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Amending Tax Return Online

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Amending Tax Return Online

Amending tax return online 11. Amending tax return online   Other Expenses Table of Contents What's New Introduction Topics - This chapter discusses: Useful Items - You may want to see: Reimbursement of Travel, Meals, and EntertainmentReimbursements Miscellaneous ExpensesMeaning of generally enforced. Amending tax return online Kickbacks. Amending tax return online Form 1099-MISC. Amending tax return online Exception. Amending tax return online Tax preparation fees. Amending tax return online Covered executive branch official. Amending tax return online Exceptions to denial of deduction. Amending tax return online Indirect political contributions. Amending tax return online Type of deduction. Amending tax return online Repayment—$3,000 or less. Amending tax return online Repayment—over $3,000. Amending tax return online Method 1. Amending tax return online Method 2. Amending tax return online Repayment does not apply. Amending tax return online Year of deduction (or credit). Amending tax return online Telephone. Amending tax return online What's New Standard mileage rate. Amending tax return online  Beginning in 2013, the standard mileage rate for the cost of operating your car, van, pickup, or panel truck for business use is 56. Amending tax return online 5 cents per mile. Amending tax return online For more information, see Car and truck expenses under Miscellaneous Expenses. Amending tax return online Introduction This chapter covers business expenses that may not have been explained to you, as a business owner, in previous chapters of this publication. Amending tax return online Topics - This chapter discusses: Travel, meals, and entertainment Bribes and kickbacks Charitable contributions Education expenses Lobbying expenses Penalties and fines Repayments (claim of right) Other miscellaneous expenses Useful Items - You may want to see: Publication 15-B Employer's Tax Guide to Fringe Benefits 463 Travel, Entertainment, Gift, and Car Expenses 526 Charitable Contributions 529 Miscellaneous Deductions 544 Sales and Other Dispositions of Assets 970 Tax Benefits for Education 1542 Per Diem Rates See chapter 12 for information about getting publications and forms. Amending tax return online Reimbursement of Travel, Meals, and Entertainment The following discussion explains how to handle any reimbursements or allowances you may provide to your employees under a reimbursement or allowance arrangement for travel, meals, and entertainment expenses. Amending tax return online If you are self-employed and report your income and expenses on Schedule C or C-EZ (Form 1040), see Publication 463. Amending tax return online To be deductible for tax purposes, expenses incurred for travel, meals, and entertainment must be ordinary and necessary expenses incurred while carrying on your trade or business. Amending tax return online Generally, you also must show that entertainment expenses (including meals) are directly related to, or associated with, the conduct of your trade or business. Amending tax return online For more information on travel, meals, and entertainment, including deductibility, see Publication 463. Amending tax return online Reimbursements A “reimbursement or allowance arrangement” provides for payment of advances, reimbursements, and allowances for travel, meals, and entertainment expenses incurred by your employees during the ordinary course of business. Amending tax return online If the expenses are substantiated, you can deduct the allowable amount on your tax return. Amending tax return online Because of differences between accounting methods and tax law, the amount you can deduct for tax purposes may not be the same as the amount you deduct on your business books and records. Amending tax return online For example, you can deduct 100% of the cost of meals on your business books and records. Amending tax return online However, only 50% of these costs are allowed by law as a tax deduction. Amending tax return online How you deduct a business expense under a reimbursement or allowance arrangement depends on whether you have: An accountable plan, or A nonaccountable plan. Amending tax return online If you reimburse these expenses under an accountable plan, deduct them as travel, meals, or entertainment expenses. Amending tax return online If you reimburse these expenses under a nonaccountable plan, report the reimbursements as wages on Form W-2, Wage and Tax Statement, and deduct them as wages on the appropriate line of your tax return. Amending tax return online If you make a single payment to your employees and it includes both wages and an expense reimbursement, you must specify the amount of the reimbursement and report it accordingly. Amending tax return online See Table 11-1 , Reporting Reimbursements. Amending tax return online Accountable Plans An accountable plan requires your employees to meet all of the following requirements. Amending tax return online Each employee must: Have paid or incurred deductible expenses while performing services as your employee, Adequately account to you for these expenses within a reasonable period of time, and Return any excess reimbursement or allowance within a reasonable period of time. Amending tax return online An arrangement under which you advance money to employees is treated as meeting (3) above only if the following requirements are also met. Amending tax return online The advance is reasonably calculated not to exceed the amount of anticipated expenses. Amending tax return online You make the advance within a reasonable period of time of your employee paying or incurring the expense. Amending tax return online If any expenses reimbursed under this arrangement are not substantiated, or an excess reimbursement is not returned within a reasonable period of time by an employee, you cannot treat these expenses as reimbursed under an accountable plan. Amending tax return online Instead, treat the reimbursed expenses as paid under a nonaccountable plan, discussed later. Amending tax return online Adequate accounting. Amending tax return online   Your employees must adequately account to you for their travel, meals, and entertainment expenses. Amending tax return online They must give you documentary evidence of their travel, mileage, and other employee business expenses. Amending tax return online This evidence should include items such as receipts, along with either a statement of expenses, an account book, a day-planner, or similar record in which the employee entered each expense at or near the time the expense was incurred. Amending tax return online Excess reimbursement or allowance. Amending tax return online   An excess reimbursement or allowance is any amount you pay to an employee that is more than the business-related expenses for which the employee adequately accounted. Amending tax return online The employee must return any excess reimbursement or other expense allowance to you within a reasonable period of time. Amending tax return online Reasonable period of time. Amending tax return online   A reasonable period of time depends on the facts and circumstances. Amending tax return online Generally, actions that take place within the times specified in the following list will be treated as taking place within a reasonable period of time. Amending tax return online You give an advance within 30 days of the time the employee pays or incurs the expense. Amending tax return online Your employees adequately account for their expenses within 60 days after the expenses were paid or incurred. Amending tax return online Your employees return any excess reimbursement within 120 days after the expenses were paid or incurred. Amending tax return online You give a periodic statement (at least quarterly) to your employees that asks them to either return or adequately account for outstanding advances and they comply within 120 days of the date of the statement. Amending tax return online How to deduct. Amending tax return online   You can claim a deduction for travel, meals, and entertainment expenses if you reimburse your employees for these expenses under an accountable plan. Amending tax return online Generally, the amount you can deduct for meals and entertainment is subject to a 50% limit, discussed later. Amending tax return online If you are a sole proprietor, or are filing as a single member limited liability company, deduct the travel reimbursement on line 24a and the deductible part of the meals and entertainment reimbursement on line 24b, Schedule C (Form 1040) or line 2, Schedule C-EZ (Form 1040). Amending tax return online   If you are filing an income tax return for a corporation, include the reimbursement on the Other deductions line of Form 1120, U. Amending tax return online S. Amending tax return online Corporation Income Tax Return. Amending tax return online If you are filing any other business income tax return, such as a partnership or S corporation return, deduct the reimbursement on the appropriate line of the return as provided in the instructions for that return. Amending tax return online Table 11-1. Amending tax return online Reporting Reimbursements IF the type of reimbursement (or other expense allowance) arrangement is under THEN the employer reports on Form W-2 An accountable plan with: Actual expense reimbursement:  Adequate accounting made and excess returned No amount. Amending tax return online Actual expense reimbursement:  Adequate accounting and return of excess both required but excess not returned The excess amount as wages in box 1. Amending tax return online Per diem or mileage allowance up to the federal rate:  Adequate accounting made and excess returned No amount. Amending tax return online Per diem or mileage allowance up to the federal rate:  Adequate accounting and return of excess both required but excess not returned The excess amount as wages in box 1. Amending tax return online The amount up to the federal rate is reported only in box 12—it is not reported in box 1. Amending tax return online Per diem or mileage allowance exceeds the federal rate:  Adequate accounting made up to the federal rate only and excess not returned The excess amount as wages in box 1. Amending tax return online The amount up to the federal rate is reported only in box 12—it is not reported in box 1. Amending tax return online A nonaccountable plan with: Either adequate accounting or return of excess, or both, not required by plan The entire amount as wages in box 1. Amending tax return online No reimbursement plan The entire amount as wages in box 1. Amending tax return online Per Diem and Car Allowances You can reimburse your employees under an accountable plan based on travel days, miles, or some