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Irs For 1040x

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Irs For 1040x

Irs for 1040x Publication 4492-B - Main Content Table of Contents DefinitionsMidwestern Disaster Areas Applicable Disaster Date Charitable Giving IncentivesTemporary Suspension of Limits on Charitable Contributions Standard Mileage Rate for Charitable Use of Vehicles Mileage Reimbursements to Charitable Volunteers Casualty and Theft LossesTime limit for making election. Irs for 1040x Replacement Period for Nonrecognition of Gain Net Operating Losses IRAs and Other Retirement PlansDefinitions Taxation of Qualified Disaster Recovery Assistance Distributions Repayment of Qualified Disaster Recovery Assistance Distributions Repayment of Qualified Distributions for the Purchase or Construction of a Main Home Loans From Qualified Plans Additional Tax Relief for IndividualsEarned Income Credit and Child Tax Credit Additional Exemption for Housing Individuals Displaced by the Severe Storms, Tornadoes, or Flooding Education Credits Recapture of Federal Mortgage Subsidy Exclusion of Certain Cancellations of Indebtedness by Reason of the Severe Storms, Tornadoes, or Flooding Tax Relief for Temporary Relocation Additional Tax Relief for BusinessesEmployee Retention Credit Employer Housing Credit and Exclusion Demolition and Clean-up Costs Increase in Rehabilitation Tax Credit Request for Copy or Transcript of Tax Return How To Get Tax HelpLow Income Taxpayer Clinics (LITCs). Irs for 1040x Definitions The following definitions are used throughout this publication. Irs for 1040x Midwestern Disaster Areas A Midwestern disaster area is an area for which a major disaster was declared by the President during the period beginning on May 20, 2008, and ending on July 31, 2008, in the state of Arkansas, Illinois, Indiana, Iowa, Kansas, Michigan, Minnesota, Missouri, Nebraska, or Wisconsin, as a result of severe storms, tornadoes, or flooding that occurred on the applicable disaster date. Irs for 1040x See Tables 1 and 2 for a list of the counties included in the Midwestern disaster areas. Irs for 1040x Applicable Disaster Date The term “applicable disaster date” as used in this publication, refers to the date on which the severe storms, tornadoes, or flooding occurred in the Midwestern disaster areas. Irs for 1040x You will need to know this date when using this publication for the various tax provisions. Irs for 1040x Table 1 The counties listed in Table 1 below are eligible for all tax provisions shown in this publication. Irs for 1040x Applicable Disaster Dates* State Affected Counties—Midwestern Disaster Areas 05/02/2008through05/12/2008 Arkansas Arkansas, Benton, Cleburne, Conway, Crittenden, Grant, Lonoke, Mississippi, Phillips, Pulaski, Saline, and Van Buren. Irs for 1040x 06/01/2008through07/22/2008 Illinois Adams, Calhoun, Clark, Coles, Crawford, Cumberland, Douglas, Edgar, Hancock, Henderson, Jasper, Jersey, Lake, Lawrence, Mercer, Rock Island, Whiteside, and Winnebago. Irs for 1040x 05/30/2008through06/27/2008 Indiana Adams, Bartholomew, Brown, Clay, Daviess, Dearborn, Decatur, Gibson, Grant, Greene, Hamilton, Hancock, Hendricks, Henry, Huntington, Jackson, Jefferson, Jennings, Johnson, Knox, Lawrence, Madison, Marion, Monroe, Morgan, Owen, Parke, Pike, Posey, Putnam, Randolph, Ripley, Rush, Shelby, Sullivan, Tippecanoe, Vermillion, Vigo, Washington, and Wayne. Irs for 1040x 05/25/2008through08/13/2008 Iowa Adair, Adams, Allamakee, Appanoose, Audubon, Benton, Black Hawk, Boone, Bremer, Buchanan, Butler, Cass, Cedar, Cerro Gordo, Chickasaw, Clarke, Clayton, Clinton, Crawford, Dallas, Davis, Decatur, Delaware, Des Moines, Dubuque, Fayette, Floyd, Franklin, Fremont, Greene, Grundy, Guthrie, Hamilton, Hancock, Hardin, Harrison, Henry, Howard, Humboldt, Iowa, Jackson, Jasper, Johnson, Jones, Keokuk, Kossuth, Lee, Linn, Louisa, Lucas, Madison, Mahaska, Marion, Marshall, Mills, Mitchell, Monona, Monroe, Montgomery, Muscatine, Page, Polk, Pottawattamie, Poweshiek, Ringgold, Scott, Story, Tama, Union, Van Buren, Wapello, Warren, Washington, Webster, Winnebago, Winneshiek, Worth, and Wright. Irs for 1040x 05/10/2008through05/11/2008 Missouri Barry, Jasper, and Newton. Irs for 1040x 06/01/2008through08/13/2008 Missouri Adair, Andrew, Callaway, Cass, Chariton, Clark, Gentry, Greene, Harrison, Holt, Johnson, Lewis, Lincoln, Linn, Livingston, Macon, Marion, Monroe, Nodaway, Pike, Putnam, Ralls, St. Irs for 1040x Charles, Stone, Taney, Vernon, and Webster. Irs for 1040x 05/22/2008through06/24/2008 Nebraska Buffalo, Butler, Colfax, Custer, Dawson, Douglas, Gage, Hamilton, Holt, Jefferson, Kearney, Lancaster, Platte, Richardson, Sarpy, and Saunders. Irs for 1040x 06/05/2008through07/25/2008 Wisconsin Adams, Calumet, Crawford, Columbia, Dane, Dodge, Fond du Lac, Grant, Green, Green Lake, Iowa, Jefferson, Juneau, Kenosha, La Crosse, Manitowoc, Marquette, Milwaukee, Monroe, Ozaukee, Racine, Richland, Rock, Sauk, Sheboygan, Vernon, Walworth, Washington, Waukesha, and Winnebago. Irs for 1040x *For more details, go to www. Irs for 1040x fema. Irs for 1040x gov Table 2 The counties listed in Table 2 below are eligible for all of the special tax provisions shown in this publication except the following. Irs for 1040x Charitable Giving Incentives. Irs for 1040x Net Operating Losses. Irs for 1040x Education Credits. Irs for 1040x Recapture of Federal Mortgage Subsidy. Irs for 1040x Tax Relief for Temporary Relocation. Irs for 1040x Employee Retention Credit. Irs for 1040x Employer Housing Credit and Exclusion. Irs for 1040x Demolition and Clean-up Costs. Irs for 1040x Increase in Rehabilitation Credit. Irs for 1040x Applicable Disaster Dates* State Affected Counties—Midwestern Disaster Areas 06/01/2008through07/22/2008 Illinois Greene, Madison, Monroe, Pike, Randolph, St. Irs for 1040x Clair, and Scott. Irs for 1040x 05/30/2008through06/27/2008 Indiana Benton, Boone, Fountain, Franklin, Jay, Montgomery, Ohio, Switzerland, Union, and Wabash. Irs for 1040x 05/25/2008through08/13/2008 Iowa Carroll, Cherokee, Lyon, Palo Alto, Pocahontas, Taylor, and Wayne. Irs for 1040x 05/22/2008through06/16/2008 Kansas Barber, Barton, Bourbon, Brown, Butler, Chautauqua, Cherokee, Clark, Clay, Comanche, Cowley, Crawford, Decatur, Dickinson, Edwards, Elk, Ellis, Ellsworth, Franklin, Gove, Graham, Harper, Haskell, Hodgeman, Jackson, Jewell, Kingman, Kiowa, Lane, Linn, Logan, Mitchell, Montgomery, Ness, Norton, Osborne, Pawnee, Phillips, Pratt, Reno, Republic, Riley, Rooks, Rush, Saline, Seward, Sheridan, Smith, Stafford, Sumner, Thomas, Trego, Wallace, and Wilson. Irs for 1040x 06/06/2008through06/13/2008 Michigan Allegan, Barry, Eaton, Ingham, Lake, Manistee, Mason, Missaukee, Osceola, Ottawa, Saginaw, and Wexford. Irs for 1040x 06/06/2008through06/12/2008 Minnesota Cook, Fillmore, Freeborn, Houston, Mower, and Nobles. Irs for 1040x 06/01/2008through08/13/2008 Missouri Atchison, Audrain, Bates, Buchanan, Cape Girardeau, Carroll, Christian, Daviess, Grundy, Howard, Jefferson, Knox, Mercer, Miller, Mississippi, Morgan, New Madrid, Pemiscot, Perry, Pettis, Platte, Polk, Randolph, Ray, Saline, Schuyler, Scotland, Shelby, St. Irs for 1040x Genevieve, St. Irs for 1040x Louis, the Independent City of St. Irs for 1040x Louis, Scott, Sullivan, and Worth. Irs for 1040x 04/23/2008through04/26/2008 Nebraska Gage, Johnson, Morrill, Nemaha, and Pawnee. Irs for 1040x 05/22/2008through06/24/2008 Nebraska Adams, Blaine, Boone, Boyd, Brown, Burt, Cass, Chase, Cherry, Cuming, Dundy, Fillmore, Frontier, Furnas, Garfield, Gosper, Greeley, Hall, Hayes, Howard, Johnson, Keya Paha, Lincoln, Logan, Loup, Merrick, McPherson, Morrill, Nance, Nemaha, Otoe, Phelps, Polk, Red Willow, Rock, Saline, Seward, Sherman, Stanton, Thayer, Thomas, Thurston, Valley, Webster, Wheeler, and York. Irs for 1040x 06/27/2008 Nebraska Dodge, Douglas, Sarpy, and Saunders. Irs for 1040x 06/05/2008through07/25/2008 Wisconsin Lafayette. Irs for 1040x * For more details, go to www. Irs for 1040x fema. Irs for 1040x gov Charitable Giving Incentives Temporary Suspension of Limits on Charitable Contributions This benefit applies only to the counties in Table 1. Irs for 1040x Individuals. Irs for 1040x   Qualified contributions are not subject to the overall limit on itemized deductions or the 50% of adjusted gross income (AGI) limit. Irs for 1040x A qualified contribution is a charitable contribution paid in cash or by check to a 50% limit organization if you make an election to have the 50% limit not apply to these contributions. Irs for 1040x   A qualified contribution must also meet all of the following requirements. Irs for 1040x Be paid after May 1, 2008, and before January 1, 2009. Irs for 1040x The contribution must be for relief efforts in one or more Midwestern disaster areas. Irs for 1040x Documentation must be provided by the donee organization that the contribution was used (or will be used) for relief efforts in one or more Midwestern disaster areas. Irs for 1040x   Your deduction for qualified contributions is limited to your AGI minus your deduction for all other charitable contributions. Irs for 1040x You can carry over any contributions you are not able to deduct for 2008 because of this limit. Irs for 1040x In 2009, the carryover of your unused qualified contributions is subject to the 50% of AGI limit. Irs for 1040x Exception. Irs for 1040x   Qualified contributions do not include contributions to certain private foundations described in section 509(a)(3) or contributions for the establishment of a new, or maintenance of an existing, donor advised fund. Irs for 1040x Corporations. Irs for 1040x   A corporation can elect to deduct qualified cash contributions without regard to the 10% of taxable income limit if the contributions were paid after May 1, 2008, and before January 1, 2009, to a qualified charitable organization (other than certain private foundations described in section 509(a)(3) or contributions for the establishment of a new, or maintenance of an existing, donor advised fund), for relief efforts in one or more Midwestern disaster areas. Irs for 1040x Documentation must be provided by the donee organization that the contribution was used (or will be used) for relief efforts in one or more Midwestern disaster areas. Irs for 1040x The corporation's deduction for these qualified contributions is limited to 100% of taxable income (as modified for the 10% limit) minus the corporation's deduction for all other charitable contributions. Irs for 1040x Any qualified contributions over this limit can be carried over to the next 5 years, subject to the 10% of taxable income limit. Irs for 1040x Partners and shareholders. Irs for 1040x   Each partner in a partnership and each shareholder in an S corporation must make a separate election to have the appropriate limit not apply. Irs for 1040x More information. Irs for 1040x   For more information, see Publication 526 or Publication 542, Corporations. Irs for 1040x Publication 526 includes a worksheet you can use to figure your deduction if any limits apply to your charitable contributions. Irs for 1040x Standard Mileage Rate for Charitable Use of Vehicles This benefit applies only to the counties in Table 1. Irs for 1040x The following are special standard mileage rates in effect for 2008 for the cost of operating your vehicle for providing charitable services related only to the severe storms, tornadoes, or flooding. Irs for 1040x 36 cents per mile for the period beginning on the applicable disaster date through June 30, 2008. Irs for 1040x 41 cents per mile for the period July 1 through December 31, 2008. Irs for 1040x Mileage Reimbursements to Charitable Volunteers This benefit applies only to the counties in Table 1. Irs for 1040x You can exclude from income amounts you receive as mileage reimbursements for the use of a private passenger vehicle for the benefit of a qualified charitable organization in providing relief related to the severe storms, tornadoes, or flooding during the period beginning on the applicable disaster date, and ending on December 31, 2008. Irs for 1040x You cannot claim a deduction or credit for amounts you exclude. Irs for 1040x You must keep records of miles driven, time, place (or use), and purpose of the mileage. Irs for 1040x The amount you can exclude cannot exceed the standard business mileage rate (shown below) for expenses incurred during the following periods. Irs for 1040x 50. Irs for 1040x 5 cents per mile for the period beginning on the applicable disaster date through June 30, 2008. Irs for 1040x 58. Irs for 1040x 5 cents per mile for the period July 1 through December 31, 2008. Irs for 1040x Casualty and Theft Losses This benefit applies to the counties in both Tables 1 and 2. Irs for 1040x The following paragraphs explain changes to casualty and theft losses that were caused by the severe storms, tornadoes, or flooding in the Midwestern disaster areas. Irs for 1040x For more information, see Publication 547. Irs for 1040x Limits on personal casualty or theft losses. Irs for 1040x   Losses of personal use property that arose in a Midwestern disaster area on or after the applicable disaster date are not subject to the $100 or 10% of AGI limits. Irs for 1040x Qualifying losses include losses from casualties and thefts that arose in a Midwestern disaster area that were attributable to the severe storms, tornadoes, or flooding. Irs for 1040x When completing Form 4684, do not include on line 17 any losses that arose in a Midwestern disaster area. Irs for 1040x A loss arising in a Midwestern disaster area is not considered a loss attributable to a federally declared disaster for purposes of that line and cannot be added to your standard deduction. Irs for 1040x When to deduct the loss. Irs for 1040x   Casualty and theft losses are generally deductible only in the year the casualty occurred or the theft was discovered. Irs for 1040x However, you can elect to deduct losses caused by the severe storms, tornadoes, or flooding on your return for the prior year. Irs for 1040x Special instructions for individuals who elect to claim a Midwestern disaster area casualty or theft loss for 2007. Irs for 1040x   Individuals filing or amending their 2007 tax return for casualty or theft losses that were attributable to the severe storms, tornadoes, or flooding should: Enter “Midwestern Disaster Area” at the top of Form 1040 or Form 1040X, and Complete the 2008 version of Form 4684. Irs for 1040x Cross out “2008” and enter “2007” at the top of Form 4684. Irs for 1040x Time limit for making election. Irs for 1040x   You must make this election to claim your casualty or theft loss in 2007 by the later of the following dates. Irs for 1040x The due date (without extensions) for filing your 2008 income tax return. Irs for 1040x The due date (with extensions) for filing your 2007 income tax return. Irs for 1040x Example. Irs for 1040x If you are a calendar year individual taxpayer, you have until April 15, 2009, to amend your 2007 tax return to claim a casualty or theft loss that occurred during 2008. Irs for 1040x Replacement Period for Nonrecognition of Gain This benefit applies to the counties in both Tables 1 and 2. Irs for 1040x Generally, an involuntary conversion occurs when property is damaged, destroyed, stolen, seized, requisitioned, or condemned, and you receive other property or money in payment, such as insurance or a condemnation award. Irs for 1040x Generally, you do not have to report a gain (if any) if you replace the property within 2 years (4 years for a main home in a federally declared disaster area). Irs for 1040x However, for property that was involuntarily converted on or after the applicable disaster date, as a result of the severe storms, tornadoes, or flooding, a 5-year replacement period applies if substantially all of the use of the replacement property is in a Midwestern disaster area. Irs for 1040x For more information, see the Instructions for Form 4684. Irs for 1040x Net Operating Losses This benefit applies only to the counties in Table 1. Irs for 1040x Qualified disaster recovery assistance loss. Irs for 1040x   Generally, you can carry a net operating loss (NOL) back to the 2 tax years before the NOL year. Irs for 1040x However, the portion of an NOL that is a qualified disaster recovery assistance loss can be carried back to the 5 tax years before the NOL year. Irs for 1040x In addition, the 90% limit on the alternative tax NOL deduction (ATNOLD) does not apply to such portion of the ATNOLD. Irs for 1040x   A qualified disaster recovery assistance loss is the smaller of: The excess of the NOL for the year over the specified liability loss for the year to which a 10-year carryback applies, or The total of the following deductions (to the extent they are taken into account in computing the NOL for the tax year): Qualified disaster recovery assistance casualty loss (as defined below), Moving expenses paid or incurred on or after the applicable disaster date, and before January 1, 2011, for the employment of an individual whose main home was in a Midwestern disaster area before the applicable disaster date, who was unable to remain in that home because of the severe storms, tornadoes, or flooding, and whose main job location (after the move) is in a Midwestern disaster area, Temporary housing expenses paid or incurred on or after the applicable disaster date, and before January 1, 2011, to house employees of the taxpayer whose main job location is in a Midwestern disaster area, Depreciation or amortization allowable for any qualified disaster recovery assistance property (even if you elected not to claim the special disaster recovery assistance depreciation allowance for such property) for the year placed in service, and Repair expenses (including expenses for the removal of debris) paid or incurred on or after the applicable disaster date, and before January 1, 2011, for any damage from the severe storms, tornadoes, or flooding to property located in a Midwestern disaster area. Irs for 1040x Qualified disaster recovery assistance casualty loss. Irs for 1040x   A qualified disaster recovery assistance casualty loss is any deductible section 1231 loss of property located in a Midwestern disaster area if the loss was caused by the severe storms, tornadoes, or flooding. Irs for 1040x For this purpose, the amount of the loss is reduced by any recognized gain from an involuntary conversion caused by the severe storms, tornadoes, or flooding of property located in a Midwestern disaster area. Irs for 1040x Any such loss taken into account in figuring your qualified disaster recovery assistance loss is not eligible for the election to be treated as having occurred in the previous tax year. Irs for 1040x More information. Irs for 1040x   For more information on NOLs, see Publication 536 or Publication 542, Corporations. Irs for 1040x IRAs and Other Retirement Plans New rules provide for tax-favored withdrawals, repayments, and loans from certain retirement plans for taxpayers who suffered economic losses as a result of the severe storms, tornadoes, or flooding. Irs for 1040x Definitions Qualified disaster recovery assistance distribution. Irs for 1040x   A qualified disaster recovery assistance distribution is any distribution you received from an eligible retirement plan if all of the following apply. Irs for 1040x The distribution was made on or after the applicable disaster date and before January 1, 2010. Irs for 1040x Your main home was located in a Midwestern disaster area on the applicable disaster date. Irs for 1040x You sustained an economic loss because of the severe storms, tornadoes, or flooding and your main home was in a Midwestern disaster area on the applicable disaster date. Irs for 1040x Examples of an economic loss include, but are not limited to: Loss, damage to, or destruction of real or personal property from fire, flooding, looting, vandalism, theft, wind, or other cause; Loss related to displacement from your home; or Loss of livelihood due to temporary or permanent layoffs. Irs for 1040x   If (1) through (3) above apply, you can generally designate any distribution (including periodic payments and required minimum distributions) from an eligible retirement plan as a qualified disaster recovery assistance distribution, regardless of whether the distribution was made on account of the severe storms, tornadoes, or flooding. Irs for 1040x Qualified disaster recovery assistance distributions are permitted without regard to your need or the actual amount of your economic loss. Irs for 1040x   The total of your qualified disaster recovery assistance distributions from all plans is limited to $100,000. Irs for 1040x If you have distributions in excess of $100,000 from more than one type of plan, such as a 401(k) plan and an IRA, you can allocate the $100,000 limit among the plans any way you choose. Irs for 1040x   A reduction or offset (on or after the applicable disaster date) of your account balance in an eligible retirement plan in order to repay a loan can also be designated as a qualified disaster recovery assistance distribution. Irs for 1040x Eligible retirement plan. Irs for 1040x   An eligible retirement plan can be any of the following. Irs for 1040x A qualified pension, profit-sharing, or stock bonus plan (including a 401(k) plan). Irs for 1040x A qualified annuity plan. Irs for 1040x A tax-sheltered annuity contract. Irs for 1040x A governmental section 457 deferred compensation plan. Irs for 1040x A traditional, SEP, SIMPLE, or Roth IRA. Irs for 1040x Main home. Irs for 1040x   Generally, your main home is the home where you live most of the time. Irs for 1040x A temporary absence due to special circumstances, such as illness, education, business, military service, evacuation, or vacation, will not change your main home. Irs for 1040x Taxation of Qualified Disaster Recovery Assistance Distributions This benefit applies to the counties in both Tables 1 and 2. Irs for 1040x Qualified disaster recovery assistance distributions are included in income in equal amounts over three years. Irs for 1040x However, if you elect, you can include the entire distribution in your income in the year it was received. Irs for 1040x Qualified disaster recovery assistance distributions are not subject to the additional 10% tax (or the additional 25% tax for certain distributions from SIMPLE IRAs) on early distributions from qualified retirement plans (including IRAs). Irs for 1040x However, any distributions you receive in excess of the $100,000 qualified disaster recovery assistance distribution limit may be subject to the additional tax on early distributions. Irs for 1040x For more information, see Form 8930. Irs for 1040x Repayment of Qualified Disaster Recovery Assistance Distributions This benefit applies to the counties in both Tables 1 and 2. Irs for 1040x If you choose, you generally can repay any portion of a qualified disaster recovery assistance distribution that is eligible for tax-free rollover treatment to an eligible retirement plan. Irs for 1040x Also, you can repay a qualified disaster recovery assistance distribution made on account of a hardship from a retirement plan. Irs for 1040x However, see Exceptions later for qualified disaster recovery assistance distributions you cannot repay. Irs for 1040x You have three years from the day after the date you received the distribution to make a repayment. Irs for 1040x Amounts that are repaid are treated as a qualified rollover and are not included in income. Irs for 1040x Also, a repayment of a qualified disaster recovery assistance distribution to an IRA is not counted when figuring the one-rollover-per-year limitation. Irs for 1040x See Form 8930 for more information on how to report repayments. Irs for 1040x Exceptions. Irs for 1040x   You cannot repay the following types of distributions. Irs for 1040x Qualified disaster recovery assistance distributions received as a beneficiary (other than a surviving spouse). Irs for 1040x Required minimum distributions. Irs for 1040x Periodic payments (other than from an IRA) that are for: A period of 10 years or more, Your life or life expectancy, or The joint lives or joint life expectancies of you and your beneficiary. Irs for 1040x Repayment of Qualified Distributions for the Purchase or Construction of a Main Home This benefit applies to the counties in both Tables 1 and 2. Irs for 1040x If you received a qualified distribution to purchase or construct a main home in a Midwestern disaster area, you can repay part or all of that distribution on or after the applicable disaster date, but no later than March 3, 2009, to an eligible retirement plan. Irs for 1040x For this purpose, an eligible retirement plan is any plan, annuity, or IRA to which a qualified rollover can be made. Irs for 1040x To be a qualified distribution, the distribution must meet all of the following requirements. Irs for 1040x The distribution is a hardship distribution from a 401(k) plan, a hardship distribution from a tax-sheltered annuity contract, or a qualified first-time homebuyer distribution from an IRA. Irs for 1040x The distribution was received after the date that was 6 months before the day after the applicable disaster date. Irs for 1040x The distribution was to be used to purchase or construct a main home in a Midwestern disaster area that was not purchased or constructed because of the severe storms, tornadoes, or flooding. Irs for 1040x Amounts that are repaid before March 4, 2009, are treated as a qualified rollover and are not included in income. Irs for 1040x Also, a repayment of a qualified distribution to an IRA is not counted when figuring the one-rollover-per-year limitation. Irs for 1040x A qualified distribution not repaid before March 4, 2009, may be taxable for 2007 or 2008 and subject to the additional 10% tax (or the additional 25% tax for certain SIMPLE IRAs) on early distributions. Irs for 1040x You must file Form 8930 if you received a qualified distribution that you repaid, in whole or in part, before March 4, 2009. Irs for 1040x Loans From Qualified Plans This benefit applies to the counties in both Tables 1 and 2. Irs for 1040x The following benefits are available to qualified individuals. Irs for 1040x Increases to the limits for distributions treated as loans from employer plans. Irs for 1040x A 1-year suspension for payments due on plan loans. Irs for 1040x Qualified individual. Irs for 1040x   You are a qualified individual if your main home was located in a Midwestern disaster area on the applicable disaster date and you had an economic loss because of the severe storms, tornadoes, or flooding. Irs for 1040x Examples of an economic loss include, but are not limited to: Loss, damage to, or destruction of real or personal property from fire, flooding, looting, vandalism, theft, wind, or other cause; Loss related to displacement from your home; or Loss of livelihood due to temporary or permanent layoffs. Irs for 1040x Limits on plan loans. Irs for 1040x   The $50,000 limit for distributions treated as plan loans is increased to $100,000. Irs for 1040x In addition, the limit based on 50% of your vested accrued benefit is increased to 100% of that benefit. Irs for 1040x If your main home was located in a Midwestern disaster area, the higher limits apply only to loans received during the period beginning on October 3, 2008, and ending on December 31, 2009. Irs for 1040x One-year suspension of loan payments. Irs for 1040x   Payments on plan loans outstanding on or after the applicable disaster date, may be suspended for 1 year by the plan administrator. Irs for 1040x To qualify for the suspension, the due date for any loan payment must occur during the period beginning on the applicable disaster date and ending on December 31, 2009. Irs for 1040x Additional Tax Relief for Individuals Earned Income Credit and Child Tax Credit This benefit applies to the counties in both Tables 1 and 2. Irs for 1040x You can elect to use your 2007 earned income to figure your earned income credit (EIC) and additional child tax credit for 2008 if: Your 2008 earned income is less than your 2007 earned income, and At least one of the following statements is true. Irs for 1040x Your main home on the applicable disaster date was in a Midwestern disaster area as shown in Table 1. Irs for 1040x Your main home on the applicable disaster date was in a Midwestern disaster area as shown in Table 2, and you were displaced from that home because of the severe storms, tornadoes, or flooding. Irs for 1040x Earned income. Irs for 1040x    For the purpose of this election, your earned income for both the EIC and the additional child tax credit is the amount of earned income used to figure your EIC, even if you did not take the EIC and even if that amount is different than your earned income for the additional child tax credit. Irs for 1040x If you are claiming only the additional child tax credit, you must figure the amount of your earned income for EIC purposes to determine your eligibility to make the election and the amount of the credit. Irs for 1040x Joint returns. Irs for 1040x   If you file a joint return, you qualify to make this election even if only one spouse meets the requirements. Irs for 1040x If you make the election, your 2007 earned income is the sum of your 2007 earned income and your spouse's 2007 earned income. Irs for 1040x Making the election. Irs for 1040x   If you make the election to