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1040ez Tax Form 2012

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1040ez Tax Form 2012

1040ez tax form 2012 1. 1040ez tax form 2012   Canceled Debts Table of Contents General RulesForm 1099-C Discounts and loan modifications Sales or other dispositions (such as foreclosures and repossessions) Abandonments Stockholder debt This chapter discusses the tax treatment of canceled debts. 1040ez tax form 2012 General Rules Generally, if a debt for which you are personally liable is forgiven or discharged for less than the full amount owed, the debt is considered canceled in whatever amount it remained unpaid. 1040ez tax form 2012 There are exceptions to this rule, discussed under Exceptions , later. 1040ez tax form 2012 Generally, you must include the canceled debt in your income. 1040ez tax form 2012 However, you may be able to exclude the canceled debt. 1040ez tax form 2012 See Exclusions , later. 1040ez tax form 2012 Example. 1040ez tax form 2012 John owed $1,000 to Mary. 1040ez tax form 2012 Mary agreed to accept and John paid $400 in satisfaction of the entire debt. 1040ez tax form 2012 John has canceled debt of $600. 1040ez tax form 2012 Example. 1040ez tax form 2012 Margaret owed $1,000 to Henry. 1040ez tax form 2012 Henry and Margaret agreed that Margaret would provide Henry with services (instead of money) in full satisfaction of the debt. 1040ez tax form 2012 Margaret does not have canceled debt. 1040ez tax form 2012 Instead, she has income from services. 1040ez tax form 2012 A debt includes any indebtedness: For which you are liable, or Subject to which you hold property. 1040ez tax form 2012 Debt for which you are personally liable is recourse debt. 1040ez tax form 2012 All other debt is nonrecourse debt. 1040ez tax form 2012 If you are not personally liable for the debt, you do not have ordinary income from the cancellation of debt unless you retain the collateral and either: The lender offers a discount for the early payment of the debt, or The lender agrees to a loan modification that results in the reduction of the principal balance of the debt. 1040ez tax form 2012 See Discounts and loan modifications , later. 1040ez tax form 2012 However, upon the disposition of the property securing a nonrecourse debt, the amount realized includes the entire unpaid amount of the debt, not just the FMV of the property. 1040ez tax form 2012 As a result, you may realize a gain or loss if the outstanding debt immediately before the disposition is more or less than your adjusted basis in the property. 1040ez tax form 2012 For more details on figuring your gain or loss, see chapter 2 of this publication or see Publication 544. 1040ez tax form 2012 There are several exceptions and exclusions that may result in part or all of a canceled debt being nontaxable. 1040ez tax form 2012 See Exceptions and Exclusions, later. 1040ez tax form 2012 You must report any taxable canceled debt as ordinary income on: Form 1040 or Form 1040NR, line 21, if the debt is a nonbusiness debt; Schedule C (Form 1040), line 6 (or Schedule C-EZ (Form 1040), line 1), if the debt is related to a nonfarm sole proprietorship; Schedule E (Form 1040), line 3, if the debt is related to nonfarm rental of real property; Form 4835, line 6, if the debt is related to a farm rental activity for which you use Form 4835 to report farm rental income based on crops or livestock produced by a tenant; or Schedule F (Form 1040), line 8, if the debt is farm debt and you are a farmer. 1040ez tax form 2012 Form 1099-C If you receive a Form 1099-C, that means an applicable entity has reported an identifiable event to the IRS regarding a debt you owe. 1040ez tax form 2012 The identifiable event may be an actual cancellation of the debt or it may be an event the applicable entity is required, solely for purposes of reporting to the IRS, to treat as a cancellation of debt. 1040ez tax form 2012 For information on the reasons an applicable entity files Form 1099-C, see Identifiable event codes, later. 1040ez tax form 2012 Unless you meet one of the exceptions or exclusions discussed later, this canceled debt is ordinary income and must be reported on the appropriate form discussed above. 1040ez tax form 2012 An applicable entity includes: A federal government agency, A financial institution, A credit union, and Any organization a significant trade or business of which is lending money. 1040ez tax form 2012 Identifiable event codes. 1040ez tax form 2012    Box 6 of Form 1099-C should indicate the reason the creditor filed this form. 1040ez tax form 2012 The codes shown in box 6 are explained below. 1040ez tax form 2012 Also see the chart after the explanation for a quick reference guide for the codes used in Box 6. 1040ez tax form 2012 Note. 1040ez tax form 2012 Codes A through G and I identify specific occurrences resulting from an actual discharge of indebtedness. 1040ez tax form 2012 However, Code H, Expiration of nonpayment testing period, does not necessarily identify an actual discharge of indebtedness. 1040ez tax form 2012 Code A — Bankruptcy. 1040ez tax form 2012 Code A is used to identify cancellation of debt as a result of a title 11 bankruptcy case. 1040ez tax form 2012 See Bankruptcy , later. 1040ez tax form 2012 Code B — Other judicial debt relief. 1040ez tax form 2012 Code B is used to identify cancellation of debt as a result of a receivership, foreclosure, or similar federal or state court proceeding other than bankruptcy. 1040ez tax form 2012 Code C — Statute of limitations or expiration of deficiency period. 1040ez tax form 2012 Code C is used to identify cancellation of debt either when the statute of limitations for collecting the debt expires or when the statutory period for filing a claim or beginning a deficiency judgment proceeding expires. 1040ez tax form 2012 In the case of the expiration of a statute of limitations, an identifiable event occurs only if and when your affirmative defense of the statute of limitations is upheld in a final judgment or decision in a judicial proceeding, and the period for appealing the judgment or decision has expired. 1040ez tax form 2012 Code D — Foreclosure election. 1040ez tax form 2012 Code D is used to identify cancellation of debt when the creditor elects foreclosure remedies that statutorily end or bar the creditor's right to pursue collection of the debt. 1040ez tax form 2012 This event applies to a mortgage lender or holder who is barred from pursuing debt collection after a power of sale in the mortgage or deed of trust is exercised. 