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Free Federal Tax E Filing

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Free Federal Tax E Filing

Free federal tax e filing Publication 3920 - Main Contents Table of Contents Tax ForgivenessYears Eligible for Tax Forgiveness Amount of Tax Forgiven Refund of Taxes Paid How To Claim Tax Forgiveness Payments to SurvivorsSeptember 11th Victim Compensation Fund of 2001 Qualified Disaster Relief Payments Disability Payments Death Benefits Canceled Debt Payments to Survivors of Public Safety Officers Postponed Tax DeadlinesCovered area. Free federal tax e filing Disaster Area Losses Estate Tax Reduction Structured Settlement Factoring Transactions Illustrated Worksheets B and C Additional Worksheets How To Get Tax Help Tax Forgiveness The IRS will forgive the federal income tax liabilities of decedents who died as a result of the Oklahoma City attack, September 11 attacks, and anthrax attacks. Free federal tax e filing Income tax is forgiven for these decedents whether they were killed in an attack or in rescue or recovery operations. Free federal tax e filing Any forgiven tax liability owed to the IRS will not have to be paid. Free federal tax e filing Any forgiven tax liability that has already been paid will be refunded. Free federal tax e filing (See Refund of Taxes Paid, later. Free federal tax e filing ) To determine the amount of tax to be forgiven, read Years Eligible for Tax Forgiveness first. Free federal tax e filing Then read Amount of Tax Forgiven. Free federal tax e filing Decedents whose total forgiven tax liability for all eligible years is less than $10,000 are entitled to $10,000 minimum relief. Free federal tax e filing Even decedents who were not required to file tax returns for the eligible tax years are entitled to $10,000 minimum relief. Free federal tax e filing See Minimum Amount of Relief later under Amount of Tax Forgiven. Free federal tax e filing Years Eligible for Tax Forgiveness The following paragraphs explain which years are eligible for tax forgiveness. Free federal tax e filing Oklahoma City attack. Free federal tax e filing   For those who died from this attack, income tax is forgiven for 1994 and all later years up to and including the year of death. Free federal tax e filing Example 1. Free federal tax e filing A man was killed in the bombing of the federal building in Oklahoma City on April 19, 1995. Free federal tax e filing His income tax is forgiven for 1994 and 1995. Free federal tax e filing Example 2. Free federal tax e filing A woman was wounded while walking outside the federal building in Oklahoma City on April 19, 1995. Free federal tax e filing She subsequently died of her wounds in 1996. Free federal tax e filing Her income tax is forgiven for 1994, 1995, and 1996. Free federal tax e filing September 11 attacks and anthrax attacks. Free federal tax e filing   For those who die from these attacks, income tax is forgiven for 2000 and all later years up to and including the year of death. Free federal tax e filing Example 1. Free federal tax e filing A Pentagon employee died in the September 11 attack. Free federal tax e filing Her income tax is forgiven for 2000 and 2001. Free federal tax e filing Example 2. Free federal tax e filing A visitor to the World Trade Center died in 2002 of wounds he sustained in the September 11 attack. Free federal tax e filing His income tax liability is forgiven for 2000, 2001, and 2002. Free federal tax e filing Amount of Tax Forgiven The IRS will forgive the decedent's income tax liability for all years eligible for tax forgiveness. Free federal tax e filing On a joint return, only the decedent's part of the joint income tax liability is eligible for forgiveness. Free federal tax e filing To figure the tax to be forgiven, use the following worksheets. Free federal tax e filing Use Worksheet A for any eligible year the decedent filed a return as single, married filing separately, head of household, or qualifying widow(er). Free federal tax e filing Use Worksheet B for any eligible year the decedent filed a joint return. Free federal tax e filing See the illustrated Worksheet B near the end of this publication. Free federal tax e filing Do not complete Worksheet A or B if the decedent was not required to file tax returns for the eligible tax years. Free federal tax e filing Instead, complete Worksheet C and file a return for the decedent's last tax year. Free federal tax e filing See Minimum Amount of Relief, later. Free federal tax e filing If you need assistance, call the IRS at 1–866–562–5227 Monday through Friday during the following times. Free federal tax e filing In English–7 a. Free federal tax e filing m. Free federal tax e filing to 10 p. Free federal tax e filing m. Free federal tax e filing local time. Free federal tax e filing In Spanish–8 a. Free federal tax e filing m. Free federal tax e filing to 9:30 p. Free federal tax e filing m. Free federal tax e filing local time. Free federal tax e filing Both spouses died. Free federal tax e filing   If both spouses died as a result of a terrorist attack and they filed a joint return for an eligible tax year, fill out Worksheet B for each spouse for that year. Free federal tax e filing Do this to determine if each spouse qualifies for the minimum relief of $10,000 (discussed later under Minimum Amount of Relief). Free federal tax e filing If you are certain that neither spouse's total forgiven tax liability for all eligible years is less than $10,000, skip Worksheet B. Free federal tax e filing However, attach a computation of the forgiven tax liability to the final income tax return or amended tax return for each eligible year. Free federal tax e filing The forgiven tax liability is the total tax shown on the joint return minus the taxes listed in the instructions for line 4 of Worksheet B. Free federal tax e filing Residents of community property states. Free federal tax e filing   If the decedent was domiciled in a community property state and the spouse reported half the community income on a separate return, the surviving spouse can get a refund of taxes paid on his or her share of the decedent's income for the eligible years. Free federal tax e filing Also, all of the decedent's income taxes paid for the eligible years will be refunded to either the executor or administrator of the estate, or to the surviving spouse if there is no legal representative. Free federal tax e filing Worksheet B. Free federal tax e filing Figuring the Tax To Be Forgiven (For Decedents Who Filed a Joint Return)       (A) First Eligible Year (1994 or 2000) (B) Second Eligible Year (1995 or 2001) (C) Third Eligible Year (1996 or 2002) 1 Enter the years eligible for forgiveness. Free federal tax e filing 1       2 Enter the decedent's taxable income. Free federal tax e filing Figure taxable income as if a separate return had been filed. Free federal tax e filing See the instructions. Free federal tax e filing 2       3 Enter the decedent's total tax. Free federal tax e filing See the instructions. Free federal tax e filing 3       4 Enter the total, if any, of the decedent's taxes not eligible for forgiveness. Free federal tax e filing See the instructions. Free federal tax e filing 4       5 Subtract line 4 from line 3. Free federal tax e filing 5       6 Enter the surviving spouse's taxable income. Free federal tax e filing Figure taxable income as if a separate return had been filed. Free federal tax e filing See the instructions. Free federal tax e filing 6       7 Enter the surviving spouse's total tax. Free federal tax e filing See the instructions. Free federal tax e filing 7       8 Enter the total, if any, of the surviving spouse's taxes listed in the