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1040ez Instructions 2010

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1040ez Instructions 2010

1040ez instructions 2010 Publication 54 - Additional Material Questions and AnswersThis section answers tax- related questions commonly asked by taxpayers living abroad. 1040ez instructions 2010 1. 1040ez instructions 2010 Filing Requirements—Where, When, and How . 1040ez instructions 2010 1) When are U. 1040ez instructions 2010 S. 1040ez instructions 2010 income tax returns due? . 1040ez instructions 2010 2) I am going abroad this year and expect to qualify for the foreign earned income exclusion. 1040ez instructions 2010 How can I secure an extension of time to file my return, when should I file my return, and what forms are required? . 1040ez instructions 2010 3) My entire income qualifies for the foreign earned income exclusion. 1040ez instructions 2010 Must I file a tax return? . 1040ez instructions 2010 4) I was sent abroad by my company in November of last year. 1040ez instructions 2010 I plan to secure an extension of time on Form 2350 to file my tax return for last year because I expect to qualify for the foreign earned income exclusion under the physical presence test. 1040ez instructions 2010 However, if my company recalls me to the United States before the end of the qualifying period and I find I will not qualify for the exclusion, how and when should I file my return? . 1040ez instructions 2010 5) I am a U. 1040ez instructions 2010 S. 1040ez instructions 2010 citizen and have no taxable income from the United States, but I have substantial income from a foreign source. 1040ez instructions 2010 Am I required to file a U. 1040ez instructions 2010 S. 1040ez instructions 2010 income tax return? . 1040ez instructions 2010 6) I am a U. 1040ez instructions 2010 S. 1040ez instructions 2010 citizen who has retired, and I expect to remain in a foreign country. 1040ez instructions 2010 Do I have any further U. 1040ez instructions 2010 S. 1040ez instructions 2010 tax obligations? . 1040ez instructions 2010 7) I have been a bona fide resident of a foreign country for over 5 years. 1040ez instructions 2010 Is it necessary for me to pay estimated tax? . 1040ez instructions 2010 8) Will a check payable in foreign currency be acceptable in payment of my U. 1040ez instructions 2010 S. 1040ez instructions 2010 tax? . 1040ez instructions 2010 9) I have met the test for physical presence in a foreign country and am filing returns for 2 years. 1040ez instructions 2010 Must I file a separate Form 2555 (or Form 2555-EZ) with each return? . 1040ez instructions 2010 10) Does a Form 2555 (or 2555-EZ) with a Schedule C or Form W-2 attached constitute a return? . 1040ez instructions 2010 11) On Form 2350, Application for Extension of Time To File U. 1040ez instructions 2010 S. 1040ez instructions 2010 Income Tax Return, I stated that I would qualify for the foreign earned income exclusion under the physical presence test. 1040ez instructions 2010 If I qualify under the bona fide residence test, can I file my return on that basis? . 1040ez instructions 2010 12) I am a U. 1040ez instructions 2010 S. 1040ez instructions 2010 citizen who worked in the United States for 6 months last year. 1040ez instructions 2010 I accepted employment overseas in July of last year and expect to qualify for the foreign earned income exclusion. 1040ez instructions 2010 Should I file a return and pay tax on the income earned in the United States during the first 6 months and then, when I qualify, file another return covering the last 6 months of the year? . 1040ez instructions 2010 13) I am a U. 1040ez instructions 2010 S. 1040ez instructions 2010 citizen. 1040ez instructions 2010 I have lived abroad for a number of years and recently realized that I should have been filing U. 1040ez instructions 2010 S. 1040ez instructions 2010 income tax returns. 1040ez instructions 2010 How do I correct this oversight in not having filed returns for these years? . 1040ez instructions 2010 14) In 2008, I qualified to exclude my foreign earned income, but I did not claim this exclusion on the return I filed in 2009. 1040ez instructions 2010 I paid all outstanding taxes with the return. 1040ez instructions 2010 Can I file a claim for refund now? . 1040ez instructions 2010 1) When are U. 1040ez instructions 2010 S. 1040ez instructions 2010 income tax returns due? Generally, for calendar year taxpayers, U. 1040ez instructions 2010 S. 1040ez instructions 2010 income tax returns are due on April 15. 1040ez instructions 2010 If you are a U. 1040ez instructions 2010 S. 1040ez instructions 2010 citizen or resident and both your tax home and your abode are outside the United States and Puerto Rico on the regular due date, an automatic extension is granted to June 15 for filing the return. 1040ez instructions 2010 Interest will be charged on any tax due, as shown on the return, from April 15. 1040ez instructions 2010 a) You should file Form 2350 by the due date of your return to request an extension of time to file. 1040ez instructions 2010 Form 2350 is a special form for those U. 1040ez instructions 2010 S. 1040ez instructions 2010 citizens or residents abroad who expect to qualify for the foreign earned income exclusion or the housing exclusion or deduction under either the bona fide residence test or physical presence test and would like to have an extension of time to delay filing until after they have qualified. 1040ez instructions 2010 b) If the extension is granted, you should file your return after you qualify, but by the approved extension date. 1040ez instructions 2010 c) You must file your Form 1040 with Form 2555 (or Form 2555-EZ). 1040ez instructions 2010 Generally, yes. 1040ez instructions 2010 Every U. 1040ez instructions 2010 S. 1040ez instructions 2010 citizen or resident who receives income must file a U. 1040ez instructions 2010 S. 1040ez instructions 2010 income tax return unless total income without regard to the foreign earned income exclusion is below an amount based on filing status. 1040ez instructions 2010 The income levels for filing purposes are discussed under Filing Requirements in chapter 1. 1040ez instructions 2010 If your regular filing date has passed, you should file a return, Form 1040, as soon as possible for last year. 1040ez instructions 2010 Include a statement with this return noting that you have returned to the United States and will not qualify for the foreign earned income exclusion. 1040ez instructions 2010 You must report your worldwide income on the return. 1040ez instructions 2010 If you paid a foreign tax on the income earned abroad, you may be able to either deduct this tax as an itemized deduction or claim it as a credit against your U. 1040ez instructions 2010 S. 1040ez instructions 2010 income tax. 1040ez instructions 2010 However, if you pay the tax due after the regular due date, interest will be charged from the regular due date until the date the tax is paid. 1040ez instructions 2010 Yes. 1040ez instructions 2010 All U. 1040ez instructions 2010 S. 1040ez instructions 2010 citizens and resident aliens are subject to U. 1040ez instructions 2010 S. 1040ez instructions 2010 tax on their worldwide income. 1040ez instructions 2010 If you paid taxes to a foreign government on income from sources outside the United States, you may be able to claim a foreign tax credit against your U. 1040ez instructions 2010 S. 1040ez instructions 2010 income tax liability for the foreign taxes paid. 1040ez instructions 2010 Form 1116 is used to figure the allowable credit. 1040ez instructions 2010 Your U. 1040ez instructions 2010 S. 1040ez instructions 2010 tax obligation on your income is the same as that of a retired person living in the United States. 1040ez instructions 2010 (See the discussion on filing requirements in chapter 1 of this publication. 1040ez instructions 2010 ) U. 1040ez instructions 2010 S. 1040ez instructions 2010 taxpayers overseas have the same requirements for paying estimated tax as those in the United States. 1040ez instructions 2010 See the discussion under Estimated Tax in chapter 1. 1040ez instructions 2010 Overseas taxpayers should not include in their estimated income any income they receive that is, or will be, exempt from U. 1040ez instructions 2010 S. 1040ez instructions 2010 taxation. 1040ez instructions 2010 Overseas taxpayers can deduct their estimated housing deduction in figuring their estimated tax. 1040ez instructions 2010 The first installment of estimated tax is due on April 15 of the year for which the income is earned. 1040ez instructions 2010 Generally, only U. 1040ez instructions 2010 S. 1040ez instructions 2010 currency is acceptable for payment of income tax. 1040ez instructions 2010 However, if you are a Fulbright grantee, see Fulbright Grant in chapter 1. 1040ez instructions 2010 Yes. 1040ez instructions 2010 A Form 2555 (or Form 2555-EZ) must be filed with each Form 1040 tax return on which the benefits of income earned abroad are claimed. 1040ez instructions 2010 No. 1040ez instructions 2010 The Form 2555 (or 2555-EZ), Schedule C, and Form W-2 are merely attachments and do not relieve you of the requirement to file a Form 1040 to show the sources of income reported and the exclusions or deductions claimed. 1040ez instructions 2010 Yes. 1040ez instructions 2010 You can claim the foreign earned income exclusion and the foreign housing exclusion or deduction under either test as long as you meet the requirements. 1040ez instructions 2010 You are not bound by the test indicated in the application for extension of time. 1040ez instructions 2010 You must be sure, however, that you file the Form 1040 by the date approved on Form 2350, since a return filed after that date may be subject to a failure to file penalty. 1040ez instructions 2010 If you will not qualify under the bona fide residence test until a date later than the extension granted under the physical presence rule, apply for a new extension to a date 30 days beyond the date you expect to qualify as a bona fide resident. 1040ez instructions 2010 No. 1040ez instructions 2010 You have the choice of one of the following two methods of filing your return: a) You can file your return when due under the regular filing rules, report all your income without excluding your foreign earned income, and pay the tax due. 1040ez instructions 2010 After you have qualified for the exclusion, you can file an amended return, Form 1040X, accompanied by Form 2555 (or 2555-EZ), for a refund of any excess tax paid. 1040ez instructions 2010 b) You can postpone the filing of your tax return by applying on Form 2350 for an extension of time to file to a date 30 days beyond the date you expect to qualify under either the bona fide residence test or the physical presence test, then file your return reflecting the exclusion of foreign earned income. 1040ez instructions 2010 This allows you to file only once and saves you from paying the tax and waiting for a refund. 1040ez instructions 2010 However, interest is charged on any tax due on the postponed tax return, but interest is not paid on refunds paid within 45 days after the return is filed. 1040ez instructions 2010 If you have moving expenses that are for services performed in two years, you can be granted an extension until after the end of the second year. 1040ez instructions 2010 File the late returns as soon as possible, stating your reason for filing late. 1040ez instructions 2010 For advice on filing the returns, you should contact an  Internal Revenue Service representative in one of the four overseas offices listed in chapter 7. 1040ez instructions 2010 It is too late to claim this refund since a claim for refund must be filed within 3 years from the date the return was filed or 2 years from the date the tax was paid, whichever is later. 1040ez instructions 2010 A return filed before the due date is considered filed on the due date. 1040ez instructions 2010 . 1040ez instructions 2010 2) I am going abroad this year and expect to qualify for the foreign earned income exclusion. 1040ez instructions 2010 How can I secure an extension of time to file my return, when should I file my return, and what forms are required? a) You should file Form 2350 by the due date of your return to request an extension of time to file. 1040ez instructions 2010 Form 2350 is a special form for those U. 1040ez instructions 2010 S. 1040ez instructions 2010 citizens or residents abroad who expect to qualify for the foreign earned income exclusion or the housing exclusion or deduction under either the bona fide residence test or physical presence test and would like to have an extension of time to delay filing until after they have qualified. 1040ez instructions 2010 b) If the extension is granted, you should file your return after you qualify, but by the approved extension date. 1040ez instructions 2010 c) You must file your Form 1040 with Form 2555 (or Form 2555-EZ). 1040ez instructions 2010 Generally, yes. 1040ez instructions 2010 Every U. 1040ez instructions 2010 S. 1040ez instructions 2010 citizen or resident who receives income must file a U. 1040ez instructions 2010 S. 1040ez instructions 2010 income tax return unless total income without regard to the foreign earned income exclusion is below an amount based on filing status. 1040ez instructions 2010 The income levels for filing purposes are discussed under Filing Requirements in chapter 1. 1040ez instructions 2010 If your regular filing date has passed, you should file a return, Form 1040, as soon as possible for last year. 1040ez instructions 2010 Include a statement with this return noting that you have returned to the United States and will not qualify for the foreign earned income exclusion. 1040ez instructions 2010 You must report your worldwide income on the return. 1040ez instructions 2010 If you paid a foreign tax on the income earned abroad, you may be able to either deduct this tax as an itemized deduction or claim it as a credit against your U. 1040ez instructions 2010 S. 1040ez instructions 2010 income tax. 1040ez instructions 2010 However, if you pay the tax due after the regular due date, interest will be charged from the regular due date until the date the tax is paid. 1040ez instructions 2010 Yes. 1040ez instructions 2010 All U. 1040ez instructions 2010 S. 1040ez instructions 2010 citizens and resident aliens are subject to U. 1040ez instructions 2010 S. 1040ez instructions 2010 tax on their worldwide income. 1040ez instructions 2010 If you paid taxes to a foreign government on income from sources outside the United States, you may be able to claim a foreign tax credit against your U. 1040ez instructions 2010 S. 1040ez instructions 2010 income tax liability for the foreign taxes paid. 1040ez instructions 2010 Form 1116 is used to figure the allowable credit. 1040ez instructions 2010 Your U. 1040ez instructions 2010 S. 1040ez instructions 2010 tax obligation on your income is the same as that of a retired person living in the United States. 1040ez instructions 2010 (See the discussion on filing requirements in chapter 1 of this publication. 1040ez instructions 2010 ) U. 1040ez instructions 2010 S. 1040ez instructions 2010 taxpayers overseas have the same requirements for paying estimated tax as those in the United States. 1040ez instructions 2010 See the discussion under Estimated Tax in chapter 1. 1040ez instructions 2010 Overseas taxpayers should not include in their estimated income any income they receive that is, or will be, exempt from U. 1040ez instructions 2010 S. 1040ez instructions 2010 taxation. 1040ez instructions 2010 Overseas taxpayers can deduct their estimated housing deduction in figuring their estimated tax. 1040ez instructions 2010 The first installment of estimated tax is due on April 15 of the year for which the income is earned. 1040ez instructions 2010 Generally, only U. 1040ez instructions 2010 S. 1040ez instructions 2010 currency is acceptable for payment of income tax. 1040ez instructions 2010 However, if you are a Fulbright grantee, see Fulbright Grant in chapter 1. 1040ez instructions 2010 Yes. 1040ez instructions 2010 A Form 2555 (or Form 2555-EZ) must be filed with each Form 1040 tax return on which the benefits of income earned abroad are claimed. 1040ez instructions 2010 No. 1040ez instructions 2010 The Form 2555 (or 2555-EZ), Schedule C, and Form W-2 are merely attachments and do not relieve you of the requirement to file a Form 1040 to show the sources of income reported and the exclusions or deductions claimed. 1040ez instructions 2010 Yes. 1040ez instructions 2010 You can claim the foreign earned income exclusion and the foreign housing exclusion or deduction under either test as long as you meet the requirements. 