File your Taxes for Free!
  • Get your maximum refund*
  • 100% accurate calculations guaranteed*

TurboTax Federal Free Edition - File Taxes Online

Don't let filing your taxes get you down! We'll help make it as easy as possible. With e-file and direct deposit, there's no faster way to get your refund!

Approved TurboTax Affiliate Site. TurboTax and TurboTax Online, among others, are registered trademarks and/or service marks of Intuit Inc. in the United States and other countries. Other parties' trademarks or service marks are the property of the respective owners.


© 2012 - 2018 All rights reserved.

This is an Approved TurboTax Affiliate site. TurboTax and TurboTax Online, among other are registered trademarks and/or service marks of Intuit, Inc. in the United States and other countries. Other parties' trademarks or service marks are the property of the respective owners.
When discussing "Free e-file", note that state e-file is an additional fee. E-file fees do not apply to New York state returns. Prices are subject to change without notice. E-file and get your refund faster
*If you pay an IRS or state penalty or interest because of a TurboTax calculations error, we'll pay you the penalty and interest.
*Maximum Refund Guarantee - or Your Money Back: If you get a larger refund or smaller tax due from another tax preparation method, we'll refund the applicable TurboTax federal and/or state purchase price paid. TurboTax Federal Free Edition customers are entitled to payment of $14.99 and a refund of your state purchase price paid. Claims must be submitted within sixty (60) days of your TurboTax filing date and no later than 6/15/14. E-file, Audit Defense, Professional Review, Refund Transfer and technical support fees are excluded. This guarantee cannot be combined with the TurboTax Satisfaction (Easy) Guarantee. *We're so confident your return will be done right, we guarantee it. Accurate calculations guaranteed. If you pay an IRS or state penalty or interest because of a TurboTax calculations error, we'll pay you the penalty and interest.
https://turbotax.intuit.com/corp/guarantees.jsp

2011 1040 Form Download

Turbotax 2012 CouponH&r Block Taxcut 20111040 Ez FileIncome Tax Forms For 2012How To Do Back TaxesHow Do I File Taxes On UnemploymentHow Do You Amend TaxesFreetaxusa 20112012 Tax Forms IrsState Tax Forms And Instructions1040ez TelefileFile A 1040x Amended ReturnDownload 1040xE-file State And Federal Taxes For FreeFree Tax Filing 2010Amend My TaxesTurbotax 1040ezTax ExtensionFree Turbo Tax 1040ezForm 1040x More:label_form_201040x More:taxesFile 2011 Taxes In 2013 FreeCan I Amend My Tax Return OnlineFree Income Tax PreparationIrs 1040x FormsFree Online Federal And State Tax FilingIrs Extention FormsHow Do College Students File Taxes1040ez DownloadAmend My TaxesFree Taxes Online 2012Irs Form 1040 Ez Instructions2010 Tax Return FormMinimum Earnings For Filing TaxesFree State Taxes Efile1040x 20101040ez ComFree Online State TaxesWhere Can I File My 2011 TaxesHow To File 2011 Taxes In 2013Free Fed And State Efile

