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1040ez online filing free Publication 541 - Main Content Table of Contents Forming a PartnershipOrganizations Classified as Partnerships Family Partnership Partnership Agreement Terminating a PartnershipIRS e-file (Electronic Filing) Exclusion From Partnership Rules Partnership Return (Form 1065) Partnership DistributionsSubstantially appreciated inventory items. 1040ez online filing free Partner's Gain or Loss Partner's Basis for Distributed Property Transactions Between Partnership and PartnersGuaranteed Payments Sale or Exchange of Property Contribution of Property Contribution of Services Basis of Partner's InterestAdjusted Basis Effect of Partnership Liabilities Disposition of Partner's InterestSale, Exchange, or Other Transfer Payments for Unrealized Receivables and Inventory Items Liquidation at Partner's Retirement or Death Tax Equity and Fiscal Responsibility Act of 1982 (TEFRA)Partnership Item. 1040ez online filing free Small Partnerships and the Small Partnership Exception Small Partnership TEFRA Election Role of Tax Matters Partner (TMP) in TEFRA Proceedings Statute of Limitations and TEFRA Amended Returns and Administrative Adjustment Requests (AARs) How To Get Tax Help Forming a Partnership The following sections contain general information about partnerships. 1040ez online filing free Organizations Classified as Partnerships An unincorporated organization with two or more members is generally classified as a partnership for federal tax purposes if its members carry on a trade, business, financial operation, or venture and divide its profits. 1040ez online filing free However, a joint undertaking merely to share expenses is not a partnership. 1040ez online filing free For example, co-ownership of property maintained and rented or leased is not a partnership unless the co-owners provide services to the tenants. 1040ez online filing free The rules you must use to determine whether an organization is classified as a partnership changed for organizations formed after 1996. 1040ez online filing free Organizations formed after 1996. 1040ez online filing free   An organization formed after 1996 is classified as a partnership for federal tax purposes if it has two or more members and it is none of the following. 1040ez online filing free An organization formed under a federal or state law that refers to it as incorporated or as a corporation, body corporate, or body politic. 1040ez online filing free An organization formed under a state law that refers to it as a joint-stock company or joint-stock association. 1040ez online filing free An insurance company. 1040ez online filing free Certain banks. 1040ez online filing free An organization wholly owned by a state, local, or foreign government. 1040ez online filing free An organization specifically required to be taxed as a corporation by the Internal Revenue Code (for example, certain publicly traded partnerships). 1040ez online filing free Certain foreign organizations identified in section 301. 1040ez online filing free 7701-2(b)(8) of the regulations. 1040ez online filing free A tax-exempt organization. 1040ez online filing free A real estate investment trust. 1040ez online filing free An organization classified as a trust under section 301. 1040ez online filing free 7701-4 of the regulations or otherwise subject to special treatment under the Internal Revenue Code. 1040ez online filing free Any other organization that elects to be classified as a corporation by filing Form 8832. 1040ez online filing free For more information, see the instructions for Form 8832. 1040ez online filing free Limited liability company. 1040ez online filing free   A limited liability company (LLC) is an entity formed under state law by filing articles of organization as an LLC. 1040ez online filing free Unlike a partnership, none of the members of an LLC are personally liable for its debts. 1040ez online filing free An LLC may be classified for federal income tax purposes as either a partnership, a corporation, or an entity disregarded as an entity separate from its owner by applying the rules in Regulations section 301. 1040ez online filing free 7701-3. 1040ez online filing free See Form 8832 and section 301. 1040ez online filing free 7701-3 of the regulations for more details. 1040ez online filing free A domestic LLC with at least two members that does not file Form 8832 is classified as a partnership for federal income tax purposes. 1040ez online filing free Organizations formed before 1997. 1040ez online filing free   An organization formed before 1997 and classified as a partnership under the old rules will generally continue to be classified as a partnership as long as the organization has at least two members and does not elect to be classified as a corporation by filing Form 8832. 1040ez online filing free Community property. 1040ez online filing free    Spouses who own a qualified entity (defined later) can choose to classify the entity as a partnership for federal tax purposes by filing the appropriate partnership tax returns. 1040ez online filing free They can choose to classify the entity as a sole proprietorship by filing a Schedule C (Form 1040) listing one spouse as the sole proprietor. 1040ez online filing free A change in reporting position will be treated for federal tax purposes as a conversion of the entity. 1040ez online filing free   A qualified entity is a business entity that meets all the following requirements. 1040ez online filing free The business entity is wholly owned by spouses as community property under the laws of a state, a foreign country, or a possession of the United States. 1040ez online filing free No person other than one or both spouses would be considered an owner for federal tax purposes. 1040ez online filing free The business entity is not treated as a corporation. 1040ez online filing free   For more information about community property, see Publication 555, Community Property. 1040ez online filing free Publication 555 discusses the community property laws of Arizona, California, Idaho, Louisiana, Nevada, New Mexico, Texas, Washington, and Wisconsin. 1040ez online filing free Family Partnership Members of a family can be partners. 1040ez online filing free However, family members (or any other person) will be recognized as partners only if one of the following requirements is met. 1040ez online filing free If capital is a material income-producing factor, they acquired their capital interest in a bona fide transaction (even if by gift or purchase from another family member), actually own the partnership interest, and actually control the interest. 1040ez online filing free If capital is not a material income-producing factor, they joined together in good faith to conduct a business. 1040ez online filing free They agreed that contributions of each entitle them to a share in the profits, and some capital or service has been (or is) provided by each partner. 1040ez online filing free Capital is material. 1040ez online filing free   Capital is a material income-producing factor if a substantial part of the gross income of the business comes from the use of capital. 1040ez online filing free Capital is ordinarily an income-producing factor if the operation of the business requires substantial inventories or investments in plants, machinery, or equipment. 1040ez online filing free Capital is not material. 1040ez online filing free   In general, capital is not a material income-producing factor if the income of the business consists principally of fees, commissions, or other compensation for personal services performed by members or employees of the partnership. 1040ez online filing free Capital interest. 1040ez online filing free   A capital interest in a partnership is an interest in its assets that is distributable to the owner of the interest in either of the following situations. 1040ez online filing free The owner withdraws from the partnership. 1040ez online filing free The partnership liquidates. 1040ez online filing free   The mere right to share in earnings and profits is not a capital interest in the partnership. 1040ez online filing free Gift of capital interest. 1040ez online filing free   If a family member (or any other person) receives a gift of a capital interest in a partnership in which capital is a material income-producing factor, the donee's distributive share of partnership income is subject to both of the following restrictions. 1040ez online filing free It must be figured by reducing the partnership income by reasonable compensation for services the donor renders to the partnership. 1040ez online filing free The donee's distributive share of partnership income attributable to donated capital must not be proportionately greater than the donor's distributive share attributable to the donor's capital. 1040ez online filing free Purchase. 1040ez online filing free   For purposes of determining a partner's distributive share, an interest purchased by one family member from another family member is considered a gift from the seller. 1040ez online filing free The fair market value of the purchased interest is considered donated capital. 1040ez online filing free For this purpose, members of a family include only spouses, ancestors, and lineal descendants (or a trust for the primary benefit of those persons). 1040ez online filing free Example. 1040ez online filing free A father sold 50% of his business to his son. 1040ez online filing free The resulting partnership had a profit of $60,000. 1040ez online filing free Capital is a material income-producing factor. 1040ez online filing free The father performed services worth $24,000, which is reasonable compensation, and the son performed no services. 1040ez online filing free The $24,000 must be allocated to the father as compensation. 1040ez online filing free Of the remaining $36,000 of profit due to capital, at least 50%, or $18,000, must be allocated to the father since he owns a 50% capital interest. 1040ez online filing free The son's share of partnership profit cannot be more than $18,000. 1040ez online filing free Business owned and operated by spouses. 1040ez online filing free   If spouses carry on a business together and share in the profits and losses, they may be partners whether or not they have a formal partnership agreement. 1040ez online filing free If so, they should report income or loss from the business on Form 1065. 1040ez online filing free They should not report the income on a Schedule C (Form 1040) in the name of one spouse as a sole proprietor. 1040ez online filing free However, the spouses can elect not to treat the joint venture as a partnership by making a Qualified Joint Venture Election. 1040ez online filing free Qualified Joint Venture Election. 1040ez online filing free   A "qualified joint venture," whose only members are spouses filing a joint return, can elect not to be treated as a partnership for federal tax purposes. 