1040ez instructions 2010 You are not bound by the test indicated in the application for extension of time. 1040ez instructions 2010 You must be sure, however, that you file the Form 1040 by the date approved on Form 2350, since a return filed after that date may be subject to a failure to file penalty. 1040ez instructions 2010 If you will not qualify under the bona fide residence test until a date later than the extension granted under the physical presence rule, apply for a new extension to a date 30 days beyond the date you expect to qualify as a bona fide resident. 1040ez instructions 2010 No. 1040ez instructions 2010 You have the choice of one of the following two methods of filing your return: a) You can file your return when due under the regular filing rules, report all your income without excluding your foreign earned income, and pay the tax due. 1040ez instructions 2010 After you have qualified for the exclusion, you can file an amended return, Form 1040X, accompanied by Form 2555 (or 2555-EZ), for a refund of any excess tax paid. 1040ez instructions 2010 b) You can postpone the filing of your tax return by applying on Form 2350 for an extension of time to file to a date 30 days beyond the date you expect to qualify under either the bona fide residence test or the physical presence test, then file your return reflecting the exclusion of foreign earned income. 1040ez instructions 2010 This allows you to file only once and saves you from paying the tax and waiting for a refund. 1040ez instructions 2010 However, interest is charged on any tax due on the postponed tax return, but interest is not paid on refunds paid within 45 days after the return is filed. 1040ez instructions 2010 If you have moving expenses that are for services performed in two years, you can be granted an extension until after the end of the second year. 1040ez instructions 2010 File the late returns as soon as possible, stating your reason for filing late. 1040ez instructions 2010 For advice on filing the returns, you should contact an  Internal Revenue Service representative in one of the four overseas offices listed in chapter 7. 1040ez instructions 2010 It is too late to claim this refund since a claim for refund must be filed within 3 years from the date the return was filed or 2 years from the date the tax was paid, whichever is later. 1040ez instructions 2010 A return filed before the due date is considered filed on the due date. 1040ez instructions 2010 . 1040ez instructions 2010 3) My entire income qualifies for the foreign earned income exclusion. 1040ez instructions 2010 Must I file a tax return? Generally, yes. 1040ez instructions 2010 Every U. 1040ez instructions 2010 S. 1040ez instructions 2010 citizen or resident who receives income must file a U. 1040ez instructions 2010 S. 1040ez instructions 2010 income tax return unless total income without regard to the foreign earned income exclusion is below an amount based on filing status. 1040ez instructions 2010 The income levels for filing purposes are discussed under Filing Requirements in chapter 1. 1040ez instructions 2010 If your regular filing date has passed, you should file a return, Form 1040, as soon as possible for last year. 1040ez instructions 2010 Include a statement with this return noting that you have returned to the United States and will not qualify for the foreign earned income exclusion. 1040ez instructions 2010 You must report your worldwide income on the return. 1040ez instructions 2010 If you paid a foreign tax on the income earned abroad, you may be able to either deduct this tax as an itemized deduction or claim it as a credit against your U. 1040ez instructions 2010 S. 1040ez instructions 2010 income tax. 1040ez instructions 2010 However, if you pay the tax due after the regular due date, interest will be charged from the regular due date until the date the tax is paid. 1040ez instructions 2010 Yes. 1040ez instructions 2010 All U. 1040ez instructions 2010 S. 1040ez instructions 2010 citizens and resident aliens are subject to U. 1040ez instructions 2010 S. 1040ez instructions 2010 tax on their worldwide income. 1040ez instructions 2010 If you paid taxes to a foreign government on income from sources outside the United States, you may be able to claim a foreign tax credit against your U. 1040ez instructions 2010 S. 1040ez instructions 2010 income tax liability for the foreign taxes paid. 1040ez instructions 2010 Form 1116 is used to figure the allowable credit. 1040ez instructions 2010 Your U. 1040ez instructions 2010 S. 1040ez instructions 2010 tax obligation on your income is the same as that of a retired person living in the United States. 1040ez instructions 2010 (See the discussion on filing requirements in chapter 1 of this publication. 1040ez instructions 2010 ) U. 1040ez instructions 2010 S. 1040ez instructions 2010 taxpayers overseas have the same requirements for paying estimated tax as those in the United States. 1040ez instructions 2010 See the discussion under Estimated Tax in chapter 1. 1040ez instructions 2010 Overseas taxpayers should not include in their estimated income any income they receive that is, or will be, exempt from U. 1040ez instructions 2010 S. 1040ez instructions 2010 taxation. 1040ez instructions 2010 Overseas taxpayers can deduct their estimated housing deduction in figuring their estimated tax. 1040ez instructions 2010 The first installment of estimated tax is due on April 15 of the year for which the income is earned. 1040ez instructions 2010 Generally, only U. 1040ez instructions 2010 S. 1040ez instructions 2010 currency is acceptable for payment of income tax. 1040ez instructions 2010 However, if you are a Fulbright grantee, see Fulbright Grant in chapter 1. 1040ez instructions 2010 Yes. 1040ez instructions 2010 A Form 2555 (or Form 2555-EZ) must be filed with each Form 1040 tax return on which the benefits of income earned abroad are claimed. 1040ez instructions 2010 No. 1040ez instructions 2010 The Form 2555 (or 2555-EZ), Schedule C, and Form W-2 are merely attachments and do not relieve you of the requirement to file a Form 1040 to show the sources of income reported and the exclusions or deductions claimed. 1040ez instructions 2010 Yes. 1040ez instructions 2010 You can claim the foreign earned income exclusion and the foreign housing exclusion or deduction under either test as long as you meet the requirements. 1040ez instructions 2010 You are not bound by the test indicated in the application for extension of time. 1040ez instructions 2010 You must be sure, however, that you file the Form 1040 by the date approved on Form 2350, since a return filed after that date may be subject to a failure to file penalty. 1040ez instructions 2010 If you will not qualify under the bona fide residence test until a date later than the extension granted under the physical presence rule, apply for a new extension to a date 30 days beyond the date you expect to qualify as a bona fide resident. 1040ez instructions 2010 No. 1040ez instructions 2010 You have the choice of one of the following two methods of filing your return: a) You can file your return when due under the regular filing rules, report all your income without excluding your foreign earned income, and pay the tax due. 1040ez instructions 2010 After you have qualified for the exclusion, you can file an amended return, Form 1040X, accompanied by Form 2555 (or 2555-EZ), for a refund of any excess tax paid. 1040ez instructions 2010 b) You can postpone the filing of your tax return by applying on Form 2350 for an extension of time to file to a date 30 days beyond the date you expect to qualify under either the bona fide residence test or the physical presence test, then file your return reflecting the exclusion of foreign earned income. 1040ez instructions 2010 This allows you to file only once and saves you from paying the tax and waiting for a refund. 1040ez instructions 2010 However, interest is charged on any tax due on the postponed tax return, but interest is not paid on refunds paid within 45 days after the return is filed. 1040ez instructions 2010 If you have moving expenses that are for services performed in two years, you can be granted an extension until after the end of the second year. 1040ez instructions 2010 File the late returns as soon as possible, stating your reason for filing late. 1040ez instructions 2010 For advice on filing the returns, you should contact an  Internal Revenue Service representative in one of the four overseas offices listed in chapter 7. 1040ez instructions 2010 It is too late to claim this refund since a claim for refund must be filed within 3 years from the date the return was filed or 2 years from the date the tax was paid, whichever is later. 1040ez instructions 2010 A return filed before the due date is considered filed on the due date. 1040ez instructions 2010 . 1040ez instructions 2010 4) I was sent abroad by my company in November of last year. 1040ez instructions 2010 I plan to secure an extension of time on Form 2350 to file my tax return for last year because I expect to qualify for the foreign earned income exclusion under the physical presence test. 1040ez instructions 2010 However, if my company recalls me to the United States before the end of the qualifying period and I find I will not qualify for the exclusion, how and when should I file my return? If your regular filing date has passed, you should file a return, Form 1040, as soon as possible for last year. 1040ez instructions 2010 Include a statement with this return noting that you have returned to the United States and will not qualify for the foreign earned income exclusion. 1040ez instructions 2010 You must report your worldwide income on the return. 1040ez instructions 2010 If you paid a foreign tax on the income earned abroad, you may be able to either deduct this tax as an itemized deduction or claim it as a credit against your U. 1040ez instructions 2010 S. 1040ez instructions 2010 income tax. 1040ez instructions 2010 However, if you pay the tax due after the regular due date, interest will be charged from the regular due date until the date the tax is paid. 1040ez instructions 2010 Yes. 1040ez instructions 2010 All U. 1040ez instructions 2010 S. 1040ez instructions 2010 citizens and resident aliens are subject to U. 1040ez instructions 2010 S. 1040ez instructions 2010 tax on their worldwide income. 1040ez instructions 2010 If you paid taxes to a foreign government on income from sources outside the United States, you may be able to claim a foreign tax credit against your U. 1040ez instructions 2010 S. 1040ez instructions 2010 income tax liability for the foreign taxes paid. 1040ez instructions 2010 Form 1116 is used to figure the allowable credit. 1040ez instructions 2010 Your U. 1040ez instructions 2010 S. 1040ez instructions 2010 tax obligation on your income is the same as that of a retired person living in the United States. 1040ez instructions 2010 (See the discussion on filing requirements in chapter 1 of this publication. 1040ez instructions 2010 ) U. 1040ez instructions 2010 S. 1040ez instructions 2010 taxpayers overseas have the same requirements for paying estimated tax as those in the United States. 1040ez instructions 2010 See the discussion under Estimated Tax in chapter 1. 1040ez instructions 2010 Overseas taxpayers should not include in their estimated income any income they receive that is, or will be, exempt from U. 1040ez instructions 2010 S. 1040ez instructions 2010 taxation. 1040ez instructions 2010 Overseas taxpayers can deduct their estimated housing deduction in figuring their estimated tax. 1040ez instructions 2010 The first installment of estimated tax is due on April 15 of the year for which the income is earned. 1040ez instructions 2010 Generally, only U. 1040ez instructions 2010 S. 1040ez instructions 2010 currency is acceptable for payment of income tax. 1040ez instructions 2010 However, if you are a Fulbright grantee, see Fulbright Grant in chapter 1. 1040ez instructions 2010 Yes. 1040ez instructions 2010 A Form 2555 (or Form 2555-EZ) must be filed with each Form 1040 tax return on which the benefits of income earned abroad are claimed. 1040ez instructions 2010 No. 1040ez instructions 2010 The Form 2555 (or 2555-EZ), Schedule C, and Form W-2 are merely attachments and do not relieve you of the requirement to file a Form 1040 to show the sources of income reported and the exclusions or deductions claimed. 1040ez instructions 2010 Yes. 1040ez instructions 2010 You can claim the foreign earned income exclusion and the foreign housing exclusion or deduction under either test as long as you meet the requirements. 1040ez instructions 2010 You are not bound by the test indicated in the application for extension of time. 1040ez instructions 2010 You must be sure, however, that you file the Form 1040 by the date approved on Form 2350, since a return filed after that date may be subject to a failure to file penalty. 1040ez instructions 2010 If you will not qualify under the bona fide residence test until a date later than the extension granted under the physical presence rule, apply for a new extension to a date 30 days beyond the date you expect to qualify as a bona fide resident. 1040ez instructions 2010 No. 1040ez instructions 2010 You have the choice of one of the following two methods of filing your return: a) You can file your return when due under the regular filing rules, report all your income without excluding your foreign earned income, and pay the tax due. 1040ez instructions 2010 After you have qualified for the exclusion, you can file an amended return, Form 1040X, accompanied by Form 2555 (or 2555-EZ), for a refund of any excess tax paid. 1040ez instructions 2010 b) You can postpone the filing of your tax return by applying on Form 2350 for an extension of time to file to a date 30 days beyond the date you expect to qualify under either the bona fide residence test or the physical presence test, then file your return reflecting the exclusion of foreign earned income. 1040ez instructions 2010 This allows you to file only once and saves you from paying the tax and waiting for a refund. 1040ez instructions 2010 However, interest is charged on any tax due on the postponed tax return, but interest is not paid on refunds paid within 45 days after the return is filed. 1040ez instructions 2010 If you have moving expenses that are for services performed in two years, you can be granted an extension until after the end of the second year. 1040ez instructions 2010 File the late returns as soon as possible, stating your reason for filing late. 1040ez instructions 2010 For advice on filing the returns, you should contact an  Internal Revenue Service representative in one of the four overseas offices listed in chapter 7. 1040ez instructions 2010 It is too late to claim this refund since a claim for refund must be filed within 3 years from the date the return was filed or 2 years from the date the tax was paid, whichever is later. 1040ez instructions 2010 A return filed before the due date is considered filed on the due date. 1040ez instructions 2010 . 1040ez instructions 2010 5) I am a U. 1040ez instructions 2010 S. 1040ez instructions 2010 citizen and have no taxable income from the United States, but I have substantial income from a foreign source. 1040ez instructions 2010 Am I required to file a U. 1040ez instructions 2010 S. 1040ez instructions 2010 income tax return? Yes. 1040ez instructions 2010 All U. 1040ez instructions 2010 S. 1040ez instructions 2010 citizens and resident aliens are subject to U. 1040ez instructions 2010 S. 1040ez instructions 2010 tax on their worldwide income. 1040ez instructions 2010 If you paid taxes to a foreign government on income from sources outside the United States, you may be able to claim a foreign tax credit against your U. 1040ez instructions 2010 S. 1040ez instructions 2010 income tax liability for the foreign taxes paid. 1040ez instructions 2010 Form 1116 is used to figure the allowable credit. 1040ez instructions 2010 Your U. 1040ez instructions 2010 S. 1040ez instructions 2010 tax obligation on your income is the same as that of a retired person living in the United States. 1040ez instructions 2010 (See the discussion on filing requirements in chapter 1 of this publication. 1040ez instructions 2010 ) U. 1040ez instructions 2010 S. 1040ez instructions 2010 taxpayers overseas have the same requirements for paying estimated tax as those in the United States. 1040ez instructions 2010 See the discussion under Estimated Tax in chapter 1. 1040ez instructions 2010 Overseas taxpayers should not include in their estimated income any income they receive that is, or will be, exempt from U. 1040ez instructions 2010 S. 1040ez instructions 2010 taxation. 