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Free 2010 Tax Software

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Free 2010 Tax Software

Free 2010 tax software 25. Free 2010 tax software   Nonbusiness Casualty and Theft Losses Table of Contents What's New Introduction Useful Items - You may want to see: CasualtyFamily pet. Free 2010 tax software Progressive deterioration. Free 2010 tax software Damage from corrosive drywall. Free 2010 tax software Theft Loss on Deposits Proof of Loss Figuring a LossDecrease in Fair Market Value Adjusted Basis Insurance and Other Reimbursements Single Casualty on Multiple Properties Deduction Limits$100 Rule 10% Rule When To Report Gains and LossesDisaster Area Loss How To Report Gains and Losses What's New New Section C of Form 4684 for Ponzi-type investment schemes. Free 2010 tax software  Section C of Form 4684 is new for 2013. Free 2010 tax software You must complete Section C if you are claiming a theft loss deduction due to a Ponzi-type investment scheme and are using Revenue Procedure 2009-20, as modified by Revenue Procedure 2011-58. Free 2010 tax software Section C of Form 4684 replaces Appendix A in Revenue Procedure 2009-20. Free 2010 tax software You do not need to complete Appendix A. Free 2010 tax software For details, see Losses from Ponzi-type investment schemes , in this chapter. Free 2010 tax software Introduction This chapter explains the tax treatment of personal (not business or investment related) casualty losses, theft losses, and losses on deposits. Free 2010 tax software The chapter also explains the following  topics. Free 2010 tax software How to figure the amount of your loss. Free 2010 tax software How to treat insurance and other reimbursements you receive. Free 2010 tax software The deduction limits. Free 2010 tax software When and how to report a casualty or theft. Free 2010 tax software Forms to file. Free 2010 tax software    When you have a casualty or theft, you have to file Form 4684. Free 2010 tax software You will also have to file one or more of the following forms. Free 2010 tax software Schedule A (Form 1040), Itemized Deductions Schedule D (Form 1040), Capital Gains and Losses Condemnations. Free 2010 tax software   For information on condemnations of property, see Involuntary Conversions in chapter 1 of Publication 544, Sales and Other Disposition of Assets. Free 2010 tax software Workbook for casualties and thefts. Free 2010 tax software    Publication 584 is available to help you make a list of your stolen or damaged personal-use property and figure your loss. Free 2010 tax software It includes schedules to help you figure the loss on your home, its contents, and your motor vehicles. Free 2010 tax software Business or investment-related losses. Free 2010 tax software   For information on a casualty or theft loss of business or income-producing property, see Publication 547, Casualties, Disasters, and Thefts. Free 2010 tax software Useful Items - You may want to see: Publication 544 Sales and Other Dispositions  of Assets 547 Casualties, Disasters, and   Thefts 584 Casualty, Disaster, and Theft   Loss Workbook (Personal-Use  Property) Form (and Instructions) Schedule A (Form 1040) Itemized Deductions Schedule D (Form 1040) Capital Gains and Losses 4684 Casualties and Thefts Casualty A casualty is the damage, destruction, or loss of property resulting from an identifiable event that is sudden, unexpected, or unusual. Free 2010 tax software A sudden event is one that is swift, not gradual or progressive. Free 2010 tax software An unexpected event is one that is ordinarily unanticipated and unintended. Free 2010 tax software An unusual event is one that is not a day-to-day occurrence and that is not typical of the activity in which you were engaged. Free 2010 tax software Deductible losses. Free 2010 tax software   Deductible casualty losses can result from a number of different causes, including the following. Free 2010 tax software Car accidents (but see Nondeductible losses , next, for exceptions). Free 2010 tax software Earthquakes. Free 2010 tax software Fires (but see Nondeductible losses , next, for exceptions). Free 2010 tax software Floods. Free 2010 tax software Government-ordered demolition or relocation of a home that is unsafe to use because of a disaster as discussed under Disaster Area Losses in Publication 547. Free 2010 tax software Mine cave-ins. Free 2010 tax software Shipwrecks. Free 2010 tax software Sonic booms. Free 2010 tax software Storms, including hurricanes and tornadoes. Free 2010 tax software Terrorist attacks. Free 2010 tax software Vandalism. Free 2010 tax software Volcanic eruptions. Free 2010 tax software Nondeductible losses. Free 2010 tax software   A casualty loss is not deductible if the damage or destruction is caused by the following. Free 2010 tax software Accidentally breaking articles such as glassware or china under normal conditions. Free 2010 tax software A family pet (explained below). Free 2010 tax software A fire if you willfully set it or pay someone else to set it. Free 2010 tax software A car accident if your willful negligence or willful act caused it. Free 2010 tax software The same is true if the willful act or willful negligence of someone acting for you caused the accident. Free 2010 tax software Progressive deterioration (explained later). Free 2010 tax software Family pet. Free 2010 tax software   Loss of property due to damage by a family pet is not deductible as a casualty loss unless the requirements discussed earlier under Casualty are met. Free 2010 tax software Example. Free 2010 tax software Your antique oriental rug was damaged by your new puppy before it was housebroken. Free 2010 tax software Because the damage was not unexpected and unusual, the loss is not deductible as a casualty loss. Free 2010 tax software Progressive deterioration. Free 2010 tax software    Loss of property due to progressive deterioration is not deductible as a casualty loss. Free 2010 tax software This is because the damage results from a steadily operating cause or a normal process, rather than from a sudden event. Free 2010 tax software The following are examples of damage due to progressive deterioration. Free 2010 tax software The steady weakening of a building due to normal wind and weather conditions. Free 2010 tax software The deterioration and damage to a water heater that bursts. Free 2010 tax software However, the rust and water damage to rugs and drapes caused by the bursting of a water heater does qualify as a casualty. Free 2010 tax software Most losses of property caused by droughts. Free 2010 tax software To be deductible, a drought-related loss generally must be incurred in a trade or business or in a transaction entered into for profit. Free 2010 tax software Termite or moth damage. Free 2010 tax software The damage or destruction of trees, shrubs, or other plants by a fungus, disease, insects, worms, or similar pests. Free 2010 tax software However, a sudden destruction due to an unexpected or unusual infestation of beetles or other insects may result in a casualty loss. Free 2010 tax software Damage from corrosive drywall. Free 2010 tax software   Under a special procedure, you may be able to claim a casualty loss deduction for amounts you paid to repair damage to your home and household appliances that resulted from corrosive drywall. Free 2010 tax software For details, see Publication 547. Free 2010 tax software Theft A theft is the taking and removing of money or property with the intent to deprive the owner of it. Free 2010 tax software The taking of property must be illegal under the laws of the state where it occurred and it must have been done with criminal intent. Free 2010 tax software You do not need to show a conviction for theft. Free 2010 tax software Theft includes the taking of money or property by the following means. Free 2010 tax software Blackmail. Free 2010 tax software Burglary. Free 2010 tax software Embezzlement. Free 2010 tax software Extortion. Free 2010 tax software Kidnapping for ransom. Free 2010 tax software Larceny. Free 2010 tax software