other fixed allowance. Amending tax return online In these cases, your employee is considered to have accounted to you for the amount of the expense that does not exceed the rates established by the federal government. Amending tax return online Your employee must actually substantiate to you the other elements of the expense, such as time, place, and business purpose. Amending tax return online Federal rate. Amending tax return online   The federal rate can be figured using any one of the following methods. Amending tax return online For car expenses: The standard mileage rate. Amending tax return online A fixed and variable rate (FAVR). Amending tax return online For per diem amounts: The regular federal per diem rate. Amending tax return online The standard meal allowance. Amending tax return online The high-low rate. Amending tax return online Car allowance. Amending tax return online   Your employee is considered to have accounted to you for car expenses that do not exceed the standard mileage rate. Amending tax return online Beginning in 2013, the standard business mileage rate is 56. Amending tax return online 5 cents per mile. Amending tax return online   You can choose to reimburse your employees using a fixed and variable rate (FAVR) allowance. Amending tax return online This is an allowance that includes a combination of payments covering fixed and variable costs, such as a cents-per-mile rate to cover your employees' variable operating costs (such as gas, oil, etc. Amending tax return online ) plus a flat amount to cover your employees' fixed costs (such as depreciation, insurance, etc. Amending tax return online ). Amending tax return online For information on using a FAVR allowance, see Revenue Procedure 2010-51, available at www. Amending tax return online irs. Amending tax return online gov/irb/2010-51_IRB/ar14. Amending tax return online html and Notice 2012-72, available at www. Amending tax return online irs. Amending tax return online gov/irb/2012-50_IRB/ar10. Amending tax return online html. Amending tax return online Per diem allowance. Amending tax return online   If your employee actually substantiates to you the other elements (discussed earlier) of the expenses reimbursed using the per diem allowance, how you report and deduct the allowance depends on whether the allowance is for lodging and meal expenses or for meal expenses only and whether the allowance is more than the federal rate. Amending tax return online Regular federal per diem rate. Amending tax return online   The regular federal per diem rate is the highest amount the federal government will pay to its employees while away from home on travel. Amending tax return online It has two components: Lodging expense, and Meal and incidental expense (M&IE). Amending tax return online The rates are different for different locations. Amending tax return online Publication 1542 lists the rates in the continental United States. Amending tax return online Standard meal allowance. Amending tax return online   The federal rate for meal and incidental expenses (M&IE) is the standard meal allowance. Amending tax return online You can pay only an M&IE allowance to employees who travel away from home if: You pay the employee for actual expenses for lodging based on receipts submitted to you, You provide for the lodging, You pay for the actual expense of the lodging directly to the provider, You do not have a reasonable belief that lodging expenses were incurred by the employee, or The allowance is computed on a basis similar to that used in computing the employee's wages (that is, number of hours worked or miles traveled). Amending tax return online Internet access. Amending tax return online    Per diem rates are available on the Internet. Amending tax return online You can access per diem rates at www. Amending tax return online gsa. Amending tax return online gov/perdiemrates. Amending tax return online High-low method. Amending tax return online   This is a simplified method of computing the federal per diem rate for travel within the continental United States. Amending tax return online It eliminates the need to keep a current list of the per diem rate for each city. Amending tax return online   Under the high-low method, the per diem amount for travel during January through September of 2013 is $242 ($65 for M&IE) for certain high-cost locations. Amending tax return online All other areas have a per diem amount of $163 ($52 for M&IE). Amending tax return online The high-cost locations eligible for the higher per diem amount under the high-low method are listed in Publication 1542. Amending tax return online   Effective October 1, 2013, the per diem rate for high-cost locations increased to $251 ($65 for M&IE). Amending tax return online The rate for all other locations increased to $170 ($52 for M&IE). Amending tax return online For October, November, and December 2013, you can either continue to use the rates described in the preceding paragraph or change to the new rates. Amending tax return online However, you must use the same rate for all employees reimbursed under the high-low method. Amending tax return online   For more information about the high-low method, see Notice 2013-65, available at www. Amending tax return online irs. Amending tax return online gov/irb/2013-44_IRB/ar13. Amending tax return online html. Amending tax return online See Publication 1542 (available on the Internet at IRS. Amending tax return online gov) for the current per diem rates for all locations. Amending tax return online Reporting per diem and car allowances. Amending tax return online   The following discussion explains how to report per diem and car allowances. Amending tax return online The manner in which you report them depends on how the allowance compares to the federal rate. Amending tax return online See Table 11-1. Amending tax return online Allowance less than or equal to the federal rate. Amending tax return online   If your allowance for the employee is less than or equal to the appropriate federal rate, that allowance is not included as part of the employee's pay in box 1 of the employee's Form W-2. Amending tax return online Deduct the allowance as travel expenses (including meals that may be subject to the 50% limit, discussed later). Amending tax return online See How to deduct under Accountable Plans, earlier. Amending tax return online Allowance more than the federal rate. Amending tax return online   If your employee's allowance is more than the appropriate federal rate, you must report the allowance as two separate items. Amending tax return online   Include the allowance amount up to the federal rate in box 12 (code L) of the employee's Form W-2. Amending tax return online Deduct it as travel expenses (as explained above). Amending tax return online This part of the allowance is treated as reimbursed under an accountable plan. Amending tax return online   Include the amount that is more than the federal rate in box 1 (and in boxes 3 and 5 if they apply) of the employee's Form W-2. Amending tax return online Deduct it as wages subject to income tax withholding, social security, Medicare, and federal unemployment taxes. Amending tax return online This part of the allowance is treated as reimbursed under a nonaccountable plan as explained later under Nonaccountable Plans. Amending tax return online Meals and Entertainment Under an accountable plan, you can generally deduct only 50% of any otherwise deductible business-related meal and entertainment expenses you reimburse your employees. Amending tax return online The deduction limit applies even if you reimburse them for 100% of the expenses. Amending tax return online Application of the 50% limit. Amending tax return online   The 50% deduction limit applies to reimbursements you make to your employees for expenses they incur for meals while traveling away from home on business and for entertaining business customers at your place of business, a restaurant, or another location. Amending tax return online It applies to expenses incurred at a business convention or reception, business meeting, or business luncheon at a club. Amending tax return online The deduction limit may also apply to meals you furnish on your premises to your employees. Amending tax return online Related expenses. Amending tax return online   Taxes and tips relating to a meal or entertainment activity you reimburse to your employee under an accountable plan are included in the amount subject to the 50% limit. Amending tax return online Reimbursements you make for expenses, such as cover charges for admission to a nightclub, rent paid for a room to hold a dinner or cocktail party, or the amount you pay for parking at a sports arena, are all subject to the 50% limit. Amending tax return online However, the cost of transportation to and from an otherwise allowable business meal or a business-related entertainment activity is not subject to the 50% limit. Amending tax return online Amount subject to 50% limit. Amending tax return online   If you provide your employees with a per diem allowance only for meal and incidental expenses, the amount treated as an expense for food and beverages is the lesser of the following. Amending tax return online The per diem allowance. Amending tax return online The federal rate for M&IE. Amending tax return online   If you provide your employees with a per diem allowance that covers lodging, meals, and incidental expenses, you must treat an amount equal to the federal M&IE rate for the area of travel as an expense for food and beverages. Amending tax return online If the per diem allowance you provide is less than the federal per diem rate for the area of travel, you can treat 40% of the per diem allowance as the amount for food and beverages. Amending tax return online Meal expenses when subject to “hours of service” limits. Amending tax return online   You can deduct 80% of the cost of reimbursed meals your employees consume while away from their tax home on business during, or incident to, any period subject to the Department of Transportation's “hours of service” limits. Amending tax return online   See Publication 463 for a detailed discussion of individuals subject to the Department of Transportation's “hours of service” limits. Amending tax return online De minimis (minimal) fringe benefit. Amending tax return online   The 50% limit does not apply to an expense for food or beverage that is excluded from the gross income of an employee because it is a de minimis fringe benefit. Amending tax return online See Publication 15-B for additional information on de minimis fringe benefits. Amending tax return online Company cafeteria or executive dining room. Amending tax return online   The cost of food and beverages you provide primarily to your employees on your business premises is deductible. Amending