1040ez tax form 2012 Code E — Debt relief from probate or similar proceeding. 1040ez tax form 2012 Code E is used to identify cancellation of debt as a result of a probate court or similar legal proceeding. 1040ez tax form 2012 Code F — By agreement. 1040ez tax form 2012 Code F is used to identify cancellation of debt as a result of an agreement between the creditor and the debtor to cancel the debt at less than full consideration. 1040ez tax form 2012 Code G — Decision or policy to discontinue collection. 1040ez tax form 2012 Code G is used to identify cancellation of debt as a result of a decision or a defined policy of the creditor to discontinue collection activity and cancel the debt. 1040ez tax form 2012 For purposes of this identifiable event, a defined policy includes both a written policy and the creditor's established business practice. 1040ez tax form 2012 Code H — Expiration of nonpayment testing period. 1040ez tax form 2012 Code H is used to indicate that the creditor has not received a payment on the debt during a testing period ending on December 31, 2013. 1040ez tax form 2012 The testing period is a 36-month period increased by the number of months the creditor was prevented from engaging in collection activity by a stay in bankruptcy or similar bar under state or local law. 1040ez tax form 2012 This identifiable event applies only for a creditor that is a financial institution or credit union (and certain of their subsidiaries), the Federal Deposit Insurance Corporation (FDIC), Resolution Trust Corporation (RTC), National Credit Union Administration (NCUA), and other Federal executive agencies. 1040ez tax form 2012 Expiration of the nonpayment testing period does not necessarily result from an actual discharge of indebtedness. 1040ez tax form 2012 Code I — Other actual discharge before identifiable event. 1040ez tax form 2012 Code I is used to identify an actual cancellation of debt that occurs before any of the identifiable events described in codes A through H. 1040ez tax form 2012 Form 1099-C Reference Guide for Box 6 Identifiable Event Codes A Bankruptcy B Other judicial debt relief C Statute of limitations or expiration of deficiency period D Foreclosure election E Debt relief from probate or similar proceeding F By agreement G Decision or policy to discontinue collection H Expiration of nonpayment testing period I Other actual discharge before identifiable event Even if you did not receive a Form 1099-C, you must report canceled debt as gross income on your tax return unless one of the exceptions or exclusions described later applies. 1040ez tax form 2012 Amount of canceled debt. 1040ez tax form 2012    The amount in box 2 of Form 1099-C may represent some or all of the debt that has been canceled or treated as canceled. 1040ez tax form 2012 The amount in box 2 will include principal and may include interest and other nonprincipal amounts (such as fees or penalties). 1040ez tax form 2012 Unless you meet one of the exceptions or exclusions discussed later, the amount of the debt that has been canceled is ordinary income and must be reported on the appropriate form as discussed earlier. 1040ez tax form 2012 Interest included in canceled debt. 1040ez tax form 2012    If any interest is included in the amount of canceled debt in box 2, it will be shown in box 3. 1040ez tax form 2012 Whether the interest portion of the canceled debt must be included in your income depends on whether the interest would be deductible if you paid it. 1040ez tax form 2012 See Deductible Debt under Exceptions, later. 1040ez tax form 2012 Persons who each receive a Form 1099-C showing the full amount of debt. 1040ez tax form 2012    If you and another person were jointly and severally liable for a canceled debt, each of you may get a Form 1099-C showing the entire amount of the canceled debt. 1040ez tax form 2012 However, you may not have to report that entire amount as income. 1040ez tax form 2012 The amount, if any, you must report depends on all the facts and circumstances, including: State law, The amount of debt proceeds each person received, How much of any interest deduction from the debt was claimed by each person, How much of the basis of any co-owned property bought with the debt proceeds was allocated to each co-owner, and Whether the canceled debt qualifies for any of the exceptions or exclusions described in this publication. 1040ez tax form 2012 See Example 3 under Insolvency, later. 1040ez tax form 2012 Discounts and loan modifications If a lender discounts (reduces) the principal balance of a loan because you pay it off early, or agrees to a loan modification (a “workout”) that includes a reduction in the principal balance of a loan, the amount of the discount or the amount of principal reduction is canceled debt. 1040ez tax form 2012 However, if the debt is nonrecourse and you did not retain the collateral, you do not have cancellation of the debt income. 1040ez tax form 2012 The amount of the canceled debt must be included in income unless one of the exceptions or exclusions described later applies. 1040ez tax form 2012 For more details, see Exceptions and Exclusions, later. 1040ez tax form 2012 Sales or other dispositions (such as foreclosures and repossessions) Recourse debt. 1040ez tax form 2012   If you owned property that was subject to a recourse debt in excess of the FMV of the property, the lender's foreclosure or repossession of the property is treated as a sale or disposition of the property by you and may result in your realization of gain or loss. 1040ez tax form 2012 The gain or loss on the disposition of the property is measured by the difference between the FMV of the property at the time of the disposition and your adjusted basis (usually your cost) in the property. 1040ez tax form 2012 The character of the gain or loss (such as ordinary or capital) is determined by the character of the property. 1040ez tax form 2012 If the lender forgives all or part of the amount of the debt in excess of the FMV of the property, the cancellation of the excess debt may result in ordinary income. 1040ez tax form 2012 The ordinary income from the cancellation of debt (the excess of the canceled debt over the FMV of the property) must be included in your gross income reported on your tax return unless one of the exceptions or exclusions described later applies. 1040ez tax form 2012 For more details, see Exceptions and Exclusions, later. 