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Free Tax Calculator 2011

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Free Tax Calculator 2011

Free tax calculator 2011 2. Free tax calculator 2011   Possession Source Income Table of Contents Types of IncomeCompensation for Labor or Personal Services Investment Income Sales or Other Dispositions of Property Scholarships, Fellowships, Grants, Prizes, and Awards Effectively Connected Income In order to determine where to file your return and which form(s) you need to complete, you must determine the source of each item of income you received during the tax year. Free tax calculator 2011 Income you received from sources within, or that was effectively connected with the conduct of a trade or business within, the relevant possession must be identified separately from U. Free tax calculator 2011 S. Free tax calculator 2011 or foreign source income. Free tax calculator 2011 This chapter discusses the rules for determining if the source of your income is from: American Samoa, The Commonwealth of the Northern Mariana Islands (CNMI), The Commonwealth of Puerto Rico (Puerto Rico), Guam, or The U. Free tax calculator 2011 S. Free tax calculator 2011 Virgin Islands (USVI). Free tax calculator 2011 Generally, the same rules that apply for determining U. Free tax calculator 2011 S. Free tax calculator 2011 source income also apply for determining possession source income. Free tax calculator 2011 However, there are some important exceptions to these rules. Free tax calculator 2011 Both the general rules and the exceptions are discussed in this chapter. Free tax calculator 2011 U. Free tax calculator 2011 S. Free tax calculator 2011 income rule. Free tax calculator 2011   This rule states that income is not possession source income if, under the rules of Internal Revenue Code sections 861–865, it is treated as income: From sources within the United States, or Effectively connected with the conduct of a trade or business within the United States. Free tax calculator 2011 Table 2-1 shows the general rules for determining whether income is from sources within the United States. Free tax calculator 2011 Table 2-1. Free tax calculator 2011 General Rules for Determining U. Free tax calculator 2011 S. Free tax calculator 2011 Source of Income Item of Income Factor Determining Source Salaries, wages, and other compensation for labor or personal services Where labor or services performed Pensions Contributions: Where services were performed that earned the pension Investment earnings: Where pension trust is located Interest Residence of payer Dividends Where corporation created or organized Rents Location of property Royalties:   Natural resources Location of property Patents, copyrights, etc. Free tax calculator 2011 Where property is used Sale of business inventory—purchased Where sold Sale of business inventory—produced Allocation if produced and sold in different locations Sale of real property Location of property Sale of personal property Seller's tax home (but see Special Rules for Gains From Dispositions of Certain Property , later, for exceptions) Sale of natural resources Allocation based on fair market value of product at export terminal. Free tax calculator 2011 For more information, see Regulations section 1. Free tax calculator 2011 863-1(b). Free tax calculator 2011 Types of Income This section looks at the most common types of income received by individuals, and the rules for determining the source of the income. Free tax calculator 2011 Generally, the same rules shown in Table 2-1 are used to determine if you have possession source income. Free tax calculator 2011 Compensation for Labor or Personal Services Income from labor or personal services includes wages, salaries, commissions, fees, per diem allowances, employee allowances and bonuses, and fringe benefits. Free tax calculator 2011 It also includes income earned by sole proprietors and general partners from providing personal services in the course of their trade or business. Free tax calculator 2011 Services performed wholly within a relevant possession. Free tax calculator 2011   Generally, all pay you receive for services performed in a relevant possession is considered to be from sources within that possession. Free tax calculator 2011 However, there is an exception for income earned as a member of the U. Free tax calculator 2011 S. Free tax calculator 2011 Armed Forces or a civilian spouse. Free tax calculator 2011 U. Free tax calculator 2011 S. Free tax calculator 2011 Armed Forces. Free tax calculator 2011   If you are a bona fide resident of a relevant possession, your military service pay will be sourced in that possession even if you perform the services in the United States or another possession. Free tax calculator 2011 However, if you are not a bona fide resident of a possession, your military service pay will be income from the  United States even if you perform services in a possession. Free tax calculator 2011 Civilian spouse of active duty member of the U. Free tax calculator 2011 S. Free tax calculator 2011 Armed Forces. Free tax calculator 2011   If you are a bona fide resident of a U. Free tax calculator 2011 S. Free tax calculator 2011 possession and choose to keep that possession as your tax residence under MSRRA when relocating with your servicemember spouse under military orders, the source of income for your labor or personal services is considered to be that possession. Free tax calculator 2011 Likewise, if your tax residence is in one of the 50 states or the District of Columbia before relocating and you choose to keep it as your tax residence, the source of income for services performed in any of the U. Free tax calculator 2011 S. Free tax calculator 2011 possessions is considered to be the United States and, specifically, your state of residence or the District of Columbia. Free tax calculator 2011 Services performed partly inside and partly outside a relevant possession. Free tax calculator 2011   If you are an employee and receive compensation for labor or personal services performed both inside and outside the relevant possession, special rules apply in determining the source of the compensation. Free tax calculator 2011 Compensation (other than certain fringe benefits) is sourced on a time basis. Free tax calculator 2011 Certain fringe benefits (such as housing and education) are sourced on a geographical basis. Free tax calculator 2011   Or, you may be permitted to use an alternative basis to determine the source of compensation. Free tax calculator 2011 See Alternative basis , later. Free tax calculator 2011   If you are self-employed, determine the source of your income for labor or personal services from self-employment on the basis that most correctly reflects the proper source of that income under the facts and circumstances of your particular case. Free tax calculator 2011 In many cases, the facts and circumstances will call for an apportionment on a time basis as explained next. Free tax calculator 2011 Time basis. Free tax calculator 2011   Use a time basis to figure your compensation for labor or personal services from the relevant possession (other than the fringe benefits discussed later). Free tax calculator 2011 Do this by multiplying your total compensation (other than the fringe benefits discussed later) by the following fraction:   Number of days you performed  services in the relevant  possession during the year     Total number of days you  performed services during the year           You can use a unit of time less than a day in the above fraction, if appropriate. Free tax calculator 2011 The time period for which the income is made does not have to be a year. Free tax calculator 2011 Instead, you can use another distinct, separate, and continuous time period if you can establish to the satisfaction of the IRS that this other period is more appropriate. Free tax calculator 2011 Example. Free tax calculator 2011 In 2013, you worked in your employer's office in the United States for 60 days and in the Puerto Rico office for 180 days, earning a total of $80,000 for the year. Free tax calculator 2011 Your Puerto Rico source income is $60,000, figured as follows. Free tax calculator 2011       180 days 240 days × $80,000 = $60,000                 Multi-year compensation. Free tax calculator 2011   The source of multi-year compensation is generally determined on a time basis over the period to which the compensation is attributable. Free tax calculator 2011 Multi-year compensation is compensation that is included in your income in 1 tax year but is attributable to a period that includes 2 or more tax years. Free tax calculator 2011 You determine the period to which the income is attributable based on the facts and circumstances of your case. Free tax calculator 2011 For more information on multi-year compensation, see Treasury Decision (T. Free tax calculator 2011 D. Free tax calculator 2011 ) 9212 and Regulations section 1. Free tax calculator 2011 861-4, 2005-35 I. Free tax calculator 2011 R. Free tax calculator 2011 B. Free tax calculator 2011 429, available at www. Free tax calculator 2011 irs. Free tax calculator 2011 gov/irb/2005-35_IRB/ar14. Free tax calculator 2011 html. Free tax calculator 2011 Certain fringe benefits sourced on a geographical basis. Free tax calculator 2011   If you received any of the following fringe benefits as compensation for labor or services performed as an employee partly inside and partly outside a relevant possession, you must source that income on a geographical basis. Free tax calculator 2011 Housing. Free tax calculator 2011 Education. Free tax calculator 2011 Local transportation. Free tax calculator 2011 Tax reimbursement. Free tax calculator 2011 Hazardous or hardship duty pay. Free tax calculator 2011 Moving expense reimbursement. Free tax calculator 2011 For information on determining the source of the fringe benefits listed above, see Regulations section 1. Free tax calculator 2011 861-4. Free tax calculator 2011 Alternative basis. Free tax calculator 2011   You can determine the source of your compensation under an alternative basis if you establish to the satisfaction of the IRS that, under the facts and circumstances of your case, the alternative basis more properly determines the source of your income than the time or geographical basis. Free tax calculator 2011 If you use an alternative basis, you must keep (and have available for inspection) records to document why the alternative basis more properly determines the source of your income. Free tax calculator 2011 De minimis exception. Free tax calculator 2011   There is an exception to the rule for determining the source of income earned in a possession. Free tax calculator 2011 Generally, you will not have income from a possession if during a tax year you: Are a U. Free tax calculator 2011 S. Free tax calculator 2011 citizen or resident, Are not a bona fide resident of that possession, Are not employed by or under contract with an individual, partnership, or corporation that is engaged in a trade or business in that possession, Temporarily perform services in that possession for 90 days or less, and Earned $3,000 or less from such services. Free tax calculator 2011 This exception began with income earned during your 2008 tax year. Free tax calculator 2011 Pensions. Free tax calculator 2011   Generally, pension income has two components: contributions to the pension plan and the earnings accrued from investing those contributions. Free tax calculator 2011 The contribution portion is sourced according to where services were performed that earned the pension. Free tax calculator 2011 The investment earnings portion is sourced according to the location of the pension trust. Free tax calculator 2011 Example. Free tax calculator 2011 You are a U. Free tax calculator 2011 S. Free tax calculator 2011 citizen who worked in Puerto Rico for a U. Free tax calculator 2011 S. Free tax calculator 2011 company. Free tax calculator 2011 All services were performed in Puerto Rico. Free tax calculator 2011 Upon retirement you remained in Puerto Rico and began receiving your pension from the U. Free tax calculator 2011 S. Free tax calculator 2011 pension trust of your employer. Free tax calculator 2011 Distributions from the U. Free tax calculator 2011 S. Free tax calculator 2011 pension trust must be allocated between (1) contributions, which are Puerto Rico source income, and (2) investment earnings, which are U. Free tax calculator 2011 S. Free tax calculator 2011 source income. Free tax calculator 2011 Investment Income This category includes such income as interest, dividends, rents, and royalties. Free tax calculator 2011 Interest income. Free tax calculator 2011   The source of interest income is generally determined by the residence of the payer. Free tax calculator 2011 Interest paid by corporations created or organized in a relevant possession (possession corporation) or by individuals who are bona fide residents of a relevant possession is considered income from sources within that possession. Free tax calculator 2011   However, there is an exception to this rule if you are a bona fide resident of a relevant possession, receive interest from a corporation created or organized in that possession, and are a shareholder of that corporation who owns, directly or indirectly, at least 10% of the total voting stock of the corporation. Free tax calculator 2011 See Regulations section 1. Free tax calculator 2011 937-2(i) for more information. Free tax calculator 2011 Dividends. Free tax calculator 2011   Generally, dividends paid by a corporation created or organized in a relevant possession will be considered income from sources within that possession. Free tax calculator 2011 There are additional rules for bona fide residents of a relevant possession who receive dividend income from possession corporations, and who own, directly or indirectly, at