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State taxes online for free Publication 4492 - Main Contents Table of Contents DefinitionsHurricane Katrina Disaster Area Katrina Covered Disaster Area Gulf Opportunity (GO) Zone (Core Disaster Area) Hurricane Rita Disaster Area (Rita Covered Disaster Area) Rita GO Zone Hurricane Wilma Disaster Area Wilma Covered Disaster Area Wilma GO Zone Extended Tax Deadlines Charitable Giving IncentivesTemporary Suspension of Limits on Charitable Contributions Standard Mileage Rate for Charitable Use of Vehicles Mileage Reimbursements to Charitable Volunteers Charitable Deduction for Contributions of Food Inventory Charitable Deduction for Contributions of Book Inventories to Public Schools Casualty and Theft LossesTime limit for making election. State taxes online for free Replacement Period for Nonrecognition of Gain Net Operating Losses IRAs and Other Retirement PlansDefinitions Taxation of Qualified Hurricane Distributions Repayment of Qualified Hurricane Distributions Repayment of Qualified Distributions for the Purchase or Construction of a Main Home Loans From Qualified Plans Additional Tax Relief for IndividualsEarned Income Credit and Child Tax Credit Additional Exemption for Housing Individuals Displaced by Hurricane Katrina Education Credits Recapture of Federal Mortgage Subsidy Exclusion of Certain Cancellations of Indebtedness by Reason of Hurricane Katrina Tax Relief for Temporary Relocation Additional Tax Relief for BusinessesSpecial Depreciation Allowance Increased Section 179 Deduction Work Opportunity Credit Employee Retention Credit Hurricane Katrina Housing Credit Reforestation Costs Demolition and Clean-up Costs Increase in Rehabilitation Tax Credit Request for Copy or Transcript of Tax Return How To Get Tax Help Definitions The following definitions are used throughout this publication. State taxes online for free Hurricane Katrina Disaster Area The Hurricane Katrina disaster area covers the area for which the President declared a major disaster before September 14, 2005, because of Hurricane Katrina. State taxes online for free The Hurricane Katrina disaster area covers the entire states of Alabama, Florida, Louisiana, and Mississippi. State taxes online for free Katrina Covered Disaster Area A portion of the Hurricane Katrina disaster area has been designated by the IRS as a covered disaster area. State taxes online for free The Katrina covered disaster area covers the following areas in four states. State taxes online for free Alabama. State taxes online for free   The counties of Baldwin, Bibb, Choctaw, Clarke, Colbert, Cullman, Greene, Hale, Jefferson, Lamar, Lauderdale, Marengo, Marion, Mobile, Monroe, Perry, Pickens, Sumter, Tuscaloosa, Washington, Wilcox, and Winston. State taxes online for free Florida. State taxes online for free   The counties of Bay, Broward, Collier, Escambia, Franklin, Gulf, Miami-Dade, Monroe, Okaloosa, Santa Rosa, and Walton. State taxes online for free Louisiana. State taxes online for free   All parishes. State taxes online for free Mississippi. State taxes online for free   All counties. State taxes online for free Gulf Opportunity (GO) Zone (Core Disaster Area) The GO Zone (also called the core disaster area) covers the portion of the Hurricane Katrina disaster area determined by the Federal Emergency Management Agency (FEMA) to be eligible for either individual only or both individual and public assistance from the Federal Government. State taxes online for free The GO Zone covers the following areas in three states. State taxes online for free Alabama. State taxes online for free   The counties of Baldwin, Choctaw, Clarke, Greene, Hale, Marengo, Mobile, Pickens, Sumter, Tuscaloosa, and Washington. State taxes online for free Louisiana. State taxes online for free   The parishes of Acadia, Ascension, Assumption, Calcasieu, Cameron, East Baton Rouge, East Feliciana, Iberia, Iberville, Jefferson, Jefferson Davis, Lafayette, Lafourche, Livingston, Orleans, Plaquemines, Pointe Coupee, St. State taxes online for free Bernard, St. State taxes online for free Charles, St. State taxes online for free Helena, St. State taxes online for free James, St. State taxes online for free John the Baptist, St. State taxes online for free Martin, St. State taxes online for free Mary, St. State taxes online for free Tammany, Tangipahoa, Terrebonne, Vermilion, Washington, West Baton Rouge, and West Feliciana. State taxes online for free Mississippi. State taxes online for free   The counties of Adams, Amite, Attala, Choctaw, Claiborne, Clarke, Copiah, Covington, Forrest, Franklin, George, Greene, Hancock, Harrison, Hinds, Holmes, Humphreys, Jackson, Jasper, Jefferson, Jefferson Davis, Jones, Kemper, Lamar, Lauderdale, Lawrence, Leake, Lincoln, Lowndes, Madison, Marion, Neshoba, Newton, Noxubee, Oktibbeha, Pearl River, Perry, Pike, Rankin, Scott, Simpson, Smith, Stone, Walthall, Warren, Wayne, Wilkinson, Winston, and Yazoo. State taxes online for free Hurricane Rita Disaster Area (Rita Covered Disaster Area) The Hurricane Rita disaster area (also designated by the IRS as the Rita covered disaster area) covers the area for which the President declared a major disaster before October 6, 2005, because of Hurricane Rita. State taxes online for free This area covers the entire states of Louisiana and Texas. State taxes online for free Rita GO Zone The Rita GO Zone covers the portion of the Hurricane Rita disaster area determined by FEMA to be eligible for either individual only or both individual and public assistance from the Federal Government. State taxes online for free The Rita GO Zone covers the following areas in two states. State taxes online for free Louisiana. State taxes online for free   The parishes of Acadia, Allen, Ascension, Beauregard, Calcasieu, Cameron, Evangeline, Iberia, Jefferson, Jefferson Davis, Lafayette, Lafourche, Livingston, Plaquemines, Sabine, St. State taxes online for free Landry, St. State taxes online for free Martin, St. State taxes online for free Mary, St. State taxes online for free Tammany, Terrebonne, Vermilion, Vernon, and West Baton Rouge. State taxes online for free Texas. State taxes online for free   The counties of Angelina, Brazoria, Chambers, Fort Bend, Galveston, Hardin, Harris, Jasper, Jefferson, Liberty, Montgomery, Nacogdoches, Newton, Orange, Polk, Sabine, San Augustine, San Jacinto, Shelby, Trinity, Tyler, and Walker. State taxes online for free Hurricane Wilma Disaster Area The Hurricane Wilma disaster area covers the area for which the President declared a major disaster before November 14, 2005, because of Hurricane Wilma. State taxes online for free The Hurricane Wilma disaster area covers the entire state of Florida. State taxes online for free Wilma Covered Disaster Area A portion of the Hurricane Wilma disaster area has been designated by the IRS as a covered disaster area. State taxes online for free The Wilma covered disaster area covers the following counties. State taxes online for free Florida. State taxes online for free   Brevard, Broward, Charlotte, Collier, DeSoto, Glades, Hardee, Hendry, Highlands, Indian River, Lee, Martin, Miami-Dade, Monroe, Okeechobee, Osceola, Palm Beach, Polk, St. State taxes online for free Lucie, and Sarasota. State taxes online for free Wilma GO Zone The Wilma GO Zone covers the portion of the Hurricane Wilma disaster area determined by FEMA to be eligible for either individual only or both individual and public assistance from the Federal Government. State taxes online for free The Wilma GO Zone covers the following counties. State taxes online for free Florida. State taxes online for free   Brevard, Broward, Collier, Glades, Hendry, Indian River, Lee, Martin, Miami-Dade, Monroe, Okeechobee, Palm Beach, and St. State taxes online for free Lucie. State taxes online for free Extended Tax Deadlines The IRS has extended deadlines that apply to filing returns, paying taxes, and performing certain other time-sensitive acts for certain taxpayers affected by Hurricane Katrina, Rita, or Wilma, until February 28, 2006. State taxes online for free The extension applies to deadlines (either an original or extended due date) that occur during the following periods. State taxes online for free After August 28, 2005 (August 23, 2005, for Florida affected taxpayers), and before February 28, 2006, for taxpayers affected by Hurricane Katrina. State taxes online for free After September 22, 2005, and before February 28, 2006, for taxpayers affected by Hurricane Rita. State taxes online for free After October 22, 2005, and before February 28, 2006, for taxpayers affected by Hurricane Wilma. State taxes online for free Affected taxpayer. State taxes online for free   The following taxpayers are eligible for the extension. State taxes online for free Any individual whose main home is located in a covered disaster area. State taxes online for free Any business entity or sole proprietor whose principal place of business is located in a covered disaster area. State taxes online for free Any individual, business entity, or sole proprietor whose records needed to meet a postponed deadline are maintained or whose tax professional's office is in a covered disaster area. State taxes online for free The main home or principal place of business does not have to be located in the covered area. State taxes online for free Any individual visiting a county or parish in the Hurricane Katrina or Hurricane Rita covered disaster area that was injured or killed (and the estate of an individual killed) as a result of the hurricane or its aftermath. State taxes online for free Any estate or trust whose tax records needed to meet a filing or payment deadline are maintained in a covered disaster area. State taxes online for free Generally, any individual who is a worker assisting in the relief activities in a covered disaster area. State taxes online for free However, a relief worker assisting in the Wilma covered disaster area is not an affected taxpayer unless the worker is affiliated with a recognized government or philanthropic organization assisting in the relief activities. State taxes online for free The spouse of an affected taxpayer, solely with regard to a joint income tax return with that taxpayer. State taxes online for free   To ensure correct processing, affected taxpayers should write the assigned disaster designation (for example, “Hurricane Katrina”) in red ink at the top of any forms or documents filed with the IRS. State taxes online for free Affected taxpayers can also identify themselves to the IRS or ask hurricane-related questions by calling the special IRS disaster hotline at 1-866-562-5227. State taxes online for free Acts extended. State taxes online for free   Deadlines for performing the following acts are extended. State taxes online for free Filing any return of income, estate, gift, generation-skipping transfer, excise, or employment tax. State taxes online for free Paying any income, estate, gift, generation-skipping transfer, excise, or employment tax. State taxes online for free This includes making estimated tax payments. State taxes online for free Making certain contributions, distributions, recharacterizing contributions, or making a rollover to or from a qualified retirement plan. State taxes online for free Filing certain petitions with the Tax Court. State taxes online for free Filing a claim for credit or refund of any tax. State taxes online for free Bringing suit upon a claim for credit or refund. State taxes online for free Certain other acts described in Revenue Procedure 2005-27. State taxes online for free You can find Revenue Procedure 2005-27 on page 1050 of Internal Revenue Bulletin 2005-20 at www. State taxes online for free irs. State taxes online for free gov/pub/irs-irbs/irb05-20. State taxes online for free pdf. State taxes online for free Forgiveness of interest and penalties. State taxes online for free   The IRS may forgive the interest and penalties on any underpaid income, estate, gift, employment, or excise tax for the length of any extension. State taxes online for free Charitable Giving Incentives Temporary Suspension of Limits on Charitable Contributions Individuals. State taxes online for free   Qualified contributions are not subject to the overall limit on itemized deductions or the 50% adjusted gross income (AGI) limit. State taxes online for free A qualified contribution is a charitable contribution paid in cash or by check after August 27, 2005, and before January 1, 2006, to a 50% limit organization (other than certain private foundations described in section 509(a)(3)) if you make an election to have the 50% limit not apply to these contributions. State taxes online for free   Your deduction for qualified contributions is limited to your AGI minus your deduction for all other charitable contributions. State taxes online for free You can carry over any contributions you are not able to deduct for 2005 because of this limit. State taxes online for free In 2006, treat the carryover of your unused qualified contributions as a carryover of contributions subject to the 50% limit. State taxes online for free Exception. State taxes online for free   Qualified contributions do not include a contribution to a segregated fund or account for which you (or any person you appoint or designate) have or expect to have advisory privileges with respect to distributions or investments based on your contribution. State taxes online for free Corporations. State taxes online for free   A corporation may elect to deduct qualified cash contributions without regard to the 10% taxable income limit if the contributions were made after August 27, 2005, and before January 1, 2006, to a qualified charitable organization (other than certain private foundations described in section 509(a)(3)), for Hurricane Katrina, Rita, or Wilma relief efforts. State taxes online for free The corporation's deduction for these qualified contributions is limited to 100% of taxable income (as modified for the 10% limit) minus the corporation's deduction for all other charitable contributions. State taxes online for free Any qualified contributions over this limit can be carried over to the next 5 years, subject to the 10% limit. State taxes online for free Partners and shareholders. State taxes online for free   Each partner in a partnership and each shareholder in an S corporation makes a separate election to have the appropriate limit not apply. State taxes online for free More information. State taxes online for free   For more information, see Publication 526 or Publication 542, Corporations. State taxes online for free Publication 526 includes a worksheet you can use to figure your deduction if any limits apply to your charitable contributions. State taxes online for free Standard Mileage Rate for Charitable Use of Vehicles The following are special standard mileage rates in effect in 2005 and 2006 for the cost of operating your automobile for providing charitable services solely related to Hurricane Katrina. State taxes online for free 29 cents per mile for the period August 25 through August 31, 2005. State taxes online for free 34 cents per mile for the period September 1 through December 31, 2005. State taxes online for free 32 cents per mile for the period January 1 through December 31, 2006. State taxes online for free Mileage Reimbursements to Charitable Volunteers You can exclude from income amounts you receive as mileage reimbursements for the use of a private passenger automobile for the benefit of a qualified charitable organization in providing relief related to Hurricane Katrina during the period beginning on August 25, 2005, and ending on December 31, 2006. State taxes online