Robbery. Free 2010 tax software The taking of money or property through fraud or misrepresentation is theft if it is illegal under state or local law. Free 2010 tax software Decline in market value of stock. Free 2010 tax software   You cannot deduct as a theft loss the decline in market value of stock acquired on the open market for investment if the decline is caused by disclosure of accounting fraud or other illegal misconduct by the officers or directors of the corporation that issued the stock. Free 2010 tax software However, you can deduct as a capital loss the loss you sustain when you sell or exchange the stock or the stock becomes completely worthless. Free 2010 tax software You report a capital loss on Schedule D (Form 1040). Free 2010 tax software For more information about stock sales, worthless stock, and capital losses, see chapter 4 of Publication 550. Free 2010 tax software Mislaid or lost property. Free 2010 tax software   The simple disappearance of money or property is not a theft. Free 2010 tax software 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 2010 tax software Sudden, unexpected, and unusual events are defined earlier. Free 2010 tax software Example. Free 2010 tax software A car door is accidentally slammed on your hand, breaking the setting of your diamond ring. Free 2010 tax software The diamond falls from the ring and is never found. Free 2010 tax software The loss of the diamond is a casualty. Free 2010 tax software Losses from Ponzi-type investment schemes. Free 2010 tax software   If you had a loss from a Ponzi-type investment scheme, see: Revenue Ruling 2009-9, 2009-14 I. Free 2010 tax software R. Free 2010 tax software B. Free 2010 tax software 735 (available at www. Free 2010 tax software irs. Free 2010 tax software gov/irb/2009-14_IRB/ar07. Free 2010 tax software html). Free 2010 tax software Revenue Procedure 2009-20, 2009-14 I. Free 2010 tax software R. Free 2010 tax software B. Free 2010 tax software 749 (available at www. Free 2010 tax software irs. Free 2010 tax software gov/irb/2009-14_IRB/ar11. Free 2010 tax software html). Free 2010 tax software Revenue Procedure 2011-58, 2011-50 I. Free 2010 tax software R. Free 2010 tax software B. Free 2010 tax software 849 (available at www. Free 2010 tax software irs. Free 2010 tax software gov/irb/2011-50_IRB/ar11. Free 2010 tax software html). Free 2010 tax software 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, first fill out Section C of Form 4684 to determine the amount to enter on Section B, line 28. Free 2010 tax software Skip lines 19 to 27. Free 2010 tax software Section C of Form 4684 replaces Appendix A in Revenue Procedure 2009-20. Free 2010 tax software You do not need to complete Appendix A. Free 2010 tax software For more information, see the above revenue ruling and revenue procedures, and the Instructions for Form 4684. Free 2010 tax software   If you choose not to use the procedures in Revenue Procedure 2009-20, you may claim your theft loss by filling out Section B, lines 19 to 39, as appropriate. Free 2010 tax software Loss on Deposits A loss on deposits can occur when a bank, credit union, or other financial institution becomes insolvent or bankrupt. Free 2010 tax software If you incurred this type of loss, you can choose one of the following ways to deduct the loss. Free 2010 tax software As a casualty loss. Free 2010 tax software As an ordinary loss. Free 2010 tax software As a nonbusiness bad debt. Free 2010 tax software Casualty loss or ordinary loss. Free 2010 tax software   You can choose to deduct a loss on deposits as a casualty loss or as an ordinary loss for any year in which you can reasonably estimate how much of your deposits you have lost in an insolvent or bankrupt financial institution. Free 2010 tax software The choice is generally made on the return you file for that year and applies to all your losses on deposits for the year in that particular financial institution. Free 2010 tax software If you treat the loss as a casualty or ordinary loss, you cannot treat the same amount of the loss as a nonbusiness bad debt when it actually becomes worthless. Free 2010 tax software However, you can take a nonbusiness bad debt deduction for any amount of loss that is more than the estimated amount you deducted as a casualty or ordinary loss. Free 2010 tax software Once you make this choice, you cannot change it without permission from the Internal Revenue Service. Free 2010 tax software   If you claim an ordinary loss, report it as a miscellaneous itemized deduction on Schedule A (Form 1040), line 23. Free 2010 tax software The maximum amount you can claim is $20,000 ($10,000 if you are married filing separately) reduced by any expected state insurance proceeds. Free 2010 tax software Your loss is subject to the 2%-of-adjusted-gross-income limit. Free 2010 tax software You cannot choose to claim an ordinary loss if any part of the deposit is federally insured. Free 2010 tax software Nonbusiness bad debt. Free 2010 tax software   If you do not choose to deduct the loss as a casualty loss or as an ordinary loss, you must wait until the year the actual loss is determined and deduct the loss as a nonbusiness bad debt in that year. Free 2010 tax software How to report. Free 2010 tax software   The kind of deduction you choose for your loss on deposits determines how you report your loss. Free 2010 tax software If you choose: Casualty loss — report it on Form 4684 first and then on Schedule A (Form 1040). Free 2010 tax software Ordinary loss — report it on Schedule A (Form 1040) as a miscellaneous itemized deduction. Free 2010 tax software Nonbusiness bad debt — report it on Form 8949 first and then on Schedule D (Form 1040). Free 2010 tax software More information. Free 2010 tax software   For more information, see Special Treatment for Losses on Deposits in Insolvent or Bankrupt Financial Institutions in the Instructions for Form 4684 or Deposit in Insolvent or Bankrupt Financial Institution in Publication 550. Free 2010 tax software Proof of Loss To deduct a casualty or theft loss, you must be able to prove that you had a casualty or theft. Free 2010 tax software You also must be able to support the amount you take as a deduction. Free 2010 tax software Casualty loss proof. Free 2010 tax software   For a casualty loss, your records should show all the following. Free 2010 tax software The type of casualty (car accident, fire, storm, etc. Free 2010 tax software ) and when it occurred. Free 2010 tax software That the loss was a direct result of the casualty. Free 2010 tax software That you were the owner of the property or, if you leased the property from someone else, that you were contractually liable to the owner for the damage. Free 2010 tax software Whether a claim for reimbursement exists for which there is a reasonable expectation of recovery. Free 2010 tax software Theft loss proof. Free 2010 tax software   For a theft loss, your records should show all the following. Free 2010 tax software When you discovered that your property was missing. Free 2010 tax software That your property was stolen. Free 2010 tax software That you were the owner of the property. Free 2010 tax software Whether a claim for reimbursement exists for which there is a reasonable expectation of recovery. Free 2010 tax software It is important that you have records that will prove your deduction. Free 2010 tax software If you do not have the actual records to support your deduction, you can use other satisfactory evidence to support it. Free 2010 tax software Figuring a Loss Figure the amount of your loss using the following steps. Free 2010 tax software Determine your adjusted basis in the property before the casualty or theft. Free 2010 tax software Determine the decrease in fair market value of the property as a result of the casualty or theft. Free 2010 tax software From the smaller of the amounts you determined in (1) and (2), subtract any insurance or other reimbursement you received or expect to receive. Free 2010 tax software For personal-use property and property used in performing services as an employee, apply