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Free Turbotax For Students

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Free Turbotax For Students

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

The Free File Alliance is a group of industry-leading private-sector tax preparation companies that have agreed to provide free commercial online tax preparation and electronic filing. All Alliance members must meet our rigorous standards for security and privacy.
 

What are the objectives of the Free File Agreement?

  • Provide greater access to free, online tax filing options
  • Make tax filing and preparation easier and reduce burden on individual taxpayers, and
  • Increase growth of e-filing to reach our goal of having 80 percent of returns filed electronically.


Why was the Free File Alliance formed?
In November of 2001, the Office of Management and Budget's (OMB) Quicksilver Task Force established 24 e-government initiatives that were a part of the President's Management Agenda. These initiatives were designed to improve government to government, government to business and government to citizen electronic capabilities.

One initiative, IRS Free File, instructed the IRS to provide free and secure online tax return preparation and filing services to taxpayers. In accordance with this OMB directive, we worked in partnership with the tax software industry to develop a solution. The result was the formation of the Free File Alliance, LLC.

Why is IRS working in a partnership with private industry rather than providing its own software free to the public?
Private industry, with established expertise and experience in electronic tax preparation, has a proven track record in providing the best technology and services available. 

Some private sector firms have offered free e-filing to select taxpayer groups for several years; how is this approach different?
Free File offers a multi-year agreement between IRS and the Free File Alliance to provide free service(s) to more taxpayers. Previously, free offerings were not consistently available and were subject to modification or discontinuation from year-to-year.

With Free File, taxpayers have easy access to IRS.gov, which offers a list of all free offerings on a single web page. Under our agreement, Free File Alliance companies offer both free preparation and free e-filing services. There is no cost to qualifying taxpayers. 

How are Free File program disputes solved?
We negotiate most issues before they become disputes. When necessary, we use binding arbitration to resolve disagreements with the Free File Alliance, LLC, Alliance members or new market entrants. In accordance with IRS guidance, binding arbitration before the General Services Board of Contract Appeals is used to resolve disputes under Article VIII of the Memorandum of Understanding on Service Standards and Disputes between IRS and the Alliance. Binding arbitration may be invoked by an Alliance member or new market entrant for various reasons. As a result, we are able to achieve our goal of providing effective, efficient and fair resolution of Free File program related controversies.
 

Note: We do not endorse any individual Free File Alliance company. While the IRS manages the content of the Free File pages accessible on IRS.gov, it does not retain any taxpayer information entered on the Free File site.

Agreements
Free File Alliance Information
Free On-Line Electronic Tax filing Agreement Amendment - 2009
Free On-Line Electronic Tax Filing Agreement Amendment - 2005
Free On-Line Electronic Filing Agreement - 2002

Memorandums of Understanding 
File (Fifth) Memorandum of Understanding - 2010

Free File (Fourth) Memorandum of Understanding - 2009
Free File (Third) Memorandum of Understanding - 2008
Free File (Second) Memorandum of Understanding - 2007
Free File (First) Memorandum of Understanding - 2006

 