for free You cannot claim a deduction or credit for amounts you receive as a mileage reimbursement. State taxes online for free You must keep records of miles driven, time, place (or use), and purpose of the mileage. State taxes online for free The amount you can exclude from income cannot exceed the standard business mileage rate (shown below) for expenses incurred during the following periods. State taxes online for free 40. State taxes online for free 5 cents per mile for the period August 25 through August 31, 2005. State taxes online for free 48. State taxes online for free 5 cents per mile for the period September 1 through December 31, 2005. State taxes online for free 44. State taxes online for free 5 cents per mile for the period January 1 through December 31, 2006. State taxes online for free Charitable Deduction for Contributions of Food Inventory Any taxpayer engaged in a trade or business is eligible to claim a deduction for a contribution of “apparently wholesome food” inventory to a qualified charitable organization described in section 501(c)(3) (except for private nonoperating foundations) after August 27, 2005, and before January 1, 2006. State taxes online for free “Apparently wholesome food” is food that meets all quality and labeling standards imposed by federal, state, and local laws and regulations even though the food may not be readily marketable due to appearance, age, freshness, grade, size, surplus, or other conditions. State taxes online for free The deduction is equal to the lesser of: The basis of the donated food plus one-half of the gain that would have been realized if the donated food had been sold at fair market value on the date of the donation, or Two times the basis of the donated food. State taxes online for free The taxpayer must receive written certification from the donee stating: The donated food is related to the purpose or function of the donee's basis for exemption under section 501(c)(3) and is to be used solely for the care of the ill, the needy, or infants; and The food was not given in exchange for money, other property, or services. State taxes online for free For a taxpayer other than a C corporation, the deduction is limited to 10% of the taxpayer's total net income from all trades or businesses from which the food contributions were made (figured without regard to the deduction for charitable contributions). State taxes online for free For example, if a taxpayer is a sole proprietor, a shareholder in an S corporation, and a partner in a partnership, and each made a contribution of apparently wholesome food inventory, the taxpayer's deduction is limited to 10% of the taxpayer's total net income from the sole proprietorship, S corporation, and partnership (figured without regard to the deduction for charitable contributions). State taxes online for free Charitable Deduction for Contributions of Book Inventories to Public Schools A corporation (other than an S corporation) may be allowed a charitable deduction for a qualified book contribution made after August 27, 2005, and before January 1, 2006, to a public school that: Provides elementary or secondary education (kindergarten through grade 12), and Normally maintains a regular faculty and curriculum and has a regular enrolled body of pupils or students in attendance at the place where its educational activities are regularly carried on. State taxes online for free . State taxes online for free The deduction is equal to the lesser of: The basis of the donated books plus one-half of the gain that would have been realized if the donated books had been sold at fair market value on the date of the donation, or Two times the basis of the donated books. State taxes online for free The corporation must receive written certification from the school stating that the donated books are suitable for the organization's educational programs and will be used for such programs. State taxes online for free Casualty and Theft Losses The following paragraphs explain changes to casualty and theft losses that were caused by Hurricane Katrina, Rita, or Wilma. State taxes online for free For more information, see Publication 547. State taxes online for free Limits on personal casualty or theft losses caused by Hurricane Katrina, Rita, or Wilma. State taxes online for free   The following losses to personal use property are not subject to the $100 or 10% of adjusted gross income limits. State taxes online for free Losses that arose in the Hurricane Katrina disaster area after August 24, 2005, and that were caused by Hurricane Katrina. State taxes online for free Losses that arose in the Hurricane Rita disaster area after September 22, 2005, and that were caused by Hurricane Rita. State taxes online for free Losses that arose in the Hurricane Wilma disaster area after October 22, 2005, and that were caused by Hurricane Wilma. State taxes online for free Qualifying losses include losses from flooding or other casualty, and from theft, that arose in the hurricane disaster area and that were caused by the hurricane. State taxes online for free Special instructions for individuals who elect to claim a Hurricane Katrina, Rita, or Wilma casualty or theft loss for 2004. State taxes online for free   Casualty and theft losses are generally deductible only in the year the casualty occurred or theft was discovered. State taxes online for free However, Hurricane Katrina, Rita, and Wilma are Presidentially declared disasters. State taxes online for free Therefore, you can elect to deduct losses from these hurricanes on your tax return for the previous year. State taxes online for free If you make this election, use the following additional instructions to complete your forms. State taxes online for free   Individuals filing or amending their 2004 tax return whose only casualty or theft losses to personal use property claimed on that return were caused by Hurricane Katrina, Rita, or Wilma should write “Hurricane Katrina,” “Hurricane Rita,” or “Hurricane Wilma” at the top of Form 1040 or 1040X. State taxes online for free They must also complete and attach the 2004 Form 4684 and write “Hurricane Katrina,”“Hurricane Rita,” or “Hurricane Wilma” on the dotted line next to line 11 and enter -0- on lines 11 and 17. State taxes online for free   Individuals filing or amending their 2004 tax return who also have casualty or theft losses to personal use property not related to Hurricane Katrina, Rita, or Wilma should disregard the caution directing taxpayers to use only one Form 4684, located above line 13, and complete lines 13 through 18 on two Forms 4684. State taxes online for free The Form 1040 or 1040X and the first Form 4684 should be prepared as explained above for Hurricane Katrina, Rita, or Wilma losses only. State taxes online for free The second Form 4684 should be prepared in the normal manner for all gains and non-Hurricane Katrina, Rita or Wilma losses. State taxes online for free If both Forms 4684 have a loss on line 18, they should carry the combined losses from that line to Schedule A (Form 1040), line 19. State taxes online for free If there is a gain on line 15 of the second Form 4684, disregard the instruction to enter it on Schedule D (Form 1040), and instead enter on Schedule A (Form 1040), line 19, the excess of the loss from the first Form 4684 over the gain on line 15 of the second Form 4684. State taxes online for free , Time limit for making election. State taxes online for free   You must make this election to claim your casualty or theft loss in 2004 by the later of the following dates. State taxes online for free The due date (without extensions) for filing your 2005 income tax return. State taxes online for free The due date (with extensions) for filing your 2004 income tax return. State taxes online for free Example. State taxes online for free If you are a calendar year individual taxpayer, you have until April 17, 2006, to amend your 2004 tax return to claim a casualty or theft loss that occurred during 2005. State taxes online for free Replacement Period for Nonrecognition of Gain Generally, an involuntary conversion occurs when property is damaged, destroyed, stolen, seized, requisitioned, or condemned, and you receive other property or money in payment, such as insurance or a condemnation award. State taxes online for free Generally, you do not have to report a gain (if any) if you replace the property within 2 years (4 years for a main home in a Presidentially declared disaster area). State taxes online for free However, for property that was involuntarily converted after August 24, 2005, as a result of Hurricane Katrina, a 5-year replacement period applies if substantially all of the use of the replacement property is in the Hurricane Katrina disaster area. State taxes online for free For more information, see the Instructions for Form 4684. State taxes online for free Net Operating Losses Qualified GO Zone loss. State taxes online for free   Generally, you can carry a net operating loss (NOL) back to the 2 tax years before the NOL year. State taxes online for free However, the portion of an NOL that is a qualified GO Zone loss can be carried back to the 5 tax years before the NOL year. State taxes online for free In addition, the 90% limit on the alternative tax NOL deduction (ATNOLD) does not apply to such portion of the ATNOLD. State taxes online for free   A qualified GO Zone loss is the smaller of: The excess of the NOL for the year over the specified liability loss for the year to which a 10-year carryback applies, or The total of the following deductions (to the extent they are taken into account in computing the NOL for the tax year): Qualified GO Zone casualty loss (as defined below), Moving expenses paid or incurred after August 27, 2005, and before January 1, 2008, for the employment of an individual whose main home was in the GO Zone before August 28, 2005, who was unable to remain in that home because of Hurricane Katrina, and whose main job location (after the move) is in the GO Zone, Temporary housing expenses paid or incurred after August 27, 2005, and before January 1, 2008, to house employees of the taxpayer whose main job location is in the GO Zone, Depreciation or amortization allowable for any qualified GO Zone property (even if you elected not to claim the special GO Zone depreciation allowance for such property) for the year placed in service, and Repair expenses (including expenses for the removal of debris) paid or incurred after August 27, 2005, and before January 1, 2008, for any damage from Hurricane Katrina to property located in the GO Zone. State taxes online for free Qualified GO Zone casualty loss. State taxes online for free   A qualified GO Zone casualty loss is any deductible section 1231 loss of property located in the GO Zone if the loss was caused by Hurricane Katrina. State taxes online for free For this purpose, the amount of the loss is reduced by any recognized gain from an involuntary conversion caused by Hurricane Katrina of property located in the GO Zone. State taxes online for free Any such loss taken into account in figuring your qualified GO Zone loss is not eligible for the election to be treated as having occurred in the previous tax year. State taxes online for free 5-year NOL carryback of certain timber losses. State taxes online for free   Generally, you can carry the portion of an NOL due to income and deductions attributable to a farming business back to the 5 tax years before the NOL year. State taxes online for free You can treat income and deductions attributable to qualified timber property as attributable to a farming business if any portion of the property is located in the GO Zone, Rita GO Zone, or Wilma GO Zone, and the income and deductions are allocable to the part of your tax year which is after the applicable date below. State taxes online for free August 27, 2005, if any portion of the property is located in the GO Zone. State taxes online for free September 22, 2005, if any portion of the property is located in the Rita GO Zone (but not in the GO Zone). State taxes online for free October 22, 2005, if any portion of the property is located in the Wilma GO Zone (but not in the GO Zone or the RITA GO Zone). State taxes online for free   These rules will not apply after 2006. State taxes online for free   However, these rules apply only to a timber producer who: Held qualified timber property (defined in Publication 535, Business Expenses) on the applicable date below: August 28, 2005, if any portion of the property is located in the GO Zone, September 23, 2005, if any portion of the property is located in the Rita GO Zone (but not in the GO Zone), or October 23, 2005, if any portion of the property is located in the Wilma GO Zone (but not in the GO Zone or the Rita GO Zone); Is not a corporation with stock publicly traded on an established securities market; Is not a real estate investment trust; and Did not hold more than 500 acres of qualified timber property on the applicable date above. State taxes online for free More information. State taxes online for free   For more information on NOLs, see Publication 536 or Publication 542, Corporations. State taxes online for free IRAs and Other Retirement Plans New rules provide for tax-favored withdrawals, repayments, and loans from certain retirement plans for taxpayers who suffered economic losses as a result of Hurricane Katrina, Rita, or Wilma. State taxes online for free Definitions Qualified hurricane distribution. State taxes online for free   A qualified hurricane distribution is any distribution you received from an eligible retirement plan if all of the following apply. State taxes online for free The distribution was made: After August 24, 2005, and before January 1, 2007, for Hurricane Katrina; After September 22, 2005, and before January 1, 2007, for Hurricane Rita; or After October 22, 2005, and before January 1, 2007, for Hurricane Wilma. State taxes online for free Your main home was located in a hurricane disaster area listed below on the date shown for that area. State taxes online for free August 28, 2005, for the Hurricane Katrina disaster area. State taxes online for free September 23, 2005, for the Hurricane Rita disaster area. State taxes online for free October 23, 2005, for the Hurricane Wilma disaster area. State taxes online for free You sustained an economic loss because of Hurricane Katrina, Rita, or Wilma and your main home was in that hurricane disaster area on the date shown in (2) above for that hurricane. State taxes online for free Examples of an economic loss include, but are not limited to: Loss, damage to, or destruction of real or personal property from fire, flooding, looting, vandalism, theft, wind, or other cause; Loss related to displacement from your home; or Loss of livelihood due to temporary or permanent layoffs. State taxes online for free   If (1) through (3) above apply, you can generally designate any distribution (including periodic payments and required minimum distributions) from an eligible retirement plan as a qualified hurricane distribution, regardless of whether the distribution was made on account of Hurricane Katrina, Rita, or Wilma. State taxes online for free Qualified hurricane distributions are permitted without regard to your need or the actual amount of your economic loss. State taxes online for free   The total of your qualified hurricane distributions from all plans is limited to $100,000. State taxes online for free If you have distributions in excess of $100,000 from more than one type of plan, such as a 401(k) plan and an IRA, you may allocate the $100,000 limit among the plans any way you choose. State taxes online for free   A reduction or offset (after August 