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1040x Amended Tax Return

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1040x Amended Tax Return

1040x amended tax return 4. 1040x amended tax return   Interest Table of Contents Introduction Topics - This chapter discusses: Useful Items - You may want to see: Allocation of InterestOrder of funds spent. 1040x amended tax return Payments from checking accounts. 1040x amended tax return Amounts paid within 30 days. 1040x amended tax return Optional method for determining date of reallocation. 1040x amended tax return Interest on a segregated account. 1040x amended tax return How to report. 1040x amended tax return Interest You Can DeductStatement. 1040x amended tax return Expenses paid to obtain a mortgage. 1040x amended tax return Prepayment penalty. 1040x amended tax return De minimis OID. 1040x amended tax return Constant-yield method. 1040x amended tax return Loan or mortgage ends. 1040x amended tax return Interest You Cannot DeductPenalties. 1040x amended tax return Who is a key person? Exceptions for pre-June 1997 contracts. 1040x amended tax return Interest allocated to unborrowed policy cash value. 1040x amended tax return Capitalization of Interest When To Deduct InterestPrepaid interest. 1040x amended tax return Discounted loan. 1040x amended tax return Refunds of interest. 1040x amended tax return Prepaid interest. 1040x amended tax return Discounted loan. 1040x amended tax return Tax deficiency. 1040x amended tax return Related person. 1040x amended tax return Below-Market LoansLimit on forgone interest for gift loans of $100,000 or less. 1040x amended tax return Introduction This chapter discusses the tax treatment of business interest expense. 1040x amended tax return Business interest expense is an amount charged for the use of money you borrowed for business activities. 1040x amended tax return Topics - This chapter discusses: Allocation of interest Interest you can deduct Interest you cannot deduct Capitalization of interest When to deduct interest Below-market loans Useful Items - You may want to see: Publication 537 Installment Sales 550 Investment Income and Expenses 936 Home Mortgage Interest Deduction Form (and Instructions) Sch A (Form 1040) Itemized Deductions Sch E (Form 1040) Supplemental Income and Loss Sch K-1 (Form 1065) Partner's Share of Income, Deductions, Credits, etc. 1040x amended tax return Sch K-1 (Form 1120S) Shareholder's Share of Income, Deductions, Credits, etc. 1040x amended tax return 1098 Mortgage Interest Statement 3115 Application for Change in Accounting Method 4952 Investment Interest Expense Deduction 8582 Passive Activity Loss Limitations See chapter 12 for information about getting publications and forms. 1040x amended tax return Allocation of Interest The rules for deducting interest vary, depending on whether the loan proceeds are used for business, personal, or investment activities. 1040x amended tax return If you use the proceeds of a loan for more than one type of expense, you must allocate the interest based on the use of the loan's proceeds. 1040x amended tax return Allocate your interest expense to the following categories. 1040x amended tax return Nonpassive trade or business activity interest Passive trade or business activity interest Investment interest Portfolio interest Personal interest In general, you allocate interest on a loan the same way you allocate the loan proceeds. 1040x amended tax return You allocate loan proceeds by tracing disbursements to specific uses. 1040x amended tax return The easiest way to trace disbursements to specific uses is to keep the proceeds of a particular loan separate from any other funds. 1040x amended tax return Secured loan. 1040x amended tax return   The allocation of loan proceeds and the related interest is not generally affected by the use of property that secures the loan. 1040x amended tax return Example. 1040x amended tax return You secure a loan with property used in your business. 1040x amended tax return You use the loan proceeds to buy an automobile for personal use. 1040x amended tax return You must allocate interest expense on the loan to personal use (purchase of the automobile) even though the loan is secured by business property. 1040x amended tax return    If the property that secures the loan is your home, you generally do not allocate the loan proceeds or the related interest. 1040x amended tax return The interest is usually deductible as qualified home mortgage interest, regardless of how the loan proceeds are used. 1040x amended tax return For more information, see Publication 936. 1040x amended tax return Allocation period. 1040x amended tax return   The period for which a loan is allocated to a particular use begins on the date the proceeds are used and ends on the earlier of the following dates. 1040x amended tax return The date the loan is repaid. 1040x amended tax return The date the loan is reallocated to another use. 1040x amended tax return Proceeds not disbursed to borrower. 1040x amended tax return   Even if the lender disburses the loan proceeds to a third party, the allocation of the loan is still based on your use of the funds. 1040x amended tax return This applies whether you pay for property, services, or anything else by incurring a loan, or you take property subject to a debt. 1040x amended tax return Proceeds deposited in borrower's account. 1040x amended tax return   Treat loan proceeds deposited in an account as property held for investment. 1040x amended tax return It does not matter whether the account pays interest. 1040x amended tax return Any interest you pay on the loan is investment interest expense. 1040x amended tax return If you withdraw the proceeds of the loan, you must reallocate the loan based on the use of the funds. 1040x amended tax return Example. 1040x amended tax return Celina, a calendar-year taxpayer, borrows $100,000 on January 4 and immediately uses the proceeds to open a checking account. 1040x amended tax return No other amounts are deposited in the account during the year and no part of the loan principal is repaid during the year. 1040x amended tax return On April 2, Celina uses $20,000 from the checking account for a passive activity expenditure. 1040x amended tax return On September 4, Celina uses an additional $40,000 from the account for personal purposes. 1040x amended tax return Under the interest allocation rules, the entire $100,000 loan is treated as property held for investment for the period from January 4 through April 1. 1040x amended tax return From April 2 through September 3, Celina must treat $20,000 of the loan as used in the passive activity and $80,000 of the loan as property held for investment. 1040x amended tax return From September 4 through December 31, she must treat $40,000 of the loan as used for personal purposes, $20,000 as used in the passive activity, and $40,000 as property held for investment. 1040x amended tax return Order of funds spent. 1040x amended tax return   Generally, you treat loan proceeds deposited in an account as used (spent) before either of the following amounts. 1040x amended tax return Any unborrowed amounts held in the same account. 1040x amended tax return Any amounts deposited after these loan proceeds. 1040x amended tax return Example. 1040x amended tax return On January 9, Olena opened a checking account, depositing $500 of the proceeds of Loan A and $1,000 of unborrowed funds. 1040x amended tax return The following table shows the transactions in her account during the tax year. 1040x amended tax return Date Transaction January 9 $500 proceeds of Loan A and $1,000 unborrowed funds deposited January 14 $500 proceeds of Loan B  deposited February 19 $800 used for personal purposes February 27 $700 used for passive activity June 19 $1,000 proceeds of Loan C  deposited November 20 $800 used for an investment December 18 $600 used for personal purposes Olena treats the $800 used for personal purposes as made from the $500 proceeds of Loan A and $300 of the proceeds of Loan B. 1040x amended tax return She treats the $700 used for a passive activity as made from the remaining $200 proceeds of Loan B and $500 of unborrowed funds. 1040x amended tax return She treats the $800 used for an investment as made entirely from the proceeds of Loan C. 1040x amended tax return She treats the $600 used for personal purposes as made from the remaining $200 proceeds of Loan C and $400 of unborrowed funds. 1040x amended tax return For the periods during which loan proceeds are held in the account, Olena treats them as property held for investment. 1040x amended tax return Payments from checking accounts. 1040x amended tax return   Generally, you treat a payment from a checking or similar account as made at the time the check is written if you mail or deliver it to the payee within a reasonable period after you write it. 1040x amended tax return You can treat checks written on the same day as written in any order. 1040x amended tax return Amounts paid within 30 days. 1040x amended tax return   If you receive loan proceeds in cash or if the loan proceeds are deposited in an account, you can treat any payment (up to the amount of the proceeds) made from any account you own, or from cash, as made from those proceeds. 1040x amended tax return This applies to any payment made within 30 days before or after the proceeds are received in cash or deposited in your account. 1040x amended tax return   If the loan proceeds are deposited in an account, you can apply this rule even if the rules stated earlier under Order of funds spent would otherwise require you to treat the proceeds as used for other purposes. 1040x amended tax return If you apply this rule to any payments, disregard those payments (and the proceeds from which they are made) when applying the rules stated under Order of funds spent. 1040x amended tax return   If you received the loan proceeds in cash, you can treat the payment as made on the date you received the cash instead of the date you actually made the payment. 1040x amended tax return Example. 1040x amended tax return Giovanni gets a loan of $1,000 on August 4 and receives the proceeds in cash. 1040x amended tax return Giovanni deposits $1,500 in an account on August 18 and on August 28 writes a check on the account for a passive activity expense. 1040x amended tax return Also, Giovanni deposits his paycheck, deposits other loan proceeds, and pays his bills during the same period. 1040x amended tax return Regardless of these other transactions, Giovanni can treat $1,000 of the deposit he made on August 18 as being paid on August 4 from the loan proceeds. 1040x amended tax return In addition, Giovanni can treat the passive activity expense he paid on August 28 as made from the $1,000 loan proceeds treated as deposited in the account. 1040x amended tax return Optional method for determining date of reallocation. 1040x amended tax return   You can use the following method to determine the date loan proceeds are reallocated to another use. 1040x amended tax return You can treat all payments from loan proceeds in the account during any month as taking place on the later of the following dates. 1040x amended tax return The first day of that month. 1040x amended tax return The date the loan proceeds are deposited in the account. 1040x amended tax return However, you can use this optional method only if you treat all payments from the account during the same calendar month in the same way. 1040x amended tax return Interest on a segregated account. 1040x amended tax return   If you have an account that contains only loan proceeds and interest earned on the account, you can treat any payment from that account as being made first from the interest. 1040x amended tax return When the interest earned is used up, any remaining payments are from loan proceeds. 1040x amended tax return Example. 1040x amended tax return You borrowed $20,000 and used the proceeds of this loan to open a new savings account. 1040x amended tax return When the account had earned interest of $867, you withdrew $20,000 for personal purposes. 1040x amended tax return You can treat the withdrawal as coming first from the interest earned on the account, $867, and then from the loan proceeds, $19,133 ($20,000 − $867). 1040x amended tax return All the interest charged on the loan from the time it was deposited in the account until the time of the withdrawal is investment interest expense. 1040x amended tax return The interest charged on the part of the proceeds used for personal purposes ($19,133) from the time you withdrew it until you either repay it or reallocate it to another use is personal interest expense. 1040x amended tax return The interest charged on the loan proceeds you left in the account ($867) continues to be investment interest expense until you either repay it or reallocate it to another use. 1040x amended tax return Loan repayment. 1040x amended tax return   When you repay any part of a loan allocated to more than one use, treat it as being repaid in the following order. 1040x amended tax return Personal use. 1040x amended tax return Investments and passive activities (other than those included in (3)). 1040x amended tax return Passive activities in connection with a rental real estate activity in which you actively participate. 1040x amended tax return Former passive activities. 1040x amended tax return Trade or business use and expenses for certain low-income housing projects. 1040x amended tax return Line of credit (continuous borrowings). 1040x amended tax return   The following rules apply if you have a line of credit or similar arrangement. 1040x amended tax return Treat all borrowed funds on which interest accrues at the same fixed or variable rate as a single loan. 1040x amended tax return Treat borrowed funds or parts of borrowed funds on which interest accrues at different fixed or variable rates as different loans. 1040x amended tax return Treat these loans as repaid in the order shown on the loan agreement. 1040x amended tax return Loan refinancing. 1040x amended tax return   Allocate the replacement loan to the same uses to which the repaid loan was allocated. 1040x amended tax return Make the allocation only to the extent you use the proceeds of the new loan to repay any part of the original loan. 1040x amended tax return Debt-financed distribution. 1040x amended tax return   A debt-financed distribution occurs when a partnership or S corporation borrows funds and allocates those funds to distributions made to partners or shareholders. 1040x amended tax return The manner in which you report the interest expense associated with the distributed debt proceeds depends on your use of those proceeds. 1040x amended tax return How to report. 1040x amended tax return   If the proceeds were used in a nonpassive trade or business activity, report the interest on Schedule E (Form 1040), line 28; enter “interest expense” and the name of the partnership or S corporation in column (a) and the amount in column (h). 1040x amended tax return If the proceeds were used in a passive activity, follow the Instructions for Form 8582, Passive Activity Loss Limitations, to determine the amount of interest expense that can be reported on Schedule E (Form 1040), line 28; enter “interest expense” and the name of the partnership in column (a) and the amount in column (f). 1040x amended tax return If the proceeds were used in an investment activity, enter the interest on Form 4952. 1040x amended tax return If the proceeds are used for personal purposes, the interest is generally not deductible. 1040x amended tax return Interest You Can Deduct You can generally deduct as a business expense all interest you pay or accrue during the tax year on debts related to your trade or business. 1040x amended tax return Interest relates to your trade or business if you use the proceeds of the loan for a trade or business expense. 1040x amended tax return It does not matter what type of property secures the loan. 1040x amended tax return You can deduct interest on a debt only if you meet all the following requirements. 1040x amended tax return You are legally liable for that debt. 1040x amended tax return Both you and the lender intend that the debt be repaid. 1040x amended tax return You and the lender have a true debtor-creditor relationship. 1040x amended tax return Partial liability. 1040x amended tax return   If you are liable for part of a business debt, you can deduct only your share of the total interest paid or accrued. 1040x amended tax return Example. 1040x amended tax return You and your brother borrow money. 1040x amended tax return You are liable for 50% of the note. 1040x amended tax return You use your half of the loan in your business, and you make one-half of the loan payments. 1040x amended tax return You can deduct your half of the total interest payments as a business deduction. 1040x amended tax return Mortgage. 1040x amended tax return   Generally, mortgage interest paid or accrued on real estate you own legally or equitably is deductible. 1040x amended tax return However, rather than deducting the interest currently, you may have to add it to the cost basis of the property as explained later under Capitalization of Interest. 1040x amended tax return Statement. 1040x amended tax return   If you paid $600 or more of mortgage interest (including certain points) during the year on any one mortgage, you generally will receive a Form 1098 or a similar statement. 1040x amended tax return You will receive the statement if you pay interest to a person (including a financial institution or a cooperative housing corporation) in the course of that person's trade or business. 1040x amended tax return A governmental unit is a person for purposes of furnishing the statement. 1040x amended tax return   If you receive a refund of interest you overpaid in an earlier year, this amount will be reported in box 3 of Form 1098. 1040x amended tax return You cannot deduct this amount. 1040x amended tax return For information on how to report this refund, see Refunds of interest, later in this chapter. 1040x amended tax return Expenses paid to obtain a mortgage. 1040x amended tax return   Certain expenses you pay to obtain a mortgage cannot be deducted as interest. 1040x amended tax return These expenses, which include mortgage commissions, abstract fees, and recording fees, are capital expenses. 1040x amended tax return If the property mortgaged is business or income-producing property, you can amortize the costs over the life of the mortgage. 1040x amended tax return Prepayment penalty. 1040x amended tax return   If you pay off your mortgage early and pay the lender a penalty for doing this, you can deduct the penalty as interest. 1040x amended tax return Interest on employment tax deficiency. 1040x amended tax return   Interest charged on employment taxes assessed on your business is deductible. 1040x amended tax return Original issue discount (OID). 1040x amended tax return   OID is a form of interest. 1040x amended tax return A loan (mortgage or other debt) generally has OID when its proceeds are less than its principal amount. 1040x amended tax return The OID is the difference between the stated redemption price at maturity and the issue price of the loan. 1040x amended tax return   A loan's stated redemption price at maturity is the sum of all amounts (principal and interest) payable on it other than qualified stated interest. 1040x amended tax return Qualified stated interest is stated interest that is unconditionally payable in cash or property (other than another loan of the issuer) at least annually over the term of the loan at a single fixed rate. 1040x amended tax return You generally deduct OID over the term of the loan. 1040x amended tax return Figure the amount to deduct each year using the constant-yield method, unless the OID on the loan is de minimis. 1040x amended tax return De minimis OID. 1040x amended tax return   The OID is de minimis if it is less than one-fourth of 1% (. 1040x amended tax return 0025) of the stated redemption price of the loan at maturity multiplied by the number of full years from the date of original issue to maturity (the term of the loan). 1040x amended tax return   If the OID is de minimis, you can choose one of the following ways to figure the amount you can deduct each year. 1040x amended tax return On a constant-yield basis over the term of the loan. 1040x amended tax return On a straight-line basis over the term of the loan. 1040x amended tax return In proportion to stated interest payments. 1040x amended tax return In its entirety at maturity of the loan. 1040x amended tax return You make this choice by deducting the OID in a manner consistent with the method chosen on your timely filed tax return for the tax year in which the loan is issued. 1040x amended tax return Example. 1040x amended tax return On January 1, 2013, you took out a $100,000 discounted loan and received $98,500 in proceeds. 1040x amended tax return The loan will mature on January 1, 2023 (a 10-year term), and the $100,000 principal is payable on that date. 1040x amended tax return Interest of $10,000 is payable on January 1 of each year, beginning January 1, 2014. 1040x amended tax return The $1,500 OID on the loan is de minimis because it is less than $2,500 ($100,000 × . 1040x amended tax return 0025 × 10). 1040x amended tax return You choose to deduct the OID on a straight-line basis over the term of the loan. 1040x amended tax return Beginning in 2013, you can deduct $150 each year for 10 years. 1040x amended tax return Constant-yield method. 1040x amended tax return   If the OID is not de minimis, you must use the constant-yield method to figure how much you can deduct each year. 1040x amended tax return You figure your deduction for the first year using the following steps. 1040x amended tax return Determine the issue price of the loan. 1040x amended tax return Generally, this equals the proceeds of the loan. 1040x amended tax return If you paid points on the loan (as discussed later), the issue price generally is the difference between the proceeds and the points. 1040x amended tax return Multiply the result in (1) by the yield to maturity. 1040x amended tax return Subtract any qualified stated interest payments from the result in (2). 1040x amended tax return This is the OID you can deduct in the first year. 1040x amended tax return   To figure your deduction in any subsequent year, follow the above steps, except determine the adjusted issue price in step (1). 1040x amended tax return To get the adjusted issue price, add to the issue price any OID previously deducted. 1040x amended tax return Then follow steps (2) and (3) above. 1040x amended tax return   The yield to maturity is generally shown in the literature you receive from your lender. 1040x amended tax return If you do not have this information, consult your lender or tax advisor. 1040x amended tax return In general, the yield to maturity is the discount rate that, when used in computing the present value of all principal and interest payments, produces an amount equal to the principal amount of the loan. 1040x amended tax return Example. 1040x amended tax return The facts are the same as in the previous example, except that you deduct the OID on a constant yield basis over the term of the loan. 1040x amended tax return The yield to maturity on your loan is 10. 1040x amended tax return 2467%, compounded annually. 1040x amended tax return For 2013, you can deduct $93 [($98,500 × . 1040x amended tax return 102467) − $10,000]. 1040x amended tax return For 2014, you can deduct $103 [($98,593 × . 1040x amended tax return 102467) − $10,000]. 1040x amended tax return Loan or mortgage ends. 1040x amended tax return   If your loan or mortgage ends, you may be able to deduct any remaining OID in the tax year in which the loan or mortgage ends. 1040x amended tax return A loan or mortgage may end due to a refinancing, prepayment, foreclosure, or similar event. 