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Tax 1040ez

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Tax 1040ez

Tax 1040ez 5. Tax 1040ez   Additional Rules for Listed Property Table of Contents Introduction Useful Items - You may want to see: What Is Listed Property?Passenger Automobiles Other Property Used for Transportation Computers and Related Peripheral Equipment Can Employees Claim a Deduction? What Is the Business-Use Requirement?How To Allocate Use Qualified Business Use Recapture of Excess Depreciation Lessee's Inclusion Amount Do the Passenger Automobile Limits Apply?Maximum Depreciation Deduction Deductions After the Recovery Period Deductions For Passenger Automobiles Acquired in a Trade-in What Records Must Be Kept?Adequate Records How Is Listed Property Information Reported? Introduction This chapter discusses the deduction limits and other special rules that apply to certain listed property. Tax 1040ez Listed property includes cars and other property used for transportation, property used for entertainment, and certain computers. Tax 1040ez Deductions for listed property (other than certain leased property) are subject to the following special rules and limits. Tax 1040ez Deduction for employees. Tax 1040ez If your use of the property is not for your employer's convenience or is not required as a condition of your employment, you cannot deduct depreciation or rent expenses for your use of the property as an employee. Tax 1040ez Business-use requirement. Tax 1040ez If the property is not used predominantly (more than 50%) for qualified business use, you cannot claim the section 179 deduction or a special depreciation allowance. Tax 1040ez In addition, you must figure any depreciation deduction under the Modified Accelerated Cost Recovery System (MACRS) using the straight line method over the ADS recovery period. Tax 1040ez You may also have to recapture (include in income) any excess depreciation claimed in previous years. Tax 1040ez A similar inclusion amount applies to certain leased property. Tax 1040ez Passenger automobile limits and rules. Tax 1040ez Annual limits apply to depreciation deductions (including section 179 deductions and any special depreciation allowance) for certain passenger automobiles. Tax 1040ez You can continue to deduct depreciation for the unrecovered basis resulting from these limits after the end of the recovery period. Tax 1040ez This chapter defines listed property and explains the special rules and depreciation deduction limits that apply, including the special inclusion amount rule for leased property. Tax 1040ez It also discusses the recordkeeping rules for listed property and explains how to report information about the property on your tax return. Tax 1040ez Useful Items - You may want to see: Publication 463 Travel, Entertainment, Gift, and Car Expenses 535 Business Expenses 587 Business Use of Your Home (Including Use by Daycare Providers) Form (and Instructions) 2106 Employee Business Expenses 2106-EZ Unreimbursed Employee Business Expenses 4562 Depreciation and Amortization 4797 Sales of Business Property See chapter 6 for information about getting publications and forms. Tax 1040ez What Is Listed Property? Listed property is any of the following. Tax 1040ez Passenger automobiles (as defined later). Tax 1040ez Any other property used for transportation, unless it is an excepted vehicle. Tax 1040ez Property generally used for entertainment, recreation, or amusement (including photographic, phonographic, communication, and video-recording equipment). Tax 1040ez Computers and related peripheral equipment, unless used only at a regular business establishment and owned or leased by the person operating the establishment. Tax 1040ez A regular business establishment includes a portion of a dwelling unit that is used both regularly and exclusively for business as discussed in Publication 587. Tax 1040ez Improvements to listed property. Tax 1040ez   An improvement made to listed property that must be capitalized is treated as a new item of depreciable property. Tax 1040ez The recovery period and method of depreciation that apply to the listed property as a whole also apply to the improvement. Tax 1040ez For example, if you must depreciate the listed property using the straight line method, you also must depreciate the improvement using the straight line method. Tax 1040ez Passenger Automobiles A passenger automobile is any four-wheeled vehicle made primarily for use on public streets, roads, and highways and rated at 6,000 pounds or less of unloaded gross vehicle weight (6,000 pounds or less of gross vehicle weight for trucks and vans). Tax 1040ez It includes any part, component, or other item physically attached to the automobile at the time of purchase or usually included in the purchase price of an automobile. Tax 1040ez The following vehicles are not considered passenger automobiles for these purposes. Tax 1040ez An ambulance, hearse, or combination ambulance-hearse used directly in a trade or business. Tax 1040ez A vehicle used directly in the trade or business of transporting persons or property for pay or hire. Tax 1040ez A truck or van that is a qualified nonpersonal use vehicle. Tax 1040ez Qualified nonpersonal use vehicles. Tax 1040ez   Qualified nonpersonal use vehicles are vehicles that by their nature are not likely to be used more than a minimal amount for personal purposes. Tax 1040ez They include the trucks and vans listed as excepted vehicles under Other Property Used for Transportation , next. Tax 1040ez They also include trucks and vans that have been specially modified so that they are not likely to be used more than a minimal amount for personal purposes, such as by installation of permanent shelving and painting the vehicle to display advertising or the company's name. Tax 1040ez For a detailed discussion of passenger automobiles, including leased passenger automobiles, see  Publication 463. Tax 1040ez Other Property Used for Transportation Although vehicles used to transport persons or property for pay or hire and vehicles rated at more than the 6,000-pound threshold are not passenger automobiles, they are still “other property used for transportation” and are subject to the special rules for listed property. Tax 1040ez Other property used for transportation includes trucks, buses, boats, airplanes, motorcycles, and any other vehicles used to transport persons or goods. Tax 1040ez Excepted vehicles. Tax 1040ez   Other property used for transportation does not include the following qualified nonpersonal use vehicles (defined earlier under Passenger Automobiles ). Tax 1040ez Clearly marked police and fire vehicles. Tax 1040ez Unmarked vehicles used by law enforcement officers if the use is officially authorized. Tax 1040ez Ambulances used as such and hearses used as such. Tax 1040ez Any vehicle with a loaded gross vehicle weight of over 14,000 pounds that is designed to carry cargo. Tax 1040ez Bucket trucks (cherry pickers), cement mixers, dump trucks (including garbage trucks), flatbed trucks, and refrigerated trucks. Tax 1040ez Combines, cranes and derricks, and forklifts. Tax 1040ez Delivery trucks with seating only for the driver, or only for the driver plus a folding jump seat. Tax 1040ez Qualified moving vans. Tax 1040ez Qualified specialized utility repair trucks. Tax 1040ez School buses used in transporting students and employees of schools. Tax 1040ez Other buses with a capacity of at least 20 passengers that are used as passenger buses. Tax 1040ez Tractors and other special purpose farm vehicles. Tax 1040ez Clearly marked police and fire vehicle. Tax 1040ez   A clearly marked police or fire vehicle is a vehicle that meets all the following requirements. Tax 1040ez It is owned or leased by a governmental unit or an agency or instrumentality of a governmental unit. Tax 1040ez It is required to be used for commuting by a police officer or fire fighter who, when not on a regular shift, is on call at all times. Tax 1040ez It is prohibited from being used for personal use (other than commuting) outside the limit of the police officer's arrest powers or the fire fighter's obligation to respond to an emergency. Tax 1040ez It is clearly marked with painted insignia or words that make it readily apparent that it is a police or fire vehicle. Tax 1040ez A marking on a license plate is not a clear marking for these purposes. Tax 1040ez Qualified moving van. Tax 1040ez   A qualified moving van is any truck or van used by a professional moving company for moving household or business goods if the following requirements are met. Tax 1040ez No personal use of the van is allowed other than for travel to and from a move site or for minor personal use, such as a stop for lunch on the way from one move site to another. Tax 1040ez Personal use for travel to and from a move site happens no more than five times a month on average. Tax 1040ez Personal use is limited to situations in which it is more convenient to the employer, because of the location of the employee's residence in relation to the location of the move site, for the van not to be returned to the employer's business location. Tax 1040ez Qualified specialized utility repair truck. Tax 1040ez   A truck is a qualified specialized utility repair truck if it is not a van or pickup truck and all the following apply. Tax 1040ez The truck was specifically designed for and is used to carry heavy tools, testing equipment, or parts. Tax 1040ez