least 10% of the voting stock of the corporation. Free tax calculator 2011 For more information, see Regulations section 1. Free tax calculator 2011 937-2(g). Free tax calculator 2011 Rental income. Free tax calculator 2011   Rents from property located in a relevant possession are treated as income from sources within that possession. Free tax calculator 2011 Royalties. Free tax calculator 2011   Royalties from natural resources located in a relevant possession are considered income from sources within that possession. Free tax calculator 2011   Also considered possession source income are royalties received for the use of, or for the privilege of using, in a relevant possession, patents, copyrights, secret processes and formulas, goodwill, trademarks, trade brands, franchises, and other like property. Free tax calculator 2011 Sales or Other Dispositions of Property The source rules for sales or other dispositions of property are varied. Free tax calculator 2011 The most common situations are discussed below. Free tax calculator 2011 Real property. Free tax calculator 2011   Real property includes land and buildings, and generally anything built on, growing on, or attached to land. Free tax calculator 2011 The location of the property generally determines the source of income from the sale. Free tax calculator 2011 For example, if you are a bona fide resident of Guam and sell your home that is located in Guam, the gain on the sale is sourced in Guam. Free tax calculator 2011 If, however, the home you sold was located in the United States, the gain is U. Free tax calculator 2011 S. Free tax calculator 2011 source income. Free tax calculator 2011 Personal property. Free tax calculator 2011   The term “personal property” refers to property (such as machinery, equipment, or furniture) that is not real property. Free tax calculator 2011 Generally, gain (or loss) from the sale or other disposition is sourced according to the seller's tax home. Free tax calculator 2011 If personal property is sold by a bona fide resident of a relevant possession, the gain (or loss) from the sale is treated as sourced within that possession. Free tax calculator 2011   This rule does not apply to the sale of inventory, intangible property, depreciable personal property, or property sold through a foreign office or fixed place of business. Free tax calculator 2011 The rules applying to sales of inventory are discussed below. Free tax calculator 2011 For information on sales of the other types of property mentioned, see Internal Revenue Code section 865. Free tax calculator 2011 Inventory. Free tax calculator 2011   Your inventory is personal property that is stock in trade or that is held primarily for sale to customers in the ordinary course of your trade or business. Free tax calculator 2011 The source of income from the sale of inventory depends on whether the inventory was purchased or produced. Free tax calculator 2011 Purchased. Free tax calculator 2011   Income from the sale of inventory that you purchased is sourced where you sell the property. Free tax calculator 2011 Generally, this is where title to the property passes to the buyer. Free tax calculator 2011 Produced. Free tax calculator 2011   Income from the sale of inventory that you produced in a relevant possession and sold outside that possession (or vice versa) is sourced based on an allocation. Free tax calculator 2011 For information on making the allocation, see Regulations section 1. Free tax calculator 2011 863-3(f). Free tax calculator 2011 Special Rules for Gains From Dispositions of Certain Property There are special rules for gains from dispositions of certain investment property (for example, stocks, bonds, debt instruments, diamonds, and gold) owned by a U. Free tax calculator 2011 S. Free tax calculator 2011 citizen or resident alien prior to becoming a bona fide resident of a possession. Free tax calculator 2011 You are subject to these special rules if you meet both of the following conditions. Free tax calculator 2011 For the tax year for which the source of the gain must be determined, you are a bona fide resident of the relevant possession. Free tax calculator 2011 For any of the 10 years preceding that year, you were a citizen or resident alien of the United States (other than a bona fide resident of the relevant possession). Free tax calculator 2011 If you meet these conditions, gains from the disposition of this property will not be treated as income from sources within the relevant possession for purposes of the Internal Revenue Code. Free tax calculator 2011 Accordingly, bona fide residents of American Samoa and Puerto Rico, for example, may not exclude the gain on their U. Free tax calculator 2011 S. Free tax calculator 2011 tax return. Free tax calculator 2011 (See chapter 3 for additional filing information. Free tax calculator 2011 ) With respect to the CNMI, Guam, and the USVI, the gain from the disposition of this property will not meet the requirements for certain tax rules that may allow bona fide residents of those possessions to reduce or obtain a rebate of taxes on income from sources within the relevant possessions. Free tax calculator 2011 These rules apply to dispositions after April 11, 2005. Free tax calculator 2011 For details, see Regulations section 1. Free tax calculator 2011 937-2(f)(1) and Examples 1 and 2 of section 1. Free tax calculator 2011 937-2(k). Free tax calculator 2011 Example 1. Free tax calculator 2011 In 2007, Cheryl Jones, a U. Free tax calculator 2011 S. Free tax calculator 2011 citizen, lived in the United States and paid $1,000 for 100 shares of stock in the Rose Corporation, a U. Free tax calculator 2011 S. Free tax calculator 2011 corporation listed on the New York Stock Exchange. Free tax calculator 2011 On March 1, 2010, she moved to Puerto Rico and changed her tax home to Puerto Rico on the same date. Free tax calculator 2011 Cheryl satisfied the presence test in 2010 and, under the year-of-move exception, she was considered a bona fide resident of Puerto Rico for the rest of 2010. Free tax calculator 2011 On March 1, 2010, the closing value of Cheryl's stock in the Rose Corporation was $2,000. Free tax calculator 2011 On January 5, 2013, while still a bona fide resident of Puerto Rico, Cheryl sold all her Rose Corporation stock for $7,000. Free tax calculator 2011 Under the earlier rules, none of Cheryl's $6,000 gain will be treated as income from sources within Puerto Rico. Free tax calculator 2011 The source rules discussed in the preceding paragraphs supplement, and may apply in conjunction with, an existing special rule. Free tax calculator 2011 This existing special rule applies if you are a U. Free tax calculator 2011 S. Free tax calculator 2011 citizen or resident alien who becomes a bona fide resident of American Samoa, the CNMI, or Guam, and who has gain from the disposition of certain U. Free tax calculator 2011 S. Free tax calculator 2011 assets during the 10-year period beginning when you became a bona fide resident. Free tax calculator 2011 The gain is U. Free tax calculator 2011 S. Free tax calculator 2011 source income that generally is subject to U. Free tax calculator 2011 S. Free tax calculator 2011 tax if the property is either (1) located in the United States; (2) stock issued by a U. Free tax calculator 2011 S. Free tax calculator 2011 corporation or a debt obligation of a U. Free tax calculator 2011 S. Free tax calculator 2011 person or of the United States, a state (or political subdivision), or the District of Columbia; or (3) property that has a basis in whole or in part by reference to property described in (1) or (2). Free tax calculator 2011 See chapter 3 for filing information. Free tax calculator 2011 Special election. Free tax calculator 2011   For dispositions after April 11, 2005, you can choose to treat the part of gain (or loss) attributable to the time you held the property while a bona fide resident of the relevant possession (the possession holding period) as gain (or loss) from sources within that possession. Free tax calculator 2011 Make the election by reporting the gain attributable to the possession holding period on your income tax return for the year of disposition. Free tax calculator 2011 This election overrides both of the special rules discussed earlier. Free tax calculator 2011   There are two methods for figuring the gain for the possession holding period, one for marketable securities and another for other types of investment property. Free tax calculator 2011 Marketable securities. Free tax calculator 2011   Marketable securities are those actively traded on an established financial market, such as stock in a publicly held corporation. Free tax calculator 2011 Under the special election, allocate the gain (or loss) by figuring the appreciation separately for your possession and U. Free tax calculator 2011 S. Free tax calculator 2011 holding periods. Free tax calculator 2011   Your possession holding period begins on the first day you do not have a tax home outside the relevant possession. Free tax calculator 2011 The gain (or loss) attributable to the possession holding period is the difference in fair market value of the security at the close of the market on the first and last days of this holding period. Free tax calculator 2011 This is your gain (or loss) that is treated as being from sources within the relevant possession. Free tax calculator 2011 If you were a bona fide resident of the relevant possession for more than one continuous period, combine the gains (or losses) from each possession holding period. Free tax calculator 2011 Example 2. Free tax calculator 2011 Assume the same facts as in Example 1, except that Cheryl makes the special election to allocate the gain between her U. Free tax calculator 2011 S. Free tax calculator 2011 and possession holding periods. Free tax calculator 2011 Cheryl's possession holding period began March 1, 2010, the date her tax home changed to Puerto Rico. Free tax calculator 2011 Therefore, the portion of gain attributable to her possession holding period is $5,000 ($7,000 sale price – $2,000 closing value on first day of the possession holding period). Free tax calculator 2011 By reporting $5,000 of her $6,000 gain as Puerto Rico source income on her 2013 Puerto Rico tax return (and the remainder as non-Puerto Rico source income), Cheryl elects to treat that amount as Puerto Rico source income. Free tax calculator 2011 Other personal property. Free tax calculator 2011   For personal property other than marketable securities, use a time-based allocation. Free tax calculator 2011 Figure the gain (or loss) attributable to the possession holding period by multiplying your total gain (or loss) by the following fraction. Free tax calculator 2011      Number of days in the  possession holding period     Total number of days  in your holding period         The result is your gain (or loss) that is treated as being from sources within the relevant possession. Free tax calculator 2011 Example 3. Free tax calculator 2011 In addition to the stock in Rose Corporation, Cheryl acquired a 5% interest in the Alder Partnership on January 1, 2009. Free tax calculator 2011 On March 1, 2010, when she established bona fide residency in Puerto Rico, her partnership interest was not considered a marketable security. Free tax calculator 2011 On September 16, 2013, while still a bona fide resident of Puerto Rico, Cheryl sold her interest in Alder Partnership for a $100,000 gain. Free tax calculator 2011 She had owned the interest for a total of 1,720 days. Free tax calculator 2011 Cheryl's possession holding period (from March 1, 2010, through September 16, 2013) is 1,296 days. Free tax calculator 2011 The portion of her gain attributable to Puerto Rico is $75,349 ($100,000 x (1,296 Puerto Rico days ÷ 1,720 total days)). Free tax calculator 2011 By reporting $75,349 of her $100,000 gain as Puerto Rico source income on her 2013 Puerto Rico tax return (and the remainder as non-Puerto Rico source income), Cheryl elects to treat that amount as Puerto Rico source income. Free tax calculator 2011 Scholarships, Fellowships, Grants, Prizes, and Awards The source of these types of income is generally the residence of the payer, regardless of who actually disburses the funds. Free tax calculator 2011 Therefore, in order to be possession source income, the payer must be a resident of the relevant possession, such as an individual who is a bona fide resident or a corporation created or organized in that possession. Free tax calculator 2011 These rules do not apply to amounts paid as salary or other compensation for services. Free tax calculator 2011 See Compensation for Labor or Personal Services, earlier in this chapter, for the source rules that apply. Free tax calculator 2011 Effectively Connected Income In limited circumstances, some kinds of income from sources outside the relevant possession must be treated as effectively connected with a trade or business in that possession. Free tax calculator 2011 These circumstances are listed below. Free tax calculator 2011 You have an office or other fixed place of business in the relevant possession to which the income can be attributed. Free tax calculator 2011 That office or place of business is a material factor in producing the income. Free tax calculator 2011 The income is produced in the ordinary course of the trade or business carried on through that office or other fixed place of business. Free tax calculator 2011 An office or other fixed place of business is a material factor if it significantly contributes to, and is an essential economic element in, the earning of the income. Free tax calculator 2011 The three kinds of income from sources outside the relevant possession to which these rules apply are the following. Free tax calculator 2011 Rents and royalties for the use of, or for the privilege of using, intangible personal property located outside the