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Federal Ez Tax Form 2012

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Federal Ez Tax Form 2012

Federal ez tax form 2012 2. Federal ez tax form 2012   Electing the Section 179 Deduction Table of Contents Introduction Useful Items - You may want to see: What Property Qualifies?Eligible Property Property Acquired for Business Use Property Acquired by Purchase What Property Does Not Qualify?Land and Improvements Excepted Property How Much Can You Deduct?Dollar Limits Business Income Limit Partnerships and Partners S Corporations Other Corporations How Do You Elect the Deduction? When Must You Recapture the Deduction? Introduction You can elect to recover all or part of the cost of certain qualifying property, up to a limit, by deducting it in the year you place the property in service. Federal ez tax form 2012 This is the section 179 deduction. Federal ez tax form 2012 You can elect the section 179 deduction instead of recovering the cost by taking depreciation deductions. Federal ez tax form 2012 Estates and trusts cannot elect the section 179 deduction. Federal ez tax form 2012 This chapter explains what property does and does not qualify for the section 179 deduction, what limits apply to the deduction (including special rules for partnerships and corporations), and how to elect it. Federal ez tax form 2012 It also explains when and how to recapture the deduction. Federal ez tax form 2012 Useful Items - You may want to see: Publication 537 Installment Sales 544 Sales and Other Dispositions of Assets 954 Tax Incentives for Distressed Communities Form (and Instructions) 4562 Depreciation and Amortization 4797 Sales of Business Property See chapter 6 for information about getting publications and forms. Federal ez tax form 2012 What Property Qualifies? To qualify for the section 179 deduction, your property must meet all the following requirements. Federal ez tax form 2012 It must be eligible property. Federal ez tax form 2012 It must be acquired for business use. Federal ez tax form 2012 It must have been acquired by purchase. Federal ez tax form 2012 It must not be property described later under What Property Does Not Qualify . Federal ez tax form 2012 The following discussions provide information about these requirements and exceptions. Federal ez tax form 2012 Eligible Property To qualify for the section 179 deduction, your property must be one of the following types of depreciable property. Federal ez tax form 2012 Tangible personal property. Federal ez tax form 2012 Other tangible property (except buildings and their structural components) used as: An integral part of manufacturing, production, or extraction or of furnishing transportation, communications, electricity, gas, water, or sewage disposal services, A research facility used in connection with any of the activities in (a) above, or A facility used in connection with any of the activities in (a) for the bulk storage of fungible commodities. Federal ez tax form 2012 Single purpose agricultural (livestock) or horticultural structures. Federal ez tax form 2012 See chapter 7 of Publication 225 for definitions and information regarding the use requirements that apply to these structures. Federal ez tax form 2012 Storage facilities (except buildings and their structural components) used in connection with distributing petroleum or any primary product of petroleum. Federal ez tax form 2012 Off-the-shelf computer software. Federal ez tax form 2012 Qualified real property (described below). Federal ez tax form 2012 Tangible personal property. Federal ez tax form 2012   Tangible personal property is any tangible property that is not real property. Federal ez tax form 2012 It includes the following property. Federal ez tax form 2012 Machinery and equipment. Federal ez tax form 2012 Property contained in or attached to a building (other than structural components), such as refrigerators, grocery store counters, office equipment, printing presses, testing equipment, and signs. Federal ez tax form 2012 Gasoline storage tanks and pumps at retail service stations. Federal ez tax form 2012 Livestock, including horses, cattle, hogs, sheep, goats, and mink and other furbearing animals. Federal ez tax form 2012   The treatment of property as tangible personal property for the section 179 deduction is not controlled by its treatment under local law. Federal ez tax form 2012 For example, property may not be tangible personal property for the deduction even if treated so under local law, and some property (such as fixtures) may be tangible personal property for the deduction even if treated as real property under local law. Federal ez tax form 2012 Off-the-shelf computer software. Federal ez tax form 2012   Off-the-shelf computer software placed in service during the tax year is qualifying property for purposes of the section 179 deduction. Federal ez tax form 2012 This is computer software that is readily available for purchase by the general public, is subject to a nonexclusive license, and has not been substantially modified. Federal ez tax form 2012 It includes any program designed to cause a computer to perform a desired function. Federal ez tax form 2012 However, a database or similar item is not considered computer software unless it is in the public domain and is incidental to the operation of otherwise qualifying software. Federal ez tax form 2012 Qualified real property. Federal ez tax form 2012   You can elect to treat certain qualified real property you placed in service as section 179 property for tax years beginning in 2013. Federal ez tax form 2012 If this election is made, the term “section 179 property” will include any qualified real property that is: Qualified leasehold improvement property, Qualified restaurant property, or Qualified retail improvement property. Federal ez tax form 2012 The maximum section 179 expense deduction that can be elected for qualified section 179 real property is $250,000 of the maximum section 179 deduction of $500,000 in 2013. Federal ez tax form 2012 For more information, see Special rules for qualified section 179 real property, later. Federal ez tax form 2012 Also, see Election for certain qualified section 179 real property, later, for information on how to make this election. Federal ez tax form 2012 Qualified leasehold improvement property. Federal ez tax form 2012   Generally, this is any improvement to an interior part of a building (placed in service before January 1, 2014) that is nonresidential real property, provided all of the requirements discussed in chapter 3 under Qualified leasehold improvement property are met. Federal ez tax form 2012   In addition, an improvement made by the lessor does not qualify as qualified leasehold improvement property to any subsequent owner unless it is acquired from the original lessor by reason of the lessor’s death or in any of the following types of transactions. Federal ez tax form 2012 A transaction to which section 381(a) applies, A mere change in the form of conducting the trade or business so long as the property is retained in the trade or business as qualified leasehold improvement property and the taxpayer retains a substantial interest in the trade or business, A like-kind exchange, involuntary conversion, or re-acquisition of real property to the extent that the basis in the property represents the carryover basis, or Certain nonrecognition transactions to the extent that your basis in the property is determined by reference to the transferor’s or distributor’s basis in the property. Federal ez tax form 2012 Examples include the following. Federal ez tax form 2012 A complete liquidation of a subsidiary. Federal ez tax form 2012 A transfer to a corporation controlled by the transferor. Federal ez tax form 2012 An exchange of property by a corporation solely for stock or securities in another corporation in a reorganization. Federal ez tax form 2012 Qualified restaurant property. Federal ez tax form 2012   Qualified restaurant property is any section 1250 property that is a building or an improvement to a building placed in service after December 31, 2008, and before January 1, 2014. Federal ez tax form 2012 Also, more than 50% of the building’s square footage must be devoted to preparation of meals and seating for on-premise consumption of prepared meals. Federal ez tax form 2012 Qualified retail improvement property. Federal ez tax form 2012   Generally, this is any improvement (placed in service after December 31, 2008, and before January 1, 2014) to an interior portion of nonresidential real property if it meets the following requirements. Federal ez tax form 2012 The portion is open to the general public and is used in the retail trade or business of selling tangible property to the general public. Federal ez tax form 2012 The improvement is placed in service more than 3 years after the date the building was first placed in service. Federal ez tax form 2012 The expenses are not for the enlargement of the building, any elevator or escalator, any structural components benefiting a common area, or the internal structural framework of the building. Federal ez tax form 2012 In addition, an improvement made by the lessor does not qualify as qualified retail improvement property to any subsequent owner unless it is acquired from the original lessor by reason of the lessor’s death or in any of the following types of transactions. Federal ez tax form 2012 A transaction to which section 381(a) applies, A mere change in the form of conducting the trade or business so long as the property is retained in the trade or business as qualified leasehold improvement property and the taxpayer retains a substantial interest in the trade or business, A like-kind exchange, involuntary conversion, or re-acquisition of real property to the extent that the basis in the property represents the carryover basis, or Certain nonrecognition transactions to the extent that your basis in the property is determined by reference to the transferor’s or distributor’s basis in the property. Federal ez tax form 2012 Examples include the following. Federal ez tax form 2012 A complete liquidation of a subsidiary. Federal ez tax form 2012 A transfer to a corporation controlled by the transferor. Federal ez tax form 2012 An exchange of property by a corporation solely for stock or securities in another corporation in a reorganization. Federal ez tax form 2012 Property Acquired for Business Use To qualify for the section 179 deduction, your property must have been acquired for use in your trade or business. Federal ez tax form 2012 Property you acquire only for the production of income, such as investment property, rental property (if renting property is not your trade or business), and property that produces royalties, does not qualify. Federal ez tax form 2012 Partial business use. Federal ez tax form 2012   When you use property for both business and nonbusiness purposes, you can elect the section 179 deduction only if you use the property more than 50% for business