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How To File 2010 Tax Returns

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How To File 2010 Tax Returns

How to file 2010 tax returns Publication 555 - Main Content Table of Contents Domicile Community or Separate Property and Income Identifying Income, Deductions, and CreditsIncome Exemptions Deductions Credits, Taxes, and Payments Community Property Laws DisregardedRequesting relief. How to file 2010 tax returns Equitable relief. How to file 2010 tax returns Earned income. How to file 2010 tax returns Trade or business income. How to file 2010 tax returns Partnership income or loss. How to file 2010 tax returns Separate property income. How to file 2010 tax returns Social security benefits. How to file 2010 tax returns Other income. How to file 2010 tax returns End of the Community Preparing a Federal Income Tax ReturnJoint Return Versus Separate Returns Separate Return Preparation How To Get Tax HelpLow Income Taxpayer Clinics Domicile Whether you have community property and community income depends on the state where you are domiciled. How to file 2010 tax returns If you and your spouse (or your registered domestic partner) have different domiciles, check the laws of each to see whether you have community property or community income. How to file 2010 tax returns You have only one domicile even if you have more than one home. How to file 2010 tax returns Your domicile is a permanent legal home that you intend to use for an indefinite or unlimited period, and to which, when absent, you intend to return. How to file 2010 tax returns The question of your domicile is mainly a matter of your intention as indicated by your actions. How to file 2010 tax returns You must be able to show that you intend a given place or state to be your permanent home. How to file 2010 tax returns If you move into or out of a community property state during the year, you may or may not have community income. How to file 2010 tax returns Factors considered in determining domicile include: Where you pay state income tax, Where you vote, Location of property you own, Your citizenship, Length of residence, and Business and social ties to the community. How to file 2010 tax returns Amount of time spent. How to file 2010 tax returns    The amount of time spent in one place does not always explain the difference between home and domicile. How to file 2010 tax returns A temporary home or residence may continue for months or years while a domicile may be established the first moment you occupy the property. How to file 2010 tax returns Your intent is the determining factor in proving where you have your domicile. How to file 2010 tax returns    Note. How to file 2010 tax returns When this publication refers to where you live, it means your domicile. How to file 2010 tax returns Community or Separate Property and Income If you file a federal tax return separately from your spouse, you must report half of all community income and all of your separate income. How to file 2010 tax returns Likewise, a registered domestic partner must report half of all community income and all of his or her separate income on his or her federal tax return. How to file 2010 tax returns You each must attach your Form 8958 to your Form 1040 showing how you figured the amount you are reporting on your return. How to file 2010 tax returns Generally, the laws of the state in which you are domiciled govern whether you have community property and community income or separate property and separate income for federal tax purposes. How to file 2010 tax returns The following is a summary of the general rules. How to file 2010 tax returns These rules are also shown in Table 1. How to file 2010 tax returns Community property. How to file 2010 tax returns    Generally, community property is property: That you, your spouse (or your registered domestic partner), or both acquire during your marriage (or registered domestic partnership) while you and your spouse (or your registered domestic partner) are domiciled in a community property state. How to file 2010 tax returns That you and your spouse (or your registered domestic partner) agreed to convert from separate to community property. How to file 2010 tax returns That cannot be identified as separate property. How to file 2010 tax returns Community income. How to file 2010 tax returns    Generally, community income is income from: Community property. How to file 2010 tax returns Salaries, wages, and other pay received for the services performed by you, your spouse (or your registered domestic partner), or both during your marriage (or registered domestic partnership) while domiciled in a community property state. How to file 2010 tax returns Real estate that is treated as community property under the laws of the state where the property is located. How to file 2010 tax returns Note Separate property. How to file 2010 tax returns    Generally, separate property is: Property that you or your spouse (or your registered domestic partner) owned separately before your marriage (or registered domestic partnership). How to file 2010 tax returns Money earned while domiciled in a noncommunity property state. How to file 2010 tax returns Property that you or your spouse (or your registered domestic partner) received separately as a gift or inheritance during your marriage (or registered domestic partnership). How to file 2010 tax returns Property that you or your spouse (or your registered domestic partner) bought with separate funds, or acquired in exchange for separate property, during your marriage (or registered domestic partnership). How to file 2010 tax returns Property that you and your spouse (or your registered domestic partner) converted from community property to separate property through an agreement valid under state law. How to file 2010 tax returns The part of property bought with separate funds, if part was bought with community funds and part with separate funds. How to file 2010 tax returns Separate income. How to file 2010 tax returns    Generally, income from separate property is the separate income of the spouse (or the registered domestic partner) who owns the property. How to file 2010 tax returns    In Idaho, Louisiana, Texas, and Wisconsin, income from most separate property is community income. How to file 2010 tax returns Table 1. How to file 2010 tax returns General Rules — Property and Income: Community or Separate? Community property is property: That you, your spouse (or your registered domestic partner), or both acquire during your marriage (or registered domestic partnership) while you and your spouse (or your registered domestic partner) are domiciled in a community property state. How to file 2010 tax returns (Includes the part of property bought with community property funds if part was bought with community funds and part with separate funds. How to file 2010 tax returns ) That you and your spouse (or your registered domestic partner) agreed to convert from separate to community property. How to file 2010 tax returns That cannot be identified as separate property. How to file 2010 tax returns Separate property is: Property that you or your spouse (or your registered domestic partner) owned separately before your marriage (or registered domestic partnership). How to file 2010 tax returns Money earned while domiciled in a noncommunity property state. How to file 2010 tax returns Property either of you received as a gift or inherited separately during your marriage (or registered domestic partnership). How to file 2010 tax returns Property bought with separate funds, or exchanged for separate property, during your marriage (or registered domestic partnership). How to file 2010 tax returns Property that you and your spouse (or your registered domestic partner) agreed to convert from community to separate property through an agreement valid under state law. How to file 2010 tax returns The part of property bought with separate funds, if part was bought with community funds and part with separate funds. How to file 2010 tax returns Community income 1,2,3 is income from: Community property. How to file 2010 tax returns Salaries, wages, or pay for services of you, your spouse (or your registered domestic partner), or both during your marriage (or registered domestic partnership) while domiciled in a community property state. How to file 2010 tax returns Real estate that is treated as community property under the laws of the state where the property is located. How to file 2010 tax returns Separate income 1,2 is income from: Separate property which belongs to the spouse (or registered domestic partner) who owns the property. How to file 2010 tax returns 1In Idaho, Louisiana, Texas, and Wisconsin, income from most separate property is community income. How to file 2010 tax returns 2Check your state law if you are separated but do not meet the conditions discussed in Spouses living apart all year , later. How to file 2010 tax returns In some states, the income you earn after you are separated and before a divorce decree is issued continues to be community income. How to file 2010 tax returns In other states, it is separate income. How to file 2010 tax returns 3Under special rules, income that can otherwise be characterized as community income may not be treated as community income for federal income tax purposes in certain situations. How to file 2010 tax returns See Community Property Laws Disregarded , later. How to file 2010 tax returns Identifying Income, Deductions, and Credits If you file separate returns, you and your spouse (or your registered domestic partner) each must attach your Form 8958 to your Form 1040 to identify your community and separate income, deductions, credits, and other return amounts according to the laws of your state. How to file 2010 tax returns Under special rules, income that can otherwise be characterized as community income may not be treated as community income for federal income tax purposes in certain situations. How to file 2010 tax returns See Community Property Laws Disregarded, later. How to file 2010 tax returns Check your state law if you are separated but do not meet the conditions discussed in Spouses living apart all year, later. How to file 2010 tax returns In some states, the income you earn after you are separated and before a divorce decree is issued continues to be community income. How to file 2010 tax returns In other states, it is separate income. How to file 2010 tax returns Income The following is a discussion of the general effect of community property laws on the federal income tax treatment of certain items of income. How to file 2010 tax returns Wages, earnings, and profits. How to file 2010 tax returns    A spouse's (or your registered domestic partner's) wages, earnings, and net profits from a sole proprietorship are community income and must be evenly split. How to file 2010 tax returns Dividends, interest, and rents. How to file 2010 tax returns    Dividends, interest, and rents from community property are community income and must be evenly split. How to file 2010 tax returns Dividends, interest, and rents from separate property are characterized in accordance with the discussion under Income from separate property , later. How to file 2010 tax returns Example. How to file 2010 tax returns If you and your spouse (or your registered domestic partner) buy a bond that is considered community property under your state laws, half the bond interest belongs to you and half belongs to your spouse. How to file 2010 tax returns You each must show the bond interest and the split of that interest on your Form 8958, and report half the interest on your Form 1040. How to file 2010 tax returns Attach your Form 8958 to your Form 1040. How to file 2010 tax returns Alimony received. How to file 2010 tax returns    Alimony or separate maintenance payments made prior to divorce are taxable to the payee spouse only to the extent they exceed 50% (his or her share) of the reportable community income. How to file 2010 tax returns This is so because the payee spouse is already required to report half of the community income. How to file 2010 tax returns See also Alimony paid , later. How to file 2010 tax returns Gains and losses. How to file 2010 tax returns    Gains and losses are classified as separate or community depending on how the property is held. How to file 2010 tax returns For example, a loss on separate property, such as stock held separately, is a separate loss. How to file 2010 tax returns On the other hand, a loss on community property, such as a casualty loss to your home held as community property, is a community loss. How to file 2010 tax returns See Publication 544, Sales and Other Dispositions of Assets, for information on gains and losses. How to file 2010 tax returns See Publication 547, Casualties, Disasters, and Thefts, for information on losses due to a casualty or theft. How to file 2010 tax returns Withdrawals from individual retirement arrangements (IRAs) and Coverdell Education Savings Accounts (ESAs). How to file 2010 tax returns    There are several kinds