relevant possession or from any interest in such property. Free tax calculator 2011 Included are rents or royalties for the use of, or for the privilege of using, outside the relevant possession, patents, copyrights, secret processes and formulas, goodwill, trademarks, trade brands, franchises, and similar properties if the rents or royalties are from the active conduct of a trade or business in the relevant possession. Free tax calculator 2011 Dividends or interest from the active conduct of a banking, financing, or similar business in the relevant possession. Free tax calculator 2011 Income, gain, or loss from the sale or exchange outside the relevant possession, through the office or other fixed place of business in the relevant possession, of: Stock in trade, Property that would be included in inventory if on hand at the end of the tax year, or Property held primarily for sale to customers in the ordinary course of business. Free tax calculator 2011 Item (3) will not apply if you sold the property for use, consumption, or disposition outside the relevant possession and an office or other fixed place of business in a foreign country was a material factor in the sale. Free tax calculator 2011 Example. Free tax calculator 2011 Marcy Jackson is a bona fide resident of American Samoa. Free tax calculator 2011 Her business, which she conducts from an office in American Samoa, is developing and selling specialized computer software. Free tax calculator 2011 A software purchaser will frequently pay Marcy an additional amount to install the software on the purchaser's operating system and to ensure that the software is functioning properly. Free tax calculator 2011 Marcy installs the software at the purchaser's place of business, which may be in American Samoa, in the United States, or in another country. Free tax calculator 2011 The income from selling the software is effectively connected with the conduct of Marcy's business in American Samoa, even though the product's destination may be outside the possession. Free tax calculator 2011 However, the compensation she receives for installing the software (personal services) outside of American Samoa is not effectively connected with the conduct of her business in the possession—the income is sourced where she performs the services. Free tax calculator 2011 Prev  Up  Next   Home   More Online Publications
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Free tax calculator 2011 Publication 596 - Main Content Table of Contents Chapter 1—Rules for EveryoneRule 1—Adjusted Gross Income (AGI) Limits Rule 2—You Must Have a Valid Social Security Number (SSN) Rule 3—Your Filing Status Cannot Be Married Filing Separately Rule 4—You Must Be a U. Free tax calculator 2011 S. Free tax calculator 2011 Citizen or Resident Alien All Year Rule 5—You Cannot File Form 2555 or Form 2555-EZ Rule 6—Your Investment Income Must Be $3,300 or Less Rule 7—You Must Have Earned Income Chapter 2—Rules If You Have a Qualifying ChildRule 8—Your Child Must Meet the Relationship, Age, Residency, and Joint Return Tests Rule 9—Your Qualifying Child Cannot Be Used by More Than One Person To Claim the EIC Rule 10—You Cannot Be a Qualifying Child of Another Taxpayer Chapter 3—Rules If You Do Not Have a Qualifying ChildRule 11—You Must Be at Least Age 25 but Under Age 65 Rule 12—You Cannot Be the Dependent of Another Person Rule 13—You Cannot Be a Qualifying Child of Another Taxpayer Rule 14—You Must Have Lived in the United States More Than Half of the Year Chapter 4—Figuring and Claiming the EICRule 15—Earned Income Limits IRS Will Figure the EIC for You How To Figure the EIC Yourself Schedule EIC Chapter 5—Disallowance of the EICForm 8862 Are You Prohibited From Claiming the EIC for a Period of Years? Chapter 6—Detailed ExamplesExample 1—Sharon Rose Example 2—Cynthia and Jerry Grey Chapter 1—Rules for Everyone This chapter discusses Rules 1 through 7. Free tax calculator 2011 You must meet all seven rules to qualify for the earned income credit. Free tax calculator 2011 If you do not meet all seven rules, you cannot get the credit and you do not need to read the rest of the publication. Free tax calculator 2011 If you meet all seven rules in this chapter, then read either chapter 2 or chapter 3 (whichever applies) for more rules you must meet. Free tax calculator 2011 Rule 1—Adjusted Gross Income (AGI) Limits Your adjusted gross income (AGI) must be less than: $46,227 ($51,567 for married filing jointly) if you have three or more qualifying children, $43,038 ($48,378 for married filing jointly) if you have two qualifying children, $37,870 ($43,210 for married filing jointly) if you have one qualifying child, or $14,340 ($19,680 for married filing jointly) if you do not have a qualifying child. Free tax calculator 2011 Adjusted gross income (AGI). Free tax calculator 2011   AGI is the amount on line 4 of Form 1040EZ, line 22 of Form 1040A, or line 38 of Form 1040. Free tax calculator 2011   If your AGI is equal to or more than the applicable limit listed above, you cannot claim the EIC. Free tax calculator 2011 You do not need to read the rest of this publication. Free tax calculator 2011 Example—AGI is more than limit. Free tax calculator 2011 Your AGI is $38,550, you are single, and you have one qualifying child. Free tax calculator 2011 You cannot claim the EIC because your AGI is not less than $37,870. Free tax calculator 2011 However, if your filing status was married filing jointly, you might be able to claim the EIC because your AGI is less than $43,210. Free tax calculator 2011 Community property. Free tax calculator 2011   If you are married, but qualify to file as head of household under special rules for married taxpayers living apart (see Rule 3), and live in a state that has community property laws, your AGI includes that portion of both your and your spouse's wages that you are required to include in gross income. Free tax calculator 2011 This is different from the community property rules that apply under Rule 7. Free tax calculator 2011 Rule 2—You Must Have a Valid Social Security Number (SSN) To claim the EIC, you (and your spouse, if filing a joint return) must have a valid SSN issued by the Social Security Administration (SSA). Free tax calculator 2011 Any qualifying child listed on Schedule EIC also must have a valid SSN. Free tax calculator 2011 (See Rule 8 if you have a qualifying child. Free tax calculator 2011 ) If your social security card (or your spouse's, if filing a joint return) says “Not valid for employment” and your SSN was issued so that you (or your spouse) could get a federally funded benefit, you cannot get the EIC. Free tax calculator 2011 An example of a federally funded benefit is Medicaid. Free tax calculator 2011 If you have a card with the legend “Not valid for employment” and your immigration status has changed so that you are now a U. Free tax calculator 2011 S. Free tax calculator 2011 citizen or permanent resident, ask the SSA for a new social security card without the legend. Free tax calculator 2011 If you get the new card after you have already filed your return, you can file an amended return on Form 1040X, Amended U. Free tax calculator 2011 S. Free tax calculator 2011 Individual Income Tax Return, to claim the EIC. Free tax calculator 2011 U. Free tax calculator 2011 S. Free tax calculator 2011 citizen. Free tax calculator 2011   If you were a U. Free tax calculator 2011 S. Free tax calculator 2011 citizen when you received your SSN, you have a valid SSN. Free tax calculator 2011 Valid for work only with INS authorization or DHS authorization. Free tax calculator 2011   If your social security card reads “Valid for work only with INS authorization” or “Valid for work only with DHS authorization,” you have a valid SSN, but only if that authorization is still valid. Free tax calculator 2011 SSN missing or incorrect. Free tax calculator 2011   If an SSN for you or your spouse is missing from your tax return or is incorrect, you may not get the EIC. Free tax calculator 2011 Other taxpayer identification number. Free tax calculator 2011   You cannot get the EIC if, instead of an SSN, you (or your spouse, if filing a joint return) have an individual taxpayer identification number (ITIN). Free tax calculator 2011 ITINs are issued by the Internal Revenue Service to noncitizens who cannot get an SSN. Free tax calculator 2011 No SSN. Free tax calculator 2011   If you do not have a valid SSN, put “No” next to line 64a (Form 1040), line 38a (Form 1040A), or line 8a (Form 1040EZ). Free tax calculator 2011 You cannot claim the EIC. Free tax calculator 2011 Getting an SSN. Free tax calculator 2011   If you (or your spouse, if filing a joint return) do not have an SSN, you can apply for one by filing Form SS-5 with the SSA. Free tax calculator 2011 You can get Form SS-5 online at www. Free tax calculator 2011 socialsecurity. Free tax calculator 2011 gov, from your local SSA office, or by calling the SSA at 1-800-772-1213. Free tax calculator 2011 Filing deadline approaching and still no SSN. Free tax calculator 2011   If the filing deadline is approaching and you still do not have an SSN, you have two choices. Free tax calculator 2011 Request an automatic 6-month extension of time to file your return. Free tax calculator 2011 You can get this extension by filing Form 4868, Application for Automatic Extension of Time to File U. Free tax calculator 2011 S. Free tax calculator 2011 Individual Income Tax Return. Free tax calculator 2011 For more information, see the instructions for Form 4868. Free tax calculator 2011 File the return on time without claiming the EIC. Free tax calculator 2011 After receiving the SSN, file an amended return, Form 1040X, claiming the EIC. Free tax calculator 2011 Attach a filled-in Schedule EIC, Earned Income Credit, if you have a qualifying child. Free tax calculator 2011 Rule 3—Your Filing Status Cannot Be “Married Filing Separately” If you are married, you usually must file a joint return to claim the EIC. Free tax calculator 2011 Your filing status cannot be “Married filing separately. Free tax calculator 2011 ” Spouse did not live with you. Free tax calculator 2011   If you are married and your spouse did not live in your home at any time during the last 6 months of the year, you may be able to file as head of household, instead of married filing separately. Free tax calculator 2011 In that case, you may be able to claim the EIC. Free tax calculator 2011 For detailed information about filing as head of household, see Publication 501, Exemptions, Standard Deduction, and Filing Information. Free tax calculator 2011 Rule 4—You Must Be a U. Free tax calculator 2011 S. Free tax calculator 2011 Citizen or Resident Alien All Year If you (or your spouse, if married) were a nonresident alien for any part of the year, you cannot claim the earned income credit unless your filing status is married filing jointly. Free tax calculator 2011 You can use that filing status only if one spouse is a U. Free tax calculator 2011 S. Free tax calculator 2011 citizen or resident alien and you choose to treat the nonresident spouse as a U. Free tax calculator 2011 S. Free tax calculator 2011 resident. Free tax calculator 2011 If you make this choice, you and your spouse are taxed on your worldwide income. Free tax calculator 2011 If you need more information on making this choice, get Publication 519, U. Free tax calculator 2011 S. Free tax calculator 2011 Tax Guide for Aliens. Free tax calculator 2011 If you (or your spouse, if married) were a nonresident alien for any part of the year and your filing status is not married filing jointly, enter “No” on the dotted line next to line 64a (Form 1040) or in the space to the left of line 38a (Form 1040A). Free tax calculator 2011 Rule 5—You Cannot File Form 2555 or Form 2555-EZ You cannot claim the earned income credit if you file Form 2555, Foreign Earned Income, or Form 2555-EZ, Foreign Earned Income Exclusion. Free tax calculator 2011 You file these forms to exclude income earned in foreign countries from your gross income, or to deduct or exclude a foreign housing amount. Free tax calculator 2011 U. Free tax calculator 2011 S. Free tax calculator 2011 possessions are not foreign countries. Free tax calculator 2011 See Publication 54, Tax Guide for U. Free tax calculator 2011 S. Free tax calculator 2011 Citizens and Resident Aliens Abroad, for more detailed information. Free tax calculator 2011 Rule 6—Your Investment Income Must Be $3,300 or Less You cannot claim the earned income credit unless your investment income is $3,300 or less. Free tax calculator 2011 If your investment income is more than $3,300, you cannot claim the credit. Free tax calculator 2011 Form 1040EZ. Free tax calculator 2011   If you file Form 1040EZ, your investment income is the total of the amount on line 2 and the amount of any tax-exempt interest you wrote to the right of the words “Form 1040EZ” on line 2. Free tax calculator 2011 Form 1040A. Free tax calculator 2011   If you file Form 1040A, your investment income is the total of the amounts on lines 8a (taxable interest), 8b (tax-exempt interest), 9a (ordinary dividends), and 10 (capital gain distributions) on that form. Free tax calculator 2011 Form 1040. Free tax calculator 2011   If you file Form 1040, use Worksheet 1 in this chapter to figure your investment income. Free tax calculator 2011    Worksheet 1. Free tax calculator 2011 Investment Income If You Are Filing Form 1040 Use this worksheet to figure investment income for the earned income credit when you file Form 1040. Free tax calculator 2011 Interest and Dividends         1. Free tax calculator 2011 Enter any amount from Form 1040, line 8a 1. Free tax calculator 2011   2. Free tax calculator 2011 Enter any amount from Form 1040, line 8b, plus any amount on Form 8814, line 1b 2. Free tax calculator 2011   3. Free tax calculator 2011 Enter any amount from Form 1040, line 9a 3. Free tax calculator 