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1040x Amended Return Instructions

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1040x Amended Return Instructions

1040x amended return instructions 4. 1040x amended return instructions   Detailed Examples Table of Contents These examples use actual forms to help you prepare your income tax return. 1040x amended return instructions However, the information shown on the filled-in forms is not from any actual person or scenario. 1040x amended return instructions Example 1—Mortgage loan modification. 1040x amended return instructions    In 2007, Nancy Oak bought a main home for $435,000. 1040x amended return instructions Nancy took out a $420,000 mortgage loan to buy the home and made a down payment of $15,000. 1040x amended return instructions The loan was secured by the home. 1040x amended return instructions The mortgage loan was a recourse debt, meaning that Nancy was personally liable for the debt. 1040x amended return instructions In 2008, Nancy took out a second mortgage loan (also a recourse debt) in the amount of $30,000 that was used to substantially improve her kitchen. 1040x amended return instructions    In 2011, when the outstanding principal of the first and second mortgage loans was $440,000, Nancy refinanced the two recourse loans into one recourse loan in the amount of $475,000. 1040x amended return instructions The FMV of Nancy's home at the time of the refinancing was $500,000. 1040x amended return instructions Nancy used the additional $35,000 debt ($475,000 new mortgage loan minus $440,000 outstanding principal of Nancy's first and second mortgage loans immediately before the refinancing) to pay off personal credit cards and to pay college tuition for her son. 1040x amended return instructions After the refinancing, Nancy has qualified principal residence indebtedness in the amount of $440,000 because the refinanced debt is qualified principal residence indebtedness only to the extent the amount of debt is not more than the old mortgage principal just before the refinancing. 1040x amended return instructions   In 2013, Nancy was unable to make her mortgage loan payments. 1040x amended return instructions On August 31, 2013, when the outstanding balance of her refinanced mortgage loan was still $475,000 and the FMV of the property was $425,000, Nancy's bank agreed to a loan modification (a “workout”) that resulted in a $40,000 reduction in the principal balance of her loan. 1040x amended return instructions Nancy was neither insolvent nor in bankruptcy at the time of the loan modification. 1040x amended return instructions   Nancy received a 2013 Form 1099-C from her bank in January 2014 showing canceled debt of $40,000 in box 2. 1040x amended return instructions Identifiable event code "F" appears in box 6. 1040x amended return instructions This box shows the reason the creditor has filed Form 1099-C. 1040x amended return instructions To determine if she must include the canceled debt in her income, Nancy must determine whether she meets any of the exceptions or exclusions that apply to canceled debts. 1040x amended return instructions Nancy determines that the only exception or exclusion that applies to her is the qualified principal residence indebtedness exclusion. 1040x amended return instructions   Next, Nancy determines the amount, if any, of the $40,000 of canceled debt that was qualified principal residence indebtedness. 1040x amended return instructions Although Nancy has $440,000 of qualified principal residence indebtedness, part of her loan ($35,000) was not qualified principal residence indebtedness because it was used to pay off personal credit cards and college tuition for her son. 1040x amended return instructions Applying the ordering rule, the qualified principal residence indebtedness exclusion applies only to the extent the amount canceled is more than the amount of the debt (immediately before the cancellation) that is not qualified principal residence indebtedness. 1040x amended return instructions Thus, Nancy can exclude only $5,000 of the canceled debt as qualified principal residence indebtedness ($40,000 amount canceled minus $35,000 nonqualified debt). 1040x amended return instructions   Because Nancy does not meet any other exception or exclusion, she checks only the box on line 1e of Form 982 and enters $5,000 on line 2. 1040x amended return instructions Nancy must also enter $5,000 on line 10b and reduce the basis of her main home by the $5,000 she excluded from income, bringing the adjusted basis in her home to $460,000 ($435,000 purchase price plus $30,000 substantial improvement minus $5,000). 1040x amended return instructions Nancy must also include the $35,000 nonqualified debt portion in income on Form 1040, line 21. 1040x amended return instructions You can see Nancy's Form 1099-C and a portion of her Form 1040 below. 1040x amended return instructions Nancy's 2013 Form 1099-C, Cancellation of Debt This image is too large to be displayed in the current screen. 1040x amended return instructions Please click the link to view the image. 1040x amended return instructions Form 1099-C, Cancellation of Debt Nancy's 2013 Form 1040 This image is too large to be displayed in the current screen. 1040x amended return instructions Please click the link to view the image. 1040x amended return instructions Form 1040, U. 1040x amended return instructions S. 1040x amended return instructions Individual Income Tax Nancy's Form 982 This image is too large to be displayed in the current screen. 1040x amended return instructions Please click the link to view the image. 1040x amended return instructions Form 982 Reduction of Tax Attributes Due to Discharge of Indebtedness (and Section 1082 Basis Adjustment)              Example 2—Mortgage loan foreclosure. 1040x amended return instructions    In 2005, John and Mary Elm bought a main home for $335,000. 1040x amended return instructions John and Mary took out a $320,000 mortgage loan to buy the home and made a down payment of $15,000. 1040x amended return instructions The loan was secured by the home and is a recourse debt, meaning John and Mary are personally liable for the debt. 1040x amended return instructions   John and Mary became unable to make their mortgage loan payments and on March 1, 2013, when the outstanding balance of the mortgage loan was $315,000 and the FMV of the property was $290,000, the bank foreclosed on the property and simultaneously canceled the remaining mortgage debt. 1040x amended return instructions Immediately before the foreclosure, John and Mary's only other assets and liabilities were a checking account with a balance of $6,000, retirement savings of $13,000, and credit card debt of $5,500. 1040x amended return instructions   John and Mary received a 2013 Form 1099-C showing canceled debt of $25,000 in box 2 ($315,000 outstanding balance minus $290,000 FMV) and an FMV of $290,000 in box 7. 1040x amended return instructions Identifiable event code "D" appears in box 6. 1040x amended return instructions This box shows the reason the creditor has filed Form 1099-C. 1040x amended return instructions In order to determine if John and Mary must include the canceled debt in income, they must first determine whether they meet any of the exceptions or exclusions that apply to canceled debts. 1040x amended return instructions In this example, John and Mary meet both the insolvency and qualified principal residence indebtedness exclusions. 1040x amended return instructions Their sample Form 1099-C is shown on this page. 1040x amended return instructions   John and Mary complete the insolvency worksheet and determine that they were insolvent immediately before the cancellation because at that time their liabilities exceeded the FMV of their assets by $11,500 ($320,500 total liabilities minus $309,000 FMV of total assets). 1040x amended return instructions However, because the entire debt canceled is qualified principal residence indebtedness, the insolvency exclusion only applies if John and Mary elect to apply the insolvency exclusion instead of the qualified principal residence exclusion. 1040x amended return instructions   John and Mary do not elect to apply the insolvency exclusion instead of the qualified principal residence exclusion because under the insolvency exclusion their exclusion would be limited to the amount by which they were insolvent ($11,500). 1040x amended return instructions Instead, John and Mary check box 1e of Form 982 to exclude the canceled debt under the qualified principal residence exclusion. 1040x amended return instructions Under the qualified principal residence exclusion, the amount that John and Mary can exclude is not limited because their qualified principal residence indebtedness is not more than $2 million and no portion of the loan was nonqualified debt. 1040x amended return instructions As a result, John and Mary enter the full $25,000 of canceled debt on line 2 of Form 982. 1040x amended return instructions Because John and Mary no longer own the home due to the foreclosure, John and Mary have no remaining basis in the home at the time of the debt cancellation. 1040x amended return instructions Thus, John and Mary leave line 10b of Form 982 blank. 1040x amended return instructions   John and Mary must also determine whether they have a gain or loss from the foreclosure. 1040x amended return instructions John and Mary complete Table 1-1 (shown below) and find that they have a $45,000 loss from the foreclosure. 1040x amended return instructions Because this loss relates to their home, it is a nondeductible loss. 1040x amended return instructions   John and Mary's Form 1099-C, Insolvency Worksheet, and Form 982 follow. 1040x amended return instructions John and Mary's 2013 Form 1099-C, Cancellation of Debt This image is too large to be displayed in the current screen. 1040x amended return instructions Please click the link to view the image. 1040x amended return instructions Form 1099-C, Cancellation of Debt Table 1-1. 1040x amended return instructions Worksheet for Foreclosures and Repossessions (for John and Mary Elm) Part 1. 1040x amended return instructions Complete Part 1 only if you were personally liable for the debt (even if none of the debt was canceled). 1040x amended return instructions Otherwise, go to Part 2. 1040x amended return instructions 1. 1040x amended return instructions Enter the amount of outstanding debt immediately before the transfer of property reduced by any amount for which you remain personally liable immediately after the transfer of property $315,000. 1040x amended return instructions 00 2. 1040x amended return instructions Enter the fair market value of the transferred property $290,000. 1040x amended return instructions 00 3. 1040x amended return instructions Ordinary income from the cancellation of debt upon foreclosure or repossession. 1040x amended return instructions * Subtract line 2 from line 1. 1040x amended return instructions If less than zero, enter zero. 1040x amended return instructions Next, go to Part 2 $ 25,000. 1040x amended return instructions 00 Part 2. 1040x amended return instructions Gain or loss from foreclosure or repossession. 