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Free 1040ez Instructions

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Free 1040ez Instructions

Free 1040ez instructions Publication 529 - Main Content Table of Contents Deductions Subject to the 2% LimitUnreimbursed Employee Expenses Tax Preparation Fees Other Expenses Deductions Not Subject to the 2% LimitList of Deductions Nondeductible ExpensesList of Nondeductible Expenses How To ReportWho can use Form 2106-EZ. Free 1040ez instructions Computer used in a home office. Free 1040ez instructions Example How To Get Tax HelpLow Income Taxpayer Clinics Deductions Subject to the 2% Limit You can deduct certain expenses as miscellaneous itemized deductions on Schedule A (Form 1040 or Form 1040NR). Free 1040ez instructions You can claim the amount of expenses that is more than 2% of your adjusted gross income. Free 1040ez instructions You figure your deduction on Schedule A by subtracting 2% of your adjusted gross income from the total amount of these expenses. Free 1040ez instructions Your adjusted gross income is the amount on Form 1040, line 38, or Form 1040NR, line 37. Free 1040ez instructions Generally, you apply the 2% limit after you apply any other deduction limit. Free 1040ez instructions For example, you apply the 50% (or 80%) limit on business-related meals and entertainment (discussed later under Travel, Transportation, Meals, Entertainment, Gifts, and Local Lodging ) before you apply the 2% limit. Free 1040ez instructions Deductions subject to the 2% limit are discussed in the following three categories. Free 1040ez instructions Unreimbursed employee expenses (Schedule A (Form 1040), line 21 or Schedule A (Form 1040NR), line 7). Free 1040ez instructions Tax preparation fees (Schedule A (Form 1040), line 22 or Schedule A (Form 1040NR), line 8). Free 1040ez instructions Other expenses (Schedule A (Form 1040), line 23 or Schedule A (Form 1040NR), line 9). Free 1040ez instructions Unreimbursed Employee Expenses Generally, the following expenses are deducted on Schedule A (Form 1040), line 21, or Schedule A (Form 1040NR), line 7. Free 1040ez instructions You can deduct only unreimbursed employee expenses that are: Paid or incurred during your tax year, For carrying on your trade or business of being an employee, and Ordinary and necessary. Free 1040ez instructions An expense is ordinary if it is common and accepted in your trade, business, or profession. Free 1040ez instructions An expense is necessary if it is appropriate and helpful to your business. Free 1040ez instructions An expense does not have to be required to be considered necessary. Free 1040ez instructions You may be able to deduct the following items as unreimbursed employee expenses. Free 1040ez instructions Business bad debt of an employee. Free 1040ez instructions Business liability insurance premiums. Free 1040ez instructions Damages paid to a former employer for breach of an employment contract. Free 1040ez instructions Depreciation on a computer your employer requires you to use in your work. Free 1040ez instructions Dues to a chamber of commerce if membership helps you do your job. Free 1040ez instructions Dues to professional societies. Free 1040ez instructions Educator expenses. Free 1040ez instructions Home office or part of your home used regularly and exclusively in your work. Free 1040ez instructions Job search expenses in your present occupation. Free 1040ez instructions Laboratory breakage fees. Free 1040ez instructions Legal fees related to your job. Free 1040ez instructions Licenses and regulatory fees. Free 1040ez instructions Malpractice insurance premiums. Free 1040ez instructions Medical examinations required by an employer. Free 1040ez instructions Occupational taxes. Free 1040ez instructions Passport for a business trip. Free 1040ez instructions Repayment of an income aid payment received under an employer's plan. Free 1040ez instructions Research expenses of a college professor. Free 1040ez instructions Rural mail carriers' vehicle expenses. Free 1040ez instructions Subscriptions to professional journals and trade magazines related to your work. Free 1040ez instructions Tools and supplies used in your work. Free 1040ez instructions Travel, transportation, meals, entertainment, gifts, and local lodging related to your work. Free 1040ez instructions Union dues and expenses. Free 1040ez instructions Work clothes and uniforms if required and not suitable for everyday use. Free 1040ez instructions Work-related education. Free 1040ez instructions Business Bad Debt A business bad debt is a loss from a debt created or acquired in your trade or business. Free 1040ez instructions Any other worthless debt is a business bad debt only if there is a very close relationship between the debt and your trade or business when the debt becomes worthless. Free 1040ez instructions A debt has a very close relationship to your trade or business of being an employee if your main motive for incurring the debt is a business reason. Free 1040ez instructions Example. Free 1040ez instructions You make a bona fide loan to the corporation you work for. Free 1040ez instructions It fails to pay you back. Free 1040ez instructions You had to make the loan in order to keep your job. Free 1040ez instructions You have a business bad debt as an employee. Free 1040ez instructions More information. Free 1040ez instructions   For more information on business bad debts, see chapter 10 in Publication 535. Free 1040ez instructions For information on nonbusiness bad debts, see chapter 4 in Publication 550, Investment Income and Expenses. Free 1040ez instructions Business Liability Insurance You can deduct insurance premiums you paid for protection against personal liability for wrongful acts on the job. Free 1040ez instructions Damages for Breach of Employment Contract If you break an employment contract, you can deduct damages you pay your former employer if the damages are attributable to the pay you received from that employer. Free 1040ez instructions Depreciation on Computers You can claim a depreciation deduction for a computer that you use in your work as an employee if its use is: For the convenience of your employer, and Required as a condition of your employment. Free 1040ez instructions For the convenience of your employer. Free 1040ez instructions   This means that your use of the computer is for a substantial business reason of your employer. Free 1040ez instructions You must consider all facts in making this determination. Free 1040ez instructions Use of your computer during your regular working hours to carry on your employer's business is generally for the convenience of your employer. Free 1040ez instructions Required as a condition of your employment. Free 1040ez instructions   This means that you cannot properly perform your duties without the computer. Free 1040ez instructions Whether you can properly perform your duties without it depends on all the facts and circumstances. Free 1040ez instructions It is not necessary that your employer explicitly requires you to use your computer. Free 1040ez instructions But neither is it enough that your employer merely states that your use of the item is a condition of your employment. Free 1040ez instructions Example. Free 1040ez instructions You are an engineer with an engineering firm. Free 1040ez instructions You occasionally take work home at night rather than work late at the office. Free 1040ez instructions You own and use a computer that is similar to the one you use at the office to complete your work at home. Free 1040ez instructions Since your use of the computer is not for the convenience of your employer and is not required as a condition of your employment, you cannot claim a depreciation deduction for it. Free 1040ez instructions Which depreciation method to use. Free 1040ez instructions   The depreciation method you use depends on whether you meet the more-than-50%-use test. Free 1040ez instructions More-than-50%-use test met. Free 1040ez instructions   You meet this test if you use the computer more than 50% in your work. Free 1040ez instructions If you meet this test, you can claim accelerated depreciation under the General Depreciation System (GDS). Free 1040ez instructions In addition, you may be able to take the section 179 deduction for the year you place the item in service. Free 1040ez instructions More-than-50%-use test not met. Free 1040ez instructions   If you do not meet the more-than-50%-use test, you are limited to the straight line method of depreciation under the Alternative Depreciation System (ADS). Free 1040ez instructions You also cannot claim the section 179 deduction. Free 1040ez instructions (But if you use your computer in a home office, see the exception below. Free 1040ez instructions ) Investment use. Free 1040ez instructions   Your use of a computer in connection with investments (described later under Other Expenses ) does not count as use in your work. Free 1040ez instructions However, you can combine your investment use with your work use in figuring your depreciation deduction. Free 1040ez instructions Exception for computer used in a home office. Free 1040ez instructions   The more-than-50%-use test does not apply to a computer used only in a part of your home that meets the requirements described later under Home Office . Free 1040ez instructions You can claim accelerated depreciation using GDS for a computer used in a qualifying home office, even if you do not use it more than 50% in your work. Free 1040ez instructions You also may be able to take a section 179 deduction for the year you place the computer in service. Free 1040ez instructions See Computer used in a home office under How To Report, later. Free 1040ez instructions More information. Free 1040ez instructions   For more information on depreciation and the section 179 deduction for computers and other items used in a home office, see Business Furniture and Equipment in Publication 587. Free 1040ez instructions Publication 946 has detailed information about the section 179 deduction and depreciation deductions using GDS and ADS. Free 1040ez instructions Reporting your depreciation deduction. Free 1040ez instructions    See How To Report, later, for information about reporting a deduction for depreciation. Free 1040ez instructions You must keep records to prove your percentage of business and investment use. Free 1040ez instructions Dues to Chambers of Commerce and Professional Societies You may be able to deduct dues paid to professional organizations (such as bar associations and medical associations) and to chambers of commerce and similar organizations, if membership helps you carry out the duties of your job. Free 1040ez instructions Similar organizations include: Boards of trade, Business leagues, Civic or public service organizations, Real estate boards, and Trade associations. Free 1040ez instructions Lobbying and political activities. Free 1040ez instructions    You may not be able to deduct that part of your dues that is for certain lobbying and political activities. Free 1040ez instructions See Lobbying Expenses under Nondeductible Expenses, later. Free 1040ez instructions Educator Expenses If you were an eligible educator in 2013, you can deduct up to $250 of qualified expenses you paid in 2013 as an adjustment to gross income on Form 1040, line 23, rather than as a miscellaneous itemized deduction. Free 1040ez instructions If you file Form 1040A, you can deduct these expenses on line 16. Free 1040ez instructions If you and your spouse are filing jointly and both of you were eligible educators, the maximum deduction is $500. Free 1040ez instructions However, neither spouse can deduct more than $250 of his or her qualified expenses. Free 1040ez instructions Eligible educator. Free 1040ez instructions   An eligible educator is a kindergarten through grade 12 teacher, instructor, counselor, principal, or aide in school for at least 900 hours during a school year. Free 1040ez instructions Qualified expenses. Free 1040ez instructions   Qualified expenses include ordinary and necessary expenses paid in connection with books, supplies, equipment (including computer equipment, software, and services), and other materials used in the classroom. Free 1040ez instructions An ordinary expense is one that is common and accepted in your educational field. Free 1040ez instructions A necessary expense is one that is helpful and appropriate for your profession as an educator. Free 1040ez instructions An expense does not have to be required to be considered necessary. Free 1040ez instructions   Qualified expenses do not include expenses for home schooling or for nonathletic supplies for courses in health or physical education. Free 1040ez instructions You must reduce your qualified expenses by the following amounts. Free 1040ez instructions Excludable U. Free 1040ez instructions S. Free 1040ez instructions series EE and I savings bond interest from Form 8815. Free 1040ez instructions Nontaxable qualified state tuition program earnings. Free 1040ez instructions Nontaxable earnings from Coverdell education savings accounts. Free 1040ez instructions Any reimbursements you received for those expenses that were not reported to you on your Form W-2, box 1. Free 1040ez instructions Educator expenses over limit. Free 1040ez instructions   If you were an educator in 2013 and you had qualified expenses that you cannot take as an adjustment to gross income, you can deduct the rest as an itemized deduction subject to the 2% limit. Free 1040ez instructions Home Office If you use a part of your home regularly and exclusively for business purposes, you may be able to deduct a part of the operating expenses and depreciation of your home. Free 1040ez instructions You can claim this deduction for the business use of a part of your home only if you use that part of your home regularly and exclusively: As your principal place of business for any trade or business, As a place to meet or deal with your patients, clients, or customers in the normal course of your trade or business, or In the case of a separate structure not attached to your home, in connection with your trade or business. Free 1040ez instructions The regular and exclusive business use must be for the convenience of your employer and not just appropriate and helpful in your job. Free 1040ez instructions Principal place of business. Free 1040ez instructions   If you have more than one place of business, the business part of your home is your principal place of business if: You use it regularly and exclusively for administrative or management activities of your trade or business, and You have no other fixed location where you conduct substantial administrative or management activities of your trade or business. Free 1040ez instructions   Otherwise, the location of your principal place of business generally depends on the relative importance of the activities performed at each location and the time spent at each location. Free 1040ez instructions You should keep records that will give the information needed to figure the deduction according to these rules. Free 1040ez instructions Also keep canceled checks, substitute checks, or account statements and receipts of the expenses paid to prove the deductions you claim. Free 1040ez instructions More information. Free 1040ez instructions   See Publication 587 for more detailed information and a worksheet for figuring the deduction. Free 1040ez instructions Job Search Expenses You can deduct certain expenses you have in looking for a new job in your present occupation, even if you do not get a new job. Free 1040ez instructions You cannot deduct these expenses if: You are looking for a job in a new occupation, There was a substantial break between the ending of your last job and your looking for a new one, or You are looking for a job for the first time. Free 1040ez instructions Employment and outplacement agency fees. Free 1040ez instructions    You can deduct employment and outplacement