instructions for line 4. Free federal tax e filing 8       9 Subtract line 8 from line 7. Free federal tax e filing 9       10 Add lines 5 and 9. Free federal tax e filing 10       11 Enter the total tax from the joint return. Free federal tax e filing See Table 1 on page 5 for the line number for years before 2002. Free federal tax e filing 11       12 Add lines 4 and 8. Free federal tax e filing 12       13 Subtract line 12 from line 11. Free federal tax e filing 13       14 Divide line 5 by line 10. Free federal tax e filing Enter the result as a decimal. Free federal tax e filing 14       15 Tax to be forgiven. Free federal tax e filing Multiply line 13 by line 14 and enter the result. Free federal tax e filing 15       Note. Free federal tax e filing If the total of columns (A), (B), and (C) of line 15 (including any amounts shown on line 5 of Worksheet A) is less than $10,000, also complete Worksheet C. Free federal tax e filing Attach the computation of the tax to be forgiven or a copy of this worksheet to the decedent's final income tax return or amended tax return (Form 1040X) for each year listed on line 1. Free federal tax e filing If filing Form 1040X for an eligible year, enter the amount from line 15 above on Form 1040X in column B of line 10 as a decrease in tax. Free federal tax e filing The IRS will determine the amount to be refunded. Free federal tax e filing Worksheet B. Free federal tax e filing Figuring the Tax To Be Forgiven (For Decedents Who Filed a Joint Return)       (A) First Eligible Year (1994 or 2000) (B) Second Eligible Year (1995 or 2001) (C) Third Eligible Year (1996 or 2002) 1 Enter the years eligible for forgiveness. Free federal tax e filing 1       2 Enter the decedent's taxable income. Free federal tax e filing Figure taxable income as if a separate return had been filed. Free federal tax e filing See the instructions. Free federal tax e filing 2       3 Enter the decedent's total tax. Free federal tax e filing See the instructions. Free federal tax e filing 3       4 Enter the total, if any, of the decedent's taxes not eligible for forgiveness. Free federal tax e filing See the instructions. Free federal tax e filing 4       5 Subtract line 4 from line 3. Free federal tax e filing 5       6 Enter the surviving spouse's taxable income. Free federal tax e filing Figure taxable income as if a separate return had been filed. Free federal tax e filing See the instructions. Free federal tax e filing 6       7 Enter the surviving spouse's total tax. Free federal tax e filing See the instructions. Free federal tax e filing 7       8 Enter the total, if any, of the surviving spouse's taxes listed in the instructions for line 4. Free federal tax e filing 8       9 Subtract line 8 from line 7. Free federal tax e filing 9       10 Add lines 5 and 9. Free federal tax e filing 10       11 Enter the total tax from the joint return. Free federal tax e filing See Table 1 on page 5 for the line number for years before 2002. Free federal tax e filing 11       12 Add lines 4 and 8. Free federal tax e filing 12       13 Subtract line 12 from line 11. Free federal tax e filing 13       14 Divide line 5 by line 10. Free federal tax e filing Enter the result as a decimal. Free federal tax e filing 14       15 Tax to be forgiven. Free federal tax e filing Multiply line 13 by line 14 and enter the result. Free federal tax e filing 15       Note. Free federal tax e filing If the total of columns (A), (B), and (C) of line 15 (including any amounts shown on line 5 of Worksheet A) is less than $10,000, also complete Worksheet C. Free federal tax e filing Attach the computation of the tax to be forgiven or a copy of this worksheet to the decedent's final income tax return or amended tax return (Form 1040X) for each year listed on line 1. Free federal tax e filing If filing Form 1040X for an eligible year, enter the amount from line 15 above on Form 1040X in column B of line 10 as a decrease in tax. Free federal tax e filing The IRS will determine the amount to be refunded. Free federal tax e filing Instructions for Worksheet B Table 1. Free federal tax e filing Total Tax Line on Decedent's Return Note: Use this table to find the total tax line on the decedent's income tax return. Free federal tax e filing * Form 1994 1995 1996 2000 2001 1040 Line 53 Line 54 Line 51 Line 57 Line 58 1040A Line 27 Line 28 Line 28 Line 35 File Form 1040 1040EZ Line 9 Line 10 Line 10 Line 10 TeleFile Tax Record ** Line E Line J Line K 1040NR Line 51 Line 52 Line 49 Line 54 Line 54 1040NR–EZ N/A Line 17 Line 17 Line 18 File Form 1040NR * Line numbers for the 2002 forms were not available when this publication went to print. Free federal tax e filing ** File Form 4506 to get a transcript of the decedent's account. Free federal tax e filing Table 1. Free federal tax e filing Total Tax Line on Decedent's Return Note: Use this table to find the total tax line on the decedent's income tax return. Free federal tax e filing * Form 1994 1995 1996 2000 2001 1040 Line 53 Line 54 Line 51 Line 57 Line 58 1040A Line 27 Line 28 Line 28 Line 35 File Form 1040 1040EZ Line 9 Line 10 Line 10 Line 10 TeleFile Tax Record ** Line E Line J Line K 1040NR Line 51 Line 52 Line 49 Line 54 Line 54 1040NR–EZ N/A Line 17 Line 17 Line 18 File Form 1040NR * Line numbers for the 2002 forms were not available when this publication went to print. Free federal tax e filing ** File Form 4506 to get a transcript of the decedent's account. Free federal tax e filing Lines 2 and 6. Free federal tax e filing   Allocate income and deductions in the same manner they would have been allocated if the spouses had filed separate returns. Free federal tax e filing   Allocate wages and salaries to the spouse who performed the services and received the Form W-2. Free federal tax e filing Business and investment income (including capital gains) are generally allocated to the spouse who owned the business or investment that produced the income. Free federal tax e filing Income from a jointly owned business or investment should be allocated equally between the spouses unless there is evidence that shows a different allocation is appropriate. Free federal tax e filing   Allocate business deductions to the owner of the business. Free federal tax e filing Allocate personal deductions (such as itemized deductions for mortgage interest and taxes) equally between the spouses unless there is evidence that shows a different allocation is appropriate. Free federal tax e filing Lines 3 and 7. Free federal tax e filing   Figure the total tax as if a separate return had been filed. Free federal tax e filing The total tax is the tax that would have been entered on the tax return line shown in Table 1 if a separate return had been filed. Free federal tax e filing When figuring the tax using the Tax Table or Tax Rate Schedule, use the “Married filing separately” column in the Tax Table or Tax Rate Schedule Y-2. Free federal tax e filing   When figuring the total tax, allocate credits and other taxes, if any, in the same manner as they would have been allocated if the spouses had filed separate returns. Free federal tax e filing If a credit would not have been allowed on a separate return, allocate the credit shown on the joint return between the spouses. Free federal tax e filing Examples of credits generally not allowed on a separate return are the child and dependent care credit, credit for the elderly, adoption credit, education credits, and earned income credit. Free federal tax e filing Line 4. Free federal tax e filing   Enter the total, if any, of the following taxes. Free federal tax e filing Self-employment tax. Free federal tax e filing Social security and Medicare tax on tip income not reported to employer. Free