Shelves, racks, or other permanent interior construction has been installed to carry and store the tools, equipment, or parts and would make it unlikely that the truck would be used, other than minimally, for personal purposes. Tax 1040ez The employer requires the employee to drive the truck home in order to be able to respond in emergency situations for purposes of restoring or maintaining electricity, gas, telephone, water, sewer, or steam utility services. Tax 1040ez Computers and Related Peripheral Equipment A computer is a programmable, electronically activated device capable of accepting information, applying prescribed processes to the information, and supplying the results of those processes with or without human intervention. Tax 1040ez It consists of a central processing unit with extensive storage, logic, arithmetic, and control capabilities. Tax 1040ez Related peripheral equipment is any auxiliary machine which is designed to be controlled by the central processing unit of a computer. Tax 1040ez The following are neither computers nor related peripheral equipment. Tax 1040ez Any equipment that is an integral part of other property that is not a computer. Tax 1040ez Typewriters, calculators, adding and accounting machines, copiers, duplicating equipment, and similar equipment. Tax 1040ez Equipment of a kind used primarily for the user's amusement or entertainment, such as video games. Tax 1040ez Can Employees Claim a Deduction? If you are an employee, you can claim a depreciation deduction for the use of your listed property (whether owned or rented) in performing services as an employee only if your use is a business use. Tax 1040ez The use of your property in performing services as an employee is a business use only if both the following requirements are met. Tax 1040ez The use is for your employer's convenience. Tax 1040ez The use is required as a condition of your employment. Tax 1040ez If these requirements are not met, you cannot deduct depreciation (including the section 179 deduction) or rent expenses for your use of the property as an employee. Tax 1040ez Employer's convenience. Tax 1040ez   Whether the use of listed property is for your employer's convenience must be determined from all the facts. Tax 1040ez The use is for your employer's convenience if it is for a substantial business reason of the employer. Tax 1040ez The use of listed property during your regular working hours to carry on your employer's business generally is for the employer's convenience. Tax 1040ez Condition of employment. Tax 1040ez   Whether the use of listed property is a condition of your employment depends on all the facts and circumstances. Tax 1040ez The use of property must be required for you to perform your duties properly. Tax 1040ez Your employer does not have to require explicitly that you use the property. Tax 1040ez However, a mere statement by the employer that the use of the property is a condition of your employment is not sufficient. Tax 1040ez Example 1. Tax 1040ez Virginia Sycamore is employed as a courier with We Deliver, which provides local courier services. Tax 1040ez She owns and uses a motorcycle to deliver packages to downtown offices. Tax 1040ez We Deliver explicitly requires all delivery persons to own a car or motorcycle for use in their employment. Tax 1040ez Virginia's use of the motorcycle is for the convenience of We Deliver and is required as a condition of employment. Tax 1040ez Example 2. Tax 1040ez Bill Nelson is an inspector for Uplift, a construction company with many sites in the local area. Tax 1040ez He must travel to these sites on a regular basis. Tax 1040ez Uplift does not furnish an automobile or explicitly require him to use his own automobile. Tax 1040ez However, it pays him for any costs he incurs in traveling to the various sites. Tax 1040ez The use of his own automobile or a rental automobile is for the convenience of Uplift and is required as a condition of employment. Tax 1040ez Example 3. Tax 1040ez Assume the same facts as in Example 2 except that Uplift furnishes a car to Bill, who chooses to use his own car and receive payment for using it. Tax 1040ez The use of his own car is neither for the convenience of Uplift nor required as a condition of employment. Tax 1040ez Example 4. Tax 1040ez Marilyn Lee is a pilot for Y Company, a small charter airline. Tax 1040ez Y requires pilots to obtain 80 hours of flight time annually in addition to flight time spent with the airline. Tax 1040ez Pilots usually can obtain these hours by flying with the Air Force Reserve or by flying part-time with another airline. Tax 1040ez Marilyn owns her own airplane. Tax 1040ez The use of her airplane to obtain the required flight hours is neither for the convenience of the employer nor required as a condition of employment. Tax 1040ez Example 5. Tax 1040ez David Rule is employed as an engineer with Zip, an engineering contracting firm. Tax 1040ez He occasionally takes work home at night rather than work late in the office. Tax 1040ez He owns and uses a home computer which is virtually identical to the office model. Tax 1040ez His use of the computer is neither for the convenience of his employer nor required as a condition of employment. Tax 1040ez What Is the Business-Use Requirement? You can claim the section 179 deduction and a special depreciation allowance for listed property and depreciate listed property using GDS and a declining balance method if the property meets the business-use requirement. Tax 1040ez To meet this requirement, listed property must be used predominantly (more than 50% of its total use) for qualified business use. Tax 1040ez If this requirement is not met, the following rules apply. Tax 1040ez Property not used predominantly for qualified business use during the year it is placed in service does not qualify for the section 179 deduction. Tax 1040ez Property not used predominantly for qualified business use during the year it is placed in service does not qualify for a special depreciation allowance. Tax 1040ez Any depreciation deduction under MACRS for property not used predominantly for qualified business use during any year must be figured using the straight line method over the ADS recovery period. Tax 1040ez This rule applies each year of the recovery period. Tax 1040ez Excess depreciation on property previously used predominantly for qualified business use must be recaptured (included in income) in the first year in which it is no longer used predominantly for qualified business use. Tax 1040ez A lessee must add an inclusion amount to income in the first year in which the leased property is not used predominantly for qualified business use. Tax 1040ez Being required to use the straight line method for an item of listed property not used predominantly for qualified business use is not the same as electing the straight line method. Tax 1040ez It does not mean that you have to use the straight line method for other property in the same class as the item of listed property. Tax 1040ez Exception for leased property. Tax 1040ez   The business-use requirement generally does not apply to any listed property leased or held for leasing by anyone regularly engaged in the business of leasing listed property. Tax 1040ez   You are considered regularly engaged in the business of leasing listed property only if you enter into contracts for the leasing of listed property with some frequency over a continuous period of time. Tax 1040ez This determination is made on the basis of the facts and circumstances in each case and takes into account the nature of your business in its entirety. Tax 1040ez Occasional or incidental leasing activity is insufficient. Tax 1040ez For example, if you lease only one passenger automobile during a tax year, you are not regularly engaged in the business of leasing automobiles. Tax 1040ez An employer who allows an employee to use the employer's property for personal purposes and charges the employee for the use is not regularly engaged in the business of leasing the property used by the employee. Tax 1040ez How To Allocate Use To determine whether the business-use requirement is met, you must allocate the use of any item of listed property used for more than one purpose during the year among its various uses. Tax 1040ez For passenger automobiles and other means of transportation, allocate the property's use on the basis of mileage. Tax 1040ez You determine the percentage of qualified business use by dividing the number of miles you drove the vehicle for business purposes during the year by the total number of miles you drove the vehicle for all purposes (including business miles) during the year. Tax 1040ez For other listed property, allocate the property's use on the basis of the most appropriate unit of time the property is actually used (rather than merely being available for use). Tax 1040ez For example, you can determine the percentage of business use of a computer by dividing the number of hours you used the computer for business purposes during the year by the total number of hours you used the computer for all purposes (including business use) during the year. Tax 1040ez Entertainment use. Tax 1040ez   Treat the use of listed property for entertainment, recreation, or amusement purposes as a business use only to the extent you can deduct expenses (other than interest and property tax expenses) due to its use as an ordinary and necessary business expense. Tax 1040ez Commuting use. Tax 1040ez   The