the deduction limits, discussed later, to determine the amount of your deductible loss. Free 2010 tax software Gain from reimbursement. Free 2010 tax software   If your reimbursement is more than your adjusted basis in the property, you have a gain. Free 2010 tax software This is true even if the decrease in the FMV of the property is smaller than your adjusted basis. Free 2010 tax software If you have a gain, you may have to pay tax on it, or you may be able to postpone reporting the gain. Free 2010 tax software See Publication 547 for more information on how to treat a gain from a reimbursement for a casualty or theft. Free 2010 tax software Leased property. Free 2010 tax software   If you are liable for casualty damage to property you lease, your loss is the amount you must pay to repair the property minus any insurance or other reimbursement you receive or expect to receive. Free 2010 tax software Decrease in Fair Market Value Fair market value (FMV) is the price for which you could sell your property to a willing buyer when neither of you has to sell or buy and both of you know all the relevant facts. Free 2010 tax software The decrease in FMV used to figure the amount of a casualty or theft loss is the difference between the property's fair market value immediately before and immediately after the casualty or theft. Free 2010 tax software FMV of stolen property. Free 2010 tax software   The FMV of property immediately after a theft is considered to be zero, since you no longer have the property. Free 2010 tax software Example. Free 2010 tax software Several years ago, you purchased silver dollars at face value for $150. Free 2010 tax software This is your adjusted basis in the property. Free 2010 tax software Your silver dollars were stolen this year. Free 2010 tax software The FMV of the coins was $1,000 just before they were stolen, and insurance did not cover them. Free 2010 tax software Your theft loss is $150. Free 2010 tax software Recovered stolen property. Free 2010 tax software   Recovered stolen property is your property that was stolen and later returned to you. Free 2010 tax software If you recovered property after you had already taken a theft loss deduction, you must refigure your loss using the smaller of the property's adjusted basis (explained later) or the decrease in FMV from the time just before it was stolen until the time it was recovered. Free 2010 tax software Use this amount to refigure your total loss for the year in which the loss was deducted. Free 2010 tax software   If your refigured loss is less than the loss you deducted, you generally have to report the difference as income in the recovery year. Free 2010 tax software But report the difference only up to the amount of the loss that reduced your tax. Free 2010 tax software For more information on the amount to report, see Recoveries in chapter 12. Free 2010 tax software Figuring Decrease in FMV— Items To Consider To figure the decrease in FMV because of a casualty or theft, you generally need a competent appraisal. Free 2010 tax software However, other measures can also be used to establish certain decreases. Free 2010 tax software Appraisal. Free 2010 tax software   An appraisal to determine the difference between the FMV of the property immediately before a casualty or theft and immediately afterward should be made by a competent appraiser. Free 2010 tax software The appraiser must recognize the effects of any general market decline that may occur along with the casualty. Free 2010 tax software This information is needed to limit any deduction to the actual loss resulting from damage to the property. Free 2010 tax software   Several factors are important in evaluating the accuracy of an appraisal, including the following. Free 2010 tax software The appraiser's familiarity with your property before and after the casualty or theft. Free 2010 tax software The appraiser's knowledge of sales of comparable property in the area. Free 2010 tax software The appraiser's knowledge of conditions in the area of the casualty. Free 2010 tax software The appraiser's method of appraisal. Free 2010 tax software    You may be able to use an appraisal that you used to get a federal loan (or a federal loan guarantee) as the result of a federally declared disaster to establish the amount of your disaster loss. Free 2010 tax software For more information on disasters, see Disaster Area Losses, in Pub. Free 2010 tax software 547. Free 2010 tax software Cost of cleaning up or making repairs. Free 2010 tax software   The cost of repairing damaged property is not part of a casualty loss. Free 2010 tax software Neither is the cost of cleaning up after a casualty. Free 2010 tax software But you can use the cost of cleaning up or making repairs after a casualty as a measure of the decrease in FMV if you meet all the following conditions. Free 2010 tax software The repairs are actually made. Free 2010 tax software The repairs are necessary to bring the property back to its condition before the casualty. Free 2010 tax software The amount spent for repairs is not excessive. Free 2010 tax software The repairs take care of the damage only. Free 2010 tax software The value of the property after the repairs is not, due to the repairs, more than the value of the property before the casualty. Free 2010 tax software Landscaping. Free 2010 tax software   The cost of restoring landscaping to its original condition after a casualty may indicate the decrease in FMV. Free 2010 tax software You may be able to measure your loss by what you spend on the following. Free 2010 tax software Removing destroyed or damaged trees and shrubs minus any salvage you receive. Free 2010 tax software Pruning and other measures taken to preserve damaged trees and shrubs. Free 2010 tax software Replanting necessary to restore the property to its approximate value before the casualty. Free 2010 tax software Car value. Free 2010 tax software    Books issued by various automobile organizations that list your car may be useful in figuring the value of your car. Free 2010 tax software You can use the book's retail values and modify them by such factors as mileage and the condition of your car to figure its value. Free 2010 tax software The prices are not official, but they may be useful in determining value and suggesting relative prices for comparison with current sales and offerings in your area. Free 2010 tax software If your car is not listed in the books, determine its value from other sources. Free 2010 tax software A dealer's offer for your car as a trade-in on a new car is not usually a measure of its true value. Free 2010 tax software Figuring Decrease in FMV— Items Not To Consider You generally should not consider the following items when attempting to establish the decrease in FMV of your property. Free 2010 tax software Cost of protection. Free 2010 tax software   The cost of protecting your property against a casualty or theft is not part of a casualty or theft loss. Free 2010 tax software The amount you spend on insurance or to board up your house against a storm is not part of your loss. Free 2010 tax software   If you make permanent improvements to your property to protect it against a casualty or theft, add the cost of these improvements to your basis in the property. Free 2010 tax software An example would be the cost of a dike to prevent flooding. Free 2010 tax software Exception. Free 2010 tax software   You cannot increase your basis in the property by, or deduct as a business expense, any expenditures you made with respect to qualified disaster mitigation payments. Free 2010 tax software See Disaster Area Losses in Publication 547. Free 2010 tax software Incidental expenses. Free 2010 tax software   Any incidental expenses you have due to a casualty or theft, such as expenses for the treatment of personal injuries, for temporary housing, or for a rental car, are not part of your casualty or theft loss. Free 2010 tax software Replacement cost. Free 2010 tax software   The cost of replacing stolen or destroyed property is not part of a casualty or theft loss. Free 2010 tax