2011 1040 Form Download

2011 1040 form download 2. 2011 1040 form download   American Opportunity Credit Table of Contents Introduction Can You Claim the CreditWho Can Claim the Credit Who Cannot Claim the Credit What Expenses QualifyQualified Education Expenses No Double Benefit Allowed Expenses That Do Not Qualify Who Is an Eligible StudentException. 2011 1040 form download Who Can Claim a Dependent's Expenses Figuring the CreditEffect of the Amount of Your Income on the Amount of Your Credit Refundable Part of Credit Claiming the Credit Introduction For 2013, there are two tax credits available to help you offset the costs of higher education by reducing the amount of your income tax. 2011 1040 form download They are the American opportunity credit (this chapter) and the lifetime learning credit ( chapter 3 ). 2011 1040 form download This chapter explains: Who can claim the American opportunity credit, What expenses qualify for the credit, Who is an eligible student, Who can claim a dependent's expenses, How to figure the credit, How to claim the credit, and When the credit must be repaid. 2011 1040 form download What is the tax benefit of the American opportunity credit. 2011 1040 form download   For the tax year, you may be able to claim an American opportunity credit of up to $2,500 for qualified education expenses paid for each eligible student. 2011 1040 form download   A tax credit reduces the amount of income tax you may have to pay. 2011 1040 form download Unlike a deduction, which reduces the amount of income subject to tax, a credit directly reduces the tax itself. 2011 1040 form download Forty percent of the American opportunity credit may be refundable. 2011 1040 form download This means that if the refundable portion of your credit is more than your tax, the excess will be refunded to you. 2011 1040 form download   Your allowable American opportunity credit may be limited by the amount of your income. 2011 1040 form download Also, the nonrefundable part of the credit may be limited by the amount of your tax. 2011 1040 form download Overview of the American opportunity credit. 2011 1040 form download   See Table 2-1, Overview of the American Opportunity Credit , for the basics of this credit. 2011 1040 form download The details are discussed in this chapter. 2011 1040 form download Can you claim more than one education credit this year. 2011 1040 form download   For each student, you can elect for any year only one of the credits. 2011 1040 form download For example, if you elect to take the American opportunity credit for a child on your 2013 tax return, you cannot use that same child's qualified education expenses to figure the lifetime learning credit for 2013. 2011 1040 form download   If you pay qualified education expenses for more than one student in the same year, you can choose to take the American opportunity credit on a per-student, per-year basis. 2011 1040 form download If you pay qualified education expenses for a student (or students) for whom you do not claim the American opportunity credit, you can use the adjusted qualified education expenses of that student (or those students) in figuring your lifetime learning credit. 2011 1040 form download This means that, for example, you can claim the American opportunity credit for one student and the lifetime learning credit for another student in the same year. 2011 1040 form download Differences between the American opportunity and lifetime learning credits. 2011 1040 form download   There are several differences between these two credits. 2011 1040 form download For example, you can claim the American opportunity credit based on the same student's expenses for no more than 4 tax years, which includes any tax years you claimed the Hope Scholarship Credit for that student. 2011 1040 form download However, there is no limit on the number of years for which you can claim a lifetime learning credit based on the same student's expenses. 2011 1040 form download The differences between these credits are shown in Appendix B, Highlights of Education Tax Benefits for Tax Year 2013 near the end of this publication. 2011 1040 form download If you claim the American opportunity credit for any student, you can choose between using that student's adjusted qualified education expenses for the American opportunity credit or the lifetime learning credit. 2011 1040 form download If you have the choice, the American opportunity credit will always be greater than the lifetime learning credit. 2011 1040 form download Table 2-1. 2011 1040 form download Overview of the American Opportunity Credit Maximum credit Up to $2,500 credit per eligible student Limit on modified adjusted gross income (MAGI) $180,000 if married filing jointly; $90,000 if single, head of household, or qualifying widow(er) Refundable or nonrefundable 40% of credit may be refundable; the rest is nonrefundable Number of years of postsecondary education Available ONLY if the student had not completed the first 4 years of postsecondary education before 2013 Number of tax years credit available Available ONLY for 4 tax years per eligible student (including any year(s) Hope Scholarship Credit was claimed) Type of program required Student must be pursuing a program leading to a degree or other recognized education credential Number of courses Student must be enrolled at least half time for at least one academic period that begins during the tax year Felony drug conviction As of the end of 2013, the student had not been convicted of a felony for possessing or distributing a controlled substance Qualified expenses Tuition, required enrollment fees, and course materials that the student needs for a course of study whether or not the materials are bought at the educational institution as a condition of enrollment or attendance Payments for academic periods Payments made in 2013 for academic periods beginning in 2013 or beginning in the first 3 months of 2014 Can You Claim the Credit The following rules will help you determine if you are eligible to claim the American opportunity credit on your tax return. 2011 1040 form download Who Can Claim the Credit Generally, you can claim the American opportunity credit if all three of the following requirements are met. 2011 1040 form download You pay qualified education expenses of higher education. 2011 1040 form download You pay the education expenses for an eligible student. 2011 1040 form download The eligible student is either yourself, your spouse, or a dependent for whom you claim an exemption on your tax return. 2011 1040 form download Student qualifications. 2011 1040 form download   Generally, you can take the American opportunity credit for a student only if all of the following four requirements are met. 2011 1040 form download As of the beginning of 2013, the student had not completed the first four years of postsecondary education (generally, the freshman through senior years of college), as determined by the eligible educational institution. 2011 1040 form download For this purpose, do not include academic credit awarded solely because of the student's performance on proficiency examinations. 2011 1040 form download Neither the American opportunity credit nor the Hope Scholarship Credit has been claimed (by you or anyone else) for this student for any four tax years before 2013. 2011 1040 form download If the American opportunity credit (and Hope Scholarship Credit) has been claimed for this student for any three or fewer tax years before 2013, this requirement is met. 2011 1040 form download For at least one academic period beginning (or treated as beginning) in 2013, the student both: Was enrolled in a program that leads to a degree, certificate, or other recognized educational credential; and Carried at least one-half the normal full-time workload for his or her course of study. 2011 1040 form download The standard for what is half of the normal full-time work load is determined by each eligible educational institution. 2011 1040 form download However, the standard may not be lower than any of those established by the U. 2011 1040 form download S. 2011 1040 form download Department of Education under the Higher Education Act of 1965. 2011 1040 form download For purposes of whether the student satisfies this third requirement for 2013, treat an academic period beginning in the first three months of 2014 as if it began in 2013 if qualified education expenses for the student were paid in 2013 for that academic period. 2011 1040 form download See Prepaid expenses, later. 2011 1040 form download As of the end of 2013, the student had not been convicted of a federal or state felony for possessing or distributing a controlled substance. 2011 1040 form download Example 1. 2011 1040 form download Sharon was eligible for the Hope Scholarship Credit for 2007 and 2008 and for the American opportunity credit for 2010 and 2012. 2011 1040 form download Her parents claimed the Hope Scholarship Credit for Sharon on their tax returns for 2007 and 2008 and claimed the American opportunity credit for Sharon on their 2010 tax return. 2011 1040 form download Sharon claimed the American opportunity credit on her 2012 tax return. 2011 1040 form download The American opportunity credit and Hope Scholarship Credit have been claimed for Sharon for four tax years before 2013. 2011 1040 form download Therefore, the American opportunity credit cannot be claimed by Sharon for 2013. 2011 1040 form download If Sharon were to file Form 8863 for 2013, she would check “Yes” for Part III, line 23, and would be eligible to claim only the lifetime learning credit. 2011 1040 form download Example 2. 2011 1040 form download Wilbert was eligible for the American opportunity credit for 2009, 2010, 2011, and 2013. 2011 1040 form download His parents claimed the American opportunity credit for Wilbert on their tax returns for 2009, 2010, and 2011. 2011 1040 form download No one claimed an American opportunity credit or Hope Scholarship Credit for Wilbert for any other tax year. 2011 1040 form download The American opportunity credit and Hope Scholarship Credit have been claimed for Wilbert for only three tax years before 2013. 2011 1040 form download Therefore, Wilbert meets the second requirement to be eligible for the American opportunity credit. 2011 1040 form download If Wilbert were to file Form 8863 for 2013, he would check “No” for Part III, line 23. 2011 1040 form download If Wilbert meets all of the other requirements, he is eligible for the American opportunity credit. 2011 1040 form download Example 3. 2011 1040 form download Glenda enrolls on a full-time basis in a degree program for the 2014 Spring semester, which begins in January 2014. 2011 1040 form download Glenda pays her tuition for the 2014 Spring semester in December 2013. 2011 1040 form download Because the tuition Glenda paid in 2013 relates to an academic period that begins in the first 3 months of 2014, her eligibility to claim an American opportunity credit in 2013 is determined as if the 2014 Spring semester began in 2013. 2011 1040 form download If the requirements above are not met for any student, you cannot take the American opportunity credit for that student. 2011 1040 form download You may be able to take the lifetime learning credit for part or all of that student's qualified education expenses instead. 