1040x amended tax return If you refinance with the original lender, you generally cannot deduct the remaining OID in the year in which the refinancing occurs, but you may be able to deduct it over the term of the new mortgage or loan. 1040x amended tax return See Interest paid with funds borrowed from original lender under Interest You Cannot Deduct, later. 1040x amended tax return Points. 1040x amended tax return   The term “points” is used to describe certain charges paid, or treated as paid, by a borrower to obtain a loan or a mortgage. 1040x amended tax return These charges are also called loan origination fees, maximum loan charges, discount points, or premium charges. 1040x amended tax return If any of these charges (points) are solely for the use of money, they are interest. 1040x amended tax return   Because points are prepaid interest, you generally cannot deduct the full amount in the year paid. 1040x amended tax return However, you can choose to fully deduct points in the year paid if you meet certain tests. 1040x amended tax return For exceptions to the general rule, see Publication 936. 1040x amended tax return The points reduce the issue price of the loan and result in original issue discount (OID), deductible as explained in the preceding discussion. 1040x amended tax return Partial payments on a nontax debt. 1040x amended tax return   If you make partial payments on a debt (other than a debt owed the IRS), the payments are applied, in general, first to interest and any remainder to principal. 1040x amended tax return You can deduct only the interest. 1040x amended tax return This rule does not apply when it can be inferred that the borrower and lender understood that a different allocation of the payments would be made. 1040x amended tax return Installment purchase. 1040x amended tax return   If you make an installment purchase of business property, the contract between you and the seller generally provides for the payment of interest. 1040x amended tax return If no interest or a low rate of interest is charged under the contract, a portion of the stated principal amount payable under the contract may be recharacterized as interest (unstated interest). 1040x amended tax return The amount recharacterized as interest reduces your basis in the property and increases your interest expense. 1040x amended tax return For more information on installment sales and unstated interest, see Publication 537. 1040x amended tax return Interest You Cannot Deduct Certain interest payments cannot be deducted. 1040x amended tax return In addition, certain other expenses that may seem to be interest but are not, cannot be deducted as interest. 1040x amended tax return You cannot currently deduct interest that must be capitalized, and you generally cannot deduct personal interest. 1040x amended tax return Interest paid with funds borrowed from original lender. 1040x amended tax return   If you use the cash method of accounting, you cannot deduct interest you pay with funds borrowed from the original lender through a second loan, an advance, or any other arrangement similar to a loan. 1040x amended tax return You can deduct the interest expense once you start making payments on the new loan. 1040x amended tax return   When you make a payment on the new loan, you first apply the payment to interest and then to the principal. 1040x amended tax return All amounts you apply to the interest on the first loan are deductible, along with any interest you pay on the second loan, subject to any limits that apply. 1040x amended tax return Capitalized interest. 1040x amended tax return   You cannot currently deduct interest you are required to capitalize under the uniform capitalization rules. 1040x amended tax return See Capitalization of Interest, later. 1040x amended tax return In addition, if you buy property and pay interest owed by the seller (for example, by assuming the debt and any interest accrued on the property), you cannot deduct the interest. 1040x amended tax return Add this interest to the basis of the property. 1040x amended tax return Commitment fees or standby charges. 1040x amended tax return   Fees you incur to have business funds available on a standby basis, but not for the actual use of the funds, are not deductible as interest payments. 1040x amended tax return You may be able to deduct them as business expenses. 1040x amended tax return   If the funds are for inventory or certain property used in your business, the fees are indirect costs and you generally must capitalize them under the uniform capitalization rules. 1040x amended tax return See Capitalization of Interest, later. 1040x amended tax return Interest on income tax. 1040x amended tax return   Interest charged on income tax assessed on your individual income tax return is not a business deduction even though the tax due is related to income from your trade or business. 1040x amended tax return Treat this interest as a business deduction only in figuring a net operating loss deduction. 1040x amended tax return Penalties. 1040x amended tax return   Penalties on underpaid deficiencies and underpaid estimated tax are not interest. 1040x amended tax return You cannot deduct them. 1040x amended tax return Generally, you cannot deduct any fines or penalties. 1040x amended tax return Interest on loans with respect to life insurance policies. 1040x amended tax return   You generally cannot deduct interest on a debt incurred with respect to any life insurance, annuity, or endowment contract that covers any individual unless that individual is a key person. 1040x amended tax return   If the policy or contract covers a key person, you can deduct the interest on up to $50,000 of debt for that person. 1040x amended tax return However, the deduction for any month cannot be more than the interest figured using Moody's Composite Yield on Seasoned Corporate Bonds (formerly known as Moody's Corporate Bond Yield Average-Monthly Average Corporates) (Moody's rate) for that month. 1040x amended tax return Who is a key person?   A key person is an officer or 20% owner. 1040x amended tax return However, the number of individuals you can treat as key persons is limited to the greater of the following. 1040x amended tax return Five individuals. 1040x amended tax return The lesser of 5% of the total officers and employees of the company or 20 individuals. 1040x amended tax return Exceptions for pre-June 1997 contracts. 1040x amended tax return   You can generally deduct the interest if the contract was issued before June 9, 1997, and the covered individual is someone other than an employee, officer, or someone financially interested in your business. 1040x amended tax return If the contract was purchased before June 21, 1986, you can generally deduct the interest no matter who is covered by the contract. 1040x amended tax return Interest allocated to unborrowed policy cash value. 1040x amended tax return   Corporations and partnerships generally cannot deduct any interest expense allocable to unborrowed cash values of life insurance, annuity, or endowment contracts. 1040x amended tax return This rule applies to contracts issued after June 8, 1997, that cover someone other than an officer, director, employee, or 20% owner. 1040x amended tax return For more information, see section 264(f) of the Internal Revenue Code. 1040x amended tax return Capitalization of Interest Under the uniform capitalization rules, you generally must capitalize interest on debt equal to your expenditures to produce real property or certain tangible personal property. 1040x amended tax return The property must be produced by you for use in your trade or business or for sale to customers. 1040x amended tax return You cannot capitalize interest related to property that you acquire in any other manner. 1040x amended tax return Interest you paid or incurred during the production period must be capitalized if the property produced is designated property. 1040x amended tax return Designated property is any of the following. 1040x amended tax return Real property. 1040x amended tax return Tangible personal property with a class life of 20 years or more. 1040x amended tax return Tangible personal property with an estimated production period of more than 2 years. 1040x amended tax return Tangible personal property with an estimated production period of more than 1 year if the estimated cost of production is more than $1 million. 1040x amended tax return Property you produce. 1040x amended tax return   You produce property if you construct, build, install, manufacture, develop, improve, create, raise, or grow it. 1040x amended tax return Treat property produced for you under a contract as produced by you up to the amount you pay or incur for the property. 1040x amended tax return Carrying charges. 1040x amended tax return   Carrying charges include taxes you pay to carry or develop real estate or to carry, transport, or install personal property. 1040x amended tax return You can choose to capitalize carrying charges not subject to the uniform capitalization rules if they are otherwise deductible. 1040x amended tax return For more information, see chapter 7. 1040x amended tax return Capitalized interest. 1040x amended tax return   Treat capitalized interest as a cost of the property produced. 1040x amended tax return You recover your interest when you sell or use the property. 1040x amended tax return If the property is inventory, recover capitalized interest through cost of goods sold. 1040x amended tax return If the property is used in your trade or business, recover capitalized interest through an adjustment to basis, depreciation, amortization, or other method. 1040x amended tax return Partnerships and S corporations. 1040x amended tax return   The interest capitalization rules are applied first at the partnership or S corporation level. 1040x amended tax return The rules are then applied at the partners' or shareholders' level to the extent the partnership or S corporation has insufficient debt to support the production or construction costs. 1040x amended tax return   If you are a partner or a shareholder, you may have to capitalize interest you incur during the tax year for the production costs of the partnership or S corporation. 1040x amended tax return You may also have to capitalize interest incurred by the partnership or S corporation for your own production costs. 1040x amended tax return To properly capitalize interest under these rules, you must be given the required information in an attachment to the Schedule K-1 you receive from the partnership or S corporation. 1040x amended tax return Additional information. 1040x amended tax return   The procedures for applying the uniform capitalization rules are beyond the scope of this publication. 1040x amended tax return For more information, see sections 1. 1040x amended tax return 263A-8 through 1. 1040x amended tax return 263A-15 of the regulations and Notice 88-99. 1040x amended tax return Notice 88-99 is in Cumulative Bulletin 1988-2. 1040x amended tax return When To Deduct Interest If the uniform capitalization rules, discussed under Capitalization of Interest, earlier, do not apply to you, deduct interest as follows. 1040x amended tax return Cash method. 1040x amended tax return   Under the cash method, you can generally deduct only the interest you actually paid during the tax year. 1040x amended tax return You cannot deduct a promissory note you gave as payment because it is a promise to pay and not an actual payment. 1040x amended tax return Prepaid interest. 1040x amended tax return   You generally cannot deduct any interest paid before the year it is due. 1040x amended tax return Interest paid in advance can be deducted only in the tax year in which it is due. 1040x amended tax return Discounted loan. 1040x amended tax return   If interest or a discount is subtracted from your loan proceeds, it is not a payment of interest and you cannot deduct it when you get the loan. 1040x amended tax return For more information, see Original issue discount (OID) under Interest You Can Deduct, earlier. 1040x amended tax return Refunds of interest. 1040x amended tax return   If you pay interest and then receive a refund in the same tax year of any part of the interest, reduce your interest deduction by the refund. 1040x amended tax return If you receive the refund in a later tax year, include the refund in your income to the extent the deduction for the interest reduced your tax. 1040x amended tax return Accrual method. 1040x amended tax return   Under an accrual method, you can deduct only interest that has accrued during the tax year. 1040x amended tax return Prepaid interest. 1040x amended tax return   See Prepaid interest, earlier. 1040x amended tax return Discounted loan. 1040x amended tax return   See Discounted loan, earlier. 1040x amended tax return Tax deficiency. 1040x amended tax return   If you contest a federal income tax deficiency, interest does not accrue until the tax year the final determination of liability is made. 1040x amended tax return If you do not contest the deficiency, then the interest accrues in the year the tax was asserted and agreed to by you. 1040x amended tax return   However, if you contest but pay the proposed tax deficiency and interest, and you do not designate the payment as a cash bond, then the interest is deductible in the year paid. 1040x amended tax return Related person. 1040x amended tax return   If you use an accrual method, you cannot deduct interest owed to a related person who uses the cash method until payment is made and the interest is includible in the gross income of that person. 1040x amended tax return The relationship is determined as of the end of the tax year for which the interest would otherwise be deductible. 1040x amended tax return See section 267 of the Internal Revenue Code for more information. 1040x amended tax return Below-Market Loans If you receive a below-market gift or demand loan and use the proceeds in your trade or business, you may be able to deduct the forgone interest. 1040x amended tax return See Treatment of gift and demand loans, later, in this discussion. 1040x amended tax return A below-market loan is a loan on which no interest is charged or on which interest is charged at a rate below the applicable federal rate. 1040x amended tax return A gift or demand loan that is a below-market loan generally is considered an arm's-length transaction in which you, the borrower, are considered as having received both the following. 1040x amended tax return A loan in exchange for a note that requires the payment of interest at the applicable federal rate. 1040x amended tax return An additional payment in an amount equal to the forgone interest. 1040x amended tax return The additional payment is treated as a gift, dividend, contribution to capital, payment of compensation, or other payment, depending on the substance of the transaction. 1040x amended tax return Forgone interest. 1040x amended tax return   For any period, forgone interest is The interest that would be payable for that period if interest accrued on the loan at the applicable federal rate and was payable annually on December 31, minus Any interest actually payable on the loan for the period. 1040x amended tax return Applicable federal rates are published by the IRS each month in the Internal Revenue Bulletin. 1040x amended tax return Internal Revenue Bulletins are available on the IRS web site at www. 1040x amended tax return irs. 1040x amended tax return gov/irb. 1040x amended tax return You can also contact an IRS office to get these rates. 1040x amended tax return Loans subject to the rules. 1040x amended tax return   The rules for below-market loans apply to the following. 1040x amended tax return Gift loans (below-market loans where the forgone interest is in the nature of a gift). 1040x amended tax return Compensation-related loans (below-market loans between an employer and an employee or between an independent contractor and a person for whom the contractor provides services). 1040x amended tax return Corporation-shareholder loans. 1040x amended tax return Tax avoidance loans (below-market loans where the avoidance of federal tax is one of the main purposes of the interest arrangement). 1040x amended tax return Loans to qualified continuing care facilities under a continuing care contract (made after October 11, 1985). 1040x amended tax return   Except as noted in (5) above, these rules apply to demand loans (loans payable in full at any time upon the lender's demand) outstanding after June 6, 1984, and to term loans (loans that are not demand loans) made after that date. 1040x amended tax return Treatment of gift and demand loans. 1040x amended tax return   If you receive a below-market gift loan or demand loan, you are treated as receiving an additional payment (as a gift, dividend, etc. 1040x amended tax return ) equal to the forgone interest on the loan. 1040x amended tax return You are then treated as transferring this amount back to the lender as interest. 1040x amended tax return These transfers are considered to occur annually, generally on December 31. 1040x amended tax return If you use the loan proceeds in your trade or business, you can deduct the forgone interest each year as a business interest expense. 1040x amended tax return The lender must report it as interest income. 1040x amended tax return Limit on forgone interest for gift loans of $100,000 or less. 1040x amended tax return   For gift loans between individuals, forgone interest treated as transferred back to the lender is limited to the borrower's net investment income for the year. 1040x amended tax return This limit applies if the outstanding loans between the lender and borrower total $100,000 or less. 1040x amended tax return If the borrower's net investment income is $1,000 or less, it is treated as zero. 1040x amended tax return This limit does not apply to a loan if the avoidance of any federal tax is one of the main purposes of the interest arrangement. 1040x amended tax return Treatment of term loans. 1040x amended tax return   If you receive a below-market term loan other than a gift or demand loan, you are treated as receiving an additional cash payment (as a dividend, etc. 1040x amended tax return ) on the date the loan is made. 1040x amended tax return This payment is equal to the loan amount minus the present value, at the applicable federal rate, of all payments due under the loan. 1040x amended tax return The same amount is treated as original issue discount on the loan. 1040x amended tax return See Original issue discount (OID) under Interest You Can Deduct, earlier. 1040x amended tax return Exceptions for loans of $10,000 or less. 1040x amended tax return   The rules for below-market loans do not apply to any day on which the total outstanding loans between the borrower and lender is $10,000 or less. 1040x amended tax return This exception applies only to the following. 1040x amended tax return Gift loans between individuals if the loan is not directly used to buy or carry income-producing assets. 1040x amended tax return Compensation-related loans or corporation-shareholder loans if the avoidance of any federal tax is not a principal purpose of the interest arrangement. 1040x amended tax return This exception does not apply to a term loan described in (2) above that was previously subject to the below-market loan rules. 1040x amended tax return Those rules will continue to apply even if the outstanding balance is reduced to $10,000 or less. 1040x amended tax return Exceptions for loans without significant tax effect. 1040x amended tax return   The following loans are specifically exempted from the rules for below-market loans because their interest arrangements do not have a significant effect on the federal tax liability of the borrower or the lender. 1040x amended tax return Loans made available by lenders to the general public on the same terms and conditions that are consistent with the lender's customary business practices. 1040x amended tax return Loans subsidized by a federal, state, or municipal government that are made available under a program of general application to the public. 1040x amended tax return Certain employee-relocation loans. 1040x amended tax return Certain loans to or from a foreign person, unless the interest income would be effectively connected with the conduct of a U. 1040x amended tax return S. 1040x amended tax return trade or business and not exempt from U. 1040x amended tax return S. 1040x amended tax return tax under an income tax treaty. 1040x amended tax return Any other loan if the taxpayer can show that the interest arrangement has no significant effect on the federal tax liability of the lender or the borrower. 1040x amended tax return Whether an interest arrangement has a significant effect on the federal tax liability of the lender or the borrower will be determined by all the facts and circumstances. 1040x amended tax return Consider all the following factors. 1040x amended tax return Whether items of income and deduction generated by the loan offset each other. 1040x amended tax return The amount of the items. 1040x amended tax return The cost of complying with the below-market loan provisions if they were to apply. 1040x amended tax return Any reasons, other than taxes, for structuring the transaction as a below-market loan. 1040x amended tax return Exception for loans to qualified continuing care facilities. 1040x amended tax return   The below-market interest rules do not apply to a loan owed by a qualified continuing care facility under a continuing care contract if the lender or lender's spouse is age 62 or older by the end of the calendar year. 1040x amended tax return A qualified continuing care facility is one or more facilities (excluding nursing homes) meeting the requirements listed below. 1040x amended tax return Designed to provide services under continuing care contracts (defined below). 1040x amended tax return Includes an independent living unit, and either an assisted living or nursing facility, or both. 1040x amended tax return Substantially all of the independent living unit residents are covered by continuing care contracts. 1040x amended tax return A continuing care contract is a written contract between an individual and a qualified continuing care facility that includes all of the following conditions. 1040x amended tax return The individual or individual's spouse must be entitled to use the facility for the rest of their life or lives. 1040x amended tax return The individual or individual's spouse will be provided with housing, as appropriate for the health of the individual or individual's spouse in an: independent living unit (which has additional available facilities outside the unit for the provision of meals and other personal care), and assisted living or nursing facility available in the continuing care facility. 1040x amended tax return The individual or individual's spouse will be provided with assisted living or nursing care available in the continuing care facility, as required for the health of the individual or the individual's spouse. 1040x amended tax return For more information, see section 7872(h) of the Internal Revenue Code. 1040x amended tax return Sale or exchange of property. 1040x amended tax return   Different rules generally apply to a loan connected with the sale or exchange of property. 1040x amended tax return If the loan does not provide adequate stated interest, part of the principal payment may be considered interest. 1040x amended tax return However, there are exceptions that may require you to apply the below-market interest rate rules to these loans. 1040x amended tax return See Unstated Interest and Original Issue Discount (OID) in Publication 537. 1040x amended tax return More information. 1040x amended tax return   For more information on below-market loans, see section 7872 of the Internal Revenue Code and section 1. 1040x amended tax return 7872-5 of the regulations. 1040x amended tax return Prev  Up  Next   Home   More Online Publications
 
