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Irs Gov 1040ez

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Irs Gov 1040ez

Irs gov 1040ez Publication 3920 - Main Contents Table of Contents Tax ForgivenessYears Eligible for Tax Forgiveness Amount of Tax Forgiven Refund of Taxes Paid How To Claim Tax Forgiveness Payments to SurvivorsSeptember 11th Victim Compensation Fund of 2001 Qualified Disaster Relief Payments Disability Payments Death Benefits Canceled Debt Payments to Survivors of Public Safety Officers Postponed Tax DeadlinesCovered area. Irs gov 1040ez Disaster Area Losses Estate Tax Reduction Structured Settlement Factoring Transactions Illustrated Worksheets B and C Additional Worksheets How To Get Tax Help Tax Forgiveness The IRS will forgive the federal income tax liabilities of decedents who died as a result of the Oklahoma City attack, September 11 attacks, and anthrax attacks. Irs gov 1040ez Income tax is forgiven for these decedents whether they were killed in an attack or in rescue or recovery operations. Irs gov 1040ez Any forgiven tax liability owed to the IRS will not have to be paid. Irs gov 1040ez Any forgiven tax liability that has already been paid will be refunded. Irs gov 1040ez (See Refund of Taxes Paid, later. Irs gov 1040ez ) To determine the amount of tax to be forgiven, read Years Eligible for Tax Forgiveness first. Irs gov 1040ez Then read Amount of Tax Forgiven. Irs gov 1040ez Decedents whose total forgiven tax liability for all eligible years is less than $10,000 are entitled to $10,000 minimum relief. Irs gov 1040ez Even decedents who were not required to file tax returns for the eligible tax years are entitled to $10,000 minimum relief. Irs gov 1040ez See Minimum Amount of Relief later under Amount of Tax Forgiven. Irs gov 1040ez Years Eligible for Tax Forgiveness The following paragraphs explain which years are eligible for tax forgiveness. Irs gov 1040ez Oklahoma City attack. Irs gov 1040ez   For those who died from this attack, income tax is forgiven for 1994 and all later years up to and including the year of death. Irs gov 1040ez Example 1. Irs gov 1040ez A man was killed in the bombing of the federal building in Oklahoma City on April 19, 1995. Irs gov 1040ez His income tax is forgiven for 1994 and 1995. Irs gov 1040ez Example 2. Irs gov 1040ez A woman was wounded while walking outside the federal building in Oklahoma City on April 19, 1995. Irs gov 1040ez She subsequently died of her wounds in 1996. Irs gov 1040ez Her income tax is forgiven for 1994, 1995, and 1996. Irs gov 1040ez September 11 attacks and anthrax attacks. Irs gov 1040ez   For those who die from these attacks, income tax is forgiven for 2000 and all later years up to and including the year of death. Irs gov 1040ez Example 1. Irs gov 1040ez A Pentagon employee died in the September 11 attack. Irs gov 1040ez Her income tax is forgiven for 2000 and 2001. Irs gov 1040ez Example 2. Irs gov 1040ez A visitor to the World Trade Center died in 2002 of wounds he sustained in the September 11 attack. Irs gov 1040ez His income tax liability is forgiven for 2000, 2001, and 2002. Irs gov 1040ez Amount of Tax Forgiven The IRS will forgive the decedent's income tax liability for all years eligible for tax forgiveness. Irs gov 1040ez On a joint return, only the decedent's part of the joint income tax liability is eligible for forgiveness. Irs gov 1040ez To figure the tax to be forgiven, use the following worksheets. Irs gov 1040ez Use Worksheet A for any eligible year the decedent filed a return as single, married filing separately, head of household, or qualifying widow(er). Irs gov 1040ez Use Worksheet B for any eligible year the decedent filed a joint return. Irs gov 1040ez See the illustrated Worksheet B near the end of this publication. Irs gov 1040ez Do not complete Worksheet A or B if the decedent was not required to file tax returns for the eligible tax years. Irs gov 1040ez Instead, complete Worksheet C and file a return for the decedent's last tax year. Irs gov 1040ez See Minimum Amount of Relief, later. Irs gov 1040ez If you need assistance, call the IRS at 1–866–562–5227 Monday through Friday during the following times. Irs gov 1040ez In English–7 a. Irs gov 1040ez m. Irs gov 1040ez to 10 p. Irs gov 1040ez m. Irs gov 1040ez local time. Irs gov 1040ez In Spanish–8 a. Irs gov 1040ez m. Irs gov 1040ez to 9:30 p. Irs gov 1040ez m. Irs gov 1040ez local time. Irs gov 1040ez Both spouses died. Irs gov 1040ez   If both spouses died as a result of a terrorist attack and they filed a joint return for an eligible tax year, fill out Worksheet B for each spouse for that year. Irs gov 1040ez Do this to determine if each spouse qualifies for the minimum relief of $10,000 (discussed later under Minimum Amount of Relief). Irs gov 1040ez If you are certain that neither spouse's total forgiven tax liability for all eligible years is less than $10,000, skip Worksheet B. Irs gov 1040ez However, attach a computation of the forgiven tax liability to the final income tax return or amended tax return for each eligible year. Irs gov 1040ez The forgiven tax liability is the total tax shown on the joint return minus the taxes listed in the instructions for line 4 of Worksheet B. Irs gov 1040ez Residents of community property states. Irs gov 1040ez   If the decedent was domiciled in a community property state and the spouse reported half the community income on a separate return, the surviving spouse can get a refund of taxes paid on his or her share of the decedent's income for the eligible years. Irs gov 1040ez Also, all of the decedent's income taxes paid for the eligible years will be refunded to either the executor or administrator of the estate, or to the surviving spouse if there is no legal representative. Irs gov 1040ez Worksheet B. Irs gov 1040ez Figuring the Tax To Be Forgiven (For Decedents Who Filed a Joint Return)       (A) First Eligible Year (1994 or 2000) (B) Second Eligible Year (1995 or 2001) (C) Third Eligible Year (1996 or 2002) 1 Enter the years eligible for forgiveness. Irs gov 1040ez 1       2 Enter the decedent's taxable income. Irs gov 1040ez Figure taxable income as if a separate return had been filed. Irs gov 1040ez See the instructions. Irs gov 1040ez 2       3 Enter the decedent's total tax. Irs gov 1040ez See the instructions. Irs gov 1040ez 3       4 Enter the total, if any, of the decedent's taxes not eligible for forgiveness. Irs gov 1040ez See the instructions. Irs gov 1040ez 4       5 Subtract line 4 from line 3. Irs gov 1040ez 5       6 Enter the surviving spouse's taxable income. Irs gov 1040ez Figure taxable income as if a separate return had been filed. Irs gov 1040ez See the instructions. Irs gov 1040ez 6       7 Enter the surviving spouse's total tax. Irs gov 1040ez See the instructions. Irs gov 1040ez 7       8 Enter the total, if any, of the surviving spouse's taxes listed in the instructions for line 4. Irs gov 1040ez 8       9 Subtract line 8 from line 7. Irs gov 1040ez 9       10 Add lines 5 and 9. Irs gov 1040ez 10       11 Enter the total tax from the joint return. Irs gov 1040ez See Table 1 on page 5 for the line number for years before 2002. Irs gov 1040ez 11       12 Add lines 4 and 8. Irs gov 1040ez 12       13 Subtract line 12 from line 11. Irs gov 1040ez 13       14 Divide line 5 by line 10. Irs gov 1040ez Enter the result as a decimal. Irs gov 1040ez 14       15 Tax to be forgiven. Irs gov 1040ez Multiply line 13 by line 14 and enter the result. Irs gov 1040ez 15       Note. Irs gov 1040ez If the total of columns (A), (B), and (C) of line 15 (including any amounts shown on line 5 of Worksheet A) is less than $10,000, also complete Worksheet C. Irs gov 1040ez Attach the computation of the tax to be forgiven or a copy of this worksheet to the decedent's final income tax return or amended tax return (Form 1040X) for each year listed on line 1. Irs gov 1040ez If filing Form 1040X for an eligible year, enter the amount from line 15 above on Form 1040X in column B of line 10 as a decrease in tax. Irs gov 1040ez The IRS will determine the amount to be refunded. Irs gov 1040ez Worksheet B. Irs gov 1040ez Figuring the Tax To Be Forgiven (For Decedents Who Filed a Joint Return)       (A) First Eligible Year (1994 or 2000) (B) Second Eligible Year (1995 or 2001) (C) Third Eligible Year (1996 or 2002) 1 Enter the years eligible for forgiveness. Irs gov 1040ez 1       2 Enter the decedent's taxable income. Irs gov 1040ez Figure taxable income as if a separate return had been filed. Irs gov 1040ez See the instructions. Irs gov 1040ez 2       3 Enter the decedent's total tax. Irs gov 1040ez See the instructions. Irs gov 1040ez 3       4 Enter the total, if any, of the decedent's taxes not eligible for forgiveness. Irs gov 1040ez See the instructions. Irs gov 1040ez 4       5 Subtract line 4 from line 3. Irs gov 1040ez 5       6 Enter the surviving spouse's taxable income. Irs gov 1040ez Figure taxable income as if a separate return had been filed. Irs gov 1040ez See the instructions. Irs gov 1040ez 6       7 Enter the surviving spouse's total tax. Irs gov 1040ez See the instructions. Irs gov 1040ez 7       8 Enter the total, if any, of the surviving spouse's taxes listed in the instructions for line 4. Irs gov 1040ez 8       9 Subtract line 8 from line 7. Irs gov 1040ez 9       10 Add lines 5 and 9. Irs gov 1040ez 10       11 Enter the total tax from the joint return. Irs gov 1040ez See Table 1 on page 5 for the line number for years before 2002. Irs gov 1040ez 11       12 Add lines 4 and 8. Irs gov 1040ez 12       13 Subtract line 12 from line 11. Irs gov 1040ez 13       14 Divide line 5 by line 10. Irs gov 1040ez Enter the result as a decimal. Irs gov 1040ez 14       15 Tax to be forgiven. Irs gov 1040ez Multiply line 13 by line 14 and enter the result. Irs gov 1040ez 15       Note. Irs gov 1040ez If the total of columns (A), (B), and (C) of line 15 (including any amounts shown on line 5 of Worksheet A) is less than $10,000, also complete Worksheet C. Irs gov 1040ez Attach the computation of the tax to be forgiven or a copy of this worksheet to the decedent's final income tax return or amended tax return (Form 1040X) for each year listed on line 1. Irs gov 1040ez If filing Form 1040X for an eligible year, enter the amount from line 15 above on Form 1040X in column B of line 10 as a decrease in tax. Irs gov 1040ez The IRS will determine the amount to be refunded. Irs gov 1040ez Instructions for Worksheet B Table 1. Irs gov 1040ez Total Tax Line on Decedent's Return Note: Use this table to find the total tax line on the decedent's income tax return. Irs gov 1040ez * Form 1994 1995 1996 2000 2001 1040 Line 53 Line 54 Line 51 Line 57 Line 58 1040A Line 27 Line 28 Line 28 Line 35 File Form 1040 1040EZ Line 9 Line 10 Line 10 Line 10 TeleFile Tax Record ** Line E Line J Line K 1040NR Line 51 Line 52 Line 49 Line 54 Line 54 1040NR–EZ N/A Line 17 Line 17 Line 18 File Form 1040NR * Line numbers for the 2002 forms were not available when this publication went to print. Irs gov 1040ez ** File Form 4506 to get a transcript of the decedent's account. Irs gov 1040ez Table 1. Irs gov 1040ez Total Tax Line on Decedent's Return Note: Use this table to find the total tax line on the decedent's income tax return. Irs gov 1040ez * Form 1994 1995 1996 2000 2001 1040 Line 53 Line 54 Line 51 Line 57 Line 58 1040A Line 27 Line 28 Line 28 Line 35 File Form 1040 1040EZ Line 9 Line 10 Line 10 Line 10 TeleFile Tax Record ** Line E Line J Line K 1040NR Line 51 Line 52 Line 49 Line 54 Line 54 1040NR–EZ N/A Line 17 Line 17 Line 18 File Form 1040NR * Line numbers for the 2002 forms were not available when this publication went to print. Irs gov 1040ez ** File Form 4506 to get a transcript of the decedent's account. Irs gov 1040ez Lines 2 and 6. Irs gov 1040ez   Allocate income and deductions in the same manner they would have been allocated if the spouses had filed separate returns. Irs gov 1040ez   Allocate wages and salaries to the spouse who performed the services and received the Form W-2. Irs gov 1040ez Business and investment income (including capital gains) are generally allocated to the spouse who owned the business or investment that produced the income. Irs gov 1040ez Income from a jointly owned business or investment should be allocated equally between the spouses unless there is evidence that shows a different allocation is appropriate. Irs gov 1040ez   Allocate business deductions to the owner of the business. Irs gov 1040ez Allocate personal deductions (such as itemized deductions for mortgage interest and taxes) equally between the spouses unless there is evidence that shows a different allocation is appropriate. Irs gov 1040ez Lines 3 and 7. Irs gov 1040ez   Figure the total tax as if a separate return had been filed. Irs gov 1040ez The total tax is the tax that would have been entered on the tax return line shown in Table 1 if a separate return had been filed. Irs gov 1040ez When figuring the tax using the Tax Table or Tax Rate Schedule, use the “Married filing separately” column in the Tax Table or Tax Rate Schedule Y-2. Irs gov 1040ez   When figuring the total tax, allocate credits and other taxes, if any, in the same manner as they would have been allocated if the spouses had filed separate returns. Irs gov 1040ez If a credit would not have been allowed on a separate return, allocate the credit shown on the joint return between the spouses. Irs gov 1040ez Examples of credits generally not allowed on a separate return are the child and dependent care credit, credit for the elderly, adoption credit, education credits, and earned income credit. Irs gov 1040ez Line 4. Irs gov 1040ez   Enter the total, if any, of the following taxes. Irs gov 1040ez Self-employment tax. Irs gov 1040ez Social security and Medicare tax on tip income not reported to employer. Irs gov 1040ez Tax on excess contributions to IRAs, Coverdell education savings accounts (formerly Ed IRAs), or Archer MSAs (formerly medical savings accounts). Irs gov 1040ez Tax on excess accumulation in qualified retirement plans. Irs gov 1040ez Household employment taxes. Irs gov 1040ez Uncollected social security and Medicare or RRTA tax on tips or group-term life insurance. Irs gov 1040ez Tax on golden parachute payments. Irs gov 1040ez Minimum Amount of Relief The minimum amount of relief is $10,000. Irs gov 1040ez If the decedent's total forgiven tax liability for all eligible years is less than $10,000, the difference between $10,000 and the total forgiven tax liability for those years will be treated as a tax payment for the decedent's last tax year. Irs gov 1040ez The IRS will refund the difference as explained under Refund of Taxes Paid. Irs gov 1040ez Use Worksheet C to figure the additional tax payment. Irs gov 1040ez But first complete Worksheet A or B, unless the decedent was not required to file tax returns for the eligible tax years. Irs gov 1040ez Example 1. Irs gov 1040ez An individual who died in the September 11 attacks had an income tax liability of $-0- for 2000 and $6,400 for 2001. Irs gov 1040ez The $6,400 is eligible for forgiveness. Irs gov 1040ez The IRS will forgive $6,400 and treat the difference between $10,000 and $6,400 ($3,600) as a tax payment for 2001. Irs gov 1040ez Example 2. Irs gov 1040ez A child who died in the September 11 attacks had no (-0-) income tax liability for 2000 or 2001. Irs gov 1040ez The IRS will treat $10,000 as a tax payment for 2001. Irs gov 1040ez Income received after date of death. Irs gov 1040ez   Generally, income of the decedent received after the date of death must be reported on Form 1041 if the estate has gross income for the tax year of $600 or more. Irs gov 1040ez Examples are the final paycheck or dividends on stock owned by the decedent. Irs gov 1040ez However, this income is exempt from income tax and is not included on Form 1041 if it is received: After the date of the decedent's death, and Before the end of the decedent's tax year (determined without regard to death). Irs gov 1040ez Nonqualifying income. Irs gov 1040ez   The following income is not exempt from tax. Irs gov 1040ez The tax on it is not eligible for forgiveness. Irs gov 1040ez Deferred compensation that would have been payable if the death had occurred because of an event other than these attacks. Irs gov 1040ez Amounts that would not have been payable but for an action taken after September 11, 2001. Irs gov 1040ez The following are examples of nonqualifying income. Irs gov 1040ez Amounts payable from a qualified retirement plan or IRA to the beneficiary or estate of the decedent. Irs gov 1040ez Amounts payable only as death or survivor's benefits from pre-existing arrangements that would have been paid if the death had occurred for another reason. Irs gov 1040ez Income received as a result of adjustments made by the decedent's employer to a plan or arrangement to accelerate the vesting of restricted property or the payment of nonqualified deferred compensation after the date of the attack. Irs gov 1040ez Interest on savings bonds cashed by the beneficiary of the decedent. Irs gov 1040ez If you are responsible for the estate of a decedent, see Publication 559. Irs gov 1040ez Publication 559 discusses how to complete and file federal income tax returns and explains your responsibility to pay any taxes due. Irs gov 1040ez Instructions for lines 2–9 of Worksheet C. Irs gov 1040ez   The tax that would have been payable on the exempt income (discussed earlier) must be considered when determining whether a decedent is entitled to the $10,000 minimum relief. Irs gov 1040ez To figure the tax that would have been payable, you can use lines 2 through 9 of Worksheet C. Irs gov 1040ez Or, if special requirements are met, you can use the alternative computation instead. Irs gov 1040ez See Alternative computation, later. Irs gov 1040ez   You have to use lines 2–9 (or the alternative computation) to figure the tax that would have