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Free H & R Block Filing

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Free H & R Block Filing

Free h & r block filing Publication 583 - Main Content Table of Contents What New Business Owners Need To Know Forms of BusinessMore information. Free h & r block filing More information. Free h & r block filing Exception—Community Income. Free h & r block filing Exception—Qualified joint venture. Free h & r block filing More information. Free h & r block filing More information. Free h & r block filing Identification NumbersEmployer Identification Number (EIN) Payee's Identification Number Tax Year Accounting Method Business TaxesIncome Tax Self-Employment Tax Employment Taxes Excise Taxes Depositing Taxes Information Returns PenaltiesWaiver of penalty. Free h & r block filing Business ExpensesBusiness Start-Up Costs Depreciation Business Use of Your Home Car and Truck Expenses RecordkeepingWhy Keep Records? Kinds of Records To Keep How Long To Keep Records Sample Record System How to Get More InformationInternal Revenue Service Small Business Administration Other Federal Agencies What New Business Owners Need To Know As a new business owner, you need to know your federal tax responsibilities. Free h & r block filing Table 1 can help you learn what those responsibilities are. Free h & r block filing Ask yourself each question listed in the table, then see the related discussion to find the answer. Free h & r block filing In addition to knowing about federal taxes, you need to make some basic business decisions. Free h & r block filing Ask yourself: What are my financial resources? What products and services will I sell? How will I market my products and services? How will I develop a strategic business plan? How will I manage my business on a day-to-day basis? How will I recruit employees? The Small Business Administration (SBA) is a federal agency that can help you answer these types of questions. Free h & r block filing For information on how to contact the SBA, see How to Get More Information, later. Free h & r block filing Forms of Business The most common forms of business are the sole proprietorship, partnership, and corporation. Free h & r block filing When beginning a business, you must decide which form of business to use. Free h & r block filing Legal and tax considerations enter into this decision. Free h & r block filing Only tax considerations are discussed in this publication. Free h & r block filing Your form of business determines which income tax return form you have to file. Free h & r block filing See Table 2 to find out which form you have to file. Free h & r block filing Sole proprietorships. Free h & r block filing   A sole proprietorship is an unincorporated business that is owned by one individual. Free h & r block filing It is the simplest form of business organization to start and maintain. Free h & r block filing The business has no existence apart from you, the owner. Free h & r block filing Its liabilities are your personal liabilities. Free h & r block filing You undertake the risks of the business for all assets owned, whether or not used in the business. Free h & r block filing You include the income and expenses of the business on your personal tax return. Free h & r block filing More information. Free h & r block filing   For more information on sole proprietorships, see Publication 334, Tax Guide for Small Business. Free h & r block filing If you are a farmer, see Publication 225, Farmer's Tax Guide. Free h & r block filing Partnerships. Free h & r block filing   A partnership is the relationship existing between two or more persons who join to carry on a trade or business. Free h & r block filing Each person contributes money, property, labor, or skill, and expects to share in the profits and losses of the business. Free h & r block filing   A partnership must file an annual information return to report the income, deductions, gains, losses, etc. Free h & r block filing , from its operations, but it does not pay income tax. Free h & r block filing Instead, it “passes through” any profits or losses to its partners. Free h & r block filing Each partner includes his or her share of the partnership's items on his or her tax return. Free h & r block filing More information. Free h & r block filing   For more information on partnerships, see Publication 541, Partnerships. Free h & r block filing Husband and wife business. Free h & r block filing   If you and your spouse jointly own and operate an unincorporated business and share in the profits and losses, you are partners in a partnership, whether or not you have a formal partnership agreement. Free h & r block filing Do not use Schedule C or C-EZ. Free h & r block filing Instead, file Form 1065, U. Free h & r block filing S. Free h & r block filing Return of Partnership Income. Free h & r block filing For more information, see Publication 541, Partnerships. Free h & r block filing Exception—Community Income. Free h & r block filing   If you and your spouse wholly own an unincorporated business as community property under the community property laws of a state, foreign country, or U. Free h & r block filing S. Free h & r block filing possession, you can treat the business either as a sole proprietorship or a partnership. Free h & r block filing The only states with community property laws are Arizona, California, Idaho, Louisiana, Nevada, New Mexico, Texas, Washington, and Wisconsin. Free h & r block filing A change in your reporting position will be treated as a conversion of the entity. Free h & r block filing Exception—Qualified joint venture. Free h & r block filing   If you and your spouse each materially participate as the only members of a jointly owned and operated business, and you file a joint return for the tax year, you can make a joint election to be treated as a qualified joint venture instead of a partnership for the tax year. Free h & r block filing Making this election will allow you to avoid the complexity of Form 1065 but still give each spouse credit for social security earnings on which retirement benefits are based. Free h & r block filing For an explanation of "material participation," see the Instructions for Schedule C, line G. Free h & r block filing   To make this election, you must divide all items of income, gain, loss, deduction, and credit attributable to the business between you and your spouse in accordance with your respective interests in the venture. Free h & r block filing Each of you must file a separate Schedule C or C-EZ and a separate Schedule SE. Free h & r block filing For more information, see Qualified Joint Venture in the Instructions for Schedule SE. Free h & r block filing Corporations. Free h & r block filing   In forming a corporation, prospective shareholders exchange money, property, or both, for the corporation's capital stock. Free h & r block filing A corporation generally takes the same deductions as a sole proprietorship to figure its taxable income. Free h & r block filing A corporation can also take special deductions. Free h & r block filing   The profit of a corporation is taxed to the corporation when earned, and then is taxed to the shareholders when distributed as dividends. Free h & r block filing However, shareholders cannot deduct any loss of the corporation. Free h & r block filing More information. Free h & r block filing   For more information on corporations, see Publication 542, Corporations. Free h & r block filing S corporations. Free h & r block filing   An eligible domestic corporation can avoid double taxation (once to the corporation and again to the shareholders) by electing to be treated as an S corporation. Free h & r block filing Generally, an S corporation is exempt from federal income tax other than tax on certain capital gains and passive income. Free h & r block filing On their tax returns, the S corporation's shareholders include their share of the corporation's separately stated items of income, deduction, loss, and credit, and their share of nonseparately stated income or loss. Free h & r block filing More information. Free h & r block filing   For more information on S corporations, see the instructions for Form 2553, Election by a Small Business Corporation, and Form 1120S, U. Free h & r block filing S. Free h & r block filing Income Tax Return for an S Corporation. Free h & r block filing Limited liability company. Free h & r block filing   A limited liability company (LLC) is an entity formed under state law by filing articles of organization as an LLC. Free h & r block filing The members of an LLC are not personally liable for its debts. Free h & r block filing An LLC may be classified for federal income tax purposes as either a partnership, a corporation, or an entity disregarded as an entity separate from its owner by applying the rules in regulations section 301. Free h & r block filing 7701-3. Free h & r block filing For more information, see the instructions for Form 8832, Entity Classification Election. Free h & r block filing Identification Numbers You must have a taxpayer identification number so the IRS can process your returns. Free h & r block filing The two most common kinds of taxpayer identification numbers are the social security number (SSN) and the employer identification number (EIN). Free h & r block filing An SSN is issued to individuals by the Social Security Administration (SSA) and is in the following format: 000–00–0000. Free h & r block filing An EIN is issued to individuals (sole proprietors), partnerships, corporations, and other entities by the IRS and is in the following format: 00–0000000. Free h & r block filing You must include your taxpayer identification number (SSN or EIN) on all returns and other documents you send to the IRS. Free h & r block filing You must also furnish your number to other persons who use your identification number on any returns or documents they send to the IRS. Free h & r block filing This includes returns or documents filed to report the following information. Free h & r block filing Interest, dividends, royalties, etc. Free h & r block filing , paid to you. Free h & r block filing Any amount paid to you as a dependent care provider. Free h & r block filing Certain other amounts paid to you that total $600 or more for the year. Free h & r block filing If you do not furnish your identification number as required, you may be subject to penalties. Free h & r block filing See Penalties, later. Free h & r block filing Employer Identification Number (EIN) EINs are used to identify the tax accounts of employers, certain sole proprietors, corporations, partnerships, estates, trusts, and other entities. Free h & r block filing If you don't already have an EIN, you need to get one if you: Have employees, Have a qualified retirement plan, Operate your business as a corporation or partnership, or File returns for: Employment taxes, or Excise taxes. Free h & r block filing Applying for an EIN. Free h & r block filing   You may apply for an EIN: Online—Click on the EIN link at www. Free h & r block filing irs. Free h & r block filing gov/businesses/small. Free h & r block filing The EIN is issued immediately once the application information is validated. Free h & r block filing By telephone at 1-800-829-4933. Free h & r block filing By mailing or faxing Form SS-4, Application for Employer Identification Number. Free h & r block filing When to apply. Free h & r block filing   You should apply for an EIN early enough to receive the number by the time you must file a return or statement or make a tax deposit. Free h & r block filing If you apply by mail, file Form SS-4 at least 4 weeks before you need an EIN. Free h & r block filing If you apply by telephone or through the IRS website, you can get an EIN immediately. Free h & r block filing If you apply by fax, you can get an EIN within 4 business days. Free h & r block filing   If you do not receive your EIN by the time a return is due, file your return anyway. Free h & r block filing Write “Applied for” and the date you applied for the number in the space for the EIN. Free h & r block filing Do not use your social security number as a substitute for an EIN on your tax returns. Free h & r block filing More than one EIN. Free h & r block filing   You should have only one EIN. Free h & r block filing If you have more than one EIN and are not sure which to use, contact the Internal Revenue Service Center where you file your return. Free h & r block filing Give the numbers you have, the name and address to which each was assigned, and the address of your main place of business. Free h & r block filing The IRS will tell you which number to use. Free h & r block filing More information. Free h & r block filing   For more information about EINs, see Publication 1635, Understanding Your EIN. Free h & r block filing Payee's Identification Number In the operation of a business, you will probably make certain payments you must report on information returns (discussed later under Information Returns). Free h & r block filing The forms used to report these payments must include the payee's identification number. Free h & r block filing Employee. Free h & r block filing   If you have employees, you must get an SSN from each of them. Free h & r block filing Record the name and SSN of each employee exactly as they are shown on the employee's social security card. Free h & r block filing If the employee's name is not correct as shown on the card, the employee should request a new card from the SSA. Free h & r block filing This may occur, for example, if the employee's name has changed due to marriage or divorce. Free h & r block filing   If your employee does not have an SSN, he or she should file Form SS-5, Application for a Social Security Card, with the SSA. Free h & r block filing This form is available at SSA offices or by calling 1-800-772-1213. Free h & r block filing It is also available from the SSA website at www. Free h & r block filing ssa. Free h & r block filing gov. Free h & r block filing Other payee. Free h & r block filing   If you make payments to someone who is not your employee and you must report the payments on an information return, get that person's SSN. Free h & r block filing If you make reportable payments to an organization, such as a corporation or partnership, you must get its EIN. Free h & r block filing   To get the payee's SSN or EIN, use Form W-9, Request for Taxpayer Identification Number and Certification. Free h & r block filing This form is available from IRS offices or by calling 1-800-829-3676. Free h & r block filing It is also available from the IRS website at IRS. Free h & r block filing gov. Free h & r block filing    If the payee does not provide you with an identification number, you may have to withhold part of the payments as backup withholding. Free h & r block filing For information on backup withholding, see the Form W-9 instructions and the General Instructions for Certain Information Returns. Free h & r block filing Tax Year You must figure your taxable income and file an income tax return based on an annual accounting period called a tax year. Free h & r block filing A tax year is usually 12 consecutive months. Free h & r block filing There are two kinds of tax years. Free h & r block filing Calendar tax year. Free h & r block filing A calendar tax year is 12 consecutive months beginning January 1 and ending December 31. Free h & r block filing Fiscal tax year. Free h & r block filing A fiscal tax year is 12 consecutive months ending on the last day of any month except December. Free h & r block filing A 52-53-week tax year is a fiscal tax year that varies from 52 to 53 weeks but does not have to end on the last day of a month. Free h & r block filing If you file your first tax return using the calendar tax year and you later begin business as a sole proprietor, become a partner in a partnership, or become a shareholder in an S corporation, you must continue to use the calendar year unless you get IRS approval to change it or are otherwise allowed to change it without IRS approval. Free h & r block filing You must use a calendar tax year if: You keep no books. Free h & r block filing You have no annual accounting period. Free h & r block filing Your present tax year does not qualify as a fiscal year. Free h & r block filing You are required to use a calendar year by a provision of the Internal Revenue Code or the Income Tax Regulations. Free h & r block filing For more information, see Publication 538, Accounting Periods and Methods. Free h & r block filing First-time filer. Free h & r block filing   If you have never filed an income tax return, you can adopt either a calendar tax year or a fiscal tax year. Free h & r block filing You adopt a tax year by filing your first income tax return using that tax year. Free h & r block filing You have not adopted a tax year if you merely did any of the following. Free h & r block filing Filed an application for an extension of time to file an income tax return. Free h & r block filing Filed an application for an employer identification number. Free h & r block filing Paid estimated taxes for that tax year. Free h & r block filing Changing your tax year. Free h & r block filing   Once you have adopted your tax year, you may have to get IRS approval to change it. Free h & r block filing To get approval, you must file Form 1128, Application To Adopt, Change, or Retain a Tax Year. Free h & r block filing You may have to pay a fee. Free h & r block filing For more information, see Publication 538. Free h & r block filing Accounting Method An accounting method is a set of rules used to determine when and how income and expenses are reported. Free h & r block filing You choose an accounting method for your business when you file your first income tax return. Free h & r block filing There are two basic accounting methods. Free h & r block filing Cash method. Free h & r block filing Under the cash method, you report income in the tax year you receive it. Free h & r block filing You usually deduct or capitalize expenses in the tax year you pay them. Free h & r block filing Accrual method. Free h & r block filing Under an accrual method, you generally report income in the tax year you earn it, even though you may receive payment in a later year. Free h & r block filing You deduct or capitalize expenses in the tax year you incur them, whether or not you pay them that year. Free h & r block filing For other methods, see Publication 538. Free h & r block filing If you need inventories to show income correctly, you must generally use an accrual method of accounting for purchases and sales. Free h & r block filing Inventories include goods held for sale in the normal course of business. Free h & r block filing They also include raw materials and supplies that will physically become a part of merchandise intended for sale. Free h & r block filing Inventories are explained in Publication 538. Free h & r block filing Certain small business taxpayers can use the cash method of accounting and can also account for inventoriable items as materials and supplies that are not incidental. Free h & r block filing For more information, see Publication 538. Free h & r block filing You must use the same accounting method to figure your taxable income and to keep your books. Free h & r block filing Also, you must use an accounting method that clearly shows your income. Free h & r block filing In general, any accounting method that consistently uses accounting principles suitable for your trade or business clearly shows income. Free h & r block filing An accounting method clearly shows income only if it treats all items of gross income and expense the same from year to year. Free h & r block filing More than one business. Free h & r block filing   When you own more than one business, you can use a different accounting method for each business if the method you use for each clearly shows your income. Free h & r block filing You must keep a complete and separate set of books and records for each business. Free h & r block filing Changing your method of accounting. Free h & r block filing   Once you have set up your accounting method, you must generally get IRS approval before you can change to another method. Free h & r block filing A change in accounting method not only includes a change in your overall system of accounting, but also a change in the treatment of any material item. Free h & r block filing For examples of changes that require approval and information on how to get approval for the change, see Publication 538. Free h & r block filing Business Taxes The form of business you operate determines what taxes you must pay and how you pay them. Free