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Free State Tax Return Forms

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Free State Tax Return Forms

Free state tax return forms 3. Free state tax return forms   Farm Income Table of Contents Introduction Topics - This chapter discusses: Useful Items - You may want to see: Schedule F (Form 1040) Sales of Farm ProductsSchedule F. Free state tax return forms Form 4797. Free state tax return forms Sales Caused by Weather-Related Conditions Rents (Including Crop Shares)Crop Shares Agricultural Program PaymentsCommodity Credit Corporation (CCC) Loans Conservation Reserve Program (CRP) Crop Insurance and Crop Disaster Payments Feed Assistance and Payments Cost-Sharing Exclusion (Improvements) Payments Under the Farm Security and Rural Investment Act of 2002 and Under the Food, Conservation, and Energy Act of 2008 Tobacco Quota Buyout Program Payments Other Payments Payment to More Than One Person Income From CooperativesPatronage Dividends Per-Unit Retain Certificates Cancellation of DebtGeneral Rule Exceptions Exclusions Income From Other SourcesSod. Free state tax return forms Granting the right to remove deposits. Free state tax return forms Income Averaging for FarmersElected Farm Income (EFI) How To Figure the Tax Effect on Other Tax Determinations Tax for Certain Children Who Have Unearned Income Alternative Minimum Tax (AMT) Schedule J Introduction You may receive income from many sources. Free state tax return forms You must report the income from all the different sources on your tax return, unless it is excluded by law. Free state tax return forms Where you report the income on your tax return depends on its source. Free state tax return forms This chapter discusses farm income you report on Schedule F (Form 1040), Profit or Loss From Farming. Free state tax return forms For information on where to report other income, see the Instructions for Form 1040, U. Free state tax return forms S. Free state tax return forms Individual Income Tax Return. Free state tax return forms Accounting method. Free state tax return forms   The rules discussed in this chapter assume you use the cash method of accounting. Free state tax return forms Under the cash method, you generally include an item of income in gross income in the year you receive it. Free state tax return forms See Cash Method in chapter 2. Free state tax return forms   If you use an accrual method of accounting, different rules may apply to your situation. Free state tax return forms See Accrual Method in chapter 2. Free state tax return forms Topics - This chapter discusses: Schedule F Sales of farm products Rents (including crop shares) Agricultural program payments Income from cooperatives Cancellation of debt Income from other sources Income averaging for farmers Useful Items - You may want to see: Publication 525 Taxable and Nontaxable Income 550 Investment Income and Expenses 908 Bankruptcy Tax Guide 925 Passive Activity and At-Risk Rules 4681 Canceled Debts, Foreclosures, Repossessions, and Abandonments Form (and Instructions) 982 Reduction of Tax Attributes Due to Discharge of Indebtedness Sch E (Form 1040) Supplemental Income and Loss Sch J (Form 1040) Income Averaging for Farmers and Fishermen 1099-G Certain Government Payments 1099-PATR Taxable Distributions Received From Cooperatives 4797 Sales of Business Property 4835 Farm Rental Income and Expenses See chapter 16 for information about getting publications and forms. Free state tax return forms Schedule F (Form 1040) Individuals, trusts, and partnerships report farm income on Schedule F (Form 1040), Profit or Loss From Farming. Free state tax return forms Use this schedule to figure the net profit or loss from regular farming operations. Free state tax return forms Income from farming reported on Schedule F includes amounts you receive from cultivating, operating, or managing a farm for gain or profit, either as owner or tenant. Free state tax return forms This includes income from operating a stock, dairy, poultry, fish, fruit, or truck farm and income from operating a plantation, ranch, range, or orchard. Free state tax return forms It also includes income from the sale of crop shares if you materially participate in producing the crop. Free state tax return forms See Rents (Including Crop Shares) , later. Free state tax return forms Income received from operating a nursery, which specializes in growing ornamental plants, is considered to be income from farming. Free state tax return forms Income reported on Schedule F does not include gains or losses from sales or other dispositions of the following farm assets. Free state tax return forms Land. Free state tax return forms Depreciable farm equipment. Free state tax return forms Buildings and structures. Free state tax return forms Livestock held for draft, breeding, sport, or dairy purposes. Free state tax return forms Gains and losses from most dispositions of farm assets are discussed in chapters 8 and 9. Free state tax return forms Gains and losses from casualties, thefts, and condemnations are discussed in chapter 11. Free state tax return forms Sales of Farm Products Where to report. Free state tax return forms    Table 3-1 shows where to report the sale of farm products on your tax return. Free state tax return forms Schedule F. Free state tax return forms   Amounts received from the sales of products you raised on your farm for sale (or bought for resale), such as livestock, produce, or grains, are reported on Schedule F. Free state tax return forms This includes money and the fair market value of any property or services you receive. Free state tax return forms When you sell farm products bought for resale, your profit or loss is the difference between your selling price (money plus the fair market value of any property) and your basis in the item (usually the cost). Free state tax return forms See chapter 6 for information on the basis of assets. Free state tax return forms You generally report these amounts on Schedule F for the year you receive payment. Free state tax return forms Example. Free state tax return forms In 2012, you bought 20 feeder calves for $11,000 for resale. Free state tax return forms You sold them in 2013 for $21,000. Free state tax return forms You report the $21,000 sales price on Schedule F, line 1b, subtract your $11,000 basis on line 1d, and report the resulting $10,000 profit on line 1e. Free state tax return forms Form 4797. Free state tax return forms   Sales of livestock held for draft, breeding, sport, or dairy purposes may result in ordinary or capital gains or losses, depending on the circumstances. Free state tax return forms In either case, you should always report these sales on Form 4797 instead of Schedule F. Free state tax return forms See Livestock under Ordinary or Capital Gain or Loss in chapter 8. Free state tax return forms Animals you do not hold primarily for sale are considered business assets of your farm. Free state tax return forms Table 3-1. Free state tax return forms Where To Report Sales of Farm Products Item Sold Schedule F Form 4797 Farm products raised for sale X   Farm products bought for resale X   Farm assets not held primarily for sale, such as livestock held for draft, breeding, sport, or dairy purposes (bought or raised)   X Sale by agent. Free state tax return forms   If your agent sells your farm products, you have constructive receipt of the income when your agent receives payment and you must include the net proceeds from the sale in gross income for the year the agent receives payment. Free state tax return forms This applies even if your agent pays you in a later year. Free state tax return forms For a discussion on constructive receipt of income, see Cash Method under Accounting Methods in chapter 2. Free state tax return forms Sales Caused by Weather-Related Conditions If you sell or exchange more livestock, including poultry, than you normally would in a year because of a drought, flood, or other weather-related condition, you may be able to postpone reporting the gain from the additional animals until the next year. Free state tax return forms You must meet all the following conditions to qualify. Free state tax return forms Your principal trade or business is farming. Free state tax return forms You use the cash method of accounting. Free state tax return forms You can show that, under your usual business practices, you would not have sold or exchanged the additional animals this year except for the weather-related condition. Free state tax return forms The weather-related condition caused an area to be designated as eligible for assistance by the federal government. Free state tax return forms Sales or exchanges made before an area became eligible for federal assistance qualify if the weather-related condition that caused the sale or exchange also caused the area to be designated as eligible for federal assistance. Free state tax return forms The designation can be made by the President, the Department of Agriculture (or any of its agencies), or by other federal departments or agencies. Free state tax return forms A weather-related sale or exchange of livestock (other than poultry) held for draft, breeding, or dairy purposes may be an involuntary conversion. Free state tax return forms See Other Involuntary Conversions in chapter 11. Free state tax return forms Usual business practice. Free state tax return forms   You must determine the number of animals you would have sold had you followed your usual business practice in the absence of the weather-related condition. Free state tax return forms Do this by considering all the facts and circumstances, but do not take into account your sales in any earlier year for which you postponed the gain. Free state tax return forms If you have not yet established a usual business practice, rely on the usual business practices of similarly situated farmers in your general region. Free state tax return forms Connection with affected area. Free state tax return forms   The livestock does not have to be raised or sold in an area affected by a weather-related condition for the postponement to apply. Free state tax return forms However, the sale must occur solely because of a weather-related condition that affected the water, grazing, or other requirements of the livestock. Free state tax return forms This requirement generally will not be met if the costs of feed, water, or other requirements of the livestock affected by the weather-related condition are not substantial in relation to the total costs of holding the livestock. Free state tax return forms Classes of livestock. Free state tax return forms   You must figure the amount to be postponed separately for each generic class of animals—for example, hogs, sheep, and cattle. Free state tax return forms Do not separate animals into classes based on age, sex, or breed. Free state tax return forms Amount to be postponed. Free state tax return forms   Follow these steps to figure the amount of gain to be postponed for each class of animals. Free state tax return forms Divide the total income realized from the sale of all livestock in the class during the tax year by the total number of such livestock sold. Free state tax return forms For this purpose, do not treat any postponed gain from the previous year as income received from the sale of livestock. Free state tax return forms Multiply the result in (1) by the excess number of such livestock sold solely because of weather-related conditions. Free state tax return forms Example. Free state tax return forms You are a calendar year taxpayer and you normally sell 100 head of beef cattle a year. Free state tax return forms As a result of drought, you sold 135 head during 2012. Free state tax return forms You realized $70,200 from the sale. Free state tax return forms On August 9, 2012, as a result of drought, the affected area was declared a disaster area eligible for federal assistance. Free state tax return forms The income you can postpone until 2013 is $18,200 [($70,200 ÷ 135) × 35]. Free state tax return forms How to postpone gain. Free state tax return forms   To postpone gain, attach a statement to your tax return for the year of the sale. Free state tax return forms The statement must include your name and address and give the following information for each class of livestock for which you are postponing gain. Free state tax return forms A statement that you are postponing gain under Internal Revenue Code (IRC) section 451(e). Free state tax return forms Evidence of the weather-related conditions that forced the early sale or exchange of the livestock and the date, if known, on which an area was designated as eligible for assistance by the federal government because of weather-related conditions. Free state tax return forms A statement explaining the relationship of the area affected by the weather-related condition to your early sale or exchange of the livestock. Free state tax return forms The number of animals sold in each of the 3 preceding years. Free state tax return forms The number of animals you would have sold in the tax year had you followed your normal business practice in the absence of weather-related conditions. Free state tax return forms The total number of animals sold and the number sold because of weather-related conditions during the tax year. Free state tax return forms A computation, as described above, of the income to be postponed for each class of livestock. Free state tax return forms   Generally, you must file the statement and the return by the due date of the return, including extensions. Free state tax return forms However, for sales or exchanges treated as an involuntary conversion from weather-related sales of livestock in an area eligible for federal assistance (discussed in chapter 11), you can file this statement at any time during the replacement period. Free state tax return forms For other sales or exchanges, if you timely filed your return for the year without postponing gain, you can still postpone gain by filing an amended return within 6 months of the due date of the return (excluding extensions). Free state tax return forms Attach the statement to the amended return and write “Filed pursuant to section 301. Free state tax return forms 9100-2” at the top of the amended return. Free state tax return forms File the amended return at the same address