2011 1040 form download Note. 2011 1040 form download Qualified education expenses paid by a dependent for whom you claim an exemption, or by a third party for that dependent, are considered paid by you. 2011 1040 form download “Qualified education expenses” are defined later under Qualified Education Expenses . 2011 1040 form download “Eligible students” are defined later under Who Is an Eligible Student . 2011 1040 form download A dependent for whom you claim an exemption is defined later under Who Can Claim a Dependent's Expenses . 2011 1040 form download You may find Figure 2-1, Can You Claim the American Opportunity Credit for 2013 , later, helpful in determining if you can claim an American opportunity credit on your tax return. 2011 1040 form download This image is too large to be displayed in the current screen. 2011 1040 form download Please click the link to view the image. 2011 1040 form download Figure 2-1 Can you claim the American opportunity credit for 2012? Who Cannot Claim the Credit You cannot claim the American opportunity credit for 2013 if any of the following apply. 2011 1040 form download Your filing status is married filing separately. 2011 1040 form download You are listed as a dependent on another person's tax return (such as your parents'). 2011 1040 form download See Who Can Claim a Dependent's Expenses , later. 2011 1040 form download Your modified adjusted gross income (MAGI) is $90,000 or more ($180,000 or more in the case of a joint return). 2011 1040 form download MAGI is explained later under Effect of the Amount of Your Income on the Amount of Your Credit . 2011 1040 form download You (or your spouse) were a nonresident alien for any part of 2013 and the nonresident alien did not elect to be treated as a resident alien for tax purposes. 2011 1040 form download More information on nonresident aliens can be found in Publication 519, U. 2011 1040 form download S. 2011 1040 form download Tax Guide for Aliens. 2011 1040 form download What Expenses Qualify The American opportunity credit is based on adjusted qualified education expenses you pay for yourself, your spouse, or a dependent for whom you claim an exemption on your tax return. 2011 1040 form download Generally, the credit is allowed for adjusted qualified education expenses paid in 2013 for an academic period beginning in 2013 or beginning in the first three months of 2014. 2011 1040 form download For example, if you paid $1,500 in December 2013 for qualified tuition for the spring 2014 semester beginning January 2014, you can use that $1,500 in figuring your 2013 credit. 2011 1040 form download Academic period. 2011 1040 form download   An academic period includes a semester, trimester, quarter, or other period of study (such as a summer school session) as reasonably determined by an educational institution. 2011 1040 form download In the case of an educational institution that uses credit hours or clock hours and does not have academic terms, each payment period can be treated as an academic period. 2011 1040 form download Paid with borrowed funds. 2011 1040 form download   You can claim an American opportunity credit for qualified education expenses paid with the proceeds of a loan. 2011 1040 form download Use the expenses to figure the American opportunity credit for the year in which the expenses are paid, not the year in which the loan is repaid. 2011 1040 form download Treat loan payments sent directly to the educational institution as paid on the date the institution credits the student's account. 2011 1040 form download Student withdraws from class(es). 2011 1040 form download   You can claim an American opportunity credit for qualified education expenses not refunded when a student withdraws. 2011 1040 form download Qualified Education Expenses For purposes of the American opportunity credit, qualified education expenses are tuition and certain related expenses required for enrollment or attendance at an eligible educational institution. 2011 1040 form download Eligible educational institution. 2011 1040 form download   An eligible educational institution is any college, university, vocational school, or other postsecondary educational institution eligible to participate in a student aid program administered by the U. 2011 1040 form download S. 2011 1040 form download Department of Education. 2011 1040 form download It includes virtually all accredited public, nonprofit, and proprietary (privately owned profit-making) postsecondary institutions. 2011 1040 form download The educational institution should be able to tell you if it is an eligible educational institution. 2011 1040 form download   Certain educational institutions located outside the United States also participate in the U. 2011 1040 form download S. 2011 1040 form download Department of Education's Federal Student Aid (FSA) programs. 2011 1040 form download Related expenses. 2011 1040 form download   Student-activity fees are included in qualified education expenses only if the fees must be paid to the institution as a condition of enrollment or attendance. 2011 1040 form download   However, expenses for books, supplies, and equipment needed for a course of study are included in qualified education expenses whether or not the materials are purchased from the educational institution. 2011 1040 form download Prepaid expenses. 2011 1040 form download   Qualified education expenses paid in 2013 for an academic period that begins in the first three months of 2014 can be used in figuring an education credit for 2013 only. 2011 1040 form download See Academic period, earlier. 2011 1040 form download For example, if you pay $2,000 in December 2013, for qualified tuition for the 2014 winter quarter that begins in January 2014, you can use that $2,000 in figuring an education credit for 2013 only (if you meet all the other requirements). 2011 1040 form download    You cannot use any amount you paid in 2012 or 2014 to figure the qualified education expenses you use to figure your 2013 education credit(s). 2011 1040 form download   In the following examples, assume that each student is an eligible student at an eligible educational institution. 2011 1040 form download Example 1. 2011 1040 form download Jefferson is a sophomore in University V's degree program in dentistry. 2011 1040 form download This year, in addition to tuition, he is required to pay a fee to the university for the rental of the dental equipment he will use in this program. 2011 1040 form download Because the equipment rental is needed for his course of study, Jefferson's equipment rental fee is a qualified expense. 2011 1040 form download Example 2. 2011 1040 form download Grace and William, both first-year students at College W, are required to have certain books and other reading materials to use in their mandatory first-year classes. 2011 1040 form download The college has no policy about how students should obtain these materials, but any student who purchases them from College W's bookstore will receive a bill directly from the college. 2011 1040 form download William bought his books from a friend; Grace bought hers at College W's bookstore. 2011 1040 form download Both are qualified education expenses for the American opportunity credit. 2011 1040 form download Example 3. 2011 1040 form download When Kelly enrolled at College X for her freshman year, she had to pay a separate student activity fee in addition to her tuition. 2011 1040 form download This activity fee is required of all students, and is used solely to fund on-campus organizations and activities run by students, such as the student newspaper and the student government. 2011 1040 form download No portion of the fee covers personal expenses. 2011 1040 form download Although labeled as a student activity fee, the fee is required for Kelly's enrollment and attendance at College X and is a qualified expense. 2011 1040 form download No Double Benefit Allowed You cannot do any of the following. 2011 1040 form download Deduct higher education expenses on your income tax return (as, for example, a business expense) and also claim an American opportunity credit based on those same expenses. 2011 1040 form download Claim an American opportunity credit in the same year that you are claiming a tuition and fees deduction for the same student. 2011 1040 form download Claim an American opportunity credit for any student and use any of that student's expenses in figuring your lifetime learning credit. 2011 1040 form download Figure the tax-free portion of a distribution from a Coverdell education savings account (ESA) or qualified tuition program (QTP) using the same expenses you used to figure the American opportunity credit. 2011 1040 form download See Coordination With American Opportunity and Lifetime Learning Credits in chapter 7, Coverdell Education Savings Account, and Coordination With American Opportunity and Lifetime Learning Credits in chapter 8, Qualified Tuition Program. 2011 1040 form download Claim a credit based on qualified education expenses paid with tax-free educational assistance, such as a scholarship, grant, or assistance provided by an employer. 2011 1040 form download See Adjustments to Qualified Education Expenses, next. 2011 1040 form download Adjustments to Qualified Education Expenses For each student, reduce the qualified education expenses paid by or on behalf of that student under the following rules. 2011 1040 form download The result is the amount of adjusted qualified education expenses for each student. 2011 1040 form download Tax-free educational assistance. 2011 1040 form download   For tax-free educational assistance received in 2013, reduce the qualified educational expenses for each academic period by the amount of tax-free educational assistance allocable to that academic period. 2011 1040 form download See Academic period, earlier. 2011 1040 form download   Some tax-free educational assistance received after 2013 may be treated as a refund of qualified education expenses paid in 2013. 2011 1040 form download This tax-free educational assistance is any tax-free educational assistance received by you or anyone else after 2013 for qualified education expenses paid on behalf of a student in 2013 (or attributable to enrollment at an eligible educational institution during 2013). 2011 1040 form download   If this tax-free educational assistance is received after 2013 but before you file your 2013 income tax return, see Refunds received after 2013 but before your income tax return is filed, later. 2011 1040 form download If this tax-free educational assistance is received after 2013 and after you file your 2013 income tax return, see Refunds received after 2013 and after your income tax return is filed, later. 2011 1040 form download   Tax-free educational assistance includes: The tax-free parts of scholarships and fellowships (see Tax-Free Scholarships and Fellowships in chapter 1, Scholarships, Fellowships, Grants, and Tuition Reductions), Pell grants (see Pell Grants and Other Title IV Need-Based Education Grants in chapter 1, Scholarships, Fellowships, Grants, and Tuition Reductions). 2011 1040 form download Employer-provided educational assistance (see chapter 11, Employer-Provided Educational Assistance ), Veterans' educational assistance (see Veterans' Benefits in chapter 1, Scholarships, Fellowships, Grants, and Tuition Reductions), and Any other nontaxable (tax-free) payments (other than gifts or inheritances) received as educational assistance. 