h & r block filing The following are the four general kinds of business taxes. Free h & r block filing Income tax. Free h & r block filing Self-employment tax. Free h & r block filing Employment taxes. Free h & r block filing Excise taxes. Free h & r block filing See Table 2 for the forms you file to report these taxes. Free h & r block filing You may want to get Publication 509. Free h & r block filing It has tax calendars that tell you when to file returns and make tax payments. Free h & r block filing Income Tax All businesses except partnerships must file an annual income tax return. Free h & r block filing Partnerships file an information return. Free h & r block filing Which form you use depends on how your business is organized. Free h & r block filing See Table 2 to find out which return you have to file. Free h & r block filing The federal income tax is a pay-as-you-go tax. Free h & r block filing You must pay the tax as you earn or receive income during the year. Free h & r block filing An employee usually has income tax withheld from his or her pay. Free h & r block filing If you do not pay your tax through withholding, or do not pay enough tax that way, you might have to pay estimated tax. Free h & r block filing If you are not required to make estimated tax payments, you may pay any tax due when you file your return. Free h & r block filing Table 2. Free h & r block filing Which Forms Must I File? IF you are a. Free h & r block filing . Free h & r block filing . Free h & r block filing   THEN you may be liable for. Free h & r block filing . Free h & r block filing . Free h & r block filing   Use Form. Free h & r block filing . Free h & r block filing . Free h & r block filing Sole proprietor   Income tax   1040 and Schedule C 1 or C-EZ (Schedule F 1 for farm business)     Self-employment tax   1040 and Schedule SE     Estimated tax   1040-ES     Employment taxes:         • Social security and Medicare   taxes and income tax   withholding   941 or 944 (943 for farm employees)     • Federal unemployment (FUTA)   tax   940     Excise taxes   See Excise Taxes Partnership   Annual return of income   1065     Employment taxes   Same as sole proprietor     Excise taxes   See Excise Taxes Partner in a partnership (individual)   Income tax   1040 and Schedule E 2     Self-employment tax   1040 and Schedule SE     Estimated tax   1040-ES Corporation or S corporation   Income tax   1120 (corporation) 2  1120S (S corporation) 2     Estimated tax   1120-W (corporation only)     Employment taxes   Same as sole proprietor     Excise taxes   See Excise Taxes S corporation shareholder   Income tax   1040 and Schedule E 2     Estimated tax   1040-ES 1 File a separate schedule for each business. Free h & r block filing 2 Various other schedules may be needed. Free h & r block filing Estimated tax. Free h & r block filing   Generally, you must pay taxes on income, including self-employment tax (discussed next), by making regular payments of estimated tax during the year. Free h & r block filing Sole proprietors, partners, and S corporation shareholders. Free h & r block filing   You generally have to make estimated tax payments if you expect to owe tax of $1,000 or more when you file your return. Free h & r block filing Use Form 1040-ES, Estimated Tax for Individuals, to figure and pay your estimated tax. Free h & r block filing For more information, see Publication 505, Tax Withholding and Estimated Tax. Free h & r block filing Corporations. Free h & r block filing   You generally have to make estimated tax payments for your corporation if you expect it to owe tax of $500 or more when you file its return. Free h & r block filing Use Form 1120-W, Estimated Tax for Corporations, to figure the estimated tax. Free h & r block filing You must deposit the payments as explained later under Depositing Taxes. Free h & r block filing For more information, see Publication 542. Free h & r block filing Self-Employment Tax Self-employment tax (SE tax) is a social security and Medicare tax primarily for individuals who work for themselves. Free h & r block filing Your payments of SE tax contribute to your coverage under the social security system. Free h & r block filing Social security coverage provides you with retirement benefits, disability benefits, survivor benefits, and hospital insurance (Medicare) benefits. Free h & r block filing You must pay SE tax and file Schedule SE (Form 1040) if either of the following applies. Free h & r block filing Your net earnings from self-employment were $400 or more. Free h & r block filing You had church employee income of $108. Free h & r block filing 28 or more. Free h & r block filing Use Schedule SE (Form 1040) to figure your SE tax. Free h & r block filing For more information, see Publication 334, Tax Guide for Small Business. Free h & r block filing You can deduct a portion of your SE tax as an adjustment to income on your Form 1040. Free h & r block filing The Social Security Administration (SSA) time limit for posting self-employment income. Free h & r block filing   Generally, the SSA will give you credit only for self-employment income reported on a tax return filed within 3 years, 3 months, and 15 days after the tax year you earned the income. Free h & r block filing If you file your tax return or report a change in your self-employment income after this time limit, the SSA may change its records, but only to remove or reduce the amount. Free h & r block filing The SSA will not change its records to increase your self-employment income. Free h & r block filing Employment Taxes This section briefly discusses the employment taxes you must pay, the forms you must file to report them, and other forms that must be filed when you have employees. Free h & r block filing Employment taxes include the following. Free h & r block filing Social security and Medicare taxes. Free h & r block filing Federal income tax withholding. Free h & r block filing Federal unemployment (FUTA) tax. Free h & r block filing If you have employees, you will need to get Publication 15, Circular E, Employer's Tax Guide. Free h & r block filing If you have agricultural employees, get Publication 51, Circular A, Agricultural Employer's Tax Guide. Free h & r block filing These publications explain your tax responsibilities as an employer. Free h & r block filing If you are not sure whether the people working for you are your employees, see Publication 15-A, Employer's Supplemental Tax Guide. Free h & r block filing That publication has information to help you determine whether an individual is an employee or an independent contractor. Free h & r block filing If you classify an employee as an independent contractor, you can be held liable for employment taxes for that worker plus a penalty. Free h & r block filing An independent contractor is someone who is self-employed. Free h & r block filing Generally, you do not have to withhold or pay any taxes on payments to an independent contractor. Free h & r block filing Federal Income, Social Security, and Medicare Taxes You generally must withhold federal income tax from your employee's wages. Free h & r block filing To figure how much federal income tax to withhold from each wage payment, use the employee's Form W-4 (discussed later under Hiring Employees) and the methods described in Publication 15. Free h & r block filing Social security and Medicare taxes pay for benefits that workers and their families receive under the Federal Insurance Contributions Act (FICA). Free h & r block filing Social security tax pays for benefits under the old-age, survivors, and disability insurance part of FICA. Free h & r block filing Medicare tax pays for benefits under the hospital insurance part of FICA. Free h & r block filing You withhold part of these taxes from your employee's wages and you pay a part yourself. Free h & r block filing To find out how much social security and Medicare tax to withhold and to pay, see Publication 15. Free h & r block filing Which form do I file?   Report these taxes on Form 941, Employer's QUARTERLY Federal Tax Return, or Form 944, Employer's ANNUAL Federal Tax Return. Free h & r block filing (Farm employers use Form 943, Employer's Annual Federal Tax Return for Agricultural Employees. Free h & r block filing ) Federal Unemployment (FUTA) Tax The federal unemployment tax is part of the federal and state program under the Federal Unemployment Tax Act (FUTA) that pays unemployment compensation to workers who lose their jobs. Free h & r block filing You report and pay FUTA tax separately from social security and Medicare taxes and withheld income tax. Free h & r block filing You pay FUTA tax only from your own funds. Free h & r block filing Employees do not pay this tax or have it withheld from their pay. Free h & r block filing Which form do I file?   Report federal unemployment tax on Form 940, Employer's Annual Federal Unemployment (FUTA) Tax Return. Free h & r block filing See Publication 15 to find out if you can use this form. Free h & r block filing Hiring Employees Have the employees you hire fill out Form I-9 and Form W-4. Free h & r block filing Form I-9. Free h & r block filing   You must verify that each new employee is legally eligible to work in the United States. Free h & r block filing Both you and the employee must complete the U. Free h & r block filing S. Free h & r block filing Citizenship and Immigration Services (USCIS) Form I-9, Employment Eligibility Verification. Free h & r block filing You can get the form from USCIS offices or from the USCIS website at www. Free h & r block filing uscis. Free h & r block filing gov. Free h & r block filing Call the USCIS at 1-800-375-5283 for more information about your responsibilities. Free h & r block filing Form W-4. Free h & r block filing   Each employee must fill out Form W-4, Employee's Withholding Allowance Certificate. Free h & r block filing You will use the filing status and withholding allowances shown on this form to figure the amount of income tax to withhold from your employee's wages. Free h & r block filing For more information, see Publication 15. Free h & r block filing Employees claiming more than 10 withholding allowances. Free h & r block filing   An employer of an employee who claims more than 10 withholding allowances for wages paid can use several methods of withholding. Free h & r block filing See section 16 of Publication 15. Free h & r block filing Form W-2 Wage Reporting After the calendar year is over, you must furnish copies of Form W-2, Wage and Tax Statement, to each employee to whom you paid wages during the year. Free h & r block filing You must also send copies to the Social Security Administration. Free h & r block filing See Information Returns, later, for more information on Form W-2. Free h & r block filing Excise Taxes This section describes the excise taxes you may have to pay and the forms you have to file if you do any of the following. Free h & r block filing Manufacture or sell certain products. Free h & r block filing Operate certain kinds of businesses. Free h & r block filing Use various kinds of equipment, facilities, or products. Free h & r block filing Receive payment for certain services. Free h & r block filing For more information on excise taxes, see Publication 510, Excise Taxes. Free h & r block filing Form 720. Free h & r block filing   The federal excise taxes reported on Form 720, Quarterly Federal Excise Tax Return, consist of several broad categories of taxes, including the following. Free h & r block filing Environmental taxes. Free h & r block filing Communications and air transportation taxes. Free h & r block filing Fuel taxes. Free h & r block filing Tax on the first retail sale of heavy trucks, trailers, and tractors. Free h & r block filing Manufacturers taxes on the sale or use of a variety of different articles. Free h & r block filing Form 2290. Free h & r block filing   There is a federal excise tax on certain trucks, truck tractors, and buses used on public highways. Free h & r block filing The tax applies to vehicles having a taxable gross weight of 55,000 pounds or more. Free h & r block filing Report the tax on Form 2290, Heavy Highway Vehicle Use Tax Return. Free h & r block filing For more information, see the instructions for Form 2290. Free h & r block filing Form 730. Free h & r block filing   If you are in the business of accepting wagers or conducting a wagering pool or lottery, you may be liable for the federal excise tax on wagering. Free h & r block filing Use Form 730, Monthly Tax Return for Wagers, to figure the tax on the wagers you receive. Free h & r block filing Form 11-C. Free h & r block filing   Use Form 11-C, Occupational Tax and Registration Return for Wagering, to register for any wagering activity and to pay the federal occupational tax on wagering. Free h & r block filing Depositing Taxes You generally have to deposit employment taxes, certain excise taxes, corporate income tax, and S corporation taxes before you file your return. Free h & r block filing Generally, taxpayers are required to deposit taxes through the Electronic Federal Tax Payment System (EFTPS). Free h & r block filing Any business that has a federal tax obligation and requests a new EIN will automatically be enrolled in EFTPS. Free h & r block filing Through the mail, the business will receive an EFTPS PIN package that contains instructions for activating its EFTPS enrollment. Free h & r block filing Information Returns If you make or receive payments in your business, you may have to report them to the IRS on information returns. Free h & r block filing The IRS compares the payments shown on the information returns with each person's income tax return to see if the payments were included in income. Free h & r block filing You must give a copy of each information return you are required to file to the recipient or payer. Free h & r block filing In addition to the forms described below, you may have to use other returns to report certain kinds of payments or transactions. Free h & r block filing For more details on information returns and when you have to file them, see the General Instructions for Certain Information Returns. Free h & r block filing Form 1099-MISC. Free h & r block filing   Use Form 1099-MISC, Miscellaneous Income, to report certain payments you make in your trade or business. Free h & r block filing These payments include the following items. Free h & r block filing Payments of $600 or more for services performed for your business by people not treated as your employees, such as subcontractors, attorneys, accountants, or directors. Free h & r block filing Rent payments of $600 or more, other than rents paid to real estate agents. Free h & r block filing Prizes and awards of $600 or more that are not for services, such as winnings on TV or radio shows. Free h & r block filing Royalty payments of $10 or more. Free h & r block filing Payments to certain crew members by operators of fishing boats. Free h & r block filing You also use Form 1099-MISC to report your sales of $5,000 or more of consumer goods to a person for resale anywhere other than in a permanent retail establishment. Free h & r block filing Form W-2. Free h & r block filing   You must file Form W-2, Wage and Tax Statement, to report payments to your employees, such as wages, tips, and other compensation, withheld income, social security, and Medicare taxes. Free h & r block filing For more information on what to report on Form W-2, see the Instructions for Forms W-2 and W-3. Free h & r block filing Form 8300. Free h & r block filing   You must file Form 8300, Report of Cash Payments Over $10,000 Received in a Trade or Business, if you receive more than $10,000 in cash in one transaction or two or more related business transactions. Free h & r block filing Cash includes U. Free h & r block filing S. Free h & r block filing and foreign coin and currency. Free h & r block filing It also includes certain monetary instruments such as cashier's and traveler's checks and money orders. Free h & r block filing For more information, see Publication 1544, Reporting Cash Payments of Over $10,000 (Received in a Trade or Business). Free h & r block filing Penalties The law provides penalties for not filing returns or paying taxes as required. Free h & r block filing Criminal penalties may be imposed for willful failure to file, tax evasion, or making a false statement. Free h & r block filing Failure to file tax returns. Free h & r block filing   If you do not file your tax return by the due date, you may have to pay a penalty. Free h & r block filing The penalty is based on the tax not paid by the due date. Free h & r block filing See your tax return instructions for more information about this penalty. Free h & r block filing Failure to pay tax. Free h & r block filing   If you do not pay your taxes by the due date, you will have to pay a penalty for each month, or part of a month, that your taxes are not paid. Free h & r block filing For more information, see your tax return instructions. Free h & r block filing Failure to withhold, deposit, or pay taxes. Free h & r block filing   If you do not withhold income, social security, or Medicare taxes from employees, or if you withhold taxes but do not deposit them or pay them to the IRS, you may be subject to a penalty of the unpaid tax, plus interest. Free h & r block filing You may also be subject to penalties if you deposit the taxes late. Free h & r block filing For more information, see Publication 15. Free h & r block filing Failure to follow information reporting requirements. Free h & r block filing   The following penalties apply if you are required to file information returns. Free h & r block filing For more information, see the General Instructions for Certain Information Returns. Free h & r block filing Failure to file information returns. Free h & r block filing A penalty applies if you do not file information returns by the due date, if you do not include all required information, or if you report incorrect information. Free h & r block filing Failure to furnish correct payee statements. Free h & r block filing A penalty applies if you do not furnish a required statement to a payee by the due date, if you do not include all required information, or if you report incorrect information. Free h & r block filing Waiver of penalty. Free h & r block filing   These penalties will not apply if you can show that the failures were due to reasonable cause and not willful neglect. Free h & r block filing   In addition, there is no penalty for failure to include all the required information, or for including incorrect information, on a de minimis number of information returns if you correct the errors by August 1 of the year the returns are due. Free h & r block filing (To be considered de minimis, the number of returns cannot exceed the greater of 10 or ½ of 1% of the total number of returns you are required to file for the year. Free h & r block filing ) Failure to supply taxpayer identification number. Free h & r block filing   If you do not include your taxpayer identification number (SSN or EIN) or the taxpayer identification number of another person where required on a return, statement, or other document, you may be subject to a penalty of $50 for each failure. Free h & r block filing You may also be subject to the $50 penalty if you do not give your taxpayer identification number to another person when it is required on a return, statement, or other document. Free h & r block filing Business Expenses You can deduct business expenses on your income tax return. Free h & r block filing These are the current operating costs of running your business. Free h & r block filing To be deductible, a business expense must be both ordinary and necessary. Free h & r block filing An ordinary expense is one that is common and accepted in your field of business, trade, or profession. Free h & r block filing A necessary expense is one that is helpful and appropriate for your business, trade, or profession. Free h & r block filing An expense does not have to be indispensable to be considered necessary. Free h & r block filing The following are brief explanations of some expenses that are of interest to people starting a business. Free h & r block filing There are many other expenses that you may be able to deduct. Free h & r block filing See your form instructions and Publication 535, Business Expenses. Free h & r block filing Business Start-Up Costs Business start-up costs are the expenses you incur before you actually begin business operations. Free h & r block filing Your business start-up costs will depend on the type of business you are starting. Free h & r block filing They may include costs for