1040ez online filing free A qualified joint venture conducts a trade or business where: the only members of the joint venture are spouses filing jointly; both spouses elect not to be treated as a partnership; both spouses materially participate in the trade or business (see Passive Activity Limitations in the Instructions for Form 1065 for a definition of material participation); and the business is co-owned by both spouses and is not held in the name of a state law entity such as a partnership or LLC. 1040ez online filing free   Under this election, a qualified joint venture conducted by spouses who file a joint return is not treated as a partnership for federal tax purposes and therefore does not have a Form 1065 filing requirement. 1040ez online filing free All items of income, gain, deduction, loss, and credit are divided between the spouses based on their respective interests in the venture. 1040ez online filing free Each spouse takes into account his or her respective share of these items as a sole proprietor. 1040ez online filing free Each spouse would account for his or her respective share on the appropriate form, such as Schedule C (Form 1040). 1040ez online filing free For purposes of determining net earnings from self-employment, each spouse's share of income or loss from a qualified joint venture is taken into account just as it is for federal income tax purposes (i. 1040ez online filing free e. 1040ez online filing free , based on their respective interests in the venture). 1040ez online filing free   If the spouses do not make the election to treat their respective interests in the joint venture as sole proprietorships, each spouse should carry his or her share of the partnership income or loss from Schedule K-1 (Form 1065) to their joint or separate Form(s) 1040. 1040ez online filing free Each spouse should include his or her respective share of self-employment income on a separate Schedule SE (Form 1040), Self-Employment Tax. 1040ez online filing free   This generally does not increase the total tax on the return, but it does give each spouse credit for social security earnings on which retirement benefits are based. 1040ez online filing free However, this may not be true if either spouse exceeds the social security tax limitation. 1040ez online filing free   For more information on qualified joint ventures, go to IRS. 1040ez online filing free gov, enter “Election for Qualified Joint Ventures” in the search box and select the link reading “Election for Husband and Wife Unincorporated Businesses. 1040ez online filing free ” Partnership Agreement The partnership agreement includes the original agreement and any modifications. 1040ez online filing free The modifications must be agreed to by all partners or adopted in any other manner provided by the partnership agreement. 1040ez online filing free The agreement or modifications can be oral or written. 1040ez online filing free Partners can modify the partnership agreement for a particular tax year after the close of the year but not later than the date for filing the partnership return for that year. 1040ez online filing free This filing date does not include any extension of time. 1040ez online filing free If the partnership agreement or any modification is silent on any matter, the provisions of local law are treated as part of the agreement. 1040ez online filing free Terminating a Partnership A partnership terminates when one of the following events takes place. 1040ez online filing free All its operations are discontinued and no part of any business, financial operation, or venture is continued by any of its partners in a partnership. 1040ez online filing free At least 50% of the total interest in partnership capital and profits is sold or exchanged within a 12-month period, including a sale or exchange to another partner. 1040ez online filing free Unlike other partnerships, an electing large partnership does not terminate on the sale or exchange of 50% or more of the partnership interests within a 12-month period. 1040ez online filing free See section 1. 1040ez online filing free 708-1(b) of the regulations for more information on the termination of a partnership. 1040ez online filing free For special rules that apply to a merger, consolidation, or division of a partnership, see sections 1. 1040ez online filing free 708-1(c) and 1. 1040ez online filing free 708-1(d) of the regulations. 1040ez online filing free Date of termination. 1040ez online filing free   The partnership's tax year ends on the date of termination. 1040ez online filing free For the event described in (1), above, the date of termination is the date the partnership completes the winding up of its affairs. 1040ez online filing free For the event described in (2), above, the date of termination is the date of the sale or exchange of a partnership interest that, by itself or together with other sales or exchanges in the preceding 12 months, transfers an interest of 50% or more in both capital and profits. 1040ez online filing free Short period return. 1040ez online filing free   If a partnership is terminated before the end of what would otherwise be its tax year, Form 1065 must be filed for the short period, which is the period from the beginning of the tax year through the date of termination. 1040ez online filing free The return is due the 15th day of the fourth month following the date of termination. 1040ez online filing free See Partnership Return (Form 1065), later, for information about filing Form 1065. 1040ez online filing free Conversion of partnership into limited liability company (LLC). 1040ez online filing free   The conversion of a partnership into an LLC classified as a partnership for federal tax purposes does not terminate the partnership. 1040ez online filing free The conversion is not a sale, exchange, or liquidation of any partnership interest; the partnership's tax year does not close; and the LLC can continue to use the partnership's taxpayer identification number. 1040ez online filing free   However, the conversion may change some of the partners' bases in their partnership interests if the partnership has recourse liabilities that become nonrecourse liabilities. 1040ez online filing free Because the partners share recourse and nonrecourse liabilities differently, their bases must be adjusted to reflect the new sharing ratios. 1040ez online filing free If a decrease in a partner's share of liabilities exceeds the partner's basis, he or she must recognize gain on the excess. 1040ez online filing free For more information, see Effect of Partnership Liabilities under Basis of Partner's Interest, later. 1040ez online filing free   The same rules apply if an LLC classified as a partnership is converted into a partnership. 1040ez online filing free IRS e-file (Electronic Filing) Please click here for the text description of the image. 1040ez online filing free e-file Certain partnerships with more than 100 partners are required to file Form 1065, Schedules K-1, and related forms and schedules electronically (e-file). 1040ez online filing free Other partnerships generally have the option to file electronically. 1040ez online filing free For details about IRS e-file, see the Form 1065 instructions. 1040ez online filing free Exclusion From Partnership Rules Certain partnerships that do not actively conduct a business can choose to be completely or partially excluded from being treated as partnerships for federal income tax purposes. 1040ez online filing free All the partners must agree to make the choice, and the partners must be able to compute their own taxable income without computing the partnership's income. 1040ez online filing free However, the partners are not exempt from the rule that limits a partner's distributive share of partnership loss to the adjusted basis of the partner's partnership interest. 1040ez online filing free Nor are they exempt from the requirement of a business purpose for adopting a tax year for the partnership that differs from its required tax year. 1040ez online filing free Investing partnership. 1040ez online filing free   An investing partnership can be excluded if the participants in the joint purchase, retention, sale, or exchange of investment property meet all the following requirements. 1040ez online filing free They own the property as co-owners. 1040ez online filing free They reserve the right separately to take or dispose of their shares of any property acquired or retained. 1040ez online filing free They do not actively conduct business or irrevocably authorize some person acting in a representative capacity to purchase, sell, or exchange the investment property. 1040ez online filing free Each separate participant can delegate authority to purchase, sell, or exchange his or her share of the investment property for the time being for his or her account, but not for a period of more than a year. 1040ez online filing free Operating agreement partnership. 1040ez online filing free   An operating agreement partnership group can be excluded if the participants in the joint production, extraction, or use of property meet all the following requirements. 1040ez online filing free They own the property as co-owners, either in fee or under lease or other form of contract granting exclusive operating rights. 1040ez online filing free They reserve the right separately to take in kind or dispose of their shares of any property produced, extracted, or used. 1040ez online filing free They do not jointly sell services or the property produced or extracted. 1040ez online filing free Each separate participant can delegate authority to sell his or her share of the property produced or extracted for the time being for his or her account, but not for a period of time in excess of the minimum needs of the industry, and in no event for more than one year. 1040ez online filing free However, this exclusion does not apply to an unincorporated organization one of whose principal purposes is cycling, manufacturing, or processing for persons who are not members of the organization. 1040ez online filing free Electing the exclusion. 1040ez online filing free   An eligible organization that wishes to be excluded from the partnership rules must make the election not later than the time for filing the partnership return for the first tax year for which exclusion is desired. 1040ez online filing free This filing date includes any extension of time. 1040ez online filing free See Regulations section 1. 1040ez online filing free 761-2(b) for the procedures to follow. 1040ez online filing free Partnership Return (Form 1065) Every partnership that engages in a trade or business or has gross income must file an information return on Form 1065 showing its income, deductions, and other required information. 1040ez online filing free The partnership return must show the names and addresses of each partner and each partner's distributive share of taxable income. 1040ez online filing free The return must be signed by a general partner. 1040ez online filing free If a limited liability company is treated as a partnership, it must file Form 1065 and one of its members must sign the return. 1040ez online filing free A partnership is not considered to engage in a trade or business, and is not required to file a Form 1065, for any tax year in which it neither receives income nor pays or incurs any expenses treated as deductions or credits for federal income tax purposes. 