in the year you place it in service. Federal ez tax form 2012 If you use the property more than 50% for business, multiply the cost of the property by the percentage of business use. Federal ez tax form 2012 Use the resulting business cost to figure your section 179 deduction. Federal ez tax form 2012 Example. Federal ez tax form 2012 May Oak bought and placed in service an item of section 179 property costing $11,000. Federal ez tax form 2012 She used the property 80% for her business and 20% for personal purposes. Federal ez tax form 2012 The business part of the cost of the property is $8,800 (80% × $11,000). Federal ez tax form 2012 Property Acquired by Purchase To qualify for the section 179 deduction, your property must have been acquired by purchase. Federal ez tax form 2012 For example, property acquired by gift or inheritance does not qualify. Federal ez tax form 2012 Property is not considered acquired by purchase in the following situations. Federal ez tax form 2012 It is acquired by one component member of a controlled group from another component member of the same group. Federal ez tax form 2012 Its basis is determined either— In whole or in part by its adjusted basis in the hands of the person from whom it was acquired, or Under the stepped-up basis rules for property acquired from a decedent. Federal ez tax form 2012 It is acquired from a related person. Federal ez tax form 2012 Related persons. Federal ez tax form 2012   Related persons are described under Related persons earlier. Federal ez tax form 2012 However, to determine whether property qualifies for the section 179 deduction, treat as an individual's family only his or her spouse, ancestors, and lineal descendants and substitute "50%" for "10%" each place it appears. Federal ez tax form 2012 Example. Federal ez tax form 2012 Ken Larch is a tailor. Federal ez tax form 2012 He bought two industrial sewing machines from his father. Federal ez tax form 2012 He placed both machines in service in the same year he bought them. Federal ez tax form 2012 They do not qualify as section 179 property because Ken and his father are related persons. Federal ez tax form 2012 He cannot claim a section 179 deduction for the cost of these machines. Federal ez tax form 2012 What Property Does Not Qualify? Certain property does not qualify for the section 179 deduction. Federal ez tax form 2012 This includes the following. Federal ez tax form 2012 Land and Improvements Land and land improvements do not qualify as section 179 property. Federal ez tax form 2012 Land improvements include swimming pools, paved parking areas, wharves, docks, bridges, and fences. Federal ez tax form 2012 Excepted Property Even if the requirements explained earlier under What Property Qualifies are met, you cannot elect the section 179 deduction for the following property. Federal ez tax form 2012 Certain property you lease to others (if you are a noncorporate lessor). Federal ez tax form 2012 Certain property used predominantly to furnish lodging or in connection with the furnishing of lodging. Federal ez tax form 2012 Air conditioning or heating units. Federal ez tax form 2012 Property used predominantly outside the United States, except property described in section 168(g)(4) of the Internal Revenue Code. Federal ez tax form 2012 Property used by certain tax-exempt organizations, except property used in connection with the production of income subject to the tax on unrelated trade or business income. Federal ez tax form 2012 Property used by governmental units or foreign persons or entities, except property used under a lease with a term of less than 6 months. Federal ez tax form 2012 Leased property. Federal ez tax form 2012   Generally, you cannot claim a section 179 deduction based on the cost of property you lease to someone else. Federal ez tax form 2012 This rule does not apply to corporations. Federal ez tax form 2012 However, you can claim a section 179 deduction for the cost of the following property. Federal ez tax form 2012 Property you manufacture or produce and lease to others. Federal ez tax form 2012 Property you purchase and lease to others if both the following tests are met. Federal ez tax form 2012 The term of the lease (including options to renew) is less than 50% of the property's class life. Federal ez tax form 2012 For the first 12 months after the property is transferred to the lessee, the total business deductions you are allowed on the property (other than rents and reimbursed amounts) are more than 15% of the rental income from the property. Federal ez tax form 2012 Property used for lodging. Federal ez tax form 2012   Generally, you cannot claim a section 179 deduction for property used predominantly to furnish lodging or in connection with the furnishing of lodging. Federal ez tax form 2012 However, this does not apply to the following types of property. Federal ez tax form 2012 Nonlodging commercial facilities that are available to those not using the lodging facilities on the same basis as they are available to those using the lodging facilities. Federal ez tax form 2012 Property used by a hotel or motel in connection with the trade or business of furnishing lodging where the predominant portion of the accommodations is used by transients. Federal ez tax form 2012 Any certified historic structure to the extent its basis is due to qualified rehabilitation expenditures. Federal ez tax form 2012 Any energy property. Federal ez tax form 2012 Energy property. Federal ez tax form 2012   Energy property is property that meets the following requirements. Federal ez tax form 2012 It is one of the following types of property. Federal ez tax form 2012 Equipment that uses solar energy to generate electricity, to heat or cool a structure, to provide hot water for use in a structure, or to provide solar process heat, except for equipment used to generate energy to heat a swimming pool. Federal ez tax form 2012 Equipment placed in service after December 31, 2005, and before January 1, 2017, that uses solar energy to illuminate the inside of a structure using fiber-optic distributed sunlight. Federal ez tax form 2012 Equipment used to produce, distribute, or use energy derived from a geothermal deposit. Federal ez tax form 2012 For electricity generated by geothermal power, this includes equipment up to (but not including) the electrical transmission stage. Federal ez tax form 2012 Qualified fuel cell property or qualified microturbine property placed in service after December 31, 2005, and before January 1, 2017. Federal ez tax form 2012 The construction, reconstruction, or erection of the property must be completed by you. Federal ez tax form 2012 For property you acquire, the original use of the property must begin with you. Federal ez tax form 2012 The property must meet the performance and quality standards, if any, prescribed by Income Tax Regulations in effect at the time you get the property. Federal ez tax form 2012   For periods before February 14, 2008, energy property does not include any property that is public utility property as defined by section 46(f)(5) of the Internal Revenue Code (as in effect on November 4, 1990). Federal ez tax form 2012 How Much Can You Deduct? Your section 179 deduction is generally the cost of the qualifying property. Federal ez tax form 2012 However, the total amount you can elect to deduct under section 179 is subject to a dollar limit and a business income limit. Federal ez tax form 2012 These limits apply to each taxpayer, not to each business. Federal ez tax form 2012 However, see Married Individuals under Dollar Limits , later. Federal ez tax form 2012 For a passenger automobile, the total section 179 deduction and depreciation deduction are limited. Federal ez tax form 2012 See Do the Passenger Automobile Limits Apply in chapter 5 . Federal ez tax form 2012 If you deduct only part of the cost of qualifying property as a section 179 deduction, you can generally depreciate the cost you do not deduct. Federal ez tax form 2012 Trade-in of other property. Federal ez tax form 2012   If you buy qualifying property with cash and a trade-in, its cost for purposes of the section 179 deduction includes only the cash you paid. Federal ez tax form 2012 Example. Federal ez tax form 2012 Silver Leaf, a retail bakery, traded two ovens having a total adjusted basis of $680 for a new oven costing $1,320. Federal ez tax form 2012 They received an $800 trade-in allowance for the old ovens and paid $520 in cash for the new oven. Federal ez tax form 2012 The bakery also traded a used van with an adjusted basis of $4,500 for a new van costing $9,000. Federal ez tax form 2012 They received a $4,800 trade-in allowance on the used van and paid $4,200 in cash for the new van. Federal ez tax form 2012 Only the portion of the new property's basis paid by cash qualifies for the section 179 deduction. Federal ez tax form 2012 Therefore, Silver Leaf's qualifying costs for the section 179 deduction are $4,720 ($520 + $4,200). Federal ez tax form 2012 Dollar Limits The total amount you can elect to deduct under section 179 for most property placed in service in 2013 generally cannot be more than $500,000. Federal ez tax form 2012 If you acquire and place in service more than one item of qualifying property during the year, you can allocate the section 179 deduction among the items in any way, as long as the total deduction is not more than $500,000. Federal ez tax form 2012 You do not have to claim the full $500,000. Federal ez tax form 2012 Qualified real property (described earlier) that you elected to treat as section 179 real property is limited to $250,000 of the maximum deduction of $500,000 for 2013. Federal ez tax form 2012 The amount you can elect to deduct is not affected if you place qualifying property in service in a short tax year or if you place qualifying property in service for only a part of a 12-month tax year. Federal ez tax form 2012 After you apply the dollar limit to determine a tentative deduction, you must apply the business income limit (described later) to determine your actual section 179 deduction. Federal ez tax form 2012 Example. Federal ez tax form 2012 In 2013, you bought and placed in service $500,000 in machinery and a $25,000 circular saw for your business. Federal ez tax form 2012 You elect to deduct $475,000 for the machinery and the entire $25,000 for the saw, a total of $500,000. Federal ez tax form 2012 This is the maximum amount you can deduct. Federal ez tax form 2012 Your $25,000 deduction for the saw completely recovered its cost. Federal ez tax form 2012 Your basis for depreciation is zero. Federal ez tax form 2012 The basis for depreciation of your machinery is $25,000. Federal ez tax form 2012 You figure this by subtracting your $475,000 section 179 deduction for the machinery from the $500,000 cost of the machinery. Federal ez tax form 2012 Situations affecting dollar limit. Federal ez tax form 2012   Under certain circumstances, the general dollar limits on the section 179 deduction may be reduced or increased or