use your 2007 earned income, the election applies for figuring both the EIC and the additional child tax credit. Irs for 1040x However, you can make the election for the additional child tax credit even if you do not take the EIC. Irs for 1040x   Electing to use your 2007 earned income can increase or decrease your EIC. Irs for 1040x Take the following steps to decide whether to make the election. Irs for 1040x Figure your 2008 EIC using your 2007 earned income. Irs for 1040x Figure your 2008 additional child tax credit using your 2007 earned income for EIC purposes. Irs for 1040x Add the results of (1) and (2). Irs for 1040x Figure your 2008 EIC using your 2008 earned income. Irs for 1040x Figure your 2008 additional child tax credit using your 2008 earned income for additional child tax credit purposes. Irs for 1040x Add the results of (4) and (5). Irs for 1040x Compare the results of (3) and (6). Irs for 1040x If (3) is larger than (6), it is to your benefit to make the election. Irs for 1040x If (3) is equal to or smaller than (6), making the election will not help you. Irs for 1040x   If you elect to use your 2007 earned income and you are claiming the EIC, enter “PYEI” and the amount of your 2007 earned income on the dotted line next to line 64a of Form 1040, on the line next to line 40a of Form 1040A, or in the space to the left of line 8a of Form 1040EZ. Irs for 1040x   If you elect to use your 2007 earned income and you are claiming the additional child tax credit, enter your 2007 earned income for EIC purposes (even if you did not claim the EIC) on Form 8812, Additional Child Tax Credit, line 4a, and check the box on that line. Irs for 1040x Getting your 2007 tax return information. Irs for 1040x   If you do not have your 2007 tax records, you can get the amount of earned income used to figure your 2007 EIC by calling 1-866-562-5227. Irs for 1040x You can also get this information by visiting the IRS website at www. Irs for 1040x irs. Irs for 1040x gov. Irs for 1040x   If you prefer to figure your 2007 earned income yourself, copies or transcripts of your filed and processed tax returns can help you reconstruct your tax records. Irs for 1040x See Request for Copy or Transcript of Tax Return on page 11. Irs for 1040x Additional Exemption for Housing Individuals Displaced by the Severe Storms, Tornadoes, or Flooding This benefit applies to the counties in both Tables 1 and 2. Irs for 1040x You can claim an additional exemption amount of $500 for providing housing in your main home for each individual displaced by the severe storms, tornadoes, or flooding. Irs for 1040x The additional exemption amount is claimed on Form 8914. Irs for 1040x You can claim an additional exemption amount only one time for a specific individual. Irs for 1040x If you claimed an additional exemption amount for an individual in 2008, you cannot claim that amount again for the same individual in 2009. Irs for 1040x The maximum additional exemption amount you can claim for all displaced individuals is $2,000. Irs for 1040x Any additional exemption amount you claimed for displaced individuals in 2008 will reduce the $2,000 maximum for 2009. Irs for 1040x The $2,000 limit applies to a husband and wife, whether the husband and wife file joint returns or separate returns. Irs for 1040x If married filing separately, the $2,000 can be divided in $500 increments between the spouses. Irs for 1040x For example, if one spouse claims an additional exemption amount for one displaced individual, the other spouse, if otherwise eligible, can claim additional exemption amounts for three different displaced individuals. Irs for 1040x If two or more taxpayers share the same main home, only one taxpayer in that main home can claim the additional exemption amount for a specific displaced individual. Irs for 1040x In order for you to be considered to have provided housing, you must have a legal interest in the main home (that is, own or rent the home). Irs for 1040x To qualify as a displaced individual, the individual: Must have had his or her main home in a Midwestern disaster area on the applicable disaster date, and he or she must have been displaced from that home. Irs for 1040x If the individual's main home was located in a Midwestern disaster area as shown in Table 2, that home must have been damaged by the severe storms, tornadoes, or flooding or the individual must have been evacuated from that home because of the severe storms, tornadoes, or flooding, Must have been provided housing in your main home for a period of at least 60 consecutive days ending in the tax year in which the exemption is claimed, and Cannot be your spouse or dependent. Irs for 1040x You cannot claim the additional exemption amount if you received rent (or any other amount) from any source for providing the housing. Irs for 1040x You are permitted to receive payments or reimbursements that do not relate to normal housing costs, including the following. Irs for 1040x Food, clothing, or personal items consumed or used by the displaced individual. Irs for 1040x Reimbursement for the cost of any long distance telephone calls made by the displaced individual. Irs for 1040x Reimbursement for the cost of gasoline for the displaced individual's use of your vehicle. Irs for 1040x However, you cannot claim the additional exemption amount if you received any reimbursement for the extra costs of heat, electricity, or water used by the displaced individual. Irs for 1040x Also, you must report on Form 8914 the displaced individual's social security number or individual taxpayer identification number to claim an additional exemption amount. Irs for 1040x For more information, see Form 8914. Irs for 1040x Education Credits This benefit applies only to the counties in Table 1. Irs for 1040x The education credits have been expanded for students attending an eligible educational institution located in a Midwestern disaster area (Midwestern disaster area students) for any tax year beginning in 2008 or 2009. Irs for 1040x The Hope credit for a Midwestern disaster area student is increased to 100% of the first $2,400 in qualified education expenses and 50% of the next $2,400 of qualified education expenses for a maximum credit of $3,600 per student. Irs for 1040x The lifetime learning credit rate for a Midwestern disaster area student is increased from 20% to 40%. Irs for 1040x The definition of qualified education expenses for a Midwestern disaster area student also has been expanded. Irs for 1040x This expanded definition also applies to the tuition and fees deduction claimed on Form 8917. Irs for 1040x In addition to tuition and fees required for the student's enrollment or attendance at an eligible educational institution, qualified education expenses for a Midwestern disaster area student include the following. Irs for 1040x Books, supplies, and equipment required for enrollment or attendance at an eligible educational institution. Irs for 1040x For a special needs student, expenses that are necessary for that person's enrollment or attendance at an eligible educational institution. Irs for 1040x For a student who is at least a half-time student, the reasonable costs of room and board, but only to the extent that the costs are not more than the greater of the following two amounts. Irs for 1040x The allowance for room and board, as determined by the eligible educational institution, that was included in the cost of attendance (for federal financial aid purposes) for a particular academic period and living arrangement of the student. Irs for 1040x The actual amount charged if the student is residing in housing owned or operated by the eligible educational institution. Irs for 1040x You will need to contact the eligible educational institution for qualified room and board costs. Irs for 1040x For more information, see Form 8863. Irs for 1040x See Form 8917 for the tuition and fees deduction. Irs for 1040x Recapture of Federal Mortgage Subsidy This benefit applies only to the counties in Table 1. Irs for 1040x Generally, if you financed your home under a federally subsidized program (loans from tax-exempt qualified mortgage bonds or loans with mortgage credit certificates), you may have to recapture all or part of the benefit you received from that program when you sell or otherwise dispose of your home. Irs for 1040x However, you do not have to recapture any benefit if your mortgage loan was a qualified home improvement loan of not more than $15,000. Irs for 1040x This amount is increased to $150,000 if the loan was provided before 2011 and was used to alter, repair, or improve an existing owner-occupied residence in a Midwestern disaster area as shown in Table 1. Irs for 1040x Exclusion of Certain Cancellations of Indebtedness by Reason of the Severe Storms, Tornadoes, or Flooding This benefit applies to the counties in both Tables 1 and 2. Irs for 1040x Generally, discharges of nonbusiness debts (such as mortgages) made on or after the applicable disaster date and before January 1, 2010, are excluded from income for individuals whose main home was in a Midwestern disaster area on the applicable disaster date. Irs for 1040x If the individual's main home was located in a Midwestern disaster area as shown in Table 2, the individual also must have had an economic loss because of the severe storms, tornadoes, or flooding. Irs for 1040x Examples of an economic loss include, but are not limited to: Loss, damage to, or destruction of real or personal property from fire, flooding, looting, vandalism, theft, wind, or other cause; Loss related to displacement from your home; or Loss of livelihood due to temporary or permanent layoffs. Irs for 1040x This relief does not apply to any debt secured by real property located outside a Midwestern disaster area. Irs for 1040x You may also have to reduce certain tax attributes by the amount excluded. Irs for 1040x For more information, see Form 982, Reduction of Tax Attributes Due to Discharge of Indebtedness (and Section 1082 Basis Adjustment). Irs for 1040x Tax Relief for Temporary Relocation This benefit applies only to the counties in Table 1. Irs for 1040x The IRS can adjust the internal revenue laws to ensure that taxpayers do not lose a deduction or credit or experience a change of filing status in 2008 or 2009 as a result of a temporary relocation caused by the severe storms, tornadoes, or flooding. Irs for 1040x However, any such adjustment must ensure that an individual is not taken into account by more than one taxpayer for the same tax benefit. Irs for 1040x The IRS has exercised this authority as follows. Irs for 1040x In determining whether you furnished over one-half of the cost of maintaining a household, you can exclude from total household costs any assistance received from the government or charitable organizations because you were temporarily relocated as a result of the severe storms, tornadoes, or flooding. Irs for 1040x In determining whether you provided more than one-half of an individual's support, you can disregard any assistance received from the government or charitable organizations because you were temporarily relocated as a result of the severe storms, tornadoes, or flooding. Irs for 1040x You can treat as a student an individual who enrolled in school before the applicable disaster date, and who is unable to attend classes because of the severe storms, tornadoes, or flooding, for each month of the enrollment period that individual is prevented by the severe storms, tornadoes, or flooding from attending school as planned. Irs for 1040x Additional Tax Relief for Businesses Employee Retention Credit This benefit applies only to the counties in Table 1. Irs for 1040x An eligible employer who conducted an active trade or business in a Midwestern disaster area can claim the employee retention credit. Irs for 1040x The credit is 40% of qualified wages for each eligible employee (up to a maximum of $6,000 in qualified wages per employee). Irs for 1040x Generally, you must reduce your deduction for salaries and wages by the amount of this credit (before the tax liability limit). Irs for 1040x Use Form 5884-A to claim the credit. Irs for 1040x Employers affected by the severe storms, tornadoes, or flooding. Irs for 1040x   The following definitions apply to employers affected by the severe storms, tornadoes, or flooding. Irs for 1040x Eligible employer. Irs for 1040x   For this purpose, an eligible employer is any employer who meets all of the following. Irs for 1040x Employed an average of not more than 200 employees on business days during the tax year before the applicable disaster date. Irs for 1040x Conducted an active trade or business on the applicable disaster date in a Midwestern disaster area. Irs for 1040x Whose trade or business was inoperable on any day after the applicable disaster date and before January 1, 2009, because of the damage caused by the severe storms, tornadoes, or flooding. Irs for 1040x Eligible employee. Irs for 1040x   For this purpose, an eligible employee is an employee whose principal place of employment on the applicable disaster date with such eligible employer was in a Midwestern disaster area. Irs for 1040x An employee is not an eligible employee for purposes of the severe storms, tornadoes, or flooding if the employee is treated as an eligible employee for the work opportunity credit. Irs for 1040x Qualified wages. Irs for 1040x   Qualified wages are wages (up to $6,000 per employee) you paid or incurred before January 1, 2009, for an eligible employee beginning on the date your trade or business first became inoperable at the employee's principal place of employment immediately before the applicable disaster, and ending on the date your trade or business resumed significant operations at that place. Irs for 1040x In addition, the wages must have been paid or incurred after the applicable disaster date. Irs for 1040x    This includes wages paid even if the employee performed no services, performed services at a place of employment other than the principal place of employment, or performed services at the principal place of employment before significant operations resumed. Irs for 1040x    Wages qualifying for the credit generally have the same meaning as wages subject to the Federal Unemployment Tax Act (FUTA). Irs for 1040x Qualified wages also include amounts you paid for medical or hospitalization expenses in connection with sickness or accident disability. Irs for 1040x Qualified wages for any employee must be reduced by the amount of any work supplementation payment you received under the Social Security Act. Irs for 1040x   For agricultural employees, if the work performed by any employee during more than half of any pay period qualified under