1040ez instructions 2010 Overseas taxpayers can deduct their estimated housing deduction in figuring their estimated tax. 1040ez instructions 2010 The first installment of estimated tax is due on April 15 of the year for which the income is earned. 1040ez instructions 2010 Generally, only U. 1040ez instructions 2010 S. 1040ez instructions 2010 currency is acceptable for payment of income tax. 1040ez instructions 2010 However, if you are a Fulbright grantee, see Fulbright Grant in chapter 1. 1040ez instructions 2010 Yes. 1040ez instructions 2010 A Form 2555 (or Form 2555-EZ) must be filed with each Form 1040 tax return on which the benefits of income earned abroad are claimed. 1040ez instructions 2010 No. 1040ez instructions 2010 The Form 2555 (or 2555-EZ), Schedule C, and Form W-2 are merely attachments and do not relieve you of the requirement to file a Form 1040 to show the sources of income reported and the exclusions or deductions claimed. 1040ez instructions 2010 Yes. 1040ez instructions 2010 You can claim the foreign earned income exclusion and the foreign housing exclusion or deduction under either test as long as you meet the requirements. 1040ez instructions 2010 You are not bound by the test indicated in the application for extension of time. 1040ez instructions 2010 You must be sure, however, that you file the Form 1040 by the date approved on Form 2350, since a return filed after that date may be subject to a failure to file penalty. 1040ez instructions 2010 If you will not qualify under the bona fide residence test until a date later than the extension granted under the physical presence rule, apply for a new extension to a date 30 days beyond the date you expect to qualify as a bona fide resident. 1040ez instructions 2010 No. 1040ez instructions 2010 You have the choice of one of the following two methods of filing your return: a) You can file your return when due under the regular filing rules, report all your income without excluding your foreign earned income, and pay the tax due. 1040ez instructions 2010 After you have qualified for the exclusion, you can file an amended return, Form 1040X, accompanied by Form 2555 (or 2555-EZ), for a refund of any excess tax paid. 1040ez instructions 2010 b) You can postpone the filing of your tax return by applying on Form 2350 for an extension of time to file to a date 30 days beyond the date you expect to qualify under either the bona fide residence test or the physical presence test, then file your return reflecting the exclusion of foreign earned income. 1040ez instructions 2010 This allows you to file only once and saves you from paying the tax and waiting for a refund. 1040ez instructions 2010 However, interest is charged on any tax due on the postponed tax return, but interest is not paid on refunds paid within 45 days after the return is filed. 1040ez instructions 2010 If you have moving expenses that are for services performed in two years, you can be granted an extension until after the end of the second year. 1040ez instructions 2010 File the late returns as soon as possible, stating your reason for filing late. 1040ez instructions 2010 For advice on filing the returns, you should contact an  Internal Revenue Service representative in one of the four overseas offices listed in chapter 7. 1040ez instructions 2010 It is too late to claim this refund since a claim for refund must be filed within 3 years from the date the return was filed or 2 years from the date the tax was paid, whichever is later. 1040ez instructions 2010 A return filed before the due date is considered filed on the due date. 1040ez instructions 2010 . 1040ez instructions 2010 6) I am a U. 1040ez instructions 2010 S. 1040ez instructions 2010 citizen who has retired, and I expect to remain in a foreign country. 1040ez instructions 2010 Do I have any further U. 1040ez instructions 2010 S. 1040ez instructions 2010 tax obligations? Your U. 1040ez instructions 2010 S. 1040ez instructions 2010 tax obligation on your income is the same as that of a retired person living in the United States. 1040ez instructions 2010 (See the discussion on filing requirements in chapter 1 of this publication. 1040ez instructions 2010 ) U. 1040ez instructions 2010 S. 1040ez instructions 2010 taxpayers overseas have the same requirements for paying estimated tax as those in the United States. 1040ez instructions 2010 See the discussion under Estimated Tax in chapter 1. 1040ez instructions 2010 Overseas taxpayers should not include in their estimated income any income they receive that is, or will be, exempt from U. 1040ez instructions 2010 S. 1040ez instructions 2010 taxation. 1040ez instructions 2010 Overseas taxpayers can deduct their estimated housing deduction in figuring their estimated tax. 1040ez instructions 2010 The first installment of estimated tax is due on April 15 of the year for which the income is earned. 1040ez instructions 2010 Generally, only U. 1040ez instructions 2010 S. 1040ez instructions 2010 currency is acceptable for payment of income tax. 1040ez instructions 2010 However, if you are a Fulbright grantee, see Fulbright Grant in chapter 1. 1040ez instructions 2010 Yes. 1040ez instructions 2010 A Form 2555 (or Form 2555-EZ) must be filed with each Form 1040 tax return on which the benefits of income earned abroad are claimed. 1040ez instructions 2010 No. 1040ez instructions 2010 The Form 2555 (or 2555-EZ), Schedule C, and Form W-2 are merely attachments and do not relieve you of the requirement to file a Form 1040 to show the sources of income reported and the exclusions or deductions claimed. 1040ez instructions 2010 Yes. 1040ez instructions 2010 You can claim the foreign earned income exclusion and the foreign housing exclusion or deduction under either test as long as you meet the requirements. 1040ez instructions 2010 You are not bound by the test indicated in the application for extension of time. 1040ez instructions 2010 You must be sure, however, that you file the Form 1040 by the date approved on Form 2350, since a return filed after that date may be subject to a failure to file penalty. 1040ez instructions 2010 If you will not qualify under the bona fide residence test until a date later than the extension granted under the physical presence rule, apply for a new extension to a date 30 days beyond the date you expect to qualify as a bona fide resident. 1040ez instructions 2010 No. 1040ez instructions 2010 You have the choice of one of the following two methods of filing your return: a) You can file your return when due under the regular filing rules, report all your income without excluding your foreign earned income, and pay the tax due. 1040ez instructions 2010 After you have qualified for the exclusion, you can file an amended return, Form 1040X, accompanied by Form 2555 (or 2555-EZ), for a refund of any excess tax paid. 1040ez instructions 2010 b) You can postpone the filing of your tax return by applying on Form 2350 for an extension of time to file to a date 30 days beyond the date you expect to qualify under either the bona fide residence test or the physical presence test, then file your return reflecting the exclusion of foreign earned income. 1040ez instructions 2010 This allows you to file only once and saves you from paying the tax and waiting for a refund. 1040ez instructions 2010 However, interest is charged on any tax due on the postponed tax return, but interest is not paid on refunds paid within 45 days after the return is filed. 1040ez instructions 2010 If you have moving expenses that are for services performed in two years, you can be granted an extension until after the end of the second year. 1040ez instructions 2010 File the late returns as soon as possible, stating your reason for filing late. 1040ez instructions 2010 For advice on filing the returns, you should contact an  Internal Revenue Service representative in one of the four overseas offices listed in chapter 7. 1040ez instructions 2010 It is too late to claim this refund since a claim for refund must be filed within 3 years from the date the return was filed or 2 years from the date the tax was paid, whichever is later. 1040ez instructions 2010 A return filed before the due date is considered filed on the due date. 1040ez instructions 2010 . 1040ez instructions 2010 7) I have been a bona fide resident of a foreign country for over 5 years. 1040ez instructions 2010 Is it necessary for me to pay estimated tax? U. 1040ez instructions 2010 S. 1040ez instructions 2010 taxpayers overseas have the same requirements for paying estimated tax as those in the United States. 1040ez instructions 2010 See the discussion under Estimated Tax in chapter 1. 1040ez instructions 2010 Overseas taxpayers should not include in their estimated income any income they receive that is, or will be, exempt from U. 1040ez instructions 2010 S. 1040ez instructions 2010 taxation. 1040ez instructions 2010 Overseas taxpayers can deduct their estimated housing deduction in figuring their estimated tax. 1040ez instructions 2010 The first installment of estimated tax is due on April 15 of the year for which the income is earned. 1040ez instructions 2010 Generally, only U. 1040ez instructions 2010 S. 1040ez instructions 2010 currency is acceptable for payment of income tax. 1040ez instructions 2010 However, if you are a Fulbright grantee, see Fulbright Grant in chapter 1. 1040ez instructions 2010 Yes. 1040ez instructions 2010 A Form 2555 (or Form 2555-EZ) must be filed with each Form 1040 tax return on which the benefits of income earned abroad are claimed. 1040ez instructions 2010 No. 1040ez instructions 2010 The Form 2555 (or 2555-EZ), Schedule C, and Form W-2 are merely attachments and do not relieve you of the requirement to file a Form 1040 to show the sources of income reported and the exclusions or deductions claimed. 1040ez instructions 2010 Yes. 1040ez instructions 2010 You can claim the foreign earned income exclusion and the foreign housing exclusion or deduction under either test as long as you meet the requirements. 1040ez instructions 2010 You are not bound by the test indicated in the application for extension of time. 1040ez instructions 2010 You must be sure, however, that you file the Form 1040 by the date approved on Form 2350, since a return filed after that date may be subject to a failure to file penalty. 1040ez instructions 2010 If you will not qualify under the bona fide residence test until a date later than the extension granted under the physical presence rule, apply for a new extension to a date 30 days beyond the date you expect to qualify as a bona fide resident. 1040ez instructions 2010 No. 1040ez instructions 2010 You have the choice of one of the following two methods of filing your return: a) You can file your return when due under the regular filing rules, report all your income without excluding your foreign earned income, and pay the tax due. 1040ez instructions 2010 After you have qualified for the exclusion, you can file an amended return, Form 1040X, accompanied by Form 2555 (or 2555-EZ), for a refund of any excess tax paid. 1040ez instructions 2010 b) You can postpone the filing of your tax return by applying on Form 2350 for an extension of time to file to a date 30 days beyond the date you expect to qualify under either the bona fide residence test or the physical presence test, then file your return reflecting the exclusion of foreign earned income. 1040ez instructions 2010 This allows you to file only once and saves you from paying the tax and waiting for a refund. 1040ez instructions 2010 However, interest is charged on any tax due on the postponed tax return, but interest is not paid on refunds paid within 45 days after the return is filed. 1040ez instructions 2010 If you have moving expenses that are for services performed in two years, you can be granted an extension until after the end of the second year. 1040ez instructions 2010 File the late returns as soon as possible, stating your reason for filing late. 1040ez instructions 2010 For advice on filing the returns, you should contact an  Internal Revenue Service representative in one of the four overseas offices listed in chapter 7. 1040ez instructions 2010 It is too late to claim this refund since a claim for refund must be filed within 3 years from the date the return was filed or 2 years from the date the tax was paid, whichever is later. 1040ez instructions 2010 A return filed before the due date is considered filed on the due date. 1040ez instructions 2010 . 1040ez instructions 2010 8) Will a check payable in foreign currency be acceptable in payment of my U. 1040ez instructions 2010 S. 1040ez instructions 2010 tax? Generally, only U. 1040ez instructions 2010 S. 1040ez instructions 2010 currency is acceptable for payment of income tax. 1040ez instructions 2010 However, if you are a Fulbright grantee, see Fulbright Grant in chapter 1. 1040ez instructions 2010 Yes. 1040ez instructions 2010 A Form 2555 (or Form 2555-EZ) must be filed with each Form 1040 tax return on which the benefits of income earned abroad are claimed. 1040ez instructions 2010 No. 1040ez instructions 2010 The Form 2555 (or 2555-EZ), Schedule C, and Form W-2 are merely attachments and do not relieve you of the requirement to file a Form 1040 to show the sources of income reported and the exclusions or deductions claimed. 1040ez instructions 2010 Yes. 1040ez instructions 2010 You can claim the foreign earned income exclusion and the foreign housing exclusion or deduction under either test as long as you meet the requirements. 1040ez instructions 2010 You are not bound by the test indicated in the application for extension of time. 1040ez instructions 2010 You must be sure, however, that you file the Form 1040 by the date approved on Form 2350, since a return filed after that date may be subject to a failure to file penalty. 1040ez instructions 2010 If you will not qualify under the bona fide residence test until a date later than the extension granted under the physical presence rule, apply for a new extension to a date 30 days beyond the date you expect to qualify as a bona fide resident. 1040ez instructions 2010 No. 1040ez instructions 2010 You have the choice of one of the following two methods of filing your return: a) You can file your return when due under the regular filing rules, report all your income without excluding your foreign earned income, and pay the tax due. 1040ez instructions 2010 After you have qualified for the exclusion, you can file an amended return, Form 1040X, accompanied by Form 2555 (or 2555-EZ), for a refund of any excess tax paid. 1040ez instructions 2010 b) You can postpone the filing of your tax return by applying on Form 2350 for an extension of time to file to a date 30 days beyond the date you expect to qualify under either the bona fide residence test or the physical presence test, then file your return reflecting the exclusion of foreign earned income. 1040ez instructions 2010 This allows you to file only once and saves you from paying the tax and waiting for a refund. 1040ez instructions 2010 However, interest is charged on any tax due on the postponed tax return, but interest is not paid on refunds paid within 45 days after the return is filed. 1040ez instructions 2010 If you have moving expenses that are for services performed in two years, you can be granted an extension until after the end of the second year. 1040ez instructions 2010 File the late returns as soon as possible, stating your reason for filing late. 1040ez instructions 2010 For advice on filing the returns, you should contact an  Internal Revenue Service representative in one of the four overseas offices listed in chapter 7. 1040ez instructions 2010 It is too late to claim this refund since a claim for refund must be filed within 3 years from the date the return was filed or 2 years from the date the tax was paid, whichever is later. 1040ez instructions 2010 A return filed before the due date is considered filed on the due date. 1040ez instructions 2010 . 1040ez instructions 2010 9) I have met the test for physical presence in a foreign country and am filing returns for 2 years. 1040ez instructions 2010 Must I file a separate Form 2555 (or Form 2555-EZ) with each return? Yes. 1040ez instructions 2010 A Form 2555 (or Form 2555-EZ) must be filed with each Form 1040 tax return on which the benefits of income earned abroad are claimed. 1040ez instructions 2010 No. 1040ez instructions 2010 The Form 2555 (or 2555-EZ), Schedule C, and Form W-2 are merely attachments and do not relieve you of the requirement to file a Form 1040 to show the sources of income reported and the exclusions or deductions claimed. 1040ez instructions 2010 Yes. 1040ez instructions 2010 You can claim the foreign earned income exclusion and the foreign housing exclusion or deduction under either test as long as you meet the requirements. 