2011   4. Free tax calculator 2011 Enter the amount from Form 1040, line 21, that is from Form 8814 if you are filing that form to report your child's interest and dividend income on your return. Free tax calculator 2011 (If your child received an Alaska Permanent Fund dividend, use Worksheet 2 in this chapter to figure the amount to enter on this line. Free tax calculator 2011 ) 4. Free tax calculator 2011   Capital Gain Net Income         5. Free tax calculator 2011 Enter the amount from Form 1040, line 13. Free tax calculator 2011 If the amount on that line is a loss, enter -0- 5. Free tax calculator 2011       6. Free tax calculator 2011 Enter any gain from Form 4797, Sales of Business Property, line 7. Free tax calculator 2011 If the amount on that line is a loss, enter -0-. Free tax calculator 2011 (But, if you completed lines 8 and 9 of Form 4797, enter the amount from line 9 instead. Free tax calculator 2011 ) 6. Free tax calculator 2011       7. Free tax calculator 2011 Substract line 6 of this worksheet from line 5 of this worksheet. Free tax calculator 2011 (If the result is less than zero, enter -0-. Free tax calculator 2011 ) 7. Free tax calculator 2011   Royalties and Rental Income From Personal Property         8. Free tax calculator 2011 Enter any royalty income from Schedule E, line 23b, plus any income from the rental of personal property shown on Form 1040, line 21 8. Free tax calculator 2011       9. Free tax calculator 2011 Enter any expenses from Schedule E, line 20, related to royalty income, plus any expenses from the rental of personal property deducted on Form 1040, line 36 9. Free tax calculator 2011       10. Free tax calculator 2011 Subtract the amount on line 9 of this worksheet from the amount on line 8. Free tax calculator 2011 (If the result is less than zero, enter -0-. Free tax calculator 2011 ) 10. Free tax calculator 2011   Passive Activities         11. Free tax calculator 2011 Enter the total of any net income from passive activities (such as income included on Schedule E, line 26, 29a (col. Free tax calculator 2011 (g)), 34a (col. Free tax calculator 2011 (d)), or 40). Free tax calculator 2011 (See instructions below for lines 11 and 12. Free tax calculator 2011 ) 11. Free tax calculator 2011       12. Free tax calculator 2011 Enter the total of any losses from passive activities (such as losses included on Schedule E, line 26, 29b (col. Free tax calculator 2011 (f)), 34b (col. Free tax calculator 2011 (c)), or 40). Free tax calculator 2011 (See instructions below for lines 11 and 12. Free tax calculator 2011 ) 12. Free tax calculator 2011       13. Free tax calculator 2011 Combine the amounts on lines 11 and 12 of this worksheet. Free tax calculator 2011 (If the result is less than zero, enter -0-. Free tax calculator 2011 ) 13. Free tax calculator 2011   14. Free tax calculator 2011 Add the amounts on lines 1, 2, 3, 4, 7, 10, and 13. Free tax calculator 2011 Enter the total. Free tax calculator 2011 This is your investment income 14. Free tax calculator 2011   15. Free tax calculator 2011 Is the amount on line 14 more than $3,300? ❑ Yes. Free tax calculator 2011 You cannot take the credit. Free tax calculator 2011  ❑ No. Free tax calculator 2011 Go to Step 3 of the Form 1040 instructions for lines 64a and 64b to find out if you can take the credit (unless you are using this publication to find out if you can take the credit; in that case, go to Rule 7, next). Free tax calculator 2011       Instructions for lines 11 and 12. Free tax calculator 2011 In figuring the amount to enter on lines 11 and 12, do not take into account any royalty income (or loss) included on line 26 of Schedule E or any amount included in your earned income. Free tax calculator 2011 To find out if the income on line 26 or line 40 of Schedule E is from a passive activity, see the Schedule E instructions. Free tax calculator 2011 If any of the rental real estate income (or loss) included on Schedule E, line 26, is not from a passive activity, print “NPA” and the amount of that income (or loss) on the dotted line next to line 26. Free tax calculator 2011 Worksheet 2. Free tax calculator 2011 Worksheet for Line 4 of Worksheet 1 Complete this worksheet only if Form 8814 includes an Alaska Permanent Fund dividend. Free tax calculator 2011 Note. Free tax calculator 2011 Fill out a separate Worksheet 2 for each Form 8814. Free tax calculator 2011     1. Free tax calculator 2011 Enter the amount from Form 8814, line 2a 1. Free tax calculator 2011   2. Free tax calculator 2011 Enter the amount from Form 8814, line 2b 2. Free tax calculator 2011   3. Free tax calculator 2011 Subtract line 2 from line 1 3. Free tax calculator 2011   4. Free tax calculator 2011 Enter the amount from Form 8814, line 1a 4. Free tax calculator 2011   5. Free tax calculator 2011 Add lines 3 and 4 5. Free tax calculator 2011   6. Free tax calculator 2011 Enter the amount of the child's Alaska Permanent Fund dividend 6. Free tax calculator 2011   7. Free tax calculator 2011 Divide line 6 by line 5. Free tax calculator 2011 Enter the result as a decimal (rounded to at least three places) 7. Free tax calculator 2011   8. Free tax calculator 2011 Enter the amount from Form 8814, line 12 8. Free tax calculator 2011   9. Free tax calculator 2011 Multiply line 7 by line 8 9. Free tax calculator 2011   10. Free tax calculator 2011 Subtract line 9 from line 8. Free tax calculator 2011 Enter the result on line 4 of Worksheet 1 10. Free tax calculator 2011     (If filing more than one Form 8814, enter on line 4 of Worksheet 1 the total of the amounts on line 10 of all Worksheets 2. Free tax calculator 2011 )     Example—completing Worksheet 2. Free tax calculator 2011 Your 10-year-old child has taxable interest income of $400, an Alaska Permanent Fund dividend of $1,000, and ordinary dividends of $1,100, of which $500 are qualified dividends. Free tax calculator 2011 You choose to report this income on your return. Free tax calculator 2011 You enter $400 on line 1a of Form 8814, $2,100 ($1,000 + $1,100) on line 2a, and $500 on line 2b. Free tax calculator 2011 After completing lines 4 through 11, you enter $400 on line 12 of Form 8814 and line 21 of Form 1040. Free tax calculator 2011 On Worksheet 2, you enter $2,100 on line 1, $500 on line 2, $1,600 on line 3, $400 on line 4, $2,000 on line 5, $1,000 on line 6, 0. Free tax calculator 2011 500 on line 7, $400 on line 8, $200 on line 9, and $200 on line 10. Free tax calculator 2011 You then enter $200 on line 4 of Worksheet 1. Free tax calculator 2011 Rule 7—You Must Have Earned Income This credit is called the “earned income” credit because, to qualify, you must work and have earned income. Free tax calculator 2011 If you are married and file a joint return, you meet this rule if at least one spouse works and has earned income. Free tax calculator 2011 If you are an employee, earned income includes all the taxable income you get from your employer. Free tax calculator 2011 Rule 15 has information that will help you figure the amount of your earned income. Free tax calculator 2011 If you are self-employed or a statutory employee, you will figure your earned income on EIC Worksheet B in the Form 1040 instructions. Free tax calculator 2011 Earned Income Earned income includes all of the following types of income. Free tax calculator 2011 Wages, salaries, tips, and other taxable employee pay. Free tax calculator 2011 Employee pay is earned income only if it is taxable. Free tax calculator 2011 Nontaxable employee pay, such as certain dependent care benefits and adoption benefits, is not earned income. Free tax calculator 2011 But there is an exception for nontaxable combat pay, which you can choose to include in earned income, as explained later in this chapter. Free tax calculator 2011 Net earnings from self-employment. Free tax calculator 2011 Gross income received as a statutory employee. Free tax calculator 2011 Wages, salaries, and tips. Free tax calculator 2011    Wages, salaries, and tips you receive for working are reported to you on Form W-2, in box 1. Free tax calculator 2011 You should report these on line 1 (Form 1040EZ) or line 7 (Forms 1040A and 1040). Free tax calculator 2011 Nontaxable combat pay election. Free tax calculator 2011   You can elect to include your nontaxable combat pay in earned income for the earned income credit. Free tax calculator 2011 The amount of your nontaxable combat pay should be shown on your Form W-2, in box 12, with code Q. Free tax calculator 2011 Electing to include nontaxable combat pay in earned income may increase or decrease your EIC. Free tax calculator 2011 For details, see Nontaxable combat pay in chapter 4. Free tax calculator 2011 Net earnings from self-employment. Free tax calculator 2011   You may have net earnings from self-employment if: You own your own business, or You are a minister or member of a religious order. Free tax calculator 2011 Minister's housing. Free tax calculator 2011   The rental value of a home or a housing allowance provided to a minister as part of the minister's pay generally is not subject to income tax but is included in net earnings from self-employment. Free tax calculator 2011 For that reason, it is included in earned income for the EIC (except in the cases described in Approved Form 4361 or Form 4029 , below). Free tax calculator 2011 Statutory employee. Free tax calculator 2011   You are a statutory employee if you receive a Form W-2 on which the “Statutory employee” box (box 13) is checked. Free tax calculator 2011 You report your income and expenses as a statutory employee on Schedule C or C-EZ (Form 1040). Free tax calculator 2011 Strike benefits. Free tax calculator 2011   Strike benefits paid by a union to its members are earned income. Free tax calculator 2011 Approved Form 4361 or Form 4029 This section is for persons who have an approved: Form 4361, Application for Exemption From Self-Employment Tax for Use by Ministers, Members of Religious Orders and Christian Science Practitioners, or Form 4029, Application for Exemption From Social Security and Medicare Taxes and Waiver of Benefits. Free tax calculator 2011 Each approved form exempts certain income from social security taxes. Free tax calculator 2011 Each form is discussed here in terms of what is or is not earned income for the EIC. Free tax calculator 2011 Form 4361. Free tax calculator 2011   Whether or not you have an approved Form 4361, amounts you received for performing ministerial duties as an employee count as earned income. Free tax calculator 2011 This includes wages, salaries, tips, and other taxable employee compensation. Free tax calculator 2011 A nontaxable housing allowance or the nontaxable rental value of a home is not earned income. Free tax calculator 2011 Also, amounts you received for performing ministerial duties, but not as an employee, do not count as earned income. Free tax calculator 2011 Examples include fees for performing marriages and honoraria for delivering speeches. Free tax calculator 2011 Form 4029. Free tax calculator 2011   Whether or not you have an approved Form 4029, all wages, salaries, tips, and other taxable employee compensation count as earned income. Free tax calculator 2011 However, amounts you received as a self-employed individual do not count as earned income. Free tax calculator 2011 Also, in figuring earned income, do not subtract losses on Schedule C, C-EZ, or F from wages on line 7 of Form 1040. Free tax calculator 2011 Disability Benefits If you retired on disability, taxable benefits you receive under your employer's disability retirement plan are considered earned income until you reach minimum retirement age. Free tax calculator 2011 Minimum retirement age generally is the earliest age at which you could have received a pension or annuity if you were not disabled. Free tax calculator 2011 You must report your taxable disability payments on line 7 of either Form 1040 or Form 1040A until you reach minimum retirement age. Free tax calculator 2011 Beginning on the day after you reach minimum retirement age, payments you receive are taxable as a pension and are not considered earned income. Free tax calculator 2011 Report taxable pension payments on Form 1040, lines 16a and 16b, or Form 1040A, lines 12a and 12b. Free tax calculator 2011 Disability insurance payments. Free tax calculator 2011   Payments you received from a disability insurance policy that you paid the premiums for are not earned income. Free tax calculator 2011 It does not matter whether you have reached minimum retirement age. Free tax calculator 2011 If this policy is through your employer, the amount may be shown in box 12 of your Form W-2 with code “J. Free tax calculator 2011 ” Income That Is Not Earned Income Examples of items that are not earned income include interest and dividends, pensions and annuities, social security and railroad retirement benefits (including disability benefits), alimony and child support, welfare benefits, workers' compensation benefits, unemployment compensation (insurance), nontaxable foster care payments, and veterans' benefits, including VA rehabilitation payments. Free tax calculator 2011 Do not include any of these items in your earned income. Free tax calculator 2011 Earnings while an inmate. Free tax calculator 2011   Amounts received for work performed while an inmate in a penal institution are not earned income when figuring the earned income credit. Free tax calculator 2011 This includes amounts for work performed while in a work release program or while in a halfway house. Free tax calculator 2011 Workfare payments. Free tax calculator 2011   Nontaxable workfare payments are not earned income for the EIC. Free tax calculator 2011 These are cash payments certain people receive from a state or local agency that administers public assistance programs funded under the federal Temporary Assistance for Needy Families (TANF) program in return for certain work