FUTA as agricultural labor, that employee's wages subject to social security and Medicare taxes are qualified wages. Irs for 1040x For a special rule that applies to railroad employees, see section 51(h)(1)(B). Irs for 1040x   Qualified wages do not include the following. Irs for 1040x Wages paid to your dependent or a related individual. Irs for 1040x See section 51(i)(1). Irs for 1040x Wages paid to any employee during the period for which you received payment for the employee from a federally funded on-the-job training program. Irs for 1040x Wages for services of replacement workers during a strike or lockout. Irs for 1040x   For more information, see Form 5884-A. Irs for 1040x Employer Housing Credit and Exclusion This benefit applies only to the counties in Table 1. Irs for 1040x An employer who conducted an active trade or business in a Midwestern disaster area can claim the employer housing credit. Irs for 1040x The credit is equal to 30% of the value (up to $600 per month per employee) of in-kind lodging furnished to a qualified employee (and the employee's spouse or dependents) from November 1, 2008, through May 1, 2009. Irs for 1040x The value of the lodging is excluded from the income of the qualified employee but is treated as wages for purposes of taxes imposed under the Federal Insurance Contributions Act (FICA) and the Federal Unemployment Tax Act (FUTA). Irs for 1040x Generally, you must reduce your deduction for salaries and wages by the amount of this credit (before the tax liability limit). Irs for 1040x The employer must use Form 5884-A to claim the credit. Irs for 1040x A qualified employee is an individual who had a main home in a Midwestern disaster area on the applicable disaster date, and who performs substantially all employment services in a Midwestern disaster area for the employer furnishing the lodging. Irs for 1040x The employee cannot be your dependent or a related individual. Irs for 1040x See section 51(i)(1). Irs for 1040x For more information, see Form 5884-A. Irs for 1040x Demolition and Clean-up Costs This benefit applies only to the counties in Table 1. Irs for 1040x You can elect to deduct 50% of any qualified disaster recovery assistance clean-up costs for the tax year in which the costs are paid or incurred, instead of capitalizing them. Irs for 1040x Qualified disaster recovery assistance clean-up costs are any amounts paid or incurred on or after the applicable disaster date, and before January 1, 2011, for the removal of debris from, or the demolition of structures on, real property located in a Midwestern disaster area that is: Held by you for use in a trade or business or for the production of income, or Inventory or other property held primarily for sale to customers in the ordinary course of your trade or business. Irs for 1040x Qualified disaster recovery assistance clean-up costs are limited to amounts necessary due to damage attributable to the severe storms, tornadoes, or flooding in the Midwestern disaster areas. Irs for 1040x Increase in Rehabilitation Tax Credit This benefit applies only to the counties in Table 1. Irs for 1040x The rehabilitation credit is increased for qualified rehabilitation expenditures paid or incurred on or after the applicable disaster date, and before January 1, 2012, on buildings located in a Midwestern disaster area as follows. Irs for 1040x For pre-1936 buildings (other than certified historic structures), the credit percentage is increased from 10% to 13%. Irs for 1040x For certified historic structures, the credit percentage is increased from 20% to 26%. Irs for 1040x For more information, see Form 3468, Investment Credit. Irs for 1040x Request for Copy or Transcript of Tax Return Request for copy of tax return. Irs for 1040x   You can use Form 4506 to order a copy of your tax return. Irs for 1040x Generally, there is a $57 fee for requesting each copy of a tax return. Irs for 1040x If your main home, principal place of business, or tax records are located in a Midwestern disaster area, the fee will be waived if “Midwestern Disaster Area” is written in red across the top of the form when filed. Irs for 1040x Request for transcript of tax return. Irs for 1040x   You can use Form 4506-T to order a free transcript of your tax return. Irs for 1040x A transcript provides most of the line entries from a tax return and usually contains the information that a third party requires. Irs for 1040x You can also call 1-800-829-1040 to order a transcript. Irs for 1040x How To Get Tax Help Special IRS assistance. Irs for 1040x   The IRS is providing special help for those affected by the severe storms, tornadoes, or flooding, as well as survivors and personal representatives of the victims. Irs for 1040x We have set up a special toll-free number for people who may have trouble filing or paying their taxes because they were affected by recent federally declared disasters, or who have other tax issues related to the severe storms, tornadoes, or flooding. Irs for 1040x Call 1-866-562-5227 Monday through FridayIn English–7 a. Irs for 1040x m. Irs for 1040x to 10 p. Irs for 1040x m. Irs for 1040x local timeIn Spanish–8 a. Irs for 1040x m. Irs for 1040x to 9:30 p. Irs for 1040x m. Irs for 1040x local time   The IRS website at www. Irs for 1040x irs. Irs for 1040x gov has notices and other tax relief information. Irs for 1040x Check it periodically for any new guidance. Irs for 1040x You can get help with unresolved tax issues, order free publications and forms, ask tax questions, and get information from the IRS in several ways. Irs for 1040x By selecting the method that is best for you, you will have quick and easy access to tax help. Irs for 1040x Contacting your Taxpayer Advocate. Irs for 1040x   The Taxpayer Advocate Service (TAS) is an independent organization within the IRS whose employees assist taxpayers who are experiencing economic harm, who are seeking help in resolving tax problems that have not been resolved through normal channels, or who believe that an IRS system or procedure is not working as it should. Irs for 1040x Here are seven things every taxpayer should know about TAS: TAS is your voice at the IRS. Irs for 1040x Our service is free, confidential, and tailored to meet your needs. Irs for 1040x You may be eligible for TAS help if you have tried to resolve your tax problem through normal IRS channels and have gotten nowhere, or you believe an IRS procedure just isn't working as it should. Irs for 1040x TAS helps taxpayers whose problems are causing financial difficulty or significant cost, including the cost of professional representation. Irs for 1040x This includes businesses as well as individuals. Irs for 1040x TAS employees know the IRS and how to navigate it. Irs for 1040x We will listen to your problem, help you understand what needs to be done to resolve it, and stay with you every step of the way until your problem is resolved. Irs for 1040x TAS has at least one local taxpayer advocate in every state, the District of Columbia, and Puerto Rico. Irs for 1040x You can call your local advocate, whose number is in your phone book, in Pub. Irs for 1040x 1546, Taxpayer Advocate Service—Your Voice at the IRS, and on our website at www. Irs for 1040x irs. Irs for 1040x gov/advocate. Irs for 1040x You can also call our toll-free line at 1-877-777-4778 or TTY/TDD 1-800-829-4059. Irs for 1040x You can learn about your rights and responsibilities as a taxpayer by visiting our online tax toolkit at www. Irs for 1040x taxtoolkit. Irs for 1040x irs. Irs for 1040x gov. Irs for 1040x Low Income Taxpayer Clinics (LITCs). Irs for 1040x   The Low Income Taxpayer Clinic program serves individuals who have a problem with the IRS and whose income is below a certain level. Irs for 1040x LITCs are independent from the IRS. Irs for 1040x Most LITCs can provide representation before the IRS or in court on audits, tax collection disputes, and other issues for free or a small fee. Irs for 1040x If an individual's native language is not English, some clinics can provide multilingual information about taxpayer rights and responsibilities. Irs for 1040x For more information, see Publication 4134, Low Income Taxpayer Clinic List. Irs for 1040x This publication is available at www. Irs for 1040x irs. Irs for 1040x gov, by calling 1-800-TAX-FORM (1-800-829-3676), or at your local IRS office. Irs for 1040x Free tax services. Irs for 1040x   To find out what services are available, get Publication 910, IRS Guide to Free Tax Services. Irs for 1040x It contains lists of free tax information sources, including publications, services, and free tax education and assistance programs. Irs for 1040x It also has an index of over 100 TeleTax topics (recorded tax information) you can listen to on your telephone. Irs for 1040x   Accessible versions of IRS published products are available on request in a variety of alternative formats for people with disabilities. Irs for 1040x Free help with your return. Irs for 1040x   Free help in preparing your return is available nationwide from IRS-trained volunteers. Irs for 1040x The Volunteer Income Tax Assistance (VITA) program is designed to help low-income taxpayers and the Tax Counseling for the Elderly (TCE) program is designed to assist taxpayers age 60 and older with their tax returns. Irs for 1040x Many VITA sites offer free electronic filing and all volunteers will let you know about credits and deductions you may be entitled to claim. Irs for 1040x To find the nearest VITA or TCE site, call 1-800-829-1040. Irs for 1040x   As part of the TCE program, AARP offers the Tax-Aide counseling program. Irs for 1040x To find the nearest AARP Tax-Aide site, call 1-888-227-7669 or visit AARP's website atwww. Irs for 1040x aarp. Irs for 1040x org/money/taxaide. Irs for 1040x   For more information on these programs, go to www. Irs for 1040x irs. Irs for 1040x gov and enter keyword “VITA” in the upper right-hand corner. Irs for 1040x Internet. Irs for 1040x You can access the IRS website at www. Irs for 1040x irs. Irs for 1040x gov 24 hours a day, 7 days a week to: E-file your return. Irs for 1040x Find out about commercial tax preparation and e-file services available free to eligible taxpayers. Irs for 1040x Check the status of your 2009 refund. Irs for 1040x Go to www. Irs for 1040x irs. Irs for 1040x gov and click on Where's My Refund. Irs for 1040x Wait at least 72 hours after the IRS acknowledges receipt of your e-filed return, or 3 to 4 weeks after mailing a paper return. Irs for 1040x If you filed Form 8379 with your return, wait 14 weeks (11 weeks if you filed electronically). Irs for 1040x Have your 2009 tax return available so you can provide your social security number, your filing status, and the exact whole dollar amount of your refund. Irs for 1040x Download forms, instructions, and publications. Irs for 1040x Order IRS products online. Irs for 1040x Research your tax questions online. Irs for 1040x Search publications online by topic or keyword. Irs for 1040x Use the online Internal Revenue Code, Regulations, or other official guidance. Irs for 1040x View Internal Revenue Bulletins (IRBs) published in the last few years. Irs for 1040x Figure your withholding allowances using the withholding calculator online at www. Irs for 1040x irs. Irs for 1040x gov/individuals. Irs for 1040x Determine if Form 6251 must be filed by using our Alternative Minimum Tax (AMT) Assistant. Irs for 1040x Sign up to receive local and national tax news by email. Irs for 1040x Get information on starting and operating a small business. Irs for 1040x Phone. Irs for 1040x Many services are available by phone. Irs for 1040x Ordering forms, instructions, and publications. Irs for 1040x Call 1-800-TAX FORM (1-800-829-3676) to order current-year forms, instructions, and publications, and prior-year forms and instructions. Irs for 1040x You should receive your order within 10 days. Irs for 1040x Asking tax questions. Irs for 1040x Call the IRS with your tax questions at 1-800-829-1040. Irs for 1040x Solving problems. Irs for 1040x You can get face-to-face help solving tax problems every business day in IRS Taxpayer Assistance Centers. Irs for 1040x An employee can explain IRS letters, request adjustments to your account, or help you set up a payment plan. Irs for 1040x Call your local Taxpayer Assistance Center for an appointment. Irs for 1040x To find the number, go to www. Irs for 1040x irs. Irs for 1040x gov/localcontacts or look in the phone book under United States Government, Internal Revenue Service. Irs for 1040x TTY/TDD equipment. Irs for 1040x If you have access to TTY/TDD equipment, call 1-800-829-4059 to ask tax questions or to order forms and publications. Irs for 1040x TeleTax topics. Irs for 1040x Call 1-800-829-4477 to listen to pre-recorded messages covering various tax topics. Irs for 1040x Refund information. Irs for 1040x To check the status of your 2009 refund, call 1-800-829-1954 during business hours or 1-800-829-4477 (automated refund information 24 hours a day, 7 days a week). Irs for 1040x Wait at least 72 hours after the IRS acknowledges receipt of your e-filed return, or 3 to 4 weeks after mailing a paper return. Irs for 1040x If you filed Form 8379 with your return, wait 14 weeks (11 weeks if you filed electronically). Irs for 1040x Have your 2009 tax return available so you can provide your social security number, your filing status, and the exact whole dollar amount of your refund. Irs for 1040x Refunds are sent out weekly on Fridays. Irs for 1040x If you check the status of your refund and are not given the date it will be issued, please wait until the next week before checking back. Irs for 1040x Other refund information. Irs for 1040x To check the status of a prior year refund or amended return refund, call 1-800-829-1954. Irs for 1040x Evaluating the quality of our telephone services. Irs for 1040x To ensure IRS representatives give accurate, courteous, and professional answers, we use several methods to evaluate the quality of our telephone services. Irs for 1040x One method is for a second IRS representative to listen in on or record random telephone calls. Irs for 1040x Another is to ask some callers to complete a short survey at the end of the call. Irs for 1040x Walk-in. Irs for 1040x Many products and services are available on a walk-in basis. Irs for 1040x Products. Irs for 1040x You can walk in to many post offices, libraries, and IRS offices to pick up certain forms, instructions, and publications. Irs for 1040x Some IRS offices, libraries, grocery stores, copy centers, city and county government offices, credit unions, and office supply stores have a collection of products available to print from a CD or photocopy from reproducible proofs. Irs for 1040x