there may be additional dollar limits. Federal ez tax form 2012 The general dollar limit is affected by any of the following situations. Federal ez tax form 2012 The cost of your section 179 property placed in service exceeds $2,000,000. Federal ez tax form 2012 Your business is an enterprise zone business. Federal ez tax form 2012 You placed in service a sport utility or certain other vehicles. Federal ez tax form 2012 You are married filing a joint or separate return. Federal ez tax form 2012 Costs exceeding $2,000,000 If the cost of your qualifying section 179 property placed in service in a year is more than $2,000,000, you generally must reduce the dollar limit (but not below zero) by the amount of cost over $2,000,000. Federal ez tax form 2012 If the cost of your section 179 property placed in service during 2013 is $2,500,000 or more, you cannot take a section 179 deduction. Federal ez tax form 2012 Example. Federal ez tax form 2012 In 2013, Jane Ash placed in service machinery costing $2,100,000. Federal ez tax form 2012 This cost is $100,000 more than $2,000,000, so she must reduce her dollar limit to $400,000 ($500,000 − $100,000). Federal ez tax form 2012 Enterprise Zone Businesses An increased section 179 deduction is available to enterprise zone businesses for qualified zone property placed in service during the tax year, in an empowerment zone. Federal ez tax form 2012 For more information including the definitions of “enterprise zone business” and “qualified zone property,” see sections 1397A, 1397C, and 1397D of the Internal Revenue Code. Federal ez tax form 2012 The dollar limit on the section 179 deduction is increased by the smaller of: $35,000, or The cost of section 179 property that is also qualified zone property placed in service before January 1, 2014 (including such property placed in service by your spouse, even if you are filing a separate return). Federal ez tax form 2012 Note. Federal ez tax form 2012   You take into account only 50% (instead of 100%) of the cost of qualified zone property placed in service in a year when figuring the reduced dollar limit for costs exceeding $2,000,000 (explained earlier). Federal ez tax form 2012 Sport Utility and Certain Other Vehicles You cannot elect to expense more than $25,000 of the cost of any heavy sport utility vehicle (SUV) and certain other vehicles placed in service during the tax year. Federal ez tax form 2012 This rule applies to any 4-wheeled vehicle primarily designed or used to carry passengers over public streets, roads, or highways, that is rated at more than 6,000 pounds gross vehicle weight and not more than 14,000 pounds gross vehicle weight. Federal ez tax form 2012 However, the $25,000 limit does not apply to any vehicle: Designed to seat more than nine passengers behind the driver's seat, Equipped with a cargo area (either open or enclosed by a cap) of at least six feet in interior length that is not readily accessible from the passenger compartment, or That has an integral enclosure fully enclosing the driver compartment and load carrying device, does not have seating rearward of the driver's seat, and has no body section protruding more than 30 inches ahead of the leading edge of the windshield. Federal ez tax form 2012 Married Individuals If you are married, how you figure your section 179 deduction depends on whether you file jointly or separately. Federal ez tax form 2012 If you file a joint return, you and your spouse are treated as one taxpayer in determining any reduction to the dollar limit, regardless of which of you purchased the property or placed it in service. Federal ez tax form 2012 If you and your spouse file separate returns, you are treated as one taxpayer for the dollar limit, including the reduction for costs over $2,000,000. Federal ez tax form 2012 You must allocate the dollar limit (after any reduction) between you equally, unless you both elect a different allocation. Federal ez tax form 2012 If the percentages elected by each of you do not total 100%, 50% will be allocated to each of you. Federal ez tax form 2012 Example. Federal ez tax form 2012 Jack Elm is married. Federal ez tax form 2012 He and his wife file separate returns. Federal ez tax form 2012 Jack bought and placed in service $2,000,000 of qualified farm machinery in 2013. Federal ez tax form 2012 His wife has her own business, and she bought and placed in service $30,000 of qualified business equipment. Federal ez tax form 2012 Their combined dollar limit is $470,000. Federal ez tax form 2012 This is because they must figure the limit as if they were one taxpayer. Federal ez tax form 2012 They reduce the $500,000 dollar limit by the $30,000 excess of their costs over $2,000,000. Federal ez tax form 2012 They elect to allocate the $470,000 dollar limit as follows. Federal ez tax form 2012 $446,500 ($470,000 x 95%) to Mr. Federal ez tax form 2012 Elm's machinery. Federal ez tax form 2012 $23,500 ($470,000 x 5%) to Mrs. Federal ez tax form 2012 Elm's equipment. Federal ez tax form 2012 If they did not make an election to allocate their costs in this way, they would have to allocate $235,000 ($470,000 × 50%) to each of them. Federal ez tax form 2012 Joint return after filing separate returns. Federal ez tax form 2012   If you and your spouse elect to amend your separate returns by filing a joint return after the due date for filing your return, the dollar limit on the joint return is the lesser of the following amounts. Federal ez tax form 2012 The dollar limit (after reduction for any cost of section 179 property over $2,000,000). Federal ez tax form 2012 The total cost of section 179 property you and your spouse elected to expense on your separate returns. Federal ez tax form 2012 Example. Federal ez tax form 2012 The facts are the same as in the previous example except that Jack elected to deduct $30,000 of the cost of section 179 property on his separate return and his wife elected to deduct $2,000. Federal ez tax form 2012 After the due date of their returns, they file a joint return. Federal ez tax form 2012 Their dollar limit for the section 179 deduction is $32,000. Federal ez tax form 2012 This is the lesser of the following amounts. Federal ez tax form 2012 $470,000—The dollar limit less the cost of section 179 property over $2,000,000. Federal ez tax form 2012 $32,000—The total they elected to expense on their separate returns. Federal ez tax form 2012 Business Income Limit The total cost you can deduct each year after you apply the dollar limit is limited to the taxable income from the active conduct of any trade or business during the year. Federal ez tax form 2012 Generally, you are considered to actively conduct a trade or business if you meaningfully participate in the management or operations of the trade or business. Federal ez tax form 2012 Any cost not deductible in one year under section 179 because of this limit can be carried to the next year. Federal ez tax form 2012 Special rules apply to a 2013 deduction of qualified section 179 real property that is disallowed because of the business income limit. Federal ez tax form 2012 See Special rules for qualified section 179 property under Carryover of disallowed deduction, later. Federal ez tax form 2012 Taxable income. Federal ez tax form 2012   In general, figure taxable income for this purpose by totaling the net income and losses from all trades and businesses you actively conducted during the year. Federal ez tax form 2012 Net income or loss from a trade or business includes the following items. Federal ez tax form 2012 Section 1231 gains (or losses). Federal ez tax form 2012 Interest from working capital of your trade or business. Federal ez tax form 2012 Wages, salaries, tips, or other pay earned as an employee. Federal ez tax form 2012 For information about section 1231 gains and losses, see chapter 3 in Publication 544. Federal ez tax form 2012   In addition, figure taxable income without regard to any of the following. Federal ez tax form 2012 The section 179 deduction. Federal ez tax form 2012 The self-employment tax deduction. Federal ez tax form 2012 Any net operating loss carryback or carryforward. Federal ez tax form 2012 Any unreimbursed employee business expenses. Federal ez tax form 2012 Two different taxable income limits. Federal ez tax form 2012   In addition to the business income limit for your section 179 deduction, you may have a taxable income limit for some other deduction. Federal ez tax form 2012 You may have to figure the limit for this other deduction taking into account the section 179 deduction. Federal ez tax form 2012 If so, complete the following steps. Federal ez tax form 2012 Step Action 1 Figure taxable income without the section 179 deduction or the other deduction. Federal ez tax form 2012 2 Figure a hypothetical section 179 deduction using the taxable income figured in Step 1. Federal ez tax form 2012 3 Subtract the hypothetical section 179 deduction figured in Step 2 from the taxable income figured in Step 1. Federal ez tax form 2012 4 Figure a hypothetical amount for the other deduction using the amount figured in Step 3 as taxable income. Federal ez tax form 2012 5 Subtract the hypothetical other deduction figured in Step 4 from the taxable income figured in Step 1. Federal ez tax form 2012 6 Figure your actual section 179 deduction using the taxable income figured in Step 5. Federal ez tax form 2012 7 Subtract your actual section 179 deduction figured in Step 6 from the taxable income figured in Step 1. Federal ez tax form 2012 8 Figure your actual other deduction using the taxable income figured in Step 7. Federal ez tax form 2012 Example. Federal ez tax form 2012 On February 1, 2013, the XYZ corporation purchased and placed in service qualifying section 179 property that cost $500,000. Federal ez tax form 2012 It elects to expense the entire $500,000 cost under section 179. Federal ez tax form 2012 In June, the corporation gave a charitable contribution of $10,000. Federal ez tax form 2012 A corporation's limit on charitable contributions is figured after subtracting any section 179 deduction. Federal ez tax form 2012 The business income limit for the section 179 deduction is figured after subtracting any allowable charitable contributions. Federal ez tax form 2012 XYZ's taxable income figured without the section 179 deduction or the deduction for charitable contributions is $520,000. Federal ez tax form 2012 XYZ figures its section 179 deduction and its deduction for charitable contributions as follows. Federal ez tax form 2012 Step 1– Taxable income figured without either deduction is $520,000. Federal ez tax form 2012 Step 2– Using $520,000 as taxable income, XYZ's hypothetical section 179 deduction is $500,000. Federal ez tax form 2012 Step 3– $20,000 ($520,000 − $500,000). Federal ez tax form 2012 Step 4– Using $20,000 (from Step 3) as taxable income, XYZ's hypothetical charitable contribution (limited to 10% of taxable income) is $2,000. Federal ez tax form 2012 Step 5– $518,000 ($520,000 − $2,000). Federal ez tax form 2012 Step 6– Using $518,000 (from Step 5) as taxable income, XYZ figures the actual section 179 deduction. Federal ez tax form 2012 Because the taxable income is at least $500,000, XYZ can take a $500,000 section 179 deduction. Federal ez tax form 2012 Step 7– $20,000 ($520,000 − $500,000). Federal ez tax form 2012 Step 8– Using $20,000 (from Step 7) as taxable income, XYZ's actual charitable contribution (limited to 10% of taxable income) is $2,000. Federal ez tax form 2012 Carryover of disallowed deduction. Federal ez tax form 2012   You can carry over for an unlimited number of years the cost of any section 179 property you elected to expense but were unable to because of the business income limit. Federal ez tax form 2012 This disallowed deduction amount is shown on line 13 of Form 4562. Federal ez tax form 2012 You use the amount you carry over to determine your section 179 deduction in the next year. Federal ez tax form 2012 Enter that amount on line 10 of your Form 4562 for the next year. Federal ez tax form 2012   If you place more than one property in service in a year, you can select the properties for which all or a part of the costs will be carried forward. Federal ez tax form 2012 Your selections must be shown in your books and records. Federal ez tax form 2012 For this purpose, treat section 179 costs allocated from a partnership or an S corporation as one item of section 179 property. Federal ez tax form 2012 If you do not make a selection, the total carryover will be allocated equally among the properties you elected to expense for the year. Federal ez tax form 2012   If costs from more than one year are carried forward to a subsequent year in which only part of the total carryover can be deducted, you must deduct the costs being carried forward from the earliest year first. Federal ez tax form 2012 Special rules for qualified section 179 real property. Federal ez tax form 2012   You can carry over to 2013 a 2012 deduction attributable to qualified section 179 real property that you elected to expense but were unable to take because of the business income limitation. Federal ez tax form 2012 Any such 2012 carryover amounts that are not deducted in 2013, plus any 2013 disallowed section 179 expense deductions attributable to qualified real property, are not carried over to 2014. Federal ez tax form 2012 Instead these amounts are treated as property placed in service on the first day of 2013 for purposes of computing depreciation (including the special depreciation allowance, if applicable). Federal ez tax form 2012 See section 179(f) of the Internal Revenue Code and Notice 2013-59 for more information. Federal ez tax form 2012 If there is a sale or other disposition of your property (including a transfer at death) before you can use the full amount of any outstanding carryover of your disallowed section 179 deduction, neither you nor the new owner can deduct any of the unused amount. Federal ez tax form 2012 Instead, you must add it back to the property's basis. Federal ez tax form 2012 Partnerships and Partners The section 179 deduction limits apply both to the partnership and to each partner. Federal ez tax form 2012 The partnership determines its section 179 deduction subject to the limits. Federal ez tax form 2012 It then allocates the deduction among its partners. Federal ez tax form 2012 Each partner adds the amount allocated from partnerships (shown on Schedule K-1 (Form 1065), Partner's Share of Income, Deductions, Credits, etc. Federal ez tax form 2012 ) to his or her nonpartnership section 179 costs and then applies the dollar limit to this total. Federal ez tax form 2012 To determine any reduction in the dollar limit for costs over $2,000,000, the partner does not include any of the cost of section 179 property placed in service by the partnership. Federal ez tax form 2012 After the dollar limit (reduced for any nonpartnership section 179 costs over $2,000,000) is applied, any remaining cost of the partnership and nonpartnership section 179 property is subject to the business income limit. Federal ez tax form 2012 Partnership's taxable income. Federal ez tax form 2012   For purposes of the business income limit, figure the partnership's taxable income by adding together the net income and losses from all trades or businesses actively conducted by the partnership during the year. Federal ez tax form 2012 See the Instructions for Form 1065 for information on how to figure partnership net income (or loss). Federal ez tax form 2012 However, figure taxable income without regard to credits, tax-exempt income, the section 179 deduction, and guaranteed payments under section 707(c) of the Internal Revenue Code. Federal ez tax form 2012 Partner's share of partnership's taxable income. Federal ez tax form 2012   For purposes of the business income limit, the taxable income of a partner engaged in the active conduct of one or more of a partnership's trades or businesses includes his or her allocable share of taxable income derived from the partnership's active conduct of any trade or business. Federal ez tax form 2012 Example. Federal ez tax form 2012 In 2013, Beech Partnership placed in service section 179 property with a total cost of $2,025,000. Federal ez tax form 2012 The partnership must reduce its dollar limit by $25,000 ($2,025,000 − $2,000,000). Federal ez tax form 2012 Its maximum section 179 deduction is $475,000 ($500,000 − $25,000), and it elects to expense that amount. Federal ez tax form 2012 The partnership's taxable income from the active conduct of all its trades or businesses for the year was $600,000, so it can deduct the full $475,000. Federal ez tax form 2012 It allocates $40,000 of its section 179 deduction and $50,000 of its taxable income to Dean, one of its partners. Federal ez tax form 2012 In addition to being a partner in Beech Partnership, Dean is also a partner in the Cedar Partnership, which allocated to him a $30,000 section 179 deduction and $35,000 of its taxable income from the active conduct of its business. Federal ez tax form 2012 He also conducts a business as a sole proprietor and, in 2013, placed in service in that business qualifying section 179 property costing $55,000. Federal ez tax form 2012 He had a net loss of $5,000 from that business for the year. Federal ez tax form 2012 Dean does not have to include section 179 partnership costs to figure any reduction in his dollar limit, so his total section 179 costs for the year are not more than $2,000,000 and his dollar limit is not reduced. Federal ez tax form 2012 His maximum section 179 deduction is $500,000. Federal ez tax form 2012 He elects to expense all of the $70,000 in section 179 deductions allocated from the partnerships ($40,000 from Beech Partnership plus $30,000 from Cedar Partnership), plus $55,000 of his sole proprietorship's section 179 costs, and notes that information in his books and records. Federal ez tax form 2012 However, his deduction is limited to his business taxable income of $80,000 ($50,000 from Beech Partnership, plus $35,000 from Cedar Partnership minus $5,000 loss from his sole proprietorship). Federal ez tax form 2012 He carries over $45,000 ($125,000 − $80,000) of the elected section 179 costs to 2014. Federal ez tax form 2012 He allocates the carryover amount to the cost of section 179 property placed in service in his sole proprietorship, and notes that allocation in his books and records. Federal ez tax form 2012 Different tax years. Federal ez tax form 2012   For purposes of the business income limit, if the partner's tax year and that of the partnership differ, the partner's share of the partnership's taxable income for a tax year is generally the partner's distributive share for the partnership tax year that ends with or within the partner's tax year. Federal ez tax form 2012 Example. Federal ez tax form 2012 John and James Oak are equal partners in Oak Partnership. Federal ez tax form 2012 Oak Partnership uses a tax year ending January 31. Federal ez tax form 2012 John and James both use a tax year ending December 31. Federal ez tax form 2012 For its tax year ending January 31, 2013, Oak Partnership's taxable income from the active conduct of its business is $80,000, of which $70,000 was earned during 2012. Federal ez tax form 2012 John and James each include $40,000 (each partner's entire share) of partnership taxable income in computing their business income limit for the 2013 tax year. Federal ez tax form 2012 Adjustment of partner's basis in partnership. Federal ez tax form 2012   A partner must reduce the basis of his or her partnership interest by the total amount of section 179 expenses allocated from the partnership even if the partner cannot currently deduct the total amount. Federal ez tax form 2012 If the partner disposes of his or her partnership interest, the partner's basis for determining gain or loss is increased by any outstanding carryover of disallowed section 179 expenses allocated from the partnership. Federal ez tax form 2012 Adjustment of partnership's basis in section 179 property. Federal ez tax form 2012   The basis of a partnership's section 179 property must be reduced by the section 179 deduction elected by the partnership. Federal ez tax form 2012 This reduction of basis must be made even if a partner cannot deduct all or part of the section 179 deduction allocated to that partner by the partnership because of the limits. Federal ez tax form 2012 S Corporations Generally, the rules that apply to a partnership and its partners also apply to an S corporation and its shareholders. Federal ez tax form 2012 The deduction limits apply to an S corporation and to each shareholder. Federal ez tax form 2012 The S corporation allocates its deduction to the shareholders who then take their section 179 deduction subject to the limits. Federal ez tax form 2012 Figuring taxable income for an S corporation. Federal ez tax form 2012   To figure taxable income (or loss) from the active conduct by an S corporation of any trade or business, you total the net income and losses from all trades or businesses actively conducted by the S corporation during the year. Federal ez tax form 2012   To figure the net income (or loss) from a trade or business actively conducted by an S corporation, you take into account the items from that trade or business that are passed through to the shareholders and used in determining each shareholder's tax liability. Federal ez tax form 2012 However, you do not take into account any credits, tax-exempt income, the section 179 deduction, and deductions for compensation paid to shareholder-employees. Federal ez tax form 2012 For purposes of determining the total amount of S corporation items, treat deductions and losses as negative income. Federal ez tax form 2012 In figuring the taxable income of an S corporation, disregard any limits on the amount of an S corporation item that must be taken into account when figuring a shareholder's taxable income. Federal ez tax form 2012 Other Corporations A corporation's taxable income from its active conduct of any trade or business