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Understanding Your IRS Notice or Letter

About Your Notice

If you receive a letter or notice from the IRS, it will explain the reason for the correspondence and provide instructions. Many of these letters and notices can be dealt with simply, without having to call or visit an IRS office.

The notice you receive covers a very specific issue about your account or tax return. Generally, the IRS will send a notice if it believes you owe additional tax, are due a larger refund, if there is a question about your tax return or a need for additional information.

IRS Notice Redesign

Currently, the IRS is in the process of redesigning and revising its correspondence with taxpayers for clarity, effectiveness and efficiency. The new format includes a plain language explanation of the nature of the correspondence, clearly states what action the taxpayer must take and presents a clear, clean design.    

Redesigned Notices

Notice Number Description Topic
CP01 We received the information that you provided and have verified your claim of identity theft. We have placed an identity theft indicator on your account. Identity Theft
CP01A This notice tells you about the Identity Protection Personal Identification Number (IP PIN) we sent you. Identity Theft
CP01H You received a CP 01H notice because we were unable to process your tax return. The IRS has locked your account because the Social Security Administration informed us that the Social Security number (SSN) of the primary or secondary taxpayer on the return belongs to someone who was deceased prior to the current tax year (before January 1, 2010 for a 2010 tax return).  
CP01S We received your Form 14039 or similar statement for your identity theft claim. We'll contact you when we finish processing your case or if we need additional information  
CP02H You owe a balance due as a result of amending your tax return to show receipt of a grant received as a result of Hurricane Katrina, Rita or Wilma. Balance Due
CP03C You received a tax credit (called the First-Time Homebuyer Credit) for a house you purchased. You may need to file a form to report a change in ownership to the house you purchased.  
CP04 Our records show that you or your spouse served in a combat zone, a qualified contingency operation, or a hazardous duty station during the tax year specified on your notice. As a result, you may be eligible for tax deferment.  
CP05 We’re reviewing your tax return.  
CP05A We are examining your return and we need documentation.  
CP07 We received your tax return and are holding your refund until we complete a more thorough review of the benefits you claimed under a treaty and/or the deductions claimed on Schedule A.  
CP08 You may qualify for the Additional Child Tax Credit and be entitled to some additional money. Additional Child Tax Credit
CP09 We've sent you this notice because our records indicate you may be eligible for the Earned Income Credit (EIC), but didn't claim it on your tax return.  
CP10 We made a change(s) to your return because we believe there's a miscalculation. This change(s) affected the estimated tax payment you wanted applied to your taxes for next year. Change To Your Estimated Tax Credit Amount
CP10A We made a change(s) to your return because we believe there's a miscalculation involving your Earned Income Credit. This change(s) affected the estimated tax payment you wanted applied to your taxes for next year. Change To Your Estimated Tax Credit Amount
CP11 We made changes to your return because we believe there’s a miscalculation. You owe money on your taxes as a result of these changes. Balance Due
CP11A We made changes to your return because we believe there's a miscalculation involving your Earned Income Credit. You owe money on your taxes as a result of these changes. Balance Due
CP11M We made changes to your return involving the Making Work Pay and Government Retiree Credit. You owe money on your taxes as a result of these changes. Balance Due
CP12 We made changes to correct a miscalculation on your return.  
CP12A We made changes to correct the Earned Income Credit (EIC) claimed on your tax return.  
CP12E We made changes to correct a miscalculation on your return.  
CP12M We made changes to the computation of the Making Work Pay and/or Government Retiree Credits on your return.  
CP12R We made changes to the computation of the Rebate Recovery Credit on your return.  
CP13 We made changes to your return because we believe there's a miscalculation. You're not due a refund nor do you owe an additional amount because of our changes. Your account balance is zero.  
CP13A We made changes to your return because we found an error involving your Earned Income Credit. You're not due a refund nor do you owe an additional amount because of our changes. Your account balance is zero.  
CP13M We made changes to your return involving the Making Work Pay credit or the Government Retiree Credit. You're not due a refund nor do you owe an additional amount because of our changes. Your account balance is zero.  
CP13R We made changes to your return involving the Recovery Rebate Credit. You're not due a refund nor do you owe an additional amount because of our changes. Your account balance is zero.  
CP14 We sent you this notice because you owe money on unpaid taxes.  
CP14I You owe taxes and penalties because you didn't take out the minimum amount you had to from your traditional individual retirement arrangement (IRA). Or, you put into a tax-sheltered account more than you can legally.  
CP15B We charged you a Trust Fund Recovery Penalty (TFRP) for not paying employment or excise taxes.  
CP16 We sent you this notice to tell you about changes we made to your return that affect your refund. We made these changes because we believe there was a miscalculation. Our records show you owe other tax debts and we applied all or part of your refund to them.  
CP18 We believe you incorrectly claimed one or more deductions or credits. As a result, your refund is less than you expected.  
CP19 We have increased the amount of tax you owe because we believe you incorrectly claimed one or more deductions or credits.  
CP20 We believe you incorrectly claimed one or more deductions or credits. As a result, your refund is less than you expected.  
CP21A We made the change(s) you requested to your tax return for the tax year specified on the notice. You owe money on your taxes as a result of the change(s). Balance Due
CP21B We made the change(s) you requested to your tax return for the tax year specified on the notice. You should receive your refund within 2-3 weeks of your notice. Refund
CP21C We made the change(s) you requested to your tax return for the tax year specified on the notice. You're not due a refund nor do you owe any additional amount. Your account balance for this tax form and tax year is zero. Even Balance
CP21E As a result of your recent audit, we made changes to your tax return for the tax year specified on the notice. You owe money on your taxes as a result of these changes. Balance Due
CP21I We made changes to your tax return for the tax year specified on the notice for Individual Retirement Arrangement (IRA) taxes. You owe money on your taxes as a result of these changes. Balance Due
CP22A We made the change(s) you requested to your tax return for the tax year specified on the notice. You owe money on your taxes as a result of the change(s). Balance Due
CP22E As a result of your recent audit, we made changes to your tax return for the tax year specified on the notice. You owe money on your taxes as a result of these changes. Balance Due
CP22I We made changes to your tax return for the tax year specified on the notice for Individual Retirement Arrangement (IRA) taxes. You owe money on your taxes as a result of these changes. Balance Due
CP23 We made changes to your return because we found a difference between the amount of estimated tax payments on your tax return and the amount we posted to your account. You have a balance due because of these changes.  
CP24 We made changes to your return because we found a difference between the amount of estimated tax payments on your tax return and the amount we posted to your account. You have a potential overpayment credit because of these changes.  
CP24E We made changes to your return because we found a difference between the amount of estimated tax payments on your tax return and the amount we posted to your account. You have a potential overpayment credit because of these changes.  
CP25 We made changes to your return because we found a difference between the amount of estimated tax payments on your tax return and the amount we posted to your account. You're not due a refund nor do you owe an additional amount because of our changes. Your account balance is zero.  
LT26 You were previously asked information regarding the filing of your tax return for a specific tax period.  
ST26 Antes le pedían información referente a la manera que fue presentada su declaración de impuestos para un período tributario específico.  
CP27 We've sent you this notice because our records indicate you may be eligible for the Earned Income Credit (EIC), but didn't claim it on your tax return.  
CP30 We charged you a penalty for not pre-paying enough of your tax either by having taxes withheld from your income, or by making timely estimated tax payments.  
CP30A We reduced or removed the penalty for underpayment of estimated tax reported on your tax return.  
CP31 Your refund check was returned to us, so you need to update your address. Refund
CP32 We sent you a replacement refund check.  
CP32A Call us to request your refund check.  
CP39 We used a refund from your spouse or former spouse to pay your past due tax debt. You may still owe money.  
CP42 The amount of your refund has changed because we used it to pay your spouse's past due tax debt.  
CP44 There is a delay processing your refund because you may owe other federal taxes.  
CP45 We were unable to apply your overpayment to your estimated tax as you requested. Overpayment
CP49 We sent you this notice to tell you we used all or part of your refund to pay a tax debt. Overpayment
CP51A We computed the tax on your Form 1040, 1040A or 1040EZ. You owe taxes.  
CP51B We computed the tax on your Form 1040, 1040A or 1040EZ. You owe taxes.  
CP51C We computed the tax on your Form 1040, 1040A or 1040EZ. You owe taxes.  
CP53 We can't provide your refund through direct deposit, so we're sending you a refund check by mail. Direct Deposits
CP53A We tried to direct deposit your refund, but the financial institution couldn’t process it.  We are researching your account, but it will take 8 to 10 weeks to reissue your refund.  
CP53B We tried to direct deposit your refund, but the financial institution couldn’t process it. We are researching your account, but it will take 8 to 10 weeks to complete our review and verify this refund.  
CP53C We tried to direct deposit your refund, but the financial institution couldn’t process it. When refund payments are questionable, we review related returns to ensure the return is valid. We are researching your account, but it will take 8 to 10 weeks to complete our review and verify this refund.  
CP54B Your tax return shows a different name and/or ID number from the information we have for your account. Please provide more information to us in order to receive your refund.  
CP54E Your tax return shows a different name and/or ID number from the information we have for your account. Please provide the requested information.  
CP54G Your tax return shows a different name and/or ID number from the information we have for your account. Please provide the requested information.  
CP54Q Your tax return shows a different name and/or ID number from the information we have on file for you or from the information from the Social Security Administration (SSA).We previously sent you a notice asking you to provide us some updated information. We still haven’t received a response from you.  
CP59 We sent you this notice because we have no record that you filed your prior personal tax return or returns.  
CP60 We removed a payment erroneously applied to your account.  
CP62 We applied a payment to your account.  
CP63 We are holding your refund because you have not filed one or more tax returns and we believe you will owe tax.  
CP71 You received this notice to remind you of the amount you owe in tax, penalty and interest.  
CP71A You received this notice to remind you of the amount you owe in tax, penalty and interest.  
CP71C You received this notice to remind you of the amount you owe in tax, penalty and interest.  
CP71D You received this notice to remind you of the amount you owe in tax, penalty and interest.  
CP72 You may have claimed a frivolous position on your tax return. A frivolous return is identified when some information on the return has no basis in the law.  
CP74 You are recertified for EITC. You don't have to fill out Form 8862, Information To Claim Earned Income Credit After Disallowance, in the future. You'll receive your EIC refund within 6 weeks as long as you don't owe other tax or debts we're required to collect.  
CP75 We’re auditing your tax return and we need documentation to verify the Earned Income Credit (EIC) that you claimed.  The Earned Income Credit and/or the Additional Child Tax Credit (ACTC) portion(s) of your refund is being held pending the results of the audit.  
CP75A We’re auditing your tax return and need documentation to verify the Earned Income Credit (EIC), dependent exemption(s) and filing status you claimed.  
CP75C You were banned from claiming the Earned Income Credit (EIC) in a prior tax year due to your intentional disregard of the rules or a fraudulent claim. Since your ban is still in effect, we disallowed the EIC for your current tax year.  
CP75D We’re auditing your tax return and we need documentation to verify the income and withholding you reported on your tax return. This may affect your eligibility for the Earned Income Credit (EIC), dependent exemption(s) and other refundable credits that you claimed. We are holding your refund pending the results of the audit.  
CP76 We are allowing your Earned Income Credit as claimed on your tax return. You will receive any expected refund in 8 weeks provided you owe no other taxes or legal debts we are required to collect.  
CP80 We credited payments and/or other credits to your tax account for the tax period shown on your notice. However, we haven't received your tax return.  
CP080 We credited payments and/or other credits to your tax account for the form and tax period shown on your notice. However, we haven't received your tax return.  
CP81 We haven’t received your tax return for a specific tax year. The statute of limitations to claim a refund of your credit or payment for that tax year is about to expire.  
CP081 We haven’t received your tax return for a specific tax year. The statute of limitations to claim a refund of your credit or payment for that tax year is about to expire.  
CP88 We are holding your refund because you have not filed one or more tax returns and we believe you will owe tax.  
CP90C We levied you for unpaid taxes. You have the right to a Collection Due Process hearing.  
CP102 We made changes to your return because we believe there’s a miscalculation.  You owe money on your taxes as a result of these changes.  
CP103 We made changes to your railroad retirement tax return because we believe there was a miscalculation. As a result of these changes, you have a balance due.  
CP104 We made changes to your excise tax return because we believe there was a miscalculation. As a result of these changes, there is a balance due.  
CP108 You are receiving this notice because you made a payment of $XXXXX on XXXXX, and we can’t determine the correct form or tax year to apply it to.  
CP112 We made changes to your return because we believe there’s a miscalculation. As a result, you are due a refund.  
CP113 We made changes to your railroad retirement tax return because we believe there was a miscalculation. As a result of these changes, you have an overpayment on your account.  
CP114 We made changes to your excise tax return because we believe there was a miscalculation. As a result of these changes, there is an overpayment on your account.  
CP120 You need to send us documentation of your tax-exempt status. Tax Exemptions
CP120A Your organization's tax-exempt status has been revoked for failure to file a Form 990 series return for three consecutive years. In addition, you are no longer eligible to sponsor a tax-sheltered annuity plan (Internal Revenue Code section 403(b) retirement plan).  
CP123 We made changes to your excise tax return because we believe there was a miscalculation. As a result of these changes, you have a balance due of less than $1.  
CP124 We made changes to your excise tax return because we believe there was a miscalculation. As a result of these changes, there is a balance due of less than $1.  
CP130 Your tax return filing requirements may have changed: You may no longer need to pay the Alternative Minimum Tax. Filing Requirements
CP138 This notice tells you that all or part of the overpayment on a return you filed was applied to other federal taxes you owe.  
CP141C You are receiving this notice because you did not respond to a previous request for missing or incomplete information on your return and your return is late.  
CP141I You are receiving this notice because you did not respond to a previous request for missing or incomplete information on your return.  
CP141L You are receiving this notice because you didn’t file your return by the due date.  
CP142 We sent you this notice because you filed your information returns late.  
CP143 We accepted your explanation for filing your information return late. We will continue processing your returns.  
CP145 We were unable to credit the full amount you requested to the succeeding tax period.  
CP152 We have received your return. Confirmation of Return Receipt
CP152A We received your Form 8038-CP, Return for Credit Payments to Issuers of Qualified Bonds and provides an explanation for the reduced credit payment amount.  
CP153 We can't provide you with your refund through a direct deposit, so we're sending you a refund check/credit payment by mail. Refund
CP156 We received your Form 990-T, Exempt Organization Business Income Tax Return and Form 8941, Credit for Small Employer Health Premiums.  
CP160 You received this notice to remind you of the amount you owe in tax, penalty and interest.  
CP161 You received this notice because of the money you owe from your tax return.  
CP163 You received this notice to remind you of the amount you owe in tax, penalty and interest.  
CP166 We were unable to process your monthly payment because there were insufficient funds in your bank account. Payment Process
CP169 You received this notice because we couldn't locate the return you said was previously filed.  
CP171 You received this notice to remind you of the amount you owe in tax, penalty and interest.  
CP178 Your tax return filing requirements may have changed: You may no longer owe excise tax. Filing Requirements
CP180/CP181 We sent you this notice because your tax return is missing a schedule or form.  
CP182 We sent you this notice because your tax return is missing Form 3468.  
CP187 You received this notice to remind you of the amount you owe in tax, penalty and interest.  
CP188 We are holding your refund until we determine you owe no other taxes.  
CP210/CP220 We made change(s) for the tax year specified on the notice.  
CP211A We approved your Form 8868, Application for Extension of Time To File an Exempt Organization Return.  
CP211B We denied your request to extend the time to file your Exempt Organization Return because your Form 8868, Application for Extension of Time To File an Exempt Organization Return, wasn't signed or was signed by someone who wasn’t authorized.  
CP211C We denied your request to extend the time to file your Exempt Organization Return because your Form 8868, Application for Extension of Time To File an Exempt Organization Return, wasn't received on time. A request for an extension of the time to file your Exempt Organization Return must be received on or before the due date of your return.  
CP211D We denied your request to extend the time to file your Exempt Organization Return for an additional three months because your Form 8868, Application for Extension of Time To File an Exempt Organization Return, Part II, Line 7 didn’t explain the need for addtional time OR establish reasons that prevented you from filing by the extended due date.  
CP211E We denied your request to extend the time to file your Exempt Organization Return because your Form 8868, Application for Extension of Time To File an Exempt Organization Return, didn’t meet one or more of the requirements.  
CP231 Your refund or credit payment was returned to us and we need you to update your current address. Address Update Needed
CP232A We approved your request for an extension to file your Form 5330.  
CP232B We denied your request to extend the time to file Form 5330 because your Form 5558, Application for Extension of Time To File Certain Employee Plan Returns, wasn't received on time. A request for an extension of the time to file Form 5330 must be received on or before the due date of your return.  
CP232C We denied your request to extend the time to file Form 5330 because your Form 5558, Application for Extension of Time To File Certain Employee Plan Returns, wasn't signed or was signed by someone who wasn’t authorized.  
CP232D We denied your request to extend the time to file Form 5330 because your Form 5558, Application for Extension of Time To File Certain Employee Plan Returns, didn’t state a reason why you need the extension.  
CP237 We sent you a replacement refund check.  
CP237A Call us to request your refund check.  
CP254 Your organization submitted a paper return for the tax period in question.  Because our records show that you must file electronically, the paper return doesn’t satisfy your filing obligation.  
CP255 We need information to complete the termination of your private foundation status.  
CP259 We've sent you this notice because our records indicate you didn't file the required business tax return identified in the notice.  
CP259A We sent you this notice because our records indicate you did not file a required Form 990/990-EZ, Return of Organization Exempt From Income Tax.  
CP259B We sent you this notice because our records indicate you didn't file a required Form 990-PF, Return of Private Foundation or Section 4947(a)(1) Nonexempt Charitable Trust Treated as a Private Foundation.  
CP259C We sent you this notice because our records indicate you are presumed to be a private foundation and you didn't file a required Form 990-PF, Return of Private Foundation or Section 4947(a)(1) Nonexempt Charitable Trust Treated as a Private Foundation.  
CP259D We sent you this notice because our records indicate you did not file a required Form 990-T, Exempt Organization Business Income Tax Return.  
CP259E We sent you this notice because our records indicate you did not file a required Form 990-N, e-Postcard.  
CP259F We're sending you this notice because our records indicate you did not file a required Form 5227, Split-Interest Trust information Return.  
CP259G We sent you this notice because our records indicate you did not file a required Form 1120-POL, U.S. Income Tax Return for Certain Political Organizations.  
CP259H We sent you this notice because our records indicate you are a tax-exempt political organization and you did not file a required Form 990/990-EZ, Return of Organization Exempt From Income Tax.  
CP261 CP261 is the approval notice for Form 2553, Election by a Small Business Corporation.  
CP264 CP264 is the notice for denial of Form 2553, Election by a Small Business Corporation.  
CP267A You received a CP267A Notice because you’ve overpaid the Branded Prescription Drug Fee.  
CP267B You received a CP267B notice because you overpaid your Insurance Provider Fee under Section 9010 of ACA.  
CP268 We made changes to your return because we believe there is a miscalculation on your return. You have a potential overpayment credit because of this miscalculation.  
CP276A We didn't receive a correctly completed tax liability schedule. We normally charge a Federal Tax Deposit (FTD) penalty when this happens. We decided not to do so this time. FTD Penalty
CP276B We didn't receive the correct amount of tax deposits. We normally charge a Federal Tax Deposit penalty when this happens. We decided not to do so this time. FTD Penalty
CP279 CP279 is the notice of acceptance to the parent corporation of a Qualified Subchapter S Subsidiary (QSub) from Form 8869, Qualified Subchapter S Subsidiary Election.  
CP279A CP279A is the notice of acceptance for a Qualified Subchapter S Subsidiary.  
CP282 You received this notice because you indicated on your Form 1065, U.S. Return of Partnership Income, or Form1065-B, U.S. Return of Income for Electing Large Partnerships, that you have foreign partners.  
CP283C We charged you a penalty for filing a late or incomplete Form 8955-SSA, Annual Registration Statement Identifying Separated Participants with Deferred Vested Benefits.  
CP284 We approved your Form 1128, Application to Adopt, Change, or Retain a Tax Year.  
CP285 CP285 notifies BMF taxpayers the reason their Form 1128, Application To Adopt, Change, or Retain a Tax Year, was denied.  
CP286 We send this notice when we approve Form 8716, Election To Have a Tax Year Other Than a Required Tax Year.  
CP288 We accepted your election to be treated as a Qualified Subchapter S Trust (QSST).  
CP290 We're approving your Electing Small Business Trust (ESBT) election.  
CP291 We're revoking your Electing Small Business Trust (ESBT) election.  
CP292 We're revoking your Qualified Subchapter S Trust (QSST) election.  
CP295 We charged you a penalty on your Form 5500.  
CP295A We charged you a penalty on your Form 5500.  
CP297C We levied you for unpaid taxes. You have the right to a Collection Due Process hearing.  
CP299 Your organization may be required to file an annual electronic notice (e-Postcard), Form 990-N.  
CP301 We sent you this notice to inform that you visited IRS online services website and went through Identity Verification process.  
CP501 You have a balance due (money you owe the IRS) on one of your tax accounts.  
CP503 We have not heard from you and you still have an unpaid balance on one of your tax accounts.  
CP504 You have an unpaid amount due on your account. If you do not pay the amount due immediately, the IRS will seize (levy) your state income tax refund and apply it to pay the amount you owe.  
CP504B You have an unpaid amount due on your account. If you do not pay the amount due immediately, the IRS will seize (levy) certain property or rights to property and apply it to pay the amount you owe.  
CP515I This is a reminder notice that we still have no record that you filed your prior tax return or returns.  
CP515B You received this reminder notice because our records indicate you didn't file a business tax return.  
CP516 This is a reminder notice that we still have no record that you filed your prior tax return or returns.  
CP518I This is a final reminder notice that we still have no record that you filed your prior tax return(s).  
CP518B This is a final reminder notice that our records still indicate you haven't filed a business tax return.  
CP521 This notice is to remind you that you have an installment agreement payment due. Please send your payment immediately.  
CP523 This notice informs you of our intent to terminate your installment agreement and seize (levy) your assets. You have defaulted on your agreement.  
CP547 We received your Form 2848, 8821, or 706, and we assigned you a Centralized Authorization File (CAF) number.  
CP563 We reviewed your Form W-7A, Application for Taxpayer Identification Number for Pending U.S. Adoptions, and we need additional information in order to process it.  
CP565 We gave you an Individual Taxpayer Identification Number (ITIN).  
CP565 (SP) Nosotros le asignamos un Número de Identificación Personal del Contribuyente (ITIN, por sus siglas en inglés).  
CP566 We need more information to process your application for an Individual Taxpayer Identification Number (ITIN). You may have sent us an incomplete form. You may have sent us the wrong documents.  
CP566 (SP) Necesitamos más información para poder tramitar su solicitud para un Número de Identificación Personal del Contribuyente (ITIN, por sus siglas en inglés). Usted quizá nos envió un formulario incompleto. O, quizá nos envió los documentos incorrectos.  
CP567 We rejected your application for an Individual Taxpayer Identification Number (ITIN). You may not be eligible for an ITIN. Your documents may be invalid. We may not have received a reply when we asked for more information.  
CP567 (SP) Hemos rechazado su solicitud para un Número de Identificación Personal de Contribuyente (ITIN, por sus siglas en inglés). Es posible que no reúna los requisitos para un ITIN o que sus documentos no sean válidos. O es posible que no hayamos recibido una contestación de su parte cuando solicitamos más información.  
CP601 Usted tiene un saldo pendiente de pago (dinero que le debe al IRS) en una de sus cuentas contributivas.  
CP603 No hemos recibido respuesta de parte de usted y todavía tiene un saldo sin pagar en una de sus cuentas contributivas.  
CP604 Usted tiene un saldo sin pagar en su cuenta. De no pagar esta cantidad inmediatemente, el IRS embargará cualquier reembolso de impuestos estatales al que tenga derecho y aplicarlo al pago de su deuda.  
CP604B Usted tiene un saldo sin pagar en su cuenta. De no pagar esta cantidad inmediatemente, el IRS embargará ciertas propiedades o derechos de propiedad y lo aplicará al pago de su deuda.  
CP615I Este aviso es un recordatorio, que según nuestros registros, todavía no tenemos información de que usted haya presentado su anterior declaración o declaraciones de impuestos.  
CP615B Este aviso es un recordatorio,  que según nuestros registros, usted todavía no ha presentado una declaración de impuestos del negocio.  
CP616 Este es un recordatorio que todavía no tenemos un registro de que usted presentó su anterior declaración o declaraciones de impuestos.  
CP618I Lo presente, es el aviso final para recordarle que según nuestros registros, usted todavía no ha presentado su(s) declaración(es) anterior(es) de impuestos.  
CP618B Lo presente, es el aviso final para recordarle que según nuestros registros, usted todavía no ha presentado una declaración de impuestos del negocio.  
CP621 Este aviso es para notificarle que usted tiene un plan de pagos a plazos vencido. Por favor, envíe el pago inmediatamente.  
CP623 Este aviso es para informarle nuestra intención de cancelar su plan de pagos a plazos y confiscar (embargar) sus bienes. Usted incumplió en su acuerdo.  
CP701 Recibimos su Formulario 14039 (SP) o declaración similar sobre su reclamo de robo de identidad. Nos comunicaremos con usted cuando completemos el procesamiento de su caso o en caso de necesitar información adicional.  
CP711 Nosotros realizamos cambios a su planilla debido a que entendemos que hubo un cálculo erróneo. Como resultado de estos cambios, usted adeuda dinero por sus contribuciones.  
CP712 Hemos realizado cambios para corregir un error de cálculo en su planilla.  
CP713 Hemos realizado cambios para corregir un error de cálculo en su planilla. No se le debe un reembolso y no adeuda una cantidad de dinero adicional a causa de estos cambios. El saldo de su cuenta es cero.  
CP714 Le enviamos este aviso porque usted adeuda contribuciones pendientes de pago.  
CP721 Hicimos el(los) cambio(s) que usted solicitó a su declaración de impuestos para el año tributario que aparece en su aviso. Como resultado de éste(estos) cambio(s) usted debe dinero en sus impuestos.  
CP722 Hicimos el(los) cambio(s) que usted solicitó a su declaración de impuestos para el año tributario que aparece en su aviso. Como resultado de éste(estos) cambio(s) usted debe dinero en sus impuestos.  
CP749 Le enviamos este aviso para informarle que hemos utilizado todo o parte de su reintegro para pagar una deuda contributiva.  
CP759 Le enviamos este aviso porque no tenemos registro que indique que usted radicó su planilla o planillas de contribuciones personales para uno o varios años anteriores.  
CP771 Usted recibió este aviso para recordarle sobre la cantidad que adeuda en contribuciones, multas e intereses.  
CP772 Usted recibió este aviso para recordarle sobre la cantidad que adeuda en contribuciones, multas e intereses.  
CP773 Usted recibió este aviso para recordarle sobre la cantidad que adeuda en contribuciones, multas e intereses.  
CP774 Usted recibió este aviso para recordarle sobre la cantidad que adeuda en contribuciones, multas e intereses.  
CP802 Hemos hecho cambios a su declaración ya que creemos que hay un cálculo erróneo.  Usted adeuda dinero por sus impuestos como resultado de estos cambios.  
CP812 Hemos hecho cambios a su declaración ya que creemos que hay un cálculo erróneo.  Como resultado, a usted se le adeuda un reembolso.  
CP838 Este aviso le informa a usted, que parte o todo su pago en exceso en la declaración que usted presentó, fue acreditado a otros impuestos federales que usted adeuda.  
CP861 Usted recibió este aviso debido al dinero que adeuda de su planilla de contribuciones.  
CP910/CP920 Hicimos cambio(s) para el año tributario indicado en el aviso.  
CP959 Usted no radicó su planilla de contribución de negocios identificada en este aviso.  
CP2000 The income and/or payment information we have on file doesn’t match the information you reported on your tax return. This could affect your tax return; it may cause an increase or decrease in your tax, or may not change it at all.  
CP2005 We accepted the information you sent us. We're not going to change your tax return. We've closed our review of it.  
CP2006 We received your information. We'll look at it and let you know what we're going to do.  
CP2030 We are proposing changes in income, credits, and deductions reported on your U.S. Corporation Income Tax Return. We compared your information with items reported to us by banks, businesses and other payers.  
CP2057 You need to file an amended return. We've received information not reported on your tax return.  
CP2501 You need to contact us. We've received information not reported on your tax return.  
CP2531 Your Tax Return does not match the information we have on file.  
CP2566 We didn't receive your tax return. We have calculated your tax, penalty and interest based on wages and other income reported to us by employers, financial institutions and others.  
CP2566R We previously sent you a CP63 notice informing you we are holding your refund until we receive one or more unfiled tax returns. Because we received no reply to our previous notice, we have calculated your tax, penalty and interest based on wages and other income reported to us by employers, financial institutions and others.  
CP3219A We've received information that is different from what you reported on your tax return. This may result in an increase or decrease in your tax. The notice explains how the amount was calculated and how you can challenge it in U.S. Tax Court.  
CP3219B This Statutory Notice of Deficiency notifies you of the IRS’s intent to assess a tax deficiency and informs you of your right to petition the United States Tax Court to dispute the proposed adjustments. .  
CP3219N We didn't receive your tax return. We have calculated your tax, penalty and interest based on wages and other income reported to us by employers, financial institutions and others.  

Other Notices and Letters

Notice or Letter Number Title
CP 57 Notice of Insufficient Funds
CP 90 / CP 297 Final Notice - Notice of Intent to Levy and Notice of Your Right to a Hearing
CP 297A Notice of Levy and Notice of Your Right to a Hearing
CP 91 / CP 298 Final Notice Before Levy on Social Security Benefits
Letter 0484C Collection Information Statement Requested (Form 433F/433D); Inability to Pay/Transfer
Letter 0549C Balance Due on Account is Paid
Letter 668D(LP 68) We released the taxpayer's levy.
Letter 0681C Proposal to Pay Accepted
Letter 0757C Installment Privilege Terminated
Letter 1058 (LT 11) Final Notice prior to levy; your right to a hearing
Letter 1615 (LT 18) Mail us your overdue tax returns.
Letter 1731 (LP 64) Please help us locate a taxpayer.
Letter 1737 (LT 27) Please complete and site Form 433F, Collection Information Statement.
Letter 1961C Installment Agreement for Direct Debit 433-G
Letter 1962C Installment Agreement Reply to Taxpayer
Letter 2050 (LT 16) Please call us about your overdue taxes or tax return.
Letter 2257C Balance Due Total to Taxpayer
Letter 2271C Installment Agreement for Direct Debit Revisions
Letter 2272C Installment Agreement Cannot be Considered
Letter 2273C Installment Agreement Accepted: Terms Explained
Letter 2318C Installment Agreement: Payroll Deduction (F2159) Incomplete
Letter 2357C Abatement of Penalties and Interest
Letter 2603C Installment Agreement Accepted - Notice of Federal Tax Lien Will be Filed
Letter 2604C Pre-assessed Installment Agreement
Letter 2761C Request for Combat Zone Service Dates
Letter 2789C Taxpayer Response to Reminder of Balance Due
Letter 2800C Incorrect Form W-4, Employee's Withholding Allowance Certificate.
Letter 2801C Exempt Status May not be Allowed
Letter 2840C CC IAPND Installment Agreement Confirmation
Letter 3030C Balance Due Explained:Tax/Interest Not Paid
Letter 3127C Revision to Installment Agreement
Letter 3217C Installment Agreement Accepted: Terms Explained
Letter 3228 (LT 39) Reminder notice.
Letter 4883C We received your federal income tax return; however, we need more information from you to process it.
Letter 5071C We received your federal income tax return; however, we need more information from you to process it.
Letter LP 47 Address Information Request
Letter LP 59 Please contact us about the taxpayer levy.

