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1040ez Instructions 2014

1040ez instructions 2014 11. 1040ez instructions 2014   Departing Aliens and the Sailing or Departure Permit Table of Contents Introduction Topics - This chapter discusses: Useful Items - You may want to see: Aliens Not Required To Obtain Sailing or Departure Permits Aliens Required To Obtain Sailing or Departure PermitsGetting a Sailing or Departure Permit Forms To File Paying Taxes and Obtaining Refunds Bond To Ensure Payment Filing Annual U. 1040ez instructions 2014 S. 1040ez instructions 2014 Income Tax Returns Introduction Before leaving the United States, all aliens (except those listed under Aliens Not Required To Obtain Sailing or Departure Permits must obtain a certificate of compliance. 1040ez instructions 2014 This document, also popularly known as the sailing permit or departure permit, is part of the income tax form you must file before leaving. 1040ez instructions 2014 You will receive a sailing or departure permit after filing a Form 1040-C or Form 2063. 1040ez instructions 2014 These forms are discussed in this chapter. 1040ez instructions 2014 To find out if you need a sailing or departure permit, first read Aliens Not Required To Obtain Sailing or Departure Permits . 1040ez instructions 2014 If you do not fall into one of the categories in that discussion, you must obtain a sailing or departure permit. 1040ez instructions 2014 Read Aliens Required To Obtain Sailing or Departure Permits . 1040ez instructions 2014 Topics - This chapter discusses: Who needs a sailing permit, How to get a sailing permit, and Forms you file to get a sailing permit. 1040ez instructions 2014 Useful Items - You may want to see: Form (and Instructions) 1040-C U. 1040ez instructions 2014 S. 1040ez instructions 2014 Departing Alien Income Tax Return 2063 U. 1040ez instructions 2014 S. 1040ez instructions 2014 Departing Alien Income Tax Statement See chapter 12 for information about getting these forms. 1040ez instructions 2014 Aliens Not Required To Obtain Sailing or Departure Permits If you are included in one of the following categories, you do not have to get a sailing or departure permit before leaving the United States. 1040ez instructions 2014 If you are in one of these categories and do not have to get a sailing or departure permit, you must be able to support your claim for exemption with proper identification or give the authority for the exemption. 1040ez instructions 2014 Category 1. 1040ez instructions 2014   Representatives of foreign governments with diplomatic passports, whether accredited to the United States or other countries, members of their households, and servants accompanying them. 1040ez instructions 2014 Servants who are leaving, but not with a person with a diplomatic passport, must get a sailing or departure permit. 1040ez instructions 2014 However, they can get a sailing or departure permit on Form 2063 without examination of their income tax liability by presenting a letter from the chief of their diplomatic mission certifying that: Their name appears on the “White List” (a list of employees of diplomatic missions), and They do not owe to the United States any income tax, and will not owe any tax up to and including the intended date of departure. 1040ez instructions 2014   The statement must be presented to an IRS office. 1040ez instructions 2014 Category 2. 1040ez instructions 2014    Employees of international organizations and foreign governments (other than diplomatic representatives exempt under category 1) and members of their households: Whose compensation for official services is exempt from U. 1040ez instructions 2014 S. 1040ez instructions 2014 tax under U. 1040ez instructions 2014 S. 1040ez instructions 2014 tax laws (described in chapter 10), and Who receive no other income from U. 1040ez instructions 2014 S. 1040ez instructions 2014 sources. 1040ez instructions 2014 If you are an alien in category (1) or (2), above, who filed the waiver under section 247(b) of the Immigration and Nationality Act, you must get a sailing or departure permit. 1040ez instructions 2014 This is true even if your income is exempt from U. 1040ez instructions 2014 S. 1040ez instructions 2014 tax because of an income tax treaty, consular agreement, or international agreement. 1040ez instructions 2014 Category 3. 1040ez instructions 2014   Alien students, industrial trainees, and exchange visitors, including their spouses and children, who enter on an “F-1,” “F-2,” “H-3,” “H-4,” “J-1,” “J-2,” or “Q” visa only and who receive no income from U. 1040ez instructions 2014 S. 1040ez instructions 2014 sources while in the United States under those visas other than: Allowances to cover expenses incident to study or training in the United States, such as expenses for travel, maintenance, and tuition, The value of any services or food and lodging connected with this study or training, Income from employment authorized by the U. 1040ez instructions 2014 S. 1040ez instructions 2014 Citizenship and Immigration Services (USCIS), or Interest income on deposits that is not effectively connected with a U. 1040ez instructions 2014 S. 1040ez instructions 2014 trade or business. 1040ez instructions 2014 (See Interest Income in chapter 3. 1040ez instructions 2014 ) Category 4. 1040ez instructions 2014   Alien students, including their spouses and children, who enter on an “M-1” or “M-2” visa only and who receive no income from U. 1040ez instructions 2014 S. 1040ez instructions 2014 sources while in the United States under those visas, other than: Income from employment authorized by the U. 1040ez instructions 2014 S. 1040ez instructions 2014 Citizenship and Immigration Services (USCIS) or Interest income on deposits that is not effectively connected with a U. 1040ez instructions 2014 S. 1040ez instructions 2014 trade or business. 1040ez instructions 2014 (See Interest Income in chapter 3. 1040ez instructions 2014 ) Category 5. 1040ez instructions 2014   Certain other aliens temporarily in the United States who have received no taxable income during the tax year up to and including the date of departure or during the preceding tax year. 1040ez instructions 2014 If the IRS has reason to believe that an alien has received income subject to tax and that the collection of income tax is jeopardized by departure, it may then require the alien to obtain a sailing or departure permit. 1040ez instructions 2014 Aliens in this category are: Alien military trainees who enter the United States for training under the sponsorship of the Department of Defense and who leave the United States on official military travel orders, Alien visitors for business on a “B-1” visa, or on both a “B-1” visa and a “B-2” visa, who do not remain in the United States or a U. 1040ez instructions 2014 S. 1040ez instructions 2014 possession for more than 90 days during the tax year, Alien visitors for pleasure on a “B-2” visa, Aliens in transit through the United States or any of its possessions on a “C-1” visa, or under a contract, such as a bond agreement, between a transportation line and the Attorney General, and Aliens who enter the United States on a border-crossing identification card or for whom passports, visas, and border-crossing identification cards are not required, if they are: Visitors for pleasure, Visitors for business who do not remain in the United States or a U. 1040ez instructions 2014 S. 1040ez instructions 2014 possession for more than 90 days during the tax year, or In transit through the United States or any of its possessions. 1040ez instructions 2014 Category 6. 1040ez instructions 2014   Alien residents of Canada or Mexico who frequently commute between that country and the United States for employment, and whose wages are subject to the withholding of U. 1040ez instructions 2014 S. 1040ez instructions 2014 tax. 1040ez instructions 2014 Aliens Required To Obtain Sailing or Departure Permits If you do not fall into one of the categories listed under Aliens Not Required To Obtain Sailing or Departure Permits, you must obtain a sailing or departure permit. 1040ez instructions 2014 To obtain a permit, file Form 1040-C or Form 2063 (whichever applies) with your local IRS office before you leave the United States. 1040ez instructions 2014 See Forms To File , later. 1040ez instructions 2014 You must also pay all the tax shown as due on Form 1040-C and any taxes due for past years. 1040ez instructions 2014 See Paying Taxes and Obtaining Refunds , later. 1040ez instructions 2014 Getting a Sailing or Departure Permit The following discussion covers when and where to get your sailing permit. 1040ez instructions 2014 Where to get a sailing or departure permit. 1040ez instructions 2014   If you have been working in the United States, you should get the permit from an IRS office in the area of your employment, or you may obtain one from an IRS office in the area of your departure. 1040ez instructions 2014 When to get a sailing or departure permit. 1040ez instructions 2014   You should get your sailing or departure permit at least 2 weeks before you plan to leave. 1040ez instructions 2014 You cannot apply earlier than 30 days before your planned departure date. 1040ez instructions 2014 Do not wait until the last minute in case there are unexpected problems. 1040ez instructions 2014 Papers to submit. 1040ez instructions 2014   Getting your sailing or departure permit will go faster if you bring to the IRS office papers and documents related to your income and your stay in the United States. 1040ez instructions 2014 Bring the following records with you if they apply. 1040ez instructions 2014 Your passport and alien registration card or visa. 1040ez instructions 2014 Copies of your U. 1040ez instructions 2014 S. 1040ez instructions 2014 income tax returns filed for the past 2 years. 1040ez instructions 2014 If you were in the United States for less than 2 years, bring the income tax returns you filed for that period. 1040ez instructions 2014 Receipts for income taxes paid on these returns. 1040ez instructions 2014 Receipts, bank records, canceled checks, and other documents that prove your deductions, business expenses, and dependents claimed on your returns. 1040ez instructions 2014 A statement from each employer showing wages paid and tax withheld from January 1 of the current year to the date of departure if you were an employee. 1040ez instructions 2014 If you were self-employed, you must bring a statement of income and expenses up to the date you plan to leave. 1040ez instructions 2014 Proof of estimated tax payments for the past year and this year. 1040ez instructions 2014 Documents showing any gain or loss from the sale of personal property and/or real property, including capital assets and merchandise. 1040ez instructions 2014 Documents relating to scholarship or fellowship grants including: Verification of the grantor, source, and purpose of the grant. 1040ez instructions 2014 Copies of the application for, and approval of, the grant. 1040ez instructions 2014 A statement of the amount paid, and your duties and obligations under the grant. 1040ez instructions 2014 A list of any previous grants. 1040ez instructions 2014 Documents indicating you qualify for any special tax treaty benefits claimed. 1040ez instructions 2014 Document verifying your date of departure from the United States, such as an airline ticket. 1040ez instructions 2014 Document verifying your U. 1040ez instructions 2014 S. 1040ez instructions 2014 taxpayer identification number, such as a social security card or an IRS issued Notice CP 565 showing your individual taxpayer identification number (ITIN). 1040ez instructions 2014 Note. 1040ez instructions 2014   If you are married and reside in a community property state, also bring the above-listed documents for your spouse. 1040ez instructions 2014 This applies whether or not your spouse requires a permit. 1040ez instructions 2014 Forms To File If you must get a sailing or departure permit, you must file Form 2063 or Form 1040-C. 1040ez instructions 2014 Employees in the IRS office can assist in filing these forms. 1040ez instructions 2014 Both forms have a “certificate of compliance” section. 1040ez instructions 2014 When the certificate of compliance is signed by an agent of the Field Assistance Area Director, it certifies that your U. 1040ez instructions 2014 S. 1040ez instructions 2014 tax obligations have been satisfied according to available information. 1040ez instructions 2014 Your Form 1040-C copy of the signed certificate, or the one detached from Form 2063, is your sailing or departure permit. 1040ez instructions 2014 Form 2063 This is a short form that asks for certain information but does not include a tax computation. 1040ez instructions 2014 The following departing aliens can get their sailing or departure permits by filing Form 2063. 1040ez instructions 2014 Aliens, whether resident or nonresident, who have had no taxable income for the tax year up to and including the date of departure and for the preceding year, if the period for filing the income tax return for that year has not expired. 1040ez instructions 2014 Resident aliens who have received taxable income during the tax year or preceding year and whose departure will not hinder the collection of any tax. 1040ez instructions 2014 However, if the IRS has information indicating that the aliens are leaving to avoid paying their income tax, they must file a Form 1040-C. 1040ez instructions 2014 Aliens in either of these categories who have not filed an income tax return or paid income tax for any tax year must file the return and pay the income tax before they can be issued a sailing or departure permit on Form 2063. 1040ez instructions 2014 The sailing or departure permit detached from Form 2063 can be used for all departures during the current year. 1040ez instructions 2014 However, the IRS may cancel the sailing or departure permit for any later departure if it believes the collection of income tax is jeopardized by that later departure. 1040ez instructions 2014 Form 1040-C If you must get a sailing or departure permit and you do not qualify to file Form 2063, you must file Form 1040-C. 1040ez instructions 2014 Ordinarily, all income received or reasonably expected to be received during the tax year up to and including the date of departure must be reported on Form 1040-C and the tax on it must be paid. 1040ez instructions 2014 When you pay any tax shown as due on the Form 1040-C, and you file all returns and pay all tax due for previous years, you will receive a sailing or departure permit. 1040ez instructions 2014 However, the IRS may permit you to furnish a bond guaranteeing payment instead of paying the taxes for certain years. 1040ez instructions 2014 See Bond To Ensure Payment , discussed later. 1040ez instructions 2014 The sailing or departure permit issued under the conditions in this paragraph is only for the specific departure for which it is issued. 1040ez instructions 2014 Returning to the United States. 1040ez instructions 2014   If you furnish the IRS with information showing, to the satisfaction of the IRS, that you intend to return to the United States and that your departure does not jeopardize the collection of income tax, you can get a sailing or departure permit by filing Form 1040-C without having to pay the tax shown on it. 1040ez instructions 2014 You must, however, file all income tax returns that have not yet been filed as required, and pay all income tax that is due on these returns. 1040ez instructions 2014   Your Form 1040-C must include all income received and reasonably expected to be received during the entire year of departure. 1040ez instructions 2014 The sailing or departure permit issued with this Form 1040-C can be used for all departures during the current year. 1040ez instructions 2014 However, the Service may cancel the sailing or departure permit for any later departure if the payment of income tax appears to be in jeopardy. 1040ez instructions 2014 Joint return on Form 1040-C. 1040ez instructions 2014   Departing husbands and wives who are nonresident aliens cannot file joint returns. 1040ez instructions 2014 However, if both spouses are resident aliens, they can file a joint return on Form 1040-C if: Both spouses can reasonably be expected to qualify to file a joint return at the normal close of their tax year, and The tax years of the spouses end at the same time. 1040ez instructions 2014 Paying Taxes and Obtaining Refunds You must pay all tax shown as due on the Form 1040-C at the time of filing it, except when a bond is furnished, or the IRS is satisfied that your departure does not jeopardize the collection of income tax. 1040ez instructions 2014 You must also pay any taxes due for past years. 1040ez instructions 2014 If the tax computation on Form 1040-C results in an overpayment, there is no tax to pay at the time you file that return. 1040ez instructions 2014 However, the IRS cannot provide a refund at the time of departure. 1040ez instructions 2014 If you are due a refund, you must file either Form 1040NR or Form 1040NR-EZ at the end of the tax year. 1040ez instructions 2014 Bond To Ensure Payment Usually, you must pay the tax shown as due on Form 1040-C when you file it. 1040ez instructions 2014 However, if you pay all taxes due that you owe for prior years, you can furnish a bond guaranteeing payment instead of paying the income taxes shown as due on the Form 1040-C or the tax return for the preceding year if the period for filing that return has not expired. 1040ez instructions 2014 The bond must equal the tax due plus interest to the date of payment as figured by the IRS. 1040ez instructions 2014 Information about the form of bond and security on it can be obtained from your IRS office. 1040ez instructions 2014 Filing Annual U. 1040ez instructions 2014 S. 1040ez instructions 2014 Income Tax Returns Form 1040-C is not an annual U. 1040ez instructions 2014 S. 1040ez instructions 2014 income tax return. 1040ez instructions 2014 If an income tax return is required by law, that return must be filed even though a Form 1040-C has already been filed. 1040ez instructions 2014 Chapters 5 and 7 discuss filing an annual U. 1040ez instructions 2014 S. 1040ez instructions 2014 income tax return. 1040ez instructions 2014 The tax paid with Form 1040-C should be taken as a credit against the tax liability for the entire tax year on your annual U. 1040ez instructions 2014 S. 1040ez instructions 2014 income tax return. 1040ez instructions 2014 Prev  Up  Next   Home   More Online Publications
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IRS Releases the “Dirty Dozen” Tax Scams for 2014; Identity Theft, Phone Scams Lead List