is its taxable income figured with the following changes. Federal ez tax form 2012 It is figured before deducting the section 179 deduction, any net operating loss deduction, and special deductions (as reported on the corporation's income tax return). Federal ez tax form 2012 It is adjusted for items of income or deduction included in the amount figured in 1, above, not derived from a trade or business actively conducted by the corporation during the tax year. Federal ez tax form 2012 How Do You Elect the Deduction? You elect to take the section 179 deduction by completing Part I of Form 4562. Federal ez tax form 2012 If you elect the deduction for listed property (described in chapter 5), complete Part V of Form 4562 before completing Part I. Federal ez tax form 2012 For property placed in service in 2013, file Form 4562 with either of the following. Federal ez tax form 2012 Your original 2013 tax return, whether or not you file it timely. Federal ez tax form 2012 An amended return for 2013 filed within the time prescribed by law. Federal ez tax form 2012 An election made on an amended return must specify the item of section 179 property to which the election applies and the part of the cost of each such item to be taken into account. Federal ez tax form 2012 The amended return must also include any resulting adjustments to taxable income. Federal ez tax form 2012 You must keep records that show the specific identification of each piece of qualifying section 179 property. Federal ez tax form 2012 These records must show how you acquired the property, the person you acquired it from, and when you placed it in service. Federal ez tax form 2012 Election for certain qualified section 179 real property. Federal ez tax form 2012   You can elect to expense certain qualified real property that you placed in service as section 179 property for tax years beginning in 2013. Federal ez tax form 2012 If you elect to treat this property as section 179 property, you must elect the application of the special rules for qualified real property described in section 179(f) of the Internal Revenue Code. Federal ez tax form 2012   To make the election, attach a statement indicating you are “electing the application of section 179(f) of the Internal Revenue Code” with either of the following. Federal ez tax form 2012 Your original 2013 tax return, whether or not you file it timely. Federal ez tax form 2012 An amended return for 2013 filed within the time prescribed by law. Federal ez tax form 2012 The amended return must also include any adjustments to taxable income. Federal ez tax form 2012   The statement should indicate your election to expense certain qualified real property under section 179(f) on your return. Federal ez tax form 2012 It must specify one or more of the three types of qualified property (described under Qualified real property ) to which the election applies, the cost of each such type, and the portion of the cost of each such property to be taken into account. Federal ez tax form 2012 Also, report this on line 6 of Form 4562. Federal ez tax form 2012    The maximum section 179 expense deduction that can be taken for qualified section 179 real property is limited to $250,000. Federal ez tax form 2012 Revoking an election. Federal ez tax form 2012   An election (or any specification made in the election) to take a section 179 deduction for 2013 can be revoked without IRS approval by filing an amended return. Federal ez tax form 2012 The amended return must be filed within the time prescribed by law. Federal ez tax form 2012 The amended return must also include any resulting adjustments to taxable income. Federal ez tax form 2012 Once made, the revocation is irrevocable. Federal ez tax form 2012 When Must You Recapture the Deduction? You may have to recapture the section 179 deduction if, in any year during the property's recovery period, the percentage of business use drops to 50% or less. Federal ez tax form 2012 In the year the business use drops to 50% or less, you include the recapture amount as ordinary income in Part IV of Form 4797. Federal ez tax form 2012 You also increase the basis of the property by the recapture amount. Federal ez tax form 2012 Recovery periods for property are discussed under Which Recovery Period Applies in chapter 4 . Federal ez tax form 2012 If you sell, exchange, or otherwise dispose of the property, do not figure the recapture amount under the rules explained in this discussion. Federal ez tax form 2012 Instead, use the rules for recapturing depreciation explained in chapter 3 of Publication 544 under Section 1245 Property. Federal ez tax form 2012 For qualified real property (described earlier), see Notice 2013-59 for determining the portion of the gain that is attributable to section 1245 property upon the sale or other disposition of qualified real property. Federal ez tax form 2012 If the property is listed property (described in chapter 5 ), do not figure the recapture amount under the rules explained in this discussion when the percentage of business use drops to 50% or less. Federal ez tax form 2012 Instead, use the rules for recapturing excess depreciation in chapter 5 under What Is the Business-Use Requirement. Federal ez tax form 2012 Figuring the recapture amount. Federal ez tax form 2012   To figure the amount to recapture, take the following steps. Federal ez tax form 2012 Figure the depreciation that would have been allowable on the section 179 deduction you claimed. Federal ez tax form 2012 Begin with the year you placed the property in service and include the year of recapture. Federal ez tax form 2012 Subtract the depreciation figured in (1) from the section 179 deduction you claimed. Federal ez tax form 2012 The result is the amount you must recapture. Federal ez tax form 2012 Example. Federal ez tax form 2012 In January 2011, Paul Lamb, a calendar year taxpayer, bought and placed in service section 179 property costing $10,000. Federal ez tax form 2012 The property is not listed property. Federal ez tax form 2012 The property is 3-year property. Federal ez tax form 2012 He elected a $5,000 section 179 deduction for the property and also elected not to claim a special depreciation allowance. Federal ez tax form 2012 He used the property only for business in 2011 and 2012. Federal ez tax form 2012 In 2013, he used the property 40% for business and 60% for personal use. Federal ez tax form 2012 He figures his recapture amount as follows. Federal ez tax form 2012 Section 179 deduction claimed (2011) $5,000. Federal ez tax form 2012 00 Minus: Allowable depreciation using Table A-1 (instead of section 179 deduction):   2011 $1,666. Federal ez tax form 2012 50   2012 2,222. Federal ez tax form 2012 50   2013 ($740. Federal ez tax form 2012 50 × 40% (business)) 296. Federal ez tax form 2012 20 4,185. Federal ez tax form 2012 20 2013 — Recapture amount $ 814. Federal ez tax form 2012 80 Paul must include $814. Federal ez tax form 2012 80 in income for 2013. Federal ez tax form 2012 If any qualified zone property placed in service during the year ceases to be used in an empowerment zone by an enterprise zone business in a later year, the benefit of the increased section 179 deduction must be reported as other income on your return. Federal ez tax form 2012 Prev  Up  Next   Home   More Online Publications
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The Federal Ez Tax Form 2012

Federal ez tax form 2012 1. Federal ez tax form 2012   Bona Fide Residence Table of Contents Presence TestDays of Presence in the United States or Relevant Possession Significant Connection Tax HomeExceptions Closer ConnectionException for Year of Move Special Rules in the Year of a MoveYear of Moving to a Possession Year of Moving From a Possession Reporting a Change in Bona Fide ResidenceWho Must File Penalty for Not Filing Form 8898 In order to qualify for certain tax benefits (see chapter 3), you must be a bona fide resident of American Samoa, the CNMI, Guam, Puerto Rico, or the USVI for the entire tax year. Federal ez tax form 2012 Generally, you are a bona fide resident of one of these possessions (the relevant possession) if, during the tax year, you: Meet the presence test, Do not have a tax home outside the relevant possession, and Do not have a closer connection to the United States or to a foreign country than to the relevant possession. Federal ez tax form 2012 Special rule for members of the U. Federal ez tax form 2012 S. Federal ez tax form 2012 Armed Forces. Federal ez tax form 2012   If you are a member of the U. Federal ez tax form 2012 S. Federal ez tax form 2012 Armed Forces who qualified as a bona fide resident of the relevant possession in an earlier tax year, your absence from that possession during the current tax year in compliance with military orders will not affect your status as a bona fide resident. Federal ez tax form 2012 Likewise, being in a possession solely in compliance with military orders will not qualify you for bona fide residency. Federal ez tax form 2012 Also see the special income source rule for members of the U. Federal ez tax form 2012 S. Federal ez tax form 2012 Armed Forces in chapter 2, under Compensation for Labor or Personal Services . Federal ez tax form 2012 Special rule for civilian spouse of active duty member of the U. Federal ez tax form 2012 S. Federal ez tax form 2012 Armed Forces. Federal ez tax form 2012   If you are the civilian spouse of an active duty servicemember, under Military Spouses Residency Relief Act (MSRRA) you can choose to keep your prior residence or domicile for tax purposes (tax residence) when accompanying the servicemember spouse, who is relocating under military orders, to a new military duty station in one of the 50 states, the District of Columbia, or a U. Federal ez tax form 2012 S. Federal ez tax form 2012 possession. Federal ez tax form 2012 Before relocating, you and your spouse must have the same tax residence. Federal ez tax form 2012 If you are a civilian spouse and choose to keep your prior tax residence after such relocation, the source of income for services performed (for example, wages, salaries, tips, or self-employment) by you is considered to be (the jurisdiction of) the prior tax residence. Federal ez tax form 2012 As a result, the amount of income tax withholding (from Form(s) W-2, Wage and Tax Statement) that you are able to claim on your federal return, as well as the need to file a state or U. Federal ez tax form 2012 S. Federal ez tax form 2012 possession return, may be affected. Federal ez tax form 2012 For more information, consult with state, local, or U. Federal ez tax form 2012 S. Federal ez tax form 2012 possession tax authorities regarding your tax obligations under MSRRA. Federal ez tax form 2012 Presence Test If you are a U. Federal ez tax form 2012 S. Federal ez tax form 2012 citizen or resident alien, you will satisfy the presence test for the entire tax year if you meet one of the following conditions. Federal ez tax form 2012 You were present in the relevant possession for at least 183 days