2011 1040 form download Generally, any scholarship or fellowship is treated as tax free. 2011 1040 form download However, a scholarship or fellowship is not treated as tax free to the extent the student includes it in gross income (if the student is required to file a tax return for the year the scholarship or fellowship is received) and either of the following is true. 2011 1040 form download The scholarship or fellowship (or any part of it) must be applied (by its terms) to expenses (such as room and board) other than qualified education expenses as defined in Qualified education expenses in chapter 1, Scholarships, Fellowships, Grants, and Tuition Reductions. 2011 1040 form download The scholarship or fellowship (or any part of it) may be applied (by its terms) to expenses (such as room and board) other than qualified education expenses as defined in Qualified education expenses in chapter 1, Scholarships, Fellowships, Grants, and Tuition Reductions. 2011 1040 form download You may be able to increase the combined value of an education credit and certain educational assistance if the student includes some or all of the educational assistance in income in the year it is received. 2011 1040 form download For examples, see Coordination with Pell grants and other scholarships, later. 2011 1040 form download Refunds. 2011 1040 form download   A refund of qualified education expenses may reduce adjusted qualified education expenses for the tax year or require repayment (recapture) of a credit claimed in an earlier year. 2011 1040 form download Some tax-free educational assistance received after 2013 may be treated as a refund. 2011 1040 form download See Tax-free educational assistance, earlier. 2011 1040 form download Refunds received in 2013. 2011 1040 form download   For each student, figure the adjusted qualified education expenses for 2013 by adding all the qualified education expenses for 2013 and subtracting any refunds of those expenses received from the eligible educational institution during 2013. 2011 1040 form download Refunds received after 2013 but before your income tax return is filed. 2011 1040 form download   If anyone receives a refund after 2013 of qualified education expenses paid on behalf of a student in 2013 and the refund is paid before you file an income tax return for 2013, the amount of qualified education expenses for 2013 is reduced by the amount of the refund. 2011 1040 form download Refunds received after 2013 and after your income tax return is filed. 2011 1040 form download   If anyone receives a refund after 2013 of qualified education expenses paid on behalf of a student in 2013 and the refund is paid after you file an income tax return for 2013, you may need to repay some or all of the credit. 2011 1040 form download See Credit recapture, next. 2011 1040 form download Credit recapture. 2011 1040 form download    If any tax-free educational assistance for the qualified education expenses paid in 2013, or any refund of your qualified education expenses paid in 2013, is received after you file your 2013 income tax return, you must recapture (repay) any excess credit. 2011 1040 form download You do this by refiguring the amount of your adjusted qualified education expenses for 2013 by reducing the expenses by the amount of the refund or tax-free educational assistance. 2011 1040 form download You then refigure your education credit(s) for 2013 and figure the amount by which your 2013 tax liability would have increased if you claimed the refigured credit(s). 2011 1040 form download Include that amount as an additional tax for the year the refund or tax-free assistance was received. 2011 1040 form download Example. 2011 1040 form download   You paid $7,000 tuition and fees in August 2013, and your child began college in September 2013. 2011 1040 form download You filed your 2013 tax return on February 17, 2014, and claimed an American opportunity credit of $2,500. 2011 1040 form download After you filed your return, you received a refund of $4,000. 2011 1040 form download You must refigure your 2013 American opportunity credit using $3,000 of qualified education expenses instead of $7,000. 2011 1040 form download The refigured credit is $2,250. 2011 1040 form download The increase to your tax liability is also $250. 2011 1040 form download Include the difference of $250 as additional tax on your 2014 tax return. 2011 1040 form download See the instructions for your 2014 income tax return to determine where to include this tax. 2011 1040 form download If you pay qualified education expenses in 2014 for an academic period that begins in the first 3 months of 2014 and you receive tax-free educational assistance, or a refund, as described above, you may choose to reduce your qualified education expenses for 2014 instead of reducing your expenses for 2013. 2011 1040 form download Amounts that do not reduce qualified education expenses. 2011 1040 form download   Do not reduce qualified education expenses by amounts paid with funds the student receives as: Payment for services, such as wages, A loan, A gift, An inheritance, or A withdrawal from the student's personal savings. 2011 1040 form download   Do not reduce the qualified education expenses by any scholarship or fellowship reported as income on the student's tax return in the following situations. 2011 1040 form download The use of the money is restricted, by the terms of the scholarship or fellowship, to costs of attendance (such as room and board) other than qualified education expenses as defined in Qualified education expenses in chapter 1, Scholarships, Fellowships, Grants, and Tuition Reductions. 2011 1040 form download The use of the money is not restricted. 2011 1040 form download Example 1. 2011 1040 form download Joan paid $3,000 for tuition and $5,000 for room and board at University X. 2011 1040 form download The university did not require her to pay any fees in addition to her tuition in order to enroll in or attend classes. 2011 1040 form download To help pay these costs, she was awarded a $2,000 scholarship and a $4,000 student loan. 2011 1040 form download The terms of the scholarship state that it can be used to pay any of Joan's college expenses. 2011 1040 form download University X applies the $2,000 scholarship against Joan's $8,000 total bill, and Joan pays the $6,000 balance of her bill from University X with a combination of her student loan and her savings. 2011 1040 form download Joan does not report any portion of the scholarship as income on her tax return. 2011 1040 form download In figuring the amount of either education credit (American opportunity or lifetime learning), Joan must reduce her qualified education expenses by the amount of the scholarship ($2,000) because she excluded the entire scholarship from her income. 2011 1040 form download The student loan is not tax-free educational assistance, so she does not need to reduce her qualified expenses by any part of the loan proceeds. 2011 1040 form download Joan is treated as having paid $1,000 in qualified education expenses ($3,000 tuition – $2,000 scholarship). 2011 1040 form download Example 2. 2011 1040 form download The facts are the same as in Example 1, except that Joan reports her entire scholarship as income on her tax return. 2011 1040 form download Because Joan reported the entire $2,000 scholarship in her income, she does not need to reduce her qualified education expenses. 2011 1040 form download Joan is treated as having paid $3,000 in qualified education expenses. 2011 1040 form download Coordination with Pell grants and other scholarships. 2011 1040 form download   In some cases, you may be able to reduce your tax liability by including scholarships in income. 2011 1040 form download If you are claiming an education credit for a claimed dependent who received a scholarship, you may be able to reduce your tax liability if the student includes the scholarship in income. 2011 1040 form download The scholarship must be one that may (by its terms) be applied to expenses (such as room and board) other than qualified education expenses. 2011 1040 form download Example 1—No scholarship. 2011 1040 form download Bill Pass, age 28 and unmarried, enrolled full-time in 2013 as a first-year student at a local college to earn a degree in law enforcement. 2011 1040 form download This was his first year of postsecondary education. 2011 1040 form download During 2013, he paid $5,600 for his qualified education expenses and $4,400 for his room and board for the fall 2013 semester. 2011 1040 form download He and the college meet all the requirements for the American opportunity credit. 2011 1040 form download Bill's AGI and his MAGI, for purposes of figuring his credit, are $30,000. 2011 1040 form download Bill takes the standard deduction of $5,950 and personal exemption of $3,800, reducing his AGI to taxable income of $20,250. 2011 1040 form download His income tax liability, before credits, is $2,599 and Bill claims no credits other than the American opportunity credit. 2011 1040 form download He figures his American opportunity credit based on qualified education expenses of $4,000, which results in a credit of $2,500 and tax after credits of $99. 2011 1040 form download Example 2—Scholarship excluded from income. 2011 1040 form download The facts are the same as in Example 1—No scholarship, except that Bill was awarded a $5,600 scholarship. 2011 1040 form download Under the terms of his scholarship, it may be used to pay any educational expenses, including room and board. 2011 1040 form download If Bill excludes the scholarship from income, he will be deemed (for purposes of computing his education credit) to have used the scholarship to pay for tuition, required fees, and course materials. 2011 1040 form download His adjusted qualified education expenses will be zero and he will not have an education credit. 2011 1040 form download Therefore, Bill's tax after credits would be $2,599. 2011 1040 form download Example 3—Scholarship partially included in income. 2011 1040 form download The facts are the same as in Example 2—Scholarship excluded from income. 2011 1040 form download If, unlike Example 2, Bill includes $4,000 of the scholarship in income, he will be deemed to have used that amount to pay for room and board. 2011 1040 form download The remaining $1,600 of the $5,600 scholarship will reduce his qualified education expenses and his adjusted qualified education expenses will be $4,000. 2011 1040 form download Bill's AGI will increase to $34,000, his taxable income will increase to $24,250, and his tax before credits will increase to $3,199. 2011 1040 form download Based on his adjusted qualified education expenses of $4,000, Bill would be able to claim an American opportunity tax credit of $2,500 and his tax after credits would be $699. 2011 1040 form download Expenses That Do Not Qualify Qualified education expenses do not include amounts paid for: Insurance, Medical expenses (including student health fees), Room and board, Transportation, or Similar personal, living, or family expenses. 2011 1040 form download This is true even if the amount must be paid to the institution as a condition of enrollment or attendance. 2011 1040 form download Sports, games, hobbies, and noncredit courses. 