use of an automobile for commuting is not business use, regardless of whether work is performed during the trip. Tax 1040ez For example, a business telephone call made on a car telephone while commuting to work does not change the character of the trip from commuting to business. Tax 1040ez This is also true for a business meeting held in a car while commuting to work. Tax 1040ez Similarly, a business call made on an otherwise personal trip does not change the character of a trip from personal to business. Tax 1040ez The fact that an automobile is used to display material that advertises the owner's or user's trade or business does not convert an otherwise personal use into business use. Tax 1040ez Use of your automobile by another person. Tax 1040ez   If someone else uses your automobile, do not treat that use as business use unless one of the following conditions applies. Tax 1040ez That use is directly connected with your business. Tax 1040ez You properly report the value of the use as income to the other person and withhold tax on the income where required. Tax 1040ez You are paid a fair market rent. Tax 1040ez Treat any payment to you for the use of the automobile as a rent payment for purposes of item (3). Tax 1040ez Employee deductions. Tax 1040ez   If you are an employee, do not treat your use of listed property as business use unless it is for your employer's convenience and is required as a condition of your employment. Tax 1040ez See Can Employees Claim a Deduction , earlier. Tax 1040ez Qualified Business Use Qualified business use of listed property is any use of the property in your trade or business. Tax 1040ez However, it does not include the following uses. Tax 1040ez The leasing of property to any 5% owner or related person (to the extent the property is used by a 5% owner or person related to the owner or lessee of the property). Tax 1040ez The use of property as pay for the services of a 5% owner or related person. Tax 1040ez The use of property as pay for services of any person (other than a 5% owner or related person), unless the value of the use is included in that person's gross income and income tax is withheld on that amount where required. Tax 1040ez Property does not stop being used predominantly for qualified business use because of a transfer at death. Tax 1040ez Exception for leasing or compensatory use of aircraft. Tax 1040ez   Treat the leasing of any aircraft by a 5% owner or related person, or the compensatory use of any aircraft, as a qualified business use if at least 25% of the total use of the aircraft during the year is for a qualified business use. Tax 1040ez 5% owner. Tax 1040ez   For a business entity that is not a corporation, a 5% owner is any person who owns more than 5% of the capital or profits interest in the business. Tax 1040ez   For a corporation, a 5% owner is any person who owns, or is considered to own, either of the following. Tax 1040ez More than 5% of the outstanding stock of the corporation. Tax 1040ez Stock possessing more than 5% of the total combined voting power of all stock in the corporation. Tax 1040ez Related persons. Tax 1040ez   For a description of related persons, see Related persons in the discussion on property owned or used in 1986 under What Method Can You Use To Depreciate Your Property in chapter 1 . Tax 1040ez For this purpose, however, treat as related persons only the relationships listed in items (1) through (10) of that discussion and substitute “50%” for “10%” each place it appears. Tax 1040ez Examples. Tax 1040ez   The following examples illustrate whether the use of business property is qualified business use. Tax 1040ez Example 1. Tax 1040ez John Maple is the sole proprietor of a plumbing contracting business. Tax 1040ez John employs his brother, Richard, in the business. Tax 1040ez As part of Richard's pay, he is allowed to use one of the company automobiles for personal use. Tax 1040ez The company includes the value of the personal use of the automobile in Richard's gross income and properly withholds tax on it. Tax 1040ez The use of the automobile is pay for the performance of services by a related person, so it is not a qualified business use. Tax 1040ez Example 2. Tax 1040ez John, in Example 1, allows unrelated employees to use company automobiles for personal purposes. Tax 1040ez He does not include the value of the personal use of the company automobiles as part of their compensation and he does not withhold tax on the value of the use of the automobiles. Tax 1040ez This use of company automobiles by employees is not a qualified business use. Tax 1040ez Example 3. Tax 1040ez James Company Inc. Tax 1040ez owns several automobiles that its employees use for business purposes. Tax 1040ez The employees also are allowed to take the automobiles home at night. Tax 1040ez The fair market value of each employee's use of an automobile for any personal purpose, such as commuting to and from work, is reported as income to the employee and James Company withholds tax on it. Tax 1040ez This use of company automobiles by employees, even for personal purposes, is a qualified business use for the company. Tax 1040ez Investment Use The use of property to produce income in a nonbusiness activity (investment use) is not a qualified business use. Tax 1040ez However, you can treat the investment use as business use to figure the depreciation deduction for the property in a given year. Tax 1040ez Example 1. Tax 1040ez Sarah Bradley uses a home computer 50% of the time to manage her investments. Tax 1040ez She also uses the computer 40% of the time in her part-time consumer research business. Tax 1040ez Sarah's home computer is listed property because it is not used at a regular business establishment. Tax 1040ez She does not use the computer predominantly for qualified business use. Tax 1040ez Therefore, she cannot elect a section 179 deduction or claim a special depreciation allowance for the computer. Tax 1040ez She must depreciate it using the straight line method over the ADS recovery period. Tax 1040ez Her combined business/investment use for determining her depreciation deduction is 90%. Tax 1040ez Example 2. Tax 1040ez If Sarah uses her computer 30% of the time to manage her investments and 60% of the time in her consumer research business, it is used predominantly for qualified business use. Tax 1040ez She can elect a section 179 deduction and, if she does not deduct all the computer's cost, she can claim a special depreciation allowance and depreciate the computer using the 200% declining balance method over the GDS recovery period. Tax 1040ez Her combined business/investment use for determining her depreciation deduction is 90%. Tax 1040ez Recapture of Excess Depreciation If you used listed property more than 50% in a qualified business use in the year you placed it in service, you must recapture (include in income) excess depreciation in the first year you use it 50% or less. Tax 1040ez You also increase the adjusted basis of your property by the same amount. Tax 1040ez Excess depreciation is: The depreciation allowable for the property (including any section 179 deduction and special depreciation allowance claimed) for years before the first year you do not use the property predominantly for qualified business use, minus The depreciation that would have been allowable for those years if you had not used the property predominantly for qualified business use in the year you placed it in service. Tax 1040ez To determine the amount in (2) above, you must refigure the depreciation using the straight line method and the ADS recovery period. Tax 1040ez Example. Tax 1040ez In June 2009, Ellen Rye purchased and placed in service a pickup truck that cost $18,000. Tax 1040ez She used it only for qualified business use for 2009 through 2012. Tax 1040ez Ellen claimed a section 179 deduction of $10,000 based on the purchase of the truck. Tax 1040ez She began depreciating it using the 200% DB method over a 5-year GDS recovery period. Tax 1040ez The pickup truck's gross vehicle weight was over 6,000 pounds, so it was not subject to the passenger automobile limits discussed later under Do the Passenger Automobile Limits Apply. Tax 1040ez During 2013, she used the truck 50% for business and 50% for personal purposes. Tax 1040ez She includes $4,018 excess depreciation in her gross income for 2013. Tax 1040ez The excess depreciation is determined as follows. Tax 1040ez Total section 179 deduction ($10,000) and depreciation claimed ($6,618) for 2009 through 2012. Tax 1040ez (Depreciation is from Table A-1. Tax 1040ez ) $16,618 Minus: Depreciation allowable (Table A-8):     2009 – 10% of $18,000 $1,800   2010 – 20% of $18,000 3,600   2011 – 20% of $18,000 3,600   2012 – 20% of $18,000 3,600 12,600 Excess depreciation $4,018 If Ellen's use of the truck does not change to 50% for business and 50% for personal purposes until 2015, there will be no excess depreciation. Tax 1040ez The total depreciation allowable using Table A-8 through 2015 will be $18,000, which equals the total of the section 179 deduction and depreciation she will have claimed. Tax 1040ez Where to figure and report recapture. Tax 1040ez   Use Form 4797, Part IV, to figure the recapture amount. Tax 1040ez Report the recapture amount as other income on the same form or schedule on which you took the depreciation deduction. Tax 1040ez For example, report the recapture amount as other income on Schedule C (Form 1040) if you took the depreciation deduction