during the tax year. Federal ez tax form 2012 You were present in the relevant possession for at least 549 days during the 3-year period that includes the current tax year and the 2 immediately preceding tax years. Federal ez tax form 2012 During each year of the 3-year period, you must be present in the relevant possession for at least 60 days. Federal ez tax form 2012 You were present in the United States for no more than 90 days during the tax year. Federal ez tax form 2012 You had earned income in the United States of no more than a total of $3,000 and were present for more days in the relevant possession than in the United States during the tax year. Federal ez tax form 2012 Earned income is pay for personal services performed, such as wages, salaries, or professional fees. Federal ez tax form 2012 You had no significant connection to the United States during the tax year. Federal ez tax form 2012 Special rule for nonresident aliens. Federal ez tax form 2012   Conditions (1) through (5) above do not apply to nonresident aliens of the United States. Federal ez tax form 2012 Instead, nonresident aliens must meet the substantial presence test discussed in chapter 1 of Publication 519. Federal ez tax form 2012 In that discussion, substitute the name of the possession for “United States” and “U. Federal ez tax form 2012 S. Federal ez tax form 2012 ” wherever they appear. Federal ez tax form 2012 Disregard the discussion in that chapter about a Closer Connection to a Foreign Country. Federal ez tax form 2012 Days of Presence in the United States or Relevant Possession Generally, you are treated as being present in the United States or in the relevant possession on any day that you are physically present in that location at any time during the day. Federal ez tax form 2012 Days of presence in a possession. Federal ez tax form 2012   You are considered to be present in the relevant possession on any of the following days. Federal ez tax form 2012 Any day you are physically present in that possession at any time during the day. Federal ez tax form 2012 Any day you are outside of the relevant possession in order to receive, or to accompany any of the following family members to receive, qualifying medical treatment (see Qualifying Medical Treatment , later). Federal ez tax form 2012 Your parent. Federal ez tax form 2012 Your spouse. Federal ez tax form 2012 Your child, who is your son, daughter, stepson, or stepdaughter. Federal ez tax form 2012 This includes an adopted child or child lawfully placed with you for legal adoption. Federal ez tax form 2012 This also includes a foster child who is placed with you by an authorized placement agency or by judgment, decree, or other order of any court of competent jurisdiction. Federal ez tax form 2012 Any day you are outside the relevant possession because you leave or are unable to return to the relevant possession during any: 14-day period within which a major disaster occurs in the relevant possession for which a Federal Emergency Management Agency (FEMA) notice of a federal declaration of a major disaster is issued in the Federal Register, or Period for which a mandatory evacuation order is in effect for the geographic area in the relevant possession in which your main home is located. Federal ez tax form 2012   If, during a single day, you are physically present: In the United States and in the relevant possession, that day is considered a day of presence in the relevant possession; or In two possessions, that day is considered a day of presence in the possession where your tax home is located (see Tax Home , later). Federal ez tax form 2012 Days of presence in the United States. Federal ez tax form 2012   You are considered to be present in the United States on any day that you are physically present in the United States at any time during the day. Federal ez tax form 2012 However, do not count the following days as days of presence in the United States. Federal ez tax form 2012 Any day you are temporarily present in the United States in order to receive, or to accompany a parent, spouse, or child who is receiving, qualifying medical treatment. Federal ez tax form 2012 “Child” is defined under item 2c earlier. Federal ez tax form 2012 “Qualifying medical treatment” is defined later. Federal ez tax form 2012 Any day you are temporarily present in the United States because you leave or are unable to return to the relevant possession during any: 14-day period within which a major disaster occurs in the relevant possession for which a Federal Emergency Management Agency (FEMA) notice of a federal declaration of a major disaster is issued in the Federal Register, or Period for which a mandatory evacuation order is in effect for the geographic area in the relevant possession in which your main home is located. Federal ez tax form 2012 Any day you are in the United States for less than 24 hours when you are traveling between two places outside the United States. Federal ez tax form 2012 Any day you are temporarily present in the United States as a professional athlete to compete in a charitable sports event (defined later). Federal ez tax form 2012 Any day you are temporarily in the United States as a student (defined later). Federal ez tax form 2012 Any day you are in the United States serving as an elected representative of the relevant possession, or serving full time as an elected or appointed official or employee of the government of that possession (or any of its political subdivisions). Federal ez tax form 2012 Qualifying Medical Treatment Such treatment is generally provided by (or under the supervision of) a physician for an illness, injury, impairment, or physical or mental condition. Federal ez tax form 2012 The treatment generally involves: Any period of inpatient care that requires an overnight stay in a hospital or hospice, and any period immediately before or after that inpatient care to the extent it is medically necessary, or Any temporary period of inpatient care in a residential medical care facility for medically necessary rehabilitation services. Federal ez tax form 2012 With respect to each qualifying medical treatment, you must prepare (or obtain) and maintain documentation supporting your claim that such treatment meets the criteria to be considered days of presence in the relevant possession. Federal ez tax form 2012 You must be able to produce this documentation within 30 days if requested by the IRS or tax administrator for the relevant possession. Federal ez tax form 2012 You must keep the following documentation. Federal ez tax form 2012 Records that provide: The patient's name and relationship to you (if the medical treatment is provided to a person you accompany); The name and address of the hospital, hospice, or residential medical care facility where the medical treatment was provided; The name, address, and telephone number of the physician who provided the medical treatment; The date(s) on which the medical treatment was provided; and Receipt(s) of payment for the medical treatment. Federal ez tax form 2012 Signed certification by the providing or supervising physician that the medical treatment met the requirements for being qualified medical treatment, and setting forth: The patient's name, A reasonably detailed description of the medical treatment provided by (or under the supervision of) the physician, The dates on which the medical treatment was provided, and The medical facts that support the physician's certification and determination that the treatment was medically necessary. Federal ez tax form 2012 Charitable Sports Event A charitable sports event is one that meets all of the following conditions. Federal ez tax form 2012 The main purpose is to benefit a qualified charitable organization. Federal ez tax form 2012 The entire net proceeds go to charity. Federal ez tax form 2012 Volunteers perform substantially all the work. Federal ez tax form 2012 In figuring the days of presence in the United States, you can exclude only the days on which you actually competed in the charitable sports event. Federal ez tax form 2012 You cannot exclude the days on which you were in the United States to practice for the event, to perform promotional or other activities related to the event, or to travel between events. Federal ez tax form 2012 Student To qualify as a student, you must be, during some part of each of any 5 calendar months during the calendar year: A full-time student at a school that has a regular teaching staff, course of study, and regularly enrolled body of students in attendance, or A student taking a full-time, on-farm training course given by a school described in (1) above or by a state, county, or local government agency. Federal ez tax form 2012 The 5 calendar months do not have to be consecutive. Federal ez tax form 2012 Full-time student. Federal ez tax form 2012   A full-time student is a person who is enrolled for the number of hours or courses the school considers to be full-time attendance. Federal ez tax form 2012 However, school attendance exclusively at night is not considered full-time attendance. Federal ez tax form 2012 School. Federal ez tax form 2012   The term “school” includes elementary schools, middle schools, junior and senior high schools, colleges, universities, and technical, trade, and mechanical schools. Federal ez tax form 2012 It does not include on-the-job training courses, correspondence schools, and schools offering courses only through the Internet. Federal ez tax form 2012 Significant Connection One way in which you can meet the presence test is to have no significant connection to the United States during the tax year. Federal ez tax form 2012 This section looks at the factors that determine if a significant connection exists. Federal ez tax form 2012 You are treated as having a significant connection to the United States if you: Have a permanent home in the United States, Are currently registered to vote in any political subdivision of the United States, or Have a spouse or child (see item 2c under Days of presence in a possession , earlier) who is under age 18 whose main home is in the United States, other than: A child who is in the United States because he or she is the child of divorced or legally separated parents and is living with a custodial parent under a custodial decree or multiple support agreement, or A child who is in the United States as a student. Federal ez tax form 2012 For the purpose of determining if you have a significant connection to the United States, the term “spouse” does not include a spouse from whom you are legally separated under a decree of divorce or separate maintenance. Federal ez tax form 2012 Permanent home. Federal ez tax form 2012   A permanent home generally includes an accommodation such as a house, an apartment, or a furnished room that is either owned or rented by you or your spouse. Federal ez tax form 2012 The dwelling unit must be available at all times, continuously, not only for short stays. Federal ez tax form 2012 Exception for rental property. Federal ez tax