1040ez tax form 2012 Nonrecourse debt. 1040ez tax form 2012   If you owned property that was subject to a nonrecourse debt in excess of the FMV of the property, the lender's foreclosure on the property does not result in ordinary income from the cancellation of debt. 1040ez tax form 2012 The entire amount of the nonrecourse debt is treated as an amount realized on the disposition of the property. 1040ez tax form 2012 The gain or loss on the disposition of the property is measured by the difference between the total amount realized (the entire amount of the nonrecourse debt plus the amount of cash and the FMV of any property received) and your adjusted basis in the property. 1040ez tax form 2012 The character of the gain or loss is determined by the character of the property. 1040ez tax form 2012 More information. 1040ez tax form 2012    See Publications 523, 544, and 551, and chapter 2 of this publication for more details. 1040ez tax form 2012 Abandonments Recourse debt. 1040ez tax form 2012   If you abandon property that secures a debt for which you are personally liable (recourse debt) and the debt is canceled, you will realize ordinary income equal to the canceled debt. 1040ez tax form 2012 You must report this income on your tax return unless one of the exceptions or exclusions described later applies. 1040ez tax form 2012 For more details, see Exceptions and Exclusions, later. 1040ez tax form 2012 This income is separate from any amount realized from the abandonment of the property. 1040ez tax form 2012 For more details, see chapter 3. 1040ez tax form 2012 Nonrecourse debt. 1040ez tax form 2012   If you abandon property that secures a debt for which you are not personally liable (nonrecourse debt), you may realize gain or loss but will not have cancellation of indebtedness income. 1040ez tax form 2012 Stockholder debt If you are a stockholder in a corporation and the corporation cancels or forgives your debt to it, the canceled debt is a constructive distribution. 1040ez tax form 2012 For more information, see Publication 542, Corporations. 1040ez tax form 2012 Prev  Up  Next   Home   More Online Publications
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The 1040ez Tax Form 2012

1040ez tax form 2012 27. 1040ez tax form 2012   Tax Benefits for Work-Related Education Table of Contents What's New Introduction Useful Items - You may want to see: Qualifying Work-Related EducationEducation Required by Employer or by Law Education To Maintain or Improve Skills Education To Meet Minimum Requirements Education That Qualifies You for a New Trade or Business What Expenses Can Be DeductedUnclaimed reimbursement. 1040ez tax form 2012 Transportation Expenses Travel Expenses No Double Benefit Allowed Reimbursements Deducting Business ExpensesSelf-Employed Persons Employees Performing Artists and Fee-Basis Officials Impairment-Related Work Expenses Recordkeeping What's New Standard mileage rate. 1040ez tax form 2012  Generally, if you claim a business deduction for work-related education and you drive your car to and from school, the amount you can deduct for miles driven from January 1, 2013, through December 31, 2013, is 56½ cents per mile. 1040ez tax form 2012 For more information, see Transportation Expenses under What Expenses Can Be Deducted. 1040ez tax form 2012 Introduction This chapter discusses work-related education expenses that you may be able to deduct as business expenses. 1040ez tax form 2012 To claim such a deduction, you must: Itemize your deductions on Schedule A (Form 1040) if you are an employee, File Schedule C (Form 1040), Schedule C-EZ (Form 1040), or Schedule F (Form 1040) if you are self-employed, and Have expenses for education that meet the requirements discussed under Qualifying Work-Related Education . 1040ez tax form 2012 If you are an employee and can itemize your deductions, you may be able to claim a deduction for the expenses you pay for your work-related education. 1040ez tax form 2012 Your deduction will be the amount by which your qualifying work-related education expenses plus other job and certain miscellaneous expenses (except for impairment-related work expenses of disabled individuals) is greater than 2% of your adjusted gross income. 1040ez tax form 2012 See chapter 28. 1040ez tax form 2012 If you are self-employed, you deduct your expenses for qualifying work-related education directly from your self-employment income. 1040ez tax form 2012 Your work-related education expenses may also qualify you for other tax benefits, such as the American opportunity and lifetime learning credits (see chapter 35). 1040ez tax form 2012 You may qualify for these other benefits even if you do not meet the requirements listed earlier. 1040ez tax form 2012 Also, keep in mind that your work-related education expenses may qualify you to claim more than one tax benefit. 1040ez tax form 2012 Generally, you may claim any number of benefits as long as you use different expenses to figure each one. 1040ez tax form 2012 When you figure your taxes, you may want to compare these tax benefits so you can choose the method(s) that give you the lowest tax liability. 1040ez tax form 2012 Useful Items - You may want to see: Publication 463 Travel, Entertainment, Gift, and Car Expenses 970 Tax Benefits for Education Form (and Instructions) 2106 Employee Business Expenses 2106-EZ Unreimbursed Employee Business Expenses Schedule A (Form 1040) Itemized Deductions Qualifying Work-Related Education You can deduct the costs of qualifying work-related education as business expenses. 1040ez tax form 2012 This is education that meets at least one of the following two tests. 1040ez tax form 2012 The education is required by your employer or the law to keep your present salary, status, or job. 1040ez tax form 2012 The required education must serve a bona fide business purpose of your employer. 1040ez tax form 2012 The education maintains or improves skills needed in your present work. 1040ez tax form 2012 However, even if the education meets one or both of the above tests, it is not qualifying work-related education if it: Is needed to meet the minimum educational requirements of your present trade or business, or Is part of a program of study that will qualify you for a new trade or business. 1040ez tax form 2012 You can deduct the costs of qualifying work-related education as a business expense even if the education could lead to a degree. 1040ez tax form 2012 Use Figure 27-A, later, as a quick check to see if your education qualifies. 1040ez tax form 2012 Education Required by Employer or by Law Once you have met the minimum educational requirements for your job, your employer or the law may require you to get more education. 