agency fees you pay in looking for a new job in your present occupation. Free 1040ez instructions Employer pays you back. Free 1040ez instructions   If, in a later year, your employer pays you back for employment agency fees, you must include the amount you receive in your gross income up to the amount of your tax benefit in the earlier year. Free 1040ez instructions See Recoveries in Publication 525. Free 1040ez instructions Employer pays the employment agency. Free 1040ez instructions   If your employer pays the fees directly to the employment agency and you are not responsible for them, you do not include them in your gross income. Free 1040ez instructions Résumé. Free 1040ez instructions   You can deduct amounts you spend for preparing and mailing copies of a résumé to prospective employers if you are looking for a new job in your present occupation. Free 1040ez instructions Travel and transportation expenses. Free 1040ez instructions   If you travel to an area and, while there, you look for a new job in your present occupation, you may be able to deduct travel expenses to and from the area. Free 1040ez instructions You can deduct the travel expenses if the trip is primarily to look for a new job. Free 1040ez instructions The amount of time you spend on personal activity compared to the amount of time you spend in looking for work is important in determining whether the trip is primarily personal or is primarily to look for a new job. Free 1040ez instructions   Even if you cannot deduct the travel expenses to and from an area, you can deduct the expenses of looking for a new job in your present occupation while in the area. Free 1040ez instructions    You can choose to use the standard mileage rate to figure your car expenses. Free 1040ez instructions The 2013 rate for business use of a vehicle is 56½ cents per mile. Free 1040ez instructions See Publication 463 for more information on travel and car expenses. Free 1040ez instructions Legal Fees You can deduct legal fees related to doing or keeping your job. Free 1040ez instructions Licenses and Regulatory Fees You can deduct the amount you pay each year to state or local governments for licenses and regulatory fees for your trade, business, or profession. Free 1040ez instructions Occupational Taxes You can deduct an occupational tax charged at a flat rate by a locality for the privilege of working or conducting a business in the locality. Free 1040ez instructions If you are an employee, you can claim occupational taxes only as a miscellaneous deduction subject to the 2% limit; you cannot claim them as a deduction for taxes elsewhere on your return. Free 1040ez instructions Repayment of Income Aid Payment An “income aid payment” is one that is received under an employer's plan to aid employees who lose their jobs because of lack of work. Free 1040ez instructions If you repay a lump-sum income aid payment that you received and included in income in an earlier year, you can deduct the repayment. Free 1040ez instructions Research Expenses of a College Professor If you are a college professor, you can deduct your research expenses, including travel expenses, for teaching, lecturing, or writing and publishing on subjects that relate directly to your teaching duties. Free 1040ez instructions You must have undertaken the research as a means of carrying out the duties expected of a professor and without expectation of profit apart from salary. Free 1040ez instructions However, you cannot deduct the cost of travel as a form of education. Free 1040ez instructions Rural Mail Carriers' Vehicle Expenses If your expenses to use a vehicle in performing services as a rural mail carrier are more than the amount of your reimbursements, you can deduct the unreimbursed expenses. Free 1040ez instructions See chapter 4 of Publication 463 for more information. Free 1040ez instructions Tools Used in Your Work Generally, you can deduct amounts you spend for tools used in your work if the tools wear out and are thrown away within 1 year from the date of purchase. Free 1040ez instructions You can depreciate the cost of tools that have a useful life substantially beyond the tax year. Free 1040ez instructions For more information about depreciation, see Publication 946. Free 1040ez instructions Travel, Transportation, Meals, Entertainment, Gifts, and Local Lodging If you are an employee and have ordinary and necessary business-related expenses for travel away from home, local transportation, entertainment, and gifts, you may be able to deduct these expenses. Free 1040ez instructions Generally, you must file Form 2106 or Form 2106-EZ to claim these expenses. Free 1040ez instructions Travel expenses. Free 1040ez instructions   Travel expenses are those incurred while traveling away from home for your employer. Free 1040ez instructions You can deduct travel expenses paid or incurred in connection with a temporary work assignment. Free 1040ez instructions Generally, you cannot deduct travel expenses paid or incurred in connection with an indefinite work assignment. Free 1040ez instructions   Travel expenses may include: The cost of getting to and from your business destination (air, rail, bus, car, etc. Free 1040ez instructions ), Meals and lodging while away from home, Taxi fares, Baggage charges, and Cleaning and laundry expenses. Free 1040ez instructions   Travel expenses are discussed more fully in chapter 1 of Publication 463. Free 1040ez instructions Temporary work assignment. Free 1040ez instructions    If your assignment or job away from home in a single location is realistically expected to last (and does in fact last) for 1 year or less, it is temporary, unless there are facts and circumstances that indicate it is not. Free 1040ez instructions Indefinite work assignment. Free 1040ez instructions   If your assignment or job away from home in a single location is realistically expected to last for more than 1 year, it is indefinite, whether or not it actually lasts for more than 1 year. Free 1040ez instructions If your assignment or job away from home in a single location is realistically expected to last for 1 year or less, but at some later date it is realistically expected to exceed 1 year, it will be treated as temporary (in the absence of facts and circumstances indicating otherwise) until the date that your realistic expectation changes, and it will be treated as indefinite after that date. Free 1040ez instructions Federal crime investigation and prosecution. Free 1040ez instructions   If you are a federal employee participating in a federal crime investigation or prosecution, you are not subject to the 1-year rule for deducting temporary travel expenses. Free 1040ez instructions This means that you may be able to deduct travel expenses even if you are away from your tax home for more than 1 year. Free 1040ez instructions   To qualify, the Attorney General must certify that you are traveling: For the Federal Government, In a temporary duty status, and To investigate, prosecute, or provide support services for the investigation or prosecution of a federal crime. Free 1040ez instructions Armed Forces reservists traveling more than 100 miles from home. Free 1040ez instructions   If you are a member of a reserve component of the Armed Forces of the United States and you travel more than 100 miles away from home in connection with your performance of services as a member of the reserves, you can deduct some of your travel expenses as an adjustment to gross income rather than as a miscellaneous itemized deduction. Free 1040ez instructions The amount of expenses you can deduct as an adjustment to gross income is limited to the regular federal per diem rate (for lodging, meals, and incidental expenses) and the standard mileage rate (for car expenses) plus any parking fees, ferry fees, and tolls. Free 1040ez instructions The balance, if any, is reported on Schedule A. Free 1040ez instructions   You are a member of a reserve component of the Armed Forces of the United States if you are in the Army, Naval, Marine Corps, Air Force, Coast Guard Reserve, the Army National Guard of the United States, the Air National Guard of the United States, or the Reserve Corps of the Public Health Service. Free 1040ez instructions   For more information on travel expenses, see Publication 463. Free 1040ez instructions Local transportation expenses. Free 1040ez instructions   Local transportation expenses are the expenses of getting from one workplace to another when you are not traveling away from home. Free 1040ez instructions They include the cost of transportation by air, rail, bus, taxi, and the cost of using your car. Free 1040ez instructions   You can choose to use the standard mileage rate to figure your car expenses. Free 1040ez instructions The 2013 rate for business use of a vehicle is 56½ cents per mile. Free 1040ez instructions    In general, the costs of commuting between your residence and your place of business are nondeductible. Free 1040ez instructions Work at two places in a day. Free 1040ez instructions   If you work at two places in a day, whether or not for the same employer, you can generally deduct the expenses of getting from one workplace to the other. Free 1040ez instructions Temporary work location. Free 1040ez instructions   You can deduct expenses incurred in going between your home and a temporary work location if at least one of the following applies. Free 1040ez instructions The work location is outside the metropolitan area where you live and normally work. Free 1040ez instructions You have at least one regular work location (other than your home) for the same trade or business. Free 1040ez instructions (If this applies, the distance between your home and the temporary work location does not matter. Free 1040ez instructions )   For this purpose, a work location is generally considered temporary if your work there is realistically expected to last (and does in fact last) for 1 year or less. Free 1040ez instructions It is not temporary if your work there is realistically expected to last for more than 1 year, even if it actually lasts for 1 year or less. Free 1040ez instructions If your work there initially is realistically expected to last for 1 year or less, but later is realistically expected to last for more than 1 year, the work location is generally considered temporary until the date your realistic expectation changes and not temporary after that date. Free 1040ez instructions For more information, see chapter 1 of Publication 463. Free 1040ez instructions Home office. Free 1040ez instructions   You can deduct expenses incurred in going between your home and a workplace if your home is your principal place of business for the same trade or business. Free 1040ez instructions (In this situation, whether the other workplace is temporary or regular and its distance from your home do not matter. Free 1040ez instructions ) See Home Office , earlier, for a discussion on the use of your home as your principal place of business. Free 1040ez instructions Meals and entertainment. Free 1040ez instructions   Generally, you can deduct entertainment expenses (including entertainment-related meals) only if they are directly related to the active conduct of your trade or business. Free 1040ez instructions However, the expense only needs to be associated with the active conduct of your trade or business if it directly precedes or follows a substantial and bona fide business-related discussion. Free 1040ez instructions   You can deduct only 50% of your business-related meal and entertainment expenses unless the expenses meet certain exceptions. Free 1040ez instructions You apply this 50% limit before you apply the 2%-of-adjusted-gross-income limit. Free 1040ez instructions Meals when subject to “hours of service” limits. Free 1040ez instructions   You can deduct 80% of your business-related meal expenses if you consume the meals during or incident to any period subject to the Department of Transportation's “hours of service” limits. Free 1040ez instructions You apply this 80% limit before you apply the 2%-of-adjusted-gross-income limit. Free 1040ez instructions Gift expenses. Free 1040ez instructions   You can generally deduct up to $25 of business gifts you give to any one individual during the year. Free 1040ez instructions The following items do not count toward the $25 limit. Free 1040ez instructions Identical, widely distributed items costing $4 or less that have your name clearly and permanently imprinted. Free 1040ez instructions Signs, racks, and promotional materials to be displayed on the business premises of the recipient. Free 1040ez instructions Local lodging. Free 1040ez instructions   If your employer provides or requires you to obtain lodging while you are not traveling away from home, you can deduct the cost of the lodging if it is: on a temporary basis, necessary for you to participate in or be available for a business meeting or employer function, and the costs are ordinary and necessary, but not lavish or extravagant. Free 1040ez instructions   If your employer provides the lodging or reimburses you for the cost of the lodging, you can deduct the cost only if the value or the reimbursement is included in your gross income because it is reported as wages on your Form W-2. Free 1040ez instructions Additional information. Free 1040ez instructions    See Publication 463 for more information on travel, transportation, meal, entertainment, and gift expenses, and reimbursements for these expenses. Free 1040ez instructions Union Dues and Expenses You can deduct dues and initiation fees you pay for union membership. Free 1040ez instructions You can also deduct assessments for benefit payments to unemployed union members. Free 1040ez instructions However, you cannot deduct the part of the assessments or contributions that provides funds for the payment of sick, accident, or death benefits. Free 1040ez instructions Also, you cannot deduct contributions to a pension fund even if the union requires you to make the contributions. Free 1040ez instructions You may not be able to deduct amounts you pay to the union that are related to certain lobbying and political activities. Free 1040ez instructions See Lobbying Expenses under Nondeductible Expenses, later. Free 1040ez instructions Work Clothes and Uniforms You can deduct the cost and upkeep of work clothes if the following two requirements are met. Free 1040ez instructions You must wear them as a condition of your employment. Free 1040ez instructions The clothes are not suitable for everyday wear. Free 1040ez instructions It is not enough that you wear distinctive clothing. Free 1040ez instructions The clothing must be specifically required by your employer. Free 1040ez instructions Nor is it enough that you do not, in fact, wear your work clothes away from work. Free 1040ez instructions The clothing must not be suitable for taking the place of your regular clothing. Free 1040ez instructions Examples of workers who may be able to deduct the cost and upkeep of work clothes are: delivery workers, firefighters, health care workers, law enforcement officers, letter carriers, professional athletes, and transportation workers (air, rail, bus, etc. Free 1040ez instructions ). Free 1040ez instructions Musicians and entertainers can deduct the cost of theatrical clothing and accessories that are not suitable for everyday wear. Free 1040ez instructions However, work clothing consisting of white cap, white shirt or white jacket, white bib overalls, and standard work shoes, which a painter is required by his union to wear on the job, is not distinctive in character or in the nature of a uniform. Free 1040ez instructions Similarly, the costs of buying and maintaining blue work clothes worn by a welder at the request of a foreman are not deductible. Free 1040ez instructions Protective clothing. Free 1040ez instructions   You can deduct the cost of protective clothing required in your work, such as safety shoes or boots, safety glasses, hard hats, and work gloves. Free 