Eight Things to Know If You Receive an IRS Notice or Letter

Read about eight things every taxpayer should know about IRS notices.

How To Identify Your Notice

The notice number prints on the top right-hand side of each page of all our notices and on the lower right-hand side of the tear-off stub included with most of them. That number identifies the message we deliver in every notice. While the contents may vary somewhat, every notice with the same number has the same basic purpose.

What If My Notice Isn't Listed

You'll find useful information here about many of the notices we send, including the purpose of the notice, the reason we send it, and a list of enclosures we might include with it. There's also sample content for each. Since parts of our notices vary depending on account conditions, the samples may not exactly match the notices we mail. The basic message, though, will be the same.

  • Individual Filer Notices
    Notices we send about Form 1040, 1040A, or 1040EZ, or any schedules, forms, or attachments included with it are Individual Filer Notice.
  • Business Filer Notices
    Notices we send about business-related tax forms such as Forms 941, 1065, and 1120, are Business Filer Notices.

Get More Information

  • Look in the upper right-hand corner to find your notice number.
  • Select your notice number from one of the tables to the left to find additional information about your notice. (Please note that not all notices are on the list.)
  • Call 1-800-829-1040 or visit a local IRS office if you suspect that you have received a fraudulent notice or that you are a victim of identity theft.

Learn about Payment Options

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Find Forms and Publications

 