software Sentimental value. Free 2010 tax software   Do not consider sentimental value when determining your loss. Free 2010 tax software If a family portrait, heirloom, or keepsake is damaged, destroyed, or stolen, you must base your loss on its FMV, as limited by your adjusted basis in the property. Free 2010 tax software Decline in market value of property in or near casualty area. Free 2010 tax software   A decrease in the value of your property because it is in or near an area that suffered a casualty, or that might again suffer a casualty, is not to be taken into consideration. Free 2010 tax software You have a loss only for actual casualty damage to your property. Free 2010 tax software However, if your home is in a federally declared disaster area, see Disaster Area Losses in Publication 547. Free 2010 tax software Costs of photographs and appraisals. Free 2010 tax software    Photographs taken after a casualty will be helpful in establishing the condition and value of the property after it was damaged. Free 2010 tax software Photographs showing the condition of the property after it was repaired, restored, or replaced may also be helpful. Free 2010 tax software    Appraisals are used to figure the decrease in FMV because of a casualty or theft. Free 2010 tax software See Appraisal , earlier, under Figuring Decrease in FMV — Items To Consider, for information about appraisals. Free 2010 tax software   The costs of photographs and appraisals used as evidence of the value and condition of property damaged as a result of a casualty are not a part of the loss. Free 2010 tax software You can claim these costs as a miscellaneous itemized deduction subject to the 2%-of-adjusted-gross-income limit on Schedule A (Form 1040). Free 2010 tax software For information about miscellaneous deductions, see chapter 28. Free 2010 tax software Adjusted Basis Adjusted basis is your basis in the property (usually cost) increased or decreased by various events, such as improvements and casualty losses. Free 2010 tax software For more information, see chapter 13. Free 2010 tax software Insurance and Other Reimbursements If you receive an insurance payment or other type of reimbursement, you must subtract the reimbursement when you figure your loss. Free 2010 tax software You do not have a casualty or theft loss to the extent you are reimbursed. Free 2010 tax software If you expect to be reimbursed for part or all of your loss, you must subtract the expected reimbursement when you figure your loss. Free 2010 tax software You must reduce your loss even if you do not receive payment until a later tax year. Free 2010 tax software See Reimbursement Received After Deducting Loss , later. Free 2010 tax software Failure to file a claim for reimbursement. Free 2010 tax software   If your property is covered by insurance, you must file a timely insurance claim for reimbursement of your loss. Free 2010 tax software Otherwise, you cannot deduct this loss as a casualty or theft loss. Free 2010 tax software However, this rule does not apply to the portion of the loss not covered by insurance (for example, a deductible). Free 2010 tax software Example. Free 2010 tax software You have a car insurance policy with a $1,000 deductible. Free 2010 tax software Because your insurance did not cover the first $1,000 of an auto collision, the $1,000 would be deductible (subject to the deduction limits discussed later). Free 2010 tax software This is true even if you do not file an insurance claim, because your insurance policy would never have reimbursed you for the deductible. Free 2010 tax software Types of Reimbursements The most common type of reimbursement is an insurance payment for your stolen or damaged property. Free 2010 tax software Other types of reimbursements are discussed next. Free 2010 tax software Also see the Instructions for Form 4684. Free 2010 tax software Employer's emergency disaster fund. Free 2010 tax software   If you receive money from your employer's emergency disaster fund and you must use that money to rehabilitate or replace property on which you are claiming a casualty loss deduction, you must take that money into consideration in computing the casualty loss deduction. Free 2010 tax software Take into consideration only the amount you used to replace your destroyed or damaged property. Free 2010 tax software Example. Free 2010 tax software Your home was extensively damaged by a tornado. Free 2010 tax software Your loss after reimbursement from your insurance company was $10,000. Free 2010 tax software Your employer set up a disaster relief fund for its employees. Free 2010 tax software Employees receiving money from the fund had to use it to rehabilitate or replace their damaged or destroyed property. Free 2010 tax software You received $4,000 from the fund and spent the entire amount on repairs to your home. Free 2010 tax software In figuring your casualty loss, you must reduce your unreimbursed loss ($10,000) by the $4,000 you received from your employer's fund. Free 2010 tax software Your casualty loss before applying the deduction limits discussed later is $6,000. Free 2010 tax software Cash gifts. Free 2010 tax software   If you receive excludable cash gifts as a disaster victim and there are no limits on how you can use the money, you do not reduce your casualty loss by these excludable cash gifts. Free 2010 tax software This applies even if you use the money to pay for repairs to property damaged in the disaster. Free 2010 tax software Example. Free 2010 tax software Your home was damaged by a hurricane. Free 2010 tax software Relatives and neighbors made cash gifts to you that were excludable from your income. Free 2010 tax software You used part of the cash gifts to pay for repairs to your home. Free 2010 tax software There were no limits or restrictions on how you could use the cash gifts. Free 2010 tax software Because it was an excludable gift, the money you received and used to pay for repairs to your home does not reduce your casualty loss on the damaged home. Free 2010 tax software Insurance payments for living expenses. Free 2010 tax software   You do not reduce your casualty loss by insurance payments you receive to cover living expenses in either of the following situations. Free 2010 tax software You lose the use of your main home because of a casualty. Free 2010 tax software Government authorities do not allow you access to your main home because of a casualty or threat of one. Free 2010 tax software Inclusion in income. Free 2010 tax software   If these insurance payments are more than the temporary increase in your living expenses, you must include the excess in your income. Free 2010 tax software Report this amount on Form 1040, line 21. Free 2010 tax software However, if the casualty occurs in a federally declared disaster area, none of the insurance payments are taxable. Free 2010 tax software See Qualified disaster relief payments, under Disaster Area Losses in Publication 547. Free 2010 tax software   A temporary increase in your living expenses is the difference between the actual living expenses you and your family incurred during the period you could not use your home and your normal living expenses for that period. Free 2010 tax software Actual living expenses are the reasonable and necessary expenses incurred because of the loss of your main home. Free 2010 tax software Generally, these expenses include the amounts you pay for the following. Free 2010 tax software Rent for suitable housing. Free 2010 tax software Transportation. Free 2010 tax software Food. Free 2010 tax software Utilities. Free 2010 tax software Miscellaneous services. Free 2010 tax software Normal living expenses consist of these same expenses that you would have incurred but did not because of the casualty or the threat of one. Free 2010 tax software Example. Free 2010 tax software As a result of a fire, you vacated your apartment for a month and moved to a motel. Free 2010 tax software You normally pay $525 a month for rent. Free 2010 tax software None was charged for the month the apartment was vacated. Free 2010 tax software