1040ez tax form 2012 This additional education is qualifying work-related education if all three of the following requirements are met. 1040ez tax form 2012 It is required for you to keep your present salary, status, or job, The requirement serves a bona fide business purpose of your employer, and The education is not part of a program that will qualify you for a new trade or business. 1040ez tax form 2012 When you get more education than your employer or the law requires, the additional education can be qualifying work-related education only if it maintains or improves skills required in your present work. 1040ez tax form 2012 See Education To Maintain or Improve Skills , later. 1040ez tax form 2012 Example. 1040ez tax form 2012 You are a teacher who has satisfied the minimum requirements for teaching. 1040ez tax form 2012 Your employer requires you to take an additional college course each year to keep your teaching job. 1040ez tax form 2012 If the courses will not qualify you for a new trade or business, they are qualifying work-related education even if you eventually receive a master's degree and an increase in salary because of this extra education. 1040ez tax form 2012 Education To Maintain or Improve Skills If your education is not required by your employer or the law, it can be qualifying work-related education only if it maintains or improves skills needed in your present work. 1040ez tax form 2012 This could include refresher courses, courses on current developments, and academic or vocational courses. 1040ez tax form 2012 Example. 1040ez tax form 2012 You repair televisions, radios, and stereo systems for XYZ Store. 1040ez tax form 2012 To keep up with the latest changes, you take special courses in radio and stereo service. 1040ez tax form 2012 These courses maintain and improve skills required in your work. 1040ez tax form 2012 Maintaining skills vs. 1040ez tax form 2012 qualifying for new job. 1040ez tax form 2012   Education to maintain or improve skills needed in your present work is not qualifying education if it will also qualify you for a new trade or business. 1040ez tax form 2012 Education during temporary absence. 1040ez tax form 2012   If you stop working for a year or less in order to get education to maintain or improve skills needed in your present work and then return to the same general type of work, your absence is considered temporary. 1040ez tax form 2012 Education that you get during a temporary absence is qualifying work-related education if it maintains or improves skills needed in your present work. 1040ez tax form 2012 Example. 1040ez tax form 2012 You quit your biology research job to become a full-time biology graduate student for one year. 1040ez tax form 2012 If you return to work in biology research after completing the courses, the education is related to your present work even if you do not go back to work with the same employer. 1040ez tax form 2012 Education during indefinite absence. 1040ez tax form 2012   If you stop work for more than a year, your absence from your job is considered indefinite. 1040ez tax form 2012 Education during an indefinite absence, even if it maintains or improves skills needed in the work from which you are absent, is considered to qualify you for a new trade or business. 1040ez tax form 2012 Therefore, it is not qualifying work-related education. 1040ez tax form 2012 Education To Meet Minimum Requirements Education you need to meet the minimum educational requirements for your present trade or business is not qualifying work-related education. 1040ez tax form 2012 The minimum educational requirements are determined by: Laws and regulations, Standards of your profession, trade, or business, and Your employer. 1040ez tax form 2012 Once you have met the minimum educational requirements that were in effect when you were hired, you do not have to meet any new minimum educational requirements. 1040ez tax form 2012 This means that if the minimum requirements change after you were hired, any education you need to meet the new requirements can be qualifying education. 1040ez tax form 2012 You have not necessarily met the minimum educational requirements of your trade or business simply because you are already doing the work. 1040ez tax form 2012 Example 1. 1040ez tax form 2012 You are a full-time engineering student. 1040ez tax form 2012 Although you have not received your degree or certification, you work part-time as an engineer for a firm that will employ you as a full-time engineer after you finish college. 1040ez tax form 2012 Although your college engineering courses improve your skills in your present job, they are also needed to meet the minimum job requirements for a full-time engineer. 1040ez tax form 2012 The education is not qualifying work-related education. 1040ez tax form 2012 Example 2. 1040ez tax form 2012 You are an accountant and you have met the minimum educational requirements of your employer. 1040ez tax form 2012 Your employer later changes the minimum educational requirements and requires you to take college courses to keep your job. 1040ez tax form 2012 These additional courses can be qualifying work-related education because you have already satisfied the minimum requirements that were in effect when you were hired. 1040ez tax form 2012 Requirements for Teachers States or school districts usually set the minimum educational requirements for teachers. 1040ez tax form 2012 The requirement is the college degree or the minimum number of college hours usually required of a person hired for that position. 1040ez tax form 2012 If there are no requirements, you will have met the minimum educational requirements when you become a faculty member. 1040ez tax form 2012 The determination of whether you are a faculty member of an educational institution must be made on the basis of the particular practices of the institution. 1040ez tax form 2012 You generally will be considered a faculty member when one or more of the following occurs. 1040ez tax form 2012 You have tenure. 1040ez tax form 2012 Your years of service count toward obtaining tenure. 1040ez tax form 2012 You have a vote in faculty decisions. 1040ez tax form 2012 Your school makes contributions for you to a retirement plan other than social security or a similar program. 1040ez tax form 2012 Example 1. 1040ez tax form 2012 The law in your state requires beginning secondary school teachers to have a bachelor's degree, including 10 professional education courses. 