Also, some IRS offices and libraries have the Internal Revenue Code, regulations, Internal Revenue Bulletins, and Cumulative Bulletins available for research purposes. Irs for 1040x Services. Irs for 1040x You can walk in to your local Taxpayer Assistance Center every business day for personal, face-to-face tax help. Irs for 1040x An employee can explain IRS letters, request adjustments to your tax account, or help you set up a payment plan. Irs for 1040x If you need to resolve a tax problem, have questions about how the tax law applies to your individual tax return, or you are more comfortable talking with someone in person, visit your local Taxpayer Assistance Center where you can spread out your records and talk with an IRS representative face-to-face. Irs for 1040x No appointment is necessary—just walk in. Irs for 1040x If you prefer, you can call your local Center and leave a message requesting an appointment to resolve a tax account issue. Irs for 1040x A representative will call you back within 2 business days to schedule an in-person appointment at your convenience. Irs for 1040x If you have an ongoing, complex tax account problem or a special need, such as a disability, an appointment can be requested. Irs for 1040x All other issues will be handled without an appointment. Irs for 1040x To find the number of your local office, go to www. Irs for 1040x irs. Irs for 1040x gov/localcontacts or look in the phone book under United States Government, Internal Revenue Service. Irs for 1040x Mail. Irs for 1040x You can send your order for forms, instructions, and publications to the address below. Irs for 1040x You should receive a response within 10 days after your request is received. Irs for 1040x Internal Revenue Service1201 N. Irs for 1040x Mitsubishi MotorwayBloomington, IL 61705-6613 DVD for tax products. Irs for 1040x You can order Publication 1796, IRS Tax Products DVD, and obtain: Current-year forms, instructions, and publications. Irs for 1040x Prior-year forms, instructions, and publications. Irs for 1040x Tax Map: an electronic research tool and finding aid. Irs for 1040x Tax law frequently asked questions. Irs for 1040x Tax Topics from the IRS telephone response system. Irs for 1040x Internal Revenue Code—Title 26 of the U. Irs for 1040x S. Irs for 1040x Code. Irs for 1040x Fill-in, print, and save features for most tax forms. Irs for 1040x Internal Revenue Bulletins. Irs for 1040x Toll-free and email technical support. Irs for 1040x Two releases during the year. Irs for 1040x – The first release will ship the beginning of January 2010. Irs for 1040x – The final release will ship the beginning of March 2010. Irs for 1040x Purchase the DVD from National Technical Information Service (NTIS) at www. Irs for 1040x irs. Irs for 1040x gov/cdorders for $30 (no handling fee) or call 1-877-233-6767 toll free to buy the DVD for $30 (plus a $6 handling fee). Irs for 1040x Prev  Up  Next   Home   More Online Publications
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Commissioner's Comments, Statements and Remarks

Written Testimony of IRS Commissioner John A. Koskinen before the House Oversight and Government Reform Committee on IRS Operations
March 26, 2014 — Commissioner Koskinen's written testimony before the House Oversight and Government Reform Committee on IRS operations.

Remarks of Acting Commissioner Werfel to the American Institute of Certified Public Accountants in Washington, DC
Nov. 5, 2013 — Prepared remarks of Acting Commissioner Danny Werfel to the American Institute of Certified Public Accountants in Washington, DC.

Oral Statement of Danny Werfel, Principal Deputy Commissioner, on the Affordable Care Act Before the House Ways and Means Committee
Aug. 1, 2013 — Principal Deputy Commissioner Danny Werfel gives an opening statement on the Affordable Care Act to the House Ways and Means Committee.

Prepared Remarks of Danny Werfel, Principal Deputy Commissioner, Before the 2013 IRS Nationwide Tax Forum
July 30, 2013 — IRS Principal Deputy Commissioner Danny Werfel speaks at a 2013 Nationwide Tax Forum taking place in Dallas, Tex.

Page Last Reviewed or Updated: 27-Mar-2014

The Irs For 1040x

Irs for 1040x 3. Irs for 1040x   Investment Expenses Table of Contents Topics - This chapter discusses: Useful Items - You may want to see: Limits on DeductionsPassive activity. Irs for 1040x Other income (nonpassive income). Irs for 1040x Expenses. Irs for 1040x Additional information. Irs for 1040x Interest ExpensesInvestment Interest Limit on Deduction Bond Premium AmortizationSpecial rules to determine amounts payable on a bond. Irs for 1040x Basis. Irs for 1040x How To Figure Amortization Choosing To Amortize How To Report Amortization Expenses of Producing IncomeFees to buy or sell. Irs for 1040x Including mutual fund or REMIC expenses in income. Irs for 1040x Nondeductible ExpensesUsed as collateral. Irs for 1040x Short-sale expenses. Irs for 1040x Expenses for both tax-exempt and taxable income. Irs for 1040x State income taxes. Irs for 1040x Nondeductible amount. Irs for 1040x Basis adjustment. Irs for 1040x How To Report Investment Expenses When To Report Investment Expenses Topics - This chapter discusses: Limits on Deductions , Interest Expenses , Bond Premium Amortization , Expenses of Producing Income , Nondeductible Expenses , How To Report Investment Expenses , and When To Report Investment Expenses . Irs for 1040x Useful Items - You may want to see: Publication 535 Business Expenses 925 Passive Activity and At-Risk Rules 929 Tax Rules for Children and Dependents Form (and Instructions) Schedule A (Form 1040) Itemized Deductions 4952 Investment Interest Expense Deduction See chapter 5, How To Get Tax Help , for information about getting these publications and forms. Irs for 1040x Limits on Deductions Your deductions for investment expenses may be limited by: The at-risk rules, The passive activity loss limits, The limit on investment interest, or The 2% limit on certain miscellaneous itemized deductions. Irs for 1040x The at-risk rules and passive activity rules are explained briefly in this section. Irs for 1040x The limit on investment interest is explained later in this chapter under Interest Expenses . Irs for 1040x The 2% limit is explained later in this chapter under Expenses of Producing Income . Irs for 1040x At-risk rules. Irs for 1040x   Special at-risk rules apply to most income-producing activities. Irs for 1040x These rules limit the amount of loss you can deduct to the amount you risk losing in the activity. Irs for 1040x Generally, this is the cash and the adjusted basis of property you contribute to the activity. Irs for 1040x It also includes money you borrow for use in the activity if you are personally liable for repayment or if you use property not used in the activity as security for the loan. Irs for 1040x For more information, see Publication 925. Irs for 1040x Passive activity losses and credits. Irs for 1040x   The amount of losses and tax credits you can claim from passive activities is limited. Irs for 1040x Generally, you are allowed to deduct passive activity losses only up to the amount of your passive activity income. Irs for 1040x Also, you can use credits from passive activities only against tax on the income from passive activities. Irs for 1040x There are exceptions for certain activities, such as rental real estate activities. Irs for 1040x Passive activity. Irs for 1040x   A passive activity generally is any activity involving the conduct of any trade or business in which you do not materially participate and any rental activity. Irs for 1040x However, if you are involved in renting real estate, the activity is not a passive activity if both of the following are true. Irs for 1040x More than one-half of the personal services you perform during the year in all trades or businesses are performed in real property trades or businesses in which you materially participate. Irs for 1040x You perform more than 750 hours of services during the year in real property trades or businesses in which you materially participate. Irs for 1040x  The term “trade or business” generally means any activity that involves the conduct of a trade or business, is conducted in anticipation of starting a trade or business, or involves certain research or experimental expenditures. Irs for 1040x However, it does not include rental activities or certain activities treated as incidental to holding property for investment. Irs for 1040x   You are considered to materially participate in an activity if you are involved on a regular, continuous, and substantial basis in the operations of the activity. Irs for 1040x Other income (nonpassive income). Irs for 1040x    Generally, you can use losses from passive activities only to offset income from passive activities. Irs for 1040x You cannot use passive activity losses to offset your other income, such as your wages or your portfolio income. Irs for 1040x Portfolio income includes gross income from interest, dividends, annuities, or royalties that is not derived in the ordinary course of a trade or business. Irs for 1040x It also includes gains or losses (not derived in the ordinary course of a trade or business) from the sale or trade of property (other than an interest in a passive activity) producing portfolio income or held for investment. Irs for 1040x This includes capital gain distributions from mutual funds (and other regulated investment companies) and real estate investment trusts. Irs for 1040x   You cannot use passive activity losses to offset Alaska Permanent Fund dividends. Irs for 1040x Expenses. Irs for 1040x   Do not include in the computation of your passive activity income or loss: Expenses (other than interest) that are clearly and directly allocable to your portfolio income, or Interest expense properly allocable to portfolio income. Irs for 1040x However, this interest and other expenses may be subject to other limits. Irs for 1040x These limits are explained in the rest of this chapter. Irs for 1040x Additional information. Irs for 1040x   For more information about determining and reporting income and losses from passive activities, see Publication 925. Irs for 1040x Interest Expenses This section discusses interest expenses you may be able to deduct as an investor. Irs for 1040x For information on business interest, see chapter 4 of Publication 535. Irs for 1040x You cannot deduct personal interest expenses other than qualified home mortgage interest, as explained in Publication 936, Home Mortgage Interest Deduction, and interest on certain student loans, as explained in Publication 970. Irs for 1040x Investment Interest If you borrow money to buy property you hold for investment, the interest you pay is investment interest. Irs for 1040x You can deduct investment interest subject to the limit discussed later. Irs for 1040x However, you cannot deduct interest you incurred to produce tax-exempt income. Irs for 1040x See Tax-exempt income under Nondeductible Expenses, later. Irs for 1040x You also cannot deduct interest expenses on straddles discussed under Interest expense and carrying charges on straddles , later. Irs for 1040x Investment interest does not include any qualified home mortgage interest or any interest taken into account in computing income or loss from a passive activity. Irs for 1040x Investment property. Irs for 1040x   Property held for investment includes property that produces interest, dividends, annuities, or royalties not derived in the ordinary course of a trade or business. Irs for 1040x It also includes property that produces gain or loss (not derived in the ordinary course of a trade or business) from the sale or trade of property producing these types of income or held for investment (other than an interest in a passive activity). Irs for 1040x Investment property also includes an interest in a trade or business activity in which you did not materially participate (other than a passive activity). Irs for 1040x Partners, shareholders, and beneficiaries. Irs for 1040x   To determine your investment interest, combine your share of investment interest from a partnership, S corporation, estate, or trust with your other investment interest. Irs for 1040x Allocation of Interest Expense If you borrow money for business or personal purposes as well as for investment, you must allocate the debt among those purposes. Irs for 1040x Only the interest expense on the part of the debt used for investment purposes is treated as investment interest. Irs for 1040x The allocation is not affected by the use of property that secures the debt. Irs for 1040x Example 1. Irs for 1040x You borrow $10,000 and use $8,000 to buy stock. Irs for 1040x You use the other $2,000 to buy items for your home. Irs for 1040x Since 80% of the debt is used for, and allocated to, investment purposes, 80% of the interest on that debt is investment interest. Irs for 1040x The other 20% is nondeductible personal interest. Irs for 1040x Debt proceeds received in cash. Irs for 1040x   If you receive debt proceeds in cash, the proceeds are generally not treated as investment property. Irs for 1040x Debt proceeds deposited in account. Irs for 1040x   If you deposit debt proceeds in an account, that deposit is treated as investment property, regardless of whether the account bears interest. Irs for 1040x But, if you withdraw the funds and use them for another purpose, you must reallocate the debt to determine the amount considered to be for investment purposes. Irs for 1040x Example 2. Irs for 1040x Assume in Example 1 that you borrowed the money on March 1 and immediately bought the stock for $8,000. Irs for 1040x You did not buy the household items until June 1. Irs for 1040x You had deposited the $2,000 in the bank. Irs for 1040x You had no other transactions on the bank account until June. Irs for 1040x You did not sell the stock, and you made no principal payments on the debt. Irs for 1040x You paid interest from another account. Irs for 1040x The $8,000 is treated as being used for an investment purpose. Irs for 1040x The $2,000 is treated as being used for an investment purpose for the 3-month period. Irs for 1040x Your total interest expense for 3 months on this debt is investment interest. Irs for 1040x In June, when you spend the $2,000 for household items, you must begin to allocate 80% of the debt and the interest expense to investment purposes and 20% to personal purposes. Irs for 1040x Amounts paid within 30 days. Irs for 1040x   If you receive loan proceeds in cash or if the loan proceeds are deposited in an account, you can treat any payment (up to the amount of the proceeds) made from any account you own, or from cash, as made from those proceeds. Irs for 1040x This