tax return online This includes the cost of maintaining the facilities for providing the food and beverages. Amending tax return online These expenses are subject to the 50% limit unless they qualify as a de minimis fringe benefit, as just discussed, or unless they are compensation to your employees (explained later). Amending tax return online Employee activities. Amending tax return online   The expense of providing recreational, social, or similar activities (including the use of a facility) for your employees is deductible and is not subject to the 50% limit. Amending tax return online The benefit must be primarily for your employees who are not highly compensated. Amending tax return online   For this purpose, a highly compensated employee is an employee who meets either of the following requirements. Amending tax return online Owned a 10% or more interest in the business during the year or the preceding year. Amending tax return online An employee is treated as owning any interest owned by his or her brother, sister, spouse, ancestors, and lineal descendants. Amending tax return online Received more than $115,000 in pay for the preceding year. Amending tax return online You can choose to include only employees who were also in the top 20% of employees when ranked by pay for the preceding year. Amending tax return online   For example, the expenses for food, beverages, and entertainment for a company-wide picnic are not subject to the 50% limit. Amending tax return online Meals or entertainment treated as compensation. Amending tax return online   The 50% limit does not apply to either of the following. Amending tax return online Expenses for meals or entertainment that you treat as: Compensation to an employee who was the recipient of the meals or entertainment, and Wages subject to withholding of federal income tax. Amending tax return online Expenses for meals or entertainment if: A recipient of the meals or entertainment who is not your employee has to include the expenses in gross income as compensation for services or as a prize or award, and You include that amount on a Form 1099 issued to the recipient, if a Form 1099 is required. Amending tax return online Sales of meals or entertainment. Amending tax return online   You can deduct the cost of meals or entertainment (including the use of facilities) you sell to the public. Amending tax return online For example, if you run a nightclub, your expense for the entertainment you furnish to your customers, such as a floor show, is a business expense that is fully deductible. Amending tax return online The 50% limit does not apply to this expense. Amending tax return online Providing meals or entertainment to general public to promote goodwill. Amending tax return online   You can deduct the cost of providing meals, entertainment, or recreational facilities to the general public as a means of advertising or promoting goodwill in the community. Amending tax return online The 50% limit does not apply to this expense. Amending tax return online Director, stockholder, or employee meetings. Amending tax return online   You can deduct entertainment expenses directly related to business meetings of your employees, partners, stockholders, agents, or directors. Amending tax return online You can provide some minor social activities, but the main purpose of the meeting must be your company's business. Amending tax return online These expenses are subject to the 50% limit. Amending tax return online Trade association meetings. Amending tax return online   You can deduct expenses directly related to and necessary for attending business meetings or conventions of certain tax-exempt organizations. Amending tax return online These organizations include business leagues, chambers of commerce, real estate boards, and trade and professional associations. Amending tax return online Nonaccountable Plans A nonaccountable plan is an arrangement that does not meet the requirements for an accountable plan. Amending tax return online All amounts paid, or treated as paid, under a nonaccountable plan are reported as wages on Form W-2. Amending tax return online The payments are subject to income tax withholding, social security, Medicare, and federal unemployment taxes. Amending tax return online You can deduct the reimbursement as compensation or wages only to the extent it meets the deductibility tests for employees' pay in chapter 2. Amending tax return online Deduct the allowable amount as compensation or wages on the appropriate line of your income tax return, as provided in its instructions. Amending tax return online Miscellaneous Expenses In addition to travel, meal, and entertainment expenses, there are other expenses you can deduct. Amending tax return online Advertising expenses. Amending tax return online   You generally can deduct reasonable advertising expenses that are directly related to your business activities. Amending tax return online Generally, you cannot deduct amounts paid to influence legislation (i. Amending tax return online e. Amending tax return online , lobbying). Amending tax return online See Lobbying expenses , later. Amending tax return online   You can usually deduct as a business expense the cost of institutional or goodwill advertising to keep your name before the public if it relates to business you reasonably expect to gain in the future. Amending tax return online For example, the cost of advertising that encourages people to contribute to the Red Cross, to buy U. Amending tax return online S. Amending tax return online Savings Bonds, or to participate in similar causes is usually deductible. Amending tax return online Anticipated liabilities. Amending tax return online   Anticipated liabilities or reserves for anticipated liabilities are not deductible. Amending tax return online For example, assume you sold 1-year TV service contracts this year totaling $50,000. Amending tax return online From experience, you know you will have expenses of about $15,000 in the coming year for these contracts. Amending tax return online You cannot deduct any of the $15,000 this year by charging expenses to a reserve or liability account. Amending tax return online You can deduct your expenses only when you actually pay or accrue them, depending on your accounting method. Amending tax return online Bribes and kickbacks. Amending tax return online   Engaging in the payment of bribes or kickbacks is a serious criminal matter. Amending tax return online Such activity could result in criminal prosecution. Amending tax return online Any payments that appear to have been made, either directly or indirectly, to an official or employee of any government or an agency or instrumentality of any government are not deductible for tax purposes and are in violation of the law. Amending tax return online   Payments paid directly or indirectly to a person in violation of any federal or state law (but only if that state law is generally enforced, defined below) that provides for a criminal penalty or for the loss of a license or privilege to engage in a trade or business are also not allowed as a deduction for tax purposes. Amending tax return online Meaning of “generally enforced. Amending tax return online ”   A state law is considered generally enforced unless it is never enforced or enforced only for infamous persons or persons whose violations are extraordinarily flagrant. Amending tax return online For example, a state law is generally enforced unless proper reporting of a violation of the law results in enforcement only under unusual circumstances. Amending tax return online Kickbacks. Amending tax return online   A kickback is a payment for referring a client, patient, or customer. Amending tax return online The common kickback situation occurs when money or property is given to someone as payment for influencing a third party to purchase from, use the services of, or otherwise deal with the person who pays the kickback. Amending tax return online In many cases, the person whose business is being sought or enjoyed by the person who pays the kickback is not aware of the payment. Amending tax return online   For example, the Yard Corporation is in the business of repairing ships. Amending tax return online It returns 10% of the repair bills as kickbacks to the captains and chief officers of the vessels it repairs. Amending tax return online Although this practice is considered an ordinary and necessary expense of getting business, it is clearly a violation of a state law that is generally enforced. Amending tax return online These expenditures are not deductible for tax purposes, whether or not the owners of the shipyard are subsequently prosecuted. Amending tax return online Form 1099-MISC. Amending tax return online   It does not matter whether any kickbacks paid during the tax year are deductible on your income tax return in regards to information reporting. Amending tax return online See Form 1099-MISC for more information. Amending tax return online Car and truck expenses. Amending tax return online   The costs of operating a car, truck, or other vehicle in your business are deductible. Amending tax return online For more information on how to figure your deduction, see Publication 463. Amending tax return online Charitable contributions. Amending tax return online   Cash payments to an organization, charitable or otherwise, may be deductible as business expenses if the payments are not charitable contributions or gifts and are directly related to your business. Amending tax return online If the payments are charitable contributions or gifts, you cannot deduct them as business expenses. Amending tax return online However, corporations (other than S corporations) can deduct charitable contributions on their income tax returns, subject to limitations. Amending tax return online See the Instructions for Form 1120 for more information. Amending tax return online Sole proprietors, partners in a partnership, or shareholders in an S corporation may be able to deduct charitable contributions made by their business on Schedule A (Form 1040). Amending tax return online Example. Amending tax return online You paid $15 to a local church for a half-page ad in a program for a concert it is sponsoring. Amending tax return online The purpose of the ad was to encourage readers to buy your products. Amending tax return online Your payment is not a charitable contribution. Amending tax return online You can deduct it as an advertising expense. Amending tax return online Example. Amending tax return online You made a $100,000 donation to a committee organized by the local Chamber of Commerce to bring a convention to your city, intended to increase business activity, including yours. Amending tax return online Your payment is not a charitable contribution. Amending tax return online You can