federal tax e filing Tax on excess contributions to IRAs, Coverdell education savings accounts (formerly Ed IRAs), or Archer MSAs (formerly medical savings accounts). Free federal tax e filing Tax on excess accumulation in qualified retirement plans. Free federal tax e filing Household employment taxes. Free federal tax e filing Uncollected social security and Medicare or RRTA tax on tips or group-term life insurance. Free federal tax e filing Tax on golden parachute payments. Free federal tax e filing Minimum Amount of Relief The minimum amount of relief is $10,000. Free federal tax e filing If the decedent's total forgiven tax liability for all eligible years is less than $10,000, the difference between $10,000 and the total forgiven tax liability for those years will be treated as a tax payment for the decedent's last tax year. Free federal tax e filing The IRS will refund the difference as explained under Refund of Taxes Paid. Free federal tax e filing Use Worksheet C to figure the additional tax payment. Free federal tax e filing But first complete Worksheet A or B, unless the decedent was not required to file tax returns for the eligible tax years. Free federal tax e filing Example 1. Free federal tax e filing An individual who died in the September 11 attacks had an income tax liability of $-0- for 2000 and $6,400 for 2001. Free federal tax e filing The $6,400 is eligible for forgiveness. Free federal tax e filing The IRS will forgive $6,400 and treat the difference between $10,000 and $6,400 ($3,600) as a tax payment for 2001. Free federal tax e filing Example 2. Free federal tax e filing A child who died in the September 11 attacks had no (-0-) income tax liability for 2000 or 2001. Free federal tax e filing The IRS will treat $10,000 as a tax payment for 2001. Free federal tax e filing Income received after date of death. Free federal tax e filing   Generally, income of the decedent received after the date of death must be reported on Form 1041 if the estate has gross income for the tax year of $600 or more. Free federal tax e filing Examples are the final paycheck or dividends on stock owned by the decedent. Free federal tax e filing However, this income is exempt from income tax and is not included on Form 1041 if it is received: After the date of the decedent's death, and Before the end of the decedent's tax year (determined without regard to death). Free federal tax e filing Nonqualifying income. Free federal tax e filing   The following income is not exempt from tax. Free federal tax e filing The tax on it is not eligible for forgiveness. Free federal tax e filing Deferred compensation that would have been payable if the death had occurred because of an event other than these attacks. Free federal tax e filing Amounts that would not have been payable but for an action taken after September 11, 2001. Free federal tax e filing The following are examples of nonqualifying income. Free federal tax e filing Amounts payable from a qualified retirement plan or IRA to the beneficiary or estate of the decedent. Free federal tax e filing Amounts payable only as death or survivor's benefits from pre-existing arrangements that would have been paid if the death had occurred for another reason. Free federal tax e filing Income received as a result of adjustments made by the decedent's employer to a plan or arrangement to accelerate the vesting of restricted property or the payment of nonqualified deferred compensation after the date of the attack. Free federal tax e filing Interest on savings bonds cashed by the beneficiary of the decedent. Free federal tax e filing If you are responsible for the estate of a decedent, see Publication 559. Free federal tax e filing Publication 559 discusses how to complete and file federal income tax returns and explains your responsibility to pay any taxes due. Free federal tax e filing Instructions for lines 2–9 of Worksheet C. Free federal tax e filing   The tax that would have been payable on the exempt income (discussed earlier) must be considered when determining whether a decedent is entitled to the $10,000 minimum relief. Free federal tax e filing To figure the tax that would have been payable, you can use lines 2 through 9 of Worksheet C. Free federal tax e filing Or, if special requirements are met, you can use the alternative computation instead. Free federal tax e filing See Alternative computation, later. Free federal tax e filing   You have to use lines 2–9 (or the alternative computation) to figure the tax that would have been payable even if Form 1041 was not required to be filed. Free federal tax e filing Use Form 1041 to figure what the taxable income would be without including the exempt income. Free federal tax e filing Then enter that taxable income (even if a negative number) on line 2 of Worksheet C (or line 1 of Worksheet D, Alternative Computation of Tax on Exempt Income (Line 9 of Worksheet C)). Free federal tax e filing Alternative computation. Free federal tax e filing   Instead of using lines 2–8 of Worksheet C to figure the tax on exempt income (line 9 of Worksheet C), you may be able to use Worksheet D. Free federal tax e filing You can use Worksheet D to figure the tax on the exempt income payable by the estate and its beneficiaries only if both of the following requirements are met. Free federal tax e filing The estate claimed an income distribution deduction on line 18 (Form 1041). Free federal tax e filing Each beneficiary submits the information necessary to refigure the income tax payable on the exempt income received from the decedent's estate. Free federal tax e filing If requirement (2) is met but requirement (1) is not, you can still use Worksheet D if: Form 1041 was not required because exempt income was received, and The estate would have claimed an income distribution deduction if the exempt income were taxable. Free federal tax e filing If you use this alternative computation, skip lines 2–8 of Worksheet C and enter the amount from line 8 of Worksheet D on line 9 of Worksheet C. Free federal tax e filing Complete the rest of Worksheet C to determine the additional payment allowed. Free federal tax e filing Worksheet C. Free federal tax e filing Amount Treated as Tax Payment for Decedent's Last Tax Year Caution: The decedent is entitled to minimum relief of $10,000. Free federal tax e filing Complete this worksheet only if the total tax forgiven for all eligible years is less than $10,000. Free federal tax e filing 1 Minimum relief amount. Free federal tax e filing Note: Before completing lines 2–9, see Instructions for lines 2–9 of Worksheet C. Free federal tax e filing 1 $10,000 2 Enter the taxable income from line 22 (Form 1041) 2       3 Enter the distribution deduction from line 18 (Form 1041) . Free federal tax e filing 3       4 Add lines 2 and 3. Free federal tax e filing 4       5 Enter exempt income received after death minus expenses allocable to exempt income. Free federal tax e filing (See Income received after date of death on page 5. Free federal tax e filing ) 5       6 Add lines 4 and 5. Free federal tax e filing 6       7 Figure the tax on line 6 using Schedule G (Form 1041). Free federal tax e filing 7       8 Figure the tax on line 4 using Schedule G (Form 1041). Free federal tax e filing 8       9 Tax on exempt income. Free federal tax e filing Subtract line 8 from line 7. Free federal tax e filing 9       10 Enter the total of columns (A)–(C) from line 5 of Worksheet A or line 15 of Worksheet B. Free federal tax e filing If the decedent was not required to file tax returns for the eligible tax years, enter -0-. Free federal tax e filing 10       11 Add lines 9 and 10. Free federal tax e filing 11   12 Additional payment allowed. Free