form 2012   If you or your spouse own the dwelling unit and at any time during the tax year it is rented to someone else at fair rental value, it will be considered your permanent home only if you or your spouse use that property for personal purposes for more than the greater of: 14 days, or 10% of the number of days during that tax year that the property is rented to others at a fair rental value. Federal ez tax form 2012   You are treated as using rental property for personal purposes on any day the property is not being rented to someone else at fair rental value for the entire day. Federal ez tax form 2012   A day of personal use of a dwelling unit is also any day that the unit is used by any of the following persons. Federal ez tax form 2012 You or any other person who has an interest in it, unless you rent it to another owner as his or her main home under a shared equity financing agreement. Federal ez tax form 2012 A member of your family or a member of the family of any other person who has an interest in it, unless the family member uses the dwelling unit as his or her main home and pays a fair rental price. Federal ez tax form 2012 Family includes only brothers and sisters, half-brothers and half-sisters, spouses, ancestors (parents, grandparents, etc. Federal ez tax form 2012 ), and lineal descendants (children, grandchildren, etc. Federal ez tax form 2012 ). Federal ez tax form 2012 Anyone under an arrangement that lets you use some other dwelling unit. Federal ez tax form 2012 Anyone at less than a fair rental price. Federal ez tax form 2012   However, any day you spend working substantially full time repairing and maintaining (not improving) your property is not counted as a day of personal use. Federal ez tax form 2012 Whether your property is used mainly for this purpose is determined in light of all the facts and circumstances, such as: The amount of time you devote to repair and maintenance work, How often during the tax year you perform repair and maintenance work on this property, and The presence and activities of companions. Federal ez tax form 2012   See Publication 527, Residential Rental Property, for more information about personal use of a dwelling unit. Federal ez tax form 2012 Example—significant connection. Federal ez tax form 2012 Ann Green, a U. Federal ez tax form 2012 S. Federal ez tax form 2012 citizen, is a sales representative for a company based in Guam. Federal ez tax form 2012 Ann lives with her spouse and young children in their house in Guam, where she is also registered to vote. Federal ez tax form 2012 Her business travel requires her to spend 120 days in the United States and another 120 days in foreign countries. Federal ez tax form 2012 When traveling on business, Ann generally stays at hotels but sometimes stays with her brother, who lives in the United States. Federal ez tax form 2012 Ann's stays are always of short duration and she asks her brother's permission to stay with him. Federal ez tax form 2012 Her brother's house is not her permanent home, nor does she have any other accommodations in the United States that would be considered her permanent home. Federal ez tax form 2012 Ann satisfies the presence test because she has no significant connection to the United States. Federal ez tax form 2012 Example—presence test. Federal ez tax form 2012 Eric and Wanda Brown live for part of the year in a condominium, which they own, in the CNMI. Federal ez tax form 2012 They also own a house in Maine where they live for 120 days every year to be near their grown children and grandchildren. Federal ez tax form 2012 The Browns are retired and their only income is from pension payments, dividends, interest, and social security benefits. Federal ez tax form 2012 In 2013, they spent only 175 days in the CNMI because of a 70-day vacation to Europe and Asia. Federal ez tax form 2012 Thus, in 2013, the Browns were not present in the CNMI for at least 183 days, were present in the United States for more than 90 days, and had a significant connection to the United States because of their permanent home. Federal ez tax form 2012 However, the Browns still satisfied the presence test with respect to the CNMI because they had no earned income in the United States and were physically present for more days in the CNMI than in the United States. Federal ez tax form 2012 Tax Home You will have met the tax home test if you did not have a tax home outside the relevant possession during any part of the tax year. Federal ez tax form 2012 Your tax home is your regular or main place of business, employment, or post of duty regardless of where you maintain your family home. Federal ez tax form 2012 If you do not have a regular or main place of business because of the nature of your work, then your tax home is the place where you regularly live. Federal ez tax form 2012 If you do not fit either of these categories, you are considered an itinerant and your tax home is wherever you work. Federal ez tax form 2012 Exceptions There are some special rules regarding tax home that provide exceptions to the general rule stated above. Federal ez tax form 2012 Students and Government Officials Disregard the following days when determining whether you have a tax home outside the relevant possession. Federal ez tax form 2012 Days you were temporarily in the United States as a student (see Student under Days of Presence in the United States or Relevant Possession, earlier). Federal ez tax form 2012 Days you were in the United States serving as an elected representative of the relevant possession, or serving full time as an elected or appointed official or employee of the government of that possession (or any of its political subdivisions). Federal ez tax form 2012 Seafarers You will not be considered to have a tax home outside the relevant possession solely because you are employed on a ship or other seafaring vessel that is predominantly used in local and international waters. Federal ez tax form 2012 For this purpose, a vessel is considered to be predominantly used in local and international waters if, during the tax year, the total amount of time it is used in international waters and in the waters within 3 miles of the relevant possession exceeds the total amount of time it is used in the territorial waters of the United States, another possession, or any foreign country. Federal ez tax form 2012 Example. Federal ez tax form 2012 In 2013, Sean Silverman, a U. Federal ez tax form 2012 S. Federal ez tax form 2012 citizen, was employed by a fishery and spent 250 days at sea on a fishing vessel. Federal ez tax form 2012 When not at sea, Sean lived with his spouse at a house they own in American Samoa. Federal ez tax form 2012 The fishing vessel on which Sean works departs and arrives at various ports in American Samoa, other possessions, and foreign countries, but was in international or American Samoa's local waters for 225 days. Federal ez tax form 2012 For purposes of determining bona fide residency of American Samoa, Sean will not be considered to have a tax home outside that possession solely because of his employment on board the fishing vessel. Federal ez tax form 2012 Year of Move If you are moving to or from a possession during the year, you may still be able to meet the tax home test for that year. Federal ez tax form 2012 See Special Rules in the Year of a Move , later in this chapter. Federal ez tax form 2012 Closer Connection You will have met the closer connection test if, during any part of the tax year, you do not have a closer connection to the United States or a foreign country than to the relevant U. Federal ez tax form 2012 S. Federal ez tax form 2012 possession. Federal ez tax form 2012 You will be considered to have a closer connection to a possession than to the United States or to a foreign country if you have maintained more significant contacts with the possession(s) than with the United States or foreign country. Federal ez tax form 2012 In determining if you have maintained more significant contacts with the relevant possession, the facts and circumstances to be considered include, but are not limited to, the following. Federal ez tax form 2012 The location of your permanent home. Federal ez tax form 2012 The location of your family. Federal ez tax form 2012 The location of personal belongings, such as automobiles, furniture, clothing, and jewelry owned by you and your family. Federal ez tax form 2012 The location of social, political, cultural, professional, or religious organizations with which you have a current relationship. Federal ez tax form 2012 The location where you conduct your routine personal banking activities. Federal ez tax form 2012 The location where you conduct business activities (other than those that go into determining your tax home). Federal ez tax form 2012 The location of the jurisdiction in which you hold a driver's license. Federal ez tax form 2012 The location of the jurisdiction in which you vote. Federal ez tax form 2012 The location of charitable organizations to which you contribute. Federal ez tax form 2012 The country of residence you designate on forms and documents. Federal ez tax form 2012 The types of official forms and documents you file, such as Form W-8BEN, Certificate of Foreign Status of Beneficial Owner for United States Tax Withholding and Reporting (Individuals), or Form W-9, Request for Taxpayer Identification Number and Certification. Federal ez tax form 2012 Your connections to the relevant possession will be compared to the total of your connections with the United States and foreign countries. Federal ez tax form 2012 Your answers to the questions on Form 8898, Part III, will help establish the jurisdiction to which you have a closer connection. Federal ez tax form 2012 Example—closer connection to the United States. Federal ez tax form 2012 Marcos Reyes, a U. Federal ez tax form 2012 S. Federal ez tax form 2012 citizen, moved to Puerto Rico in 2013 to start an investment consulting and venture capital business. Federal ez tax form 2012 His spouse and two teenage children remained in California to allow the children to complete high school. Federal ez tax form 2012 He traveled back to the United States regularly to see his spouse and children, to engage in business activities, and to take vacations. Federal ez tax form 2012 Marcos had an apartment available for his full-time use in Puerto Rico, but remained a joint owner of the residence in California where his spouse and children lived. Federal ez tax form 2012 Marcos and his family had automobiles and personal belongings such as furniture, clothing, and jewelry located at both residences. Federal ez tax form 2012 Although Marcos was a member of the Puerto Rico Chamber of Commerce, he also belonged to and had current relationships with social, political, cultural, and religious organizations in California. Federal ez tax form 2012 Marcos received mail in California, including bank and brokerage statements and credit card bills. Federal ez tax form 2012 He conducted his personal banking activities