on Schedule C. Tax 1040ez If you took the depreciation deduction on Form 2106, report the recapture amount as other income on Form 1040, line 21. Tax 1040ez Lessee's Inclusion Amount If you use leased listed property other than a passenger automobile for business/investment use, you must include an amount in your income in the first year your qualified business-use percentage is 50% or less. Tax 1040ez Your qualified business-use percentage is the part of the property's total use that is qualified business use (defined earlier). Tax 1040ez For the inclusion amount rules for a leased passenger automobile, see Leasing a Car in chapter 4 of Publication 463. Tax 1040ez The inclusion amount is the sum of Amount A and Amount B, described next. Tax 1040ez However, see the special rules for the inclusion amount, later, if your lease begins in the last 9 months of your tax year or is for less than one year. Tax 1040ez Amount A. Tax 1040ez   Amount A is: The fair market value of the property, multiplied by The business/investment use for the first tax year the qualified business-use percentage is 50% or less, multiplied by The applicable percentage from Table A-19 in Appendix A . Tax 1040ez   The fair market value of the property is the value on the first day of the lease term. Tax 1040ez If the capitalized cost of an item of listed property is specified in the lease agreement, you must treat that amount as the fair market value. Tax 1040ez Amount B. Tax 1040ez   Amount B is: The fair market value of the property, multiplied by The average of the business/investment use for all tax years the property was leased that precede the first tax year the qualified business-use percentage is 50% or less, multiplied by The applicable percentage from Table A–20 in Appendix A . Tax 1040ez Maximum inclusion amount. Tax 1040ez   The inclusion amount cannot be more than the sum of the deductible amounts of rent for the tax year in which the lessee must include the amount in gross income. Tax 1040ez Inclusion amount worksheet. Tax 1040ez   The following worksheet is provided to help you figure the inclusion amount for leased listed property. Tax 1040ez Inclusion Amount Worksheet for Leased Listed Property 1. Tax 1040ez Fair market value   2. Tax 1040ez Business/investment use for first year business use is 50% or less   3. Tax 1040ez Multiply line 1 by line 2. Tax 1040ez   4. Tax 1040ez Rate (%) from Table A-19   5. Tax 1040ez Multiply line 3 by line 4. Tax 1040ez This is Amount A. Tax 1040ez   6. Tax 1040ez Fair market value   7. Tax 1040ez Average business/investment use for years property leased before the first year business use is 50% or less . Tax 1040ez . Tax 1040ez . Tax 1040ez . Tax 1040ez . Tax 1040ez . Tax 1040ez . Tax 1040ez . Tax 1040ez . Tax 1040ez . Tax 1040ez . Tax 1040ez . Tax 1040ez . Tax 1040ez   8. Tax 1040ez Multiply line 6 by line 7   9. Tax 1040ez Rate (%) from Table A-20   10. Tax 1040ez Multiply line 8 by line 9. Tax 1040ez This is Amount B. Tax 1040ez   11. Tax 1040ez Add line 5 and line 10. Tax 1040ez This is your inclusion amount. Tax 1040ez Enter here and as other income on the form or schedule on which you originally took the deduction (for example, Schedule C or F (Form 1040), Form 1040, Form 1120, etc. Tax 1040ez )         Example. Tax 1040ez On February 1, 2011, Larry House, a calendar year taxpayer, leased and placed in service a computer with a fair market value of $3,000. Tax 1040ez The lease is for a period of 5 years. Tax 1040ez Larry does not use the computer at a regular business establishment, so it is listed property. Tax 1040ez His business use of the property (all of which is qualified business use) is 80% in 2011, 60% in 2012, and 40% in 2013. Tax 1040ez He must add an inclusion amount to gross income for 2013, the first tax year his qualified business-use percentage is 50% or less. Tax 1040ez The computer has a 5-year recovery period under both GDS and ADS. Tax 1040ez 2013 is the third tax year of the lease, so the applicable percentage from Table A-19 is −19. Tax 1040ez 8%. Tax 1040ez The applicable percentage from Table A-20 is 22. Tax 1040ez 0%. Tax 1040ez Larry's deductible rent for the computer for 2013 is $800. Tax 1040ez Larry uses the Inclusion amount worksheet. Tax 1040ez to figure the amount he must include in income for 2013. Tax 1040ez His inclusion amount is $224, which is the sum of −$238 (Amount A) and $462 (Amount B). Tax 1040ez Inclusion Amount Worksheet for Leased Listed Property 1. Tax 1040ez Fair market value $3,000   2. Tax 1040ez Business/investment use for first year business use is 50% or less 40 % 3. Tax 1040ez Multiply line 1 by line 2. Tax 1040ez 1,200   4. Tax 1040ez Rate (%) from Table A-19 −19. Tax 1040ez 8 % 5. Tax 1040ez Multiply line 3 by line 4. Tax 1040ez This is Amount A. Tax 1040ez −238   6. Tax 1040ez Fair market value 3,000   7. Tax 1040ez Average business/investment use for years property leased before the first year business use is 50% or less 70 % 8. Tax 1040ez Multiply line 6 by line 7 2,100   9. Tax 1040ez Rate (%) from Table A-20 22. Tax 1040ez 0 % 10. Tax 1040ez Multiply line 8 by line 9. Tax 1040ez This is Amount B. Tax 1040ez 462   11. Tax 1040ez Add line 5 and line 10. Tax 1040ez This is your inclusion amount. Tax 1040ez Enter here and as other income on the form or schedule on which you originally took the deduction (for example, Schedule C or F (Form 1040), Form 1040, Form 1120, etc. Tax 1040ez ) $224           Lease beginning in the last 9 months of your tax year. Tax 1040ez    The inclusion amount is subject to a special rule if all the following apply. Tax 1040ez The lease term begins within 9 months before the close of your tax year. Tax 1040ez You do not use the property predominantly (more than 50%) for qualified business use during that part of the tax year. Tax 1040ez The lease term continues into your next tax year. Tax 1040ez Under this special rule, add the inclusion amount to income in the next tax year. Tax 1040ez Figure the inclusion amount by taking into account the average of the business/investment use for both tax years (line 2 of the Inclusion Amount Worksheet for Leased Listed Property) and the applicable percentage for the tax year the lease term begins. Tax 1040ez Skip lines 6 through 9 of the worksheet and enter zero on line 10. Tax 1040ez Example 1. Tax 1040ez On August 1, 2012, Julie Rule, a calendar year taxpayer, leased and placed in service an item of listed property. Tax 1040ez The property is 5-year property with a fair market value of $10,000. Tax 1040ez Her property has a recovery period of 5 years under ADS. Tax 1040ez The lease is for 5 years. Tax 1040ez Her business use of the property was 50% in 2012 and 90% in 2013. Tax 1040ez She paid rent of $3,600 for 2012, of which $3,240 is deductible. Tax 1040ez She must include $147 in income in 2013. Tax 1040ez The $147 is the sum of Amount A and Amount B. Tax 1040ez Amount A is $147 ($10,000 × 70% × 2. Tax 1040ez 1%), the product of the fair market value, the average business use for 2012 and 2013, and the applicable percentage for year one from Table A-19 . Tax 1040ez Amount B is zero. Tax 1040ez Lease for less than one year. Tax 1040ez   A special rule for the inclusion amount applies if the lease term is less than one year and you do not use the property predominantly (more than 50%) for qualified business use. Tax 1040ez The amount included in income is the inclusion amount (figured as described in the preceding discussions) multiplied by a fraction. Tax 1040ez The numerator of the fraction is the number of days in the lease term and the denominator is 365 (or 366 for leap years). Tax 1040ez   The lease term for listed property other than residential rental or nonresidential real property includes options to renew. Tax 1040ez If you have two or more successive leases that are part of the same transaction (or a series of related transactions) for the same or substantially similar property, treat them as one lease. Tax 1040ez Example 2. Tax 1040ez On October 1, 2012, John Joyce, a calendar year taxpayer, leased and placed in service an item of listed property that is 3-year property. Tax 1040ez This property had a fair market value of $15,000 and a recovery period of 5 years under ADS. Tax 1040ez The lease term was 6 months (ending on March 31, 2013), during which he used the property 45% in business. Tax 1040ez He must include $71 in income in 2013. Tax 1040ez The $71 is the sum of Amount A and Amount B. Tax 1040ez Amount A is $71 ($15,000 × 45% × 2. Tax 1040ez 1% × 183/365), the product of the fair market value, the average business use for both years, and the applicable percentage for year one from Table A-19 , prorated for the length of the lease. Tax 1040ez Amount B is zero. Tax 1040ez Where to report inclusion amount. Tax 1040ez   Report the inclusion amount figured as described in the preceding discussions as other income on the same form or schedule on which you took the deduction for your rental costs. Tax 1040ez For example, report the inclusion amount as other income on Schedule C (Form 1040) if you took the deduction on Schedule C. Tax 1040ez If you took the deduction for rental costs on Form 2106, report the inclusion amount as other income on Form 1040, line 21. Tax 1040ez Do the Passenger Automobile Limits Apply? The depreciation deduction, including the section 179 deduction and special depreciation allowance, you can claim for a passenger automobile (defined earlier) each year is limited. Tax 1040ez