applies to any payment made within 30 days before or after the proceeds are received in cash or deposited in your account. Irs for 1040x   If you received the loan proceeds in cash, you can treat the payment as made on the date you received the cash instead of the date you actually made the payment. Irs for 1040x Payments on debt may require new allocation. Irs for 1040x   As you repay a debt used for more than one purpose, you must reallocate the balance. Irs for 1040x You must first reduce the amount allocated to personal purposes by the repayment. Irs for 1040x You then reallocate the rest of the debt to find what part is for investment purposes. Irs for 1040x Example 3. Irs for 1040x If, in Example 2 , you repay $500 on November 1, the entire repayment is applied against the amount allocated to personal purposes. Irs for 1040x The debt balance is now allocated as $8,000 for investment purposes and $1,500 for personal purposes. Irs for 1040x Until the next reallocation is necessary, 84% ($8,000 ÷ $9,500) of the debt and the interest expense is allocated to investment. Irs for 1040x Pass-through entities. Irs for 1040x   If you use borrowed funds to buy an interest in a partnership or S corporation, then the interest on those funds must be allocated based on the assets of the entity. Irs for 1040x If you contribute to the capital of the entity, you can make the allocation using any reasonable method. Irs for 1040x Additional allocation rules. Irs for 1040x   For more information about allocating interest expense, see chapter 4 of Publication 535. Irs for 1040x When To Deduct Investment Interest If you use the cash method of accounting, you must pay the interest before you can deduct it. Irs for 1040x If you use an accrual method of accounting, you can deduct interest over the period it accrues, regardless of when you pay it. Irs for 1040x For an exception, see Unpaid expenses owed to related party under When To Report Investment Expenses, later in this chapter. Irs for 1040x Example. Irs for 1040x You borrowed $1,000 on August 26, 2013, payable in 90 days at 12% interest. Irs for 1040x On November 26, 2013, you paid this with a new note for $1,030, due on February 26, 2014. Irs for 1040x If you use the cash method of accounting, you cannot deduct any part of the $30 interest on your return for 2013 because you did not actually pay it. Irs for 1040x If you use an accrual method, you may be able to deduct a portion of the interest on the loans through December 31, 2013, on your return for 2013. Irs for 1040x Interest paid in advance. Irs for 1040x   Generally, if you pay interest in advance for a period that goes beyond the end of the tax year, you must spread the interest over the tax years to which it belongs under the OID rules discussed in chapter 1. Irs for 1040x You can deduct in each year only the interest for that year. Irs for 1040x Interest on margin accounts. Irs for 1040x   If you are a cash method taxpayer, you can deduct interest on margin accounts to buy taxable securities as investment interest in the year you paid it. Irs for 1040x You are considered to have paid interest on these accounts only when you actually pay the broker or when payment becomes available to the broker through your account. Irs for 1040x Payment may become available to the broker through your account when the broker collects dividends or interest for your account, or sells securities held for you or received from you. Irs for 1040x   You cannot deduct any interest on money borrowed for personal reasons. Irs for 1040x Limit on interest deduction for market discount bonds. Irs for 1040x   The amount you can deduct for interest expense you paid or accrued during the year to buy or carry a market discount bond may be limited. Irs for 1040x This limit does not apply if you accrue the market discount and include it in your income currently. Irs for 1040x   Under this limit, the interest is deductible only to the extent it is more than: The total interest and OID includible in gross income for the bond for the year, plus The market discount for the number of days you held the bond during the year. Irs for 1040x Figure the amount in (2) above using the rules for figuring accrued market discount in chapter 1 under Market Discount Bonds . Irs for 1040x Interest not deducted due to limit. Irs for 1040x   In the year you dispose of the bond, you can deduct any interest expense you were not allowed to deduct in earlier years because of the limit. Irs for 1040x Choosing to deduct disallowed interest expense before the year of disposition. Irs for 1040x   You can choose to deduct disallowed interest expense in any year before the year you dispose of the bond, up to your net interest income from the bond during the year. Irs for 1040x The rest of the disallowed interest expense remains deductible in the year you dispose of the bond. Irs for 1040x Net interest income. Irs for 1040x   This is the interest income (including OID) from the bond that you include in income for the year, minus the interest expense paid or accrued during the year to purchase or carry the bond. Irs for 1040x Limit on interest deduction for short-term obligations. Irs for 1040x   If the current income inclusion rules discussed in chapter 1 under Discount on Short-Term Obligations do not apply to you, the amount you can deduct for interest expense you paid or accrued during the year to buy or carry a short-term obligation is limited. Irs for 1040x   The interest is deductible only to the extent it is more than: The amount of acquisition discount or OID on the obligation for the tax year, plus The amount of any interest payable on the obligation for the year that is not included in income because of your accounting method (other than interest taken into account in determining the amount of acquisition discount or OID). Irs for 1040x The method of determining acquisition discount and OID for short-term obligations is discussed in chapter 1 under Discount on Short-Term Obligations . Irs for 1040x Interest not deducted due to limit. Irs for 1040x   In the year you dispose of the obligation, or, if you choose, in another year in which you have net interest income from the obligation, you can deduct any interest expense you were not allowed to deduct for an earlier year because of the limit. Irs for 1040x Follow the same rules provided in the earlier discussion under Limit on interest deduction for market discount bonds , earlier. Irs for 1040x Limit on Deduction Generally, your deduction for investment interest expense is limited to your net investment income. Irs for 1040x You can carry over the amount of investment interest you could not deduct because of this limit to the next tax year. Irs for 1040x The interest carried over is treated as investment interest paid or accrued in that next year. Irs for 1040x You can carry over disallowed investment interest to the next tax year even if it is more than your taxable income in the year the interest was paid or accrued. Irs for 1040x Net Investment Income Determine the amount of your net investment income by subtracting your investment expenses (other than interest expense) from your investment income. Irs for 1040x Investment income. Irs for 1040x   This generally includes your gross income from property held for investment (such as interest, dividends, annuities, and royalties). Irs for 1040x Investment income does not include Alaska Permanent Fund dividends. Irs for 1040x It also does not include qualified dividends or net capital gain unless you choose to include them. Irs for 1040x Choosing to include qualified dividends. Irs for 1040x   Investment income generally does not include qualified dividends, discussed in chapter 1. Irs for 1040x However, you can choose to include all or part of your qualified dividends in investment income. Irs for 1040x   You make this choice by completing Form 4952, line 4g, according to its instructions. Irs for 1040x   If you choose to include any of your qualified dividends in investment income, you must reduce your qualified dividends that are eligible for the lower capital gains tax rates by the same amount. Irs for 1040x Choosing to include net capital gain. Irs for 1040x    Investment income generally does not include net capital gain from disposing of investment property (including capital gain distributions from mutual funds). Irs for 1040x However, you can choose to include all or part of your net capital gain in investment income. Irs for 1040x   You make this choice by completing Form 4952, line 4g, according to its instructions. Irs for 1040x   If you choose to include any of your net capital gain in investment income, you must reduce your net capital gain that is eligible for the lower capital gains tax rates by the same amount. Irs for 1040x   For more information about the capital gains rates, see Capital Gain Tax Rates in chapter 4. Irs for 1040x    Before making either choice, consider the overall effect on your tax liability. Irs for 1040x Compare your tax if you make one or both of these choices with your tax if you do not. Irs for 1040x Investment income of child reported on parent's return. Irs for 1040x   Investment income includes the part of your child's interest and dividend income you choose to report on your return. Irs for 1040x If the child does not have qualified dividends, Alaska Permanent Fund dividends, or capital gain distributions, this is the amount on line 6 of Form 8814. Irs for 1040x Include it on line 4a of Form 4952. Irs for 1040x Example. Irs for 1040x Your 8-year-old son has interest income of $2,200, which you choose to report on your own return. Irs for 1040x You enter $2,200 on Form 8814, lines 1a and 4, and $200 on lines 6 and 12 and complete Part II. Irs for 1040x Also enter $200 on Form 1040, line 21. Irs for 1040x Your investment income includes this $200. Irs for 1040x Child's qualified dividends. Irs for 1040x   If part of the amount you report is your child's qualified dividends, that part (which is reported on Form 1040, line 9b) generally does not count as investment income. Irs for 1040x However, you can choose to include all or part of it in investment income, as explained under Choosing to include qualified dividends , earlier. Irs for 1040x   Your investment income also includes the amount on Form 8814, line 12 (or, if applicable, the reduced amount figured next under Child's Alaska Permanent Fund dividends). Irs for 1040x Child's Alaska Permanent Fund dividends. Irs for 1040x   If part of the amount you report is your child's Alaska Permanent Fund dividends, that part does not count as investment income. Irs for 1040x To figure the amount of your child's income that you can consider your investment income, start with the amount on Form 8814, line 6. Irs for 1040x Multiply that amount by a percentage that is equal to the Alaska Permanent Fund dividends divided by the total amount on Form 8814, line 4. Irs for 1040x Subtract the result from the amount on Form 8814, line 12. Irs for 1040x Example. Irs for 1040x Your 10-year-old child has taxable interest income of $4,000 and Alaska Permanent Fund dividends of $2,000. Irs for 1040x You choose to report this on your return. Irs for 1040x You enter $4,000 on Form 8814, line 1a, $2,000 on line 2a, and $6,000 on line 4. Irs for 1040x You then enter $4,000 on Form 8814, lines 6 and 12, and Form 1040, line 21. Irs for 1040x You figure the amount of your child's income that you can consider your investment income as follows: $4,000 − ($4,000 × ($2,000 ÷ $6,000)) = $2,667 You include the result, $2,667, on Form 4952, line 4a. Irs for 1040x Child's capital gain distributions. Irs for 1040x   If part of the amount you report is your child's capital gain distributions, that part (which is reported on Schedule D (Form 1040), line 13, or Form 1040, line 13) generally does not count as investment income. Irs for 1040x However, you can choose to include all or part of it in investment income, as explained in Choosing to include net capital gain , earlier. Irs for 1040x   Your investment income also includes the amount on Form 8814, line 12 (or, if applicable, the reduced amount figured under Child's Alaska Permanent Fund dividends , earlier). Irs for 1040x Investment expenses. Irs for 1040x   Investment expenses are your allowed deductions (other than interest expense) directly connected with the production of investment income. Irs for 1040x Investment expenses that are included as a miscellaneous itemized deduction on Schedule A (Form 1040) are allowable deductions after applying the 2% limit that applies to miscellaneous itemized deductions. Irs for 1040x Use the smaller of: The investment expenses included on Schedule A (Form 1040), line 23, or The amount on Schedule A (Form 1040), line 27. Irs for 1040x See Expenses of Producing Income , later, for a discussion of the 2% limit. Irs for 1040x Losses from passive activities. Irs for 1040x   Income or expenses that you used in computing income or loss from a passive activity are not included in determining your investment income or investment expenses (including investment interest expense). Irs for 1040x See Publication 925 for information about passive activities. Irs for 1040x Example. Irs for 1040x Ted is a partner in a partnership that operates a business. Irs for 1040x However, he does not materially participate in the partnership's business. Irs for 1040x Ted's interest in the partnership is considered a passive activity. Irs for 1040x Ted's investment income from interest and dividends (other than qualified dividends) is $10,000. Irs for 1040x His investment expenses (other than interest) are $3,200 after taking into account the 2% limit on miscellaneous itemized deductions. Irs for 1040x His investment interest expense is $8,000. Irs for 1040x Ted also has income from the partnership of $2,000. Irs for 1040x Ted figures his net investment income and the limit on his investment interest expense deduction in the following way: Total investment income $10,000 Minus: Investment expenses (other than interest) 3,200 Net investment income $6,800 Deductible investment interest expense for the year $6,800 The $2,000 of income from the passive activity is not used in determining Ted's net investment income. Irs for 1040x His investment interest deduction for the year is limited to $6,800, the amount of his net investment income. Irs for 1040x Form 4952 Use Form 4952 to figure your deduction for investment interest. Irs for 1040x See Form 4952 for more information. Irs for 1040x Exception to use of Form 4952. Irs for 1040x   You do not have to complete Form 4952 or attach it to your return if you meet all of the following tests. Irs for 1040x Your investment interest expense is not more than your investment