1040x amended return instructions   4. 1040x amended return instructions Enter the smaller of line 1 or line 2. 1040x amended return instructions If you did not complete Part 1 (because you were not personally liable for the debt), enter the amount of outstanding debt immediately before the transfer of property $290,000. 1040x amended return instructions 00 5. 1040x amended return instructions Enter any proceeds you received from the foreclosure sale   6. 1040x amended return instructions Add line 4 and line 5 $290,000. 1040x amended return instructions 00 7. 1040x amended return instructions Enter the adjusted basis of the transferred property $335,000. 1040x amended return instructions 00 8. 1040x amended return instructions Gain or loss from foreclosure or repossession. 1040x amended return instructions Subtract line 7 from line 6 ($ 45,000. 1040x amended return instructions 00) * The income may not be taxable. 1040x amended return instructions See chapter 1 for more details. 1040x amended return instructions Insolvency Worksheet—John and Mary Elm Date debt was canceled (mm/dd/yy) 03/01/13 Part I. 1040x amended return instructions Total liabilities immediately before the cancellation (do not include the same liability in more than one category) Liabilities (debts) Amount Owed Immediately Before the Cancellation 1. 1040x amended return instructions Credit card debt $ 5,500 2. 1040x amended return instructions Mortgage(s) on real property (including first and second mortgages and home equity loans) (mortgage(s) can be on personal residence, any additional residence, or property held for investment or used in a trade or business) $ 315,000 3. 1040x amended return instructions Car and other vehicle loans $ 4. 1040x amended return instructions Medical bills owed $ 5. 1040x amended return instructions Student loans $ 6. 1040x amended return instructions Accrued or past-due mortgage interest $ 7. 1040x amended return instructions Accrued or past-due real estate taxes $ 8. 1040x amended return instructions Accrued or past-due utilities (water, gas, electric) $ 9. 1040x amended return instructions Accrued or past-due child care costs $ 10. 1040x amended return instructions Federal or state income taxes remaining due (for prior tax years) $ 11. 1040x amended return instructions Judgments $ 12. 1040x amended return instructions Business debts (including those owed as a sole proprietor or partner) $ 13. 1040x amended return instructions Margin debt on stocks and other debt to purchase or secured by investment assets other than real property $ 14. 1040x amended return instructions Other liabilities (debts) not included above $ 15. 1040x amended return instructions Total liabilities immediately before the cancellation. 1040x amended return instructions Add lines 1 through 14. 1040x amended return instructions $ 320,500 Part II. 1040x amended return instructions Fair market value (FMV) of assets owned immediately before the cancellation (do not include the FMV of the same asset in more than one category) Assets FMV Immediately Before  the Cancellation 16. 1040x amended return instructions Cash and bank account balances $ 6,000 17. 1040x amended return instructions Real property, including the value of land (can be main home, any additional home, or property held for investment or used in a trade or business) $ 290,000 18. 1040x amended return instructions Cars and other vehicles $ 19. 1040x amended return instructions Computers $ 20. 1040x amended return instructions Household goods and furnishings (for example, appliances, electronics, furniture, etc. 1040x amended return instructions ) $ 21. 1040x amended return instructions Tools $ 22. 1040x amended return instructions Jewelry $ 23. 1040x amended return instructions Clothing $ 24. 1040x amended return instructions Books $ 25. 1040x amended return instructions Stocks and bonds $ 26. 1040x amended return instructions Investments in coins, stamps, paintings, or other collectibles $ 27. 1040x amended return instructions Firearms, sports, photographic, and other hobby equipment $ 28. 1040x amended return instructions Interest in retirement accounts (IRA accounts, 401(k) accounts, and other retirement accounts) $ 13,000 29. 1040x amended return instructions Interest in a pension plan $ 30. 1040x amended return instructions Interest in education accounts $ 31. 1040x amended return instructions Cash value of life insurance $ 32. 1040x amended return instructions Security deposits with landlords, utilities, and others $ 33. 1040x amended return instructions Interests in partnerships $ 34. 1040x amended return instructions Value of investment in a business $ 35. 1040x amended return instructions Other investments (for example, annuity contracts, guaranteed investment contracts, mutual funds, commodity accounts, interests in hedge funds, and options) $ 36. 1040x amended return instructions Other assets not included above $ 37. 1040x amended return instructions FMV of total assets immediately before the cancellation. 1040x amended return instructions Add lines 16 through 36. 1040x amended return instructions $ 309,000 Part III. 1040x amended return instructions Insolvency 38. 1040x amended return instructions Amount of Insolvency. 1040x amended return instructions Subtract line 37 from line 15. 1040x amended return instructions If zero or less, you are not insolvent. 1040x amended return instructions $ 11,500 John and Mary's Form 982 This image is too large to be displayed in the current screen. 1040x amended return instructions Please click the link to view the image. 1040x amended return instructions Form 982, Reduction of Tax Attributes Due to Discharge of Indebtedness (and Section 1082 Basis Adjustment)          Example 3—Mortgage loan foreclosure with debt exceeding $2 million limit. 1040x amended return instructions    In 2011, Kathy and Frank Willow got married and entered into a contract with Hive Construction Corporation to build a house for $3,000,000 to be used as their main home. 1040x amended return instructions Kathy and Frank made a $400,000 down payment and took out a $2,600,000 mortgage to finance the remaining cost of the house. 1040x amended return instructions Kathy and Frank are personally liable for the mortgage loan, which is secured by the home. 1040x amended return instructions   In November 2013, when the outstanding principal balance on the mortgage loan was $2,500,000, the FMV of the property fell to $1,750,000 and Kathy and Frank abandoned the property by permanently moving out. 1040x amended return instructions The lender foreclosed on the property and, on December 5, 2013, sold the property to another buyer for $1,750,000. 1040x amended return instructions On December 26, 2013, the lender canceled the remaining debt. 1040x amended return instructions Kathy and Frank have no tax attributes other than basis of personal-use property. 1040x amended return instructions   The lender issued a 2013 Form 1099-C to Kathy and Frank showing canceled debt of $750,000 in box 2 (the remaining balance on the $2,500,000 mortgage debt after application of the foreclosure sale proceeds) and $1,750,000 in box 7 (FMV of the property). 1040x amended return instructions Identifiable event code "D" appears in box 6. 1040x amended return instructions This box shows the reason the creditor has filed Form 1099-C. 1040x amended return instructions Although Kathy and Frank abandoned the property, the lender did not need to also file a Form 1099-A because the lender canceled the debt in connection with the foreclosure in the same calendar year. 1040x amended return instructions Kathy and Frank are filing a joint return for 2013. 1040x amended return instructions   Because the foreclosure occurred prior to the debt cancellation, Kathy and Frank first calculate their gain or loss from the foreclosure using Table 1-1. 1040x amended return instructions Because Kathy and Frank remained personally liable for the $750,000 debt remaining after the foreclosure ($2,500,000 outstanding debt immediately before the foreclosure minus $1,750,000 satisfied through the sale of the home), Kathy and Frank enter $1,750,000 on line 1 of Table 1-1 ($2,500,000 outstanding debt immediately before the foreclosure minus the $750,000 for which they remained liable). 1040x amended return instructions Completing Table 1-1, Kathy and Frank find that they have no ordinary income from the cancellation of debt upon foreclosure and that they have a $1,250,000 loss. 1040x amended return instructions Because this loss relates to their home, it is a nondeductible loss. 1040x amended return instructions   Because the lender later canceled the remaining amount of the debt, Kathy and Frank must also determine whether that canceled debt is taxable. 1040x amended return instructions Immediately before the cancellation, Kathy and Frank had $15,000 in a savings account, household furnishings with an FMV of $17,000, a car with an FMV of $10,000, and $18,000 in credit card debt. 1040x amended return instructions Kathy and Frank also had the $750,000 remaining balance on the mortgage loan at that time. 1040x amended return instructions The household furnishings originally cost $30,000. 1040x amended return instructions The car had been fully paid off (so there was no related outstanding debt) and was originally purchased for $16,000. 1040x amended return instructions Kathy and Frank had no adjustments to the cost basis of the car. 1040x amended return instructions Kathy and Frank had no other assets or liabilities at the time of the cancellation. 1040x amended return instructions Kathy and Frank complete the insolvency worksheet to calculate that they were insolvent to the extent of $726,000 immediately before the cancellation ($768,000 of total liabilities minus $42,000 FMV of total assets). 1040x amended return instructions   At the beginning of 2014, Kathy and Frank had $9,000 in their savings account and $15,000 in credit card debt. 1040x amended return instructions Kathy and Frank also owned the same car at that time (still with an FMV of $10,000 and basis of $16,000) and the same household furnishings (still with an FMV of $17,000 and a basis of $30,000). 1040x amended return instructions Kathy and Frank had no other assets or liabilities at that time. 1040x amended return instructions Kathy and Frank no longer own the home because the lender foreclosed on it in 2013. 1040x amended return instructions   Because the canceled debt is qualified principal residence indebtedness, the insolvency exclusion does not apply unless Kathy and Frank elect to apply the insolvency exclusion instead of the qualified principal residence indebtedness exclusion. 1040x amended return instructions The maximum amount that Kathy and Frank can treat as qualified principal residence indebtedness is $2,000,000. 1040x amended return instructions The remaining $500,000 ($2,500,000 outstanding mortgage loan minus $2,000,000 limit on qualified principal residence indebtedness) is not qualified principal residence indebtedness. 