been payable even if Form 1041 was not required to be filed. Irs gov 1040ez Use Form 1041 to figure what the taxable income would be without including the exempt income. Irs gov 1040ez Then enter that taxable income (even if a negative number) on line 2 of Worksheet C (or line 1 of Worksheet D, Alternative Computation of Tax on Exempt Income (Line 9 of Worksheet C)). Irs gov 1040ez Alternative computation. Irs gov 1040ez   Instead of using lines 2–8 of Worksheet C to figure the tax on exempt income (line 9 of Worksheet C), you may be able to use Worksheet D. Irs gov 1040ez You can use Worksheet D to figure the tax on the exempt income payable by the estate and its beneficiaries only if both of the following requirements are met. Irs gov 1040ez The estate claimed an income distribution deduction on line 18 (Form 1041). Irs gov 1040ez Each beneficiary submits the information necessary to refigure the income tax payable on the exempt income received from the decedent's estate. Irs gov 1040ez If requirement (2) is met but requirement (1) is not, you can still use Worksheet D if: Form 1041 was not required because exempt income was received, and The estate would have claimed an income distribution deduction if the exempt income were taxable. Irs gov 1040ez If you use this alternative computation, skip lines 2–8 of Worksheet C and enter the amount from line 8 of Worksheet D on line 9 of Worksheet C. Irs gov 1040ez Complete the rest of Worksheet C to determine the additional payment allowed. Irs gov 1040ez Worksheet C. Irs gov 1040ez Amount Treated as Tax Payment for Decedent's Last Tax Year Caution: The decedent is entitled to minimum relief of $10,000. Irs gov 1040ez Complete this worksheet only if the total tax forgiven for all eligible years is less than $10,000. Irs gov 1040ez 1 Minimum relief amount. Irs gov 1040ez Note: Before completing lines 2–9, see Instructions for lines 2–9 of Worksheet C. Irs gov 1040ez 1 $10,000 2 Enter the taxable income from line 22 (Form 1041) 2       3 Enter the distribution deduction from line 18 (Form 1041) . Irs gov 1040ez 3       4 Add lines 2 and 3. Irs gov 1040ez 4       5 Enter exempt income received after death minus expenses allocable to exempt income. Irs gov 1040ez (See Income received after date of death on page 5. Irs gov 1040ez ) 5       6 Add lines 4 and 5. Irs gov 1040ez 6       7 Figure the tax on line 6 using Schedule G (Form 1041). Irs gov 1040ez 7       8 Figure the tax on line 4 using Schedule G (Form 1041). Irs gov 1040ez 8       9 Tax on exempt income. Irs gov 1040ez Subtract line 8 from line 7. Irs gov 1040ez 9       10 Enter the total of columns (A)–(C) from line 5 of Worksheet A or line 15 of Worksheet B. Irs gov 1040ez If the decedent was not required to file tax returns for the eligible tax years, enter -0-. Irs gov 1040ez 10       11 Add lines 9 and 10. Irs gov 1040ez 11   12 Additional payment allowed. Irs gov 1040ez If line 11 is $10,000 or more, enter -0- and stop here. Irs gov 1040ez No additional amount is allowed as a tax payment. Irs gov 1040ez Otherwise, subtract line 11 from line 1 and enter the result. Irs gov 1040ez 12   Note. Irs gov 1040ez The amount on line 12 is allowed as a tax payment for the decedent's last tax year (usually 1995 or 2001). Irs gov 1040ez Attach the computation of the additional payment allowed or a copy of this worksheet to the original or amended income tax return for the decedent's last tax year. Irs gov 1040ez If filing Form 1040, include the amount from line 12 above on the “Other payments” line of the form. Irs gov 1040ez Write "Sec. Irs gov 1040ez 692(d)(2) Payment" and the amount to the right of the entry space. Irs gov 1040ez Also indicate whether a Form 1041 is being filed for the decedent's estate. Irs gov 1040ez If filing Form 1040X, include the amount from line 12 above on Form 1040X on line 15, columns (B) and (C). Irs gov 1040ez Write “Sec. Irs gov 1040ez 692(d)(2) Payment” on the dotted line to the left of the entry space. Irs gov 1040ez Worksheet C. Irs gov 1040ez Amount Treated as Tax Payment for Decedent's Last Tax Year Caution: The decedent is entitled to minimum relief of $10,000. Irs gov 1040ez Complete this worksheet only if the total tax forgiven for all eligible years is less than $10,000. Irs gov 1040ez 1 Minimum relief amount. Irs gov 1040ez Note: Before completing lines 2–9, see Instructions for lines 2–9 of Worksheet C. Irs gov 1040ez 1 $10,000 2 Enter the taxable income from line 22 (Form 1041) 2       3 Enter the distribution deduction from line 18 (Form 1041) . Irs gov 1040ez 3       4 Add lines 2 and 3. Irs gov 1040ez 4       5 Enter exempt income received after death minus expenses allocable to exempt income. Irs gov 1040ez (See Income received after date of death on page 5. Irs gov 1040ez ) 5       6 Add lines 4 and 5. Irs gov 1040ez 6       7 Figure the tax on line 6 using Schedule G (Form 1041). Irs gov 1040ez 7       8 Figure the tax on line 4 using Schedule G (Form 1041). Irs gov 1040ez 8       9 Tax on exempt income. Irs gov 1040ez Subtract line 8 from line 7. Irs gov 1040ez 9       10 Enter the total of columns (A)–(C) from line 5 of Worksheet A or line 15 of Worksheet B. Irs gov 1040ez If the decedent was not required to file tax returns for the eligible tax years, enter -0-. Irs gov 1040ez 10       11 Add lines 9 and 10. Irs gov 1040ez 11   12 Additional payment allowed. Irs gov 1040ez If line 11 is $10,000 or more, enter -0- and stop here. Irs gov 1040ez No additional amount is allowed as a tax payment. Irs gov 1040ez Otherwise, subtract line 11 from line 1 and enter the result. Irs gov 1040ez 12   Note. Irs gov 1040ez The amount on line 12 is allowed as a tax payment for the decedent's last tax year (usually 1995 or 2001). Irs gov 1040ez Attach the computation of the additional payment allowed or a copy of this worksheet to the original or amended income tax return for the decedent's last tax year. Irs gov 1040ez If filing Form 1040, include the amount from line 12 above on the “Other payments” line of the form. Irs gov 1040ez Write "Sec. Irs gov 1040ez 692(d)(2) Payment" and the amount to the right of the entry space. Irs gov 1040ez Also indicate whether a Form 1041 is being filed for the decedent's estate. Irs gov 1040ez If filing Form 1040X, include the amount from line 12 above on Form 1040X on line 15, columns (B) and (C). Irs gov 1040ez Write “Sec. Irs gov 1040ez 692(d)(2) Payment” on the dotted line to the left of the entry space. Irs gov 1040ez Worksheet D. Irs gov 1040ez Alternative Computation of Tax on Exempt Income (Line 9 of Worksheet C) 1 Enter the taxable income from line 22 (Form 1041) 1   2 Enter exempt income received after death minus expenses allocable to exempt income. Irs gov 1040ez (See Income received after date of death on page 5. Irs gov 1040ez ) 2   3 Add lines 1 and 2 3   4 Figure the tax on line 3 using Schedule G (Form 1041). Irs gov 1040ez 4   5 Figure the tax on line 1 using Schedule G (Form 1041). Irs gov 1040ez 5   6 Estate's tax on exempt income. Irs gov 1040ez Subtract line 5 from line 4 6   7 Beneficiaries' tax on exempt income. Irs gov 1040ez Figure the total tax that would have been payable by all beneficiaries. Irs gov 1040ez Do this by including in each beneficiary's gross income the exempt income received from the decedent's estate and refiguring the income tax. Irs gov 1040ez Add the amounts by which each beneficiary's income tax is increased. Irs gov 1040ez 7   8 Add lines 6 and 7. Irs gov 1040ez Enter this amount on line 9 of Worksheet C. Irs gov 1040ez 8   Worksheet D. Irs gov 1040ez Alternative Computation of Tax on Exempt Income (Line 9 of Worksheet C) 1 Enter the taxable income from line 22 (Form 1041) 1   2 Enter exempt income received after death minus expenses allocable to exempt income. Irs gov 1040ez (See Income received after date of death on page 5. Irs gov 1040ez ) 2   3 Add lines 1 and 2 3   4 Figure the tax on line 3 using Schedule G (Form 1041). Irs gov 1040ez 4   5 Figure the tax on line 1 using Schedule G (Form 1041). Irs gov 1040ez 5   6 Estate's tax on exempt income. Irs gov 1040ez Subtract line 5 from line 4 6   7 Beneficiaries' tax on exempt income. Irs gov 1040ez Figure the total tax that would have been payable by all beneficiaries. Irs gov 1040ez Do this by including in each beneficiary's gross income the exempt income received from the decedent's estate and refiguring the income tax. Irs gov 1040ez Add the amounts by which each beneficiary's income tax is increased. Irs gov 1040ez 7   8 Add lines 6 and 7. Irs gov 1040ez Enter this amount on line 9 of Worksheet C. Irs gov 1040ez 8   Refund of Taxes Paid The IRS will refund the following forgiven income tax liabilities. Irs gov 1040ez Income tax liabilities that have been paid. Irs gov 1040ez Income tax liabilities treated as paid because the total tax liability for all years eligible for tax forgiveness is less than $10,000. Irs gov 1040ez See Minimum Amount of Relief, earlier. Irs gov 1040ez Example 1. Irs gov 1040ez A man who died in the September 11 attacks had an income tax liability of $7,500 for 2000 and $6,500 for 2001. Irs gov 1040ez The total, $14,000, is eligible for tax forgiveness. Irs gov 1040ez However, he paid only $13,000 of that amount. Irs gov 1040ez The IRS will refund the $13,000 paid. Irs gov 1040ez Example 2. Irs gov 1040ez A child who died in the September 11 attacks had no income tax liability for 2000 or 2001. Irs gov 1040ez The child qualifies for the minimum relief of $10,000. Irs gov 1040ez The $10,000 is treated as a tax payment for 2001 and will be refunded. Irs gov 1040ez Period for filing a claim for credit or refund. Irs gov 1040ez   To obtain a tax refund on a previously filed income tax return, file an amended return (Form 1040X or an amended Form 1041) within 3 years from the time the return was filed or 2 years from the time the tax was paid, whichever is later. Irs gov 1040ez For example, you have until April 15, 2004, to file an amended return on a 2000 Form 1040, 1040A, or 1040EZ that was filed by April 16, 2001, and for which the tax was paid when due. Irs gov 1040ez To obtain a refund on a return that has not been filed, file the return within 3 years of the original due date of the return. Irs gov 1040ez Extension of time for victims of Oklahoma City attack. Irs gov 1040ez   The period described above has been extended for victims of the Oklahoma City attack. Irs gov 1040ez Survivors and personal representatives of these victims have until January 22, 2003, to file an original or amended return. Irs gov 1040ez How To Claim Tax Forgiveness Use the following procedures to claim income tax forgiveness. Irs gov 1040ez Which Form To Use The form you use depends on whether an income tax return for the eligible year was already filed for the decedent. Irs gov 1040ez Return required but not yet filed. Irs gov 1040ez   File Form 1040 if the decedent was a U. Irs gov 1040ez S. Irs gov 1040ez citizen or resident. Irs gov 1040ez File Form 1040NR if the decedent was a nonresident alien. Irs gov 1040ez A nonresident alien is someone who is not a U. Irs gov 1040ez S. Irs gov 1040ez citizen or resident. Irs gov 1040ez Return required and already filed. Irs gov 1040ez   File a separate Form 1040X for each year you are claiming tax relief. Irs gov 1040ez Return not required and not filed. Irs gov 1040ez   File Form 1040 only for the year of death if the decedent was a U. Irs gov 1040ez S. Irs gov 1040ez citizen or resident. Irs gov 1040ez File Form 1040NR if the decedent was a nonresident alien. Irs gov 1040ez Return not required but already filed. Irs gov 1040ez   File Form 1040X only for the year of death. Irs gov 1040ez How to complete the returns. Irs gov 1040ez   Fill out Form 1040 or 1040NR according to its instructions but do not reduce the decedent's tax liability by any taxes that will be forgiven. Irs gov 1040ez Attach to each return a computation of the income tax to be forgiven or a copy of Worksheet A or B. Irs gov 1040ez If filing Form 1040 or Form 1040NR, also attach any Forms W–2. Irs gov 1040ez If the total forgiven tax liability for all eligible years is less than $10,000, attach to the decedent's final return a computation of the additional tax payment allowed or a copy of Worksheet C. Irs gov 1040ez Also, please write one of the following across the top of page 1 of each return. Irs gov 1040ez KITA—Oklahoma City KITA—9/11 KITA—Anthrax “KITA” means “killed in terrorist attack. Irs gov 1040ez ” Need a copy of a previously filed return?   You will find it easier to prepare Form 1040X if you have a copy of the decedent's previously filed tax return. Irs gov 1040ez If you need a copy, use Form 4506. Irs gov 1040ez The IRS will provide a free copy of the tax return if you write “DISASTER” in the top margin of Form 4506. Irs gov 1040ez Attach Letters Testamentary or other evidence to establish that you are authorized to act for the decedent's estate. Irs gov 1040ez Send Form 4506 to the address shown in the form instructions. Irs gov 1040ez Taxpayer identification number. Irs gov 1040ez   A taxpayer identification number must be furnished on the decedent's returns. Irs gov 1040ez This is usually the decedent's social security number (SSN). Irs gov 1040ez However, a nonresident alien who is not eligible to get an SSN should have an individual taxpayer identification number (ITIN). Irs gov 1040ez If the decedent was a nonresident alien, had neither an SSN nor an ITIN, and was not required to file a U. Irs gov 1040ez S. Irs gov 1040ez income tax return for any tax year, do not apply for an ITIN. Irs gov 1040ez You may claim a refund by filing Form 1040NR without an SSN or ITIN. Irs gov 1040ez Necessary Documents Please attach the following documents to the return or amended return. Irs gov 1040ez Proof of death. Irs gov 1040ez   Attach a copy of the death certificate. Irs gov 1040ez If the Department of Defense issued DD Form 1300, Report of Casualty, you can attach that form instead of the death certificate. Irs gov 1040ez Form 1310. Irs gov 1040ez   You must send Form 1310 with all returns and claims for refund, unless either of the following applies. Irs gov 1040ez You are a surviving spouse filing an original or amended joint return with the decedent. Irs gov 1040ez You are a personal representative filing an original Form 1040 or Form 1040NR for the decedent and a court certificate showing your appointment is attached to the return. Irs gov 1040ez A personal representative is an executor or administrator of a decedent's estate, as certified or appointed by the court. Irs gov 1040ez A copy of the decedent's will cannot be accepted as evidence that you are the personal representative. Irs gov 1040ez      If you have proof of death but do not have enough tax information to file a timely claim for a refund, file Form 1040X with Form 1310. Irs gov 1040ez Include a statement saying an amended return will be filed as soon as the necessary tax information is available. Irs gov 1040ez Where To File The IRS has set up a special office for processing returns and claims for tax forgiveness. Irs gov 1040ez Use one of the addresses shown below. Irs gov 1040ez Where you file the returns or claims depends on whether you use the U. Irs gov 1040ez S. Irs gov 1040ez Postal Service or a private delivery service. Irs gov 1040ez Please do not send these returns or claims to any of the addresses shown in the tax form instructions. Irs gov 1040ez U. Irs gov 1040ez S. Irs gov 1040ez Postal Service. Irs gov 1040ez   If you use the U. Irs gov 1040ez S. Irs gov 1040ez Postal Service, file these returns and claims at the following address. Irs gov 1040ez Internal Revenue Service P. Irs gov 1040ez O. Irs gov 1040ez Box 4053 Woburn, MA 01888 Private delivery service. Irs gov 1040ez   Private delivery services cannot deliver items to P. Irs gov 1040ez O. Irs gov 1040ez boxes. Irs gov 1040ez If you use a private delivery service, file these returns and claims at the following address. Irs gov 1040ez Internal Revenue Service Stop 661 310 Lowell St. Irs gov 1040ez Andover, MA 01810 Designated private delivery services. Irs gov 1040ez   You can use the following private delivery services to file these returns and claims. Irs gov 1040ez Airborne Express (Airborne): Overnight Air Express Service, Next Afternoon Service, and Second Day Service. Irs gov 1040ez DHL Worldwide Express (DHL): DHL “Same Day” Service, and DHL USA Overnight. Irs gov 1040ez Federal Express (FedEx): FedEx Priority Overnight, FedEx Standard Overnight, and FedEx 2Day. Irs gov 1040ez United Parcel Service (UPS): UPS Next Day Air, UPS Next Day Air Saver, UPS 2nd Day Air, UPS 2nd Day Air A. Irs gov 1040ez M. Irs gov 1040ez , UPS Worldwide Express Plus, and UPS Worldwide Express. Irs gov 1040ez The private delivery service can tell you how to get written proof of the mailing date. Irs gov 1040ez Payments to Survivors The following section discusses the tax treatment of certain amounts received by survivors. Irs gov 1040ez September 11th Victim Compensation Fund of 2001 Payments from the September 11th Victim Compensation Fund of 2001 are not included in income. Irs gov 1040ez Qualified Disaster Relief Payments Qualified disaster relief payments are not included in income. Irs gov 1040ez These payments are not subject to income tax, self-employment tax, or employment taxes (social security, Medicare, and federal unemployment taxes). Irs gov 1040ez No withholding applies to these payments. Irs gov 1040ez Qualified disaster relief payments include payments you receive (regardless of the source) after September 10, 2001, for the following expenses. Irs gov 1040ez Reasonable and necessary personal, family, living, or funeral expenses incurred as a result of a terrorist attack. Irs gov 1040ez Reasonable and necessary expenses incurred for the repair or rehabilitation of a personal residence due to a terrorist attack. Irs gov 1040ez (A personal residence can be a rented residence or one you own. Irs gov 1040ez ) Reasonable and necessary expenses incurred for the repair or replacement of the contents of a personal residence due to a terrorist attack. Irs gov 1040ez Qualified disaster relief payments also include the following. Irs gov 1040ez Payments made by common carriers (for example, American Airlines and United Airlines regarding the September 11 attacks) because of death or physical injury incurred as a result of a terrorist attack. Irs gov 1040ez Amounts paid by a federal, state, or local government in connection with a terrorist attack to those affected by the attack. Irs gov 1040ez Qualified disaster relief payments do not include: Insurance or other reimbursements for expenses, or Income replacement payments, such as payments of lost wages, lost business income, or unemployment compensation. Irs gov 1040ez Disability Payments For tax years ending after September 10, 2001, disability payments for injuries incurred as a direct result of a terrorist attack directed against the United States (or its allies), whether outside or within the United States, are not included in income. Irs gov 1040ez Death Benefits Payments received by an individual or the estate of a decedent from the employer of an employee who died as a result of the Oklahoma City or September 11 terrorist attacks, or as a result of the anthrax attacks, are not included in income. Irs gov 1040ez Only the amount that exceeds the benefits that would have been payable if the death had occurred for a reason other than a terrorist or anthrax attack is excludable. Irs gov 1040ez However, the exclusion does apply to incidental death benefits paid under a qualified retirement plan even if these amounts would have been payable if the death had occurred for a reason other than a terrorist or anthrax attack. Irs gov 1040ez If you included death benefits in income on a previously filed return and they are now excludable under the above rule, file Form 1040X to amend that return. Irs gov 1040ez For information on the period for filing Form 1040X, see Period for filing claim for credit or refund earlier under Refund of Taxes Paid. Irs gov 1040ez If that period has expired, you are granted an extension. Irs gov 1040ez You have until January 22, 2003, to file Form 1040X to exclude the death benefits. Irs gov 1040ez On top of page 1 of Form 1040X, write “Extension of Limitations Under PL 107–134, sec. Irs gov 1040ez 102(b)(2). Irs gov 1040ez ” Canceled Debt Canceled debt is not included in your income (or the income of the estate) if: You (or the estate) were liable, or became liable, for the debt of a decedent, and The debt was canceled after September 10, 2001, and before January 1, 2002, because the decedent died as a result of the September 11 attacks or anthrax attacks. Irs gov 1040ez The lender is not required to report the canceled debt on Form 1099–C, Cancellation of Debt. Irs gov 1040ez Payments to Survivors of Public Safety Officers If you are a survivor of a public safety officer who died in the line of duty, certain amounts you receive are not included in income. Irs gov 1040ez Bureau of Justice Assistance payments. Irs gov 1040ez   If you are a surviving dependent of a public safety officer (law enforcement officer or firefighter) who died in the line of duty, do not include in your income the death benefit paid to you by the Bureau of Justice Assistance. Irs gov 1040ez Government plan annuity. Irs gov 1040ez   If you receive a survivor annuity as the child or spouse (or former spouse) of a public safety officer who was killed in the line of duty, you generally do not have to include it in income. Irs gov 1040ez This exclusion applies to the amount of the annuity based on the officer's service as a public safety officer. Irs gov 1040ez For this purpose, the term public safety officer includes police and law enforcement officers, firefighters, and rescue squad and ambulance crews. Irs gov 1040ez More information. Irs gov 1040ez   For more information, see Publication 559. Irs gov 1040ez Postponed Tax Deadlines The IRS may postpone for up to 1 year certain tax deadlines of taxpayers who are affected by a terrorist attack. Irs gov 1040ez The tax deadlines the IRS may postpone include those for filing income and employment tax returns, paying income and employment taxes, and making contributions to a traditional IRA or Roth IRA. Irs gov 1040ez If any tax deadline is postponed, the IRS will publicize the postponement in the affected area and publish a news release, revenue ruling, revenue procedure, notice, announcement, or other guidance in the Internal Revenue Bulletin (IRB). Irs gov 1040ez Affected taxpayers. Irs gov 1040ez   If the IRS postpones a tax deadline, the following taxpayers are eligible for the postponement. Irs gov 1040ez Any individual whose main home is located in a covered area (defined later). Irs gov 1040ez Any business entity or sole proprietor whose principal place of business is located in a covered area. Irs gov 1040ez Any individual, business entity, or sole proprietor whose records needed to meet a postponed deadline are maintained in a covered area. Irs gov 1040ez The main home or principal place of business does not have to be located in the covered area. Irs gov 1040ez Any estate or trust whose tax records necessary to meet a postponed tax deadline are maintained in a covered area. Irs gov 1040ez Any individual who is a relief worker affiliated with a recognized government or philanthropic organization and who is assisting in a covered area. Irs gov 1040ez The spouse on a joint return with a taxpayer who is eligible for postponements. Irs gov 1040ez Any other person determined by the IRS to be affected by a terrorist attack. Irs gov 1040ez Covered area. Irs gov 1040ez   This is an area in which a terrorist attack took place and in which the IRS has decided to postpone tax deadlines for up to 1 year. Irs gov 1040ez Abatement of interest. Irs gov 1040ez   The IRS may abate (forgive) the interest on any underpaid income tax for the length of any postponement. Irs gov 1040ez Disaster Area Losses If your property was damaged or destroyed as a result of the September 11 attacks, you can choose to deduct your disaster loss on your 2000 return (or amended return) rather than on your 2001 return. Irs gov 1040ez You must make this choice to deduct your loss on your 2000 return by the later of the following dates. Irs gov 1040ez The due date (without extensions) for filing your 2001 income tax return (April 15, 2002, if you are a calendar year taxpayer). Irs gov 1040ez The due date (with extensions) for the 2000 return. Irs gov 1040ez For more information about disaster area losses, see Publication 547. Irs gov 1040ez Estate Tax Reduction The federal estate tax is reduced for taxable estates of individuals who died as a result of the Oklahoma City attack, the September 11 attacks, and the anthrax attacks. Irs gov 1040ez The estate tax is computed using a new rate schedule on page 25 of the November 2001 revision of the instructions for Form 706. Irs gov 1040ez The estate tax is reduced by credits against the estate tax, including the unified credit and the state death tax credit. Irs gov 1040ez These credits may reduce or eliminate the estate tax due. Irs gov 1040ez A special rule extends until January 22, 2003, the period of time allowed to file a claim for a refund of estate taxes that have been paid. Irs gov 1040ez Recovery from the September 11th Victim Compensation Fund. Irs gov 1040ez   The value of claims for a decedent's pain and suffering is normally included in the gross estate. Irs gov 1040ez However, if the estate chooses to seek recovery from this fund, the IRS has determined that, in view of the unique circumstances of this situation and the high likelihood that such claims will be valued at a nominal or zero amount, the claims will be valued at zero for estate tax purposes. Irs gov 1040ez Thus, there are no federal estate tax consequences if an estate or beneficiary receives a recovery from this fund. Irs gov 1040ez Which estates must file a return. Irs gov 1040ez   For decedents dying in 2001, Form 706 must be filed by the executor for the estate of every U. Irs gov 1040ez S. Irs gov 1040ez citizen or resident whose gross estate, plus adjusted taxable gifts and specific exemption, is more than $675,000. Irs gov 1040ez Form 706 must be filed within 9 months after the date of decedent's death unless you receive an extension of time to file. Irs gov 1040ez Use Form 4768, Application for Extension of Time To File a Return and/or Pay U. Irs gov 1040ez S. Irs gov 1040ez Estate (and Generation-Skipping Transfer) Taxes, to apply for an extension. Irs gov 1040ez Where to file. Irs gov 1040ez   Returns on which the new rate schedule is used should be sent to the following address, which was not available when Form 706 went to print. Irs gov 1040ez Internal Revenue Service E & G Department/Stop 824T 201 W. Irs gov 1040ez Rivercenter Blvd. Irs gov 1040ez Covington, KY 41011 More information. Irs gov 1040ez   For more information on the federal estate tax, see the instructions for Form 706. Irs gov 1040ez Structured Settlement Factoring Transactions A person who acquires payment rights in a structured settlement arrangement after February 21, 2002, may be subject to a 40% excise tax unless the transfer of the payment rights was approved in advance in a qualified order. Irs gov 1040ez The excise tax is figured on the excess of the undiscounted amount of the payments being acquired over the total amount actually paid to acquire them. Irs gov 1040ez However, this tax will not apply to transactions entered into from February 22, 2002, to July 1, 2002, if certain requirements are met. Irs gov 1040ez For information about these requirements, see Internal Revenue Code section 5891. Irs gov 1040ez Worksheet B Illustrated. Irs gov 1040ez Figuring the Tax To Be Forgiven (For Decedents Who Filed a Joint Return)       (A) First Eligible Year (1994 or 2000) (B) Second Eligible Year (1995 or 2001) (C) Third Eligible Year (1996 or 2002) 1 Enter the years eligible for forgiveness. Irs gov 1040ez 1 2000 2001   2 Enter the decedent's taxable income. Irs gov 1040ez Figure taxable income as if a separate return had been filed. Irs gov 1040ez See the instructions. Irs gov 1040ez 2 $17,259 $14,295   3 Enter the decedent's total tax. Irs gov 1040ez See the instructions. Irs gov 1040ez 3 6,123 5,250   4 Enter the total, if any, of the decedent's taxes not eligible for forgiveness. Irs gov 1040ez See the instructions. Irs gov 1040ez 4 3,532 3,109   5 Subtract line 4 from line 3. Irs gov 1040ez 5 2,591 2,141   6 Enter the surviving spouse's taxable income. Irs gov 1040ez Figure taxable income as if a separate return had been filed. Irs gov 1040ez See the instructions for line 2. Irs gov 1040ez 6 29,025 29,850   7 Enter the surviving spouse's total tax. Irs gov 1040ez See the instructions. Irs gov 1040ez 7 5,277 5,391   8 Enter the total, if any, of the surviving spouse's taxes listed in the instructions for line 4. Irs gov 1040ez 8 0 0   9 Subtract line 8 from line 7. Irs gov 1040ez 9 5,277 5,391   10 Add lines 5 and 9. Irs gov 1040ez 10 7,868 7,532   11 Enter the total tax from the joint return. Irs gov 1040ez See Table 1 on page 5 for the line number for years before 2002. Irs gov 1040ez 11 10,789 9,728   12 Add lines 4 and 8. Irs gov 1040ez 12 3,532 3,109   13 Subtract line 12 from line 11. Irs gov 1040ez 13 7,257 6,619   14 Divide line 5 by line 10. Irs gov 1040ez Enter the result as a decimal. Irs gov 1040ez 14 . Irs gov 1040ez 329 . Irs gov 1040ez 284   15 Tax to be forgiven. Irs gov 1040ez Multiply line 13 by line 14 and enter the result. Irs gov 1040ez 15 $2,388 $1,880   Note. Irs gov 1040ez If the total of columns (A), (B), and (C) of line 15 (including any amounts shown on line 5 of Worksheet A) is less than $10,000, also complete Worksheet C. Irs gov 1040ez Attach the computation of the tax to be forgiven or a copy of this worksheet to the decedent's final income tax return or amended tax return (Form 1040X) for each year listed on line 1. Irs gov 1040ez If filing Form 1040X for an eligible year, enter the amount from line 15 above on Form 1040X in column B of line 10 as a decrease in tax. Irs gov 1040ez The IRS will determine the amount to be refunded. Irs gov 1040ez Worksheet B Illustrated. Irs gov 1040ez Figuring the Tax To Be Forgiven (For Decedents Who Filed a Joint Return)       (A) First Eligible Year (1994 or 2000) (B) Second Eligible Year (1995 or 2001) (C) Third Eligible Year (1996 or 2002) 1 Enter the years eligible for forgiveness. Irs gov 1040ez 1 2000 2001   2 Enter the decedent's taxable income. Irs gov 1040ez Figure taxable income as if a separate return had been filed. Irs gov 1040ez See the instructions. Irs gov 1040ez 2 $17,259 $14,295   3 Enter the decedent's total tax. Irs gov 1040ez See the instructions. Irs gov 1040ez 3 6,123 5,250   4 Enter the total, if any, of the decedent's taxes not eligible for forgiveness. Irs gov 1040ez See the instructions. Irs gov 1040ez 4 3,532 3,109   5 Subtract line 4 from line 3. Irs gov 1040ez 5 2,591 2,141   6 Enter the surviving spouse's taxable income. Irs gov 1040ez Figure taxable income as if a separate return had been filed. Irs gov 1040ez See the instructions for line 2. Irs gov 1040ez 6 29,025 29,850   7 Enter the surviving spouse's total tax. Irs gov 1040ez See the instructions. Irs gov 1040ez 7 5,277 5,391   8 Enter the total, if any, of the surviving spouse's taxes listed in the instructions for line 4. Irs gov 1040ez 8 0 0   9 Subtract line 8 from line 7. Irs gov 1040ez 9 5,277 5,391   10 Add lines 5 and 9. Irs gov 1040ez 10 7,868 7,532   11 Enter the total tax from the joint return. Irs gov 1040ez See Table 1 on page 5 for the line number for years before 2002. Irs gov 1040ez 11 10,789 9,728   12 Add lines 4 and 8. Irs gov 1040ez 12 3,532 3,109   13 Subtract line 12 from line 11. Irs gov 1040ez 13 7,257 6,619   14 Divide line 5 by line 10. Irs gov 1040ez Enter the result as a decimal. Irs gov 1040ez 14 . Irs gov 1040ez 329 . Irs gov 1040ez 284   15 Tax to be forgiven. Irs gov 1040ez Multiply line 13 by line 14 and enter the result. Irs gov 1040ez 15 $2,388 $1,880   Note. Irs gov 1040ez If the total of columns (A), (B), and (C) of line 15 (including any amounts shown on line 5 of Worksheet A) is less than $10,000, also complete Worksheet C. Irs gov 1040ez Attach the computation of the tax to be forgiven or a copy of this worksheet to the decedent's final income tax return or amended tax return (Form 1040X) for each year listed on line 1. Irs gov 1040ez If filing Form 1040X for an eligible year, enter the amount from line 15 above on Form 1040X in column B of line 10 as a decrease in tax. Irs gov 1040ez The IRS will determine the amount to be refunded. Irs gov 1040ez Illustrated Worksheets B and C A wife lost her husband in the September 11 attack on the World Trade Center. Irs gov 1040ez They filed a joint return for 2000 and the wife chose to file a joint return as a surviving spouse for 2001. Irs gov 1040ez The returns for 2000 and 2001 showed the following income, deductions, and tax liabilities. Irs gov 1040ez After the husband died, his estate received income of $4,000. Irs gov 1040ez Of that amount, $1,000 is net profit from Schedule C received before the end of 2001. Irs gov 1040ez This net profit is exempt from income tax as explained earlier under Income received after date of death. Irs gov 1040ez The wife files Form 1041 because the gross income of the estate for the tax year ($3,000) is $600 or more. Irs gov 1040ez To determine how much of the husband's tax liability for 2000 and 2001 is to be forgiven, the wife completes Worksheet B. Irs gov 1040ez She also completes Worksheet C because the forgiven tax liabilities for 2000 and 2001 (line 15 of Worksheet B) total less than $10,000. Irs gov 1040ez To claim tax relief for 2000, the wife files Form 1040X and attaches a copy of Worksheet B. Irs gov 1040ez To claim tax relief for 2001, she files Form 1040 and attaches copies of Worksheets B and C. Irs gov 1040ez   2000 2001 Wages (wife) $35,000 $36,000 Net profit from Schedule C, Profit or Loss From Business (husband) 25,000 22,000 Interest income (joint account) 1,000 1,100 Deduction for ½ of self-employment tax (husband) (1,766) (1,555) Standard deduction (7,350) (7,600) Personal exemptions (2) (5,600) (5,800) Taxable income $46,284 $44,145 Joint income tax liability $7,257 $6,619 Plus: Self-employment tax (husband) 3,532 3,109 Total tax liability $10,789 $9,728   2000 2001 Wages (wife) $35,000 $36,000 Net profit from Schedule C, Profit or Loss From Business (husband) 25,000 22,000 Interest income (joint account) 1,000 1,100 Deduction for ½ of self-employment tax (husband) (1,766) (1,555) Standard deduction (7,350) (7,600) Personal exemptions (2) (5,600) (5,800) Taxable income $46,284 $44,145 Joint income tax liability $7,257 $6,619 Plus: Self-employment tax (husband) 3,532 3,109 Total tax liability $10,789 $9,728 Worksheet C Illustrated. Irs gov 1040ez Amount Treated as Tax Payment for Decedent's Last Tax Year Caution: The decedent is entitled to minimum relief of $10,000. Irs gov 1040ez Complete this worksheet only if the total tax forgiven for all eligible years is less than $10,000. Irs gov 1040ez 1 Minimum relief amount. Irs gov 1040ez Note: Before completing lines 2–9, see Instructions for lines 2–9 of Worksheet C. Irs gov 1040ez 1 $10,000 2 Enter the taxable income from line 22 (Form 1041) 2 2,400     3 Enter the distribution deduction from line 18 (Form 1041) . Irs gov 1040ez 3 0     4 Add lines 2 and 3. Irs gov 1040ez 4 2,400     5 Enter exempt income received after death minus expenses allocable to exempt income. Irs gov 1040ez (See Income received after date of death on page 5. Irs gov 1040ez ) 5 1,000     6 Add lines 4 and 5. Irs gov 1040ez 6 3,400     7 Figure the tax on line 6 using Schedule G (Form 1041). Irs gov 1040ez 7 710     8 Figure the tax on line 4 using