IR-2014-16, Feb. 19, 2014

WASHINGTON — The Internal Revenue Service today issued its annual “Dirty Dozen” list of tax scams, reminding taxpayers to use caution during tax season to protect themselves against a wide range of schemes ranging from identity theft to return preparer fraud.

The Dirty Dozen listing, compiled by the IRS each year, lists a variety of common scams taxpayers can encounter at any point during the year. But many of these schemes peak during filing season as people prepare their tax returns.

"Taxpayers should be on the lookout for tax scams using the IRS name,” said IRS Commissioner John Koskinen. “These schemes jump every year at tax time. Scams can be sophisticated and take many different forms. We urge people to protect themselves and use caution when viewing e-mails, receiving telephone calls or getting advice on tax issues.”

Illegal scams can lead to significant penalties and interest and possible criminal prosecution. IRS Criminal Investigation works closely with the Department of Justice (DOJ) to shutdown scams and prosecute the criminals behind them.

The following are the Dirty Dozen tax scams for 2014:

Identity Theft

Tax fraud through the use of identity theft tops this year’s Dirty Dozen list. Identity theft occurs when someone uses your personal information, such as your name, Social Security number (SSN) or other identifying information, without your permission, to commit fraud or other crimes. In many cases, an identity thief uses a legitimate taxpayer’s identity to fraudulently file a tax return and claim a refund.

The agency’s work on identity theft and refund fraud continues to grow, touching nearly every part of the organization. For the 2014 filing season, the IRS has expanded these efforts to better protect taxpayers and help victims.

The IRS has a special section on IRS.gov dedicated to identity theft issues, including YouTube videos, tips for taxpayers and an assistance guide. For victims, the information includes how to contact the IRS Identity Protection Specialized Unit. For other taxpayers, there are tips on how taxpayers can protect themselves against identity theft.

Taxpayers who believe they are at risk of identity theft due to lost or stolen personal information should contact the IRS immediately so the agency can take action to secure their tax account. Taxpayers can call the IRS Identity Protection Specialized Unit at 800-908-4490. More information can be found on the special identity protection page.

Pervasive Telephone Scams

The IRS has seen a recent increase in local phone scams across the country, with callers pretending to be from the IRS in hopes of stealing money or identities from victims.

These phone scams include many variations, ranging from instances from where callers say the victims owe money or are entitled to a huge refund. Some calls can threaten arrest and threaten a driver’s license revocation. Sometimes these calls are paired with follow-up calls from people saying they are from the local police department or the state motor vehicle department.

Characteristics of these scams can include:

  • Scammers use fake names and IRS badge numbers. They generally use common names and surnames to identify themselves.
  • Scammers may be able to recite the last four digits of a victim’s Social Security Number.
  • Scammers “spoof” or imitate the IRS toll-free number on caller ID to make it appear that it’s the IRS calling.
  • Scammers sometimes send bogus IRS emails to some victims to support their bogus calls.
  • Victims hear background noise of other calls being conducted to mimic a call site.

After threatening victims with jail time or a driver’s license revocation, scammers hang up and others soon call back pretending to be from the local police or DMV, and the caller ID supports their claim.

In another variation, one sophisticated phone scam has targeted taxpayers, including recent immigrants, throughout the country. Victims are told they owe money to the IRS and it must be paid promptly through a pre-loaded debit card or wire transfer. If the victim refuses to cooperate, they are then threatened with arrest, deportation or suspension of a business or driver’s license. In many cases, the caller becomes hostile and insulting.

If you get a phone call from someone claiming to be from the IRS, here’s what you should do: If you know you owe taxes or you think you might owe taxes, call the IRS at 800-829-1040. The IRS employees at that line can help you with a payment issue – if there really is such an issue.

If you know you don’t owe taxes or have no reason to think that you owe any taxes (for example, you’ve never received a bill or the caller made some bogus threats as described above), then call and report the incident to the Treasury Inspector General for Tax Administration at 800-366-4484.

If you’ve been targeted by these scams, you should also contact the Federal Trade Commission and use their “FTC Complaint Assistant” at FTC.gov.  Please add "IRS Telephone Scam" to the comments of your complaint.

Phishing

Phishing is a scam typically carried out with the help of unsolicited email or a fake website that poses as a legitimate site to lure in potential victims and prompt them to provide valuable personal and financial information. Armed with this information, a criminal can commit identity theft or financial theft.

If you receive an unsolicited email that appears to be from either the IRS or an organization closely linked to the IRS, such as the Electronic Federal Tax Payment System (EFTPS), report it by sending it to phishing@irs.gov.

It is important to keep in mind the IRS does not initiate contact with taxpayers by email to request personal or financial information. This includes any type of electronic communication, such as text messages and social media channels. The IRS has information online that can help you protect yourself from email scams.

False Promises of “Free Money” from Inflated Refunds

Scam artists routinely pose as tax preparers during tax time, luring victims in by promising large federal tax refunds or refunds that people never dreamed they were due in the first place.

Scam artists use flyers, advertisements, phony store fronts and even word of mouth to throw out a wide net for victims. They may even spread the word through community groups or churches where trust is high. Scammers prey on people who do not have a filing requirement, such as low-income individuals or the elderly. They also prey on non-English speakers, who may or may not have a filing requirement.

Scammers build false hope by duping people into making claims for fictitious rebates, benefits or tax credits. They charge good money for very bad advice. Or worse, they file a false return in a person's name and that person never knows that a refund was paid.

Scam artists also victimize people with a filing requirement and due a refund by promising inflated refunds based on fictitious Social Security benefits and false claims for education credits, the Earned Income Tax Credit (EITC), or the American Opportunity Tax Credit, among others.

The IRS sometimes hears about scams from victims complaining about losing their federal benefits, such as Social Security benefits, certain veteran’s benefits or low-income housing benefits. The loss of benefits was the result of false claims being filed with the IRS that provided false income amounts.

While honest tax preparers provide their customers a copy of the tax return they’ve prepared, victims of scam frequently are not given a copy of what was filed. Victims also report that the fraudulent refund is deposited into the scammer’s bank account. The scammers deduct a large “fee” before cutting a check to the victim, a practice not used by legitimate tax preparers.

The IRS reminds all taxpayers that they are legally responsible for what’s on their returns even if it was prepared by someone else. Taxpayers who buy into such schemes can end up being penalized for filing false claims or receiving fraudulent refunds.

Taxpayers should take care when choosing an individual or firm to prepare their taxes. Honest return preparers generally: ask for proof of income and eligibility for credits and deductions; sign returns as the preparer; enter their IRS Preparer Tax Identification Number (PTIN); provide the taxpayer a copy of the return.

Beware: Intentional mistakes of this kind can result in a $5,000 penalty.

Return Preparer Fraud

About 60 percent of taxpayers will use tax professionals this year to prepare their tax returns. Most return preparers provide honest service to their clients. But, some unscrupulous preparers prey on unsuspecting taxpayers, and the result can be refund fraud or identity theft.

It is important to choose carefully when hiring an individual or firm to prepare your return. This year, the IRS wants to remind all taxpayers that they should use only preparers who sign the returns they prepare and enter their IRS Preparer Tax Identification Numbers (PTINs).

The IRS also has a web page to assist taxpayers. For tips about choosing a preparer, details on preparer qualifications and information on how and when to make a complaint, view IRS Fact Sheet 2014-5, IRS Offers Advice on How to Choose a Tax Preparer.

Remember: Taxpayers are legally responsible for what’s on their tax return even if it is prepared by someone else. Make sure the preparer you hire is up to the task.

IRS.gov has general information on reporting tax fraud. More specifically, you report abusive tax preparers to the IRS on Form 14157, Complaint: Tax Return Preparer. Download Form 14157 and fill it out or order by mail at 800-TAX FORM (800-829-3676). The form includes a return address.

Hiding Income Offshore

Over the years, numerous individuals have been identified as evading U.S. taxes by hiding income in offshore banks, brokerage accounts or nominee entities and then using debit cards, credit cards or wire transfers to access the funds. Others have employed foreign trusts, employee-leasing schemes, private annuities or insurance plans for the same purpose.

The IRS uses information gained from its investigations to pursue taxpayers with undeclared accounts, as well as the banks and bankers suspected of helping clients hide their assets overseas. The IRS works closely with the Department of Justice (DOJ) to prosecute tax evasion cases.