1040ez tax form 2012 In addition, to keep the job a teacher must complete a fifth year of training within 10 years from the date of hire. 1040ez tax form 2012 If the employing school certifies to the state Department of Education that qualified teachers cannot be found, the school can hire persons with only 3 years of college. 1040ez tax form 2012 However, to keep their jobs, these teachers must get a bachelor's degree and the required professional education courses within 3 years. 1040ez tax form 2012 Under these facts, the bachelor's degree, whether or not it includes the 10 professional education courses, is considered the minimum educational requirement for qualification as a teacher in your state. 1040ez tax form 2012 If you have all the required education except the fifth year, you have met the minimum educational requirements. 1040ez tax form 2012 The fifth year of training is qualifying work-related education unless it is part of a program of study that will qualify you for a new trade or business. 1040ez tax form 2012 Figure 27-A Does Your Work-Related Education Qualify? Please click here for the text description of the image. 1040ez tax form 2012 Figure 27-A. 1040ez tax form 2012 Does Your Work-Related Education Qualify?" Example 2. 1040ez tax form 2012 Assume the same facts as in Example 1 except that you have a bachelor's degree and only six professional education courses. 1040ez tax form 2012 The additional four education courses can be qualifying work-related education. 1040ez tax form 2012 Although you do not have all the required courses, you have already met the minimum educational requirements. 1040ez tax form 2012 Example 3. 1040ez tax form 2012 Assume the same facts as in Example 1 except that you are hired with only 3 years of college. 1040ez tax form 2012 The courses you take that lead to a bachelor's degree (including those in education) are not qualifying work-related education. 1040ez tax form 2012 They are needed to meet the minimum educational requirements for employment as a teacher. 1040ez tax form 2012 Example 4. 1040ez tax form 2012 You have a bachelor's degree and you work as a temporary instructor at a university. 1040ez tax form 2012 At the same time, you take graduate courses toward an advanced degree. 1040ez tax form 2012 The rules of the university state that you can become a faculty member only if you get a graduate degree. 1040ez tax form 2012 Also, you can keep your job as an instructor only as long as you show satisfactory progress toward getting this degree. 1040ez tax form 2012 You have not met the minimum educational requirements to qualify you as a faculty member. 1040ez tax form 2012 The graduate courses are not qualifying work-related education. 1040ez tax form 2012 Certification in a new state. 1040ez tax form 2012   Once you have met the minimum educational requirements for teachers for your state, you are considered to have met the minimum educational requirements in all states. 1040ez tax form 2012 This is true even if you must get additional education to be certified in another state. 1040ez tax form 2012 Any additional education you need is qualifying work-related education. 1040ez tax form 2012 You have already met the minimum requirements for teaching. 1040ez tax form 2012 Teaching in another state is not a new trade or business. 1040ez tax form 2012 Example. 1040ez tax form 2012 You hold a permanent teaching certificate in State A and are employed as a teacher in that state for several years. 1040ez tax form 2012 You move to State B and are promptly hired as a teacher. 1040ez tax form 2012 You are required, however, to complete certain prescribed courses to get a permanent teaching certificate in State B. 1040ez tax form 2012 These additional courses are qualifying work-related education because the teaching position in State B involves the same general kind of work for which you were qualified in State A. 1040ez tax form 2012 Education That Qualifies You for a New Trade or Business Education that is part of a program of study that will qualify you for a new trade or business is not qualifying work-related education. 1040ez tax form 2012 This is true even if you do not plan to enter that trade or business. 1040ez tax form 2012 If you are an employee, a change of duties that involves the same general kind of work is not a new trade or business. 1040ez tax form 2012 Example 1. 1040ez tax form 2012 You are an accountant. 1040ez tax form 2012 Your employer requires you to get a law degree at your own expense. 1040ez tax form 2012 You register at a law school for the regular curriculum that leads to a law degree. 1040ez tax form 2012 Even if you do not intend to become a lawyer, the education is not qualifying because the law degree will qualify you for a new trade or business. 1040ez tax form 2012 Example 2. 1040ez tax form 2012 You are a general practitioner of medicine. 1040ez tax form 2012 You take a 2-week course to review developments in several specialized fields of medicine. 1040ez tax form 2012 The course does not qualify you for a new profession. 1040ez tax form 2012 It is qualifying work-related education because it maintains or improves skills required in your present profession. 1040ez tax form 2012 Example 3. 1040ez tax form 2012 While working in the private practice of psychiatry, you enter a program to study and train at an accredited psychoanalytic institute. 1040ez tax form 2012 The program will lead to qualifying you to practice psychoanalysis. 1040ez tax form 2012 The psychoanalytic training does not qualify you for a new profession. 1040ez tax form 2012 It is qualifying work-related education because it maintains or improves skills required in your present profession. 1040ez tax form 2012 Bar or CPA Review Course Review courses to prepare for the bar examination or the certified public accountant (CPA) examination are not qualifying work-related education. 1040ez tax form 2012 They are part of a program of study that can qualify you for a new profession. 1040ez tax form 2012 Teaching and Related Duties All teaching and related duties are considered the same general kind of work. 1040ez tax form 2012 A change in duties in any of the following ways is not considered a change to a new business. 1040ez tax form 2012 Elementary school teacher to secondary school teacher. 1040ez tax form 2012 Teacher of one subject, such as biology, to teacher of another subject, such as art. 1040ez tax form 2012 Classroom teacher to guidance counselor. 1040ez tax form 2012 Classroom teacher to school administrator. 