1040x amended return instructions Because only a part of the loan is qualified principal residence indebtedness, Kathy and Frank must apply the ordering rule to the canceled debt. 1040x amended return instructions Under the ordering rule, the qualified principal residence indebtedness exclusion applies only to the extent that the amount canceled ($750,000) exceeds the amount of the loan (immediately before the cancellation) that is not qualified principal residence indebtedness ($500,000). 1040x amended return instructions This means that Kathy and Frank can only exclude $250,000 ($750,000 amount canceled minus $500,000 nonqualified debt) under the qualified principal residence indebtedness exclusion. 1040x amended return instructions   Kathy and Frank do not elect to have the insolvency exclusion apply instead of the qualified principal residence exclusion. 1040x amended return instructions Nonetheless, they can still apply the insolvency exclusion to the $500,000 nonqualified debt because it is not qualified principal residence indebtedness. 1040x amended return instructions Kathy and Frank can exclude the remaining $500,000 canceled debt under the insolvency exclusion because they were insolvent immediately before the cancellation to the extent of $726,000. 1040x amended return instructions Thus, Kathy and Frank check the boxes on lines 1b and 1e of Form 982 and enter $750,000 on line 2 ($250,000 excluded under the qualified principal residence indebtedness exclusion plus $500,000 excluded under the insolvency exclusion). 1040x amended return instructions   Next, Kathy and Frank reduce their tax attributes using Part II of Form 982. 1040x amended return instructions Because Kathy and Frank no longer own the home due to the foreclosure, Kathy and Frank have no remaining basis in the home at the time of the debt cancellation. 1040x amended return instructions Thus, Kathy and Frank leave line 10b of Form 982 blank. 1040x amended return instructions However, Kathy and Frank are also excluding nonqualified debt under the insolvency exclusion. 1040x amended return instructions As a result, Kathy and Frank must reduce the basis of property they own based on the amount of canceled debt they are excluding from income under the insolvency rules. 1040x amended return instructions Because Kathy and Frank have no tax attributes other than basis of personal-use property to reduce, Kathy and Frank figure the amount they must include on line 10a of Form 982 by taking the smallest of: The $46,000 bases of their personal-use property held at the beginning of 2014 ($16,000 basis in the car plus $30,000 basis in household furnishings), The $500,000 of the nonbusiness debt (other than qualified principal residence indebtedness) that they are excluding from income on line 2 of Form 982, or The $43,000 excess of the total bases of the property and the amount of money they held immediately after the cancellation over their total liabilities immediately after the cancellation ($15,000 in savings account plus $30,000 basis in household furnishings plus $16,000 adjusted basis in car minus $18,000 credit card debt). 1040x amended return instructions Kathy and Frank enter $43,000 on Form 982, line 10a and reduce their bases in the car and the household furnishings in proportion to the total adjusted bases in all their property. 1040x amended return instructions Kathy and Frank reduce the basis in the car by $14,956. 1040x amended return instructions 52 ($43,000 x $16,000/$46,000). 1040x amended return instructions And they reduce the basis in the household furnishings by $28,043. 1040x amended return instructions 48 ($43,000 x $30,000/$46,000). 1040x amended return instructions   Following are Kathy and Frank's sample forms and worksheets. 1040x amended return instructions Frank and Kathy's 2013 Form 1099-C, Cancellation of Debt This image is too large to be displayed in the current screen. 1040x amended return instructions Please click the link to view the image. 1040x amended return instructions Form 1099-C, Cancellation of Debt Table 1-1. 1040x amended return instructions Worksheet for Foreclosures and Repossessions (for Frank and Kathy Willow) Part 1. 1040x amended return instructions Complete Part 1 only if you were personally liable for the debt (even if none of the debt was canceled). 1040x amended return instructions Otherwise, go to Part 2. 1040x amended return instructions 1. 1040x amended return instructions Enter the amount of outstanding debt immediately before the transfer of property reduced by any amount for which you remain personally liable immediately after the transfer of property $1,750,000. 1040x amended return instructions 00 2. 1040x amended return instructions Enter the fair market value of the transferred property $1,750,000. 1040x amended return instructions 00 3. 1040x amended return instructions Ordinary income from the cancellation of debt upon foreclosure or repossession. 1040x amended return instructions * Subtract line 2 from line 1. 1040x amended return instructions If less than zero, enter zero. 1040x amended return instructions Next, go to Part 2 $0. 1040x amended return instructions 00 Part 2. 1040x amended return instructions Gain or loss from foreclosure or repossession. 1040x amended return instructions   4. 1040x amended return instructions Enter the smaller of line 1 or line 2. 1040x amended return instructions If you did not complete Part 1 (because you were not personally liable for the debt), enter the amount of outstanding debt immediately before the transfer of property. 1040x amended return instructions $1,750,000. 1040x amended return instructions 00 5. 1040x amended return instructions Enter any proceeds you received from the foreclosure sale   6. 1040x amended return instructions Add line 4 and line 5 $1,750,000. 1040x amended return instructions 00 7. 1040x amended return instructions Enter the adjusted basis of the transferred property $3,000,000. 1040x amended return instructions 00 8. 1040x amended return instructions Gain or loss from foreclosure or repossession. 1040x amended return instructions Subtract line 7 from line 6 ($1,250,000. 1040x amended return instructions 00) * The income may not be taxable. 1040x amended return instructions See chapter 1 for more details. 1040x amended return instructions    Insolvency Worksheet—Frank and Kathy Willow Date debt was canceled (mm/dd/yy) 12/26/13 Part I. 1040x amended return instructions Total liabilities immediately before the cancellation (do not include the same liability in more than one category) Liabilities (debts) Amount Owed Immediately Before the Cancellation 1. 1040x amended return instructions Credit card debt $ 18,000 2. 1040x amended return instructions Mortgage(s) on real property (including first and second mortgages and home equity loans) (mortgage(s) can be on personal residence, any additional residence, or property held for investment or used in a trade or business) $ 750,000 3. 1040x amended return instructions Car and other vehicle loans $ 4. 1040x amended return instructions Medical bills owed $ 5. 1040x amended return instructions Student loans $ 6. 1040x amended return instructions Accrued or past-due mortgage interest $ 7. 1040x amended return instructions Accrued or past-due real estate taxes $ 8. 1040x amended return instructions Accrued or past-due utilities (water, gas, electric) $ 9. 1040x amended return instructions Accrued or past-due child care costs $ 10. 1040x amended return instructions Federal or state income taxes remaining due (for prior tax years) $ 11. 1040x amended return instructions Judgments $ 12. 1040x amended return instructions Business debts (including those owed as a sole proprietor or partner) $ 13. 1040x amended return instructions Margin debt on stocks and other debt to purchase or secured by investment assets other than real property $ 14. 1040x amended return instructions Other liabilities (debts) not included above $ 15. 1040x amended return instructions Total liabilities immediately before the cancellation. 1040x amended return instructions Add lines 1 through 14. 1040x amended return instructions $ 768,000 Part II. 1040x amended return instructions Fair market value (FMV) of assets owned immediately before the cancellation (do not include the FMV of the same asset in more than one category) Assets FMV Immediately Before  the Cancellation 16. 1040x amended return instructions Cash and bank account balances $ 15,000 17. 1040x amended return instructions Real property, including the value of land (can be main home, any additional home, or property held for investment or used in a trade or business) $ 18. 1040x amended return instructions Cars and other vehicles $ 10,000 19. 1040x amended return instructions Computers $ 20. 1040x amended return instructions Household goods and furnishings (for example, appliances, electronics, furniture, etc. 1040x amended return instructions ) $ 17,000 21. 1040x amended return instructions Tools $ 22. 1040x amended return instructions Jewelry $ 23. 1040x amended return instructions Clothing $ 24. 1040x amended return instructions Books $ 25. 1040x amended return instructions Stocks and bonds $ 26. 1040x amended return instructions Investments in coins, stamps, paintings, or other collectibles $ 27. 1040x amended return instructions Firearms, sports, photographic, and other hobby equipment $ 28. 1040x amended return instructions Interest in retirement accounts (IRA accounts, 401(k) accounts, and other retirement accounts) $ 29. 1040x amended return instructions Interest in a pension plan $ 30. 1040x amended return instructions Interest in education accounts $ 31. 1040x amended return instructions Cash value of life insurance $ 32. 1040x amended return instructions Security deposits with landlords, utilities, and others $ 33. 1040x amended return instructions Interests in partnerships $ 34. 1040x amended return instructions Value of investment in a business $ 35. 1040x amended return instructions Other investments (for example, annuity contracts, guaranteed investment contracts, mutual funds, commodity accounts, interests in hedge funds, and options) $ 36. 1040x amended return instructions Other assets not included above $ 37. 1040x amended return instructions FMV of total assets immediately before the cancellation. 1040x amended return instructions Add lines 16 through 36. 1040x amended return instructions $ 42,000 Part III. 1040x amended return instructions Insolvency 38. 1040x amended return instructions Amount of Insolvency. 1040x amended return instructions Subtract line 37 from line 15. 1040x amended return instructions If zero or less, you are not insolvent. 1040x amended return instructions $ 726,000    Frank and Kathy's Form 982 This image is too large to be displayed in the current screen. 1040x amended return instructions Please click the link to view the image. 1040x amended return instructions Form 982, Reduction of Tax Attributes Due to Discharge of Indebtedness (and Section 1082 Basis Adjustment) Prev  Up  Next   Home   More Online Publications

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The 1040x Amended Return Instructions