of individual retirement arrangements (IRAs). How to file 2010 tax returns They are traditional IRAs (including SEP-IRAs), SIMPLE IRAs, and Roth IRAs. How to file 2010 tax returns IRAs and ESAs by law are deemed to be separate property. How to file 2010 tax returns Therefore, taxable IRA and ESA distributions are separate property, even if the funds in the account would otherwise be community property. How to file 2010 tax returns These distributions are wholly taxable to the spouse (or registered domestic partner) whose name is on the account. How to file 2010 tax returns That spouse (or registered domestic partner) is also liable for any penalties and additional taxes on the distributions. How to file 2010 tax returns Pensions. How to file 2010 tax returns    Generally, distributions from pensions will be characterized as community or separate income depending on the respective periods of participation in the pension while married (or during the registered domestic partnership) and domiciled in a community property state or in a noncommunity property state during the total period of participation in the pension. How to file 2010 tax returns See the example under Civil service retirement , later. How to file 2010 tax returns These rules may vary between states. How to file 2010 tax returns Check your state law. How to file 2010 tax returns Lump-sum distributions. How to file 2010 tax returns    If you were born before January 2, 1936, and receive a lump-sum distribution from a qualified retirement plan, you may be able to choose an optional method of figuring the tax on the distribution. How to file 2010 tax returns For the 10-year tax option, you must disregard community property laws. How to file 2010 tax returns For more information, see Publication 575, Pension and Annuity Income, and Form 4972, Tax on Lump-Sum Distributions. How to file 2010 tax returns Civil service retirement. How to file 2010 tax returns    For income tax purposes, community property laws apply to annuities payable under the Civil Service Retirement Act (CSRS) or Federal Employee Retirement System (FERS). How to file 2010 tax returns   Whether a civil service annuity is separate or community income depends on your marital status (or your status as a registered domestic partner) and domicile of the employee when the services were performed for which the annuity is paid. How to file 2010 tax returns Even if you now live in a noncommunity property state and you receive a civil service annuity, it may be community income if it is based on services you performed while married (or during the registered domestic partnership) and domiciled in a community property state. How to file 2010 tax returns   If a civil service annuity is a mixture of community income and separate income, it must be divided between the two kinds of income. How to file 2010 tax returns The division is based on the employee's domicile and marital status (or registered domestic partnership) in community and noncommunity property states during his or her periods of service. How to file 2010 tax returns Example. How to file 2010 tax returns Henry Wright retired this year after 30 years of civil service. How to file 2010 tax returns He and his wife were domiciled in a community property state during the past 15 years. How to file 2010 tax returns Since half the service was performed while the Wrights were married and domiciled in a community property state, half the civil service retirement pay is considered to be community income. How to file 2010 tax returns If Mr. How to file 2010 tax returns Wright receives $1,000 a month in retirement pay, $500 is considered community income—half ($250) is his income and half ($250) is his wife's. How to file 2010 tax returns Military retirement pay. How to file 2010 tax returns    State community property laws apply to military retirement pay. How to file 2010 tax returns Generally, the pay is either separate or community income based on the marital status and domicile of the couple while the member of the Armed Forces was in active military service. How to file 2010 tax returns For example, military retirement pay for services performed during marriage and domicile in a community property state is community income. How to file 2010 tax returns   Active military pay earned while married and domiciled in a community property state is also community income. How to file 2010 tax returns This income is considered to be received half by the member of the Armed Forces and half by the spouse. How to file 2010 tax returns Partnership income. How to file 2010 tax returns    If an interest is held in a partnership, and income from the partnership is attributable to the efforts of either spouse (or registered domestic partner), the partnership income is community property. How to file 2010 tax returns If it is merely a passive investment in a separate property partnership, the partnership income will be characterized in accordance with the discussion under Income from separate property , later. How to file 2010 tax returns Tax-exempt income. How to file 2010 tax returns    For spouses, community income exempt from federal tax generally keeps its exempt status for both spouses. How to file 2010 tax returns For example, under certain circumstances, income earned outside the United States is tax exempt. How to file 2010 tax returns If you earned income and met the conditions that made it exempt, the income is also exempt for your spouse even though he or she may not have met the conditions. How to file 2010 tax returns Registered domestic partners should consult the particular exclusion provision to see if the exempt status applies to both. How to file 2010 tax returns Income from separate property. How to file 2010 tax returns    In some states, income from separate property is separate income. How to file 2010 tax returns These states include Arizona, California, Nevada, New Mexico, and Washington. How to file 2010 tax returns Other states characterize income from separate property as community income. How to file 2010 tax returns These states include Idaho, Louisiana, Texas, and Wisconsin. How to file 2010 tax returns Exemptions When you file separate returns, you must claim your own exemption amount for that year. How to file 2010 tax returns (See your tax return instructions. How to file 2010 tax returns ) You cannot divide the amount allowed as an exemption for a dependent between you and your spouse (or your registered domestic partner). How to file 2010 tax returns When community funds provide support for more than one person, each of whom otherwise qualifies as a dependent, you and your spouse (or your registered domestic partner) may divide the number of dependency exemptions as explained in the following example. How to file 2010 tax returns Example. How to file 2010 tax returns Ron and Diane White have three dependent children and live in Nevada. How to file 2010 tax returns If Ron and Diane file separately, only Ron can claim his own exemption, and only Diane can claim her own exemption. How to file 2010 tax returns Ron and Diane can agree that one of them will claim the exemption for one, two, or all of their children and the other will claim any remaining exemptions. How to file 2010 tax returns They cannot each claim half of the total exemption amount for their three children. How to file 2010 tax returns Deductions If you file separate returns, your deductions generally depend on whether the expenses involve community or separate income. How to file 2010 tax returns Business and investment expenses. How to file 2010 tax returns    If you file separate returns, expenses incurred to earn or produce community business or investment income are generally divided equally between you and your spouse (or your registered domestic partner). How to file 2010 tax returns Each of you is entitled to deduct one-half of the expenses on your separate returns. How to file 2010 tax returns Expenses incurred by a spouse (or registered domestic partner) to produce separate business or investment income is deductible by the spouse (or the registered domestic partner) who earns the corresponding separate business or investment income. How to file 2010 tax returns    Other limits may also apply to business and investment expenses. How to file 2010 tax returns For more information, see Publication 535, Business Expenses, and Publication 550, Investment Income and Expenses. How to file 2010 tax returns Alimony paid. How to file 2010 tax returns    Payments that may otherwise qualify as alimony are not deductible by the payer if they are the recipient spouse's part of community income. How to file 2010 tax returns They are deductible as alimony only to the extent they are more than that spouse's part of community income. How to file 2010 tax returns Example. How to file 2010 tax returns You live in a community property state. How to file 2010 tax returns You are separated but the special rules explained later under Spouses living apart all year do not apply. How to file 2010 tax returns Under a written agreement, you pay your spouse $12,000 of your $20,000 total yearly community income. How to file 2010 tax returns Your spouse receives no other community income. How to file 2010 tax returns Under your state law, earnings of a spouse living separately and apart from the other spouse continue as community property. How to file 2010 tax returns On your separate returns, each of you must report $10,000 of the total community income. How to file 2010 tax returns In addition, your spouse must report $2,000 as alimony received. How to file 2010 tax returns You can deduct $2,000 as alimony paid. How to file 2010 tax returns IRA deduction. How to file 2010 tax returns    Deductions for IRA contributions cannot be split between spouses (or registered domestic partners). How to file 2010 tax returns The deduction for each spouse (or each registered domestic partner) is figured separately and without regard to community property laws. How to file 2010 tax returns Personal expenses. How to file 2010 tax returns   Expenses that are paid out of separate funds, such as medical expenses, are deductible by the spouse who pays them. How to file 2010 tax returns If these expenses are paid from community funds, divide the deduction equally between you and your spouse. How to file 2010 tax returns Credits, Taxes, and Payments The following is a discussion of the general effect of community property laws on the treatment of certain credits, taxes, and payments on your separate return. How to file 2010 tax returns Child tax credit. How to file 2010 tax returns    You may be entitled to a child tax credit for each of your qualifying children. How to file 2010 tax returns You must provide the name and identification number (usually the social security number) of each qualifying child on your return. How to file 2010 tax returns See your tax return instructions for the maximum amount of the credit you can claim for each qualifying child. How to file 2010 tax returns Limit on credit. How to file 2010 tax returns    The credit is limited if your modified adjusted gross income (modified AGI) is above a certain amount. How to file 2010 tax returns The amount at which the limitation (phaseout) begins depends on your filing status. How to file 2010 tax returns Generally, your credit is limited to your tax liability unless you have three or more qualifying children. How to file 2010 tax returns See your tax return instructions for more information. How to file 2010 tax returns Self-employment tax. How to file 2010 tax returns    For the effect of community property laws on the income tax treatment of income from a sole proprietorship and partnerships, see Wages, earnings, and profits and Partnership income , earlier. How to file 2010 tax returns The following rules only apply to persons married for federal tax purposes. How to file 2010 tax returns Registered domestic partners report community income for self-employment tax purposes the same way they do for income tax purposes. How to file 2010 tax returns Sole proprietorship. How to file 2010 tax returns    With regard to net income from a trade or business (other than a partnership) that is community income, self-employment tax is imposed on the spouse carrying on the trade or business. How to file 2010 tax returns Partnerships. How to file 2010 tax returns    All of the distributive share of a married partner's income or loss from a partnership trade or business is attributable to the partner for computing any self-employment tax, even if a portion of the partner's distributive share of income or loss is community income or loss that is otherwise attributable to the partner's spouse for income tax purposes. How to file 2010 tax returns If both spouses are partners, any self-employment tax is allocated based on their distributive shares. How to file 2010 tax returns Federal income tax withheld. How to file 2010 tax returns    Report the credit for federal income tax withheld on community wages in the same manner as your wages. How to file 2010 tax returns If you and your spouse file separate returns on which each