1040ez tax form 2012 What Expenses Can Be Deducted If your education meets the requirements described earlier under Qualifying Work-Related Education , you can generally deduct your education expenses as business expenses. 1040ez tax form 2012 If you are not self-employed, you can deduct business expenses only if you itemize your deductions. 1040ez tax form 2012 You cannot deduct expenses related to tax-exempt and excluded income. 1040ez tax form 2012 Deductible expenses. 1040ez tax form 2012   The following education expenses can be deducted. 1040ez tax form 2012 Tuition, books, supplies, lab fees, and similar items. 1040ez tax form 2012 Certain transportation and travel costs. 1040ez tax form 2012 Other education expenses, such as costs of research and typing when writing a paper as part of an educational program. 1040ez tax form 2012 Nondeductible expenses. 1040ez tax form 2012   You cannot deduct personal or capital expenses. 1040ez tax form 2012 For example, you cannot deduct the dollar value of vacation time or annual leave you take to attend classes. 1040ez tax form 2012 This amount is a personal expense. 1040ez tax form 2012 Unclaimed reimbursement. 1040ez tax form 2012   If you do not claim reimbursement that you are entitled to receive from your employer, you cannot deduct the expenses that apply to that unclaimed reimbursement. 1040ez tax form 2012 Example. 1040ez tax form 2012 Your employer agrees to pay your education expenses if you file a voucher showing your expenses. 1040ez tax form 2012 You do not file a voucher, and you do not get reimbursed. 1040ez tax form 2012 Because you did not file a voucher, you cannot deduct the expenses on your tax return. 1040ez tax form 2012 Transportation Expenses If your education qualifies, you can deduct local transportation costs of going directly from work to school. 1040ez tax form 2012 If you are regularly employed and go to school on a temporary basis, you can also deduct the costs of returning from school to home. 1040ez tax form 2012 Temporary basis. 1040ez tax form 2012   You go to school on a temporary basis if either of the following situations applies to you. 1040ez tax form 2012 Your attendance at school is realistically expected to last 1 year or less and does indeed last for 1 year or less. 1040ez tax form 2012 Initially, your attendance at school is realistically expected to last 1 year or less, but at a later date your attendance is reasonably expected to last more than 1 year. 1040ez tax form 2012 Your attendance is temporary up to the date you determine it will last more than 1 year. 1040ez tax form 2012 Note. 1040ez tax form 2012 If you are in either situation (1) or (2), your attendance is not temporary if facts and circumstances indicate otherwise. 1040ez tax form 2012 Attendance not on a temporary basis. 1040ez tax form 2012   You do not go to school on a temporary basis if either of the following situations apply to you. 1040ez tax form 2012 Your attendance at school is realistically expected to last more than 1 year. 1040ez tax form 2012 It does not matter how long you actually attend. 1040ez tax form 2012 Initially, your attendance at school is realistically expected to last 1 year or less, but at a later date your attendance is reasonably expected to last more than 1 year. 1040ez tax form 2012 Your attendance is not temporary after the date you determine it will last more than 1 year. 1040ez tax form 2012 Deductible Transportation Expenses If you are regularly employed and go directly from home to school on a temporary basis, you can deduct the round-trip costs of transportation between your home and school. 1040ez tax form 2012 This is true regardless of the location of the school, the distance traveled, or whether you attend school on nonwork days. 1040ez tax form 2012 Transportation expenses include the actual costs of bus, subway, cab, or other fares, as well as the costs of using your car. 1040ez tax form 2012 Transportation expenses do not include amounts spent for travel, meals, or lodging while you are away from home overnight. 1040ez tax form 2012 Example 1. 1040ez tax form 2012 You regularly work in a nearby town, and go directly from work to home. 1040ez tax form 2012 You also attend school every work night for 3 months to take a course that improves your job skills. 1040ez tax form 2012 Since you are attending school on a temporary basis, you can deduct your daily round-trip transportation expenses in going between home and school. 1040ez tax form 2012 This is true regardless of the distance traveled. 1040ez tax form 2012 Example 2. 1040ez tax form 2012 Assume the same facts as in Example 1 except that on certain nights you go directly from work to school and then home. 1040ez tax form 2012 You can deduct your transportation expenses from your regular work site to school and then home. 1040ez tax form 2012 Example 3. 1040ez tax form 2012 Assume the same facts as in Example 1 except that you attend the school for 9 months on Saturdays, nonwork days. 1040ez tax form 2012 Since you are attending school on a temporary basis, you can deduct your round-trip transportation expenses in going between home and school. 1040ez tax form 2012 Example 4. 1040ez tax form 2012 Assume the same facts as in Example 1 except that you attend classes twice a week for 15 months. 1040ez tax form 2012 Since your attendance in school is not considered temporary, you cannot deduct your transportation expenses in going between home and school. 1040ez tax form 2012 If you go directly from work to school, you can deduct the one-way transportation expenses of going from work to school. 1040ez tax form 2012 If you go from work to home to school and return home, your transportation expenses cannot be more than if you had gone directly from work to school. 1040ez tax form 2012 Using your car. 1040ez tax form 2012   If you use your car (whether you own or lease it) for transportation to school, you can deduct your actual expenses or use the standard mileage rate to figure the amount you can deduct. 1040ez tax form 2012 The standard mileage rate for miles driven from January 1, 2013, through December 31, 2013 is 56½ cents per mile. 1040ez tax form 2012 Whichever method you use, you can also deduct parking fees and tolls. 1040ez tax form 2012 See chapter 26 for information on deducting your actual expenses of using a car. 1040ez tax form 2012 Travel Expenses You can deduct expenses for travel, meals (see 50% limit on meals , later), and lodging if you travel overnight mainly to obtain qualifying work-related education. 