1040ez online filing free See the Instructions for Form 1065 for more information about who must file Form 1065. 1040ez online filing free Partnership Distributions Partnership distributions include the following. 1040ez online filing free A withdrawal by a partner in anticipation of the current year's earnings. 1040ez online filing free A distribution of the current year's or prior years' earnings not needed for working capital. 1040ez online filing free A complete or partial liquidation of a partner's interest. 1040ez online filing free A distribution to all partners in a complete liquidation of the partnership. 1040ez online filing free A partnership distribution is not taken into account in determining the partner's distributive share of partnership income or loss. 1040ez online filing free If any gain or loss from the distribution is recognized by the partner, it must be reported on his or her return for the tax year in which the distribution is received. 1040ez online filing free Money or property withdrawn by a partner in anticipation of the current year's earnings is treated as a distribution received on the last day of the partnership's tax year. 1040ez online filing free Effect on partner's basis. 1040ez online filing free   A partner's adjusted basis in his or her partnership interest is decreased (but not below zero) by the money and adjusted basis of property distributed to the partner. 1040ez online filing free See Adjusted Basis under Basis of Partner's Interest, later. 1040ez online filing free Effect on partnership. 1040ez online filing free   A partnership generally does not recognize any gain or loss because of distributions it makes to partners. 1040ez online filing free The partnership may be able to elect to adjust the basis of its undistributed property. 1040ez online filing free Certain distributions treated as a sale or exchange. 1040ez online filing free   When a partnership distributes the following items, the distribution may be treated as a sale or exchange of property rather than a distribution. 1040ez online filing free Unrealized receivables or substantially appreciated inventory items distributed in exchange for any part of the partner's interest in other partnership property, including money. 1040ez online filing free Other property (including money) distributed in exchange for any part of a partner's interest in unrealized receivables or substantially appreciated inventory items. 1040ez online filing free   See Payments for Unrealized Receivables and Inventory Items under Disposition of Partner's Interest, later. 1040ez online filing free   This treatment does not apply to the following distributions. 1040ez online filing free A distribution of property to the partner who contributed the property to the partnership. 1040ez online filing free Payments made to a retiring partner or successor in interest of a deceased partner that are the partner's distributive share of partnership income or guaranteed payments. 1040ez online filing free Substantially appreciated inventory items. 1040ez online filing free   Inventory items of the partnership are considered to have appreciated substantially in value if, at the time of the distribution, their total fair market value is more than 120% of the partnership's adjusted basis for the property. 1040ez online filing free However, if a principal purpose for acquiring inventory property is to avoid ordinary income treatment by reducing the appreciation to less than 120%, that property is excluded. 1040ez online filing free Partner's Gain or Loss A partner generally recognizes gain on a partnership distribution only to the extent any money (and marketable securities treated as money) included in the distribution exceeds the adjusted basis of the partner's interest in the partnership. 1040ez online filing free Any gain recognized is generally treated as capital gain from the sale of the partnership interest on the date of the distribution. 1040ez online filing free If partnership property (other than marketable securities treated as money) is distributed to a partner, he or she generally does not recognize any gain until the sale or other disposition of the property. 1040ez online filing free For exceptions to these rules, see Distribution of partner's debt and Net precontribution gain, later. 1040ez online filing free Also, see Payments for Unrealized Receivables and Inventory Items under Disposition of Partner's Interest, later. 1040ez online filing free Example. 1040ez online filing free The adjusted basis of Jo's partnership interest is $14,000. 1040ez online filing free She receives a distribution of $8,000 cash and land that has an adjusted basis of $2,000 and a fair market value of $3,000. 1040ez online filing free Because the cash received does not exceed the basis of her partnership interest, Jo does not recognize any gain on the distribution. 1040ez online filing free Any gain on the land will be recognized when she sells or otherwise disposes of it. 1040ez online filing free The distribution decreases the adjusted basis of Jo's partnership interest to $4,000 [$14,000 − ($8,000 + $2,000)]. 1040ez online filing free Marketable securities treated as money. 1040ez online filing free   Generally, a marketable security distributed to a partner is treated as money in determining whether gain is recognized on the distribution. 1040ez online filing free This treatment, however, does not generally apply if that partner contributed the security to the partnership or an investment partnership made the distribution to an eligible partner. 1040ez online filing free   The amount treated as money is the security's fair market value when distributed, reduced (but not below zero) by the excess (if any) of: The partner's distributive share of the gain that would be recognized had the partnership sold all its marketable securities at their fair market value immediately before the transaction resulting in the distribution, over The partner's distributive share of the gain that would be recognized had the partnership sold all such securities it still held after the distribution at the fair market value in (1). 1040ez online filing free   For more information, including the definition of marketable securities, see section 731(c) of the Internal Revenue Code. 1040ez online filing free Loss on distribution. 1040ez online filing free   A partner does not recognize loss on a partnership distribution unless all the following requirements are met. 1040ez online filing free The adjusted basis of the partner's interest in the partnership exceeds the distribution. 1040ez online filing free The partner's entire interest in the partnership is liquidated. 1040ez online filing free The distribution is in money, unrealized receivables, or inventory items. 1040ez online filing free   There are exceptions to these general rules. 1040ez online filing free See the following discussions. 1040ez online filing free Also, see Liquidation at Partner's Retirement or Death under Disposition of Partner's Interest, later. 1040ez online filing free Distribution of partner's debt. 1040ez online filing free   If a partnership acquires a partner's debt and extinguishes the debt by distributing it to the partner, the partner will recognize capital gain or loss to the extent the fair market value of the debt differs from the basis of the debt (determined under the rules discussed in Partner's Basis for Distributed Property, later). 1040ez online filing free   The partner is treated as having satisfied the debt for its fair market value. 1040ez online filing free If the issue price (adjusted for any premium or discount) of the debt exceeds its fair market value when distributed, the partner may have to include the excess amount in income as canceled debt. 1040ez online filing free   Similarly, a deduction may be available to a corporate partner if the fair market value of the debt at the time of distribution exceeds its adjusted issue price. 1040ez online filing free Net precontribution gain. 1040ez online filing free   A partner generally must recognize gain on the distribution of property (other than money) if the partner contributed appreciated property to the partnership during the 7-year period before the distribution. 1040ez online filing free   The gain recognized is the lesser of the following amounts. 1040ez online filing free The excess of: The fair market value of the property received in the distribution, over The adjusted basis of the partner's interest in the partnership immediately before the distribution, reduced (but not below zero) by any money received in the distribution. 1040ez online filing free The “net precontribution gain” of the partner. 1040ez online filing free This is the net gain the partner would recognize if all the property contributed by the partner within 7 years of the distribution, and held by the partnership immediately before the distribution, were distributed to another partner, other than a partner who owns more than 50% of the partnership. 1040ez online filing free For information about the distribution of contributed property to another partner, see Contribution of Property , under Transactions Between Partnership and Partners, later. 1040ez online filing free   The character of the gain is determined by reference to the character of the net precontribution gain. 1040ez online filing free This gain is in addition to any gain the partner must recognize if the money distributed is more than his or her basis in the partnership. 1040ez online filing free For these rules, the term “money” includes marketable securities treated as money, as discussed earlier. 1040ez online filing free Effect on basis. 1040ez online filing free   The adjusted basis of the partner's interest in the partnership is increased by any net precontribution gain recognized by the partner. 1040ez online filing free Other than for purposes of determining the gain, the increase is treated as occurring immediately before the distribution. 1040ez online filing free See Basis of Partner's Interest , later. 1040ez online filing free   The partnership must adjust its basis in any property the partner contributed within 7 years of the distribution to reflect any gain that partner recognizes under this rule. 1040ez online filing free Exceptions. 1040ez online filing free   Any part of a distribution that is property the partner previously contributed to the partnership is not taken into account in determining the amount of the excess distribution or the partner's net precontribution gain. 1040ez online filing free For this purpose, the partner's previously contributed property does not include a contributed interest in an entity to the extent its value is due to property contributed to the entity after the interest was contributed to the partnership. 1040ez online filing free   Recognition of gain under this rule also does not apply to a distribution of unrealized receivables or substantially appreciated inventory items if the distribution is treated as a sale or exchange, as discussed earlier. 