Page Last Reviewed or Updated: 16-Jan-2014

The Free Turbotax For Students

Free turbotax for students 4. Free turbotax for students   Limit on Elective Deferrals Table of Contents Excess elective deferrals. Free turbotax for students General Limit 15-Year RuleYears of Service Figuring the Limit on Elective DeferralsExample The second and final component of MAC is the limit on elective deferrals. Free turbotax for students This is a limit on the amount of contributions that can be made to your account through a salary reduction agreement. Free turbotax for students A salary reduction agreement is an agreement between you and your employer that allows for a portion of your compensation to be directly invested in a 403(b) account on your behalf. Free turbotax for students You can enter into more than one salary reduction agreement during a year. Free turbotax for students More than one 403(b) account. Free turbotax for students If, for any year, elective deferrals are contributed to more than one 403(b) account for you (whether or not with the same employer), you must combine all the elective deferrals to determine whether the total is more than the limit for that year. Free turbotax for students 403(b) plan and another retirement plan. Free turbotax for students If, during the year, contributions in the form of elective deferrals are made to other retirement plans on your behalf, you must combine all of the elective deferrals to determine if they are more than your limit on elective deferrals. Free turbotax for students The limit on elective deferrals applies to amounts contributed to: 401(k) plans, to the extent excluded from income, Roth contribution programs, Section 501(c)(18) plans, to the extent excluded from income, Savings incentive match plan for employees (SIMPLE plans), Simplified employee pension (SEP) plans, and All 403(b) plans. Free turbotax for students Roth contribution program. Free turbotax for students   Your 403(b) plan may allow you to designate all or a portion of your elective deferrals as Roth contributions. Free turbotax for students Elective deferrals designated as Roth contributions must be maintained in a separate Roth account and are not excludable from your gross income. Free turbotax for students   The maximum amount of contributions allowed under a Roth contribution program is your limit on elective deferrals, less your elective deferrals not designated as Roth contributions. Free turbotax for students For more information on the Roth contribution program, see Publication 560, Retirement Plans for Small Business. Free turbotax for students Excess elective deferrals. Free turbotax for students   If the amount contributed is more than the allowable limit, you must include the excess that is not a Roth contribution in your gross income for the year contributed. Free turbotax for students General Limit Under the general limit on elective deferrals, the most that can be contributed to your 403(b) account through a salary reduction agreement is $17,500 for 2013 and 2014. Free turbotax for students This limit applies without regard to community property laws. Free turbotax for students 15-Year Rule If you have at least 15 years of service with an educational organization (such as a public or private school), hospital, home health service agency, health and welfare service agency, church, or convention or association of churches (or associated organization), the limit on elective deferrals to your 403(b) account is increased by the least of: $3,000, $15,000, reduced by the sum of: The additional pre-tax elective deferrals made in prior years because of this rule, plus The aggregate amount of designated Roth contributions permitted for prior years because of this rule, or $5,000 times the number of your years of service for the organization, minus the total elective deferrals made by your employer on your behalf for earlier years. Free turbotax for students If you qualify for the 15-year rule, your elective deferrals under this limit can be as high as $20,500 for 2013 and 2014. Free turbotax for students To determine whether you have 15 years of service with your employer, see Years of Service , next. Free turbotax for students Years of Service To determine if you are eligible for the increased limit on elective deferrals, you will first need to figure your years of service. Free turbotax for students How you figure your years of service depends on whether you were a full-time or a part-time employee, whether you worked for the full year or only part of the year, and whether you have worked for your employer for an entire year. Free turbotax for students You must figure years of service for each year during which you worked for the employer who is maintaining your 403(b) account. Free turbotax for students If more than one employer maintains a 403(b) account for you in the same year, you must figure years of service separately for each employer. Free turbotax for students Definition Your years of service are the total number of years you have worked as a full time employee for the employer maintaining your 403(b) account as of the end of the year. Free turbotax for students Figuring Your Years of Service Take the following rules into account when figuring your years of service. Free turbotax for students Status of employer. Free turbotax for students   Your years of service include only periods during which your employer was a qualified employer. Free turbotax for students Your plan administrator can tell you whether or not your employer was qualified during all your periods of service. Free turbotax for