of you reports half the community wages, each of you is entitled to credit for half the income tax withheld on those wages. How to file 2010 tax returns Likewise, each registered domestic partner is entitled to credit for half the income tax withheld on those wages. How to file 2010 tax returns Estimated tax payments. How to file 2010 tax returns    In determining whether you must pay estimated tax, apply the estimated tax rules to your estimated income. How to file 2010 tax returns These rules are explained in Publication 505. How to file 2010 tax returns   If you think you may owe estimated tax and want to pay the tax separately (registered domestic partners must pay the tax separately), determine whether you must pay it by taking into account: Half the community income and deductions, All of your separate income and deductions, and Your own exemption and any exemptions for dependents that you may claim. How to file 2010 tax returns   Whether you and your spouse pay estimated tax jointly or separately will not affect your choice of filing joint or separate income tax returns. How to file 2010 tax returns   If you and your spouse paid estimated tax jointly but file separate income tax returns, either of you can claim all of the estimated tax paid, or you may divide it between you in any way that you agree upon. How to file 2010 tax returns   If you cannot agree on how to divide it, the estimated tax you can claim equals the total estimated tax paid times the tax shown on your separate return, divided by the total of the tax shown on your return and your spouse's return. How to file 2010 tax returns   If you paid your estimated taxes separately, you get credit for only the estimated taxes you paid. How to file 2010 tax returns Earned income credit. How to file 2010 tax returns    You may be entitled to an earned income credit (EIC). How to file 2010 tax returns You cannot claim this credit if your filing status is married filing separately. How to file 2010 tax returns   If you are married, but qualify to file as head of household under rules for married taxpayers living apart (see Publication 501, Exemptions, Standard Deduction, and Filing Information), 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 community property laws. How to file 2010 tax returns That amount is not earned income for the EIC, even though you must include it in your gross income on your income tax return. How to file 2010 tax returns 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. How to file 2010 tax returns The same rule applies to registered domestic partners. How to file 2010 tax returns    This rule does not apply when determining your adjusted gross income (AGI) for the EIC. How to file 2010 tax returns Your AGI includes that part of both your and your spouse's (or your registered domestic partner's) wages that you are required to include in gross income shown on your tax return. How to file 2010 tax returns   For more information about the EIC, see Publication 596, Earned Income Credit (EIC). How to file 2010 tax returns Overpayments. How to file 2010 tax returns    The amount of an overpayment on a joint return is allocated under the community property laws of the state in which you are domiciled. How to file 2010 tax returns If, under the laws of your state, community property is subject to premarital or other separate debts of either spouse, the full joint overpayment may be used to offset the obligation. How to file 2010 tax returns If, under the laws of your state, community property is not subject to premarital or other separate debts of either spouse, only the portion of the joint overpayment allocated to the spouse liable for the obligation can be used to offset that liability. How to file 2010 tax returns The portion allocated to the other spouse can be refunded. How to file 2010 tax returns Community Property Laws Disregarded The following discussions are situations where special rules apply to community property and community income for spouses. How to file 2010 tax returns These rules do not apply to registered domestic partners. How to file 2010 tax returns Certain community income not treated as community income by one spouse. How to file 2010 tax returns    Community property laws may not apply to an item of community income that you received but did not treat as community income. How to file 2010 tax returns You are responsible for reporting all of that income item if: You treat the item as if only you are entitled to the income, and You do not notify your spouse of the nature and amount of the income by the due date for filing the return (including extensions). How to file 2010 tax returns Relief from liability arising from community property law. How to file 2010 tax returns    You are not responsible for the tax relating to an item of community income if all the following conditions are met. How to file 2010 tax returns You did not file a joint return for the tax year. How to file 2010 tax returns You did not include an item of community income in gross income. How to file 2010 tax returns The item of community income you did not include is one of the following: Wages, salaries, and other compensation your spouse (or former spouse) received for services he or she performed as an employee. How to file 2010 tax returns Income your spouse (or former spouse) derived from a trade or business he or she operated as a sole proprietor. How to file 2010 tax returns Your spouse's (or former spouse's) distributive share of partnership income. How to file 2010 tax returns Income from your spouse's (or former spouse's) separate property (other than income described in (a), (b), or (c)). How to file 2010 tax returns Use the appropriate community property law to determine what is separate property. How to file 2010 tax returns Any other income that belongs to your spouse (or former spouse) under community property law. How to file 2010 tax returns You establish that you did not know of, and had no reason to know of, that community income. How to file 2010 tax returns Under all facts and circumstances, it would not be fair to include the item of community income in your gross income. How to file 2010 tax returns Requesting relief. How to file 2010 tax returns    For information on how and when to request relief from liabilities arising from community property laws, see Community Property Laws in Publication 971, Innocent Spouse Relief. How to file 2010 tax returns Equitable relief. How to file 2010 tax returns    If you do not qualify for the relief discussed earlier under Relief from liability arising from community property law and are now liable for an underpaid or understated tax you believe should be paid only by your spouse (or former spouse), you may request equitable relief. How to file 2010 tax returns To request equitable relief, you must file Form 8857, Request for Innocent Spouse Relief. How to file 2010 tax returns Also see Publication 971. How to file 2010 tax returns Spousal agreements. How to file 2010 tax returns    In some states a married couple may enter into an agreement that affects the status of property or income as community or separate property. How to file 2010 tax returns Check your state law to determine how it affects you. How to file 2010 tax returns Nonresident alien spouse. How to file 2010 tax returns    If you are a U. How to file 2010 tax returns S. How to file 2010 tax returns citizen or resident alien and you choose to treat your nonresident alien spouse as a U. How to file 2010 tax returns S. How to file 2010 tax returns resident for tax purposes and you are domiciled in a community property state or country, use the community property rules. How to file 2010 tax returns You must file a joint return for the year you make the choice. How to file 2010 tax returns You can file separate returns in later years. How to file 2010 tax returns For details on making this choice, see Publication 519, U. How to file 2010 tax returns S. How to file 2010 tax returns Tax Guide for Aliens. How to file 2010 tax returns   If you are a U. How to file 2010 tax returns S. How to file 2010 tax returns citizen or resident alien and do not choose to treat your nonresident alien spouse as a U. How to file 2010 tax returns S. How to file 2010 tax returns resident for tax purposes, treat your community income as explained next under Spouses living apart all year. How to file 2010 tax returns However, you do not have to meet the four conditions discussed there. How to file 2010 tax returns Spouses living apart all year. How to file 2010 tax returns    If you are married at any time during the calendar year, special rules apply for reporting certain community income. How to file 2010 tax returns You must meet all the following conditions for these special rules to apply. How to file 2010 tax returns You and your spouse lived apart all year. How to file 2010 tax returns You and your spouse did not file a joint return for a tax year beginning or ending in the calendar year. How to file 2010 tax returns You and/or your spouse had earned income for the calendar year that is community income. How to file 2010 tax returns You and your spouse have not transferred, directly or indirectly, any of the earned income in condition (3) above between yourselves before the end of the year. How to file 2010 tax returns Do not take into account transfers satisfying child support obligations or transfers of very small amounts or value. How to file 2010 tax returns If all these conditions are met, you and your spouse must report your community income as discussed next. How to file 2010 tax returns See also Certain community income not treated as community income by one spouse , earlier. How to file 2010 tax returns Earned income. How to file 2010 tax returns    Treat earned income that is not trade or business or partnership income as the income of the spouse who performed the services to earn the income. How to file 2010 tax returns Earned income is wages, salaries, professional fees, and other pay for personal services. How to file 2010 tax returns   Earned income does not include amounts paid by a corporation that are a distribution of earnings and profits rather than a reasonable allowance for personal services rendered. How to file 2010 tax returns Trade or business income. How to file 2010 tax returns    Treat income and related deductions from a trade or business that is not a partnership as those of the spouse carrying on the trade or business. How to file 2010 tax returns Partnership income or loss. How to file 2010 tax returns    Treat income or loss from a trade or business carried on by a partnership as the income or loss of the spouse who is the partner. How to file 2010 tax returns Separate property income. How to file 2010 tax returns    Treat income from the separate property of one spouse as the income of that spouse. How to file 2010 tax returns Social security benefits. How to file 2010 tax returns    Treat social security and equivalent railroad retirement benefits as the income of the spouse who receives the benefits. How to file 2010 tax returns Other income. How to file 2010 tax returns    Treat all other community income, such as dividends, interest, rents, royalties, or gains, as provided under your state's community property law. How to file 2010 tax returns Example. How to file 2010 tax returns George and Sharon were married throughout the year but did not live together at any time during the year. How to file 2010 tax returns Both domiciles were in a community property state. How to file 2010 tax returns They did not file a joint return or transfer any of their earned income between themselves. How to file 2010 tax returns During the year their incomes were as follows:   George Sharon Wages $20,000 $22,000 Consulting business 5,000   Partnership   10,000 Dividends from separate property 1,000 2,000 Interest from community property 500 500 Total $26,500 $34,500 Under the community property law of their state, all the income is considered community income. How to file 2010 tax returns (Some states treat income from separate property as separate income—check your state law. How to file 2010 tax returns ) Sharon did not take part in George's consulting business. How to file 2010 tax returns Ordinarily, on their separate returns they would each report $30,500, half the total community income of $61,000 ($26,500 + $34,500). How to file 2010 tax returns But because they meet the four conditions listed earlier under Spouses living apart all year , they must disregard community property law in reporting all their income (except the interest income) from community property. How to file 2010 tax returns They each report on their returns only their own earnings and other income, and their share of the interest income from community property. How to file 2010 tax returns George reports $26,500 and Sharon reports $34,500. How to file 2010 tax returns Other separated spouses. How to file 2010 tax returns    If you and your spouse are separated but do not meet the four conditions discussed earlier under Spouses living apart all year , you must treat your income according to the laws of