While there are legitimate reasons for maintaining financial accounts abroad, there are reporting requirements that need to be fulfilled. U.S. taxpayers who maintain such accounts and who do not comply with reporting requirements are breaking the law and risk significant penalties and fines, as well as the possibility of criminal prosecution.

Since 2009, tens of thousands of individuals have come forward voluntarily to disclose their foreign financial accounts, taking advantage of special opportunities to comply with the U.S. tax system and resolve their tax obligations. And, with new foreign account reporting requirements being phased in over the next few years, hiding income offshore is increasingly more difficult.

At the beginning of 2012, the IRS reopened the Offshore Voluntary Disclosure Program (OVDP) following continued strong interest from taxpayers and tax practitioners after the closure of the 2011 and 2009 programs. The IRS works on a wide range of international tax issues with DOJ to pursue criminal prosecution of international tax evasion. This program will be open for an indefinite period until otherwise announced.

The IRS has collected billions of dollars in back taxes, interest and penalties so far from people who participated in offshore voluntary disclosure programs since 2009. It is in the best long-term interest of taxpayers to come forward, catch up on their filing requirements and pay their fair share.

Impersonation of Charitable Organizations

Another long-standing type of abuse or fraud is scams that occur in the wake of significant natural disasters.

Following major disasters, it’s common for scam artists to impersonate charities to get money or private information from well-intentioned taxpayers. Scam artists can use a variety of tactics. Some scammers operating bogus charities may contact people by telephone or email to solicit money or financial information. They may even directly contact disaster victims and claim to be working for or on behalf of the IRS to help the victims file casualty loss claims and get tax refunds.

They may attempt to get personal financial information or Social Security numbers that can be used to steal the victims’ identities or financial resources. Bogus websites may solicit funds for disaster victims. The IRS cautions both victims of natural disasters and people wishing to make charitable donations to avoid scam artists by following these tips:

  • To help disaster victims, donate to recognized charities.
  • Be wary of charities with names that are similar to familiar or nationally known organizations. Some phony charities use names or websites that sound or look like those of respected, legitimate organizations. IRS.gov has a search feature, Exempt Organizations Select Check, which allows people to find legitimate, qualified charities to which donations may be tax-deductible.
  • Don’t give out personal financial information, such as Social Security numbers or credit card and bank account numbers and passwords, to anyone who solicits a contribution from you. Scam artists may use this information to steal your identity and money.
  • Don’t give or send cash. For security and tax record purposes, contribute by check or credit card or another way that provides documentation of the gift.

Call the IRS toll-free disaster assistance telephone number (866-562-5227) if you are a disaster victim with specific questions about tax relief or disaster related tax issues.

False Income, Expenses or Exemptions

Another scam involves inflating or including income on a tax return that was never earned, either as wages or as self-employment income in order to maximize refundable credits. Claiming income you did not earn or expenses you did not pay in order to secure larger refundable credits such as the Earned Income Tax Credit could have serious repercussions. This could result in repaying the erroneous refunds, including interest and penalties, and in some cases, even prosecution.

Additionally, some taxpayers are filing excessive claims for the fuel tax credit. Farmers and other taxpayers who use fuel for off-highway business purposes may be eligible for the fuel tax credit. But other individuals have claimed the tax credit although they were not eligible. Fraud involving the fuel tax credit is considered a frivolous tax claim and can result in a penalty of $5,000.

Frivolous Arguments

Promoters of frivolous schemes encourage taxpayers to make unreasonable and outlandish claims to avoid paying the taxes they owe. The IRS has a list of frivolous tax arguments that taxpayers should avoid. These arguments are wrong and have been thrown out of court. While taxpayers have the right to contest their tax liabilities in court, no one has the right to disobey the law or disregard their responsibility to pay taxes.

Those who promote or adopt frivolous positions risk a variety of penalties.  For example, taxpayers could be responsible for an accuracy-related penalty, a civil fraud penalty, an erroneous refund claim penalty, or a failure to file penalty.  The Tax Court may also impose a penalty against taxpayers who make frivolous arguments in court.   

Taxpayers who rely on frivolous arguments and schemes may also face criminal prosecution for attempting to evade or defeat tax. Similarly, taxpayers may be convicted of a felony for willfully making and signing under penalties of perjury any return, statement, or other document that the person does not believe to be true and correct as to every material matter.  Persons who promote frivolous arguments and those who assist taxpayers in claiming tax benefits based on frivolous arguments may be prosecuted for a criminal felony.

Falsely Claiming Zero Wages or Using False Form 1099

Filing a phony information return is an illegal way to lower the amount of taxes an individual owes. Typically, a Form 4852 (Substitute Form W-2) or a “corrected” Form 1099 is used as a way to improperly reduce taxable income to zero. The taxpayer may also submit a statement rebutting wages and taxes reported by a payer to the IRS.

Sometimes, fraudsters even include an explanation on their Form 4852 that cites statutory language on the definition of wages or may include some reference to a paying company that refuses to issue a corrected Form W-2 for fear of IRS retaliation. Taxpayers should resist any temptation to participate in any variations of this scheme. Filing this type of return may result in a $5,000 penalty.

Some people also attempt fraud using false Form 1099 refund claims. In some cases, individuals have made refund claims based on the bogus theory that the federal government maintains secret accounts for U.S. citizens and that taxpayers can gain access to the accounts by issuing 1099-OID forms to the IRS. In this ongoing scam, the perpetrator files a fake information return, such as a Form 1099 Original Issue Discount (OID), to justify a false refund claim on a corresponding tax return.

Don’t fall prey to people who encourage you to claim deductions or credits to which you are not entitled or willingly allow others to use your information to file false returns. If you are a party to such schemes, you could be liable for financial penalties or even face criminal prosecution.

Abusive Tax Structures

Abusive tax schemes have evolved from simple structuring of abusive domestic and foreign trust arrangements into sophisticated strategies that take advantage of the financial secrecy laws of some foreign jurisdictions and the availability of credit/debit cards issued from offshore financial institutions.

IRS Criminal Investigation (CI) has developed a nationally coordinated program to combat these abusive tax schemes. CI's primary focus is on the identification and investigation of the tax scheme promoters as well as those who play a substantial or integral role in facilitating, aiding, assisting, or furthering the abusive tax scheme (e.g., accountants, lawyers).  Secondarily, but equally important, is the investigation of investors who knowingly participate in abusive tax schemes.

What is an abusive scheme? The Abusive Tax Schemes program encompasses violations of the Internal Revenue Code (IRC) and related statutes where multiple flow-through entities are used as an integral part of the taxpayer's scheme to evade taxes.  These schemes are characterized by the use of Limited Liability Companies (LLCs), Limited Liability Partnerships (LLPs), International Business Companies (IBCs), foreign financial accounts, offshore credit/debit cards and other similar instruments.  The schemes are usually complex involving multi-layer transactions for the purpose of concealing the true nature and ownership of the taxable income and/or assets.

Form over substance are the most important words to remember before buying into any arrangements that promise to "eliminate" or "substantially reduce" your tax liability.  The promoters of abusive tax schemes often employ financial instruments in their schemes.  However, the instruments are used for improper purposes including the facilitation of tax evasion.

The IRS encourages taxpayers to report unlawful tax evasion. Where Do You Report Suspected Tax Fraud Activity?

Misuse of Trusts

Trusts also commonly show up in abusive tax structures. They are highlighted here because unscrupulous promoters continue to urge taxpayers to transfer large amounts of assets into trusts. These assets include not only cash and investments, but also successful on-going businesses. There are legitimate uses of trusts in tax and estate planning, but the IRS commonly sees highly questionable transactions. These transactions promise reduced taxable income, inflated deductions for personal expenses, the reduction or elimination of self-employment taxes and reduced estate or gift transfer taxes. These transactions commonly arise when taxpayers are transferring wealth from one generation to another. Questionable trusts rarely deliver the tax benefits promised and are used primarily as a means of avoiding income tax liability and hiding assets from creditors, including the IRS.

IRS personnel continue to see an increase in the improper use of private annuity trusts and foreign trusts to shift income and deduct personal expenses, as well as to avoid estate transfer taxes. As with other arrangements, taxpayers should seek the advice of a trusted professional before entering a trust arrangement.

The IRS reminds taxpayers that tax scams can take many forms beyond the “Dirty Dozen,” and people should be on the lookout for many other schemes. More information on tax scams is available at IRS.gov.

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Page Last Reviewed or Updated: 21-Feb-2014