1040ez instructions   Examples of workers who may be required to wear safety items are: carpenters, cement workers, chemical workers, electricians, fishing boat crew members, machinists, oil field workers, pipe fitters, steamfitters, and truck drivers. Free 1040ez instructions Military uniforms. Free 1040ez instructions   You generally cannot deduct the cost of your uniforms if you are on full-time active duty in the armed forces. Free 1040ez instructions However, if you are an armed forces reservist, you can deduct the unreimbursed cost of your uniform if military regulations restrict you from wearing it except while on duty as a reservist. Free 1040ez instructions In figuring the deduction, you must reduce the cost by any nontaxable allowance you receive for these expenses. Free 1040ez instructions   If local military rules do not allow you to wear fatigue uniforms when you are off duty, you can deduct the amount by which the cost of buying and keeping up these uniforms is more than the uniform allowance you receive. Free 1040ez instructions   If you are a student at an armed forces academy, you cannot deduct the cost of your uniforms if they replace regular clothing. Free 1040ez instructions However, you can deduct the cost of insignia, shoulder boards, and related items. Free 1040ez instructions    You can deduct the cost of your uniforms if you are a civilian faculty or staff member of a military school. Free 1040ez instructions Work-Related Education You can deduct expenses you have for education, even if the education may lead to a degree, if the education meets at least one of the following two tests. Free 1040ez instructions It maintains or improves skills required in your present work. Free 1040ez instructions It is required by your employer or the law to keep your salary, status, or job, and the requirement serves a business purpose of your employer. Free 1040ez instructions You cannot deduct expenses you have for education, even though one or both of the preceding tests are met, if the education: Is needed to meet the minimum educational requirements to qualify you in your trade or business, or Is part of a program of study that will lead to qualifying you in a new trade or business. Free 1040ez instructions If your education qualifies, you can deduct expenses for tuition, books, supplies, laboratory fees, and similar items, and certain transportation costs. Free 1040ez instructions If the education qualifies you for a new trade or business, you cannot deduct the educational expenses even if you do not intend to enter that trade or business. Free 1040ez instructions Travel as education. Free 1040ez instructions   You cannot deduct the cost of travel that in itself constitutes a form of education. Free 1040ez instructions For example, a French teacher who travels to France to maintain general familiarity with the French language and culture cannot deduct the cost of the trip as an educational expense. Free 1040ez instructions More information. Free 1040ez instructions    See Publication 970, Tax Benefits for Education, for a complete discussion of the deduction for work-related education expenses. Free 1040ez instructions Education Expenses During Unemployment If you stop working for a year or less in order to get education in order to maintain or improve skills needed in your present work and then return to the same general type of work, your absence is considered temporary. Free 1040ez instructions Education that you get during a temporary absence is qualifying work-related education if it maintains or improves skills needed in your present work. Free 1040ez instructions Tax Preparation Fees You can usually deduct tax preparation fees on the return for the year in which you pay them. Free 1040ez instructions Thus, on your 2013 return, you can deduct fees paid in 2013 for preparing your 2012 return. Free 1040ez instructions These fees include the cost of tax preparation software programs and tax publications. Free 1040ez instructions They also include any fee you paid for electronic filing of your return. Free 1040ez instructions See Tax preparation fees under How To Report, later. Free 1040ez instructions Other Expenses You can deduct certain other expenses as miscellaneous itemized deductions subject to the 2%-of-adjusted-gross-income limit. Free 1040ez instructions On Schedule A (Form 1040), line 23, or Schedule A (Form 1040NR), line 9, you can deduct the ordinary and necessary expenses that you pay: To produce or collect income that must be included in your gross income, To manage, conserve, or maintain property held for producing such income, or To determine, contest, pay, or claim a refund of any tax. Free 1040ez instructions You can deduct expenses you pay for the purposes in (1) and (2) above only if they are reasonable and closely related to these purposes. Free 1040ez instructions These other expenses include the following items. Free 1040ez instructions Appraisal fees for a casualty loss or charitable contribution. Free 1040ez instructions Casualty and theft losses from property used in performing services as an employee. Free 1040ez instructions Clerical help and office rent in caring for investments. Free 1040ez instructions Depreciation on home computers used for investments. Free 1040ez instructions Excess deductions (including administrative expenses) allowed a beneficiary on termination of an estate or trust. Free 1040ez instructions Fees to collect interest and dividends. Free 1040ez instructions Hobby expenses, but generally not more than hobby income. Free 1040ez instructions Indirect miscellaneous deductions from pass-through entities. Free 1040ez instructions Investment fees and expenses. Free 1040ez instructions Legal fees related to producing or collecting taxable income or getting tax advice. Free 1040ez instructions Loss on deposits in an insolvent or bankrupt financial institution. Free 1040ez instructions Loss on traditional IRAs or Roth IRAs, when all amounts have been distributed to you. Free 1040ez instructions Repayments of income. Free 1040ez instructions Repayments of social security benefits. Free 1040ez instructions Safe deposit box rental, except for storing jewelry and other personal effects. Free 1040ez instructions Service charges on dividend reinvestment plans. Free 1040ez instructions Tax advice fees. Free 1040ez instructions Trustee's fees for your IRA, if separately billed and paid. Free 1040ez instructions If the expenses you pay produce income that is only partially taxable, see Tax-Exempt Income Expenses, later, under Nondeductible Expenses. Free 1040ez instructions Appraisal Fees You can deduct appraisal fees if you pay them to figure a casualty loss or the fair market value of donated property. Free 1040ez instructions Casualty and Theft Losses You can deduct a casualty or theft loss as a miscellaneous itemized deduction subject to the 2% limit if you used the damaged or stolen property in performing services as an employee. Free 1040ez instructions First report the loss in Section B of Form 4684, Casualties and Thefts. Free 1040ez instructions You may also have to include the loss on Form 4797, Sales of Business Property, if you are otherwise required to file that form. Free 1040ez instructions To figure your deduction, add all casualty or theft losses from this type of property included on Form 4684, lines 32 and 38b, or Form 4797, line 18a. Free 1040ez instructions For more information on casualty and theft losses, see Publication 547, Casualties, Disasters, and Thefts. Free 1040ez instructions Clerical Help and Office Rent You can deduct office expenses, such as rent and clerical help, that you have in connection with your investments and collecting the taxable income on them. Free 1040ez instructions Credit or Debit Card Convenience Fees You can deduct the convenience fee charged by the card processor for paying your income tax (including estimated tax payments) by credit or debit card. Free 1040ez instructions The fees are deductible on the return for the year in which you paid them. Free 1040ez instructions For example, fees charged to payments made in 2013 can be claimed on the 2013 tax return. Free 1040ez instructions Depreciation on Home Computer You can deduct depreciation on your home computer if you use it to produce income (for example, to manage your investments that produce taxable income). Free 1040ez instructions You generally must depreciate the computer using the straight line method over the Alternative Depreciation System (ADS) recovery period. Free 1040ez instructions But if you work as an employee and also use the computer in that work, see Depreciation on Computers under Unreimbursed Employee Expenses, earlier. Free 1040ez instructions For more information on depreciation, see Publication 946. Free 1040ez instructions Excess Deductions of an Estate If an estate's total deductions in its last tax year are more than its gross income for that year, the beneficiaries succeeding to the estate's property can deduct the excess. Free 1040ez instructions Do not include deductions for the estate's personal exemption and charitable contributions when figuring the estate's total deductions. Free 1040ez instructions The beneficiaries can claim the deduction only for the tax year in which, or with which, the estate terminates, whether the year of termination is a normal year or a short tax year. Free 1040ez instructions For more information, see Termination of Estate in Publication 559, Survivors, Executors, and Administrators. Free 1040ez instructions Fees To Collect Interest and Dividends You can deduct fees you pay to a broker, bank, trustee, or similar agent to collect your taxable bond interest or dividends on shares of stock. Free 1040ez instructions But you cannot deduct a fee you pay to a broker to buy investment property, such as stocks or bonds. Free 1040ez instructions You must add the fee to the cost of the property. Free 1040ez instructions You cannot deduct the fee you pay to a broker to sell securities. Free 1040ez instructions You can use the fee only to figure gain or loss from the sale. Free 1040ez instructions See the instructions for Schedule D (Form 1040) for information on how to report the fee. Free 1040ez instructions Hobby Expenses You can generally deduct hobby expenses, but only up to the amount of hobby income. Free 1040ez instructions A hobby is not a business because it is not carried on to make a profit. Free 1040ez instructions See Not-for-Profit Activities in chapter 1 of Publication 535. Free 1040ez instructions Indirect Deductions of Pass-Through Entities Pass-through entities include partnerships, S corporations, and mutual funds that are not publicly offered. Free 1040ez instructions Deductions of pass-through entities are passed through to the partners or shareholders. Free 1040ez instructions The partners or shareholders can deduct their share of passed-through deductions for investment expenses as miscellaneous itemized deductions subject to the 2% limit. Free 1040ez instructions Example. Free 1040ez instructions You are a member of an investment club that is formed solely to invest in securities. Free 1040ez instructions The club is treated as a partnership. Free 1040ez instructions The partnership's income is solely from taxable dividends, interest, and gains from sales of securities. Free 1040ez instructions In this case, you can deduct your share of the partnership's operating expenses as miscellaneous itemized deductions subject to the 2% limit. Free 1040ez instructions However, if the investment club partnership has investments that also produce nontaxable income, you cannot deduct your share of the partnership's expenses that produce the nontaxable income. Free 1040ez instructions Publicly offered mutual funds. Free 1040ez instructions   Publicly offered mutual funds do not pass deductions for investment expenses through to shareholders. Free 1040ez instructions A mutual fund is “publicly offered” if it is: Continuously offered pursuant to a public offering, Regularly traded on an established securities market, or Held by or for at least 500 persons at all times during the tax year. Free 1040ez instructions   A publicly offered mutual fund will send you a Form 1099-DIV, Dividends and Distributions, or a substitute form, showing the net amount of dividend income (gross dividends minus investment expenses). Free 1040ez instructions This net figure is the amount you report on your return as income. Free 1040ez instructions You cannot further deduct investment expenses related to publicly offered mutual funds because they are already included as part of the net income amount. Free 1040ez instructions Information returns. Free 1040ez instructions   You should receive information returns from pass-through entities. Free 1040ez instructions Partnerships and S corporations. Free 1040ez instructions   These entities issue Schedule K-1, which lists the items and amounts you must report, and identifies the tax return schedules and lines to use. Free 1040ez instructions Nonpublicly offered mutual funds. Free 1040ez instructions   These funds will send you a Form 1099-DIV, or a substitute form, showing your share of gross income and investment expenses. Free 1040ez instructions You can claim the expenses only as a miscellaneous itemized deduction subject to the 2% limit. Free 1040ez instructions Investment Fees and Expenses You can deduct investment fees, custodial fees, trust administration fees, and other expenses you paid for managing your investments that produce taxable income. Free 1040ez instructions Legal Expenses You can usually deduct legal expenses that you incur in attempting to produce or collect taxable income or that you pay in connection with the determination, collection, or refund of any tax. Free 1040ez instructions You can also deduct legal expenses that are: Related to either doing or keeping your job, such as those you paid to defend yourself against criminal charges arising out of your trade or business, For tax advice related to a divorce if the bill specifies how much is for tax advice and it is determined in a reasonable way, or To collect taxable alimony. Free 1040ez instructions You can deduct expenses of resolving tax issues relating to profit or loss from business (Schedule C or C-EZ), rentals or royalties (Schedule E), or farm income and expenses (Schedule F) on the appropriate schedule. Free 1040ez instructions You deduct expenses of resolving nonbusiness tax issues on Schedule A (Form 1040 or Form 1040NR). Free 1040ez instructions See Tax Preparation Fees, earlier. Free 1040ez instructions Unlawful discrimination claims. Free 1040ez instructions   You may be able to deduct, as an adjustment to income on Form 1040, line 36, or Form 1040NR, line 35, rather than as a miscellaneous itemized deduction, attorney fees and court costs for actions settled or decided after October 22, 2004, involving a claim of unlawful discrimination, a claim against the U. Free 1040ez instructions S. Free 1040ez instructions Government, or a claim made under section 1862(b)(3)(A) of the Social Security Act. Free 1040ez instructions However, the amount you can deduct on Form 1040, line 36, or Form 1040NR, line 35, is limited to the amount of the judgment or settlement you are including in income for the tax year. Free 1040ez instructions See Publication 525 for more information. Free 1040ez instructions Loss on Deposits A loss on deposits can occur when a bank, credit union, or other financial institution becomes insolvent or bankrupt. Free 1040ez instructions If you can reasonably estimate the amount of your loss on money you have on deposit in a financial institution that becomes insolvent or bankrupt, you can generally choose to deduct it in the current year even though its exact amount has not been finally determined. Free 1040ez instructions If elected, the casualty loss is subject to certain deduction limitations. Free 1040ez instructions The election is made on Form 4684. Free 1040ez instructions Once you make this