federal tax e filing If line 11 is $10,000 or more, enter -0- and stop here. Free federal tax e filing No additional amount is allowed as a tax payment. Free federal tax e filing Otherwise, subtract line 11 from line 1 and enter the result. Free federal tax e filing 12   Note. Free federal tax e filing The amount on line 12 is allowed as a tax payment for the decedent's last tax year (usually 1995 or 2001). Free federal tax e filing Attach the computation of the additional payment allowed or a copy of this worksheet to the original or amended income tax return for the decedent's last tax year. Free federal tax e filing If filing Form 1040, include the amount from line 12 above on the “Other payments” line of the form. Free federal tax e filing Write "Sec. Free federal tax e filing 692(d)(2) Payment" and the amount to the right of the entry space. Free federal tax e filing Also indicate whether a Form 1041 is being filed for the decedent's estate. Free federal tax e filing If filing Form 1040X, include the amount from line 12 above on Form 1040X on line 15, columns (B) and (C). Free federal tax e filing Write “Sec. Free federal tax e filing 692(d)(2) Payment” on the dotted line to the left of the entry space. Free federal tax e filing Worksheet C. Free federal tax e filing Amount Treated as Tax Payment for Decedent's Last Tax Year Caution: The decedent is entitled to minimum relief of $10,000. Free federal tax e filing Complete this worksheet only if the total tax forgiven for all eligible years is less than $10,000. Free federal tax e filing 1 Minimum relief amount. Free federal tax e filing Note: Before completing lines 2–9, see Instructions for lines 2–9 of Worksheet C. Free federal tax e filing 1 $10,000 2 Enter the taxable income from line 22 (Form 1041) 2       3 Enter the distribution deduction from line 18 (Form 1041) . Free federal tax e filing 3       4 Add lines 2 and 3. Free federal tax e filing 4       5 Enter exempt income received after death minus expenses allocable to exempt income. Free federal tax e filing (See Income received after date of death on page 5. Free federal tax e filing ) 5       6 Add lines 4 and 5. Free federal tax e filing 6       7 Figure the tax on line 6 using Schedule G (Form 1041). Free federal tax e filing 7       8 Figure the tax on line 4 using Schedule G (Form 1041). Free federal tax e filing 8       9 Tax on exempt income. Free federal tax e filing Subtract line 8 from line 7. Free federal tax e filing 9       10 Enter the total of columns (A)–(C) from line 5 of Worksheet A or line 15 of Worksheet B. Free federal tax e filing If the decedent was not required to file tax returns for the eligible tax years, enter -0-. Free federal tax e filing 10       11 Add lines 9 and 10. Free federal tax e filing 11   12 Additional payment allowed. Free federal tax e filing If line 11 is $10,000 or more, enter -0- and stop here. Free federal tax e filing No additional amount is allowed as a tax payment. Free federal tax e filing Otherwise, subtract line 11 from line 1 and enter the result. Free federal tax e filing 12   Note. Free federal tax e filing The amount on line 12 is allowed as a tax payment for the decedent's last tax year (usually 1995 or 2001). Free federal tax e filing Attach the computation of the additional payment allowed or a copy of this worksheet to the original or amended income tax return for the decedent's last tax year. Free federal tax e filing If filing Form 1040, include the amount from line 12 above on the “Other payments” line of the form. Free federal tax e filing Write "Sec. Free federal tax e filing 692(d)(2) Payment" and the amount to the right of the entry space. Free federal tax e filing Also indicate whether a Form 1041 is being filed for the decedent's estate. Free federal tax e filing If filing Form 1040X, include the amount from line 12 above on Form 1040X on line 15, columns (B) and (C). Free federal tax e filing Write “Sec. Free federal tax e filing 692(d)(2) Payment” on the dotted line to the left of the entry space. Free federal tax e filing Worksheet D. Free federal tax e filing Alternative Computation of Tax on Exempt Income (Line 9 of Worksheet C) 1 Enter the taxable income from line 22 (Form 1041) 1   2 Enter exempt income received after death minus expenses allocable to exempt income. Free federal tax e filing (See Income received after date of death on page 5. Free federal tax e filing ) 2   3 Add lines 1 and 2 3   4 Figure the tax on line 3 using Schedule G (Form 1041). Free federal tax e filing 4   5 Figure the tax on line 1 using Schedule G (Form 1041). Free federal tax e filing 5   6 Estate's tax on exempt income. Free federal tax e filing Subtract line 5 from line 4 6   7 Beneficiaries' tax on exempt income. Free federal tax e filing Figure the total tax that would have been payable by all beneficiaries. Free federal tax e filing Do this by including in each beneficiary's gross income the exempt income received from the decedent's estate and refiguring the income tax. Free federal tax e filing Add the amounts by which each beneficiary's income tax is increased. Free federal tax e filing 7   8 Add lines 6 and 7. Free federal tax e filing Enter this amount on line 9 of Worksheet C. Free federal tax e filing 8   Worksheet D. Free federal tax e filing Alternative Computation of Tax on Exempt Income (Line 9 of Worksheet C) 1 Enter the taxable income from line 22 (Form 1041) 1   2 Enter exempt income received after death minus expenses allocable to exempt income. Free federal tax e filing (See Income received after date of death on page 5. Free federal tax e filing ) 2   3 Add lines 1 and 2 3   4 Figure the tax on line 3 using Schedule G (Form 1041). Free federal tax e filing 4   5 Figure the tax on line 1 using Schedule G (Form 1041). Free federal tax e filing 5   6 Estate's tax on exempt income. Free federal tax e filing Subtract line 5 from line 4 6   7 Beneficiaries' tax on exempt income. Free federal tax e filing Figure the total tax that would have been payable by all beneficiaries. Free federal tax e filing Do this by including in each beneficiary's gross income the exempt income received from the decedent's estate and refiguring the income tax. Free federal tax e filing Add the amounts by which each beneficiary's income tax is increased. Free federal tax e filing 7   8 Add lines 6 and 7. Free federal tax e filing Enter this amount on line 9 of Worksheet C. Free federal tax e filing 8   Refund of Taxes Paid The IRS will refund the following forgiven income tax liabilities. Free federal tax e filing Income tax liabilities that have been paid. Free federal tax e filing Income tax liabilities treated as paid because the total tax liability for all years eligible for tax forgiveness is less than $10,000. Free federal tax e filing See Minimum Amount of Relief, earlier. Free federal tax e filing Example 1. Free federal tax e filing A man who died in the September 11 attacks had an income tax liability of $7,500 for 2000 and $6,500 for 2001. Free federal tax e filing The total, $14,000, is eligible for tax forgiveness. Free federal tax e filing However, he paid only $13,000 of that amount. Free federal tax e filing The IRS will refund the $13,000 paid. Free federal tax e filing Example 2. Free federal tax e filing A child who died in the September 11 attacks had no income tax liability for 2000 or 2001. Free federal tax e filing The child qualifies for the minimum relief of $10,000. Free federal tax e filing The $10,000 is treated as a tax payment for 2001 and will be refunded. Free federal tax e filing Period for filing a claim for credit or refund. Free federal tax e filing   To obtain a tax refund on a previously filed income tax return, file an amended