activities such as (1) work experience activities (including remodeling or repairing public housing) if sufficient private sector employment is not available, or (2) community service program activities. Free tax calculator 2011 Community property. Free tax calculator 2011   If you are married, but qualify to file as head of household under special rules for married taxpayers living apart (see Rule 3), and live in a state that has community property laws, your earned income for the EIC does not include any amount earned by your spouse that is treated as belonging to you under those laws. Free tax calculator 2011 That amount is not earned income for the EIC, even though you must include it in your gross income on your income tax return. Free tax calculator 2011 Your earned income includes the entire amount you earned, even if part of it is treated as belonging to your spouse under your state's community property laws. Free tax calculator 2011 Nevada, Washington, and California domestic partners. Free tax calculator 2011   If you are a registered domestic partner in Nevada, Washington, or California, the same rules apply. Free tax calculator 2011 Your earned income for the EIC does not include any amount earned by your partner. Free tax calculator 2011 Your earned income includes the entire amount you earned. Free tax calculator 2011 For details, see Publication 555. Free tax calculator 2011 Conservation Reserve Program (CRP) payments. Free tax calculator 2011   If you were receiving social security retirement benefits or social security disability benefits at the time you received any CRP payments, your CRP payments are not earned income for the EIC. Free tax calculator 2011 Nontaxable military pay. Free tax calculator 2011   Nontaxable pay for members of the Armed Forces is not considered earned income for the EIC. Free tax calculator 2011 Examples of nontaxable military pay are combat pay, the Basic Allowance for Housing (BAH), and the Basic Allowance for Subsistence (BAS). Free tax calculator 2011 See Publication 3, Armed Forces' Tax Guide, for more information. Free tax calculator 2011    Combat pay. Free tax calculator 2011 You can elect to include your nontaxable combat pay in earned income for the EIC. Free tax calculator 2011 See Nontaxable combat pay in chapter 4. Free tax calculator 2011 Chapter 2—Rules If You Have a Qualifying Child If you have met all the rules in chapter 1, use this chapter to see if you have a qualifying child. Free tax calculator 2011 This chapter discusses Rules 8 through 10. Free tax calculator 2011 You must meet all three of those rules, in addition to the rules in chapters 1 and 4, to qualify for the earned income credit with a qualifying child. Free tax calculator 2011 You must file Form 1040 or Form 1040A to claim the EIC with a qualifying child. Free tax calculator 2011 (You cannot file Form 1040EZ. Free tax calculator 2011 ) You also must complete Schedule EIC and attach it to your return. Free tax calculator 2011 If you meet all the rules in chapter 1 and this chapter, read chapter 4 to find out what to do next. Free tax calculator 2011 No qualifying child. Free tax calculator 2011   If you do not meet Rule 8, you do not have a qualifying child. Free tax calculator 2011 Read chapter 3 to find out if you can get the earned income credit without a qualifying child. Free tax calculator 2011 Rule 8—Your Child Must Meet the Relationship, Age, Residency, and Joint Return Tests Your child is a qualifying child if your child meets four tests. Free tax calculator 2011 The fours tests are: Relationship, Age, Residency, and Joint return. Free tax calculator 2011 The four tests are illustrated in Figure 1. Free tax calculator 2011 The paragraphs that follow contain more information about each test. Free tax calculator 2011 Relationship Test To be your qualifying child, a child must be your: Son, daughter, stepchild, foster child, or a descendant of any of them (for example, your grandchild), or Brother, sister, half brother, half sister, stepbrother, stepsister, or a descendant of any of them (for example, your niece or nephew). Free tax calculator 2011 The following definitions clarify the relationship test. Free tax calculator 2011 Adopted child. Free tax calculator 2011   An adopted child is always treated as your own child. Free tax calculator 2011 The term “adopted child” includes a child who was lawfully placed with you for legal adoption. Free tax calculator 2011 Foster child. Free tax calculator 2011   For the EIC, a person is your foster child if the child is placed with you by an authorized placement agency or by judgment, decree, or other order of any court of competent jurisdiction. Free tax calculator 2011 (An authorized placement agency includes a state or local government agency. Free tax calculator 2011 It also includes a tax-exempt organization licensed by a state. Free tax calculator 2011 In addition, it includes an Indian tribal government or an organization authorized by an Indian tribal government to place Indian children. Free tax calculator 2011 ) Example. Free tax calculator 2011 Debbie, who is 12 years old, was placed in your care 2 years ago by an authorized agency responsible for placing children in foster homes. Free tax calculator 2011 Debbie is your foster child. Free tax calculator 2011 Figure 1. Free tax calculator 2011 Tests for Qualifying Child Please click here for the text description of the image. Free tax calculator 2011 Conditions for Qualifying Child Age Test Your child must be: Under age 19 at the end of 2013 and younger than you (or your spouse, if filing jointly), Under age 24 at the end of 2013, a student, and younger than you (or your spouse, if filing jointly, or Permanently and totally disabled at any time during 2013, regardless of age. Free tax calculator 2011 The following examples and definitions clarify the age test. Free tax calculator 2011 Example 1—child not under age 19. Free tax calculator 2011 Your son turned 19 on December 10. Free tax calculator 2011 Unless he was permanently and totally disabled or a student, he is not a qualifying child because, at the end of the year, he was not under age 19. Free tax calculator 2011 Example 2—child not younger than you or your spouse. Free tax calculator 2011 Your 23-year-old brother, who is a full-time student and unmarried, lives with you and your spouse. Free tax calculator 2011 He is not disabled. Free tax calculator 2011 Both you and your spouse are 21 years old, and you file a joint return. Free tax calculator 2011 Your brother is not your qualifying child because he is not younger than you or your spouse. Free tax calculator 2011 Example 3—child younger than your spouse but not younger than you. Free tax calculator 2011 The facts are the same as in Example 2 except that your spouse is 25 years old. Free tax calculator 2011 Because your brother is younger than your spouse, he is your qualifying child, even though he is not younger than you. Free tax calculator 2011 Student defined. Free tax calculator 2011   To qualify as a student, your child must be, during some part of each of any 5 calendar months during the calendar year: A full-time student at a school that has a regular teaching staff, course of study, and regular student body at the school, or A student taking a full-time, on-farm training course given by a school described in (1), or a state, county, or local government. Free tax calculator 2011   The 5 calendar months need not be consecutive. Free tax calculator 2011   A full-time student is a student who is enrolled for the number of hours or courses the school considers to be full-time attendance. Free tax calculator 2011 School defined. Free tax calculator 2011   A school can be an elementary school, junior or senior high school, college, university, or technical, trade, or mechanical school. Free tax calculator 2011 However, on-the-job training courses, correspondence schools, and schools offering courses only through the Internet do not count as schools for the EIC. Free tax calculator 2011 Vocational high school students. Free tax calculator 2011   Students who work in co-op jobs in private industry as a part of a school's regular course of classroom and practical training are considered full-time students. Free tax calculator 2011 Permanently and totally disabled. Free tax calculator 2011   Your child is permanently and totally disabled if both of the following apply. Free tax calculator 2011 He or she cannot engage in any substantial gainful activity because of a physical or mental condition. Free tax calculator 2011 A doctor determines the condition has lasted or can be expected to last continuously for at least a year or can lead to death. Free tax calculator 2011 Residency Test Your child must have lived with you in the United States for more than half of 2013. Free tax calculator 2011 The following definitions clarify the residency test. Free tax calculator 2011 United States. Free tax calculator 2011   This means the 50 states and the District of Columbia. Free tax calculator 2011 It does not include Puerto Rico or U. Free tax calculator 2011 S. Free tax calculator 2011 possessions such as Guam. Free tax calculator 2011 Homeless shelter. Free tax calculator 2011   Your home can be any location where you regularly live. Free tax calculator 2011 You do not need a traditional home. Free tax calculator 2011 For example, if your child lived with you for more than half the year in one or more homeless shelters, your child meets the residency test. Free tax calculator 2011 Military personnel stationed outside the United States. Free tax calculator 2011   U. Free tax calculator 2011 S. Free tax calculator 2011 military personnel stationed outside the United States on extended active duty are considered to live in the United States during that duty period for purposes of the EIC. Free tax calculator 2011 Extended active duty. Free tax calculator 2011   Extended active duty means you are called or ordered to duty for an indefinite period or for a period of more than 90 days. Free tax calculator 2011 Once you begin serving your extended active duty, you are still considered to have been on extended active duty even if you do not serve more than 90 days. Free tax calculator 2011 Birth or death of child. Free tax calculator 2011    child who was born or died in 2013 is treated as having lived with you for more than half of 2013 if your home was the child's home for more than half the time he or she was alive in 2013. Free tax calculator 2011 Temporary absences. Free tax calculator 2011   Count time that you or your child is away from home on a temporary absence due to a special circumstance as time the child lived with you. Free tax calculator 2011 Examples of a special circumstance include illness, school attendance, business, vacation, military service, and detention in a juvenile facility. Free tax calculator 2011 Kidnapped child. Free tax calculator 2011   A kidnapped child is treated as living with you for more than half of the year if the child lived with you for more than half the part of the year before the date of the kidnapping. Free tax calculator 2011 The child must be presumed by law enforcement authorities to have been kidnapped by someone who is not a member of your family or the child's family. Free tax calculator 2011 This treatment applies for all years until the child is returned. Free tax calculator 2011 However, the last year this treatment can apply is the earlier of: The year there is a determination that the child is dead, or The year the child would have reached age 18. Free tax calculator 2011   If your qualifying child has been kidnapped and meets these requirements, enter “KC,” instead of a number, on line 6 of Schedule EIC. Free tax calculator 2011 Joint Return Test To meet this test, the child cannot file a joint return for the year. Free tax calculator 2011 Exception. Free tax calculator 2011   An exception to the joint return test applies if your child and his or her spouse file a joint return only to claim a refund of income tax withheld or estimated tax paid. Free tax calculator 2011 Example 1—child files joint return. Free tax calculator 2011 You supported your 18-year-old daughter, and she lived with you all year while her husband was in the Armed Forces. Free tax calculator 2011 He earned $25,000 for the year. Free tax calculator 2011 The couple files a joint return. Free tax calculator 2011 Because your daughter and her husband file a joint return, she is not your qualifying child. Free tax calculator 2011 Example 2—child files joint return to get refund of tax withheld. Free tax calculator 2011 Your 18-year-old son and his 17-year-old wife had $800 of wages from part-time jobs and no other income. Free tax calculator 2011 They do not have a child. Free tax calculator 2011 Neither is required to file a tax return. Free tax calculator 2011 Taxes were taken out of their pay, so they file a joint return only to get a refund of the withheld taxes. Free tax calculator 2011 The exception to the joint return test applies, so your son may be your qualifying child if all the other tests are met. Free tax calculator 2011 Example 3—child files joint return to claim American opportunity credit. Free tax calculator 2011 The facts are the same as in Example 2 except no taxes were taken out of your son's pay. Free tax calculator 2011 He and his wife are not required to file a tax return, but they file a joint return to claim an American opportunity credit of $124 and get a refund of that amount. Free tax calculator 2011 Because claiming the American opportunity credit is their reason for filing the return, they are not filing it only to claim a refund of income tax withheld or estimated tax paid. Free tax calculator 2011 The exception to the joint return test does not apply, so your son is not your qualifying child. Free tax calculator 2011 Married child. Free tax calculator 2011   Even if your child does not file a joint