This section describes the maximum depreciation deduction amounts for 2013 and explains how to deduct, after the recovery period, the unrecovered basis of your property that results from applying the passenger automobile limit. Tax 1040ez Exception for leased cars. Tax 1040ez   The passenger automobile limits generally do not apply to passenger automobiles leased or held for leasing by anyone regularly engaged in the business of leasing passenger automobiles. Tax 1040ez For information on when you are considered regularly engaged in the business of leasing listed property, including passenger automobiles, see Exception for leased property , earlier, under What Is the Business-Use Requirement . Tax 1040ez Maximum Depreciation Deduction The passenger automobile limits are the maximum depreciation amounts you can deduct for a passenger automobile. Tax 1040ez They are based on the date you placed the automobile in service. Tax 1040ez Passenger Automobiles The maximum deduction amounts for most passenger automobiles are shown in the following table. Tax 1040ez Maximum Depreciation Deduction for Passenger Automobiles Date       4th & Placed 1st 2nd 3rd Later In Service Year Year Year Years 2013 $11,1601 $5,100 $3,050 $1,875 2012 11,1601 5,100 3,050 1,875 2011 11,0602 4,900 2,950 1,775 2010 11,0602  4,900 2,950 1,775 2009 10,9603 4,800 2,850 1,775 2008 10,9603  4,800 2,850 1,775 2007 3,060 4,900 2,850 1,775 2006 2,960 4,800 2,850 1,775 2005 2,960 4,700 2,850 1,675 2004 10,6104 4,800 2,850 1,675 5/06/2003– 12/31/2003 10,7105 4,900 2,950 1,775 1/01/2003– 5/05/2003 7,6606 4,900 2,950 1,775 1If you elected not to claim any special depreciation allowance or the vehicle is not qualified property, the maximum deduction is $3,160. Tax 1040ez 2If you elected not to claim any special depreciation allowance or the vehicle is not qualified property, the maximum deduction is $3,060. Tax 1040ez 3If you elected not to claim any special depreciation allowance for the vehicle or the vehicle is not qualified property, the maximum deduction is $2,960. Tax 1040ez 4If you elected not to claim any special depreciation allowance for the vehicle, the vehicle is not qualified property, or the vehicle is qualified Liberty Zone property, the maximum deduction is $2,960. Tax 1040ez 5If you acquired the vehicle before 5/06/03, the maximum deduction is $7,660. Tax 1040ez If you elected not to claim any special depreciation allowance for the vehicle, the vehicle is not qualified property, or the vehicle is qualified Liberty Zone property, the maximum deduction is $3,060. Tax 1040ez 6If you elected not to claim any special depreciation allowance for the vehicle, the vehicle is not qualified property, or the vehicle is qualified Liberty Zone property, the maximum deduction is $3,060. Tax 1040ez If your business/investment use of the automobile is less than 100%, you must reduce the maximum deduction amount by multiplying the maximum amount by the percentage of business/investment use determined on an annual basis during the tax year. Tax 1040ez If you have a short tax year, you must reduce the maximum deduction amount by multiplying the maximum amount by a fraction. Tax 1040ez The numerator of the fraction is the number of months and partial months in the short tax year and the denominator is 12. Tax 1040ez Example. Tax 1040ez On April 15, 2013, Virginia Hart bought and placed in service a new car for $14,500. Tax 1040ez She used the car only in her business. Tax 1040ez She files her tax return based on the calendar year. Tax 1040ez She does not elect a section 179 deduction and elected not to claim any special depreciation allowance for the car. Tax 1040ez Under MACRS, a car is 5-year property. Tax 1040ez Since she placed her car in service on April 15 and used it only for business, she uses the percentages in Table A-1 to figure her MACRS depreciation on the car. Tax 1040ez Virginia multiplies the $14,500 unadjusted basis of her car by 0. Tax 1040ez 20 to get her MACRS depreciation of $2,900 for 2013. Tax 1040ez This $2,900 is below the maximum depreciation deduction of $3,160 for passenger automobiles placed in service in 2013. Tax 1040ez She can deduct the full $2,900. Tax 1040ez Electric Vehicles The maximum depreciation deductions for passenger automobiles that are produced to run primarily on electricity are higher than those for other automobiles. Tax 1040ez The maximum deduction amounts for electric vehicles placed in service after August 5, 1997, and before January 1, 2007, are shown in the following table. Tax 1040ez Owners of electric vehicles placed in service after December 31, 2006, should use the table of maximum deduction amounts later for electric vehicles classified as passenger automobiles or use the table of maximum deduction amounts for trucks and vans later, for electric vehicles classified as trucks and vans. Tax 1040ez Maximum Depreciation Deduction For Electric Vehicles Date       4th & Placed 1st 2nd 3rd Later In Service Year Year Year Years 2006 $8,980 $14,400 $8,650 $5,225 2005 8,880 14,200 8,450 5,125 2004 31,8301 14,300 8,550 5,125 5/06/2003– 12/31/2003 32,0302 14,600 8,750 5,225 1/01/2003– 5/05/2003 22,8803 14,600 8,750 5,225 1If you elected not to claim any special depreciation allowance for the vehicle or the vehicle is not qualified property, or the vehicle is qualified Liberty Zone property, the maximum deduction is $8,880. Tax 1040ez 2If you acquired the vehicle before 5/06/03, the maximum deduction is $22,880. Tax 1040ez If you elected not to claim any special depreciation allowance for the vehicle, the vehicle is not qualified property, or the vehicle is qualified Liberty Zone property, the maximum deduction is $9,080. Tax 1040ez 3 If you elected not to claim any special depreciation allowance for the vehicle, the vehicle is not qualified property, or the vehicle is qualified Liberty Zone property, the maximum deduction is $9,080. Tax 1040ez Trucks and Vans The maximum depreciation deductions for trucks and vans placed in service after 2002 are higher than those for other passenger automobiles. Tax 1040ez The maximum deduction amounts for trucks and vans are shown in the following table. Tax 1040ez Maximum Depreciation Deduction For Trucks and Vans Date       4th & Placed 1st 2nd 3rd Later In Service Year Year Year Years 2013 $11,3601 $5,400 $3,250 $1,975 2012 11,3601 5,300 3,150 1,875 2011 11,2602 5,200 3,150 1,875 2010 11,1603 5,100 3,050 1,875 2009 11,0604 4,900 2,950 1,775 2008 11,1605 5,100 3,050 1,875 2007 3,260 5,200 3,050 1,875 2006 3,260 5,200 3,150 1,875 2005 3,260 5,200 3,150 1,875 2004 10,9106 5,300 3,150 1,875 5/06/2003– 12/31/2003 11,0107 5,400 3,250 1,975 1/01/2003– 5/05/2003 7,9608 5,400 3,250 1,975 1 If you elected not to claim any special depreciation allowance or the vehicle is not qualified property, the maximum deduction is $3,360. Tax 1040ez 2 If you elected not to claim any special depreciation allowance or the vehicle is not qualified property, the maximum deduction is $3,260. Tax 1040ez 3 If you elected not to claim any special depreciation allowance or the vehicle is not qualified property, the maximum deduction is $3,160. Tax 1040ez 4 If you elect not to claim any special depreciation allowance for the vehicle or the vehicle is not qualified property, the maximum deduction is $3,060. Tax 1040ez 5If you elected not to claim any special depreciation allowance for the vehicle or the vehicle is not qualified property, the maximum deduction is $3,160. Tax 1040ez 6If you elected not to claim any special depreciation allowance for the vehicle, the vehicle is not qualified property, or the vehicle is qualified Liberty Zone property, or the maximum deduction is $3,260. Tax 1040ez 7 If you acquired the vehicle before 5/06/03, the maximum deduction is $7,960. Tax 1040ez If you elected not to claim any special depreciation allowance for the vehicle, the vehicle is not qualified property, or the vehicle is qualified Liberty Zone property, the maximum deduction is $3,360. Tax 1040ez 8 If you elected not to claim any special depreciation allowance for the vehicle, the vehicle is not qualified property, or the vehicle is qualified Liberty Zone property, the maximum deduction is $3,360. Tax 1040ez Depreciation Worksheet for Passenger Automobiles You can use the following worksheet to figure your depreciation deduction using the percentage tables. Tax 1040ez Then use the information from this worksheet to prepare Form 4562. Tax 1040ez Depreciation Worksheet for Passenger Automobiles   Part I   1. Tax 1040ez MACRS system (GDS or ADS)     2. Tax 1040ez Property class     3. Tax 1040ez Date placed in service     4. Tax 1040ez Recovery period     5. Tax 1040ez Method and convention     6. Tax 1040ez Depreciation rate (from tables)     7. Tax 1040ez Maximum depreciation deduction for this year from the appropriate table       8. Tax 1040ez Business/investment-use percentage       9. Tax 1040ez Multiply line 7 by line 8. Tax 1040ez This is your adjusted maximum depreciation deduction       10. Tax 1040ez Section 179 deduction claimed this year (not more than line 9). Tax 1040ez Enter -0- if this is not the year you placed the car in service. Tax 1040ez         Note. Tax 1040ez  1) If line 10 is equal to line 9, stop here. Tax 1040ez Your combined section 179 and depreciation deduction (including your special depreciation allowance) is limited to the amount on line 9. Tax 1040ez  2) If line 10 is less than line 9, complete Part II. Tax 1040ez   Part II   11. Tax 1040ez