return (Form 1040X or an amended Form 1041) within 3 years from the time the return was filed or 2 years from the time the tax was paid, whichever is later. Free federal tax e filing For example, you have until April 15, 2004, to file an amended return on a 2000 Form 1040, 1040A, or 1040EZ that was filed by April 16, 2001, and for which the tax was paid when due. Free federal tax e filing To obtain a refund on a return that has not been filed, file the return within 3 years of the original due date of the return. Free federal tax e filing Extension of time for victims of Oklahoma City attack. Free federal tax e filing   The period described above has been extended for victims of the Oklahoma City attack. Free federal tax e filing Survivors and personal representatives of these victims have until January 22, 2003, to file an original or amended return. Free federal tax e filing How To Claim Tax Forgiveness Use the following procedures to claim income tax forgiveness. Free federal tax e filing Which Form To Use The form you use depends on whether an income tax return for the eligible year was already filed for the decedent. Free federal tax e filing Return required but not yet filed. Free federal tax e filing   File Form 1040 if the decedent was a U. Free federal tax e filing S. Free federal tax e filing citizen or resident. Free federal tax e filing File Form 1040NR if the decedent was a nonresident alien. Free federal tax e filing A nonresident alien is someone who is not a U. Free federal tax e filing S. Free federal tax e filing citizen or resident. Free federal tax e filing Return required and already filed. Free federal tax e filing   File a separate Form 1040X for each year you are claiming tax relief. Free federal tax e filing Return not required and not filed. Free federal tax e filing   File Form 1040 only for the year of death if the decedent was a U. Free federal tax e filing S. Free federal tax e filing citizen or resident. Free federal tax e filing File Form 1040NR if the decedent was a nonresident alien. Free federal tax e filing Return not required but already filed. Free federal tax e filing   File Form 1040X only for the year of death. Free federal tax e filing How to complete the returns. Free federal tax e filing   Fill out Form 1040 or 1040NR according to its instructions but do not reduce the decedent's tax liability by any taxes that will be forgiven. Free federal tax e filing Attach to each return a computation of the income tax to be forgiven or a copy of Worksheet A or B. Free federal tax e filing If filing Form 1040 or Form 1040NR, also attach any Forms W–2. Free federal tax e filing If the total forgiven tax liability for all eligible years is less than $10,000, attach to the decedent's final return a computation of the additional tax payment allowed or a copy of Worksheet C. Free federal tax e filing Also, please write one of the following across the top of page 1 of each return. Free federal tax e filing KITA—Oklahoma City KITA—9/11 KITA—Anthrax “KITA” means “killed in terrorist attack. Free federal tax e filing ” Need a copy of a previously filed return?   You will find it easier to prepare Form 1040X if you have a copy of the decedent's previously filed tax return. Free federal tax e filing If you need a copy, use Form 4506. Free federal tax e filing The IRS will provide a free copy of the tax return if you write “DISASTER” in the top margin of Form 4506. Free federal tax e filing Attach Letters Testamentary or other evidence to establish that you are authorized to act for the decedent's estate. Free federal tax e filing Send Form 4506 to the address shown in the form instructions. Free federal tax e filing Taxpayer identification number. Free federal tax e filing   A taxpayer identification number must be furnished on the decedent's returns. Free federal tax e filing This is usually the decedent's social security number (SSN). Free federal tax e filing However, a nonresident alien who is not eligible to get an SSN should have an individual taxpayer identification number (ITIN). Free federal tax e filing If the decedent was a nonresident alien, had neither an SSN nor an ITIN, and was not required to file a U. Free federal tax e filing S. Free federal tax e filing income tax return for any tax year, do not apply for an ITIN. Free federal tax e filing You may claim a refund by filing Form 1040NR without an SSN or ITIN. Free federal tax e filing Necessary Documents Please attach the following documents to the return or amended return. Free federal tax e filing Proof of death. Free federal tax e filing   Attach a copy of the death certificate. Free federal tax e filing If the Department of Defense issued DD Form 1300, Report of Casualty, you can attach that form instead of the death certificate. Free federal tax e filing Form 1310. Free federal tax e filing   You must send Form 1310 with all returns and claims for refund, unless either of the following applies. Free federal tax e filing You are a surviving spouse filing an original or amended joint return with the decedent. Free federal tax e filing You are a personal representative filing an original Form 1040 or Form 1040NR for the decedent and a court certificate showing your appointment is attached to the return. Free federal tax e filing A personal representative is an executor or administrator of a decedent's estate, as certified or appointed by the court. Free federal tax e filing A copy of the decedent's will cannot be accepted as evidence that you are the personal representative. Free federal tax e filing      If you have proof of death but do not have enough tax information to file a timely claim for a refund, file Form 1040X with Form 1310. Free federal tax e filing Include a statement saying an amended return will be filed as soon as the necessary tax information is available. Free federal tax e filing Where To File The IRS has set up a special office for processing returns and claims for tax forgiveness. Free federal tax e filing Use one of the addresses shown below. Free federal tax e filing Where you file the returns or claims depends on whether you use the U. Free federal tax e filing S. Free federal tax e filing Postal Service or a private delivery service. Free federal tax e filing Please do not send these returns or claims to any of the addresses shown in the tax form instructions. Free federal tax e filing U. Free federal tax e filing S. Free federal tax e filing Postal Service. Free federal tax e filing   If you use the U. Free federal tax e filing S. Free federal tax e filing Postal Service, file these returns and claims at the following address. Free federal tax e filing Internal Revenue Service P. Free federal tax e filing O. Free federal tax e filing Box 4053 Woburn, MA 01888 Private delivery service. Free federal tax e filing   Private delivery services cannot deliver items to P. Free federal tax e filing O. Free federal tax e filing boxes. Free federal tax e filing If you use a private delivery service, file these returns and claims at the following address. Free federal tax e filing Internal Revenue Service Stop 661 310 Lowell St. Free federal tax e filing Andover, MA 01810 Designated private delivery services. Free federal tax e filing   You can use the following private delivery services to file these returns and claims. Free federal tax e filing Airborne Express (Airborne): Overnight Air Express Service, Next Afternoon Service, and Second Day Service. Free federal tax e filing DHL Worldwide Express (DHL): DHL “Same Day” Service, and DHL USA Overnight. Free federal tax e filing Federal Express (FedEx): FedEx Priority Overnight, FedEx Standard Overnight, and FedEx 2Day. Free federal tax e filing United Parcel Service (UPS): UPS Next