your state. How to file 2010 tax returns In some states, income earned after separation but before a decree of divorce continues to be community income. How to file 2010 tax returns In other states, it is separate income. How to file 2010 tax returns End of the Community The marital community may end in several ways. How to file 2010 tax returns When the marital community ends, the community assets (money and property) are divided between the spouses. How to file 2010 tax returns Similarly, a registered domestic partnership may end in several ways and the community assets must be divided between the registered domestic partners. How to file 2010 tax returns Death of spouse. How to file 2010 tax returns    If you own community property and your spouse dies, the total fair market value (FMV) of the community property, including the part that belongs to you, generally becomes the basis of the entire property. How to file 2010 tax returns For this rule to apply, at least half the value of the community property interest must be includible in your spouse's gross estate, whether or not the estate must file a return (this rule does not apply to registered domestic partners). How to file 2010 tax returns Example. How to file 2010 tax returns Bob and Ann owned community property that had a basis of $80,000. How to file 2010 tax returns When Bob died, his and Ann's community property had an FMV of $100,000. How to file 2010 tax returns One-half of the FMV of their community interest was includible in Bob's estate. How to file 2010 tax returns The basis of Ann's half of the property is $50,000 after Bob died (half of the $100,000 FMV). How to file 2010 tax returns The basis of the other half to Bob's heirs is also $50,000. How to file 2010 tax returns   For more information about the basis of assets, see Publication 551, Basis of Assets. How to file 2010 tax returns    The above basis rule does not apply if your spouse died in 2010 and the spouse's executor elected out of the estate tax, in which case section 1022 will apply. How to file 2010 tax returns See Publication 4895, Tax Treatment of Property Acquired From a Decedent Dying in 2010, for additional information. How to file 2010 tax returns Divorce or separation. How to file 2010 tax returns    If spouses divorce or separate, the (equal or unequal) division of community property in connection with the divorce or property settlement does not result in a gain or loss. How to file 2010 tax returns For registered domestic partners, an unequal division of community property in a property settlement may result in a gain or loss. How to file 2010 tax returns For information on the tax consequences of the division of property under a property settlement or divorce decree, see Publication 504. How to file 2010 tax returns   Each spouse (or each registered domestic partner) is taxed on half the community income for the part of the year before the community ends. How to file 2010 tax returns However, see Spouses living apart all year , earlier. How to file 2010 tax returns Any income received after the community ends is separate income. How to file 2010 tax returns This separate income is taxable only to the spouse (or the registered domestic partner) to whom it belongs. How to file 2010 tax returns   An absolute decree of divorce or annulment ends the marital community in all community property states. How to file 2010 tax returns A decree of annulment, even though it holds that no valid marriage ever existed, usually does not nullify community property rights arising during the “marriage. How to file 2010 tax returns ” However, you should check your state law for exceptions. How to file 2010 tax returns   A decree of legal separation or of separate maintenance may or may not end the marital community. How to file 2010 tax returns The court issuing the decree may terminate the marital community and divide the property between the spouses. How to file 2010 tax returns   A separation agreement may divide the community property between you and your spouse. How to file 2010 tax returns It may provide that this property, along with future earnings and property acquired, will be separate property. How to file 2010 tax returns This agreement may end the community. How to file 2010 tax returns   In some states, the marital community ends when the spouses permanently separate, even if there is no formal agreement. How to file 2010 tax returns Check your state law. How to file 2010 tax returns   If you are a registered domestic partner, you should check your state law to determine when the community ends. How to file 2010 tax returns Preparing a Federal Income Tax Return The following discussion does not apply to spouses who meet the conditions under Spouses living apart all year , discussed earlier. How to file 2010 tax returns Those spouses must report their community income as explained in that discussion. How to file 2010 tax returns Joint Return Versus Separate Returns Ordinarily, filing a joint return will give you a greater tax advantage than filing a separate return. How to file 2010 tax returns But in some cases, your combined income tax on separate returns may be less than it would be on a joint return. How to file 2010 tax returns This discussion concerning joint versus separate returns does not apply to registered domestic partners. How to file 2010 tax returns The following rules apply if your filing status is married filing separately. How to file 2010 tax returns You should itemize deductions if your spouse itemizes deductions, because you cannot claim the standard deduction. How to file 2010 tax returns You cannot take the credit for child and dependent care expenses in most instances. How to file 2010 tax returns You cannot take the earned income credit. How to file 2010 tax returns You cannot exclude any interest income from qualified U. How to file 2010 tax returns S. How to file 2010 tax returns savings bonds that you used for higher education expenses. How to file 2010 tax returns You cannot take the credit for the elderly or the disabled unless you lived apart from your spouse all year. How to file 2010 tax returns You may have to include in income more of any social security benefits (including any equivalent railroad retirement benefits) you received during the year than you would on a joint return. How to file 2010 tax returns You cannot deduct interest paid on a qualified student loan. How to file 2010 tax returns You cannot take the education credits. How to file 2010 tax returns You may have a smaller child tax credit than you would on a joint return. How to file 2010 tax returns You cannot take the exclusion or credit for adoption expenses in most instances. How to file 2010 tax returns Figure your tax both on a joint return and on separate returns under the community property laws of your state. How to file 2010 tax returns You can then compare the tax figured under both methods and use the one that results in less tax. How to file 2010 tax returns Separate Return Preparation If you file separate returns, you and your spouse must each report half of your combined community income and deductions in addition to your separate income and deductions. How to file 2010 tax returns Each of you must complete and attach Form 8958 to your Form 1040 showing how you figured the amount you are reporting on your return. How to file 2010 tax returns On the appropriate lines of your separate Form 1040, list only your share of the income and deductions on the appropriate lines of your separate tax returns (wages, interest, dividends, etc. How to file 2010 tax returns ). How to file 2010 tax returns The same reporting rule applies to registered domestic partners. How to file 2010 tax returns For a discussion of the effect of community property laws on certain items of income, deductions, credits, and other return amounts, see Identifying Income, Deductions, and Credits , earlier. How to file 2010 tax returns Attach your Form 8958 to your separate return showing how you figured the income, deductions, and federal income tax withheld that each of you reported. How to file 2010 tax returns Form 8958 is used for married spouses in community property states who choose to file married filing separately. How to file 2010 tax returns Form 8958 is also used for registered domestic partners who are domiciled in Nevada, Washington, or California. How to file 2010 tax returns A registered domestic partner in Nevada, Washington, or California must follow state community property laws and report half the combined community income of the individual and his or her registered domestic partner. How to file 2010 tax returns Extension of time to file. How to file 2010 tax returns    An extension of time for filing your separate return does not extend the time for filing your spouse's (or your registered domestic partner's) separate return. How to file 2010 tax returns If you and your spouse file a joint return, you cannot file separate returns after the due date for filing either separate return has passed. How to file 2010 tax returns How To Get Tax Help Whether it's help with a tax issue, preparing your tax return or a need for a free publication or form, get the help you need the way you want it: online, use a smart phone, call or walk in to an IRS office or volunteer site near you. How to file 2010 tax returns Free help with your tax return. How to file 2010 tax returns    You can get free help preparing your return nationwide from IRS-certified volunteers. How to file 2010 tax returns The Volunteer Income Tax Assistance (VITA) program helps low-to-moderate income, elderly, people with disabilities, and limited English proficient taxpayers. How to file 2010 tax returns The Tax Counseling for the Elderly (TCE) program helps taxpayers age 60 and older with their tax returns. How to file 2010 tax returns Most VITA and TCE sites offer free electronic filing and all volunteers will let you know about credits and deductions you may be entitled to claim. How to file 2010 tax returns In addition, some VITA and TCE sites provide taxpayers the opportunity to prepare their own return with help from an IRS-certified volunteer. How to file 2010 tax returns To find the nearest VITA or TCE site, you can use the VITA Locator Tool on IRS. How to file 2010 tax returns gov, download the IRS2Go app, or call 1-800-906-9887. How to file 2010 tax returns   As part of the TCE program, AARP offers the Tax-Aide counseling program. How to file 2010 tax returns To find the nearest AARP Tax-Aide site, visit AARP's website at www. How to file 2010 tax returns aarp. How to file 2010 tax returns org/money/taxaide or call 1-888-227-7669. How to file 2010 tax returns For more information on these programs, go to IRS. How to file 2010 tax returns gov and enter “VITA” in the search box. How to file 2010 tax returns Internet. How to file 2010 tax returns    IRS. How to file 2010 tax returns gov and IRS2Go are ready when you are —24 hours a day, 7 days a week. How to file 2010 tax returns Download the free IRS2Go app from the iTunes app store or from Google Play. How to file 2010 tax returns Use it to check your refund status, order transcripts of your tax returns or tax account, watch the IRS YouTube channel, get IRS news as soon as it's released to the public, subscribe to filing season updates or daily tax tips, and follow the IRS Twitter news feed, @IRSnews, to get the latest federal tax news, including information about tax law changes and important IRS programs. How to file 2010 tax returns Check the status of your 2013 refund with the Where's My Refund? application on IRS. How to file 2010 tax returns gov or download the IRS2Go app and select the Refund Status option. How to file 2010 tax returns The IRS issues more than 9 out of 10 refunds in less than 21 days. How to file 2010 tax returns Using these applications, you can start checking on the status of your return within 24 hours after we receive your e-filed return or 4 weeks after you mail a paper return. How to file 2010 tax returns You will also be given a personalized refund date as soon as the IRS processes your tax return and approves your refund. How to file 2010 tax returns The IRS updates Where's My Refund? every 24 hours, usually overnight, so you only need to check once a day. How to file 2010 tax returns Use the Interactive Tax Assistant (ITA) to research your tax questions. How to file 2010 tax returns No need to wait on the phone or stand in line. How to file 2010 tax returns The ITA is available 24 hours a day, 7 days a week, and provides you with a variety of tax information related to general filing topics, deductions, credits, and income. How to file 2010 tax returns When you reach the response screen, you can print the entire interview and the final response for your records. How to file 2010 tax returns New subject areas are added on a regular basis. How to file 2010 tax returns  Answers not provided through ITA may be found in Tax Trails, one of the Tax Topics on IRS. How to file 2010 tax returns gov which contain general individual and business tax information or by searching the IRS Tax Map, which includes an international