advertising, travel, surveys, and training. Free h & r block filing These costs are generally capital expenses. Free h & r block filing You usually recover costs for a particular asset (such as machinery or office equipment) through depreciation (discussed next). Free h & r block filing You can elect to deduct up to $5,000 of business start-up costs and $5,000 of organizational costs paid or incurred after October 22, 2004. Free h & r block filing The $5,000 deduction is reduced by the amount your total start-up or organizational costs exceed $50,000. Free h & r block filing Any remaining cost must be amortized. Free h & r block filing For more information about amortizing start-up and organizational costs, see chapter 7 in Publication 535. Free h & r block filing Depreciation If property you acquire to use in your business has a useful life that extends substantially beyond the year it is placed in service, you generally cannot deduct the entire cost as a business expense in the year you acquire it. Free h & r block filing You must spread the cost over more than one tax year and deduct part of it each year. Free h & r block filing This method of deducting the cost of business property is called depreciation. Free h & r block filing Business property you must depreciate includes the following items. Free h & r block filing Office furniture. Free h & r block filing Buildings. Free h & r block filing Machinery and equipment. Free h & r block filing You can choose to deduct a limited amount of the cost of certain depreciable property in the year you place the property in service. Free h & r block filing This deduction is known as the “section 179 deduction. Free h & r block filing ” For more information about depreciation and the section 179 deduction, see Publication 946, How To Depreciate Property. Free h & r block filing Depreciation must be taken in the year it is allowable. Free h & r block filing Allowable depreciation not taken in a prior year cannot be taken in the current year. Free h & r block filing If you do not deduct the correct depreciation, you may be able to make a correction by filing Form 1040X, Amended U. Free h & r block filing S. Free h & r block filing Individual Income Tax Return, or by changing your accounting method. Free h & r block filing For more information on how to correct depreciation deductions, see chapter 1 in Publication 946. Free h & r block filing Business Use of Your Home To deduct expenses related to the business use of part of your home, you must meet specific requirements. Free h & r block filing Even then, your deduction may be limited. Free h & r block filing To qualify to claim expenses for business use of your home, you must meet both the following tests. Free h & r block filing Your use of the business part of your home must be: Exclusive (however, see Exceptions to exclusive use, later), Regular, For your trade or business, AND The business part of your home must be one of the following: Your principal place of business (defined later), A place where you meet or deal with patients, clients, or customers in the normal course of your trade or business, or A separate structure (not attached to your home) you use in connection with your trade or business. Free h & r block filing Exclusive use. Free h & r block filing   To qualify under the exclusive use test, you must use a specific area of your home only for your trade or business. Free h & r block filing The area used for business can be a room or other separately identifiable space. Free h & r block filing The space does not need to be marked off by a permanent partition. Free h & r block filing   You do not meet the requirements of the exclusive use test if you use the area in question both for business and for personal purposes. Free h & r block filing Exceptions to exclusive use. Free h & r block filing   You do not have to meet the exclusive use test if either of the following applies. Free h & r block filing You use part of your home for the storage of inventory or product samples. Free h & r block filing You use part of your home as a daycare facility. Free h & r block filing For an explanation of these exceptions, see Publication 587, Business Use of Your Home (Including Use by Daycare Providers). Free h & r block filing Principal place of business. Free h & r block filing   Your home office will qualify as your principal place of business for deducting expenses for its use if you meet the following requirements. Free h & r block filing You use it exclusively and regularly for administrative or management activities of your trade or business. Free h & r block filing You have no other fixed location where you conduct substantial administrative or management activities of your trade or business. Free h & r block filing   Alternatively, if you use your home exclusively and regularly for your business, but your home office does not qualify as your principal place of business based on the previous rules, you determine your principal place of business based on the following factors. Free h & r block filing The relative importance of the activities performed at each location. Free h & r block filing If the relative importance factor does not determine your principal place of business, the time spent at each location. Free h & r block filing    If, after considering your business locations, your home cannot be identified as your principal place of business, you cannot deduct home office expenses. Free h & r block filing However, for other ways to qualify to deduct home office expenses, see Publication 587. Free h & r block filing Which form do I file?   If you file Schedule C (Form 1040), use Form 8829, Expenses for Business Use of Your Home, to figure your deduction. Free h & r block filing If you file Schedule F (Form 1040) or you are a partner, you can use the worksheet in Publication 587. Free h & r block filing More information. Free h & r block filing   For more information about business use of your home, see Publication 587. Free h & r block filing Car and Truck Expenses If you use your car or truck in your business, you can deduct the costs of operating and maintaining it. Free h & r block filing You generally can deduct either your actual expenses or the standard mileage rate. Free h & r block filing Actual expenses. Free h & r block filing   If you deduct actual expenses, you can deduct the cost of the following items: Depreciation Lease payments Registration Garage rent Licenses Repairs Gas Oil Tires Insurance Parking fees Tolls   If you use your vehicle for both business and personal purposes, you must divide your expenses between business and personal use. Free h & r block filing You can divide your expenses based on the miles driven for each purpose. Free h & r block filing Example. Free h & r block filing You are the sole proprietor of a flower shop. Free h & r block filing You drove your van 20,000 miles during the year. Free h & r block filing 16,000 miles were for delivering flowers to customers and 4,000 miles were for personal use. Free h & r block filing You can claim only 80% (16,000 ÷ 20,000) of the cost of operating your van as a business expense. Free h & r block filing Standard mileage rate. Free h & r block filing   Instead of figuring actual expenses, you may be able to use the standard mileage rate to figure the deductible costs of operating your car, van, pickup, or panel truck for business purposes. Free h & r block filing You can use the standard mileage rate for a vehicle you own or lease. Free h & r block filing The standard mileage rate is a specified amount of money you can deduct for each business mile you drive. Free h & r block filing It is announced annually by the IRS. Free h & r block filing To figure your deduction, multiply your business miles by the standard mileage rate for the year. Free h & r block filing    Generally, if you use the standard mileage rate, you cannot deduct your actual expenses. Free h & r block filing However, you may be able to deduct business-related parking fees, tolls, interest on your car loan, and certain state and local taxes. Free h & r block filing Choosing the standard mileage rate. Free h & r block filing   If you want to use the standard mileage rate for a car you own, you must choose to use it in the first year the car is available for use in your business. Free h & r block filing In later years, you can choose to use either the standard mileage rate or actual expenses. Free h & r block filing   If you use the standard mileage rate for a car you lease, you must choose to use it for the entire lease period (including renewals). Free h & r block filing Additional information. Free h & r block filing   For more information about the rules for claiming car and truck expenses, see Publication 463, Travel, Entertainment, Gift, and Car Expenses. Free h & r block filing Recordkeeping This part explains why you must keep records, what kinds of records you must keep, and how to keep them. Free h & r block filing It also explains how long you must keep your records for federal tax purposes. Free h & r block filing A sample recordkeeping system is illustrated at the end of this part. Free h & r block filing Why Keep Records? Everyone in business must keep records. Free h & r block filing Good records will help you do the following. Free h & r block filing Monitor the progress of your business. Free h & r block filing   You need good records to monitor the progress of your business. Free h & r block filing Records can show whether your business is improving, which items are selling, or what changes you need to make. Free h & r block filing Good records can increase the likelihood of business success. Free h & r block filing Prepare your financial statements. Free h & r block filing   You need good records to prepare accurate financial statements. Free h & r block filing These include income (profit and loss) statements and balance sheets. Free h & r block filing These statements can help you in dealing with your bank or creditors and help you manage your business. Free h & r block filing An income statement shows the income and expenses of the business for a given period of time. Free h & r block filing A balance sheet shows the assets, liabilities, and your equity in the business on a given date. Free h & r block filing Identify source of receipts. Free h & r block filing   You will receive money or property from many sources. Free h & r block filing Your records can identify the source of your receipts. Free h & r block filing You need this information to separate business from nonbusiness receipts and taxable from nontaxable income. Free h & r block filing Keep track of deductible expenses. Free h & r block filing   You may forget expenses when you prepare your tax return unless you record them when they occur. Free h & r block filing Prepare your tax returns. Free h & r block filing   You need good records to prepare your tax returns. Free h & r block filing These records must support the income, expenses, and credits you report. Free h & r block filing Generally, these are the same records you use to monitor your business and prepare your financial statements. Free h & r block filing Support items reported on tax returns. Free h & r block filing   You must keep your business records available at all times for inspection by the IRS. Free h & r block filing If the IRS examines any of your tax returns, you may be asked to explain the items reported. Free h & r block filing A complete set of records will speed up the examination. Free h & r block filing Kinds of Records To Keep Except in a few cases, the law does not require any specific kind of records. Free h & r block filing You can choose any recordkeeping system suited to your business that clearly shows your income and expenses. Free h & r block filing The business you are in affects the type of records you need to keep for federal tax purposes. Free h & r block filing You should set up your recordkeeping system using an accounting method that clearly shows your income for your tax year. Free h & r block filing See Accounting Method, earlier. Free h & r block filing If you are in more than one business, you should keep a complete and separate set of records for each business. Free h & r block filing A corporation should keep minutes of board of directors' meetings. Free h & r block filing Your recordkeeping system should include a summary of your business transactions. Free h & r block filing This summary is ordinarily made in your books (for example, accounting journals and ledgers). Free h & r block filing Your books must show your gross income, as well as your deductions and credits. Free h & r block filing For most small businesses, the business checkbook (discussed later) is the main source for entries in the business books. Free h & r block filing In addition, you must keep supporting documents, explained later. Free h & r block filing Electronic records. Free h & r block filing   All requirements that apply to hard copy books and records also apply to electronic storage systems that maintain tax books and records. Free h & r block filing When you replace hard copy books and records, you must maintain the electronic storage systems for as long as they are material to the administration of tax law. Free h & r block filing An electronic storage system is any system for preparing or keeping your records either by electronic imaging or by transfer to an electronic storage media. Free h & r block filing The electronic storage system must index, store, preserve, retrieve and reproduce the electronically stored books and records in legible format. Free h & r block filing All electronic storage systems must provide a complete and accurate record of your data that is accessible to the IRS. Free h & r block filing Electronic storage systems are also subject to the same controls and retention guidelines as those imposed on your original hard copy books and records. Free h & r block filing   The original hard copy books and records may be destroyed provided that the electronic storage system has been tested to establish that the hard copy books and records are being reproduced in compliance with IRS requirements for an electronic storage system and procedures are established to ensure continued compliance with all applicable rules and regulations. Free h & r block filing You still have the responsibility of retaining any other books and records that are required to be retained. Free h & r block filing   The IRS may test your electronic storage system, including the equipment used, indexing methodology, software and retrieval capabilities. Free h & r block filing This test is not considered an examination and the results must be shared with you. Free h & r block filing If your electronic storage system meets the requirements mentioned earlier, you will be in compliance. Free h & r block filing If not, you may be subject to penalties for non-compliance, unless you continue to maintain your original hard copy books and records in a manner that allows you and the IRS to determine your correct tax. Free h & r block filing For details on electronic storage system requirements, see Revenue Procedure 97-22, available in Internal Revenue Bulletin 1997-13. Free h & r block filing Supporting Documents Purchases, sales, payroll, and other transactions you have in your business generate supporting documents. Free h & r block filing Supporting documents include sales slips, paid bills, invoices, receipts, deposit slips, and canceled checks. Free h & r block filing These documents contain information you need to record in your books. Free h & r block filing It is important to keep these documents because they support the entries in your books and on your tax return. Free h & r block filing Keep them in an orderly fashion and in a safe place. Free h & r block filing For instance, organize them by year and type of income or expense. Free h & r block filing Gross receipts. Free h & r block filing   Gross receipts are the income you receive from your business. Free h & r block filing You should keep supporting documents that show the amounts and sources of your gross receipts. Free h & r block filing Documents that show gross receipts include the following. Free h & r block filing Cash register tapes. Free h & r block filing Bank deposit slips. Free h & r block filing Receipt books. Free h & r block filing Invoices. Free h & r block filing Credit card charge slips. Free h & r block filing Forms 1099-MISC. Free h & r block filing Purchases. Free h & r block filing   Purchases are the items you buy and resell to customers. Free h & r block filing If you are a manufacturer or producer, this includes the cost of all raw materials or parts purchased for manufacture into finished products. Free h & r block filing Your supporting documents should show the amount paid and that the amount was for purchases. Free h & r block filing Documents for purchases include the following. Free h & r block filing Canceled checks. Free h & r block filing Cash register tape receipts. Free h & r block filing Credit card sales slips. Free h & r block filing Invoices. Free h & r block filing These records will help you determine the value of your inventory at the end of the year. Free h & r block filing See Publication 538 for information on methods for valuing inventory. Free h & r block filing Expenses. Free h & r block filing   Expenses are the costs you incur (other than purchases) to carry on your business. Free h & r block filing Your supporting documents should show the amount paid and that the amount was for a business expense. Free h & r block filing Documents for expenses include the following. Free h & r block filing Canceled checks. Free h & r block filing Cash register tapes. Free h & r block filing Account statements. Free h & r block filing Credit card sales slips. Free h & r block filing Invoices. Free h & r block filing Petty cash slips for small cash payments. Free h & r block filing    A petty cash fund allows you to make small payments without having to write checks for small amounts. Free h & r block filing Each time you make a payment from this fund, you should make out a petty cash slip and attach it to your receipt as proof of payment. Free h & r block filing Travel, transportation, entertainment, and gift expenses. Free h & r block filing   Specific recordkeeping rules apply to these expenses. Free h & r block filing For more information, see Publication 463. Free h & r block filing Employment taxes. Free h & r block filing   There are specific employment tax records you must keep. Free h & r block filing For a list, see Publication 15. Free h & r block filing Assets. Free h & r block filing   Assets are the property, such as machinery and furniture you own and use in your business. Free h & r block filing You must keep records to verify certain information about your business assets. Free h & r block filing You need records to figure the annual depreciation and the gain or loss when you sell the assets. Free h & r block filing Your records should show the following information. Free h & r block filing When and how you acquired the asset. Free h & r block filing Purchase price. Free h & r block filing Cost of any improvements. Free h & r block filing Section 179 deduction taken. Free h & r block filing Deductions taken for depreciation. Free h & r block filing Deductions taken for casualty losses, such as losses resulting from fires or storms. Free h & r block filing How you used the asset. Free h & r block filing When and how you disposed of the asset. Free h & r block filing Selling price. Free h & r block filing Expenses of sale. Free h & r block filing   The following documents may show this information. Free h & r block filing Purchase and sales invoices. Free h & r block filing Real estate closing statements. Free h & r block filing Canceled checks. Free h & r block filing What if I don't have a canceled check?   