Subtract line 10 from line 9. Tax 1040ez This is the limit on the amount you can deduct for depreciation (including any special depreciation allowance )       12. Tax 1040ez Cost or other basis (reduced by any alternative motor vehicle credit 1or credit for electric vehicles 2)       13. Tax 1040ez Multiply line 12 by line 8. Tax 1040ez This is your business/investment cost       14. Tax 1040ez Section 179 deduction claimed in the year you placed the car in service       15. Tax 1040ez Subtract line 14 from line 13. Tax 1040ez This is your tentative basis for depreciation       16. Tax 1040ez Multiply line 15 by . Tax 1040ez 50 if the 50% special depreciation allowance applies. Tax 1040ez This is your special depreciation allowance. Tax 1040ez Enter -0- if this is not the year you placed the car in service, the car is not qualified property, or you elected not to claim a special depreciation allowance       Note 1) If line 16 is equal to line 11, stop here. Tax 1040ez Your depreciation deduction (including your special depreciation allowance) is limited to the amount on line 11. Tax 1040ez  2) If line 16 is less than line 11, complete Part III. Tax 1040ez   Part III   17. Tax 1040ez Subtract line 16 from 11. Tax 1040ez This is the limit on the amount you can deduct for MACRS depreciation       18. Tax 1040ez Subtract line 16 from line 15. Tax 1040ez This is your basis for depreciation. Tax 1040ez       19. Tax 1040ez Multiply line 18 by line 6. Tax 1040ez This is your tentative MACRS depreciation deduction. Tax 1040ez       20. Tax 1040ez Enter the lesser of line 17 or line 19. Tax 1040ez This is your MACRS depreciation deduction. Tax 1040ez     1 When figuring the amount to enter on line 12, do not reduce your cost or other basis by any section 179 deduction you claimed for your car. Tax 1040ez 2 Reduce the basis by the lesser of $4,000 or 10% of the cost of the vehicle even if the credit is less than that amount. Tax 1040ez             Deductions After the Recovery Period If the depreciation deductions for your automobile are reduced under the passenger automobile limits, you will have unrecovered basis in your automobile at the end of the recovery period. Tax 1040ez If you continue to use the automobile for business, you can deduct that unrecovered basis after the recovery period ends. Tax 1040ez You can claim a depreciation deduction in each succeeding tax year until you recover your full basis in the car. Tax 1040ez The maximum amount you can deduct each year is determined by the date you placed the car in service and your business/investment-use percentage. Tax 1040ez See Maximum Depreciation Deduction , earlier. Tax 1040ez Unrecovered basis is the cost or other basis of the passenger automobile reduced by any clean-fuel vehicle deduction, electric vehicle credit, depreciation, and section 179 deductions that would have been allowable if you had used the car 100% for business and investment use and the passenger automobile limits had not applied. Tax 1040ez You cannot claim a depreciation deduction for listed property other than passenger automobiles after the recovery period ends. Tax 1040ez There is no unrecovered basis at the end of the recovery period because you are considered to have used this property 100% for business and investment purposes during all of the recovery period. Tax 1040ez Example. Tax 1040ez In May 2007, you bought and placed in service a car costing $31,500. Tax 1040ez The car was 5-year property under GDS (MACRS). Tax 1040ez You did not elect a section 179 deduction and elected not to claim any special depreciation allowance for the car. Tax 1040ez You used the car exclusively for business during the recovery period (2007 through 2012). Tax 1040ez You figured your depreciation as shown below. Tax 1040ez Year Percentage Amount Limit   Allowed 2007 20. Tax 1040ez 0% $6,300 $2,960   $2,960 2008 32. Tax 1040ez 0 10,080 4,800   4,800 2009 19. Tax 1040ez 2 6,048 2,850   2,850 2010 11. Tax 1040ez 52 3,629 1,675   1,675 2011 11. Tax 1040ez 52 3,629 1,675   1,675 2012 5. Tax 1040ez 76 1,814 1,675   1,675 Total   $15,635 At the end of 2012, you had an unrecovered basis of $15,865 ($31,500 − $15,635). Tax 1040ez If in 2013 and later years you continue to use the car 100% for business, you can deduct each year the lesser of $1,675 or your remaining unrecovered basis. Tax 1040ez If your business use of the car had been less than 100% during any year, your depreciation deduction would have been less than the maximum amount allowable for that year. Tax 1040ez However, in figuring your unrecovered basis in the car, you would still reduce your basis by the maximum amount allowable as if the business use had been 100%. Tax 1040ez For example, if you had used your car 60% for business instead of 100%, your allowable depreciation deductions would have been $9,519 ($15,865 × 60%), but you still would have to reduce your basis by $15,865 to determine your unrecovered basis. Tax 1040ez Deductions For Passenger Automobiles Acquired in a Trade-in If you acquire a passenger automobile in a trade-in, depreciate the carryover basis separately as if the trade-in did not occur. Tax 1040ez Depreciate the part of the new automobile's basis that exceeds its carryover basis (excess basis) as if it were newly placed in service property. Tax 1040ez This excess basis is the additional cash paid for the new automobile in the trade-in. Tax 1040ez The depreciation figured for the two components of the basis (carryover basis and excess basis) is subject to a single passenger automobile limit. Tax 1040ez Special rules apply in determining the passenger automobile limits. Tax 1040ez These rules and examples are discussed in section 1. Tax 1040ez 168(i)-6(d)(3) of the regulations. Tax 1040ez Instead of figuring depreciation for the carryover basis and the excess basis separately, you can elect to treat the old automobile as disposed of and both of the basis components for the new automobile as if placed in service at the time of the trade-in. Tax 1040ez For more information, including how to make this election, see Election out under Property Acquired in a Like-kind Exchange or Involuntary Conversion in chapter 4 and sections 1. Tax 1040ez 168(i)-6(i) and 1. Tax 1040ez 168(i)-6(j) of the regulations. Tax 1040ez What Records Must Be Kept? You cannot take any depreciation or section 179 deduction for the use of listed property unless you can prove your business/investment use with adequate records or with sufficient evidence to support your own statements. Tax 1040ez For listed property, you must keep records for as long as any recapture can still occur. Tax 1040ez Recapture can occur in any tax year of the recovery period. Tax 1040ez Adequate Records To meet the adequate records requirement, you must maintain an account book, diary, log, statement of expense, trip sheet, or similar record or other documentary evidence that, together with the receipt, is sufficient to establish each element of an expenditure or use. Tax 1040ez You do not have to record information in an account book, diary, or similar record if the information is already shown on the receipt. Tax 1040ez However, your records should back up your receipts in an orderly manner. Tax 1040ez Elements of expenditure or use. Tax 1040ez   Your records or other documentary evidence must support all the following. Tax 1040ez The amount of each separate expenditure, such as the cost of acquiring the item, maintenance and repair costs, capital improvement costs, lease payments, and any other expenses. Tax 1040ez The amount of each business and investment use (based on an appropriate measure, such as mileage for vehicles and time for other listed property), and the total use of the property for the tax year. Tax 1040ez The date of the expenditure or use. Tax 1040ez The business or investment purpose for the expenditure or use. Tax 1040ez   Written documents of your expenditure or use are generally better evidence than oral statements alone. Tax 1040ez You do not have to keep a daily log. Tax 1040ez However, some type of record containing the elements of an expenditure or the business or investment use of listed property made at or near the time of the expenditure or use and backed up by other documents is preferable to a statement you prepare later. Tax 1040ez Timeliness. Tax 1040ez   You must record the elements of an expenditure or use at the time you have full knowledge of the elements. Tax 1040ez An expense account statement made from an account book, diary, or similar record prepared or maintained at or near the time of the expenditure or use generally is considered a timely record if, in the regular course of business: The statement is given by an employee to the employer, or The statement is given by an independent contractor to the client or customer. Tax 1040ez   For example, a log maintained on a weekly basis, that accounts for use during the week, will be considered a record made at or near the time of use. Tax 1040ez Business purpose supported. Tax 1040ez   Generally, an adequate record of business purpose must be in the form of a written statement. Tax 1040ez However, the amount of detail necessary to establish a business purpose depends on the facts and circumstances of each case. Tax 1040ez A written explanation of the business purpose will not be required if the purpose can be determined from the surrounding facts and circumstances. Tax 1040ez For example, a salesperson visiting customers on an established sales