1040x amended return instructions 32. 1040x amended return instructions   Child and Dependent Care Credit Table of Contents Reminders Introduction Useful Items - You may want to see: Tests To Claim the CreditQualifying Person Test Earned Income Test Work-Related Expense Test Joint Return Test Provider Identification Test How To Figure the CreditFiguring Total Work-Related Expenses Earned Income Limit Dollar Limit Amount of Credit How To Claim the CreditTax credit not refundable. 1040x amended return instructions Employment Taxes for Household Employers Reminders Taxpayer identification number needed for each qualifying person. 1040x amended return instructions  You must include on line 2 of Form 2441 the name and taxpayer identification number (generally the social security number) of each qualifying person. 1040x amended return instructions See Taxpayer identification number under Qualifying Person Test, later. 1040x amended return instructions You may have to pay employment taxes. 1040x amended return instructions  If you pay someone to come to your home and care for your dependent or spouse, you may be a household employer who has to pay employment taxes. 1040x amended return instructions Usually, you are not a household employer if the person who cares for your dependent or spouse does so at his or her home or place of business. 1040x amended return instructions See Employment Taxes for Household Employers , later. 1040x amended return instructions Introduction This chapter discusses the credit for child and dependent care expenses and covers the following topics. 1040x amended return instructions Tests you must meet to claim the credit. 1040x amended return instructions How to figure the credit. 1040x amended return instructions How to claim the credit. 1040x amended return instructions Employment taxes you may have to pay as a household employer. 1040x amended return instructions You may be able to claim the credit if you pay someone to care for your dependent who is under age 13 or for your spouse or dependent who is not able to care for himself or herself. 1040x amended return instructions The credit can be up to 35% of your expenses. 1040x amended return instructions To qualify, you must pay these expenses so you can work or look for work. 1040x amended return instructions This credit should not be confused with the child tax credit discussed in chapter 34. 1040x amended return instructions Dependent care benefits. 1040x amended return instructions   If you received any dependent care benefits from your employer during the year, you may be able to exclude from your income all or part of them. 1040x amended return instructions You must complete Form 2441, Part III, before you can figure the amount of your credit. 1040x amended return instructions See Dependent Care Benefits under How To Figure the Credit, later. 1040x amended return instructions Useful Items - You may want to see: Publication 501 Exemptions, Standard Deduction, and Filing Information 503 Child and Dependent Care Expenses 926 Household Employer's Tax Guide Form (and Instructions) 2441 Child and Dependent Care Expenses Schedule H (Form 1040) Household Employment Taxes W-7 Application for IRS Individual Taxpayer Identification Number W-10 Dependent Care Provider's Identification and Certification Tests To Claim the Credit To be able to claim the credit for child and dependent care expenses, you must file Form 1040 or Form 1040A, not Form 1040EZ, and meet all the following tests. 1040x amended return instructions The care must be for one or more qualifying persons who are identified on Form 2441. 1040x amended return instructions (See Qualifying Person Test . 1040x amended return instructions ) You (and your spouse if filing jointly) must have earned income during the year. 1040x amended return instructions (However, see Rule for student-spouse or spouse not able to care for self under Earned Income Test, later. 1040x amended return instructions ) You must pay child and dependent care expenses so you (and your spouse if filing jointly) can work or look for work. 1040x amended return instructions (See Work-Related Expense Test , later. 1040x amended return instructions ) You must make payments for child and dependent care to someone you (and your spouse) cannot claim as a dependent. 1040x amended return instructions If you make payments to your child, he or she cannot be your dependent and must be age 19 or older by the end of the year. 1040x amended return instructions You cannot make payments to: Your spouse, or The parent of your qualifying person if your qualifying person is your child and under age 13. 1040x amended return instructions (See Payments to Relatives or Dependents under Work-Related Expense Test, later. 1040x amended return instructions ) Your filing status may be single, head of household, or qualifying widow(er) with dependent child. 1040x amended return instructions If you are married, you must file a joint return, unless an exception applies to you. 1040x amended return instructions (See Joint Return Test , later. 1040x amended return instructions ) You must identify the care provider on your tax return. 1040x amended return instructions (See Provider Identification Test , later. 1040x amended return instructions ) If you exclude or deduct dependent care benefits provided by a dependent care benefits plan, the total amount you exclude or deduct must be less than the dollar limit for qualifying expenses (generally, $3,000 if one qualifying person was cared for or $6,000 if two or more qualifying persons were cared for). 1040x amended return instructions (If two or more qualifying persons were cared for, the amount you exclude or deduct will always be less than the dollar limit, since the total amount you can exclude or deduct is limited to $5,000. 1040x amended return instructions See Reduced Dollar Limit under How To Figure the Credit, later. 1040x amended return instructions ) These tests are presented in Figure 32-A and are also explained in detail in this chapter. 1040x amended return instructions Figure 32-A. 1040x amended return instructions Can You Claim the Credit? Please click here for the text description of the image. 1040x amended return instructions Figure 32-A Can You Claim the Credit? Qualifying Person Test Your child and dependent care expenses must be for the care of one or more qualifying persons. 1040x amended return instructions A qualifying person is: Your qualifying child who is your dependent and who was under age 13 when the care was provided (but see Child of divorced or separated parents or parents living apart, later), Your spouse who was not physically or mentally able to care for himself or herself and lived with you for more than half the year, or A person who was not physically or mentally able to care for himself or herself, lived with you for more than half the year, and either: Was your dependent, or Would have been your dependent except that: He or she received gross income of $3,900 or more, He or she filed a joint return, or You, or your spouse if filing jointly, could be claimed as a dependent on someone else's 2013 return. 1040x amended return instructions Dependent defined. 1040x amended return instructions   A dependent is a person, other than you or your spouse, for whom you can claim an exemption. 1040x amended return instructions To be your dependent, a person must be your qualifying child (or your qualifying relative). 1040x amended return instructions Qualifying child. 1040x amended return instructions   To be your qualifying child, a child must live with you for more than half the year and meet other requirements. 1040x amended return instructions More information. 1040x amended return instructions   For more information about who is a dependent or a qualifying child, see chapter 3. 1040x amended return instructions Physically or mentally not able to care for oneself. 1040x amended return instructions   Persons who cannot dress, clean, or feed themselves because of physical or mental problems are considered not able to care for themselves. 1040x amended return instructions Also, persons who must have constant attention to prevent them from injuring themselves or others are considered not able to care for themselves. 1040x amended return instructions Person qualifying for part of year. 1040x amended return instructions   You determine a person's qualifying status each day. 1040x amended return instructions For example, if the person for whom you pay child and dependent care expenses no longer qualifies on September 16, count only those expenses through September 15. 1040x amended return instructions Also see Yearly limit under Dollar Limit, later. 1040x amended return instructions Birth or death of otherwise qualifying person. 1040x amended return instructions   In determining whether a person is a qualifying person, a person who was born or died in 2013 is treated as having lived with you for more than half of 2013 if your home was the person's home for more than half the time he or she was alive in 2013. 1040x amended return instructions Taxpayer identification number. 1040x amended return instructions   You must include on your return the name and taxpayer identification number (generally the social security number) of the qualifying person(s). 1040x amended return instructions If the correct information is not shown, the credit may be reduced or disallowed. 1040x amended return instructions Individual taxpayer identification number (ITIN) for aliens. 1040x amended return instructions   If your qualifying person is a nonresident or resident alien who does not have and cannot get a social security number (SSN), use that person's ITIN. 1040x amended return instructions The ITIN is entered wherever an SSN is requested on a tax return. 1040x amended return instructions To apply for an ITIN, see Form W-7. 1040x amended return instructions   An ITIN is for tax use only. 1040x amended return instructions It does not entitle the holder to social security benefits or change the holder's employment or immigration status under U. 1040x amended return instructions S. 1040x amended return instructions law. 1040x amended return instructions Adoption taxpayer identification number (ATIN). 1040x amended return instructions   If your qualifying person is a child who was placed in your home for adoption and for whom you do not have an SSN, you must get an ATIN for the child. 1040x amended return instructions File Form W-7A, Application for Taxpayer Identification Number for Pending U. 1040x amended return instructions S. 1040x amended return instructions Adoptions. 1040x amended return instructions Child of divorced or separated parents or parents living apart. 1040x amended return instructions   Even if you cannot claim your child as a dependent, he or she is treated as your qualifying person if: The child was under age 13 or was not physically or mentally able to care for himself or herself, The child received over half of his or her support during the calendar year from one or both parents who are divorced or legally separated under a decree of divorce or separate maintenance, are separated under a written separation agreement, or lived apart at all times during the last 6 months of the calendar year, The child was in the custody of one or both parents for more than half the year, and You were the child's custodial parent. 1040x amended return instructions   The custodial parent is the parent with whom the child lived for the greater number of nights in 2013. 