you filed the original return. Free state tax return forms Once you have filed the statement, you can cancel your postponement of gain only with the approval of the IRS. Free state tax return forms Rents (Including Crop Shares) The rent you receive for the use of your farmland is generally rental income, not farm income. Free state tax return forms However, if you materially participate in farming operations on the land, the rent is farm income. Free state tax return forms See Landlord Participation in Farming in chapter 12. Free state tax return forms Pasture income and rental. Free state tax return forms   If you pasture someone else's livestock and take care of them for a fee, the income is from your farming business. Free state tax return forms You must enter it as Other income on Schedule F. Free state tax return forms If you simply rent your pasture for a flat cash amount without providing services, report the income as rent on Part I of Schedule E (Form 1040), Supplemental Income and Loss. Free state tax return forms Crop Shares You must include rent you receive in the form of crop shares in income in the year you convert the shares to money or the equivalent of money. Free state tax return forms It does not matter whether you use the cash method of accounting or an accrual method of accounting. Free state tax return forms If you materially participate in operating a farm from which you receive rent in the form of crop shares or livestock, the rental income is included in self-employment income. Free state tax return forms See Landlord Participation in Farming in chapter 12. Free state tax return forms Report the rental income on Schedule F. Free state tax return forms If you do not materially participate in operating the farm, report this income on Form 4835 and carry the net income or loss to Schedule E (Form 1040). Free state tax return forms The income is not included in self-employment income. Free state tax return forms Crop shares you use to feed livestock. Free state tax return forms   Crop shares you receive as a landlord and feed to your livestock are considered converted to money when fed to the livestock. Free state tax return forms You must include the fair market value of the crop shares in income at that time. Free state tax return forms You are entitled to a business expense deduction for the livestock feed in the same amount and at the same time you include the fair market value of the crop share as rental income. Free state tax return forms Although these two transactions cancel each other for figuring adjusted gross income on Form 1040, they may be necessary to figure your self-employment tax. Free state tax return forms See  chapter 12. Free state tax return forms Crop shares you give to others (gift). Free state tax return forms   Crop shares you receive as a landlord and give to others are considered converted to money when you make the gift. Free state tax return forms You must report the fair market value of the crop share as income, even though someone else receives payment for the crop share. Free state tax return forms Example. Free state tax return forms A tenant farmed part of your land under a crop-share arrangement. Free state tax return forms The tenant harvested and delivered the crop in your name to an elevator company. Free state tax return forms Before selling any of the crop, you instructed the elevator company to cancel your warehouse receipt and make out new warehouse receipts in equal amounts of the crop in the names of your children. Free state tax return forms They sell their crop shares in the following year and the elevator company makes payments directly to your children. Free state tax return forms In this situation, you are considered to have received rental income and then made a gift of that income. Free state tax return forms You must include the fair market value of the crop shares in your income for the tax year you gave the crop shares to your children. Free state tax return forms Crop share loss. Free state tax return forms   If you are involved in a rental or crop-share lease arrangement, any loss from these activities may be subject to the limits under the passive loss rules. Free state tax return forms See Publication 925 for information on these rules. Free state tax return forms Agricultural Program Payments You must include in income most government payments, such as those for approved conservation practices, direct payments, and counter-cyclical payments, whether you receive them in cash, materials, services, or commodity certificates. Free state tax return forms However, you can exclude from income some payments you receive under certain cost-sharing conservation programs. Free state tax return forms See Cost-Sharing Exclusion (Improvements) , later. Free state tax return forms Report the agricultural program payment on the appropriate line of Schedule F, Part I. Free state tax return forms Report the full amount even if you return a government check for cancellation, refund any of the payment you receive, or the government collects all or part of the payment from you by reducing the amount of some other payment or Commodity Credit Corporation (CCC) loan. Free state tax return forms However, you can deduct the amount you refund or return or that reduces some other payment or loan to you. Free state tax return forms Claim the deduction on Schedule F for the year of repayment or reduction. Free state tax return forms Commodity Credit Corporation (CCC) Loans Generally, you do not report loans you receive as income. Free state tax return forms However, if you pledge part or all of your production to secure a CCC loan, you can treat the loan as if it were a sale of the crop and report the loan proceeds as income in the year you receive them. Free state tax return forms You do not need approval from the IRS to adopt this method of reporting CCC loans. Free state tax return forms Once you report a CCC loan as income for the year received, you generally must report all CCC loans in that year and later years in the same way. Free state tax return forms However, you can obtain for your tax year an automatic consent to change your method of accounting for loans received from the CCC, from including the loan amount in gross income for the tax year in which the loan is received to treating the loan amount as a loan. Free state tax return forms For more information, see Part I of the Instructions for Form 3115 and Revenue Procedure 2008-52. Free state tax return forms Revenue Procedure 2008-52, 2008-36 I. Free state tax return forms R. Free state tax return forms B. Free state tax return forms 587, is available at  www. Free state tax return forms irs. Free state tax return forms gov/irb/2008-36_IRB/ar09. Free state tax return forms html. Free state tax return forms You can request income tax withholding from CCC loan payments you receive. Free state tax return forms Use Form W-4V, Voluntary Withholding Request. Free state tax return forms See chapter 16 for information about ordering the form. Free state tax return forms To elect to report a CCC loan as income, include the loan proceeds as income on Schedule F, line 7a, for the year you receive it. Free state tax return forms Attach a statement to your return showing the details of the loan. Free state tax return forms You must file the statement and the return by the due date of the return, including extensions. Free state tax return forms If you timely filed your return for the year without making the election, you can still make the election by filing an amended return within 6 months of the due date of the return (excluding extensions). Free state tax return forms Attach the statement to the amended return and write “Filed pursuant to section 301. Free state tax return forms 9100-2” at the top of the return. Free state tax return forms File the amended return at the same address you filed the original return. Free state tax return forms When you make this election, the amount you report as income becomes your basis in the commodity. Free state tax return forms See chapter 6 for information on the basis of assets. Free state tax return forms If you later repay the loan, redeem the pledged commodity, and sell it, you report as income at the time of sale the sale proceeds minus your basis in the commodity. Free state tax return forms If the sale proceeds are less than your basis in the commodity, you can report the difference as a loss on Schedule F. Free state tax return forms If you forfeit the pledged crops to the CCC in full payment of the loan, the forfeiture is treated for tax purposes as a sale of the crops. Free state tax return forms If you did not report the loan proceeds as income for the year you received them, you must include them in your income for the year of the forfeiture. Free state tax return forms Form 1099-A. Free state tax return forms   If you forfeit pledged crops to the CCC in full payment of a loan, you may receive a Form 1099-A, Acquisition or Abandonment of Secured Property. Free state tax return forms “CCC” should be shown in box 6. Free state tax return forms The amount of any CCC loan outstanding when you forfeited your commodity should also be indicated on the form. Free state tax return forms Market Gain Under the CCC nonrecourse marketing assistance loan program, your repayment amount for a loan secured by your pledge of an eligible commodity is generally based on the lower of the loan rate or the prevailing world market price for the commodity on the date of repayment. Free state tax return forms If you repay the loan when the world price is lower, the difference between that repayment amount and the original loan amount is market gain. Free state tax return forms Whether you use cash or CCC certificates to repay the loan, you will receive a Form 1099-G showing the market gain you realized. Free state tax return forms Market gain should be reported as follows. Free state tax return forms If you elected to include the CCC loan in income in the year you received it, do not include the market gain in income. Free state tax return forms However, adjust the basis of the commodity for the amount of the market gain. Free state tax return forms If you did not include the CCC loan in income in the year received, include the market gain in your income. Free state tax return forms The following examples show how to report market gain. Free state tax return forms Example 1. Free state tax return forms Mike Green is a cotton farmer. Free state tax return forms He uses the cash method of accounting and files his tax return on a calendar year basis. Free state tax return forms He has deducted all expenses incurred in producing the cotton and has a zero basis in the commodity. Free state tax return forms In 2012, Mike pledged 1,000 pounds of cotton as collateral for a CCC loan of $2,000 (a loan rate of $2. Free state tax return forms 00 per pound). Free state tax return forms In 2013, he repaid the loan and redeemed the cotton for $1,500 when the world price was $1. Free state tax return forms 50 per pound (lower than the loan amount). Free state tax return forms Later in 2013, he sold the cotton for $2,500. Free state tax return forms The market gain on the redemption was $. Free state tax return forms 50 ($2. Free state tax return forms 00 – $1. Free state tax return forms 50) per pound. Free state tax return forms Mike realized total market gain of $500 ($. Free state tax return forms 50 x 1,000 pounds). Free state tax return forms How he reports this market gain and figures his gain or loss from the sale of the cotton depends on whether he included CCC loans in income in 2012. Free state tax return forms Included CCC loan. Free state tax return forms   Mike reported the $2,000 CCC loan as income for 2012 on Schedule F, line 1b, so he is treated as if he sold the cotton for $2,000 when he pledged it and repurchased the cotton for $1,500 when he redeemed it. Free state tax return forms The $500 market gain is not recognized on the redemption. Free state tax return forms He reports it for 2013 as an agricultural program payment on Schedule F, line 4a, but does not include it as a taxable amount on line 4b. Free state tax return forms   Mike's basis in the cotton after he redeemed it was $1,500, which is the redemption (repurchase) price paid for the cotton. Free state tax return forms His gain from the sale is $1,000 ($2,500 – $1,500). Free state tax return forms He reports the $1,000 gain as income for 2013 on Schedule F, line 1b. Free state tax return forms Excluded CCC loan. Free state tax return forms   Mike has income of $500 from market gain in 2013. Free state tax return forms He reports it on Schedule F, lines 4a and 4b. Free state tax return forms His basis in the cotton is zero, so his gain from its sale is $2,500. Free state tax return forms He reports the $2,500 gain as income for 2013 on Schedule F, line 1b. Free state tax return forms Example 2. Free state tax return forms The facts are the same as in Example 1 except that, instead of selling the cotton for $2,500 after redeeming it, Mike entered into an option-to-purchase contract with a cotton buyer before redeeming the cotton. Free state tax return forms Under that contract, Mike authorized the cotton buyer to pay the CCC loan on Mike's behalf. Free state tax return forms In 2013, the cotton buyer repaid the loan for $1,500 and immediately exercised his option, buying the cotton for $1,500. Free state tax return forms How Mike reports the $500 market gain on the redemption of the cotton and figures his gain or loss from its sale depends on whether he included CCC loans in income in 2012. Free state tax return forms Included CCC loan. Free state tax return forms   As in Example 1, Mike is treated as though he sold the cotton for $2,000 when he pledged it and repurchased the cotton for $1,500 when the cotton buyer redeemed it for him. Free state tax return forms The $500 market gain is not recognized on the redemption. Free state tax return forms Mike reports it for 2013 as an agricultural program payment on Schedule F, line 4a, but does not include it as a taxable amount on line 4b. Free state tax return forms   Also, as in Example 1, Mike's basis in the cotton when the cotton buyer redeemed it for him was $1,500. Free state tax return forms Mike has no gain or loss on its sale to the cotton buyer for that amount. Free state tax return forms Excluded CCC