route will not normally need a written explanation of the business purpose of his or her travel. Tax 1040ez Business use supported. Tax 1040ez   An adequate record contains enough information on each element of every business or investment use. Tax 1040ez The amount of detail required to support the use depends on the facts and circumstances. Tax 1040ez For example, a taxpayer who uses a truck for both business and personal purposes and whose only business use of the truck is to make customer deliveries on an established route can satisfy the requirement by recording the length of the route, including the total number of miles driven during the tax year and the date of each trip at or near the time of the trips. Tax 1040ez   Although you generally must prepare an adequate written record, you can prepare a record of the business use of listed property in a computer memory device that uses a logging program. Tax 1040ez Separate or combined expenditures or uses. Tax 1040ez   Each use by you normally is considered a separate use. Tax 1040ez However, you can combine repeated uses as a single item. Tax 1040ez   Record each expenditure as a separate item. Tax 1040ez Do not combine it with other expenditures. Tax 1040ez If you choose, however, you can combine amounts you spent for the use of listed property during a tax year, such as for gasoline or automobile repairs. Tax 1040ez If you combine these expenses, you do not need to support the business purpose of each expense. Tax 1040ez Instead, you can divide the expenses based on the total business use of the listed property. Tax 1040ez   You can account for uses that can be considered part of a single use, such as a round trip or uninterrupted business use, by a single record. Tax 1040ez For example, you can account for the use of a truck to make deliveries at several locations that begin and end at the business premises and can include a stop at the business in between deliveries by a single record of miles driven. Tax 1040ez You can account for the use of a passenger automobile by a salesperson for a business trip away from home over a period of time by a single record of miles traveled. Tax 1040ez Minimal personal use (such as a stop for lunch between two business stops) is not an interruption of business use. Tax 1040ez Confidential information. Tax 1040ez   If any of the information on the elements of an expenditure or use is confidential, you do not need to include it in the account book or similar record if you record it at or near the time of the expenditure or use. Tax 1040ez You must keep it elsewhere and make it available as support to the IRS director for your area on request. Tax 1040ez Substantial compliance. Tax 1040ez   If you have not fully supported a particular element of an expenditure or use, but have complied with the adequate records requirement for the expenditure or use to the satisfaction of the IRS director for your area, you can establish this element by any evidence the IRS director for your area deems adequate. Tax 1040ez   If you fail to establish to the satisfaction of the IRS director for your area that you have substantially complied with the adequate records requirement for an element of an expenditure or use, you must establish the element as follows. Tax 1040ez By your own oral or written statement containing detailed information as to the element. Tax 1040ez By other evidence sufficient to establish the element. Tax 1040ez   If the element is the cost or amount, time, place, or date of an expenditure or use, its supporting evidence must be direct evidence, such as oral testimony by witnesses or a written statement setting forth detailed information about the element or the documentary evidence. Tax 1040ez If the element is the business purpose of an expenditure, its supporting evidence can be circumstantial evidence. Tax 1040ez Sampling. Tax 1040ez   You can maintain an adequate record for part of a tax year and use that record to support your business and investment use of listed property for the entire tax year if it can be shown by other evidence that the periods for which you maintain an adequate record are representative of the use throughout the year. Tax 1040ez Example 1. Tax 1040ez Denise Williams, a sole proprietor and calendar year taxpayer, operates an interior decorating business out of her home. Tax 1040ez She uses her automobile for local business visits to the homes or offices of clients, for meetings with suppliers and subcontractors, and to pick up and deliver items to clients. Tax 1040ez There is no other business use of the automobile, but she and family members also use it for personal purposes. Tax 1040ez She maintains adequate records for the first 3 months of the year showing that 75% of the automobile use was for business. Tax 1040ez Subcontractor invoices and paid bills show that her business continued at approximately the same rate for the rest of the year. Tax 1040ez If there is no change in circumstances, such as the purchase of a second car for exclusive use in her business, the determination that her combined business/investment use of the automobile for the tax year is 75% rests on sufficient supporting evidence. Tax 1040ez Example 2. Tax 1040ez Assume the same facts as in Example 1, except that Denise maintains adequate records during the first week of every month showing that 75% of her use of the automobile is for business. Tax 1040ez Her business invoices show that her business continued at the same rate during the later weeks of each month so that her weekly records are representative of the automobile's business use throughout the month. Tax 1040ez The determination that her business/investment use of the automobile for the tax year is 75% rests on sufficient supporting evidence. Tax 1040ez Example 3. Tax 1040ez Bill Baker, a sole proprietor and calendar year taxpayer, is a salesman in a large metropolitan area for a company that manufactures household products. Tax 1040ez For the first 3 weeks of each month, he occasionally uses his own automobile for business travel within the metropolitan area. Tax 1040ez During these weeks, his business use of the automobile does not follow a consistent pattern. Tax 1040ez During the fourth week of each month, he delivers all business orders taken during the previous month. Tax 1040ez The business use of his automobile, as supported by adequate records, is 70% of its total use during that fourth week. Tax 1040ez The determination based on the record maintained during the fourth week of the month that his business/investment use of the automobile for the tax year is 70% does not rest on sufficient supporting evidence because his use during that week is not representative of use during other periods. Tax 1040ez Loss of records. Tax 1040ez   When you establish that failure to produce adequate records is due to loss of the records through circumstances beyond your control, such as through fire, flood, earthquake, or other casualty, you have the right to support a deduction by reasonable reconstruction of your expenditures and use. Tax 1040ez How Is Listed Property Information Reported? You must provide the information about your listed property requested in Part V of Form 4562, Section A, if you claim either of the following deductions. Tax 1040ez Any deduction for a vehicle. Tax 1040ez A depreciation deduction for any other listed property. Tax 1040ez If you claim any deduction for a vehicle, you also must provide the information requested in Section B. Tax 1040ez If you provide the vehicle for your employee's use, the employee must give you this information. Tax 1040ez If you provide any vehicle for use by an employee, you must first answer the questions in Section C to see if you meet an exception to completing Section B for that vehicle. Tax 1040ez Vehicles used by your employees. Tax 1040ez   You do not have to complete Section B, Part V, for vehicles used by your employees who are not more-than-5% owners or related persons if you meet at least one of the following requirements. Tax 1040ez You maintain a written policy statement that prohibits one of the following uses of the vehicles. Tax 1040ez All personal use including commuting. Tax 1040ez Personal use, other than commuting, by employees who are not officers, directors, or 1%-or-more owners. Tax 1040ez You treat all use of the vehicles by your employees as personal use. Tax 1040ez You provide more than five vehicles for use by your employees, and you keep in your records the information on their use given to you by the employees. Tax 1040ez For demonstrator automobiles provided to full-time salespersons, you maintain a written policy statement that limits the total mileage outside the salesperson's normal working hours and prohibits use of the automobile by anyone else, for vacation trips, or to store personal possessions. Tax 1040ez Exceptions. Tax 1040ez   If you file Form 2106, 2106-EZ, or Schedule C-EZ (Form 1040), and you are not required to file Form 4562, report information about listed property on that form and not on Form 4562. Tax 1040ez Also, if you file Schedule C (Form 1040) and are claiming the standard mileage rate or actual vehicle expenses (except depreciation) and you are not required to file Form 4562 for any other reason, report vehicle information in Part IV of Schedule C and not on Form 4562. Tax 1040ez Prev  Up  Next   Home   More Online Publications
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Understanding your CP259H Notice

