frank can exclude the remaining $500,000 canceled debt under the insolvency exclusion because they were insolvent immediately before the cancellation to the extent of $726,000. Form to amend taxes Thus, Kathy and Frank check the boxes on lines 1b and 1e of Form 982 and enter $750,000 on line 2 ($250,000 excluded under the qualified principal residence indebtedness exclusion plus $500,000 excluded under the insolvency exclusion). Form to amend taxes   Next, Kathy and Frank reduce their tax attributes using Part II of Form 982. Form to amend taxes Because Kathy and Frank no longer own the home due to the foreclosure, Kathy and Frank have no remaining basis in the home at the time of the debt cancellation. Form to amend taxes Thus, Kathy and Frank leave line 10b of Form 982 blank. Form to amend taxes However, Kathy and Frank are also excluding nonqualified debt under the insolvency exclusion. Form to amend taxes As a result, Kathy and Frank must reduce the basis of property they own based on the amount of canceled debt they are excluding from income under the insolvency rules. Form to amend taxes Because Kathy and Frank have no tax attributes other than basis of personal-use property to reduce, Kathy and Frank figure the amount they must include on line 10a of Form 982 by taking the smallest of: The $46,000 bases of their personal-use property held at the beginning of 2014 ($16,000 basis in the car plus $30,000 basis in household furnishings), The $500,000 of the nonbusiness debt (other than qualified principal residence indebtedness) that they are excluding from income on line 2 of Form 982, or The $43,000 excess of the total bases of the property and the amount of money they held immediately after the cancellation over their total liabilities immediately after the cancellation ($15,000 in savings account plus $30,000 basis in household furnishings plus $16,000 adjusted basis in car minus $18,000 credit card debt). Form to amend taxes Kathy and Frank enter $43,000 on Form 982, line 10a and reduce their bases in the car and the household furnishings in proportion to the total adjusted bases in all their property. Form to amend taxes Kathy and Frank reduce the basis in the car by $14,956. Form to amend taxes 52 ($43,000 x $16,000/$46,000). Form to amend taxes And they reduce the basis in the household furnishings by $28,043. Form to amend taxes 48 ($43,000 x $30,000/$46,000). Form to amend taxes   Following are Kathy and Frank's sample forms and worksheets. Form to amend taxes Frank and Kathy's 2013 Form 1099-C, Cancellation of Debt This image is too large to be displayed in the current screen. Form to amend taxes Please click the link to view the image. Form to amend taxes Form 1099-C, Cancellation of Debt Table 1-1. Form to amend taxes Worksheet for Foreclosures and Repossessions (for Frank and Kathy Willow) Part 1. Form to amend taxes Complete Part 1 only if you were personally liable for the debt (even if none of the debt was canceled). Form to amend taxes Otherwise, go to Part 2. Form to amend taxes 1. Form to amend taxes Enter the amount of outstanding debt immediately before the transfer of property reduced by any amount for which you remain personally liable immediately after the transfer of property $1,750,000. Form to amend taxes 00 2. Form to amend taxes Enter the fair market value of the transferred property $1,750,000. Form to amend taxes 00 3. Form to amend taxes Ordinary income from the cancellation of debt upon foreclosure or repossession. Form to amend taxes * Subtract line 2 from line 1. Form to amend taxes If less than zero, enter zero. Form to amend taxes Next, go to Part 2 $0. Form to amend taxes 00 Part 2. Form to amend taxes Gain or loss from foreclosure or repossession. Form to amend taxes   4. Form to amend taxes Enter the smaller of line 1 or line 2. Form to amend taxes If you did not complete Part 1 (because you were not personally liable for the debt), enter the amount of outstanding debt immediately before the transfer of property. Form to amend taxes $1,750,000. Form to amend taxes 00 5. Form to amend taxes Enter any proceeds you received from the foreclosure sale   6. Form to amend taxes Add line 4 and line 5 $1,750,000. Form to amend taxes 00 