24, 2005, for Katrina; after September 22, 2005, for Rita; or after October 22, 2005, for Wilma) of your account balance in an eligible retirement plan in order to repay a loan can also be designated as a qualified hurricane distribution. State taxes online for free Eligible retirement plan. State taxes online for free   An eligible retirement plan can be any of the following. State taxes online for free A qualified pension, profit-sharing, or stock bonus plan (including a 401(k) plan). State taxes online for free A qualified annuity plan. State taxes online for free A tax-sheltered annuity contract. State taxes online for free A governmental section 457 deferred compensation plan. State taxes online for free A traditional, SEP, SIMPLE, or Roth IRA. State taxes online for free Main home. State taxes online for free   Generally, your main home is the home where you live most of the time. State taxes online for free A temporary absence due to special circumstances, such as illness, education, business, military service, evacuation, or vacation, will not change your main home. State taxes online for free Taxation of Qualified Hurricane Distributions Qualified hurricane distributions are included in income in equal amounts over three years. State taxes online for free However, if you elect, you can include the entire distribution in your income in the year it was received. State taxes online for free Qualified hurricane distributions are not subject to the additional 10% tax (or the additional 25% tax for certain distributions from SIMPLE IRAs) on early distributions from qualified retirement plans (including IRAs). State taxes online for free However, any distributions you receive in excess of the $100,000 qualified hurricane distribution limit may be subject to the additional tax on early distributions. State taxes online for free For more information, see Form 8915. State taxes online for free Repayment of Qualified Hurricane Distributions If you choose, you generally can repay any portion of a qualified hurricane distribution that is eligible for tax-free rollover treatment to an eligible retirement plan. State taxes online for free Also, you can repay a qualified hurricane distribution made on account of a hardship from a retirement plan. State taxes online for free However, see Exceptions below for qualified hurricane distributions you cannot repay. State taxes online for free You have three years from the day after the date you received the distribution to make a repayment. State taxes online for free Amounts that are repaid are treated as a qualified rollover and are not included in income. State taxes online for free Also, for purposes of the one-rollover-per-year limitation for IRAs, a repayment to an IRA is not considered a qualified rollover. State taxes online for free See Form 8915 for more information on how to report repayments. State taxes online for free Exceptions. State taxes online for free   You cannot repay the following types of distributions. State taxes online for free Qualified hurricane distributions received as a beneficiary (other than a surviving spouse). State taxes online for free Required minimum distributions. State taxes online for free Periodic payments (other than from an IRA) that are for: A period of 10 years or more, Your life or life expectancy, or The joint lives or joint life expectancies of you and your beneficiary. State taxes online for free Repayment of Qualified Distributions for the Purchase or Construction of a Main Home If you received a qualified distribution to purchase or construct a main home in the Hurricane Katrina, Rita, or Wilma disaster area, you can repay that distribution before March 1, 2006, to an eligible retirement plan after August 24, 2005 (Katrina); after September 22, 2005 (Rita); or after October 22, 2005 (Wilma). State taxes online for free For this purpose, an eligible retirement plan is any plan, annuity, or IRA to which a qualified rollover can be made. State taxes online for free To be a qualified distribution, the distribution must meet all of the following requirements. State taxes online for free The distribution is a hardship distribution from a 401(k) plan, a hardship distribution from a tax-sheltered annuity contract, or a qualified first-time homebuyer distribution from an IRA. State taxes online for free The distribution was received in 2005 after February 28 and before: August 29 for Hurricane Katrina; September 24 for Hurricane Rita; or October 24 for Hurricane Wilma. State taxes online for free The distribution was to be used to purchase or construct a main home in the Hurricane Katrina, Rita, or Wilma disaster area that was not purchased or constructed because of Hurricane Katrina, Rita, or Wilma. State taxes online for free Amounts that are repaid before March 1, 2006, are treated as a qualified rollover and are not included in income. State taxes online for free Also, for purposes of the one-rollover-per-year limitation for IRAs, a repayment to an IRA is not considered a qualified rollover. State taxes online for free A qualified distribution not repaid before March 1, 2006, may be taxable for 2005 and subject to the additional 10% tax (or the additional 25% tax for certain SIMPLE IRAs) on early distributions. State taxes online for free You must file Form 8915 if you received a qualified distribution that you repaid, in whole or in part, before March 1, 2006. State taxes online for free Loans From Qualified Plans The following benefits are available to qualified individuals. State taxes online for free Increases to the limits for distributions treated as loans from employer plans. State taxes online for free A 1-year suspension for payments due on plan loans. State taxes online for free Qualified individual. State taxes online for free   You are a qualified individual if any of the following apply. State taxes online for free Your main home on August 28, 2005, was located in the Hurricane Katrina disaster area and you had an economic loss because of Hurricane Katrina. State taxes online for free Your main home on September 23, 2005, was located in the Hurricane Rita disaster area and you had an economic loss because of Hurricane Rita. State taxes online for free Your main home on October 23, 2005, was located in the Hurricane Wilma disaster area and you had an economic loss because of Hurricane Wilma. State taxes online for free Examples of an economic loss include, but are not limited to: Loss, damage to, or destruction of real or personal property from fire, flooding, looting, vandalism, theft, wind, or other cause; Loss related to displacement from your home; or Loss of livelihood due to temporary or permanent layoffs. State taxes online for free Limits on plan loans. State taxes online for free   The $50,000 limit for distributions treated as plan loans is increased to $100,000. State taxes online for free In addition, the limit based on 50% of your vested accrued benefit is increased to 100% of that benefit. State taxes online for free The higher limits apply only to loans received during the following period. State taxes online for free If your main home was located in the Hurricane Katrina disaster area, the period began on September 24, 2005, and ends on December 31, 2006. State taxes online for free If your main home was located in the Hurricane Rita or Wilma disaster area, the period began on December 21, 2005, and ends on December 31, 2006. State taxes online for free If you are a qualified individual based on Hurricane Katrina and another hurricane, use the period based on Hurricane Katrina. State taxes online for free One-year suspension of loan payments. State taxes online for free   Payments on plan loans due before 2007 may be suspended for 1 year by the plan administrator. State taxes online for free To qualify for the suspension, the due date for any loan payment must occur during the period beginning on: August 28, 2005, if your main home was located in the Hurricane Katrina disaster area. State taxes online for free September 23, 2005, if your main home was located in the Hurricane Rita disaster area. State taxes online for free October 23, 2005, if your main home was located in the Hurricane Wilma disaster area. State taxes online for free If you are a qualified individual based on more than one hurricane, use the period with the earliest beginning date. State taxes online for free Additional Tax Relief for Individuals Earned Income Credit and Child Tax Credit You can elect to use your 2004 earned income to figure your earned income credit (EIC) and additional child tax credit for 2005 if: Your 2005 earned income is less than your 2004 earned income, and At least one of the following statements is true. State taxes online for free Your main home on August 25, 2005, was in the Gulf Opportunity (GO) Zone. State taxes online for free Your main home on August 25, 2005, was in the Hurricane Katrina disaster area and you were displaced from that home because of Hurricane Katrina. State taxes online for free Your main home on September 23, 2005, was in the Rita GO Zone. State taxes online for free Your main home on September 23, 2005, was in the Hurricane Rita disaster area and you were displaced from that home because of Hurricane Rita. State taxes online for free Your main home on October 23, 2005, was in the Wilma GO Zone. State taxes online for free Your main home on October 23, 2005, was in the Hurricane Wilma disaster area and you were displaced from that home because of Hurricane Wilma. State taxes online for free Earned income. State taxes online for free    For the purpose of this election, your earned income for both the EIC and the additional child tax credit is the amount of earned income used to figure your EIC, even if you did not take the EIC and even if that amount is different than your earned income for the additional child tax credit. State taxes online for free If you are claiming only the additional child tax credit, you must figure the amount of your earned income for EIC purposes to determine your eligibility to make the election and the amount of the credit. State taxes online for free Joint returns. State taxes online for free   If you file a joint return, you qualify to make this election even if only one spouse meets the requirements. State taxes online for free If you make the election, your 2004 earned income is the sum of your 2004 earned income and your spouse's 2004 earned income. State taxes online for free Making the election. State taxes online for free   If you make the election to use your 2004 earned income, the election applies for figuring both the EIC and the additional child tax credit. State taxes online for free However, you can make the election for the additional child tax credit even if you do not take the EIC. State taxes online for free   Electing to use your 2004 earned income may increase or decrease your EIC. State taxes online for free Take the following steps to decide whether to make the election. State taxes online for free Figure your 2005 EIC using your 2004 earned income. State taxes online for free Figure your 2005 additional child tax credit using your 2004 earned income for EIC purposes. State taxes online for free Add the results of (1) and (2). State taxes online for free Figure your 2005 EIC using your 2005 earned income. State taxes online for free Figure your 2005 additional child tax credit using your 2005 earned income for additional child tax credit purposes. State taxes online for free Add the results of (4) and (5). State taxes online for free Compare the results of (3) and (6). State taxes online for free If (3) is larger than (6), it is to your benefit to make the election. State taxes online for free If (3) is equal to or smaller than (6), making the election will not help you. State taxes online for free   If you elect to use your 2004 earned income and you are claiming the EIC, enter “PYEI” and the amount of your 2004 earned income on the dotted line next to line 66a of Form 1040, on the line next to line 41a of Form 1040A, or in the space to the left of line 8a of Form 1040EZ. State taxes online for free   If you elect to use your 2004 earned income and you are claiming the additional child tax credit, enter your 2004 earned income for EIC purposes (even if you did not claim the EIC) on Form 8812, Additional Child Tax Credit, line 4a, and check the box on that line. State taxes online for free   Because Form 8812 was released before the GO Zone legislation was enacted, the instructions refer only to individuals whose main home was in the Hurricane Katrina disaster area. State taxes online for free When completing Form 8812, line 4a, use the above rules to determine your eligibility to make the election (instead of the Form 8812 instructions). State taxes online for free Getting your 2004 tax return information. State taxes online for free   If you do not have your 2004 tax records, you can get the amount of earned income used to figure your 2004 EIC by calling 1-866-562-5227. State taxes online for free You can also get this information by visiting the IRS website at www. State taxes online for free irs. State taxes online for free gov. State taxes online for free   If you prefer to figure your 2004 earned income yourself, copies or transcripts of your filed and processed tax returns can help you reconstruct your tax records. State taxes online for free See Request for Copy or Transcript of Tax Return on page 16. State taxes online for free Additional Exemption for Housing Individuals Displaced by Hurricane Katrina You may be able to claim an additional exemption amount of $500 for providing housing in your main home for each individual displaced by Hurricane Katrina. State taxes online for free The additional exemption amount is claimed on new Form 8914. State taxes online for free The additional exemption amount is allowable once per taxpayer for a specific individual in 2005 or 2006, but not in both years. State taxes online for free The maximum additional exemption amount you can claim for all displaced individuals is $2,000 ($1,000 if married filing separately). State taxes online for free The additional exemption amount you claim for displaced individuals in 2005 will reduce the $2,000 maximum for 2006. State taxes online for free If two or more taxpayers share the same main home, only one taxpayer in that main home can claim the additional exemption amount for a specific displaced individual. State taxes online for free If married filing separately, only one spouse may claim the additional exemption amount for a specific displaced individual. State taxes online for free In order for you to be considered to have provided housing, you must have a legal interest in the main home (that is, own or rent the home). State taxes online for free To qualify as a displaced individual, the individual: Must have had his or her main home in the Hurricane Katrina disaster area on August 28, 2005, and he or she must have been displaced from that home. State taxes online for free If the individual's main home was located outside the core disaster area, that home must have been damaged by Hurricane Katrina or the individual must have been evacuated from that home because of Hurricane Katrina, Must have been provided housing in your main home for a period of at least 60 consecutive days ending in the tax year in which the exemption is claimed, and Cannot be your spouse or dependent. State taxes online for free You cannot claim the additional exemption amount if you received rent (or any other amount) from any source for providing the housing. State taxes online for free You are permitted to receive payments or reimbursements that do not relate to normal housing costs, including