students Service with one employer. Free turbotax for students   Generally, you cannot count service for any employer other than the one who maintains your 403(b) account. Free turbotax for students Church employee. Free turbotax for students   If you are a church employee, treat all of your years of service with related church organizations as years of service with the same employer. Free turbotax for students For more information about church employees, see chapter 5. Free turbotax for students Self-employed ministers. Free turbotax for students   If you are a self-employed minister, your years of service include full and part years in which you have been treated as employed by a tax-exempt organization that is a qualified employer. Free turbotax for students Total years of service. Free turbotax for students   When figuring prior years of service, figure each year individually and then add the individual years of service to determine your total years of service. Free turbotax for students Example. Free turbotax for students The annual work period for full-time teachers employed by ABC Public Schools is September through December and February through May. Free turbotax for students Marsha began working with ABC schools in September 2009. Free turbotax for students She has always worked full-time for each annual work period. Free turbotax for students At the end of 2013, Marsha had 4. Free turbotax for students 5 years of service with ABC Public Schools, as shown in Table 4-1. Free turbotax for students Table 4-1. Free turbotax for students Marsha's Years of Service Note. Free turbotax for students This table shows how Marsha figures her years of service, as explained in the previous example. Free turbotax for students Year Period Worked Portion of Work Period Years of Service 2009 Sept. Free turbotax for students –Dec. Free turbotax for students . Free turbotax for students 5 year . Free turbotax for students 5 year 2010 Feb. Free turbotax for students –May . Free turbotax for students 5 year 1 year Sept. Free turbotax for students –Dec. Free turbotax for students . Free turbotax for students 5 year 2011 Feb. Free turbotax for students –May . Free turbotax for students 5 year 1 year Sept. Free turbotax for students –Dec. Free turbotax for students . Free turbotax for students 5 year 2012 Feb. Free turbotax for students –May . Free turbotax for students 5 year 1 year Sept. Free turbotax for students –Dec. Free turbotax for students . Free turbotax for students 5 year 2013 Feb. Free turbotax for students –May . Free turbotax for students 5 year 1 year Sept. Free turbotax for students –Dec. Free turbotax for students . Free turbotax for students 5 year Total years of service 4. Free turbotax for students 5 years Full-time or part-time. Free turbotax for students   To figure your years of service, you must analyze each year individually and determine whether you worked full-time for the full year or something other than full-time. Free turbotax for students When determining whether you worked full-time or something other than full-time, use your employer's annual work period as the standard. Free turbotax for students Employer's annual work period. Free turbotax for students   Your employer's annual work period is the usual amount of time an individual working full-time in a specific position is required to work. Free turbotax for students Generally, this period of time is expressed in days, weeks, months, or semesters, and can span 2 calendar years. Free turbotax for students Note. Free turbotax for students You cannot accumulate more than 1 year of service in a 12-month period. Free turbotax for students Example. Free turbotax for students All full-time teachers at ABC Public Schools are required to work both the September through December semester and the February through May semester. Free turbotax for students Therefore, the annual work period for full-time teachers employed by ABC Public Schools is September through December and February through May. Free turbotax for students Teachers at ABC Public Schools who work both semesters in the same calendar year are considered working a full year of service in that calendar year. Free turbotax for students Full-Time Employee for the Full Year Count each full year during which you were employed full-time as 1 year of service. Free turbotax for students In determining whether you were employed full-time, compare the amount of work you were required to perform with the amount of work normally required of others who held the same position with the same employer and who generally received most of their pay from the position. Free turbotax for students How to compare. Free turbotax for students   You can use any method that reasonably and accurately reflects the amount of work required. Free turbotax for students For example, if you are a teacher, you can use the number of hours of classroom instruction as a measure of the amount of work required. Free turbotax for students   In determining whether positions with the same employer are the same, consider all of the facts and circumstances concerning the positions, including the work performed, the methods by which pay is determined, and the descriptions (or titles) of the positions. Free turbotax for students Example. Free turbotax for students An assistant professor employed in the English department of a university will be considered a full-time employee if the amount of work that he or she is required to perform is the same as the amount of work normally required of assistant professors of English at that university who get most of