income from interest and ordinary dividends minus any qualified dividends. Irs for 1040x You do not have any other deductible investment expenses. Irs for 1040x You have no carryover of investment interest expense from 2012. Irs for 1040x   If you meet all of these tests, you can deduct all of your investment interest. Irs for 1040x    Bond Premium Amortization If you pay a premium to buy a bond, the premium is part of your basis in the bond. Irs for 1040x If the bond yields taxable interest, you can choose to amortize the premium. Irs for 1040x This generally means that each year, over the life of the bond, you use a part of the premium to reduce the amount of interest includible in your income. Irs for 1040x If you make this choice, you must reduce your basis in the bond by the amortization for the year. Irs for 1040x If the bond yields tax-exempt interest, you must amortize the premium. Irs for 1040x This amortized amount is not deductible in determining taxable income. Irs for 1040x However, each year you must reduce your basis in the bond (and tax-exempt interest otherwise reportable on Form 1040, line 8b) by the amortization for the year. Irs for 1040x Bond premium. Irs for 1040x   Bond premium is the amount by which your basis in the bond right after you get it is more than the total of all amounts payable on the bond after you get it (other than payments of qualified stated interest). Irs for 1040x For example, a bond with a maturity value of $1,000 generally would have a $50 premium if you buy it for $1,050. Irs for 1040x Special rules to determine amounts payable on a bond. Irs for 1040x   For special rules that apply to determine the amounts payable on a variable rate bond, an inflation-indexed debt instrument, a bond that provides for certain alternative payment schedules (for example, a bond callable prior to the stated maturity date of the bond), or a bond that provides for remote or incidental contingencies, see Regulations section 1. Irs for 1040x 171-3. Irs for 1040x Basis. Irs for 1040x   In general, your basis for figuring bond premium amortization is the same as your basis for figuring any loss on the sale of the bond. Irs for 1040x However, you may need to use a different basis for: Convertible bonds, Bonds you got in a trade, and Bonds whose basis has to be determined using the basis of the person who transferred the bond to you. Irs for 1040x See Regulations section 1. Irs for 1040x 171-1(e). Irs for 1040x Dealers. Irs for 1040x   A dealer in taxable bonds (or anyone who holds them mainly for sale to customers in the ordinary course of a trade or business or who would properly include bonds in inventory at the close of the tax year) cannot claim a deduction for amortizable bond premium. Irs for 1040x   See section 75 of the Internal Revenue Code for the treatment of bond premium by a dealer in tax-exempt bonds. Irs for 1040x How To Figure Amortization For bonds issued after September 27, 1985, you must amortize bond premium using a constant yield method on the basis of the bond's yield to maturity, determined by using the bond's basis and compounding at the close of each accrual period. Irs for 1040x Constant yield method. Irs for 1040x   Figure the bond premium amortization for each accrual period as follows. Irs for 1040x Step 1: Determine your yield. Irs for 1040x   Your yield is the discount rate that, when used in figuring the present value of all remaining payments to be made on the bond (including payments of qualified stated interest), produces an amount equal to your basis in the bond. Irs for 1040x Figure the yield as of the date you got the bond. Irs for 1040x It must be constant over the term of the bond and must be figured to at least two decimal places when expressed as a percentage. Irs for 1040x   If you do not know the yield, consult your broker or tax advisor. Irs for 1040x Databases available to them are likely to show the yield at the date of purchase. Irs for 1040x Step 2: Determine the accrual periods. Irs for 1040x   You can choose the accrual periods to use. Irs for 1040x They may be of any length and may vary in length over the term of the bond, but each accrual period can be no longer than 1 year and each scheduled payment of principal or interest must occur either on the first or the final day of an accrual period. Irs for 1040x The computation is simplest if accrual periods are the same as the intervals between interest payment dates. Irs for 1040x Step 3: Determine the bond premium for the accrual period. Irs for 1040x   To do this, multiply your adjusted acquisition price at the beginning of the accrual period by your yield. Irs for 1040x Then subtract the result from the qualified stated interest for the period. Irs for 1040x   Your adjusted acquisition price at the beginning of the first accrual period is the same as your basis. Irs for 1040x After that, it is your basis decreased by the amount of bond premium amortized for earlier periods and the amount of any payment previously made on the bond other than a payment of qualified stated interest. Irs for 1040x Example. Irs for 1040x On February 1, 2012, you bought a taxable bond for $110,000. Irs for 1040x The bond has a stated principal amount of $100,000, payable at maturity on February 1, 2019, making your premium $10,000 ($110,000 − $100,000). Irs for 1040x The bond pays qualified stated interest of $10,000 on February 1 of each year. Irs for 1040x Your yield is 8. Irs for 1040x 07439% compounded annually. Irs for 1040x You choose to use annual accrual periods ending on February 1 of each year. Irs for 1040x To find your bond premium amortization for the accrual period ending on February 1, 2013, you multiply the adjusted acquisition price at the beginning of the period ($110,000) by your yield. Irs for 1040x When you subtract the result ($8,881. Irs for 1040x 83) from the qualified stated interest for the period ($10,000), you find that your bond premium amortization for the period is $1,118. Irs for 1040x 17. Irs for 1040x Special rules to figure amortization. Irs for 1040x   For special rules to figure the bond premium amortization on a variable rate bond, an inflation-indexed debt instrument, a bond that provides for certain alternative payment schedules (for example, a bond callable prior to the stated maturity date of the bond), or a bond that provides for remote or incidental contingencies, see Regulations section 1. Irs for 1040x 171-3. Irs for 1040x Bonds Issued Before September 28, 1985 For these bonds, you can amortize bond premium using any reasonable method. Irs for 1040x Reasonable methods include: The straight-line method, and The Revenue Ruling 82-10 method. Irs for 1040x Straight-line method. Irs for 1040x   Under this method, the amount of your bond premium amortization is the same each month. Irs for 1040x Divide the number of months you held the bond during the year by the number of months from the beginning of the tax year (or, if later, the date of acquisition) to the date of maturity or earlier call date. Irs for 1040x Then multiply the result by the bond premium (reduced by any bond premium amortization claimed in earlier years). Irs for 1040x This gives you your bond premium amortization for the year. Irs for 1040x Revenue Ruling 82-10 method. Irs for 1040x   Under this method, the amount of your bond premium amortization increases each month over the life of the bond. Irs for 1040x This method is explained in Revenue Ruling 82-10, 1982-1 C. Irs for 1040x B. Irs for 1040x 46. Irs for 1040x Choosing To Amortize You choose to amortize the premium on taxable bonds by reporting the amortization for the year on your income tax return for the first tax year you want the choice to apply. Irs for 1040x You should attach a statement to your return that you are making this choice under section 171. Irs for 1040x See How To Report Amortization, next. Irs for 1040x This choice is binding for the year you make it and for later tax years. Irs for 1040x It applies to all taxable bonds you own in the year you make the choice and also to those you acquire in later years. Irs for 1040x You can change your decision to amortize bond premium only with the written approval of the IRS. Irs for 1040x To request approval, use Form 3115. Irs for 1040x For more information on requesting approval, see section 5 of the Appendix to Revenue Procedure 2011-14 in Internal Revenue Bulletin 2011-4. Irs for 1040x You can find Revenue Procedure 2011-14 at www. Irs for 1040x irs. Irs for 1040x gov/irb/2011-04_IRB/ar08. Irs for 1040x html. Irs for 1040x How To Report Amortization Subtract the bond premium amortization from your interest income from these bonds. Irs for 1040x Report the bond's interest on Schedule B (Form 1040A or 1040), line 1. Irs for 1040x Under your last entry on line 1, put a subtotal of all interest listed on line 1. Irs for 1040x Below this subtotal, print “ABP Adjustment,” and the total interest you received. Irs for 1040x Subtract this amount from the subtotal, and enter the result on line 2. Irs for 1040x Bond premium amortization more than interest. Irs for 1040x   If the amount of your bond premium amortization for an accrual period is more than the qualified stated interest for the period, you can deduct the difference as a miscellaneous itemized deduction on Schedule A (Form 1040), line 28. Irs for 1040x    But your deduction is limited to the amount by which your total interest inclusions on the bond in prior accrual periods is more than your total bond premium deductions on the bond in prior periods. Irs for 1040x Any amount you cannot deduct because of this limit can be carried forward to the next accrual period. Irs for 1040x Pre-1998 election to amortize bond premium. Irs for 1040x   Generally, if you first elected to amortize bond premium before 1998, the above treatment of the premium does not apply to bonds you acquired before 1988. Irs for 1040x Bonds acquired before October 23, 1986. Irs for 1040x   The amortization of the premium on these bonds is a miscellaneous itemized deduction not subject to the 2%-of-adjusted-gross-income limit. Irs for 1040x Bonds acquired after October 22, 1986, but before 1988. Irs for 1040x    The amortization of the premium on these bonds is investment interest expense subject to the investment interest limit, unless you choose to treat it as an offset to interest income on the bond. Irs for 1040x Expenses of Producing Income You deduct investment expenses (other than interest expenses) as miscellaneous itemized deductions on Schedule A (Form 1040). Irs for 1040x To be deductible, these expenses must be ordinary and necessary expenses paid or incurred: To produce or collect income, or To manage property held for producing income. Irs for 1040x The expenses must be directly related to the income or income-producing property, and the income must be taxable to you. Irs for 1040x The deduction for most income-producing expenses is subject to a 2% limit that also applies to certain other miscellaneous itemized deductions. Irs for 1040x The amount deductible is limited to the total of these miscellaneous deductions that is more than 2% of your adjusted gross income. Irs for 1040x For information on how to report expenses of producing income, see How To Report Investment Expenses , later. Irs for 1040x Attorney or accounting fees. Irs for 1040x   You can deduct attorney or accounting fees that are necessary to produce or collect taxable income. Irs for 1040x However, in some cases, attorney or accounting fees are part of the basis of property. Irs for 1040x See Basis of Investment Property in chapter 4. Irs for 1040x Automatic investment service and dividend reinvestment plans. Irs for 1040x   A bank may offer its checking account customers an automatic investment service so that, for a charge, each customer can choose to invest a part of the checking account each month in common stock. Irs for 1040x Or a bank that is a dividend disbursing agent for a number of publicly-owned corporations may set up an automatic dividend reinvestment service. Irs for 1040x Through that service, cash dividends are reinvested in more shares of stock after the bank deducts a service charge. Irs for 1040x   A corporation in which you own stock also may have a dividend reinvestment plan. Irs for 1040x This plan lets you choose to use your dividends to buy more shares of stock in the corporation instead of receiving the dividends in cash. Irs for 1040x   You can deduct the monthly service charge you pay to a bank to participate in an automatic investment service. Irs for 1040x If you participate in a dividend reinvestment plan, you can deduct any service charge subtracted from your cash dividends before the dividends are used to buy more shares of stock. Irs for 1040x Deduct the charges in the year you pay them. Irs for 1040x Clerical help and office rent. Irs for 1040x   You can deduct office expenses, such as rent and clerical help, you incurred in connection with your investments and collecting the taxable income on your investments. Irs for 1040x Cost of replacing missing securities. Irs for 1040x   To replace your taxable securities that are mislaid, lost, stolen, or destroyed, you may have to post an indemnity bond. Irs for 1040x You can deduct the premium you pay to buy the indemnity bond and the related incidental expenses. Irs for 1040x   You may, however, get a refund of part of the bond premium if the missing securities are recovered within a specified time. Irs for 1040x Under certain types of insurance policies, you can recover some of the expenses. Irs for 1040x   If you receive the refund in the tax year you pay the amounts, you can deduct only the difference between the expenses paid and the amount refunded. Irs for 1040x If the refund is made in a later tax year, you must include the refund in income in the year you received it, but only to the extent that the expenses decreased your tax in the year you deducted them. Irs for 1040x Fees to collect income. Irs for 1040x   You can deduct fees you pay to a broker, bank, trustee, or similar agent to collect investment income, such as your taxable bond or mortgage interest, or your dividends on shares of stock. Irs for 1040x Fees to buy or sell. Irs for 1040x   You cannot deduct a fee you pay to a broker to acquire investment property, such as stocks or bonds. Irs for 1040x You must add the fee to the cost of the property. Irs for 1040x See Basis of Investment Property in chapter 4. Irs for 1040x    You cannot deduct any broker's fees, commissions, or option premiums you pay (or that were netted out) in connection with the sale of investment property. Irs for 1040x They can be used only to figure gain or loss from the sale. Irs for 1040x See Reporting Capital Gains