return, if your child was married at the end of the year, he or she cannot be your qualifying child unless: You can claim an exemption for the child, or The reason you cannot claim an exemption for the child is that you let the child's other parent claim the exemption under the Special rule for divorced or separated parents (or parents who live apart) described later. Free tax calculator 2011    Social security number. Free tax calculator 2011 Your qualifying child must have a valid social security number (SSN), unless the child was born and died in 2013 and you attach to your return a copy of the child's birth certificate, death certificate, or hospital records showing a live birth. Free tax calculator 2011 You cannot claim the EIC on the basis of a qualifying child if: The qualifying child's SSN is missing from your tax return or is incorrect, The qualifying child's social security card says “Not valid for employment” and was issued for use in getting a federally funded benefit, or Instead of an SSN, the qualifying child has: An individual taxpayer identification number (ITIN), which is issued to a noncitizen who cannot get an SSN, or An adoption taxpayer identification number (ATIN), issued to adopting parents who cannot get an SSN for the child being adopted until the adoption is final. Free tax calculator 2011   If you have more than one qualifying child and only one has a valid SSN, you can use only that child to claim the EIC. Free tax calculator 2011 For more information about SSNs, see Rule 2. Free tax calculator 2011 Rule 9—Your Qualifying Child Cannot Be Used by More Than One Person To Claim the EIC Sometimes a child meets the tests to be a qualifying child of more than one person. Free tax calculator 2011 However, only one of these persons can actually treat the child as a qualifying child. Free tax calculator 2011 Only that person can use the child as a qualifying child to take all of the following tax benefits (provided the person is eligible for each benefit). Free tax calculator 2011 The exemption for the child. Free tax calculator 2011 The child tax credit. Free tax calculator 2011 Head of household filing status. Free tax calculator 2011 The credit for child and dependent care expenses. Free tax calculator 2011 The exclusion for dependent care benefits. Free tax calculator 2011 The EIC. Free tax calculator 2011 The other person cannot take any of these benefits based on this qualifying child. Free tax calculator 2011 In other words, you and the other person cannot agree to divide these tax benefits between you. Free tax calculator 2011 The other person cannot take any of these tax benefits unless he or she has a different qualifying child. Free tax calculator 2011 The tiebreaker rules, which follow, explain who, if anyone, can claim the EIC when more than one person has the same qualifying child. Free tax calculator 2011 However, the tiebreaker rules do not apply if the other person is your spouse and you file a joint return. Free tax calculator 2011 Tiebreaker rules. Free tax calculator 2011   To determine which person can treat the child as a qualifying child to claim the six tax benefits just listed, the following tiebreaker rules apply. Free tax calculator 2011 If only one of the persons is the child's parent, the child is treated as the qualifying child of the parent. Free tax calculator 2011 If the parents file a joint return together and can claim the child as a qualifying child, the child is treated as the qualifying child of the parents. Free tax calculator 2011 If the parents do not file a joint return together but both parents claim the child as a qualifying child, the IRS will treat the child as the qualifying child of the parent with whom the child lived for the longer period of time during the year. Free tax calculator 2011 If the child lived with each parent for the same amount of time, the IRS will treat the child as the qualifying child of the parent who had the higher adjusted gross income (AGI) for the year. Free tax calculator 2011 If no parent can claim the child as a qualifying child, the child is treated as the qualifying child of the person who had the highest AGI for the year. Free tax calculator 2011 If a parent can claim the child as a qualifying child but no parent does so claim the child, the child is treated as the qualifying child of the person who had the highest AGI for the year, but only if that person's AGI is higher than the highest AGI of any of the child's parents who can claim the child. Free tax calculator 2011 If the child's parents file a joint return with each other, this rule can be applied by treating the parents' total AGI as divided evenly between them. Free tax calculator 2011 See Example 8. Free tax calculator 2011   Subject to these tiebreaker rules, you and the other person may be able to choose which of you claims the child as a qualifying child. Free tax calculator 2011 See Examples 1 through 13. Free tax calculator 2011   If you cannot claim the EIC because your qualifying child is treated under the tiebreaker rules as the qualifying child of another person for 2013, you may be able to take the EIC using a different qualifying child, but you cannot take the EIC using the rules in chapter 3 for people who do not have a qualifying child. Free tax calculator 2011 If the other person cannot claim the EIC. Free tax calculator 2011   If you and someone else have the same qualifying child but the other person cannot claim the EIC because he or she is not eligible or his or her earned income or AGI is too high, you may be able to treat the child as a qualifying child. Free tax calculator 2011 See Examples 6 and 7. Free tax calculator 2011 But you cannot treat the child as a qualifying child to claim the EIC if the other person uses the child to claim any of the other six tax benefits listed earlier in this chapter. Free tax calculator 2011 Examples. Free tax calculator 2011    The following examples may help you in determining whether you can claim the EIC when you and someone else have the same qualifying child. Free tax calculator 2011 Example 1—child lived with parent and grandparent. Free tax calculator 2011 You and your 2-year-old son Jimmy lived with your mother all year. Free tax calculator 2011 You are 25 years old, unmarried, and your AGI is $9,000. Free tax calculator 2011 Your only income was $9,000 from a part-time job. Free tax calculator 2011 Your mother's only income was $20,000 from her job, and her AGI is $20,000. Free tax calculator 2011 Jimmy's father did not live with you or Jimmy. Free tax calculator 2011 The special rule explained later for divorced or separated parents (or parents who live apart) does not apply. Free tax calculator 2011 Jimmy is a qualifying child of both you and your mother because he meets the relationship, age, residency, and joint return tests for both you and your mother. Free tax calculator 2011 However, only one of you can treat him as a qualifying child to claim the EIC (and the other tax benefits listed earlier in this chapter for which that person qualifies). Free tax calculator 2011 He is not a qualifying child of anyone else, including his father. Free tax calculator 2011 If you do not claim Jimmy as a qualifying child for the EIC or any of the other tax benefits listed earlier, your mother can treat him as a qualifying child to claim the EIC (and any of the other tax benefits listed earlier for which she qualifies). Free tax calculator 2011 Example 2—parent has higher AGI than grandparent. Free tax calculator 2011 The facts are the same as in Example 1 except your AGI is $25,000. Free tax calculator 2011 Because your mother's AGI is not higher than yours, she cannot claim Jimmy as a qualifying child. Free tax calculator 2011 Only you can claim him. Free tax calculator 2011 Example 3—two persons claim same child. Free tax calculator 2011 The facts are the same as in Example 1 except that you and your mother both claim Jimmy as a qualifying child. Free tax calculator 2011 In this case, you as the child's parent will be the only one allowed to claim Jimmy as a qualifying child for the EIC and the other tax benefits listed earlier for which you qualify. Free tax calculator 2011 The IRS will disallow your mother's claim to the EIC and any of the other tax benefits listed earlier unless she has another qualifying child. Free tax calculator 2011 Example 4—qualifying children split between two persons. Free tax calculator 2011 The facts are the same as in Example 1 except that you also have two other young children who are qualifying children of both you and your mother. Free tax calculator 2011 Only one of you can claim each child. Free tax calculator 2011 However, if your mother's AGI is higher than yours, you can allow your mother to claim one or more of the children. Free tax calculator 2011 For example, if you claim one child, your mother can claim the other two. Free tax calculator 2011 Example 5—taxpayer who is a qualifying child. Free tax calculator 2011 The facts are the same as in Example 1 except that you are only 18 years old. Free tax calculator 2011 This means you are a qualifying child of your mother. Free tax calculator 2011 Because of Rule 10, discussed next, you cannot claim the EIC and cannot claim your son as a qualifying child. Free tax calculator 2011 Only your mother may be able to treat Jimmy as a qualifying child to claim the EIC. Free tax calculator 2011 If your mother meets all the other requirements for claiming the EIC and you do not claim Jimmy as a qualifying child for any of the other tax benefits listed earlier, your mother can claim both you and Jimmy as qualifying children for the EIC. Free tax calculator 2011 Example 6—grandparent with too much earned income to claim EIC. Free tax calculator 2011 The facts are the same as in Example 1 except that your mother earned $50,000 from her job. Free tax calculator 2011 Because your mother's earned income is too high for her to claim the EIC, only you can claim the EIC using your son. Free tax calculator 2011 Example 7—parent with too much earned income to claim EIC. Free tax calculator 2011 The facts are the same as in Example 1 except that you earned $50,000 from your job and your AGI is $50,500. Free tax calculator 2011 Your earned income is too high for you to claim the EIC. Free tax calculator 2011 But your mother cannot claim the EIC either, because her AGI is not higher than yours. Free tax calculator 2011 Example 8—child lived with both parents and grandparent. Free tax calculator 2011 The facts are the same as in Example 1 except that you and Jimmy's father are married to each other, live with Jimmy and your mother, and have AGI of $30,000 on a joint return. Free tax calculator 2011 If you and your husband do not claim Jimmy as a qualifying child for the EIC or any of the other tax benefits listed earlier, your mother can claim him instead. Free tax calculator 2011 Even though the AGI on your joint return, $30,000, is more than your mother's AGI of $20,000, for this purpose half of the joint AGI can be treated as yours and half as your husband's. Free tax calculator 2011 In other words, each parent's AGI can be treated as $15,000. Free tax calculator 2011 Example 9—separated parents. Free tax calculator 2011 You, your husband, and your 10-year-old son Joey lived together until August 1, 2013, when your husband moved out of the household. Free tax calculator 2011 In August and September, Joey lived with you. Free tax calculator 2011 For the rest of the year, Joey lived with your husband, who is Joey's father. Free tax calculator 2011 Joey is a qualifying child of both you and your husband because he lived with each of you for more than half the year and because he met the relationship, age, and joint return tests for both of you. Free tax calculator 2011 At the end of the year, you and your husband still were not divorced, legally separated, or separated under a written separation agreement, so the Special rule for divorced or separated parents (or parents who live apart) does not apply. Free tax calculator 2011 You and your husband will file separate returns. Free tax calculator 2011 Your husband agrees to let you treat Joey as a qualifying child. Free tax calculator 2011 This means, if your husband does not claim Joey as a qualifying child for any of the tax benefits listed earlier, you can claim him as a qualifying child for any tax benefit listed earlier for which you qualify. Free tax calculator 2011 However, your filing status is married filing separately, so you cannot claim the EIC or the credit for child and dependent care expenses. Free tax calculator 2011 See Rule 3. Free tax calculator 2011 Example 10—separated parents claim same child. Free tax calculator 2011 The facts are the same as in Example 9 except that you and your husband both claim Joey as a qualifying child. Free tax calculator 2011 In this case, only your husband will be allowed to treat Joey as a qualifying child. Free tax calculator 2011 This is because, during 2013, the boy lived with him longer than with you. Free tax calculator 2011 You cannot claim the EIC (either with or without a qualifying child). Free tax calculator 2011 However, your husband's filing status is married filing separately, so he cannot claim the EIC or the credit for child and dependent care expenses. Free tax calculator 2011 See Rule 3. Free tax calculator 2011 Example 11—unmarried parents. Free tax calculator 2011 You, your 5-year-old son, and your son's father lived together all year. Free tax calculator 2011 You and your son's father are not married. Free tax calculator 2011 Your son is a qualifying child of both you and his father because he meets the relationship, age, residency, and joint return tests for both you and his father. Free tax calculator 2011 Your earned income and AGI are $12,000, and your son's father's earned income and AGI are $14,000. Free tax calculator 2011 Neither of you had any other income. Free tax calculator 2011 Your