If you do not have a canceled check, you may be able to prove payment with certain financial account statements prepared by financial institutions. Free h & r block filing These include account statements prepared for the financial institution by a third party. Free h & r block filing These account statements must be highly legible. Free h & r block filing The following table lists acceptable account statements. Free h & r block filing  IF payment is by. Free h & r block filing . Free h & r block filing . Free h & r block filing THEN the statement must show the. Free h & r block filing . Free h & r block filing . Free h & r block filing Check Check number. Free h & r block filing Amount. Free h & r block filing Payee's name. Free h & r block filing Date the check amount was posted to the account by the financial institution. Free h & r block filing Electronic funds transfer Amount transferred. Free h & r block filing Payee's name. Free h & r block filing Date the transfer was posted to the account by the financial institution. Free h & r block filing Credit card Amount charged. Free h & r block filing Payee's name. Free h & r block filing Transaction date. Free h & r block filing    Proof of payment of an amount, by itself, does not establish you are entitled to a tax deduction. Free h & r block filing You should also keep other documents, such as credit card sales slips and invoices, to show that you also incurred the cost. Free h & r block filing Recording Business Transactions A good recordkeeping system includes a summary of your business transactions. Free h & r block filing (Your business transactions are shown on the supporting documents just discussed. Free h & r block filing ) Business transactions are ordinarily summarized in books called journals and ledgers. Free h & r block filing You can buy them at your local stationery or office supply store. Free h & r block filing A journal is a book where you record each business transaction shown on your supporting documents. Free h & r block filing You may have to keep separate journals for transactions that occur frequently. Free h & r block filing A ledger is a book that contains the totals from all of your journals. Free h & r block filing It is organized into different accounts. Free h & r block filing Whether you keep journals and ledgers and how you keep them depends on the type of business you are in. Free h & r block filing For example, a recordkeeping system for a small business might include the following items. Free h & r block filing Business checkbook. Free h & r block filing Daily summary of cash receipts. Free h & r block filing Monthly summary of cash receipts. Free h & r block filing Check disbursements journal. Free h & r block filing Depreciation worksheet. Free h & r block filing Employee compensation record. Free h & r block filing The business checkbook is explained next. Free h & r block filing The other items are illustrated later under Sample Record System. Free h & r block filing The system you use to record business transactions will be more effective if you follow good recordkeeping practices. Free h & r block filing For example, record expenses when they occur, and identify the source of recorded receipts. Free h & r block filing Generally, it is best to record transactions on a daily basis. Free h & r block filing Business checkbook. Free h & r block filing   One of the first things you should do when you start a business is open a business checking account. Free h & r block filing You should keep your business account separate from your personal checking account. Free h & r block filing   The business checkbook is your basic source of information for recording your business expenses. Free h & r block filing You should deposit all daily receipts in your business checking account. Free h & r block filing You should check your account for errors by reconciling it. Free h & r block filing See Reconciling the checking account, later. Free h & r block filing   Consider using a checkbook that allows enough space to identify the source of deposits as business income, personal funds, or loans. Free h & r block filing You should also note on the deposit slip the source of the deposit and keep copies of all slips. Free h & r block filing   You should make all payments by check to document business expenses. Free h & r block filing Write checks payable to yourself only when making withdrawals from your business for personal use. Free h & r block filing Avoid writing checks payable to cash. Free h & r block filing If you must write a check for cash to pay a business expense, include the receipt for the cash payment in your records. Free h & r block filing If you cannot get a receipt for a cash payment, you should make an adequate explanation in your records at the time of payment. Free h & r block filing    Use the business account for business purposes only. Free h & r block filing Indicate the source of deposits and the type of expense in the checkbook. Free h & r block filing Reconciling the checking account. Free h & r block filing   When you receive your bank statement, make sure the statement, your checkbook, and your books agree. Free h & r block filing The statement balance may not agree with the balance in your checkbook and books if the statement: Includes bank charges you did not enter in your books and subtract from your checkbook balance, or Does not include deposits made after the statement date or checks that did not clear your account before the statement date. Free h & r block filing   By reconciling your checking account, you will: Verify how much money you have in the account, Make sure that your checkbook and books reflect all bank charges and the correct balance in the checking account, and Correct any errors in your bank statement, checkbook, and books. Free h & r block filing    You should reconcile your checking account each month. Free h & r block filing     Before you reconcile your monthly bank statement, check your own figures. Free h & r block filing Begin with the balance shown in your checkbook at the end of the previous month. Free h & r block filing To this balance, add the total cash deposited during the month and subtract the total cash disbursements. Free h & r block filing   After checking your figures, the result should agree with your checkbook balance at the end of the month. Free h & r block filing If the result does not agree, you may have made an error in recording a check or deposit. Free h & r block filing You can find the error by doing the following. Free h & r block filing Adding the amounts on your check stubs and comparing that total with the total in the “amount of check” column in your check disbursements journal. Free h & r block filing If the totals do not agree, check the individual amounts to see if an error was made in your check stub record or in the related entry in your check disbursements journal. Free h & r block filing Adding the deposit amounts in your checkbook. Free h & r block filing Compare that total with the monthly total in your cash receipt book, if you have one. Free h & r block filing If the totals do not agree, check the individual amounts to find any errors. Free h & r block filing   If your checkbook and journal entries still disagree, then refigure the running balance in your checkbook to make sure additions and subtractions are correct. Free h & r block filing   When your checkbook balance agrees with the balance figured from the journal entries, you may begin reconciling your checkbook with the bank statement. Free h & r block filing Many banks print a reconciliation worksheet on the back of the statement. Free h & r block filing   To reconcile your account, follow these steps. Free h & r block filing Compare the deposits listed on the bank statement with the deposits shown in your checkbook. Free h & r block filing Note all differences in the dollar amounts. Free h & r block filing Compare each canceled check, including both check number and dollar amount, with the entry in your checkbook. Free h & r block filing Note all differences in the dollar amounts. Free h & r block filing Mark the check number in the checkbook as having cleared the bank. Free h & r block filing After accounting for all checks returned by the bank, those not marked in your checkbook are your outstanding checks. Free h & r block filing Prepare a bank reconciliation. Free h & r block filing One is illustrated later under Sample Record System. Free h & r block filing Update your checkbook and journals for items shown on the reconciliation as not recorded (such as service charges) or recorded incorrectly. Free h & r block filing At this point, the adjusted bank statement balance should equal your adjusted checkbook balance. Free h & r block filing If you still have differences, check the previous steps to find the errors. Free h & r block filing   Table 3. Free h & r block filing Period of Limitations IF you. Free h & r block filing . Free h & r block filing . Free h & r block filing   THEN the period is. Free h & r block filing . Free h & r block filing . Free h & r block filing 1. Free h & r block filing Owe additional tax and situations (2), (3), and (4), below, do not apply to you   3 years 2. Free h & r block filing Do not report income that you should report and it is more than 25% of the gross income shown on the return   6 years 3. Free h & r block filing File a fraudulent return   Not limited 4. Free h & r block filing Do not file a return   Not limited 5. Free h & r block filing File a claim for credit or refund after you filed your return   Later of: 3 years or  2 years after tax   was paid 6. Free h & r block filing File a claim for a loss from worthless securities or a bad debt deduction   7 years Bookkeeping System You must decide whether to use a single-entry or a double-entry bookkeeping system. Free h & r block filing The single-entry system of bookkeeping is the simplest to maintain, but it may not be suitable for everyone. Free h & r block filing You may find the double-entry system better because it has built-in checks and balances to assure accuracy and control. Free h & r block filing Single-entry. Free h & r block filing   A single-entry system is based on the income statement (profit or loss statement). Free h & r block filing It can be a simple and practical system if you are starting a small business. Free h & r block filing The system records the flow of income and expenses through the use of: A daily summary of cash receipts, and Monthly summaries of cash receipts and disbursements. Free h & r block filing Double-entry. Free h & r block filing   A double-entry bookkeeping system uses journals and ledgers. Free h & r block filing Transactions are first entered in a journal and then posted to ledger accounts. Free h & r block filing These accounts show income, expenses, assets (property a business owns), liabilities (debts of a business), and net worth (excess of assets over liabilities). Free h & r block filing You close income and expense accounts at the end of each tax year. Free h & r block filing You keep asset, liability, and net worth accounts open on a permanent basis. Free h & r block filing   In the double-entry system, each account has a left side for debits and a right side for credits. Free h & r block filing It is self-balancing because you record every transaction as a debit entry in one account and as a credit entry in another. Free h & r block filing   Under this system, the total debits must equal the total credits after you post the journal entries to the ledger accounts. Free h & r block filing If the amounts do not balance, you have made an error and you must find and correct it. Free h & r block filing   An example of a journal entry exhibiting a payment of rent in October is shown next. Free h & r block filing General Journal Date Description of Entry Debit  Credit Oct. Free h & r block filing 5 Rent expense 780. Free h & r block filing 00     Cash   780. Free h & r block filing 00                 Computerized System There are computer software packages you can use for recordkeeping. Free h & r block filing They can be purchased in many retail stores. Free h & r block filing These packages are very helpful and relatively easy to use; they require very little knowledge of bookkeeping and accounting. Free h & r block filing If you use a computerized system, you must be able to produce sufficient legible records to support and verify entries made on your return and determine your correct tax liability. Free h & r block filing To meet this qualification, the machine-sensible records must reconcile with your books and return. Free h & r block filing These records must provide enough detail to identify the underlying source documents. Free h & r block filing You must also keep all machine-sensible records and a complete description of the computerized portion of your recordkeeping system. Free h & r block filing This documentation must be sufficiently detailed to show all of the following items. Free h & r block filing Functions being performed as the data flows through the system. Free h & r block filing Controls used to ensure accurate and reliable processing. Free h & r block filing Controls used to prevent the unauthorized addition, alteration, or deletion of retained records. Free h & r block filing Charts of accounts and detailed account descriptions. Free h & r block filing See Revenue Procedure 98-25 in Cumulative Bulletin 1998-1 for more information. Free h & r block filing How Long To Keep Records You must keep your records as long as they may be needed for the administration of any provision of the Internal Revenue Code. Free h & r block filing Generally, this means you must keep records that support an item of income or deduction on a return until the period of limitations for that return runs out. Free h & r block filing The period of limitations is the period of time in which you can amend your return to claim a credit or refund, or the IRS can assess additional tax. Free h & r block filing Table 3 contains the periods of limitations that apply to income tax returns. Free h & r block filing Unless otherwise stated, the years refer to the period after the return was filed. Free h & r block filing Returns filed before the due date are treated as filed on the due date. Free h & r block filing Keep copies of your filed tax returns. Free h & r block filing They help in preparing future tax returns and making computations if you file an amended return. Free h & r block filing Employment taxes. Free h & r block filing   If you have employees, you must keep all employment tax records for at least 4 years after the date the tax becomes due or is paid, whichever is later. Free h & r block filing For more information about recordkeeping for employment taxes, see Publication 15. Free h & r block filing Assets. Free h & r block filing   Keep records relating to property until the period of limitations expires for the year in which you dispose of the property in a taxable disposition. Free h & r block filing You must keep these records to figure any depreciation, amortization, or depletion deduction, and to figure your basis for computing gain or loss when you sell or otherwise dispose of the property. Free h & r block filing   Generally, if you received property in a nontaxable exchange, your basis in that property is the same as the basis of the property you gave up, increased by any money you paid. Free h & r block filing You must keep the records on the old property, as well as on the new property, until the period of limitations expires for the year in which you dispose of the new property in a taxable disposition. Free h & r block filing Records for nontax purposes. Free h & r block filing   When your records are no longer needed for tax purposes, do not discard them until you check to see if you have to keep them longer for other purposes. Free h & r block filing For example, your insurance company or creditors may require you to keep them longer than the IRS does. Free h & r block filing Sample Record System This example illustrates a single-entry system used by Henry Brown, who is the sole proprietor of a small automobile body shop. Free h & r block filing Henry uses part-time help, has no inventory of items held for sale, and uses the cash method of accounting. Free h & r block filing These sample records should not be viewed as a recommendation of how to keep your records. Free h & r block filing They are intended only to show how one business keeps its records. Free h & r block filing 1. Free h & r block filing Daily Summary of Cash Receipts This summary is a record of cash sales for the day. Free h & r block filing It accounts for cash at the end of the day over the amount in the Change and Petty Cash Fund at the beginning of the day. Free h & r block filing Henry takes the cash sales entry from his cash register tape. Free h & r block filing If he had no cash register, he would simply total his cash sale slips and any other cash received that day. Free h & r block filing He carries the total receipts shown in this summary for January 3 ($267. Free h & r block filing 80), including cash sales ($263. Free h & r block filing 60) and sales tax ($4. Free h & r block filing 20), to the Monthly Summary of Cash Receipts. Free h & r block filing Petty cash fund. Free h & r block filing   Henry uses a petty cash fund to make small payments without having to write checks for small amounts. Free h & r block filing Each time he makes a payment from this fund, he makes out a petty cash slip and attaches it to his receipt as proof of payment. Free h & r block filing He sets up a fixed amount ($50) in his petty cash fund. Free h & r block filing The total of the unspent petty cash and the amounts on the petty cash slips should equal the fixed amount of the fund. Free h & r block filing When the totals on the petty cash slips approach the fixed amount, he brings the cash in the fund back to the fixed amount by writing a check to “Petty Cash” for the total of the outstanding slips. Free h & r block filing (See the Check Disbursements Journal entry for check number 92. Free h & r block filing ) This restores the fund to its fixed amount of $50. Free h & r block filing He then summarizes the slips and enters them in the proper columns in the monthly check disbursements journal. Free h & r block filing 2. Free h & r block filing Monthly Summary of Cash Receipts This shows the income activity for the month. Free h & r block filing Henry carries the total monthly net sales shown in this summary for January ($4,865. Free h & r block filing 05) to his Annual Summary. Free h & r block filing To figure total monthly net sales, Henry reduces the total monthly receipts by the sales tax imposed on his customers and turned over to the state. Free h & r block filing He cannot take a deduction for sales tax turned over to the state because he only collected the tax. Free h & r block filing He does not include the tax in his income. Free h & r block filing 3. Free h & r block filing Check Disbursements Journal Henry enters checks drawn on the business checking account in the Check Disbursements Journal each day. Free h & r block filing All checks are prenumbered and each check number is listed and accounted for in the column provided in the journal. Free h & r block filing Frequent expenses have their own headings across the sheet. Free h & r block filing He enters in a separate column expenses that require comparatively numerous or large payments each month, such as materials, gross payroll, and rent. Free h & r block filing Under the General Accounts column, he enters small expenses that normally have only one or two monthly payments, such as licenses and postage. Free h & r block filing Henry does not pay personal or nonbusiness expenses by checks drawn on the business account. Free h & r block filing If he did, he would record them in the journal, even though he could not deduct them as business expenses. Free h & r block filing Henry carries the January total of expenses for materials ($1,083. Free h & r block filing 50) to the Annual Summary. Free h & r block filing Similarly, he enters the monthly total of expenses for telephone, truck/auto, etc. Free h & r block filing , in the appropriate columns of that summary. Free h & r block filing 4. Free h & r block filing Employee Compensation Record This record shows the following information. Free h & r block filing The number of hours Henry's employee worked in a pay period. Free h & r block filing The employee's total pay for the period. Free h & r block filing The deductions Henry withheld in figuring the employee's net pay. Free h & r block filing The monthly gross payroll. Free h & r block filing Henry carries the January gross payroll ($520) to the Annual Summary. Free h & r block filing 5. Free h & r block filing Annual Summary This annual summary of monthly cash receipts and expense totals provides the final amounts to enter on Henry's tax return. Free h & r block filing He figures the cash receipts total from the total of monthly cash receipts shown in the Monthly Summary of Cash Receipts. Free h & r block filing He figures the expense totals from the totals of monthly expense items shown in the Check Disbursements Journal. Free h & r block filing As in the journal, he keeps each major expense in a separate column. Free h & r block filing Henry carries the cash receipts total shown in the annual summary ($47,440. Free h & r block filing 9
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Tax Code, Regulations and Official Guidance