deduct it as a business expense. Amending tax return online See Publication 526 for a discussion of donated inventory, including capital gain property. Amending tax return online Club dues and membership fees. Amending tax return online   Generally, you cannot deduct amounts paid or incurred for membership in any club organized for business, pleasure, recreation, or any other social purpose. Amending tax return online This includes country clubs, golf and athletic clubs, hotel clubs, sporting clubs, airline clubs, and clubs operated to provide meals under circumstances generally considered to be conducive to business discussions. Amending tax return online Exception. Amending tax return online   The following organizations are not treated as clubs organized for business, pleasure, recreation, or other social purpose unless one of the main purposes is to conduct entertainment activities for members or their guests or to provide members or their guests with access to entertainment facilities. Amending tax return online Boards of trade. Amending tax return online Business leagues. Amending tax return online Chambers of commerce. Amending tax return online Civic or public service organizations. Amending tax return online Professional organizations such as bar associations and medical associations. Amending tax return online Real estate boards. Amending tax return online Trade associations. Amending tax return online Credit card convenience fees. Amending tax return online   Credit card companies charge a fee to businesses who accept their cards. Amending tax return online This fee when paid or incurred by the business can be deducted as a business expense. Amending tax return online Damages recovered. Amending tax return online   Special rules apply to compensation you receive for damages sustained as a result of patent infringement, breach of contract or fiduciary duty, or antitrust violations. Amending tax return online You must include this compensation in your income. Amending tax return online However, you may be able to take a special deduction. Amending tax return online The deduction applies only to amounts recovered for actual economic injury, not any additional amount. Amending tax return online The deduction is the smaller of the following. Amending tax return online The amount you received or accrued for damages in the tax year reduced by the amount you paid or incurred in the year to recover that amount. Amending tax return online Your losses from the injury you have not deducted. Amending tax return online Demolition expenses or losses. Amending tax return online   Amounts paid or incurred to demolish a structure are not deductible. Amending tax return online These amounts are added to the basis of the land where the demolished structure was located. Amending tax return online Any loss for the remaining undepreciated basis of a demolished structure would not be recognized until the property is disposed of. Amending tax return online Education expenses. Amending tax return online   Ordinary and necessary expenses paid for the cost of the education and training of your employees are deductible. Amending tax return online See Education Expenses in chapter 2. Amending tax return online   You can also deduct the cost of your own education (including certain related travel) related to your trade or business. Amending tax return online You must be able to show the education maintains or improves skills required in your trade or business, or that it is required by law or regulations, for keeping your license to practice, status, or job. Amending tax return online For example, an attorney can deduct the cost of attending Continuing Legal Education (CLE) classes that are required by the state bar association to maintain his or her license to practice law. Amending tax return online   Education expenses you incur to meet the minimum requirements of your present trade or business, or those that qualify you for a new trade or business, are not deductible. Amending tax return online This is true even if the education maintains or improves skills presently required in your business. Amending tax return online For more information on education expenses, see Publication 970. Amending tax return online Franchise, trademark, trade name. Amending tax return online   If you buy a franchise, trademark, or trade name, you can deduct the amount you pay or incur as a business expense only if your payments are part of a series of payments that are: Contingent on productivity, use, or disposition of the item, Payable at least annually for the entire term of the transfer agreement, and Substantially equal in amount (or payable under a fixed formula). Amending tax return online   When determining the term of the transfer agreement, include all renewal options and any other period for which you and the transferrer reasonably expect the agreement to be renewed. Amending tax return online   A franchise includes an agreement that gives one of the parties to the agreement the right to distribute, sell, or provide goods, services, or facilities within a specified area. Amending tax return online Impairment-related expenses. Amending tax return online   If you are disabled, you can deduct expenses necessary for you to be able to work (impairment-related expenses) as a business expense, rather than as a medical expense. Amending tax return online   You are disabled if you have either of the following. Amending tax return online A physical or mental disability (for example, blindness or deafness) that functionally limits your being employed. Amending tax return online A physical or mental impairment that substantially limits one or more of your major life activities. Amending tax return online   The expense qualifies as a business expense if all the following apply. Amending tax return online Your work clearly requires the expense for you to satisfactorily perform that work. Amending tax return online The goods or services purchased are clearly not needed or used, other than incidentally, in your personal activities. Amending tax return online Their treatment is not specifically provided for under other tax law provisions. Amending tax return online Example. Amending tax return online You are blind. Amending tax return online You must use a reader to do your work, both at and away from your place of work. Amending tax return online The reader's services are only for your work. Amending tax return online You can deduct your expenses for the reader as a business expense. Amending tax return online Internet-related expenses. Amending tax return online   Generally, you can deduct internet-related expenses including domain registrations fees and webmaster consulting costs. Amending tax return online If you are starting a business you may have to amortize these expenses as start-up costs. Amending tax return online For more information about amortizing start-up and organizational costs, see chapter 8. Amending tax return online Interview expense allowances. Amending tax return online   Reimbursements you make to job candidates for transportation or other expenses related to interviews for possible employment are not wages. Amending tax return online You can deduct the reimbursements as a business expense. Amending tax return online However, expenses for food, beverages, and entertainment are subject to the 50% limit discussed earlier under Meals and Entertainment. Amending tax return online Legal and professional fees. Amending tax return online   Fees charged by accountants and attorneys that are ordinary and necessary expenses directly related to operating your business are deductible as business expenses. Amending tax return online However, usually legal fees you pay to acquire business assets are not deductible. Amending tax return online These costs are added to the basis of the property. Amending tax return online   Fees that include payments for work of a personal nature (such as drafting a will, or damages arising from a personal injury) are not allowed as a business deduction on Schedule C or C-EZ. Amending tax return online If the invoice includes both business and personal charges, compute the business portion as follows: multiply the total amount of the bill by a fraction, the numerator of which is the amount attributable to business matters, the denominator of which is the total amount paid. Amending tax return online The result is the portion of the invoice attributable to business expenses. Amending tax return online The portion attributable to personal matters is the difference between the total amount and the business portion (computed above). Amending tax return online   Legal fees relating to personal tax advice may be deductible on Schedule A (Form 1040), if you itemize deductions. Amending tax return online However, the deduction is subject to the 2% limitation on miscellaneous itemized deductions. Amending tax return online See Publication 529, Miscellaneous Deductions. Amending tax return online Tax preparation fees. Amending tax return online   The cost of hiring a tax professional, such as a C. Amending tax return online P. Amending tax return online A. Amending tax return online , to prepare that part of your tax return relating to your business as a sole proprietor is deductible on Schedule C or Schedule C-EZ. Amending tax return online Any remaining cost may be deductible on Schedule A (Form 1040) if you itemize deductions. Amending tax return online   You can also claim a business deduction for amounts paid or incurred in resolving asserted tax deficiencies for your business operated as a sole proprietor. Amending tax return online Licenses and regulatory fees. Amending tax return online   Licenses and regulatory fees for your trade or business paid annually to state or local governments generally are deductible. Amending tax return online Some licenses and fees may have to be amortized. Amending tax return online See chapter 8 for more information. Amending tax return online Lobbying expenses. Amending tax return online   Generally, lobbying expenses are not deductible. Amending tax return online Lobbying expenses include amounts paid or incurred for any of the following activities. Amending tax return online Influencing legislation. Amending tax return online Participating in or intervening in any political campaign for, or against, any candidate for public office. Amending tax return online Attempting to influence the general public, or segments of the public, about elections, legislative matters, or referendums. Amending tax return online Communicating directly with covered executive branch officials (defined later) in any attempt to influence the official actions or positions of those officials. Amending tax return online Researching, preparing, planning, or coordinating any of the preceding activities. Amending tax return online   