son's father agrees to let you treat the child as a qualifying child. Free tax calculator 2011 This means, if your son's father does not claim your son as a qualifying child for the EIC or any of the other tax benefits listed earlier, you can claim him as a qualifying child for the EIC and any of the other tax benefits listed earlier for which you qualify. Free tax calculator 2011 Example 12—unmarried parents claim same child. Free tax calculator 2011 The facts are the same as in Example 11 except that you and your son's father both claim your son as a qualifying child. Free tax calculator 2011 In this case, only your son's father will be allowed to treat your son as a qualifying child. Free tax calculator 2011 This is because his AGI, $14,000, is more than your AGI, $12,000. Free tax calculator 2011 You cannot claim the EIC (either with or without a qualifying child). Free tax calculator 2011 Example 13—child did not live with a parent. Free tax calculator 2011 You and your 7-year-old niece, your sister's child, lived with your mother all year. Free tax calculator 2011 You are 25 years old, and your AGI is $9,300. Free tax calculator 2011 Your only income was from a part-time job. Free tax calculator 2011 Your mother's AGI is $15,000. Free tax calculator 2011 Her only income was from her job. Free tax calculator 2011 Your niece's parents file jointly, have an AGI of less than $9,000, and do not live with you or their child. Free tax calculator 2011 Your niece is a qualifying child of both you and your mother because she meets the relationship, age, residency, and joint return tests for both you and your mother. Free tax calculator 2011 However, only your mother can treat her as a qualifying child. Free tax calculator 2011 This is because your mother's AGI, $15,000, is more than your AGI, $9,300. Free tax calculator 2011 Special rule for divorced or separated parents (or parents who live apart). Free tax calculator 2011   A child will be treated as the qualifying child of his or her noncustodial parent (for purposes of claiming an exemption and the child tax credit, but not for the EIC) if all of the following statements are true. Free tax calculator 2011 The parents: Are divorced or legally separated under a decree of divorce or separate maintenance, Are separated under a written separation agreement, or Lived apart at all time during the last 6 months of 2013, whether or not they are or were married. Free tax calculator 2011 The child received over half of his or her support for the year from the parents. Free tax calculator 2011 The child is in the custody of one or both parents for more than half of 2013. Free tax calculator 2011 Either of the following statements is true. Free tax calculator 2011 The custodial parent signs Form 8332 or a substantially similar statement that he or she will not claim the child as a dependent for the year, and the noncustodial parent attaches the form or statement to his or her return. Free tax calculator 2011 If the divorce decree or separation agreement went into effect after 1984 and before 2009, the noncustodial parent may be able to attach certain pages from the decree or agreement instead of Form 8332. Free tax calculator 2011 A pre-1985 decree of divorce or separate maintenance or written separation agreement that applies to 2013 provides that the noncustodial parent can claim the child as a dependent, and the noncustodial parent provides at least $600 for support of the child during 2013. Free tax calculator 2011 For details, see Publication 501. Free tax calculator 2011 Also see Applying Rule 9 to divorced or separated parents (or parents who live apart), next. Free tax calculator 2011 Applying Rule 9 to divorced or separated parents (or parents who live apart). Free tax calculator 2011   If a child is treated as the qualifying child of the noncustodial parent under the special rule just described for children of divorced or separated parents (or parents who live apart), only the noncustodial parent can claim an exemption and the child tax credit for the child. Free tax calculator 2011 However, the custodial parent, if eligible, or another eligible taxpayer can claim the child as a qualifying child for the EIC and other tax benefits listed earlier in this chapter. Free tax calculator 2011 If the child is the qualifying child of more than one person for these benefits, then the tiebreaker rules determine which person can treat the child as a qualifying child. Free tax calculator 2011 Example 1. Free tax calculator 2011 You and your 5-year-old son lived all year with your mother, who paid the entire cost of keeping up the home. Free tax calculator 2011 Your AGI is $10,000. Free tax calculator 2011 Your mother’s AGI is $25,000. Free tax calculator 2011 Your son's father did not live with you or your son. Free tax calculator 2011 Under the Special rule for divorced or separated parents (or parents who live apart), your son is treated as the qualifying child of his father, who can claim an exemption and the child tax credit for the child. Free tax calculator 2011 However, your son's father cannot claim your son as a qualifying child for head of household filing status, the credit for child and dependent care expenses, the exclusion for dependent care benefits, or the EIC. Free tax calculator 2011 You and your mother did not have any child care expenses or dependent care benefits. Free tax calculator 2011 If you do not claim your son as a qualifying child, your mother can claim him as a qualifying child for the EIC and head of household filing status, if she qualifies for these tax benefits. Free tax calculator 2011 Example 2. Free tax calculator 2011 The facts are the same as in Example 1 except that your AGI is $25,000 and your mother's AGI is $21,000. Free tax calculator 2011 Your mother cannot claim your son as a qualifying child for any purpose because her AGI is not higher than yours. Free tax calculator 2011 Example 3. Free tax calculator 2011 The facts are the same as in Example 1 except that you and your mother both claim your son as a qualifying child for the EIC. Free tax calculator 2011 Your mother also claims him as a qualifying child for head of household filing status. Free tax calculator 2011 You as the child's parent will be the only one allowed to claim your son as a qualifying child for the EIC. Free tax calculator 2011 The IRS will disallow your mother's claim to the EIC and head of household filing status unless she has another qualifying child. Free tax calculator 2011 Rule 10—You Cannot Be a Qualifying Child of Another Taxpayer You are a qualifying child of another taxpayer (your parent, guardian, foster parent, etc. Free tax calculator 2011 ) if all of the following statements are true. Free tax calculator 2011 You are that person's son, daughter, stepchild, foster child, or a descendant of any of them. Free tax calculator 2011 Or, you are that person's brother, sister, half brother, half sister, stepbrother, stepsister, or a descendant of any of them. Free tax calculator 2011 You were: Under age 19 at the end of the year and younger than that person (or that person's spouse, if the person files jointly), Under age 24 at the end of the year, a student, and younger than that person (or that person's spouse, if the person files jointly), or Permanently and totally disabled, regardless of age. Free tax calculator 2011 You lived with that person in the United States for more than half of the year. Free tax calculator 2011 You are not filing a joint return for the year (or are filing a joint return only to claim a refund of withheld income tax or estimated tax paid). Free tax calculator 2011 For more details about the tests to be a qualifying child, see Rule 8. Free tax calculator 2011 If you are a qualifying child of another taxpayer, you cannot claim the EIC. Free tax calculator 2011 This is true even if the person for whom you are a qualifying child does not claim the EIC or meet all of the rules to claim the EIC. Free tax calculator 2011 Put “No” beside line 64a (Form 1040) or line 38a (Form 1040A). Free tax calculator 2011 Example. Free tax calculator 2011 You and your daughter lived with your mother all year. Free tax calculator 2011 You are 22 years old, unmarried, and attended a trade school full time. Free tax calculator 2011 You had a part-time job and earned $5,700. Free tax calculator 2011 You had no other income. Free tax calculator 2011 Because you meet the relationship, age, residency, and joint return tests, you are a qualifying child of your mother. Free tax calculator 2011 She can claim the EIC if she meets all the other requirements. Free tax calculator 2011 Because you are your mother's qualifying child, you cannot claim the EIC. Free tax calculator 2011 This is so even if your mother cannot or does not claim the EIC. Free tax calculator 2011 Child of person not required to file a return. Free tax calculator 2011   You are not the qualifying child of another taxpayer (and so may qualify to claim the EIC) if the person for whom you met the relationship, age, residency, and joint return tests is not required to file an income tax return and either: Does not file an income tax return, or Files a return only to get a refund of income tax withheld or estimated tax paid. Free tax calculator 2011 Example 1—return not required. Free tax calculator 2011 The facts are the same as in the last example except your mother had no gross income, is not required to file a 2013 tax return, and does not file a 2013 tax return. Free tax calculator 2011 As a result, you are not your mother's qualifying child. Free tax calculator 2011 You can claim the EIC if you meet all the other requirements to do so. Free tax calculator 2011 Example 2—return filed to get refund of tax withheld. Free tax calculator 2011 The facts are the same as in Example 1 except your mother had wages of $1,500 and had income tax withheld from her wages. Free tax calculator 2011 She files a return only to get a refund of the income tax withheld and does not claim the EIC or any other tax credits or deductions. Free tax calculator 2011 As a result, you are not your mother's qualifying child. Free tax calculator 2011 You can claim the EIC if you meet all the other requirements to do so. Free tax calculator 2011 Example 3—return filed to get EIC. Free tax calculator 2011 The facts are the same as in Example 2 except your mother claimed the EIC on her return. Free tax calculator 2011 Since she filed the return to get the EIC, she is not filing it only to get a refund of income tax withheld. Free tax calculator 2011 As a result, you are your mother's qualifying child. Free tax calculator 2011 You cannot claim the EIC. Free tax calculator 2011 Chapter 3—Rules If You Do Not Have a Qualifying Child Use this chapter if you do not have a qualifying child and have met all the rules in chapter 1. Free tax calculator 2011 This chapter discusses Rules 11 through 14. Free tax calculator 2011 You must meet all four of those rules, in addition to the rules in chapters 1 and 4, to qualify for the earned income credit without a qualifying child. Free tax calculator 2011 You can file Form 1040, Form 1040A, or Form 1040EZ to claim the EIC without a qualifying child. Free tax calculator 2011 If you meet all the rules in chapter 1 and this chapter, read chapter 4 to find out what to do next. Free tax calculator 2011 If you have a qualifying child. Free tax calculator 2011   If you meet Rule 8, you have a qualifying child. Free tax calculator 2011 If you meet Rule 8 and do not claim the EIC with a qualifying child, you cannot claim the EIC without a qualifying child. Free tax calculator 2011 Rule 11—You Must Be at Least Age 25 but Under Age 65 You must be at least age 25 but under age 65 at the end of 2013. Free tax calculator 2011 If you are married filing a joint return, either you or your spouse must be at least age 25 but under age 65 at the end of 2013. Free tax calculator 2011 It does not matter which spouse meets the age test, as long as one of the spouses does. Free tax calculator 2011 You meet the age test if you were born after December 31, 1948, and before January 2, 1989. Free tax calculator 2011 If you are married filing a joint return, you meet the age test if either you or your spouse was born after December 31, 1948, and before January 2, 1989. Free tax calculator 2011 If neither you nor your spouse meets the age test, you cannot claim the EIC. Free tax calculator 2011 Put “No” next to line 64a (Form 1040), line 38a (Form 1040A), or line 8a (Form 1040EZ). Free tax calculator 2011 Death of spouse. Free tax calculator 2011   If you are filing a joint return with your spouse who died in 2013, you meet the age test if your spouse was at least age 25 but under age 65 at the time of death. Free tax calculator 2011 Example 1. Free tax calculator 2011 You are age 28 and unmarried. Free tax calculator 2011 You meet the age test. Free tax calculator 2011 Example 2—spouse meets age test. Free tax calculator 2011 You are married and filing a joint return. Free tax calculator 2011 You are age 23 and your spouse is age 27. Free tax calculator 2011 You meet the age test because your spouse is at least age 25 but under age 65. Free tax calculator 2011 Example 3—spouse dies in 2013. Free tax calculator 2011 You are married and filing a joint return with your spouse who died in August 2013. Free tax calculator 2011 You are age 67. Free tax calculator 2011 Your spouse would have become age 65 in November 2013. Free tax calculator 2011 Because your spouse was under age 65 when she died, you meet the age test. Free tax calculator 2011 Rule 12—You Cannot Be the Dependent of Another Person If you are not filing a joint return, you meet this rule if: You checked box 6a on Form 1040 or 1040A, or You did not check the “You” box on line 5 of Form 1040EZ, and you entered $10,000 on that line. Free tax calculator 2011 If you are filing a joint return, you meet this rule if: You checked both box 