1040ez online filing free Partner's Basis for Distributed Property Unless there is a complete liquidation of a partner's interest, the basis of property (other than money) distributed to the partner by a partnership is its adjusted basis to the partnership immediately before the distribution. 1040ez online filing free However, the basis of the property to the partner cannot be more than the adjusted basis of his or her interest in the partnership reduced by any money received in the same transaction. 1040ez online filing free Example 1. 1040ez online filing free The adjusted basis of Emily's partnership interest is $30,000. 1040ez online filing free She receives a distribution of property that has an adjusted basis of $20,000 to the partnership and $4,000 in cash. 1040ez online filing free Her basis for the property is $20,000. 1040ez online filing free Example 2. 1040ez online filing free The adjusted basis of Steve's partnership interest is $10,000. 1040ez online filing free He receives a distribution of $4,000 cash and property that has an adjusted basis to the partnership of $8,000. 1040ez online filing free His basis for the distributed property is limited to $6,000 ($10,000 − $4,000, the cash he receives). 1040ez online filing free Complete liquidation of partner's interest. 1040ez online filing free   The basis of property received in complete liquidation of a partner's interest is the adjusted basis of the partner's interest in the partnership reduced by any money distributed to the partner in the same transaction. 1040ez online filing free Partner's holding period. 1040ez online filing free   A partner's holding period for property distributed to the partner includes the period the property was held by the partnership. 1040ez online filing free If the property was contributed to the partnership by a partner, then the period it was held by that partner is also included. 1040ez online filing free Basis divided among properties. 1040ez online filing free   If the basis of property received is the adjusted basis of the partner's interest in the partnership (reduced by money received in the same transaction), it must be divided among the properties distributed to the partner. 1040ez online filing free For property distributed after August 5, 1997, allocate the basis using the following rules. 1040ez online filing free Allocate the basis first to unrealized receivables and inventory items included in the distribution by assigning a basis to each item equal to the partnership's adjusted basis in the item immediately before the distribution. 1040ez online filing free If the total of these assigned bases exceeds the allocable basis, decrease the assigned bases by the amount of the excess. 1040ez online filing free Allocate any remaining basis to properties other than unrealized receivables and inventory items by assigning a basis to each property equal to the partnership's adjusted basis in the property immediately before the distribution. 1040ez online filing free If the allocable basis exceeds the total of these assigned bases, increase the assigned bases by the amount of the excess. 1040ez online filing free If the total of these assigned bases exceeds the allocable basis, decrease the assigned bases by the amount of the excess. 1040ez online filing free Allocating a basis increase. 1040ez online filing free   Allocate any basis increase required in rule (2), above, first to properties with unrealized appreciation to the extent of the unrealized appreciation. 1040ez online filing free If the basis increase is less than the total unrealized appreciation, allocate it among those properties in proportion to their respective amounts of unrealized appreciation. 1040ez online filing free Allocate any remaining basis increase among all the properties in proportion to their respective fair market values. 1040ez online filing free Example. 1040ez online filing free Eun's basis in her partnership interest is $55,000. 1040ez online filing free In a distribution in liquidation of her entire interest, she receives properties A and B, neither of which is inventory or unrealized receivables. 1040ez online filing free Property A has an adjusted basis to the partnership of $5,000 and a fair market value of $40,000. 1040ez online filing free Property B has an adjusted basis to the partnership of $10,000 and a fair market value of $10,000. 1040ez online filing free To figure her basis in each property, Eun first assigns bases of $5,000 to property A and $10,000 to property B (their adjusted bases to the partnership). 1040ez online filing free This leaves a $40,000 basis increase (the $55,000 allocable basis minus the $15,000 total of the assigned bases). 1040ez online filing free She first allocates $35,000 to property A (its unrealized appreciation). 1040ez online filing free The remaining $5,000 is allocated between the properties based on their fair market values. 1040ez online filing free $4,000 ($40,000/$50,000) is allocated to property A and $1,000 ($10,000/$50,000) is allocated to property B. 1040ez online filing free Eun's basis in property A is $44,000 ($5,000 + $35,000 + $4,000) and her basis in property B is $11,000 ($10,000 + $1,000). 1040ez online filing free Allocating a basis decrease. 1040ez online filing free   Use the following rules to allocate any basis decrease required in rule (1) or rule (2), earlier. 1040ez online filing free Allocate the basis decrease first to items with unrealized depreciation to the extent of the unrealized depreciation. 1040ez online filing free If the basis decrease is less than the total unrealized depreciation, allocate it among those items in proportion to their respective amounts of unrealized depreciation. 1040ez online filing free Allocate any remaining basis decrease among all the items in proportion to their respective assigned basis amounts (as decreased in (1)). 1040ez online filing free Example. 1040ez online filing free Armando's basis in his partnership interest is $20,000. 1040ez online filing free In a distribution in liquidation of his entire interest, he receives properties C and D, neither of which is inventory or unrealized receivables. 1040ez online filing free Property C has an adjusted basis to the partnership of $15,000 and a fair market value of $15,000. 1040ez online filing free Property D has an adjusted basis to the partnership of $15,000 and a fair market value of $5,000. 1040ez online filing free To figure his basis in each property, Armando first assigns bases of $15,000 to property C and $15,000 to property D (their adjusted bases to the partnership). 1040ez online filing free This leaves a $10,000 basis decrease (the $30,000 total of the assigned bases minus the $20,000 allocable basis). 1040ez online filing free He allocates the entire $10,000 to property D (its unrealized depreciation). 1040ez online filing free Armando's basis in property C is $15,000 and his basis in property D is $5,000 ($15,000 − $10,000). 1040ez online filing free Distributions before August 6, 1997. 1040ez online filing free   For property distributed before August 6, 1997, allocate the basis using the following rules. 1040ez online filing free Allocate the basis first to unrealized receivables and inventory items included in the distribution to the extent of the partnership's adjusted basis in those items. 1040ez online filing free If the partnership's adjusted basis in those items exceeded the allocable basis, allocate the basis among the items in proportion to their adjusted bases to the partnership. 1040ez online filing free Allocate any remaining basis to other distributed properties in proportion to their adjusted bases to the partnership. 1040ez online filing free Partner's interest more than partnership basis. 1040ez online filing free   If the basis of a partner's interest to be divided in a complete liquidation of the partner's interest is more than the partnership's adjusted basis for the unrealized receivables and inventory items distributed, and if no other property is distributed to which the partner can apply the remaining basis, the partner has a capital loss to the extent of the remaining basis of the partnership interest. 1040ez online filing free Special adjustment to basis. 1040ez online filing free   A partner who acquired any part of his or her partnership interest in a sale or exchange or upon the death of another partner may be able to choose a special basis adjustment for property distributed by the partnership. 1040ez online filing free To choose the special adjustment, the partner must have received the distribution within 2 years after acquiring the partnership interest. 1040ez online filing free Also, the partnership must not have chosen the optional adjustment to basis when the partner acquired the partnership interest. 1040ez online filing free   If a partner chooses this special basis adjustment, the partner's basis for the property distributed is the same as it would have been if the partnership had chosen the optional adjustment to basis. 1040ez online filing free However, this assigned basis is not reduced by any depletion or depreciation that would have been allowed or allowable if the partnership had previously chosen the optional adjustment. 1040ez online filing free   The choice must be made with the partner's tax return for the year of the distribution if the distribution includes any property subject to depreciation, depletion, or amortization. 1040ez online filing free If the choice does not have to be made for the distribution year, it must be made with the return for the first year in which the basis of the distributed property is pertinent in determining the partner's income tax. 1040ez online filing free   A partner choosing this special basis adjustment must attach a statement to his or her tax return that the partner chooses under section 732(d) of the Internal Revenue Code to adjust the basis of property received in a distribution. 1040ez online filing free The statement must show the computation of the special basis adjustment for the property distributed and list the properties to which the adjustment has been allocated. 1040ez online filing free Example. 1040ez online filing free Chin Ho purchased a 25% interest in X partnership for $17,000 cash. 1040ez online filing free At the time of the purchase, the partnership owned inventory having a basis to the partnership of $14,000 and a fair market value of $16,000. 1040ez online filing free Thus, $4,000 of the $17,000 he paid was attributable to his share of inventory with a basis to the partnership of $3,500. 1040ez online filing free Within 2 years after acquiring his interest, Chin Ho withdrew from the partnership and for his entire interest received cash of $1,500, inventory with a basis to the partnership of $3,500, and other property with a basis of $6,000. 1040ez online filing free The value of the inventory received was 25% of the value of all partnership inventory. 1040ez online filing free (It is immaterial whether the inventory he received was on hand when he acquired his interest. 1040ez online filing free ) Since the partnership from which Chin Ho withdrew did not make the optional adjustment to basis, he chose to adjust the basis of the inventory received. 