loan. Free state tax return forms   As in Example 1, Mike has income of $500 from market gain in 2013. Free state tax return forms He reports it on Schedule F, lines 4a and 4b. Free state tax return forms His basis in the cotton is zero, so his gain from its sale is $1,500. Free state tax return forms He reports the $1,500 gain as income for 2013 on Schedule F, line 1b. Free state tax return forms Conservation Reserve Program (CRP) Under the Conservation Reserve Program (CRP), if you own or operate highly erodible or other specified cropland, you may enter into a long-term contract with the USDA, agreeing to convert to a less intensive use of that cropland. Free state tax return forms You must include the annual rental payments and any one-time incentive payment you receive under the program on Schedule F, lines 4a and 4b. Free state tax return forms Cost-share payments you receive may qualify for the cost-sharing exclusion. Free state tax return forms See Cost-Sharing Exclusion (Improvements) , later. Free state tax return forms CRP payments are reported to you on Form 1099-G. Free state tax return forms Individuals who are receiving Social Security retirement or disability benefits may exclude CRP payments when calculating self-employment tax. Free state tax return forms See the instructions for Schedule SE (Form 1040). Free state tax return forms Crop Insurance and Crop Disaster Payments You must include in income any crop insurance proceeds you receive as the result of physical crop damage or reduction of crop revenue, or both. Free state tax return forms You generally include them in the year you receive them. Free state tax return forms Treat as crop insurance proceeds the crop disaster payments you receive from the federal government as the result of destruction or damage to crops, or the inability to plant crops, because of drought, flood, or any other natural disaster. Free state tax return forms You can request income tax withholding from crop disaster payments you receive from the federal government. Free state tax return forms Use Form W-4V, Voluntary Withholding Request. Free state tax return forms See chapter 16 for information about ordering the form. Free state tax return forms Election to postpone reporting until the following year. Free state tax return forms   You can postpone reporting some or all crop insurance proceeds as income until the year following the year the physical damage occurred if you meet all the following conditions. Free state tax return forms You use the cash method of accounting. Free state tax return forms You receive the crop insurance proceeds in the same tax year the crops are damaged. Free state tax return forms You can show that under your normal business practice you would have included income from the damaged crops in any tax year following the year the damage occurred. Free state tax return forms   Deferral is not permitted for proceeds received from revenue insurance policies. Free state tax return forms   To postpone reporting some or all crop insurance proceeds received in 2013, report the amount you received on Schedule F, line 6a, but do not include it as a taxable amount on line 6b. Free state tax return forms Check the box on line 8c and attach a statement to your tax return. Free state tax return forms The statement must include your name and address and contain the following information. Free state tax return forms A statement that you are making an election under IRC section 451(d) and Regulations section 1. Free state tax return forms 451-6. Free state tax return forms The specific crop or crops physically destroyed or damaged. Free state tax return forms A statement that under your normal business practice you would have included income from some or all of the destroyed or damaged crops in gross income for a tax year following the year the crops were destroyed or damaged. Free state tax return forms The cause of the physical destruction or damage and the date or dates it occurred. Free state tax return forms The total payments you received from insurance carriers, itemized for each specific crop, and the date you received each payment. Free state tax return forms The name of each insurance carrier from whom you received payments. Free state tax return forms   One election covers all crops representing a single trade or business. Free state tax return forms If you have more than one farming business, make a separate election for each one. Free state tax return forms For example, if you operate two separate farms on which you grow different crops and you keep separate books for each farm, you should make two separate elections to postpone reporting insurance proceeds you receive for crops grown on each of your farms. Free state tax return forms   An election is binding for the year unless the IRS approves your request to change it. Free state tax return forms To request IRS approval to change your election, write to the IRS at the following address giving your name, address, identification number, the year you made the election, and your reasons for wanting to change it. Free state tax return forms Ogden Submission Processing Center P. Free state tax return forms O. Free state tax return forms Box 9941 Ogden, UT 84409 Feed Assistance and Payments The Disaster Assistance Act of 1988 authorizes programs to provide feed assistance, reimbursement payments, and other benefits to qualifying livestock producers if the Secretary of Agriculture determines that, because of a natural disaster, a livestock emergency exists. Free state tax return forms These programs include partial reimbursement for the cost of purchased feed and for certain transportation expenses. Free state tax return forms They also include the donation or sale at a below-market price of feed owned by the Commodity Credit Corporation. Free state tax return forms Include in income: The market value of donated feed, The difference between the market value and the price you paid for feed you buy at below-market prices, and Any cost reimbursement you receive. Free state tax return forms You must include these benefits in income in the year you receive them. Free state tax return forms You cannot postpone reporting them under the rules explained earlier for weather-related sales of livestock or crop insurance proceeds. Free state tax return forms Report the benefits on Schedule F, Part I, as agricultural program payments. Free state tax return forms You can usually take a current deduction for the same amount as a feed expense. Free state tax return forms Cost-Sharing Exclusion (Improvements) You can exclude from your income part or all of a payment you receive under certain federal or state cost-sharing conservation, reclamation, and restoration programs. Free state tax return forms A payment is any economic benefit you get as a result of an improvement. Free state tax return forms However, this exclusion applies only to that part of a payment that meets all three of the following tests. Free state tax return forms It was for a capital expense. Free state tax return forms You cannot exclude any part of a payment for an expense you can deduct in the year you pay or incur it. Free state tax return forms You must include the payment for a deductible expense in income, and you can take any offsetting deduction. Free state tax return forms See chapter 5 for information on deducting soil and water conservation expenses. Free state tax return forms It does not substantially increase your annual income from the property for which it is made. Free state tax return forms An increase in annual income is substantial if it is more than the greater of the following amounts. Free state tax return forms 10% of the average annual income derived from the affected property before receiving the improvement. Free state tax return forms $2. Free state tax return forms 50 times the number of affected acres. Free state tax return forms The Secretary of Agriculture certified that the payment was primarily made for conserving soil and water resources, protecting or restoring the environment, improving forests, or providing a habitat for wildlife. Free state tax return forms Qualifying programs. Free state tax return forms   If the three tests listed above are met, you can exclude part or all of the payments from the following programs. Free state tax return forms The rural clean water program authorized by the Federal Water Pollution Control Act. Free state tax return forms The rural abandoned mine program authorized by the Surface Mining Control and Reclamation Act of 1977. Free state tax return forms The water bank program authorized by the Water Bank Act. Free state tax return forms The emergency conservation measures program authorized by title IV of the Agricultural Credit Act of 1978. Free state tax return forms The agricultural conservation program authorized by the Soil Conservation and Domestic Allotment Act. Free state tax return forms The great plains conservation program authorized by the Soil Conservation and Domestic Policy Act. Free state tax return forms The resource conservation and development program authorized by the Bankhead-Jones Farm Tenant Act and by the Soil Conservation and Domestic Allotment Act. Free state tax return forms Certain small watershed programs, listed later. Free state tax return forms Any program of a state, possession of the United States, a political subdivision of any of these, or of the District of Columbia under which payments are made to individuals primarily for conserving soil, protecting or restoring the environment, improving forests, or providing a habitat for wildlife. Free state tax return forms Several state programs have been approved. Free state tax return forms For information about the status of those programs, contact the state offices of the Farm Service Agency (FSA) and the Natural Resources and Conservation Service (NRCS). Free state tax return forms Small watershed programs. Free state tax return forms   If the three tests listed earlier are met, you can exclude part or all of the payments you receive under the following programs for improvements made in connection with a watershed. Free state tax return forms The programs under the Watershed Protection and Flood Prevention Act. Free state tax return forms The flood prevention projects under the Flood Control Act of 1944. Free state tax return forms The Emergency Watershed Protection Program under the Flood Control Act of 1950. Free state tax return forms Certain programs under the Colorado River Basin Salinity Control Act. Free state tax return forms The Wetlands Reserve Program authorized by the Food Security Act of 1985, the Federal Agriculture Improvement and Reform Act of 1996 and the Farm Security and Rural Investment Act of 2002. Free state tax return forms The Environmental Quality Incentives Program (EQIP) authorized by the Federal Agriculture Improvement and Reform Act of 1996. Free state tax return forms The Wildlife Habitat Incentives Program (WHIP) authorized by the Federal Agriculture Improvement and Reform Act of 1996. Free state tax return forms The Soil and Water Conservation Assistance Program authorized by the Agricultural Risk Protection Act of 2000. Free state tax return forms The Agricultural Management Assistance Program authorized by the Agricultural Risk Protection Act of 2000. Free state tax return forms The Conservation Reserve Program authorized by the Food Security Act of 1985 and the Federal Agriculture Improvement and Reform Act of 1996. Free state tax return forms The Forest Land Enhancement Program authorized under the Farm Security and Rural Investment Act of 2002. Free state tax return forms The Conservation Security Program authorized by the Food Security Act of 1985. Free state tax return forms The Forest Health Protection Program (FHPP) authorized by the Cooperative Forestry Assistance Act of 1978. Free state tax return forms Income realized. Free state tax return forms   The gross income you realize upon getting an improvement under these cost-sharing programs is the value of the improvement reduced by the sum of the excludable portion and your share of the cost of the improvement (if any). Free state tax return forms Value of the improvement. Free state tax return forms   You determine the value of the improvement by multiplying its fair market value (defined in chapter 6) by a fraction. Free state tax return forms The numerator of the fraction is the total cost of the improvement (all amounts paid either by you or by the government for the improvement) reduced by the sum of the following items. Free state tax return forms Any government payments under a program not listed earlier. Free state tax return forms Any part of a government payment under a program listed earlier that the Secretary of Agriculture has not certified as primarily for conservation. Free state tax return forms Any government payment to you for rent or for your services. Free state tax return forms The denominator of the fraction is the total cost of the improvement. Free state tax return forms Excludable portion. Free state tax return forms   The excludable portion is the present fair market value of the right to receive annual income from the affected acreage of the greater of the following amounts. Free state tax return forms 10% of the prior average annual income from the affected acreage. Free state tax return forms The prior average annual income is the average of the gross receipts from the affected acreage for the last 3 tax years before the tax year in which you started to install the improvement. Free state tax return forms $2. Free state tax return forms 50 times the number of affected acres. Free state tax return forms The calculation of present fair market value of the right to receive annual income is too complex to discuss in this publication. Free state tax return forms You may need to consult your tax advisor for assistance. Free state tax return forms Example. Free state tax return forms One hundred acres of your land was reclaimed under a rural abandoned mine program contract with the Natural Resources Conservation Service of the USDA. Free state tax return forms The total cost of the improvement was $500,000. Free state tax return forms The USDA paid $490,000. Free state tax return forms You paid $10,000. Free state tax return forms The value of the cost-sharing improvement is $15,000. Free state tax return forms The