1040ez tax form 2012 Travel expenses for qualifying work-related education are treated the same as travel expenses for other employee business purposes. 1040ez tax form 2012 For more information, see chapter 26. 1040ez tax form 2012 You cannot deduct expenses for personal activities, such as sightseeing, visiting, or entertaining. 1040ez tax form 2012 Mainly personal travel. 1040ez tax form 2012   If your travel away from home is mainly personal, you cannot deduct all of your expenses for travel, meals, and lodging. 1040ez tax form 2012 You can deduct only your expenses for lodging and 50% of your expenses for meals during the time you attend the qualified educational activities. 1040ez tax form 2012   Whether a trip's purpose is mainly personal or educational depends upon the facts and circumstances. 1040ez tax form 2012 An important factor is the comparison of time spent on personal activities with time spent on educational activities. 1040ez tax form 2012 If you spend more time on personal activities, the trip is considered mainly educational only if you can show a substantial nonpersonal reason for traveling to a particular location. 1040ez tax form 2012 Example 1. 1040ez tax form 2012 John works in Newark, New Jersey. 1040ez tax form 2012 He traveled to Chicago to take a deductible 1-week course at the request of his employer. 1040ez tax form 2012 His main reason for going to Chicago was to take the course. 1040ez tax form 2012 While there, he took a sight-seeing trip, entertained some friends, and took a side trip to Pleasantville for a day. 1040ez tax form 2012 Since the trip was mainly for business, John can deduct his round-trip airfare to Chicago. 1040ez tax form 2012 He cannot deduct his transportation expenses of going to Pleasantville. 1040ez tax form 2012 He can deduct only the meals (subject to the 50% limit) and lodging connected with his educational activities. 1040ez tax form 2012 Example 2. 1040ez tax form 2012 Sue works in Boston. 1040ez tax form 2012 She went to a university in Michigan to take a course for work. 1040ez tax form 2012 The course is qualifying work-related education. 1040ez tax form 2012 She took one course, which is one-fourth of a full course load of study. 1040ez tax form 2012 She spent the rest of the time on personal activities. 1040ez tax form 2012 Her reasons for taking the course in Michigan were all personal. 1040ez tax form 2012 Sue's trip is mainly personal because three-fourths of her time is considered personal time. 1040ez tax form 2012 She cannot deduct the cost of her round-trip train ticket to Michigan. 1040ez tax form 2012 She can deduct one-fourth of the meals (subject to the 50% limit) and lodging costs for the time she attended the university. 1040ez tax form 2012 Example 3. 1040ez tax form 2012 Dave works in Nashville and recently traveled to California to take a 2-week seminar. 1040ez tax form 2012 The seminar is qualifying work-related education. 1040ez tax form 2012 While there, he spent an extra 8 weeks on personal activities. 1040ez tax form 2012 The facts, including the extra 8-week stay, show that his main purpose was to take a vacation. 1040ez tax form 2012 Dave cannot deduct his round-trip airfare or his meals and lodging for the 8 weeks. 1040ez tax form 2012 He can deduct only his expenses for meals (subject to the 50% limit) and lodging for the 2 weeks he attended the seminar. 1040ez tax form 2012 Cruises and conventions. 1040ez tax form 2012   Certain cruises and conventions offer seminars or courses as part of their itinerary. 1040ez tax form 2012 Even if the seminars or courses are work-related, your deduction for travel may be limited. 1040ez tax form 2012 This applies to: Travel by ocean liner, cruise ship, or other form of luxury water transportation, and Conventions outside the North American area. 1040ez tax form 2012   For a discussion of the limits on travel expense deductions that apply to cruises and conventions, see Luxury Water Travel and Conventions in chapter 1 of Publication 463. 1040ez tax form 2012 50% limit on meals. 1040ez tax form 2012   You can deduct only 50% of the cost of your meals while traveling away from home to obtain qualifying work-related education. 1040ez tax form 2012 You cannot have been reimbursed for the meals. 1040ez tax form 2012   Employees must use Form 2106 or Form 2106-EZ to apply the 50% limit. 1040ez tax form 2012 Travel as Education You cannot deduct the cost of travel as a form of education even if it is directly related to your duties in your work or business. 1040ez tax form 2012 Example. 1040ez tax form 2012 You are a French language teacher. 1040ez tax form 2012 While on sabbatical leave granted for travel, you traveled through France to improve your knowledge of the French language. 1040ez tax form 2012 You chose your itinerary and most of your activities to improve your French language skills. 1040ez tax form 2012 You cannot deduct your travel expenses as education expenses. 1040ez tax form 2012 This is true even if you spent most of your time learning French by visiting French schools and families, attending movies or plays, and engaging in similar activities. 1040ez tax form 2012 No Double Benefit Allowed You cannot do either of the following. 1040ez tax form 2012 Deduct work-related education expenses as business expenses if you benefit from these expenses under any other provision of the law, for example, the tuition and fees deduction (see chapter 35). 1040ez tax form 2012 Deduct work-related education expenses paid with tax-free scholarship, grant, or employer-provided educational assistance. 1040ez tax form 2012 See Adjustments to Qualifying Work-Related Education Expenses , next. 1040ez tax form 2012 Adjustments to Qualifying Work-Related Education Expenses If you pay qualifying work-related education expenses with certain tax-free funds, you cannot claim a deduction for those amounts. 1040ez tax form 2012 You must reduce the qualifying expenses by the amount of such expenses allocable to the tax-free educational assistance. 1040ez tax form 2012 For more information, see chapter 12 of Publication 970. 1040ez tax form 2012 Tax-free educational assistance includes: The tax-free part of scholarships and fellowships (see chapter 1 of Publication 970), The tax-free part of Pell grants (see chapter 1 of Publication 970), The tax-free part of employer-provided educational assistance (see chapter 11 of Publication 970), Veterans' educational assistance (see chapter 1 of Publication 970), and Any other nontaxable (tax-free) payments (other than gifts or inheritances) received for education assistance. 