Your expenses for influencing legislation and communicating directly with a covered executive branch official include a portion of your labor costs and general and administrative costs of your business. Amending tax return online For information on making this allocation, see section 1. Amending tax return online 162-28 of the regulations. Amending tax return online   You cannot claim a charitable or business expense deduction for amounts paid to an organization if both of the following apply. Amending tax return online The organization conducts lobbying activities on matters of direct financial interest to your business. Amending tax return online A principal purpose of your contribution is to avoid the rules discussed earlier that prohibit a business deduction for lobbying expenses. Amending tax return online   If a tax-exempt organization, other than a section 501(c)(3) organization, provides you with a notice on the part of dues that is allocable to nondeductible lobbying and political expenses, you cannot deduct that part of the dues. Amending tax return online Covered executive branch official. Amending tax return online   For purposes of this discussion, a covered executive branch official is any of the following. Amending tax return online The President. Amending tax return online The Vice President. Amending tax return online Any officer or employee of the White House Office of the Executive Office of the President and the two most senior level officers of each of the other agencies in the Executive Office. Amending tax return online Any individual who: Is serving in a position in Level I of the Executive Schedule under section 5312 of title 5, United States Code, Has been designated by the President as having Cabinet-level status, or Is an immediate deputy of an individual listed in item (a) or (b). Amending tax return online Exceptions to denial of deduction. Amending tax return online   The general denial of the deduction does not apply to the following. Amending tax return online Expenses of appearing before, or communicating with, any committee or member of any local council or similar governing body concerning its legislation (local legislation) if the legislation is of direct interest to you or to you and an organization of which you are a member. Amending tax return online An Indian tribal government is treated as a local council or similar governing body. Amending tax return online Any in-house expenses for influencing legislation and communicating directly with a covered executive branch official if those expenses for the tax year do not exceed $2,000 (excluding overhead expenses). Amending tax return online Expenses incurred by taxpayers engaged in the trade or business of lobbying (professional lobbyists) on behalf of another person (but does apply to payments by the other person to the lobbyist for lobbying activities). Amending tax return online Moving machinery. Amending tax return online   Generally, the cost of moving machinery from one city to another is a deductible expense. Amending tax return online So is the cost of moving machinery from one plant to another, or from one part of your plant to another. Amending tax return online You can deduct the cost of installing the machinery in the new location. Amending tax return online However, you must capitalize the costs of installing or moving newly purchased machinery. Amending tax return online Outplacement services. Amending tax return online   The costs of outplacement services you provide to your employees to help them find new employment, such as career counseling, résumé assistance, skills assessment, etc. Amending tax return online are deductible. Amending tax return online   The costs of outplacement services may cover more than one deduction category. Amending tax return online For example, deduct as a utilities expense the cost of telephone calls made under this service and deduct as rental expense the cost of renting machinery and equipment for this service. Amending tax return online   For information on whether the value of outplacement services is includable in your employees' income, see Publication 15-B. Amending tax return online Penalties and fines. Amending tax return online   Penalties paid for late performance or nonperformance of a contract are generally deductible. Amending tax return online For instance, you own and operate a construction company. Amending tax return online Under a contract, you are to finish construction of a building by a certain date. Amending tax return online Due to construction delays, the building is not completed and ready for occupancy on the date stipulated in the contract. Amending tax return online You are now required to pay an additional amount for each day that completion is delayed beyond the completion date stipulated in the contract. Amending tax return online These additional costs are deductible business expenses. Amending tax return online   On the other hand, penalties or fines paid to any government agency or instrumentality because of a violation of any law are not deductible. Amending tax return online These fines or penalties include the following amounts. Amending tax return online Paid because of a conviction for a crime or after a plea of guilty or no contest in a criminal proceeding. Amending tax return online Paid as a penalty imposed by federal, state, or local law in a civil action, including certain additions to tax and additional amounts and assessable penalties imposed by the Internal Revenue Code. Amending tax return online Paid in settlement of actual or possible liability for a fine or penalty, whether civil or criminal. Amending tax return online Forfeited as collateral posted for a proceeding that could result in a fine or penalty. Amending tax return online   Examples of nondeductible penalties and fines include the following. Amending tax return online Fines for violating city housing codes. Amending tax return online Fines paid by truckers for violating state maximum highway weight laws. Amending tax return online Fines for violating air quality laws. Amending tax return online Civil penalties for violating federal laws regarding mining safety standards and discharges into navigable waters. Amending tax return online   A fine or penalty does not include any of the following. Amending tax return online Legal fees and related expenses to defend yourself in a prosecution or civil action for a violation of the law imposing the fine or civil penalty. Amending tax return online Court costs or stenographic and printing charges. Amending tax return online Compensatory damages paid to a government. Amending tax return online Political contributions. Amending tax return online   Contributions or gifts paid to political parties or candidates are not deductible. Amending tax return online In addition, expenses paid or incurred to take part in any political campaign of a candidate for public office are not deductible. Amending tax return online Indirect political contributions. Amending tax return online   You cannot deduct indirect political contributions and costs of taking part in political activities as business expenses. Amending tax return online Examples of nondeductible expenses include the following. Amending tax return online Advertising in a convention program of a political party, or in any other publication if any of the proceeds from the publication are for, or intended for, the use of a political party or candidate. Amending tax return online Admission to a dinner or program (including, but not limited to, galas, dances, film presentations, parties, and sporting events) if any of the proceeds from the function are for, or intended for, the use of a political party or candidate. Amending tax return online Admission to an inaugural ball, gala, parade, concert, or similar event if identified with a political party or candidate. Amending tax return online Repairs. Amending tax return online   The cost of repairing or improving property used in your trade or business is either a deductible or capital expense. Amending tax return online Routine maintenance that keeps your property in a normal efficient operating condition, but that does not materially increase the value or substantially prolong the useful life of the property, is deductible in the year that it is incurred. Amending tax return online Otherwise, the cost must be capitalized and depreciated. Amending tax return online See Form 4562 and its instructions for how to compute and claim the depreciation deduction. Amending tax return online   The cost of repairs includes the costs of labor, supplies, and certain other items. Amending tax return online The value of your own labor is not deductible. Amending tax return online Examples of repairs include: Reconditioning floors (but not replacement), Repainting the interior and exterior walls of a building, Cleaning and repairing roofs and gutters, and Fixing plumbing leaks (but not replacement of fixtures). Amending tax return online Repayments. Amending tax return online   If you had to repay an amount you included in your income in an earlier year, you may be able to deduct the amount repaid for the year in which you repaid it. Amending tax return online Or, if the amount you repaid is more than $3,000, you may be able to take a credit against your tax for the year in which you repaid it. Amending tax return online Type of deduction. Amending tax return online   The type of deduction you are allowed in the year of repayment depends on the type of income you included in the earlier year. Amending tax return online For instance, if you repay an amount you previously reported as a capital gain, deduct the repayment as a capital loss on Form 8949. Amending tax return online If you reported it as self-employment income, deduct it as a business deduction on Schedule C or Schedule C-EZ (Form 1040) or Schedule F (Form 1040). Amending tax return online   If you reported the amount as wages, unemployment compensation, or other nonbusiness ordinary income, enter it on Schedule A (Form 1040) as a miscellaneous itemized deduction that is subject to the 2% limitation. Amending tax return online However, if the repayment is over $3,000 and Method 1 (discussed later) applies, deduct it on Schedule A (Form 1040) as a miscellaneous itemized deduction that is not subject to the 2% limitation. Amending tax return online Repayment—$3,000 or less. Amending tax return online   If the amount you repaid was $3,000 or less, deduct it from your income in the year you repaid it. Amending tax return online Repayment—over $3,000. Amending tax return online   If the amount you repaid was more than $3,000, you can deduct the repayment, as described earlier. Amending tax return online However, you can instead choose to take a tax credit for the year of repayment if you included the income under