and Losses , in chapter 4, for more information about the treatment of these sale expenses. Irs for 1040x Investment counsel and advice. Irs for 1040x   You can deduct fees you pay for counsel and advice about investments that produce taxable income. Irs for 1040x This includes amounts you pay for investment advisory services. Irs for 1040x Safe deposit box rent. Irs for 1040x   You can deduct rent you pay for a safe deposit box if you use the box to store taxable income-producing stocks, bonds, or other investment-related papers and documents. Irs for 1040x If you also use the box to store tax-exempt securities or personal items, you can deduct only part of the rent. Irs for 1040x See Tax-exempt income under Nondeductible Expenses, later, to figure what part you can deduct. Irs for 1040x State and local transfer taxes. Irs for 1040x   You cannot deduct the state and local transfer taxes you pay when you buy or sell securities. Irs for 1040x If you pay these transfer taxes when you buy securities, you must treat them as part of the cost of the property. Irs for 1040x If you pay these transfer taxes when you sell securities, you must treat them as a reduction in the amount realized. Irs for 1040x Trustee's commissions for revocable trust. Irs for 1040x   If you set up a revocable trust and have its income distributed to you, you can deduct the commission you pay the trustee for managing the trust to the extent it is to produce or collect taxable income or to manage property. Irs for 1040x However, you cannot deduct any part of the commission used for producing or collecting tax-exempt income or for managing property that produces tax-exempt income. Irs for 1040x   If you are a cash-basis taxpayer and pay the commissions for several years in advance, you must deduct a part of the commission each year. Irs for 1040x You cannot deduct the entire amount in the year you pay it. Irs for 1040x Investment expenses from pass-through entities. Irs for 1040x   If you hold an interest in a partnership, S corporation, real estate mortgage investment conduit (REMIC), or a nonpublicly offered mutual fund, you can deduct your share of that entity's investment expenses. Irs for 1040x A partnership or S corporation will show your share of these expenses on your Schedule K-1 (Form 1065) or Schedule K-1 (Form 1120S). Irs for 1040x A nonpublicly offered mutual fund will indicate your share of these expenses in box 5 of Form 1099-DIV (or substitute statement). Irs for 1040x Publicly-offered mutual funds are discussed later. Irs for 1040x   If you hold an interest in a REMIC, any expenses relating to your residual interest investment will be shown on Schedule Q (Form 1066), line 3b. Irs for 1040x Any expenses relating to your regular interest investment will appear in box 5 of Form 1099-INT (or substitute statement) or box 9 of Form 1099-OID (or substitute statement). Irs for 1040x   Report your share of these investment expenses on Schedule A (Form 1040), subject to the 2% limit, in the same manner as your other investment expenses. Irs for 1040x Including mutual fund or REMIC expenses in income. Irs for 1040x   Your share of the investment expenses of a REMIC or a nonpublicly offered mutual fund, as described above, are considered to be indirect deductions through that pass-through entity. Irs for 1040x You must include in your gross income an amount equal to the expenses allocated to you, whether or not you are able to claim a deduction for those expenses. Irs for 1040x If you are a shareholder in a nonpublicly offered mutual fund, you must include on your return the full amount of ordinary dividends or other distributions of stock, as shown in box 1a of Form 1099-DIV (or substitute statement). Irs for 1040x If you are a residual interest holder in a REMIC, you must report as ordinary income on Schedule E (Form 1040) the total amounts shown on Schedule Q (Form 1066), lines 1b and 3b. Irs for 1040x If you are a REMIC regular interest holder, you must include the amount of any expense allocation you received on Form 1040, line 8a. Irs for 1040x Publicly-offered mutual funds. Irs for 1040x   Most mutual funds are publicly offered. Irs for 1040x These mutual funds, generally, are traded on an established securities exchange. Irs for 1040x These funds do not pass investment expenses through to you. Irs for 1040x Instead, the dividend income they report to you in box 1a of Form 1099-DIV (or substitute statement) is already reduced by your share of investment expenses. Irs for 1040x As a result, you cannot deduct the expenses on your return. Irs for 1040x   Include the amount from box 1a of Form 1099-DIV (or substitute statement) in your income. Irs for 1040x    A publicly offered mutual fund is one that: Is continuously offered pursuant to a public offering, Is regularly traded on an established securities market, and Is held by or for no fewer than 500 persons at any time during the year. Irs for 1040x Contact your mutual fund if you are not sure whether it is publicly offered. Irs for 1040x Nondeductible Expenses Some expenses that you incur as an investor are not deductible. Irs for 1040x Stockholders' meetings. Irs for 1040x   You cannot deduct transportation and other expenses you pay to attend stockholders' meetings of companies in which you have no interest other than owning stock. Irs for 1040x This is true even if your purpose in attending is to get information that would be useful in making further investments. Irs for 1040x Investment-related seminar. Irs for 1040x   You cannot deduct expenses for attending a convention, seminar, or similar meeting for investment purposes. Irs for 1040x Single-premium life insurance, endowment, and annuity contracts. Irs for 1040x   You cannot deduct interest on money you borrow to buy or carry a single-premium life insurance, endowment, or annuity contract. Irs for 1040x Used as collateral. Irs for 1040x   If you use a single premium annuity contract as collateral to obtain or continue a mortgage loan, you cannot deduct any interest on the loan that is collateralized by the annuity contract. Irs for 1040x Figure the amount of interest expense disallowed by multiplying the current interest rate on the mortgage loan by the lesser of the amount of the annuity contract used as collateral or the amount of the loan. Irs for 1040x Borrowing on insurance. Irs for 1040x   Generally, you cannot deduct interest on money you borrow to buy or carry a life insurance, endowment, or annuity contract if you plan to systematically borrow part or all of the increases in the cash value of the contract. Irs for 1040x This rule applies to the interest on the total amount borrowed to buy or carry the contract, not just the interest on the borrowed increases in the cash value. Irs for 1040x Tax-exempt income. Irs for 1040x   You cannot deduct expenses you incur to produce tax-exempt income. Irs for 1040x Nor can you deduct interest on money you borrow to buy tax-exempt securities or shares in a mutual fund or other regulated investment company that distributes only exempt-interest dividends. Irs for 1040x Short-sale expenses. Irs for 1040x   The rule disallowing a deduction for interest expenses on tax-exempt securities applies to amounts you pay in connection with personal property used in a short sale or amounts paid by others for the use of any collateral in connection with the short sale. Irs for 1040x However, it does not apply to the expenses you incur if you deposit cash as collateral for the property used in the short sale and the cash does not earn a material return during the period of the sale. Irs for 1040x Short sales are discussed in Short Sales in chapter 4. Irs for 1040x Expenses for both tax-exempt and taxable income. Irs for 1040x   You may have expenses that are for both tax-exempt and taxable income. Irs for 1040x If you cannot specifically identify what part of the expenses is for each type of income, you can divide the expenses, using reasonable proportions based on facts and circumstances. Irs for 1040x You must attach a statement to your return showing how you divided the expenses and stating that each deduction claimed is not based on tax-exempt income. Irs for 1040x   One accepted method for dividing expenses is to do it in the same proportion that each type of income is to the total income. Irs for 1040x If the expenses relate in part to capital gains and losses, include the gains, but not the losses, in figuring this proportion. Irs for 1040x To find the part of the expenses that is for the tax-exempt income, divide your tax-exempt income by the total income and multiply your expenses by the result. Irs for 1040x Example. Irs for 1040x You received $6,000 interest; $4,800 was tax-exempt and $1,200 was taxable. Irs for 1040x In earning this income, you had $500 of expenses. Irs for 1040x You cannot specifically identify the amount of each expense item that is for each income item, so you must divide your expenses. Irs for 1040x 80% ($4,800 tax-exempt interest divided by $6,000 total interest) of your expenses is for the tax-exempt income. Irs for 1040x You cannot deduct $400 (80% of $500) of the expenses. Irs for 1040x You can deduct $100 (the rest of the expenses) because they are for the taxable interest. Irs for 1040x State income taxes. Irs for 1040x   If you itemize your deductions, you can deduct, as taxes, state income taxes on interest income that is exempt from federal income tax. Irs for 1040x But you cannot deduct, as either taxes or investment expenses, state income taxes on other exempt income. Irs for 1040x Interest expense and carrying charges on straddles. Irs for 1040x   You cannot deduct interest and carrying charges allocable to personal property that is part of a straddle. Irs for 1040x The nondeductible interest and carrying charges are added to the basis of the straddle property. Irs for 1040x However, this treatment does not apply if: All the offsetting positions making up the straddle either consist of one or more qualified covered call options and the optioned stock, or consist of section 1256 contracts (and the straddle is not part of a larger straddle); or The straddle is a hedging transaction. Irs for 1040x  For information about straddles, including definitions of the terms used in this discussion, see Straddles in chapter 4. Irs for 1040x   Interest includes any amount you pay or incur in connection with personal property used in a short sale. Irs for 1040x However, you must first apply the rules discussed in Payments in lieu of dividends under Short Sales in chapter 4. Irs for 1040x   To determine the interest on market discount bonds and short-term obligations that are part of a straddle, you must first apply the rules discussed under Limit on interest deduction for market discount bonds and Limit on interest deduction for short-term obligations (both under Interest Expenses, earlier). Irs for 1040x Nondeductible amount. Irs for 1040x   Figure the nondeductible interest and carrying charges on straddle property as follows. Irs for 1040x Add: Interest on indebtedness incurred or continued to buy or carry the personal property, and All other amounts (including charges to insure, store, or transport the personal property) paid or incurred to carry the personal property. Irs for 1040x Subtract from the amount in (1): Interest (including OID) includible in gross income for the year on the personal property, Any income from the personal property treated as ordinary income on the disposition of short-term government obligations or as ordinary income under the market discount and short-term bond provisions — see Discount on Debt Instruments in chapter 1, The dividends includible in gross income for the year from the personal property, and Any payment on a loan of the personal property for use in a short sale that is includible in gross income. Irs for 1040x Basis adjustment. Irs for 1040x   Add the nondeductible amount to the basis of your straddle property. Irs for 1040x How To Report Investment Expenses To deduct your investment expenses, you must itemize deductions on Schedule A (Form 1040). Irs for 1040x Enter your deductible investment interest expense on Schedule A (Form1040), line 14. Irs for 1040x Include any deductible short sale expenses. Irs for 1040x (See Short Sales in chapter 4 for information on these expenses. Irs for 1040x ) Also attach a completed Form 4952 if you used that form to figure your investment interest expense. Irs for 1040x Enter the total amount of your other investment expenses (other than interest expenses) on Schedule A (Form 1040), line 23. Irs for 1040x List the type and amount of each expense on the dotted lines next to line 23. Irs for 1040x (If necessary, you can show the required information on an attached statement. Irs for 1040x ) For information on how to report amortizable bond premium, see Bond Premium Amortization , earlier in this chapter. Irs for 1040x When To Report Investment Expenses If you use the cash method to report income and expenses, you generally deduct your expenses, except for certain prepaid interest, in the year you pay them. Irs for 1040x If you use an accrual method, you generally deduct your expenses when you incur a liability for them, rather than when you pay them. Irs for 1040x Also see When To Deduct Investment Interest , earlier in this chapter. Irs for 1040x Unpaid expenses owed to related party. Irs for 1040x   If you use an accrual method, you cannot deduct interest and other expenses owed to a related cash-basis person until payment is made and the amount is includible in the gross income of that person. Irs for 1040x The relationship, for purposes of this rule, is determined as of the end of the tax year for which the interest or expense would otherwise be deductible. Irs for 1040x If a deduction is denied under this rule, this rule will continue to apply even if your relationship with the person ceases to exist before the amount is includible in the gross income of that person. Irs for 1040x   This rule generally applies to those relationships listed in chapter 4 under Related Party Transactions . Irs for 1040x It also applies to accruals by partnerships to partners, partners to partnerships, shareholders to S corporations, and S corporations to shareholders. Irs for 1040x   The postponement of deductions for unpaid expenses and interest under the related party rule does not apply to OID, regardless of when payment is made. Irs for 1040x This rule also does not apply to loans with below-market interest rates or to certain payments for the use of property and services when the lender or recipient has to include payments periodically in income, even if a payment has not been made. Irs for 1040x Prev  Up  Next   Home   More Online Publications