Your motel rent for this month was $1,200. Free 2010 tax software You normally pay $200 a month for food. Free 2010 tax software Your food expenses for the month you lived in the motel were $400. Free 2010 tax software You received $1,100 from your insurance company to cover your living expenses. Free 2010 tax software You determine the payment you must include in income as follows. Free 2010 tax software 1) Insurance payment for living expenses $1,100 2) Actual expenses during the month you are unable to use your home because of fire 1,600   3) Normal living expenses 725   4) Temporary increase in living  expenses: Subtract line 3 from line 2 875 5) Amount of payment includible  in income: Subtract line 4  from line 1 $ 225 Tax year of inclusion. Free 2010 tax software   You include the taxable part of the insurance payment in income for the year you regain the use of your main home or, if later, for the year you receive the taxable part of the insurance payment. Free 2010 tax software Example. Free 2010 tax software Your main home was destroyed by a tornado in August 2011. Free 2010 tax software You regained use of your home in November 2012. Free 2010 tax software The insurance payments you received in 2011 and 2012 were $1,500 more than the temporary increase in your living expenses during those years. Free 2010 tax software You include this amount in income on your 2012 Form 1040. Free 2010 tax software If, in 2013, you receive further payments to cover the living expenses you had in 2011 and 2012, you must include those payments in income on your 2013 Form 1040. Free 2010 tax software Disaster relief. Free 2010 tax software   Food, medical supplies, and other forms of assistance you receive do not reduce your casualty loss unless they are replacements for lost or destroyed property. Free 2010 tax software Qualified disaster relief payments you receive for expenses you incurred as a result of a federally declared disaster are not taxable income to you. Free 2010 tax software For more information, see Disaster Area Losses in Publication 547. Free 2010 tax software Disaster unemployment assistance payments are unemployment benefits that are taxable. Free 2010 tax software Generally, disaster relief grants and qualified disaster mitigation payments made under the Robert T. Free 2010 tax software Stafford Disaster Relief and Emergency Assistance Act or the National Flood Insurance Act (as in effect on April 15, 2005) are not includible in your income. Free 2010 tax software See Disaster Area Losses in Publication 547. Free 2010 tax software Reimbursement Received After Deducting Loss If you figured your casualty or theft loss using your expected reimbursement, you may have to adjust your tax return for the tax year in which you receive your actual reimbursement. Free 2010 tax software This section explains the adjustment you may have to make. Free 2010 tax software Actual reimbursement less than expected. Free 2010 tax software   If you later receive less reimbursement than you expected, include that difference as a loss with your other losses (if any) on your return for the year in which you can reasonably expect no more reimbursement. Free 2010 tax software Example. Free 2010 tax software Your personal car had an FMV of $2,000 when it was destroyed in a collision with another car in 2012. Free 2010 tax software The accident was due to the negligence of the other driver. Free 2010 tax software At the end of 2012, there was a reasonable prospect that the owner of the other car would reimburse you in full. Free 2010 tax software You did not have a deductible loss in 2012. Free 2010 tax software In January 2013, the court awarded you a judgment of $2,000. Free 2010 tax software However, in July it became apparent that you will be unable to collect any amount from the other driver. Free 2010 tax software You can deduct the loss in 2013 subject to the limits discussed later. Free 2010 tax software Actual reimbursement more than expected. Free 2010 tax software   If you later receive more reimbursement than you expected after you claimed a deduction for the loss, you may have to include the extra reimbursement in your income for the year you receive it. Free 2010 tax software However, if any part of the original deduction did not reduce your tax for the earlier year, do not include that part of the reimbursement in your income. Free 2010 tax software You do not refigure your tax for the year you claimed the deduction. Free 2010 tax software For more information, see Recoveries in chapter 12. Free 2010 tax software If the total of all the reimbursements you receive is more than your adjusted basis in the destroyed or stolen property, you will have a gain on the casualty or theft. Free 2010 tax software If you have already taken a deduction for a loss and you receive the reimbursement in a later year, you may have to include the gain in your income for the later year. Free 2010 tax software Include the gain as ordinary income up to the amount of your deduction that reduced your tax for the earlier year. Free 2010 tax software See Figuring a Gain in Publication 547 for more information on how to treat a gain from the reimbursement of a casualty or theft. Free 2010 tax software Actual reimbursement same as expected. Free 2010 tax software   If you receive exactly the reimbursement you expected to receive, you do not have to include any of the reimbursement in your income and you cannot deduct any additional loss. Free 2010 tax software Example. Free 2010 tax software In December 2013, you had a collision while driving your personal car. Free 2010 tax software Repairs to the car cost $950. Free 2010 tax software You had $100 deductible collision insurance. Free 2010 tax software Your insurance company agreed to reimburse you for the rest of the damage. Free 2010 tax software Because you expected a reimbursement from the insurance company, you did not have a casualty loss deduction in 2013. Free 2010 tax software Due to the $100 rule (discussed later under Deduction Limits ), you cannot deduct the $100 you paid as the deductible. Free 2010 tax software When you receive the $850 from the insurance company in 2014, do not report it as income. Free 2010 tax software Single Casualty on Multiple Properties Personal property. Free 2010 tax software   Personal property is any property that is not real property. Free 2010 tax software If your personal property is stolen or is damaged or destroyed by a casualty, you must figure your loss separately for each item of property. Free 2010 tax software Then combine these separate losses to figure the total loss from that casualty or theft. Free 2010 tax software Example. Free 2010 tax software A fire in your home destroyed an upholstered chair, an oriental rug, and an antique table. Free 2010 tax software You did not have fire insurance to cover your loss. Free 2010 tax software (This was the only casualty or theft you had during the year. Free 2010 tax software ) You paid $750 for the chair and you established that it had an FMV of $500 just before the fire. Free 2010 tax software The rug cost $3,000 and had an FMV of $2,500 just before the fire. Free 2010 tax software You bought the table at an auction for $100 before discovering it was an antique. Free 2010 tax software It had been appraised at $900 before the fire. Free 2010 tax software You figure your loss on each of these items as follows:     Chair Rug Table 1) Basis (cost) $750 $3,000 $100 2) FMV before fire $500 $2,500 $900 3) FMV after fire –0– –0– –0– 4) Decrease in FMV $500 $2,500 $900 5) Loss (smaller of (1) or  (4)) $500 $2,500 $100           6) Total loss     $3,100 Real property. Free 2010 tax software   In figuring a casualty loss on personal-use real property, treat the entire property (including any improvements, such as buildings, trees, and shrubs) as one item. Free 2010 tax software Figure the loss using the smaller of the adjusted basis or the decrease in FMV of the entire property. Free 2010 tax software Example. Free 2010 tax software You bought your home a few years ago. Free 2010 tax software You paid $160,000 ($20,000 