2011 1040 form download   Qualified education expenses generally do not include expenses that relate to any course of instruction or other education that involves sports, games or hobbies, or any noncredit course. 2011 1040 form download However, if the course of instruction or other education is part of the student's degree program, these expenses can qualify. 2011 1040 form download Comprehensive or bundled fees. 2011 1040 form download   Some eligible educational institutions combine all of their fees for an academic period into one amount. 2011 1040 form download If you do not receive or do not have access to an allocation showing how much you paid for qualified education expenses and how much you paid for personal expenses, such as those listed earlier, contact the institution. 2011 1040 form download The institution is required to make this allocation and provide you with the amount you paid (or were billed) for qualified education expenses on Form 1098-T, Tuition Statement. 2011 1040 form download See Figuring the Credit , later, for more information about Form 1098-T. 2011 1040 form download Who Is an Eligible Student To claim the American opportunity credit, the student for whom you pay qualified education expenses must be an eligible student. 2011 1040 form download This is a student who meets all of the following requirements. 2011 1040 form download The student did not have expenses that were used to figure an American opportunity credit in any 4 earlier tax years. 2011 1040 form download This includes any tax year(s) in which you claimed the Hope Scholarship Credit for the same student. 2011 1040 form download The student had not completed the first 4 years of postsecondary education (generally, the freshman, sophomore, junior, and senior years of college) before 2013. 2011 1040 form download For at least one academic period beginning in 2013, the student was enrolled at least half-time in a program leading to a degree, certificate, or other recognized educational credential. 2011 1040 form download The student has not been convicted of any federal or state felony for possessing or distributing a controlled substance as of the end of 2013. 2011 1040 form download These requirements are also shown in Figure 2-2, Who is an Eligible Student for the American Opportunity Credit , later. 2011 1040 form download Completion of first 4 years. 2011 1040 form download   A student has completed the first 4 years of postsecondary education if the institution at which the student is enrolled awards the student 4 years of academic credit at that institution for coursework completed by the student before 2013. 2011 1040 form download This student generally would not be an eligible student for purposes of the American opportunity credit. 2011 1040 form download Exception. 2011 1040 form download   Any academic credit awarded solely on the basis of the student's performance on proficiency examinations is disregarded in determining whether the student has completed 4 years of postsecondary education. 2011 1040 form download Enrolled at least half-time. 2011 1040 form download   A student was enrolled at least half-time if the student was taking at least half the normal full-time work load for his or her course of study. 2011 1040 form download   The standard for what is half of the normal full-time work load is determined by each eligible educational institution. 2011 1040 form download However, the standard may not be lower than any of those established by the U. 2011 1040 form download S. 2011 1040 form download Department of Education under the Higher Education Act of 1965. 2011 1040 form download Please click here for the text description of the image. 2011 1040 form download Figure 2-2 Example 1. 2011 1040 form download Mack graduated from high school in June 2012. 2011 1040 form download In September, he enrolled in an undergraduate degree program at College U, and attended full-time for both the 2012 fall and 2013 spring semesters. 2011 1040 form download For the 2013 fall semester, Mack was enrolled less than half-time. 2011 1040 form download Because Mack was enrolled in an undergraduate degree program on at least a half-time basis for at least one academic period that began during 2012 and at least one academic period that began during 2013, he is an eligible student for tax years 2012 and 2013 (including the 2013 fall semester when he enrolled at College U on less than a half-time basis). 2011 1040 form download Example 2. 2011 1040 form download After taking classes at College V on a part-time basis for a few years, Shelly became a full-time student for the 2013 spring semester. 2011 1040 form download College V classified Shelly as a second-semester senior (fourth year) for the 2013 spring semester and as a first-semester graduate student (fifth year) for the 2013 fall semester. 2011 1040 form download Because College V did not classify Shelly as having completed the first 4 years of postsecondary education as of the beginning of 2013, Shelly is an eligible student for tax year 2013. 2011 1040 form download Therefore, the qualified education expenses paid for the 2013 spring semester and the 2013 fall semester are taken into account in calculating the American opportunity credit for 2013. 2011 1040 form download Example 3. 2011 1040 form download During the 2012 fall semester, Larry was a high school student who took classes on a half-time basis at College X. 2011 1040 form download Larry was not enrolled as part of a degree program at College X because College X only admits students to a degree program if they have a high school diploma or equivalent. 2011 1040 form download Because Larry was not enrolled in a degree program at College X during 2012, Larry was not an eligible student for tax year 2012. 2011 1040 form download Example 4. 2011 1040 form download The facts are the same as in Example 3. 2011 1040 form download During the 2013 spring semester, Larry again attended College X but not as part of a degree program. 2011 1040 form download Larry graduated from high school in June 2013. 2011 1040 form download For the 2013 fall semester, Larry enrolled as a full-time student in College X as part of a degree program, and College X awarded Larry credit for his prior coursework at College X. 2011 1040 form download Because Larry was enrolled in a degree program at College X for the 2013 fall term on at least a half-time basis, Larry is an eligible student for all of tax year 2013. 2011 1040 form download Therefore, the qualified education expenses paid for classes taken at College X during both the 2013 spring semester (during which Larry was not enrolled in a degree program) and the 2013 fall semester are taken into account in computing any American opportunity credit. 2011 1040 form download Example 5. 2011 1040 form download Dee graduated from high school in June 2012. 2011 1040 form download In January 2013, Dee enrolled in a 1-year postsecondary certificate program on a full-time basis to obtain a certificate as a travel agent. 2011 1040 form download Dee completed the program in December 2013, and was awarded a certificate. 2011 1040 form download In January 2014, she enrolled in a 1-year postsecondary certificate program on a full-time basis to obtain a certificate as a computer programmer. 2011 1040 form download Dee is an eligible student for both tax years 2013 and 2014 because she meets the degree requirement, the work load requirement, and the year of study requirement for those years. 2011 1040 form download Who Can Claim a Dependent's Expenses If there are qualified education expenses for your dependent during a tax year, either you or your dependent, but not both of you, can claim an American opportunity credit for your dependent's expenses for that year. 2011 1040 form download For you to claim an American opportunity credit for your dependent's expenses, you must also claim an exemption for your dependent. 2011 1040 form download You do this by listing your dependent's name and other required information on Form 1040 (or Form 1040A), line 6c. 2011 1040 form download IF you. 2011 1040 form download . 2011 1040 form download . 2011 1040 form download THEN only. 2011 1040 form download . 2011 1040 form download . 2011 1040 form download claim an exemption on  your tax return for a  dependent who is an  eligible student you can claim the American opportunity credit based on that dependent's expenses. 2011 1040 form download The dependent cannot claim the credit. 2011 1040 form download do not claim an exemption on your tax return for a dependent who is an eligible student (even if entitled to the exemption) the dependent can claim the American opportunity credit. 2011 1040 form download You cannot claim the credit based on this dependent's expenses. 2011 1040 form download Expenses paid by dependent. 2011 1040 form download   If you claim an exemption on your tax return for an eligible student who is your dependent, treat any expenses paid (or deemed paid) by your dependent as if you had paid them. 2011 1040 form download Include these expenses when figuring the amount of your American opportunity credit. 2011 1040 form download    Qualified education expenses paid directly to an eligible educational institution for your dependent under a court-approved divorce decree are treated as paid by your dependent. 2011 1040 form download Expenses paid by you. 2011 1040 form download   If you claim an exemption for a dependent who is an eligible student, only you can include any expenses you paid when figuring the amount of the American opportunity credit. 2011 1040 form download If neither you nor anyone else claims an exemption for the dependent, only the dependent can include any expenses you paid when figuring the American opportunity credit. 2011 1040 form download Expenses paid by others. 2011 1040 form download   Someone other than you, your spouse, or your dependent (such as a relative or former spouse) may make a payment directly to an eligible educational institution to pay for an eligible student's qualified education expenses. 2011 1040 form download In this case, the student is treated as receiving the payment from the other person and, in turn, paying the institution. 2011 1040 form download If you claim an exemption on your tax return for the student, you are considered to have paid the expenses. 2011 1040 form download Example. 2011 1040 form download In 2013, Ms. 2011 1040 form download Allen makes a payment directly to an eligible educational institution for her grandson Todd's qualified education expenses. 2011 1040 form download For purposes of claiming an American opportunity credit, Todd is treated as receiving the money from his grandmother and, in turn, paying his qualified education expenses himself. 2011 1040 form download Unless an exemption for Todd is claimed on someone else's 2013 tax return, only Todd can use the payment to claim an American opportunity credit. 2011 1040 form download If anyone, such as Todd's parents, claims an exemption for Todd on his or her 2013 tax return, whoever claims the exemption may be able to use the expenses to claim an American opportunity credit. 2011 1040 form download If anyone else claims an exemption for Todd, Todd cannot claim an American opportunity credit. 2011 1040 form download Tuition reduction. 2011 1040 form download    When an eligible educational institution provides a reduction in tuition to an employee of the institution (or spouse or dependent child of an employee), the amount of the reduction may or may not be taxable. 