present fair market value of the right to receive the annual income described in (1) above is $1,380, and the present fair market value of the right to receive the annual income described in (2) is $1,550. Free state tax return forms The excludable portion is the greater amount, $1,550. Free state tax return forms You figure the amount to include in gross income as follows: Value of cost-sharing improvement $15,000 Minus: Your share $10,000     Excludable portion 1,550 11,550 Amount included in income $ 3,450 Effects of the exclusion. Free state tax return forms   When you figure the basis of property you acquire or improve using cost-sharing payments excluded from income, subtract the excluded payments from your capital costs. Free state tax return forms Any payment excluded from income is not part of your basis. Free state tax return forms In the example above, the increase in basis is $500,000 – $490,000 + $3,450 = $13,450. Free state tax return forms   In addition, you cannot take depreciation, amortization, or depletion deductions for the part of the cost of the property for which you receive cost-sharing payments you exclude from income. Free state tax return forms How to report the exclusion. Free state tax return forms   Attach a statement to your tax return (or amended return) for the tax year you receive the last government payment for the improvement. Free state tax return forms The statement must include the following information. Free state tax return forms The dollar amount of the cost funded by the government payment. Free state tax return forms The value of the improvement. Free state tax return forms The amount you are excluding. Free state tax return forms   Report the total cost-sharing payments you receive on Schedule F, line 4a, and the taxable amount on line 4b. Free state tax return forms Recapture. Free state tax return forms   If you dispose of the property within 20 years after you received the excluded payments, you must treat as ordinary income part or all of the cost-sharing payments you excluded. Free state tax return forms In the above example, if the 100 acres were sold within 20 years of the exclusion for a gain of $2,000, $1,550 of that amount would be included in ordinary income. Free state tax return forms You must report the recapture on Form 4797. Free state tax return forms See Section 1255 property under Other Gains in chapter 9. Free state tax return forms Electing not to exclude payments. Free state tax return forms   You can elect not to exclude all or part of any payments you receive under these programs. Free state tax return forms If you make this election for all of these payments, none of the above restrictions and rules apply. Free state tax return forms You must make this election by the due date, including extensions, for filing your return. Free state tax return forms In the example above, an election not to exclude payments results in $5,000 included in income and a $15,000 increase in basis. Free state tax return forms If you timely filed your return for the year without making the election, you can still make the election by filing an amended return within 6 months of the due date of the return (excluding extensions). Free state tax return forms Write “Filed pursuant to section 301. Free state tax return forms 9100-2” at the top of the amended return and file it at the same address you filed the original return. Free state tax return forms Payments Under the Farm Security and Rural Investment Act of 2002 and Under the Food, Conservation, and Energy Act of 2008 The Farm Security and Rural Investment Act of 2002 created two new types of payments—direct and counter-cyclical payments. Free state tax return forms You must include these payments on Schedule F, lines 4a and 4b. Free state tax return forms The Food, Conservation, and Energy Act of 2008 provides for direct and counter-cyclical payments (DCP) as well as Average Crop Revenue Election (ACRE) payments. Free state tax return forms You must include these payments on Schedule F, lines 6a and 6b. Free state tax return forms The American Taxpayer Relief Act of 2012, enacted on January 2, 2013, amends the Food, Conservation, and Energy Act of 2008 and provided a one-year extension for these payments. Free state tax return forms Tobacco Quota Buyout Program Payments The Fair and Equitable Tobacco Reform Act of 2004, title VI of the American Jobs Creation Act of 2004, terminated the tobacco marketing quota program and the tobacco price support program. Free state tax return forms As a result, the USDA offered to enter into contracts with eligible tobacco quota holders and growers to provide compensation for the lost value of the quotas and related price support. Free state tax return forms If you are an eligible tobacco quota holder, your contract entitles you to receive total payments of $7 per pound of quota in 10 equal annual payments in fiscal years 2005 through 2014. Free state tax return forms If you are an eligible tobacco grower, your contract entitles you to receive total payments of up to $3 per pound of quota in 10 equal annual payments in fiscal years 2005 through 2014. Free state tax return forms Tobacco Quota Holders Contract payments you receive are considered proceeds from a sale of your tobacco quota as of the date on which you and the USDA enter into the contract. Free state tax return forms Your taxable gain or loss is the total amount received for your quota reduced by any amount treated as interest (discussed below), over your adjusted basis. Free state tax return forms The gain or loss is capital or ordinary depending on how you used the quota. Free state tax return forms See Capital or ordinary gain or loss , later. Free state tax return forms Report the entire gain on your income tax return for the tax year that includes the date you entered into the contract if you elect not to use the installment method. Free state tax return forms Adjusted basis. Free state tax return forms   The adjusted basis of your quota is determined differently depending on how you obtained the quota. Free state tax return forms The basis of a quota derived from an original grant by the federal government is zero. Free state tax return forms The basis of a purchased quota is the purchase price. Free state tax return forms The basis of a quota received as a gift is generally the same as the donor's basis. Free state tax return forms However, under certain circumstances, the basis is increased by the amount of gift taxes paid. Free state tax return forms If the basis is greater than the fair market value of the quota at the time of the gift, the basis for determining loss is the fair market value. Free state tax return forms The basis of an inherited quota is generally the fair market value of the quota at the time of the decedent's death. Free state tax return forms Reduction of basis. Free state tax return forms   You are required to reduce the basis of your tobacco quota by the following amounts. Free state tax return forms Deductions you took for amortization, depletion, or depreciation. Free state tax return forms Amounts you previously deducted as a loss because of a reduction in the number of pounds of tobacco allowable under the quota. Free state tax return forms The entire cost of a purchased quota you deducted in an earlier year (which reduces your basis to zero). Free state tax return forms Amount treated as interest. Free state tax return forms   You must reduce your tobacco quota buyout program payment by the amount treated as interest. Free state tax return forms The interest is reportable as ordinary income. Free state tax return forms If payments total $3,000 or less, your total quota buyout program payment does not include any amount treated as interest and you are not required to reduce the total payment you receive. Free state tax return forms   In all other cases, a portion of each payment may be treated as interest for federal tax purposes. Free state tax return forms You may be required to reduce your total quota buyout program payment before you calculate your gain or loss. Free state tax return forms For more information, see Notice 2005-57, 2005-32 I. Free state tax return forms R. Free state tax return forms B. Free state tax return forms 267, available at www. Free state tax return forms irs. Free state tax return forms gov/irb/2005-32_IRB/ar13. Free state tax return forms html. Free state tax return forms Installment method. Free state tax return forms   You may use the installment method to report a gain if you receive at least one payment after the close of your tax year. Free state tax return forms Under the installment method, a portion of the gain is taken into account in each year in which a payment is received. Free state tax return forms See chapter 10 for more information. Free state tax return forms Capital or ordinary gain or loss. Free state tax return forms   Whether your gain or loss is ordinary or capital depends on how you used the quota. Free state tax return forms Quota used in the trade or business of farming. Free state tax return forms   If you used the quota in the trade or business of farming and you held it for more than one year, you report the transaction as a section 1231 transaction on Form 4797. Free state tax return forms See Section 1231 transactions in the Instructions for Form 4797 for detailed information on reporting section 1231 transactions. Free state tax return forms Quota held for investment. Free state tax return forms   If you held the quota for investment purposes, any gain or loss is capital gain or loss. Free state tax return forms The same result also applies if you held the quota for the production of income, though not connected with a trade or business. Free state tax return forms Gain treated as ordinary income. Free state tax return forms   If you previously deducted any of the following items, some or all of the capital gain must be recharacterized and reported as ordinary income. Free state tax return forms Any resulting capital gain is taxed as ordinary income up to the amount previously deducted. Free state tax return forms The cost of acquiring a quota. Free state tax return forms Amounts for amortization, depletion, or depreciation. Free state tax return forms Amounts to reflect a reduction in the quota pounds. Free state tax return forms   You should include the ordinary income on your return for the tax year even if you use the installment method to report the remainder of the gain. Free state tax return forms Self-employment income. Free state tax return forms   The tobacco quota buyout payments are not self-employment income. Free state tax return forms Income averaging for farmers. Free state tax return forms   The gain or loss resulting from the quota payments does not qualify for income averaging. Free state tax return forms A tobacco quota is considered an interest in land. Free state tax return forms Income averaging is not available for gain or loss arising from the sale or other disposition of land. Free state tax return forms Involuntary conversion. Free state tax return forms   The buyout of the tobacco quota is not an involuntary conversion. Free state tax return forms Form 1099-S. Free state tax return forms   A tobacco quota is considered an interest in land, so the USDA will generally report the total amount you receive under a contract on Form 1099-S, Proceeds From Real Estate Transactions, if the amount is $600 or more. Free state tax return forms The USDA will generally report any portion of a payment treated as interest of $600 or more to you on Form 1099-INT, Interest Income, for the year in which the payment is made. Free state tax return forms Like-kind exchange of quota. Free state tax return forms   You may postpone reporting the gain or loss from tobacco quota buyout payments by entering into a like-kind exchange if you comply with the requirements of section 1031 and the regulations thereunder. Free state tax return forms See Notice 2005-57 for more information. Free state tax return forms Tobacco Growers Contract payments you receive are determined by reference to the amount of quota under which you produced (or planted) quota tobacco during the 2002, 2003, and 2004 tobacco marketing years and are prorated based on the number of years that you produced (or planted) quota tobacco during those years. Free state tax return forms Taxation of payments to tobacco growers. Free state tax return forms   Payments to growers replace ordinary income that would have been earned had the tobacco marketing quota and price support programs continued. Free state tax return forms Individuals will generally report the payments as an Agricultural program payment on Schedule F. Free state tax return forms If you are a landowner who does not materially participate in the operation or management of the farm and are receiving the grower payment because your farm rental income is based on the tobacco grown by a tenant, the grower payment should be reported on Form 4835. Free state tax return forms Self-employment income. Free state tax return forms   Payments to growers generally represent self-employment income. Free state tax return forms If the grower is an individual carrying on a trade or business and deriving income (other than farm rental income properly reported on Form 4835) from that trade or business, the payments are net earnings from self-employment. Free state tax return forms Income averaging for farmers. Free state tax return forms   Payments to growers who are individuals qualify for farm income averaging. Free state tax return forms Form 1099-G. Free state tax return forms   If the amount received in a taxable year is $600 or more, the amount will generally be reported by the USDA on a Form 1099-G. Free state tax return forms Other Payments You must include most other government program payments in income. Free state tax return forms Fertilizer and Lime Include in income the value of fertilizer or lime you receive under a government program. Free state tax return forms How to claim the offsetting deduction is explained under Fertilizer and Lime in chapter 4. Free state tax return forms Improvements If government payments are based on improvements, such as a pollution control facility, you must include them in income. Free state tax return forms You must also capitalize the full cost of the improvement. Free state tax return forms Since you