Internal Revenue Code |   Treasury (Tax) Regulations    |    Other Official Guidance

Internal Revenue Code

Federal tax law begins with the Internal Revenue Code (IRC), enacted by Congress in Title 26 of the United States Code (26 U.S.C.).

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Note: The IRC materials retrieved via the above functions are provided as a public service by The Legal Information Institute of Cornell University Law School, not the IRS.

CAUTION.  The version of the IRC underlying the retrieval functions presented above is generated from the official version of the U.S. Code made available to the public by Congress.  However, this version is only current through the 1st Session of the 112th Congress convened in 2011.  Before relying on an IRC section retrieved from this or any other publicly accessible version of the U.S. Code, please check the U.S. Code Classification Tables  published by the U.S. House of Representatives to verify that there have been no amendments since that session of Congress.

Finally, the IRC is complex and its sections must be read in the context of the entire Code and the court decisions that interpret it.  At a minimum, please do not be misled by the false interpretations of the IRC promoted by the purveyors of anti-tax law evasion schemes.

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Treasury (Tax) Regulations

Treasury regulations (26 C.F.R.)--commonly referred to as Federal tax regulations-- pick up where the Internal Revenue Code (IRC) leaves off by providing the official interpretation of the IRC by the U.S. Department of the Treasury.

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The IRS publishes a list of the official documents explaining any changes to the Treasury regulations retrieved from the above resources, or to announce the issuance of any proposed or temporary ones:

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Other Official Tax Guidance

In addition to participating in the promulgation of Treasury (Tax) Regulations, the IRS publishes a regular series of other forms of official tax guidance, including revenue rulings, revenue procedures, notices, and announcements. See Understanding IRS Guidance - A Brief Primer  for more information about official IRS guidance versus non-precedential rulings or advice.

The authoritative instrument for the distribution of all forms of official IRS tax guidance is the Internal Revenue Bulletin (IRB), a weekly collection of these and other items of general interest to the tax professional community.

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Note: The IRB materials retrieved from the above resources are provided by IRS Media and Publications.

The IRS frequently releases individual items in advance of their publication in the IRB.  See the Advance Notice for Tax Professionals page for more information about the "early drop" of these items.  And if you'd like to receive automated email notifications about these items, please feel free to subscribe to our IRS GuideWire service.

Finally, see the Applicable Federal Rates (AFR) page for a series of revenue rulings providing certain prescribed rates for federal income tax purposes.  These AFR revenue rulings are always released before they are officially published in the IRB.

PLEASE NOTERulings and procedures reported in the IRB do not have the force and effect of Treasury tax regulations, but they may be used as precedents. In contrast, any documents not published in the IRB cannot be relied on, used, or cited as precedents in the disposition of other cases.

In applying rulings and procedures published in the IRB, the effect of subsequent legislation, regulations, court decisions, rulings, and procedures must be considered.  In addition, all parties are cautioned against reaching the same conclusions in other cases unless the facts and circumstances are substantially the same.

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Page Last Reviewed or Updated: 24-Feb-2014