choice, you cannot change it without IRS approval. Free 1040ez instructions If none of the deposit is federally insured, you can deduct the loss in either of the following ways. Free 1040ez instructions As an ordinary loss (as a miscellaneous itemized deduction subject to the 2% limit). Free 1040ez instructions Write the name of the financial institution and “Insolvent Financial Institution” beside the amount on Schedule A (Form 1040), line 23, or Schedule A (Form 1040NR), line 9. Free 1040ez instructions This deduction is limited to $20,000 ($10,000 if you are married filing separately) for each financial institution, reduced by any expected state insurance proceeds. Free 1040ez instructions As a casualty loss. Free 1040ez instructions Report it on Form 4684 first and then on Schedule A (Form 1040). Free 1040ez instructions See Publication 547 for details. Free 1040ez instructions As a nonbusiness bad debt. Free 1040ez instructions Report it on Schedule D (Form 1040). Free 1040ez instructions If any part of the deposit is federally insured, you can deduct the loss only as a casualty loss. Free 1040ez instructions Exception. Free 1040ez instructions   You cannot make this choice if you are a 1%-or-more-owner or an officer of the financial institution, or are related to such owner or officer. Free 1040ez instructions For a definition of “related,” see Deposit in Insolvent or Bankrupt Financial Institution in chapter 4 of Publication 550. Free 1040ez instructions Actual loss different from estimated loss. Free 1040ez instructions   If you make this choice and your actual loss is less than your estimated loss, you must include the excess in income. Free 1040ez instructions See Recoveries in Publication 525. Free 1040ez instructions If your actual loss is more than your estimated loss, treat the excess loss as explained under Choice not made, next. Free 1040ez instructions Choice not made. Free 1040ez instructions   If you do not make this choice (or if you have an excess actual loss after choosing to deduct your estimated loss), treat your loss (or excess loss) as a nonbusiness bad debt (deductible as a short-term capital loss) in the year its amount is finally determined. Free 1040ez instructions See Nonbusiness Bad Debts in chapter 4 of Publication 550. Free 1040ez instructions Loss on IRA If you have a loss on your traditional IRA (or Roth IRA) investment, you can deduct the loss as a miscellaneous itemized deduction subject to the 2% limit, but only when all the amounts in all your traditional IRA (or Roth IRA) accounts have been distributed to you and the total distributions are less than your unrecovered basis. Free 1040ez instructions For more information, see Publication 590, Individual Retirement Arrangements (IRAs). Free 1040ez instructions Repayments of Income If you had to repay an amount that you included in income in an earlier year, you may be able to deduct the amount you repaid. Free 1040ez instructions If the amount you had to repay was ordinary income of $3,000 or less, the deduction is subject to the 2% limit. Free 1040ez instructions If it was more than $3,000, see Repayments Under Claim of Right under Deductions Not Subject to the 2% Limit, later. Free 1040ez instructions Repayments of Social Security Benefits If the total of the amounts in box 5 (net benefits for 2013) of all your Forms SSA-1099, Social Security Benefit Statement, and Forms RRB-1099, Payments By the Railroad Retirement Board, is a negative figure (a figure in parentheses), you may be able to take a miscellaneous itemized deduction subject to the 2% limit. Free 1040ez instructions The amount you can deduct is the part of the negative figure that represents an amount you included in gross income in an earlier year. Free 1040ez instructions The amount in box 5 of Form SSA-1099 or RRB-1099 is the net amount of your benefits for the year. Free 1040ez instructions It will be a negative figure if the amount of benefits you repaid in 2013 (box 4) is more than the gross amount of benefits paid to you in 2013 (box 3). Free 1040ez instructions If the deduction is more than $3,000, you will have to use a special computation to figure your tax. Free 1040ez instructions See Publication 915, Social Security and Equivalent Railroad Retirement Benefits, for additional information. Free 1040ez instructions Safe Deposit Box Rent You can deduct safe deposit box rent if you use the box to store taxable income-producing stocks, bonds, or investment-related papers and documents. Free 1040ez instructions You cannot deduct the rent if you use the box only for jewelry, other personal items, or tax-exempt securities. Free 1040ez instructions Service Charges on Dividend Reinvestment Plans You can deduct service charges you pay as a subscriber in a dividend reinvestment plan. Free 1040ez instructions These service charges include payments for: Holding shares acquired through a plan, Collecting and reinvesting cash dividends, and Keeping individual records and providing detailed statements of accounts. Free 1040ez instructions Trustee's Administrative Fees for IRA Trustee's administrative fees that are billed separately and paid by you in connection with your IRA are deductible (if they are ordinary and necessary) as a miscellaneous itemized deduction subject to the 2% limit. Free 1040ez instructions Deductions Not Subject to the 2% Limit You can deduct the items listed below as miscellaneous itemized deductions. Free 1040ez instructions They are not subject to the 2% limit. Free 1040ez instructions Report these items on Schedule A (Form 1040), line 28, or Schedule A (Form 1040NR), line 14. Free 1040ez instructions List of Deductions Amortizable premium on taxable bonds. Free 1040ez instructions Casualty and theft losses from income-producing property. Free 1040ez instructions Federal estate tax on income in respect of a decedent. Free 1040ez instructions Gambling losses up to the amount of gambling winnings. Free 1040ez instructions Impairment-related work expenses of persons with disabilities. Free 1040ez instructions Loss from other activities from Schedule K-1 (Form 1065-B), box 2. Free 1040ez instructions Losses from Ponzi-type investment schemes. Free 1040ez instructions Repayments of more than $3,000 under a claim of right. Free 1040ez instructions Unrecovered investment in an annuity. Free 1040ez instructions Amortizable Premium on Taxable Bonds In general, if the amount you pay for a bond is greater than its stated principal amount, the excess is bond premium. Free 1040ez instructions You can elect to amortize the premium on taxable bonds. Free 1040ez instructions The amortization of the premium is generally an offset to interest income on the bond rather than a separate deduction item. Free 1040ez instructions Pre-1998 election to amortize bond premium. Free 1040ez instructions   Generally, if you first elected to amortize bond premium before 1998, the above treatment of the premium does not apply to bonds you acquired before 1988. Free 1040ez instructions Bonds acquired after October 22, 1986, and before 1988. Free 1040ez instructions   The amortization of the premium on these bonds is investment interest expense subject to the investment interest limit, unless you chose to treat it as an offset to interest income on the bond. Free 1040ez instructions Bonds acquired before October 23, 1986. Free 1040ez instructions   The amortization of the premium on these bonds is a miscellaneous itemized deduction not subject to the 2% limit. Free 1040ez instructions Deduction for excess premium. Free 1040ez instructions   On certain bonds (such as bonds that pay a variable rate of interest or that provide for an interest-free period), the amount of bond premium allocable to a period may exceed the amount of stated interest allocable to the period. Free 1040ez instructions If this occurs, treat the excess as a miscellaneous itemized deduction that is not subject to the 2% limit. Free 1040ez instructions However, the amount deductible is limited to the amount by which your total interest inclusions on the bond in prior periods exceed the total amount you treated as a bond premium deduction on the bond in prior periods. Free 1040ez instructions If any of the excess bond premium cannot be deducted because of the limit, this amount is carried forward to the next period and is treated as bond premium allocable to that period. Free 1040ez instructions    Pre-1998 choice to amortize bond premium. Free 1040ez instructions If you made the choice to amortize the premium on taxable bonds before 1998, you can deduct the bond premium amortization that is more than your interest income only for bonds acquired during 1998 and later years. Free 1040ez instructions More information. Free 1040ez instructions    For more information on bond premium, see Bond Premium Amortization in chapter 3 of Publication 550. Free 1040ez instructions Casualty and Theft Losses of Income-Producing Property You can deduct a casualty or theft loss as a miscellaneous itemized deduction not subject to the 2% limit if the damaged or stolen property was income-producing property (property held for investment, such as stocks, notes, bonds, gold, silver, vacant lots, and works of art). Free 1040ez instructions First report the loss in Section B of Form 4684. Free 1040ez instructions You may also have to include the loss on Form 4797, Sales of Business Property, if you are otherwise required to file that form. Free 1040ez instructions To figure your deduction, add all casualty or theft losses from this type of property included on Form 4684, lines 32 and 38b, or Form 4797, line 18a. Free 1040ez instructions For more information on casualty and theft losses, see Publication 547. Free 1040ez instructions Federal Estate Tax on Income in Respect of a Decedent You can deduct the federal estate tax attributable to income in respect of a decedent that you as a beneficiary include in your gross income. Free 1040ez instructions Income in respect of the decedent is gross income that the decedent would have received had death not occurred and that was not properly includible in the decedent's final income tax return. Free 1040ez instructions See Publication 559 for information about figuring the amount of this deduction. Free 1040ez instructions Gambling Losses Up to the Amount of Gambling Winnings You must report the full amount of your gambling winnings for the year on Form 1040, line 21. Free 1040ez instructions You deduct your gambling losses for the year on Schedule A (Form 1040), line 28. Free 1040ez instructions You cannot deduct gambling losses that are more than your winnings. Free 1040ez instructions Generally, nonresident aliens cannot deduct gambling losses on Schedule A (Form 1040NR). Free 1040ez instructions You cannot reduce your gambling winnings by your gambling losses and report the difference. Free 1040ez instructions You must report the full amount of your winnings as income and claim your losses (up to the amount of winnings) as an itemized deduction. Free 1040ez instructions Therefore, your records should show your winnings separately from your losses. Free 1040ez instructions Diary of winnings and losses. Free 1040ez instructions You must keep an accurate diary or similar record of your losses and winnings. Free 1040ez instructions Your diary should contain at least the following information. Free 1040ez instructions The date and type of your specific wager or wagering activity. Free 1040ez instructions The name and address or location of the gambling establishment. Free 1040ez instructions The names of other persons present with you at the gambling establishment. Free 1040ez instructions The amount(s) you won or lost. Free 1040ez instructions Proof of winnings and losses. Free 1040ez instructions   In addition to your diary, you should also have other documentation. Free 1040ez instructions You can generally prove your winnings and losses through Form W-2G, Certain Gambling Winnings, Form 5754, Statement by Person(s) Receiving Gambling Winnings, wagering tickets, canceled checks, substitute checks, credit records, bank withdrawals, and statements of actual winnings or payment slips provided to you by the gambling establishment. Free 1040ez instructions   For specific wagering transactions, you can use the following items to support your winnings and losses. Free 1040ez instructions    These recordkeeping suggestions are intended as general guidelines to help you establish your winnings and losses. Free 1040ez instructions They are not all-inclusive. Free 1040ez instructions Your tax liability depends on your particular facts and circumstances. Free 1040ez instructions Keno. Free 1040ez instructions   Copies of the keno tickets you purchased that were validated by the gambling establishment, copies of your casino credit records, and copies of your casino check cashing records. Free 1040ez instructions Slot machines. Free 1040ez instructions   A record of the machine number and all winnings by date and time the machine was played. Free 1040ez instructions Table games (twenty-one (blackjack), craps, poker, baccarat, roulette, wheel of fortune, etc. Free 1040ez instructions ). Free 1040ez instructions   The number of the table at which you were playing. Free 1040ez instructions Casino credit card data indicating whether the credit was issued in the pit or at the cashier's cage. Free 1040ez instructions Bingo. Free 1040ez instructions   A record of the number of games played, cost of tickets purchased, and amounts collected on winning tickets. Free 1040ez instructions Supplemental records include any receipts from the casino, parlor, etc. Free 1040ez instructions Racing (horse, harness, dog, etc. Free 1040ez instructions ). Free 1040ez instructions   A record of the races, amounts of wagers, amounts collected on winning tickets, and amounts lost on losing tickets. Free 1040ez instructions Supplemental records include unredeemed tickets and payment records from the racetrack. Free 1040ez instructions Lotteries. Free 1040ez instructions   A record of ticket purchases, dates, winnings, and losses. Free 1040ez instructions Supplemental records include unredeemed tickets, payment slips, and winnings statements. Free 1040ez instructions Impairment-Related Work Expenses If you have a physical or mental disability that limits your being employed, or substantially limits one or more of your major life activities, such as performing manual tasks, walking, speaking, breathing, learning, and working, you can deduct your impairment-related work expenses. Free 1040ez instructions Impairment-related work expenses are ordinary and necessary business expenses for attendant care services at your place of work and other expenses in connection with your place of work that are necessary for you to be able to work. Free 1040ez instructions Example. Free 1040ez instructions You are blind. Free 1040ez instructions You must use a reader to do your work. Free 1040ez instructions You use the reader both during your regular working hours at your place of work and outside your regular working hours away from your place of work. Free 1040ez instructions The reader's services are only for your work. Free 1040ez instructions You can deduct your expenses for the reader as impairment-related work expenses. Free 1040ez instructions Self-employed. Free 1040ez instructions   If you are self-employed, enter your impairment-related work expenses on the appropriate form (Schedule C, C-EZ, E, or F) used to report your business income and expenses. Free 1040ez instructions See Impairment-related work expenses. Free 1040ez instructions , later under How To Report. Free 1040ez instructions Loss From Other Activities From Schedule K-1 (Form 1065-B), Box 2 If the amount reported in Schedule K-1 (Form 1065-B), box 2, is a loss, report it on Schedule A (Form 1040), line 28, or Schedule A (Form 1040NR), line 14 (only if effectively connected with a U. Free 1040ez instructions S. Free 1040ez instructions trade or business). Free 1040ez instructions It is not subject