We sent you this notice because our records indicate you are a tax-exempt political organization and you did not file a required Form 990/990-EZ, Return of Organization Exempt From Income Tax.

Printable samples of this notice (PDF)

Tax publications you may find useful

How to get help

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

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


What you need to do

  • Disregard this notice if you have filed the return within the last four weeks using the same name and EIN listed on the notice.
  • Otherwise, file your required Form 990 or Form 990-EZ immediately according to the instructions on the notice.
    • If you don't think you need to file, complete the Response form enclosed with your notice and mail it to us using the envelope provided.
    • If you filed more than four weeks ago or used a different name or EIN, complete the Response form enclosed with your notice and mail it to us in the envelope provided along with a signed and dated copy of the return.

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Answers to Common Questions

Which political organizations must file a Form 990 or Form 990-EZ?
A tax-exempt political organization must file Form 990 or 990-EZ if it has gross receipts of $25,000 or more, unless excepted. A political organization that is a qualified state or local political organization must file Form 990 or 990-EZ only if it has gross receipts of $100,000 or more. Political organizations may not submit Form 990-N.

When is Form 990 or Form 990-EZ due?
Form 990 or 990-EZ is due by the 15th day of the 5th month after the end of the tax year. Thus, for a calendar year taxpayer, Form 990 or Form 990-EZ is due on May 15 of the following year. If any due date falls on a Saturday, Sunday or legal holiday, the organization can file the return on the next business day.

Can I get help over the phone?
If you have questions and/or need help completing the form, please call 1-877-829-5500. Personal assistance is available Monday through Friday, 7:00 a.m. to 7:00 p.m. CT.

Where can I go for more information about tax-exempt organizations?
For more information on tax-exempt organizations see Tax Information for Charities & Other Non-Profits.


Tips for next year

Review the political organization resources at Tax Information for Political Organizations.


Understanding your notice

Reading your notice
Your notice may look different from the sample because the information contained in your notice is tailored to your situation.

Notice CP259H, Page 1

Notice CP259H, Page 2

Notice CP259H, Page 3

Notice CP259H, Page 4

Page Last Reviewed or Updated: 29-Mar-2014

The Tax 1040ez

Tax 1040ez Publication 3920 - Introductory Material Table of Contents Introduction Useful Items - You may want to see: Introduction This publication explains some of the provisions of the Victims of Terrorism Tax Relief Act of 2001. Tax 1040ez Under this Act, the federal income tax liability of those killed in the following attacks is forgiven for certain tax years. Tax 1040ez The April 19, 1995, attack on the Alfred P. Tax 1040ez Murrah Federal Building (Oklahoma City attack). Tax 1040ez The September 11, 2001, attacks on the World Trade Center, the Pentagon, and United Airlines Flight 93 in Somerset County, Pennsylvania (September 11 attacks). Tax 1040ez Terrorist attacks involving anthrax occurring after September 10, 2001, and before January 1, 2002 (anthrax attacks). Tax 1040ez The Act also provides other types of relief. Tax 1040ez For example, it provides that the following amounts are not included in income. Tax 1040ez Payments from the September 11th Victim Compensation Fund of 2001. Tax 1040ez Qualified disaster relief payments made after September 10, 2001, to cover personal, family, living, or funeral expenses incurred because of a terrorist attack. Tax 1040ez Certain disability payments received in tax years ending after September 10, 2001, for injuries sustained in a terrorist attack. Tax 1040ez Death benefits paid by an employer to the survivor of an employee if the benefits are paid because the employee died as a result of a terrorist attack. Tax 1040ez Debt cancellations made after September 10, 2001, and before January 1, 2002, because an individual died as a result of the September 11 attacks or anthrax attacks. Tax 1040ez Worksheet A. Tax 1040ez Figuring the Tax To Be Forgiven (For Decedents Who Filed a Return as Single, Married Filing Separately, Head of Household, or Qualifying Widow(er))         (A) First Eligible Year (1994 or 2000) (B) Second Eligible Year (1995 or 2001) (C) Third Eligible Year (1996 or 2002) 1 Enter the years eligible for tax forgiveness. Tax 1040ez 1       2 Enter the total tax from the decedent's income tax return. Tax 1040ez See Table 1 on page 5 for the line number for years before 2002. Tax 1040ez 2       3 Enter the following taxes, if any, shown on the decedent's income tax return. Tax 1040ez (These taxes are not eligible for forgiveness. Tax 1040ez )           a Self-employment tax. Tax 1040ez 3a         b Social security and Medicare tax on tip income not reported to employer. Tax 1040ez 3b         c Tax on excess contributions to IRAs, Coverdell education savings accounts (formerly Ed IRAs), or Archer MSAs (formerly medical savings accounts). Tax 1040ez 3c         d Tax on excess accumulation in qualified retirement plans. Tax 1040ez 3d         e Household employment taxes. Tax 1040ez 3e         f Uncollected social security and Medicare or RRTA tax on tips or group-term life insurance. Tax 1040ez 3f         g Tax on golden parachute payments. Tax 1040ez 3g       4 Add lines 3a through 3g. Tax 1040ez 4       5 Tax to be forgiven. Tax 1040ez Subtract line 4 from line 2. Tax 1040ez 5       Note. Tax 1040ez If the total of columns (A), (B), and (C) of line 5 (including any amounts shown on line 15 of Worksheet B) is less than $10,000, also complete Worksheet C. Tax 1040ez Attach the computation of the tax to be forgiven or a copy of this worksheet to the decedent's final income tax return or amended tax return (Form 1040X) for each year listed on line 1. Tax 1040ez If filing Form 1040X for an eligible year, enter the amount from line 5 above on Form 1040X in column B of line 10 as a decrease in tax. Tax 1040ez The IRS will determine the amount to be refunded. Tax 1040ez Worksheet A. Tax 1040ez Figuring the Tax To Be Forgiven (For Decedents Who Filed a Return as Single, Married Filing Separately, Head of Household, or Qualifying Widow(er))         (A) First Eligible Year (1994 or 2000) (B) Second Eligible Year (1995 or 2001) (C) Third Eligible Year (1996 or 2002) 1 Enter the years eligible for tax forgiveness. Tax 1040ez 1       2 Enter the total tax from the decedent's income tax return. Tax 1040ez See Table 1 on page 5 for the line number for years before 2002. Tax 1040ez 2       3 Enter the following taxes, if any, shown on the decedent's income tax return. Tax 1040ez (These taxes are not eligible for forgiveness. Tax 1040ez )           a Self-employment tax. Tax 1040ez 3a         b Social security and Medicare tax on tip income not reported to employer. Tax 1040ez 3b         c Tax on excess contributions to IRAs, Coverdell education savings accounts (formerly Ed IRAs), or Archer MSAs (formerly medical savings accounts). Tax 1040ez 3c         d Tax on excess accumulation in qualified retirement plans. Tax 1040ez 3d         e Household employment taxes. Tax 1040ez 3e         f Uncollected social security and Medicare or RRTA tax on tips or group-term life insurance. Tax 1040ez 3f         g Tax on golden parachute payments. Tax 1040ez 3g       4 Add lines 3a through 3g. Tax 1040ez 4       5 Tax to be forgiven. Tax 1040ez Subtract line 4 from line 2. Tax 1040ez 5       Note. Tax 1040ez If the total of columns (A), (B), and (C) of line 5 (including any amounts shown on line 15 of Worksheet B) is less than $10,000, also complete Worksheet C. Tax 1040ez Attach the computation of the tax to be forgiven or a copy of this worksheet to the decedent's final income tax return or amended tax return (Form 1040X) for each year listed on line 1. Tax 1040ez If filing Form 1040X for an eligible year, enter the amount from line 5 above on Form 1040X in column B of line 10 as a decrease in tax. Tax 1040ez The IRS will determine the amount to be refunded. Tax 1040ez Useful Items - You may want to see: Publication 547 Casualties, Disasters, and Thefts 559 Survivors, Executors, and Administrators Form (and Instructions) 706 United States Estate (and Generation- Skipping Transfer) Tax Return 1040 U. Tax 1040ez S. Tax 1040ez Individual Income Tax Return 1040NR U. Tax 1040ez S. Tax 1040ez Nonresident Alien Income Tax Return 1040X Amended U. Tax 1040ez S. Tax 1040ez Individual Income Tax Return 1041 U. Tax 1040ez S. Tax 1040ez Income Tax Return for Estates and Trusts 1310 Statement of Person Claiming Refund Due a Deceased Taxpayer 4506 Request for Copy or Transcript of Tax Form Prev  Up  Next   Home   More Online Publications