2011 1040 form download If it is taxable, the employee is treated as receiving a payment of that amount and, in turn, paying it to the educational institution on behalf of the student. 2011 1040 form download For more information on tuition reductions, see Qualified Tuition Reduction in chapter 1, Scholarships, Fellowships, Grants, and Tuition Reductions. 2011 1040 form download Figuring the Credit The amount of the American opportunity credit (per eligible student) is the sum of: 100% of the first $2,000 of qualified education expenses you paid for the eligible student, and 25% of the next $2,000 of qualified education expenses you paid for that student. 2011 1040 form download The maximum amount of American opportunity credit you can claim in 2013 is $2,500 multiplied by the number of eligible students. 2011 1040 form download You can claim the full $2,500 for each eligible student for whom you paid at least $4,000 of adjusted qualified education expenses. 2011 1040 form download However, the credit may be reduced based on your MAGI. 2011 1040 form download See Effect of the Amount of Your Income on the Amount of Your Credit , later. 2011 1040 form download Example. 2011 1040 form download Jack and Kay Ford are married and file a joint tax return. 2011 1040 form download For 2013, they claim an exemption for their dependent daughter on their tax return. 2011 1040 form download Their MAGI is $70,000. 2011 1040 form download Their daughter is in her junior (third) year of studies at the local university. 2011 1040 form download Jack and Kay paid qualified education expenses of $4,300 in 2013. 2011 1040 form download Jack and Kay, their daughter, and the local university meet all of the requirements for the American opportunity credit. 2011 1040 form download Jack and Kay can claim a $2,500 American opportunity credit in 2013. 2011 1040 form download This is 100% of the first $2,000 of qualified education expenses, plus 25% of the next $2,000. 2011 1040 form download Form 1098-T. 2011 1040 form download   To help you figure your American opportunity credit, the student should receive Form 1098-T, Tuition Statement. 2011 1040 form download Generally, an eligible educational institution (such as a college or university) must send Form 1098-T (or acceptable substitute) to each enrolled student by January 31, 2014. 2011 1040 form download An institution may choose to report either payments received (box 1), or amounts billed (box 2), for qualified education expenses. 2011 1040 form download However, the amounts in boxes 1 and 2 of Form 1098-T might be different than what you paid. 2011 1040 form download When figuring the credit, use only the amounts you paid or are deemed to have paid in 2013 for qualified education expenses. 2011 1040 form download   In addition, Form 1098-T should give other information for that institution, such as adjustments made for prior years, the amount of scholarships or grants, reimbursements or refunds, and whether the student was enrolled at least half-time or was a graduate student. 2011 1040 form download    The eligible educational institution may ask for a completed Form W-9S, Request for Student's or Borrower's Taxpayer Identification Number and Certification, or similar statement to obtain the student's name, address, and taxpayer identification number. 2011 1040 form download Effect of the Amount of Your Income on the Amount of Your Credit The amount of your American opportunity credit is phased out (gradually reduced) if your MAGI is between $80,000 and $90,000 ($160,000 and $180,000 if you file a joint return). 2011 1040 form download You cannot claim an American opportunity credit if your MAGI is $90,000 or more ($180,000 or more if you file a joint return). 2011 1040 form download Modified adjusted gross income (MAGI). 2011 1040 form download   For most taxpayers, MAGI is adjusted gross income (AGI) as figured on their federal income tax return. 2011 1040 form download MAGI when using Form 1040A. 2011 1040 form download   If you file Form 1040A, your MAGI is the AGI on line 22 of that form. 2011 1040 form download MAGI when using Form 1040. 2011 1040 form download   If you file Form 1040, your MAGI is the AGI on line 38 of that form, modified by adding back any: Foreign earned income exclusion, Foreign housing exclusion, Foreign housing deduction, Exclusion of income by bona fide residents of American Samoa, and Exclusion of income by bona fide residents of Puerto Rico. 2011 1040 form download You can use Worksheet 2-1, next, to figure your MAGI. 2011 1040 form download    Worksheet 2-1. 2011 1040 form download MAGI for the American Opportunity Credit 1. 2011 1040 form download Enter your adjusted gross income  (Form 1040, line 38)   1. 2011 1040 form download   2. 2011 1040 form download Enter your foreign earned income exclusion and/or housing exclusion (Form 2555, line 45, or Form 2555-EZ, line 18)   2. 2011 1040 form download       3. 2011 1040 form download Enter your foreign housing deduction (Form 2555, line 50)   3. 2011 1040 form download       4. 2011 1040 form download Enter the amount of income from Puerto Rico you are excluding   4. 2011 1040 form download       5. 2011 1040 form download Enter the amount of income from American Samoa you are excluding (Form 4563, line 15)   5. 2011 1040 form download       6. 2011 1040 form download Add the amounts on lines 2, 3, 4, and 5   6. 2011 1040 form download   7. 2011 1040 form download Add the amounts on lines 1 and 6. 2011 1040 form download  This is your modified adjusted  gross income. 2011 1040 form download Enter here and  on Form 8863, line 3   7. 2011 1040 form download   Phaseout. 2011 1040 form download   If your MAGI is within the range of incomes where the credit must be reduced, you will figure your reduced credit using lines 2-7, of Form 8863, Part I. 2011 1040 form download The same method is shown in the following example. 2011 1040 form download Example. 2011 1040 form download You are filing a joint return and your MAGI is $165,000. 2011 1040 form download In 2013, you paid $5,000 of qualified education expenses. 2011 1040 form download You figure a tentative American opportunity credit of $2,500 (100% of the first $2,000 of qualified education expenses, plus 25% of the next $2,000 of qualified education expenses). 2011 1040 form download Because your MAGI is within the range of incomes where the credit must be reduced, you must multiply your tentative credit ($2,500) by a fraction. 2011 1040 form download The numerator of the fraction is $180,000 (the upper limit for those filing a joint return) minus your MAGI. 2011 1040 form download The denominator is $20,000, the range of incomes for the phaseout ($160,000 to $180,000). 2011 1040 form download The result is the amount of your phased out (reduced) American opportunity credit ($1,875). 2011 1040 form download      $2,500 × $180,000 − $165,000  $20,000 = $1,875   Refundable Part of Credit Forty percent of the American opportunity credit is refundable for most taxpayers. 2011 1040 form download However, if you were under age 24 at the end of 2013 and the conditions listed below apply to you, you cannot claim any part of the American opportunity credit as a refundable credit on your tax return. 2011 1040 form download Instead, your allowed credit (figured on Form 8863, Part II) will be used to reduce your tax as a nonrefundable credit only. 2011 1040 form download You do not qualify for a refund if items 1 (a, b, or c), 2, and 3 below apply to you. 2011 1040 form download You were: Under age 18 at the end of 2013, or Age 18 at the end of 2013 and your earned income (defined below) was less than one-half of your support (defined below), or Over age 18 and under age 24 at the end of 2013 and a full-time student (defined below) and your earned income (defined below) was less than one-half of your support (defined below). 2011 1040 form download At least one of your parents was alive at the end of 2013. 2011 1040 form download You are filing a return as single, head of household, qualifying widow(er), or married filing separately for 2013. 2011 1040 form download Earned income. 2011 1040 form download   Earned income includes wages, salaries, professional fees, and other payments received for personal services actually performed. 2011 1040 form download Earned income includes the part of any scholarship or fellowship that represents payment for teaching, research, or other services performed by the student that are required as a condition for receiving the scholarship or fellowship. 2011 1040 form download Earned income does not include that part of the compensation for personal services rendered to a corporation which represents a distribution of earnings or profits rather than a reasonable allowance as compensation for the personal services actually rendered. 2011 1040 form download   If you are a sole proprietor or a partner in a trade or business in which both personal services and capital are material income-producing factors, earned income also includes a reasonable allowance for compensation for personal services, but not more than 30% of your share of the net profits from that trade or business (after subtracting the deduction for one-half of self-employment tax). 2011 1040 form download However, if capital is not an income-producing factor and your personal services produced the business income, the 30% limit does not apply. 2011 1040 form download Support. 2011 1040 form download   Your support includes food, shelter, clothing, medical and dental care, education, and the like. 2011 1040 form download Generally, the amount of the item of support will be the amount of expenses incurred by the one furnishing such item. 2011 1040 form download If the item of support is in the form of property or lodging, measure the amount of such item of support by its fair market value. 2011 1040 form download However, a scholarship received by you is not considered support if you are a full-time student. 2011 1040 form download See Publication 501 for details. 2011 1040 form download Full-time student. 2011 1040 form download   You are a full-time student for 2013 if during any part of any 5 calendar months during the year you were enrolled as a full-time student at an eligible educational institution (defined earlier), or took a full-time, on-farm training course given by such an institution or by a state, county, or local government agency. 2011 1040 form download Claiming the Credit You claim the American opportunity credit by completing Form 8863 and submitting it with your Form 1040 or 1040A. 2011 1040 form download Enter the nonrefundable part of the credit on Form 1040, line 49, or on Form 1040A, line 31. 2011 1040 form download Enter the refundable part of the credit on Form 1040, line 66, or on Form 1040A, line 40. 2011 1040 form download A filled-in Form 8863 is shown at the end of this publication. 2011 1040 form download Note. 2011 1040 form download In Appendix A. 2011 1040 form download at the end of this publication, there is an example illustrating the use of Form 8863 when both the American opportunity credit and the lifetime learning credit are claimed on the same tax return. 2011 1040 form download Prev  Up  Next   Home   More Online Publications
Print - Click this link to Print this page