Day Air, UPS Next Day Air Saver, UPS 2nd Day Air, UPS 2nd Day Air A. Free federal tax e filing M. Free federal tax e filing , UPS Worldwide Express Plus, and UPS Worldwide Express. Free federal tax e filing The private delivery service can tell you how to get written proof of the mailing date. Free federal tax e filing Payments to Survivors The following section discusses the tax treatment of certain amounts received by survivors. Free federal tax e filing September 11th Victim Compensation Fund of 2001 Payments from the September 11th Victim Compensation Fund of 2001 are not included in income. Free federal tax e filing Qualified Disaster Relief Payments Qualified disaster relief payments are not included in income. Free federal tax e filing These payments are not subject to income tax, self-employment tax, or employment taxes (social security, Medicare, and federal unemployment taxes). Free federal tax e filing No withholding applies to these payments. Free federal tax e filing Qualified disaster relief payments include payments you receive (regardless of the source) after September 10, 2001, for the following expenses. Free federal tax e filing Reasonable and necessary personal, family, living, or funeral expenses incurred as a result of a terrorist attack. Free federal tax e filing Reasonable and necessary expenses incurred for the repair or rehabilitation of a personal residence due to a terrorist attack. Free federal tax e filing (A personal residence can be a rented residence or one you own. Free federal tax e filing ) Reasonable and necessary expenses incurred for the repair or replacement of the contents of a personal residence due to a terrorist attack. Free federal tax e filing Qualified disaster relief payments also include the following. Free federal tax e filing Payments made by common carriers (for example, American Airlines and United Airlines regarding the September 11 attacks) because of death or physical injury incurred as a result of a terrorist attack. Free federal tax e filing Amounts paid by a federal, state, or local government in connection with a terrorist attack to those affected by the attack. Free federal tax e filing Qualified disaster relief payments do not include: Insurance or other reimbursements for expenses, or Income replacement payments, such as payments of lost wages, lost business income, or unemployment compensation. Free federal tax e filing Disability Payments For tax years ending after September 10, 2001, disability payments for injuries incurred as a direct result of a terrorist attack directed against the United States (or its allies), whether outside or within the United States, are not included in income. Free federal tax e filing Death Benefits Payments received by an individual or the estate of a decedent from the employer of an employee who died as a result of the Oklahoma City or September 11 terrorist attacks, or as a result of the anthrax attacks, are not included in income. Free federal tax e filing Only the amount that exceeds the benefits that would have been payable if the death had occurred for a reason other than a terrorist or anthrax attack is excludable. Free federal tax e filing However, the exclusion does apply to incidental death benefits paid under a qualified retirement plan even if these amounts would have been payable if the death had occurred for a reason other than a terrorist or anthrax attack. Free federal tax e filing If you included death benefits in income on a previously filed return and they are now excludable under the above rule, file Form 1040X to amend that return. Free federal tax e filing For information on the period for filing Form 1040X, see Period for filing claim for credit or refund earlier under Refund of Taxes Paid. Free federal tax e filing If that period has expired, you are granted an extension. Free federal tax e filing You have until January 22, 2003, to file Form 1040X to exclude the death benefits. Free federal tax e filing On top of page 1 of Form 1040X, write “Extension of Limitations Under PL 107–134, sec. Free federal tax e filing 102(b)(2). Free federal tax e filing ” Canceled Debt Canceled debt is not included in your income (or the income of the estate) if: You (or the estate) were liable, or became liable, for the debt of a decedent, and The debt was canceled after September 10, 2001, and before January 1, 2002, because the decedent died as a result of the September 11 attacks or anthrax attacks. Free federal tax e filing The lender is not required to report the canceled debt on Form 1099–C, Cancellation of Debt. Free federal tax e filing Payments to Survivors of Public Safety Officers If you are a survivor of a public safety officer who died in the line of duty, certain amounts you receive are not included in income. Free federal tax e filing Bureau of Justice Assistance payments. Free federal tax e filing   If you are a surviving dependent of a public safety officer (law enforcement officer or firefighter) who died in the line of duty, do not include in your income the death benefit paid to you by the Bureau of Justice Assistance. Free federal tax e filing Government plan annuity. Free federal tax e filing   If you receive a survivor annuity as the child or spouse (or former spouse) of a public safety officer who was killed in the line of duty, you generally do not have to include it in income. Free federal tax e filing This exclusion applies to the amount of the annuity based on the officer's service as a public safety officer. Free federal tax e filing For this purpose, the term public safety officer includes police and law enforcement officers, firefighters, and rescue squad and ambulance crews. Free federal tax e filing More information. Free federal tax e filing   For more information, see Publication 559. Free federal tax e filing Postponed Tax Deadlines The IRS may postpone for up to 1 year certain tax deadlines of taxpayers who are affected by a terrorist attack. Free federal tax e filing 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 federal tax e filing If any tax deadline is postponed, the IRS will publicize the postponement in the affected area and publish a news release, revenue ruling, revenue procedure, notice, announcement, or other guidance in the Internal Revenue Bulletin (IRB). Free federal tax e filing Affected taxpayers. Free federal tax e filing   If the IRS postpones a tax deadline, the following taxpayers are eligible for the postponement. Free federal tax e filing Any individual whose main home is located in a covered area (defined later). Free federal tax e filing Any business entity or sole proprietor whose principal place of business is located in a covered area. Free federal tax e filing Any individual, business entity, or sole proprietor whose records needed to meet a postponed deadline are maintained in a covered area. Free federal tax e filing The main home or principal place of business does not have to be located in the covered area. Free federal tax e filing Any estate or trust whose tax records necessary to meet a postponed tax deadline are maintained in a covered area. Free federal tax e filing Any individual who is a relief worker affiliated with a recognized government or philanthropic organization and who is assisting in a covered area. Free federal tax e filing The spouse on a joint return with a taxpayer who is eligible for postponements. Free federal tax e filing Any other person determined by the IRS to be affected by a terrorist attack. Free federal tax e filing Covered area. Free federal tax e filing   This is an area in which a terrorist attack took place and in which the IRS has decided to postpone tax deadlines for up to 1 year. Free federal tax e filing Abatement of