have included the payments in income, they do not reduce your basis. Free state tax return forms However, see Cost-Sharing Exclusion (Improvements) , earlier, for additional information. Free state tax return forms National Tobacco Growers' Settlement Trust Fund Payments If you are a producer, landowner, or tobacco quota owner who receives money from the National Tobacco Growers' Settlement Trust Fund, you must report those payments as income. Free state tax return forms You should receive a Form 1099-MISC, Miscellaneous Income, that shows the payment amount. Free state tax return forms If you produce a tobacco crop, report the payments as income from farming on your Schedule F. Free state tax return forms If you are a landowner or tobacco quota owner who leases tobacco-related property but you do not produce the crop, report the payments as farm rental income on Form 4835. Free state tax return forms Payment to More Than One Person The USDA reports program payments to the IRS. Free state tax return forms It reports a program payment intended for more than one person as having been paid to the person whose identification number is on record for that payment (payee of record). Free state tax return forms If you, as the payee of record, receive a program payment belonging to someone else, such as your landlord, the amount belonging to the other person is a nominee distribution. Free state tax return forms You should file Form 1099-G to report the identity of the actual recipient to the IRS. Free state tax return forms You should also give this information to the recipient. Free state tax return forms You can avoid the inconvenience of unnecessary inquiries about the identity of the recipient if you file this form. Free state tax return forms Report the total amount reported to you as the payee of record on Schedule F, line 4a or 6a. Free state tax return forms However, do not report as a taxable amount on line 4b or 6b any amount belonging to someone else. Free state tax return forms See chapter 16 for information about ordering Form 1099-G. Free state tax return forms Income From Cooperatives If you buy farm supplies through a cooperative, you may receive income from the cooperative in the form of patronage dividends (refunds). Free state tax return forms If you sell your farm products through a cooperative, you may receive either patronage dividends or a per-unit retain certificate, explained later, from the cooperative. Free state tax return forms Form 1099-PATR. Free state tax return forms   The cooperative will report the income to you on Form 1099-PATR or a similar form and send a copy to the IRS. Free state tax return forms Form 1099-PATR may also show an alternative minimum tax adjustment that you must include on Form 6251, Alternative Minimum Tax—Individuals, if you are required to file the form. Free state tax return forms For information on the alternative minimum tax, see the Instructions for Form 6251. Free state tax return forms Patronage Dividends You generally report patronage dividends as income on Schedule F, lines 3a and 3b, for the tax year you receive them. Free state tax return forms They include the following items. Free state tax return forms Money paid as a patronage dividend, including cash advances received (for example, from a marketing cooperative). Free state tax return forms The stated dollar value of qualified written notices of allocation. Free state tax return forms The fair market value of other property. Free state tax return forms Do not report as income on line 3b any patronage dividends you receive from expenditures that were not deductible, such as buying personal or family items, capital assets, or depreciable property. Free state tax return forms You must reduce the cost or other basis of these items by the amount of such patronage dividends received. Free state tax return forms Personal items include fuel purchased for personal use, basic local telephone service, and personal long distance calls. Free state tax return forms If you cannot determine what the dividend is for, report it as income on lines 3a and 3b. Free state tax return forms Qualified written notice of allocation. Free state tax return forms   If you receive a qualified written notice of allocation as part of a patronage dividend, you must generally include its stated dollar value in your income on Schedule F, lines 3a and 3b, in the year you receive it. Free state tax return forms A written notice of allocation is qualified if at least 20% of the patronage dividend is paid in money or by qualified check and either of the following conditions is met. Free state tax return forms The notice must be redeemable in cash for at least 90 days after it is issued, and you must have received a written notice of your right of redemption at the same time as the written notice of allocation. Free state tax return forms You must have agreed to include the stated dollar value in income in the year you receive the notice by doing one of the following. Free state tax return forms Signing and giving a written agreement to the cooperative. Free state tax return forms Getting or keeping membership in the cooperative after it adopted a bylaw providing that membership constitutes agreement. Free state tax return forms The cooperative must notify you in writing of this bylaw and give you a copy. Free state tax return forms Endorsing and cashing a qualified check paid as part of the same patronage dividend. Free state tax return forms You must cash the check by the 90th day after the close of the payment period for the cooperative's tax year for which the patronage dividend was paid. Free state tax return forms Qualified check. Free state tax return forms   A qualified check is any instrument that is redeemable in money and meets both of the following requirements. Free state tax return forms It is part of a patronage dividend that also includes a qualified written notice of allocation for which you met condition 2(c), above. Free state tax return forms It is imprinted with a statement that endorsing and cashing it constitutes the payee's consent to include in income the stated dollar value of any written notices of allocation paid as part of the same patronage dividend. Free state tax return forms Loss on redemption. Free state tax return forms   You can deduct on Schedule F, Part II, any loss incurred on the redemption of a qualified written notice of allocation you received in the ordinary course of your farming business. Free state tax return forms The loss is the difference between the stated dollar amount of the qualified written notice you included in income and the amount you received when you redeemed it. Free state tax return forms Nonqualified notice of allocation. Free state tax return forms   Do not include the stated dollar value of any nonqualified notice of allocation in income when you receive it. Free state tax return forms Your basis in the notice is zero. Free state tax return forms You must include in income for the tax year of disposition any amount you receive from its sale, redemption, or other disposition. Free state tax return forms Report that amount, up to the stated dollar value of the notice, on Schedule F, lines 3a and 3b. Free state tax return forms However, do not include that amount in your income if the notice resulted from buying or selling capital assets or depreciable property or from buying personal items, as explained in the following discussions. Free state tax return forms   If the amount you receive is more than the stated dollar value of the notice, report the excess as the type of income it represents. Free state tax return forms For example, if it represents interest income, report it on your return as interest. Free state tax return forms Buying or selling capital assets or depreciable property. Free state tax return forms   Do not include in income patronage dividends from buying capital assets or depreciable property used in your business. Free state tax return forms You must, however, reduce the basis of these assets by the dividends. Free state tax return forms This reduction is taken into account as of the first day of the tax year in which the dividends are received. Free state tax return forms If the dividends are more than your unrecovered basis, reduce the unrecovered basis to zero and include the difference on Schedule F, line 3a, for the tax year you receive them. Free state tax return forms   This rule and the exceptions explained below also apply to amounts you receive from the sale, redemption, or other disposition of a nonqualified notice of allocation that resulted from buying or selling capital assets or depreciable property. Free state tax return forms Example. Free state tax return forms On July 1, 2012, Mr. Free state tax return forms Brown, a patron of a cooperative association, bought a machine for his dairy farm business from the association for $2,900. Free state tax return forms The machine has a life of 7 years under MACRS (as provided in the Table of Class Lives and Recovery Periods in Appendix B of Publication 946, Depreciation and Amortization). Free state tax return forms Mr. Free state tax return forms Brown files his return on a calendar year basis. Free state tax return forms For 2012, he claimed a depreciation deduction of $311, using the 10. Free state tax return forms 71% depreciation rate from the 150% declining balance, half-year convention table (shown in Table A-14 in Appendix A of Publication 946). Free state tax return forms On July 2, 2013, the cooperative association paid Mr. Free state tax return forms Brown a $300 cash patronage dividend for buying the machine. Free state tax return forms Mr. Free state tax return forms Brown adjusts the basis of the machine and figures his depreciation deduction for 2013 (and later years) as follows. Free state tax return forms Cost of machine on July 1, 2012 $2,900 Minus: 2012 depreciation $311     2013 cash dividend 300 611 Adjusted basis for  depreciation for 2013: $2,289 Depreciation rate: 1 ÷ 6½ (remaining recovery period as of 1/1/2012) = 15. Free state tax return forms 38% × 1. Free state tax return forms 5 = 23. Free state tax return forms 07% Depreciation deduction for 2013 ($2,289 × 23. Free state tax return forms 07%) $528 Exceptions. Free state tax return forms   If the dividends are for buying or selling capital assets or depreciable property you did not own at any time during the year you received the dividends, you must include them on Schedule F, lines 3a and 3b, unless one of the following rules applies. Free state tax return forms If the dividends relate to a capital asset you held for more than 1 year for which a loss was or would have been deductible, treat them as gain from the sale or exchange of a capital asset held for more than 1 year. Free state tax return forms If the dividends relate to a capital asset for which a loss was not or would not have been deductible, do not report them as income (ordinary or capital gain). Free state tax return forms   If the dividends are for selling capital assets or depreciable property during the year you received the dividends, treat them as an additional amount received on the sale. Free state tax return forms Personal purchases. Free state tax return forms   Because you cannot deduct the cost of personal, living, or family items, such as supplies, equipment, or services not related to the production of farm income, you can omit from the taxable amount of patronage dividends on Schedule F, line 3b, any dividends from buying those items (and you must reduce the cost or other basis of those items by the amount of the dividends). Free state tax return forms This rule also applies to amounts you receive from the sale, redemption, or other disposition of a nonqualified written notice of allocation resulting from these purchases. Free state tax return forms Per-Unit Retain Certificates A per-unit retain certificate is any written notice that shows the stated dollar amount of a per-unit retain allocation made to you by the cooperative. Free state tax return forms A per-unit retain allocation is an amount paid to patrons for products sold for them that is fixed without regard to the net earnings of the cooperative. Free state tax return forms These allocations can be paid in money, other property, or qualified certificates. Free state tax return forms Per-unit retain certificates issued by a cooperative generally receive the same tax treatment as patronage dividends, discussed earlier. Free state tax return forms Qualified certificates. Free state tax return forms   Qualified per-unit retain certificates are those issued to patrons who have agreed to include the stated dollar amount of these certificates in income in the year of receipt. Free state tax return forms The agreement may be made in writing or by getting or keeping membership in a cooperative whose bylaws or charter states that membership constitutes agreement. Free state tax return forms If you receive qualified per-unit retain certificates, include the stated dollar amount of the certificates in income on Schedule F, lines 3a and 3b, for the tax year you receive them. Free state tax return forms Nonqualified certificates. Free state tax return forms   Do not include the stated dollar value of a nonqualified per-unit retain certificate in income when you receive it. Free state tax return forms Your basis in the certificate is zero. Free state tax return forms You must include in income any amount you receive from its sale, redemption, or other disposition. Free state tax return forms Report the amount you receive from the disposition as ordinary income on Schedule F, lines 3a and 3b, for the tax year of disposition. Free state tax return forms Cancellation of Debt This section explains the general rule for including canceled debt in income and the exceptions to the general rule. Free state tax return forms For more information on canceled debt, see Publication 4681, Canceled Debts, Foreclosures, Repossessions, and Abandonments. Free state tax return forms General Rule Generally, if your debt is canceled or forgiven, other than as a gift or bequest to you, you must include the canceled amount in gross income for tax purposes. Free state tax return forms Discharge of qualified farm indebtedness (defined below) is one of the exceptions to the general rule. Free state tax return forms It is excluded from taxable income (see