1040ez instructions 2010 You are not bound by the test indicated in the application for extension of time. 1040ez instructions 2010 You must be sure, however, that you file the Form 1040 by the date approved on Form 2350, since a return filed after that date may be subject to a failure to file penalty. 1040ez instructions 2010 If you will not qualify under the bona fide residence test until a date later than the extension granted under the physical presence rule, apply for a new extension to a date 30 days beyond the date you expect to qualify as a bona fide resident. 1040ez instructions 2010 No. 1040ez instructions 2010 You have the choice of one of the following two methods of filing your return: a) You can file your return when due under the regular filing rules, report all your income without excluding your foreign earned income, and pay the tax due. 1040ez instructions 2010 After you have qualified for the exclusion, you can file an amended return, Form 1040X, accompanied by Form 2555 (or 2555-EZ), for a refund of any excess tax paid. 1040ez instructions 2010 b) You can postpone the filing of your tax return by applying on Form 2350 for an extension of time to file to a date 30 days beyond the date you expect to qualify under either the bona fide residence test or the physical presence test, then file your return reflecting the exclusion of foreign earned income. 1040ez instructions 2010 This allows you to file only once and saves you from paying the tax and waiting for a refund. 1040ez instructions 2010 However, interest is charged on any tax due on the postponed tax return, but interest is not paid on refunds paid within 45 days after the return is filed. 1040ez instructions 2010 If you have moving expenses that are for services performed in two years, you can be granted an extension until after the end of the second year. 1040ez instructions 2010 File the late returns as soon as possible, stating your reason for filing late. 1040ez instructions 2010 For advice on filing the returns, you should contact an  Internal Revenue Service representative in one of the four overseas offices listed in chapter 7. 1040ez instructions 2010 It is too late to claim this refund since a claim for refund must be filed within 3 years from the date the return was filed or 2 years from the date the tax was paid, whichever is later. 1040ez instructions 2010 A return filed before the due date is considered filed on the due date. 1040ez instructions 2010 . 1040ez instructions 2010 10) Does a Form 2555 (or 2555-EZ) with a Schedule C or Form W-2 attached constitute a return? No. 1040ez instructions 2010 The Form 2555 (or 2555-EZ), Schedule C, and Form W-2 are merely attachments and do not relieve you of the requirement to file a Form 1040 to show the sources of income reported and the exclusions or deductions claimed. 1040ez instructions 2010 Yes. 1040ez instructions 2010 You can claim the foreign earned income exclusion and the foreign housing exclusion or deduction under either test as long as you meet the requirements. 1040ez instructions 2010 You are not bound by the test indicated in the application for extension of time. 1040ez instructions 2010 You must be sure, however, that you file the Form 1040 by the date approved on Form 2350, since a return filed after that date may be subject to a failure to file penalty. 1040ez instructions 2010 If you will not qualify under the bona fide residence test until a date later than the extension granted under the physical presence rule, apply for a new extension to a date 30 days beyond the date you expect to qualify as a bona fide resident. 1040ez instructions 2010 No. 1040ez instructions 2010 You have the choice of one of the following two methods of filing your return: a) You can file your return when due under the regular filing rules, report all your income without excluding your foreign earned income, and pay the tax due. 1040ez instructions 2010 After you have qualified for the exclusion, you can file an amended return, Form 1040X, accompanied by Form 2555 (or 2555-EZ), for a refund of any excess tax paid. 1040ez instructions 2010 b) You can postpone the filing of your tax return by applying on Form 2350 for an extension of time to file to a date 30 days beyond the date you expect to qualify under either the bona fide residence test or the physical presence test, then file your return reflecting the exclusion of foreign earned income. 1040ez instructions 2010 This allows you to file only once and saves you from paying the tax and waiting for a refund. 1040ez instructions 2010 However, interest is charged on any tax due on the postponed tax return, but interest is not paid on refunds paid within 45 days after the return is filed. 1040ez instructions 2010 If you have moving expenses that are for services performed in two years, you can be granted an extension until after the end of the second year. 1040ez instructions 2010 File the late returns as soon as possible, stating your reason for filing late. 1040ez instructions 2010 For advice on filing the returns, you should contact an  Internal Revenue Service representative in one of the four overseas offices listed in chapter 7. 1040ez instructions 2010 It is too late to claim this refund since a claim for refund must be filed within 3 years from the date the return was filed or 2 years from the date the tax was paid, whichever is later. 1040ez instructions 2010 A return filed before the due date is considered filed on the due date. 1040ez instructions 2010 . 1040ez instructions 2010 11) On Form 2350, Application for Extension of Time To File U. 1040ez instructions 2010 S. 1040ez instructions 2010 Income Tax Return, I stated that I would qualify for the foreign earned income exclusion under the physical presence test. 1040ez instructions 2010 If I qualify under the bona fide residence test, can I file my return on that basis? Yes. 1040ez instructions 2010 You can claim the foreign earned income exclusion and the foreign housing exclusion or deduction under either test as long as you meet the requirements. 1040ez instructions 2010 You are not bound by the test indicated in the application for extension of time. 1040ez instructions 2010 You must be sure, however, that you file the Form 1040 by the date approved on Form 2350, since a return filed after that date may be subject to a failure to file penalty. 1040ez instructions 2010 If you will not qualify under the bona fide residence test until a date later than the extension granted under the physical presence rule, apply for a new extension to a date 30 days beyond the date you expect to qualify as a bona fide resident. 1040ez instructions 2010 No. 1040ez instructions 2010 You have the choice of one of the following two methods of filing your return: a) You can file your return when due under the regular filing rules, report all your income without excluding your foreign earned income, and pay the tax due. 1040ez instructions 2010 After you have qualified for the exclusion, you can file an amended return, Form 1040X, accompanied by Form 2555 (or 2555-EZ), for a refund of any excess tax paid. 1040ez instructions 2010 b) You can postpone the filing of your tax return by applying on Form 2350 for an extension of time to file to a date 30 days beyond the date you expect to qualify under either the bona fide residence test or the physical presence test, then file your return reflecting the exclusion of foreign earned income. 1040ez instructions 2010 This allows you to file only once and saves you from paying the tax and waiting for a refund. 1040ez instructions 2010 However, interest is charged on any tax due on the postponed tax return, but interest is not paid on refunds paid within 45 days after the return is filed. 1040ez instructions 2010 If you have moving expenses that are for services performed in two years, you can be granted an extension until after the end of the second year. 1040ez instructions 2010 File the late returns as soon as possible, stating your reason for filing late. 1040ez instructions 2010 For advice on filing the returns, you should contact an  Internal Revenue Service representative in one of the four overseas offices listed in chapter 7. 1040ez instructions 2010 It is too late to claim this refund since a claim for refund must be filed within 3 years from the date the return was filed or 2 years from the date the tax was paid, whichever is later. 1040ez instructions 2010 A return filed before the due date is considered filed on the due date. 1040ez instructions 2010 . 1040ez instructions 2010 12) I am a U. 1040ez instructions 2010 S. 1040ez instructions 2010 citizen who worked in the United States for 6 months last year. 1040ez instructions 2010 I accepted employment overseas in July of last year and expect to qualify for the foreign earned income exclusion. 1040ez instructions 2010 Should I file a return and pay tax on the income earned in the United States during the first 6 months and then, when I qualify, file another return covering the last 6 months of the year? No. 1040ez instructions 2010 You have the choice of one of the following two methods of filing your return: a) You can file your return when due under the regular filing rules, report all your income without excluding your foreign earned income, and pay the tax due. 1040ez instructions 2010 After you have qualified for the exclusion, you can file an amended return, Form 1040X, accompanied by Form 2555 (or 2555-EZ), for a refund of any excess tax paid. 1040ez instructions 2010 b) You can postpone the filing of your tax return by applying on Form 2350 for an extension of time to file to a date 30 days beyond the date you expect to qualify under either the bona fide residence test or the physical presence test, then file your return reflecting the exclusion of foreign earned income. 1040ez instructions 2010 This allows you to file only once and saves you from paying the tax and waiting for a refund. 1040ez instructions 2010 However, interest is charged on any tax due on the postponed tax return, but interest is not paid on refunds paid within 45 days after the return is filed. 1040ez instructions 2010 If you have moving expenses that are for services performed in two years, you can be granted an extension until after the end of the second year. 1040ez instructions 2010 File the late returns as soon as possible, stating your reason for filing late. 1040ez instructions 2010 For advice on filing the returns, you should contact an  Internal Revenue Service representative in one of the four overseas offices listed in chapter 7. 1040ez instructions 2010 It is too late to claim this refund since a claim for refund must be filed within 3 years from the date the return was filed or 2 years from the date the tax was paid, whichever is later. 1040ez instructions 2010 A return filed before the due date is considered filed on the due date. 1040ez instructions 2010 . 1040ez instructions 2010 13) I am a U. 1040ez instructions 2010 S. 1040ez instructions 2010 citizen. 1040ez instructions 2010 I have lived abroad for a number of years and recently realized that I should have been filing U. 1040ez instructions 2010 S. 1040ez instructions 2010 income tax returns. 1040ez instructions 2010 How do I correct this oversight in not having filed returns for these years? File the late returns as soon as possible, stating your reason for filing late. 1040ez instructions 2010 For advice on filing the returns, you should contact an  Internal Revenue Service representative in one of the four overseas offices listed in chapter 7. 1040ez instructions 2010 It is too late to claim this refund since a claim for refund must be filed within 3 years from the date the return was filed or 2 years from the date the tax was paid, whichever is later. 1040ez instructions 2010 A return filed before the due date is considered filed on the due date. 1040ez instructions 2010 . 1040ez instructions 2010 14) In 2008, I qualified to exclude my foreign earned income, but I did not claim this exclusion on the return I filed in 2009. 1040ez instructions 2010 I paid all outstanding taxes with the return. 1040ez instructions 2010 Can I file a claim for refund now? It is too late to claim this refund since a claim for refund must be filed within 3 years from the date the return was filed or 2 years from the date the tax was paid, whichever is later. 1040ez instructions 2010 A return filed before the due date is considered filed on the due date. 1040ez instructions 2010 2. 1040ez instructions 2010 Meeting the Requirements of Either the Bona Fide Residence Test or the Physical Presence Test . 1040ez instructions 2010 1) I recently came to Country X to work for the Orange Tractor Co. 1040ez instructions 2010 and I expect to be here for 5 or 6 years. 1040ez instructions 2010 I understand that upon the completion of 1 full year I will qualify for an exclusion or deduction under the bona fide residence test. 1040ez instructions 2010 Is this correct? . 1040ez instructions 2010 2) I understand the physical presence test to be simply a matter of being physically present in a foreign country for at least 330 days within 12 consecutive months; but what are the criteria of the bona fide residence test? . 1040ez instructions 2010 3) To meet the qualification of an uninterrupted period which includes an entire taxable year, do I have to be physically present in a foreign country for the entire year? . 1040ez instructions 2010 4) I am a U. 1040ez instructions 2010 S. 1040ez instructions 2010 citizen and during 2012 was a bona fide resident of Country X. 1040ez instructions 2010 On January 15, 2013, I was notified that I was to be assigned to Country Y. 1040ez instructions 2010 I was recalled to New York for 90 days orientation and then went to Country Y, where I have been since. 1040ez instructions 2010 Although I was not in Country Y on January 1, I was a bona fide resident of Country X and was in Country Y on December 31, 2013. 1040ez instructions 2010 My family remained in Country X until completion of the orientation period, and my household goods were shipped directly to my new post. 1040ez instructions 2010 Am I a bona fide resident of a foreign country for 2013, or must I wait for the entire year of 2014 to become one? . 1040ez instructions 2010 5) Due to illness, I returned to the United States before I completed my qualifying period to claim the foreign earned income exclusion. 1040ez instructions 2010 Can I figure the exclusion for the period I resided abroad? . 1040ez instructions 2010 6) Can a resident alien of the United States qualify for an exclusion or deduction under the bona fide residence test or the physical presence test? . 1040ez instructions 2010 7) On August 13 of last year I left the United States and arrived in Country Z to work for the Gordon Manufacturing Company. 1040ez instructions 2010 I expected to be able to exclude my foreign earned income under the physical presence test because I planned to be in Country Z for at least 1 year. 1040ez instructions 2010 However, I was reassigned back to the United States and left Country Z on July 1 of this year. 1040ez instructions 2010 Can I exclude any of my foreign earned income? . 1040ez instructions 2010 1) I recently came to Country X to work for the Orange Tractor Co. 1040ez instructions 2010 and I expect to be here for 5 or 6 years. 1040ez instructions 2010 I understand that upon the completion of 1 full year I will qualify for an exclusion or deduction under the bona fide residence test. 1040ez instructions 2010 Is this correct? Not necessarily. 1040ez instructions 2010 The law provides that to qualify under this test for the foreign earned income exclusion, the foreign housing exclusion, or the foreign housing deduction, a person must be a “bona fide resident of a foreign country or countries for an uninterrupted period which includes an entire taxable year. 1040ez instructions 2010 ” If, like most U. 1040ez instructions 2010 S. 1040ez instructions 2010 citizens, you file your return on a calendar year basis, the taxable year referred to in the law would be from January 1 to December 31 of any particular year. 1040ez instructions 2010 Unless you established residence in Country X on January 1, it would be more than 1 year before you would be a bona fide resident of a foreign country. 1040ez instructions 2010 Once you have completed your qualifying period, however, you are entitled to exclude the income or to claim the housing exclusion or deduction from the date you established bona fide residence. 1040ez instructions 2010 To be a bona fide resident of a foreign country, you must show that you entered a foreign country intending to remain there for an indefinite or prolonged period and, to that end, you are making your home in that country. 