their pay from that position. Free turbotax for students   If no one else works for your employer in the same position, compare your work with the work normally required of others who held the same position with similar employers or similar positions with your employer. Free turbotax for students Full year of service. Free turbotax for students   A full year of service for a particular position means the usual annual work period of anyone employed full-time in that general type of work at that place of employment. Free turbotax for students Example. Free turbotax for students If a doctor works for a hospital 12 months of a year except for a 1-month vacation, the doctor will be considered as employed for a full year if the other doctors at that hospital also work 11 months of the year with a 1-month vacation. Free turbotax for students Similarly, if the usual annual work period at a university consists of the fall and spring semesters, an instructor at that university who teaches these semesters will be considered as working a full year. Free turbotax for students Other Than Full-Time for the Full Year If, during any year, you were employed full-time for only part of your employer's annual work period, part-time for the entire annual work period, or part-time for only part of the work period, your year of service for that year is a fraction of your employer's annual work period. Free turbotax for students Full-time for part of the year. Free turbotax for students   If, during a year, you were employed full-time for only part of your employer's annual work period, figure the fraction for that year as follows: The numerator (top number) is the number of weeks, months, or semesters you were a full-time employee. Free turbotax for students The denominator (bottom number) is the number of weeks, months, or semesters considered the normal annual work period for the position. Free turbotax for students Example. Free turbotax for students Jason was employed as a full-time instructor by a local college for the 4 months of the 2013 spring semester (February 2013 through May 2013). Free turbotax for students The annual work period for the college is 8 months (February through May and July through October). Free turbotax for students Given these facts, Jason was employed full-time for part of the annual work period and provided ½ of a year of service. Free turbotax for students Jason's years of service computation for 2013 is as follows: Number of months Jason worked = 4 = 1 Number of months in annual work period 8 2 Part-time for the full year. Free turbotax for students   If, during a year, you were employed part-time for the employer's entire annual work period, you figure the fraction for that year as follows: The numerator (top number) is the number of hours or days you worked. Free turbotax for students The denominator (bottom number) is the number of hours or days normally required of someone holding the same position who works full-time. Free turbotax for students Example. Free turbotax for students Vance teaches one course at a local medical school. Free turbotax for students He teaches 3 hours per week for two semesters. Free turbotax for students Other faculty members at the same school teach 9 hours per week for two semesters. Free turbotax for students The annual work period of the medical school is two semesters. Free turbotax for students An instructor teaching 9 hours a week for two semesters is considered a full-time employee. Free turbotax for students Given these facts, Vance has worked part-time for a full annual work period. Free turbotax for students Vance has completed 1/3 of a year of service, figured as shown below. Free turbotax for students Number of hours per week Vance worked = 3 = 1 Number of hours per week considered full-time 9 3 Part-time for part of the year. Free turbotax for students   If, during any year, you were employed part-time for only part of your employer's annual work period, you figure your fraction for that year by multiplying two fractions. Free turbotax for students   Figure the first fraction as though you had worked full-time for part of the annual work period. Free turbotax for students The fraction is as follows: The numerator (top number) is the number of weeks, months, or semesters you were a full-time employee. Free turbotax for students The denominator (bottom number) is the number of weeks, months, or semesters considered the normal annual work period for the position. Free turbotax for students   Figure the second fraction as though you had worked part-time for the entire annual work period. Free turbotax for students The fraction is as follows: The numerator (top number) is the number of hours or days you worked. Free turbotax for students The denominator (bottom number) is the number of hours or days normally required of someone holding the same position who works full-time. Free turbotax for students   Once you have figured these two fractions, multiply them together to determine the fraction representing your partial year of service for the year. Free turbotax for students Example. Free turbotax for students Maria, an attorney, teaches a course for one semester at a law school. Free turbotax for students She teaches 3 hours per week. Free turbotax for students The annual work period for teachers at the school is two semesters. Free turbotax for students All full-time instructors at the school are required to teach 12 hours per week. Free turbotax for students Based on these facts, Maria is employed part-time for part of the annual work period. Free turbotax for students Her year of