1040x amended return instructions If the child was with each parent for an equal number of nights, the custodial parent is the parent with the higher adjusted gross income. 1040x amended return instructions For details and an exception for a parent who works at night, see Pub. 1040x amended return instructions 501. 1040x amended return instructions   The noncustodial parent cannot treat the child as a qualifying person even if that parent is entitled to claim the child as a dependent under the special rules for a child of divorced or separated parents. 1040x amended return instructions Earned Income Test To claim the credit, you (and your spouse if filing jointly) must have earned income during the year. 1040x amended return instructions Earned income. 1040x amended return instructions   Earned income includes wages, salaries, tips, other taxable employee compensation, and net earnings from self-employment. 1040x amended return instructions A net loss from self-employment reduces earned income. 1040x amended return instructions Earned income also includes strike benefits and any disability pay you report as wages. 1040x amended return instructions   Generally, only taxable compensation is included. 1040x amended return instructions However, you can elect to include nontaxable combat pay in earned income. 1040x amended return instructions If you are filing a joint return and both you and your spouse received nontaxable combat pay, you can each make your own election. 1040x amended return instructions (In other words, if one of you makes the election, the other one can also make it but does not have to. 1040x amended return instructions ) You should figure your credit both ways and make the election if it gives you a greater tax benefit. 1040x amended return instructions Members of certain religious faiths opposed to social security. 1040x amended return instructions   Certain income earned by persons who are members of certain religious faiths that are opposed to participation in Social Security Act programs and have an IRS-approved form that exempts certain income from social security and Medicare taxes may not be considered earned income for this purpose. 1040x amended return instructions See Earned Income Test in Publication 503. 1040x amended return instructions Not earned income. 1040x amended return instructions   Earned income does not include: Pensions and annuities, Social security and railroad retirement benefits, Workers' compensation, Interest and dividends, Unemployment compensation, Scholarship or fellowship grants, except for those reported on a Form W-2 and paid to you for teaching or other services, Nontaxable workfare payments, Child support payments received by you, Income of nonresident aliens that is not effectively connected with a U. 1040x amended return instructions S. 1040x amended return instructions trade or business, or Any amount received for work while an inmate in a penal institution. 1040x amended return instructions Rule for student-spouse or spouse not able to care for self. 1040x amended return instructions   Your spouse is treated as having earned income for any month that he or she is: A full-time student, or Physically or mentally not able to care for himself or herself. 1040x amended return instructions (Your spouse also must live with you for more than half the year. 1040x amended return instructions )   If you are filing a joint return, this rule also applies to you. 1040x amended return instructions You can be treated as having earned income for any month you are a full-time student or not able to care for yourself. 1040x amended return instructions   Figure the earned income of the nonworking spouse described under (1) or (2) above as explained under Earned Income Limit , later. 1040x amended return instructions   This rule applies to only one spouse for any one month. 1040x amended return instructions If, in the same month, both you and your spouse do not work and are either full-time students or not physically or mentally able to care for yourselves, only one of you can be treated as having earned income in that month. 1040x amended return instructions Full-time student. 1040x amended return instructions   You are a full-time student if you are enrolled at a school for the number of hours or classes that the school considers full time. 1040x amended return instructions You must have been a full-time student for some part of each of 5 calendar months during the year. 1040x amended return instructions (The months need not be consecutive. 1040x amended return instructions ) School. 1040x amended return instructions   The term “school” includes high schools, colleges, universities, and technical, trade, and mechanical schools. 1040x amended return instructions A school does not include an on-the-job training course, correspondence school, or school offering courses only through the Internet. 1040x amended return instructions Work-Related Expense Test Child and dependent care expenses must be work-related to qualify for the credit. 1040x amended return instructions Expenses are considered work-related only if both of the following are true. 1040x amended return instructions They allow you (and your spouse if filing jointly) to work or look for work. 1040x amended return instructions They are for a qualifying person's care. 1040x amended return instructions Working or Looking for Work To be work-related, your expenses must allow you to work or look for work. 1040x amended return instructions If you are married, generally both you and your spouse must work or look for work. 1040x amended return instructions One spouse is treated as working during any month he or she is a full-time student or is not physically or mentally able to care for himself or herself. 1040x amended return instructions Your work can be for others or in your own business or partnership. 1040x amended return instructions It can be either full time or part time. 1040x amended return instructions Work also includes actively looking for work. 1040x amended return instructions However, if you do not find a job and have no earned income for the year, you cannot take this credit. 1040x amended return instructions See Earned Income Test , earlier. 1040x amended return instructions An expense is not considered work-related merely because you had it while you were working. 1040x amended return instructions The purpose of the expense must be to allow you to work. 1040x amended return instructions Whether your expenses allow you to work or look for work depends on the facts. 1040x amended return instructions Example 1. 1040x amended return instructions The cost of a babysitter while you and your spouse go out to eat is not normally a work-related expense. 1040x amended return instructions Example 2. 1040x amended return instructions You work during the day. 1040x amended return instructions Your spouse works at night and sleeps during the day. 1040x amended return instructions You pay for care of your 5-year-old child during the hours when you are working and your spouse is sleeping. 1040x amended return instructions Your expenses are considered work-related. 1040x amended return instructions Volunteer work. 1040x amended return instructions    For this purpose, you are not considered to be working if you do unpaid volunteer work or volunteer work for a nominal salary. 1040x amended return instructions Work for part of year. 1040x amended return instructions   If you work or actively look for work during only part of the period covered by the expenses, then you must figure your expenses for each day. 1040x amended return instructions For example, if you work all year and pay care expenses of $250 a month ($3,000 for the year), all the expenses are work-related. 1040x amended return instructions However, if you work or look for work for only 2 months and 15 days during the year and pay expenses of $250 a month, your work-related expenses are limited to $625 (2½ months × $250). 1040x amended return instructions Temporary absence from work. 1040x amended return instructions   You do not have to figure your expenses for each day during a short, temporary absence from work, such as for vacation or a minor illness, if you have to pay for care anyway. 1040x amended return instructions Instead, you can figure your credit including the expenses you paid for the period of absence. 1040x amended return instructions   An absence of 2 weeks or less is a short, temporary absence. 1040x amended return instructions An absence of more than 2 weeks may be considered a short, temporary absence, depending on the circumstances. 1040x amended return instructions Example. 1040x amended return instructions You pay a nanny to care for your 2-year-old son and 4-year-old daughter so you can work. 1040x amended return instructions You become ill and miss 4 months of work but receive sick pay. 1040x amended return instructions You continue to pay the nanny to care for the children while you are ill. 1040x amended return instructions Your absence is not a short, temporary absence, and your expenses are not considered work-related. 1040x amended return instructions Part-time work. 1040x amended return instructions   If you work part-time, you generally must figure your expenses for each day. 1040x amended return instructions However, if you have to pay for care weekly, monthly, or in another way that includes both days worked and days not worked, you can figure your credit including the expenses you paid for days you did not work. 1040x amended return instructions Any day when you work at least 1 hour is a day of work. 1040x amended return instructions Example 1. 1040x amended return instructions You work 3 days a week. 1040x amended return instructions While you work, your 6-year-old child attends a dependent care center, which complies with all state and local regulations. 1040x amended return instructions You can pay the center $150 for any 3 days a week or $250 for 5 days a week. 1040x amended return instructions Your child attends the center 5 days a week. 1040x amended return instructions Your work-related expenses are limited to $150 a week. 1040x amended return instructions Example 2. 1040x amended return instructions The facts are the same as in Example 1 except the center does not offer a 3-day option. 1040x amended return instructions The entire $250 weekly fee may be a work-related expense. 1040x amended return instructions Care of a Qualifying Person To be work-related, your expenses must be to provide care for a qualifying person. 1040x amended return instructions You do not have to choose the least expensive way of providing care. 1040x amended return instructions The cost of a paid care provider may be an expense for the care of a qualifying person even if another care provider is available at no cost. 1040x amended return instructions Expenses are for the care of a qualifying person only if their main purpose is the person's well-being and protection. 1040x amended return instructions Expenses for household services qualify if part of the services is for the care of qualifying persons. 1040x amended return instructions See Household services , later. 