The 1040ez Instructions 2014

1040ez instructions 2014 Publication 559 - Main Content Table of Contents Personal RepresentativeDuties Fees Received by Personal Representatives Final Income Tax Return for Decedent—Form 1040Name, Address, and Signature When and Where To File Filing Requirements Income To Include Exemptions and Deductions Credits, Other Taxes, and Payments Tax Forgiveness for Armed Forces Members, Victims of Terrorism, and Astronauts Filing Reminders Other Tax InformationTax Benefits for Survivors Income in Respect of a Decedent Deductions in Respect of a Decedent Estate Tax Deduction Gifts, Insurance, and Inheritances Other Items of Income Income Tax Return of an Estate— Form 1041Filing Requirements Income To Include Exemption and Deductions Credits, Tax, and Payments Name, Address, and Signature When and Where To File Distributions to BeneficiariesIncome That Must Be Distributed Currently Other Amounts Distributed Discharge of a Legal Obligation Character of Distributions How and When To Report Bequest Termination of Estate Estate and Gift TaxesApplicable Credit Amount Gift Tax Estate Tax Generation-Skipping Transfer Tax Comprehensive ExampleFinal Return for Decedent—Form 1040 Income Tax Return of an Estate—Form 1041 How To Get Tax HelpLow Income Taxpayer Clinics Personal Representative A personal representative of an estate is an executor, administrator, or anyone who is in charge of the decedent's property. 1040ez instructions 2014 Generally, an executor (or executrix) is named in a decedent's will to administer the estate and distribute properties as the decedent has directed. 1040ez instructions 2014 An administrator (or administratrix) is usually appointed by the court if no will exists, if no executor was named in the will, or if the named executor cannot or will not serve. 1040ez instructions 2014 In general, an executor and an administrator perform the same duties and have the same responsibilities. 1040ez instructions 2014 For estate tax purposes, if there is no executor or administrator appointed, qualified, and acting within the United States, the term “executor” includes anyone in actual or constructive possession of any property of the decedent. 1040ez instructions 2014 It includes, among others, the decedent's agents and representatives; safe-deposit companies, warehouse companies, and other custodians of property in this country; brokers holding securities of the decedent as collateral; and the debtors of the decedent who are in this country. 1040ez instructions 2014 Duties The primary duties of a personal representative are to collect all the decedent's assets, pay his or her creditors, and distribute the remaining assets to the heirs or other beneficiaries. 1040ez instructions 2014 The personal representative also must perform the following duties. 1040ez instructions 2014 Apply for an employer identification number (EIN) for the estate. 1040ez instructions 2014 File all tax returns, including income, estate and gift tax returns, when due. 1040ez instructions 2014 Pay the tax determined up to the date of discharge from duties. 1040ez instructions 2014 Other duties of the personal representative in federal tax matters are discussed in other sections of this publication. 1040ez instructions 2014 If any beneficiary is a nonresident alien, see Publication 515, Withholding of Tax on Nonresident Aliens and Foreign Entities, for information on the personal representative's duties as a withholding agent. 1040ez instructions 2014 Penalty. 1040ez instructions 2014   There is a penalty for failure to file a tax return when due unless the failure is due to reasonable cause. 1040ez instructions 2014 Reliance on an agent (attorney, accountant, etc. 1040ez instructions 2014 ) is not reasonable cause for late filing. 1040ez instructions 2014 It is the personal representative's duty to file the returns for the decedent and the estate when due. 1040ez instructions 2014 Identification number. 1040ez instructions 2014   The first action you should take if you are the personal representative for the decedent is to apply for an EIN for the estate. 1040ez instructions 2014 You should apply for this number as soon as possible because you need to enter it on returns, statements, and other documents you file concerning the estate. 1040ez instructions 2014 You also must give the number to payers of interest and dividends and other payers who must file a return concerning the estate. 1040ez instructions 2014   You can get an EIN by applying online at www. 1040ez instructions 2014 irs. 1040ez instructions 2014 gov (click on "Apply for an EIN Online" under the Tools heading). 1040ez instructions 2014 Generally, if you apply online, you will receive your EIN immediately upon completing the application. 1040ez instructions 2014 You can also apply using Form SS-4, Application for Employer Identification Number. 1040ez instructions 2014 Generally, if you apply by mail, it takes about 4 weeks to get your EIN. 1040ez instructions 2014 See the form instructions for other ways to apply. 1040ez instructions 2014   Payers of interest and dividends report amounts on Forms 1099 using the identification number of the person to whom the account is payable. 1040ez instructions 2014 After a decedent's death, Forms 1099 must reflect the identification number of the estate or beneficiary to whom the amounts are payable. 1040ez instructions 2014 As the personal representative handling the estate, you must furnish this identification number to the payer. 1040ez instructions 2014 For example, if interest is payable to the estate, the estate's EIN must be provided to the payer and used to report the interest on Form 1099-INT, Interest Income. 1040ez instructions 2014 If the interest is payable to a surviving joint owner, the survivor's identification number, such as an SSN or ITIN, must be provided to the payer and used to report the interest. 1040ez instructions 2014   If the estate or a survivor may receive interest or dividends after you inform the payer of the decedent's death, the payer should give you (or the survivor) a Form W-9, Request for Taxpayer Identification Number and Certification (or a similar substitute form). 1040ez instructions 2014 Complete this form to inform the payer of the estate's (or if completed by the survivor, the survivor's) identification number and return it to the payer. 1040ez instructions 2014    Do not use the deceased individual's identifying number to file an individual income tax return after the decedent's final tax return. 1040ez instructions 2014 Also do not use it to make estimated tax payments for a tax year after the year of death. 1040ez instructions 2014 Penalty. 1040ez instructions 2014   If you do not include the EIN or the taxpayer identification number of another person where it is required on a return, statement, or other document, you are liable for a penalty for each failure, unless you can show reasonable cause. 1040ez instructions 2014 You also are liable for a penalty if you do not give the taxpayer identification number of another person when required on a return, statement, or other document. 1040ez instructions 2014 Notice of fiduciary relationship. 1040ez instructions 2014   The term fiduciary means any person acting for another person. 1040ez instructions 2014 It applies to persons who have positions of trust on behalf of others. 1040ez instructions 2014 A personal representative for a decedent's estate is a fiduciary. 1040ez instructions 2014 Form 56. 1040ez instructions 2014   If you are appointed to act in a fiduciary capacity for another, you must file a written notice with the IRS stating this. 1040ez instructions 2014 Form 56, Notice Concerning Fiduciary Relationship, is used for this purpose. 1040ez instructions 2014 See the Instructions for Form 56 for filing requirements and other information. 1040ez instructions 2014   File Form 56 as soon as all the necessary information (including the EIN) is available. 1040ez instructions 2014 It notifies the IRS that you, as the fiduciary, are assuming the powers, rights, duties, and privileges of the decedent. 1040ez instructions 2014 The notice remains in effect until you notify the IRS (by filing another Form 56) that your fiduciary relationship with the estate has terminated. 1040ez instructions 2014 Termination of fiduciary relationship. 1040ez instructions 2014   Form 56 should also be filed to notify the IRS if your fiduciary relationship is terminated or when a successor fiduciary is appointed if the estate has not been terminated. 1040ez instructions 2014 See Form 56 and its instructions for more information. 1040ez instructions 2014   At the time of termination of the fiduciary relationship, you may want to file Form 4810, Request for Prompt Assessment Under Internal Revenue Code Section 6501(d), and Form 5495, Request for Discharge From Personal Liability Under Internal Revenue Code Section 2204 or 6905, to wind up your duties as fiduciary. 1040ez instructions 2014 See below for a discussion of these forms. 1040ez instructions 2014 Request for prompt assessment (charge) of tax. 1040ez instructions 2014   The IRS ordinarily has 3 years from the date an income tax return is filed, or its due date, whichever is later, to charge any additional tax due. 1040ez instructions 2014 However, as a personal representative, you may request a prompt assessment of tax after the return has been filed. 1040ez instructions 2014 This reduces the time for making the assessment to 18 months from the date the written request for prompt assessment was received. 1040ez instructions 2014 This request can be made for any tax return (except the estate tax return) of the decedent or the decedent's estate. 1040ez instructions 2014 This may permit a quicker settlement of the tax liability of the estate and an earlier final distribution of the assets to the beneficiaries. 1040ez instructions 2014 Form 4810. 1040ez instructions 2014   Form 4810 can be used for making this request. 1040ez instructions 2014 It must be filed separately from any other document. 1040ez instructions 2014   As the personal representative for the decedent's estate, you are responsible for any additional taxes that may be due. 1040ez instructions 2014 You can request prompt assessment of any of the decedent's taxes (other than federal estate taxes) for any years for which the statutory period for assessment is open. 1040ez instructions 2014 This applies even though the returns were filed before the decedent's death. 1040ez instructions 2014 Failure to report income. 1040ez instructions 2014   If you or the decedent failed to report substantial amounts of gross income (more than 25% of the gross income reported on the return) or filed a false or fraudulent return, your request for prompt assessment will not shorten the period during which the IRS may assess the additional tax. 1040ez instructions 2014 However, such a request may relieve you of personal liability for the tax if you did not have knowledge of the unpaid tax. 1040ez instructions 2014 Request for discharge from personal liability for tax. 1040ez instructions 2014   An executor can make a request for discharge from personal liability for a decedent's income, gift, and estate taxes. 1040ez instructions 2014 The request must be made after the returns for those taxes are filed. 1040ez instructions 2014 To make the request, file Form 5495. 1040ez instructions 2014 For this purpose, an executor is an executor or administrator that is appointed, qualified, and acting within the United States. 1040ez instructions 2014   Within 9 months after receipt of the request, the IRS will notify the executor of the amount of taxes due. 1040ez instructions 2014 If this amount is paid, the executor will be discharged from personal liability for any future deficiencies. 1040ez instructions 2014 If the IRS has not notified the executor, he or she will be discharged from personal liability at the end of the 9-month period. 1040ez instructions 2014    Even if the executor is discharged from personal liability, the IRS will still be able to assess tax deficiencies against the executor to the extent he or she still has any of the decedent's property. 1040ez instructions 2014 Insolvent estate. 1040ez instructions 2014   Generally, if a decedent's estate is insufficient to pay all the decedent's debts, the debts due to the United States must be paid first. 1040ez instructions 2014 Both the decedent's federal income tax liabilities at the time of death and the estate's income tax liability are debts due to the United States. 1040ez instructions 2014 The personal representative of an insolvent estate is personally responsible for any tax liability of the decedent or of the estate if he or she had notice of such tax obligations or failed to exercise due care in determining if such obligations existed before distribution of the estate's assets and before being discharged from duties. 1040ez instructions 2014 The extent of such personal responsibility is the amount of any other payments made before paying the debts due to the United States, except where such other debt paid has priority over the debts due to the United States. 1040ez instructions 2014 Income tax liabilities need not be formally assessed for the personal representative to be liable if he or she was aware or should have been aware of their existence. 1040ez instructions 2014 Fees Received by Personal Representatives All personal representatives must include fees paid to them from an estate in their gross income. 1040ez instructions 2014 If you are not in the trade or business of being an executor (for instance, you are the executor of a friend's or relative's estate), report these fees on your Form 1040, line 21. 1040ez instructions 2014 If you are in the trade or business of being an executor, report fees received from the estate as self-employment income on Schedule C or Schedule C-EZ of your Form 1040. 1040ez instructions 2014 If the estate operates a trade or business and you, as executor, actively participate in the trade or business while fulfilling your duties, any fees you receive related to the operation of the trade or business must be reported as self-employment income on Schedule C (or Schedule C-EZ) of your Form 1040. 1040ez instructions 2014 Final Income Tax Return for Decedent—Form 1040 The personal representative (defined earlier) must file the final income tax return (Form 1040) of the decedent for the year of death and any returns not filed for preceding years. 1040ez instructions 2014 A surviving spouse, under certain circumstances, may have to file the returns for the decedent. 1040ez instructions 2014 See Joint Return, later. 1040ez instructions 2014 Return for preceding year. 1040ez instructions 2014   If an individual died after the close of the tax year, but before the return for that year was filed, the return for the year just closed will not be the final return. 1040ez instructions 2014 The return for that year will be a regular return and the personal representative must file it. 1040ez instructions 2014 Example. 1040ez instructions 2014 Samantha Smith died on March 21, 2013, before filing her 2012 tax return. 1040ez instructions 2014 Her personal representative must file her 2012 return by April 15, 2013. 1040ez instructions 2014 Her final tax return covering the period from January 1, 2013, to March 20, 2013, is due April 15, 2014. 1040ez instructions 2014 Name, Address, and Signature Write the word “DECEASED,” the decedent's name, and the date of death across the top of the tax return. 1040ez instructions 2014 If filing a joint return, write the name and address of the decedent and the surviving spouse in the name and address fields. 