the following. State taxes online for free Food, clothing, or personal items consumed or used by the displaced individual. State taxes online for free Reimbursement for the cost of any long distance telephone calls made by the displaced individual. State taxes online for free Reimbursement for the cost of gasoline for the displaced individual's use of your vehicle. State taxes online for free However, you cannot claim the additional exemption amount if you received any reimbursement for the extra costs of heat, electricity, or water used by the displaced individual. State taxes online for free Also, you must report on Form 8914 the displaced individual's social security number or individual taxpayer identification number to claim an additional exemption amount. State taxes online for free For more information, see Form 8914. State taxes online for free Education Credits The education credits have been expanded for students attending an eligible educational institution located in the Gulf Opportunity Zone (GOZ students) for any tax year beginning in 2005 or 2006. State taxes online for free The Hope credit for a GOZ student is increased to 100% of the first $2,000 in qualified education expenses and 50% of the next $2,000 of qualified education expenses for a maximum credit of $3,000 per student. State taxes online for free The lifetime learning credit rate for a GOZ student is increased from 20% to 40%. State taxes online for free The definition of qualified education expenses for a GOZ student also has been expanded. State taxes online for free In addition to tuition and fees required for the student's enrollment or attendance at an eligible educational institution, qualified education expenses for a GOZ student include the following. State taxes online for free Books, supplies, and equipment required for enrollment or attendance at an eligible educational institution. State taxes online for free For a special needs student, expenses that are necessary for that person's enrollment or attendance at an eligible educational institution. State taxes online for free For a student who is at least a half-time student, the reasonable costs of room and board, but only to the extent that the costs are not more than the greater of the following two amounts. State taxes online for free The allowance for room and board, as determined by the eligible educational institution, that was included in the cost of attendance (for federal financial aid purposes) for a particular academic period and living arrangement of the student. State taxes online for free The actual amount charged if the student is residing in housing owned or operated by the eligible educational institution. State taxes online for free You will need to contact the eligible educational institution for qualified room and board costs. State taxes online for free For more information, see Form 8863. State taxes online for free Recapture of Federal Mortgage Subsidy Generally, if you financed your home under a federally subsidized program (loans from tax-exempt qualified mortgage bonds or loans with mortgage credit certificates), you may have to recapture all or part of the benefit you received from that program when you sell or otherwise dispose of your home. State taxes online for free However, you do not have to recapture any benefit if your mortgage loan was a qualified home improvement loan of not more than $15,000. State taxes online for free This amount is increased to $150,000 if the loan was provided before 2011 and was used to: Repair damage caused by Hurricane Katrina to a residence in the Hurricane Katrina disaster area, or Alter, repair, or improve an existing owner-occupied residence in the GO Zone, Rita GO Zone, or Wilma GO Zone. State taxes online for free Exclusion of Certain Cancellations of Indebtedness by Reason of Hurricane Katrina Generally, discharges of nonbusiness debts (such as mortgages) made after August 24, 2005, and before January 1, 2007, are excluded from income for individuals whose main home was in the Hurricane Katrina disaster area on August 25, 2005. State taxes online for free If the individual's main home was located outside the core disaster area, the individual also must have had an economic loss because of Hurricane Katrina. State taxes online for free Examples of an economic loss include, but are not limited to: Loss, damage to, or destruction of real or personal property from fire, flooding, looting, vandalism, theft, wind, or other cause; Loss related to displacement from your home; or Loss of livelihood due to temporary or permanent layoffs. State taxes online for free This relief does not apply to any debt secured by real property located outside the Hurricane Katrina disaster area. State taxes online for free You may also have to reduce certain tax attributes by the amount excluded. State taxes online for free For more information, see Form 982, Reduction of Tax Attributes Due to Discharge of Indebtedness (and Section 1082 Basis Adjustment). State taxes online for free Tax Relief for Temporary Relocation Under the Gulf Opportunity Zone Act of 2005, the IRS may adjust the internal revenue laws to ensure that taxpayers do not lose a deduction or credit or experience a change of filing status in 2005 or 2006 as a result of a temporary relocation caused by Hurricane Katrina, Rita, or Wilma. State taxes online for free However, any such adjustment must ensure that an individual is not taken into account by more than one taxpayer for the same tax benefit. State taxes online for free The IRS has exercised this authority as follows. State taxes online for free In determining whether you furnished over one-half of the cost of maintaining a household, you can exclude from total household costs any assistance received from the government or charitable organizations because you were temporarily relocated as a result of Hurricane Katrina, Rita, or Wilma. State taxes online for free In determining whether you provided more than one-half of an individual's support, you can disregard any assistance received from the government or charitable organizations because you were temporarily relocated as a result of Hurricane Katrina, Rita, or Wilma. State taxes online for free You can treat as a student an individual who enrolled in school before August 25, 2005, and who is unable to attend classes because of Hurricane Katrina, for each month of the enrollment period that individual is prevented by Hurricane Katrina from attending school as planned. State taxes online for free You can treat as a student an individual who enrolled in school before September 23, 2005, and who is unable to attend classes because of Hurricane Rita, for each month of the enrollment period that individual is prevented by Hurricane Rita from attending school as planned. State taxes online for free You can treat as a student an individual who enrolled in school before October 23, 2005, and who is unable to attend classes because of Hurricane Wilma, for each month of the enrollment period that individual is prevented by Hurricane Wilma from attending school as planned. State taxes online for free Additional Tax Relief for Businesses Special Depreciation Allowance You can take a special depreciation allowance for qualified Gulf Opportunity (GO) Zone property (as defined below) you place in service after August 27, 2005. State taxes online for free The allowance is an additional deduction of 50% of the property's depreciable basis (after any section 179 deduction and before figuring your regular depreciation deduction). State taxes online for free The special allowance applies only for the first year the property is placed in service. State taxes online for free The allowance is deductible for both the regular tax and the alternative minimum tax (AMT). State taxes online for free There is no AMT adjustment required for any depreciation figured on the remaining basis of the property. State taxes online for free You can elect not to deduct the special GO Zone depreciation allowance for qualified property. State taxes online for free If you make this election for any property, it applies to all property in the same class placed in service during the year. State taxes online for free Qualified GO Zone property. State taxes online for free   Property that qualifies for the special GO Zone depreciation allowance includes the following. State taxes online for free Tangible property depreciated under the modified accelerated cost recovery system (MACRS) with a recovery period of 20 years or less. State taxes online for free Water utility property. State taxes online for free Computer software that is readily available for purchase by the general public, is subject to a nonexclusive license, and has not been substantially modified. State taxes online for free (The cost of some computer software is treated as part of the cost of hardware and is depreciated under MACRS. State taxes online for free ) Qualified leasehold improvement property. State taxes online for free Nonresidential real property and residential rental property. State taxes online for free   For more information on this property, see Publication 946. State taxes online for free Other tests to be met. State taxes online for free   To be qualified GO Zone property, the property must also meet all of the following tests. State taxes online for free You must have acquired the property, by purchase, after August 27, 2005, but only if no binding written contract for the acquisition was in effect before August 28, 2005. State taxes online for free The property must be placed in service before 2008 (2009 in the case of nonresidential real property and residential rental property). State taxes online for free Substantially all of the use of the property must be in the GO Zone and in the active conduct of your trade or business in the GO Zone. State taxes online for free The original use of the property in the GO Zone must begin with you after August 27, 2005. State taxes online for free Used property can be qualified GO Zone property if it has not previously been used within the GO Zone. State taxes online for free Also, additional capital expenditures you incurred after August 27, 2005, to recondition or rebuild your property meet the original use test if the original use of the property in the GO Zone began with you. State taxes online for free Excepted property. State taxes online for free   Qualified GO Zone property does not include any of the following. State taxes online for free Property required to be depreciated using the Alternative Depreciation System (ADS). State taxes online for free Property any portion of which is financed with the proceeds of a tax-exempt obligation under section 103. State taxes online for free Property for which you are claiming a commercial revitalization deduction. State taxes online for free Any property used in connection with any private or commercial golf course, country club, massage parlor, hot tub facility, suntan facility, or any store, the principal business of which is the sale of alcoholic beverages for consumption off premises. State taxes online for free Any gambling or animal racing property (as defined below). State taxes online for free Property in the same class as that for which you elected not to claim the special GO Zone depreciation allowance. State taxes online for free   Gambling or animal racing property is: Any equipment, furniture, software, or other property used directly in connection with gambling, the racing of animals, or the on-site viewing of such racing, and The portion of any real property (determined by square footage) that is dedicated to gambling, the racing of animals, or the on-site viewing of such racing, unless this portion is less than 100 square feet. State taxes online for free Recapture of special allowance. State taxes online for free   If, in any year after the year you claim the special allowance, the property ceases to be qualified GO Zone property, you may have to recapture as ordinary income any excess benefit you received from claiming the special allowance. State taxes online for free Increased Section 179 Deduction An increased section 179 deduction is allowable for qualified section 179 Gulf Opportunity (GO) Zone property (as defined later) placed in service in the GO Zone. State taxes online for free Increased dollar limit. State taxes online for free   The limit on the section 179 deduction ($105,000 for 2005, $108,000 for 2006) for qualified section 179 GO Zone property acquired after August 27, 2005, is increased by the smaller of: $100,000, or The cost of qualified section 179 GO Zone property placed in service during the year (including such property placed in service by your spouse, even if you are filing a separate return). State taxes online for free   The amount for which you can make the election is reduced if the cost of all qualified section 179 GO Zone property you placed in service during the year exceeds $420,000 for 2005 ($430,000 for 2006) increased by the smaller of: $600,000, or The cost of qualified section 179 GO Zone property placed in service during the year. State taxes online for free Qualified section 179 GO Zone property. State taxes online for free   Qualified section 179 GO Zone property is section 179 property that is qualified GO Zone property (explained earlier under Special Depreciation Allowance). State taxes online for free Section 179 property does not include nonresidential real property or residential rental property. State taxes online for free For more information, including the requirements that must be met for property to qualify for the section 179 deduction, see chapter 2 of Publication 946. State taxes online for free Work Opportunity Credit For the work opportunity credit, the definition of “targeted group employee” has been expanded to include a Hurricane Katrina employee. State taxes online for free Hurricane Katrina employee. State taxes online for free   A Hurricane Katrina employee is: A person who, on August 28, 2005, had a main home in the core disaster area and, within a two-year period beginning on that date, is hired to perform services principally in the core disaster area; or A person who, on August 28, 2005, had a main home in the core disaster area, was displaced from that main home as a result of Hurricane Katrina, and was hired during the period beginning on August 28, 2005, and ending on December 31, 2005. State taxes online for free Qualified wages. State taxes online for free   Generally, qualified wages do not include wages you paid to a targeted group employee who worked for you previously. State taxes online for free However, wages will qualify if: You paid them to an employee who is a Hurricane Katrina employee, The employee was not in your employment on August 28, 2005, and This is your first hire of the employee as a Hurricane Katrina employee after August 28, 2005. State taxes online for free   For more information, see Form 5884. State taxes online for free Certification requirements. State taxes online for free   An employee must provide to the employer reasonable evidence that he or she is a Hurricane Katrina employee. State taxes online for free An employer may accept a completed Form 8850, Pre-Screening Notice and Certification Request for the Work Opportunity and Welfare-to-Work Credits, as such evidence. State taxes online for free The certification requirements described in Form 8850 do not apply to a Hurricane Katrina employee. State taxes online for free Do not send any Forms 8850 that have only box 1 checked to the state employment security agency. State taxes online for free Instead, the employer should keep these Forms 8850 with the employer's other records. State taxes