1040x amended return instructions Expenses not for care. 1040x amended return instructions   Expenses for care do not include amounts you pay for food, lodging, clothing, education, and entertainment. 1040x amended return instructions However, you can include small amounts paid for these items if they are incidental to and cannot be separated from the cost of caring for the qualifying person. 1040x amended return instructions   Child support payments are not for care and do not qualify for the credit. 1040x amended return instructions Education. 1040x amended return instructions   Expenses for a child in nursery school, preschool, or similar programs for children below the level of kindergarten are expenses for care. 1040x amended return instructions Expenses to attend kindergarten or a higher grade are not expenses for care. 1040x amended return instructions Do not use these expenses to figure your credit. 1040x amended return instructions   However, expenses for before- or after-school care of a child in kindergarten or a higher grade may be expenses for care. 1040x amended return instructions   Summer school and tutoring programs are not for care. 1040x amended return instructions Example 1. 1040x amended return instructions You take your 3-year-old child to a nursery school that provides lunch and educational activities as a part of its preschool childcare service. 1040x amended return instructions The lunch and educational activities are incidental to the childcare, and their cost cannot be separated from the cost of care. 1040x amended return instructions You can count the total cost when you figure the credit. 1040x amended return instructions Example 2. 1040x amended return instructions You place your 10-year-old child in a boarding school so you can work full time. 1040x amended return instructions Only the part of the boarding school expense that is for the care of your child is a work-related expense. 1040x amended return instructions You can count that part of the expense in figuring your credit if it can be separated from the cost of education. 1040x amended return instructions You cannot count any part of the amount you pay the school for your child's education. 1040x amended return instructions Care outside your home. 1040x amended return instructions   You can count the cost of care provided outside your home if the care is for your dependent under age 13 or any other qualifying person who regularly spends at least 8 hours each day in your home. 1040x amended return instructions Dependent care center. 1040x amended return instructions   You can count care provided outside your home by a dependent care center only if the center complies with all state and local regulations that apply to these centers. 1040x amended return instructions   A dependent care center is a place that provides care for more than six persons (other than persons who live there) and receives a fee, payment, or grant for providing services for any of those persons, even if the center is not run for profit. 1040x amended return instructions Camp. 1040x amended return instructions   The cost of sending your child to an overnight camp is not considered a work-related expense. 1040x amended return instructions The cost of sending your child to a day camp may be a work-related expense, even if the camp specializes in a particular activity, such as computers or soccer. 1040x amended return instructions Transportation. 1040x amended return instructions   If a care provider takes a qualifying person to or from a place where care is provided, that transportation is for the care of the qualifying person. 1040x amended return instructions This includes transportation by bus, subway, taxi, or private car. 1040x amended return instructions However, transportation not provided by a care provider is not for the care of a qualifying person. 1040x amended return instructions Also, if you pay the transportation cost for the care provider to come to your home, that expense is not for care of a qualifying person. 1040x amended return instructions Fees and deposits. 1040x amended return instructions   Fees you paid to an agency to get the services of a care provider, deposits you paid to an agency or preschool, application fees, and other indirect expenses are work-related expenses if you have to pay them to get care, even though they are not directly for care. 1040x amended return instructions However, a forfeited deposit is not for the care of a qualifying person if care is not provided. 1040x amended return instructions Example 1. 1040x amended return instructions You paid a fee to an agency to get the services of the nanny who cares for your 2-year-old daughter while you work. 1040x amended return instructions The fee you paid is a work-related expense. 1040x amended return instructions Example 2. 1040x amended return instructions You placed a deposit with a preschool to reserve a place for your 3-year-old child. 1040x amended return instructions You later sent your child to a different preschool and forfeited the deposit. 1040x amended return instructions The forfeited deposit is not for care and so is not a work-related expense. 1040x amended return instructions Household services. 1040x amended return instructions   Expenses you pay for household services meet the work-related expense test if they are at least partly for the well-being and protection of a qualifying person. 1040x amended return instructions   Household services are ordinary and usual services done in and around your home that are necessary to run your home. 1040x amended return instructions They include the services of a housekeeper, maid, or cook. 1040x amended return instructions However, they do not include the services of a chauffeur, bartender, or gardener. 1040x amended return instructions See Household Services in Publication 503 for more information. 1040x amended return instructions   In this chapter, the term housekeeper refers to any household employee whose services include the care of a qualifying person. 1040x amended return instructions Taxes paid on wages. 1040x amended return instructions   The taxes you pay on wages for qualifying child and dependent care services are work-related expenses. 1040x amended return instructions See Employment Taxes for Household Employers , later. 1040x amended return instructions Payments to Relatives or Dependents You can count work-related payments you make to relatives who are not your dependents, even if they live in your home. 1040x amended return instructions However, do not count any amounts you pay to: A dependent for whom you (or your spouse if filing jointly) can claim an exemption, Your child who was under age 19 at the end of the year, even if he or she is not your dependent, A person who was your spouse any time during the year, or The parent of your qualifying person if your qualifying person is your child and under age 13. 1040x amended return instructions Joint Return Test Generally, married couples must file a joint return to take the credit. 1040x amended return instructions However, if you are legally separated or living apart from your spouse, you may be able to file a separate return and still take the credit. 1040x amended return instructions Legally separated. 1040x amended return instructions   You are not considered married if you are legally separated from your spouse under a decree of divorce or separate maintenance. 1040x amended return instructions You may be eligible to take the credit on your return using head of household filing status. 1040x amended return instructions Married and living apart. 1040x amended return instructions   You are not considered married and are eligible to take the credit if all the following apply. 1040x amended return instructions You file a return apart from your spouse. 1040x amended return instructions Your home is the home of a qualifying person for more than half the year. 1040x amended return instructions You pay more than half the cost of keeping up your home for the year. 1040x amended return instructions Your spouse does not live in your home for the last 6 months of the year. 1040x amended return instructions Costs of keeping up a home. 1040x amended return instructions   The costs of keeping up a home normally include property taxes, mortgage interest, rent, utility charges, home repairs, insurance on the home, and food eaten at home. 1040x amended return instructions   The costs of keeping up a home do not include payments for clothing, education, medical treatment, vacations, life insurance, transportation, or mortgage principal. 1040x amended return instructions   They also do not include the purchase, permanent improvement, or replacement of property. 1040x amended return instructions For example, you cannot include the cost of replacing a water heater. 1040x amended return instructions However, you can include the cost of repairing a water heater. 1040x amended return instructions Death of spouse. 1040x amended return instructions   If your spouse died during the year and you do not remarry before the end of the year, you generally must file a joint return to take the credit. 1040x amended return instructions If you do remarry before the end of the year, the credit can be claimed on your deceased spouse's return. 1040x amended return instructions Provider Identification Test You must identify all persons or organizations that provide care for your child or dependent. 1040x amended return instructions Use Form 2441, Part I, to show the information. 1040x amended return instructions If you do not have any care providers and you are filing Form 2441 only to report taxable income in Part III, enter “none” in line 1, column (a). 1040x amended return instructions Information needed. 1040x amended return instructions   To identify the care provider, you must give the provider's: Name, Address, and Taxpayer identification number. 1040x amended return instructions   If the care provider is an individual, the taxpayer identification number is his or her social security number or individual taxpayer identification number. 1040x amended return instructions If the care provider is an organization, then it is the employer identification number (EIN). 1040x amended return instructions   You do not have to show the taxpayer identification number if the care provider is a tax-exempt organization (such as a church or school). 1040x amended return instructions In this case, enter “Tax-Exempt” in the space where Form 2441 asks for the number. 1040x amended return instructions   If you cannot provide all of the information or if the information is incorrect, you must be able to show that you used due diligence (discussed later) in trying to furnish the necessary information. 1040x amended return instructions Getting the information. 1040x amended return instructions   You can use Form W-10 to request the required information from the care provider. 1040x amended return instructions If you do not use Form W-10, you can get the information from one of the other sources listed in the instructions for Form W-10 including: A copy of the provider's social security card, A copy of the provider's completed Form W-4 if he or she is your household employee, A copy of the statement furnished by your employer if the provider is your employer's dependent care plan, or A letter or invoice from the provider if it shows the information. 