1040ez instructions 2014 If a joint return is not being filed, write the decedent's name in the name field and the personal representative's name and address in the address field. 1040ez instructions 2014 Third party designee. 1040ez instructions 2014   You can check the “Yes” box in the Third Party Designee area on page 2 of the return to authorize the IRS to discuss the return with a friend, family member, or any other person you choose. 1040ez instructions 2014 This allows the IRS to call the person you identified as the designee to answer any questions that may arise during the processing of the return. 1040ez instructions 2014 It also allows the designee to perform certain actions. 1040ez instructions 2014 See the Instructions for Form 1040 for details. 1040ez instructions 2014 Signature. 1040ez instructions 2014   If a personal representative has been appointed, that person must sign the return. 1040ez instructions 2014 If it is a joint return, the surviving spouse must also sign it. 1040ez instructions 2014 If no personal representative has been appointed, the surviving spouse (on a joint return) signs the return and writes in the signature area “Filing as surviving spouse. 1040ez instructions 2014 ” If no personal representative has been appointed and if there is no surviving spouse, the person in charge of the decedent's property must file and sign the return as “personal representative. 1040ez instructions 2014 ” Paid preparer. 1040ez instructions 2014   If you pay someone to prepare, assist in preparing, or review the tax return, that person must sign the return and fill in the other blanks in the Paid Preparer Use Only area of the return. 1040ez instructions 2014 See the Form 1040 instructions for details. 1040ez instructions 2014 When and Where To File The final income tax return is due at the same time the decedent's return would have been due had death not occurred. 1040ez instructions 2014 A final return for a decedent who was a calendar year taxpayer is generally due on April 15 following the year of death, regardless of when during that year death occurred. 1040ez instructions 2014 However, when the due date falls on a Saturday, Sunday, or legal holiday, the return is filed timely if filed by the next business day. 1040ez instructions 2014 The tax return must be prepared for the year of death regardless of when during the year death occurred. 1040ez instructions 2014 Generally, you must file the final income tax return of the decedent with the Internal Revenue Service Center for the place where you live. 1040ez instructions 2014 A tax return for a decedent can be electronically filed. 1040ez instructions 2014 A personal representative may also obtain an income tax filing extension on behalf of a decedent. 1040ez instructions 2014 Filing Requirements The gross income, age, and filing status of a decedent generally determine whether a return must be filed. 1040ez instructions 2014 Gross income is all income received by an individual from any source in the form of money, goods, property, and services that is not tax-exempt. 1040ez instructions 2014 It includes gross receipts from self-employment, but if the business involves manufacturing, merchandising, or mining, subtract any cost of goods sold. 1040ez instructions 2014 In general, filing status depends on whether the decedent was considered single or married at the time of death. 1040ez instructions 2014 See the income tax return instructions or Publication 501, Exemptions, Standard Deduction, and Filing Information. 1040ez instructions 2014 Refund A return must be filed to obtain a refund if tax was withheld from salaries, wages, pensions, or annuities, or if estimated tax was paid, even if a return is not otherwise required to be filed. 1040ez instructions 2014 Also, the decedent may be entitled to other credits that result in a refund. 1040ez instructions 2014 These advance payments of tax and credits are discussed later under Credits, Other Taxes, and Payments. 1040ez instructions 2014 Form 1310, Statement of Person Claiming Refund Due a Deceased Taxpayer. 1040ez instructions 2014   Form 1310 does not have to be filed if you are claiming a refund and you are: A surviving spouse filing an original or amended joint return with the decedent, or A court-appointed or certified personal representative filing the decedent’s original return and a copy of the court certificate showing your appointment is attached to the return. 1040ez instructions 2014   If the personal representative is filing a claim for refund on Form 1040X, Amended U. 1040ez instructions 2014 S. 1040ez instructions 2014 Individual Income Tax Return, or Form 843, Claim for Refund and Request for Abatement, and the court certificate has already been filed with the IRS, attach Form 1310 and write “Certificate Previously Filed” at the bottom of the form. 1040ez instructions 2014 Example. 1040ez instructions 2014 Edward Green died before filing his tax return. 1040ez instructions 2014 You were appointed the personal representative for Edward's estate, and you file his Form 1040 showing a refund due. 1040ez instructions 2014 You do not need Form 1310 to claim the refund if you attach a copy of the court certificate showing you were appointed the personal representative. 1040ez instructions 2014    If you are a surviving spouse and you receive a tax refund check in both your name and your deceased spouse's name, you can have the check reissued in your name alone. 1040ez instructions 2014 Return the joint-name check marked “VOID” to your local IRS office or the service center where you mailed your return, along with a written request for reissuance of the refund check. 1040ez instructions 2014 A new check will be issued in your name and mailed to you. 1040ez instructions 2014 Death certificate. 1040ez instructions 2014   When filing the decedent's final income tax return, do not attach the death certificate or other proof of death to the final return. 1040ez instructions 2014 Instead, keep it for your records and provide it if requested. 1040ez instructions 2014 Nonresident Alien If the decedent was a nonresident alien who would have had to file Form 1040NR, U. 1040ez instructions 2014 S. 1040ez instructions 2014 Nonresident Alien Income Tax Return, you must file that form for the decedent's final tax year. 1040ez instructions 2014 See the Instructions for Form 1040NR for the filing requirements, due date, and where to file. 1040ez instructions 2014 Joint Return Generally, the personal representative and the surviving spouse can file a joint return for the decedent and the surviving spouse. 1040ez instructions 2014 However, the surviving spouse alone can file the joint return if no personal representative has been appointed before the due date for filing the final joint return for the year of death. 1040ez instructions 2014 This also applies to the return for the preceding year if the decedent died after the close of the preceding tax year and before filing the return for that year. 1040ez instructions 2014 The income of the decedent that was includible on his or her return for the year up to the date of death (see Income To Include, later) and the income of the surviving spouse for the entire year must be included in the final joint return. 1040ez instructions 2014 A final joint return with the decedent cannot be filed if the surviving spouse remarried before the end of the year of the decedent's death. 1040ez instructions 2014 The filing status of the decedent in this instance is married filing a separate return. 1040ez instructions 2014 For information about tax benefits to which a surviving spouse may be entitled, see Tax Benefits for Survivors, later, under Other Tax Information. 1040ez instructions 2014 Personal representative may revoke joint return election. 1040ez instructions 2014   A court-appointed personal representative may revoke an election to file a joint return previously made by the surviving spouse alone. 1040ez instructions 2014 This is done by filing a separate return for the decedent within one year from the due date of the return (including any extensions). 1040ez instructions 2014 The joint return made by the surviving spouse will then be regarded as the separate return of that spouse by excluding the decedent's items and refiguring the tax liability. 1040ez instructions 2014 Relief from joint liability. 1040ez instructions 2014   In some cases, one spouse may be relieved of joint liability for tax, interest, and penalties on a joint return for items of the other spouse that were incorrectly reported on the joint return. 1040ez instructions 2014 If the decedent qualified for this relief while alive, the personal representative can pursue an existing request, or file a request, for relief from joint liability. 1040ez instructions 2014 For information on requesting this relief, see Publication 971, Innocent Spouse Relief. 1040ez instructions 2014 Income To Include The decedent's income includible on the final return is generally determined as if the person were still alive except that the taxable period is usually shorter because it ends on the date of death. 1040ez instructions 2014 The method of accounting regularly used by the decedent before death also determines the income includible on the final return. 1040ez instructions 2014 This section explains how some types of income are reported on the final return. 1040ez instructions 2014 For more information about accounting methods, see Publication 538, Accounting Periods and Methods. 1040ez instructions 2014 Cash Method If the decedent accounted for income under the cash method, only those items actually or constructively received before death are included on the final return. 1040ez instructions 2014 Constructive receipt of income. 1040ez instructions 2014   Interest from coupons on the decedent's bonds is constructively received by the decedent if the coupons matured in the decedent's final tax year, but had not been cashed. 1040ez instructions 2014 Include the interest income on the final return. 1040ez instructions 2014   Generally, a dividend is considered constructively received if it was available for use by the decedent without restriction. 1040ez instructions 2014 If the corporation customarily mailed its dividend checks, the dividend was includible when received. 1040ez instructions 2014 If the individual died between the time the dividend was declared and the time it was received in the mail, the decedent did not constructively receive it before death. 1040ez instructions 2014 Do not include the dividend in the final return. 1040ez instructions 2014 Accrual Method Generally, under an accrual method of accounting, income is reported when earned. 1040ez instructions 2014 If the decedent used an accrual method, only the income items normally accrued before death are included on the final return. 1040ez instructions 2014 Interest and Dividend Income (Forms 1099) Form(s) 1099 reporting interest and dividends earned by the decedent before death should be received and the amounts included on the decedent's final return. 1040ez instructions 2014 A separate Form 1099 should show the interest and dividends earned after the date of the decedent's death and paid to the estate or other recipient that must include those amounts on its return. 1040ez instructions 2014 You can request corrected Forms 1099 if these forms do not properly reflect the right recipient or amounts. 1040ez instructions 2014 For example, a Form 1099-INT, reporting interest payable to the decedent, may include income that should be reported on the final income tax return of the decedent, as well as income that the estate or other recipient should report, either as income earned after death or as income in respect of the decedent (discussed later). 1040ez instructions 2014 For income earned after death, you should ask the payer for a Form 1099 that properly identifies the recipient (by name and identification number) and the proper amount. 1040ez instructions 2014 If that is not possible, or if the form includes an amount that represents income in respect of the decedent, report the interest as shown next under How to report. 1040ez instructions 2014 See U. 1040ez instructions 2014 S. 1040ez instructions 2014 savings bonds acquired from decedent under Income in Respect of a Decedent, later, for information on savings bond interest that may have to be reported on the final return. 1040ez instructions 2014 How to report. 1040ez instructions 2014   If you are preparing the decedent's final return and you have received a Form 1099-INT for the decedent that includes amounts belonging to the decedent and to another recipient (the decedent's estate or another beneficiary), report the total interest shown on Form 1099-INT on Schedule B (Form 1040A or 1040), Interest and Ordinary Dividends. 1040ez instructions 2014 Next, enter a subtotal of the interest shown on Forms 1099, and the interest reportable from other sources for which you did not receive Forms 1099. 1040ez instructions 2014 Then, show any interest (including any interest you receive as a nominee) belonging to another recipient separately and subtract it from the subtotal. 1040ez instructions 2014 Identify the amount of this adjustment as “Nominee Distribution” or other appropriate designation. 1040ez instructions 2014   Report dividend income for which you received a Form 1099-DIV, Dividends and Distributions, on the appropriate schedule using the same procedure. 1040ez instructions 2014    Note. 1040ez instructions 2014 If the decedent received amounts as a nominee, you must give the actual owner a Form 1099, unless the owner is the decedent's spouse. 1040ez instructions 2014 See General Instructions for Certain Information Returns (Forms 1097, 1098, 1099, 3921, 3922, 5498, and W-2G) for more information on filing Forms 1099. 1040ez instructions 2014 Partnership Income The death of a partner closes the partnership's tax year for that partner. 1040ez instructions 2014 Generally, it does not close the partnership's tax year for the remaining partners. 1040ez instructions 2014 The decedent's distributive share of partnership items must be figured as if the partnership's tax year ended on the date the partner died. 1040ez instructions 2014 To avoid an interim closing of the partnership books, the partners can agree to estimate the decedent's distributive share by prorating the amounts the partner would have included for the entire partnership tax year. 1040ez instructions 2014 On the decedent's final return, include the decedent's distributive share of partnership items for the following periods. 1040ez instructions 2014 The partnership's tax year that ended within or with the decedent's final tax year (the year ending on the date of death). 1040ez instructions 2014 The period, if any, from the end of the partnership's tax year in (1) to the decedent's date of death. 1040ez instructions 2014 Example. 1040ez instructions 2014 Mary Smith was a partner in XYZ partnership and reported her income on a tax year ending December 31. 1040ez instructions 2014 The partnership uses a tax year ending June 30. 1040ez instructions 2014 Mary died August 31, 2013, and her estate established its tax year through August 31. 1040ez instructions 2014 The distributive share of partnership items based on the decedent's partnership interest is reported as follows. 1040ez instructions 2014 Final Return for the Decedent—January 1 through August 31, 2013, includes XYZ partnership items from (a) the partnership tax year ending June 30, 2013, and (b) the partnership tax year beginning July 1, 2013, and ending August 31, 2013 (the date of death). 