1040ez instructions 2010 Consideration is given to the type of quarters occupied, whether your family went with you, the type of visa, the employment agreement, and any other factor pertinent to show whether your stay in the foreign country is indefinite or prolonged. 1040ez instructions 2010 To claim the foreign earned income exclusion or foreign housing exclusion or deduction under this test, the period of foreign residence must include 1 full tax year (usually January 1 – December 31), but once you meet this time requirement, you figure the exclusions and the deduction from the date the residence actually began. 1040ez instructions 2010 No. 1040ez instructions 2010 Uninterrupted refers to the bona fide residence proper and not to the physical presence of the individual. 1040ez instructions 2010 During the period of bona fide residence in a foreign country, even during the first full year, you can leave the country for brief and temporary trips back to the United States or elsewhere for vacation, or even for business. 1040ez instructions 2010 To preserve your status as a bona fide resident of a foreign country, you must have a clear intention of returning from those trips, without unreasonable delay, to your foreign residence. 1040ez instructions 2010 Since you did not break your period of foreign residence, you would continue to be a bona fide resident of a foreign country for 2013. 1040ez instructions 2010 No. 1040ez instructions 2010 You are not entitled to any exclusion of foreign earned income since you did not complete your qualifying period under either the bona fide residence test or physical presence test. 1040ez instructions 2010 If you paid foreign tax on the income earned abroad, you may be able to claim that tax as a deduction or as a credit against your U. 1040ez instructions 2010 S. 1040ez instructions 2010 tax. 1040ez instructions 2010 Resident aliens of the United States can qualify for the foreign earned income exclusion, the foreign housing exclusion, or the foreign housing deduction if they meet the requirements of the physical presence test. 1040ez instructions 2010 Resident aliens who are citizens or nationals of a country with which the United States has an income tax treaty in effect also can qualify under the bona fide residence test. 1040ez instructions 2010 No. 1040ez instructions 2010 You cannot exclude any of the income you earned in Country Z because you were not in a foreign country for at least 330 full days as required under the physical presence test. 1040ez instructions 2010 . 1040ez instructions 2010 2) I understand the physical presence test to be simply a matter of being physically present in a foreign country for at least 330 days within 12 consecutive months; but what are the criteria of the bona fide residence test? To be a bona fide resident of a foreign country, you must show that you entered a foreign country intending to remain there for an indefinite or prolonged period and, to that end, you are making your home in that country. 1040ez instructions 2010 Consideration is given to the type of quarters occupied, whether your family went with you, the type of visa, the employment agreement, and any other factor pertinent to show whether your stay in the foreign country is indefinite or prolonged. 1040ez instructions 2010 To claim the foreign earned income exclusion or foreign housing exclusion or deduction under this test, the period of foreign residence must include 1 full tax year (usually January 1 – December 31), but once you meet this time requirement, you figure the exclusions and the deduction from the date the residence actually began. 1040ez instructions 2010 No. 1040ez instructions 2010 Uninterrupted refers to the bona fide residence proper and not to the physical presence of the individual. 1040ez instructions 2010 During the period of bona fide residence in a foreign country, even during the first full year, you can leave the country for brief and temporary trips back to the United States or elsewhere for vacation, or even for business. 1040ez instructions 2010 To preserve your status as a bona fide resident of a foreign country, you must have a clear intention of returning from those trips, without unreasonable delay, to your foreign residence. 1040ez instructions 2010 Since you did not break your period of foreign residence, you would continue to be a bona fide resident of a foreign country for 2013. 1040ez instructions 2010 No. 1040ez instructions 2010 You are not entitled to any exclusion of foreign earned income since you did not complete your qualifying period under either the bona fide residence test or physical presence test. 1040ez instructions 2010 If you paid foreign tax on the income earned abroad, you may be able to claim that tax as a deduction or as a credit against your U. 1040ez instructions 2010 S. 1040ez instructions 2010 tax. 1040ez instructions 2010 Resident aliens of the United States can qualify for the foreign earned income exclusion, the foreign housing exclusion, or the foreign housing deduction if they meet the requirements of the physical presence test. 1040ez instructions 2010 Resident aliens who are citizens or nationals of a country with which the United States has an income tax treaty in effect also can qualify under the bona fide residence test. 1040ez instructions 2010 No. 1040ez instructions 2010 You cannot exclude any of the income you earned in Country Z because you were not in a foreign country for at least 330 full days as required under the physical presence test. 1040ez instructions 2010 . 1040ez instructions 2010 3) To meet the qualification of “an uninterrupted period which includes an entire taxable year,” do I have to be physically present in a foreign country for the entire year? No. 1040ez instructions 2010 Uninterrupted refers to the bona fide residence proper and not to the physical presence of the individual. 1040ez instructions 2010 During the period of bona fide residence in a foreign country, even during the first full year, you can leave the country for brief and temporary trips back to the United States or elsewhere for vacation, or even for business. 1040ez instructions 2010 To preserve your status as a bona fide resident of a foreign country, you must have a clear intention of returning from those trips, without unreasonable delay, to your foreign residence. 1040ez instructions 2010 Since you did not break your period of foreign residence, you would continue to be a bona fide resident of a foreign country for 2013. 1040ez instructions 2010 No. 1040ez instructions 2010 You are not entitled to any exclusion of foreign earned income since you did not complete your qualifying period under either the bona fide residence test or physical presence test. 1040ez instructions 2010 If you paid foreign tax on the income earned abroad, you may be able to claim that tax as a deduction or as a credit against your U. 1040ez instructions 2010 S. 1040ez instructions 2010 tax. 1040ez instructions 2010 Resident aliens of the United States can qualify for the foreign earned income exclusion, the foreign housing exclusion, or the foreign housing deduction if they meet the requirements of the physical presence test. 1040ez instructions 2010 Resident aliens who are citizens or nationals of a country with which the United States has an income tax treaty in effect also can qualify under the bona fide residence test. 1040ez instructions 2010 No. 1040ez instructions 2010 You cannot exclude any of the income you earned in Country Z because you were not in a foreign country for at least 330 full days as required under the physical presence test. 1040ez instructions 2010 . 1040ez instructions 2010 4) I am a U. 1040ez instructions 2010 S. 1040ez instructions 2010 citizen and during 2012 was a bona fide resident of Country X. 1040ez instructions 2010 On January 15, 2013, I was notified that I was to be assigned to Country Y. 1040ez instructions 2010 I was recalled to New York for 90 days orientation and then went to Country Y, where I have been since. 1040ez instructions 2010 Although I was not in Country Y on January 1, I was a bona fide resident of Country X and was in Country Y on December 31, 2013. 1040ez instructions 2010 My family remained in Country X until completion of the orientation period, and my household goods were shipped directly to my new post. 1040ez instructions 2010 Am I a bona fide resident of a foreign country for 2013, or must I wait for the entire year of 2014 to become one? Since you did not break your period of foreign residence, you would continue to be a bona fide resident of a foreign country for 2013. 1040ez instructions 2010 No. 1040ez instructions 2010 You are not entitled to any exclusion of foreign earned income since you did not complete your qualifying period under either the bona fide residence test or physical presence test. 1040ez instructions 2010 If you paid foreign tax on the income earned abroad, you may be able to claim that tax as a deduction or as a credit against your U. 1040ez instructions 2010 S. 1040ez instructions 2010 tax. 1040ez instructions 2010 Resident aliens of the United States can qualify for the foreign earned income exclusion, the foreign housing exclusion, or the foreign housing deduction if they meet the requirements of the physical presence test. 1040ez instructions 2010 Resident aliens who are citizens or nationals of a country with which the United States has an income tax treaty in effect also can qualify under the bona fide residence test. 1040ez instructions 2010 No. 1040ez instructions 2010 You cannot exclude any of the income you earned in Country Z because you were not in a foreign country for at least 330 full days as required under the physical presence test. 1040ez instructions 2010 . 1040ez instructions 2010 5) Due to illness, I returned to the United States before I completed my qualifying period to claim the foreign earned income exclusion. 1040ez instructions 2010 Can I figure the exclusion for the period I resided abroad? No. 1040ez instructions 2010 You are not entitled to any exclusion of foreign earned income since you did not complete your qualifying period under either the bona fide residence test or physical presence test. 1040ez instructions 2010 If you paid foreign tax on the income earned abroad, you may be able to claim that tax as a deduction or as a credit against your U. 1040ez instructions 2010 S. 1040ez instructions 2010 tax. 1040ez instructions 2010 Resident aliens of the United States can qualify for the foreign earned income exclusion, the foreign housing exclusion, or the foreign housing deduction if they meet the requirements of the physical presence test. 1040ez instructions 2010 Resident aliens who are citizens or nationals of a country with which the United States has an income tax treaty in effect also can qualify under the bona fide residence test. 1040ez instructions 2010 No. 1040ez instructions 2010 You cannot exclude any of the income you earned in Country Z because you were not in a foreign country for at least 330 full days as required under the physical presence test. 1040ez instructions 2010 . 1040ez instructions 2010 6) Can a resident alien of the United States qualify for an exclusion or deduction under the bona fide residence test or the physical presence test? Resident aliens of the United States can qualify for the foreign earned income exclusion, the foreign housing exclusion, or the foreign housing deduction if they meet the requirements of the physical presence test. 1040ez instructions 2010 Resident aliens who are citizens or nationals of a country with which the United States has an income tax treaty in effect also can qualify under the bona fide residence test. 1040ez instructions 2010 No. 1040ez instructions 2010 You cannot exclude any of the income you earned in Country Z because you were not in a foreign country for at least 330 full days as required under the physical presence test. 1040ez instructions 2010 . 1040ez instructions 2010 7) On August 13 of last year I left the United States and arrived in Country Z to work for the Gordon Manufacturing Company. 1040ez instructions 2010 I expected to be able to exclude my foreign earned income under the physical presence test because I planned to be in Country Z for at least 1 year. 1040ez instructions 2010 However, I was reassigned back to the United States and left Country Z on July 1 of this year. 1040ez instructions 2010 Can I exclude any of my foreign earned income? No. 1040ez instructions 2010 You cannot exclude any of the income you earned in Country Z because you were not in a foreign country for at least 330 full days as required under the physical presence test. 1040ez instructions 2010 3. 1040ez instructions 2010 Foreign Earned Income . 1040ez instructions 2010 1) I am an employee of the U. 1040ez instructions 2010 S. 1040ez instructions 2010 Government working abroad. 1040ez instructions 2010 Can all or part of my government income earned abroad qualify for the foreign earned income exclusion? . 1040ez instructions 2010 2) I qualify for the foreign earned income exclusion under the bona fide residence test. 1040ez instructions 2010 Does my foreign earned income include my U. 1040ez instructions 2010 S. 1040ez instructions 2010 dividends and the interest I receive on a foreign bank account? . 1040ez instructions 2010 3) My company pays my foreign income tax on my foreign earnings. 1040ez instructions 2010 Is this taxable compensation? . 1040ez instructions 2010 4) I live in an apartment in a foreign city for which my employer pays the rent. 1040ez instructions 2010 Should I include in my income the cost to my employer ($1,200 a month) or the fair market value of equivalent housing in the United States ($800 a month)? . 1040ez instructions 2010 5) My U. 1040ez instructions 2010 S. 1040ez instructions 2010 employer pays my salary into my U. 1040ez instructions 2010 S. 1040ez instructions 2010 bank account. 1040ez instructions 2010 Is this income considered earned in the United States or is it considered foreign earned income? . 1040ez instructions 2010 6) What is considered a foreign country? . 1040ez instructions 2010 7) What is the source of earned income? . 1040ez instructions 2010 1) I am an employee of the U. 1040ez instructions 2010 S. 1040ez instructions 2010 Government working abroad. 1040ez instructions 2010 Can all or part of my government income earned abroad qualify for the foreign earned income exclusion? No. 1040ez instructions 2010 The foreign earned income exclusion applies to your foreign earned income. 1040ez instructions 2010 Amounts paid by the United States or its agencies to their employees are not treated, for this purpose, as foreign earned income. 1040ez instructions 2010 No. 1040ez instructions 2010 The only income that is foreign earned income is income from the performance of personal services abroad. 1040ez instructions 2010 Investment income is not earned income. 1040ez instructions 2010 However, you must include it in gross income reported on your Form 1040. 1040ez instructions 2010 Yes. 1040ez instructions 2010 The amount is compensation for services performed. 1040ez instructions 2010 The tax paid by your company should be reported on Form 1040, line 7, and on Form 2555, Part IV, line 22(f) (or on Form 2555-EZ, Part IV, line 17). 1040ez instructions 2010 You must include in income the fair market value (FMV) of the facility provided, where it is provided. 1040ez instructions 2010 This will usually be the rent your employer pays. 1040ez instructions 2010 Situations when the FMV is not included in income are discussed in chapter 4 under Exclusion of Meals and Lodging. 1040ez instructions 2010 If you performed the services to earn this salary outside the United States, your salary is considered earned abroad. 1040ez instructions 2010 It does not matter that you are paid by a U. 1040ez instructions 2010 S. 1040ez instructions 2010 employer or that your salary is deposited in a U. 1040ez instructions 2010 S. 1040ez instructions 2010 bank account in the United States. 1040ez instructions 2010 The source of salary, wages, commissions, and other personal service income is the place where you perform the services. 1040ez instructions 2010 For the purposes of the foreign earned income exclusion and the foreign housing exclusion or deduction, any territory under the sovereignty of a countr
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CP 297 - Notice of Intent to Levy and Notice of Your Right to a Hearing

Details About This Notice:
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Purpose:   We send CP 297 to notify the recipient of our intent to levy and of the their right to a hearing.
Reason for Issuance:   There is a balance due on the recipient's account we've previously asked them to pay. We're sending the notice to inform them the account is still unpaid and to notify them of our intent to levy and of their right to receive appeals consideration.