Page Last Reviewed or Updated: 24-Feb-2014

The 1040x Amended Tax Return

1040x amended tax return Publication 80 - Main Content Table of Contents Introduction 1. 1040x amended tax return Employer Identification Number (EIN) 2. 1040x amended tax return Who Are Employees?Tests. 1040x amended tax return Business Owned and Operated by Spouses Farm Crew Leaders 3. 1040x amended tax return Employee's Social Security Number (SSN)Registering for SSNVS. 1040x amended tax return 4. 1040x amended tax return Wages and Other CompensationFringe Benefits 5. 1040x amended tax return TipsOrdering rule. 1040x amended tax return 6. 1040x amended tax return Social Security and Medicare Taxes for FarmworkersThe $150 Test or the $2,500 Test 7. 1040x amended tax return How To Figure Social Security and Medicare TaxesHousehold and agricultural employers. 1040x amended tax return 8. 1040x amended tax return Depositing TaxesPayment with Return When To Deposit How To Deposit Deposit Penalties 9. 1040x amended tax return Employer's ReturnsReporting Adjustments to Form 941-SS, 944-SS, 944, or 943 Current Period Adjustments Prior Period Adjustments 10. 1040x amended tax return Wage and Tax StatementsWaiver. 1040x amended tax return 11. 1040x amended tax return Federal Unemployment (FUTA) Tax—U. 1040x amended tax return S. 1040x amended tax return Virgin Islands Employers Only How To Get Tax Help Introduction This publication is for employers whose principal place of business is in the U. 1040x amended tax return S. 1040x amended tax return Virgin Islands, Guam, American Samoa, or the Commonwealth of the Northern Mariana Islands, or who have employees who are subject to income tax withholding for any of these jurisdictions. 1040x amended tax return Employers and employees in these areas are generally subject to social security and Medicare taxes under the Federal Insurance Contributions Act (FICA). 1040x amended tax return See section 6 and section 7 for more information. 1040x amended tax return This publication summarizes employer responsibilities to collect, pay, and report these taxes. 1040x amended tax return Whenever the term “United States” is used in this publication, it includes U. 1040x amended tax return S. 1040x amended tax return Virgin Islands, Guam, American Samoa, and the Commonwealth of the Northern Mariana Islands. 1040x amended tax return This publication also provides employers in the U. 1040x amended tax return S. 1040x amended tax return Virgin Islands with a summary of their responsibilities in connection with the tax under the Federal Unemployment Tax Act, known as FUTA tax. 1040x amended tax return See section 11 for more information. 1040x amended tax return Except as shown in the table in section 12, social security, Medicare, and FUTA taxes apply to every employer who pays taxable wages to employees or who has employees who report tips. 1040x amended tax return This publication does not include information relating to the self-employment tax (for social security and Medicare of self-employed persons). 1040x amended tax return See Publication 570, Tax Guide for Individuals With Income From U. 1040x amended tax return S. 1040x amended tax return Possessions, if you need this information. 1040x amended tax return This publication also does not include information relating to income tax withholding. 1040x amended tax return In U. 1040x amended tax return S. 1040x amended tax return Virgin Islands, Guam, American Samoa, and the Commonwealth of the Northern Mariana Islands, contact your local tax department for information about income tax withholding. 1040x amended tax return See Publication 15 (Circular E), for information on U. 1040x amended tax return S. 1040x amended tax return federal income tax withholding. 1040x amended tax return Comments and suggestions. 1040x amended tax return   We welcome your comments about this publication and your suggestions for future editions. 1040x amended tax return   You can write to us at the following address: Internal Revenue Service Tax Forms and Publications Division 1111 Constitution Ave. 1040x amended tax return NW, IR-6526 Washington, DC 20224   We respond to many letters by telephone. 1040x amended tax return Therefore, it would be helpful if you would include your daytime phone number, including the area code, in your correspondence. 1040x amended tax return    You can also send us comments from www. 1040x amended tax return irs. 1040x amended tax return gov/formspubs. 1040x amended tax return Click on More Information and then click on Comment on Tax Forms and Publications. 1040x amended tax return   Although we cannot respond individually to each comment received, we do appreciate your feedback and will consider your comments as we revise our tax forms, instructions, and publications. 1040x amended tax return 1. 1040x amended tax return Employer Identification Number (EIN) An employer identification number (EIN) is a nine-digit number that the IRS issues. 1040x amended tax return Its format is 00-0000000. 1040x amended tax return It is used to identify the tax accounts of employers and certain other organizations and entities that have no employees. 1040x amended tax return Use your EIN on all of the items that you send to the IRS and SSA for your business. 1040x amended tax return If you do not have an EIN, you may apply for one online. 1040x amended tax return Go to IRS. 1040x amended tax return gov and click on the Apply for an EIN Online link under Tools. 1040x amended tax return You may also apply for an EIN by calling 1-800-829-4933, (U. 1040x amended tax return S. 1040x amended tax return Virgin Islands only) or 267-941-1099 (toll call), or you can fax or mail Form SS-4, Application for Employer Identification Number, to the IRS. 1040x amended tax return Do not use a social security number (SSN) in place of an EIN. 1040x amended tax return If you do not have an EIN by the time a return is due, file a paper return and enter “Applied For” and the date that you applied for it in the space shown for the number. 1040x amended tax return If you took over another employer's business, do not use that employer's EIN. 1040x amended tax return You should have only one EIN. 1040x amended tax return If you have more than one, write to the IRS office where you file your returns using the “without a payment” address in the Instructions for Form 941-SS, Instructions for Form 944, or Instructions for Form 943. 1040x amended tax return Or call the IRS Business & Specialty Tax Line at 1-800-829-4933 (U. 1040x amended tax return S. 1040x amended tax return Virgin Islands only) or 267-941-1000 (toll call). 1040x amended tax return Persons who are deaf, hard of hearing, or have a speech disability (TDD/TTY users) in the U. 1040x amended tax return S. 1040x amended tax return Virgin Islands may call 1-800-829-4059. 1040x amended tax return The IRS will tell you which EIN to use. 1040x amended tax return For more information, see Publication 1635, Employer Identification Number: Understanding Your EIN, or Publication 583, Starting a Business and Keeping Records. 1040x amended tax return 2. 1040x amended tax return Who Are Employees? Generally, employees are defined either under common law or under special statutes for certain situations. 1040x amended tax return See Publication 15-A, Employer's Supplemental Tax Guide, for details on statutory employees and nonemployees. 1040x amended tax return Employee status under common law. 1040x amended tax return   Generally, a worker who performs services for you is your employee if you can control what will be done and how it will be done. 1040x amended tax return This is so even when you give the employee freedom of action. 1040x amended tax return What matters is that you have the right to control the details of how the services are performed. 1040x amended tax return See Publication 15-A for more information on how to determine whether an individual providing services is an independent contractor or an employee. 1040x amended tax return    Generally, people in business for themselves are not employees. 1040x amended tax return For example, doctors, lawyers, veterinarians, and others in an independent trade in which they offer their services to the public are usually not employees. 1040x amended tax return However, if the business is incorporated, corporate officers who work in the business are employees of the corporation. 1040x amended tax return   If an employer-employee relationship exists, it does not matter what it is called. 1040x amended tax return The employee may be called an agent or independent contractor. 1040x amended tax return It also does not matter how payments are measured or paid, what they are called, or if the employee works full or part time. 1040x amended tax return Statutory employees. 1040x amended tax return   There are also some special definitions of employees for social security, Medicare, and FUTA taxes. 1040x amended tax return   While the following persons may not be common law employees, they are considered employees for social security and Medicare purposes if the conditions under Tests , discussed later, are met. 1040x amended tax return a. 1040x amended tax return   An agent (or commission) driver who delivers food or beverages (other than milk) or picks up and delivers laundry or dry cleaning for someone else. 1040x amended tax return b. 1040x amended tax return   A full-time life insurance salesperson who sells primarily for one company. 1040x amended tax return c. 1040x amended tax return   A homeworker who works by the guidelines of the person for whom the work is done, with materials furnished by and returned to that person or to someone that person designates. 1040x amended tax return d. 1040x amended tax return   A traveling or city salesperson (other than an agent-driver or commission-driver) who works full time (except for sideline sales activities) for one firm or person getting orders from customers. 1040x amended tax return The orders must be for merchandise for resale or supplies for use in the customer's business. 1040x amended tax return The customers must be retailers, wholesalers, contractors, or operators of hotels, restaurants, or other businesses dealing with food or lodging. 1040x amended tax return Tests. 1040x amended tax return   Withhold social security and Medicare taxes from statutory employees' wages if all three of the following tests apply. 1040x amended tax return The service contract states or implies that almost all of the services are to be performed personally by them. 1040x amended tax return They have little or no investment in the equipment and property used to perform the services (other than an investment in transportation facilities). 1040x amended tax return The services are performed on a continuing basis for the same payer. 1040x amended tax return Persons in a or d, earlier, are also employees for FUTA tax purposes if tests 1 through 3 are met (U. 1040x amended tax return S. 1040x amended tax return Virgin Islands only). 1040x amended tax return   Publication 15-A gives examples of the employer-employee relationship. 1040x amended tax return Statutory nonemployees. 1040x amended tax return   Certain direct sellers, qualified real estate agents, and certain companion sitters are, by law, considered nonemployees. 1040x amended tax return They are generally treated as self-employed for employment tax purposes. 1040x amended tax return See Publication 15-A for details. 1040x amended tax return H-2A agricultural workers. 1040x amended tax return   On Form W-2, do not check box 13 (Statutory employee) as H-2A workers are not statutory employees. 1040x amended tax return Treating employees as nonemployees. 1040x amended tax return   If you incorrectly treated an employee as a nonemployee and did not withhold social security and Medicare taxes, you will be liable for the taxes. 1040x amended tax return See Treating employees as nonemployees in section 2 of Publication 15 (Circular E), for details on Internal Revenue Code section 3509, which may apply. 1040x amended tax return IRS help. 1040x amended tax return   If you want the IRS to determine if a worker is an employee, file Form SS-8, Determination of Worker Status for Purposes of Federal Employment Taxes and Income Tax Withholding. 1040x amended tax return Voluntary Classification Settlement Program (VCSP). 1040x amended tax return   Employers who are currently treating their workers (or a class or group of workers) as independent contractors or other nonemployees and want to voluntarily reclassify their workers as employees for future tax periods may be eligible to participate in the VCSP if certain requirements are met. 1040x amended tax return To apply, use Form 8952, Application for Voluntary Classification Settlement Program (VCSP). 1040x amended tax return For more information, visit IRS. 1040x amended tax return gov and enter “VCSP” in the search box. 1040x amended tax return Business Owned and Operated by Spouses If you and your spouse jointly own and operate a business and share in the profits and losses, you are partners in a partnership, whether or not you have a formal partnership agreement. 1040x amended tax return See Publication 541, Partnerships, for more details. 1040x amended tax return The partnership is considered the employer of any employees, and is liable for any employment taxes due on wages paid to its employees. 1040x amended tax return Exception—Qualified Joint Venture. 1040x amended tax return   If you and your spouse materially participate as the only members of a jointly owned and operated business, and you file a joint Form 1040, U. 1040x amended tax return S. 1040x amended tax return Individual Income Tax Return, or joint Form 1040-SS, U. 1040x amended tax return S. 1040x amended tax return Self-Employment Tax Return—U. 1040x amended tax return S. 1040x amended tax return Virgin Islands, Guam, American Samoa, the Commonwealth of the Northern Mariana Islands, or Puerto Rico, you can make a joint election to be taxed as a qualified joint venture instead of a partnership. 1040x amended tax return See the Instructions for Schedule C (Form 1040) or the Instructions for Form 1040-SS. 1040x amended tax return Spouses electing qualified joint venture status are treated as sole proprietors for federal tax purposes. 1040x amended tax return Either of the sole proprietor spouses may report and pay the employment taxes due on wages paid to the employees, using the EIN of that spouse’s sole proprietorship. 1040x amended tax return For more information on qualified joint ventures, visit IRS. 1040x amended tax return gov and enter “qualified joint venture” in the search box. 1040x amended tax return Farm Crew Leaders You are an employer of farmworkers if you are a crew leader. 1040x amended tax return A crew leader is a person who furnishes and pays (either on his or her own behalf or on behalf of the farm operator) workers to do farmwork for the farm operator. 1040x amended tax return If there is no written agreement between you and the farm operator stating that you are his or her employee, and if you pay the workers (either for yourself or for the farm operator), then you are a crew leader. 1040x amended tax return 3. 1040x amended tax return Employee's Social Security Number (SSN) An employee's social security number (SSN) consists of nine digits separated as follows: 000-00-0000. 1040x amended tax return You must get each employee's name and SSN and enter them on Form W-2AS, W-2CM, W-2GU, or W-2VI. 1040x amended tax return If you do not report the employee's correct name and SSN, you may owe a penalty unless you have reasonable cause. 1040x amended tax return See Publication 1586, Reasonable Cause Regulations and Requirements for Missing and Incorrect Name/TINs, for information on the requirement to solicit the employee's SSN. 1040x amended tax return Employee's social security card. 1040x amended tax return   You should ask the employee to show you his or her social security card. 1040x amended tax return The employee may show the card if it is available. 1040x amended tax return Do not accept a social security card that says “Not valid for employment. 1040x amended tax return ” A social security number issued with this legend does not permit employment. 1040x amended tax return You may, but you are not required to, photocopy the social security card if the employee provides it. 1040x amended tax return If an employee does not have a social security card or needs a new one, the employee should apply for one on Form SS-5 and submit the necessary documentation. 1040x amended tax return The employee must complete and sign Form SS-5; it cannot be filed by the employer. 1040x amended tax return You may be asked to supply a letter to accompany Form SS-5 if the employee has exceeded his or her yearly or lifetime limit for the number of replacement cards allowed. 1040x amended tax return If your employee has applied for an SSN but has not received the card before you must file your Form W-2 reports, and you are filing your reports on paper, enter “Applied For” in box d. 1040x amended tax return Enter all zeroes in the SSN field if filing electronically. 1040x amended tax return When the employee receives the SSN, file Copy A of Form W-2c with SSA to show the employee's SSN. 1040x amended tax return Correctly record the employee's name and SSN. 1040x amended tax return   Record the name and number of each employee as they appear on his or her social security card. 1040x amended tax return If the name is not correct as shown on the card (for example, because of marriage or divorce), the employee should request a corrected card from the SSA. 1040x amended tax return Continue to use the old name until the employee shows you the replacement social security card with the corrected name. 1040x amended tax return   If the SSA issues the employee a replacement card after a name change, or a new card with a different social security number after a change in alien work status, file a Form W-2c to correct the name/SSN reported on the most recently filed Form W-2AS, W-2CM, W-2GU, or W-2VI. 1040x amended tax return It is not necessary to correct other years if the previous name and SSN were used for years before the most recent Form W-2. 1040x amended tax return Where to get and file social security number application forms. 1040x amended tax return    U. 1040x amended tax return S. 1040x amended tax return Virgin Islands—U. 1040x amended tax return S. 1040x amended tax return Social Security Administration, 8000 Nisky Center, First Floor, Suite 2, St. 1040x amended tax return Thomas, VI 00802. 1040x amended tax return  Guam—U. 1040x amended tax return S. 1040x amended tax return Social Security Administration, 655 Harmon Loop Road, Suite 300, Dededo, GU 96929. 1040x amended tax return  American Samoa—U. 1040x amended tax return S. 1040x amended tax return Social Security Administration, Pago Plaza, Suite 117, Pago Pago, AS 96799. 1040x amended tax return  Commonwealth of the Northern Mariana Islands—U. 1040x amended tax return S. 1040x amended tax return Social Security Administration, MH Building, Suite 201, Saipan, MP 96950. 1040x amended tax return Verification of social security numbers. 1040x amended tax return   Employers and authorized reporting agents can use the Social Security Number Verification Service (SSNVS) to instantly verify up to 10 names and SSNs (per screen) at a time, or submit an electronic file of up to 250,000 names and SSNs and usually receive the results the next business day. 1040x amended tax return Visit www. 1040x amended tax return socialsecurity. 1040x amended tax return gov/employer/ssnv. 1040x amended tax return htm for more information. 1040x amended tax return Registering for SSNVS. 1040x amended tax return   You must register online and receive authorization from your employer to use SSNVS. 1040x amended tax return To register, visit SSA's website at www. 1040x amended tax return ssa. 1040x amended tax return gov/employer and click on the Business Services Online link. 1040x amended tax return Follow the registration instructions to obtain a user identification (ID) and password. 1040x amended tax return You will need to provide the following information about yourself and your company. 1040x amended tax return Name. 1040x amended tax return SSN. 1040x amended tax return Date of birth. 1040x amended tax return Type of employer. 