a “claim of right. Amending tax return online ” This means that at the time you included the income, it appeared that you had an unrestricted right to it. Amending tax return online If you qualify for this choice, figure your tax under both methods and use the method that results in less tax. Amending tax return online Method 1. Amending tax return online   Figure your tax for 2013 claiming a deduction for the repaid amount. Amending tax return online Method 2. Amending tax return online   Figure your tax for 2013 claiming a credit for the repaid amount. Amending tax return online Follow these steps. Amending tax return online Figure your tax for 2013 without deducting the repaid amount. Amending tax return online Refigure your tax from the earlier year without including in income the amount you repaid in 2013. Amending tax return online Subtract the tax in (2) from the tax shown on your return for the earlier year. Amending tax return online This is the amount of your credit. Amending tax return online Subtract the answer in (3) from the tax for 2013 figured without the deduction (step 1). Amending tax return online   If Method 1 results in less tax, deduct the amount repaid as discussed earlier under Type of deduction. Amending tax return online   If Method 2 results in less tax, claim the credit on line 71 of Form 1040, and write “I. Amending tax return online R. Amending tax return online C. Amending tax return online 1341” next to line 71. Amending tax return online Example. Amending tax return online For 2012, you filed a return and reported your income on the cash method. Amending tax return online In 2013, you repaid $5,000 included in your 2012 gross income under a claim of right. Amending tax return online Your filing status in 2013 and 2012 is single. Amending tax return online Your income and tax for both years are as follows:   2012  With Income 2012  Without Income Taxable Income $15,000 $10,000 Tax $ 1,819 $ 1,069   2013  Without Deduction 2013  With Deduction Taxable Income $49,950 $44,950 Tax $8,423 $7,173 Your tax under Method 1 is $7,173. Amending tax return online Your tax under Method 2 is $7,673, figured as follows: Tax previously determined for 2012 $ 1,819 Less: Tax as refigured − 1,069 Decrease in 2012 tax $ 750 Regular tax liability for 2013 $8,423 Less: Decrease in 2012 tax − 750 Refigured tax for 2013 $ 7,673 Because you pay less tax under Method 1, you should take a deduction for the repayment in 2013. Amending tax return online Repayment does not apply. Amending tax return online   This discussion does not apply to the following. Amending tax return online Deductions for bad debts. Amending tax return online Deductions from sales to customers, such as returns and allowances, and similar items. Amending tax return online Deductions for legal and other expenses of contesting the repayment. Amending tax return online Year of deduction (or credit). Amending tax return online   If you use the cash method of accounting, you can take the deduction (or credit, if applicable) for the tax year in which you actually make the repayment. Amending tax return online If you use any other accounting method, you can deduct the repayment or claim a credit for it only for the tax year in which it is a proper deduction under your accounting method. Amending tax return online For example, if you use the accrual method, you are entitled to the deduction or credit in the tax year in which the obligation for the repayment accrues. Amending tax return online Subscriptions. Amending tax return online   Subscriptions to professional, technical, and trade journals that deal with your business field are deductible. Amending tax return online Supplies and materials. Amending tax return online   Unless you have deducted the cost in any earlier year, you generally can deduct the cost of materials and supplies actually consumed and used during the tax year. Amending tax return online   If you keep incidental materials and supplies on hand, you can deduct the cost of the incidental materials and supplies you bought during the tax year if all the following requirements are met. Amending tax return online You do not keep a record of when they are used. Amending tax return online You do not take an inventory of the amount on hand at the beginning and end of the tax year. Amending tax return online This method does not distort your income. Amending tax return online   You can also deduct the cost of books, professional instruments, equipment, etc. Amending tax return online , if you normally use them within a year. Amending tax return online However, if the usefulness of these items extends substantially beyond the year they are placed in service, you generally must recover their costs through depreciation. Amending tax return online For more information regarding depreciation see Publication 946, How To Depreciate Property. Amending tax return online Utilities. Amending tax return online   Business expenses for heat, lights, power, telephone service, and water and sewerage are deductible. Amending tax return online However, any part due to personal use is not deductible. Amending tax return online Telephone. Amending tax return online   You cannot deduct the cost of basic local telephone service (including any taxes) for the first telephone line you have in your home, even if you have an office in your home. Amending tax return online However, charges for business long-distance phone calls on that line, as well as the cost of a second line into your home used exclusively for business, are deductible business expenses. Amending tax return online Prev  Up  Next   Home   More Online Publications
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National AIDS Policy Office

Part of the Domestic Policy Council, the National AIDS Policy Office works to reduce the number of new HIV infections in the U.S. through various education initiatives. The office also helps to coordinate the care and treatment of citizens with HIV/AIDS, and also helps to coordinate the U.S. response to the global AIDS pandemic.

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The Amending Tax Return Online

Amending tax return online 18. Amending tax return online   Alimony Table of Contents IntroductionSpouse or former spouse. Amending tax return online Divorce or separation instrument. Amending tax return online Useful Items - You may want to see: General RulesMortgage payments. Amending tax return online Taxes and insurance. Amending tax return online Other payments to a third party. Amending tax return online Instruments Executed After 1984Payments to a third party. Amending tax return online Exception. Amending tax return online Substitute payments. Amending tax return online Specifically designated as child support. Amending tax return online Contingency relating to your child. Amending tax return online Clearly associated with a contingency. Amending tax return online How To Deduct Alimony Paid How To Report Alimony Received Recapture Rule Introduction This chapter discusses the rules that apply if you pay or receive alimony. Amending tax return online It covers the following topics. Amending tax return online What payments are alimony. Amending tax return online What payments are not alimony, such as child support. Amending tax return online How to deduct alimony you paid. Amending tax return online How to report alimony you received as income. Amending tax return online Whether you must recapture the tax benefits of alimony. Amending tax return online Recapture means adding back in your income all or part of a deduction you took in a prior year. Amending tax return online Alimony is a payment to or for a spouse or former spouse under a divorce or separation instrument. Amending tax return online It does not include voluntary payments that are not made under a divorce or separation instrument. Amending tax return online Alimony is deductible by the payer and must be included in the spouse's or former spouse's income. Amending tax return online Although this chapter is generally written for the payer of the alimony, the recipient can use the information to determine whether an amount received is alimony. Amending tax return online To be alimony, a payment must meet certain requirements. Amending tax return online Different requirements generally apply to payments under instruments executed after 1984 and to payments under instruments executed before 1985. Amending tax return online This chapter discusses the rules for payments under instruments executed after 1984. Amending tax return online If you need the rules for payments under pre-1985 instruments, get and keep a copy of the 2004 version of Publication 504. Amending tax return online That was the last year the information on pre-1985 instruments was included in Publication 504. Amending tax return online Use Table 18-1 in this chapter as a guide to determine whether certain payments are considered alimony. Amending tax return online Definitions. Amending tax return online   The following definitions apply throughout this chapter. Amending tax return online Spouse or former spouse. Amending tax return online   Unless otherwise stated, the term “spouse” includes former spouse. Amending tax return online Divorce or separation instrument. Amending tax return online   The term “divorce or separation instrument” means: A decree of divorce or separate maintenance or a written instrument incident to that decree, A written separation agreement, or A decree or any type of court order requiring a spouse to make payments for the support or maintenance of the other spouse. Amending tax return online This includes a temporary decree, an interlocutory (not final) decree, and a decree of alimony pendente lite (while awaiting action on the final decree or agreement). Amending tax return online Useful Items - You may want to see: Publication 504 Divorced or Separated Individuals General Rules The following rules apply to alimony regardless of when the divorce or separation instrument was executed. Amending tax return online Payments not alimony. Amending tax return online   Not all payments under a divorce or separation instrument are alimony. Amending tax return online Alimony does not include: Child support, Noncash property settlements, Payments that are your spouse's part of community income, as explained under Community Property in Publication 504, Payments to keep up the payer's property, or Use of the payer's property. Amending tax return online Payments to a third party. Amending tax return online   Cash payments, checks, or money orders to a third party on behalf of your spouse under the terms of your divorce or separation instrument can be alimony, if they otherwise qualify. Amending tax return online These include payments for your spouse's medical expenses, housing costs (rent, utilities, etc. Amending