online for free For more information, see Form 8850 and its instructions. State taxes online for free Employee Retention Credit An eligible employer who conducted an active trade or business in the Gulf Opportunity (GO) Zone, the Rita GO Zone, or the Wilma GO Zone can claim the employee retention credit. State taxes online for free The credit is 40% of qualified wages for each eligible employee (up to a maximum of $6,000 in qualified wages per employee). State taxes online for free Generally, you must reduce your deduction for salaries and wages by the amount of this credit (before the tax liability limit). State taxes online for free Use Form 5884-A to claim the credit. State taxes online for free See the following rules and definitions for each hurricane. State taxes online for free Employers affected by Hurricane Katrina. State taxes online for free   The following definitions apply to employers affected by Hurricane Katrina. State taxes online for free Eligible employer. State taxes online for free   For this purpose, an eligible employer is any employer who conducted an active trade or business on August 28, 2005, in the GO Zone and whose trade or business was inoperable on any day after August 28, 2005, and before January 1, 2006, because of damage caused by Hurricane Katrina. State taxes online for free Eligible employee. State taxes online for free   For this purpose, an eligible employee is an employee whose principal place of employment on August 28, 2005, with such eligible employer was in the GO Zone. State taxes online for free An employee is not an eligible employee for purposes of Hurricane Katrina if the employee is treated as an eligible employee for the work opportunity credit. State taxes online for free Employers affected by Hurricane Rita. State taxes online for free   The following definitions apply to employers affected by Hurricane Rita. State taxes online for free Eligible employer. State taxes online for free   For this purpose, an eligible employer is any employer who conducted an active trade or business on September 23, 2005, in the Rita GO Zone and whose trade or business was inoperable on any day after September 23, 2005, and before January 1, 2006, because of damage caused by Hurricane Rita. State taxes online for free Eligible employee. State taxes online for free   For this purpose, an eligible employee is an employee whose principal place of employment on September 23, 2005, with such eligible employer was in the Rita GO Zone. State taxes online for free An employee is not an eligible employee for purposes of Hurricane Rita if the employee is treated as an eligible employee for the work opportunity credit or the Hurricane Katrina employee retention credit. State taxes online for free Employers affected by Hurricane Wilma. State taxes online for free   The following definitions apply to employers affected by Hurricane Wilma. State taxes online for free Eligible employer. State taxes online for free   For this purpose, an eligible employer is any employer who conducted an active trade or business on October 23, 2005, in the Wilma GO Zone and whose trade or business was inoperable on any day after October 23, 2005, and before January 1, 2006, because of damage caused by Hurricane Wilma. State taxes online for free Eligible employee. State taxes online for free   For this purpose, an eligible employee is an employee whose principal place of employment on October 23, 2005, with such eligible employer was in the Wilma GO Zone. State taxes online for free An employee is not an eligible employee for purposes of Hurricane Wilma if the employee is treated as an eligible employee for the work opportunity credit or the Hurricane Katrina or Rita employee retention credit. State taxes online for free Qualified wages. State taxes online for free   Qualified wages are wages you paid or incurred before January 1, 2006, (up to $6,000 per employee) for an eligible employee beginning on the date your trade or business first became inoperable at the employee's principal place of employment immediately before the applicable hurricane, and ending on the date your trade or business resumed significant operations at that place. State taxes online for free In addition, the wages must have been paid or incurred after the following date. State taxes online for free August 28, 2005, for Hurricane Katrina. State taxes online for free September 23, 2005, for Hurricane Rita. State taxes online for free October 23, 2005, for Hurricane Wilma. State taxes online for free    This includes wages paid even if the employee performed no services, performed services at a place of employment other than the principal place of employment, or performed services at the principal place of employment before significant operations resumed. State taxes online for free    Wages qualifying for the credit generally have the same meaning as wages subject to the Federal Unemployment Tax Act (FUTA). State taxes online for free Qualified wages also include amounts you paid for medical or hospitalization expenses in connection with sickness or accident disability. State taxes online for free Qualified wages for any employee must be reduced by the amount of any work supplementation payment you received under the Social Security Act. State taxes online for free   For agricultural employees, if the work performed by any employee during more than half of any pay period qualified under FUTA as agricultural labor, that employee's wages subject to social security and Medicare taxes are qualified wages. State taxes online for free For a special rule that applies to railroad employees, see section 51(h)(1)(B). State taxes online for free   Qualified wages do not include the following. State taxes online for free Wages paid to your dependent or a related individual. State taxes online for free See section 51(i)(1). State taxes online for free Wages paid to any employee during the period for which you received payment for the employee from a federally funded on-the-job training program. State taxes online for free Wages for services of replacement workers during a strike or lockout. State taxes online for free   For more information, see Form 5884-A. State taxes online for free Hurricane Katrina Housing Credit An employer who conducted an active trade or business in the Gulf Opportunity (GO) Zone can claim the Hurricane Katrina housing credit. State taxes online for free The credit is equal to 30% of the value (up to $600 per month per employee) of in-kind lodging furnished to a qualified employee (and the employee's spouse or dependents) from January 1, 2006, through July 1, 2006. State taxes online for free The value of the lodging is excluded from the income of the qualified employee but is treated as wages for purposes of taxes imposed under the Federal Insurance Contributions Act (FICA) and the Federal Unemployment Tax Act (FUTA). State taxes online for free Generally, you must reduce your deduction for salaries and wages by the amount of this credit (before the tax liability limit). State taxes online for free The employer must use Form 5884-A to claim the credit. State taxes online for free A qualified employee is an individual who had a main home in the GO Zone on August 28, 2005, and who performs substantially all employment services in the GO Zone for the employer furnishing the lodging. State taxes online for free The employee cannot be your dependent or a related individual. State taxes online for free See section 51(i)(1). State taxes online for free For more information, see Form 5884-A. State taxes online for free Reforestation Costs You may be able to elect to deduct a limited amount of reforestation costs for each qualified timber property. State taxes online for free The deduction for any tax year generally is limited to $10,000 ($5,000 if married filing separately, $0 for a trust). State taxes online for free However, this limit is increased if you paid or incurred reforestation costs after the applicable date below and any portion of the qualified timber property is located in one of the following areas. State taxes online for free August 27, 2005, if any portion of the property is located in the GO Zone. State taxes online for free September 22, 2005, if any portion of the property is located in the Rita GO Zone (but not in the GO Zone). State taxes online for free October 22, 2005, if any portion of the property is located in the Wilma GO Zone. State taxes online for free The limit for each qualified timber property is increased by the smaller of: $10,000 ($5,000 if married filing separately, $0 for a trust), or The amount of reforestation costs you paid or incurred after the applicable date for the qualified timber property, any portion of which is located in the zone described above. State taxes online for free The increase in the limit applies only to costs paid or incurred before 2008. State taxes online for free However, these rules do not apply to any timber producer who: Held more than 500 acres of qualified timber property at any time during the tax year, Is a corporation with stock publicly traded on an established securities market, or Is a real estate investment trust. State taxes online for free For more information about the election to deduct reforestation costs, see chapter 8 in Publication 535, Business Expenses. State taxes online for free Demolition and Clean-up Costs You can elect to deduct 50% of any qualified GO Zone clean-up costs for the tax year in which the costs are paid or incurred, instead of capitalizing them. State taxes online for free Qualified GO Zone clean-up costs are any amounts paid or incurred after August 27, 2005, and before January 1, 2008, for the removal of debris from, or the demolition of structures on, real property located in the GO Zone that is: Held by you for use in a trade or business or for the production of income, or Inventory or other property held primarily for sale to customers in the ordinary course of your trade or business. State taxes online for free Increase in Rehabilitation Tax Credit The rehabilitation credit is increased for qualified rehabilitation expenditures paid or incurred after August 27, 2005, and before January 1, 2009, on buildings located in the GO Zone as follows. State taxes online for free For pre-1936 buildings (other than certified historic structures), the credit percentage is increased from 10% to 13%. State taxes online for free For certified historic structures, the credit percentage is increased from 20% to 26%. State taxes online for free For more information, see Form 3468, Investment Credit. State taxes online for free Request for Copy or Transcript of Tax Return Request for copy of tax return. State taxes online for free   You can use Form 4506 to order a copy of your tax return. State taxes online for free Generally, there is a $39. State taxes online for free 00 fee for requesting each copy of a tax return. State taxes online for free If your main home, principal place of business, or tax records are located in a Presidentially declared disaster area, the fee will be waived if the assigned disaster designation (for example, “Hurricane Katrina”) is written in red across the top of the form when filed. State taxes online for free Request for transcript of tax return. State taxes online for free   You can use Form 4506-T to order a free transcript of your tax return. State taxes online for free A transcript provides most of the line entries from a tax return and usually contains the information that a third party requires. State taxes online for free You can also call 1-800-829-1040 to order a transcript. State taxes online for free How To Get Tax Help Special IRS assistance. State taxes online for free   The IRS is providing special help for those affected by Hurricane Katrina, Rita, or Wilma, as well as survivors and personal representatives of the victims. State taxes online for free 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 Hurricane Katrina, Rita, or Wilma, or who have other tax issues related to the hurricanes. State taxes online for free Call 1-866-562-5227 Monday through Friday In English-7 a. State taxes online for free m. State taxes online for free to 10 p. State taxes online for free m. State taxes online for free local time In Spanish-8 a. State taxes online for free m. State taxes online for free to 9:30 p. State taxes online for free m. State taxes online for free local time   The IRS website at www. State taxes online for free irs. State taxes online for free gov has notices and other tax relief information. State taxes online for free Check it periodically for any new guidance. State taxes online for free Other help from the IRS. State taxes online for free   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. State taxes online for free By selecting the method that is best for you, you will have quick and easy access to tax help. State taxes online for free Contacting your Taxpayer Advocate. State taxes online for free   If you have attempted to deal with an IRS problem unsuccessfully, you should contact your Taxpayer Advocate. State taxes online for free   The Taxpayer Advocate independently represents your interests and concerns within the IRS by protecting your rights and resolving problems that have not been fixed through normal channels. State taxes online for free 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. State taxes online for free   To contact your Taxpayer Advocate: Call the Taxpayer Advocate toll free at 1-877-777-4778. State taxes online for free Call, write, or fax the Taxpayer Advocate office in your area. State taxes online for free Call 1-800-829-4059 if you are a TTY/TDD user. State taxes online for free Visit www. State taxes online for free irs. State taxes online for free gov/advocate. State taxes online for free   For more information, see Publication 1546, How To Get Help With Unresolved Tax Problems (now available in Chinese, Korean, Russian, and Vietnamese, in addition to English and Spanish). State taxes online for free Free tax services. State taxes online for free   To find out what services are available, get Publication 910, IRS Guide to Free Tax Services. State taxes online for free It contains a list of free tax publications and an index of tax topics. State taxes online for free It also describes other free tax information services, including tax education and assistance programs and a list of TeleTax topics. State taxes online for free Internet. State taxes online for free You can access the IRS website 24 hours a day, 7 days a week, at www. State taxes online for free irs. State taxes online for free gov to: E-file your return. State taxes online for free Find out about commercial tax preparation and e-file services available free to eligible taxpayers. State taxes online for free Check the status of your refund. State taxes online for free Click on Where's My Refund. State taxes online for free Be sure to wait at least 6 weeks from the date you filed your return (3 weeks if you filed electronically). State taxes online for free Have your tax return available because you will need to know your social security number, your filing status, and the exact whole dollar amount of your refund. State taxes online for free Download forms, instructions, and publications. State taxes online for free Order IRS products online. State taxes online for free Research your tax questions online. State taxes online for free Search publications online by topic or keyword. State taxes online for free View Internal Revenue Bulletins (IRBs) published in the last few years. State taxes online for free Figure your withholdin
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Filing and Paying Your Business Taxes