for the land and $140,000 for the house). Free 2010 tax software You also spent $2,000 for landscaping. Free 2010 tax software This year a fire destroyed your home. Free 2010 tax software The fire also damaged the shrubbery and trees in your yard. Free 2010 tax software The fire was your only casualty or theft loss this year. Free 2010 tax software Competent appraisers valued the property as a whole at $200,000 before the fire, but only $30,000 after the fire. Free 2010 tax software (The loss to your household furnishings is not shown in this example. Free 2010 tax software It would be figured separately on each item, as explained earlier under Personal property . Free 2010 tax software ) Shortly after the fire, the insurance company paid you $155,000 for the loss. Free 2010 tax software You figure your casualty loss as follows: 1) Adjusted basis of the entire property (land, building, and landscaping) $162,000 2) FMV of entire property before fire $200,000 3) FMV of entire property after fire 30,000 4) Decrease in FMV of entire  property $170,000 5) Loss (smaller of (1) or (4)) $162,000 6) Subtract insurance 155,000 7) Amount of loss after reimbursement $7,000 Deduction Limits After you have figured your casualty or theft loss, you must figure how much of the loss you can deduct. Free 2010 tax software If the loss was to property for your personal use or your family's use, there are two limits on the amount you can deduct for your casualty or theft loss. Free 2010 tax software You must reduce each casualty or theft loss by $100 ($100 rule). Free 2010 tax software You must further reduce the total of all your casualty or theft losses by 10% of your adjusted gross income (10% rule). Free 2010 tax software You make these reductions on Form 4684. Free 2010 tax software These rules are explained next and Table 25-1 summarizes how to apply the $100 rule and the 10% rule in various situations. Free 2010 tax software For more detailed explanations and examples, see Publication 547. Free 2010 tax software Table 25-1. Free 2010 tax software How To Apply the Deduction Limits for Personal-Use Property   $100 Rule 10% Rule General Application You must reduce each casualty or theft loss by $100 when figuring your deduction. Free 2010 tax software Apply this rule after you have figured the amount of your loss. Free 2010 tax software You must reduce your total casualty or theft loss by 10% of your adjusted gross income. Free 2010 tax software Apply this rule after you reduce each loss by $100 (the $100 rule). Free 2010 tax software Single Event Apply this rule only once, even if many pieces of property are affected. Free 2010 tax software Apply this rule only once, even if many pieces of property are affected. Free 2010 tax software More Than One Event Apply to the loss from each event. Free 2010 tax software Apply to the total of all your losses from all events. Free 2010 tax software More Than One Person— With Loss From the Same Event (other than a married couple filing jointly) Apply separately to each person. Free 2010 tax software Apply separately to each person. Free 2010 tax software Married Couple—With Loss From the Same Event Filing Jointly Apply as if you were one person. Free 2010 tax software Apply as if you were one person. Free 2010 tax software Filing Separately Apply separately to each spouse. Free 2010 tax software Apply separately to each spouse. Free 2010 tax software More Than One Owner (other than a married couple filing jointly) Apply separately to each owner of jointly owned property. Free 2010 tax software Apply separately to each owner of jointly owned property. Free 2010 tax software Property used partly for business and partly for personal purposes. Free 2010 tax software   When property is used partly for personal purposes and partly for business or income-producing purposes, the casualty or theft loss deduction must be figured separately for the personal-use part and for the business or income-producing part. Free 2010 tax software You must figure each loss separately because the $100 rule and the 10% rule apply only to the loss on the personal-use part of the property. Free 2010 tax software $100 Rule After you have figured your casualty or theft loss on personal-use property, you must reduce that loss by $100. Free 2010 tax software This reduction applies to each total casualty or theft loss. Free 2010 tax software It does not matter how many pieces of property are involved in an event. Free 2010 tax software Only a single $100 reduction applies. Free 2010 tax software Example. Free 2010 tax software A hailstorm damages your home and your car. Free 2010 tax software Determine the amount of loss, as discussed earlier, for each of these items. Free 2010 tax software Since the losses are due to a single event, you combine the losses and reduce the combined amount by $100. Free 2010 tax software Single event. Free 2010 tax software   Generally, events closely related in origin cause a single casualty. Free 2010 tax software It is a single casualty when the damage is from two or more closely related causes, such as wind and flood damage caused by the same storm. Free 2010 tax software 10% Rule You must reduce the total of all your casualty or theft losses on personal-use property by 10% of your adjusted gross income. Free 2010 tax software Apply this rule after you reduce each loss by $100. Free 2010 tax software For more information, see the Form 4684 instructions. Free 2010 tax software If you have both gains and losses from casualties or thefts, see Gains and losses , later in this discussion. Free 2010 tax software Example 1. Free 2010 tax software In June, you discovered that your house had been burglarized. Free 2010 tax software Your loss after insurance reimbursement was $2,000. Free 2010 tax software Your adjusted gross income for the year you discovered the theft is $29,500. Free 2010 tax software You first apply the $100 rule and then the 10% rule. Free 2010 tax software Figure your theft loss deduction as follows. Free 2010 tax software 1) Loss after insurance $2,000 2) Subtract $100 100 3) Loss after $100 rule $1,900 4) Subtract 10% × $29,500 AGI 2,950 5) Theft loss deduction –0– You do not have a theft loss deduction because your loss after you apply the $100 rule ($1,900) is less than 10% of your adjusted gross income ($2,950). Free 2010 tax software Example 2. Free 2010 tax software In March, you had a car accident that totally destroyed your car. Free 2010 tax software You did not have collision insurance on your car, so you did not receive any insurance reimbursement. Free 2010 tax software Your loss on the car was $1,800. Free 2010 tax software In November, a fire damaged your basement and totally destroyed the furniture, washer, dryer, and other items stored there. Free 2010 tax software Your loss on the basement items after reimbursement was $2,100. Free 2010 tax software Your adjusted gross income for the year that the accident and fire occurred is $25,000. Free 2010 tax software You figure your casualty loss deduction as follows. Free 2010 tax software       Base-     Car ment 1) Loss $1,800 $2,100 2) Subtract $100 per incident 100 100 3) Loss after $100 rule $1,700 $2,000 4) Total loss $3,700 5) Subtract 10% × $25,000 AGI 2,500 6) Casualty loss deduction $1,200 Gains and losses. Free 2010 tax software   If you had both gains and losses from casualties or thefts to personal-use property, you must compare your total gains to your total losses. Free 2010 tax software Do this after you have reduced each loss by any reimbursements and by $100, but before you have reduced the losses by 10% of your adjusted gross income. Free 2010 tax software Casualty or theft gains do not include gains you choose to postpone. Free 2010 tax software See Publication 547 for information on the postponement of gain. Free 2010 tax software Losses more than gains. Free 2010 tax software   If your losses are more than your recognized gains, subtract your gains from your losses and reduce the result by 10% of your adjusted gross income. Free 2010 tax software The rest, if any, is your deductible loss from