tax return online ), taxes, tuition, etc. Amending tax return online The payments are treated as received by your spouse and then paid to the third party. Amending tax return online Life insurance premiums. Amending tax return online   Alimony includes premiums you must pay under your divorce or separation instrument for insurance on your life to the extent your spouse owns the policy. Amending tax return online Payments for jointly-owned home. Amending tax return online   If your divorce or separation instrument states that you must pay expenses for a home owned by you and your spouse, some of your payments may be alimony. Amending tax return online Mortgage payments. Amending tax return online   If you must pay all the mortgage payments (principal and interest) on a jointly-owned home, and they otherwise qualify as alimony, you can deduct one-half of the total payments as alimony. Amending tax return online If you itemize deductions and the home is a qualified home, you can claim one-half of the interest in figuring your deductible interest. Amending tax return online Your spouse must report one-half of the payments as alimony received. Amending tax return online If your spouse itemizes deductions and the home is a qualified home, he or she can claim one-half of the interest on the mortgage in figuring deductible interest. Amending tax return online Taxes and insurance. Amending tax return online   If you must pay all the real estate taxes or insurance on a home held as tenants in common, you can deduct one-half of these payments as alimony. Amending tax return online Your spouse must report one-half of these payments as alimony received. Amending tax return online If you and your spouse itemize deductions, you can each claim one-half of the real estate taxes and none of the home insurance. Amending tax return online    If your home is held as tenants by the entirety or joint tenants, none of your payments for taxes or insurance are alimony. Amending tax return online But if you itemize deductions, you can claim all of the real estate taxes and none of the home insurance. Amending tax return online Other payments to a third party. Amending tax return online   If you made other third-party payments, see Publication 504 to see whether any part of the payments qualifies as alimony. Amending tax return online Instruments Executed After 1984 The following rules for alimony apply to payments under divorce or separation instruments executed after 1984. Amending tax return online Exception for instruments executed before 1985. Amending tax return online   There are two situations where the rules for instruments executed after 1984 apply to instruments executed before 1985. Amending tax return online A divorce or separation instrument executed before 1985 and then modified after 1984 to specify that the after-1984 rules will apply. Amending tax return online A temporary divorce or separation instrument executed before 1985 and incorporated into, or adopted by, a final decree executed after 1984 that: Changes the amount or period of payment, or Adds or deletes any contingency or condition. Amending tax return online   For the rules for alimony payments under pre-1985 instruments not meeting these exceptions, get the 2004 version of Publication 504 at www. Amending tax return online irs. Amending tax return online gov/pub504. Amending tax return online Example 1. Amending tax return online In November 1984, you and your former spouse executed a written separation agreement. Amending tax return online In February 1985, a decree of divorce was substituted for the written separation agreement. Amending tax return online The decree of divorce did not change the terms for the alimony you pay your former spouse. Amending tax return online The decree of divorce is treated as executed before 1985. Amending tax return online Alimony payments under this decree are not subject to the rules for payments under instruments executed after 1984. Amending tax return online Example 2. Amending tax return online Assume the same facts as in Example 1 except that the decree of divorce changed the amount of the alimony. Amending tax return online In this example, the decree of divorce is not treated as executed before 1985. Amending tax return online The alimony payments are subject to the rules for payments under instruments executed after 1984. Amending tax return online Alimony requirements. Amending tax return online   A payment to or for a spouse under a divorce or separation instrument is alimony if the spouses do not file a joint return with each other and all the following requirements are met. Amending tax return online The payment is in cash. Amending tax return online The instrument does not designate the payment as not alimony. Amending tax return online Spouses legally separated under a decree of divorce or separate maintenance are not members of the same household. Amending tax return online There is no liability to make any payment (in cash or property) after the death of the recipient spouse. Amending tax return online The payment is not treated as child support. Amending tax return online Each of these requirements is discussed below. Amending tax return online Cash payment requirement. Amending tax return online   Only cash payments, including checks and money orders, qualify as alimony. Amending tax return online The following do not qualify as alimony. Amending tax return online Transfers of services or property (including a debt instrument of a third party or an annuity contract). Amending tax return online Execution of a debt instrument by the payer. Amending tax return online The use of the payer's property. Amending tax return online Payments to a third party. Amending tax return online   Cash payments to a third party under the terms of your divorce or separation instrument can qualify as cash payments to your spouse. Amending tax return online See Payments to a third party under General Rules, earlier. Amending tax return online   Also, cash payments made to a third party at the written request of your spouse may qualify as alimony if all the following requirements are met. Amending tax return online The payments are in lieu of payments of alimony directly to your spouse. Amending tax return online The written request states that both spouses intend the payments to be treated as alimony. Amending tax return online You receive the written request from your spouse before you file your return for the year you made the payments. Amending tax return online Payments designated as not alimony. Amending tax return online   You and your spouse can designate that otherwise qualifying payments are not alimony. Amending tax return online You do this by including a provision in your divorce or separation instrument that states the payments are not deductible as alimony by you and are excludable from your spouse's income. Amending tax return online For this purpose, any instrument (written statement) signed by both of you that makes this designation and that refers to a previous written separation agreement is treated as a written separation agreement (and therefore a divorce or separation instrument). Amending tax return online If you are subject to temporary support orders, the designation must be made in the original or a later temporary support order. Amending tax return online   Your spouse can exclude the payments from income only if he or she attaches a copy of the instrument designating them as not alimony to his or her return. Amending tax return online The copy must be attached each year the designation applies. Amending tax return online Spouses cannot be members of the same household. Amending tax return online    Payments to your spouse while you are members of the same household are not alimony if you are legally separated under a decree of divorce or separate maintenance. Amending tax return online A home you formerly shared is considered one household, even if you physically separate yourselves in the home. Amending tax return online   You are not treated as members of the same household if one of you is preparing to leave the household and does leave no later than 1 month after the date of the payment. Amending tax return online Exception. Amending tax return online   If you are not legally separated under a decree of divorce or separate maintenance, a payment under a written separation agreement, support decree, or other court order may qualify as alimony even if you are members of the same household when the payment is made. Amending tax return online Table 18-1. Amending tax return online Alimony Requirements (Instruments Executed After 1984) Payments ARE alimony if all of the following are true: Payments are NOT alimony if any of the following are true: Payments are required by a divorce or separation instrument. Amending tax return online Payments are not required by a divorce or separation instrument. Amending tax return online Payer and recipient spouse do not file a joint return with each other. Amending tax return online Payer and recipient spouse file a joint return with each other. Amending tax return online Payment is in cash (including checks or money orders). Amending tax return online Payment is: Not in cash, A noncash property settlement, Spouse's part of community income, or To keep up the payer's property. Amending tax return online Payment is not designated in the instrument as not alimony. Amending tax return online Payment is designated in the instrument as not alimony. Amending tax return online Spouses legally separated under a decree of divorce or separate maintenance are not members of the same household. Amending tax return online Spouses legally separated under a decree of divorce or separate maintenance are members of the same household. Amending tax return online Payments are not required after death of the recipient spouse. Amending tax return online Payments are required after death of the recipient spouse. Amending tax return online Payment is not treated as child support. Amending tax return online Payment is treated as child support. Amending tax return online These payments are deductible by the payer and includible in income by the recipient. Amending tax return online These payments are neither deductible by the payer nor includible in income by the recipient. Amending tax return online Liability for payments after death of recipient spouse. Amending tax return online   If any part of payments you make must continue to be made for any period after your spouse's death, that part of your payments is not alimony, whether made before or after the death. Amending tax return online If all of the payments would continue, then none of the payments made before or after the death are alimony. Amending tax return online   The divorce or separation instrument does not have to expressly state that the