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Electronic Payment Options 
A secure way to pay your Federal taxes.

Filing

Electronic Filing Options for Business and Self-Employed Taxpayers
There are electronic filing options available for many of the taxes and forms that small businesses are required to file, such as excise and employment taxes, Forms 1120, 7004, 1041 and various information returns.

Employer Identification Number
An Employer Identification Number (EIN), also known as a federal tax identification number, is used to identify tax reports to the IRS.

Business Taxes
The form of business you operate determines what taxes you must pay and how you pay them.

Estimated Taxes
Federal income tax is a pay-as-you-go tax. You must pay the tax as you earn or receive income during the year. There are two ways to pay as you go: withholding and estimated taxes.

Employment Taxes for Small Businesses
If you have employees, you are responsible for several federal, state, and local taxes. As an employer, you must withhold Federal income tax withholding, social security and Medicare taxes, and Federal Unemployment Tax Act (FUTA) taxes.

Self-Employment Taxes
The self-employment tax is a social security and Medicare tax for individuals who work for themselves.

Reporting Information Returns
Your business may be required to file information returns to report certain types of payments made during the year.

e-File Form 940, 941 or 944 for Small Businesses
Learn your options for e-filing form 940, 941 or 944 for Small Businesses.

Filing Past Due Tax Returns
Before you decide not to file your tax return on time or not pay all of your taxes when they are due, consider this.

Reporting Payments to Independent Contractors
If you pay independent contractors, you may have to file Form 1099-MISC, Miscellaneous Income, to report payments for services performed for your trade or business.