Account Balance:   Balance due
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Page Last Reviewed or Updated: 20-May-2013

The 1040ez Instructions 2010

1040ez instructions 2010 2. 1040ez instructions 2010   Depreciation of Rental Property Table of Contents The BasicsWhat Rental Property Can Be Depreciated? When Does Depreciation Begin and End? Depreciation Methods Basis of Depreciable Property Claiming the Special Depreciation Allowance MACRS DepreciationDepreciation Systems Property Classes Under GDS Recovery Periods Under GDS Conventions Figuring Your Depreciation Deduction Figuring MACRS Depreciation Under ADS Claiming the Correct Amount of Depreciation You recover the cost of income producing property through yearly tax deductions. 1040ez instructions 2010 You do this by depreciating the property; that is, by deducting some of the cost each year on your tax return. 1040ez instructions 2010 Three factors determine how much depreciation you can deduct each year: (1) your basis in the property, (2) the recovery period for the property, and (3) the depreciation method used. 1040ez instructions 2010 You cannot simply deduct your mortgage or principal payments, or the cost of furniture, fixtures and equipment, as an expense. 1040ez instructions 2010 You can deduct depreciation only on the part of your property used for rental purposes. 1040ez instructions 2010 Depreciation reduces your basis for figuring gain or loss on a later sale or exchange. 1040ez instructions 2010 You may have to use Form 4562 to figure and report your depreciation. 1040ez instructions 2010 See Which Forms To Use in chapter 3. 1040ez instructions 2010 Also see Publication 946. 1040ez instructions 2010 Section 179 deduction. 1040ez instructions 2010   The section 179 deduction is a means of recovering part or all of the cost of certain qualifying property in the year you place the property in service. 1040ez instructions 2010 This deduction is not allowed for property used in connection with residential rental property. 1040ez instructions 2010 See chapter 2 of Publication 946. 1040ez instructions 2010 Alternative minimum tax (AMT). 1040ez instructions 2010   If you use accelerated depreciation, you may be subject to the AMT. 1040ez instructions 2010 Accelerated depreciation allows you to deduct more depreciation earlier in the recovery period than you could deduct using a straight line method (same deduction each year). 1040ez instructions 2010   The prescribed depreciation methods for rental real estate are not accelerated, so the depreciation deduction is not adjusted for the AMT. 1040ez instructions 2010 However, accelerated methods are generally used for other property connected with rental activities (for example, appliances and wall-to-wall carpeting). 1040ez instructions 2010   To find out if you are subject to the AMT, see the Instructions for Form 6251. 1040ez instructions 2010 The Basics The following section discusses the information you will need to have about the rental property and the decisions to be made before figuring your depreciation deduction. 1040ez instructions 2010 What Rental Property Can Be Depreciated? You can depreciate your property if it meets all the following requirements. 1040ez instructions 2010 You own the property. 1040ez instructions 2010 You use the property in your business or income-producing activity (such as rental property). 1040ez instructions 2010 The property has a determinable useful life. 1040ez instructions 2010 The property is expected to last more than one year. 1040ez instructions 2010 Property you own. 1040ez instructions 2010   To claim depreciation, you usually must be the owner of the property. 1040ez instructions 2010 You are considered as owning property even if it is subject to a debt. 1040ez instructions 2010 Rented property. 1040ez instructions 2010   Generally, if you pay rent for property, you cannot depreciate that property. 1040ez instructions 2010 Usually, only the owner can depreciate it. 1040ez instructions 2010 However, if you make permanent improvements to leased property, you may be able to depreciate the improvements. 1040ez instructions 2010 See Additions or improvements to property , later in this chapter, under Recovery Periods Under GDS. 1040ez instructions 2010 Cooperative apartments. 1040ez instructions 2010   If you are a tenant-stockholder in a cooperative housing corporation and rent your cooperative apartment to others, you can deduct depreciation on your stock in the corporation. 1040ez instructions 2010 See chapter 4, Special Situations. 1040ez instructions 2010 Property having a determinable useful life. 1040ez instructions 2010   To be depreciable, your property must have a determinable useful life. 1040ez instructions 2010 This means that it must be something that wears out, decays, gets used up, becomes obsolete, or loses its value from natural causes. 1040ez instructions 2010 What Rental Property Cannot Be Depreciated? Certain property cannot be depreciated. 1040ez instructions 2010 This includes land and certain excepted property. 1040ez instructions 2010 Land. 1040ez instructions 2010   You cannot depreciate the cost of land because land generally does not wear out, become obsolete, or get used up. 1040ez instructions 2010 But if it does, the loss is accounted for upon disposition. 1040ez instructions 2010 The costs of clearing, grading, planting, and landscaping are usually all part of the cost of land and cannot be depreciated. 1040ez instructions 2010   Although you cannot depreciate land, you can depreciate certain land preparation costs, such as landscaping costs, incurred in preparing land for business use. 1040ez instructions 2010 These costs must be so closely associated with other depreciable property that you can determine a life for them along with the life of the associated property. 1040ez instructions 2010 Example. 1040ez instructions 2010 You built a new house to use as a rental and paid for grading, clearing, seeding, and planting bushes and trees. 1040ez instructions 2010 Some of the bushes and trees were planted right next to the house, while others were planted around the outer border of the lot. 1040ez instructions 2010 If you replace the house, you would have to destroy the bushes and trees right next to it. 1040ez instructions 2010 These bushes and trees are closely associated with the house, so they have a determinable useful life. 1040ez instructions 2010 Therefore, you can depreciate them. 1040ez instructions 2010 Add your other land preparation costs to the basis of your land because they have no determinable life and you cannot depreciate them. 1040ez instructions 2010 Excepted property. 1040ez instructions 2010   Even if the property meets all the requirements listed earlier under What Rental Property Can Be Depreciated , you cannot depreciate the following property. 1040ez instructions 2010 Property placed in service and disposed of (or taken out of business use) in the same year. 1040ez instructions 2010 Equipment used to build capital improvements. 1040ez instructions 2010 You must add otherwise allowable depreciation on the equipment during the period of construction to the basis of your improvements. 1040ez instructions 2010 For more information, see chapter 1 of Publication 946. 1040ez instructions 2010 When Does Depreciation Begin and End? You begin to depreciate your rental property when you place it in service for the production of income. 1040ez instructions 2010 You stop depreciating it either when you have fully recovered your cost or other basis, or when you retire it from service, whichever happens first. 1040ez instructions 2010 Placed in Service You place property in service in a rental activity when it is ready and available for a specific use in that activity. 1040ez instructions 2010 Even if you are not using the property, it is in service when it is ready and available for its specific use. 1040ez instructions 2010 Example 1. 1040ez instructions 2010 On November 22 of last year, you purchased a dishwasher for your rental property. 1040ez instructions 2010 The appliance was delivered on December 7, but was not installed and ready for use until January 3 of this year. 1040ez instructions 2010 Because the dishwasher was not ready for use last year, it is not considered placed in service until this year. 1040ez instructions 2010 If the appliance had been installed and ready for use when it was delivered in December of last year, it would have been considered placed in service in December, even if it was not actually used until this year. 1040ez instructions 2010 Example 2. 1040ez instructions 2010 On April 6, you purchased a house to use as residential rental property. 1040ez instructions 2010 You made extensive repairs to the house and had it ready for rent on July 5. 1040ez instructions 2010 You began to advertise the house for rent in July and actually rented it beginning September 1. 1040ez instructions 2010 The house is considered placed in service in July when it was ready and available for rent. 1040ez instructions 2010 You can begin to depreciate the house in July. 1040ez instructions 2010 Example 3. 1040ez instructions 2010 You moved from your home in July. 1040ez instructions 2010 During August and September you made several repairs to the house. 1040ez instructions 2010 On October 1, you listed the property for rent with a real estate company, which rented it on December 1. 1040ez instructions 2010 The property is considered placed in service on October 1, the date when it was available for rent. 1040ez instructions 2010 Conversion to business use. 1040ez instructions 2010   If you place property in service in a personal activity, you cannot claim depreciation. 1040ez instructions 2010 However, if you change the property's use to business or the production of income, you can begin to depreciate it at the time of the change. 1040ez instructions 2010 You place the property in service for business or income-producing use on the date of the change. 1040ez instructions 2010 Example. 1040ez instructions 2010 You bought a house and used it as your personal home several years before you converted it to rental property. 1040ez instructions 2010 Although its specific use was personal and no depreciation was allowable, you placed the home in service when you began using it as your home. 1040ez instructions 2010 You can begin to claim depreciation in the year you converted it to rental property because at that time its use changed to the production of income. 1040ez instructions 2010 Idle Property Continue to claim a deduction for depreciation on property used in your rental activity even if it is temporarily idle (not in use). 1040ez instructions 2010 For example, if you must make repairs after a tenant moves out, you still depreciate the rental property during the time it is not available for rent. 1040ez instructions 2010 Cost or Other Basis Fully Recovered You must stop depreciating property when the total of your yearly depreciation deductions equals your cost or other basis of your property. 1040ez instructions 2010 For this purpose, your yearly depreciation deductions include any depreciation that you were allowed to claim, even if you did not claim it. 1040ez instructions 2010 See Basis of Depreciable Property , later. 1040ez instructions 2010 Retired From Service You stop depreciating property when you retire it from service, even if you have not fully recovered its cost or other basis. 1040ez instructions 2010 You retire property from service when you permanently withdraw it from use in a trade or business or from use in the production of income because of any of the following events. 1040ez instructions 2010 You sell or exchange the property. 1040ez instructions 2010 You convert the property to personal use. 1040ez instructions 2010 You abandon the property. 1040ez instructions 2010 The property is destroyed. 1040ez instructions 2010 Depreciation Methods Generally, you must use the Modified Accelerated Cost Recovery System (MACRS) to depreciate residential rental property placed in service after 1986. 1040ez instructions 2010 If you placed rental property in service before 1987, you are using one of the following methods. 1040ez instructions 2010 ACRS (Accelerated Cost Recovery System) for property placed in service after 1980 but before 1987. 1040ez instructions 2010 Straight line or declining balance method over the useful life of property placed in service before 1981. 1040ez instructions 2010 See MACRS Depreciation , later, for more information. 1040ez instructions 2010 Rental property placed in service before 2013. 1040ez instructions 2010   Continue to use the same method of figuring depreciation that you used in the past. 1040ez instructions 2010 Use of real property changed. 1040ez instructions 2010   Generally, you must use MACRS to depreciate real property that you acquired for personal use before 1987 and changed to business or income-producing use after 1986. 1040ez instructions 2010 This includes your residence that you changed to rental use. 1040ez instructions 2010 See Property Owned or Used in 1986 in Publication 946, chapter 1, for those situations in which MACRS is not allowed. 1040ez instructions 2010 Improvements made after 1986. 1040ez instructions 2010   Treat an improvement made after 1986 to property you placed in service before 1987 as separate depreciable property. 1040ez instructions 2010 As a result, you can depreciate that improvement as separate property under MACRS if it is the type of property that otherwise qualifies for MACRS depreciation. 1040ez instructions 2010 For more information about improvements, see Additions or improvements to property , later in this chapter under Recovery Periods Under GDS. 1040ez instructions 2010 This publication discusses MACRS depreciation only. 1040ez instructions 2010 If you need information about depreciating property placed in service before 1987, see Publication 534. 1040ez instructions 2010 Basis of Depreciable Property The basis of property used in a rental activity is generally its adjusted basis when you place it in service in that activity. 1040ez instructions 2010 This is its cost or other basis when you acquired it, adjusted for certain items occurring before you place it in service in the rental activity. 1040ez instructions 2010 If you depreciate your property under MACRS, you may also have to reduce your basis by certain deductions and credits with respect to the property. 1040ez instructions 2010 Basis and adjusted basis are explained in the following discussions. 1040ez instructions 2010 If you used the property for personal purposes before changing it to rental use, its basis for depreciation is the lesser of its adjusted basis or its fair market value when you change it to rental use. 1040ez instructions 2010 See Basis of Property Changed to Rental Use in chapter 4. 1040ez instructions 2010 Cost Basis The basis of property you buy is usually its cost. 1040ez instructions 2010 The cost is the amount you pay for it in cash, in debt obligation, in other property, or in services. 1040ez instructions 2010 Your cost also includes amounts you pay for: Sales tax charged on the purchase (but see Exception next), Freight charges to obtain the property, and Installation and testing charges. 1040ez instructions 2010 Exception. 1040ez instructions 2010   If you deducted state and local general sales taxes as an itemized deduction on Schedule A (Form 1040), do not include those sales taxes as part of your cost basis. 1040ez instructions 2010 Such taxes were deductible before 1987 and after 2003. 1040ez instructions 2010 Loans with low or no interest. 1040ez instructions 2010   If you buy property on any time-payment plan that charges little or no interest, the basis of your property is your stated purchase price, less the amount considered to be unstated interest. 1040ez instructions 2010 See Unstated Interest and Original Issue Discount (OID) in Publication 537, Installment Sales. 1040ez instructions 2010 Real property. 1040ez instructions 2010   If you buy real property, such as a building and land, certain fees and other expenses you pay are part of your cost basis in the property. 1040ez instructions 2010 Real estate taxes. 1040ez instructions 2010   If you buy real property and agree to pay real estate taxes on it that were owed by the seller and the seller does not reimburse you, the taxes you pay are treated as part of your basis in the property. 1040ez instructions 2010 You cannot deduct them as taxes paid. 1040ez instructions 2010   If you reimburse the seller for real estate taxes the seller paid for you, you can usually deduct that amount. 1040ez instructions 2010 Do not include that amount in your basis in the property. 1040ez instructions 2010 Settlement fees and other costs. 1040ez instructions 2010   The following settlement fees and closing costs for buying the property are part of your basis in the property. 1040ez instructions 2010 Abstract fees. 1040ez instructions 2010 Charges for installing utility services. 1040ez instructions 2010 Legal fees. 1040ez instructions 2010 Recording fees. 1040ez instructions 2010 Surveys. 1040ez instructions 2010 Transfer taxes. 1040ez instructions 2010 Title insurance. 