Schedule G (Form 1041). Irs gov 1040ez 8 435     9 Tax on exempt income. Irs gov 1040ez Subtract line 8 from line 7. Irs gov 1040ez 9 275     10 Enter the total of columns (A)–(C) from line 5 of Worksheet A or line 15 of Worksheet B. Irs gov 1040ez If the decedent was not required to file tax returns for the eligible tax years, enter -0-. Irs gov 1040ez 10 4,268     11 Add lines 9 and 10. Irs gov 1040ez 11 $4,543 12 Additional payment allowed. Irs gov 1040ez If line 11 is $10,000 or more, enter -0- and stop here. Irs gov 1040ez No additional amount is allowed as a tax payment. Irs gov 1040ez Otherwise, subtract line 11 from line 1 and enter the result. Irs gov 1040ez 12 $5,457 Note. Irs gov 1040ez The amount on line 12 is allowed as a tax payment for the decedent's last tax year (usually 1995 or 2001). Irs gov 1040ez Attach the computation of the additional payment allowed or a copy of this worksheet to the original or amended income tax return for the decedent's last tax year. Irs gov 1040ez If filing Form 1040, include the amount from line 12 above on the “Other payments” line of the form. Irs gov 1040ez Write "Sec. Irs gov 1040ez 692(d)(2) Payment" and the amount to the right of the entry space. Irs gov 1040ez Also indicate whether a Form 1041 is being filed for the decedent's estate. Irs gov 1040ez If filing Form 1040X, include the amount from line 12 above on Form 1040X on line 15, columns (B) and (C). Irs gov 1040ez Write “Sec. Irs gov 1040ez 692(d)(2) Payment” on the dotted line to the left of the entry space. Irs gov 1040ez Worksheet C Illustrated. Irs gov 1040ez Amount Treated as Tax Payment for Decedent's Last Tax Year Caution: The decedent is entitled to minimum relief of $10,000. Irs gov 1040ez Complete this worksheet only if the total tax forgiven for all eligible years is less than $10,000. Irs gov 1040ez 1 Minimum relief amount. Irs gov 1040ez Note: Before completing lines 2–9, see Instructions for lines 2–9 of Worksheet C. Irs gov 1040ez 1 $10,000 2 Enter the taxable income from line 22 (Form 1041) 2 2,400     3 Enter the distribution deduction from line 18 (Form 1041) . Irs gov 1040ez 3 0     4 Add lines 2 and 3. Irs gov 1040ez 4 2,400     5 Enter exempt income received after death minus expenses allocable to exempt income. Irs gov 1040ez (See Income received after date of death on page 5. Irs gov 1040ez ) 5 1,000     6 Add lines 4 and 5. Irs gov 1040ez 6 3,400     7 Figure the tax on line 6 using Schedule G (Form 1041). Irs gov 1040ez 7 710     8 Figure the tax on line 4 using Schedule G (Form 1041). Irs gov 1040ez 8 435     9 Tax on exempt income. Irs gov 1040ez Subtract line 8 from line 7. Irs gov 1040ez 9 275     10 Enter the total of columns (A)–(C) from line 5 of Worksheet A or line 15 of Worksheet B. Irs gov 1040ez If the decedent was not required to file tax returns for the eligible tax years, enter -0-. Irs gov 1040ez 10 4,268     11 Add lines 9 and 10. Irs gov 1040ez 11 $4,543 12 Additional payment allowed. Irs gov 1040ez If line 11 is $10,000 or more, enter -0- and stop here. Irs gov 1040ez No additional amount is allowed as a tax payment. Irs gov 1040ez Otherwise, subtract line 11 from line 1 and enter the result. Irs gov 1040ez 12 $5,457 Note. Irs gov 1040ez The amount on line 12 is allowed as a tax payment for the decedent's last tax year (usually 1995 or 2001). Irs gov 1040ez Attach the computation of the additional payment allowed or a copy of this worksheet to the original or amended income tax return for the decedent's last tax year. Irs gov 1040ez If filing Form 1040, include the amount from line 12 above on the “Other payments” line of the form. Irs gov 1040ez Write "Sec. Irs gov 1040ez 692(d)(2) Payment" and the amount to the right of the entry space. Irs gov 1040ez Also indicate whether a Form 1041 is being filed for the decedent's estate. Irs gov 1040ez If filing Form 1040X, include the amount from line 12 above on Form 1040X on line 15, columns (B) and (C). Irs gov 1040ez Write “Sec. Irs gov 1040ez 692(d)(2) Payment” on the dotted line to the left of the entry space. Irs gov 1040ez Additional Worksheets The following additional worksheets are provided for your convenience. Irs gov 1040ez Worksheet A. Irs gov 1040ez Figuring the Tax To Be Forgiven (For Decedents Who Filed a Return as Single, Married Filing Separately, Head of Household, or Qualifying Widow(er))         (A) First Eligible Year (1994 or 2000) (B) Second Eligible Year (1995 or 2001) (C) Third Eligible Year (1996 or 2002) 1 Enter the years eligible for tax forgiveness. Irs gov 1040ez 1       2 Enter the total tax from the decedent's income tax return. Irs gov 1040ez See Table 1 on page 5 for the line number for years before 2002. Irs gov 1040ez 2       3 Enter the following taxes, if any, shown on the decedent's income tax return. Irs gov 1040ez (These taxes are not eligible for forgiveness. Irs gov 1040ez )           a Self-employment tax. Irs gov 1040ez 3a         b Social security and Medicare tax on tip income not reported to employer. Irs gov 1040ez 3b         c Tax on excess contributions to IRAs, Coverdell education savings accounts (formerly Ed IRAs), or Archer MSAs (formerly medical savings accounts). Irs gov 1040ez 3c         d Tax on excess accumulation in qualified retirement plans. Irs gov 1040ez 3d         e Household employment taxes. Irs gov 1040ez 3e         f Uncollected social security and Medicare or RRTA tax on tips or group-term life insurance. Irs gov 1040ez 3f         g Tax on golden parachute payments. Irs gov 1040ez 3g       4 Add lines 3a through 3g. Irs gov 1040ez 4       5 Tax to be forgiven. Irs gov 1040ez Subtract line 4 from line 2. Irs gov 1040ez 5       Note. Irs gov 1040ez If the total of columns (A), (B), and (C) of line 5 (including any amounts shown on line 15 of Worksheet B) is less than $10,000, also complete Worksheet C. Irs gov 1040ez Attach the computation of the tax to be forgiven or a copy of this worksheet to the decedent's final income tax return or amended tax return (Form 1040X) for each year listed on line 1. Irs gov 1040ez If filing Form 1040X for an eligible year, enter the amount from line 5 above on Form 1040X in column B of line 10 as a decrease in tax. Irs gov 1040ez The IRS will determine the amount to be refunded. Irs gov 1040ez Worksheet A. Irs gov 1040ez Figuring the Tax To Be Forgiven (For Decedents Who Filed a Return as Single, Married Filing Separately, Head of Household, or Qualifying Widow(er))         (A) First Eligible Year (1994 or 2000) (B) Second Eligible Year (1995 or 2001) (C) Third Eligible Year (1996 or 2002) 1 Enter the years eligible for tax forgiveness. Irs gov 1040ez 1       2 Enter the total tax from the decedent's income tax return. Irs gov 1040ez See Table 1 on page 5 for the line number for years before 2002. Irs gov 1040ez 2       3 Enter the following taxes, if any, shown on the decedent's income tax return. Irs gov 1040ez (These taxes are not eligible for forgiveness. Irs gov 1040ez )           a Self-employment tax. Irs gov 1040ez 3a         b Social security and Medicare tax on tip income not reported to employer. Irs gov 1040ez 3b         c Tax on excess contributions to IRAs, Coverdell education savings accounts (formerly Ed IRAs), or Archer MSAs (formerly medical savings accounts). Irs gov 1040ez 3c         d Tax on excess accumulation in qualified retirement plans. Irs gov 1040ez 3d         e Household employment taxes. Irs gov 1040ez 3e         f Uncollected social security and Medicare or RRTA tax on tips or group-term life insurance. Irs gov 1040ez 3f         g Tax on golden parachute payments. Irs gov 1040ez 3g       4 Add lines 3a through 3g. Irs gov 1040ez 4       5 Tax to be forgiven. Irs gov 1040ez Subtract line 4 from line 2. Irs gov 1040ez 5       Note. Irs gov 1040ez If the total of columns (A), (B), and (C) of line 5 (including any amounts shown on line 15 of Worksheet B) is less than $10,000, also complete Worksheet C. Irs gov 1040ez Attach the computation of the tax to be forgiven or a copy of this worksheet to the decedent's final income tax return or amended tax return (Form 1040X) for each year listed on line 1. Irs gov 1040ez If filing Form 1040X for an eligible year, enter the amount from line 5 above on Form 1040X in column B of line 10 as a decrease in tax. Irs gov 1040ez The IRS will determine the amount to be refunded. Irs gov 1040ez Worksheet B. Irs gov 1040ez Figuring the Tax To Be Forgiven (For Decedents Who Filed a Joint Return)       (A) First Eligible Year (1994 or 2000) (B) Second Eligible Year (1995 or 2001) (C) Third Eligible Year (1996 or 2002) 1 Enter the years eligible for forgiveness. Irs gov 1040ez 1       2 Enter the decedent's taxable income. Irs gov 1040ez Figure taxable income as if a separate return had been filed. Irs gov 1040ez See the instructions. Irs gov 1040ez 2       3 Enter the decedent's total tax. Irs gov 1040ez See the instructions. Irs gov 1040ez 3       4 Enter the total, if any, of the decedent's taxes not eligible for forgiveness. Irs gov 1040ez See the instructions. Irs gov 1040ez 4       5 Subtract line 4 from line 3. Irs gov 1040ez 5       6 Enter the surviving spouse's taxable income. Irs gov 1040ez Figure taxable income as if a separate return had been filed. Irs gov 1040ez See the instructions. Irs gov 1040ez 6       7 Enter the surviving spouse's total tax. Irs gov 1040ez See the instructions. Irs gov 1040ez 7       8 Enter the total, if any, of the surviving spouse's taxes listed in the instructions for line 4. Irs gov 1040ez 8       9 Subtract line 8 from line 7. Irs gov 1040ez 9       10 Add lines 5 and 9. Irs gov 1040ez 10       11 Enter the total tax from the joint return. Irs gov 1040ez See Table 1 on page 5 for the line number for years before 2002. Irs gov 1040ez 11       12 Add lines 4 and 8. Irs gov 1040ez 12       13 Subtract line 12 from line 11. Irs gov 1040ez 13       14 Divide line 5 by line 10. Irs gov 1040ez Enter the result as a decimal. Irs gov 1040ez 14       15 Tax to be forgiven. Irs gov 1040ez Multiply line 13 by line 14 and enter the result. Irs gov 1040ez 15       Note. Irs gov 1040ez If the total of columns (A), (B), and (C) of line 15 (including any amounts shown on line 5 of Worksheet A) is less than $10,000, also complete Worksheet C. Irs gov 1040ez Attach the computation of the tax to be forgiven or a copy of this worksheet to the decedent's final income tax return or amended tax return (Form 1040X) for each year listed on line 1. Irs gov 1040ez If filing Form 1040X for an eligible year, enter the amount from line 15 above on Form 1040X in column B of line 10 as a decrease in tax. Irs gov 1040ez The IRS will determine the amount to be refunded. Irs gov 1040ez Worksheet B. Irs gov 1040ez Figuring the Tax To Be Forgiven (For Decedents Who Filed a Joint Return)       (A) First Eligible Year (1994 or 2000) (B) Second Eligible Year (1995 or 2001) (C) Third Eligible Year (1996 or 2002) 1 Enter the years eligible for forgiveness. Irs gov 1040ez 1       2 Enter the decedent's taxable income. Irs gov 1040ez Figure taxable income as if a separate return had been filed. Irs gov 1040ez See the instructions. Irs gov 1040ez 2       3 Enter the decedent's total tax. Irs gov 1040ez See the instructions. Irs gov 1040ez 3       4 Enter the total, if any, of the decedent's taxes not eligible for forgiveness. Irs gov 1040ez See the instructions. Irs gov 1040ez 4       5 Subtract line 4 from line 3. Irs gov 1040ez 5       6 Enter the surviving spouse's taxable income. Irs gov 1040ez Figure taxable income as if a separate return had been filed. Irs gov 1040ez See the instructions. Irs gov 1040ez 6       7 Enter the surviving spouse's total tax. Irs gov 1040ez See the instructions. Irs gov 1040ez 7       8 Enter the total, if any, of the surviving spouse's taxes listed in the instructions for line 4. Irs gov 1040ez 8       9 Subtract line 8 from line 7. Irs gov 1040ez 9       10 Add lines 5 and 9. Irs gov 1040ez 10       11 Enter the total tax from the joint return. Irs gov 1040ez See Table 1 on page 5 for the line number for years before 2002. Irs gov 1040ez 11       12 Add lines 4 and 8. Irs gov 1040ez 12       13 Subtract line 12 from line 11. Irs gov 1040ez 13       14 Divide line 5 by line 10. Irs gov 1040ez Enter the result as a decimal. Irs gov 1040ez 14       15 Tax to be forgiven. Irs gov 1040ez Multiply line 13 by line 14 and enter the result. Irs gov 1040ez 15       Note. Irs gov 1040ez If the total of columns (A), (B), and (C) of line 15 (including any amounts shown on line 5 of Worksheet A) is less than $10,000, also complete Worksheet C. Irs gov 1040ez Attach the computation of the tax to be forgiven or a copy of this worksheet to the decedent's final income tax return or amended tax return (Form 1040X) for each year listed on line 1. Irs gov 1040ez If filing Form 1040X for an eligible year, enter the amount from line 15 above on Form 1040X in column B of line 10 as a decrease in tax. Irs gov 1040ez The IRS will determine the amount to be refunded. Irs gov 1040ez Worksheet C. Irs gov 1040ez Amount Treated as Tax Payment for Decedent's Last Tax Year Caution: The decedent is entitled to minimum tax forgiveness of $10,000. Irs gov 1040ez Complete this worksheet only if the total tax forgiven for all eligible years is less than $10,000. Irs gov 1040ez 1 Minimum tax forgiveness. Irs gov 1040ez Note. Irs gov 1040ez Before completing lines 2–9, see Instructions for lines 2–9 of Worksheet C. Irs gov 1040ez 1 $10,000 2 Enter the taxable income from line 22 (Form 1041) 2       3 Enter the distribution deduction from line 18 (Form 1041) . Irs gov 1040ez 3       4 Add lines 2 and 3. Irs gov 1040ez 4       5 Enter exempt income received after death minus expenses allocable to exempt income. Irs gov 1040ez (See Income received after date of death on page 5. Irs gov 1040ez ) 5       6 Add lines 4 and 5. Irs gov 1040ez 6       7 Figure the tax on line 6 using Schedule G (Form 1041). Irs gov 1040ez 7       8 Figure the tax on line 4 using Schedule G (Form 1041). Irs gov 1040ez 8       9 Tax on exempt income. Irs gov 1040ez Subtract line 8 from line 7. Irs gov 1040ez 9       10 Enter the total of columns (A)–(C) from line 5 of Worksheet A or line 15 of Worksheet B. Irs gov 1040ez If the decedent was not required to file tax returns for the eligible tax years, enter -0-. Irs gov 1040ez 10       11 Add lines 9 and 10. Irs gov 1040ez 11   12 Additional payment allowed. Irs gov 1040ez If line 11 is $10,000 or more, enter -0- and stop here. Irs gov 1040ez No additional amount is allowed as a tax payment. Irs gov 1040ez Otherwise, subtract line 11 from line 1 and enter the result. Irs gov 1040ez 12   Note. Irs gov 1040ez The amount on line 12 is allowed as a tax payment for the decedent's last tax year (usually 1995 or 2001). Irs gov 1040ez Attach the computation of the additional payment allowed or a copy of this worksheet to the original or amended income tax return for the decedent's last tax year. Irs gov 1040ez If filing Form 1040, include the amount from line 12 above on the “Other payments” line of the form. Irs gov 1040ez Write "Sec. Irs gov 1040ez 692(d)(2) Payment" and the amount to the right of the entry space. Irs gov 1040ez Also indicate whether a Form 1041 is being filed for the decedent's estate. Irs gov 1040ez If filing Form 1040X, include the amount from line 12 above on Form 1040X on line 15, columns (B) and (C). Irs gov 1040ez Write “Sec. Irs gov 1040ez 692(d)(2) Payment” on the dotted line to the left of the entry space. Irs gov 1040ez Worksheet C. Irs gov 1040ez Amount Treated as Tax Payment for Decedent's Last Tax Year Caution: The decedent is entitled to minimum tax forgiveness of $10,000. Irs gov 1040ez Complete this worksheet only if the total tax forgiven for all eligible years is less than $10,000. Irs gov 1040ez 1 Minimum tax forgiveness. Irs gov 1040ez Note. Irs gov 1040ez Before completing lines 2–9, see Instructions for lines 2–9 of Worksheet C. Irs gov 1040ez 1 $10,000 2 Enter the taxable income from line 22 (Form 1041) 2       3 Enter the distribution deduction from line 18 (Form 1041) . Irs gov 1040ez 3       4 Add lines 2 and 3. Irs gov 1040ez 4       5 Enter exempt income received after death minus expenses allocable to exempt income. Irs gov 1040ez (See Income received after date of death on page 5. Irs gov 1040ez ) 5       6 Add lines 4 and 5. Irs gov 1040ez 6       7 Figure the tax on line 6 using Schedule G (Form 1041). Irs gov 1040ez 7       8 Figure the tax on line 4 using Schedule G (Form 1041). Irs gov 1040ez 8       9 Tax on exempt income. Irs gov 1040ez Subtract line 8 from line 7. Irs gov 1040ez 9       10 Enter the total of columns (A)–(C) from line 5 of Worksheet A or line 15 of Worksheet B. Irs gov 1040ez If the decedent was not required to file tax returns for the eligible tax years, enter -0-. Irs gov 1040ez 10       11 Add lines 9 and 10. Irs gov 1040ez 11   12 Additional payment allowed. Irs gov 1040ez If line 11 is $10,000 or more, enter -0- and stop here. Irs gov 1040ez No additional amount is allowed as a tax payment. Irs gov 1040ez Otherwise, subtract line 11 from line 1 and enter the result. Irs gov 1040ez 12   Note. Irs gov 1040ez The amount on line 12 is allowed as a tax payment for the decedent's last tax year (usually 1995 or 2001). Irs gov 1040ez Attach the computation of the additional payment allowed or a copy of this worksheet to the original or amended income tax return for the decedent's last tax year. Irs gov 1040ez If filing Form 1040, include the amount from line 12 above on the “Other payments” line of the form. Irs gov 1040ez Write "Sec. Irs gov 1040ez 692(d)(2) Payment" and the amount to the right of the entry space. Irs gov 1040ez Also indicate whether a Form 1041 is being filed for the decedent's estate. Irs gov 1040ez If filing Form 1040X, include the amount from line 12 above on Form 1040X on line 15, columns (B) and (C). Irs gov 1040ez Write “Sec. Irs gov 1040ez 692(d)(2) Payment” on the