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Page Last Reviewed or Updated: 21-Mar-2014

The State Taxes Online For Free

State taxes online for free 3. State taxes online for free   SIMPLE Plans Table of Contents Topics - This chapter discusses: Useful Items - You may want to see: SIMPLE IRA PlanWho Can Set Up a SIMPLE IRA Plan? Who Can Participate in a SIMPLE IRA Plan? How To Set Up a SIMPLE IRA Plan Notification Requirement Contribution Limits When To Deduct Contributions Where To Deduct Contributions Tax Treatment of Contributions Distributions (Withdrawals) More Information on SIMPLE IRA Plans SIMPLE 401(k) Plan Topics - This chapter discusses: SIMPLE IRA plan SIMPLE 401(k) plan Useful Items - You may want to see: Publications 590 Individual Retirement Arrangements (IRAs) 3998 Choosing A Retirement Solution for Your Small Business 4284 SIMPLE IRA Plan Checklist 4334 SIMPLE IRA Plans for Small Businesses Forms (and Instructions) W-2 Wage and Tax Statement 5304-SIMPLE Savings Incentive Match Plan for Employees of Small Employers (SIMPLE)–Not for Use With a Designated Financial Institution 5305-SIMPLE Savings Incentive Match Plan for Employees of Small Employers (SIMPLE)–for Use With a Designated Financial Institution 8880 Credit for Qualified Retirement Savings Contributions 8881 Credit for Small Employer Pension Plan Startup Costs A savings incentive match plan for employees (SIMPLE plan) is a written arrangement that provides you and your employees with a simplified way to make contributions to provide retirement income. State taxes online for free Under a SIMPLE plan, employees can choose to make salary reduction contributions to the plan rather than receiving these amounts as part of their regular pay. State taxes online for free In addition, you will contribute matching or nonelective contributions. State taxes online for free SIMPLE plans can only be maintained on a calendar-year basis. State taxes online for free A SIMPLE plan can be set up in either of the following ways. State taxes online for free Using SIMPLE IRAs (SIMPLE IRA plan). State taxes online for free As part of a 401(k) plan (SIMPLE 401(k) plan). State taxes online for free Many financial institutions will help you set up a SIMPLE plan. State taxes online for free SIMPLE IRA Plan A SIMPLE IRA plan is a retirement plan that uses SIMPLE IRAs for each eligible employee. State taxes online for free Under a SIMPLE IRA plan, a SIMPLE IRA must be set up for each eligible employee. State taxes online for free For the definition of an eligible employee, see Who Can Participate in a SIMPLE IRA Plan , later. State taxes online for free Who Can Set Up a SIMPLE IRA Plan? You can set up a SIMPLE IRA plan if you meet both the following requirements. State taxes online for free You meet the employee limit. State taxes online for free You do not maintain another qualified plan unless the other plan is for collective bargaining employees. State taxes online for free Employee limit. State taxes online for free   You can set up a SIMPLE IRA plan only if you had 100 or fewer employees who received $5,000 or more in compensation from you for the preceding year. State taxes online for free Under this rule, you must take into account all employees employed at any time during the calendar year regardless of whether they are eligible to participate. State taxes online for free Employees include self-employed individuals who received earned income and leased employees (defined in chapter 1). State taxes online for free   Once you set up a SIMPLE IRA plan, you must continue to meet the 100-employee limit each year you maintain the plan. State taxes online for free Grace period for employers who cease to meet the 100-employee limit. State taxes online for free   If you maintain the SIMPLE IRA plan for at least 1 year and you cease to meet the 100-employee limit in a later year, you will be treated as meeting it for the 2 calendar years immediately following the calendar year for which you last met it. State taxes online for free   A different rule applies if you do not meet the 100-employee limit because of an acquisition, disposition, or similar transaction. State taxes online for free Under this rule, the SIMPLE IRA plan will be treated as meeting the 100-employee limit for the year of the transaction and the 2 following years if both the following conditions are satisfied. State taxes online for free Coverage under the plan has not significantly changed during the grace period. State taxes online for free The SIMPLE IRA plan would have continued to qualify after the transaction if you had remained a separate employer. State taxes online for free    The grace period for acquisitions, dispositions, and similar transactions also applies if, because of these types of transactions, you do not meet the rules explained under Other qualified plan or Who Can Participate in a SIMPLE IRA Plan, below. State taxes online for free Other qualified plan. State taxes online for free   The SIMPLE IRA plan generally must be the only retirement plan to which you make contributions, or to which benefits accrue, for service in any year beginning with the year the SIMPLE IRA plan becomes effective. State taxes online for free Exception. State taxes online for free   If you maintain a qualified plan for collective bargaining employees, you are permitted to maintain a SIMPLE IRA plan for other employees. State taxes online for free Who Can Participate in a SIMPLE IRA Plan? Eligible employee. State taxes online for free   Any employee who received at least $5,000 in compensation during any 2 years preceding the current calendar year and is reasonably expected to receive at least $5,000 during the current calendar year is eligible to participate. State taxes online for free The term “employee” includes a self-employed individual who received earned income. State taxes online for free   You can use less restrictive eligibility requirements (but not more restrictive ones) by eliminating or reducing the prior year compensation requirements, the current year compensation requirements, or both. State taxes online for free For example, you can allow participation for employees who received at least $3,000 in compensation during any preceding calendar year. State taxes online for free However, you cannot impose any other conditions for participating in a SIMPLE IRA plan. State taxes online for free Excludable employees. State taxes online for free   The following employees do not need to be covered under a SIMPLE IRA plan. State taxes online for free Employees who are covered by a union agreement and whose retirement benefits were bargained for in good faith by the employees' union and you. State taxes online for free Nonresident alien employees who have received no U. State taxes online for free S. State taxes online for free source wages, salaries, or other personal services compensation from you. State taxes online for free Compensation. State taxes online for free   Compensation for employees is the total wages, tips, and other compensation from the employer subject to federal income tax withholding and the amounts paid for domestic service in a private home, local college club, or local chapter of a college fraternity or sorority. State taxes online for free Compensation also includes the employee's salary reduction contributions made under this plan and, if applicable, elective deferrals under a section 401(k) plan, a SARSEP, or a section 403(b) annuity contract and compensation deferred under a section 457 plan required to be reported by the employer on Form W-2. State taxes online for free If you are self-employed, compensation is your net earnings from self-employment (line 4 of Short Schedule SE or line 6 of Long Schedule SE (Form 1040)) before subtracting any contributions made to the SIMPLE IRA plan for yourself. State taxes online for free How To Set Up a SIMPLE IRA Plan You can use Form 5304-SIMPLE or Form 5305-SIMPLE to set up a SIMPLE IRA plan. State taxes online for free Each form is a model savings incentive match plan for employees (SIMPLE) plan document. State taxes online for free Which form you use depends on whether you select a financial institution or your employees select the institution that will receive the contributions. State taxes online for free Use Form 5304-SIMPLE if you allow each plan participant to select the financial institution for receiving his or her SIMPLE IRA plan contributions. State taxes online for free Use Form 5305-SIMPLE if you require that all contributions under the SIMPLE IRA plan be deposited initially at a designated financial institution. State taxes online for free The SIMPLE IRA plan is adopted when you have completed all appropriate boxes and blanks on the form and you (and the designated financial institution, if any) have signed it. State taxes online for free Keep the original form. State taxes online for free Do not file it with the IRS. State taxes online for free Other uses of the forms. State taxes online for free   If you set up a SIMPLE IRA plan using Form 5304-SIMPLE or Form 5305-SIMPLE, you can use the form to satisfy other requirements, including the following. State taxes online for free Meeting employer notification requirements for the SIMPLE IRA plan. State taxes online for free Form 5304-SIMPLE and Form 5305-SIMPLE contain a Model Notification to Eligible Employees that provides the necessary information to the employee. State taxes online for free Maintaining the SIMPLE IRA plan records and proving you set up a SIMPLE IRA plan for employees. State taxes online for free Deadline for setting up a SIMPLE IRA plan. State taxes online for free   You can set up a SIMPLE IRA plan effective on any date from January 1 through October 1 of a year, provided you did not previously maintain a SIMPLE IRA plan. State taxes online for free This requirement does not apply if you are a new employer that comes into existence after October 1 of the year the SIMPLE IRA plan is set up and you set up a SIMPLE IRA plan as soon as administratively feasible after your business comes into existence. State taxes online for free If you previously maintained a SIMPLE IRA plan, you can set up a SIMPLE IRA plan effective only on January 1 of a year. State taxes online for free A SIMPLE IRA plan cannot have an effective date that is before the date you actually adopt the plan. State taxes online for free Setting up a SIMPLE IRA. State taxes online for free   SIMPLE IRAs are the individual retirement accounts or annuities into which the contributions are deposited. State taxes online for free A SIMPLE IRA must be set up for each eligible employee. State taxes online for free Forms 5305-S, SIMPLE Individual Retirement Trust Account, and 5305-SA, SIMPLE Individual Retirement Custodial Account, are model trust and custodial account documents the participant and the trustee (or custodian) can use for this purpose. State taxes online for free   A SIMPLE IRA cannot be a Roth IRA. State taxes online for free Contributions to a SIMPLE IRA will not affect the amount an individual can contribute to a Roth or traditional IRA. State taxes online for free Deadline for setting up a SIMPLE IRA. State taxes online for free   A SIMPLE IRA must be set up for an employee before the first date by which a contribution is required to be deposited into the employee's IRA. State taxes online for free See Time limits for contributing funds , later, under Contribution Limits. State taxes online for free Credit for startup costs. State taxes online for free   You may be able to claim a tax credit for part of the ordinary and necessary costs of starting a SIMPLE IRA plan that first became effective in 2013. State taxes online for free For more information, see Credit for startup costs under Reminders, earlier. State taxes online for free Notification Requirement If you adopt a SIMPLE IRA plan, you must notify each employee of the following information before the beginning of the election period. State taxes online for free The employee's opportunity to make or change a salary reduction choice under a SIMPLE IRA plan. State taxes online for free Your decision to make either matching contributions or nonelective contributions (discussed later). State taxes online for free A summary description provided by the financial institution. State taxes online for free Written notice that his or her balance can be transferred without cost or penalty if they use a designated financial institution. State taxes online for free Election period. State taxes online for free   The election period is generally the 60-day period immediately preceding January 1 of a calendar year (November 2 to December 31 of the preceding calendar year). State taxes online for free However, the dates of this period are modified if you set up a SIMPLE IRA plan in mid-year (for example, on July 1) or if the 60-day period falls before the first day an employee becomes eligible to participate in the SIMPLE IRA plan. State taxes online for free   A SIMPLE IRA plan can provide longer periods for permitting employees to enter into salary reduction agreements or to modify prior agreements. State taxes online for free For example, a SIMPLE IRA plan can provide a 90-day election period instead of the 60-day period. State taxes online for free Similarly, in addition to the 60-day period, a SIMPLE IRA plan can provide quarterly election periods during the 30 days before each calendar quarter, other than the first quarter of each year. State taxes online for free Contribution Limits Contributions are made up of salary reduction contributions and employer contributions. State taxes online for free You, as the employer, must make either matching contributions or nonelective contributions, defined later. State taxes online for free