6a and box 6b on Form 1040 or 1040A, or You and your spouse did not check either the “You” box or the “Spouse” box on line 5 of Form 1040EZ, and you entered $20,000 on that line. Free tax calculator 2011 If you are not sure whether someone else can claim you as a dependent, get Publication 501 and read the rules for claiming a dependent. Free tax calculator 2011 If someone else can claim you as a dependent on his or her return, but does not, you still cannot claim the credit. Free tax calculator 2011 Example 1. Free tax calculator 2011 In 2013, you were age 25, single, and living at home with your parents. Free tax calculator 2011 You worked and were not a student. Free tax calculator 2011 You earned $7,500. Free tax calculator 2011 Your parents cannot claim you as a dependent. Free tax calculator 2011 When you file your return, you claim an exemption for yourself by not checking the You box on line 5 of your Form 1040EZ and by entering $10,000 on that line. Free tax calculator 2011 You meet this rule. Free tax calculator 2011 You can claim the EIC if you meet all the other requirements. Free tax calculator 2011 Example 2. Free tax calculator 2011 The facts are the same as in Example 1, except that you earned $2,000. Free tax calculator 2011 Your parents can claim you as a dependent but decide not to. Free tax calculator 2011 You do not meet this rule. Free tax calculator 2011 You cannot claim the credit because your parents could have claimed you as a dependent. Free tax calculator 2011 Joint returns. Free tax calculator 2011   You generally cannot be claimed as a dependent by another person if you are married and file a joint return. Free tax calculator 2011   However, another person may be able to claim you as a dependent if you and your spouse file a joint return merely to claim a refund of income tax withheld or estimated tax paid. Free tax calculator 2011 But neither you nor your spouse can be claimed as a dependent by another person if you claim the EIC on your joint return. Free tax calculator 2011 Example 1—return filed to get refund of tax withheld. Free tax calculator 2011 You are 26 years old. Free tax calculator 2011 You and your wife live with your parents and had $800 of wages from part-time jobs and no other income. Free tax calculator 2011 Neither you nor your wife is required to file a tax return. Free tax calculator 2011 You do not have a child. Free tax calculator 2011 Taxes were taken out of your pay so you file a joint return only to get a refund of the withheld taxes. Free tax calculator 2011 Your parents are not disqualified from claiming an exemption for you just because you filed a joint return. Free tax calculator 2011 They can claim exemptions for you and your wife if all the other tests to do so are met. Free tax calculator 2011 Example 2—return filed to get EIC. Free tax calculator 2011 The facts are the same as in Example 1except no taxes were taken out of your pay. Free tax calculator 2011 Also, you and your wife are not required to file a tax return, but you file a joint return to claim an EIC of $63 and get a refund of that amount. Free tax calculator 2011 Because claiming the EIC is your reason for filing the return, you are not filing it only to claim a refund of income tax withheld or estimated tax paid. Free tax calculator 2011 Your parents cannot claim an exemption for either you or your wife. Free tax calculator 2011 Rule 13—You Cannot Be a Qualifying Child of Another Taxpayer You are a qualifying child of another taxpayer (your parent, guardian, foster parent, etc. Free tax calculator 2011 ) if all of the following statements are true. Free tax calculator 2011 You are that person's son, daughter, stepchild, foster child, or a descendant of any of them. Free tax calculator 2011 Or, you are that person's brother, sister, half brother, half sister, stepbrother, stepsister, or a descendant of any of them. Free tax calculator 2011 You were: Under age 19 at the end of the year and younger than that person (or that person's spouse, if the person files jointly), Under age 24 at the end of the year, a student, and younger than that person (or that person's spouse, if the person files jointly), or Permanently and totally disabled, regardless of age. Free tax calculator 2011 You lived with that person in the United States for more than half of the year. Free tax calculator 2011 You are not filing a joint return for the year (or are filing a joint return only to claim a refund of withheld income tax or estimated tax paid). Free tax calculator 2011 For more details about the tests to be a qualifying child, see Rule 8. Free tax calculator 2011 If you are a qualifying child of another taxpayer, you cannot claim the EIC. Free tax calculator 2011 This is true even if the person for whom you are a qualifying child does not claim the EIC or meet all of the rules to claim the EIC. Free tax calculator 2011 Put “No” next to line 64a (Form 1040), line 38a (Form 1040A), or line 8a (Form 1040EZ). Free tax calculator 2011 Example. Free tax calculator 2011 You lived with your mother all year. Free tax calculator 2011 You are age 26, unmarried, and permanently and totally disabled. Free tax calculator 2011 Your only income was from a community center where you went three days a week to answer telephones. Free tax calculator 2011 You earned $5,000 for the year and provided more than half of your own support. Free tax calculator 2011 Because you meet the relationship, age, residency, and joint return tests, you are a qualifying child of your mother for the EIC. Free tax calculator 2011 She can claim the EIC if she meets all the other requirements. Free tax calculator 2011 Because you are a qualifying child of your mother, you cannot claim the EIC. Free tax calculator 2011 This is so even if your mother cannot or does not claim the EIC. Free tax calculator 2011 Joint returns. Free tax calculator 2011   You generally cannot be a qualifying child of another taxpayer if you are married and file a joint return. Free tax calculator 2011   However, you may be a qualifying child of another taxpayer if you and your spouse file a joint return merely to claim a refund of income tax withheld or estimated tax paid. Free tax calculator 2011 But neither you nor your spouse can be a qualifying child of another taxpayer if you claim the EIC on your joint return. Free tax calculator 2011 Child of person not required to file a return. Free tax calculator 2011   You are not the qualifying child of another taxpayer (and so may qualify to claim the EIC) if the person for whom you meet the relationship, age, residency, and joint return tests is not required to file an income tax return and either: Does not file an income tax return, or Files a return only to get a refund of income tax withheld or estimated tax paid. Free tax calculator 2011 Example 1—return not required. Free tax calculator 2011 You lived all year with your father. Free tax calculator 2011 You are 27 years old, unmarried, permanently and totally disabled, and earned $13,000. Free tax calculator 2011 You have no other income, no children, and provided more than half of your own support. Free tax calculator 2011 Your father had no gross income, is not required to file a 2013 tax return, and does not file a 2013 tax return. Free tax calculator 2011 As a result, you are not your father's qualifying child. Free tax calculator 2011 You can claim the EIC if you meet all the other requirements to do so. Free tax calculator 2011 Example 2—return filed to get refund of tax withheld. Free tax calculator 2011 The facts are the same as in Example 1 except your father had wages of $1,500 and had income tax withheld from his wages. Free tax calculator 2011 He files a return only to get a refund of the income tax withheld and does not claim the EIC or any other tax credits or deductions. Free tax calculator 2011 As a result, you are not your father's qualifying child. Free tax calculator 2011 You can claim the EIC if you meet all the other requirements to do so. Free tax calculator 2011 Example 3—return filed to get EIC. Free tax calculator 2011 The facts are the same as in Example 2 except your father claimed the EIC on his return. Free tax calculator 2011 Since he filed the return to get the EIC, he is not filing it only to get a refund of income tax withheld. Free tax calculator 2011 As a result, you are your father's qualifying child. Free tax calculator 2011 You cannot claim the EIC. Free tax calculator 2011 Rule 14—You Must Have Lived in the United States More Than Half of the Year Your home (and your spouse's, if filing a joint return) must have been in the United States for more than half the year. Free tax calculator 2011 If it was not, put “No” next to line 64a (Form 1040), line 38a (Form 1040A), or line 8a (Form 1040EZ). Free tax calculator 2011 United States. Free tax calculator 2011   This means the 50 states and the District of Columbia. Free tax calculator 2011 It does not include Puerto Rico or U. Free tax calculator 2011 S. Free tax calculator 2011 possessions such as Guam. Free tax calculator 2011 Homeless shelter. Free tax calculator 2011   Your home can be any location where you regularly live. Free tax calculator 2011 You do not need a traditional home. Free tax calculator 2011 If you lived in one or more homeless shelters in the United States for more than half the year, you meet this rule. Free tax calculator 2011 Military personnel stationed outside the United States. Free tax calculator 2011   U. Free tax calculator 2011 S. Free tax calculator 2011 military personnel stationed outside the United States on extended active duty (defined in chapter 2) are considered to live in the United States during that duty period for purposes of the EIC. Free tax calculator 2011 Chapter 4—Figuring and Claiming the EIC You must meet one more rule to claim the EIC. Free tax calculator 2011 You need to know the amount of your earned income to see if you meet the rule in this chapter. Free tax calculator 2011 You also need to know that amount to figure your EIC. Free tax calculator 2011 Rule 15—Earned Income Limits Your earned income must be less than: $46,227 ($51,567 for married filing jointly) if you have three or more qualifying children, $43,038 ($48,378 for married filing jointly) if you have two qualifying children, $37,870 ($43,210 for married filing jointly) if you have one qualifying child, or $14,340 ($19,680 for married filing jointly) if you do not have a qualifying child. Free tax calculator 2011 Earned Income Earned income generally means wages, salaries, tips, other taxable employee pay, and net earnings from self-employment. Free tax calculator 2011 Employee pay is earned income only if it is taxable. Free tax calculator 2011 Nontaxable employee pay, such as certain dependent care benefits and adoption benefits, is not earned income. Free tax calculator 2011 But there is an exception for nontaxable combat pay, which you can choose to include in earned income. Free tax calculator 2011 Earned income is explained in detail in Rule 7 in chapter 1. Free tax calculator 2011 Figuring earned income. Free tax calculator 2011   If you are self-employed, a statutory employee, or a member of the clergy or a church employee who files Schedule SE (Form 1040), you will figure your earned income when you fill out Part 4 of EIC Worksheet B in the Form 1040 instructions. Free tax calculator 2011   Otherwise, figure your earned income by using the worksheet in Step 5 of the Form 1040 instructions for lines 64a and 64b or the Form 1040A instructions for lines 38a and 38b, or the worksheet in Step 2 of the Form 1040EZ instructions for lines 8a and 8b. Free tax calculator 2011   When using one of those worksheets to figure your earned income, you will start with the amount on line 7 (Form 1040 or Form 1040A) or line 1 (Form 1040EZ). Free tax calculator 2011 You will then reduce that amount by any amount included on that line and described in the following list. Free tax calculator 2011 Scholarship or fellowship grants not reported on a Form W-2. Free tax calculator 2011 A scholarship or fellowship grant that was not reported to you on a Form W-2 is not considered earned income for the earned income credit. Free tax calculator 2011 Inmate's income. Free tax calculator 2011 Amounts received for work performed while an inmate in a penal institution are not earned income for the earned income credit. Free tax calculator 2011 This includes amounts received for work performed while in a work release program or while in a halfway house. Free tax calculator 2011 If you received any amount for work done while an inmate in a penal institution and that amount is included in the total on line 7 (Form 1040 or Form 1040A) or line 1 (Form 1040EZ), put “PRI” and the amount on the dotted line next to line 7 (Form 1040), in the space to the left of the entry space for line 7 (Form 1040A), or in the space to the left of line 1 (Form 1040EZ). Free tax calculator 2011 Pension or annuity from deferred compensation plans. Free tax calculator 2011 A pension or annuity from a nonqualified deferred compensation plan or a nongovernmental section 457 plan is not considered earned income for the earned income credit. Free tax calculator 2011 If you received such an amount and it was included in the total on line 7 (Form 1040 or Form 1040A) or line 1 (Form 1040EZ), put “DFC” and the amount on the dotted line next to line 7 (Form 1040), in the space to the left of the entry space for line 7 (Form 1040A), or in the space to the left of line 1 (Form 1040EZ). Free tax calculator 2011 This amount may be reported in box 11 of your Form W-2. Free tax calculator 2011 If you received such an amount but box 11 is blank, contact your employer for the amount received as a pension or an annuity. Free tax calculator 2011 Clergy. Free tax calculator 2011   If you are a member of the clergy who files Schedule SE and the amount on line 2 of that schedule includes an amount that was also re