subject index. How to file 2010 tax returns You can use the IRS Tax Map, to search publications and instructions by topic or keyword. How to file 2010 tax returns The IRS Tax Map integrates forms and publications into one research tool and provides single-point access to tax law information by subject. How to file 2010 tax returns When the user searches the IRS Tax Map, they will be provided with links to related content in existing IRS publications, forms and instructions, questions and answers, and Tax Topics. How to file 2010 tax returns Coming this filing season, you can immediately view and print for free all 5 types of individual federal tax transcripts (tax returns, tax account, record of account, wage and income statement, and certification of non-filing) using Get Transcript. How to file 2010 tax returns You can also ask the IRS to mail a return or an account transcript to you. How to file 2010 tax returns Only the mail option is available by choosing the Tax Records option on the IRS2Go app by selecting Mail Transcript on IRS. How to file 2010 tax returns gov or by calling 1-800-908-9946. How to file 2010 tax returns Tax return and tax account transcripts are generally available for the current year and the past three years. How to file 2010 tax returns Determine if you are eligible for the EITC and estimate the amount of the credit with the Earned Income Tax Credit (EITC) Assistant. How to file 2010 tax returns Visit Understanding Your IRS Notice or Letter to get answers to questions about a notice or letter you received from the IRS. How to file 2010 tax returns If you received the First Time Homebuyer Credit, you can use the First Time Homebuyer Credit Account Look-up tool for information on your repayments and account balance. How to file 2010 tax returns Check the status of your amended return using Where's My Amended Return? Go to IRS. How to file 2010 tax returns gov and enter Where's My Amended Return? in the search box. How to file 2010 tax returns You can generally expect your amended return to be processed up to 12 weeks from the date we receive it. How to file 2010 tax returns It can take up to 3 weeks from the date you mailed it to show up in our system. How to file 2010 tax returns Make a payment using one of several safe and convenient electronic payment options available on IRS. How to file 2010 tax returns gov. How to file 2010 tax returns Select the Payment tab on the front page of IRS. How to file 2010 tax returns gov for more information. How to file 2010 tax returns Determine if you are eligible and apply for an online payment agreement, if you owe more tax than you can pay today. How to file 2010 tax returns Figure your income tax withholding with the IRS Withholding Calculator on IRS. How to file 2010 tax returns gov. How to file 2010 tax returns Use it if you've had too much or too little withheld, your personal situation has changed, you're starting a new job or you just want to see if you're having the right amount withheld. How to file 2010 tax returns Determine if you might be subject to the Alternative Minimum Tax by using the Alternative Minimum Tax Assistant on IRS. How to file 2010 tax returns gov. How to file 2010 tax returns Request an Electronic Filing PIN by going to IRS. How to file 2010 tax returns gov and entering Electronic Filing PIN in the search box. How to file 2010 tax returns Download forms, instructions and publications, including accessible versions for people with disabilities. How to file 2010 tax returns Locate the nearest Taxpayer Assistance Center (TAC) using the Office Locator tool on IRS. How to file 2010 tax returns gov, or choose the Contact Us option on the IRS2Go app and search Local Offices. How to file 2010 tax returns An employee can answer questions about your tax account or help you set up a payment plan. How to file 2010 tax returns Before you visit, check the Office Locator on IRS. How to file 2010 tax returns gov, or Local Offices under Contact Us on IRS2Go to confirm the address, phone number, days and hours of operation, and the services provided. How to file 2010 tax returns If you have a special need, such as a disability, you can request an appointment. How to file 2010 tax returns Call the local number listed in the Office Locator, or look in the phone book under United States Government, Internal Revenue Service. How to file 2010 tax returns Apply for an Employer Identification Number (EIN). How to file 2010 tax returns Go to IRS. How to file 2010 tax returns gov and enter Apply for an EIN in the search box. How to file 2010 tax returns Read the Internal Revenue Code, regulations, or other official guidance. How to file 2010 tax returns Read Internal Revenue Bulletins. How to file 2010 tax returns Sign up to receive local and national tax news and more by email. How to file 2010 tax returns Just click on “subscriptions” above the search box on IRS. How to file 2010 tax returns gov and choose from a variety of options. How to file 2010 tax returns    Phone. How to file 2010 tax returns You can call the IRS, or you can carry it in your pocket with the IRS2Go app on your smart phone or tablet. How to file 2010 tax returns Download the free IRS2Go app from the iTunes app store or from Google Play. How to file 2010 tax returns Call to locate the nearest volunteer help site, 1-800-906-9887 or you can use the VITA Locator Tool on IRS. How to file 2010 tax returns gov, or download the IRS2Go app. How to file 2010 tax returns Low-to-moderate income, elderly, people with disabilities, and limited English proficient taxpayers can get free help with their tax return from the nationwide Volunteer Income Tax Assistance (VITA) program. How to file 2010 tax returns The Tax Counseling for the Elderly (TCE) program helps taxpayers age 60 and older with their tax returns. How to file 2010 tax returns Most VITA and TCE sites offer free electronic filing. How to file 2010 tax returns Some VITA and TCE sites provide IRS-certified volunteers who can help prepare your tax return. How to file 2010 tax returns Through the TCE program, AARP offers the Tax-Aide counseling program; call 1-888-227-7669 to find the nearest Tax-Aide location. How to file 2010 tax returns Call the automated Where's My Refund? information hotline to check the status of your 2013 refund 24 hours a day, 7 days a week at 1-800-829-1954. How to file 2010 tax returns If you e-file, you can start checking on the status of your return within 24 hours after the IRS receives your tax return or 4 weeks after you've mailed a paper return. How to file 2010 tax returns The IRS issues more than 9 out of 10 refunds in less than 21 days. How to file 2010 tax returns Where's My Refund? will give you a personalized refund date as soon as the IRS processes your tax return and approves your refund. How to file 2010 tax returns Before you call this automated hotline, have your 2013 tax return handy so you can enter your social security number, your filing status, and the exact whole dollar amount of your refund. How to file 2010 tax returns The IRS updates Where's My Refund? every 24 hours, usually overnight, so you only need to check once a day. How to file 2010 tax returns Note, the above information is for our automated hotline. How to file 2010 tax returns Our live phone and walk-in assistors can research the status of your refund only if it's been 21 days or more since you filed electronically or more than 6 weeks since you mailed your paper return. How to file 2010 tax returns Call the Amended Return Hotline, 1-866-464-2050, to check the status of your amended return. How to file 2010 tax returns You can generally expect your amended return to be processed up to 12 weeks from the date we receive it. How to file 2010 tax returns It can take up to 3 weeks from the date you mailed it to show up in our system. How to file 2010 tax returns Call 1-800-TAX-FORM (1-800-829-3676) to order current-year forms, instructions, publications, and prior-year forms and instructions (limited to 5 years). How to file 2010 tax returns You should receive your order within 10 business days. How to file 2010 tax returns Call TeleTax, 1-800-829-4477, to listen to pre-recorded messages covering general and business tax information. How to file 2010 tax returns If, between January and April 15, you still have questions about the Form 1040, 1040A, or 1040EZ (like filing requirements, dependents, credits, Schedule D, pensions and IRAs or self-employment taxes), call 1-800-829-1040. How to file 2010 tax returns Call using TTY/TDD equipment, 1-800-829-4059 to ask tax questions or order forms and publications. How to file 2010 tax returns The TTY/TDD telephone number is for people who are deaf, hard of hearing, or have a speech disability. How to file 2010 tax returns These individuals can also contact the IRS through relay services such as the Federal Relay Service. How to file 2010 tax returns    Walk-in. How to file 2010 tax returns You can find a selection of forms, publications and services — in-person. How to file 2010 tax returns Products. How to file 2010 tax returns You can walk in to some post offices, libraries, and IRS offices to pick up certain forms, instructions, and publications. How to file 2010 tax returns Some IRS offices, libraries, and city and county government offices have a collection of products available to photocopy from reproducible proofs. How to file 2010 tax returns Services. How to file 2010 tax returns You can walk in to your local TAC for face-to-face tax help. How to file 2010 tax returns An employee can answer questions about your tax account or help you set up a payment plan. How to file 2010 tax returns Before visiting, use the Office Locator tool on IRS. How to file 2010 tax returns gov, or choose the Contact Us option on the IRS2Go app and search Local Offices for days and hours of operation, and services provided. How to file 2010 tax returns    Mail. How to file 2010 tax returns You can send your order for forms, instructions, and publications to the address below. How to file 2010 tax returns You should receive a response within 10 business days after your request is received. How to file 2010 tax returns Internal Revenue Service 1201 N. How to file 2010 tax returns Mitsubishi Motorway Bloomington, IL 61705-6613   The Taxpayer Advocate Service Is Here to Help You. How to file 2010 tax returns The Taxpayer Advocate Service (TAS) is your voice at the IRS. How to file 2010 tax returns Our job is to ensure that every taxpayer is treated fairly and that you know and understand your rights. How to file 2010 tax returns   What can TAS do for you? We can offer you free help with IRS problems that you can't resolve on your own. How to file 2010 tax returns We know this process can be confusing, but the worst thing you can do is nothing at all! TAS can help if you can't resolve your tax problem and: Your problem is causing financial difficulties for you, your family, or your business. How to file 2010 tax returns You face (or your business is facing) an immediate threat of adverse action. How to file 2010 tax returns You've tried repeatedly to contact the IRS but no one has responded, or the IRS hasn't responded by the date promised. How to file 2010 tax returns   If you qualify for our help, you'll be assigned to one advocate who'll be with you at every turn and will do everything possible to resolve your problem. How to file 2010 tax returns Here's why we can help: TAS is an independent organization within the IRS. How to file 2010 tax returns Our advocates know how to work with the IRS. How to file 2010 tax returns Our services are free and tailored to meet your needs. How to file 2010 tax returns We have offices in every state, the District of Columbia, and Puerto Rico. How to file 2010 tax returns   How can you reach us? If you think TAS can help you, call your local advocate, whose number is in your local directory and at www. How to file 2010 tax returns irs. How to file 2010 tax returns gov/advocate, or call us toll-free at 1-877-777-4778. How to file 2010 tax returns   How else does TAS help taxpayers?  TAS also works to resolve large-scale, systemic problems that affect many taxpayers. How to file 2010 tax returns If you know of one of these broad issues, please report it to us through our Systemic Advocacy Management System at www. How to file 2010 tax returns irs. How to file 2010 tax returns gov/sams. How to file 2010 tax returns Low Income Taxpayer Clinics Low Income Taxpayer Clinics (LITCs) serve individuals whose income is below a certain level and need to resolve tax problems such as audits, appeals and tax collection disputes. How to file 2010 tax returns Some clinics can provide information about taxpayer rights and responsibilities in different languages for individuals who speak English as a second language. How to file 2010 tax returns Visit www. How to file 2010 tax returns irs. How to file 2010 tax returns gov/litc or see IRS Publication 4134, Low Income Taxpayer Clinic List. How to file 2010 tax returns Prev  Up  Next   Home   More Online Publications
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Understanding your CP24E Notice