1040ez instructions 2014 Income Tax Return of the Estate—September 1, 2013, through August 31, 2014, includes XYZ partnership items for the period September 1, 2013, through June 30, 2014. 1040ez instructions 2014 S Corporation Income If the decedent was a shareholder in an S corporation, include on the final return the decedent's share of the S corporation's items of income, loss, deduction, and credit for the following periods. 1040ez instructions 2014 The corporation's tax year that ended within or with the decedent's final tax year (the year ending on the date of death). 1040ez instructions 2014 The period, if any, from the end of the corporation's tax year in (1) to the decedent's date of death. 1040ez instructions 2014 Self-Employment Income Include self-employment income actually or constructively received or accrued, depending on the decedent's accounting method. 1040ez instructions 2014 For self-employment tax purposes only, the decedent's self-employment income will include the decedent's distributive share of a partnership's income or loss through the end of the month in which death occurred. 1040ez instructions 2014 For this purpose, the partnership's income or loss is considered to be earned ratably over the partnership's tax year. 1040ez instructions 2014 Community Income If the decedent was married and domiciled in a community property state, half of the income received and half of the expenses paid during the decedent's tax year by either the decedent or spouse may be considered to be the income and expenses of the other. 1040ez instructions 2014 For more information, see Publication 555, Community Property. 1040ez instructions 2014 HSA, Archer MSA, or Medicare Advantage MSA The treatment of an HSA (health savings account), an Archer MSA (medical savings account), or a Medicare Advantage MSA at the death of the account holder, depends on who acquires the interest in the account. 1040ez instructions 2014 If the decedent's estate acquires the interest, the fair market value (FMV) of the assets in the account on the date of death is included in income on the decedent's final return. 1040ez instructions 2014 The estate tax deduction, discussed later, does not apply to this amount. 1040ez instructions 2014 If a beneficiary acquires the interest, see the discussion under Income in Respect of a Decedent, later. 1040ez instructions 2014 For other information on HSAs, Archer MSAs, or Medicare Advantage MSAs, see Publication 969, Health Savings Accounts and Other Tax-Favored Health Plans. 1040ez instructions 2014 Coverdell Education Savings Account (ESA) Generally, the balance in a Coverdell ESA must be distributed within 30 days after the individual for whom the account was established reaches age 30, or dies, whichever is earlier. 1040ez instructions 2014 The treatment of the Coverdell ESA at the death of an individual under age 30 depends on who acquires the interest in the account. 1040ez instructions 2014 If the decedent's estate acquires the interest, the earnings on the account must be included on the final income tax return of the decedent. 1040ez instructions 2014 The estate tax deduction, discussed later, does not apply to this amount. 1040ez instructions 2014 If a beneficiary acquires the interest, see the discussion under Income in Respect of a Decedent, later. 1040ez instructions 2014 The age 30 limitation does not apply if the individual for whom the account was established or the beneficiary that acquires the account is an individual with special needs. 1040ez instructions 2014 This includes an individual who, because of a physical, mental, or emotional condition (including a learning disability), requires additional time to complete his or her education. 1040ez instructions 2014 For more information on Coverdell ESAs, see Publication 970, Tax Benefits for Education. 1040ez instructions 2014 Accelerated Death Benefits Accelerated death benefits are amounts received under a life insurance contract before the death of the insured individual. 1040ez instructions 2014 These benefits also include amounts received on the sale or assignment of the contract to a viatical settlement provider. 1040ez instructions 2014 Generally, if the decedent received accelerated death benefits on the life of a terminally or chronically ill individual, whether on his or her own life or on the life of another person, those benefits are not included in the decedent's income. 1040ez instructions 2014 For more information, see the discussion under Gifts, Insurance, and Inheritances under Other Tax Information, later. 1040ez instructions 2014 Exemptions and Deductions Generally, the rules for exemptions and deductions allowed to an individual also apply to the decedent's final income tax return. 1040ez instructions 2014 Show on the final return deductible items the decedent paid (or accrued, if the decedent reported deductions on an accrual method) before death. 1040ez instructions 2014 This section contains a detailed discussion of medical expenses because the tax treatment of the decedent's medical expenses can be different. 1040ez instructions 2014 See Medical Expenses, later. 1040ez instructions 2014 Exemptions You can claim the decedent's personal exemption on the final income tax return. 1040ez instructions 2014 If the decedent was another person's dependent (for example, a parent's), you cannot claim the personal exemption on the decedent's final return. 1040ez instructions 2014 Standard Deduction If you do not itemize deductions on the final return, the full amount of the appropriate standard deduction is allowed regardless of the date of death. 1040ez instructions 2014 For information on the appropriate standard deduction, see the Form 1040 income tax return instructions or Publication 501. 1040ez instructions 2014 Medical Expenses Medical expenses paid before death by the decedent are deductible, subject to limits, on the final income tax return if deductions are itemized. 1040ez instructions 2014 This includes expenses for the decedent, as well as for the decedent's spouse and dependents. 1040ez instructions 2014 Beginning in 2013, medical expenses exceeding 10% of adjusted gross income (AGI) may be deducted, unless the decedent or their spouse is age 65 or older. 1040ez instructions 2014 In that case medical expenses exceeding 7. 1040ez instructions 2014 5% of AGI may be deducted. 1040ez instructions 2014 Qualified medical expenses are not deductible if paid with a tax-free distribution from an HSA or an Archer MSA. 1040ez instructions 2014 Election for decedent's expenses. 1040ez instructions 2014   Medical expenses not paid before death are liabilities of the estate and are shown on the federal estate tax return (Form 706). 1040ez instructions 2014 However, if medical expenses for the decedent are paid out of the estate during the 1-year period beginning with the day after death, you can elect to treat all or part of the expenses as paid by the decedent at the time they were incurred. 1040ez instructions 2014   If you make the election, you can claim all or part of the expenses on the decedent's income tax return (if deductions are itemized) rather than on the federal estate tax return (Form 706). 1040ez instructions 2014 You can deduct expenses incurred in the year of death on the final income tax return. 1040ez instructions 2014 You should file an amended return (Form 1040X) for medical expenses incurred in an earlier year, unless the statutory period for filing a claim for that year has expired. 1040ez instructions 2014   The amount you can deduct on the income tax return is the amount above 10% of adjusted gross income (or 7. 1040ez instructions 2014 5% of adjusted gross income if the decedent or the decedent's spouse was born before January 2, 1949). 1040ez instructions 2014 Amounts not deductible because of this percentage cannot be claimed on the federal estate tax return. 1040ez instructions 2014 Making the election. 1040ez instructions 2014   You make the election by attaching a statement, in duplicate, to the decedent's income tax return or amended return. 1040ez instructions 2014 The statement must state that you have not claimed the amount as an estate tax deduction, and that the estate waives the right to claim the amount as a deduction. 1040ez instructions 2014 This election applies only to expenses incurred for the decedent, not to expenses incurred to provide medical care for dependents. 1040ez instructions 2014 Example. 1040ez instructions 2014 Richard Brown used the cash method of accounting and filed his income tax return on a calendar year basis. 1040ez instructions 2014 Richard died on June 1, 2013, at the age of 78, after incurring $800 in medical expenses. 1040ez instructions 2014 Of that amount, $500 was incurred in 2012 and $300 was incurred in 2013. 1040ez instructions 2014 Richard itemized his deductions when he filed his 2012 income tax return. 1040ez instructions 2014 The personal representative of the estate paid the entire $800 liability in August 2013. 1040ez instructions 2014 The personal representative may file an amended return (Form 1040X) for 2012 claiming the $500 medical expense as a deduction, subject to the 7. 1040ez instructions 2014 5% limit. 1040ez instructions 2014 The $300 of expenses incurred in 2013 can be deducted on the final income tax return if deductions are itemized, subject to the 7. 1040ez instructions 2014 5% limit. 1040ez instructions 2014 The personal representative must file a statement in duplicate with each return stating that these amounts have not been claimed on the federal estate tax return (Form 706), and waiving the right to claim such a deduction on Form 706 in the future. 1040ez instructions 2014 Medical expenses not paid by estate. 1040ez instructions 2014   If you paid medical expenses for your deceased spouse or dependent, claim the expenses on your tax return for the year in which you paid them, whether they are paid before or after the decedent's death. 1040ez instructions 2014 If the decedent was a child of divorced or separated parents, the medical expenses can usually be claimed by both the custodial and noncustodial parent to the extent paid by that parent during the year. 1040ez instructions 2014 Insurance reimbursements. 1040ez instructions 2014   Insurance reimbursements of previously deducted medical expenses due a decedent at the time of death and later received by the decedent's estate are includible in the income tax return of the estate (Form 1041) for the year the reimbursements are received. 1040ez instructions 2014 The reimbursements are also includible in the decedent's gross estate. 1040ez instructions 2014 No deduction for funeral expenses can be taken on the final Form 1040 of a decedent. 1040ez instructions 2014 These expenses may be deductible for estate tax purposes on Form 706. 1040ez instructions 2014 Deduction for Losses A decedent's net operating loss deduction from a prior year and any capital losses (including capital loss carryovers) can be deducted only on the decedent's final income tax return. 1040ez instructions 2014 A net operating loss on the decedent's final income tax return can be carried back to prior years. 1040ez instructions 2014 (See Publication 536, Net Operating Losses (NOLs) for Individuals, Estates, and Trusts. 1040ez instructions 2014 ) You cannot deduct any unused net operating loss or capital loss on the estate's income tax return. 1040ez instructions 2014 At-risk loss limits. 1040ez instructions 2014   Special at-risk rules apply to most activities that are engaged in as a trade or business or for the production of income. 1040ez instructions 2014   These rules limit the deductible loss to the amount which the individual was considered at-risk in the activity. 1040ez instructions 2014 An individual generally will be considered at-risk to the extent of the money and the adjusted basis of property that he or she contributed to the activity and certain amounts the individual borrowed for use in the activity. 1040ez instructions 2014 An individual will be considered at-risk for amounts borrowed only if he or she was personally liable for the repayment or if the amounts borrowed were secured by property other than that used in the activity. 1040ez instructions 2014 The individual is not considered at-risk for borrowed amounts if the lender has an interest in the activity or if the lender is related to a person who has an interest in the activity. 1040ez instructions 2014 For more information, see Publication 925, Passive Activity and At-Risk Rules. 1040ez instructions 2014 Passive activity rules. 1040ez instructions 2014   A passive activity is any trade or business activity in which the taxpayer does not materially participate. 1040ez instructions 2014 To determine material participation, see Publication 925. 1040ez instructions 2014 Rental activities are passive activities regardless of the taxpayer's participation, unless the taxpayer meets certain eligibility requirements. 1040ez instructions 2014   Individuals, estates, and trusts can offset passive activity losses only against passive activity income. 1040ez instructions 2014 Passive activity losses or credits not allowed in one tax year can be carried forward to the next year. 1040ez instructions 2014   If a passive activity interest is transferred because a taxpayer dies, the accumulated unused passive activity losses are allowed as a deduction against the decedent's income in the year of death. 1040ez instructions 2014 Losses are allowed only to the extent they are greater than the excess of the transferee's (recipient of the interest transferred) basis in the property over the decedent's adjusted basis in the property immediately before death. 1040ez instructions 2014 The part of the accumulated losses equal to the excess is not allowed as a deduction for any tax year. 1040ez instructions 2014   Use Form 8582, Passive Activity Loss Limitations, to summarize losses and income from passive activities and to figure the amounts allowed. 1040ez instructions 2014 For more information, see Publication 925. 1040ez instructions 2014 Credits, Other Taxes, and Payments Discussed below are some of the tax credits, types of taxes that may be owed, income tax withheld, and estimated tax payments reported on the final return of a decedent. 1040ez instructions 2014 Credits On the final income tax return, you can claim any tax credits that applied to the decedent before death. 1040ez instructions 2014 Some of these credits are discussed next. 1040ez instructions 2014 Earned income credit. 1040ez instructions 2014   If the decedent was an eligible individual, you can claim the earned income credit on the decedent's final return even though the return covers less than 12 months. 1040ez instructions 2014 If the allowable credit is more than the tax liability for the year, the excess is refunded. 1040ez instructions 2014   For more information, see Publication 596, Earned Income Credit (EIC). 1040ez instructions 2014 Credit for the elderly or the disabled. 1040ez instructions 2014   This credit is allowable on a decedent's final income tax return if the decedent met both of the following requirements in the year of death. 1040ez instructions 2014 The decedent: Was a “qualified individual,” and Had income (adjusted gross income (AGI) and nontaxable social security and pensions) less than certain limits. 1040ez instructions 2014   For details on qualifying for or figuring the credit, see Publication 524, Credit for the Elderly or the Disabled. 1040ez instructions 2014 Child tax credit. 