No other contributions can be made to the SIMPLE IRA plan. State taxes online for free These contributions, which you can deduct, must be made timely. State taxes online for free See Time limits for contributing funds , later. State taxes online for free Salary reduction contributions. State taxes online for free   The amount the employee chooses to have you contribute to a SIMPLE IRA on his or her behalf cannot be more than $12,000 for 2013 and 2014. State taxes online for free These contributions must be expressed as a percentage of the employee's compensation unless you permit the employee to express them as a specific dollar amount. State taxes online for free You cannot place restrictions on the contribution amount (such as limiting the contribution percentage), except to comply with the $12,000 limit. State taxes online for free   If you or an employee participates in any other qualified plan during the year and you or your employee have salary reduction contributions (elective deferrals) under those plans, the salary reduction contributions under a SIMPLE IRA plan also count toward the overall annual limit ($17,500 for 2013 and 2014) on exclusion of salary reduction contributions and other elective deferrals. State taxes online for free Catch-up contributions. State taxes online for free   A SIMPLE IRA plan can permit participants who are age 50 or over at the end of the calendar year to also make catch-up contributions. State taxes online for free The catch-up contribution limit for 2013 and 2014 for SIMPLE IRA plans is $2,500. State taxes online for free Salary reduction contributions are not treated as catch-up contributions for 2013 or 2014 until they exceed $12,000. State taxes online for free However, the catch-up contribution a participant can make for a year cannot exceed the lesser of the following amounts. State taxes online for free The catch-up contribution limit. State taxes online for free The excess of the participant's compensation over the salary reduction contributions that are not catch-up contributions. State taxes online for free Employer matching contributions. State taxes online for free   You are generally required to match each employee's salary reduction contributions on a dollar-for-dollar basis up to 3% of the employee's compensation. State taxes online for free This requirement does not apply if you make nonelective contributions as discussed later. State taxes online for free Example. State taxes online for free In 2013, your employee, John Rose, earned $25,000 and chose to defer 5% of his salary. State taxes online for free Your net earnings from self-employment are $40,000, and you choose to contribute 10% of your earnings to your SIMPLE IRA. State taxes online for free You make 3% matching contributions. State taxes online for free The total contribution you make for John is $2,000, figured as follows. State taxes online for free Salary reduction contributions ($25,000 × . State taxes online for free 05) $1,250 Employer matching contribution ($25,000 × . State taxes online for free 03) 750 Total contributions $2,000     The total contribution you make for yourself is $5,200, figured as follows. State taxes online for free Salary reduction contributions ($40,000 × . State taxes online for free 10) $4,000 Employer matching contribution ($40,000 × . State taxes online for free 03) 1,200 Total contributions $5,200 Lower percentage. State taxes online for free   If you choose a matching contribution less than 3%, the percentage must be at least 1%. State taxes online for free You must notify the employees of the lower match within a reasonable period of time before the 60-day election period (discussed earlier) for the calendar year. State taxes online for free You cannot choose a percentage less than 3% for more than 2 years during the 5-year period that ends with (and includes) the year for which the choice is effective. State taxes online for free Nonelective contributions. State taxes online for free   Instead of matching contributions, you can choose to make nonelective contributions of 2% of compensation on behalf of each eligible employee who has at least $5,000 (or some lower amount you select) of compensation from you for the year. State taxes online for free If you make this choice, you must make nonelective contributions whether or not the employee chooses to make salary reduction contributions. State taxes online for free Only $255,000 of the employee's compensation can be taken into account to figure the contribution limit in 2013 ($260,000 in 2014). State taxes online for free   If you choose this 2% contribution formula, you must notify the employees within a reasonable period of time before the 60-day election period (discussed earlier) for the calendar year. State taxes online for free Example 1. State taxes online for free In 2013, your employee, Jane Wood, earned $36,000 and chose to have you contribute 10% of her salary. State taxes online for free Your net earnings from self-employment are $50,000, and you choose to contribute 10% of your earnings to your SIMPLE IRA. State taxes online for free You make a 2% nonelective contribution. State taxes online for free Both of you are under age 50. State taxes online for free The total contribution you make for Jane is $4,320, figured as follows. State taxes online for free Salary reduction contributions ($36,000 × . State taxes online for free 10) $3,600 2% nonelective contributions ($36,000 × . State taxes online for free 02) 720 Total contributions $4,320     The total contribution you make for yourself is $6,000, figured as follows. State taxes online for free Salary reduction contributions ($50,000 × . State taxes online for free 10) $5,000 2% nonelective contributions ($50,000 × . State taxes online for free 02) 1,000 Total contributions $6,000 Example 2. State taxes online for free Using the same facts as in Example 1, above, the maximum contribution you make for Jane or for yourself if you each earned $75,000 is $13,500, figured as follows. State taxes online for free Salary reduction contributions (maximum amount allowed) $12,000 2% nonelective contributions ($75,000 × . State taxes online for free 02) 1,500 Total contributions $13,500 Time limits for contributing funds. State taxes online for free   You must make the salary reduction contributions to the SIMPLE IRA within 30 days after the end of the month in which the amounts would otherwise have been payable to the employee in cash. State taxes online for free You must make matching contributions or nonelective contributions by the due date (including extensions) for filing your federal income tax return for the year. State taxes online for free Certain plans subject to Department of Labor rules may have an earlier due date for salary reduction contributions. State taxes online for free When To Deduct Contributions You can deduct SIMPLE IRA contributions in the tax year within which the calendar year for which contributions were made ends. State taxes online for free You can deduct contributions for a particular tax year if they are made for that tax year and are made by the due date (including extensions) of your federal income tax return for that year. State taxes online for free Example 1. State taxes online for free Your tax year is the fiscal year ending June 30. State taxes online for free Contributions under a SIMPLE IRA plan for the calendar year 2013 (including contributions made in 2013 before July 1, 2013) are deductible in the tax year ending June 30, 2014. State taxes online for free Example 2. State taxes online for free You are a sole proprietor whose tax year is the calendar year. State taxes online for free Contributions under a SIMPLE IRA plan for the calendar year 2013 (including contributions made in 2014 by April 15, 2014) are deductible in the 2013 tax year. State taxes online for free Where To Deduct Contributions Deduct the contributions you make for your common-law employees on your tax return. State taxes online for free For example, sole proprietors deduct them on Schedule C (Form 1040) or Schedule F (Form 1040); partnerships deduct them on Form 1065; and corporations deduct them on Form 1120 or Form 1120S. State taxes online for free Sole proprietors and partners deduct contributions for themselves on line 28 of Form 1040. State taxes online for free (If you are a partner, contributions for yourself are shown on the Schedule K-1 (Form 1065) you receive from the partnership. State taxes online for free ) Tax Treatment of Contributions You can deduct your contributions and your employees can exclude these contributions from their gross income. State taxes online for free SIMPLE IRA plan contributions are not subject to federal income tax withholding. State taxes online for free However, salary reduction contributions are subject to social security, Medicare, and federal unemployment (FUTA) taxes. State taxes online for free Matching and nonelective contributions are not subject to these taxes. State taxes online for free Reporting on Form W-2. State taxes online for free   Do not include SIMPLE IRA plan contributions in the “Wages, tips, other compensation” box of Form W-2. State taxes online for free You must, however, include them in the “Social security wages” and “Medicare wages and tips” boxes. State taxes online for free You must also include them in box 12. State taxes online for free Mark the “Retirement plan” checkbox in box 13. State taxes online for free For more information, see the Form W-2 instructions. State taxes online for free Distributions (Withdrawals) Distributions from a SIMPLE IRA are subject to IRA rules and generally are includible in income for the year received. State taxes online for free Tax-free rollovers can be made from one SIMPLE IRA into another SIMPLE IRA. State taxes online for free However, a rollover from a SIMPLE IRA to a non-SIMPLE IRA can be made tax free only after a 2-year participation in the SIMPLE IRA plan. State taxes online for free Generally, you or your employee must begin to receive distributions from a SIMPLE IRA by April 1 of the first year after the calendar year in which you or your employee reaches age 70½. State taxes online for free Early withdrawals generally are subject to a 10% additional tax. State taxes online for free However, the additional tax is increased to 25% if funds are withdrawn within 2 years of beginning participation. State taxes online for free More information. State taxes online for free   See Publication 590 for information about IRA rules, including those on the tax treatment of distributions, rollovers, required distributions, and income tax withholding. State taxes online for free More Information on SIMPLE IRA Plans If you need help to set up or maintain a SIMPLE IRA plan, go to the IRS website and search SIMPLE IRA Plan. State taxes online for free SIMPLE 401(k) Plan You can adopt a SIMPLE plan as part of a 401(k) plan if you meet the 100-employee limit as discussed earlier under SIMPLE IRA Plan. State taxes online for free A SIMPLE 401(k) plan is a qualified retirement plan and generally must satisfy the rules discussed under Qualification Rules in chapter 4, including the required distribution rules. State taxes online for free However, a SIMPLE 401(k) plan is not subject to the nondiscrimination and top-heavy rules discussed in chapter 4 if the plan meets the conditions listed below. State taxes online for free Under the plan, an employee can choose to have you make salary reduction contributions for the year to a trust in an amount expressed as a percentage of the employee's compensation, but not more than $12,000 for 2013 and 2014. State taxes online for free If permitted under the plan, an employee who is age 50 or over can also make a catch-up contribution of up to $2,500 for 2013 and 2014. State taxes online for free See Catch-up contributions , earlier under Contribution Limits. State taxes online for free You must make either: Matching contributions up to 3% of compensation for the year, or Nonelective contributions of 2% of compensation on behalf of each eligible employee who has at least $5,000 of compensation from you for the year. State taxes online for free No other contributions can be made to the trust. State taxes online for free No contributions are made, and no benefits accrue, for services during the year under any other qualified retirement plan sponsored by you on behalf of any employee eligible to participate in the SIMPLE 401(k) plan. State taxes online for free The employee's rights to any contributions are nonforfeitable. State taxes online for free No more than $255,000 of the employee's compensation can be taken into account in figuring matching contributions and nonelective contributions in 2013 ($260,000 in 2014). State taxes online for free Compensation is defined earlier in this chapter. State taxes online for free Employee notification. State taxes online for free   The notification requirement that applies to SIMPLE IRA plans also applies to SIMPLE 401(k) plans. State taxes online for free See Notification Requirement in this chapter. State taxes online for free Credit for startup costs. State taxes online for free   You may be able to claim a tax credit for part of the ordinary and necessary costs of starting a SIMPLE 401(k) plan that first became effective in 2013. State taxes online for free For more information, see Credit for startup costs under Reminders, earlier. State taxes online for free Note on Forms. State taxes online for free   Please note that Forms 5304-SIMPLE and 5305-SIMPLE can not be used to establish a SIMPLE 401(k) plan. State taxes online for free To set up a SIMPLE 401(k) plan, see Adopting a Written Plan in chapter 4. State taxes online for free Prev  Up  Next   Home   More Online Publications