to the passive activity limitations. Free 1040ez instructions Officials Paid on a Fee Basis If you are a fee-basis official, you can claim your expenses in performing services in that job as an adjustment to income rather than as a miscellaneous itemized deduction. Free 1040ez instructions See Publication 463 for more information. Free 1040ez instructions Performing Artists If you are a qualified performing artist, you can deduct your employee business expenses as an adjustment to income rather than as a miscellaneous itemized deduction. Free 1040ez instructions If you are an employee, complete Form 2106 or Form 2106-EZ. Free 1040ez instructions See Publication 463 for more information. Free 1040ez instructions Losses From Ponzi-type Investment Schemes These losses are deductible as theft losses of income-producing property on your tax return for the year the loss was discovered. Free 1040ez instructions You figure the deductible loss in Section B of Form 4684. Free 1040ez instructions However, if you qualify to use Revenue Procedure 2009-20 (as modified by Revenue Procedure 2011-58) and you choose to follow the procedures in the guidance, complete Section C of Form 4684 before completing Section B. Free 1040ez instructions Section C of Form 4684 replaces Appendix A in Revenue Procedure 2009-20. Free 1040ez instructions You do not need to complete Appendix A. Free 1040ez instructions See the Form 4684 instructions and Publication 547, Casualties, Disasters, and Thefts, for more information. Free 1040ez instructions Repayments Under Claim of Right If you had to repay more than $3,000 that you included in your income in an earlier year because at the time you thought you had an unrestricted right to it, you may be able to deduct the amount you repaid, or take a credit against your tax. Free 1040ez instructions See Repayments in Publication 525 for more information. Free 1040ez instructions Unrecovered Investment in Annuity A retiree who contributed to the cost of an annuity can exclude from income a part of each payment received as a tax-free return of the retiree's investment. Free 1040ez instructions If the retiree dies before the entire investment is recovered tax free, any unrecovered investment can be deducted on the retiree's final income tax return. Free 1040ez instructions See Publication 575, Pension and Annuity Income, for more information about the tax treatment of pensions and annuities. Free 1040ez instructions Nondeductible Expenses You cannot deduct the following expenses. Free 1040ez instructions List of Nondeductible Expenses Adoption expenses. Free 1040ez instructions Broker's commissions. Free 1040ez instructions Burial or funeral expenses, including the cost of a cemetery lot. Free 1040ez instructions Campaign expenses. Free 1040ez instructions Capital expenses. Free 1040ez instructions Check-writing fees. Free 1040ez instructions Club dues. Free 1040ez instructions Commuting expenses. Free 1040ez instructions Fees and licenses, such as car licenses, marriage licenses, and dog tags. Free 1040ez instructions Fines and penalties, such as parking tickets. Free 1040ez instructions Health spa expenses. Free 1040ez instructions Hobby losses—but see Hobby Expenses, earlier. Free 1040ez instructions Home repairs, insurance, and rent. Free 1040ez instructions Home security system. Free 1040ez instructions Illegal bribes and kickbacks—see Bribes and kickbacks in chapter 11 of Publication 535. Free 1040ez instructions Investment-related seminars. Free 1040ez instructions Life insurance premiums paid by the insured. Free 1040ez instructions Lobbying expenses. Free 1040ez instructions Losses from the sale of your home, furniture, personal car, etc. Free 1040ez instructions Lost or misplaced cash or property. Free 1040ez instructions Lunches with co-workers. Free 1040ez instructions Meals while working late. Free 1040ez instructions Medical expenses as business expenses other than medical examinations required by your employer. Free 1040ez instructions Personal disability insurance premiums. Free 1040ez instructions Personal legal expenses. Free 1040ez instructions Personal, living, or family expenses. Free 1040ez instructions Political contributions. Free 1040ez instructions Professional accreditation fees. Free 1040ez instructions Professional reputation, expenses to improve. Free 1040ez instructions Relief fund contributions. Free 1040ez instructions Residential telephone line. Free 1040ez instructions Stockholders' meeting, expenses of attending. Free 1040ez instructions Tax-exempt income, expenses of earning or collecting. Free 1040ez instructions The value of wages never received or lost vacation time. Free 1040ez instructions Travel expenses for another individual. Free 1040ez instructions Voluntary unemployment benefit fund contributions. Free 1040ez instructions Wristwatches. Free 1040ez instructions Adoption Expenses You cannot deduct the expenses of adopting a child but you may be able to take a credit for those expenses. Free 1040ez instructions For details, see Form 8839, Qualified Adoption Expenses. Free 1040ez instructions Commissions Commissions paid on the purchase of securities are not deductible, either as business or nonbusiness expenses. Free 1040ez instructions Instead, these fees must be added to the taxpayer's cost of the securities. Free 1040ez instructions Commissions paid on the sale are deductible as business expenses only by dealers. Free 1040ez instructions Campaign Expenses You cannot deduct campaign expenses of a candidate for any office, even if the candidate is running for reelection to the office. Free 1040ez instructions These include qualification and registration fees for primary elections. Free 1040ez instructions Legal fees. Free 1040ez instructions   You cannot deduct legal fees paid to defend charges that arise from participation in a political campaign. Free 1040ez instructions Capital Expenses You cannot currently deduct amounts paid to buy property that has a useful life substantially beyond the tax year or amounts paid to increase the value or prolong the life of property. Free 1040ez instructions If you use such property in your work, you may be able to take a depreciation deduction. Free 1040ez instructions See Publication 946. Free 1040ez instructions If the property is a car used in your work, also see Publication 463. Free 1040ez instructions Check-Writing Fees on Personal Account If you have a personal checking account, you cannot deduct fees charged by the bank for the privilege of writing checks, even if the account pays interest. Free 1040ez instructions Club Dues Generally, you cannot deduct the cost of membership in any club organized for business, pleasure, recreation, or other social purpose. Free 1040ez instructions This includes business, social, athletic, luncheon, sporting, airline, hotel, golf, and country clubs. Free 1040ez instructions You cannot deduct dues paid to an organization if one of its main purposes is to: Conduct entertainment activities for members or their guests, or Provide members or their guests with access to entertainment facilities. Free 1040ez instructions Dues paid to airline, hotel, and luncheon clubs are not deductible. Free 1040ez instructions Commuting Expenses You cannot deduct commuting expenses (the cost of transportation between your home and your main or regular place of work). Free 1040ez instructions If you haul tools, instruments, or other items in your car to and from work, you can deduct only the additional cost of hauling the items, such as the rent on a trailer to carry the items. Free 1040ez instructions Fines or Penalties You cannot deduct fines or penalties you pay to a governmental unit for violating a law. Free 1040ez instructions This includes an amount paid in settlement of your actual or potential liability for a fine or penalty (civil or criminal). Free 1040ez instructions Fines or penalties include parking tickets, tax penalties, and penalties deducted from teachers' paychecks after an illegal strike. Free 1040ez instructions Health Spa Expenses You cannot deduct health spa expenses, even if there is a job requirement to stay in excellent physical condition, such as might be required of a law enforcement officer. Free 1040ez instructions Home Security System You cannot deduct the cost of a home security system as a miscellaneous deduction. Free 1040ez instructions However, you may be able to claim a deduction for a home security system as a business expense if you have a home office. Free 1040ez instructions See Home Office under Unreimbursed Employee Expenses, earlier, and Publication 587. Free 1040ez instructions Investment-Related Seminars You cannot deduct any expenses for attending a convention, seminar, or similar meeting for investment purposes. Free 1040ez instructions Life Insurance Premiums You cannot deduct premiums you pay on your life insurance. Free 1040ez instructions You may be able to deduct, as alimony, premiums you pay on life insurance policies assigned to your former spouse. Free 1040ez instructions See Publication 504, Divorced or Separated Individuals, for information on alimony. Free 1040ez instructions Lobbying Expenses You generally cannot deduct amounts paid or incurred for lobbying expenses. Free 1040ez instructions These include expenses to: Influence legislation, Participate, or intervene, in any political campaign for, or against, any candidate for public office, Attempt to influence the general public, or segments of the public, about elections, legislative matters, or referendums, or Communicate directly with covered executive branch officials in any attempt to influence the official actions or positions of those officials. Free 1040ez instructions Lobbying expenses also include any amounts paid or incurred for research, preparation, planning, or coordination of any of these activities. Free 1040ez instructions Covered executive branch official. Free 1040ez instructions   A covered executive branch official, for the purpose of (4) above, is any of the following officials. Free 1040ez instructions The President. Free 1040ez instructions The Vice President. Free 1040ez instructions 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. Free 1040ez instructions Any individual serving in a position in Level I of the Executive Schedule under section 5312 of Title 5, United States Code, any other individual designated by the President as having Cabinet-level status, and any immediate deputy of one of these individuals. Free 1040ez instructions Dues used for lobbying. Free 1040ez instructions   If a tax-exempt organization notifies you that part of the dues or other amounts you pay to the organization are used to pay nondeductible lobbying expenses, you cannot deduct that part. Free 1040ez instructions Exceptions. Free 1040ez instructions   You can deduct certain lobbying expenses if they are ordinary and necessary expenses of carrying on your trade or business. Free 1040ez instructions You can deduct expenses for attempting to influence the legislation of any local council or similar governing body (local legislation). Free 1040ez instructions An Indian tribal government is considered a local council or similar governing body. Free 1040ez instructions You can deduct in-house expenses for influencing legislation or communicating directly with a covered executive branch official if the expenses for the tax year are not more than $2,000 (not counting overhead expenses). Free 1040ez instructions If you are a professional lobbyist, you can deduct the expenses you incur in the trade or business of lobbying on behalf of another person. Free 1040ez instructions Payments by the other person to you for lobbying activities cannot be deducted. Free 1040ez instructions Lost or Mislaid Cash or Property You cannot deduct a loss based on the mere disappearance of money or property. Free 1040ez instructions However, an accidental loss or disappearance of property can qualify as a casualty if it results from an identifiable event that is sudden, unexpected, or unusual. Free 1040ez instructions See Publication 547. Free 1040ez instructions Example. Free 1040ez instructions A car door is accidentally slammed on your hand, breaking the setting of your diamond ring. Free 1040ez instructions The diamond falls from the ring and is never found. Free 1040ez instructions The loss of the diamond is a casualty. Free 1040ez instructions Lunches With Co-workers You cannot deduct the expenses of lunches with co-workers, except while traveling away from home on business. Free 1040ez instructions See Publication 463 for information on deductible expenses while traveling away from home. Free 1040ez instructions Meals While Working Late You cannot deduct the cost of meals while working late. Free 1040ez instructions However, you may be able to claim a deduction if the cost of the meals is a deductible entertainment expense, or if you are traveling away from home. Free 1040ez instructions See Publication 463 for information on deductible entertainment expenses and expenses while traveling away from home. Free 1040ez instructions Personal Legal Expenses You cannot deduct personal legal expenses such as those for the following. Free 1040ez instructions Custody of children. Free 1040ez instructions Breach of promise to marry suit. Free 1040ez instructions Civil or criminal charges resulting from a personal relationship. Free 1040ez instructions Damages for personal injury (except certain whistleblower claims and unlawful discrimination claims). Free 1040ez instructions For more information about unlawful discrimination claims, see Deductions Subject to the 2% Limit, earlier. Free 1040ez instructions Preparation of a title (or defense or perfection of a title). Free 1040ez instructions Preparation of a will. Free 1040ez instructions Property claims or property settlement in a divorce. Free 1040ez instructions You cannot deduct these expenses even if a result of the legal proceeding is the loss of income-producing property. Free 1040ez instructions Political Contributions You cannot deduct contributions made to a political candidate, a campaign committee, or a newsletter fund. Free 1040ez instructions Advertisements in convention bulletins and admissions to dinners or programs that benefit a political party or political candidate are not deductible. Free 1040ez instructions Professional Accreditation Fees You cannot deduct professional accreditation fees such as the following. Free 1040ez instructions Accounting certificate fees paid for the initial right to practice accounting. Free 1040ez instructions Bar exam fees and incidental expenses in securing initial admission to the bar. Free 1040ez instructions Medical and dental license fees paid to get initial licensing. Free 1040ez instructions Professional Reputation You cannot deduct expenses of radio and TV appearances to increase your personal prestige or establish your professional reputation. Free 1040ez instructions Relief Fund Contributions You cannot deduct contributions paid to a private plan that pays benefits to any covered employee who cannot work because of any injury or illness not related to the job. Free 1040ez instructions Residential Telephone Service You cannot deduct any charge (including taxes) for basic local telephone service for the first telephone line to your residence, even if it is used in a trade or business. Free 1040ez instructions Stockholders' Meetings You cannot deduct transportation and other expenses you pay to attend stockholders' meetings of companies in which you own stock but have no other interest. Free 1040ez instructions You cannot deduct these expenses even if you are attending the meeting to get information that would be useful in making further investments. Free 1040ez instructions Tax-Exempt Income Expenses You cannot deduct expenses to produce tax-exempt income. Free 1040ez instructions You cannot deduct interest on a debt incurred or continued to buy or carry tax-exempt securities. Free 1040ez instructions If you have expenses to p
 