1040ez online filing free His share of the partnership's basis for the inventory is increased by $500 (25% of the $2,000 difference between the $16,000 fair market value of the inventory and its $14,000 basis to the partnership at the time he acquired his interest). 1040ez online filing free The adjustment applies only for purposes of determining his new basis in the inventory, and not for purposes of partnership gain or loss on disposition. 1040ez online filing free The total to be allocated among the properties Chin Ho received in the distribution is $15,500 ($17,000 basis of his interest − $1,500 cash received). 1040ez online filing free His basis in the inventory items is $4,000 ($3,500 partnership basis + $500 special adjustment). 1040ez online filing free The remaining $11,500 is allocated to his new basis for the other property he received. 1040ez online filing free Mandatory adjustment. 1040ez online filing free   A partner does not always have a choice of making this special adjustment to basis. 1040ez online filing free The special adjustment to basis must be made for a distribution of property (whether or not within 2 years after the partnership interest was acquired) if all the following conditions existed when the partner received the partnership interest. 1040ez online filing free The fair market value of all partnership property (other than money) was more than 110% of its adjusted basis to the partnership. 1040ez online filing free If there had been a liquidation of the partner's interest immediately after it was acquired, an allocation of the basis of that interest under the general rules (discussed earlier under Basis divided among properties) would have decreased the basis of property that could not be depreciated, depleted, or amortized and increased the basis of property that could be. 1040ez online filing free The optional basis adjustment, if it had been chosen by the partnership, would have changed the partner's basis for the property actually distributed. 1040ez online filing free Required statement. 1040ez online filing free   Generally, if a partner chooses a special basis adjustment and notifies the partnership, or if the partnership makes a distribution for which the special basis adjustment is mandatory, the partnership must provide a statement to the partner. 1040ez online filing free The statement must provide information necessary for the partner to compute the special basis adjustment. 1040ez online filing free Marketable securities. 1040ez online filing free   A partner's basis in marketable securities received in a partnership distribution, as determined in the preceding discussions, is increased by any gain recognized by treating the securities as money. 1040ez online filing free See Marketable securities treated as money under Partner's Gain or Loss, earlier. 1040ez online filing free The basis increase is allocated among the securities in proportion to their respective amounts of unrealized appreciation before the basis increase. 1040ez online filing free Transactions Between Partnership and Partners For certain transactions between a partner and his or her partnership, the partner is treated as not being a member of the partnership. 1040ez online filing free These transactions include the following. 1040ez online filing free Performing services for, or transferring property to, a partnership if: There is a related allocation and distribution to a partner, and The entire transaction, when viewed together, is properly characterized as occurring between the partnership and a partner not acting in the capacity of a partner. 1040ez online filing free Transferring money or other property to a partnership if: There is a related transfer of money or other property by the partnership to the contributing partner or another partner, and The transfers together are properly characterized as a sale or exchange of property. 1040ez online filing free Payments by accrual basis partnership to cash basis partner. 1040ez online filing free   A partnership that uses an accrual method of accounting cannot deduct any business expense owed to a cash basis partner until the amount is paid. 1040ez online filing free However, this rule does not apply to guaranteed payments made to a partner, which are generally deductible when accrued. 1040ez online filing free Guaranteed Payments Guaranteed payments are those made by a partnership to a partner that are determined without regard to the partnership's income. 1040ez online filing free A partnership treats guaranteed payments for services, or for the use of capital, as if they were made to a person who is not a partner. 1040ez online filing free This treatment is for purposes of determining gross income and deductible business expenses only. 1040ez online filing free For other tax purposes, guaranteed payments are treated as a partner's distributive share of ordinary income. 1040ez online filing free Guaranteed payments are not subject to income tax withholding. 1040ez online filing free The partnership generally deducts guaranteed payments on line 10 of Form 1065 as a business expense. 1040ez online filing free They are also listed on Schedules K and K-1 of the partnership return. 1040ez online filing free The individual partner reports guaranteed payments on Schedule E (Form 1040) as ordinary income, along with his or her distributive share of the partnership's other ordinary income. 1040ez online filing free Guaranteed payments made to partners for organizing the partnership or syndicating interests in the partnership are capital expenses. 1040ez online filing free Generally, organizational and syndication expenses are not deductible by the partnership. 1040ez online filing free However, a partnership can elect to deduct a portion of its organizational expenses and amortize the remaining expenses (see Business start-up and organizational costs in the Instructions for Form 1065). 1040ez online filing free Organizational expenses (if the election is not made) and syndication expenses paid to partners must be reported on the partners' Schedule K-1 as guaranteed payments. 1040ez online filing free Minimum payment. 1040ez online filing free   If a partner is to receive a minimum payment from the partnership, the guaranteed payment is the amount by which the minimum payment is more than the partner's distributive share of the partnership income before taking into account the guaranteed payment. 1040ez online filing free Example. 1040ez online filing free Under a partnership agreement, Divya is to receive 30% of the partnership income, but not less than $8,000. 1040ez online filing free The partnership has net income of $20,000. 1040ez online filing free Divya's share, without regard to the minimum guarantee, is $6,000 (30% × $20,000). 1040ez online filing free The guaranteed payment that can be deducted by the partnership is $2,000 ($8,000 − $6,000). 1040ez online filing free Divya's income from the partnership is $8,000, and the remaining $12,000 of partnership income will be reported by the other partners in proportion to their shares under the partnership agreement. 1040ez online filing free If the partnership net income had been $30,000, there would have been no guaranteed payment since her share, without regard to the guarantee, would have been greater than the guarantee. 1040ez online filing free Self-employed health insurance premiums. 1040ez online filing free   Premiums for health insurance paid by a partnership on behalf of a partner, for services as a partner, are treated as guaranteed payments. 1040ez online filing free The partnership can deduct the payments as a business expense, and the partner must include them in gross income. 1040ez online filing free However, if the partnership accounts for insurance paid for a partner as a reduction in distributions to the partner, the partnership cannot deduct the premiums. 1040ez online filing free   A partner who qualifies can deduct 100% of the health insurance premiums paid by the partnership on his or her behalf as an adjustment to income. 1040ez online filing free The partner cannot deduct the premiums for any calendar month, or part of a month, in which the partner is eligible to participate in any subsidized health plan maintained by any employer of the partner, the partner's spouse, the partner's dependents, or any children under age 27 who are not dependents. 1040ez online filing free For more information on the self-employed health insurance deduction, see chapter 6 in Publication 535. 1040ez online filing free Including payments in partner's income. 1040ez online filing free   Guaranteed payments are included in income in the partner's tax year in which the partnership's tax year ends. 1040ez online filing free Example 1. 1040ez online filing free Under the terms of a partnership agreement, Erica is entitled to a fixed annual payment of $10,000 without regard to the income of the partnership. 1040ez online filing free Her distributive share of the partnership income is 10%. 1040ez online filing free The partnership has $50,000 of ordinary income after deducting the guaranteed payment. 1040ez online filing free She must include ordinary income of $15,000 ($10,000 guaranteed payment + $5,000 ($50,000 × 10%) distributive share) on her individual income tax return for her tax year in which the partnership's tax year ends. 1040ez online filing free Example 2. 1040ez online filing free Lamont is a calendar year taxpayer who is a partner in a partnership. 1040ez online filing free The partnership uses a fiscal year that ended January 31, 2013. 1040ez online filing free Lamont received guaranteed payments from the partnership from February 1, 2012, until December 31, 2012. 1040ez online filing free He must include these guaranteed payments in income for 2013 and report them on his 2013 income tax return. 1040ez online filing free Payments resulting in loss. 1040ez online filing free   If guaranteed payments to a partner result in a partnership loss in which the partner shares, the partner must report the full amount of the guaranteed payments as ordinary income. 1040ez online filing free The partner separately takes into account his or her distributive share of the partnership loss, to the extent of the adjusted basis of the partner's partnership interest. 1040ez online filing free Sale or Exchange of Property Special rules apply to a sale or exchange of property between a partnership and certain persons. 1040ez online filing free Losses. 1040ez online filing free   Losses will not be allowed from a sale or exchange of property (other than an interest in the partnership) directly or indirectly between a partnership and a person whose direct or indirect interest in the capital or profits of the partnership is more than 50%. 1040ez online filing free   If the sale or exchange is between two partnerships in which the same persons directly or indirectly own more than 50% of the capital or profits interests in each partnership, no deduction of a loss is allowed. 1040ez online filing free   The basis of each partner's interest in the partnership is decreased (but not below zero) by the partner's share of the disallowed loss. 1040ez online filing free   If the purchaser later sells the property, only the gain realized that is greater than the loss not allowed will be taxable. 