We made changes to your return because we found a difference between the amount of estimated tax payments on your tax return and the amount we posted to your account. You have a potential overpayment credit because of these changes.

Printable samples of this notice (PDF)

Tax publications you may find useful

How to get help

Calling the 1-800 number listed on the top right corner of your notice is the fastest way to get your questions answered.

You can also authorize someone (such as an accountant) to contact the IRS on your behalf using this Power of Attorney and Declaration of Representative (Form 2848).

Or you may qualify for help from a Low Income Taxpayer Clinic.
 


What you need to do

  • Read your notice carefully — it will explain the changes we made to your return.
  • Check the list of payments we applied to your account to see if we applied all the payments you made.
  • Correct the copy of your tax return that you kept for your records.
  • You don't need to do anything if you agree with the notice.
  • If you disagree with the notice, please contact us at the toll-free number listed on its top right-hand corner (within 60 days of the notice’s date).

You may want to...


Answers to Common Questions

Is an overpayment credit different from a refund?
You get an overpayment credit when your tax payments exceed what you owe. You will receive the overpayment credit as a refund automatically. You also, however, can ask us to apply the credit as an advance payment towards your next year's taxes instead of sending it to you as a refund.

When can I expect to receive my refund?
You will receive it in four to six weeks if you owe no other taxes or debts we're required to collect.

What can I do if I don't receive my refund in four to six weeks?
Call us at the toll-free number listed on the top right-hand corner of your notice.

How can I find out what caused my tax return to change?
Please contact us at the number listed on your notice for specific information concerning your tax return.

What should I do if I find you misapplied a payment or haven't credited a payment that I made?
Contact us with your information at the toll-free number listed on your notice. Please have your documentation (such as cancelled checks, amended return, etc.) ready when you call. Our representative will discuss the issue with you and give you further instructions.

What should I do if I disagree with the changes you made?
Contact us at the toll free number listed on the top right-hand corner of your notice.

How do I adjust my estimated tax payments?
You can adjust your estimated tax payments by completing a Form 1040-ES, Estimated Tax for Individuals. See Publication 505, Tax Withholding and Estimated Tax for more information.

What should I do if I need to make another correction to my tax return?
You'll need to file Form 1040X, Amended U.S. Individual Income Tax Return.


Tips for next year

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

You can receive your refund quickly with a direct deposit to your bank account by completing the banking information in the refund section of your tax return.