personal-use property. Free 2010 tax software Gains more than losses. Free 2010 tax software   If your recognized gains are more than your losses, subtract your losses from your gains. Free 2010 tax software The difference is treated as capital gain and must be reported on Schedule D (Form 1040). Free 2010 tax software The 10% rule does not apply to your gains. Free 2010 tax software When To Report Gains and Losses Gains. Free 2010 tax software   If you receive an insurance or other reimbursement that is more than your adjusted basis in the destroyed or stolen property, you have a gain from the casualty or theft. Free 2010 tax software You must include this gain in your income in the year you receive the reimbursement, unless you choose to postpone reporting the gain as explained in Publication 547. Free 2010 tax software If you have a loss, see Table 25-2 . Free 2010 tax software Table 25-2. Free 2010 tax software When To Deduct a Loss IF you have a loss. Free 2010 tax software . Free 2010 tax software . Free 2010 tax software THEN deduct it in the year. Free 2010 tax software . Free 2010 tax software . Free 2010 tax software from a casualty, the loss occurred. Free 2010 tax software in a federally declared disaster area, the disaster occurred or the year immediately before the disaster. Free 2010 tax software from a theft, the theft was discovered. Free 2010 tax software on a deposit treated as a:   • casualty or any ordinary loss, a reasonable estimate can be made. Free 2010 tax software • bad debt, deposits are totally worthless. Free 2010 tax software Losses. Free 2010 tax software   Generally, you can deduct a casualty loss that is not reimbursable only in the tax year in which the casualty occurred. Free 2010 tax software This is true even if you do not repair or replace the damaged property until a later year. Free 2010 tax software   You can deduct theft losses that are not reimbursable only in the year you discover your property was stolen. Free 2010 tax software   If you are not sure whether part of your casualty or theft loss will be reimbursed, do not deduct that part until the tax year when you become reasonably certain that it will not be reimbursed. Free 2010 tax software Loss on deposits. Free 2010 tax software   If your loss is a loss on deposits in an insolvent or bankrupt financial institution, see Loss on Deposits , earlier. Free 2010 tax software Disaster Area Loss You generally must deduct a casualty loss in the year it occurred. Free 2010 tax software However, if you have a casualty loss from a federally declared disaster that occurred in an area warranting public or individual assistance (or both), you can choose to deduct the loss on your tax return or amended return for either of the following years. Free 2010 tax software The year the disaster occurred. Free 2010 tax software The year immediately preceding the year the disaster occurred. Free 2010 tax software Gains. Free 2010 tax software    Special rules apply if you choose to postpone reporting gain on property damaged or destroyed in a federally declared disaster area. Free 2010 tax software For those special rules, see Publication 547. Free 2010 tax software Postponed tax deadlines. Free 2010 tax software   The IRS may postpone for up to 1 year certain tax deadlines of taxpayers who are affected by a federally declared disaster. Free 2010 tax software The tax deadlines the IRS may postpone include those for filing income and employment tax returns, paying income and employment taxes, and making contributions to a traditional IRA or Roth IRA. Free 2010 tax software   If any tax deadline is postponed, the IRS will publicize the postponement in your area by publishing a news release, revenue ruling, revenue procedure, notice, announcement, or other guidance in the Internal Revenue Bulletin (IRB). Free 2010 tax software Go to www. Free 2010 tax software irs. Free 2010 tax software gov/uac/Tax-Relief-in-Disaster-Situations to find out if a tax deadline has been postponed for your area. Free 2010 tax software Who is eligible. Free 2010 tax software   If the IRS postpones a tax deadline, the following taxpayers are eligible for the postponement. Free 2010 tax software Any individual whose main home is located in a covered disaster area (defined next). Free 2010 tax software Any business entity or sole proprietor whose principal place of business is located in a covered disaster area. Free 2010 tax software Any individual who is a relief worker affiliated with a recognized government or philanthropic organization who is assisting in a covered disaster area. Free 2010 tax software Any individual, business entity, or sole proprietorship whose records are needed to meet a postponed tax deadline, provided those records are maintained in a covered disaster area. Free 2010 tax software The main home or principal place of business does not have to be located in the covered disaster area. Free 2010 tax software Any estate or trust that has tax records necessary to meet a postponed tax deadline, provided those records are maintained in a covered disaster area. Free 2010 tax software The spouse on a joint return with a taxpayer who is eligible for postponements. Free 2010 tax software Any individual, business entity, or sole proprietorship not located in a covered disaster area, but whose records necessary to meet a postponed tax deadline are located in the covered disaster area. Free 2010 tax software Any individual visiting the covered disaster area who was killed or injured as a result of the disaster. Free 2010 tax software Any other person determined by the IRS to be affected by a federally declared disaster. Free 2010 tax software Covered disaster area. Free 2010 tax software   This is an area of a federally declared disaster in which the IRS has decided to postpone tax deadlines for up to 1 year. Free 2010 tax software Abatement of interest and penalties. Free 2010 tax software   The IRS may abate the interest and penalties on underpaid income tax for the length of any postponement of tax deadlines. Free 2010 tax software More information. Free 2010 tax software   For more information, see Disaster Area Losses in Publication 547. Free 2010 tax software How To Report Gains and Losses Use Form 4684 to report a gain or a deductible loss from a casualty or theft. Free 2010 tax software If you have more than one casualty or theft, use a separate Form 4684 to determine your gain or loss for each event. Free 2010 tax software Combine the gains and losses on one Form 4684. Free 2010 tax software Follow the form instructions as to which lines to fill out. Free 2010 tax software In addition, you must use the appropriate schedule to report a gain or loss. Free 2010 tax software The schedule you use depends on whether you have a gain or loss. Free 2010 tax software If you have a: Report it on: Gain Schedule D (Form 1040) Loss Schedule A (Form 1040) Adjustments to basis. Free 2010 tax software   If you have a casualty or theft loss, you must decrease your basis in the property by any insurance or other reimbursement you receive, and by any deductible loss. Free 2010 tax software Amounts you spend to restore your property after a casualty increase your adjusted basis. Free 2010 tax software See Adjusted Basis in chapter 13 for more information. Free 2010 tax software Net operating loss (NOL). Free 2010 tax software    If your casualty or theft loss deduction causes your deductions for the year to be more than your income for the year, you may have an NOL. Free 2010 tax software You can use an NOL to lower your tax in an earlier year, allowing you to get a refund for tax you have already paid. Free 2010 tax software Or, you can use it to lower your tax in a later year. Free 2010 tax software You do not have to be in business to have an NOL from a casualty or theft loss. Free 2010 tax software For more information, see Publication 536, Net Operating Losses (NOLs) for Individuals, Estates, and Trusts. Free 2010 tax software Prev  Up  Next   Home   More Online Publications
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IRS Letters and Visits to Return Preparers