1040ez online filing free If any gain from the sale of the property is not recognized because of this rule, the basis of each partner's interest in the partnership is increased by the partner's share of that gain. 1040ez online filing free Gains. 1040ez online filing free   Gains are treated as ordinary income in a sale or exchange of property directly or indirectly between a person and a partnership, or between two partnerships, if both of the following tests are met. 1040ez online filing free More than 50% of the capital or profits interest in the partnership(s) is directly or indirectly owned by the same person(s). 1040ez online filing free The property in the hands of the transferee immediately after the transfer is not a capital asset. 1040ez online filing free Property that is not a capital asset includes accounts receivable, inventory, stock-in-trade, and depreciable or real property used in a trade or business. 1040ez online filing free More than 50% ownership. 1040ez online filing free   To determine if there is more than 50% ownership in partnership capital or profits, the following rules apply. 1040ez online filing free An interest directly or indirectly owned by, or for, a corporation, partnership, estate, or trust is considered to be owned proportionately by, or for, its shareholders, partners, or beneficiaries. 1040ez online filing free An individual is considered to own the interest directly or indirectly owned by, or for, the individual's family. 1040ez online filing free For this rule, “family” includes only brothers, sisters, half-brothers, half-sisters, spouses, ancestors, and lineal descendants. 1040ez online filing free If a person is considered to own an interest using rule (1), that person (the “constructive owner”) is treated as if actually owning that interest when rules (1) and (2) are applied. 1040ez online filing free However, if a person is considered to own an interest using rule (2), that person is not treated as actually owning that interest in reapplying rule (2) to make another person the constructive owner. 1040ez online filing free Example. 1040ez online filing free Individuals A and B and Trust T are equal partners in Partnership ABT. 1040ez online filing free A's husband, AH, is the sole beneficiary of Trust T. 1040ez online filing free Trust T's partnership interest will be attributed to AH only for the purpose of further attributing the interest to A. 1040ez online filing free As a result, A is a more-than-50% partner. 1040ez online filing free This means that any deduction for losses on transactions between her and ABT will not be allowed, and gain from property that in the hands of the transferee is not a capital asset is treated as ordinary, rather than capital, gain. 1040ez online filing free More information. 1040ez online filing free   For more information on these special rules, see Sales and Exchanges Between Related Persons in chapter 2 of Publication 544. 1040ez online filing free Contribution of Property Usually, neither the partner nor the partnership recognizes a gain or loss when property is contributed to the partnership in exchange for a partnership interest. 1040ez online filing free This applies whether a partnership is being formed or is already operating. 1040ez online filing free The partnership's holding period for the property includes the partner's holding period. 1040ez online filing free The contribution of limited partnership interests in one partnership for limited partnership interests in another partnership qualifies as a tax-free contribution of property to the second partnership if the transaction is made for business purposes. 1040ez online filing free The exchange is not subject to the rules explained later under Disposition of Partner's Interest. 1040ez online filing free Disguised sales. 1040ez online filing free   A contribution of money or other property to the partnership followed by a distribution of different property from the partnership to the partner is treated not as a contribution and distribution, but as a sale of property, if both of the following tests are met. 1040ez online filing free The distribution would not have been made but for the contribution. 1040ez online filing free The partner's right to the distribution does not depend on the success of partnership operations. 1040ez online filing free   All facts and circumstances are considered in determining if the contribution and distribution are more properly characterized as a sale. 1040ez online filing free However, if the contribution and distribution occur within 2 years of each other, the transfers are presumed to be a sale unless the facts clearly indicate that the transfers are not a sale. 1040ez online filing free If the contribution and distribution occur more than 2 years apart, the transfers are presumed not to be a sale unless the facts clearly indicate that the transfers are a sale. 1040ez online filing free Form 8275 required. 1040ez online filing free   A partner must attach Form 8275, Disclosure Statement, (or other statement) to his or her return if the partner contributes property to a partnership and, within 2 years (before or after the contribution), the partnership transfers money or other consideration to the partner. 1040ez online filing free For exceptions to this requirement, see section 1. 1040ez online filing free 707-3(c)(2) of the regulations. 1040ez online filing free   A partnership must attach Form 8275 (or other statement) to its return if it distributes property to a partner, and, within 2 years (before or after the distribution), the partner transfers money or other consideration to the partnership. 1040ez online filing free   Form 8275 must include the following information. 1040ez online filing free A caption identifying the statement as a disclosure under section 707 of the Internal Revenue Code. 1040ez online filing free A description of the transferred property or money, including its value. 1040ez online filing free A description of any relevant facts in determining if the transfers are properly viewed as a disguised sale. 1040ez online filing free See section 1. 1040ez online filing free 707-3(b)(2) of the regulations for a description of the facts and circumstances considered in determining if the transfers are a disguised sale. 1040ez online filing free Contribution to partnership treated as investment company. 1040ez online filing free   Gain is recognized when property is contributed (in exchange for an interest in the partnership) to a partnership that would be treated as an investment company if it were incorporated. 1040ez online filing free   A partnership is generally treated as an investment company if over 80% of the value of its assets is held for investment and consists of certain readily marketable items. 1040ez online filing free These items include money, stocks and other equity interests in a corporation, and interests in regulated investment companies and real estate investment trusts. 1040ez online filing free For more information, see section 351(e)(1) of the Internal Revenue Code and the related regulations. 1040ez online filing free Whether a partnership is treated as an investment company under this test is ordinarily determined immediately after the transfer of property. 1040ez online filing free   This rule applies to limited partnerships and general partnerships, regardless of whether they are privately formed or publicly syndicated. 1040ez online filing free Contribution to foreign partnership. 1040ez online filing free   A domestic partnership that contributed property after August 5, 1997, to a foreign partnership in exchange for a partnership interest may have to file Form 8865 if either of the following apply. 1040ez online filing free Immediately after the contribution, the partnership owned, directly or indirectly, at least a 10% interest in the foreign partnership. 1040ez online filing free The fair market value of the property contributed to the foreign partnership, when added to other contributions of property made to the partnership during the preceding 12-month period, is greater than $100,000. 1040ez online filing free   The partnership may also have to file Form 8865, even if no contributions are made during the tax year, if it owns a 10% or more interest in a foreign partnership at any time during the year. 1040ez online filing free See the form instructions for more information. 1040ez online filing free Basis of contributed property. 1040ez online filing free   If a partner contributes property to a partnership, the partnership's basis for determining depreciation, depletion, gain, or loss for the property is the same as the partner's adjusted basis for the property when it was contributed, increased by any gain recognized by the partner at the time of contribution. 1040ez online filing free Allocations to account for built-in gain or loss. 1040ez online filing free   The fair market value of property at the time it is contributed may be different from the partner's adjusted basis. 1040ez online filing free The partnership must allocate among the partners any income, deduction, gain, or loss on the property in a manner that will account for the difference. 1040ez online filing free This rule also applies to contributions of accounts payable and other accrued but unpaid items of a cash basis partner. 1040ez online filing free   The partnership can use different allocation methods for different items of contributed property. 1040ez online filing free A single reasonable method must be consistently applied to each item, and the overall method or combination of methods must be reasonable. 1040ez online filing free See section 1. 1040ez online filing free 704-3 of the regulations for allocation methods generally considered reasonable. 1040ez online filing free   If the partnership sells contributed property and recognizes gain or loss, built-in gain or loss is allocated to the contributing partner. 1040ez online filing free If contributed property is subject to depreciation or other cost recovery, the allocation of deductions for these items takes into account built-in gain or loss on the property. 1040ez online filing free However, the total depreciation, depletion, gain, or loss allocated to partners cannot be more than the depreciation or depletion allowable to the partnership or the gain or loss realized by the partnership. 1040ez online filing free Example. 1040ez online filing free Areta and Sofia formed an equal partnership. 1040ez online filing free Areta contributed $10,000 in cash to the partnership and Sofia contributed depreciable property with a fair market value of $10,000 and an adjusted basis of $4,000. 1040ez online filing free The partnership's basis for depreciation is limited to the adjusted basis of the property in Sofia's hands, $4,000. 1040ez online filing free In effect, Areta purchased an undivided one-half interest in the depreciable property with her contribution of $10,000. 