1040x amended tax return EIN. 1040x amended tax return Company name, address, and telephone number. 1040x amended tax return Email address. 1040x amended tax return   When you have completed the online registration process, SSA will mail a one-time activation code to your employer. 1040x amended tax return You must enter the activation code online to use SSNVS. 1040x amended tax return 4. 1040x amended tax return Wages and Other Compensation Generally, all wages are subject to social security and Medicare tax (and FUTA tax for U. 1040x amended tax return S. 1040x amended tax return Virgin Islands employers). 1040x amended tax return However, wages subject to social security tax and FUTA tax are limited by a wage base amount that you pay to each employee for the year. 1040x amended tax return The wage base for social security tax is $117,000 for 2014. 1040x amended tax return After you pay $117,000 to an employee in 2014, including tips, do not withhold social security tax on any amount that you later pay to the employee for the year. 1040x amended tax return The wage base for FUTA tax is $7,000 for 2014. 1040x amended tax return All wages are subject to Medicare tax. 1040x amended tax return The wages may be in cash or in other forms, such as an automobile for personal use. 1040x amended tax return Wages include salaries, vacation allowances, bonuses, commissions, and fringe benefits. 1040x amended tax return It does not matter how payments are measured or paid. 1040x amended tax return See the table in section 12 for exceptions to social security, Medicare, and FUTA taxes on wages. 1040x amended tax return See section 5 and section 6 for a discussion of how the rules apply to tips and farmworkers. 1040x amended tax return Social security and Medicare taxes apply to most payments of sick pay, including payments by third parties such as insurance companies. 1040x amended tax return Special rules apply to the reporting of third-party sick pay. 1040x amended tax return For details, see Publication 15-A. 1040x amended tax return Determine the value of noncash pay (such as goods, lodging, and meals) by its fair market value. 1040x amended tax return However, see Fringe Benefits , later in this section. 1040x amended tax return Except for farmworkers and household employees, this kind of pay may be subject to social security, Medicare, and FUTA taxes. 1040x amended tax return Back pay, including retroactive wage increases (but not amounts paid as liquidated damages), is taxed as ordinary wages in the year paid. 1040x amended tax return For information on reporting back pay to the Social Security Administration, see Publication 957, Reporting Back Pay and Special Wage Payments to the Social Security Administration. 1040x amended tax return Travel and business expenses. 1040x amended tax return   Payments to your employee for travel and other necessary expenses of your business generally are included in taxable wages if (a) your employee is not required to or does not substantiate timely those expenses to you with receipts or other documentation, or (b) you advance an amount to your employee for business expenses and your employee is not required to or does not return timely any amount that he or she does not substantiate. 1040x amended tax return Sick pay. 1040x amended tax return   In general, sick pay is any amount that you pay, under a plan that you take part in, to an employee because of sickness or injury. 1040x amended tax return These amounts are sometimes paid by a third party, such as an insurance company. 1040x amended tax return In either case, these payments are subject to social security and Medicare taxes (and FUTA tax for U. 1040x amended tax return S. 1040x amended tax return Virgin Islands employers). 1040x amended tax return Sick pay becomes exempt from these taxes after the end of 6 calendar months after the calendar month the employee last worked for the employer. 1040x amended tax return Publication 15-A explains the employment tax rules that apply to sick pay, disability benefits, and similar payments to employees. 1040x amended tax return Fringe Benefits Generally, fringe benefits are includible in the gross income of an employee and are subject to employment taxes. 1040x amended tax return Examples of fringe benefits include the use of an automobile, aircraft flights that you provide, free or discounted commercial airline flights, vacations, discounts on property or services, memberships in country clubs or other social clubs, and tickets to entertainment or sporting events. 1040x amended tax return In general, the amount included in the employee's income is the excess of the fair market value of the benefit over the sum of any amount paid for it by the employee and any amount excluded by law. 1040x amended tax return For more information, see Publication 15-B, Employer's Tax Guide to Fringe Benefits. 1040x amended tax return When fringe benefits are treated as paid. 1040x amended tax return   You can choose to treat certain noncash fringe benefits (including personal use of an automobile provided by you) as paid by the pay period, quarter, or on any other basis that you choose, but they must be treated as paid at least annually. 1040x amended tax return You do not have to make a formal choice of payment dates or notify the IRS. 1040x amended tax return You do not have to use the same basis for all employees. 1040x amended tax return You may change methods as often as you like, as long as all benefits provided in a calendar year are treated as paid no later than December 31 of the calendar year. 1040x amended tax return However, see Special accounting rule for fringe benefits provided during November and December , later in this section. 1040x amended tax return   You can treat the value of a single taxable noncash fringe benefit as paid on one or more dates in the same calendar year, even if the employee gets the entire benefit at one time. 1040x amended tax return However, once you elect the payment dates, you must report the taxes on your return in the same tax period in which you treated them as paid. 1040x amended tax return This election does not apply to a fringe benefit where real property or investment personal property is transferred. 1040x amended tax return Withholding social security and Medicare taxes on fringe benefits. 1040x amended tax return   You add the value of fringe benefits to regular wages for a payroll period and figure social security and Medicare taxes on the total. 1040x amended tax return   If you withhold less than the required amount of social security and Medicare taxes from the employee in a calendar year but report and pay the proper amount, you may recover the taxes from the employee. 1040x amended tax return Depositing taxes on fringe benefits. 1040x amended tax return   Once you choose payment dates for taxable noncash fringe benefits, you must deposit taxes in the same deposit period that you treat the fringe benefits as paid. 1040x amended tax return You may make a reasonable estimate of the value of the fringe benefits. 1040x amended tax return In general, the value of taxable noncash fringe benefits provided in a calendar year must be determined by January 31 of the following year. 1040x amended tax return   You may claim a refund of overpayments or elect to have any overpayment applied to the next employment tax return. 1040x amended tax return If deposits are underpaid, see Deposit Penalties in section 8. 1040x amended tax return Valuation of vehicles provided to employees. 1040x amended tax return    If you provide a vehicle to your employees, you may either determine the actual value of the benefit for the entire calendar year, taking into account the business use of the vehicle, or consider the entire use for the calendar year as personal and include 100% of the value of the vehicle in the employee's income. 1040x amended tax return For reporting information to employees, see the box 14 instructions in the General Instructions for Forms W-2 and W-3. 1040x amended tax return Special accounting rule for fringe benefits provided during November and December. 1040x amended tax return   You may choose to treat the value of taxable noncash fringe benefits provided during November and December as paid in the next year. 1040x amended tax return However, this applies only to those benefits that you actually provided during November and December, not to those you merely treated as paid during those months. 1040x amended tax return   If you use this rule, you must notify each affected employee between the time of the employee's last paycheck of the calendar year and at or near the time that you give the employee Form W-2AS, W-2CM, W-2GU, or W-2VI. 1040x amended tax return If you use the special accounting rule, your employee must also use it for the same period that you use it. 1040x amended tax return You cannot use this rule for a fringe benefit of real property or tangible or intangible real property of a kind normally held for investment that is transferred to your employee. 1040x amended tax return 5. 1040x amended tax return Tips Tips that your employee receives from customers are generally subject to social security and Medicare withholding. 1040x amended tax return Your employee must report cash tips to you by the 10th of the month after the month that the tips are received. 1040x amended tax return The report should include tips you paid over to the employee for charge customers, tips the employee received directly from customers, and tips received from other employees under any tip-sharing arrangement. 1040x amended tax return Both directly and indirectly tipped employees must report tips to you. 1040x amended tax return The report should not include tips that the employee paid out to other employees. 1040x amended tax return No report is required for months when tips are less than $20. 1040x amended tax return Your employees report tips on Form 4070, Employee's Report of Tips to Employer, or on a similar statement. 1040x amended tax return They may also use Form 4070A, Employee's Daily Record of Tips, to keep a record of their tips. 1040x amended tax return Both forms are included in Publication 1244, Employee's Daily Record of Tips and Report to Employer, available at IRS. 1040x amended tax return gov. 1040x amended tax return The statement must be signed by the employee and must include: The employee's name, address, and SSN, Your name and address, The month or period that the report covers, and The total tips received during the month or period. 1040x amended tax return You are permitted to establish a system for electronic tip reporting by employees. 1040x amended tax return See Regulations section 31. 1040x amended tax return 6053-1(d). 1040x amended tax return Collecting taxes on tips. 1040x amended tax return   You must collect the employee social security and Medicare taxes on the employee's tips. 1040x amended tax return You can also collect these taxes from the employee's wages or from other funds that he or she makes available. 1040x amended tax return Stop collecting the employee social security tax when his or her total wages and tips for 2014 reach $117,000. 1040x amended tax return Collect the employee Medicare tax for the whole year on all wages and tips. 1040x amended tax return   You are responsible for the employer social security tax on wages and tips until the wages (including tips) reach the wage base limit. 1040x amended tax return You are responsible for the employer Medicare tax for the whole year on all wages and tips. 1040x amended tax return File Form 941-SS (or Form 944) to report withholding and employer taxes on tips. 1040x amended tax return The withholding rules for withholding an employee's share of Medicare tax on tips also apply to withholding the Additional Medicare Tax once wages and tips exceed $200,000 in the calendar year. 1040x amended tax return Ordering rule. 1040x amended tax return   If, by the 10th of the month after the month you received an employee's report on tips, you do not have enough employee funds available to deduct the employee social security and Medicare tax on tips, you no longer have to collect it and are not liable for it. 1040x amended tax return Reporting tips. 1040x amended tax return   Report tips and any collected and uncollected social security in boxes 1, 5, 7, and 12 on Forms W-2AS, W-2CM, W-2GU, or W-2VI and on Form 941-SS, lines 5b, 5c, and 5d (Form 944, lines 4b, 4c, and 4d). 1040x amended tax return Do not include any uncollected Additional Medicare Tax in box 12 of Form W-2. 1040x amended tax return Report an adjustment on Form 941-SS, line 9 (Form 944, line 6), for the uncollected social security and Medicare taxes. 1040x amended tax return The table in section 12 shows how tips are treated for FUTA tax purposes. 1040x amended tax return   Revenue Ruling 2012-18 provides guidance for employers regarding social security and Medicare taxes imposed on tips, including information on the reporting of the employer share of social security and Medicare taxes under section 3121(q), the difference between tips and service charges, and the section 45B credit. 1040x amended tax return See Revenue Ruling 2012-18, 2012-26 I. 1040x amended tax return R. 1040x amended tax return B. 1040x amended tax return 1032, available at www. 1040x amended tax return irs. 1040x amended tax return gov/irb/2012-26_IRB/ar07. 1040x amended tax return html. 1040x amended tax return 6. 1040x amended tax return Social Security and Medicare Taxes for Farmworkers The tests described below apply only to services that are defined as agricultural labor (farmwork). 1040x amended tax return In general, you are an employer of farmworkers if your employees: Raise or harvest agricultural or horticultural products on your farm (including the raising and feeding of livestock); Work in connection with the operation, management, conservation, improvement, or maintenance of your farm and its tools and equipment; Provide services relating to salvaging timber, or clearing land of brush and other debris, left by a hurricane (also known as hurricane labor); Handle, process, or package any agricultural or horticultural commodity if you produced over half of the commodity (for a group of up to 20 unincorporated operators, all of the commodity); or Do work for you related to cotton ginning, turpentine, gum resin products, or the operation and maintenance of irrigation facilities. 1040x amended tax return For this purpose, the term “farm” includes stock, dairy, poultry, fruit, fur-bearing animal, and truck farms, as well as plantations, ranches, nurseries, ranges, greenhouses or other similar structures used primarily for the raising of agricultural or horticultural commodities, and orchards. 1040x amended tax return Farmwork does not include reselling activities that do not involve any substantial activity of raising agricultural or horticultural commodities, such as a retail store or a greenhouse used primarily for display or storage. 1040x amended tax return A “share farmer” working for you is not your employee. 1040x amended tax return However, the share farmer may be subject to self-employment tax. 1040x amended tax return In general, share farming is an arrangement in which certain commodity products are shared between the farmer and the owner (or tenant) of the land. 1040x amended tax return For details, see Regulations section 31. 1040x amended tax return 3121(b)(16)-1. 1040x amended tax return The $150 Test or the $2,500 Test All cash wages that you pay to any employee for farmwork are subject to social security and Medicare taxes if either of the following two tests is met. 1040x amended tax return You pay cash wages to the employee of $150 or more in a year (count all cash wages paid on a time, piecework, or other basis) for farmwork. 1040x amended tax return The $150 test applies separately to each farmworker that you employ. 1040x amended tax return If you employ a family of workers, each member is treated separately. 1040x amended tax return Do not count wages paid by other employers. 1040x amended tax return The total that you pay for farmwork (cash and noncash) to all of your employees is $2,500 or more during the year. 1040x amended tax return Exceptions. 1040x amended tax return   The $150 and $2,500 tests do not apply to wages that you pay to a farmworker who receives less than $150 in annual cash wages and the wages are not subject to social security and Medicare taxes even if you pay $2,500 or more in that year to all of your farmworkers if the farmworker: Is employed in agriculture as a hand-harvest laborer, Is paid piece rates in an operation that is usually paid on a piece-rate basis in the region of employment, Commutes daily from his or her home to the farm, and Had been employed in agriculture less than 13 weeks in the preceding calendar year. 1040x amended tax return   Amounts that you pay to these seasonal farmworkers, however, count toward the $2,500-or-more test to determine whether wages that you pay to other farmworkers are subject to social security and Medicare taxes. 1040x amended tax return 7. 1040x amended tax return How To Figure Social Security and Medicare Taxes The tax rate for social security is 6. 1040x amended tax return 2% (amount withheld) each for the employer and employee (12. 1040x amended tax return 4% total). 1040x amended tax return The social security wage base limit is $117,000. 1040x amended tax return The tax rate for Medicare is 1. 1040x amended tax return 45% (amount withheld) each for the employee and employer (2. 1040x amended tax return 9% total). 1040x amended tax return There is no wage base limit for Medicare tax; all covered wages are subject to Medicare tax. 1040x amended tax return Multiply each wage payment by these percentages to figure the tax to withhold from employees. 1040x amended tax return Employers report both the employee and employer shares on Forms 941-SS, 944, or Form 943 (farm employment). 1040x amended tax return See section 5 for information on tips. 1040x amended tax return Additional Medicare Tax withholding. 1040x amended tax return   In addition to withholding Medicare tax at 1. 1040x amended tax return 45%, you must withhold a 0. 1040x amended tax return 9% Additional Medicare Tax from wages you pay to an employee in excess of $200,000 in a calendar year. 1040x amended tax return You are required to begin withholding Additional Medicare Tax in the pay period in which you pay wages in excess of $200,000 to an employee and continue to withhold it each pay period until the end of the calendar year. 1040x amended tax return Additional Medicare Tax is only imposed on the employee. 1040x amended tax return There is no employer share of Additional Medicare Tax. 1040x amended tax return All wages that are subject to Medicare tax are subject to Additional Medicare Tax withholding if paid in excess of the $200,000 withholding threshold. 1040x amended tax return   For more information on what wages are subject to Medicare tax, see the chart Special Rules for Various Types of Employment and Payments in section 12. 1040x amended tax return For more information on Additional Medicare Tax, visit IRS. 1040x amended tax return gov and enter “Additional Medicare Tax” in the search box. 1040x amended tax return Deducting the tax. 1040x amended tax return   Deduct the employee tax from each wage payment. 1040x amended tax return If you are not sure that the wages that you pay to a farmworker during the year will be taxable, you may either deduct the tax when you make the payments or wait until the $2,500 test or the $150 test explained in section 6 has been met. 1040x amended tax return Employee's portion of taxes paid by employer. 1040x amended tax return   If you pay your employee's social security and Medicare taxes without deducting them from the employee's pay, you must include the amount of the payments in the employee's wages for social security and Medicare taxes. 1040x amended tax return This increase in the employee's wage payment for your payment of the employee's social security and Medicare taxes is also subject to employee social security and Medicare taxes. 1040x amended tax return This again increases the amount of the additional taxes that you must pay. 1040x amended tax return Household and agricultural employers. 1040x amended tax return   This discussion does not apply to household and agricultural employers. 