Understanding your CP501 Notice

You have a balance due (money you owe the IRS) on one of your tax accounts.

Printable samples of this notice (PDF)

Tax publications you may find useful

How to get help

Calling the 1-800 number listed on the top right corner of your notice is the fastest way to get your questions answered.

You can also authorize someone (such as an accountant) to contact the IRS on your behalf using this Power of Attorney and Declaration of Representative (Form 2848).

Or you may qualify for help from a Low Income Taxpayer Clinic.
 


What you need to do

  • Read your notice carefully — it explains your due date, amount due, and payment options.
  • Make your payment by your due date. Go to the payments page to find out more about your payment options.

You may want to...


Answers to Common Questions

What should I do if I disagree with the changes you made?
If you disagree, contact us immediately at the toll-free number listed on the top right corner of your notice.

What happens if I can't pay the full amount I owe now?
See if you may be able to set up a payment plan through our Online Payment Agreement Application.

What happens if I don't respond to this notice?
If you don't pay the amount due or call us to make payment arrangements, we can file a Notice of Federal Tax Lien on your property at any time, if we haven't already done so. In addition, if you don't pay the amount you owe by the due date on the notice, interest will increase and additional penalties may apply.

If the lien is in place, you may find it difficult to sell or borrow against your property. The tax lien would also appear on your credit report ― which may harm your credit rating ― and your creditors would also be publicly notified that the IRS has priority to seize your property.

Am I charged interest on the money I owe?
Yes. You will continue to be charged interest on any outstanding balance until the amount is paid in full. See the Penalties section that starts on page 2 of the notice.

Will I receive a penalty if I can't pay the full amount?
Yes, you'll receive a late payment penalty. The failure to pay penalty continues to accrue until the amount you owe is paid in full. Contact us by the due date of your payment and, depending on your situation, we may be able to remove the penalty.

What if I need to make a correction to my tax return?
You'll need to file Form 1040X, Amended U.S. Individual Income Tax Return.