interest. Free federal tax e filing   The IRS may abate (forgive) the interest on any underpaid income tax for the length of any postponement. Free federal tax e filing Disaster Area Losses If your property was damaged or destroyed as a result of the September 11 attacks, you can choose to deduct your disaster loss on your 2000 return (or amended return) rather than on your 2001 return. Free federal tax e filing You must make this choice to deduct your loss on your 2000 return by the later of the following dates. Free federal tax e filing The due date (without extensions) for filing your 2001 income tax return (April 15, 2002, if you are a calendar year taxpayer). Free federal tax e filing The due date (with extensions) for the 2000 return. Free federal tax e filing For more information about disaster area losses, see Publication 547. Free federal tax e filing Estate Tax Reduction The federal estate tax is reduced for taxable estates of individuals who died as a result of the Oklahoma City attack, the September 11 attacks, and the anthrax attacks. Free federal tax e filing The estate tax is computed using a new rate schedule on page 25 of the November 2001 revision of the instructions for Form 706. Free federal tax e filing The estate tax is reduced by credits against the estate tax, including the unified credit and the state death tax credit. Free federal tax e filing These credits may reduce or eliminate the estate tax due. Free federal tax e filing A special rule extends until January 22, 2003, the period of time allowed to file a claim for a refund of estate taxes that have been paid. Free federal tax e filing Recovery from the September 11th Victim Compensation Fund. Free federal tax e filing   The value of claims for a decedent's pain and suffering is normally included in the gross estate. Free federal tax e filing However, if the estate chooses to seek recovery from this fund, the IRS has determined that, in view of the unique circumstances of this situation and the high likelihood that such claims will be valued at a nominal or zero amount, the claims will be valued at zero for estate tax purposes. Free federal tax e filing Thus, there are no federal estate tax consequences if an estate or beneficiary receives a recovery from this fund. Free federal tax e filing Which estates must file a return. Free federal tax e filing   For decedents dying in 2001, Form 706 must be filed by the executor for the estate of every U. Free federal tax e filing S. Free federal tax e filing citizen or resident whose gross estate, plus adjusted taxable gifts and specific exemption, is more than $675,000. Free federal tax e filing Form 706 must be filed within 9 months after the date of decedent's death unless you receive an extension of time to file. Free federal tax e filing Use Form 4768, Application for Extension of Time To File a Return and/or Pay U. Free federal tax e filing S. Free federal tax e filing Estate (and Generation-Skipping Transfer) Taxes, to apply for an extension. Free federal tax e filing Where to file. Free federal tax e filing   Returns on which the new rate schedule is used should be sent to the following address, which was not available when Form 706 went to print. Free federal tax e filing Internal Revenue Service E & G Department/Stop 824T 201 W. Free federal tax e filing Rivercenter Blvd. Free federal tax e filing Covington, KY 41011 More information. Free federal tax e filing   For more information on the federal estate tax, see the instructions for Form 706. Free federal tax e filing Structured Settlement Factoring Transactions A person who acquires payment rights in a structured settlement arrangement after February 21, 2002, may be subject to a 40% excise tax unless the transfer of the payment rights was approved in advance in a qualified order. Free federal tax e filing The excise tax is figured on the excess of the undiscounted amount of the payments being acquired over the total amount actually paid to acquire them. Free federal tax e filing However, this tax will not apply to transactions entered into from February 22, 2002, to July 1, 2002, if certain requirements are met. Free federal tax e filing For information about these requirements, see Internal Revenue Code section 5891. Free federal tax e filing Worksheet B Illustrated. Free federal tax e filing Figuring the Tax To Be Forgiven (For Decedents Who Filed a Joint Return)       (A) First Eligible Year (1994 or 2000) (B) Second Eligible Year (1995 or 2001) (C) Third Eligible Year (1996 or 2002) 1 Enter the years eligible for forgiveness. Free federal tax e filing 1 2000 2001   2 Enter the decedent's taxable income. Free federal tax e filing Figure taxable income as if a separate return had been filed. Free federal tax e filing See the instructions. Free federal tax e filing 2 $17,259 $14,295   3 Enter the decedent's total tax. Free federal tax e filing See the instructions. Free federal tax e filing 3 6,123 5,250   4 Enter the total, if any, of the decedent's taxes not eligible for forgiveness. Free federal tax e filing See the instructions. Free federal tax e filing 4 3,532 3,109   5 Subtract line 4 from line 3. Free federal tax e filing 5 2,591 2,141   6 Enter the surviving spouse's taxable income. Free federal tax e filing Figure taxable income as if a separate return had been filed. Free federal tax e filing See the instructions for line 2. Free federal tax e filing 6 29,025 29,850   7 Enter the surviving spouse's total tax. Free federal tax e filing See the instructions. Free federal tax e filing 7 5,277 5,391   8 Enter the total, if any, of the surviving spouse's taxes listed in the instructions for line 4. Free federal tax e filing 8 0 0   9 Subtract line 8 from line 7. Free federal tax e filing 9 5,277 5,391   10 Add lines 5 and 9. Free federal tax e filing 10 7,868 7,532   11 Enter the total tax from the joint return. Free federal tax e filing See Table 1 on page 5 for the line number for years before 2002. Free federal tax e filing 11 10,789 9,728   12 Add lines 4 and 8. Free federal tax e filing 12 3,532 3,109   13 Subtract line 12 from line 11. Free federal tax e filing 13 7,257 6,619   14 Divide line 5 by line 10. Free federal tax e filing Enter the result as a decimal. Free federal tax e filing 14 . Free federal tax e filing 329 . Free federal tax e filing 284   15 Tax to be forgiven. Free federal tax e filing Multiply line 13 by line 14 and enter the result. Free federal tax e filing 15 $2,388 $1,880   Note. Free federal tax e filing If the total of columns (A), (B), and (C) of line 15 (including any amounts shown on line 5 of Worksheet A) is less than $10,000, also complete Worksheet C. Free federal tax e filing Attach the computation of the tax to be forgiven or a copy of this worksheet to the decedent's final income tax return or amended tax return (Form 1040X) for each year listed on line 1. Free federal tax e filing If filing Form 1040X for an eligible year, enter the amount from line 15 above on Form 1040X in column B of line 10 as a decrease in tax. Free federal tax e filing The IRS will determine the amount to be refunded. Free federal tax e filing Worksheet B Illustrated. Free federal tax e filing Figuring the Tax To Be Forgiven (For Decedents Who Filed a Joint Return)       (A) First Eligible Year (1994 or 2000) (B) Second Eligible Year (1995 or 2001) (C) Third Eligible Year (1996 or 2002) 1 Enter the years eligible for forgiveness. Free federal tax e filing 1 2000 2001   2 Enter the decedent's taxable income. Free federal tax e filing Figure taxable income as if a separate return had been filed. Free federal tax e filing See the instructions. Free federal tax e filing 2 $17,259 $14,295   3 Enter the decedent's total tax. Free federal tax e