Page Last Reviewed or Updated: 03-Mar-2014

The How To File 2010 Tax Returns

How to file 2010 tax returns 9. How to file 2010 tax returns   Dispositions of Property Used in Farming Table of Contents Introduction Topics - This chapter discusses: Useful Items - You may want to see: Section 1231 Gains and LossesNonrecaptured section 1231 losses. How to file 2010 tax returns Depreciation RecaptureSection 1245 Property Section 1250 Property Installment Sale Other Dispositions Other GainsExceptions. How to file 2010 tax returns Amount to report as ordinary income. How to file 2010 tax returns Applicable percentage. How to file 2010 tax returns Amount to report as ordinary income. How to file 2010 tax returns Applicable percentage. How to file 2010 tax returns Introduction When you dispose of property used in your farm business, your taxable gain or loss is usually treated as ordinary income (which is taxed at the same rates as wages and interest income) or capital gain (which is generally taxed at lower rates) under the rules for section 1231 transactions. How to file 2010 tax returns When you dispose of depreciable property (section 1245 property or section 1250 property) at a gain, you may have to recognize all or part of the gain as ordinary income under the depreciation recapture rules. How to file 2010 tax returns Any gain remaining after applying the depreciation recapture rules is a section 1231 gain, which may be taxed as a capital gain. How to file 2010 tax returns Gains and losses from property used in farming are reported on Form 4797, Sales of Business Property. How to file 2010 tax returns Table 9-1 contains examples of items reported on Form 4797 and refers to the part of that form on which they first should be reported. How to file 2010 tax returns Topics - This chapter discusses: Section 1231 gains and losses Depreciation recapture Other gains Useful Items - You may want to see: Publication 544 Sales and Other Dispositions of Assets Form (and Instructions) 4797 Sales of Business Property See chapter 16 for information about getting publications and forms. How to file 2010 tax returns Section 1231 Gains and Losses Section 1231 gains and losses are the taxable gains and losses from section 1231 transactions (explained below). How to file 2010 tax returns Their treatment as ordinary or capital gains depends on whether you have a net gain or a net loss from all of your section 1231 transactions in the tax year. How to file 2010 tax returns Table 9-1. How to file 2010 tax returns Where to First Report Certain Items on Form 4797 Type of property Held 1 year  or less Held more than  1 year 1 Depreciable trade or business property:       a Sold or exchanged at a gain Part II Part III (1245, 1250)   b Sold or exchanged at a loss Part II Part I 2 Farmland held less than 10 years for which soil, water, or land clearing expenses were deducted:       a Sold at a gain Part II Part III (1252)   b Sold at a loss Part II Part I 3 All other farmland Part II Part I 4 Disposition of cost-sharing payment property described in section 126 Part II Part III (1255) 5 Cattle and horses used in a trade or business for draft, breeding, dairy, or sporting purposes: Held less  than 24 mos. How to file 2010 tax returns Held 24 mos. How to file 2010 tax returns  or more   a Sold at a gain Part II Part III (1245)   b Sold at a loss Part II Part I   c Raised cattle and horses sold at a gain Part II Part I 6 Livestock other than cattle and horses used in a trade or business for draft, breeding, dairy, or sporting purposes: Held less  than 12 mos. How to file 2010 tax returns Held 12 mos. How to file 2010 tax returns   or more   a Sold at a gain Part II Part III (1245)   b Sold at a loss Part II Part I   c Raised livestock sold at a gain Part II Part I If you have a gain from a section 1231 transaction, first determine whether any of the gain is ordinary income under the depreciation recapture rules (explained later). How to file 2010 tax returns Do not take that gain into account as section 1231 gain. How to file 2010 tax returns Section 1231 transactions. How to file 2010 tax returns   Gain or loss on the following transactions is subject to section 1231 treatment. How to file 2010 tax returns Sale or exchange of cattle and horses. How to file 2010 tax returns The cattle and horses must be held for draft, breeding, dairy, or sporting purposes and held for 24 months or longer. How to file 2010 tax returns Sale or exchange of other livestock. How to file 2010 tax returns This livestock must be held for draft, breeding, dairy, or sporting purposes and held for 12 months or longer. How to file 2010 tax returns Other livestock includes hogs, mules, sheep, goats, donkeys, and other fur-bearing animals. How to file 2010 tax returns Other livestock does not include poultry. How to file 2010 tax returns Sale or exchange of depreciable personal property. How to file 2010 tax returns This property must be used in your business and held longer than 1 year. How to file 2010 tax returns Generally, property held for the production of rents or royalties is considered to be used in a trade or business. How to file 2010 tax returns Examples of depreciable personal property include farm machinery and trucks. How to file 2010 tax returns It also includes amortizable section 197 intangibles. How to file 2010 tax returns Sale or exchange of real estate. How to file 2010 tax returns This property must be used in your business and held longer than 1 year. How to file 2010 tax returns Examples are your farm or ranch (including barns and sheds). How to file 2010 tax returns Sale or exchange of unharvested crops. How to file 2010 tax returns The crop and land must be sold, exchanged, or involuntarily converted at the same time and to the same person, and the land must have been held longer than 1 year. How to file 2010 tax returns You cannot keep any right or option to reacquire the land directly or indirectly (other than a right customarily incident to a mortgage or other security transaction). How to file 2010 tax returns Growing crops sold with a leasehold on the land, even if sold to the same person in a single transaction, are not included. How to file 2010 tax returns Distributive share of partnership gains and losses. How to file 2010 tax returns Your distributive share must be from the sale or exchange of property listed above and held longer than 1 year (or for the required period for certain livestock). How to file 2010 tax returns Cutting or disposal of timber. How to file 2010 tax returns Special rules apply if you owned the timber longer than 1 year and elect to treat timber cutting as a sale or exchange, or you enter into a cutting contract, as described in chapter 8 under Timber . How to file 2010 tax returns Condemnation. How to file 2010 tax returns The condemned property (defined in chapter 11) must have been held longer than 1 year. How to file 2010 tax returns It must be business property or a capital asset held in connection with a trade or business or a transaction entered into for profit, such as investment property. How to file 2010 tax returns It cannot be property held for personal use. How to file 2010 tax returns Casualty or theft. How to file 2010 tax returns The casualty or theft must have affected business property, property held for the production of rents or royalties, or investment property (such as notes and bonds). How to file 2010 tax returns You must have held the property longer than 1 year. How to file 2010 tax returns However, if your casualty or theft losses are more than your casualty or theft gains, neither the gains nor the losses are taken into account in the section 1231 computation. How to file 2010 tax returns Section 1231 does not apply to personal casualty gains and losses. How to file 2010 tax returns See chapter 11 for information on how to treat those gains and losses. How to file 2010 tax returns If the property is not held for the required holding period, the transaction is not subject to section 1231 treatment, and any gain or loss is ordinary income reported in Part II of Form 4797. How to file 2010 tax returns See Table 9-1. How to file 2010 tax returns Property for sale to customers. How to file 2010 tax returns   A sale, exchange, or involuntary conversion of property held mainly for sale to customers is not a section 1231 transaction. How to file 2010 tax returns If you will get back all, or nearly all, of your investment in the property by selling it rather than by using it up in your business, it is property held mainly for sale to customers. How to file 2010 tax returns Treatment as ordinary or capital. How to file 2010 tax returns   To determine the treatment of section 1231 gains and losses, combine all of your section 1231 gains and losses for the year. How to file 2010 tax returns If you have a net section 1231 loss, it is an ordinary loss. How to file 2010 tax returns If you have a net section 1231 gain, it is ordinary income up to your nonrecaptured section 1231 losses from previous years, explained next. How to file 2010 tax returns The rest, if any, is long-term capital gain. How to file 2010 tax returns Nonrecaptured section 1231 losses. How to file 2010 tax returns   Your nonrecaptured section 1231 losses are your net section 1231 losses for the previous 5 years that have not been applied against a net section 1231 gain by treating the gain as ordinary income. How to file 2010 tax returns These losses are applied against your net section 1231 gain beginning with the earliest loss in the 5-year period. How to file 2010 tax returns Example. How to file 2010 tax returns In 2013, Ben has a $2,000 net section 1231 gain. How to file 2010 tax returns To figure how much he has to report as ordinary income and long-term capital gain, he must first determine his section 1231 gains and losses from the previous 5-year period. How to file 2010 tax returns From 2008 through 2012 he had the following section 1231 gains and losses. How to file 2010 tax returns Year Amount 2008 -0- 2009 -0- 2010 ($2,500) 2011 -0- 2012 $1,800   Ben uses this information to figure how to report his net section 1231 gain for 2013 as shown below. How to file 2010 tax returns 1) Net section 1231 gain (2013) $2,000 2) Net section 1231 loss (2010) ($2,500)   3) Net section 1231 gain (2012) 1,800   4) Remaining net section 1231 loss from prior 5 years ($700)   5) Gain treated as  ordinary income $700 6) Gain treated as long-term  capital gain $1,300 His remaining net section 1231 loss from 2010 is completely recaptured in 2013. How to file 2010 tax returns Depreciation Recapture If you dispose of depreciable or amortizable property at a gain, you may have to treat all or part of the gain (even if it is otherwise nontaxable) as ordinary income. How to file 2010 tax returns To figure any gain that must be reported as ordinary income, you must keep permanent records of the facts necessary to figure the depreciation or amortization allowed or allowable on your property. How to file 2010 tax returns For more information, see chapter 3 of Publication 544. How to file 2010 tax returns Section 1245 Property A gain on the disposition of section 1245 property is treated as ordinary income to the extent of depreciation allowed or allowable. How to file 2010 tax returns Any recognized gain that is more than the part that is ordinary income is a section 1231 gain. How to file 2010 tax returns See Treatment as ordinary or capital under Section 1231 Gains and Losses , earlier. How to file 2010 tax returns Section 1245 property includes any property that is or has been subject to an allowance for depreciation or amortization and that is any of the following types of property. How to file 2010 tax returns Personal property (either tangible or intangible). How to file 2010 tax returns Other tangible property (except buildings and their structural components) used as any of the following. How to file 2010 tax returns See Buildings and structural components below. How to file 2010 tax returns An integral part of manufacturing, production, or extraction, or of furnishing certain services. How to file 2010 tax returns A research facility in any of the activities in (a). How to file 2010 tax returns A facility in any of the activities in (a) above, for the bulk storage of fungible commodities (discussed later). How to file 2010 tax returns That part of real property (not included in (2)) with an adjusted basis reduced by (but not limited to) the following. How to file 2010 tax returns Amortization of certified pollution control facilities. How to file 2010 tax returns The section 179 expense deduction. How to file 2010 tax returns Deduction for clean-fuel vehicles and certain refueling property. How to file 2010 tax returns Expenditures to remove architectural and transportation barriers to the handicapped and elderly. How to file 2010 tax returns Certain reforestation expenditures (as described under Reforestation Costs in chapter 7. How to file 2010 tax returns Single purpose agricultural (livestock) or horticultural structures. How to file 2010 tax returns Storage facilities (except buildings and their structural components) used in distributing petroleum or any primary product of petroleum. How to file 2010 tax returns Buildings and structural components. How to file 2010 tax returns   Section 1245 property does not include buildings and structural components. How to file 2010 tax returns The term building includes a house, barn, warehouse, or garage. How to file 2010 tax returns The term structural component includes walls, floors, windows, doors, central air conditioning systems, light fixtures, etc. How to file 2010 tax returns   Do not treat a structure that is essentially machinery or equipment as a building or structural component. How to file 2010 tax returns Also, do not treat a structure that houses property used as an integral part of an activity as a building or structural component if the structure's use is so closely related to the property's use that the structure can be expected to be replaced when the property it initially houses is replaced. How to file 2010 tax returns   The fact that the structure is specially designed to withstand the stress and other demands of the property and cannot be used economically for other purposes indicates it is closely related to the use of the property it houses. How to file 2010 tax returns Structures such as oil and gas storage tanks, grain storage bins, and silos are not treated as buildings, but as section 1245 property. How to file 2010 tax returns Facility for bulk storage of fungible commodities. How to file 2010 tax returns   This is a facility used mainly for the bulk storage of fungible commodities. How to file 2010 tax returns Bulk storage means storage of a commodity in a large mass before it is used. How to file 2010 tax returns For example, if a facility is used to store oranges that have been sorted and boxed, it is not used for bulk storage. How to file 2010 tax returns To be fungible, a commodity must be such that one part may be used in place of another. How to file 2010 tax returns Gain Treated as Ordinary Income The gain treated as ordinary income on