Page Last Reviewed or Updated: 05-Mar-2014

The 2011 1040 Form Download

2011 1040 form download 2. 2011 1040 form download   Employees' Pay Table of Contents Introduction Topics - This chapter discusses: Useful Items - You may want to see: Tests for Deducting PayTest 1—Reasonableness Test 2—For Services Performed Kinds of PayAwards Bonuses Education Expenses Fringe Benefits Loans or Advances Property Reimbursements for Business Expenses Sick and Vacation Pay Introduction You can generally deduct the amount you pay your employees for the services they perform. 2011 1040 form download The pay may be in cash, property, or services. 2011 1040 form download It may include wages, salaries, bonuses, commissions, or other non-cash compensation such as vacation allowances and fringe benefits. 2011 1040 form download For information about deducting employment taxes, see chapter 5. 2011 1040 form download You can claim employment credits, such as the following, if you hire individuals who meet certain requirements. 2011 1040 form download Empowerment zone employment credit (Form 8844). 2011 1040 form download Indian employment credit (Form 8845). 2011 1040 form download Work opportunity credit (Form 5884). 2011 1040 form download Credit for employer differential wage payments (Form 8932). 2011 1040 form download Reduce your deduction for employee wages by the amount of employment credits you claim. 2011 1040 form download For more information about these credits, see the form on which the credit is claimed. 2011 1040 form download Topics - This chapter discusses: Tests for deducting pay Kinds of pay Useful Items - You may want to see: Publication 15 (Circular E), Employer's Tax Guide 15-A Employer's Supplemental Tax Guide 15-B Employer's Tax Guide to Fringe Benefits See chapter 12 for information about getting publications and forms. 2011 1040 form download Tests for Deducting Pay To be deductible, your employees' pay must be an ordinary and necessary business expense and you must pay or incur it. 2011 1040 form download These and other requirements that apply to all business expenses are explained in chapter 1. 2011 1040 form download In addition, the pay must meet both of the following tests. 2011 1040 form download Test 1. 2011 1040 form download It must be reasonable. 2011 1040 form download Test 2. 2011 1040 form download It must be for services performed. 2011 1040 form download The form or method of figuring the pay does not affect its deductibility. 2011 1040 form download For example, bonuses and commissions based on sales or earnings, and paid under an agreement made before the services were performed, are both deductible. 2011 1040 form download Test 1—Reasonableness You must be able to prove that the pay is reasonable. 2011 1040 form download Whether the pay is reasonable depends on the circumstances that existed when you contracted for the services, not those that exist when reasonableness is questioned. 2011 1040 form download If the pay is excessive, the excess pay is disallowed as a deduction. 2011 1040 form download Factors to consider. 2011 1040 form download   Determine the reasonableness of pay by the facts and circumstances. 2011 1040 form download Generally, reasonable pay is the amount that a similar business would pay for the same or similar services. 2011 1040 form download   To determine if pay is reasonable, also consider the following items and any other pertinent facts. 2011 1040 form download The duties performed by the employee. 2011 1040 form download The volume of business handled. 2011 1040 form download The character and amount of responsibility. 2011 1040 form download The complexities of your business. 2011 1040 form download The amount of time required. 2011 1040 form download The cost of living in the locality. 2011 1040 form download The ability and achievements of the individual employee performing the service. 2011 1040 form download The pay compared with the gross and net income of the business, as well as with distributions to shareholders if the business is a corporation. 2011 1040 form download Your policy regarding pay for all your employees. 2011 1040 form download The history of pay for each employee. 2011 1040 form download Test 2—For Services Performed You must be able to prove the payment was made for services actually performed. 2011 1040 form download Employee-shareholder salaries. 2011 1040 form download   If a corporation pays an employee who is also a shareholder a salary that is unreasonably high considering the services actually performed, the excessive part of the salary may be treated as a constructive dividend to the employee-shareholder. 2011 1040 form download The excessive part of the salary would not be allowed as a salary deduction by the corporation. 2011 1040 form download For more information on corporate distributions to shareholders, see Publication 542, Corporations. 2011 1040 form download Kinds of Pay Some of the ways you may provide pay to your employees in addition to regular wages or salaries are discussed next. 2011 1040 form download For specialized and detailed information on employees' pay and the employment tax treatment of employees' pay, see Publications 15, 15-A, and 15-B. 2011 1040 form download Awards You can generally deduct amounts you pay to your employees as awards, whether paid in cash or property. 2011 1040 form download If you give property to an employee as an employee achievement award, your deduction may be limited. 2011 1040 form download Achievement awards. 2011 1040 form download   An achievement award is an item of tangible personal property that meets all the following requirements. 2011 1040 form download It is given to an employee for length of service or safety achievement. 2011 1040 form download It is awarded as part of a meaningful presentation. 2011 1040 form download It is awarded under conditions and circumstances that do not create a significant likelihood of disguised pay. 2011 1040 form download Length-of-service award. 2011 1040 form download    An award will qualify as a length-of-service award only if either of the following applies. 2011 1040 form download The employee receives the award after his or her first 5 years of employment. 2011 1040 form download The employee did not receive another length-of-service award (other than one of very small value) during the same year or in any of the prior 4 years. 2011 1040 form download Safety achievement award. 2011 1040 form download    An award for safety achievement will qualify as an achievement award unless one of the following applies. 2011 1040 form download It is given to a manager, administrator, clerical employee, or other professional employee. 2011 1040 form download During the tax year, more than 10% of your employees, excluding those listed in (1), have already received a safety achievement award (other than one of very small value). 2011 1040 form download Deduction limit. 2011 1040 form download   Your deduction for the cost of employee achievement awards given to any one employee during the tax year is limited to the following. 2011 1040 form download $400 for awards that are not qualified plan awards. 2011 1040 form download $1,600 for all awards, whether or not qualified plan awards. 2011 1040 form download   A qualified plan award is an achievement award given as part of an established written plan or program that does not favor highly compensated employees as to eligibility or benefits. 2011 1040 form download   A highly compensated employee is an employee who meets either of the following tests. 2011 1040 form download The employee was a 5% owner at any time during the year or the preceding year. 2011 1040 form download The employee received more than $115,000 in pay for the preceding year. 2011 1040 form download You can choose to ignore test (2) if the employee was not also in the top 20% of employees ranked by pay for the preceding year. 2011 1040 form download   An award is not a qualified plan award if the average cost of all the employee achievement awards given during the tax year (that would be qualified plan awards except for this limit) is more than $400. 2011 1040 form download To figure this average cost, ignore awards of nominal value. 2011 1040 form download Deduct achievement awards as a nonwage business expense on your return or business schedule. 2011 1040 form download You may not owe employment taxes on the value of some achievement awards you provide to an employee. 2011 1040 form download See Publication 15-B. 2011 1040 form download Bonuses You can generally deduct a bonus paid to an employee if you intended the bonus as additional pay for services, not as a gift, and the services were performed. 2011 1040 form download However, the total bonuses, salaries, and other pay must be reasonable for the services performed. 2011 1040 form download If the bonus is paid in property, see Property , later. 2011 1040 form download Gifts of nominal value. 2011 1040 form download    If, to promote employee goodwill, you distribute food or merchandise of nominal value to your employees at holidays, you can deduct the cost of these items as a nonwage business expense. 2011 1040 form download Your deduction for de minimis gifts of food or drink are not subject to the 50% deduction limit that generally applies to meals. 2011 1040 form download For more information on this deduction limit, see Meals and lodging , later. 2011 1040 form download Education Expenses If you pay or reimburse education expenses for an employee, you can deduct the payments if they are part of a qualified educational assistance program. 2011 1040 form download Deduct them on the “Employee benefit programs” or other appropriate line of your tax return. 2011 1040 form download For information on educational assistance programs, see Educational Assistance in section 2 of Publication 15-B. 2011 1040 form download Fringe Benefits A fringe benefit is a form of pay for the performance of services. 2011 1040 form download You can generally deduct the cost of fringe benefits. 2011 1040 form download You may be able to exclude all or part of the value of some fringe benefits from your employees' pay. 2011 1040 form download You also may not owe employment taxes on the value of the fringe benefits. 2011 1040 form download See Table 2-1, Special Rules for Various Types of Fringe Benefits, in Publication 15-B for details. 2011 1040 form download Your deduction for the cost of fringe benefits for activities generally considered entertainment, amusement, or recreation, or for a facility used in connection with such an activity (for example, a company aircraft) for certain officers, directors, and more-than-10% shareholders is limited. 2011 1040 form download Certain fringe benefits are discussed next. 2011 1040 form download See Publication 15-B for more details on these and other fringe benefits. 2011 1040 form download Meals and lodging. 2011 1040 form download   You can usually deduct the cost of furnishing meals and lodging to your employees. 2011 1040 form download Deduct the cost in whatever category the expense falls. 2011 1040 form download For example, if you operate a restaurant, deduct the cost of the meals you furnish to employees as part of the cost of goods sold. 2011 1040 form download If you operate a nursing home, motel, or rental property, deduct the cost of furnishing lodging to an employee as expenses for utilities, linen service, salaries, depreciation, etc. 2011 1040 form download Deduction limit on meals. 2011 1040 form download   You can generally deduct only 50% of the cost of furnishing meals to your employees. 2011 1040 form download However, you can deduct the full cost of the following meals. 2011 1040 form download Meals whose value you include in an employee's wages. 2011 1040 form download Meals that qualify as a de minimis fringe benefit as discussed in section 2 of Publication 15-B. 2011 1040 form download This generally includes meals you furnish to employees at your place of business if more than half of these employees are provided the meals for your convenience. 2011 1040 form download Meals you furnish to your employees at the work site when you operate a restaurant or catering service. 2011 1040 form download Meals you furnish to your employees as part of the expense of providing recreational or social activities, such as a company picnic. 2011 1040 form download Meals you are required by federal law to furnish to crew members of certain commercial vessels (or would be required to furnish if the vessels were operated at sea). 2011 1040 form download This does not include meals you furnish on vessels primarily providing luxury water transportation. 2011 1040 form download Meals you furnish on an oil or gas platform or drilling rig located offshore or in Alaska. 2011 1040 form download This includes meals you furnish at a support camp that is near and integral to an oil or gas drilling rig located in Alaska. 2011 1040 form download Employee benefit programs. 2011 1040 form download   Employee benefit programs include the following. 2011 1040 form download Accident and health plans. 2011 1040 form download Adoption assistance. 2011 1040 form download Cafeteria plans. 2011 1040 form download Dependent care assistance. 2011 1040 form download Education assistance. 2011 1040 form download Life insurance coverage. 2011 1040 form download Welfare benefit funds. 2011 1040 form download   You can generally deduct amounts you spend on employee benefit programs on the applicable line of your tax return. 2011 1040 form download For example, if you provide dependent care by operating a dependent care facility for your employees, deduct your costs in whatever categories they fall (utilities, salaries, etc. 2011 1040 form download ). 2011 1040 form download Life insurance coverage. 2011 1040 form download   You cannot deduct the cost of life insurance coverage for you, an employee, or any person with a financial interest in your business, if you are directly or indirectly the beneficiary of the policy. 2011 1040 form download See Regulations section 1. 2011 1040 form download 264-1 for more information. 2011 1040 form download Welfare benefit funds. 2011 1040 form download   A welfare benefit fund is a funded plan (or a funded arrangement having the effect of a plan) that provides welfare benefits to your employees, independent contractors, or their beneficiaries. 2011 1040 form download Welfare benefits are any benefits other than deferred compensation or transfers of restricted property. 2011 1040 form download   Your deduction for contributions to a welfare benefit fund is limited to the fund's qualified cost for the tax year. 2011 1040 form download If your contributions to the fund are more than its qualified cost, carry the excess over to the next tax year. 2011 1040 form download   Generally, the fund's “qualified cost” is the total of the following amounts, reduced by the after-tax income of the fund. 2011 1040 form download The cost you would have been able to deduct using the cash method of accounting if you had paid for the benefits directly. 2011 1040 form download The contributions added to a reserve account that are needed to fund claims incurred but not paid as of the end of the year. 2011 1040 form download These claims can be for supplemental unemployment benefits, severance pay, or disability, medical, or life insurance benefits. 2011 1040 form download   For more information, see sections 419(c) and 419A of the Internal Revenue Code and the related regulations. 2011 1040 form download Loans or Advances You generally can deduct as wages an advance you make to an employee for services performed if you do not expect the employee to repay the advance. 2011 1040 form download However, if the employee performs no services, treat the amount you advanced as a loan. 2011 1040 form download If the employee does not repay the loan, treat it as income to the employee. 2011 1040 form download Below-market interest rate loans. 2011 1040 form download   On certain loans you make to an employee or shareholder, you are treated as having received interest income and as having paid compensation or dividends equal to that interest. 2011 1040 form download See Below-Market Loans in chapter 4. 2011 1040 form download Property If you transfer property (including your company's stock) to an employee as payment for services, you can generally deduct it as wages. 2011 1040 form download The amount you can deduct is the property's fair market value on the date of the transfer less any amount the employee paid for the property. 2011 1040 form download You can claim the deduction only for the tax year in which your employee includes the property's value in income. 2011 1040 form download Your employee is deemed to have included the value in income if you report it on Form W-2, Wage and Tax Statement, in a timely manner. 2011 1040 form download You treat the deductible amount as received in exchange for the property, and you must recognize any gain or loss realized on the transfer, unless it is the company's stock transferred as payment for services. 2011 1040 form download Your gain or loss is the difference between the fair market value of the property and its adjusted basis on the date of transfer. 2011 1040 form download These rules also apply to property transferred to an independent contractor for services, generally reported on Form 1099-MISC, Miscellaneous Income. 2011 1040 form download Restricted property. 2011 1040 form download   If the property you transfer for services is subject to restrictions that affect its value, you generally cannot deduct it and do not report gain or loss until it is substantially vested in the recipient. 2011 1040 form download However, if the recipient pays for the property, you must report any gain at the time of the transfer up to the amount paid. 2011 1040 form download    “Substantially vested” means the property is not subject to a substantial risk of forfeiture. 2011 1040 form download This means that the recipient is not likely to have to give up his or her rights in the property in the future. 2011 1040 form download Reimbursements for Business Expenses You can generally deduct the amount you pay or reimburse employees for business expenses incurred for your business. 2011 1040 form download However, your deduction may be limited. 2011 1040 form download If you make the payment under an accountable plan, deduct it in the category of the expense paid. 2011 1040 form download For example, if you pay an employee for travel expenses incurred on your behalf, deduct this payment as a travel expense. 2011 1040 form download If you make the payment under a nonaccountable plan, deduct it as wages and include it in the employee's Form W-2. 2011 1040 form download See Reimbursement of Travel, Meals, and Entertainment in chapter 11 for more information about deducting reimbursements and an explanation of accountable and nonaccountable plans. 2011 1040 form download Sick and Vacation Pay Sick pay. 2011 1040 form download   You can deduct amounts you pay to your employees for sickness and injury, including lump-sum amounts, as wages. 2011 1040 form download However, your deduction is limited to amounts not compensated by insurance or other means. 2011 1040 form download Vacation pay. 2011 1040 form download   Vacation pay is an employee benefit. 2011 1040 form download It includes amounts paid for unused vacation leave. 2011 1040 form download You can deduct vacation pay only in the tax year in which the employee actually receives it. 2011 1040 form download This rule applies regardless of whether you use the cash or accrual method of accounting. 2011 1040 form download Prev  Up  Next   Home   More Online Publications