Exclusions , later). Free state tax return forms Report the canceled amount on Schedule F, line 8, if you incurred the debt in your farming business. Free state tax return forms If the debt is a nonbusiness debt, report the canceled amount as other income on Form 1040, line 21. Free state tax return forms Election to defer income from discharge of indebtedness. Free state tax return forms   You can elect to defer income from a discharge of business indebtedness that occurred after 2008 and before 2011. Free state tax return forms Generally, if the election is made, the deferred income is included in gross income ratably over a 5-year period beginning in 2014 (for calendar year taxpayers) and the exclusions listed below do not apply. Free state tax return forms See IRC section 108(i) and Publication 4681 for details. Free state tax return forms Form 1099-C. Free state tax return forms   If a federal agency, financial institution, credit union, finance company, or credit card company cancels or forgives your debt of $600 or more, you will receive a Form 1099-C, Cancellation of Debt. Free state tax return forms The amount of debt canceled is shown in box 2. Free state tax return forms Exceptions The following discussion covers some exceptions to the general rule for canceled debt. Free state tax return forms These exceptions apply before the exclusions discussed below. Free state tax return forms Price reduced after purchase. Free state tax return forms   If your purchase of property was financed by the seller and the seller reduces the amount of the debt at a time when you are not insolvent and the reduction does not occur in a chapter 11 bankruptcy case, the amount of the debt reduction will be treated as a reduction in the purchase price of the property. Free state tax return forms Reduce your basis in the property by the amount of the reduction in the debt. Free state tax return forms The rules that apply to bankruptcy and insolvency are explained below under Exclusions . Free state tax return forms Deductible debt. Free state tax return forms   You do not realize income from a canceled debt to the extent the payment of the debt would have been a deductible expense. Free state tax return forms This exception applies before the price reduction exception discussed above and the bankruptcy and insolvency exclusions discussed next. Free state tax return forms Example. Free state tax return forms You get accounting services for your farm on credit. Free state tax return forms Later, you have trouble paying your farm debts, but you are not bankrupt or insolvent. Free state tax return forms Your accountant forgives part of the amount you owe for the accounting services. Free state tax return forms How you treat the canceled debt depends on your method of accounting. Free state tax return forms Cash method — You do not include the canceled debt in income because payment of the debt would have been deductible as a business expense. Free state tax return forms Accrual method — You include the canceled debt in income because the expense was deductible when you incurred the debt. Free state tax return forms Exclusions Do not include canceled debt in income in the following situations. Free state tax return forms The cancellation takes place in a bankruptcy case under title 11 of the U. Free state tax return forms S. Free state tax return forms Code. Free state tax return forms The cancellation takes place when you are insolvent. Free state tax return forms The canceled debt is a qualified farm debt. Free state tax return forms The canceled debt is a qualified real property business debt (in the case of a taxpayer other than a C corporation). Free state tax return forms See Publication 334, Tax Guide for Small Business, chapter 5. Free state tax return forms The canceled debt is qualified principal residence indebtedness which is discharged after 2006 and before 2014. Free state tax return forms The exclusions do not apply in the following situations: If a canceled debt is excluded from income because it takes place in a bankruptcy case, the exclusions in situations (2), (3), (4), and (5) do not apply. Free state tax return forms If a canceled debt is excluded from income because it takes place when you are insolvent, the exclusions in situations (3) and (4) do not apply to the extent you are insolvent. Free state tax return forms If a canceled debt is excluded from income because it is qualified principal residence indebtedness, the exclusion in situation (2) does not apply unless you elect to apply situation (2) instead of the exclusion for qualified principal residence indebtedness. Free state tax return forms See Form 982 , later, for information on how to claim an exclusion for a canceled debt. Free state tax return forms Debt. Free state tax return forms   For this discussion, debt includes any debt for which you are liable or that attaches to property you hold. Free state tax return forms Bankruptcy and Insolvency You can exclude a canceled debt from income if you are bankrupt or to the extent you are insolvent. Free state tax return forms Bankruptcy. Free state tax return forms   A bankruptcy case is a case under title 11 of the U. Free state tax return forms S. Free state tax return forms Code if you are under the jurisdiction of the court and the cancellation of the debt is granted by the court or is the result of a plan approved by the court. Free state tax return forms   Do not include debt canceled in a bankruptcy case in your income in the year it is canceled. Free state tax return forms Instead, you must use the amount canceled to reduce your tax attributes, explained below under Reduction of tax attributes . Free state tax return forms Insolvency. Free state tax return forms   You are insolvent to the extent your liabilities are more than the fair market value of your assets immediately before the cancellation of debt. Free state tax return forms   You can exclude canceled debt from gross income up to the amount by which you are insolvent. Free state tax return forms If the canceled debt is more than this amount and the debt qualifies, you can apply the rules for qualified farm debt or qualified real property business debt to the difference. Free state tax return forms Otherwise, you include the difference in gross income. Free state tax return forms Use the amount excluded because of insolvency to reduce any tax attributes, as explained below under Reduction of tax attributes . Free state tax return forms You must reduce the tax attributes under the insolvency rules before applying the rules for qualified farm debt or for qualified real property business debt. Free state tax return forms Example. Free state tax return forms You had a $15,000 debt that was not qualified principal residence debt canceled outside of bankruptcy. Free state tax return forms Immediately before the cancellation, your liabilities totaled $80,000 and your assets totaled $75,000. Free state tax return forms Since your liabilities were more than your assets, you were insolvent to the extent of $5,000 ($80,000 − $75,000). Free state tax return forms You can exclude this amount from income. Free state tax return forms The remaining canceled debt ($10,000) may be subject to the qualified farm debt or qualified real property business debt rules. Free state tax return forms If not, you must include it in income. Free state tax return forms Reduction of tax attributes. Free state tax return forms   If you exclude canceled debt from income in a bankruptcy case or during insolvency, you must use the excluded debt to reduce certain tax attributes. Free state tax return forms Order of reduction. Free state tax return forms   You must use the excluded canceled debt to reduce the following tax attributes in the order listed unless you elect to reduce the basis of depreciable property first, as explained later. Free state tax return forms Net operating loss (NOL). Free state tax return forms Reduce any NOL for the tax year of the debt cancellation, and then any NOL carryover to that year. Free state tax return forms Reduce the NOL or NOL carryover one dollar for each dollar of excluded canceled debt. Free state tax return forms General business credit carryover. Free state tax return forms Reduce the credit carryover to or from the tax year of the debt cancellation. Free state tax return forms Reduce the carryover 331/3 cents for each dollar of excluded canceled debt. Free state tax return forms Minimum tax credit. Free state tax return forms Reduce the minimum tax credit available at the beginning of the tax year following the tax year of the debt cancellation. Free state tax return forms Reduce the credit 331/3 cents for each dollar of excluded canceled debt. Free state tax return forms Capital loss. Free state tax return forms Reduce any net capital loss for the tax year of the debt cancellation, and then any capital loss carryover to that year. Free state tax return forms Reduce the capital loss or loss carryover one dollar for each dollar of excluded canceled debt. Free state tax return forms Basis. Free state tax return forms Reduce the basis of the property you hold at the beginning of the tax year following the tax year of the debt cancellation in the following order. Free state tax return forms Real property (except inventory) used in your trade or business or held for investment that secured the canceled debt. Free state tax return forms Personal property (except inventory and accounts and notes receivable) used in your trade or business or held for investment that secured the canceled debt. Free state tax return forms Other property (except inventory and accounts and notes receivable) used in your trade or business or held for investment. Free state tax return forms Inventory and accounts and notes receivable. Free state tax return forms Other property. Free state tax return forms Reduce the basis one dollar for each dollar of excluded canceled debt. Free state tax return forms However, the reduction cannot be more than the total basis of property and the amount of money you hold immediately after the debt cancellation minus your total liabilities immediately after the cancellation. Free state tax return forms For allocation rules that apply to basis reductions for multiple canceled debts, see Regulations section 1. Free state tax return forms 1017-1(b)(2). Free state tax return forms Also see Electing to reduce the basis of depreciable property
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The Free State Tax Return Forms

Free state tax return forms 31. Free state tax return forms   Tax on Unearned Income of Certain Children Table of Contents What's New Introduction Useful Items - You may want to see: Which Parent's Return To UseParents Who Do Not File a Joint Return Parent's Election To Report Child's Interest and DividendsEffect of Making the Election Figuring Child's Income Figuring Additional Tax Tax for Certain Children Who Have Unearned IncomeProviding Parental Information (Form 8615, lines A–C) Step 1. Free state tax return forms Figuring the Child's Net Unearned Income (Form 8615, Part I) Step 2. Free state tax return forms Figuring Tentative Tax at the Parent's Tax Rate (Form 8615, Part II) Step 3. Free state tax return forms Figuring the Child's Tax (Form 8615, Part III) What's New Net Investment Income Tax. Free state tax return forms . Free state tax return forms  For tax years beginning after December 31, 2012, a child whose tax is figured on Form 8615 may be subject to the Net Investment Income Tax (NIIT). Free state tax return forms NIIT is a 3. Free state tax return forms 8% tax on the lesser of the net investment income or the excess of the child's modified adjusted gross income (MAGI) over the threshold amount. Free state tax return forms Use Form 8960, Net Investment Income Tax, to figure this tax. Free state tax return forms For more information on NIIT, go to www. Free state tax return forms irs. Free state tax return forms gov and enter “Net Investment Income Tax” in the search box. Free state tax return forms Introduction This chapter discusses the following two rules that may affect the tax on unearned income of certain children. Free state tax return forms If the child's interest and dividend income (including capital gain distributions) total less than $10,000, the child's parent may be able to choose to include that income on the parent's return rather than file a return for the child. Free state tax return forms (See Parent's Election To Report Child's Interest and Dividends , later. Free state tax return forms ) If the child's interest, dividends, and other unearned income total more than $2,000, part of that income may be taxed at the parent's tax rate instead of the child's tax rate. Free state tax return forms (See Tax for Certain Children Who Have Unearned Income , later. Free state tax return forms ) For these rules, the term “child” includes a legally adopted child and a stepchild. Free state tax return forms These rules apply whether or not the child is a dependent. Free state tax return forms Useful Items - You may want to see: Publication 929 Tax Rules for Children and Dependents Form (and Instructions) 8615 Tax for Certain Children Who Have Unearned Income 8814 Parents' Election To Report Child's Interest and Dividends Which Parent's Return To Use If a child's parents are married to each other and file a joint return, use the joint return to figure the tax on the child's unearned income. Free state tax return forms The tax rate and other return information from that return are used to figure the child's tax as explained later under Tax for Certain Children Who Have Unearned Income . Free state tax return forms Parents Who Do Not File a Joint Return For parents who do not file a joint return, the following discussions explain which parent's tax return must be used to figure the tax. Free state tax return forms Only the parent whose tax return is used can make the election described under Parent's Election To Report Child's Interest and Dividends . Free state tax return forms Parents are married. Free state tax return forms   If the child's parents file separate returns, use the return of the parent with the greater taxable income. Free state tax return forms Parents not living together. Free state tax return forms   If the child's parents are married to each other but not living together, and the parent with whom the child lives (the custodial parent) is considered unmarried, use the return of the custodial parent. Free state tax return forms If the custodial parent is not considered unmarried, use the return of the parent with the greater taxable income. Free state tax return forms   For an explanation of when a married person living apart from his or her spouse is considered unmarried, see Head of Household in chapter 2. Free state tax return forms Parents are divorced. Free state tax return forms   If the child's parents are divorced or legally separated, and the parent who had custody of the child for the greater part of the year (the custodial parent) has not remarried, use the return of the custodial parent. Free state tax return forms Custodial parent remarried. Free state tax return forms   If the custodial parent has remarried, the stepparent (rather than the noncustodial parent) is treated as the child's other parent. Free state tax return forms Therefore, if the custodial parent and the stepparent file a joint return, use that joint return. Free state tax return forms Do not use the return of the noncustodial parent. Free state tax return forms   If the custodial parent and the stepparent are married, but file separate returns, use the return of the one with the greater taxable income. Free state tax return forms If the custodial parent and the stepparent are married but not living together, the earlier discussion under Parents not living together applies. Free state tax return forms Parents never married. Free state tax return forms   If a child's parents have never been married to each other, but lived together all year, use the return of the parent with the greater taxable income. Free state tax return forms If the parents did not live together all year, the rules explained earlier under Parents are divorced apply. Free state tax return forms Widowed parent remarried. Free state tax return forms   If a widow or widower remarries, the new spouse is treated as the child's other parent. Free state tax return forms The rules explained earlier under Custodial parent remarried apply. Free state tax return forms Parent's Election To Report Child's Interest and Dividends You may be able to elect to include your child's interest and dividend income (including capital gain distributions) on your tax return. Free state tax return forms If you do, your child will not have to file a return. Free state tax return forms You can make this election only if all the following conditions are met. Free state tax return forms Your child was under age 19 (or under age 24 if a full-time student) at the end of the year. Free state tax return forms Your child had income only from interest and dividends (including capital gain distributions and Alaska Permanent Fund dividends). Free state tax return forms The child's gross income was less than $10,000. Free state tax return forms The child is required to file a return unless you make this election. Free state tax return forms The child does not file a joint return for the year. Free state tax return forms No estimated tax payment was made for the year, and no overpayment from the previous year (or from any amended return) was applied to this year under your child's name and social security number. Free state tax return forms No federal income tax was taken out of your child's income under the backup withholding rules. Free state tax return forms You are the parent whose return must be used when applying the special tax rules for children. Free state tax return forms (See Which Parent's Return To Use , earlier. Free state tax return forms ) These conditions are also shown in Figure 31-A. Free state tax return forms Certain January 1 birthdays. Free state tax return forms   A child born on January 1, 1995, is considered to be age 19 at the end of 2013. Free state tax return forms You cannot make this election for such a child unless the child was a full-time student. Free state tax return forms   A child born on January 1, 1990, is considered to be age 24 at the end of 2013. Free state tax return forms You cannot make this election for such a child. Free state tax return forms Full-time student. Free state tax return forms   A full-time student is a child who during some part of each of any 5 calendar months of the year was enrolled as a full-time student at a school, or took a full-time on-farm training course given by a school or a state, county, or local government agency. Free state tax return forms A school includes a technical, trade, or mechanical school. Free state tax return forms It does not include an on-the-job training course, correspondence school, or school offering courses only through the Internet. Free state tax return forms How to make the election. Free state tax return forms   Make the election by attaching Form 8814 to your Form 1040. Free state tax return forms (If you make this election, you cannot file Form 1040A or Form 1040EZ. Free state tax return forms ) Attach a separate Form 8814 for each child for whom you make the election. Free state tax return forms You can make the election for one or more children and not for others. Free state tax return forms Effect of Making the Election The federal income tax on your child's income may be more if you make the Form 8814 election. Free state tax return forms Rate may be higher. Free state tax return forms   If your child received qualified dividends or capital gain distributions, you may pay up to $100 more tax if you make this election instead of filing a separate tax return for the child. Free state tax return forms This is because the tax rate on the child's income between $1,000 and $2,000 is 10% if you make this election. Free state tax return forms However, if you file a separate return for the child, the tax rate may be as low as 0% (zero percent) because of the preferential tax rates for qualified dividends and capital gain distributions. Free state tax return forms Deductions you cannot take. Free state tax return forms   By making the Form 8814 election, you cannot take any of the following deductions that the child would be entitled to on his or her return. Free state tax return forms The additional standard deduction if the child is blind. Free state tax return forms The deduction for a penalty on an early withdrawal of your child's savings. Free state tax return forms Itemized deductions (such as your child's investment expenses or charitable contributions). Free state tax return forms Reduced deductions or credits. Free state tax return forms   If you use Form 8814, your increased adjusted gross income may reduce certain deductions or credits on your return including the following. Free state tax return forms Deduction for contributions to a traditional individual retirement arrangement (IRA). Free state tax return forms Deduction for student loan interest. Free state tax return forms Itemized deductions for medical expenses, casualty and theft losses, and certain miscellaneous expenses. Free state tax return forms Credit for child and dependent care expenses. Free state tax return forms Child tax credit. Free state tax return forms Education tax credits. Free state tax return forms Earned income credit. Free state tax return forms Penalty for underpayment of estimated tax. Free state tax return forms   If you make this election for 2013 and did not have enough tax withheld or pay enough estimated tax to cover the tax you owe, you may be subject to a penalty. Free state tax return forms If you plan to make this election for 2014, you may need to increase your federal income tax withholding or your estimated tax payments to avoid the penalty. Free state tax return forms See chapter 4 for more information. Free state tax return forms Figuring Child's Income Use Form 8814, Part I, to figure your child's interest and dividend income to report on your return. Free state tax return forms Only the amount over $2,000 is added to your income. Free state tax return forms The amount over $2,000 is shown on Form 8814, line 6. Free state tax return forms Unless the child's income includes qualified dividends or capital gain distributions (discussed next), the same amount is shown on Form 8814, line 12. Free state tax return forms Include the amount from Form 8814, line 12, on Form 1040, line 21. Free state tax return forms Enter “Form 8814” on the dotted line next to line 21. Free state tax return forms If you file more than one Form 8814, include the total amounts from line 12 of all your Forms 8814 on Form 1040, line 21. Free state tax return forms Capital gain distributions and qualified dividends. Free state tax return forms   If your child's dividend income included any capital gain distributions, see Capital gain distributions under Figuring Child's Income in Publication 929, Part 2. Free state tax return forms If your child's dividend income included any qualified dividends, see Qualified dividends under Figuring Child's Income in Publication 929, Part 2. Free state tax return forms Figuring Additional Tax Use Form 8814, Part II, to figure the tax on the $2,000 of your child's interest and dividends that you do not include in your income. Free state tax return forms This tax is added to the tax figured on your income. Free state tax return forms This additional tax is the smaller of: 10% × (your child's gross income − $1,000), or $100. Free state tax return forms Include the amount from line 15 of all your Forms 8814 in the total on Form 1040, line 44. Free state tax return forms Check box a on Form 1040, line 44. Free state tax return forms Figure 31-A. Free state tax return forms Can You Include Your Child's Income On Your Tax Return? Please click here for the text description of the image. Free state tax return forms Figure 31–A. Free state tax return forms Can You Include Your Child's Income On Your Tax Return? Tax for Certain Children Who Have Unearned Income If a child's interest, dividends, and other unearned income total more than $2,000, part of that income may be taxed at the parent's tax rate instead of the child's tax rate. Free state tax return forms If the parent does not or cannot choose to include the child's income on the parent's return, use Form 8615 to figure the child's tax. Free state tax return forms Attach the completed form to the child's Form 1040 or Form 1040A. Free state tax return forms When Form 8615 must be filed. Free state tax return forms   Form 8615 must be filed for a child if all of the following statements are true. Free state tax return forms The child's investment income was more than $2,000. Free state tax return forms The child is required to file a return for 2013. Free state tax return forms The child either: Was under age 18 at the end of the year, Was age 18 at the end of the year and did not have earned income that was more than half of his or her support, or Was over age 18 and under age 24 at the end of the year, was a full-time student, and did not have earned income that was more than half of his or her support. Free state tax return forms At least one of the child's parents was alive at the end of 2013. Free state tax return forms The child does not file a joint return for 2013. Free state tax return forms These conditions are also shown in  Figure 31-B. Free state tax return forms Earned income. Free state tax return forms   Earned income includes salaries, wages, tips, and other payments received for personal services performed. Free state tax return forms It does not include unearned income as defined later in this chapter. Free state tax return forms Support. Free state tax return forms   Your child's support includes all amounts spent to provide the child with food, lodging, clothing, education, medical and dental care, recreation, transportation, and similar necessities. Free state tax return forms To figure your child's support, count support provided by you, your child, and others. Free state tax return forms However, a scholarship received by your child is not considered support if your child is a full-time student. Free state tax return forms See chapter 3 for details about support. Free state tax return forms Certain January 1 birthdays. Free state tax return forms   Use the following chart to determine whether certain children with January 1 birthdays meet condition 3 under When Form 8615 must be filed. Free state tax return forms Figure 31-B. Free state tax return forms Do You Have To Use Form 8615 To Figure Your Child's Tax? Please click here for the text description of the image. Free state tax return forms Figure 31-B. Free state tax return forms Do You Have To Use Form 8615 To Figure Your Child's Tax?    