The Free H & R Block Filing

Free h & r block filing Publication 504 - Main Content Table of Contents Filing StatusUnmarried persons. Free h & r block filing Married persons. Free h & r block filing Same-sex marriage. Free h & r block filing Exception. Free h & r block filing Married Filing Jointly Married Filing Separately Head of Household ExemptionsPersonal Exemptions Exemptions for Dependents Phaseout of Exemptions AlimonyInvalid decree. Free h & r block filing Amended instrument. Free h & r block filing General Rules Instruments Executed After 1984 Instruments Executed Before 1985 Qualified Domestic Relations OrderRollovers. Free h & r block filing Individual Retirement Arrangements Property SettlementsTransfer Between Spouses Gift Tax on Property Settlements Sale of Jointly-Owned Property Costs of Getting a Divorce Tax Withholding and Estimated Tax Community PropertyCommunity Income Alimony (Community Income) How To Get Tax Help Filing Status Your filing status is used in determining whether you must file a return, your standard deduction, and the correct tax. Free h & r block filing It may also be used in determining whether you can claim certain other deductions and credits. Free h & r block filing The filing status you can choose depends partly on your marital status on the last day of your tax year. Free h & r block filing Marital status. Free h & r block filing   If you are unmarried, your filing status is single or, if you meet certain requirements, head of household or qualifying widow(er). Free h & r block filing If you are married, your filing status is either married filing a joint return or married filing a separate return. Free h & r block filing For information about the single and qualifying widow(er) filing statuses, see Publication 501. Free h & r block filing Unmarried persons. Free h & r block filing   You are unmarried for the whole year if either of the following applies. Free h & r block filing You have obtained a final decree of divorce or separate maintenance by the last day of your tax year. Free h & r block filing You must follow your state law to determine if you are divorced or legally separated. Free h & r block filing Exception. Free h & r block filing If you and your spouse obtain a divorce in one year for the sole purpose of filing tax returns as unmarried individuals, and at the time of divorce you intend to remarry each other and do so in the next tax year, you and your spouse must file as married individuals. Free h & r block filing You have obtained a decree of annulment, which holds that no valid marriage ever existed. Free h & r block filing You must file amended returns (Form 1040X, Amended U. Free h & r block filing S. Free h & r block filing Individual Income Tax Return) for all tax years affected by the annulment that are not closed by the statute of limitations. Free h & r block filing The statute of limitations generally does not end until 3 years (including extensions) after the date you file your original return or within 2 years after the date you pay the tax. Free h & r block filing On the amended return you will change your filing status to single or, if you meet certain requirements, head of household. Free h & r block filing Married persons. Free h & r block filing   You are married for the whole year if you are separated but you have not obtained a final decree of divorce or separate maintenance by the last day of your tax year. Free h & r block filing An interlocutory decree is not a final decree. Free h & r block filing Same-sex marriage. Free h & r block filing   For federal tax purposes, individuals of the same sex are considered married if they were lawfully married in a state (or foreign country) whose laws authorize the marriage of two individuals of the same sex, even if the state (or foreign country) in which they now live does not recognize same-sex marriage. Free h & r block filing The term "spouse" includes an individual married to a person of the same sex if the couple is lawfully married under state (or foreign) law. Free h & r block filing However, individuals who have entered into a registered domestic partnership, civil union, or other similar relationship that is not considered a marriage under state (or foreign) law are not considered married for federal tax purposes. Free h & r block filing For more details, see Publication 501. Free h & r block filing Exception. Free h & r block filing   If you live apart from your spouse, under certain circumstances, you may be considered unmarried and can file as head of household. Free h & r block filing See Head of Household , later. Free h & r block filing Married Filing Jointly If you are married, you and your spouse can choose to file a joint return. Free h & r block filing If you file jointly, you both must include all your income, exemptions, deductions, and credits on that return. Free h & r block filing You can file a joint return even if one of you had no income or deductions. Free h & r block filing If both you and your spouse have income, you should usually figure your tax on both a joint return and separate returns (using the filing status of married filing separately) to see which gives the two of you the lower combined tax. Free h & r block filing Nonresident alien. Free h & r block filing   To file a joint return, at least one of you must be a U. Free h & r block filing S. Free h & r block filing citizen or resident alien at the end of the tax year. Free h & r block filing If either of you was a nonresident alien at any time during the tax year, you can file a joint return only if you agree to treat the nonresident spouse as a resident of the United States. Free h & r block filing This means that your combined worldwide incomes are subject to U. Free h & r block filing S. Free h & r block filing income tax. Free h & r block filing These rules are explained in Publication 519, U. Free h & r block filing S. Free h & r block filing Tax Guide for Aliens. Free h & r block filing Signing a joint return. Free h & r block filing   Both you and your spouse generally must sign the return, or it will not be considered a joint return. Free h & r block filing Joint and individual liability. Free h & r block filing   Both you and your spouse may be held responsible, jointly and individually, for the tax and any interest or penalty due on your joint return. Free h & r block filing This means that one spouse may be held liable for all the tax due even if all the income was earned by the other spouse. Free h & r block filing Divorced taxpayers. Free h & r block filing   If you are divorced, you are jointly and individually responsible for any tax, interest, and penalties due on a joint return for a tax year ending before your divorce. Free h & r block filing This responsibility applies even if your divorce decree states that your former spouse will be responsible for any amounts due on previously filed joint returns. Free h & r block filing Relief from joint liability. Free h & r block filing   In some cases, a spouse may be relieved of the tax, interest, and penalties on a joint return. Free h & r block filing You can ask for relief no matter how small the liability. Free h & r block filing   There are three types of relief available. Free h & r block filing Innocent spouse relief. Free h & r block filing Separation of liability, which applies to joint filers who are divorced, widowed, legally separated, or who have not lived together for the 12 months ending on the date election of this relief is filed. Free h & r block filing Equitable relief. Free h & r block filing   Married persons who live in community property states, but who did not file joint returns, may also qualify for relief from liability arising from community property law or for equitable relief. Free h & r block filing See Relief from liability arising from community property law , later, under Community Property. Free h & r block filing    Each kind of relief has different requirements. Free h & r block filing You must file Form 8857 to request relief under any of these categories. Free h & r block filing Publication 971 explains these kinds of relief and who may qualify for them. Free h & r block filing You can also find information on our website at IRS. Free h & r block filing gov. Free h & r block filing Tax refund applied to spouse's debts. Free h & r block filing   The overpayment shown on your joint return may be used to pay the past-due amount of your spouse's debts. Free h & r block filing This includes your spouse's federal tax, state income tax, child or spousal support payments, or a federal nontax debt, such as a student loan. Free h & r block filing You can get a refund of your share of the overpayment if you qualify as an injured spouse. Free h & r block filing Injured spouse. Free h & r block filing   You are an injured spouse if you file a joint return and all or part of your share of the overpayment was, or is expected to be, applied against your spouse's past-due debts. Free h & r block filing An injured spouse can get a refund for his or her share of the overpayment that would otherwise be used to pay the past-due amount. Free h & r block filing   To be considered an injured spouse, you must: Have made and reported tax payments (such as federal income tax withheld from wages or estimated tax payments), or claimed a refundable tax credit, such as the earned income credit or additional child tax credit on the joint return, and Not be legally obligated to pay the past-due amount. Free h & r block filing Note. Free h & r block filing If the injured spouse's permanent home is in a community property state, then the injured spouse must only meet (2). Free h & r block filing For more information, see Publication 555. Free h & r block filing    Refunds that involve community property states must be divided according to local law. Free h & r block filing If you live in a community property state in which all community property is subject to the debts of either spouse, your entire refund is generally used to pay those debts. Free h & r block filing   If you are an injured spouse, you must file Form 8379 to have your portion of the overpayment refunded to you. Free h & r block filing Follow the instructions for the form. Free h & r block filing   If you have not filed your joint return and you know that your joint refund will be offset, file Form 8379 with your return. Free h & r block filing You should receive your refund within 14 weeks from the date the paper return is filed or within 11 weeks from the date the return is filed electronically. Free h & r block filing   If you filed your joint return and your joint refund was offset, file Form 8379 by itself. Free h & r block filing When filed after offset, it can take up to 8 weeks to receive your refund. Free h & r block filing Do not attach the previously filed tax return, but do include copies of all Forms W-2, Wage and Tax Statement, and W-2G, Certain Gambling Winnings, for both spouses and any Forms 1099 that show income tax withheld. Free h & r block filing    An injured spouse claim is different from an innocent spouse relief request. Free h & r block filing An injured spouse uses Form 8379 to request an allocation of the tax overpayment attributed to each spouse. Free h & r block filing An innocent spouse uses Form 8857 to request relief from joint liability for tax, interest, and penalties on a joint return for items of the other spouse (or former spouse) that were incorrectly reported on or omitted from the joint return. Free h & r block filing For information on innocent spouses, see Relief from joint liability, earlier. Free h & r block filing Married Filing Separately If you and your spouse file separate returns, you should each report only your own income, exemptions, deductions, and credits on your individual return. Free h & r block filing You can file a separate return even if only one of you had income. Free h & r block filing For information on exemptions you can claim on your separate return, see Exemptions , later. Free h & r block filing Community or separate income. Free h & r block filing   If you live in a community property state and file a separate return, your income may be separate income or community income for income tax purposes. Free h & r block filing For more information, see Community Income under Community Property, later. Free h & r block filing Separate liability. Free h & r block filing   If you and your spouse file separately, you each are responsible only for the tax due on your own return. Free h & r block filing Itemized deductions. Free h & r block filing   If you and your spouse file separate returns and one of you itemizes deductions, the other spouse cannot use the standard deduction and should also itemize deductions. Free h & r block filing Table 1. Free h & r block filing Itemized Deductions on Separate Returns This table shows itemized deductions you can claim on your married filing separate return whether you paid the expenses separately with your own funds or jointly with your spouse. Free h & r block filing  Caution: If you live in a community property state, these rules do not apply. Free h & r block filing See Community Property. Free h & r block filing IF you paid . Free h & r block filing . Free h & r block filing . Free h & r block filing AND you . Free h & r block filing . Free h & r block filing . Free h & r block filing THEN you can deduct on your separate federal return. Free h & r block filing . Free h & r block filing . Free h & r block filing   medical expenses   paid with funds deposited in a joint checking account in which you and your spouse have an equal interest     half of the total medical expenses, subject to certain limits, unless you can show that you alone paid the expenses. Free h & r block filing     state income tax   file a separate state income tax return     the state income tax you alone paid during the year. Free h & r block filing         file a joint state income tax return and you and your spouse are jointly and individually liable for the full amount of the state income tax     the state income tax you alone paid during the year. Free h & r block filing         file a joint state income tax return and you  are liable for only your own share of state  income tax     the smaller of: the state income tax you alone paid during the year, or the total state income tax you and your spouse paid during the year multiplied by the following fraction. Free h & r block filing The numerator is your gross income and the denominator  is your combined gross income. Free h & r block filing     property tax   paid the tax on property held as tenants by the entirety     the property tax you alone paid. Free h & r block filing     mortgage interest   paid the interest on a qualified home1 held  as tenants by the entirety     the mortgage interest you alone paid. Free h & r block filing     casualty loss   have a casualty loss on a home you own  as tenants by the entirety     half of the loss, subject to the deduction limits. Free h & r block filing Neither spouse may report the total casualty loss. Free h & r block filing 1 For more information on a qualified home and deductible mortgage interest, see Publication 936, Home Mortgage Interest Deduction. Free h & r block filing Dividing itemized deductions. Free h & r block filing   You may be able to claim itemized deductions on a separate return for certain expenses that you paid separately or jointly with your spouse. Free h & r block filing See Table 1, later. Free h & r block filing Separate returns may give you a higher tax. Free h & r block filing   Some married couples file separate returns because each wants to be responsible only for his or her own tax. Free h & r block filing There is no joint liability. Free h & r block filing But in almost all instances, if you file separate returns, you will pay more combined federal tax than you would with a joint return. Free h & r block filing This is because the following special rules apply if you file a separate return. Free h & r block filing Your tax rate generally will be higher than it would be on a joint return. Free h & r block filing Your exemption amount for figuring the alternative minimum tax will be half of that allowed a joint return filer. Free h & r block filing You cannot take the credit for child and dependent care expenses in most cases. Free h & r block filing You cannot take the earned income credit. Free h & r block filing You cannot take the exclusion or credit for adoption expenses in most cases. Free h & r block filing You cannot take the credit for higher education expenses (American opportunity and lifetime learning credits), the deduction for student loan interest, or the tuition and fees deduction. Free h & r block filing You cannot exclude the interest from qualified savings bonds that you used for higher education expenses. Free h & r block filing If you lived with your spouse at any time during the tax year: You cannot claim the credit for the elderly or the disabled, and You will have to include in income more (up to 85%) of any social security or equivalent railroad retirement benefits you received. Free h & r block filing Your income limits that reduce the child tax credit, the retirement savings contributions credit, itemized deductions, and the deduction for personal exemptions are half of the limits for a joint return filer. Free h & r block filing Your capital loss deduction limit is $1,500 (instead of $3,000 on a joint return). Free h & r block filing Your basic standard deduction, if allowable, is half of that allowed a joint return filer. Free h & r block filing See Itemized deductions , earlier. Free h & r block filing Joint return after separate returns. Free h & r block filing   If either you or your spouse (or both of you) file a separate return, you generally can change to a joint return within 3 years from the due date (not including extensions) of the separate return or returns. Free h & r block filing This applies to a return either of you filed claiming married filing separately, single, or head of household filing status. Free h & r block filing Use Form 1040X to change your filing status. Free h & r block filing Separate returns after joint return. Free h & r block filing   After the due date of your return, you and your spouse cannot file separate returns if you previously filed a joint return. Free h & r block filing Exception. Free h & r block filing   A personal representative for a decedent can change from a joint return elected by the surviving spouse to a separate return for the decedent. Free h & r block filing The personal representative has 1 year from the due date (including extensions) of the joint return to make the change. Free h & r block filing Head of Household Filing as head of household has the following advantages. Free h & r block filing You can claim the standard deduction even if your spouse files a separate return and itemizes deductions. Free h & r block filing Your standard deduction is higher than is allowed if you claim a filing status of single or married filing separately. Free h & r block filing Your tax rate usually will be lower than it is if you claim a filing status of single or married filing separately. Free h & r block filing You may be able to claim certain credits (such as the dependent care credit and the earned income credit) you cannot claim if your filing status is married filing separately. Free h & r block filing Income limits that reduce your child tax credit, retirement savings contributions credit, itemized deductions, and the deduction for personal exemptions are higher than the income limits if you claim a filing status of married filing separately. Free h & r block filing Requirements. Free h & r block filing   You may be able to file as head of household if you meet all the following requirements. Free h & r block filing You are unmarried or “considered unmarried” on the last day of the year. Free h & r block filing You paid more than half the cost of keeping up a home for the year. Free h & r block filing A “qualifying person” lived with you in the home for more than half the year (except for temporary absences, such as school). Free h & r block filing However, if the “qualifying person” is your dependent parent, he or she does not have to live with you. Free h & r block filing See Special rule for parent , later, under Qualifying person. Free h & r block filing Considered unmarried. Free h & r block filing   You are considered unmarried on the last day of the tax year if you meet all the following tests. Free h & r block filing You file a separate return. Free h & r block filing A separate return includes a return claiming married filing separately, single, or head of household filing status. Free h & r block filing You paid more than half the cost of keeping up your home for the tax year. Free h & r block filing Your spouse did not live in your home during the last 6 months of the tax year. Free h & r block filing Your spouse is considered to live in your home even if he or she is temporarily absent due to special circumstances. Free h & r block filing See Temporary absences , later. Free h & r block filing Your home was the main home of your child, stepchild, or foster child for more than half the year. Free h & r block filing (See Qualifying person , later, for rules applying to a child's birth, death, or temporary absence during the year. Free h & r block filing ) You must be able to claim an exemption for the child. Free h & r block filing However, you meet this test if you cannot claim the exemption only because the noncustodial parent can claim the child using the rule described later in Special rule for divorced or separated parents (or parents who live apart) under Exemptions for Dependents. Free h & r block filing The general rules for claiming an exemption for a dependent are shown later in Table 3. Free h & r block filing    If you were considered married for part of the year and lived in a community property state (one of the states listed later under Community Property), special rules may apply in determining your income and expenses. Free h & r block filing See Publication 555 for more information. Free h & r block filing Nonresident alien spouse. Free h & r block filing   If your spouse was a nonresident alien at any time during the tax year, and you have not chosen to treat your spouse as a resident alien, you are considered unmarried for head of household purposes. Free h & r block filing However, your spouse is not a qualifying person for head of household purposes. Free h & r block filing You must have another qualifying person and meet the other requirements to file as head of household. Free h & r block filing Keeping up a home. Free h & r block filing   You are keeping up a home only if you pay more than half the cost of its upkeep for the year. Free h & r block filing This includes rent, mortgage interest, real estate taxes, insurance on the home, repairs, utilities, and food eaten in the home. Free h & r block filing This does not include the cost of clothing, education, medical treatment, vacations, life insurance, or transportation for any member of the household. Free h & r block filing Qualifying person. Free h & r block filing    Table 2, later, shows who can be a qualifying person. Free h & r block filing Any person not described in Table 2 is not a qualifying person. Free h & r block filing   Generally, the qualifying person must live with you for more than half of the year. Free h & r block filing Table 2. Free h & r block filing Who Is a Qualifying Person Qualifying You To File as Head of Household?1 Caution. Free h & r block filing See the text of this publication for the other requirements you must meet to claim head of household filing status. Free h & r block filing IF the person is your . Free h & r block filing . Free h & r block filing . Free h & r block filing AND . Free h & r block filing . Free h & r block filing . Free h & r block filing THEN that person is . Free h & r block filing . Free h & r block filing . Free h & r block filing   qualifying child (such as a son, daughter, or grandchild who lived with you more than half the year and meets certain other tests)2 he or she is single a qualifying person, whether or not you can claim an exemption for the person. Free h & r block filing     he or she is married and you can claim an exemption for him or her a qualifying person. Free h & r block filing     he or she is married and you cannot claim an exemption for him or her not a qualifying person. Free h & r block filing 3     qualifying relative4 who is your father or mother you can claim an exemption for him or her5 a qualifying person. Free h & r block filing 6     you cannot claim an exemption for him or her not a qualifying person. Free h & r block filing     qualifying relative4 other than your father or mother (such as a grandparent, brother, or sister who meets certain tests) he or she lived with you more than half the year, and he or she is related to you in one of the ways listed under Relatives who do not have to live with you in Publication 501 and you can claim an exemption for him or her5 a qualifying person. Free h & r block filing     he or she did not live with you more than half the year not a qualifying person. Free h & r block filing     he or she is not related to you in one of the ways listed under Relatives who do not have to live with you in Publication 501 and is your qualifying relative only because he or she lived with you all year as a member of your household not a qualifying person. Free h & r block filing     you cannot claim an exemption for him or her not a qualifying person. Free h & r block filing   1 A person cannot qualify more than one taxpayer to use the head of household filing status for the year. Free h & r block filing 2 See Table 3, later, for the tests that must be met to be a qualifying child. Free h & r block filing Note. Free h & r block filing If you are a noncustodial parent, the term “qualifying child” for head of household filing status does not include a child who is your qualifying child for exemption purposes only because of the rules described under Children of Divorced or Separated Parents (or Parents Who Live Apart) under Exemptions for Dependents, later. Free h & r block filing If you are the custodial parent and those rules apply, the child is generally your qualifying child for head of household filing status even though the child is not a qualifying child for whom you can claim an exemption. Free h & r block filing 3 This person is a qualifying person