The Internal Revenue Service sends many letters annually to federal tax return preparers. Beginning in November 2013, the agency began its fifth year of a hands-on effort to improve the accuracy and quality of filed tax returns and to heighten awareness of preparer responsibilities. Approximately 12,000 letters will be sent to tax return preparers nationwide. Types of letters sent include:

Letter 4810 - Sent in November 2013 advising the recipient that an IRS representative will contact them to schedule an educational visit to review their responsibilities in correctly preparing the Schedule C.

Letter 5105 - Sent in December 2013 recommending the recipient review all Schedule C and preparer due diligence rules, as well as pay special attention to Schedule C accuracy in 2014.

Letter 5271 - Sent in December 2013 recommending the recipient review all Additional Child Tax Credit (ACTC) and preparer due diligence rules, as well as pay special attention to ACTC accuracy in 2014.

Letter 5272 - Sent in December 2013 recommending the recipient review all Additional Child Tax Credit (ACTC) and preparer due diligence rules, as well as pay special attention to ACTC accuracy in 2014 on returns where dependents have an Individual Tax Identification Number (ITIN).

Letter 5292 - Sent in November 2013 advising the recipient that an IRS representative will contact them to schedule an educational visit to review their responsibilities in correctly following preparer tax identification number (PTIN) rules.

The IRS also regularly checks whether federal tax return preparers are compliant with their own tax filing and payment responsibilities.

Letter 4911 - Sent to notify paid tax return preparers that they are not compliant with their personal tax responsibilities and should resolve the matter to avoid affecting their status as a preparer tax identification number (PTIN) holder.

IRS Letters and Visits to Return Preparers: FAQs

 

 

Page Last Reviewed or Updated: 19-Dec-2013

The Free 2010 Tax Software

Free 2010 tax software Publication 560 - Additional Material This image is too large to be displayed in the current screen. Free 2010 tax software Please click the link to view the image. Free 2010 tax software Tax Publications Prev  Up  Next   Home   More Online Publications