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General FAQs on Payment Card and Third Party Network Transactions

I received Form 1099-K. How do I report it on my tax return?

Separate reporting of these transactions is not required. However, you should follow the return instructions on the form you are completing to report your gross receipts or sales. You should report items that qualify as a trade or business expense on the appropriate line item of Schedules C, E and F.

What is a participating payee?

A participating payee is:

  • Any person who accepts a payment card as payment, or
  • Any person who accepts payment made by a third party settlement organization on behalf of the purchaser or customer.

Why is this reporting necessary?

This reporting is required by law. Third party information reporting has been shown to increase voluntary tax compliance and improve collections and assessments within IRS.

How are reportable transactions to be reported to IRS?

Gross payment card and third party network transaction amounts are reported on the Form 1099-K, Payment Card and Third Party Network Transactions.

What information must be reported on the Form 1099-K?

The gross amount of reportable payment transactions for the calendar year and its corresponding months are required to be reported for each payee. The reporting of both annual and monthly amounts is necessary to resolve differences between information returns and tax returns of fiscal year filers. The name, address and taxpayer identification number of each participating payee must also be included on the form.

When are Forms 1099-K due?

Information reporting for payment card and third party network transactions is due to the IRS on the last day of February of the year following the transactions. If filing electronically, it is due the first day of April of the year following the transactions.

May Forms 1099-K be filed electronically?

Yes. Those required to file may do so through the FIRE (Filing Information Returns Electronically) system. If a payment settlement entity has more than 250 individual information returns to file in any calendar year, they all must be submitted electronically. Existing users may log into FIRE. New users may create an account and test their file before submitting.

For more information, review Publication 1220, Specifications for Filing Forms 1097, 1098, 1099, 3921, 3922, 5498, 8935, and W-2G Electronically. If you are considering filing on paper, review General Instructions for Certain Information Returns.

What are payee statements and when are they due?

Every payment settlement entity required to file a Form 1099-K must also furnish to each participating payee a written statement with the same information reported to the IRS. The statements must be furnished to the payee by January 31 of the year following the transactions.

May payee statements be furnished to participating payees electronically?

Yes. With the participating payee’s prior consent, payee statements may be provided electronically. This consent may be granted electronically. (See Treasury regulations section 1.6050W-2 for instructions for receiving consent from payees.) If a payee statement is furnished electronically, an email address for the reporting entity may be provided in lieu of a phone number.

Is there a de minimis exception for Forms 1099-K by third party settlement organizations?  

There is a “de minimis” exception from reporting for a third party settlement organization with respect to third party network transactions. If payments to a participating payee exceed $20,000 and exceed 200 transactions within the calendar year they must file for that participating payee.

Does the de minimis exception described above apply to payment card transactions?

No. The “de minimis” exception does not apply to payment card transactions settled by merchant acquiring entities.

What constitutes the "gross amount" of reportable transactions?

The "gross amount" of reportable transactions means the total unadjusted dollar amount of aggregate payment transactions for each participating payee.  

Are foreign payment settlement entities subject to the reporting requirements?

Yes. The statute and regulations establish that a "payment settlement entity" may be a domestic or foreign entity.

Are payment settlement entities required to report the transactions of governmental units, whether state or federal?

Yes. The term "participating payees" includes any governmental unit.

What is payment card and third party network reporting?

Under section 6050W of the Internal Revenue Code, payment settlement entities (merchant acquiring entities and third party settlement organizations) must report payment card and third party network transactions. This reporting requirement began in early 2012 for payment card and third party network transactions that occurred in 2011.

Are purchases made with stored-value cards or gift cards reportable transactions?

It depends.

  • Purchases are not reportable when the card is accepted as payment by the issuer or someone who is related to the issuer of the card (such as a subsidiary company or the company itself). Under these circumstances, the stored-value cards do not fit the definition of a "payment card" and purchases made with such cards are therefore not reportable. 
  • Purchases are reportable when the stored-value card is accepted by a network of persons unrelated to the issuer and each other.

For the definition of unrelated person see section 267(b) of the Internal Revenue Code, including the application of section 267(b) and (e)(3), or section 707(b)(1).

If transactions are already reportable on other information returns, must they be reported again by payment settlement entities?

No. If a transaction is reportable by a PSE both under section 6041 or section 6041 A(a) and under section 6050W, the transaction must be reported on a Form 1099-K and not a Form 1099-MISC.

If a worker at a trade or business is an independent contractor, and the independent contractor swipes payment cards on behalf of the trade or business in the normal course of business (in other words, the trade or business, not the independent contractor, receives the proceeds), should the trade or business report payments to the worker on Form 1099-K or Form 1099-MISC?

In this situation, the trade or business should continue to report payments made to independent contractors on Form 1099-MISC as they have done in the past. However, the business will receive a Form 1099-K for these payment card transactions from the payment settlement entity.

How can payee TINs be verified?

Verification of payee TINs is done through the Taxpayer Identification Number (TIN) Matching Program.   

For further information please visit General Instructions for Certain Information Returns - Introductory Material or call 1-866-255-0654.

Can the entity responsible for filing Form 1099-K contract with a third party to prepare and file these returns?

Yes. However, the entity responsible for filing (i.e., the entity that submits the instructions to transfer funds) is liable for any applicable penalties under sections 6721 and 6722 if the reporting requirements are not met. In addition, the name, address and Taxpayer Identification Number of the entity responsible for filing must be reported on the Form 1099-K in the box for the filer's information.

What is Form 1099-K?

The Form 1099-K, Payment Card and Third Party Network Transactions, is an information return that reports the gross amount of reportable transactions for the calendar year to the IRS.

If you receive a Form 1099-K, you should retain it for your records and may use it to assist you in completing your tax returns.

I filed Form 1099-K last year. What changes will I see on my 2013 Form 1099-K?

IRS modified calendar year 2013 Form 1099-K to improve compliance effectiveness. These changes include:

  • Box 3 (Number of payment transactions) is no longer optional for calendar year 2013 and should reflect the number of purchase transactions (not including refund transactions) processed through the payment card or the third party network.
  • Box 4 (Federal income tax withheld) was added to reflect amounts that may have been withheld by the payer, such as backup withholding. The recipient of the Form 1099-K should include this amount on their income tax return as tax withheld.
  • Boxes 6, 7 & 8 were added to be consistent with other information returns and reflect the State, State ID Number and State Income Tax Withheld, respectively.

What are payment settlement entities?

A payment settlement entity is an entity that makes payment in settlement of a payment card transaction or third party network transaction. Payment Settlement Entities are often referred to as “PSEs” and can take one of two forms:

  • Merchant Acquiring Entity: A bank or other organization that has the contractual obligation to make payment to participating payees in settlement of payment card transactions
  • Third Party Settlement Organization: The central organization that has the contractual obligation to make payment to participating payees of third party network transactions

If I use a payment card (or a third party settlement organization) to pay for a purchase, do these payment card reporting rules affect me and will I receive a Form 1099-K?

No. Individuals will not receive a Form 1099-K for making a purchase. These provisions affect only businesses or entities that accept payment cards or use third party network settlement organizations for payment of goods or services.

Do payment settlement entities adjust the "gross amount" to account for fees, refunds, charge-backs or other costs and refunded amounts?

No. The "gross amount" is the total unadjusted dollar amount of the payment transactions for a participating payee. This amount is not to be adjusted to account for any fees, refunds, or any other amounts.

What do I do with the information on Form 1099-K?

The Form 1099-K is an information return. Use this information return in conjunction with your other tax records to determine your correct tax. To get further information on record keeping, check out Publication 552, for individuals or Publication 583, Starting a Business and Keeping Record.  

How will IRS use the data?

The IRS will use the data from the Form 1099-K to develop:

  • Taxpayer education and outreach products and services.
  • New examination and collection approaches.    

What do I do if I think my Form 1099-K is incorrect?

If you believe the information on a Form 1099-K is incorrect, the form has been issued in error, or you have a question relating to the form, contact the filer, whose name appears in the upper left corner on the front of the form.

Or you may contact the payer, or PSE, whose name and phone number are shown in the lower left corner of the form. If you cannot get this form corrected, you may attach an explanation to your tax return and report your income correctly.

To get the further information on Information Returns, check out the General Instructions for Certain Information Returns.

Where can I call if I have a question on the Form 1099-K?

Payors who have questions about the Form 1099-K itself, may call the IRS at 1-866-455-7438. Payees who have questions about the information on a Form 1099-K they have received should contact the filer, whose name appears in the upper left corner on the form.  

I own a small business and also have a not-for-profit hobby. I do not accept payment cards for payment for either, but I do use a credit card and third party settlement organization to make purchases for both. Do the payment card reporting rules affect me?

No. The provisions for payment settlement entity reporting affect only those businesses or entities that accept these forms of payment for goods or services.

Since you do not accept these forms of payments, you will not receive a Form 1099-K for your sales.

Additionally, you will not receive a Form 1099-K for your purchases. Individuals and businesses only receive Form 1099-K for receiving payment for goods and services in reportable transactions.

I occasionally sell items on an Internet auction site and accept payment cards. How do the payment settlement entity reporting rules affect me?

If you accept payment cards as a form of payment, you will receive a Form 1099-K for the gross amount of proceeds for the goods or services purchased from you through the use of a payment card in a calendar year. Further, if you accept payments from a third party settlement organization, you should receive a Form 1099-K from that organization only if:

  • The total number of your transactions exceeds 200 

AND 

  • The aggregate value exceeds $20,000 in a calendar year.

If I have a holiday craft business and accept payment cards for payments, how do the payment settlement entity reporting rules affect me?

If you are set up to accept payment cards as a form of payment, you will receive a Form 1099-K for the gross amount of the proceeds for the goods or services purchased from you through the use of a payment card in a calendar year. Further, if you accept payments from a third party settlement organization, you should receive a Form 1099-K only if:

  • the total number of your transactions exceeds 200 

AND

  • the aggregate value exceeds $20,000 in a calendar year.

 