in California. Federal ez tax form 2012 He held a California driver's license and was also registered to vote there. Federal ez tax form 2012 Based on all of the particular facts and circumstances pertaining to Marcos, he was not a bona fide resident of Puerto Rico in 2013 because he had a closer connection to the United States than to Puerto Rico. Federal ez tax form 2012 Closer connection to another possession. Federal ez tax form 2012   Generally, possessions are not treated as foreign countries. Federal ez tax form 2012 Therefore, a closer connection to a possession other than the relevant possession will not be treated as a closer connection to a foreign country. Federal ez tax form 2012 Example—tax home and closer connection to possession. Federal ez tax form 2012 Pearl Blackmon, a U. Federal ez tax form 2012 S. Federal ez tax form 2012 citizen, is a permanent employee of a hotel in Guam, but works only during the tourist season. Federal ez tax form 2012 For the remainder of each year, Pearl lives with her spouse and children in the CNMI, where she has no outside employment. Federal ez tax form 2012 Most of Pearl's personal belongings, including her automobile, are located in the CNMI. Federal ez tax form 2012 She is registered to vote in, and has a driver's license issued by, the CNMI. Federal ez tax form 2012 She does her personal banking in the CNMI and routinely lists her CNMI address as her permanent address on forms and documents. Federal ez tax form 2012 Pearl satisfies the presence test with respect to both Guam and the CNMI. Federal ez tax form 2012 She satisfies the tax home test with respect to Guam, because her regular place of business is in Guam. Federal ez tax form 2012 Pearl satisfies the closer connection test with respect to both Guam and the CNMI, because she does not have a closer connection to the United States or to any foreign country. Federal ez tax form 2012 Pearl is considered a bona fide resident of Guam, the location of her tax home. Federal ez tax form 2012 Exception for Year of Move If you are moving to or from a possession during the year, you may still be able to meet the closer connection test for that year. Federal ez tax form 2012 See Special Rules in the Year of a Move , next. Federal ez tax form 2012 Special Rules in the Year of a Move If you are moving to or from a possession during the year, you may still be able to meet the tax home and closer connection tests for that year. Federal ez tax form 2012 Year of Moving to a Possession You will satisfy the tax home and closer connection tests in the tax year of changing your residence to the relevant possession if you meet all of the following. Federal ez tax form 2012 You have not been a bona fide resident of the relevant possession in any of the 3 tax years immediately preceding your move. Federal ez tax form 2012 In the year of the move, you do not have a tax home outside the relevant possession or a closer connection to the United States or a foreign country than to the relevant possession during any of the last 183 days of the tax year. Federal ez tax form 2012 You are a bona fide resident of the relevant possession for each of the 3 tax years immediately following your move. Federal ez tax form 2012 Example. Federal ez tax form 2012 Dwight Wood, a U. Federal ez tax form 2012 S. Federal ez tax form 2012 citizen, files returns on a calendar year basis. Federal ez tax form 2012 He lived in the United States from January 2007 through May 2013. Federal ez tax form 2012 In June 2013 he moved to the USVI, purchased a house, and accepted a permanent job with a local employer. Federal ez tax form 2012 From July 1 through December 31, 2013 (more than 183 days), Dwight's principal place of business was in the USVI and, during that time, he did not have a closer connection to the United States or a foreign country than to the USVI. Federal ez tax form 2012 If he is a bona fide resident of the USVI during all of 2014 through 2016, he will satisfy the tax home and closer connection tests for 2013. Federal ez tax form 2012 If Dwight also satisfies the presence test in 2013, he will be considered a bona fide resident of the USVI for the entire 2013 tax year. Federal ez tax form 2012 Year of Moving From a Possession In the year you cease to be a bona fide resident of American Samoa, the CNMI, Guam, or the USVI, you will satisfy the tax home and closer connection tests with respect to the relevant possession if you meet all of the following. Federal ez tax form 2012 You have been a bona fide resident of the relevant possession for each of the 3 tax years immediately preceding your change of residence. Federal ez tax form 2012 In the year of the move, you do not have a tax home outside the relevant possession or a closer connection to the United States or a foreign country than to the relevant possession during any of the first 183 days of the tax year. Federal ez tax form 2012 You are not a bona fide resident of the relevant possession for any of the 3 tax years immediately following your move. Federal ez tax form 2012 Example. Federal ez tax form 2012 Jean Aspen, a U. Federal ez tax form 2012 S. Federal ez tax form 2012 citizen, files returns on a calendar year basis. Federal ez tax form 2012 From January 2010 through December 2012, Jean was a bona fide resident of American Samoa. Federal ez tax form 2012 Jean continued to live there until September 6, 2013, when she accepted new employment and moved to Hawaii. Federal ez tax form 2012 Jean's principal place of business from January 1 through September 5, 2013 (more than 183 days), was in American Samoa, and during that period Jean did not have a closer connection to the United States or a foreign country than to American Samoa. Federal ez tax form 2012 If Jean continues to live and work in Hawaii for the rest of 2013 and throughout years 2014 through 2016, she will satisfy the tax home and closer connection tests for 2013 with respect to American Samoa. Federal ez tax form 2012 If Jean also satisfies the presence test in 2013, she will be considered a bona fide resident for the entire 2013 tax year. Federal ez tax form 2012 Puerto Rico You will be considered a bona fide resident of Puerto Rico for the part of the tax year preceding the date on which you move if you: Are a U. Federal ez tax form 2012 S. Federal ez tax form 2012 citizen, Are a bona fide resident of Puerto Rico for at least 2 tax years immediately preceding the tax year of the move, Cease to be a bona fide resident of Puerto Rico during the tax year, Cease to have a tax home in Puerto Rico during the tax year, and Have a closer connection to Puerto Rico than to the United States or a foreign country throughout the part of the tax year preceding the date on which you cease to have a tax home in Puerto Rico. Federal ez tax form 2012 Example. Federal ez tax form 2012 Randy White, a U. Federal ez tax form 2012 S. Federal ez tax form 2012 citizen, files returns on a calendar year basis. Federal ez tax form 2012 For all of 2011 and 2012, Randy was a bona fide resident of Puerto Rico. Federal ez tax form 2012 From January through April 2013, Randy continued to reside and maintain his principal place of business in and closer connection to Puerto Rico. Federal ez tax form 2012 On May 5, 2013, Randy moved and changed his tax home to Nevada. Federal ez tax form 2012 Later that year he established a closer connection to the United States than to Puerto Rico. Federal ez tax form 2012 Randy did not satisfy the presence test for 2013 with respect to Puerto Rico, nor the tax home or closer connection tests. Federal ez tax form 2012 However, because Randy was a bona fide resident of Puerto Rico for at least 2 tax years before he moved to Nevada in 2013, he was a bona fide resident of Puerto Rico from January 1 through May 4, 2013. Federal ez tax form 2012 Reporting a Change in Bona Fide Residence If you became or ceased to be a bona fide resident of a U. Federal ez tax form 2012 S. Federal ez tax form 2012 possession, you may need to file Form 8898. Federal ez tax form 2012 This applies to the U. Federal ez tax form 2012 S. Federal ez tax form 2012 possessions of American Samoa, the CNMI, Guam, Puerto Rico, and the USVI. Federal ez tax form 2012 Who Must File You must file Form 8898 for the tax year in which you meet both of the following conditions. Federal ez tax form 2012 Your worldwide gross income (defined below) in that tax year is more than $75,000. Federal ez tax form 2012 You meet one of the following. Federal ez tax form 2012 You take a position for U. Federal ez tax form 2012 S. Federal ez tax form 2012 tax purposes that you became a bona fide resident of a U. Federal ez tax form 2012 S. Federal ez tax form 2012 possession after a tax year for which you filed a U. Federal ez tax form 2012 S. Federal ez tax form 2012 income tax return as a citizen or resident alien of the United States but not as a bona fide resident of the possession. Federal ez tax form 2012 You are a citizen or resident alien of the United States who takes the position for U. Federal ez tax form 2012 S. Federal ez tax form 2012 tax purposes that you ceased to be a bona fide resident of a U. Federal ez tax form 2012 S. Federal ez tax form 2012 possession after a tax year for which you filed an income tax return (with the IRS, the possession tax authority, or both) as a bona fide resident of the possession. Federal ez tax form 2012 You take the position for U. Federal ez tax form 2012 S. Federal ez tax form 2012 tax purposes that you became a bona fide resident of Puerto Rico or American Samoa after a tax year for which you were required to file an income tax return as a bona fide resident of the CNMI, Guam, or the USVI. Federal ez tax form 2012 Worldwide gross income. Federal ez tax form 2012   Worldwide gross income means all income you received in the form of money, goods, property, and services, including any income from sources outside the United States (even if you can exclude part or all of it) and before any deductions, credits, or rebates. Federal ez tax form 2012 Example. Federal ez tax form 2012 You are a U. Federal ez tax form 2012 S. Federal ez tax form 2012 citizen who moved to the CNMI in December 2012, but did not become a bona fide resident of that possession until the 2013 tax year. Federal ez tax form 2012 You must file Form 8898 for the 2013 tax year if your worldwide gross income for that year was more than $75,000. Federal ez tax form 2012 Penalty for Not Filing Form 8898 If you are required to file Form 8898 for any tax year and you fail to file it, you may owe a penalty of $1,000. Federal ez tax form 2012 You may also owe this penalty if you do not include all the information required by the form or the form includes incorrect information. Federal ez tax form 2012 In either case, you will not owe this penalty if you can show that such failure is due to reasonable cause and not willful neglect. Federal ez tax form 2012 This is in addition to any criminal penalty that may be imposed. Federal ez tax form 2012 Prev  Up  Next   Home   More Online Publications