1040x amended return instructions    You should keep this information with your tax records. 1040x amended return instructions Do not send Form W-10 (or other document containing this information) to the Internal Revenue Service. 1040x amended return instructions Due diligence. 1040x amended return instructions   If the care provider information you give is incorrect or incomplete, your credit may not be allowed. 1040x amended return instructions However, if you can show that you used due diligence in trying to supply the information, you can still claim the credit. 1040x amended return instructions   You can show due diligence by getting and keeping the provider's completed Form W-10 or one of the other sources of information just listed. 1040x amended return instructions Care providers can be penalized if they do not provide this information to you or if they provide incorrect information. 1040x amended return instructions Provider refusal. 1040x amended return instructions   If the provider refuses to give you their identifying information, you should report on Form 2441 whatever information you have (such as the name and address). 1040x amended return instructions Enter “See Attached Statement” in the columns calling for the information you do not have. 1040x amended return instructions Then attach a statement explaining that you requested the information from the care provider, but the provider did not give you the information. 1040x amended return instructions Be sure to write your name and social security number on this statement. 1040x amended return instructions The statement will show that you used due diligence in trying to furnish the necessary information. 1040x amended return instructions U. 1040x amended return instructions S. 1040x amended return instructions citizens and resident aliens living abroad. 1040x amended return instructions   If you are living abroad, your care provider may not have, and may not be required to get, a U. 1040x amended return instructions S. 1040x amended return instructions taxpayer identification number (for example, an SSN or EIN). 1040x amended return instructions If so, enter “LAFCP” (Living Abroad Foreign Care Provider) in the space for the care provider's taxpayer identification number. 1040x amended return instructions How To Figure the Credit Your credit is a percentage of your work-related expenses. 1040x amended return instructions Your expenses are subject to the earned income limit and the dollar limit. 1040x amended return instructions The percentage is based on your adjusted gross income. 1040x amended return instructions Figuring Total Work-Related Expenses To figure the credit for 2013 work-related expenses, count only those you paid by December 31, 2013. 1040x amended return instructions Expenses prepaid in an earlier year. 1040x amended return instructions   If you pay for services before they are provided, you can count the prepaid expenses only in the year the care is received. 1040x amended return instructions Claim the expenses for the later year as if they were actually paid in that later year. 1040x amended return instructions Expenses not paid until the following year. 1040x amended return instructions   Do not count 2012 expenses that you paid in 2013 as work-related expenses for 2013. 1040x amended return instructions You may be able to claim an additional credit for them on your 2013 return, but you must figure it separately. 1040x amended return instructions See Payments for prior year's expenses under Amount of Credit in Publication 503. 1040x amended return instructions    If you had expenses in 2013 that you did not pay until 2014, you cannot count them when figuring your 2013 credit. 1040x amended return instructions You may be able to claim a credit for them on your 2014 return. 1040x amended return instructions Expenses reimbursed. 1040x amended return instructions   If a state social services agency pays you a nontaxable amount to reimburse you for some of your child and dependent care expenses, you cannot count the expenses that are reimbursed as work-related expenses. 1040x amended return instructions Example. 1040x amended return instructions You paid work-related expenses of $3,000. 1040x amended return instructions You are reimbursed $2,000 by a state social services agency. 1040x amended return instructions You can use only $1,000 to figure your credit. 1040x amended return instructions Medical expenses. 1040x amended return instructions   Some expenses for the care of qualifying persons who are not able to care for themselves may qualify as work-related expenses and also as medical expenses. 1040x amended return instructions You can use them either way, but you cannot use the same expenses to claim both a credit and a medical expense deduction. 1040x amended return instructions   If you use these expenses to figure the credit and they are more than the earned income limit or the dollar limit, discussed later, you can add the excess to your medical expenses. 1040x amended return instructions However, if you use your total expenses to figure your medical expense deduction, you cannot use any part of them to figure your credit. 1040x amended return instructions    Amounts excluded from your income under your employer's dependent care benefits plan cannot be used to claim a medical expense deduction. 1040x amended return instructions Dependent Care Benefits If you receive dependent care benefits, your dollar limit for purposes of the credit may be reduced. 1040x amended return instructions See Reduced Dollar Limit , later. 1040x amended return instructions But, even if you cannot take the credit, you may be able to take an exclusion or deduction for the dependent care benefits. 1040x amended return instructions Dependent care benefits. 1040x amended return instructions   Dependent care benefits include: Amounts your employer paid directly to either you or your care provider for the care of your qualifying person while you work, The fair market value of care in a daycare facility provided or sponsored by your employer, and Pre-tax contributions you made under a dependent care flexible spending arrangement. 1040x amended return instructions Your salary may have been reduced to pay for these benefits. 1040x amended return instructions If you received benefits as an employee, they should be shown in box 10 of your Form W-2. 1040x amended return instructions See Statement for employee , later. 1040x amended return instructions Benefits you received as a partner should be shown in box 13 of your Schedule K-1 (Form 1065) with code O. 1040x amended return instructions Enter the amount of these benefits on Form 2441, Part III, line 12. 1040x amended return instructions Exclusion or deduction. 1040x amended return instructions   If your employer provides dependent care benefits under a qualified plan, you may be able to exclude these benefits from your income. 1040x amended return instructions Your employer can tell you whether your benefit plan qualifies. 1040x amended return instructions To claim the exclusion, you must complete Part III of Form 2441. 1040x amended return instructions You cannot use Form 1040EZ. 1040x amended return instructions   If you are self-employed and receive benefits from a qualified dependent care benefit plan, you are treated as both employer and employee. 1040x amended return instructions Therefore, you would not get an exclusion from wages. 1040x amended return instructions Instead, you would get a deduction on Form 1040, Schedule C, line 14; Schedule E, line 19 or 28; or Schedule F, line 15. 1040x amended return instructions To claim the deduction, you must use Form 2441. 1040x amended return instructions   The amount you can exclude or deduct is limited to the smallest of: The total amount of dependent care benefits you received during the year, The total amount of qualified expenses you incurred during the year, Your earned income, Your spouse's earned income, or $5,000 ($2,500 if married filing separately). 1040x amended return instructions The definition of earned income for the exclusion or deduction is the same as the definition used when figuring the credit except that earned income for the exclusion or deduction does not include any dependent care benefits you receive. 1040x amended return instructions See Earned Income Limit, later. 1040x amended return instructions    You can choose to include your nontaxable combat pay in earned income when figuring your exclusion or deduction, even if you choose not to include it in earned income for the earned income credit or the credit for child and dependent care expenses. 1040x amended return instructions Statement for employee. 1040x amended return instructions   Your employer must give you a Form W-2 (or similar statement) showing in box 10 the total amount of dependent care benefits provided to you during the year under a qualified plan. 1040x amended return instructions Your employer will also include any dependent care benefits over $5,000 in your wages shown on your Form W-2 in box 1. 1040x amended return instructions Effect of exclusion on credit. 1040x amended return instructions   If you exclude dependent care benefits from your income, the amount of the excluded benefits: Is not included in your work-related expenses, and Reduces the dollar limit, discussed later. 1040x amended return instructions Earned Income Limit The amount of work-related expenses you use to figure your credit cannot be more than: Your earned income for the year if you are single at the end of the year, or The smaller of your or your spouse's earned income for the year if you are married at the end of the year. 1040x amended return instructions Earned income is defined under Earned Income Test , earlier. 1040x amended return instructions For purposes of item (2), use your spouse's earned income for the entire year, even if you were married for only part of the year. 1040x amended return instructions Separated spouse. 1040x amended return instructions   If you are legally separated or married and living apart from your spouse (as described under Joint Return Test , earlier), you are not considered married for purposes of the earned income limit. 1040x amended return instructions Use only your income in figuring the earned income limit. 1040x amended return instructions Surviving spouse. 1040x amended return instructions   If your spouse died during the year and you file a joint return as a surviving spouse, you may, but are not required to, take into account the earned income of your spouse who died during the year. 1040x amended return instructions Community property laws. 1040x amended return instructions   You should disregard community property laws when you figure earned income for this credit. 1040x amended return instructions You or your spouse is a student or not able to care for self. 1040x amended return instructions   Your spouse who is either a full-time student or not able to care for himself or herself is treated as having earned income. 