dotted line to the left of the entry space. Irs gov 1040ez How To Get Tax Help Special IRS assistance. Irs gov 1040ez   The IRS is providing special help for those affected by the terrorist attacks, as well as survivors and personal representatives of the victims. Irs gov 1040ez 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 the terrorist attacks, or who have other tax issues related to the attacks. Irs gov 1040ez Call 1–866–562–5227 Monday through Friday In English–7 a. Irs gov 1040ez m. Irs gov 1040ez to 10 p. Irs gov 1040ez m. Irs gov 1040ez local time In Spanish–8 a. Irs gov 1040ez m. Irs gov 1040ez to 9:30 p. Irs gov 1040ez m. Irs gov 1040ez local time   The IRS web site at www. Irs gov 1040ez irs. Irs gov 1040ez gov has notices and other tax relief information. Irs gov 1040ez Check it periodically for any new guidance or to see if Congress has enacted new legislation. Irs gov 1040ez   Business taxpayers affected by the attacks can e-mail their questions to corp. Irs gov 1040ez disaster. Irs gov 1040ez relief@irs. Irs gov 1040ez gov. Irs gov 1040ez   For current information on Presidentially declared disaster areas, check the Federal Emergency Management Agency Web site at www. Irs gov 1040ez fema. Irs gov 1040ez gov. Irs gov 1040ez Other help from the IRS. Irs gov 1040ez   You can get help with unresolved tax issues, order free publications and forms, ask tax questions, and get more information from the IRS in several ways. Irs gov 1040ez By selecting the method that is best for you, you will have quick and easy access to tax help. Irs gov 1040ez Contacting your Taxpayer Advocate. Irs gov 1040ez   If you have attempted to deal with an IRS problem unsuccessfully, you should contact your Taxpayer Advocate. Irs gov 1040ez   The Taxpayer Advocate represents your interests and concerns within the IRS by protecting your rights and resolving problems that have not been fixed through normal channels. Irs gov 1040ez While Taxpayer Advocates cannot change the tax law or make a technical tax decision, they can clear up problems that resulted from previous contacts and ensure that your case is given a complete and impartial review. Irs gov 1040ez   To contact your Taxpayer Advocate: Call the Taxpayer Advocate at 1–877–777–4778. Irs gov 1040ez Call the IRS at 1–800–829–1040. Irs gov 1040ez Call, write, or fax the Taxpayer Advocate office in your area. Irs gov 1040ez Call 1–800–829–4059 if you are a TTY/TDD user. Irs gov 1040ez   For more information, see Publication 1546, The Taxpayer Advocate Service of the IRS. Irs gov 1040ez Free tax services. Irs gov 1040ez   To find out what services are available, get Publication 910, Guide to Free Tax Services. Irs gov 1040ez It contains a list of free tax publications and an index of tax topics. Irs gov 1040ez It also describes other free tax information services, including tax education and assistance programs and a list of TeleTax topics. Irs gov 1040ez Personal computer. Irs gov 1040ez With your personal computer and modem, you can access the IRS on the Internet at www. Irs gov 1040ez irs. Irs gov 1040ez gov. Irs gov 1040ez While visiting our web site, you can: Find answers to questions you may have. Irs gov 1040ez Download forms and publications or search for forms and pub
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The Irs Gov 1040ez

Irs gov 1040ez 5. Irs gov 1040ez   Additional Rules for Listed Property Table of Contents Introduction Useful Items - You may want to see: What Is Listed Property?Passenger Automobiles Other Property Used for Transportation Computers and Related Peripheral Equipment Can Employees Claim a Deduction? What Is the Business-Use Requirement?How To Allocate Use Qualified Business Use Recapture of Excess Depreciation Lessee's Inclusion Amount Do the Passenger Automobile Limits Apply?Maximum Depreciation Deduction Deductions After the Recovery Period Deductions For Passenger Automobiles Acquired in a Trade-in What Records Must Be Kept?Adequate Records How Is Listed Property Information Reported? Introduction This chapter discusses the deduction limits and other special rules that apply to certain listed property. Irs gov 1040ez Listed property includes cars and other property used for transportation, property used for entertainment, and certain computers. Irs gov 1040ez Deductions for listed property (other than certain leased property) are subject to the following special rules and limits. Irs gov 1040ez Deduction for employees. Irs gov 1040ez If your use of the property is not for your employer's convenience or is not required as a condition of your employment, you cannot deduct depreciation or rent expenses for your use of the property as an employee. Irs gov 1040ez Business-use requirement. Irs gov 1040ez If the property is not used predominantly (more than 50%) for qualified business use, you cannot claim the section 179 deduction or a special depreciation allowance. Irs gov 1040ez In addition, you must figure any depreciation deduction under the Modified Accelerated Cost Recovery System (MACRS) using the straight line method over the ADS recovery period. Irs gov 1040ez You may also have to recapture (include in income) any excess depreciation claimed in previous years. Irs gov 1040ez A similar inclusion amount applies to certain leased property. Irs gov 1040ez Passenger automobile limits and rules. Irs gov 1040ez Annual limits apply to depreciation deductions (including section 179 deductions and any special depreciation allowance) for certain passenger automobiles. Irs gov 1040ez You can continue to deduct depreciation for the unrecovered basis resulting from these limits after the end of the recovery period. Irs gov 1040ez This chapter defines listed property and explains the special rules and depreciation deduction limits that apply, including the special inclusion amount rule for leased property. Irs gov 1040ez It also discusses the recordkeeping rules for listed property and explains how to report information about the property on your tax return. Irs gov 1040ez Useful Items - You may want to see: Publication 463 Travel, Entertainment, Gift, and Car Expenses 535 Business Expenses 587 Business Use of Your Home (Including Use by Daycare Providers) Form (and Instructions) 2106 Employee Business Expenses 2106-EZ Unreimbursed Employee Business Expenses 4562 Depreciation and Amortization 4797 Sales of Business Property See chapter 6 for information about getting publications and forms. Irs gov 1040ez What Is Listed Property? Listed property is any of the following. Irs gov 1040ez Passenger automobiles (as defined later). Irs gov 1040ez Any other property used for transportation, unless it is an excepted vehicle. Irs gov 1040ez Property generally used for entertainment, recreation, or amusement (including photographic, phonographic, communication, and video-recording equipment). Irs gov 1040ez Computers and related peripheral equipment, unless used only at a regular business establishment and owned or leased by the person operating the establishment. Irs gov 1040ez A regular business establishment includes a portion of a dwelling unit that is used both regularly and exclusively for business as discussed in Publication 587. Irs gov 1040ez Improvements to listed property. Irs gov 1040ez   An improvement made to listed property that must be capitalized is treated as a new item of depreciable property. Irs gov 1040ez The recovery period and method of depreciation that apply to the listed property as a whole also apply to the improvement. Irs gov 1040ez For example, if you must depreciate the listed property using the straight line method, you also must depreciate the improvement using the straight line method. Irs gov 1040ez Passenger Automobiles A passenger automobile is any four-wheeled vehicle made primarily for use on public streets, roads, and highways and rated at 6,000 pounds or less of unloaded gross vehicle weight (6,000 pounds or less of gross vehicle weight for trucks and vans). Irs gov 1040ez It includes any part, component, or other item physically attached to the automobile at the time of purchase or usually included in the purchase price of an automobile. Irs gov 1040ez The following vehicles are not considered passenger automobiles for these purposes. Irs gov 1040ez An ambulance, hearse, or combination ambulance-hearse used directly in a trade or business. Irs gov 1040ez A vehicle used directly in the trade or business of transporting persons or property for pay or hire. Irs gov 1040ez A truck or van that is a qualified nonpersonal use vehicle. Irs gov 1040ez Qualified nonpersonal use vehicles. Irs gov 1040ez   Qualified nonpersonal use vehicles are vehicles that by their nature are not likely to be used more than a minimal amount for personal purposes. Irs gov 1040ez They include the trucks and vans listed as excepted vehicles under Other Property Used for Transportation , next. Irs gov 1040ez They also include trucks and vans that have been specially modified so that they are not likely to be used more than a minimal amount for personal purposes, such as by installation of permanent shelving and painting the vehicle to display advertising or the company's name. Irs gov 1040ez For a detailed discussion of passenger automobiles, including leased passenger automobiles, see  Publication 463. Irs gov 1040ez Other Property Used for Transportation Although vehicles used to transport persons or property for pay or hire and vehicles rated at more than the 6,000-pound threshold are not passenger automobiles, they are still “other property used for transportation” and are subject to the special rules for listed property. Irs gov 1040ez Other property used for transportation includes trucks, buses, boats, airplanes, motorcycles, and any other vehicles used to transport persons or goods. Irs gov 1040ez Excepted vehicles. Irs gov 1040ez   Other property used for transportation does not include the following qualified nonpersonal use vehicles (defined earlier under Passenger Automobiles ). Irs gov 1040ez Clearly marked police and fire vehicles. Irs gov 1040ez Unmarked vehicles used by law enforcement officers if the use is officially authorized. Irs gov 1040ez Ambulances used as such and hearses used as such. Irs gov 1040ez Any vehicle with a loaded gross vehicle weight of over 14,000 pounds that is designed to carry cargo. Irs gov 1040ez Bucket trucks (cherry pickers), cement mixers, dump trucks (including garbage trucks), flatbed trucks, and refrigerated trucks. Irs gov 1040ez Combines, cranes and derricks, and forklifts. Irs gov 1040ez Delivery trucks with seating only for the driver, or only for the driver plus a folding jump seat. Irs gov 1040ez Qualified moving vans. Irs gov 1040ez Qualified specialized utility repair trucks. Irs gov 1040ez School buses used in transporting students and employees of schools. Irs gov 1040ez Other buses with a capacity of at least 20 passengers that are used as passenger buses. Irs gov 1040ez Tractors and other special purpose farm vehicles. Irs gov 1040ez Clearly marked police and fire vehicle. Irs gov 1040ez   A clearly marked police or fire vehicle is a vehicle that meets all the following requirements. Irs gov 1040ez It is owned or leased by a governmental unit or an agency or instrumentality of a governmental unit. Irs gov 1040ez It is required to be used for commuting by a police officer or fire fighter who, when not on a regular shift, is on call at all times. Irs gov 1040ez It is prohibited from being used for personal use (other than commuting) outside the limit of the police officer's arrest powers or the fire fighter's obligation to respond to an emergency. Irs gov 1040ez It is clearly marked with painted insignia or words that make it readily apparent that it is a police or fire vehicle. Irs gov 1040ez A marking on a license plate is not a clear marking for these purposes. Irs gov 1040ez Qualified moving van. Irs gov 1040ez   A qualified moving van is any truck or van used by a professional moving company for moving household or business goods if the following requirements are met. Irs gov 1040ez No personal use of the van is allowed other than for travel to and from a move site or for minor personal use, such as a stop for lunch on the way from one move site to another. Irs gov 1040ez Personal use for travel to and from a move site happens no more than five times a month on average. Irs gov 1040ez Personal use is limited to situations in which it is more convenient to the employer, because of the location of the employee's residence in relation to the location of the move site, for the van not to be returned to the employer's business location. Irs gov 1040ez Qualified specialized utility repair truck. Irs gov 1040ez   A truck is a qualified specialized utility repair truck if it is not a van or pickup truck and all the following apply. Irs gov 1040ez The truck was specifically designed for and is used to carry heavy tools, testing equipment, or parts. Irs gov 1040ez Shelves, racks, or other permanent interior construction has been installed to carry and store the tools, equipment, or parts and would make it unlikely that the truck would be used, other than minimally, for personal purposes. Irs gov 1040ez The employer requires the employee to drive the truck home in order to be able to respond in emergency situations for purposes of restoring or maintaining electricity, gas, telephone, water, sewer, or steam utility services. Irs gov 1040ez Computers and Related Peripheral Equipment A computer is a programmable, electronically activated device capable of accepting information, applying prescribed processes to the information, and supplying the results of those processes with or without human intervention. Irs gov 1040ez It consists of a central processing unit with extensive storage, logic, arithmetic, and control capabilities. Irs gov 1040ez Related peripheral equipment is any auxiliary machine which is designed to be controlled by the central processing unit of a computer. Irs gov 1040ez The following are neither computers nor related peripheral equipment. Irs gov 1040ez Any equipment that is an integral part of other property that is not a computer. Irs gov 1040ez Typewriters, calculators, adding and accounting machines, copiers, duplicating equipment, and similar equipment. Irs gov 1040ez Equipment of a kind used primarily for the user's amusement or entertainment, such as video games. Irs gov 1040ez Can Employees Claim a Deduction? If you are an employee, you can claim a depreciation deduction for the use of your listed property (whether owned or rented) in performing services as an employee only if your use is a business use. Irs gov 1040ez The use of your property in performing services as an employee is a business use only if both the following requirements are met. Irs gov 1040ez The use is for your employer's convenience. Irs gov 1040ez The use is required as a condition of your employment. Irs gov 1040ez If these requirements are not met, you cannot deduct depreciation (including the section 179 deduction) or rent expenses for your use of the property as an employee. Irs gov 1040ez Employer's convenience. Irs gov 1040ez   Whether the use of listed property is for your employer's convenience must be determined from all the facts. Irs gov 1040ez The use is for your employer's convenience if it is for a substantial business reason of the employer. Irs gov 1040ez The use of listed property during your regular working hours to carry on your employer's business generally is for the employer's convenience. Irs gov 1040ez Condition of employment. Irs gov 1040ez   Whether the use of listed property is a condition of your employment depends on all the facts and circumstances. Irs gov 1040ez The use of property must be required for you to perform your duties properly. Irs gov 1040ez Your employer does not have to require explicitly that you use the property. Irs gov 1040ez However, a mere statement by the employer that the use of the property is a condition of your employment is not sufficient. Irs gov 1040ez Example 1. Irs gov 1040ez Virginia Sycamore is employed as a courier with We Deliver, which provides local courier services. Irs gov 1040ez She owns and uses a motorcycle to deliver packages to downtown offices. Irs gov 1040ez We Deliver explicitly requires all delivery persons to own a car or motorcycle for use in their employment. Irs gov 1040ez Virginia's use of the motorcycle is for the convenience of We Deliver and is required as a condition of employment. Irs gov 1040ez Example 2. Irs gov 1040ez Bill Nelson is an inspector for Uplift, a construction company with many sites in the local area. Irs gov 1040ez He must travel to these sites on a regular basis. Irs gov 1040ez Uplift does not furnish an automobile or explicitly require him to use his own automobile. Irs gov 1040ez However, it pays him for any costs he incurs in traveling to the various sites. Irs gov 1040ez The use of his own automobile or a rental automobile is for the convenience of Uplift and is required as a condition of employment. Irs gov 1040ez Example 3. Irs gov 1040ez Assume the same facts as in Example 2 except that Uplift furnishes a car to Bill, who chooses to use his own car and receive payment for using it. Irs gov 1040ez The use of his own car is neither for the convenience of Uplift nor required as a condition of employment. Irs gov 1040ez Example 4. Irs gov 1040ez Marilyn Lee is a pilot for Y Company, a small charter airline. Irs gov 1040ez Y requires pilots to obtain 80 hours of flight time annually in addition to flight time spent with the airline. Irs gov 1040ez Pilots usually can obtain these hours by flying with the Air Force Reserve or by flying part-time with another airline. Irs gov 1040ez Marilyn owns her own airplane. Irs gov 1040ez The use of her airplane to obtain the required flight hours is neither for the convenience of the employer nor required as a condition of employment. Irs gov 1040ez