IF a child was born on. Free state tax return forms . Free state tax return forms . Free state tax return forms THEN, at the end of 2013, the child is considered to be. Free state tax return forms . Free state tax return forms . Free state tax return forms January 1, 1996 18* January 1, 1995 19** January 1, 1990 24*** *This child is not under age 18. Free state tax return forms The child meets condition 3 only if the child did not have earned income that was more than half of the child's support. Free state tax return forms  **This child meets condition 3 only if the child was a full-time student who did not have earned income that was more than half of the child's support. Free state tax return forms  ***Do not use Form 8615 for this child. Free state tax return forms Providing Parental Information (Form 8615, lines A–C) On Form 8615, lines A and B, enter the parent's name and social security number. Free state tax return forms (If the parents filed a joint return, enter the name and social security number listed first on the joint return. Free state tax return forms ) On line C, check the box for the parent's filing status. Free state tax return forms See Which Parent's Return To Use at the beginning of this chapter for information on which parent's return information must be used on Form 8615. Free state tax return forms Parent with different tax year. Free state tax return forms   If the parent and the child do not have the same tax year, complete Form 8615 using the information on the parent's return for the tax year that ends in the child's tax year. Free state tax return forms Parent's return information not known timely. Free state tax return forms   If the information needed from the parent's return is not known by the time the child's return is due (usually April 15), you can file the return using estimates. Free state tax return forms   You can use any reasonable estimate. Free state tax return forms This includes using information from last year's return. Free state tax return forms If you use an estimated amount on Form 8615, enter “Estimated” on the line next to the amount. Free state tax return forms    When you get the correct information, file an amended return on Form 1040X, Amended U. Free state tax return forms S. Free state tax return forms Individual Income Tax Return. Free state tax return forms   Instead of using estimates, you can get an automatic 6-month extension of time to file if, by the date your return is due, you file Form 4868, Application for Automatic Extension of Time To File U. Free state tax return forms S. Free state tax return forms Individual Income Tax Return. Free state tax return forms Extensions are discussed in chapter 1. Free state tax return forms Step 1. Free state tax return forms Figuring the Child's Net Unearned Income (Form 8615, Part I) The first step in figuring a child's tax using Form 8615 is to figure the child's net unearned income. Free state tax return forms To do that, use Form 8615, Part I. Free state tax return forms Line 1 (unearned income). Free state tax return forms   If the child had no earned income, enter on this line the adjusted gross income shown on the child's return. Free state tax return forms Adjusted gross income is shown on Form 1040, line 38, or Form 1040A, line 22. Free state tax return forms Form 1040EZ cannot be used if Form 8615 must be filed. Free state tax return forms   If the child had earned income, figure the amount to enter on Form 8615, line 1, by using the worksheet in the instructions for the form. Free state tax return forms   However, if the child has: excluded any foreign earned income, deducted either a loss from self-employment, or deducted a net operating loss from another year, then use the Alternate Worksheet for Form 8615, Line 1, in Publication 929 to figure the amount to enter on Form 8615, line 1. Free state tax return forms Unearned income defined. Free state tax return forms   Unearned income is generally all income other than salaries, wages, and other amounts received as pay for work actually done. Free state tax return forms It includes taxable interest, dividends (including capital gain distributions), capital gains, unemployment compensation, the taxable part of social security and pension payments, and certain distributions from trusts. Free state tax return forms Unearned income includes amounts produced by assets the child obtained with earned income (such as interest on a savings account into which the child deposited wages). Free state tax return forms Nontaxable income. Free state tax return forms   For this purpose, unearned income includes only amounts the child must include in total income. Free state tax return forms Nontaxable unearned income, such as tax-exempt interest and the nontaxable part of social security and pension payments, is not included. Free state tax return forms Income from property received as a gift. Free state tax return forms   A child's unearned income includes all income produced by property belonging to the child. Free state tax return forms This is true even if the property was transferred to the child, regardless of when the property was transferred or purchased or who transferred it. Free state tax return forms   A child's unearned income includes income produced by property given as a gift to the child. Free state tax return forms This includes gifts to the child from grandparents or any other person and gifts made under the Uniform Gift to Minors Act. Free state tax return forms Example. Free state tax return forms Amanda Black, age 13, received the following income. Free state tax return forms Dividends — $800 Wages — $2,100 Taxable interest — $1,200 Tax-exempt interest — $100 Net capital gains — $100 The dividends were qualified dividends on stock given to her by her grandparents. Free state tax return forms Amanda's unearned income is $2,100. Free state tax return forms This is the total of the dividends ($800), taxable interest ($1,200), and net capital gains ($100). Free state tax return forms Her wages are earned (not unearned) income because they are received for work actually done. Free state tax return forms Her tax-exempt interest is not included because it is nontaxable. Free state tax return forms Trust income. Free state tax return forms   If a child is the beneficiary of a trust, distributions of taxable interest, dividends, capital gains, and other unearned income from the trust are unearned income to the child. Free state tax return forms   However, for purposes of completing Form 8615, a taxable distribution from a qualified disability trust is considered earned income, not unearned income. Free state tax return forms Line 2 (deductions). Free state tax return forms   If the child does not itemize deductions on Schedule A (Form 1040), enter $2,000 on line 2. Free state tax return forms   If the child does itemize deductions, enter on line 2 the larger of: $1,000 plus the portion of the child's itemized deductions on Schedule A (Form 1040), line 29, that are directly connected with the production of unearned income entered on line 1, or $2,000. Free state tax return forms Directly connected. Free state tax return forms   Itemized deductions are directly connected with the production of unearned income if they are for expenses paid to produce or collect taxable income or to manage, conserve, or maintain property held for producing income. Free state tax return forms These expenses include custodian fees and service charges, service fees to collect taxable interest and dividends, and certain investment counsel fees. Free state tax return forms   These expenses are added to certain other miscellaneous itemized deductions on Schedule A (Form 1040). Free state tax return forms Only the amount greater than 2% of the child's adjusted gross income can be deducted. Free state tax return forms See chapter 28 for more information. Free state tax return forms Example 1. Free state tax return forms Roger, age 12, has unearned income of $8,000, no other income, no adjustments to income, and itemized deductions of $300 (net of the 2% limit) that are directly connected with his unearned income. Free state tax return forms His adjusted gross income is $8,000, which is entered on Form 1040, line 38, and on Form 8615, line 1. Free state tax return forms Roger enters $2,000 on line 2 because that is more than the total of $1,000 plus his directly connected itemized deductions of $300. Free state tax return forms Example 2. Free state tax return forms Eleanor, age 8, has unearned income of $16,000 and an early withdrawal penalty of $100. Free state tax return forms She has no other income. Free state tax return forms She has itemized deductions of $1,050 (net of the 2% limit) that are directly connected with the production of her unearned income. Free state tax return forms Her adjusted gross income, entered on line 1, is $15,900 ($16,000 − $100). Free state tax return forms The amount on line 2 is $2,050. Free state tax return forms This is the larger of: $1,000 plus the $1,050 of directly connected itemized deductions, or $2,000. Free state tax return forms Line 3. Free state tax return forms   Subtract line 2 from line 1 and enter the result on this line. Free state tax return forms If zero or less, do not complete the rest of the form. Free state tax return forms However, you must still attach Form 8615 to the child's tax return. Free state tax return forms Figure the tax on the child's taxable income in the normal manner. Free state tax return forms Line 4 (child's taxable income). Free state tax return forms   Enter on line 4 the child's taxable income from Form 1040, line 43, or Form 1040A, line 27. Free state tax return forms   However, if the child files Form 2555 or 2555-EZ to claim the foreign earned income exclusion, housing exclusion, or housing deduction, see the Form 8615 instructions or Pub. Free state tax return forms 929. Free state tax return forms Line 5 (net unearned income). Free state tax return forms   A child's net unearned income cannot be more than his or her taxable income. Free state tax return forms Enter on Form 8615, line 5, the smaller of line 3 or line 4. Free state tax return forms This is the child's net unearned income. Free state tax return forms   If zero or less, do not complete the rest of the form. Free state tax return forms However, you must still attach Form 8615 to the child's tax return. Free state tax return forms Figure the tax on the child's taxable income in the normal manner. Free state tax return forms Step 2. Free state tax return forms Figuring Tentative Tax at the Parent's Tax Rate (Form 8615, Part II) The next step in completing Form 8615 is to figure a tentative tax on the child's net unearned income at the parent's tax rate. Free state tax return forms The tentative tax at the parent's tax rate is the difference between the tax on the parent's taxable income figured with the child's net unearned income (plus the net unearned income of any other child whose Form 8615 includes the tax return information of that parent) and the tax figured without it. Free state tax return forms When figuring the tentative tax at the parent's tax rate on Form 8615, do not refigure any of the exclusions, deductions, or credits on the parent's return because of the child's net unearned income. Free state tax return forms For example, do not refigure the medical expense deduction. Free state tax return forms Figure the tentative tax on Form 8615, lines 6 through 13. Free state tax return forms Note. Free state tax return forms If the child or parent has any capital gains or losses, get Publication 929 for help in completing Form 8615, Part II. Free state tax return forms Line 6 (parent's taxable income). Free state tax return forms   Enter on line 6 the parent's taxable income from Form 1040, line 43, Form 1040A, line 27, or Form 1040EZ, line 6. Free state tax return forms   If the Foreign Earned Income Tax Worksheet (in the Form 1040 instructions) was used to figure the parent's tax, enter the amount from line 3 of that worksheet instead of the parent's taxable income. Free state tax return forms Line 7 (net unearned income of other children). Free state tax return forms   If the tax return information of the parent is also used on any other child's Form 8615, enter on line 7 the total of the amounts from line 5 of all the other children's Forms 8615. Free state tax return forms Do not include the amount from line 5 of the Form 8615 being completed. Free state tax return forms Example. Free state tax return forms Paul and Jane Persimmon have three children, Sharon, Jerry, and Mike, who must attach Form 8615 to their tax returns. Free state tax return forms The children's net unearned income amounts on line 5 of their Forms 8615 are: Sharon — $800 Jerry — $600 Mike — $1,000 Line 7 of Sharon's Form 8615 will show $1,600, the total of the amounts on line 5 of Jerry's and Mike's Forms 8615. Free state tax return forms Line 7 of Jerry's Form 8615 will show $1,800 ($800 + $1,000). Free state tax return forms Line 7 of Mike's Form 8615 will show $1,400 ($800 + $600). Free state tax return forms Other children's information not available. Free state tax return forms   If the net unearned income of the other children is not available when the return is due, either file the return using estimates or get an extension of time to file. Free state tax return forms See Parent's return information not known timely , earlier. Free state tax return forms Line 11 (tentative tax). Free state tax return forms   Subtract line 10 from line 9 and enter the result on this line. Free state tax return forms This is the tentative tax. Free state tax return forms   If line 7 is blank, skip lines 12a and 12b and enter the amount from line 11 on line 13. Free state tax return forms Also skip the discussion for lines 12a and 12b that follows. Free state tax return forms Lines 12a and 12b (dividing the tentative tax). Free state tax return forms   If an amount is entered on line 7, divide the tentative tax shown on line 11 among the children according to each child's share of the total net unearned income. Free state tax return forms This is done on lines 12a, 12b, and 13. Free state tax return forms Add the amount on line 7 to the amount on line 5 and enter the total on line 12a. Free state tax return forms Divide the amount on line 5 by the amount on line 12a and enter the result, as a decimal, on line 12b. Free state tax return forms Example. Free state tax return forms In the earlier example under Line 7 (net unearned income of other children), Sharon's Form 8615 shows $1,600 on line 7. Free state tax return forms The amount entered on line 12a is $2,400, the total of the amounts on lines 5 and 7 ($800 + $1,600). Free state tax return forms The decimal on line 12b is  . Free state tax return forms 333, figured as follows and rounded to three places. Free state tax return forms   $800 = . Free state tax return forms 333     $2,400   Step 3. Free state tax return forms Figuring the Child's Tax (Form 8615, Part III) The final step in figuring a child's tax using Form 8615 is to determine the larger of: The total of: The child's share of the tentative tax based on the parent's tax rate, plus The tax on the child's taxable income in excess of net unearned income, figured at the child's tax rate, or The tax on the child's taxable income, figured at the child's tax rate. Free state tax return forms This is the child's tax. Free state tax return forms It is figured on Form 8615, lines 14 through 18. Free state tax return forms Alternative minimum tax. Free state tax return forms   A child may be subject to alternative minimum tax (AMT) if he or she has certain items given preferential treatment under the tax law. Free state tax return forms See Alternative Minimum Tax (AMT) in chapter 30. Free state tax return forms    For more information on who is liable for AMT and how to figure it, see Form 6251, Alternative Minimum Tax—Individuals. Free state tax return forms For information on special limits that apply to a child who files Form 6251, see Certain Children Under Age 24 in the Instructions for Form 6251. Free state tax return forms Prev  Up  Next   Home   More Online Publications