1040ez instructions 2014   If the decedent had a qualifying child, you may be able to claim the child tax credit on the decedent's final return even though the return covers less than 12 months. 1040ez instructions 2014 You may be able to claim the additional child tax credit and get a refund if the credit is more than the decedent's liability. 1040ez instructions 2014 For more information, see the Instructions for Form 1040. 1040ez instructions 2014 Adoption credit. 1040ez instructions 2014   Depending upon when the adoption was finalized, this credit may be taken on a decedent's final income tax return if the decedent: Adopted an eligible child and paid qualified adoption expenses, or Has a carryforward of an adoption credit from a prior year. 1040ez instructions 2014   Also, if the decedent is survived by a spouse who meets the filing status of qualifying widow(er), unused adoption credit may be carried forward and used following the death of the decedent. 1040ez instructions 2014 See Form 8839, Qualified Adoption Expenses, and its instructions for more details. 1040ez instructions 2014 General business tax credit. 1040ez instructions 2014   The general business credit available to a taxpayer is limited. 1040ez instructions 2014 Any credit arising in a tax year beginning before 1998 that has not been used up can be carried forward for up to 15 years. 1040ez instructions 2014 Any unused credit arising in a tax year beginning after 1997 has a 1-year carryback and a 20-year carryforward period. 1040ez instructions 2014   After the carryforward period, a deduction may be allowed for any unused business credit. 1040ez instructions 2014 If the taxpayer dies before the end of the carryforward period, the deduction generally is allowed in the year of death. 1040ez instructions 2014   For more information on the general business credit, see Publication 334, Tax Guide for Small Business. 1040ez instructions 2014 Other Taxes Taxes other than income tax that may be owed on the final return of a decedent include self-employment tax and alternative minimum tax, which are reported on Form 1040. 1040ez instructions 2014 Self-employment tax. 1040ez instructions 2014   Self-employment tax may be owed on the final return if either of the following applied to the decedent in the year of death: Net earnings from self-employment (excluding income described in (2)) were $400 or more; or Wages from services performed as a church employee were $108. 1040ez instructions 2014 28 or more. 1040ez instructions 2014 Alternative minimum tax (AMT). 1040ez instructions 2014   The tax laws give special treatment to certain types of income and allow special deductions and credits for certain types of expenses. 1040ez instructions 2014 The alternative minimum tax (AMT) was enacted so taxpayers who benefit from these laws still pay at least a minimum amount of tax. 1040ez instructions 2014 In general, the AMT is the excess of the tentative minimum tax over the regular tax shown on the return. 1040ez instructions 2014 Form 6251. 1040ez instructions 2014    Use Form 6251, Alternative Minimum Tax—Individuals, to determine if this tax applies to the decedent. 1040ez instructions 2014 See the form instructions for information on when you must attach Form 6251 to Form 1040. 1040ez instructions 2014 Form 8801. 1040ez instructions 2014   If the decedent paid AMT in a previous year or had a credit carryforward, the decedent may be eligible for a minimum tax credit. 1040ez instructions 2014 See Form 8801, Credit for Prior Year Minimum Tax—Individuals, Estates, and Trusts. 1040ez instructions 2014 Payments of Tax The income tax withheld from the decedent's salary, wages, pensions, or annuities, and the amount paid as estimated tax are credits (advance payments of tax) that must be claimed on the final return. 1040ez instructions 2014 Tax Forgiveness for Armed Forces Members, Victims of Terrorism, and Astronauts Income tax liability may be forgiven for a decedent who dies due to service in a combat zone, due to military or terrorist actions, as a result of a terrorist attack, or while serving in the line of duty as an astronaut. 1040ez instructions 2014 Combat Zone If a member of the Armed Forces of the United States dies while in active service in a combat zone or from wounds, disease, or injury incurred in a combat zone, the decedent's income tax liability is abated (forgiven) for the entire year in which death occurred and for any prior tax year ending on or after the first day the person served in a combat zone in active service. 1040ez instructions 2014 For this purpose, a qualified hazardous duty area is treated as a combat zone. 1040ez instructions 2014 If the tax (including interest, additions to the tax, and additional amounts) for these years has been assessed, the assessment will be forgiven. 1040ez instructions 2014 If the tax has been collected (regardless of the date of collection), that tax will be credited or refunded. 1040ez instructions 2014 Any of the decedent's income tax for tax years before those mentioned above that remains unpaid as of the actual (or presumptive) date of death will not be assessed. 1040ez instructions 2014 If any unpaid tax (including interest, additions to the tax, and additional amounts) has been assessed, this assessment will be forgiven. 1040ez instructions 2014 Also, if any tax was collected after the date of death, that amount will be credited or refunded. 1040ez instructions 2014 The date of death of a member of the Armed Forces reported as missing in action or as a prisoner of war is the date his or her name is removed from missing status for military pay purposes. 1040ez instructions 2014 This is true even if death actually occurred earlier. 1040ez instructions 2014 For other tax information for members of the Armed Forces, see Publication 3, Armed Forces' Tax Guide. 1040ez instructions 2014 Military or Terrorist Actions The decedent's income tax liability is forgiven if, at death, he or she was a military or civilian employee of the United States who died because of wounds or injury incurred: While a U. 1040ez instructions 2014 S. 1040ez instructions 2014 employee, and In a military or terrorist action. 1040ez instructions 2014 The forgiveness applies to the tax year in which death occurred and for any earlier tax year, beginning with the year before the year in which the wounds or injury occurred. 1040ez instructions 2014 Example. 1040ez instructions 2014 The income tax liability of a civilian employee of the United States who died in 2013 because of wounds incurred while a U. 1040ez instructions 2014 S. 1040ez instructions 2014 employee in a terrorist attack that occurred in 2008 will be forgiven for 2013 and for all prior tax years in the period 2007 through 2012. 1040ez instructions 2014 Refunds are allowed for the tax years for which the period for filing a claim for refund has not ended, as discussed later. 1040ez instructions 2014 Military or terrorist action defined. 1040ez instructions 2014   A military or terrorist action means the following. 1040ez instructions 2014 Any terrorist activity that most of the evidence indicates was directed against the United States or any of its allies. 1040ez instructions 2014 Any military action involving the U. 1040ez instructions 2014 S. 1040ez instructions 2014 Armed Forces and resulting from violence or aggression against the United States or any of its allies, or the threat of such violence or aggression. 1040ez instructions 2014   Terrorist activity includes criminal offenses intended to coerce, intimidate, or retaliate against the government or civilian population. 1040ez instructions 2014 Military action does not include training exercises. 1040ez instructions 2014 Any multinational force in which the United States is participating is treated as an ally of the United States. 1040ez instructions 2014 Determining if a terrorist activity or military action has occurred. 1040ez instructions 2014   You may rely on published guidance from the IRS to determine if a particular event is considered a terrorist activity or military action. 1040ez instructions 2014 Specified Terrorist Victim The Victims of Terrorism Tax Relief Act of 2001 (the Act) provides tax relief for those injured or killed as a result of terrorist attacks, certain survivors of those killed as a result of terrorist attacks, and others who were affected by terrorist attacks. 1040ez instructions 2014 Under the Act, the federal income tax liability of those killed in the following attacks (specified terrorist victim) is forgiven for certain tax years. 1040ez instructions 2014 The April 19, 1995, terrorist attack on the Alfred P. 1040ez instructions 2014 Murrah Federal Building (Oklahoma City). 1040ez instructions 2014 The September 11, 2001, terrorist attacks. 1040ez instructions 2014 The terrorist attacks involving anthrax occurring after September 10, 2001, and before January 1, 2002. 1040ez instructions 2014 The Act also exempts from federal income tax the following types of income. 1040ez instructions 2014 Qualified disaster relief payments made after September 10, 2001, to cover personal, family, living, or funeral expenses incurred because of a terrorist attack. 1040ez instructions 2014 Certain disability payments received in tax years ending after September 10, 2001, for injuries sustained in a terrorist attack. 1040ez instructions 2014 Certain death benefits paid by an employer to the survivor of an employee because the employee died as a result of a terrorist attack. 1040ez instructions 2014 Payments from the September 11th Victim Compensation Fund 2001. 1040ez instructions 2014 The Act also reduces the estate tax of individuals who die as a result of a terrorist attack. 1040ez instructions 2014 See Publication 3920, Tax Relief for Victims of Terrorist Attacks, for more information. 1040ez instructions 2014 Astronauts Legislation extended the tax relief available under the Victims of Terrorism Tax Relief Act of 2001 (the Act) to astronauts who died in the line of duty after December 31, 2002. 1040ez instructions 2014 The decedent's income tax liability is forgiven for the tax year in which death occurs, and for the tax year prior to death. 1040ez instructions 2014 For information on death benefit payments and the reduction of federal estate taxes, see Publication 3920. 1040ez instructions 2014 However, the discussions in that publication under Death Benefits and Estate Tax Reduction should be modified for astronauts (for example, by using the date of death of the astronaut instead of September 11, 2001). 1040ez instructions 2014 For more information on the Act, see Publication 3920. 1040ez instructions 2014 Claim for Credit or Refund If any of these tax-forgiveness situations applies to a prior year tax, any tax paid for which the period for filing a claim has not ended will be credited or refunded. 1040ez instructions 2014 If any tax is still due, it will be canceled. 1040ez instructions 2014 The normal period for filing a claim for credit or refund is 3 years after the return was filed or 2 years after the tax was paid, whichever is later. 1040ez instructions 2014 If death occurred in a combat zone or from wounds, disease, or injury incurred in a combat zone, the period for filing the claim is extended by: The amount of time served in the combat zone (including any period in which the individual was in missing status), plus The period of continuous qualified hospitalization for injury from service in the combat zone, if any, plus The next 180 days. 1040ez instructions 2014 Qualified hospitalization means any hospitalization outside the United States and any hospitalization in the United States of not more than 5 years. 1040ez instructions 2014 This extended period for filing the claim also applies to a member of the Armed Forces who was deployed outside the United States in a designated contingency operation. 1040ez instructions 2014 Filing a claim. 1040ez instructions 2014   Use the following procedures to file a claim. 1040ez instructions 2014 If a U. 1040ez instructions 2014 S. 1040ez instructions 2014 individual income tax return (Form 1040, 1040A, or 1040EZ) has not been filed, you should make a claim for refund of any withheld income tax or estimated tax payments by filing Form 1040. 1040ez instructions 2014 Form W-2, Wage and Tax Statement, must accompany all returns. 1040ez instructions 2014 If a U. 1040ez instructions 2014 S. 1040ez instructions 2014 individual income tax return has been filed, you should make a claim for refund by filing Form 1040X. 1040ez instructions 2014 You must file a separate Form 1040X for each year in question. 1040ez instructions 2014   You must file these returns and claims at the following address for regular mail (U. 1040ez instructions 2014 S. 1040ez instructions 2014 Postal Service). 1040ez instructions 2014    Internal Revenue Service 333 W. 1040ez instructions 2014 Pershing, P5–6503 Kansas City, MO 64108   Identify all returns and claims for refund by writing “Iraq—KIA,” “Enduring Freedom—KIA,” “Kosovo Operation—KIA,” “Desert Storm—KIA,” or “Former Yugoslavia—KIA” in bold letters on the top of page 1 of the return or claim. 1040ez instructions 2014 On the applicable return, write the same phrase on the line for total tax. 1040ez instructions 2014 If the individual was killed in a terrorist or military action, put “KITA” on the front of the return and on the line for total tax. 1040ez instructions 2014   Include an attachment showing the computation of the decedent's tax liability and a computation of the amount to be forgiven. 1040ez instructions 2014 On joint returns, make an allocation of the tax as described below under Joint returns. 1040ez instructions 2014 If you cannot make a proper allocation, attach a statement of all income and deductions allocable to each spouse and the IRS will make the proper allocation. 1040ez instructions 2014   You must attach Form 1310 to all returns and claims for refund. 1040ez instructions 2014 However, for exceptions to filing Form 1310, see Form 1310. 1040ez instructions 2014 Statement of Person Claiming Refund Due a Deceased Taxpayer, under Refund, earlier. 1040ez instructions 2014   You must also attach proof of death that includes a statement that the individual was a U. 1040ez instructions 2014 S. 1040ez instructions 2014 employee on the date of injury and on the date of death and died as the result of a military or terrorist action. 1040ez instructions 2014 For military and civilian employees of the Department of Defense, attach DD Form 1300, Report of Casualty. 1040ez instructions 2014 For other U. 1040ez instructions 2014 S. 1040ez instructions 2014 civilian employees killed in the United States, attach a death certificate and a certification (letter) from the federal employer. 1040ez instructions 2014 For other U. 1040ez instructions 2014 S. 1040ez instructions 2014 civilian employees killed overseas, attach a certification from the Department of State. 1040ez instructions 2014   If you do not have enough tax information to file a timely claim for refund, you can suspend the period for filing a claim by filing Form 1040X. 1040ez instructions 2014 Attach Form 1310, any required documentation currently available, and a statement that you will file an amended claim as soon as you have the required tax information. 1040ez instructions 2014 Joint returns. 1040ez instructions 2014   If a joint return was filed, only the decedent's part of the income tax liability is eligible for forgiveness. 1040ez instructions 2014 Determine the decedent's tax liability as follows. 1040ez instructions 2014 Figure the income tax for which the decedent would have been liable if a separate return had been filed. 