1040ez tax form 2012 Amounts that do not reduce qualifying work-related education expenses. 1040ez tax form 2012   Do not reduce the qualifying work-related education expenses by amounts paid with funds the student receives as: Payment for services, such as wages, A loan, A gift, An inheritance, or A withdrawal from the student's personal savings. 1040ez tax form 2012   Also, do not reduce the qualifying work-related education expenses by any scholarship or fellowship reported as income on the student's return or any scholarship which, by its terms, cannot be applied to qualifying work-related education expenses. 1040ez tax form 2012 Reimbursements How you treat reimbursements depends on the arrangement you have with your employer. 1040ez tax form 2012 There are two basic types of reimbursement arrangements—accountable plans and nonaccountable plans. 1040ez tax form 2012 You can tell the type of plan you are reimbursed under by the way the reimbursement is reported on your Form W-2. 1040ez tax form 2012 For information on how to treat reimbursements under both accountable and nonaccountable plans, see Reimbursements in chapter 26. 1040ez tax form 2012 Deducting Business Expenses Self-employed persons and employees report business expenses differently. 1040ez tax form 2012 The following information explains what forms you must use to deduct the cost of your qualifying work-related education as a business expense. 1040ez tax form 2012 Self-Employed Persons If you are self-employed, report the cost of your qualifying work-related education on the appropriate form used to report your business income and expenses (generally Schedule C, C-EZ, or F). 1040ez tax form 2012 If your educational expenses include expenses for a car or truck, travel, or meals, report those expenses the same way you report other business expenses for those items. 1040ez tax form 2012 See the instructions for the form you file for information on how to complete it. 1040ez tax form 2012 Employees If you are an employee, you can deduct the cost of qualifying work-related education only if you: Did not receive (and were not entitled to receive) any reimbursement from your employer, Were reimbursed under a nonaccountable plan (amount is included in box 1 of Form W-2), or Received reimbursement under an accountable plan, but the amount received was less than your expenses for which you claimed reimbursement. 1040ez tax form 2012 If either (1) or (2) applies, you can deduct the total qualifying cost. 1040ez tax form 2012 If (3) applies, you can deduct only the qualifying costs that were more than your reimbursement. 1040ez tax form 2012 In order to deduct the cost of your qualifying work-related education as a business expense, include the amount with your deduction for any other employee business expenses on Schedule A (Form 1040), line 21. 1040ez tax form 2012 (Special rules for expenses of certain performing artists and fee-basis officials and for impairment-related work expenses are explained later. 1040ez tax form 2012 ) This deduction (except for impairment-related work expenses of disabled individuals) is subject to the 2%-of-adjusted-gross-income limit that applies to most miscellaneous itemized deductions. 1040ez tax form 2012 See chapter 28. 1040ez tax form 2012 Form 2106 or 2106-EZ. 1040ez tax form 2012   To figure your deduction for employee business expenses, including qualifying work-related education, you generally must complete Form 2106 or Form 2106-EZ. 1040ez tax form 2012 Form not required. 1040ez tax form 2012   Do not complete either Form 2106 or Form 2106-EZ if: If amounts included in box 1 of your Form W-2, are not considered reimbursements, and You are not claiming travel, transportation, meal, or entertainment expenses. 1040ez tax form 2012   If you meet both of these requirements, enter the expenses directly on Schedule A (Form 1040), line 21. 1040ez tax form 2012 (Special rules for expenses of certain performing artists and fee-basis officials and for impairment-related work expenses are explained later. 1040ez tax form 2012 ) Using Form 2106-EZ. 1040ez tax form 2012   This form is shorter and easier to use than Form 2106. 1040ez tax form 2012 Generally, you can use this form if: All reimbursements, if any, are included in box 1 of your Form W-2, and You are using the standard mileage rate if you are claiming vehicle expenses. 1040ez tax form 2012   If you do not meet both of these requirements, use Form 2106. 1040ez tax form 2012 Performing Artists and Fee-Basis Officials If you are a qualified performing artist, or a state (or local) government official who is paid in whole or in part on a fee basis, you can deduct the cost of your qualifying work-related education as an adjustment to gross income rather than as an itemized deduction. 1040ez tax form 2012 Include the cost of your qualifying work-related education with any other employee business expenses on Form 1040, line 24. 1040ez tax form 2012 You do not have to itemize your deductions on Schedule A (Form 1040), and, therefore, the deduction is not subject to the 2%-of-adjusted-gross-income limit. 1040ez tax form 2012 You must complete Form 2106 or 2106-EZ to figure your deduction, even if you meet the requirements described earlier under Form not required . 1040ez tax form 2012 For more information on qualified performing artists, see chapter 6 of Publication 463. 1040ez tax form 2012 Impairment-Related Work Expenses If you are disabled and have impairment-related work expenses that are necessary for you to be able to get qualifying work-related education, you can deduct these expenses on Schedule A (Form 1040), line 28. 1040ez tax form 2012 They are not subject to the 2%-of-adjusted-gross-income limit. 1040ez tax form 2012 To deduct these expenses, you must complete Form 2106 or 2106-EZ even if you meet the requirements described earlier under Form not required . 1040ez tax form 2012 For more information on impairment-related work expenses, see chapter 6 of Publication 463. 1040ez tax form 2012 Recordkeeping You must keep records as proof of any deduction claimed on your tax return. 1040ez tax form 2012 Generally, you should keep your records for 3 years from the date of filing the tax return and claiming the deduction. 1040ez tax form 2012 For specific information about keeping records of business expenses, see Recordkeeping in chapter 26. 1040ez tax form 2012 Prev  Up  Next   Home   More Online Publications