Page Last Reviewed or Updated: 20-Mar-2014

The Free 1040ez Instructions

Free 1040ez instructions 4. Free 1040ez instructions   Communications and Air Transportation Taxes Table of Contents Uncollected Tax Report Communications TaxLocal-only service. Free 1040ez instructions Private communication service. Free 1040ez instructions Exemptions Credits or Refunds Air Transportation TaxesTransportation of Persons by Air International Air Travel Facilities Transportation of Property by Air Special Rules on Transportation Taxes Excise taxes are imposed on amounts paid for certain facilities and services. Free 1040ez instructions If you receive any payment on which tax is imposed, you are required to collect the tax, file returns, and pay the tax over to the government. Free 1040ez instructions If you fail to collect and pay over the taxes, you may be liable for the trust fund recovery penalty. Free 1040ez instructions See chapter 14, later. Free 1040ez instructions Uncollected Tax Report A separate report is required to be filed by collecting agents of communications services and air transportation taxes if the person from whom the facilities or services tax (the tax) is required to be collected (the taxpayer) refuses to pay the tax, or it is impossible for the collecting agent to collect the tax. Free 1040ez instructions The report must contain the name and address of the taxpayer, the type of facility provided or service rendered, the amount paid for the facility or service (the amount on which the tax is based), and the date paid. Free 1040ez instructions Regular method taxpayers. Free 1040ez instructions   For regular method taxpayers, the report must be filed by the due date of the Form 720 on which the tax would have been reported. Free 1040ez instructions Alternative method taxpayers. Free 1040ez instructions   For alternative method taxpayers, the report must be filed by the due date of the Form 720 that includes an adjustment to the separate account for the uncollected tax. Free 1040ez instructions See Alternative method in  chapter 11. Free 1040ez instructions Where to file. Free 1040ez instructions    Do not file the uncollected tax report with Form 720. Free 1040ez instructions Instead, mail the report to: Internal Revenue Service Excise Tax Program SE:S:SP:EX MS C9-109 5000 Ellin Rd. Free 1040ez instructions  Lanham, MD 20706 Communications Tax A 3% tax is imposed on amounts paid for local telephone service and teletypewriter exchange service. Free 1040ez instructions Local telephone service. Free 1040ez instructions   This includes access to a local telephone system and the privilege of telephonic quality communication with most people who are part of the system. Free 1040ez instructions Local telephone service also includes any facility or services provided in connection with this service. Free 1040ez instructions The tax applies to lease payments for certain customer premises equipment (CPE) even though the lessor does not also provide access to a local telecommunications system. Free 1040ez instructions Local-only service. Free 1040ez instructions   Local-only service is local telephone service as described above, provided under a plan that does not include long distance telephone service or that separately states the charge for local service on the bill to customers. Free 1040ez instructions Local-only service also includes any facility or services provided in connection with this service, even though these services and facilities may also be used with long-distance service. Free 1040ez instructions Private communication service. Free 1040ez instructions   Private communication service is not local telephone service. Free 1040ez instructions Private communication service includes accessory-type services provided in connection with a Centrex, PBX, or other similar system for dual use accessory equipment. Free 1040ez instructions However, the charge for the service must be stated separately from the charge for the basic system, and the accessory must function, in whole or in part, in connection with intercommunication among the subscriber's stations. Free 1040ez instructions Teletypewriter exchange service. Free 1040ez instructions   This includes access from a teletypewriter or other data station to a teletypewriter exchange system and the privilege of intercommunication by that station with most persons having teletypewriter or other data stations in the same exchange system. Free 1040ez instructions Figuring the tax. Free 1040ez instructions   The tax is based on the sum of all charges for local telephone service included in the bill. Free 1040ez instructions However, if the bill groups individual items for billing and tax purposes, the tax is based on the sum of the individual items within that group. Free 1040ez instructions The tax on the remaining items not included in any group is based on the charge for each item separately. Free 1040ez instructions Do not include in the tax base state or local sales or use taxes that are separately stated on the taxpayer's bill. Free 1040ez instructions Exemptions Payments for certain services or payments from certain users are exempt from the communications tax. Free 1040ez instructions Nontaxable service. Free 1040ez instructions   Nontaxable service means bundled service and long distance service. Free 1040ez instructions Nontaxable service also includes pre-paid telephone cards and pre-paid cellular service. Free 1040ez instructions Bundled service. Free 1040ez instructions   Bundled service is local and long distance service provided under a plan that does not separately state the charge for the local telephone service. Free 1040ez instructions Bundled service includes plans that provide both local and long distance service for either a flat monthly fee or a charge that varies with the elapsed transmission time for which the service is used. Free 1040ez instructions Telecommunications companies provide bundled service for both landlines and wireless (cellular) service. Free 1040ez instructions If Voice over Internet Protocol service provides both local and long distance service and the charges are not separately stated, such service is bundled service. Free 1040ez instructions   The method for sending or receiving a call, such as on a landline telephone, wireless (cellular), or some other method, does not affect whether a service is local-only or bundled. Free 1040ez instructions Long distance service. Free 1040ez instructions   Long distance service is telephonic quality communication with persons whose telephones are outside the local telephone system of the caller. Free 1040ez instructions Pre-paid telephone cards (PTC). Free 1040ez instructions   A PTC will be treated as bundled service unless a PTC expressly states it is for local-only service. Free 1040ez instructions Generally, the person responsible for collecting the tax is the carrier who transfers the PTC to the transferee. Free 1040ez instructions The transferee is the first person that is not a carrier to whom a PTC is transferred by the carrier. Free 1040ez instructions The transferee is the person liable for the tax and is eligible to request a credit or refund. Free 1040ez instructions For more information, see Regulations section 49. Free 1040ez instructions 4251-4. Free 1040ez instructions   The holder is the person that purchases a PTC to use and not to resell. Free 1040ez instructions Holders are not liable for the tax and cannot request a credit or refund. Free 1040ez instructions Pre-paid cellular telephones. Free 1040ez instructions   Rules similar to the PTC rules described above apply to pre-paid cellular telephones. Free 1040ez instructions The transferee is the person eligible to request the credit or refund. Free 1040ez instructions Installation charges. Free 1040ez instructions   The tax does not apply to payments received for the installation of any instrument, wire, pole, switchboard, apparatus, or equipment. Free 1040ez instructions However, the tax does apply to payments for the repair or replacement of those items incidental to ordinary maintenance. Free 1040ez instructions Answering services. Free 1040ez instructions   The tax does not apply to amounts paid for a private line, an answering service, and a one-way paging or message service if they do not provide access to a local telephone system and the privilege of telephonic communication as part of the local telephone system. Free 1040ez instructions Mobile radio telephone service. Free 1040ez instructions   The tax does not apply to payments for a two-way radio service that does not provide access to a local telephone system. Free 1040ez instructions Coin-operated telephones. Free 1040ez instructions   The tax for local telephone service does not apply to payments made for services by inserting coins in public coin-operated telephones. Free 1040ez instructions But the tax applies if the coin-operated telephone service is furnished for a guaranteed amount. Free 1040ez instructions Figure the tax on the amount paid under the guarantee plus any fixed monthly or other periodic charge. Free 1040ez instructions Telephone-operated security systems. Free 1040ez instructions   The tax does not apply to amounts paid for telephones used only to originate calls to a limited number of telephone stations for security entry into a building. Free 1040ez instructions In addition, the tax does not apply to any amounts paid for rented communication equipment used in the security system. Free 1040ez instructions News services. Free 1040ez instructions   The tax on teletypewriter exchange service does not apply to charges for the following news services. Free 1040ez instructions Services dealing exclusively with the collection or dissemination of news for or through the public press or radio or television broadcasting. Free 1040ez instructions Services used exclusively in the collection or dissemination of news by a news ticker service furnishing a general news service similar to that of the public press. Free 1040ez instructions This exemption applies to payments received for messages from one member of the news media to another member (or to or from their bona fide correspondents). Free 1040ez instructions For the exemption to apply, the charge for these services must be billed in writing to the person paying for the service and that person must certify in writing that the services are used for an exempt purpose. Free 1040ez instructions Services not exempted. Free 1040ez instructions   The tax applies to amounts paid by members of the news media for local telephone service. Free 1040ez instructions International organizations and the American Red Cross. Free 1040ez instructions   The tax does not apply to communication services furnished to an international organization or to the American National Red Cross. Free 1040ez instructions Nonprofit hospitals. Free 1040ez instructions   The tax does not apply to telephone services furnished to income tax-exempt nonprofit hospitals for their use. Free 1040ez instructions Also, the tax does not apply to amounts paid by these hospitals to provide local telephone service in the homes of their personnel who must be reached during their off-duty hours. Free 1040ez instructions Nonprofit educational organizations. Free 1040ez instructions   The tax does not apply to payments received for services and facilities furnished to a nonprofit educational organization for its use. Free 1040ez instructions A nonprofit educational organization is one that satisfies all the following requirements. Free 1040ez instructions It normally maintains a regular faculty and curriculum. Free 1040ez instructions It normally has a regularly enrolled body of pupils or students in attendance at the place where its educational activities are regularly carried on. Free 1040ez instructions It is exempt from income tax under section 501(a). Free 1040ez instructions This includes a school operated by an organization exempt under section 501(c)(3) if the school meets the above qualifications. Free 1040ez instructions Qualified blood collector organizations. Free 1040ez instructions   The tax does not apply to telephone services furnished to qualified blood collector organizations for their use. Free 1040ez instructions A qualified blood collector organization is one that is: Described in section 501(c)(3) and exempt from tax under section 501(a), Primarily engaged in the activity of collecting human blood, Registered with the IRS, and Registered by the Food and Drug Administration to collect blood. Free 1040ez instructions Federal, state, and local government. Free 1040ez instructions   The tax does not apply to communication services provided to the government of the United States, the government of any state or its political subdivisions, the District of Columbia, or the United Nations. Free 1040ez instructions Treat an Indian tribal government as a state for the exemption from the communications tax only if the services involve the exercise of an essential tribal government function. Free 1040ez instructions Exemption certificate. Free 1040ez instructions   Any form of exemption certificate will be acceptable if it includes all the information required by the Internal Revenue Code and Regulations. Free 1040ez instructions See Regulations section 49. Free 1040ez instructions 4253-11. Free 1040ez instructions File the certificate with the provider of the communication services. Free 1040ez instructions An exemption certificate is not required for nontaxable services. Free 1040ez instructions   The following users that are exempt from the communications tax do not have to file an annual exemption certificate after they have filed the initial certificate to claim an exemption from the communications tax. Free 1040ez instructions The American National Red Cross and other international organizations. Free 1040ez instructions Nonprofit hospitals. Free 1040ez instructions Nonprofit educational organizations. Free 1040ez instructions Qualified blood collector organizations. Free 1040ez instructions State and local governments. Free 1040ez instructions   The federal government does not have to file any exemption certificate. Free 1040ez instructions   All other organizations must furnish exemption certificates when required. Free 1040ez instructions Credits or Refunds If tax is collected and paid over for nontaxable services, or for certain services or users exempt from the communications tax, the collector or taxpayer may claim a credit or refund if it has repaid the tax to the person from whom the tax was collected or obtained the consent of that person to the allowance of the credit or refund. Free 1040ez instructions Alternatively, the person who paid the tax may claim a refund. Free 1040ez instructions For more information on how to file for credits or refunds, see the Instructions for Form 720 or Form 8849. Free 1040ez instructions Collectors. Free 1040ez instructions   The collector may request a credit or refund if it has repaid the tax to the person from whom the tax was collected, or obtained the consent of that person to the allowance of the credit or refund. Free 1040ez instructions These requirements also apply to nontaxable service refunds. Free 1040ez instructions Collectors using the regular method for deposits. Free 1040ez instructions   Collectors using the regular method for deposits must use Form 720X to request a credit or refund if the collector has repaid the tax to the person from whom the tax was collected, or obtained the consent of that person to the allowance of the credit or refund. Free 1040ez instructions Collectors using the alternative method for deposits. Free 1040ez instructions   Collectors using the alternative method for deposits must adjust their separate accounts for the credit or refund if it has repaid the tax to the person from whom the tax was collected, or obtained the consent of that person to the allowance of the credit or refund. Free 1040ez instructions For more information, see the Instructions for Form 720. Free 1040ez instructions Air Transportation Taxes Taxes are imposed on amounts paid for: Transportation of persons by air, Use of international air travel facilities, and Transportation of property by air. Free 1040ez instructions Transportation of Persons by Air The tax on transportation of persons by air is made up of the: Percentage tax, and Domestic-segment tax. Free 1040ez instructions Percentage tax. Free 1040ez instructions   A tax of 7. Free 1040ez instructions 5% applies to amounts paid for taxable transportation of persons by air. Free 1040ez instructions Amounts paid for transportation include charges for layover or waiting time and movement of aircraft in deadhead service. Free 1040ez instructions Mileage awards. Free 1040ez instructions   The percentage tax may apply to an amount paid (in cash or in kind) to an air carrier (or any related person) for the right to provide mileage awards for, or other reductions in the cost of, any transportation of persons by air. Free 1040ez instructions For example, this applies to mileage awards purchased by credit card companies, telephone companies, restaurants, hotels, and other businesses. Free 1040ez instructions   Generally, the percentage tax does not apply to amounts paid for mileage awards where the mileage awards cannot, under any circumstances, be redeemed for air transportation that is subject to the tax. Free 1040ez instructions Until regulations are issued, the following rules apply to mileage awards. Free 1040ez instructions Amounts paid for mileage awards that cannot be redeemed for taxable transportation beginning and ending in the United States are not subject to the tax. Free 1040ez instructions For this rule, mileage awards issued by a foreign air carrier are considered to be usable only on that foreign air carrier and thus not redeemable for taxable transportation beginning and ending in the United States. Free 1040ez instructions Therefore, amounts paid to a foreign air carrier for mileage awards are not subject to the tax. Free 1040ez instructions Amounts paid by an air carrier to a domestic air carrier for mileage awards that can be redeemed for taxable transportation are not subject to the tax to the extent those miles will be awarded in connection with the purchase of taxable transportation. Free 1040ez instructions Amounts paid by an air carrier to a domestic air carrier for mileage awards that can be redeemed for taxable transportation are subject to the tax to the extent those miles will not be awarded in connection with the purchase of taxable transportation. Free 1040ez instructions Domestic-segment tax. Free 1040ez instructions   The domestic-segment tax is a flat dollar amount for each segment of taxable transportation for which an amount is paid. Free 1040ez instructions However, see Rural airports, later. Free 1040ez instructions A segment is a single takeoff and a single landing. Free 1040ez instructions The