Example 5. Irs gov 1040ez David Rule is employed as an engineer with Zip, an engineering contracting firm. Irs gov 1040ez He occasionally takes work home at night rather than work late in the office. Irs gov 1040ez He owns and uses a home computer which is virtually identical to the office model. Irs gov 1040ez His use of the computer is neither for the convenience of his employer nor required as a condition of employment. Irs gov 1040ez What Is the Business-Use Requirement? You can claim the section 179 deduction and a special depreciation allowance for listed property and depreciate listed property using GDS and a declining balance method if the property meets the business-use requirement. Irs gov 1040ez To meet this requirement, listed property must be used predominantly (more than 50% of its total use) for qualified business use. Irs gov 1040ez If this requirement is not met, the following rules apply. Irs gov 1040ez Property not used predominantly for qualified business use during the year it is placed in service does not qualify for the section 179 deduction. Irs gov 1040ez Property not used predominantly for qualified business use during the year it is placed in service does not qualify for a special depreciation allowance. Irs gov 1040ez Any depreciation deduction under MACRS for property not used predominantly for qualified business use during any year must be figured using the straight line method over the ADS recovery period. Irs gov 1040ez This rule applies each year of the recovery period. Irs gov 1040ez Excess depreciation on property previously used predominantly for qualified business use must be recaptured (included in income) in the first year in which it is no longer used predominantly for qualified business use. Irs gov 1040ez A lessee must add an inclusion amount to income in the first year in which the leased property is not used predominantly for qualified business use. Irs gov 1040ez Being required to use the straight line method for an item of listed property not used predominantly for qualified business use is not the same as electing the straight line method. Irs gov 1040ez It does not mean that you have to use the straight line method for other property in the same class as the item of listed property. Irs gov 1040ez Exception for leased property. Irs gov 1040ez   The business-use requirement generally does not apply to any listed property leased or held for leasing by anyone regularly engaged in the business of leasing listed property. Irs gov 1040ez   You are considered regularly engaged in the business of leasing listed property only if you enter into contracts for the leasing of listed property with some frequency over a continuous period of time. Irs gov 1040ez This determination is made on the basis of the facts and circumstances in each case and takes into account the nature of your business in its entirety. Irs gov 1040ez Occasional or incidental leasing activity is insufficient. Irs gov 1040ez For example, if you lease only one passenger automobile during a tax year, you are not regularly engaged in the business of leasing automobiles. Irs gov 1040ez An employer who allows an employee to use the employer's property for personal purposes and charges the employee for the use is not regularly engaged in the business of leasing the property used by the employee. Irs gov 1040ez How To Allocate Use To determine whether the business-use requirement is met, you must allocate the use of any item of listed property used for more than one purpose during the year among its various uses. Irs gov 1040ez For passenger automobiles and other means of transportation, allocate the property's use on the basis of mileage. Irs gov 1040ez You determine the percentage of qualified business use by dividing the number of miles you drove the vehicle for business purposes during the year by the total number of miles you drove the vehicle for all purposes (including business miles) during the year. Irs gov 1040ez For other listed property, allocate the property's use on the basis of the most appropriate unit of time the property is actually used (rather than merely being available for use). Irs gov 1040ez For example, you can determine the percentage of business use of a computer by dividing the number of hours you used the computer for business purposes during the year by the total number of hours you used the computer for all purposes (including business use) during the year. Irs gov 1040ez Entertainment use. Irs gov 1040ez   Treat the use of listed property for entertainment, recreation, or amusement purposes as a business use only to the extent you can deduct expenses (other than interest and property tax expenses) due to its use as an ordinary and necessary business expense. Irs gov 1040ez Commuting use. Irs gov 1040ez   The use of an automobile for commuting is not business use, regardless of whether work is performed during the trip. Irs gov 1040ez For example, a business telephone call made on a car telephone while commuting to work does not change the character of the trip from commuting to business. Irs gov 1040ez This is also true for a business meeting held in a car while commuting to work. Irs gov 1040ez Similarly, a business call made on an otherwise personal trip does not change the character of a trip from personal to business. Irs gov 1040ez The fact that an automobile is used to display material that advertises the owner's or user's trade or business does not convert an otherwise personal use into business use. Irs gov 1040ez Use of your automobile by another person. Irs gov 1040ez   If someone else uses your automobile, do not treat that use as business use unless one of the following conditions applies. Irs gov 1040ez That use is directly connected with your business. Irs gov 1040ez You properly report the value of the use as income to the other person and withhold tax on the income where required. Irs gov 1040ez You are paid a fair market rent. Irs gov 1040ez Treat any payment to you for the use of the automobile as a rent payment for purposes of item (3). Irs gov 1040ez Employee deductions. Irs gov 1040ez   If you are an employee, do not treat your use of listed property as business use unless it is for your employer's convenience and is required as a condition of your employment. Irs gov 1040ez See Can Employees Claim a Deduction , earlier. Irs gov 1040ez Qualified Business Use Qualified business use of listed property is any use of the property in your trade or business. Irs gov 1040ez However, it does not include the following uses. Irs gov 1040ez The leasing of property to any 5% owner or related person (to the extent the property is used by a 5% owner or person related to the owner or lessee of the property). Irs gov 1040ez The use of property as pay for the services of a 5% owner or related person. Irs gov 1040ez The use of property as pay for services of any person (other than a 5% owner or related person), unless the value of the use is included in that person's gross income and income tax is withheld on that amount where required. Irs gov 1040ez Property does not stop being used predominantly for qualified business use because of a transfer at death. Irs gov 1040ez Exception for leasing or compensatory use of aircraft. Irs gov 1040ez   Treat the leasing of any aircraft by a 5% owner or related person, or the compensatory use of any aircraft, as a qualified business use if at least 25% of the total use of the aircraft during the year is for a qualified business use. Irs gov 1040ez 5% owner. Irs gov 1040ez   For a business entity that is not a corporation, a 5% owner is any person who owns more than 5% of the capital or profits interest in the business. Irs gov 1040ez   For a corporation, a 5% owner is any person who owns, or is considered to own, either of the following. Irs gov 1040ez More than 5% of the outstanding stock of the corporation. Irs gov 1040ez Stock possessing more than 5% of the total combined voting power of all stock in the corporation. Irs gov 1040ez Related persons. Irs gov 1040ez   For a description of related persons, see Related persons in the discussion on property owned or used in 1986 under What Method Can You Use To Depreciate Your Property in chapter 1 . Irs gov 1040ez For this purpose, however, treat as related persons only the relationships listed in items (1) through (10) of that discussion and substitute “50%” for “10%” each place it appears. Irs gov 1040ez Examples. Irs gov 1040ez   The following examples illustrate whether the use of business property is qualified business use. Irs gov 1040ez Example 1. Irs gov 1040ez John Maple is the sole proprietor of a plumbing contracting business. Irs gov 1040ez John employs his brother, Richard, in the business. Irs gov 1040ez As part of Richard's pay, he is allowed to use one of the company automobiles for personal use. Irs gov 1040ez The company includes the value of the personal use of the automobile in Richard's gross income and properly withholds tax on it. Irs gov 1040ez The use of the automobile is pay for the performance of services by a related person, so it is not a qualified business use. Irs gov 1040ez Example 2. Irs gov 1040ez John, in Example 1, allows unrelated employees to use company automobiles for personal purposes. Irs gov 1040ez He does not include the value of the personal use of the company automobiles as part of their compensation and he does not withhold tax on the value of the use of the automobiles. Irs gov 1040ez This use of company automobiles by employees is not a qualified business use. Irs gov 1040ez Example 3. Irs gov 1040ez James Company Inc. Irs gov 1040ez owns several automobiles that its employees use for business purposes. Irs gov 1040ez The employees also are allowed to take the automobiles home at night. Irs gov 1040ez The fair market value of each employee's use of an automobile for any personal purpose, such as commuting to and from work, is reported as income to the employee and James Company withholds tax on it. Irs gov 1040ez This use of company automobiles by employees, even for personal purposes, is a qualified business use for the company. Irs gov 1040ez Investment Use The use of property to produce income in a nonbusiness activity (investment use) is not a qualified business use. Irs gov 1040ez However, you can treat the investment use as business use to figure the depreciation deduction for the property in a given year. Irs gov 1040ez Example 1. Irs gov 1040ez Sarah Bradley uses a home computer 50% of the time to manage her investments. Irs gov 1040ez She also uses the computer 40% of the time in her part-time consumer research business. Irs gov 1040ez Sarah's home computer is listed property because it is not used at a regular business establishment. Irs gov 1040ez She does not use the computer predominantly for qualified business use. Irs gov 1040ez Therefore, she cannot elect a section 179 deduction or claim a special depreciation allowance for the computer. Irs gov 1040ez She must depreciate it using the straight line method over the ADS recovery period. Irs gov 1040ez Her combined business/investment use for determining her depreciation deduction is 90%. Irs gov 1040ez Example 2. Irs gov 1040ez If Sarah uses her computer 30% of the time to manage her investments and 60% of the time in her consumer research business, it is used predominantly for qualified business use. Irs gov 1040ez She can elect a section 179 deduction and, if she does not deduct all the computer's cost, she can claim a special depreciation allowance and depreciate the computer using the 200% declining balance method over the GDS recovery period. Irs gov 1040ez Her combined business/investment use for determining her depreciation deduction is 90%. Irs gov 1040ez Recapture of Excess Depreciation If you used listed property more than 50% in a qualified business use in the year you placed it in service, you must recapture (include in income) excess depreciation in the first year you use it 50% or less. Irs gov 1040ez You also increase the adjusted basis of your property by the same amount. Irs gov 1040ez Excess depreciation is: The depreciation allowable for the property (including any section 179 deduction and special depreciation allowance claimed) for years before the first year you do not use the property predominantly for qualified business use, minus The depreciation that would have been allowable for those years if you had not used the property predominantly for qualified business use in the year you placed it in service. Irs gov 1040ez To determine the amount in (2) above, you must refigure the depreciation using the straight line method and the ADS recovery period. Irs gov 1040ez Example. Irs gov 1040ez In June 2009, Ellen Rye purchased and placed in service a pickup truck that cost $18,000. Irs gov 1040ez She used it only for qualified business use for 2009 through 2012. Irs gov 1040ez Ellen claimed a section 179 deduction of $10,000 based on the purchase of the truck. Irs gov 1040ez She began depreciating it using the 200% DB method over a 5-year GDS recovery period. Irs gov 1040ez The pickup truck's gross vehicle weight was over 6,000 pounds, so it was not subject to the passenger automobile limits discussed later under Do the Passenger Automobile Limits Apply. Irs gov 1040ez During 2013, she used the truck 50% for business and 50% for personal purposes. Irs gov 1040ez She includes $4,018 excess depreciation in her gross income for 2013. Irs gov 1040ez The excess depreciation is determined as follows. Irs gov 1040ez Total section 179 deduction ($10,000) and depreciation claimed ($6,618) for 2009 through 2012. Irs gov 1040ez (Depreciation is from Table A-1. Irs gov 1040ez ) $16,618 Minus: Depreciation allowable (Table A-8):     2009 – 10% of $18,000 $1,800   2010 – 20% of $18,000 3,600   2011 – 20% of $18,000 3,600   2012 – 20% of $18,000 3,600 12,600 Excess depreciation $4,018 If Ellen's use of the truck does not change to 50% for business and 50% for personal purposes until 2015, there will be no excess depreciation. Irs gov 1040ez The total depreciation allowable using Table A-8 through 2015 will be $18,000, which equals the total of the section 179 deduction and depreciation she will have claimed. Irs gov 1040ez Where to figure and report recapture. Irs gov 1040ez   Use Form 4797, Part IV, to figure the recapture amount. Irs gov 1040ez Report the recapture amount as other income on the same form or schedule on which you took the depreciation deduction. Irs gov 1040ez For example, report the recapture amount as other income on Schedule C (Form 1040) if you took the depreciation deduction on Schedule C. Irs gov 1040ez If you took the depreciation deduction on Form 2106, report the recapture amount as other income on Form 1040, line 21. Irs gov 1040ez Lessee's Inclusion Amount If you use leased listed property other than a passenger automobile for business/investment use, you must include an amount in your income in the first year your qualified business-use percentage is 50% or less. Irs gov 1040ez Your qualified business-use percentage is the part of the property's total use that is qualified business use (defined earlier). Irs gov 1040ez For the inclusion amount rules for a leased passenger automobile, see Leasing a Car in chapter 4 of Publication 463. Irs gov 1040ez The inclusion amount is the sum of Amount A and Amount B, described next. Irs gov 1040ez However, see the special rules for the inclusion amount, later, if your lease begins in the last 9 months of your tax year or is for less than one year. Irs gov 1040ez Amount A. Irs gov 1040ez   Amount A is: The fair market value of the property, multiplied by The business/investment use for the first tax year the qualified business-use percentage is 50% or less, multiplied by The applicable percentage from Table A-19 in Appendix A . Irs gov 1040ez   The fair market value of the property is the value on the first day of the lease term. Irs gov 1040ez If the capitalized cost of an item of listed property is specified in the lease agreement, you must treat that amount as the fair market value. Irs gov 1040ez Amount B. Irs gov 1040ez   Amount B is: The fair market value of the property, multiplied by The average of the business/investment use for all tax years the property was leased that precede the first tax year the qualified business-use percentage is 50% or less, multiplied by The applicable percentage from Table A–20 in Appendix A . Irs gov 1040ez Maximum inclusion amount. Irs gov 1040ez   The inclusion amount cannot be more than the sum of the deductible amounts of rent for the tax year in which the lessee must include the amount in gross income. Irs gov 1040ez Inclusion amount worksheet. Irs gov 1040ez   The following worksheet is provided to help you figure the inclusion amount for leased listed property. Irs gov 1040ez Inclusion Amount Worksheet for Leased Listed Property 1. Irs gov 1040ez Fair market value   2. Irs gov 1040ez Business/investment use for first year business use is 50% or less   3. Irs gov 1040ez Multiply line 1 by line 2. Irs gov 1040ez   4. Irs gov 1040ez Rate (%) from Table A-19   5. Irs gov 1040ez Multiply line 3 by line 4. Irs gov 1040ez This is Amount A. Irs gov 1040ez   6. Irs gov 1040ez Fair market value   7. Irs gov 1040ez Average business/investment use for years property leased before the first year business use is 50% or less . Irs gov 1040ez . Irs gov 1040ez . Irs gov 1040ez . Irs gov 1040ez . Irs gov 1040ez . Irs gov 1040ez . Irs gov 1040ez . Irs gov 1040ez . Irs gov 1040ez . Irs gov 1040ez . Irs gov 1040ez . Irs gov 1040ez . Irs gov 1040ez   8. Irs gov 1040ez Multiply line 6 by line 7   9. Irs gov 1040ez Rate (%) from Table A-20   10. Irs gov 1040ez Multiply line 8 by line 9. Irs gov 1040ez This is Amount B. Irs gov 1040ez   11. Irs gov 1040ez Add line 5 and line 10. Irs gov 1040ez This is your inclusion amount. Irs gov 1040ez Enter here and as other income on the form or schedule on which