1040x amended tax return If you pay a household or agricultural employee's social security and Medicare taxes, these payments must be included in the employee's wages. 1040x amended tax return However, this wage increase due to the tax payments is not subject to social security or Medicare taxes as discussed in this section. 1040x amended tax return See Publication 15-A for details. 1040x amended tax return Sick pay payments. 1040x amended tax return   Social security and Medicare taxes apply to most payments of sick pay, including payments made by third parties such as insurance companies. 1040x amended tax return For details on third-party payers of sick pay, see Publication 15-A. 1040x amended tax return 8. 1040x amended tax return Depositing Taxes You must deposit social security and Medicare taxes if your tax liability (Form 941-SS, line 10; Form 944, line 7; or Form 943, line 11) is $2,500 or more for the tax return period. 1040x amended tax return You must make the deposit by electronic funds transfer. 1040x amended tax return For more information about electronic funds transfers, see How To Deposit , later in this section. 1040x amended tax return Payment with Return $2,500 rule. 1040x amended tax return   Instead of making deposits during the current quarter, you can pay your total Form 941-SS tax liability when you timely file Form 941-SS if: Your total Form 941-SS tax liability for either the current quarter or the preceding quarter is less than $2,500 and You do not incur a $100,000 next-day deposit obligation during the current quarter. 1040x amended tax return   If you are not sure your total liability for the current quarter will be less than $2,500, (and your liability for the preceding quarter was not less than $2,500), make deposits using the semiweekly or monthly rules so you won't be subject to failure to deposit penalties. 1040x amended tax return Employers who have been notified to file Form 944 can pay their tax liability due for the fourth quarter with Form 944, if their fourth quarter tax liability is less than $2,500. 1040x amended tax return Employers must have deposited any tax liability due for the first, second, and third quarters, according to the deposit rules, in order to avoid failure-to-deposit penalties for deposits due during those quarters. 1040x amended tax return Only monthly schedule depositors are allowed to make an Accuracy of Deposits Rule payment with the return. 1040x amended tax return Semiweekly schedule depositors must timely deposit the amount. 1040x amended tax return See Accuracy of Deposits Rule and How To Deposit, later in this section. 1040x amended tax return When To Deposit Under the rules discussed below, the only difference between farm and nonfarm workers' employment tax deposit rules is the lookback period. 1040x amended tax return Therefore, farm and nonfarm workers are discussed together except where noted. 1040x amended tax return Depending on your total taxes reported during a lookback period (discussed later), you are either a monthly schedule depositor or a semiweekly schedule depositor. 1040x amended tax return The terms “monthly schedule depositor” and “semiweekly schedule depositor” do not refer to how often you pay your employees or how often you are required to make deposits. 1040x amended tax return The terms identify which set of rules that you must follow when a tax liability arises (for example, when you have a payday). 1040x amended tax return You will need to determine your deposit schedule for a calendar year based on the total employment taxes reported on Forms 941-SS, line 10; Form 944, line 7; or Form 943, line 9, for your lookback period (defined below). 1040x amended tax return If you filed both Forms 941-SS and 941 during the lookback period, combine the tax liabilities for these returns for purposes of determining your deposit schedule. 1040x amended tax return Determine your deposit schedule for Form 943 separately from Forms 941-SS and 941. 1040x amended tax return Lookback period for employers of nonfarm workers. 1040x amended tax return   The lookback period for Form 941-SS (or Form 941) consists of four quarters beginning July 1 of the second preceding year and ending June 30 of the prior year. 1040x amended tax return These four quarters are your lookback period even if you did not report any taxes for any of the quarters. 1040x amended tax return For 2014, the lookback period is July 1, 2012, through June 30, 2013. 1040x amended tax return    Table 1. 1040x amended tax return Lookback Period for Calendar Year 2014 Lookback Period July 1, 2012 Oct. 1040x amended tax return 1, 2012 Jan. 1040x amended tax return 1, 2013 Apr. 1040x amended tax return 1, 2013 through through through through Sep. 1040x amended tax return 30, 2012 Dec. 1040x amended tax return 31, 2012 Mar. 1040x amended tax return 31, 2013 June 30, 2013    The lookback period for Form 944 is the second calendar year preceding the current calendar year. 1040x amended tax return For example, the lookback period for calendar year 2014 is calendar year 2012. 1040x amended tax return In addition, for employers who filed Form 944 for 2012 or for 2013 and will file Form 941-SS (or Form 941) for 2014, the lookback period for 2014 is the second calendar year preceding the current calendar year, that is, 2012. 1040x amended tax return Lookback period for employers of farmworkers. 1040x amended tax return   The lookback period for Form 943 is the second calendar year preceding the current calendar year. 1040x amended tax return The lookback period for calendar year 2014 is calendar year 2012. 1040x amended tax return Adjustments to lookback period taxes. 1040x amended tax return   To determine your taxes for the lookback period, use only the tax that you reported on the original returns (Forms 941-SS, 943, or 944). 1040x amended tax return Do not include any adjustments shown on Form 941-X, 943-X, or 944-X. 1040x amended tax return Example. 1040x amended tax return   An employer originally reported total taxes of $45,000 for the lookback period. 1040x amended tax return The employer discovered during January 2014 that the tax reported during the lookback period was understated by $10,000 and corrected this error by filing Form 941-X. 1040x amended tax return The employer is a monthly schedule depositor for 2014 because the lookback period tax liabilities are based on the amounts originally reported, and they were $50,000 or less. 1040x amended tax return Deposit Period The term “deposit period” refers to the period during which tax liabilities are accumulated for each required deposit due date. 1040x amended tax return For monthly schedule depositors, the deposit period is a calendar month. 1040x amended tax return The deposit periods for semiweekly schedule depositors are Wednesday through Friday and Saturday through Tuesday. 1040x amended tax return Monthly Deposit Schedule If your total tax reported for the lookback period is $50,000 or less, you are a monthly schedule depositor for the current year. 1040x amended tax return You must deposit taxes on wage payments made during a calendar month by the 15th day of the following month. 1040x amended tax return New employers. 1040x amended tax return   Your tax liability for any quarter in the lookback period before the date you started or acquired your business is considered to be zero. 1040x amended tax return Therefore, you are a monthly schedule depositor for the first calendar year of your business (but see the $100,000 Next-Day Deposit Rule , later in this section). 1040x amended tax return Semiweekly Deposit Schedule If your total tax reported for the lookback period is more than $50,000, you are a semiweekly schedule depositor for the current year. 1040x amended tax return If you are a semiweekly schedule depositor, you must deposit on Wednesday and/or Friday, depending on what day of the week that you make wage payments, as follows. 1040x amended tax return Deposit taxes on wage payments made on Wednesday, Thursday, and/or Friday by the following Wednesday. 1040x amended tax return Deposit taxes on wage payments made on Saturday, Sunday, Monday, and/or Tuesday by the following Friday. 1040x amended tax return Semiweekly depositors are generally not required to deposit twice a week if their payments were in the same semiweekly period unless the $100,000 Next-Day Deposit Rule , discussed later in this section, applies. 1040x amended tax return For example, if you made a payment on both Wednesday and Friday and incurred taxes of $10,000 for each pay date, deposit the $20,000 on the following Wednesday. 1040x amended tax return If you made no additional payments on Saturday through Tuesday, no deposit is due on Friday. 1040x amended tax return Semiweekly deposit period spanning two quarters. 1040x amended tax return   If you have more than one pay date during a semiweekly period and the pay dates fall in different calendar quarters, you will need to make separate deposits for the separate liabilities. 1040x amended tax return Example. 1040x amended tax return   If you have a pay date on Monday, March 31, 2014 (first quarter), and another pay date on Tuesday, April 1, 2014 (second quarter), two separate deposits will be required even though the pay dates fall within the same semiweekly period. 1040x amended tax return Both deposits will be due on Friday, April 4, 2014 (3 business days from the end of the semiweekly deposit period). 1040x amended tax return Examples of Monthly and Semiweekly Schedules Employers of nonfarm workers. 1040x amended tax return   Rose Co. 1040x amended tax return reported Form 941-SS taxes as follows: 2013 Lookback Period 3rd Quarter 2011 $12,000 4th Quarter 2011 12,000 1st Quarter 2012 12,000 2nd Quarter 2012 12,000   $48,000 2014 Lookback Period 3rd Quarter 2012 $12,000 4th Quarter 2012 12,000 1st Quarter 2013 12,000 2nd Quarter 2013 15,000   $51,000 Rose Co. 1040x amended tax return is a monthly schedule depositor for 2013 because its taxes for the four quarters in its lookback period ($48,000 for the 3rd quarter of 2011 through the 2nd quarter of 2012) were not more than $50,000. 1040x amended tax return However, for 2014, Rose Co. 1040x amended tax return is a semiweekly schedule depositor because the total taxes for the four quarters in its lookback period ($51,000 for the 3rd quarter of 2012 through the 2nd quarter of 2013) exceeded $50,000. 1040x amended tax return Employers of farmworkers. 1040x amended tax return   Red Co. 1040x amended tax return reported taxes on its 2012 Form 943, line 9, of $48,000. 1040x amended tax return On its 2013 Form 943, line 11, it reported taxes of $60,000. 1040x amended tax return   Red Co. 1040x amended tax return is a monthly schedule depositor for 2014 because its taxes for its lookback period ($48,000 for calendar year 2012) were not more than $50,000. 1040x amended tax return However, for 2015, Red Co. 1040x amended tax return is a semiweekly schedule depositor because the total taxes for its lookback period ($60,000 for calendar year 2013) exceeded $50,000. 1040x amended tax return New agricultural employers. 1040x amended tax return   New agricultural employers filing Form 943 are monthly schedule depositors for the first and second calendar years of their business because their taxes for the lookback period (2 years) are considered to be zero. 1040x amended tax return However, see the $100,000 Next-Day Deposit Rule , later in this section. 1040x amended tax return Deposits on Business Days Only If a deposit due date falls on a day that is not a business day, the deposit is considered timely if it is made by the close of the next business day. 1040x amended tax return A business day is any day other than a Saturday, Sunday, or legal holiday. 1040x amended tax return For example, if a deposit is required to be made on Friday, but Friday is a legal holiday, the deposit is considered timely if it is made by the following Monday (if Monday is a business day). 1040x amended tax return Semiweekly schedule depositors have at least 3 business days to make a deposit. 1040x amended tax return If any of the 3 weekdays after the end of a semiweekly period is a legal holiday, you will have an additional day for each day that is a legal holiday to make the required deposit. 1040x amended tax return For example, if a semiweekly schedule depositor accumulated taxes for payments made on Friday and the following Monday is a legal holiday, the deposit normally due on Wednesday may be made on Thursday (this allows 3 business days to make the deposit). 1040x amended tax return Legal holiday. 1040x amended tax return   The term “legal holiday” means any legal holiday in the District of Columbia. 1040x amended tax return Legal holidays for 2014 are listed below. 1040x amended tax return January 1—New Year's Day January 20—Birthday of Martin Luther King, Jr. 1040x amended tax return February 17—Washington's Birthday April 16—District of Columbia Emancipation Day May 26—Memorial Day July 4—Independence Day September 1—Labor Day October 13—Columbus Day November 11—Veterans Day November 27—Thanksgiving Day December 25—Christmas Day Application of Monthly and Semiweekly Schedules The following examples illustrate the procedure for determining the deposit date under the two different deposit schedules. 1040x amended tax return Monthly schedule example. 1040x amended tax return   Spruce Co. 1040x amended tax return is a monthly schedule depositor with seasonal employees. 1040x amended tax return It paid wages each Friday during August but did not pay any wages during September. 1040x amended tax return Under the monthly deposit schedule, Spruce Co. 1040x amended tax return must deposit the combined tax liabilities for the four August paydays by September 15. 1040x amended tax return Spruce Co. 1040x amended tax return does not have a deposit requirement for September (due by October 15) because no wages were paid and, therefore, it did not have a tax liability for September. 1040x amended tax return Semiweekly schedule example. 1040x amended tax return   Green, Inc. 1040x amended tax return is a semiweekly schedule depositor and pays wages once each month on the last Friday of the month. 1040x amended tax return Although Green, Inc. 1040x amended tax return , has a semiweekly deposit schedule, it will deposit just once a month because it pays wages only once a month. 1040x amended tax return The deposit, however, will be made under the semiweekly deposit schedule as follows: Green, Inc. 1040x amended tax return ’s tax liability for the April 25, 2014 (Friday), payday must be deposited by April 30, 2014 (Wednesday). 1040x amended tax return Under the semiweekly deposit schedule, liabilities for wages paid on Wednesday through Friday must be deposited by the following Wednesday. 1040x amended tax return $100,000 Next-Day Deposit Rule If you accumulate taxes of $100,000 or more on any day during a deposit period, you must deposit by the close of the next business day, whether you are a monthly or a semiweekly schedule depositor. 1040x amended tax return For purposes of the $100,000 rule, do not continue accumulating taxes after the end of a deposit period. 1040x amended tax return For example, if a semiweekly schedule depositor has accumulated taxes of $95,000 on Tuesday and $10,000 on Wednesday, the $100,000 next-day deposit rule does not apply because the $10,000 is accumulated in the next deposit period. 1040x amended tax return Thus, $95,000 must be deposited by Friday and $10,000 must be deposited by the following Wednesday. 1040x amended tax return However, once you accumulate at least $100,000 in a deposit period, stop accumulating at the end of that day and begin to accumulate anew on the next day. 1040x amended tax return For example, Fir Co. 1040x amended tax return is a semiweekly schedule depositor. 1040x amended tax return On Monday, Fir Co. 1040x amended tax return accumulates taxes of $110,000 and must deposit on Tuesday, the next business day. 1040x amended tax return On Tuesday, Fir Co. 1040x amended tax return accumulates additional taxes of $30,000. 1040x amended tax return Because the $30,000 is not added to the previous $110,000 and is less than $100,000, Fir Co. 1040x amended tax return does not have to deposit the $30,000 until Friday (following the semiweekly deposit schedule). 1040x amended tax return If you are a monthly schedule depositor and you accumulate a $100,000 tax liability on any day during a month, you become a semiweekly schedule depositor on the next day and remain so for the remainder of the calendar year and for the following calendar year. 1040x amended tax return Example. 1040x amended tax return   Elm, Inc. 1040x amended tax return started its business on May 1, 2014. 1040x amended tax return On May 8, it paid wages for the first time and accumulated a tax liability of $40,000. 1040x amended tax return On Friday, May 9, Elm, Inc. 1040x amended tax return paid wages and accumulated a liability of $60,000, making its accumulated Form 941-SS tax liability total $100,000. 1040x amended tax return Elm, Inc. 1040x amended tax return must deposit $100,000 by Monday, May 12, the next business day. 1040x amended tax return Because this was the first year of its business, the tax liability for its lookback period is considered to be zero, and it would be a monthly schedule depositor based on the lookback rules. 1040x amended tax return However, because Elm, Inc. 1040x amended tax return accumulated $100,000 on May 9, it became a semiweekly schedule depositor on May 10. 1040x amended tax return It will be a semiweekly schedule depositor for the remainder of 2014 and for 2015. 1040x amended tax return Accuracy of Deposits Rule You are required to deposit 100% of your tax liability on or before the deposit due date. 1040x amended tax return However, penalties will not be applied for depositing less than 100% if both of the following conditions are met. 1040x amended tax return Any deposit shortfall does not exceed the greater of $100 or 2% of the amount of taxes otherwise required to be deposited, and The deposit shortfall is paid or deposited by the shortfall makeup date as described below. 1040x amended tax return Makeup date for deposit shortfall: Monthly schedule depositor. 1040x amended tax return Deposit or pay the shortfall by the due date of your Form 941-SS, 944, or 943 for the period in which the shortfall occurred. 1040x amended tax return You may pay the shortfall with your return even if the amount is $2,500 or more. 1040x amended tax return Semiweekly schedule depositor. 1040x amended tax return Deposit by the earlier of: The first Wednesday or Friday (whichever comes first) that comes on or after the 15th of the month following the month in which the shortfall occurred, or The return due date for the period in which the shortfall occurred. 1040x amended tax return For example, if a semiweekly schedule depositor filing Form 941-SS has a deposit shortfall during July 2014, the shortfall makeup date is August 15, 2014 (Friday). 1040x amended tax return However, if the shortfall occurred on the required April 2 (Wednesday), deposit date for a March 28 (Friday) pay date, the return due date for the March 28 pay date (April 30) would come before the May 16 (Friday) shortfall makeup date. 1040x amended tax return In this case, the shortfall must be deposited by April 30, 2014. 1040x amended tax return Employers of Both Farm and Nonfarm Workers If you employ both farm and nonfarm workers, you must treat employment taxes for the farmworkers (Form 943 taxes) separately from employment taxes for the nonfarm workers (Form 941-SS or 944 taxes). 1040x amended tax return Form 943 taxes and Form 941-SS (or Form 944) taxes are not combined for purposes of applying any of the deposit rules. 1040x amended tax return If a deposit is due, deposit the Form 941-SS (or Form 944) taxes and Form 943 taxes separately, as discussed next. 1040x amended tax return How To Deposit You must deposit employment taxes by electronic funds transfer. 1040x amended tax return See Payment with Return , earlier in this section, for exceptions explaining when taxes may be paid with the tax return instead of being deposited. 1040x amended tax return Electronic deposit requirement. 1040x amended tax return   You must use electronic funds transfer to make all federal tax deposits (such as deposits of employment tax, excise tax, and corporate income tax). 