if the only reason you cannot claim the exemption is that you can be claimed as a dependent on someone else's return. Free h & r block filing 4 See Table 3, later, for the tests that must be met to be a qualifying relative. Free h & r block filing 5 If you can claim an exemption for a person only because of a multiple support agreement, that person is not a qualifying person. Free h & r block filing See Multiple Support Agreement in Publication 501. Free h & r block filing 6 See Special rule for parent . Free h & r block filing Special rule for parent. Free h & r block filing   If your qualifying person is your father or mother, you may be eligible to file as head of household even if your father or mother does not live with you. Free h & r block filing However, you must be able to claim an exemption for your father or mother. Free h & r block filing Also, you must pay more than half the cost of keeping up a home that was the main home for the entire year for your father or mother. Free h & r block filing You are keeping up a main home for your father or mother if you pay more than half the cost of keeping your parent in a rest home or home for the elderly. Free h & r block filing Death or birth. Free h & r block filing   If the person for whom you kept up a home was born or died in 2013, you still may be able to file as head of household. Free h & r block filing If the person is your qualifying child, the child must have lived with you for more than half the part of the year he or she was alive. Free h & r block filing If the person is anyone else, see Publication 501. Free h & r block filing Temporary absences. Free h & r block filing   You and your qualifying person are considered to live together even if one or both of you are temporarily absent from your home due to special circumstances such as illness, education, business, vacation, or military service. Free h & r block filing It must be reasonable to assume that the absent person will return to the home after the temporary absence. Free h & r block filing You must continue to keep up the home during the absence. Free h & r block filing Kidnapped child. Free h & r block filing   You may be eligible to file as head of household even if the child who is your qualifying person has been kidnapped. Free h & r block filing You can claim head of household filing status if all the following statements are true. Free h & r block filing The child must be presumed by law enforcement authorities to have been kidnapped by someone who is not a member of your family or the child's family. Free h & r block filing In the year of the kidnapping, the child lived with you for more than half the part of the year before the kidnapping. Free h & r block filing You would have qualified for head of household filing status if the child had not been kidnapped. Free h & r block filing   This treatment applies for all years until the earlier of: The year the child is returned, The year there is a determination that the child is dead, or The year the child would have reached age 18. Free h & r block filing More information. Free h & r block filing   For more information on filing as head of household, see Publication 501. Free h & r block filing Exemptions You can deduct $3,900 for each exemption you claim in 2013. Free h & r block filing However, if your adjusted gross income is more than $150,000, see Phaseout of Exemptions , later. Free h & r block filing There are two types of exemptions: personal exemptions and exemptions for dependents. Free h & r block filing If you are entitled to claim an exemption for a dependent (such as your child), that dependent cannot claim his or her personal exemption on his or her own tax return. Free h & r block filing Personal Exemptions You can claim your own exemption unless someone else can claim it. Free h & r block filing If you are married, you may be able to take an exemption for your spouse. Free h & r block filing These are called personal exemptions. Free h & r block filing Exemption for Your Spouse Your spouse is never considered your dependent. Free h & r block filing Joint return. Free h & r block filing   On a joint return, you can claim one exemption for yourself and one for your spouse. Free h & r block filing   If your spouse had any gross income, you can claim his or her exemption only if you file a joint return. Free h & r block filing Separate return. Free h & r block filing   If you file a separate return, you can take an exemption for your spouse only if your spouse had no gross income, is not filing a return, and was not the dependent of another taxpayer. Free h & r block filing If your spouse is the dependent of another taxpayer, you cannot claim an exemption for your spouse even if the other taxpayer does not actually claim your spouse's exemption. Free h & r block filing Alimony paid. Free h & r block filing   If you paid alimony to your spouse, you cannot take an exemption for your spouse. Free h & r block filing This is because alimony is gross income to the spouse who received it. Free h & r block filing Divorced or separated spouse. Free h & r block filing   If you obtained a final decree of divorce or separate maintenance during the year, you cannot take your former spouse's exemption. Free h & r block filing This rule applies even if you provided all of your former spouse's support. Free h & r block filing Exemptions for Dependents You are allowed one exemption for each person you can claim as a dependent. Free h & r block filing You can claim an exemption for a dependent even if your dependent files a return. Free h & r block filing The term “dependent” means: A qualifying child, or A qualifying relative. Free h & r block filing Table 3 shows the tests that must be met to be either a qualifying child or qualifying relative, plus the additional requirements for claiming an exemption for a dependent. Free h & r block filing For detailed information, see Publication 501. Free h & r block filing   Dependent not allowed a personal exemption. Free h & r block filing If you can claim an exemption for your dependent, the dependent cannot claim his or her own exemption on his or her own tax return. Free h & r block filing This is true even if you do not claim the dependent's exemption on your return. Free h & r block filing It is also true if the decedent's exemption on your return is reduced or eliminated under the phaseout rule described under Phaseout of Exemptions, later. Free h & r block filing Table 3. Free h & r block filing Overview of the Rules for Claiming an Exemption for a Dependent Caution. Free h & r block filing This table is only an overview of the rules. Free h & r block filing For details, see Publication 501. Free h & r block filing • You cannot claim any dependents if you, or your spouse if filing jointly, could be claimed as a dependent by another taxpayer. Free h & r block filing • You cannot claim a married person who files a joint return as a dependent unless that joint return is only a claim for refund and there would be no tax liability for either spouse on separate returns. Free h & r block filing • You cannot claim a person as a dependent unless that person is a U. Free h & r block filing S. Free h & r block filing citizen, U. Free h & r block filing S. Free h & r block filing resident alien, U. Free h & r block filing S. Free h & r block filing national, or a resident of Canada or Mexico. Free h & r block filing 1 • You cannot claim a person as a dependent unless that person is your qualifying child or qualifying relative. Free h & r block filing   Tests To Be a Qualifying Child   Tests To Be a Qualifying Relative 1. Free h & r block filing     2. Free h & r block filing       3. Free h & r block filing    4. Free h & r block filing    5. Free h & r block filing    The child must be your son, daughter, stepchild, foster child, brother, sister, half brother, half sister, stepbrother, stepsister, or a descendant of any of them. Free h & r block filing   The child must be (a) under age 19 at the end of the year and younger than you (or your spouse if filing jointly), (b) under age 24 at the end of the year, a student, and younger than you (or your spouse if filing jointly), or (c) any age if permanently and totally disabled. Free h & r block filing   The child must have lived with you for more than half of the year. Free h & r block filing 2   The child must not have provided more than half of his or her own support for the year. Free h & r block filing   The child is not filing a joint return for the year (unless that joint return is filed only as a claim for refund of withheld income tax or estimated tax paid). Free h & r block filing   1. Free h & r block filing    2. Free h & r block filing       3. Free h & r block filing    4. Free h & r block filing The person cannot be your qualifying child or the qualifying child of anyone else. Free h & r block filing   The person either (a) must be related to you in one of the ways listed under Relatives who do not have to live with you in Publication 501 or (b) must live with you all year as a member of your household 2 (and your relationship must not violate local law). Free h & r block filing   The person's gross income for the year must be less than $3,900. Free h & r block filing 3   You must provide more than half of the person's total support for the year. Free h & r block filing 4 If the child meets the rules to be a qualifying child of more than one person, only one person can actually treat the child as a qualifying child. Free h & r block filing See Special Rule for Qualifying Child of More Than One Person , later, to find out which person is the person entitled to claim the child as a qualifying child. Free h & r block filing     1 Exception exists for certain adopted children. Free h & r block filing 2 Exceptions exist for temporary absences, children who were born or died during the year, children of divorced or separated parents (or parents who live apart), and kidnapped children. Free h & r block filing 3 Exception exists for persons who are disabled and have income from a sheltered workshop. Free h & r block filing 4 Exceptions exist for multiple support agreements, children of divorced or separated parents (or parents who live apart), and kidnapped children. Free h & r block filing See Publication 501. Free h & r block filing You may be entitled to a child tax credit for each qualifying child who was under age 17 at the end of the year if you claimed an exemption for that child. Free h & r block filing For more information, see the instructions for your tax return if you file Form 1040A or 1040. Free h & r block filing Children of Divorced or Separated Parents (or Parents Who Live Apart) In most cases, because of the residency test (see item 3 under Tests To Be a Qualifying Child in Table 3), a child of divorced or separated parents is the qualifying child of the custodial parent. Free h & r block filing However, the child will be treated as the qualifying child of the noncustodial parent if the special rule (discussed next) applies. Free h & r block filing Special rule for divorced or separated parents (or parents who live apart). Free h & r block filing   A child will be treated as the qualifying child of his or her noncustodial parent if all four of the following statements are true. Free h & r block filing The parents: Are divorced or legally separated under a decree of divorce or separate maintenance, Are separated under a written separation agreement, or Lived apart at all times during the last 6 months of the year, whether or not they are or were married. Free h & r block filing The child received over half of his or her support for the year from the parents. Free h & r block filing The child is in the custody of one or both parents for more than half of the year. Free h & r block filing Either of the following applies. Free h & r block filing The custodial parent signs a written declaration, discussed later, that he or she will not claim the child as a dependent for the year, and the noncustodial parent attaches this written declaration to his or her return. Free h & r block filing (If the decree or agreement went into effect after 1984, see Divorce decree or separation agreement that went into effect after 1984 and before 2009 , later. Free h & r block filing A pre-1985 decree of divorce or separate maintenance or written separation agreement that applies to 2013 states that the noncustodial parent can claim the child as a dependent, the decree or agreement was not changed after 1984 to say the noncustodial parent cannot claim the child as a dependent, and the noncustodial parent provides at least $600 for the child's support during 2013. Free h & r block filing See Child support under pre-1985 agreement , later. Free h & r block filing Custodial parent and noncustodial parent. Free h & r block filing   The custodial parent is the parent with whom the child lived for the greater number of nights during the year. Free h & r block filing The other parent is the noncustodial parent. Free h & r block filing   If the parents divorced or separated during the year and the child lived with both parents before the separation, the custodial parent is the one with whom the child lived for the greater number of nights during the rest of the year. Free h & r block filing   A child is treated as living with a parent for a night if the child sleeps: At that parent's home, whether or not the parent is present, or In the company of the parent, when the child does not sleep at a parent's home (for example, the parent and child are on vacation together). Free h & r block filing Equal number of nights. Free h & r block filing   If the child lived with each parent for an equal number of nights during the year, the custodial parent is the parent with the higher adjusted gross income. Free h & r block filing December 31. Free h & r block filing   The night of December 31 is treated as part of the year in which it begins. Free h & r block filing For example, December 31, 2013, is treated as part of 2013. Free h & r block filing Emancipated child. Free h & r block filing   If a child is emancipated under state law, the child is treated as not living with either parent. Free h & r block filing See Examples 5 and 6 . Free h & r block filing Absences. Free h & r block filing    If a child was not with either parent on a particular night (because, for example, the child was staying at a friend's house), the child is treated as living with the parent with whom the child normally would have lived for that night, except for the absence. Free h & r block filing But if it cannot be determined with which parent the child normally would have lived or if the child would not have lived with either parent that night, the child is treated as not living with either parent that night. Free h & r block filing Parent works at night. Free h & r block filing   If, due to a parent's nighttime work schedule, a child lives for a greater number of days but not nights with the parent who works at night, that parent is treated as the custodial parent. Free h & r block filing On a school day, the child is treated as living at the primary residence registered with the school. Free h & r block filing Example 1 – child lived with one parent greater number of nights. Free h & r block filing You and your child’s other parent are divorced. Free h & r block filing In 2013, your child lived with you 210 nights and with the other parent 156 nights. Free h & r block filing You are the custodial parent. Free h & r block filing Example 2 – child is away at camp. Free h & r block filing In 2013, your daughter lives with each parent for alternate weeks. Free h & r block filing In the summer, she spends 6 weeks at summer camp. Free h & r block filing During the time she is at camp, she is treated as living with you for 3 weeks and with her other parent, your ex-spouse, for 3 weeks because this is how long she would have lived with each parent if she had not attended summer camp. Free h & r block filing Example 3 – child lived same number of days with each parent. Free h & r block filing Your son lived with you 180 nights during the year and lived the same number of nights with his other parent, your ex-spouse. Free h & r block filing Your adjusted gross income is $40,000. Free h & r block filing Your ex-spouse's adjusted gross income is $25,000. Free h & r block filing You are treated as your son's custodial parent because you have the higher adjusted gross income. Free h & r block filing Example 4 – child is at parent’s home but with other parent. Free h & r block filing Your son normally lives with you during the week and with his other parent, your ex-spouse, every other weekend. Free h & r block filing You become ill and are hospitalized. Free h & r block filing The other parent lives in your home with your son for 10 consecutive days while you are in the hospital. Free h & r block filing Your son is treated as living with you during this 10-day period because he was living in your home. Free h & r block filing Example 5 – child emancipated in May. Free h & r block filing When your son turned age 18 in May 2013, he became emancipated under the law of the state where he lives. Free h & r block filing As a result, he is not considered in the custody of his parents for more than half of the year. Free h & r block filing The special rule for children of divorced or separated parents (or parents who live apart) does not apply. Free h & r block filing Example 6 – child emancipated in August. Free h & r block filing Your daughter lives with you from January 1, 2013, until May 31, 2013, and lives with her other parent, your ex-spouse, from June 1, 2013, through the end of the year. Free h & r block filing She turns 18 and is emancipated under state law on August 1, 2013. Free h & r block filing Because she is treated as not living with either parent beginning on August 1, she is treated as living with you the greater number of nights in 2013. Free h & r block filing You are the custodial parent. Free h & r block filing Written declaration. Free h & r block filing    The custodial parent must use either Form 8332 or a similar statement (containing the same information required by the form) to make the written declaration to release the exemption to the noncustodial parent. Free h & r block filing The noncustodial parent must attach a copy of the form or statement to his or her tax return. Free h & r block filing   The exemption can be released for 1 year, for a number of specified years (for example, alternate years), or for all future years, as specified in the declaration. Free h & r block filing Divorce decree or separation agreement that went into effect after 1984 and before 2009. Free h & r block filing   If the divorce decree or separation agreement went into effect after 1984 and before 2009, the noncustodial parent may be able to attach certain pages from the decree or agreement instead of Form 8332. Free h & r block filing To be able to do this, the decree or agreement must state all three of the following. Free h & r block filing The noncustodial parent can claim the child as a dependent without regard to any condition, such as payment of support. Free h & r block filing The custodial parent will not claim the child as a dependent for the year. Free h & r block filing The years for which the noncustodial parent, rather than the custodial parent, can claim the child as a dependent. Free h & r block filing   The noncustodial parent must attach all of the following pages of the decree or agreement to his or her return. Free h & r block filing The cover page (write the other parent's social security number on this page). Free h & r block filing The pages that include all of the information identified in items (1) through (3) above. Free h & r block filing The signature page with the other parent's signature and the date of the agreement. Free h & r block filing Post-2008 divorce decree or separation agreement. Free h & r block filing   If the decree or agreement went into effect after 2008, a noncustodial parent claiming an exemption for a child cannot attach pages from a divorce decree or separation agreement instead of Form 8332. Free h & r block filing The custodial parent must sign either a Form 8332 or a similar statement. Free h & r block filing The only purpose of this statement must be to release the custodial parent's claim to the child's exemption. Free h & r block filing The noncustodial parent must attach a copy to his or her return. Free h & r block filing The form or statement must release the custodial parent's claim to the child without any conditions. Free h & r block filing For example, the release must not depend on the noncustodial parent paying support. Free h & r block filing    The noncustodial parent must attach the required information even if it was filed with a return in an earlier year. Free h & r block filing Revocation of release of claim to an exemption. Free h & r block filing   The custodial parent can revoke a release of claim to exemption that he or she previously released to the noncustodial parent on Form 8332 or a similar statement. Free h & r block filing In order for the revocation to be effective for 2013, the custodial parent must have given (or made reasonable efforts to give) written notice of the revocation to the noncustodial parent in 2012 or earlier. Free h & r block filing The custodial parent can use Part III of Form 8332 for this purpose and must attach a copy of the revocation to his or her return for each tax year he or she claims the child as a dependent as a result of the revocation. Free h & r block filing Remarried parent. Free h & r block filing   If you remarry, the support provided by your new spouse is treated as provided by you. Free h & r block filing Child support under pre-1985 agreement. Free h & r block filing   All child support payments actually received from the noncustodial parent under a pre-1985 agreement are considered used for the support of the child, even if such amounts are not actually spent for child support. Free h & r block filing Example. Free h & r block filing Under a pre-1985 agreement, the noncustodial parent provides $1,200 for the child's support. Free h & r block filing This amount is considered support provided by the noncustodial parent even if the $1,200 was actually spent on things other than support. Free h & r block filing Parents who never married. Free h & r block filing   The special rule for divorced or separated parents also applies to parents who never married and lived apart at all times during the last 6 months of the year. Free h & r block filing Alimony. Free h & r block filing   Payments to your spouse that are includible in his or her gross income as either alimony, separate maintenance payments, or similar payments from an estate or trust, are not treated as a payment for the support of a dependent. Free h & r block filing Special Rule for Qualifying Child of More Than One Person If your qualifying child is not a qualifying child of anyone else, this special rule does not apply to you and you do not need to read about it. Free h & r block filing This is also true if your qualifying child is not a qualifying child of anyone else except your spouse with whom you file a joint return. Free h & r block filing If a child is treated as the qualifying child of the noncustodial parent under the Special rule for divorced or separated parents (or parents who live apart), earlier, see Applying this special rule to divorced or separated parents (or parents who live apart), later. Free h & r block filing Sometimes, a child meets the relationship, age, residency, support, and joint return tests to be a qualifying child of more than one person. Free h & r block filing (For a description of these tests, see list items 1 through 5 under Tests To Be a Qualifying Child in Table 3). Free h & r block filing Although the child meets the conditions to be a qualifying child of each of these persons, only one person can actually use the child as a qualifying child to take all of the following tax benefits (provided the person is eligible for each benefit). Free h & r block filing The exemption for the child. Free h & r block filing The child tax credit. Free h & r block filing Head of household filing status. Free h & r block filing The credit for child and dependent care expenses. Free h & r block filing The exclusion from income for dependent care benefits. Free h & r block filing The earned income credit. Free h & r block filing The other person cannot take any of these benefits based on this qualifying child. Free h & r block filing In other words, you and the other person cannot agree to divide these tax benefits between you. Free h & r block filing The other person cannot take any of these tax benefits unless he or she has a different qualifying child. Free h & r block filing Tiebreaker rules. Free h & r block filing   To determine which person can treat the child as a qualifying child to claim these six tax benefits, the following tiebreaker rules apply. Free h & r block filing If only one of the persons is the child's parent, the child is treated as the qualifying child of the parent. Free h & r block filing If the parents do not file a joint return together but both parents claim the child as a qualifying child, the IRS will treat the child as the qualifying child of the parent with whom the child lived for the longer period of time during the year. Free h & r block filing If the child lived with each parent for the same amount of time, the IRS will treat the child as the qualifying child of the parent who had the higher adjusted gross income (AGI) for the year. Free h & r block filing If no parent can claim the child as a qualifying child, the child is treated as the qualifying child of the person who had the highest AGI for the year. Free h & r block filing If a parent can claim the child as a qualifying child but no parent does so claim the child, the child is treated as the qualifying child of the person who had the highest AGI for the year, but only if that person's AGI is higher than the highest AGI of any of the child's parents who can claim the child. Free h & r block filing If the child's parents file a joint return with each other, this rule can be applied by dividing the parents' total AGI evenly between them; see Publication 501 for details. Free h & r block filing   Subject to these tiebreaker rules, you and the other person may be able to choose which of you claims the child as a qualifying child. Free h & r block filing Example 1—separated