service for this year is determined by multiplying two fractions. Free turbotax for students Her computation is as follows: Maria's first fraction Number of semesters Maria worked = 1 Number of semesters in annual work period 2 Maria's second fraction Number of hours Maria worked per week = 3 = 1 Number of hours per week considered full-time 12 4 Maria would multiply these fractions to obtain the fractional year of service: 1 x 1 = 1         2 4 8         Figuring the Limit on Elective Deferrals You can use Part II of Worksheet 1 in chapter 9 to figure the limit on elective deferrals. Free turbotax for students Example Floyd has figured his limit on annual additions. Free turbotax for students The only other component needed before he can determine his MAC for 2014 is his limit on elective deferrals. Free turbotax for students Figuring Floyd's limit on elective deferrals. Free turbotax for students   Floyd has been employed with his current employer for less than 15 years. Free turbotax for students He is not eligible for the special 15-year increase. Free turbotax for students Therefore, his limit on elective deferrals for 2014 is $17,500 as shown in Table 4-2. Free turbotax for students Floyd's employer will not make any nonelective contributions to his 403(b) account and Floyd will not make any after-tax contributions. Free turbotax for students Additionally, Floyd's employer does not offer a Roth contribution program. Free turbotax for students Figuring Floyd's MAC Floyd has determined that his limit on annual additions for 2014 is $52,000 and his limit on elective deferrals is $17,500. Free turbotax for students Because elective deferrals are the only contributions made to Floyd's account, the maximum amount that can be contributed to a 403(b) account on Floyd's behalf in 2014 is $17,500, the lesser of both limits. Free turbotax for students Table 4-2. Free turbotax for students Worksheet 1. Free turbotax for students Maximum Amount Contributable (MAC) Note. Free turbotax for students Use this worksheet to figure your MAC. Free turbotax for students Part I. Free turbotax for students Limit on Annual Additions     1. Free turbotax for students Enter your includible compensation for your most recent year of service 1. Free turbotax for students $70,475 2. Free turbotax for students Maximum: For 2013 enter $51,000 For 2014 enter $52,000 2. Free turbotax for students 52,000 3. Free turbotax for students Enter the lesser of line 1 or line 2. Free turbotax for students This is your limit on annual additions 3. Free turbotax for students 52,000   Caution: If you had only nonelective contributions, skip Part II and enter the amount from line 3 on line 18. Free turbotax for students     Part II. Free turbotax for students Limit on Elective Deferrals     4. Free turbotax for students Maximum contribution: For 2013, enter $17,500 For 2014, enter $17,500 4. Free turbotax for students 17,500   Note. Free turbotax for students If you have at least 15 years of service with a qualifying organization, complete lines 5 through 17. Free turbotax for students If not, enter zero (-0-) on line 16 and go to line 17. Free turbotax for students     5. Free turbotax for students Amount per year of service 5. Free turbotax for students 5,000 6. Free turbotax for students Enter your years of service 6. Free turbotax for students   7. Free turbotax for students Multiply line 5 by line 6 7. Free turbotax for students   8. Free turbotax for students Enter the total of all elective deferrals made for you by the qualifying organization for prior years 8. Free turbotax for students   9. Free turbotax for students Subtract line 8 from line 7. Free turbotax for students If zero or less, enter zero (-0-) 9. Free turbotax for students   10. Free turbotax for students Maximum increase in limit for long service 10. Free turbotax for students 15,000 11. Free turbotax for students Enter the total of additional pre-tax elective deferrals made in prior years under the 15-year rule 11. Free turbotax for students   12. Free turbotax for students Enter the aggregate amount of all designated Roth contributions permitted for prior years under the 15-year rule 12. Free turbotax for students   13. Free turbotax for students Add lines 11 and 12 13. Free turbotax for students   14. Free turbotax for students Subtract line 13 from line 10 14. Free turbotax for students   15. Free turbotax for students Maximum additional contributions 15. Free turbotax for students 3,000 16. Free turbotax for students Enter the least of lines 9, 14, or 15. Free turbotax for students This is your increase in the limit for long service 16. Free turbotax for students -0- 17. Free turbotax for students Add lines 4 and 16. Free turbotax for students This is your limit on elective deferrals 17. Free turbotax for students 17,500   Part III. Free turbotax for students Maximum Amount Contributable     18. Free turbotax for students If you had only nonelective contributions, enter the amount from line 3. Free turbotax for students This is your MAC. Free turbotax for students    If you had only elective deferrals, enter the lesser of lines 3 or 17. Free turbotax for students This is your MAC. Free turbotax for students    If you had both elective deferrals and nonelective contributions, enter the amount from line 3. Free turbotax for students This is your MAC. Free turbotax for students (Use the amount on line 17 to determine if you have excess elective deferrals as explained in chapter 7. Free turbotax for students ) 18. Free turbotax for students $17,500 Prev  Up  Next   Home   More Online Publications