1040ez instructions 2010 Any amounts the seller owes that you agree to pay, such as back taxes or interest, recording or mortgage fees, charges for improvements or repairs, and sales commissions. 1040ez instructions 2010   The following are settlement fees and closing costs you cannot include in your basis in the property. 1040ez instructions 2010 Fire insurance premiums. 1040ez instructions 2010 Rent or other charges relating to occupancy of the property before closing. 1040ez instructions 2010 Charges connected with getting or refinancing a loan, such as: Points (discount points, loan origination fees), Mortgage insurance premiums, Loan assumption fees, Cost of a credit report, and Fees for an appraisal required by a lender. 1040ez instructions 2010   Also, do not include amounts placed in escrow for the future payment of items such as taxes and insurance. 1040ez instructions 2010 Assumption of a mortgage. 1040ez instructions 2010   If you buy property and become liable for an existing mortgage on the property, your basis is the amount you pay for the property plus the amount remaining to be paid on the mortgage. 1040ez instructions 2010 Example. 1040ez instructions 2010 You buy a building for $60,000 cash and assume a mortgage of $240,000 on it. 1040ez instructions 2010 Your basis is $300,000. 1040ez instructions 2010 Separating cost of land and buildings. 1040ez instructions 2010   If you buy buildings and your cost includes the cost of the land on which they stand, you must divide the cost between the land and the buildings to figure the basis for depreciation of the buildings. 1040ez instructions 2010 The part of the cost that you allocate to each asset is the ratio of the fair market value of that asset to the fair market value of the whole property at the time you buy it. 1040ez instructions 2010   If you are not certain of the fair market values of the land and the buildings, you can divide the cost between them based on their assessed values for real estate tax purposes. 1040ez instructions 2010 Example. 1040ez instructions 2010 You buy a house and land for $200,000. 1040ez instructions 2010 The purchase contract does not specify how much of the purchase price is for the house and how much is for the land. 1040ez instructions 2010 The latest real estate tax assessment on the property was based on an assessed value of $160,000, of which $136,000 was for the house and $24,000 was for the land. 1040ez instructions 2010 You can allocate 85% ($136,000 ÷ $160,000) of the purchase price to the house and 15% ($24,000 ÷ $160,000) of the purchase price to the land. 1040ez instructions 2010 Your basis in the house is $170,000 (85% of $200,000) and your basis in the land is $30,000 (15% of $200,000). 1040ez instructions 2010 Basis Other Than Cost You cannot use cost as a basis for property that you received: In return for services you performed; In an exchange for other property; As a gift; From your spouse, or from your former spouse as the result of a divorce; or As an inheritance. 1040ez instructions 2010 If you received property in one of these ways, see Publication 551 for information on how to figure your basis. 1040ez instructions 2010 Adjusted Basis To figure your property's basis for depreciation, you may have to make certain adjustments (increases and decreases) to the basis of the property for events occurring between the time you acquired the property and the time you placed it in service for business or the production of income. 1040ez instructions 2010 The result of these adjustments to the basis is the adjusted basis. 1040ez instructions 2010 Increases to basis. 1040ez instructions 2010   You must increase the basis of any property by the cost of all items properly added to a capital account. 1040ez instructions 2010 These include the following. 1040ez instructions 2010 The cost of any additions or improvements made before placing your property into service as a rental that have a useful life of more than 1 year. 1040ez instructions 2010 Amounts spent after a casualty to restore the damaged property. 1040ez instructions 2010 The cost of extending utility service lines to the property. 1040ez instructions 2010 Legal fees, such as the cost of defending and perfecting title, or settling zoning issues. 1040ez instructions 2010 Additions or improvements. 1040ez instructions 2010   Add to the basis of your property the amount an addition or improvement actually cost you, including any amount you borrowed to make the addition or improvement. 1040ez instructions 2010 This includes all direct costs, such as material and labor, but does not include your own labor. 1040ez instructions 2010 It also includes all expenses related to the addition or improvement. 1040ez instructions 2010   For example, if you had an architect draw up plans for remodeling your property, the architect's fee is a part of the cost of the remodeling. 1040ez instructions 2010 Or, if you had your lot surveyed to put up a fence, the cost of the survey is a part of the cost of the fence. 1040ez instructions 2010   Keep separate accounts for depreciable additions or improvements made after you place the property in service in your rental activity. 1040ez instructions 2010 For information on depreciating additions or improvements, see Additions or improvements to property , later in this chapter, under Recovery Periods Under GDS. 1040ez instructions 2010    The cost of landscaping improvements is usually treated as an addition to the basis of the land, which is not depreciable. 1040ez instructions 2010 However, see What Rental Property Cannot Be Depreciated, earlier. 1040ez instructions 2010 Assessments for local improvements. 1040ez instructions 2010   Assessments for items which tend to increase the value of property, such as streets and sidewalks, must be added to the basis of the property. 1040ez instructions 2010 For example, if your city installs curbing on the street in front of your house, and assesses you and your neighbors for its cost, you must add the assessment to the basis of your property. 1040ez instructions 2010 Also add the cost of legal fees paid to obtain a decrease in an assessment levied against property to pay for local improvements. 1040ez instructions 2010 You cannot deduct these items as taxes or depreciate them. 1040ez instructions 2010    However, you can deduct as taxes, charges or assessments for maintenance, repairs, or interest charges related to the improvements. 1040ez instructions 2010 Do not add them to your basis in the property. 1040ez instructions 2010 Deducting vs. 1040ez instructions 2010 capitalizing costs. 1040ez instructions 2010   Do not add to your basis costs you can deduct as current expenses. 1040ez instructions 2010 However, there are certain costs you can choose either to deduct or to capitalize. 1040ez instructions 2010 If you capitalize these costs, include them in your basis. 1040ez instructions 2010 If you deduct them, do not include them in your basis. 1040ez instructions 2010   The costs you may choose to deduct or capitalize include carrying charges, such as interest and taxes, that you must pay to own property. 1040ez instructions 2010   For more information about deducting or capitalizing costs and how to make the election, see Carrying Charges in Publication 535, chapter 7. 1040ez instructions 2010 Decreases to basis. 1040ez instructions 2010   You must decrease the basis of your property by any items that represent a return of your cost. 1040ez instructions 2010 These include the following. 1040ez instructions 2010 Insurance or other payment you receive as the result of a casualty or theft loss. 1040ez instructions 2010 Casualty loss not covered by insurance for which you took a deduction. 1040ez instructions 2010 Amount(s) you receive for granting an easement. 1040ez instructions 2010 Residential energy credits you were allowed before 1986, or after 2005, if you added the cost of the energy items to the basis of your home. 1040ez instructions 2010 Exclusion from income of subsidies for energy conservation measures. 1040ez instructions 2010 Special depreciation allowance claimed on qualified property. 1040ez instructions 2010 Depreciation you deducted, or could have deducted, on your tax returns under the method of depreciation you chose. 1040ez instructions 2010 If you did not deduct enough or deducted too much in any year, see Depreciation under Decreases to Basis in Publication 551. 1040ez instructions 2010   If your rental property was previously used as your main home, you must also decrease the basis by the following. 1040ez instructions 2010 Gain you postponed from the sale of your main home before May 7, 1997, if the replacement home was converted to your rental property. 1040ez instructions 2010 District of Columbia first-time homebuyer credit allowed on the purchase of your main home after August 4, 1997 and before January 1, 2012. 1040ez instructions 2010 Amount of qualified principal residence indebtedness discharged on or after January 1, 2007. 1040ez instructions 2010 Claiming the Special Depreciation Allowance For 2013, your residential rental property may qualify for a special depreciation allowance. 1040ez instructions 2010 This allowance is figured before you figure your regular depreciation deduction. 1040ez instructions 2010 See Publication 946, chapter 3, for details. 1040ez instructions 2010 Also see the Instructions for Form 4562, Line 14. 1040ez instructions 2010 If you qualify for, but choose not to take, a special depreciation allowance, you must attach a statement to your return. 1040ez instructions 2010 The details of this election are in Publication 946, chapter 3, and the Instructions for Form 4562, Line 14. 1040ez instructions 2010 MACRS Depreciation Most business and investment property placed in service after 1986 is depreciated using MACRS. 1040ez instructions 2010 This section explains how to determine which MACRS depreciation system applies to your property. 1040ez instructions 2010 It also discusses other information you need to know before you can figure depreciation under MACRS. 1040ez instructions 2010 This information includes the property's: Recovery class, Applicable recovery period, Convention, Placed-in-service date, Basis for depreciation, and Depreciation method. 1040ez instructions 2010 Depreciation Systems MACRS consists of two systems that determine how you depreciate your property—the General Depreciation System (GDS) and the Alternative Depreciation System (ADS). 1040ez instructions 2010 You must use GDS unless you are specifically required by law to use ADS or you elect to use ADS. 1040ez instructions 2010 Excluded Property You cannot use MACRS for certain personal property (such as furniture or appliances) placed in service in your rental property in 2013 if it had been previously placed in service before 1987 when MACRS became effective. 1040ez instructions 2010 In most cases, personal property is excluded from MACRS if you (or a person related to you) owned or used it in 1986 or if your tenant is a person (or someone related to the person) who owned or used it in 1986. 1040ez instructions 2010 However, the property is not excluded if your 2013 deduction under MACRS (using a half-year convention) is less than the deduction you would have under ACRS. 1040ez instructions 2010 For more information, see What Method Can You Use To Depreciate Your Property? in Publication 946, chapter 1. 1040ez instructions 2010 Electing ADS If you choose, you can use the ADS method for most property. 1040ez instructions 2010 Under ADS, you use the straight line method of depreciation. 1040ez instructions 2010 The election of ADS for one item in a class of property generally applies to all property in that class that is placed in service during the tax year of the election. 1040ez instructions 2010 However, the election applies on a property-by-property basis for residential rental property and nonresidential real property. 1040ez instructions 2010 If you choose to use ADS for your residential rental property, the election must be made in the first year the property is placed in service. 1040ez instructions 2010 Once you make this election, you can never revoke it. 1040ez instructions 2010 For property placed in service during 2013, you make the election to use ADS by entering the depreciation on Form 4562, Part III, Section C, line 20c. 1040ez instructions 2010 Property Classes Under GDS Each item of property that can be depreciated under MACRS is assigned to a property class, determined by its class life. 1040ez instructions 2010 The property class generally determines the depreciation method, recovery period, and convention. 1040ez instructions 2010 The property classes under GDS are: 3-year property, 5-year property, 7-year property, 10-year property, 15-year property, 20-year property, Nonresidential real property, and Residential rental property. 1040ez instructions 2010 Under MACRS, property that you placed in service during 2013 in your rental activities generally falls into one of the following classes. 1040ez instructions 2010 5-year property. 1040ez instructions 2010 This class includes computers and peripheral equipment, office machinery (typewriters, calculators, copiers, etc. 1040ez instructions 2010 ), automobiles, and light trucks. 1040ez instructions 2010 This class also includes appliances, carpeting, furniture, etc. 1040ez instructions 2010 , used in a residential rental real estate activity. 1040ez instructions 2010 Depreciation on automobiles, other property used for transportation, computers and related peripheral equipment, and property of a type generally used for entertainment, recreation, or amusement is limited. 1040ez instructions 2010 See chapter 5 of Publication 946. 1040ez instructions 2010 7-year property. 1040ez instructions 2010 This class includes office furniture and equipment (desks, file cabinets, etc. 1040ez instructions 2010 ). 1040ez instructions 2010 This class also includes any property that does not have a class life and that has not been designated by law as being in any other class. 1040ez instructions 2010 15-year property. 1040ez instructions 2010 This class includes roads, fences, and shrubbery (if depreciable). 1040ez instructions 2010 Residential rental property. 1040ez instructions 2010 This class includes any real property that is a rental building or structure (including a mobile home) for which 80% or more of the gross rental income for the tax year is from dwelling units. 1040ez instructions 2010 It does not include a unit in a hotel, motel, inn, or other establishment where more than half of the units are used on a transient basis. 1040ez instructions 2010 If you live in any part of the building or structure, the gross rental income includes the fair rental value of the part you live in. 1040ez instructions 2010 The other property classes do not generally apply to property used in rental activities. 1040ez instructions 2010 These classes are not discussed in this publication. 1040ez instructions 2010 See Publication 946 for more information. 1040ez instructions 2010 Recovery Periods Under GDS The recovery period of property is the number of years over which you recover its cost or other basis. 1040ez instructions 2010 The recovery periods are generally longer under ADS than GDS. 1040ez instructions 2010 The recovery period of property depends on its property class. 1040ez instructions 2010 Under GDS, the recovery period of an asset is generally the same as its property class. 1040ez instructions 2010 Class lives and recovery periods for most assets are listed in Appendix B of Publication 946. 1040ez instructions 2010 See Table 2-1 for recovery periods of property commonly used in residential rental activities. 1040ez instructions 2010 Qualified Indian reservation property. 1040ez instructions 2010   Shorter recovery periods are provided under MACRS for qualified Indian reservation property placed in service on Indian reservations. 1040ez instructions 2010 For more information, see chapter 4 of Publication 946. 1040ez instructions 2010 Additions or improvements to property. 1040ez instructions 2010   Treat additions or improvements you make to your depreciable rental property as separate property items for depreciation purposes. 1040ez instructions 2010   The property class and recovery period of the addition or improvement is the one that would apply to the original property if you had placed it in service at the same time as the addition or improvement. 1040ez instructions 2010   The recovery period for an addition or improvement to property begins on the later of: The date the addition or improvement is placed in service, or The date the property to which the addition or improvement was made is placed in service. 1040ez instructions 2010 Example. 1040ez instructions 2010 You own a residential rental house that you have been renting since 1986 and depreciating under ACRS. 1040ez instructions 2010 You built an addition onto the house and placed it in service in 2013. 1040ez instructions 2010 You must use MACRS for the addition. 1040ez instructions 2010 Under GDS, the addition is depreciated as residential rental property over 27. 1040ez instructions 2010 5 years. 1040ez instructions 2010 Table 2-1. 