1040ez online filing free Assuming that the depreciation rate is 10% a year under the General Depreciation System (GDS), she would have been entitled to a depreciation deduction of $500 per year, based on her interest in the partnership, if the adjusted basis of the property equaled its fair market value when contributed. 1040ez online filing free To simplify this example, the depreciation deductions are determined without regard to any first-year depreciation conventions. 1040ez online filing free However, since the partnership is allowed only $400 per year of depreciation (10% of $4,000), no more than $400 can be allocated between the partners. 1040ez online filing free The entire $400 must be allocated to Areta. 1040ez online filing free Distribution of contributed property to another partner. 1040ez online filing free   If a partner contributes property to a partnership and the partnership distributes the property to another partner within 7 years of the contribution, the contributing partner must recognize gain or loss on the distribution. 1040ez online filing free   The recognized gain or loss is the amount the contributing partner would have recognized if the property had been sold for its fair market value when it was distributed. 1040ez online filing free This amount is the difference between the property's basis and its fair market value at the time of contribution. 1040ez online filing free The character of the gain or loss will be the same as the character of the gain or loss that would have resulted if the partnership had sold the property to the distributee partner. 1040ez online filing free Appropriate adjustments must be made to the adjusted basis of the contributing partner's partnership interest and to the adjusted basis of the property distributed to reflect the recognized gain or loss. 1040ez online filing free Disposition of certain contributed property. 1040ez online filing free   The following rules determine the character of the partnership's gain or loss on a disposition of certain types of contributed property. 1040ez online filing free Unrealized receivables. 1040ez online filing free If the property was an unrealized receivable in the hands of the contributing partner, any gain or loss on its disposition by the partnership is ordinary income or loss. 1040ez online filing free Unrealized receivables are defined later under Payments for Unrealized Receivables and Inventory Items. 1040ez online filing free When reading the definition, substitute “partner” for “partnership. 1040ez online filing free ” Inventory items. 1040ez online filing free If the property was an inventory item in the hands of the contributing partner, any gain or loss on its disposition by the partnership within 5 years after the contribution is ordinary income or loss. 1040ez online filing free Inventory items are defined later in Payments for Unrealized Receivables and Inventory Items. 1040ez online filing free Capital loss property. 1040ez online filing free If the property was a capital asset in the contributing partner's hands, any loss on its disposition by the partnership within 5 years after the contribution is a capital loss. 1040ez online filing free The capital loss is limited to the amount by which the partner's adjusted basis for the property exceeded the property's fair market value immediately before the contribution. 1040ez online filing free Substituted basis property. 1040ez online filing free If the disposition of any of the property listed in (1), (2), or (3) is a nonrecognition transaction, these rules apply when the recipient of the property disposes of any substituted basis property (other than certain corporate stock) resulting from the transaction. 1040ez online filing free Contribution of Services A partner can acquire an interest in partnership capital or profits as compensation for services performed or to be performed. 1040ez online filing free Capital interest. 1040ez online filing free   A capital interest is an interest that would give the holder a share of the proceeds if the partnership's assets were sold at fair market value and the proceeds were distributed in a complete liquidation of the partnership. 1040ez online filing free This determination generally is made at the time of receipt of the partnership interest. 1040ez online filing free The fair market value of such an interest received by a partner as compensation for services must generally be included in the partner's gross income in the first tax year in which the partner can transfer the interest or the interest is not subject to a substantial risk of forfeiture. 1040ez online filing free The capital interest transferred as compensation for services is subject to the rules for restricted property discussed in Publication 525 under Employee Compensation. 1040ez online filing free   The fair market value of an interest in partnership capital transferred to a partner as payment for services to the partnership is a guaranteed payment, discussed earlier. 1040ez online filing free Profits interest. 1040ez online filing free   A profits interest is a partnership interest other than a capital interest. 1040ez online filing free If a person receives a profits interest for providing services to, or for the benefit of, a partnership in a partner capacity or in anticipation of being a partner, the receipt of such an interest is not a taxable event for the partner or the partnership. 1040ez online filing free However, this does not apply in the following situations. 1040ez online filing free The profits interest relates to a substantially certain and predictable stream of income from partnership assets, such as income from high-quality debt securities or a high-quality net lease. 1040ez online filing free Within 2 years of receipt, the partner disposes of the profits interest. 1040ez online filing free The profits interest is a limited partnership interest in a publicly traded partnership. 1040ez online filing free   A profits interest transferred as compensation for services is not subject to the rules for restricted property that apply to capital interests. 1040ez online filing free Basis of Partner's Interest The basis of a partnership interest is the money plus the adjusted basis of any property the partner contributed. 1040ez online filing free If the partner must recognize gain as a result of the contribution, this gain is included in the basis of his or her interest. 1040ez online filing free Any increase in a partner's individual liabilities because of an assumption of partnership liabilities is considered a contribution of money to the partnership by the partner. 1040ez online filing free Interest acquired by gift, etc. 1040ez online filing free   If a partner acquires an interest in a partnership by gift, inheritance, or under any circumstance other than by a contribution of money or property to the partnership, the partner's basis must be determined using the basis rules described in Publication 551. 1040ez online filing free Adjusted Basis There is a worksheet for adjusting the basis of a partner's interest in the partnership in the Partner's Instructions for Schedule K-1 (Form 1065). 1040ez online filing free The basis of an interest in a partnership is increased or decreased by certain items. 1040ez online filing free Increases. 1040ez online filing free   A partner's basis is increased by the following items. 1040ez online filing free The partner's additional contributions to the partnership, including an increased share of, or assumption of, partnership liabilities. 1040ez online filing free The partner's distributive share of taxable and nontaxable partnership income. 1040ez online filing free The partner's distributive share of the excess of the deductions for depletion over the basis of the depletable property, unless the property is oil or gas wells whose basis has been allocated to partners. 1040ez online filing free Decreases. 1040ez online filing free   The partner's basis is decreased (but never below zero) by the following items. 1040ez online filing free The money (including a decreased share of partnership liabilities or an assumption of the partner's individual liabilities by the partnership) and adjusted basis of property distributed to the partner by the partnership. 1040ez online filing free The partner's distributive share of the partnership losses (including capital losses). 1040ez online filing free The partner's distributive share of nondeductible partnership expenses that are not capital expenditures. 1040ez online filing free This includes the partner's share of any section 179 expenses, even if the partner cannot deduct the entire amount on his or her individual income tax return. 1040ez online filing free The partner's deduction for depletion for any partnership oil and gas wells, up to the proportionate share of the adjusted basis of the wells allocated to the partner. 1040ez online filing free Partner's liabilities assumed by partnership. 1040ez online filing free   If contributed property is subject to a debt or if a partner's liabilities are assumed by the partnership, the basis of that partner's interest is reduced (but not below zero) by the liability assumed by the other partners. 1040ez online filing free This partner must reduce his or her basis because the assumption of the liability is treated as a distribution of money to that partner. 1040ez online filing free The other partners' assumption of the liability is treated as a contribution by them of money to the partnership. 1040ez online filing free See Effect of Partnership Liabilities , later. 1040ez online filing free Example 1. 1040ez online filing free Ivan acquired a 20% interest in a partnership by contributing property that had an adjusted basis to him of $8,000 and a $4,000 mortgage. 1040ez online filing free The partnership assumed payment of the mortgage. 1040ez online filing free The basis of Ivan's interest is: Adjusted basis of contributed property $8,000 Minus: Part of mortgage assumed by other partners (80% × $4,000) 3,200 Basis of Ivan's partnership interest $4,800 Example 2. 1040ez online filing free If, in Example 1, the contributed property had a $12,000 mortgage, the basis of Ivan's partnership interest would be zero. 1040ez online filing free The $1,600 difference between the mortgage assumed by the other partners, $9,600 (80% × $12,000), and his basis of $8,000 would be treated as capital gain from the sale or exchange of a partnership interest. 1040ez online filing free However, this gain would not increase the basis of his partnership interest. 1040ez online filing free Book value of partner's interest. 1040ez online filing free   The adjusted basis of a partner's interest is determined without considering any amount shown in the partnership books as a capital, equity, or similar account. 1040ez online filing free Example. 1040ez online filing free Enzo contributes to his partnership property that has an adjusted basis of $400 and a fair market value of $1,000. 1040ez online filing free His partner contributes $1,000 cash. 1040ez online filing free While each partner has increased his capital account by $1,000, which will be re
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Withholding Compliance Questions & Answers