7. Form to amend taxes Enter the adjusted basis of the transferred property $3,000,000. Form to amend taxes 00 8. Form to amend taxes Gain or loss from foreclosure or repossession. Form to amend taxes Subtract line 7 from line 6 ($1,250,000. Form to amend taxes 00) * The income may not be taxable. Form to amend taxes See chapter 1 for more details. Form to amend taxes    Insolvency Worksheet—Frank and Kathy Willow Date debt was canceled (mm/dd/yy) 12/26/13 Part I. Form to amend taxes Total liabilities immediately before the cancellation (do not include the same liability in more than one category) Liabilities (debts) Amount Owed Immediately Before the Cancellation 1. Form to amend taxes Credit card debt $ 18,000 2. Form to amend taxes Mortgage(s) on real property (including first and second mortgages and home equity loans) (mortgage(s) can be on personal residence, any additional residence, or property held for investment or used in a trade or business) $ 750,000 3. Form to amend taxes Car and other vehicle loans $ 4. Form to amend taxes Medical bills owed $ 5. Form to amend taxes Student loans $ 6. Form to amend taxes Accrued or past-due mortgage interest $ 7. Form to amend taxes Accrued or past-due real estate taxes $ 8. Form to amend taxes Accrued or past-due utilities (water, gas, electric) $ 9. Form to amend taxes Accrued or past-due child care costs $ 10. Form to amend taxes Federal or state income taxes remaining due (for prior tax years) $ 11. Form to amend taxes Judgments $ 12. Form to amend taxes Business debts (including those owed as a sole proprietor or partner) $ 13. Form to amend taxes Margin debt on stocks and other debt to purchase or secured by investment assets other than real property $ 14. Form to amend taxes Other liabilities (debts) not included above $ 15. Form to amend taxes Total liabilities immediately before the cancellation. Form to amend taxes Add lines 1 through 14. Form to amend taxes $ 768,000 Part II. Form to amend taxes Fair market value (FMV) of assets owned immediately before the cancellation (do not include the FMV of the same asset in more than one category) Assets FMV Immediately Before  the Cancellation 16. Form to amend taxes Cash and bank account balances $ 15,000 17. Form to amend taxes Real property, including the value of land (can be main home, any additional home, or property held for investment or used in a trade or business) $ 18. Form to amend taxes Cars and other vehicles $ 10,000 19. Form to amend taxes Computers $ 20. Form to amend taxes Household goods and furnishings (for example, appliances, electronics, furniture, etc. Form to amend taxes ) $ 17,000 21. Form to amend taxes Tools $ 22. Form to amend taxes Jewelry $ 23. Form to amend taxes Clothing $ 24. Form to amend taxes Books $ 25. Form to amend taxes Stocks and bonds $ 26. Form to amend taxes Investments in coins, stamps, paintings, or other collectibles $ 27. Form to amend taxes Firearms, sports, photographic, and other hobby equipment $ 28. Form to amend taxes Interest in retirement accounts (IRA accounts, 401(k) accounts, and other retirement accounts) $ 29. Form to amend taxes Interest in a pension plan $ 30. Form to amend taxes Interest in education accounts $ 31. Form to amend taxes Cash value of life insurance $ 32. Form to amend taxes Security deposits with landlords, utilities, and others $ 33. Form to amend taxes Interests in partnerships $ 34. Form to amend taxes Value of investment in a business $ 35. Form to amend taxes Other investments (for example, annuity contracts, guaranteed investment contracts, mutual funds, commodity accounts, interests in hedge funds, and options) $ 36. Form to amend taxes Other assets not included above $ 37. Form to amend taxes FMV of total assets immediately before the cancellation. Form to amend taxes Add lines 16 through 36. Form to amend taxes $ 42,000 Part III. Form to amend taxes Insolvency 38. Form to amend taxes Amount of Insolvency. Form to amend taxes Subtract line 37 from line 15. Form to amend taxes If zero or less, you are not insolvent. Form to amend taxes $ 726,000    Frank and Kathy's Form 982 This image is too large to be displayed in the current screen. 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