parents. Free h & r block filing You, your husband, and your 10-year-old son lived together until August 1, 2013, when your husband moved out of the household. Free h & r block filing In August and September, your son lived with you. Free h & r block filing For the rest of the year, your son lived with your husband, the boy's father. Free h & r block filing Your son is a qualifying child of both you and your husband because your son lived with each of you for more than half the year and because he met the relationship, age, support, and joint return tests for both of you. Free h & r block filing At the end of the year, you and your husband still were not divorced, legally separated, or separated under a written separation agreement, so the special rule for divorced or separated parents (or parents who live apart) does not apply. Free h & r block filing You and your husband will file separate returns. Free h & r block filing Your husband agrees to let you treat your son as a qualifying child. Free h & r block filing This means, if your husband does not claim your son as a qualifying child, you can claim your son as a dependent and treat him as a qualifying child for the child tax credit and exclusion for dependent care benefits, if you qualify for each of those tax benefits. Free h & r block filing However, you cannot claim head of household filing status because you and your husband did not live apart the last 6 months of the year. Free h & r block filing And, as a result of your filing status being married filing separately, you cannot claim the earned income credit or the credit for child and dependent care expenses. Free h & r block filing Example 2—separated parents claim same child. Free h & r block filing The facts are the same as in Example 1 except that you and your husband both claim your son as a qualifying child. Free h & r block filing In this case, only your husband will be allowed to treat your son as a qualifying child. Free h & r block filing This is because, during 2013, the boy lived with him longer than with you. Free h & r block filing If you claimed an exemption, the child tax credit, or the exclusion for dependent care benefits for your son, the IRS will disallow your claim to all these tax benefits, unless you have another qualifying child. Free h & r block filing In addition, because you and your husband did not live apart the last 6 months of the year, your husband cannot claim head of household filing status. Free h & r block filing And, as a result of his filing status being married filing separately, he cannot claim the earned income credit or the credit for child and dependent care expenses. Free h & r block filing Applying this special rule to divorced or separated parents (or parents who live apart). Free h & r block filing   If a child is treated as the qualifying child of the noncustodial parent under the special rule for divorced or separated parents (or parents who live apart) described earlier, only the noncustodial parent can claim an exemption and the child tax credit for the child. Free h & r block filing However, the noncustodial parent cannot claim the child as a qualifying child for head of household filing status, the credit for child and dependent care expenses, the exclusion for dependent care benefits, and the earned income credit. Free h & r block filing Only the custodial parent, if eligible, or another eligible taxpayer can claim the child as a qualifying child for those four tax benefits. Free h & r block filing If the child is the qualifying child of more than one person for those tax benefits, the tiebreaker rules determine which person can treat the child as a qualifying child. Free h & r block filing Example 1. Free h & r block filing You and your 5-year-old son lived all year with your mother, who paid the entire cost of keeping up the home. Free h & r block filing Your AGI is $10,000. Free h & r block filing Your mother's AGI is $25,000. Free h & r block filing Your son's father does not live with you or your son. Free h & r block filing Under the rules for children of divorced or separated parents (or parents who live apart), your son is treated as the qualifying child of his father, who can claim an exemption and the child tax credit for the child if he meets all the requirements to do so. Free h & r block filing Because of this, you cannot claim an exemption or the child tax credit for your son. Free h & r block filing However, your son's father cannot claim your son as a qualifying child for head of household filing status, the credit for child and dependent care expenses, the exclusion for dependent care benefits, or the earned income credit. Free h & r block filing You and your mother did not have any child care expenses or dependent care benefits, but the boy is a qualifying child of both you and your mother for head of household filing status and the earned income credit because he meets the relationship, age, residency, support, and joint return tests for both you and your mother. Free h & r block filing (Note: The support test does not apply for the earned income credit. Free h & r block filing ) However, you agree to let your mother claim your son. Free h & r block filing This means she can claim him for head of household filing status and the earned income credit if she qualifies for each and if you do not claim him as a qualifying child for the earned income credit. Free h & r block filing (You cannot claim head of household filing status because your mother paid the entire cost of keeping up the home. Free h & r block filing ) Example 2. Free h & r block filing The facts are the same as in Example 1 except that your AGI is $25,000 and your mother's AGI is $21,000. Free h & r block filing Your mother cannot claim your son as a qualifying child for any purpose because her AGI is not higher than yours. Free h & r block filing Example 3. Free h & r block filing The facts are the same as in Example 1 except that you and your mother both claim your son as a qualifying child for the earned income credit. Free h & r block filing Your mother also claims him as a qualifying child for head of household filing status. Free h & r block filing You, as the child's parent, will be the only one allowed to claim your son as a qualifying child for the earned income credit. Free h & r block filing The IRS will disallow your mother's claim to the earned income credit and head of household filing status unless she has another qualifying child. Free h & r block filing Phaseout of Exemptions The amount you can claim as a deduction for exemptions is reduced once your adjusted gross income (AGI) goes above a certain level for your filing status. Free h & r block filing These levels are as follows:    Filing Status AGI Level That Reduces Exemption Amount Married filing separately $150,000 Single 250,000 Head of household 275,000 Married filing jointly 300,000 Qualifying widow(er) 300,000 You must reduce the dollar amount of your exemptions by 2% for each $2,500, or part of $2,500 ($1,250 if you are married filing separately), that your AGI exceeds the amount shown above for your filing status. Free h & r block filing If your AGI exceeds the amount shown above by more than $122,500 ($61,250 if married filing separately), the amount of your deduction for exemptions is reduced to zero. Free h & r block filing If your AGI exceeds the level for your filing status, use the Deduction for Exemptions Worksheet found in the instructions for Form 1040 or Form 1040NR to figure the amount of your deduction for exemptions. Free h & r block filing Alimony Alimony is a payment to or for a spouse or former spouse under a divorce or separation instrument. Free h & r block filing It does not include voluntary payments that are not made under a divorce or separation instrument. Free h & r block filing Alimony is deductible by the payer and must be included in the spouse's or former spouse's income. Free h & r block filing Although this discussion is generally written for the payer of the alimony, the recipient can use the information to determine whether an amount received is alimony. Free h & r block filing To be alimony, a payment must meet certain requirements. Free h & r block filing There are some differences between the requirements that apply to payments under instruments executed after 1984 and to payments under instruments executed before 1985. Free h & r block filing The general requirements that apply to payments regardless of when the divorce or separation instrument was executed and the specific requirements that apply to post-1984 instruments (and, in certain cases, some pre-1985 instruments) are discussed in this publication. Free h & r block filing See, Instruments Executed Before 1985 , later, if you are looking for information on where to find the specific requirements that apply to pre-1985 instruments. Free h & r block filing Spouse or former spouse. Free h & r block filing   Unless otherwise stated, the term “spouse” includes former spouse. Free h & r block filing Divorce or separation instrument. Free h & r block filing   The term “divorce or separation instrument” means: A decree of divorce or separate maintenance or a written instrument incident to that decree, A written separation agreement, or A decree or any type of court order requiring a spouse to make payments for the support or maintenance of the other spouse. Free h & r block filing This includes a temporary decree, an interlocutory (not final) decree, and a decree of alimony pendente lite (while awaiting action on the final decree or agreement). Free h & r block filing Invalid decree. Free h & r block filing   Payments under a divorce decree can be alimony even if the decree's validity is in question. Free h & r block filing A divorce decree is valid for tax purposes until a court having proper jurisdiction holds it invalid. Free h & r block filing Amended instrument. Free h & r block filing   An amendment to a divorce decree may change the nature of your payments. Free h & r block filing Amendments are not ordinarily retroactive for federal tax purposes. Free h & r block filing However, a retroactive amendment to a divorce decree correcting a clerical error to reflect the original intent of the court will generally be effective retroactively for federal tax purposes. Free h & r block filing Example 1. Free h & r block filing A court order retroactively corrected a mathematical error under your divorce decree to express the original intent to spread the payments over more than 10 years. Free h & r block filing This change also is effective retroactively for federal tax purposes. Free h & r block filing Example 2. Free h & r block filing Your original divorce decree did not fix any part of the payment as child support. Free h & r block filing To reflect the true intention of the court, a court order retroactively corrected the error by designating a part of the payment as child support. Free h & r block filing The amended order is effective retroactively for federal tax purposes. Free h & r block filing Deducting alimony paid. Free h & r block filing   You can deduct alimony you paid, whether or not you itemize deductions on your return. Free h & r block filing You must file Form 1040. Free h & r block filing You cannot use Form 1040A, 1040EZ, or 1040NR. Free h & r block filing Enter the amount of alimony you paid on Form 1040, line 31a. Free h & r block filing In the space provided on line 31b, enter your spouse's social security number (SSN) or IRS individual taxpayer identification number (ITIN). Free h & r block filing If you paid alimony to more than one person, enter the SSN or ITIN of one of the recipients. Free h & r block filing Show the SSN or ITIN and amount paid to each other recipient on an attached statement. Free h & r block filing Enter your total payments on line 31a. Free h & r block filing If you do not provide your spouse's SSN or ITIN, you may have to pay a $50 penalty and your deduction may be disallowed. Free h & r block filing Reporting alimony received. Free h & r block filing   Report alimony you received as income on Form 1040, line 11, or on Schedule NEC (Form 1040NR), line 12. Free h & r block filing You cannot use Form 1040A, 1040EZ, or 1040NR-EZ. Free h & r block filing    You must give the person who paid the alimony your SSN or ITIN. Free h & r block filing If you do not, you may have to pay a $50 penalty. Free h & r block filing Withholding on nonresident aliens. Free h & r block filing   If you are a U. Free h & r block filing S. Free h & r block filing citizen or resident alien and you pay alimony to a nonresident alien spouse, you may have to withhold income tax at a rate of 30% on each payment. Free h & r block filing However, many tax treaties provide for an exemption from withholding for alimony payments. Free h & r block filing For more information, see Publication 515, Withholding of Tax on Nonresident Aliens and Foreign Entities. Free h & r block filing General Rules The following rules apply to alimony regardless of when the divorce or separation instrument was executed. Free h & r block filing Payments not alimony. Free h & r block filing   Not all payments under a divorce or separation instrument are alimony. Free h & r block filing Alimony does not include: Child support, Noncash property settlements, Payments that are your spouse's part of community income, as explained later under Community Property , Payments to keep up the payer's property, or Use of the payer's property. Free h & r block filing Example. Free h & r block filing Under your written separation agreement, your spouse lives rent-free in a home you own and you must pay the mortgage, real estate taxes, insurance, repairs, and utilities for the home. Free h & r block filing Because you own the home and the debts are yours, your payments for the mortgage, real estate taxes, insurance, and repairs are not alimony. Free h & r block filing Neither is the value of your spouse's use of the home. Free h & r block filing If they otherwise qualify, you can deduct the payments for utilities as alimony. Free h & r block filing Your spouse must report them as income. Free h & r block filing If you itemize deductions, you can deduct the real estate taxes and, if the home is a qualified home, you can also include the interest on the mortgage in figuring your deductible interest. Free h & r block filing However, if your spouse owned the home, see Example 2 under Payments to a third party, later. Free h & r block filing If you owned the home jointly with your spouse, see Table 4. Free h & r block filing For more information on a qualified home and deductible mortgage interest, see Publication 936, Home Mortgage Interest Deduction. Free h & r block filing Child support. Free h & r block filing   To determine whether a payment is child support, see the discussion under Instruments Executed After 1984 , later. Free h & r block filing If your divorce or separation agreement was executed before 1985, see the 2004 revision of Publication 504 available at www. Free h & r block filing irs. Free h & r block filing gov/formspubs. Free h & r block filing Underpayment. Free h & r block filing   If both alimony and child support payments are called for by your divorce or separation instrument, and you pay less than the total required, the payments apply first to child support and then to alimony. Free h & r block filing Example. Free h & r block filing Your divorce decree calls for you to pay your former spouse $200 a month ($2,400 ($200 x 12) a year) as child support and $150 a month ($1,800 ($150 x 12) a year) as alimony. Free h & r block filing If you pay the full amount of $4,200 ($2,400 + $1,800) during the year, you can deduct $1,800 as alimony and your former spouse must report $1,800 as alimony received. Free h & r block filing If you pay only $3,600 during the year, $2,400 is child support. Free h & r block filing You can deduct only $1,200 ($3,600 – $2,400) as alimony and your former spouse must report $1,200 as alimony received. Free h & r block filing Payments to a third party. Free h & r block filing   Cash payments, checks, or money orders to a third party on behalf of your spouse under the terms of your divorce or separation instrument can be alimony, if they otherwise qualify. Free h & r block filing These include payments for your spouse's medical expenses, housing costs (rent, utilities, etc. Free h & r block filing ), taxes, tuition, etc. Free h & r block filing The payments are treated as received by your spouse and then paid to the third party. Free h & r block filing Example 1. Free h & r block filing Under your divorce decree, you must pay your former spouse's medical and dental expenses. Free h & r block filing If the payments otherwise qualify, you can deduct them as alimony on your return. Free h & r block filing Your former spouse must report them as alimony received and can include them in figuring deductible medical expenses. Free h & r block filing Example 2. Free h & r block filing Under your separation agreement, you must pay the real estate taxes, mortgage payments, and insurance premiums on a home owned by your spouse. Free h & r block filing If they otherwise qualify, you can deduct the payments as alimony on your return, and your spouse must report them as alimony received. Free h & r block filing If itemizing deductions, your spouse can deduct the real estate taxes and, if the home is a qualified home, also include the interest on the mortgage in figuring deductible interest. Free h & r block filing However, if you owned the home, see the example under Payments not alimony , earlier. Free h & r block filing If you owned the home jointly with your spouse, see Table 4. Free h & r block filing Life insurance premiums. Free h & r block filing   Alimony includes premiums you must pay under your divorce or separation instrument for insurance on your life to the extent your spouse owns the policy. Free h & r block filing Payments for jointly-owned home. Free h & r block filing   If your divorce or separation instrument states that you must pay expenses for a home owned by you and your spouse or former spouse, some of your payments may be alimony. Free h & r block filing See Table 4. Free h & r block filing   However, if your spouse owned the home, see Example 2 under Payments to a third party, earlier. Free h & r block filing If you owned the home, see the example under Payments not alimony , earlier. Free h & r block filing Table 4. Free h & r block filing Expenses for a Jointly-Owned Home Use the table below to find how much of your payment is alimony and how much you can claim as an itemized deduction. Free h & r block filing IF you must pay all of the . Free h & r block filing . Free h & r block filing . Free h & r block filing AND your home is . Free h & r block filing . Free h & r block filing . Free h & r block filing THEN you can deduct and your spouse (or former spouse) must include as alimony . Free h & r block filing . Free h & r block filing . Free h & r block filing AND you can claim as an itemized deduction . Free h & r block filing . Free h & r block filing . Free h & r block filing   mortgage payments (principal and interest) jointly owned half of the total payments half of the interest as interest expense (if the home is a qualified home). Free h & r block filing 1   real estate taxes and home insurance held as tenants in common half of the total payments half of the real estate taxes2 and none of the home insurance. Free h & r block filing     held as tenants by the entirety or in joint tenancy none of the payments all of the real estate taxes and none of the home insurance. Free h & r block filing 1 Your spouse (or former spouse) can deduct the other half of the interest if the home is a qualified home. Free h & r block filing  2 Your spouse (or former spouse) can deduct the other half of the real estate taxes. Free h & r block filing Instruments Executed After 1984 The following rules for alimony apply to payments under divorce or separation instruments executed after 1984. Free h & r block filing Exception for instruments executed before 1985. Free h & r block filing   There are two situations where the rules for instruments executed after 1984 apply to instruments executed before 1985. Free h & r block filing A divorce or separation instrument executed before 1985 and then modified after 1984 to specify that the after-1984 rules will apply. Free h & r block filing A temporary divorce or separation instrument executed before 1985 and incorporated into, or adopted by, a final decree executed after 1984 that: Changes the amount or period of payment, or Adds or deletes any contingency or condition. Free h & r block filing   For the rules for alimony payments under pre-1985 instruments not meeting these exceptions, see the 2004 revision of Publication 504 available at www. Free h & r block filing irs. Free h & r block filing gov/formspubs. Free h & r block filing Example 1. Free h & r block filing In November 1984, you and your former spouse executed a written separation agreement. Free h & r block filing In February 1985, a decree of divorce was substituted for the written separation agreement. Free h & r block filing The decree of divorce did not change the terms for the alimony you pay your former spouse. Free h & r block filing The decree of divorce is treated as executed before 1985. Free h & r block filing Alimony payments under this decree are not subject to the rules for payments under instruments executed after 1984. Free h & r block filing Example 2. Free h & r block filing The facts are the same as in Example 1 except that the decree of divorce changed the amount of the alimony. Free h & r block filing In this example, the decree of divorce is not treated as executed before 1985. Free h & r block filing The alimony payments are subject to the rules for payments under instruments executed after 1984. Free h & r block filing Alimony Requirements A payment to or for a spouse under a divorce or separation instrument is alimony if the spouses do not file a joint return with each other and all the following requirements are met. Free h & r block filing The payment is in cash. Free h & r block filing The instrument does not designate the payment as not alimony. Free h & r block filing The spouses are not members of the same household at the time the payments are made. Free h & r block filing This requirement applies only if the spouses are legally separated under a decree of divorce or separate maintenance. Free h & r block filing There is no liability to make any payment (in cash or property) after the death of the recipient spouse. Free h & r block filing The payment is not treated as child support. Free h & r block filing Each of these requirements is discussed next. Free h & r block filing Cash payment requirement. Free h & r block filing   Only cash payments, including checks and money orders, qualify as alimony. Free h & r block filing The following do not qualify as alimony. Free h & r block filing Transfers of services or property (including a debt instrument of a third party or an annuity contract). Free h & r block filing Execution of a debt instrument by the payer. Free h & r block filing The use of the payer's property. Free h & r block filing Payments to a third party. Free h & r block filing   Cash payments to a third party under the terms of your divorce or separation instrument can qualify as cash payments to your spouse. Free h & r block filing See Payments to a third party under General Rules, earlier. Free h & r block filing   Also, cash payments made to a third party at the written request of your spouse may qualify as alimony if all the following requirements are met. Free h & r block filing The payments are in lieu of payments of alimony directly to your spouse. Free h & r block filing The written request states that both spouses intend the payments to be treated as alimony. Free h & r block filing You receive the written request from your spouse before you file your return for the year you made the payments. Free h & r block filing Payments designated as not alimony. Free h & r block filing   You and your spouse can designate that otherwise qualifying payments are not alimony. Free h & r block filing You do this by including a provision in your divorce or separation instrument that states the payments are not deductible as alimony by you and are excludable from your spouse's income. Free h & r block filing For this purpose, any instrument (written statement) signed by both of you that makes this designation and that refers to a previous written separation agreement is treated as a written separation agreement (and therefore a divorce or separation instrument). Free h & r block filing If you are subject to temporary support orders, the designation must be made in the original or a later temporary support order. Free h & r block filing   Your spouse can exclude the payments from income only if he or she attaches a copy of the instrument designating them as not alimony to his or her return. Free h & r block filing The copy must be attached each year the designation applies. Free h & r block filing Spouses cannot be members of the same household. Free h & r block filing   Payments to your spouse while you are members of the same household are not alimony if you are legally separated under a decree of divorce or separate maintenance. Free h & r block filing A home you formerly shared is considered one household, even if you physically separate yourselves in the home. Free h & r block filing   You are not treated as members of the same household if one of you is preparing to leave the household and does leave no later than 1 month after the date of the payment. Free h & r block filing Exception. Free h & r block filing   If you are not legally separated under a decree of divorce or separate maintenance, a payment under a written separation agreement, support decree, or other court order may qualify as alimony even if you are members of the same household when the payment is made. Free h & r block filing Liability for payments after death of recipient spouse. Free h & r block filing   If any part of payments you make must continue to be made for any period after your spouse's death, that part of your payments is not alimony whether made before or after the death. Free h & r block filing If all of the payments would continue, then none of the payments made before or after the death are alimony. Free h & r block filing   The divorce or separation instrument does not have to expressly state that the payments cease upon the