Q1: In the past, as an employer, I was required to submit all Forms W-4 that claimed complete exemption from withholding (when $200 or more in weekly wages were regularly expected) or claimed more than 10 allowances. What Forms W-4 do I now have to submit to the IRS?

A1: Employers are no longer required to routinely submit Forms W-4 to the IRS.  However, in certain circumstances, the IRS may direct you to submit copies of Forms W-4 for certain employees in order to ensure that the employees have adequate withholding. You are now required to submit the Forms W-4 to IRS only if directed to do so in a written notice or pursuant to specified criteria set forth in future published guidance.

 


Q2: If an employer no longer has to submit Forms W-4 claiming complete exemption from withholding or claiming more than 10 allowances, how does the IRS determine adequate withholding?

A2: The IRS is making more effective use of information contained in its records along with information reported on Form W-2 wage statements to ensure that employees have enough federal income tax withheld. 
 


Q3: If the IRS determines that an employee does not have enough federal income tax withheld, what will an employer be asked to do?

A3: If the IRS determines that an employee does not have enough withholding, we will notify you to increase the amount of withholding tax by issuing a “lock-in” letter that specifies the maximum number of withholding allowances permitted for the employee. You will also receive a copy for the employee that identifies the maximum number of withholding exemptions permitted and the process by which the employee can provide additional information to the IRS for purposes of determining the appropriate number of withholding exemptions. If the employee still works for you, you must furnish the employee copy to the employee. If the employee no longer works for you, NO ACTION IS REQUIRED AT THIS TIME. However if the employee should return to work within twelve (12) months, you should begin withholding income tax from the employee’s wages based on the withholding rate stated in this letter.The employee will be given a period of time before the lock-in rate is effective to submit for approval to the IRS a new Form W-4 and a statement supporting the claims made on the Form W-4 that would decrease federal income tax withholding. The employee must send the Form W-4 and statement directly to the IRS office designated on the lock-in letter. You must withhold tax in accordance with the lock-in letter as of the date specified in the lock-in letter, unless otherwise notified by the IRS. You will be required to take this action no sooner than 45 calendar days after the date of the lock-in letter. Once a lock-in rate is effective, an employer can not decrease withholding unless approved by the IRS.

 


Q4: As an employer, after I lock in withholding on an employee based on a lock-in letter from the IRS, what do I do if I receive a revised Form W-4 from the employee?

A4: After the receipt of a lock-in letter, you must disregard any Form W-4 that decreases the amount of withholding. The employee must submit for approval to the IRS any new Form W-4 and a statement supporting the claims made on the Form W-4 that would decrease federal income tax withholding. The employee should send the Form W-4 and statement directly to the address on the lock-in letter. The IRS will notify you to withhold at a specific rate if the employee’s request is approved. However, if, at any time, the employee furnishes a Form W-4 that claims a number of withholding allowances less than the maximum number specified in the lock-in letter, the employer must increase withholding by withholding tax based on that Form W-4.

 


Q5: As an employer who has received a modification letter (letter 2808C) from the WHC program, do I wait for another 60 days to change the marital status and/or number of allowances per the modification letter?

A5: No, the modifications to the marital status and/or number of allowances become effective immediately upon receipt of the letter 2808C.

 


Q6: I have been directed to lock in an employee’s withholding. What happens if I do not lock in the employee’s withholding as directed?

A6: Those employers who do not follow the IRS lock-in instructions will be liable for paying the additional amount of tax that should have been withheld. 

 


Q7: Our employees can submit or change their Forms W-4 on line. How can I prevent them from changing their Forms W-4 after they have been locked-in by the IRS?

A7: You will need to block employees who have been locked-in from using an on line Form W-4 system to decrease their withholding.

 


Q8:  What should I do if an employee submits a valid Form W-4 that appears to be claiming an incorrect withholding amount?

A8: You should withhold federal income tax based on the allowances claimed on the Form W-4.  But, you should advise the employee that the IRS may review withholding to ensure it is adequate, and that the IRS may direct you, as the employer, to withhold income tax for the employee at a certain rate if the review indicates the employee’s withholding is inadequate. Once this occurs the employee will not be allowed to decrease their withholding unless approved by the IRS.

 


Q9: What do I do if an employee hands me a substitute Form W-4 developed by the employee?

A9:  Employers may refuse to accept a substitute form developed by an employee and the employee submitting such a form will be treated as failing to furnish a Form W-4.  In such case, you should inform the employee that you will not accept this form and offer the employee an opportunity to complete an official Form W-4 or a substitute Form W-4 developed by you. Until the employee furnishes a new Form W-4, the employer must withhold from the employee as from a single person claiming no allowances; if, however, a prior Form W-4 is in effect for the employee, the employer must continue to withhold based on the prior Form W-4.  As an employer, a substitute withholding exemption certificate developed by you can be used in lieu of the official Form W-4, if you provide all the tables, instructions, and worksheets contained in the Form W-4 in effect at that time to the employee.  

 


Q10: What do I do if an employee hands me an official IRS Form W-4 that is clearly altered?

A10: Any alteration of a Form W-4 (e.g. crossed out penalties of perjury statement above the signature) will cause the Form W-4 to be invalid. If an employer receives an invalid Form W-4, the employee will be treated as failing to furnish a Form W-4; the employer must inform the employee that the Form W-4 is invalid, and must request another Form W-4 from the employee. Until the employee furnishes a new Form W-4, the employer must withhold from the employee as from a single person claiming no allowances. If, however, a prior Form W-4 is in effect for the employee, the employer must continue to withhold based on the prior Form W-4.

 


Q11: I heard my employer no longer has to routinely submit Forms W-4 to the IRS.  How will this affect me as an employee?

A11: There is no change in the requirement that employees have adequate income tax withholding. The withholding calculator found on www.irs.gov is available to help employees determine the proper amount of federal income tax withholding. Another useful resource, Publication 505, “Tax Withholding and Estimated Taxes" is available on the IRS Web site or can be obtained by calling 1-800-TAX-FORM (829-3676).  Individuals who do not have sufficient income tax withholding are subject to penalties. The IRS will be making more effective use of information contained in its records along with information reported on Form W-2 wage statements to ensure that employees have enough federal income tax withheld. 

 


Q12: As an employee, what happens if the IRS determines that I do not have adequate withholding?

A12: The IRS may direct your employer to withhold federal income tax at an increased rate to ensure you have adequate withholding by issuing a lock-in letter. At that point, your employer must disregard any Form W-4 that decreases the amount of withholding. You will receive a copy of the lock-in letter. You will be given a period of time before the lock-in rate is put in effect to submit for approval to the IRS a new Form W-4 and a statement supporting the claims made on the Form W-4 that would decrease your federal income tax withholding. You should send the Form W-4 and statement directly to the address on the lock-in letter. Once a lock-in letter is issued, you will not be allowed to decrease your withholding unless approved by the IRS.

 


Q13: What if I don’t want to submit a Form W-4 to my employer?

A13: Your employer is required to withhold income tax from your wages as if you are single with zero allowances if you do not submit a Form W-4.

 

 


Q14: How can you be released from the Withholding Compliance Program?

A14: You must continue to file returns and pay your taxes due. If you timely meet all your filing and payment obligations for three consecutive years, you can request that we release you from the Withholding Compliance Program.

Page Last Reviewed or Updated: 20-Mar-2014

The 1040ez Online Filing Free

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