payments cease upon the death of your spouse if, for example, the liability for continued payments would end under state law. Amending tax return online Example. Amending tax return online You must pay your former spouse $10,000 in cash each year for 10 years. Amending tax return online Your divorce decree states that the payments will end upon your former spouse's death. Amending tax return online You must also pay your former spouse or your former spouse's estate $20,000 in cash each year for 10 years. Amending tax return online The death of your spouse would not terminate these payments under state law. Amending tax return online The $10,000 annual payments may qualify as alimony. Amending tax return online The $20,000 annual payments that do not end upon your former spouse's death are not alimony. Amending tax return online Substitute payments. Amending tax return online   If you must make any payments in cash or property after your spouse's death as a substitute for continuing otherwise qualifying payments before the death, the otherwise qualifying payments are not alimony. Amending tax return online To the extent that your payments begin, accelerate, or increase because of the death of your spouse, otherwise qualifying payments you made may be treated as payments that were not alimony. Amending tax return online Whether or not such payments will be treated as not alimony depends on all the facts and circumstances. Amending tax return online Example 1. Amending tax return online Under your divorce decree, you must pay your former spouse $30,000 annually. Amending tax return online The payments will stop at the end of 6 years or upon your former spouse's death, if earlier. Amending tax return online Your former spouse has custody of your minor children. Amending tax return online The decree provides that if any child is still a minor at your spouse's death, you must pay $10,000 annually to a trust until the youngest child reaches the age of majority. Amending tax return online The trust income and corpus (principal) are to be used for your children's benefit. Amending tax return online These facts indicate that the payments to be made after your former spouse's death are a substitute for $10,000 of the $30,000 annual payments. Amending tax return online Of each of the $30,000 annual payments, $10,000 is not alimony. Amending tax return online Example 2. Amending tax return online Under your divorce decree, you must pay your former spouse $30,000 annually. Amending tax return online The payments will stop at the end of 15 years or upon your former spouse's death, if earlier. Amending tax return online The decree provides that if your former spouse dies before the end of the 15-year period, you must pay the estate the difference between $450,000 ($30,000 × 15) and the total amount paid up to that time. Amending tax return online For example, if your spouse dies at the end of the tenth year, you must pay the estate $150,000 ($450,000 − $300,000). Amending tax return online These facts indicate that the lump-sum payment to be made after your former spouse's death is a substitute for the full amount of the $30,000 annual payments. Amending tax return online None of the annual payments are alimony. Amending tax return online The result would be the same if the payment required at death were to be discounted by an appropriate interest factor to account for the prepayment. Amending tax return online Child support. Amending tax return online   A payment that is specifically designated as child support or treated as specifically designated as child support under your divorce or separation instrument is not alimony. Amending tax return online The amount of child support may vary over time. Amending tax return online Child support payments are not deductible by the payer and are not taxable to the recipient. Amending tax return online Specifically designated as child support. Amending tax return online   A payment will be treated as specifically designated as child support to the extent that the payment is reduced either: On the happening of a contingency relating to your child, or At a time that can be clearly associated with the contingency. Amending tax return online A payment may be treated as specifically designated as child support even if other separate payments are specifically designated as child support. Amending tax return online Contingency relating to your child. Amending tax return online   A contingency relates to your child if it depends on any event relating to that child. Amending tax return online It does not matter whether the event is certain or likely to occur. Amending tax return online Events relating to your child include the child's: Becoming employed, Dying, Leaving the household, Leaving school, Marrying, or Reaching a specified age or income level. Amending tax return online Clearly associated with a contingency. Amending tax return online   Payments that would otherwise qualify as alimony are presumed to be reduced at a time clearly associated with the happening of a contingency relating to your child only in the following situations. Amending tax return online The payments are to be reduced not more than 6 months before or after the date the child will reach 18, 21, or local age of majority. Amending tax return online The payments are to be reduced on two or more occasions that occur not more than 1 year before or after a different one of your children reaches a certain age from 18 to 24. Amending tax return online This certain age must be the same for each child, but need not be a whole number of years. Amending tax return online In all other situations, reductions in payments are not treated as clearly associated with the happening of a contingency relating to your child. Amending tax return online   Either you or the IRS can overcome the presumption in the two situations above. Amending tax return online This is done by showing that the time at which the payments are to be reduced was determined independently of any contingencies relating to your children. Amending tax return online For example, if you can show that the period of alimony payments is customary in the local jurisdiction, such as a period equal to one-half of the duration of the marriage, you can overcome the presumption and may be able to treat the amount as alimony. Amending tax return online How To Deduct Alimony Paid You can deduct alimony you paid, whether or not you itemize deductions on your return. Amending tax return online You must file Form 1040. Amending tax return online You cannot use Form 1040A or Form 1040EZ. Amending tax return online Enter the amount of alimony you paid on Form 1040, line 31a. Amending tax return online In the space provided on line 31b, enter your spouse's social security number (SSN) or individual taxpayer identification number (ITIN). Amending tax return online If you paid alimony to more than one person, enter the SSN or ITIN of one of the recipients. Amending tax return online Show the SSN or ITIN and amount paid to each other recipient on an attached statement. Amending tax return online Enter your total payments on line 31a. Amending tax return online You must provide your spouse's SSN or ITIN. Amending tax return online If you do not, you may have to pay a $50 penalty and your deduction may be disallowed. Amending tax return online For more information on SSNs and ITINs, see Social Security Number (SSN) in chapter 1. Amending tax return online How To Report Alimony Received Report alimony you received as income on Form 1040, line 11. Amending tax return online You cannot use Form 1040A or Form 1040EZ. Amending tax return online You must give the person who paid the alimony your SSN or ITIN. Amending tax return online If you do not, you may have to pay a $50 penalty. Amending tax return online Recapture Rule If your alimony payments decrease or end during the first 3 calendar years, you may be subject to the recapture rule. Amending tax return online If you are subject to this rule, you have to include in income in the third year part of the alimony payments you previously deducted. Amending tax return online Your spouse can deduct in the third year part of the alimony payments he or she previously included in income. Amending tax return online The 3-year period starts with the first calendar year you make a payment qualifying as alimony under a decree of divorce or separate maintenance or a written separation agreement. Amending tax return online Do not include any time in which payments were being made under temporary support orders. Amending tax return online The second and third years are the next 2 calendar years, whether or not payments are made during those years. Amending tax return online The reasons for a reduction or end of alimony payments that can require a recapture include: A change in your divorce or separation instrument, A failure to make timely payments, A reduction in your ability to provide support, or A reduction in your spouse's support needs. Amending tax return online When to apply the recapture rule. Amending tax return online   You are subject to the recapture rule in the third year if the alimony you pay in the third year decreases by more than $15,000 from the second year or the alimony you pay in the second and third years decreases significantly from the alimony you pay in the first year. Amending tax return online   When you figure a decrease in alimony, do not include the following amounts. Amending tax return online Payments made under a temporary support order. Amending tax return online Payments required over a period of at least 3 calendar years that vary because they are a fixed part of your income from a business or property, or from compensation for employment or self-employment. Amending tax return online Payments that decrease because of the death of either spouse or the remarriage of the spouse receiving the payments before the end of the third year. Amending tax return online Figuring the recapture. Amending tax return online   You can use Worksheet 1 in Publication 504 to figure recaptured alimony. Amending tax return online Including the recapture in income. Amending tax return online   If you must include a recapture amount in income, show it on Form 1040, line 11 (“Alimony received”). Amending tax return online Cross out “received” and enter “recapture. Amending tax return online ” On the dotted line next to the amount, enter your spouse's last name and SSN or ITIN. Amending tax return online Deducting the recapture. Amending tax return online   If you can deduct a recapture amount, show it on Form 1040, line 31a (“Alimony paid”). Amending tax return online Cross out “paid” and enter “recapture. Amending tax return online ” In the space provided, enter your spouse's SSN or ITIN. Amending tax return online Prev  Up  Next   Home   More Online Publications