1040ez instructions 2014 Figure the income tax for which the spouse would have been liable if a separate return had been filed. 1040ez instructions 2014 Multiply the joint tax liability by a fraction. 1040ez instructions 2014 The numerator of the fraction is the amount in (1), above. 1040ez instructions 2014 The denominator of the fraction is the total of (1) and (2). 1040ez instructions 2014   The resulting amount from (3) above is the decedent's tax liability eligible for forgiveness. 1040ez instructions 2014 Filing Reminders To minimize the time needed to process the decedent's final return and issue any refund, be sure to follow these procedures. 1040ez instructions 2014 Write “DECEASED,” the decedent's name, and the date of death across the top of the tax return. 1040ez instructions 2014 If a personal representative has been appointed, the personal representative must sign the return. 1040ez instructions 2014 If it is a joint return, the surviving spouse must also sign it. 1040ez instructions 2014 If you are the decedent's spouse filing a joint return with the decedent and no personal representative has been appointed, write “Filing as surviving spouse” in the area where you sign the return. 1040ez instructions 2014 If no personal representative has been appointed and if there is no surviving spouse, the person in charge of the decedent's property must file and sign the return as “personal representative. 1040ez instructions 2014 ” To claim a refund for the decedent, do the following. 1040ez instructions 2014 If you are the decedent's spouse filing a joint return with the decedent, file only the tax return to claim the refund. 1040ez instructions 2014 If you are the personal representative and the return is not a joint return filed with the decedent's surviving spouse, file the return and attach a copy of the certificate that shows your appointment by the court. 1040ez instructions 2014 (A power of attorney or a copy of the decedent's will is not acceptable evidence of your appointment as the personal representative. 1040ez instructions 2014 ) If you are filing an amended return, attach Form 1310 and a copy of the certificate of appointment (or, if you have already sent the certificate of appointment to IRS, write “Certificate Previously Filed” at the bottom of Form 1310). 1040ez instructions 2014 If you are not filing a joint return as the surviving spouse and a personal representative has not been appointed, file the return and attach Form 1310. 1040ez instructions 2014 Other Tax Information Discussed below is information about the effect of an individual's death on the income tax liability of the survivors (including widows and widowers), the beneficiaries, and the estate. 1040ez instructions 2014 Tax Benefits for Survivors Survivors can qualify for certain benefits when filing their own income tax returns. 1040ez instructions 2014 Joint return by surviving spouse. 1040ez instructions 2014   A surviving spouse can file a joint return for the year of death and may qualify for special tax rates for the following 2 years, as explained under Qualifying widows and widowers, later. 1040ez instructions 2014 Decedent as your dependent. 1040ez instructions 2014   If the decedent qualified as your dependent for a part of the year before death, you can claim the exemption for the dependent on your tax return, regardless of when death occurred during the year. 1040ez instructions 2014   If the decedent was your qualifying child, you may be able to claim the child tax credit or the earned income credit. 1040ez instructions 2014 To determine if you qualify for the child tax credit, see the instructions for Form 1040, line 51; Form 1040A, line 33; or Form 1040NR, line 48. 1040ez instructions 2014 To determine if you qualify for the earned income credit, see the instructions for Form 1040, lines 64a and 64b or Form 1040A, lines 38a and 38b. 1040ez instructions 2014 Qualifying widows and widowers. 1040ez instructions 2014   If your spouse died within the 2 tax years preceding the year for which your return is being filed, you may be eligible to claim the filing status of qualifying widow(er) with dependent child and qualify to use the married-filing-jointly tax rates. 1040ez instructions 2014 Requirements. 1040ez instructions 2014   Generally, you qualify for this special benefit if you meet all of the following requirements. 1040ez instructions 2014 You were entitled to file a joint return with your spouse for the year of death—whether or not you actually filed jointly. 1040ez instructions 2014 You did not remarry before the end of the current tax year. 1040ez instructions 2014 You have a child, stepchild, or foster child who qualifies as your dependent for the tax year. 1040ez instructions 2014 You provide more than half the cost of maintaining your home, which is the principal residence of that child for the entire year except for temporary absences. 1040ez instructions 2014 Example. 1040ez instructions 2014 William Burns' wife died in 2010. 1040ez instructions 2014 William has not remarried and continued throughout 2011 and 2012 to maintain a home for himself and his dependent child. 1040ez instructions 2014 For 2010, he was entitled to file a joint return for himself and his deceased wife. 1040ez instructions 2014 For 2011 and 2012, he qualifies to file as a qualifying widower with dependent child. 1040ez instructions 2014 For later years, he may qualify to file as a head of household. 1040ez instructions 2014 Figuring your tax. 1040ez instructions 2014   Check the box on line 5 (Form 1040 or 1040A) under Filing Status on your tax return. 1040ez instructions 2014 Use the Tax Rate Schedule or the column in the Tax Table for Married filing jointly, which gives you the split-income benefits. 1040ez instructions 2014   The last year you can file jointly with, or claim an exemption for, your deceased spouse is the year of death. 1040ez instructions 2014 Joint return filing rules. 1040ez instructions 2014   If you are the surviving spouse and a personal representative is handling the estate for the decedent, you should coordinate filing your return for the year of death with this personal representative. 1040ez instructions 2014 See Joint Return under Final Income Tax Return for Decedent—Form 1040, earlier. 1040ez instructions 2014 Income in Respect of a Decedent All income the decedent would have received had death not occurred that was not properly includible on the final return, discussed earlier, is income in respect of a decedent. 1040ez instructions 2014 If the decedent is a specified terrorist victim (see Specified Terrorist Victim, earlier), income received after the date of death and before the end of the decedent's tax year (determined without regard to death) is excluded from the recipient's gross income. 1040ez instructions 2014 This exclusion does not apply to certain income. 1040ez instructions 2014 For more information, see Publication 3920. 1040ez instructions 2014 How To Report Income in respect of a decedent must be included in the income of one of the following. 1040ez instructions 2014 The decedent's estate, if the estate receives it. 1040ez instructions 2014 The beneficiary, if the right to income is passed directly to the beneficiary and the beneficiary receives it. 1040ez instructions 2014 Any person to whom the estate properly distributes the right to receive it. 1040ez instructions 2014 If you have to include income in respect of a decedent in your gross income and an estate tax return (Form 706) was filed for the decedent, you may be able to claim a deduction for the estate tax paid on that income. 1040ez instructions 2014 See Estate Tax Deduction, later. 1040ez instructions 2014 Example 1. 1040ez instructions 2014 Frank Johnson owned and operated an apple orchard. 1040ez instructions 2014 He used the cash method of accounting. 1040ez instructions 2014 He sold and delivered 1,000 bushels of apples to a canning factory for $2,000, but did not receive payment before his death. 1040ez instructions 2014 The proceeds from the sale are income in respect of a decedent. 1040ez instructions 2014 When the estate was settled, payment had not been made and the estate transferred the right to the payment to his widow. 1040ez instructions 2014 When Frank's widow collects the $2,000, she must include that amount in her return. 1040ez instructions 2014 It is not reported on the final return of the decedent or on the return of the estate. 1040ez instructions 2014 Example 2. 1040ez instructions 2014 Assume the same facts as in Example 1, except that Frank used the accrual method of accounting. 1040ez instructions 2014 The amount accrued from the sale of the apples would be included on his final return. 1040ez instructions 2014 Neither the estate nor the widow would realize income in respect of a decedent when the money is later paid. 1040ez instructions 2014 Example 3. 1040ez instructions 2014 On February 1, George High, a cash method taxpayer, sold his tractor for $3,000, payable March 1 of the same year. 1040ez instructions 2014 His adjusted basis in the tractor was $2,000. 1040ez instructions 2014 George died on February 15, before receiving payment. 1040ez instructions 2014 The gain to be reported as income in respect of a decedent is the $1,000 difference between the decedent's basis in the property and the sale proceeds. 1040ez instructions 2014 In other words, the income in respect of a decedent is the gain the decedent would have realized had he lived. 1040ez instructions 2014 Example 4. 1040ez instructions 2014 Cathy O'Neil was entitled to a large salary payment at the date of her death. 1040ez instructions 2014 The amount was to be paid in five annual installments. 1040ez instructions 2014 The estate, after collecting two installments, distributed the right to the remaining installments to you, the beneficiary. 1040ez instructions 2014 The payments are income in respect of a decedent. 1040ez instructions 2014 None of the payments were includible on Cathy's final return. 1040ez instructions 2014 The estate must include in its income the two installments it received, and you must include in your income each of the three installments as you receive them. 1040ez instructions 2014 Example 5. 1040ez instructions 2014 You inherited the right to receive renewal commissions on life insurance sold by your father before his death. 1040ez instructions 2014 You inherited the right from your mother, who acquired it by bequest from your father. 1040ez instructions 2014 Your mother died before she received all the commissions she had the right to receive, so you received the rest. 1040ez instructions 2014 The commissions are income in respect of a decedent. 1040ez instructions 2014 None of these commissions were includible in your father's final return. 1040ez instructions 2014 The commissions received by your mother were included in her income. 1040ez instructions 2014 The commissions you received are not includible in your mother's income, even on her final return. 1040ez instructions 2014 You must include them in your income. 1040ez instructions 2014 Character of income. 1040ez instructions 2014   The character of the income you receive in respect of a decedent remains the same as it would have been to the decedent if he or she were alive. 1040ez instructions 2014 If the income would have been a capital gain to the decedent, it will be a capital gain to you. 1040ez instructions 2014 Transfer of right to income. 1040ez instructions 2014   If you transfer your right to income in respect of a decedent, you must include in your income the greater of: The amount you receive for the right, or The fair market value of the right you transfer. 1040ez instructions 2014   If you make a gift of such a right, you must include in your income the fair market value of the right at the time of the gift. 1040ez instructions 2014   If the right to income from an installment obligation is transferred, the amount you must include in income is reduced by the basis of the obligation. 1040ez instructions 2014 See Installment obligations, later. 1040ez instructions 2014 Transfer defined. 1040ez instructions 2014   A transfer for this purpose includes a sale, exchange, or other disposition, the satisfaction of an installment obligation at other than face value, or the cancellation of an installment obligation. 1040ez instructions 2014 Installment obligations. 1040ez instructions 2014   If the decedent sold property using the installment method and you are collecting payments on an installment obligation acquired from the decedent, use the same gross profit percentage the decedent used to figure the part of each payment that represents profit. 1040ez instructions 2014 Include in your income the same profit the decedent would have included had death not occurred. 1040ez instructions 2014 For more information, see Publication 537, Installment Sales. 1040ez instructions 2014   If you dispose of an installment obligation acquired from a decedent (other than by transfer to the obligor), the rules explained in Publication 537 for figuring gain or loss on the disposition apply to you. 1040ez instructions 2014 Transfer to obligor. 1040ez instructions 2014   A transfer of a right to income, discussed earlier, has occurred if the decedent (seller) sold property using the installment method and the installment obligation was transferred to the obligor (buyer or person legally obligated to pay the installments). 1040ez instructions 2014 A transfer also occurs if the obligation was canceled either at death or by the estate or person receiving the obligation from the decedent. 1040ez instructions 2014 An obligation that becomes unenforceable is treated as having been canceled. 1040ez instructions 2014   If such a transfer occurs, the amount included in the income of the transferor (the estate or beneficiary) is the greater of the amount received or the fair market value of the installment obligation at the time of transfer, reduced by the basis of the obligation. 1040ez instructions 2014 The basis of the obligation is the decedent's basis, adjusted for all installment payments received after the decedent's death and before the transfer. 1040ez instructions 2014   If the decedent and obligor were related persons, the fair market value of the obligation cannot be less than its face value. 1040ez instructions 2014 Specific Types of Income in Respect of a Decedent This section explains and provides examples of some specific types of income in respect of a decedent. 1040ez instructions 2014 Wages. 1040ez instructions 2014   The entire amount of wages or other employee compensation earned by the decedent but unpaid at the time of death is income in respect of a decedent. 1040ez instructions 2014 The income is not reduced by any amounts withheld by the employer. 1040ez instructions 2014 If the income is $600 or more, the employer should report it in box 3 of Form 1099-MISC, Miscellaneous Income, and give the recipient a copy of the form or a similar statement. 1040ez instructions 2014   Wages paid as income in respect of a decedent are not subject to federal income tax withholding. 1040ez instructions 2014 However, if paid during the calendar year of death, they are subject to withholding for social security and Medicare taxes. 1040ez instructions 2014 These taxes should be included on the decedent's Form W-2 along with the taxes withheld before death. 1040ez instructions 2014 These wages are not included in box 1 of Form W-2. 1040ez instructions 2014   Wages paid as income in respect of a decedent after the year of death generally are not subject to withholding for any federal taxe