1040ez instructions 2010 MACRS Recovery Periods for Property Used in Rental Activities   MACRS Recovery Period   Type of Property General Depreciation System Alternative Depreciation System   Computers and their peripheral equipment 5 years 5 years   Office machinery, such as: Typewriters Calculators Copiers 5 years 6 years   Automobiles 5 years 5 years   Light trucks 5 years 5 years   Appliances, such as: Stoves Refrigerators 5 years 9 years   Carpets 5 years 9 years   Furniture used in rental property 5 years 9 years   Office furniture and equipment, such as: Desks Files 7 years 10 years   Any property that does not have a class life and that has not been designated by law as being in any other class 7 years 12 years   Roads 15 years 20 years   Shrubbery 15 years 20 years   Fences 15 years 20 years   Residential rental property (buildings or structures) and structural components such as furnaces, waterpipes, venting, etc. 1040ez instructions 2010 27. 1040ez instructions 2010 5 years 40 years   Additions and improvements, such as a new roof The same recovery period as that of the property to which the addition or improvement is made, determined as if the property were placed in service at the same time as the addition or improvement. 1040ez instructions 2010   Conventions A convention is a method established under MACRS to set the beginning and end of the recovery period. 1040ez instructions 2010 The convention you use determines the number of months for which you can claim depreciation in the year you place property in service and in the year you dispose of the property. 1040ez instructions 2010 Mid-month convention. 1040ez instructions 2010    A mid-month convention is used for all residential rental property and nonresidential real property. 1040ez instructions 2010 Under this convention, you treat all property placed in service, or disposed of, during any month as placed in service, or disposed of, at the midpoint of that month. 1040ez instructions 2010 Mid-quarter convention. 1040ez instructions 2010   A mid-quarter convention must be used if the mid-month convention does not apply and the total depreciable basis of MACRS property placed in service in the last 3 months of a tax year (excluding nonresidential real property, residential rental property, and property placed in service and disposed of in the same year) is more than 40% of the total basis of all such property you place in service during the year. 1040ez instructions 2010   Under this convention, you treat all property placed in service, or disposed of, during any quarter of a tax year as placed in service, or disposed of, at the midpoint of the quarter. 1040ez instructions 2010 Example. 1040ez instructions 2010 During the tax year, Tom Martin purchased the following items to use in his rental property. 1040ez instructions 2010 He elects not to claim the special depreciation allowance discussed earlier. 1040ez instructions 2010 A dishwasher for $400 that he placed in service in January. 1040ez instructions 2010 Used furniture for $100 that he placed in service in September. 1040ez instructions 2010 A refrigerator for $800 that he placed in service in October. 1040ez instructions 2010 Tom uses the calendar year as his tax year. 1040ez instructions 2010 The total basis of all property placed in service that year is $1,300. 1040ez instructions 2010 The $800 basis of the refrigerator placed in service during the last 3 months of his tax year exceeds $520 (40% × $1,300). 1040ez instructions 2010 Tom must use the mid-quarter convention instead of the half-year convention for all three items. 1040ez instructions 2010 Half-year convention. 1040ez instructions 2010    The half-year convention is used if neither the mid-quarter convention nor the mid-month convention applies. 1040ez instructions 2010 Under this convention, you treat all property placed in service, or disposed of, during a tax year as placed in service, or disposed of, at the midpoint of that tax year. 1040ez instructions 2010   If this convention applies, you deduct a half year of depreciation for the first year and the last year that you depreciate the property. 1040ez instructions 2010 You deduct a full year of depreciation for any other year during the recovery period. 1040ez instructions 2010 Figuring Your Depreciation Deduction You can figure your MACRS depreciation deduction in one of two ways. 1040ez instructions 2010 The deduction is substantially the same both ways. 1040ez instructions 2010 You can either: Actually compute the deduction using the depreciation method and convention that apply over the recovery period of the property, or Use the percentage from the MACRS percentage tables. 1040ez instructions 2010 In this publication we will use the percentage tables. 1040ez instructions 2010 For instructions on how to compute the deduction, see chapter 4 of Publication 946. 1040ez instructions 2010 Residential rental property. 1040ez instructions 2010   You must use the straight line method and a mid-month convention for residential rental property. 1040ez instructions 2010 In the first year that you claim depreciation for residential rental property, you can claim depreciation only for the number of months the property is in use, and you must use the mid-month convention (explained under Conventions , earlier). 1040ez instructions 2010 5-, 7-, or 15-year property. 1040ez instructions 2010   For property in the 5- or 7-year class, use the 200% declining balance method and a half-year convention. 1040ez instructions 2010 However, in limited cases you must use the mid-quarter convention, if it applies. 1040ez instructions 2010 For property in the 15-year class, use the 150% declining balance method and a half-year convention. 1040ez instructions 2010   You can also choose to use the 150% declining balance method for property in the 5- or 7-year class. 1040ez instructions 2010 The choice to use the 150% method for one item in a class of property applies to all property in that class that is placed in service during the tax year of the election. 1040ez instructions 2010 You make this election on Form 4562. 1040ez instructions 2010 In Part III, column (f), enter “150 DB. 1040ez instructions 2010 ” Once you make this election, you cannot change to another method. 1040ez instructions 2010   If you use either the 200% or 150% declining balance method, you figure your deduction using the straight line method in the first tax year that the straight line method gives you an equal or larger deduction. 1040ez instructions 2010   You can also choose to use the straight line method with a half-year or mid-quarter convention for 5-, 7-, or 15-year property. 1040ez instructions 2010 The choice to use the straight line method for one item in a class of property applies to all property in that class that is placed in service during the tax year of the election. 1040ez instructions 2010 You elect the straight line method on Form 4562. 1040ez instructions 2010 In Part III, column (f), enter “S/L. 1040ez instructions 2010 ” Once you make this election, you cannot change to another method. 1040ez instructions 2010 MACRS Percentage Tables You can use the percentages in Table 2-2, earlier, to compute annual depreciation under MACRS. 1040ez instructions 2010 The tables show the percentages for the first few years or until the change to the straight line method is made. 1040ez instructions 2010 See Appendix A of Publication 946 for complete tables. 1040ez instructions 2010 The percentages in Tables 2-2a, 2-2b, and 2-2c make the change from declining balance to straight line in the year that straight line will give a larger deduction. 1040ez instructions 2010 If you elect to use the straight line method for 5-, 7-, or 15-year property, or the 150% declining balance method for 5- or 7-year property, use the tables in Appendix A of Publication 946. 1040ez instructions 2010 How to use the percentage tables. 1040ez instructions 2010   You must apply the table rates to your property's unadjusted basis (defined below) each year of the recovery period. 1040ez instructions 2010   Once you begin using a percentage table to figure depreciation, you must continue to use it for the entire recovery period unless there is an adjustment to the basis of your property for a reason other than: Depreciation allowed or allowable, or An addition or improvement that is depreciated as a separate item of property. 1040ez instructions 2010   If there is an adjustment for any reason other than (1) or (2), for example, because of a deductible casualty loss, you can no longer use the table. 1040ez instructions 2010 For the year of the adjustment and for the remaining recovery period, figure depreciation using the property's adjusted basis at the end of the year and the appropriate depreciation method, as explained earlier under Figuring Your Depreciation Deduction . 1040ez instructions 2010 See Figuring the Deduction Without Using the Tables in Publication 946, chapter 4. 1040ez instructions 2010 Unadjusted basis. 1040ez instructions 2010   This is the same basis you would use to figure gain on a sale (see Basis of Depreciable Property , earlier), but without reducing your original basis by any MACRS depreciation taken in earlier years. 1040ez instructions 2010   However, you do reduce your original basis by other amounts claimed on the property, including: Any amortization, Any section 179 deduction, and Any special depreciation allowance. 1040ez instructions 2010 For more information, see chapter 4 of Publication 946. 1040ez instructions 2010 Please click here for the text description of the image. 1040ez instructions 2010 Table 2-2 Tables 2-2a, 2-2b, and 2-2c. 1040ez instructions 2010   The percentages in these tables take into account the half-year and mid-quarter conventions. 1040ez instructions 2010 Use Table 2-2a for 5-year property, Table 2-2b for 7-year property, and Table 2-2c for 15-year property. 1040ez instructions 2010 Use the percentage in the second column (half-year convention) unless you are required to use the mid-quarter convention (explained earlier). 1040ez instructions 2010 If you must use the mid-quarter convention, use the column that corresponds to the calendar year quarter in which you placed the property in service. 1040ez instructions 2010 Example 1. 1040ez instructions 2010 You purchased a stove and refrigerator and placed them in service in June. 1040ez instructions 2010 Your basis in the stove is $600 and your basis in the refrigerator is $1,000. 1040ez instructions 2010 Both are 5-year property. 1040ez instructions 2010 Using the half-year convention column in Table 2-2a, the depreciation percentage for Year 1 is 20%. 1040ez instructions 2010 For that year your depreciation deduction is $120 ($600 × . 1040ez instructions 2010 20) for the stove and $200 ($1,000 × . 1040ez instructions 2010 20) for the refrigerator. 1040ez instructions 2010 For Year 2, the depreciation percentage is 32%. 1040ez instructions 2010 That year's depreciation deduction will be $192 ($600 × . 1040ez instructions 2010 32) for the stove and $320 ($1,000 × . 1040ez instructions 2010 32) for the refrigerator. 1040ez instructions 2010 Example 2. 1040ez instructions 2010 Assume the same facts as in Example 1, except you buy the refrigerator in October instead of June. 1040ez instructions 2010 Since the refrigerator was placed in service in the last 3 months of the tax year, and its basis ($1,000) is more than 40% of the total basis of all property placed in service during the year ($1,600 × . 1040ez instructions 2010 40 = $640), you are required to use the mid-quarter convention to figure depreciation on both the stove and refrigerator. 1040ez instructions 2010 Because you placed the refrigerator in service in October, you use the fourth quarter column of Table 2-2a and find the depreciation percentage for Year 1 is 5%. 1040ez instructions 2010 Your depreciation deduction for the refrigerator is $50 ($1,000 x . 1040ez instructions 2010 05). 1040ez instructions 2010 Because you placed the stove in service in June, you use the second quarter column of Table 2-2a and find the depreciation percentage for Year 1 is 25%. 1040ez instructions 2010 For that year, your depreciation deduction for the stove is $150 ($600 x . 1040ez instructions 2010 25). 1040ez instructions 2010 Table 2-2d. 1040ez instructions 2010    Use this table when you are using the GDS 27. 1040ez instructions 2010 5 year option for residential rental property. 1040ez instructions 2010 Find the row for the month that you placed the property in service. 1040ez instructions 2010 Use the percentages listed for that month to figure your depreciation deduction. 1040ez instructions 2010 The mid-month convention is taken into account in the percentages shown in the table. 1040ez instructions 2010 Continue to use the same row (month) under the column for the appropriate year. 1040ez instructions 2010 Example. 1040ez instructions 2010 You purchased a single family rental house for $185,000 and placed it in service on February 8. 1040ez instructions 2010 The sales contract showed that the building cost $160,000 and the land cost $25,000. 1040ez instructions 2010 Your basis for depreciation is its original cost, $160,000. 1040ez instructions 2010 This is the first year of service for your residential rental property and you decide to use GDS which has a recovery period of 27. 1040ez instructions 2010 5 years. 1040ez instructions 2010 Using Table 2-2d, you find that the percentage for property placed in service in February of Year 1 is 3. 1040ez instructions 2010 182%. 1040ez instructions 2010 That year's depreciation deduction is $5,091 ($160,000 x . 1040ez instructions 2010 03182). 1040ez instructions 2010 Figuring MACRS Depreciation Under ADS Table 2–1, earlier, shows the ADS recovery periods for property used in rental activities. 1040ez instructions 2010 See Appendix B in Publication 946 for other property. 1040ez instructions 2010 If your property is not listed in Appendix B, it is considered to have no class life. 1040ez instructions 2010 Under ADS, personal property with no class life is depreciated using a recovery period of 12 years. 1040ez instructions 2010 Use the mid-month convention for residential rental property and nonresidential real property. 1040ez instructions 2010 For all other property, use the half-year or mid-quarter convention, as appropriate. 1040ez instructions 2010 See Publication 946 for ADS depreciation tables. 1040ez instructions 2010 Claiming the Correct Amount of Depreciation You should claim the correct amount of depreciation each tax year. 1040ez instructions 2010 If you did not claim all the depreciation you were entitled to deduct, you must still reduce your basis in the property by the full amount of depreciation that you could have deducted. 1040ez instructions 2010 For more information, see Depreciation under Decreases to Basis in Publication 551. 1040ez instructions 2010 If you deducted an incorrect amount of depreciation for property in any year, you may be able to make a correction by filing Form 1040X, Amended U. 1040ez instructions 2010 S. 1040ez instructions 2010 Individual Income Tax Return. 1040ez instructions 2010 If you are not allowed to make the correction on an amended return, you can change your accounting method to claim the correct amount of depreciation. 1040ez instructions 2010 Filing an amended return. 1040ez instructions 2010   You can file an amended return to correct the amount of depreciation claimed for any property in any of the following situations. 1040ez instructions 2010 You claimed the incorrect amount because of a mathematical error made in any year. 1040ez instructions 2010 You claimed the incorrect amount because of a posting error made in any year. 1040ez instructions 2010 You have not adopted a method of accounting for property placed in service by you in tax years ending after December 29, 2003. 1040ez instructions 2010 You claimed the incorrect amount on property placed in service by you in tax years ending before December 30, 2003. 1040ez instructions 2010   Generally, you adopt a method of accounting for depreciation by using a permissible method of determining depreciation when you file your first tax return for the property used in your rental activity. 1040ez instructions 2010 This also occurs when you use the same impermissible method of determining depreciation (for example, using the wrong MACRS recovery period) in two or more consecutively filed tax returns. 1040ez instructions 2010   If an amended return is allowed, you must file it by the later of the following dates. 1040ez instructions 2010 3 years from the date you filed your original return for the year in which you did not deduct the correct amount. 1040ez instructions 2010 A return filed before an unextended due date is considered filed on that due date. 1040ez instructions 2010 2 years from the time you paid your tax for that year. 1040ez instructions 2010 Changing your accounting method. 1040ez instructions 2010   To change your accounting method, you generally must file Form 3115, Application for Change in Accounting Method, to get the consent of the IRS. 1040ez instructions 2010 In some instances, that consent is automatic. 1040ez instructions 2010 For more information, see Changing Your Accounting Method in Publication 946,  chapter 1. 1040ez instructions 2010 Prev  Up  Next   Home   More Online Publications