you originally took the deduction (for example, Schedule C or F (Form 1040), Form 1040, Form 1120, etc. Irs gov 1040ez )         Example. Irs gov 1040ez On February 1, 2011, Larry House, a calendar year taxpayer, leased and placed in service a computer with a fair market value of $3,000. Irs gov 1040ez The lease is for a period of 5 years. Irs gov 1040ez Larry does not use the computer at a regular business establishment, so it is listed property. Irs gov 1040ez His business use of the property (all of which is qualified business use) is 80% in 2011, 60% in 2012, and 40% in 2013. Irs gov 1040ez He must add an inclusion amount to gross income for 2013, the first tax year his qualified business-use percentage is 50% or less. Irs gov 1040ez The computer has a 5-year recovery period under both GDS and ADS. Irs gov 1040ez 2013 is the third tax year of the lease, so the applicable percentage from Table A-19 is −19. Irs gov 1040ez 8%. Irs gov 1040ez The applicable percentage from Table A-20 is 22. Irs gov 1040ez 0%. Irs gov 1040ez Larry's deductible rent for the computer for 2013 is $800. Irs gov 1040ez Larry uses the Inclusion amount worksheet. Irs gov 1040ez to figure the amount he must include in income for 2013. Irs gov 1040ez His inclusion amount is $224, which is the sum of −$238 (Amount A) and $462 (Amount B). Irs gov 1040ez Inclusion Amount Worksheet for Leased Listed Property 1. Irs gov 1040ez Fair market value $3,000   2. Irs gov 1040ez Business/investment use for first year business use is 50% or less 40 % 3. Irs gov 1040ez Multiply line 1 by line 2. Irs gov 1040ez 1,200   4. Irs gov 1040ez Rate (%) from Table A-19 −19. Irs gov 1040ez 8 % 5. Irs gov 1040ez Multiply line 3 by line 4. Irs gov 1040ez This is Amount A. Irs gov 1040ez −238   6. Irs gov 1040ez Fair market value 3,000   7. Irs gov 1040ez Average business/investment use for years property leased before the first year business use is 50% or less 70 % 8. Irs gov 1040ez Multiply line 6 by line 7 2,100   9. Irs gov 1040ez Rate (%) from Table A-20 22. Irs gov 1040ez 0 % 10. Irs gov 1040ez Multiply line 8 by line 9. Irs gov 1040ez This is Amount B. Irs gov 1040ez 462   11. Irs gov 1040ez Add line 5 and line 10. Irs gov 1040ez This is your inclusion amount. Irs gov 1040ez Enter here and as other income on the form or schedule on which you originally took the deduction (for example, Schedule C or F (Form 1040), Form 1040, Form 1120, etc. Irs gov 1040ez ) $224           Lease beginning in the last 9 months of your tax year. Irs gov 1040ez    The inclusion amount is subject to a special rule if all the following apply. Irs gov 1040ez The lease term begins within 9 months before the close of your tax year. Irs gov 1040ez You do not use the property predominantly (more than 50%) for qualified business use during that part of the tax year. Irs gov 1040ez The lease term continues into your next tax year. Irs gov 1040ez Under this special rule, add the inclusion amount to income in the next tax year. Irs gov 1040ez Figure the inclusion amount by taking into account the average of the business/investment use for both tax years (line 2 of the Inclusion Amount Worksheet for Leased Listed Property) and the applicable percentage for the tax year the lease term begins. Irs gov 1040ez Skip lines 6 through 9 of the worksheet and enter zero on line 10. Irs gov 1040ez Example 1. Irs gov 1040ez On August 1, 2012, Julie Rule, a calendar year taxpayer, leased and placed in service an item of listed property. Irs gov 1040ez The property is 5-year property with a fair market value of $10,000. Irs gov 1040ez Her property has a recovery period of 5 years under ADS. Irs gov 1040ez The lease is for 5 years. Irs gov 1040ez Her business use of the property was 50% in 2012 and 90% in 2013. Irs gov 1040ez She paid rent of $3,600 for 2012, of which $3,240 is deductible. Irs gov 1040ez She must include $147 in income in 2013. Irs gov 1040ez The $147 is the sum of Amount A and Amount B. Irs gov 1040ez Amount A is $147 ($10,000 × 70% × 2. Irs gov 1040ez 1%), the product of the fair market value, the average business use for 2012 and 2013, and the applicable percentage for year one from Table A-19 . Irs gov 1040ez Amount B is zero. Irs gov 1040ez Lease for less than one year. Irs gov 1040ez   A special rule for the inclusion amount applies if the lease term is less than one year and you do not use the property predominantly (more than 50%) for qualified business use. Irs gov 1040ez The amount included in income is the inclusion amount (figured as described in the preceding discussions) multiplied by a fraction. Irs gov 1040ez The numerator of the fraction is the number of days in the lease term and the denominator is 365 (or 366 for leap years). Irs gov 1040ez   The lease term for listed property other than residential rental or nonresidential real property includes options to renew. Irs gov 1040ez If you have two or more successive leases that are part of the same transaction (or a series of related transactions) for the same or substantially similar property, treat them as one lease. Irs gov 1040ez Example 2. Irs gov 1040ez On October 1, 2012, John Joyce, a calendar year taxpayer, leased and placed in service an item of listed property that is 3-year property. Irs gov 1040ez This property had a fair market value of $15,000 and a recovery period of 5 years under ADS. Irs gov 1040ez The lease term was 6 months (ending on March 31, 2013), during which he used the property 45% in business. Irs gov 1040ez He must include $71 in income in 2013. Irs gov 1040ez The $71 is the sum of Amount A and Amount B. Irs gov 1040ez Amount A is $71 ($15,000 × 45% × 2. Irs gov 1040ez 1% × 183/365), the product of the fair market value, the average business use for both years, and the applicable percentage for year one from Table A-19 , prorated for the length of the lease. Irs gov 1040ez Amount B is zero. Irs gov 1040ez Where to report inclusion amount. Irs gov 1040ez   Report the inclusion amount figured as described in the preceding discussions as other income on the same form or schedule on which you took the deduction for your rental costs. Irs gov 1040ez For example, report the inclusion amount as other income on Schedule C (Form 1040) if you took the deduction on Schedule C. Irs gov 1040ez If you took the deduction for rental costs on Form 2106, report the inclusion amount as other income on Form 1040, line 21. Irs gov 1040ez Do the Passenger Automobile Limits Apply? The depreciation deduction, including the section 179 deduction and special depreciation allowance, you can claim for a passenger automobile (defined earlier) each year is limited. Irs gov 1040ez This section describes the maximum depreciation deduction amounts for 2013 and explains how to deduct, after the recovery period, the unrecovered basis of your property that results from applying the passenger automobile limit. Irs gov 1040ez Exception for leased cars. Irs gov 1040ez   The passenger automobile limits generally do not apply to passenger automobiles leased or held for leasing by anyone regularly engaged in the business of leasing passenger automobiles. Irs gov 1040ez For information on when you are considered regularly engaged in the business of leasing listed property, including passenger automobiles, see Exception for leased property , earlier, under What Is the Business-Use Requirement . Irs gov 1040ez Maximum Depreciation Deduction The passenger automobile limits are the maximum depreciation amounts you can deduct for a passenger automobile. Irs gov 1040ez They are based on the date you placed the automobile in service. Irs gov 1040ez Passenger Automobiles The maximum deduction amounts for most passenger automobiles are shown in the following table. Irs gov 1040ez Maximum Depreciation Deduction for Passenger Automobiles Date       4th & Placed 1st 2nd 3rd Later In Service Year Year Year Years 2013 $11,1601 $5,100 $3,050 $1,875 2012 11,1601 5,100 3,050 1,875 2011 11,0602 4,900 2,950 1,775 2010 11,0602  4,900 2,950 1,775 2009 10,9603 4,800 2,850 1,775 2008 10,9603  4,800 2,850 1,775 2007 3,060 4,900 2,850 1,775 2006 2,960 4,800 2,850 1,775 2005 2,960 4,700 2,850 1,675 2004 10,6104 4,800 2,850 1,675 5/06/2003– 12/31/2003 10,7105 4,900 2,950 1,775 1/01/2003– 5/05/2003 7,6606 4,900 2,950 1,775 1If you elected not to claim any special depreciation allowance or the vehicle is not qualified property, the maximum deduction is $3,160. Irs gov 1040ez 2If you elected not to claim any special depreciation allowance or the vehicle is not qualified property, the maximum deduction is $3,060. Irs gov 1040ez 3If you elected not to claim any special depreciation allowance for the vehicle or the vehicle is not qualified property, the maximum deduction is $2,960. Irs gov 1040ez 4If you elected not to claim any special depreciation allowance for the vehicle, the vehicle is not qualified property, or the vehicle is qualified Liberty Zone property, the maximum deduction is $2,960. Irs gov 1040ez 5If you acquired the vehicle before 5/06/03, the maximum deduction is $7,660. Irs gov 1040ez If you elected not to claim any special depreciation allowance for the vehicle, the vehicle is not qualified property, or the vehicle is qualified Liberty Zone property, the maximum deduction is $3,060. Irs gov 1040ez 6If you elected not to claim any special depreciation allowance for the vehicle, the vehicle is not qualified property, or the vehicle is qualified Liberty Zone property, the maximum deduction is $3,060. Irs gov 1040ez If your business/investment use of the automobile is less than 100%, you must reduce the maximum deduction amount by multiplying the maximum amount by the percentage of business/investment use determined on an annual basis during the tax year. Irs gov 1040ez If you have a short tax year, you must reduce the maximum deduction amount by multiplying the maximum amount by a fraction. Irs gov 1040ez The numerator of the fraction is the number of months and partial months in the short tax year and the denominator is 12. Irs gov 1040ez Example. Irs gov 1040ez On April 15, 2013, Virginia Hart bought and placed in service a new car for $14,500. Irs gov 1040ez She used the car only in her business. Irs gov 1040ez She files her tax return based on the calendar year. Irs gov 1040ez She does not elect a section 179 deduction and elected not to claim any special depreciation allowance for the car. Irs gov 1040ez Under MACRS, a car is 5-year property. Irs gov 1040ez Since she placed her car in service on April 15 and used it only for business, she uses the percentages in Table A-1 to figure her MACRS depreciation on the car. Irs gov 1040ez Virginia multiplies the $14,500 unadjusted basis of her car by 0. Irs gov 1040ez 20 to get her MACRS depreciation of $2,900 for 2013. Irs gov 1040ez This $2,900 is below the maximum depreciation deduction of $3,160 for passenger automobiles placed in service in 2013. Irs gov 1040ez She can deduct the full $2,900. Irs gov 1040ez Electric Vehicles The maximum depreciation deductions for passenger automobiles that are produced to run primarily on electricity are higher than those for other automobiles. Irs gov 1040ez The maximum deduction amounts for electric vehicles placed in service after August 5, 1997, and before January 1, 2007, are shown in the following table. Irs gov 1040ez Owners of electric vehicles placed in service after December 31, 2006, should use the table of maximum deduction amounts later for electric vehicles classified as passenger automobiles or use the table of maximum deduction amounts for trucks and vans later, for electric vehicles classified as trucks and vans. Irs gov 1040ez Maximum Depreciation Deduction For Electric Vehicles Date       4th & Placed 1st 2nd 3rd Later In Service Year Year Year Years 2006 $8,980 $14,400 $8,650 $5,225 2005 8,880 14,200 8,450 5,125 2004 31,8301 14,300 8,550 5,125 5/06/2003– 12/31/2003 32,0302 14,600 8,750 5,225 1/01/2003– 5/05/2003 22,8803 14,600 8,750 5,225 1If you elected not to claim any special depreciation allowance for the vehicle or the vehicle is not qualified property, or the vehicle is qualified Liberty Zone property, the maximum deduction is $8,880. Irs gov 1040ez 2If you acquired the vehicle before 5/06/03, the maximum deduction is $22,880. Irs gov 1040ez If you elected not to claim any special depreciation allowance for the vehicle, the vehicle is not qualified property, or the vehicle is qualified Liberty Zone property, the maximum deduction is $9,080. Irs gov 1040ez 3 If you elected not to claim any special depreciation allowance for the vehicle, the vehicle is not qualified property, or the vehicle is qualified Liberty Zone property, the maximum deduction is $9,080. Irs gov 1040ez Trucks and Vans The maximum depreciation deductions for trucks and vans placed in service after 2002 are higher than those for other passenger automobiles. Irs gov 1040ez The maximum deduction amounts for trucks and vans are shown in the following table. Irs gov 1040ez Maximum Depreciation Deduction For Trucks and Vans Date       4th & Placed 1st 2nd 3rd Later In Service Year Year Year Years 2013 $11,3601 $5,400 $3,250 $1,975 2012 11,3601 5,300 3,150 1,875 2011 11,2602 5,200 3,150 1,875 2010 11,1603 5,100 3,050 1,875 2009 11,0604 4,900 2,950 1,775 2008 11,1605 5,100 3,050 1,875 2007 3,260 5,200 3,050 1,875 2006 3,260 5,200 3,150 1,875 2005 3,260 5,200 3,150 1,875 2004 10,9106 5,300 3,150 1,875 5/06/2003– 12/31/2003 11,0107 5,400 3,250 1,975 1/01/2003– 5/05/2003 7,9608 5,400 3,250 1,975 1 If you elected not to claim any special depreciation allowance or the vehicle is not qualified property, the maximum deduction is $3,360. Irs gov 1040ez 2 If you elected not to claim any special depreciation allowance or the vehicle is not qualified property, the maximum deduction is $3,260. Irs gov 1040ez 3 If you elected not to claim any special depreciation allowance or the vehicle is not qualified property, the maximum deduction is $3,160. Irs gov 1040ez 4 If you elect not to claim any special depreciation allowance for the vehicle or the vehicle is not qualified property, the maximum deduction is $3,060. Irs gov 1040ez 5If you elected not to claim any special depreciation allowance for the vehicle or the vehicle is not qualified property, the maximum deduction is $3,160. Irs gov 1040ez 6If you elected not to claim any special depreciation allowance for the vehicle, the vehicle is not qualified property, or the vehicle is qualified Liberty Zone property, or the maximum deduction is $3,260. Irs gov 1040ez 7 If you acquired the vehicle before 5/06/03, the maximum deduction is $7,960. Irs gov 1040ez If you elected not to claim any special depreciation allowance for the vehicle, the vehicle is not qualified property, or the vehicle is qualified Liberty Zone property, the maximum deduction is $3,360. Irs gov 1040ez 8 If you elected not to claim any special depreciation allowance for the vehicle, the vehicle is not qualified property, or the vehicle is qualified Liberty Zone property, the maximum deduction is $3,360. Irs gov 1040ez Depreciation Worksheet for Passenger Automobiles You can use the following worksheet to figure your depreciation deduction using the percentage tables. Irs gov 1040ez Then use the information from this worksheet to prepare Form 4562. Irs gov 1040ez Depreciation Worksheet for Passenger Automobiles   Part I   1. Irs gov 1040ez MACRS system (GDS or ADS)     2. Irs gov 1040ez Property class     3. Irs gov 1040ez Date placed in service     4. Irs gov 1040ez Recovery period     5. Irs gov 1040ez Method and convention     6. Irs gov 1040ez Depreciation rate (from tables)     7. Irs gov 1040ez Maximum depreciation deduction for this year from the appropriate table       8. Irs gov 1040ez Business/investment-use percentage       9. Irs gov 1040ez Multiply line 7 by line 8. Irs gov 1040ez This is your adjusted maximum depreciation deduction       10. Irs gov 1040ez Section 179 deduction claimed this year (not more than line 9). Irs gov 1040ez Enter -0- if this is not the year you placed the car in service. Irs gov 1040ez         Note. Irs gov 1040ez  1) If line 10 is equal to line 9, stop here. Irs gov 1040ez Your combined section 179 and depreciation deduction (including your special depreciation allowance) is limited to the amount on line 9. Irs gov 1040ez  2) If line 10 is less than line 9, complete Part II. Irs gov 1040ez   Part II   11. Irs gov 1040ez Subtract line 10 from line 9. Irs gov 1040ez This is the limit on the amount you can deduct for depreciation (including any special depreciation allowance )       12. Irs gov 1040ez Cost or other basis (reduced by any alternative motor vehicle credit 1or credit for electric vehicles 2)       13. Irs gov 1040ez Multiply line 12 by line 8. Irs gov 1040ez This is your business/investment cost       14. Irs gov 1040ez Section 179 deduction claimed in the year you placed the car in service       15. Irs gov 1040ez Subtract line 14 from line 13. Irs gov 1040ez This is your tentative basis for depreciation       16. Irs gov 1040ez Multiply line 15 by . Irs gov 1040ez 50 if the 50% special depreciation allowance applies. Irs gov 1040ez This is your special depreciation allowance. Irs gov 1040ez Enter -0- if this is not the year you placed the car in service, the car is not qualified property, or you elected not to claim a special depreciation allowance       Note 1) If line 16 is equal to line 11, stop here. Irs gov 1040ez Your depreciation deduction (including your special depreciation allowance) is limited to the amount on line 11. Irs gov 1040ez  2) If line 16 is less than line 11, complete Part III. Irs gov 1040ez   Part III   17. Irs gov 1040ez Subtract line 16 from 11. Irs gov 1040ez This is the limit on the amount you can deduct for MACRS depreciation       18. Irs gov 1040ez Subtract line 16 from line 15. Irs gov 1040ez This is your basis for depreciation. Irs gov 1040ez       19. Irs gov 1040ez Multiply line 18 by line 6. Irs gov 