amount of the domestic-segment tax is in the Instructions for Form 720. Free 1040ez instructions Charter flights. Free 1040ez instructions    If an aircraft is chartered, the domestic-segment tax for each segment of taxable transportation is figured by multiplying the tax by the number of passengers transported on the aircraft. Free 1040ez instructions Rural airports. Free 1040ez instructions   The domestic-segment tax does not apply to a segment to or from a rural airport. Free 1040ez instructions An airport is a rural airport for a calendar year if fewer than 100,000 commercial passengers departed from the airport by air during the second preceding calendar year (the 100,000 passenger rule), and one of the following is true: The airport is not located within 75 miles of another airport from which 100,000 or more commercial passengers departed during the second preceding calendar year, The airport was receiving essential air service subsidies as of August 5, 1997, or The airport is not connected by paved roads to another airport. Free 1040ez instructions   To apply the 100,000 passenger rule to any airport described in (3) above, only count commercial passengers departing from the airport by air on flight segments of at least 100 miles. Free 1040ez instructions   An updated list of rural airports can be found on the Department of Transportation website at www. Free 1040ez instructions dot. Free 1040ez instructions gov and enter the phrase “Essential Air Service” in the search box. Free 1040ez instructions Taxable transportation. Free 1040ez instructions   Taxable transportation is transportation by air that meets either of the following tests. Free 1040ez instructions It begins and ends either in the United States or at any place in Canada or Mexico not more than 225 miles from the nearest point on the continental United States boundary (this is the 225-mile zone). Free 1040ez instructions It is directly or indirectly from one port or station in the United States to another port or station in the United States, but only if it is not a part of uninterrupted international air transportation, discussed later. Free 1040ez instructions Round trip. Free 1040ez instructions   A round trip is considered two separate trips. Free 1040ez instructions The first trip is from the point of departure to the destination. Free 1040ez instructions The second trip is the return trip from that destination. Free 1040ez instructions Uninterrupted international air transportation. Free 1040ez instructions   This means transportation entirely by air that does not begin and end in the United States or in the 225-mile zone if there is not more than a 12-hour scheduled interval between arrival and departure at any station in the United States. Free 1040ez instructions For a special rule that applies to military personnel, see Exemptions, later. Free 1040ez instructions Transportation between the continental U. Free 1040ez instructions S. Free 1040ez instructions and Alaska or Hawaii. Free 1040ez instructions   This transportation is partially exempt from the tax on transportation of persons by air. Free 1040ez instructions The tax does not apply to the part of the trip between the point at which the route of transportation leaves or enters the continental United States (or a port or station in the 225-mile zone) and the point at which it enters or leaves Hawaii or Alaska. Free 1040ez instructions Leaving or entering occurs when the route of the transportation passes over either the United States border or a point 3 nautical miles (3. Free 1040ez instructions 45 statute miles) from low tide on the coast line, or when it leaves a port or station in the 225-mile zone. Free 1040ez instructions Therefore, this transportation is subject to the percentage tax on the part of the trip in U. Free 1040ez instructions S. Free 1040ez instructions airspace, the domestic-segment tax for each domestic segment, and the tax on the use of international air travel facilities, discussed later. Free 1040ez instructions Transportation within Alaska or Hawaii. Free 1040ez instructions   The tax on transportation of persons by air applies to the entire fare paid in the case of flights between any of the Hawaiian Islands, and between any ports or stations in the Aleutian Islands or other ports or stations elsewhere in Alaska. Free 1040ez instructions The tax applies even though parts of the flights may be over international waters or over Canada, if no point on the direct line of transportation between the ports or stations is more than 225 miles from the United States (Hawaii or Alaska). Free 1040ez instructions Package tours. Free 1040ez instructions   The air transportation taxes apply to “complimentary” air transportation furnished solely to participants in package holiday tours. Free 1040ez instructions The amount paid for these package tours includes a charge for air transportation even though it may be advertised as “free. Free 1040ez instructions ” This rule also applies to the tax on the use of international air travel facilities, discussed later. Free 1040ez instructions Liability for tax. Free 1040ez instructions   The person paying for taxable transportation is liable for the tax and, ordinarily, the person receiving the payment collects the tax, files the returns, and pays the tax over to the government. Free 1040ez instructions However, if payment is made outside the United States for a prepaid order, exchange order, or similar order, the person furnishing the initial transportation provided for under that order must collect the tax. Free 1040ez instructions    A travel agency that is an independent broker and sells tours on aircraft that it charters must collect the transportation tax, file the returns, and pay the tax over to the government. Free 1040ez instructions However, a travel agency that sells tours as the agent of an airline must collect the tax and remit it to the airline for the filing of returns and for the payment of the tax over to the government. Free 1040ez instructions An independent third party that is not under the airline's supervision or control, but is acting on behalf of, and receiving compensation from, a passenger, is not required to collect the tax and pay it to the government. Free 1040ez instructions For more information on resellers of air transportation, see Revenue Ruling 2006-52. Free 1040ez instructions You can find Revenue Ruling 2006-52 on page 761 of I. Free 1040ez instructions R. Free 1040ez instructions B. Free 1040ez instructions 2006-43 at www. Free 1040ez instructions irs. Free 1040ez instructions gov/pub/irs-irbs/irb06-43. Free 1040ez instructions pdf. Free 1040ez instructions   The fact that the aircraft does not use public or commercial airports in taking off and landing has no effect on the tax. Free 1040ez instructions But see Certain helicopter uses, later. Free 1040ez instructions   For taxable transportation that begins and ends in the United States, the tax applies regardless of whether the payment is made in or outside the United States. Free 1040ez instructions   If the tax is not paid when payment for the transportation is made, the air carrier providing the initial segment of the transportation that begins or ends in the United States becomes liable for the tax. Free 1040ez instructions Exemptions. Free 1040ez instructions   The tax on transportation of persons by air does not apply in the following situations. Free 1040ez instructions See also Special Rules on Transportation Taxes, later. Free 1040ez instructions Military personnel on international trips. Free 1040ez instructions   When traveling in uniform at their own expense, United States military personnel on authorized leave are deemed to be traveling in uninterrupted international air transportation (defined earlier) even if the scheduled interval between arrival and departure at any station in the United States is actually more than 12 hours. Free 1040ez instructions However, such personnel must buy their tickets within 12 hours after landing at the first domestic airport and accept the first available accommodation of the type called for by their tickets. Free 1040ez instructions The trip must begin or end outside the United States and the 225-mile zone. Free 1040ez instructions Certain helicopter uses. Free 1040ez instructions   The tax does not apply to air transportation by helicopter if the helicopter is used for any of the following purposes. Free 1040ez instructions Transporting individuals, equipment, or supplies in the exploration for, or the development or removal of, hard minerals, oil, or gas. Free 1040ez instructions Planting, cultivating, cutting, transporting, or caring for trees (including logging operations). Free 1040ez instructions Providing emergency medical transportation. Free 1040ez instructions   However, during a use described in items (1) or (2), the tax applies if the helicopter takes off from, or lands at, a facility eligible for assistance under the Airport and Airway Development Act of 1970, or otherwise uses services provided under section 44509 or 44913(b) or subchapter I of chapter 471 of title 49, United States Code. Free 1040ez instructions For item (1), treat each flight segment as a separate flight. Free 1040ez instructions Fixed-wing aircraft uses. Free 1040ez instructions   The tax does not apply to air transportation by fixed-wing aircraft if the fixed-wing aircraft is used for any of the following purposes. Free 1040ez instructions Planting, cultivating, cutting, transporting, or caring for trees (including logging operations). Free 1040ez instructions Providing emergency medical transportation. Free 1040ez instructions The aircraft must be equipped for and exclusively dedicated on that flight to acute care emergency medical services. Free 1040ez instructions   However, during a use described in item (1), the tax applies if the fixed-wing aircraft takes off from, or lands at, a facility eligible for assistance under the Airport and Airway Development Act of 1970, or otherwise uses services provided under section 44509 or 44913(b) or subchapter I of chapter 471 of title 49, United States Code. Free 1040ez instructions Skydiving. Free 1040ez instructions   The tax does not apply to any air transportation exclusively for the purpose of skydiving. Free 1040ez instructions Seaplanes. Free 1040ez instructions   The tax does not apply to any air transportation by seaplane for any segment consisting of a takeoff from, and a landing on, water if the places where the takeoff and landing occur are not receiving financial assistance from the Airport and Airways Trust Fund. Free 1040ez instructions Bonus tickets. Free 1040ez instructions   The tax does not apply to free bonus tickets issued by an airline company to its customers who have satisfied all requirements to qualify for the bonus tickets. Free 1040ez instructions However, the tax applies to amounts paid by customers for advance bonus tickets when customers have traveled insufficient mileage to fully qualify for the free advance bonus tickets. Free 1040ez instructions International Air Travel Facilities A tax per person is imposed (whether in or outside the United States) for international flights that begin or end in the United States. Free 1040ez instructions However, for a domestic segment that begins or ends in Alaska or Hawaii, a reduced tax per person applies only to departures. Free 1040ez instructions This tax does not apply if all the transportation is subject to the percentage tax, discussed earlier. Free 1040ez instructions It also doesn't apply if the surtax on fuel used in a fractional ownership program aircraft (discussed earlier) is imposed. Free 1040ez instructions See the Instructions for Form 720 for the tax rates. Free 1040ez instructions Transportation of Property by Air A tax of 6. Free 1040ez instructions 25% is imposed on amounts paid (whether in or outside the United States) for transportation of property by air. Free 1040ez instructions The fact that the aircraft may not use public or commercial airports in taking off and landing has no effect on the tax. Free 1040ez instructions The tax applies only to amounts paid to a person engaged in the business of transporting property by air for hire. Free 1040ez instructions The tax applies only to transportation (including layover time and movement of aircraft in deadhead service) that begins and ends in the United States. Free 1040ez instructions Thus, the tax does not apply to transportation of property by air that begins or ends outside the United States. Free 1040ez instructions Exemptions. Free 1040ez instructions   The tax on transportation of property by air does not apply in the following situations. Free 1040ez instructions See also Special Rules on Transportation Taxes, later. Free 1040ez instructions Cropdusting and firefighting service. Free 1040ez instructions   The tax does not apply to amounts paid for cropdusting or aerial firefighting service. Free 1040ez instructions Exportation. Free 1040ez instructions    The tax does not apply to payments for transportation of property by air in the course of exportation (including to United States possessions) by continuous movement, as evidenced by the execution of Form 1363, Export Exemption Certificate. Free 1040ez instructions See Form 1363 for more information. Free 1040ez instructions Certain helicopter and fixed-wing air ambulance uses. Free 1040ez instructions   The tax does not apply to amounts paid for the use of helicopters in construction to set heating and air conditioning units on roofs of buildings, to dismantle tower cranes, and to aid in construction of power lines and ski lifts. Free 1040ez instructions   The tax also does not apply to air transportation by helicopter or fixed-wing aircraft for the purpose of providing emergency medical services. Free 1040ez instructions The fixed-wing aircraft must be equipped for and exclusively dedicated on that flight to acute care emergency medical services. Free 1040ez instructions Skydiving. Free 1040ez instructions   The tax does not apply to any air transportation exclusively for the purpose of skydiving. Free 1040ez instructions Excess baggage. Free 1040ez instructions    The tax does not apply to excess baggage accompanying a passenger on an aircraft operated on an established line. Free 1040ez instructions Surtax on fuel used in a fractional ownership program aircraft. Free 1040ez instructions   The tax does not apply if the surtax on fuel used in a fractional ownership program aircraft (discussed earlier) is imposed. Free 1040ez instructions Alaska and Hawaii. Free 1040ez instructions   For transportation of property to and from Alaska and Hawaii, the tax in general does not apply to the portion of the transportation that is entirely outside the continental United States (or the 225-mile zone if the aircraft departs from or arrives at an airport in the 225-mile zone). Free 1040ez instructions But the tax applies to flights between ports or stations in Alaska and the Aleutian Islands, as well as between ports or stations in Hawaii. Free 1040ez instructions The tax applies even though parts of the flights may be over international waters or over Canada, if no point on a line drawn from where the route of transportation leaves the United States (Alaska) to where it reenters the United States (Alaska) is more than 225 miles from the United States. Free 1040ez instructions Liability for tax. Free 1040ez instructions   The person paying for taxable transportation is liable for the tax and, ordinarily, the person engaged in the business of transporting property by air for hire receives the payment, collects the tax, files the returns, and pays the tax over to the government. Free 1040ez instructions   If tax is not paid when a payment is made outside the United States, the person furnishing the last segment of taxable transportation collects the tax from the person to whom the property is delivered in the United States. Free 1040ez instructions Special Rules on Transportation Taxes In certain circumstances, special rules apply to the taxes on transportation of persons and property by air. Free 1040ez instructions Aircraft used by affiliated corporations. Free 1040ez instructions   The taxes do not apply to payments received by one member of an affiliated group of corporations from another member for services furnished in connection with the use of an aircraft. Free 1040ez instructions However, the aircraft must be owned or leased by a member of the affiliated group and cannot be available for hire by a nonmember of the affiliated group. Free 1040ez instructions Determine whether an aircraft is available for hire by a nonmember of an affiliated group on a flight-by-flight basis. Free 1040ez instructions   For this rule, an affiliated group of corporations is any group of corporations connected with a common parent corporation through 80% or more of stock ownership. Free 1040ez instructions Small aircraft. Free 1040ez instructions   The taxes do not apply to transportation furnished by an aircraft having a maximum certificated takeoff weight of 6,000 pounds or less. Free 1040ez instructions However, the taxes do apply if the aircraft is operated on an established line. Free 1040ez instructions “Operated on an established line” means the aircraft operates with some degree of regularity between definite points. Free 1040ez instructions However, it does not include any time an aircraft is being operated on a flight that is solely for sightseeing. Free 1040ez instructions   Consider an aircraft to be operated on an established line if it is operated on a charter basis between two cities also served by that carrier on a regularly scheduled basis. Free 1040ez instructions   Also, the taxes apply if the aircraft is jet-powered, regardless of its maximum certificated takeoff weight or whether or not it is operated on an established line. Free 1040ez instructions Mixed load of persons and property. Free 1040ez instructions   If a single amount is paid for air transportation of persons and property, the payment must be allocated between the amount subject to the tax on transportation of persons and the amount subject to the tax on transportation of property. Free 1040ez instructions The allocation must be reasonable and supported by adequate records. Free 1040ez instructions Credits or refunds. Free 1040ez instructions   If tax is collected and paid over for air transportation that is not taxable air transportation, the collector may claim a credit or refund if it has repaid the tax to the person from whom the tax was collected or obtained the consent of that person to the allowance of the credit or refund. Free 1040ez instructions Alternatively, the person who paid the tax may claim a refund. Free 1040ez instructions For information on how to file for credits or refunds, see the Instructions for Form 720 or Form 8849. Free 1040ez instructions Prev  Up  Next   Home   More Online Publications