the sale, exchange, or involuntary conversion of section 1245 property, including a sale and leaseback transaction, is the lesser of the following amounts. How to file 2010 tax returns The depreciation (which includes any section 179 deduction claimed) and amortization allowed or allowable on the property. How to file 2010 tax returns The gain realized on the disposition (the amount realized from the disposition minus the adjusted basis of the property). How to file 2010 tax returns For any other disposition of section 1245 property, ordinary income is the lesser of (1) above or the amount by which its fair market value (FMV) is more than its adjusted basis. How to file 2010 tax returns For details, see chapter 3 of Publication 544. How to file 2010 tax returns Use Part III of Form 4797 to figure the ordinary income part of the gain. How to file 2010 tax returns Depreciation claimed on other property or claimed by other taxpayers. How to file 2010 tax returns   Depreciation and amortization include the amounts you claimed on the section 1245 property as well as the following depreciation and amortization amounts. How to file 2010 tax returns Amounts you claimed on property you exchanged for, or converted to, your section 1245 property in a like-kind exchange or involuntary conversion. How to file 2010 tax returns For details on exchanges of property that are not taxable, see Like-Kind Exchanges in chapter 8. How to file 2010 tax returns Amounts a previous owner of the section 1245 property claimed if your basis is determined with reference to that person's adjusted basis (for example, the donor's depreciation deductions on property you received as a gift and part of the transfer is a sale or exchange). How to file 2010 tax returns Example. How to file 2010 tax returns Jeff Free paid $120,000 for a tractor in 2012. How to file 2010 tax returns On February 23, 2013, he traded it for a chopper and paid an additional $30,000. How to file 2010 tax returns To figure his depreciation deduction on the chopper for the current year, Jeff continues to use the basis of the tractor as he would have before the trade. How to file 2010 tax returns Jeff can also depreciate the additional $30,000 for the chopper. How to file 2010 tax returns Depreciation and amortization. How to file 2010 tax returns   Depreciation and amortization deductions that must be recaptured as ordinary income include (but are not limited to) the following items. How to file 2010 tax returns See Depreciation Recapture in chapter 3 of Publication 544 for more details. How to file 2010 tax returns Ordinary depreciation deductions. How to file 2010 tax returns Section 179 deduction (see chapter 7). How to file 2010 tax returns Any special depreciation allowance. How to file 2010 tax returns Amortization deductions for all the following costs. How to file 2010 tax returns Acquiring a lease. How to file 2010 tax returns Lessee improvements. How to file 2010 tax returns Pollution control facilities. How to file 2010 tax returns Reforestation expenses. How to file 2010 tax returns Section 197 intangibles. How to file 2010 tax returns Qualified disaster expenses. How to file 2010 tax returns Franchises, trademarks, and trade names acquired before August 11, 1993. How to file 2010 tax returns Example. How to file 2010 tax returns You file your returns on a calendar year basis. How to file 2010 tax returns In February 2011, you bought and placed in service for 100% use in your farming business a light-duty truck (5-year property) that cost $10,000. How to file 2010 tax returns You used the half-year convention and your MACRS deductions for the truck were $1,500 in 2011 and $2,550 in 2012. How to file 2010 tax returns You did not claim the section 179 expense deduction for the truck. How to file 2010 tax returns You sold it in May 2013 for $7,000. How to file 2010 tax returns The MACRS deduction in 2013, the year of sale, is $893 (½ of $1,785). How to file 2010 tax returns Figure the gain treated as ordinary income as follows. How to file 2010 tax returns 1) Amount realized $7,000 2) Cost (February 2011) $10,000   3) Depreciation allowed or allowable (MACRS deductions: $1,500 + $2,550 + $893) 4,943   4) Adjusted basis (subtract line 3 from line 2) $5,057 5) Gain realized (subtract line 4 from line 1) 1,943 6) Gain treated as ordinary income (lesser of line 3 or line 5) $1,943 Depreciation allowed or allowable. How to file 2010 tax returns   You generally use the greater of the depreciation allowed or allowable when figuring the part of gain to report as ordinary income. How to file 2010 tax returns If, in prior years, you have consistently taken proper deductions under one method, the amount allowed for your prior years will not be increased even though a greater amount would have been allowed under another proper method. How to file 2010 tax returns If you did not take any deduction at all for depreciation, your adjustments to basis for depreciation allowable are figured by using the straight line method. How to file 2010 tax returns This treatment applies only when figuring what part of the gain is treated as ordinary income under the rules for section 1245 depreciation recapture. How to file 2010 tax returns Disposition of plants and animals. How to file 2010 tax returns   If you elect not to use the uniform capitalization rules (see chapter 6), you must treat any plant you produce as section 1245 property. How to file 2010 tax returns If you have a gain on the property's disposition, you must recapture the pre-productive expenses you would have capitalized if you had not made the election by treating the gain, up to the amount of these expenses, as ordinary income. How to file 2010 tax returns For section 1231 transactions, show these expenses as depreciation on Form 4797, Part III, line 22. How to file 2010 tax returns For plant sales that are reported on Schedule F (1040), Profit or Loss From Farming, this recapture rule does not change the reporting of income because the gain is already ordinary income. How to file 2010 tax returns You can use the farm-price method or the unit-livestock-price method discussed in  chapter 2 to figure these expenses. How to file 2010 tax returns Example. How to file 2010 tax returns Janet Maple sold her apple orchard in 2013 for $80,000. How to file 2010 tax returns Her adjusted basis at the time of sale was $60,000. How to file 2010 tax returns She bought the orchard in 2006, but the trees did not produce a crop until 2009. How to file 2010 tax returns Her pre-productive expenses were $6,000. How to file 2010 tax returns She elected not to use the uniform capitalization rules. How to file 2010 tax returns Janet must treat $6,000 of the gain as ordinary income. How to file 2010 tax returns Section 1250 Property Section 1250 property includes all real property subject to an allowance for depreciation that is not and never has been section 1245 property. How to file 2010 tax returns It includes buildings and structural components that are not section 1245 property (discussed earlier). How to file 2010 tax returns It includes a leasehold of land or section 1250 property subject to an allowance for depreciation. How to file 2010 tax returns A fee simple interest in land is not section 1250 property because, like land, it is not depreciable. How to file 2010 tax returns Gain on the disposition of section 1250 property is treated as ordinary income to the extent of additional depreciation allowed or allowable. How to file 2010 tax returns To determine the additional depreciation on section 1250 property, see Depreciation Recapture in chapter 3 of Publication 544. How to file 2010 tax returns You will not have additional depreciation if any of the following apply to the property disposed of. How to file 2010 tax returns You figured depreciation for the property using the straight line method or any other method that does not result in depreciation that is more than the amount figured by the straight line method and you have held the property longer than 1 year. How to file 2010 tax returns You chose the alternate ACRS (straight line) method for the property, which was a type of 15-, 18-, or 19-year real property covered by the section 1250 rules. How to file 2010 tax returns The property was nonresidential real property placed in service after 1986 (or after July 31, 1986, if the choice to use MACRS was made) and you held it longer than 1 year. How to file 2010 tax returns These properties are depreciated using the straight line method. How to file 2010 tax returns Installment Sale If you report the sale of property under the installment method, any depreciation recapture under section 1245 or 1250 is taxable as ordinary income in the year of sale. How to file 2010 tax returns This applies even if no payments are received in that year. How to file 2010 tax returns If the gain is more than the depreciation recapture income, report the rest of the gain using the rules of the installment method. How to file 2010 tax returns For this purpose, include the recapture income in your installment sale basis to determine your gross profit on the installment sale. How to file 2010 tax returns If you dispose of more than one asset in a single transaction, you must separately figure the gain on each asset so that it may be properly reported. How to file 2010 tax returns To do this, allocate the selling price and the payments you receive in the year of sale to each asset. How to file 2010 tax returns Report any depreciation recapture income in the year of sale before using the installment method for any remaining gain. How to file 2010 tax returns For more information on installment sales, see chapter 10. How to file 2010 tax returns Other Dispositions Chapter 3 of Publication 544 discusses the tax treatment of the following transfers of depreciable property. How to file 2010 tax returns By gift. How to file 2010 tax returns At death. How to file 2010 tax returns In like-kind exchanges. How to file 2010 tax returns In involuntary conversions. How to file 2010 tax returns Publication 544 also explains how to handle a single transaction involving multiple properties. How to file 2010 tax returns Other Gains This section discusses gain on the disposition of farmland for which you were allowed either of the following. How to file 2010 tax returns Deductions for soil and water conservation expenditures (section 1252 property). How to file 2010 tax returns Exclusions from income for certain cost sharing payments (section 1255 property). How to file 2010 tax returns Section 1252 property. How to file 2010 tax returns   If you disposed of farmland you held more than 1 year and less than 10 years at a gain and you were allowed deductions for soil and water conservation expenses for the land, as discussed in chapter 5, you must treat part of the gain as ordinary income and treat the balance as section 1231 gain. How to file 2010 tax returns Exceptions. How to file 2010 tax returns   Do not treat gain on the following transactions as gain on section 1252 property. How to file 2010 tax returns Disposition of farmland by gift. How to file 2010 tax returns Transfer of farm property at death (except for income in respect of a decedent). How to file 2010 tax returns For more information, see Regulations section 1. How to file 2010 tax returns 1252-2. How to file 2010 tax returns Amount to report as ordinary income. How to file 2010 tax returns   You report as ordinary income the lesser of the following amounts. How to file 2010 tax returns Your gain (determined by subtracting the adjusted basis from the amount realized from a sale, exchange, or involuntary conversion, or the FMV for all other dispositions). How to file 2010 tax returns The total deductions allowed for soil and water conservation expenses multiplied by the applicable percentage, discussed next. How to file 2010 tax returns Applicable percentage. How to file 2010 tax returns   The applicable percentage is based on the length of time you held the land. How to file 2010 tax returns If you dispose of your farmland within 5 years after the date you acquired it, the percentage is 100%. How to file 2010 tax returns If you dispose of the land within the 6th through 9th year after you acquired it, the applicable percentage is reduced by 20% a year for each year or part of a year you hold the land after the 5th year. How to file 2010 tax returns If you dispose of the land 10 or more years after you acquired it, the percentage is 0%, and the entire gain is a section 1231 gain. How to file 2010 tax returns Example. How to file 2010 tax returns You acquired farmland on January 19, 2005. How to file 2010 tax returns On October 3, 2013, you sold the land at a $30,000 gain. How to file 2010 tax returns Between January 1 and October 3, 2013, you incur soil and water conservation expenditures of $15,000 for the land that are fully deductible in 2013. How to file 2010 tax returns The applicable percentage is 40% since you sold the land within the 8th year after you acquired it. How to file 2010 tax returns You treat $6,000 (40% of $15,000) of the $30,000 gain as ordinary income and the $24,000 balance as a section 1231 gain. How to file 2010 tax returns Section 1255 property. How to file 2010 tax returns   If you receive certain cost-sharing payments on property and you exclude those payments from income (as discussed in chapter 3), you may have to treat part of any gain as ordinary income and treat the balance as a section 1231 gain. How to file 2010 tax returns If you chose not to exclude these payments, you will not have to recognize ordinary income under this provision. How to file 2010 tax returns Amount to report as ordinary income. How to file 2010 tax returns   You report as ordinary income the lesser of the following amounts. How to file 2010 tax returns The applicable percentage of the total excluded cost-sharing payments. How to file 2010 tax returns The gain on the disposition of the property. How to file 2010 tax returns You do not report ordinary income under this rule to the extent the gain is recognized as ordinary income under sections 1231 through 1254, 1256, and 1257. How to file 2010 tax returns However, if applicable, gain reported under this rule must be reported regardless of any contrary provisions (including nonrecognition provisions) under any other section. How to file 2010 tax returns Applicable percentage. How to file 2010 tax returns   The applicable percentage of the excluded cost-sharing payments to be reported as ordinary income is based on the length of time you hold the property after receiving the payments. How to file 2010 tax returns If the property is held less than 10 years after you receive the payments, the percentage is 100%. How to file 2010 tax returns After 10 years, the percentage is reduced by 10% a year, or part of a year, until the rate is 0%. How to file 2010 tax returns Form 4797, Part III. How to file 2010 tax returns   Use Form 4797, Part III, to figure the ordinary income part of a gain from the sale, exchange, or involuntary conversion of section 1252 property and section 1255 property. 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