1040x amended tax return Generally, electronic fund transfers are made using the Electronic Federal Tax Payment System (EFTPS). 1040x amended tax return If you do not want to use EFTPS, you can arrange for your tax professional, financial institution, payroll service, or other trusted third party to make electronic deposits on your behalf. 1040x amended tax return   EFTPS is a free service provided by the Department of the Treasury. 1040x amended tax return To get more information or to enroll in EFTPS, call 1-800-555-4477 (U. 1040x amended tax return S. 1040x amended tax return Virgin Islands only) or 303-967-5916 (toll call). 1040x amended tax return You can also visit the EFTPS website at www. 1040x amended tax return eftps. 1040x amended tax return gov. 1040x amended tax return Additional information about EFTPS is also available in Publication 966. 1040x amended tax return When you receive your EIN. 1040x amended tax return   If you are a new employer that indicated a federal tax obligation when requesting an EIN, you will be pre-enrolled in EFTPS. 1040x amended tax return You will receive information about Express Enrollment in your Employer Identification Number (EIN) Package and an additional mailing containing your EFTPS personal identification number (PIN) and instructions for activating your PIN. 1040x amended tax return Follow the steps in your “How to Activate Your Enrollment” brochure to activate your enrollment and begin making your payroll tax deposits. 1040x amended tax return If you outsource any of your payroll and related tax duties to a third party payer, such as a payroll service provider or reporting agent, be sure to tell them about your EFTPS enrollment. 1040x amended tax return Deposit record. 1040x amended tax return   For your records, an Electronic Funds Transfer (EFT) Trace Number will be provided with each successful payment. 1040x amended tax return The number can be used as a receipt or to trace the payment. 1040x amended tax return Depositing on time. 1040x amended tax return   For deposits made by EFTPS to be on time, you must initiate the deposit by 8 p. 1040x amended tax return m. 1040x amended tax return Eastern time the day before the date the deposit is due. 1040x amended tax return If you use a third party to make deposits on your behalf, they may have different cutoff times. 1040x amended tax return Same-day payment option. 1040x amended tax return   If you fail to initiate a deposit transaction on EFTPS by 8 p. 1040x amended tax return m. 1040x amended tax return Eastern time the day before the date a deposit is due, you can still make your deposit on time by using the Federal Tax Application (FTA). 1040x amended tax return To use the same-day payment method, you will need to make arrangements with your financial institution ahead of time. 1040x amended tax return Please check with your financial institution regarding availability, deadlines, and costs. 1040x amended tax return Your financial institution may charge you a fee for payments made this way. 1040x amended tax return To learn more about the information you will need to provide your financial institution to make a same-day wire payment, please visit www. 1040x amended tax return eftps. 1040x amended tax return gov to download the Same-Day Payment Worksheet. 1040x amended tax return How to claim credit for overpayments. 1040x amended tax return   If you deposited more than the right amount of taxes for a tax period, you can choose on Form 941-SS, 941, 944, or 943 for that tax period to have the overpayment refunded or applied as a credit to your next return. 1040x amended tax return Do not ask EFTPS to request a refund from the IRS for you. 1040x amended tax return Deposit Penalties Penalties may apply if you do not make required deposits on time or if you make deposits of less than the required amount. 1040x amended tax return The penalties do not apply if any failure to make a proper and timely deposit was due to reasonable cause and not to willful neglect. 1040x amended tax return The IRS may also waive penalties if you inadvertently fail to deposit in the first quarter that a deposit is due, or the first quarter during which your frequency of deposits changed, if you timely filed your employment tax return. 1040x amended tax return For amounts not properly or timely deposited, the penalty rates are as follows. 1040x amended tax return 2% - Deposits made 1 to 5 days late. 1040x amended tax return 5% - Deposits made 6 to 15 days late. 1040x amended tax return 10% - Deposits made 16 or more days late. 1040x amended tax return Also applies to amounts paid within 10 days of the date of the first notice that the IRS sent asking for the tax due. 1040x amended tax return 10% - Amounts (that should have been deposited) paid directly to the IRS or paid with your tax return (but see Payment with Return , earlier in this section, for exceptions). 1040x amended tax return 15% - Amounts still unpaid more than 10 days after the date of the first notice that the IRS sent asking for the tax due or the day on which you received notice and demand for immediate payment, whichever is earlier. 1040x amended tax return Late deposit penalty amounts are determined using calendar days, starting from the due date of the liability. 1040x amended tax return Special rule for former Form 944 filers. 1040x amended tax return    If you filed Form 944 for the prior year and must file Forms 941-SS for the current year because your employment tax liability for the prior year exceeded the Form 944 eligibility requirement ($1,000 or less), the failure-to-deposit penalty will not apply to a late deposit of employment taxes for the first month of the current year if the taxes are deposited in full by March 15 of the current year. 1040x amended tax return Order in which deposits are applied. 1040x amended tax return   Deposits generally are applied to the most recent tax liability within the return period (quarter or year). 1040x amended tax return However, if you receive a failure-to-deposit penalty notice, you may designate how your payment is to be applied in order to minimize the amount of the penalty, if you do so within 90 days of the date of the notice. 1040x amended tax return Follow the instructions on the penalty notice that you received. 1040x amended tax return For more information on designating deposits, see Revenue Procedure 2001-58. 1040x amended tax return You can find Revenue Procedure 2001-58 on page 579 of Internal Revenue Bulletin 2001-50 at www. 1040x amended tax return irs. 1040x amended tax return gov/pub/irs-irbs/irb01-50. 1040x amended tax return pdf. 1040x amended tax return Example. 1040x amended tax return Cedar, Inc. 1040x amended tax return is required to make a deposit of $1,000 on July 15 and $1,500 on August 15. 1040x amended tax return It does not make the deposit on July 15. 1040x amended tax return On August 15, Cedar, Inc. 1040x amended tax return deposits $2,000. 1040x amended tax return Under the deposits rule, which applies deposits to the most recent tax liability, $1,500 of the deposit is applied to the August 15 deposit and the remaining $500 is applied to the July deposit. 1040x amended tax return Accordingly, $500 of the July 15 liability remains undeposited. 1040x amended tax return The penalty on this underdeposit will apply as explained earlier. 1040x amended tax return Trust fund recovery penalty. 1040x amended tax return   If federal income, social security, or Medicare taxes that must be withheld are not withheld or are not deposited or paid to the United States Treasury, the trust fund recovery penalty may apply. 1040x amended tax return The penalty is the full amount of the unpaid trust fund tax. 1040x amended tax return This penalty may apply to you if these unpaid taxes cannot be immediately collected from the employer or business. 1040x amended tax return   The trust fund recovery penalty may be imposed on all persons who are determined by the IRS to be responsible for collecting, accounting for, and paying over these taxes, and who acted willfully in not doing so. 1040x amended tax return   A responsible person can be an officer or employee of a corporation, a partner or employee of a partnership, an accountant, a volunteer director/trustee, or an employee of a sole proprietorship, or any other person or entity that is responsible for collecting, accounting for, and paying over trust fund taxes. 1040x amended tax return A responsible person also may include one who signs checks for the business or otherwise has authority to cause the spending of business funds. 1040x amended tax return    Willfully means voluntarily, consciously, and intentionally. 1040x amended tax return A responsible person acts willfully if the person knows the required actions of collecting, accounting for or paying over trust fund taxes are not taking place, or recklessly disregards obvious and known risks to the government's right to receive trust fund taxes. 1040x amended tax return “Averaged” failure-to-deposit penalty. 1040x amended tax return   The IRS may assess an “averaged” failure-to-deposit (FTD) penalty of 2% to 10% if you are a monthly schedule depositor and did not properly complete Form 941-SS, line 14, when your tax liability shown on Form 941-SS, line 10, was $2,500 or more. 1040x amended tax return IRS may also assess this penalty of 2% to 10% if you are a semiweekly schedule depositor and your tax liability shown on Form 941-SS, line 10, was $2,500 or more and you did any of the following. 1040x amended tax return Completed Form 941-SS, line 14, instead of Schedule B (Form 941). 1040x amended tax return Failed to attach a properly completed Schedule B (Form 941). 1040x amended tax return Completed Schedule B (Form 941) incorrectly, for example, by entering tax deposits instead of tax liabilities in the numbered spaces. 1040x amended tax return   The IRS figures the penalty by allocating your total tax liability shown on Form 941-SS, line 10, equally throughout the tax period. 1040x amended tax return Your deposits and payments may not be counted as timely because IRS does not know the actual dates of your tax liabilities. 1040x amended tax return   You can avoid the penalty by reviewing your return before filing it. 1040x amended tax return Follow these steps before filing your Form 941-SS. 1040x amended tax return If you are a monthly schedule depositor, report your tax liabilities (not your deposits) in the monthly entry spaces on Form 941-SS, line 14. 1040x amended tax return If you are a semiweekly schedule depositor, report your tax liabilities (not your deposits) on Schedule B (Form 941) in the lines that represent the dates you paid your employees. 1040x amended tax return Verify that your total liability shown on Form 941-SS, line 14, or the bottom of Schedule B (Form 941) equals your tax liability shown on Form 941-SS,  line 10. 1040x amended tax return Do not show negative amounts on Form 941-SS, line 14, or Schedule B (Form 941). 1040x amended tax return For prior period errors, do not adjust your tax liabilities reported on your current Form 941-SS, line 14, or on Schedule B (Form 941). 1040x amended tax return Instead, file an adjusted return (Form 941-X (if you are adjusting a previously filed Form 941-SS) or Form 944-X (if you are adjusting a previously filed Form 944-SS or 944)) if you are also adjusting your tax liability. 1040x amended tax return If you are only adjusting your deposits in response to a failure-to-deposit penalty notice, see the Instructions for Schedule B (Form 941) (if you previously filed Form 941-SS) or the Instructions for Form 944-X (if you previously filed Form 944-SS or 944). 1040x amended tax return If you filed Form 944 for 2013 and line 7 was $2,500 or more, you were required to complete Form 944, lines 13a–13m, or attach Form 945-A, Annual Record of Federal Tax Liability. 1040x amended tax return If you failed to complete lines 13a–13m, or failed to attach Form 945-A, whichever was required, IRS may assess an “averaged” failure-to-deposit (FTD) penalty. 1040x amended tax return 9. 1040x amended tax return Employer's Returns General instructions. 1040x amended tax return   File Forms 941-SS (or Form 944) for nonfarm workers and Form 943 for farmworkers. 1040x amended tax return (U. 1040x amended tax return S. 1040x amended tax return Virgin Islands employers may be required to file Form 940 for the combined wages of nonfarm workers and farmworkers. 1040x amended tax return ) Employers with employees subject to U. 1040x amended tax return S. 1040x amended tax return income tax withholding. 1040x amended tax return   If you have both employees who are subject to U. 1040x amended tax return S. 1040x amended tax return income tax withholding and employees who are not subject to U. 1040x amended tax return S. 1040x amended tax return income tax withholding, you must file only Form 941 (or Form 944) and include all your employees’ wages on that form. 1040x amended tax return Nonfarm employers. 1040x amended tax return   File Form 941-SS for the calendar quarter in which you first pay wages for nonfarm workers and for each quarter thereafter unless you are a seasonal employer or file a final return. 1040x amended tax return Due dates for each quarter of the calendar year are as follows. 1040x amended tax return Quarter Due Jan. 1040x amended tax return , Feb. 1040x amended tax return , Mar. 1040x amended tax return Apr. 1040x amended tax return 30 Apr. 1040x amended tax return , May, June July 31 July, Aug. 1040x amended tax return , Sept. 1040x amended tax return Oct. 1040x amended tax return 31 Oct. 1040x amended tax return , Nov. 1040x amended tax return , Dec. 1040x amended tax return Jan. 1040x amended tax return 31   However, if you deposited all taxes when due for the quarter, you have 10 additional days from the due dates to file the return. 1040x amended tax return If the due date for filing your return falls on a Saturday, Sunday, or legal holiday, you may file on the next business day. 1040x amended tax return   If you closed your business or stopped paying wages and do not have to file returns in the future, check the box on line 15 of your final Form 941-SS and show the date final wages were paid. 1040x amended tax return Form 944. 1040x amended tax return   If IRS notified you to file Form 944, file your 2013 Form 944 by January 31, 2014, or by February 10, 2014 (if you deposited all taxes when due). 1040x amended tax return Household employers reporting social security and Medicare taxes. 1040x amended tax return   If you are a sole proprietor and file Forms 941-SS (or Form 944) for business employees, you may include taxes for household employees on your Forms 941-SS (or Form 944). 1040x amended tax return Otherwise, report social security and Medicare taxes for household employees on Schedule H (Form 1040), Household Employment Taxes. 1040x amended tax return See Publication 926, Household Employer's Tax Guide, for more information. 1040x amended tax return Employers of farmworkers. 1040x amended tax return   Every employer of farmworkers must file a Form 943 for each calendar year beginning with the first year the employer pays $2,500 or more for farmwork or employs a farmworker who meets the $150 test described in section 6. 1040x amended tax return   File a Form 943 each year for all taxable wages paid for farmwork. 1040x amended tax return You may report household workers in a private home on a farm operated for profit on Form 943. 1040x amended tax return Do not report wages for farmworkers on Form 941-SS or 944. 1040x amended tax return   Send Form 943 to the IRS by January 31 of the following year. 1040x amended tax return Send it with payment of any taxes due that you are not required to deposit. 1040x amended tax return If you deposited all taxes when due, you have 10 additional days to file. 1040x amended tax return Penalties. 1040x amended tax return   For each whole or part month that a return is not filed when required (disregarding any extensions of the filing deadline), there is a failure-to-file penalty of 5% of the unpaid tax due with that return. 1040x amended tax return The maximum penalty is generally 25% of the tax due. 1040x amended tax return Also, for each whole or part month that the tax is paid late (disregarding any extensions of the payment deadline), there is a failure-to-pay penalty of 0. 1040x amended tax return 5% per month of the amount of tax. 1040x amended tax return For individual filers only, the failure-to-pay penalty is reduced from 0. 1040x amended tax return 5% per month to 0. 1040x amended tax return 25% per month if an installment agreement is in effect. 1040x amended tax return You must have filed your return on or before the due date of the return to qualify for the reduced penalty. 1040x amended tax return The maximum amount of the failure-to-pay penalty is also 25% of the tax due. 1040x amended tax return If both penalties apply in any month, the failure-to-file penalty is reduced by the amount of the failure-to-pay penalty. 1040x amended tax return The penalties will not be charged if you have a reasonable cause for failing to file or pay. 1040x amended tax return If you receive a penalty notice, you can provide an explanation of why you believe reasonable cause exists. 1040x amended tax return Reporting Adjustments to Form 941-SS, 944-SS, 944, or 943 Current Period Adjustments Make current period adjustments for fractions of cents, sick pay, tips, and group-term life insurance on your Form 941-SS, 944, or 943. 1040x amended tax return See the Instructions for Form 941-SS, Instructions for Form 944, or Instructions for Form 943 for information on how to report these adjustments. 1040x amended tax return Prior Period Adjustments Forms for prior period adjustments. 1040x amended tax return   Use Form 941-X or Form 944-X to make a correction after you discover an error on a previously filed Form 941 or Form 944. 1040x amended tax return There are also Forms 943-X, 945-X, and CT-1X to report corrections on the corresponding returns. 1040x amended tax return Form 941-X and Form 944-X also replace Form 843, Claim for Refund and Request for Abatement, for employers to request a refund or abatement of overreported employment taxes. 1040x amended tax return Continue to use Form 843 when requesting a refund or abatement of assessed interest or penalties. 1040x amended tax return See Revenue Ruling 2009-39, 2009-52 I. 1040x amended tax return R. 1040x amended tax return B. 1040x amended tax return 951, for examples of how the interest-free adjustment and claim for refund rules apply in 10 different situations. 1040x amended tax return You can find Revenue Ruling 2009-39, at www. 1040x amended tax return irs. 1040x amended tax return gov/irb/2009-52_IRB/ar14. 1040x amended tax return html. 1040x amended tax return Background. 1040x amended tax return   Treasury Decision 9405 changed the process for making interest-free adjustments to employment taxes reported on Forms 941-SS, 943, 944-SS, and 944, and for filing a claim for refund of employment taxes. 1040x amended tax return Treasury Decision 9405, 2008-32 I. 1040x amended tax return R. 1040x amended tax return B. 1040x amended tax return 293, is available at www. 1040x amended tax return irs. 1040x amended tax return gov/irb/2008-32_IRB/ar13. 1040x amended tax return html. 1040x amended tax return You will use the adjustment process if you underreported employment taxes and are making a payment, or if you overreported employment taxes and will be applying the credit to the Form 941-SS, 943, or 944 period during which you file Forms 941-X, 943-X, or 944-X, respectively. 1040x amended tax return You will use the claim process if you overreported employment taxes and are requesting a refund or abatement of the overreported amount. 1040x amended tax return We use the terms “correct” and “corrections” to include interest-free adjustments under sections 6205 and 6413, and claims for refund and abatement under sections 6402, 6414, and 6404 of the Internal Revenue Code. 1040x amended tax return Correcting employment taxes. 1040x amended tax return   When you discover an error on a previously filed Form 941-SS, 943, 944-SS, or 944, you must: Correct that error using Form 941-X, Form 943-X, or Form 944-X, File a separate Form 941-X, Form 943-X, or Form 944-X for