1040ez This is your tentative MACRS depreciation deduction. Irs gov 1040ez       20. Irs gov 1040ez Enter the lesser of line 17 or line 19. Irs gov 1040ez This is your MACRS depreciation deduction. Irs gov 1040ez     1 When figuring the amount to enter on line 12, do not reduce your cost or other basis by any section 179 deduction you claimed for your car. Irs gov 1040ez 2 Reduce the basis by the lesser of $4,000 or 10% of the cost of the vehicle even if the credit is less than that amount. Irs gov 1040ez             Deductions After the Recovery Period If the depreciation deductions for your automobile are reduced under the passenger automobile limits, you will have unrecovered basis in your automobile at the end of the recovery period. Irs gov 1040ez If you continue to use the automobile for business, you can deduct that unrecovered basis after the recovery period ends. Irs gov 1040ez You can claim a depreciation deduction in each succeeding tax year until you recover your full basis in the car. Irs gov 1040ez The maximum amount you can deduct each year is determined by the date you placed the car in service and your business/investment-use percentage. Irs gov 1040ez See Maximum Depreciation Deduction , earlier. Irs gov 1040ez Unrecovered basis is the cost or other basis of the passenger automobile reduced by any clean-fuel vehicle deduction, electric vehicle credit, depreciation, and section 179 deductions that would have been allowable if you had used the car 100% for business and investment use and the passenger automobile limits had not applied. Irs gov 1040ez You cannot claim a depreciation deduction for listed property other than passenger automobiles after the recovery period ends. Irs gov 1040ez There is no unrecovered basis at the end of the recovery period because you are considered to have used this property 100% for business and investment purposes during all of the recovery period. Irs gov 1040ez Example. Irs gov 1040ez In May 2007, you bought and placed in service a car costing $31,500. Irs gov 1040ez The car was 5-year property under GDS (MACRS). Irs gov 1040ez You did not elect a section 179 deduction and elected not to claim any special depreciation allowance for the car. Irs gov 1040ez You used the car exclusively for business during the recovery period (2007 through 2012). Irs gov 1040ez You figured your depreciation as shown below. Irs gov 1040ez Year Percentage Amount Limit   Allowed 2007 20. Irs gov 1040ez 0% $6,300 $2,960   $2,960 2008 32. Irs gov 1040ez 0 10,080 4,800   4,800 2009 19. Irs gov 1040ez 2 6,048 2,850   2,850 2010 11. Irs gov 1040ez 52 3,629 1,675   1,675 2011 11. Irs gov 1040ez 52 3,629 1,675   1,675 2012 5. Irs gov 1040ez 76 1,814 1,675   1,675 Total   $15,635 At the end of 2012, you had an unrecovered basis of $15,865 ($31,500 − $15,635). Irs gov 1040ez If in 2013 and later years you continue to use the car 100% for business, you can deduct each year the lesser of $1,675 or your remaining unrecovered basis. Irs gov 1040ez If your business use of the car had been less than 100% during any year, your depreciation deduction would have been less than the maximum amount allowable for that year. Irs gov 1040ez However, in figuring your unrecovered basis in the car, you would still reduce your basis by the maximum amount allowable as if the business use had been 100%. Irs gov 1040ez For example, if you had used your car 60% for business instead of 100%, your allowable depreciation deductions would have been $9,519 ($15,865 × 60%), but you still would have to reduce your basis by $15,865 to determine your unrecovered basis. Irs gov 1040ez Deductions For Passenger Automobiles Acquired in a Trade-in If you acquire a passenger automobile in a trade-in, depreciate the carryover basis separately as if the trade-in did not occur. Irs gov 1040ez Depreciate the part of the new automobile's basis that exceeds its carryover basis (excess basis) as if it were newly placed in service property. Irs gov 1040ez This excess basis is the additional cash paid for the new automobile in the trade-in. Irs gov 1040ez The depreciation figured for the two components of the basis (carryover basis and excess basis) is subject to a single passenger automobile limit. Irs gov 1040ez Special rules apply in determining the passenger automobile limits. Irs gov 1040ez These rules and examples are discussed in section 1. Irs gov 1040ez 168(i)-6(d)(3) of the regulations. Irs gov 1040ez Instead of figuring depreciation for the carryover basis and the excess basis separately, you can elect to treat the old automobile as disposed of and both of the basis components for the new automobile as if placed in service at the time of the trade-in. Irs gov 1040ez For more information, including how to make this election, see Election out under Property Acquired in a Like-kind Exchange or Involuntary Conversion in chapter 4 and sections 1. Irs gov 1040ez 168(i)-6(i) and 1. Irs gov 1040ez 168(i)-6(j) of the regulations. Irs gov 1040ez What Records Must Be Kept? You cannot take any depreciation or section 179 deduction for the use of listed property unless you can prove your business/investment use with adequate records or with sufficient evidence to support your own statements. Irs gov 1040ez For listed property, you must keep records for as long as any recapture can still occur. Irs gov 1040ez Recapture can occur in any tax year of the recovery period. Irs gov 1040ez Adequate Records To meet the adequate records requirement, you must maintain an account book, diary, log, statement of expense, trip sheet, or similar record or other documentary evidence that, together with the receipt, is sufficient to establish each element of an expenditure or use. Irs gov 1040ez You do not have to record information in an account book, diary, or similar record if the information is already shown on the receipt. Irs gov 1040ez However, your records should back up your receipts in an orderly manner. Irs gov 1040ez Elements of expenditure or use. Irs gov 1040ez   Your records or other documentary evidence must support all the following. Irs gov 1040ez The amount of each separate expenditure, such as the cost of acquiring the item, maintenance and repair costs, capital improvement costs, lease payments, and any other expenses. Irs gov 1040ez The amount of each business and investment use (based on an appropriate measure, such as mileage for vehicles and time for other listed property), and the total use of the property for the tax year. Irs gov 1040ez The date of the expenditure or use. Irs gov 1040ez The business or investment purpose for the expenditure or use. Irs gov 1040ez   Written documents of your expenditure or use are generally better evidence than oral statements alone. Irs gov 1040ez You do not have to keep a daily log. Irs gov 1040ez However, some type of record containing the elements of an expenditure or the business or investment use of listed property made at or near the time of the expenditure or use and backed up by other documents is preferable to a statement you prepare later. Irs gov 1040ez Timeliness. Irs gov 1040ez   You must record the elements of an expenditure or use at the time you have full knowledge of the elements. Irs gov 1040ez An expense account statement made from an account book, diary, or similar record prepared or maintained at or near the time of the expenditure or use generally is considered a timely record if, in the regular course of business: The statement is given by an employee to the employer, or The statement is given by an independent contractor to the client or customer. Irs gov 1040ez   For example, a log maintained on a weekly basis, that accounts for use during the week, will be considered a record made at or near the time of use. Irs gov 1040ez Business purpose supported. Irs gov 1040ez   Generally, an adequate record of business purpose must be in the form of a written statement. Irs gov 1040ez However, the amount of detail necessary to establish a business purpose depends on the facts and circumstances of each case. Irs gov 1040ez A written explanation of the business purpose will not be required if the purpose can be determined from the surrounding facts and circumstances. Irs gov 1040ez For example, a salesperson visiting customers on an established sales route will not normally need a written explanation of the business purpose of his or her travel. Irs gov 1040ez Business use supported. Irs gov 1040ez   An adequate record contains enough information on each element of every business or investment use. Irs gov 1040ez The amount of detail required to support the use depends on the facts and circumstances. Irs gov 1040ez For example, a taxpayer who uses a truck for both business and personal purposes and whose only business use of the truck is to make customer deliveries on an established route can satisfy the requirement by recording the length of the route, including the total number of miles driven during the tax year and the date of each trip at or near the time of the trips. Irs gov 1040ez   Although you generally must prepare an adequate written record, you can prepare a record of the business use of listed property in a computer memory device that uses a logging program. Irs gov 1040ez Separate or combined expenditures or uses. Irs gov 1040ez   Each use by you normally is considered a separate use. Irs gov 1040ez However, you can combine repeated uses as a single item. Irs gov 1040ez   Record each expenditure as a separate item. Irs gov 1040ez Do not combine it with other expenditures. Irs gov 1040ez If you choose, however, you can combine amounts you spent for the use of listed property during a tax year, such as for gasoline or automobile repairs. Irs gov 1040ez If you combine these expenses, you do not need to support the business purpose of each expense. Irs gov 1040ez Instead, you can divide the expenses based on the total business use of the listed property. Irs gov 1040ez   You can account for uses that can be considered part of a single use, such as a round trip or uninterrupted business use, by a single record. Irs gov 1040ez For example, you can account for the use of a truck to make deliveries at several locations that begin and end at the business premises and can include a stop at the business in between deliveries by a single record of miles driven. Irs gov 1040ez You can account for the use of a passenger automobile by a salesperson for a business trip away from home over a period of time by a single record of miles traveled. Irs gov 1040ez Minimal personal use (such as a stop for lunch between two business stops) is not an interruption of business use. Irs gov 1040ez Confidential information. Irs gov 1040ez   If any of the information on the elements of an expenditure or use is confidential, you do not need to include it in the account book or similar record if you record it at or near the time of the expenditure or use. Irs gov 1040ez You must keep it elsewhere and make it available as support to the IRS director for your area on request. Irs gov 1040ez Substantial compliance. Irs gov 1040ez   If you have not fully supported a particular element of an expenditure or use, but have complied with the adequate records requirement for the expenditure or use to the satisfaction of the IRS director for your area, you can establish this element by any evidence the IRS director for your area deems adequate. Irs gov 1040ez   If you fail to establish to the satisfaction of the IRS director for your area that you have substantially complied with the adequate records requirement for an element of an expenditure or use, you must establish the element as follows. Irs gov 1040ez By your own oral or written statement containing detailed information as to the element. Irs gov 1040ez By other evidence sufficient to establish the element. Irs gov 1040ez   If the element is the cost or amount, time, place, or date of an expenditure or use, its supporting evidence must be direct evidence, such as oral testimony by witnesses or a written statement setting forth detailed information about the element or the documentary evidence. Irs gov 1040ez If the element is the business purpose of an expenditure, its supporting evidence can be circumstantial evidence. Irs gov 1040ez Sampling. Irs gov 1040ez   You can maintain an adequate record for part of a tax year and use that record to support your business and investment use of listed property for the entire tax year if it can be shown by other evidence that the periods for which you maintain an adequate record are representative of the use throughout the year. Irs gov 1040ez Example 1. Irs gov 1040ez Denise Williams, a sole proprietor and calendar year taxpayer, operates an interior decorating business out of her home. Irs gov 1040ez She uses her automobile for local business visits to the homes or offices of clients, for meetings with suppliers and subcontractors, and to pick up and deliver items to clients. Irs gov 1040ez There is no other business use of the automobile, but she and family members also use it for personal purposes. Irs gov 1040ez She maintains adequate records for the first 3 months of the year showing that 75% of the automobile use was for business. Irs gov 1040ez Subcontractor invoices and paid bills show that her business continued at approximately the same rate for the rest of the year. Irs gov 1040ez If there is no change in circumstances, such as the purchase of a second car for exclusive use in her business, the determination that her combined business/investment use of the automobile for the tax year is 75% rests on sufficient supporting evidence. Irs gov 1040ez Example 2. Irs gov 1040ez Assume the same facts as in Example 1, except that Denise maintains adequate records during the first week of every month showing that 75% of her use of the automobile is for business. Irs gov 1040ez Her business invoices show that her business continued at the same rate during the later weeks of each month so that her weekly records are representative of the automobile's business use throughout the month. Irs gov 1040ez The determination that her business/investment use of the automobile for the tax year is 75% rests on sufficient supporting evidence. Irs gov 1040ez Example 3. Irs gov 1040ez Bill Baker, a sole proprietor and calendar year taxpayer, is a salesman in a large metropolitan area for a company that manufactures household products. Irs gov 1040ez For the first 3 weeks of each month, he occasionally uses his own automobile for business travel within the metropolitan area. Irs gov 1040ez During these weeks, his business use of the automobile does not follow a consistent pattern. Irs gov 1040ez During the fourth week of each month, he delivers all business orders taken during the previous month. Irs gov 1040ez The business use of his automobile, as supported by adequate records, is 70% of its total use during that fourth week. Irs gov 1040ez The determination based on the record maintained during the fourth week of the month that his business/investment use of the automobile for the tax year is 70% does not rest on sufficient supporting evidence because his use during that week is not representative of use during other periods. Irs gov 1040ez Loss of records. Irs gov 1040ez   When you establish that failure to produce adequate records is due to loss of the records through circumstances beyond your control, such as through fire, flood, earthquake, or other casualty, you have the right to support a deduction by reasonable reconstruction of your expenditures and use. Irs gov 1040ez How Is Listed Property Information Reported? You must provide the information about your listed property requested in Part V of Form 4562, Section A, if you claim either of the following deductions. Irs gov 1040ez Any deduction for a vehicle. Irs gov 1040ez A depreciation deduction for any other listed property. Irs gov 1040ez If you claim any deduction for a vehicle, you also must provide the information requested in Section B. Irs gov 1040ez If you provide the vehicle for your employee's use, the employee must give you this information. Irs gov 1040ez If you provide any vehicle for use by an employee, you must first answer the questions in Section C to see if you meet an exception to completing Section B for that vehicle. Irs gov 1040ez Vehicles used by your employees. Irs gov 1040ez   You do not have to complete Section B, Part V, for vehicles used by your employees who are not more-than-5% owners or related persons if you meet at least one of the following requirements. Irs gov 1040ez You maintain a written policy statement that prohibits one of the following uses of the vehicles. Irs gov 1040ez All personal use including commuting. Irs gov 1040ez Personal use, other than commuting, by employees who are not officers, directors, or 1%-or-more owners. Irs gov 1040ez You treat all use of the vehicles by your employees as personal use. Irs gov 1040ez You provide more than five vehicles for use by your employees, and you keep in your records the information on their use given to you by the employees. Irs gov 1040ez For demonstrator automobiles provided to full-time salespersons, you maintain a written policy statement that limits the total mileage outside the salesperson's normal working hours and prohibits use of the automobile by anyone else, for vacation trips, or to store personal possessions. Irs gov 1040ez Exceptions. Irs gov 1040ez   If you file Form 2106, 2106-EZ, or Schedule C-EZ (Form 1040), and you are not required to file Form 4562, report information about listed property on that form and not on Form 4562. Irs gov 1040ez Also, if you file Schedule C (Form 1040) and are claiming the standard mileage rate or actual vehicle expenses (except depreciation) and you are not required to file Form 4562 for any other reason, report vehicle information in Part IV of Schedule C and not on Form 4562. Irs gov 1040ez Prev  Up  Next   Home   More Online Publications