1040x amended return instructions His or her earned income for each month is considered to be at least $250 if there is one qualifying person in your home, or at least $500 if there are two or more. 1040x amended return instructions Spouse works. 1040x amended return instructions   If your spouse works during that month, use the higher of $250 (or $500) or his or her actual earned income for that month. 1040x amended return instructions Spouse qualifies for part of month. 1040x amended return instructions    If your spouse is a full-time student or not able to care for himself or herself for only part of a month, the full $250 (or $500) still applies for that month. 1040x amended return instructions You are a student or not able to care for self. 1040x amended return instructions   These rules also apply if you are a student or not able to care for yourself and you are filing a joint return. 1040x amended return instructions For each month or part of a month you are a student or not able to care for yourself, your earned income is considered to be at least $250 (or $500). 1040x amended return instructions If you also work during that month, use the higher of $250 (or $500) or your actual earned income for that month. 1040x amended return instructions Both spouses qualify. 1040x amended return instructions   If, in the same month, both you and your spouse are either full-time students or not able to care for yourselves, only one spouse can be considered to have this earned income of $250 (or $500) for that month. 1040x amended return instructions Dollar Limit There is a dollar limit on the amount of your work-related expenses you can use to figure the credit. 1040x amended return instructions This limit is $3,000 for one qualifying person, or $6,000 for two or more qualifying persons. 1040x amended return instructions If you paid work-related expenses for the care of two or more qualifying persons, the applicable dollar limit is $6,000. 1040x amended return instructions This $6,000 limit does not need to be divided equally among them. 1040x amended return instructions For example, if your work-related expenses for the care of one qualifying person are $3,200 and your work-related expenses for another qualifying person are $2,800, you can use the total, $6,000, when figuring the credit. 1040x amended return instructions Yearly limit. 1040x amended return instructions   The dollar limit is a yearly limit. 1040x amended return instructions The amount of the dollar limit remains the same no matter how long, during the year, you have a qualifying person in your household. 1040x amended return instructions Use the $3,000 limit if you paid work-related expenses for the care of one qualifying person at any time during the year. 1040x amended return instructions Use $6,000 if you paid work-related expenses for the care of more than one qualifying person at any time during the year. 1040x amended return instructions Reduced Dollar Limit If you received dependent care benefits that you exclude or deduct from your income, you must subtract that amount from the dollar limit that applies to you. 1040x amended return instructions Your reduced dollar limit is figured on Form 2441, Part III. 1040x amended return instructions See Dependent Care Benefits , earlier, for information on excluding or deducting these benefits. 1040x amended return instructions Example 1. 1040x amended return instructions George is a widower with one child and earns $24,000 a year. 1040x amended return instructions He pays work-related expenses of $2,900 for the care of his 4-year-old child and qualifies to claim the credit for child and dependent care expenses. 1040x amended return instructions His employer pays an additional $1,000 under a dependent care benefit plan. 1040x amended return instructions This $1,000 is excluded from George's income. 1040x amended return instructions Although the dollar limit for his work-related expenses is $3,000 (one qualifying person), George figures his credit on only $2,000 of the $2,900 work-related expenses he paid. 1040x amended return instructions This is because his dollar limit is reduced as shown next. 1040x amended return instructions   George's Reduced Dollar Limit 1) Maximum allowable expenses for one qualifying person $3,000 2) Minus: Dependent care benefits George excludes from income −1,000 3) Reduced dollar limit on expenses George can use for the credit $2,000 Example 2. 1040x amended return instructions Randall is married and both he and his wife are employed. 1040x amended return instructions Each has earned income in excess of $6,000. 1040x amended return instructions They have two children, Anne and Andy, ages 2 and 4, who attend a daycare facility licensed and regulated by the state. 1040x amended return instructions Randall's work-related expenses are $6,000 for the year. 1040x amended return instructions Randall's employer has a dependent care assistance program as part of its cafeteria plan, which allows employees to make pre-tax contributions to a dependent care flexible spending arrangement. 1040x amended return instructions Randall has elected to take the maximum $5,000 exclusion from his salary to cover dependent care expenses through this program. 1040x amended return instructions Although the dollar limit for his work- related expenses is $6,000 (two or more qualifying persons), Randall figures his credit on only $1,000 of the $6,000 work-related expense paid. 1040x amended return instructions This is because his dollar limit is reduced as shown next. 1040x amended return instructions   Randall's Reduced Dollar Limit 1) Maximum allowable expenses for two qualifying persons $6,000 2) Minus: Dependent care benefits Randall selects from employer's cafeteria plan and excludes from income −5,000 3) Reduced dollar limit on expenses Randall can use for the credit $1,000 Amount of Credit To determine the amount of your credit, multiply your work-related expenses (after applying the earned income and dollar limits) by a percentage. 1040x amended return instructions This percentage depends on your adjusted gross income shown on Form 1040, line 38, or Form 1040A, line 22. 1040x amended return instructions The following table shows the percentage to use based on adjusted gross income. 1040x amended return instructions   IF your adjusted gross income is: THEN the percentage is:       Over   But not over         $0   $15,000   35%       15,000   17,000   34%       17,000   19,000   33%       19,000   21,000   32%       21,000   23,000   31%       23,000   25,000   30%       25,000   27,000   29%       27,000   29,000   28%       29,000   31,000   27%       31,000   33,000   26%       33,000   35,000   25%       35,000   37,000   24%       37,000   39,000   23%       39,000   41,000   22%       41,000   43,000   21%       43,000   No limit   20%   How To Claim the Credit To claim the credit, you can file Form 1040 or Form 1040A. 1040x amended return instructions You cannot claim the credit on Form 1040EZ. 1040x amended return instructions Form 1040 or 1040A. 1040x amended return instructions   You must complete Form 2441 and attach it to your Form 1040 or 1040A. 1040x amended return instructions Enter the credit on Form 1040, line 48, or Form 1040A, line 29. 1040x amended return instructions Limit on credit. 1040x amended return instructions   The amount of credit you can claim is generally limited to the amount of your tax. 1040x amended return instructions For more information, see the Instructions for Form 2441. 1040x amended return instructions Tax credit not refundable. 1040x amended return instructions   You cannot get a refund for any part of the credit that is more than this limit. 1040x amended return instructions Recordkeeping. 1040x amended return instructions You should keep records of your work-related expenses. 1040x amended return instructions Also, if your dependent or spouse is not able to care for himself or herself, your records should show both the nature and the length of the disability. 1040x amended return instructions Other records you should keep to support your claim for the credit are described earlier under Provider Identification Test . 1040x amended return instructions Employment Taxes for Household Employers If you pay someone to come to your home and care for your dependent or spouse, you may be a household employer. 1040x amended return instructions If you are a household employer, you will need an employer identification number (EIN) and you may have to pay employment taxes. 1040x amended return instructions If the individuals who work in your home are self-employed, you are not liable for any of the taxes discussed in this section. 1040x amended return instructions Self-employed persons who are in business for themselves are not household employees. 1040x amended return instructions Usually, you are not a household employer if the person who cares for your dependent or spouse does so at his or her home or place of business. 1040x amended return instructions If you use a placement agency that exercises control over what work is done and how it will be done by a babysitter or companion who works in your home, the worker is not your employee. 1040x amended return instructions This control could include providing rules of conduct and appearance and requiring regular reports. 1040x amended return instructions In this case, you do not have to pay employment taxes. 1040x amended return instructions But, if an agency merely gives you a list of sitters and you hire one from that list, and pay the sitter directly, the sitter may be your employee. 1040x amended return instructions If you have a household employee, you may be subject to: Social security and Medicare taxes, Federal unemployment tax, and Federal income tax withholding. 1040x amended return instructions Social security and Medicare taxes are generally withheld from the employee's pay and matched by the employer. 1040x amended return instructions Federal unemployment (FUTA) tax is paid by the employer only and provides for payments of unemployment compensation to workers who have lost their jobs. 1040x amended return instructions Federal income tax is withheld from the employee's total pay if the employee asks you to do so and you agree. 1040x amended return instructions For more information on a household employer's tax responsibilities, see Publication 926 and Schedule H (Form 1040) and its instructions. 1040x amended return instructions State employment tax. 1040x amended return instructions   You may also have to pay state unemployment tax. 1040x amended return instructions Contact your state unemployment tax office for information. 1040x amended return instructions You should also find out whether you need to pay or collect other state employment taxes or carry workers' compensation insurance. 1040x amended return instructions For a list of state unemployment tax agencies, visit the U. 1040x amended return instructions S. 1040x amended return instructions Department of Labor's website. 1040x amended return instructions A link to that website is in Publication 926, or you can find it with an online search. 1040x amended return instructions Prev  Up  Next   Home   More Online Publications