filing See the instructions. Free federal tax e filing 3 6,123 5,250   4 Enter the total, if any, of the decedent's taxes not eligible for forgiveness. Free federal tax e filing See the instructions. Free federal tax e filing 4 3,532 3,109   5 Subtract line 4 from line 3. Free federal tax e filing 5 2,591 2,141   6 Enter the surviving spouse's taxable income. Free federal tax e filing Figure taxable income as if a separate return had been filed. Free federal tax e filing See the instructions for line 2. Free federal tax e filing 6 29,025 29,850   7 Enter the surviving spouse's total tax. Free federal tax e filing See the instructions. Free federal tax e filing 7 5,277 5,391   8 Enter the total, if any, of the surviving spouse's taxes listed in the instructions for line 4. Free federal tax e filing 8 0 0   9 Subtract line 8 from line 7. Free federal tax e filing 9 5,277 5,391   10 Add lines 5 and 9. Free federal tax e filing 10 7,868 7,532   11 Enter the total tax from the joint return. Free federal tax e filing See Table 1 on page 5 for the line number for years before 2002. Free federal tax e filing 11 10,789 9,728   12 Add lines 4 and 8. Free federal tax e filing 12 3,532 3,109   13 Subtract line 12 from line 11. Free federal tax e filing 13 7,257 6,619   14 Divide line 5 by line 10. Free federal tax e filing Enter the result as a decimal. Free federal tax e filing 14 . Free federal tax e filing 329 . Free federal tax e filing 284   15 Tax to be forgiven. Free federal tax e filing Multiply line 13 by line 14 and enter the result. Free federal tax e filing 15 $2,388 $1,880   Note. Free federal tax e filing If the total of columns (A), (B), and (C) of line 15 (including any amounts shown on line 5 of Worksheet A) is less than $10,000, also complete Worksheet C. Free federal tax e filing Attach the computation of the tax to be forgiven or a copy of this worksheet to the decedent's final income tax return or amended tax return (Form 1040X) for each year listed on line 1. Free federal tax e filing If filing Form 1040X for an eligible year, enter the amount from line 15 above on Form 1040X in column B of line 10 as a decrease in tax. Free federal tax e filing The IRS will determine the amount to be refunded. Free federal tax e filing Illustrated Worksheets B and C A wife lost her husband in the September 11 attack on the World Trade Center. Free federal tax e filing They filed a joint return for 2000 and the wife chose to file a joint return as a surviving spouse for 2001. Free federal tax e filing The returns for 2000 and 2001 showed the following income, deductions, and tax liabilities. Free federal tax e filing After the husband died, his estate received income of $4,000. Free federal tax e filing Of that amount, $1,000 is net profit from Schedule C received before the end of 2001. Free federal tax e filing This net profit is exempt from income tax as explained earlier under Income received after date of death. Free federal tax e filing The wife files Form 1041 because the gross income of the estate for the tax year ($3,000) is $600 or more. Free federal tax e filing To determine how much of the husband's tax liability for 2000 and 2001 is to be forgiven, the wife completes Worksheet B. Free federal tax e filing She also completes Worksheet C because the forgiven tax liabilities for 2000 and 2001 (line 15 of Worksheet B) total less than $10,000. Free federal tax e filing To claim tax relief for 2000, the wife files Form 1040X and attaches a copy of Worksheet B. Free federal tax e filing To claim tax relief for 2001, she files Form 1040 and attaches copies of Worksheets B and C. Free federal tax e filing   2000 2001 Wages (wife) $35,000 $36,000 Net profit from Schedule C, Profit or Loss From Business (husband) 25,000 22,000 Interest income (joint account) 1,000 1,100 Deduction for ½ of self-employment tax (husband) (1,766) (1,555) Standard deduction (7,350) (7,600) Personal exemptions (2) (5,600) (5,800) Taxable income $46,284 $44,145 Joint income tax liability $7,257 $6,619 Plus: Self-employment tax (husband) 3,532 3,109 Total tax liability $10,789 $9,728   2000 2001 Wages (wife) $35,000 $36,000 Net profit from Schedule C, Profit or Loss From Business (husband) 25,000 22,000 Interest income (joint account) 1,000 1,100 Deduction for ½ of self-employment tax (husband) (1,766) (1,555) Standard deduction (7,350) (7,600) Personal exemptions (2) (5,600) (5,800) Taxable income $46,284 $44,145 Joint income tax liability $7,257 $6,619 Plus: Self-employment tax (husband) 3,532 3,109 Total tax liability $10,789 $9,728 Worksheet C Illustrated. Free federal tax e filing Amount Treated as Tax Payment for Decedent's Last Tax Year Caution: The decedent is entitled to minimum relief of $10,000. Free federal tax e filing Complete this worksheet only if the total tax forgiven for all eligible years is less than $10,000. Free federal tax e filing 1 Minimum relief amount. Free federal tax e filing Note: Before completing lines 2–9, see Instructions for lines 2–9 of Worksheet C. Free federal tax e filing 1 $10,000 2 Enter the taxable income from line 22 (Form 1041) 2 2,400     3 Enter the distribution deduction from line 18 (Form 1041) . Free federal tax e filing 3 0     4 Add lines 2 and 3. Free federal tax e filing 4 2,400     5 Enter exempt income received after death minus expenses allocable to exempt income. Free federal tax e filing (See Income received after date of death on page 5. Free federal tax e filing ) 5 1,000     6 Add lines 4 and 5. Free federal tax e filing 6 3,400     7 Figure the tax on line 6 using Schedule G (Form 1041). Free federal tax e filing 7 710     8 Figure the tax on line 4 using Schedule G (Form 1041). Free federal tax e filing 8 435     9 Tax on exempt income. Free federal tax e filing Subtract line 8 from line 7. Free federal tax e filing 9 275     10 Enter the total of columns (A)–(C) from line 5 of Worksheet A or line 15 of Worksheet B. Free federal tax e filing If the decedent was not required to file tax returns for the eligible tax years, enter -0-. Free federal tax e filing 10 4,268     11 Add lines 9 and 10. Free federal tax e filing 11 $4,543 12 Additional payment allowed. Free federal tax e filing If line 11 is $10,000 or more, enter -0- and stop here. Free federal tax e filing No additional amount is allowed as a tax payment. Free federal tax e filing Otherwise, subtract line 11 from line 1 and enter the result. Free federal tax e filing 12 $5,457 Note. Free federal tax e filing The amount on line 12 is allowed as a tax payment for the decedent's last tax year (usually 1995 or 2001). Free federal tax e filing Attach the computation of the additional payment allowed or a copy of this worksheet to the original or amended income tax return for the decedent's last tax year. Free federal tax e filing If filing Form 1040, include the amount from line 12 above on the “Other payments” line of the form. Free federal tax e filing Write "Sec. Free federal tax e filing 692(d)(2) Payment" and the amount to the right of the entry space. Free federal tax e filing Also indicate whether a Form 1041 is being filed for the decedent's estate. Free federal tax e filing If filing Form 1040X, include the amount from line 12 above on Form 1040X on line 15, columns (B) and (C). Free federal tax e filing Write “Sec. Free federal tax e filing 692(d)(2) Payment” on the dotted line to the left of the entry space. Free federal tax e filing Worksheet C Illustrated. Free federal tax e filing Amount Treated as Tax Payment for Decedent's Last Tax Year Caution: The decedent is entitled to minimum relief of $10,000. Free federal tax e filing Complete this worksheet only if the total tax forgiven for all eligible years is less than $10,000. Free federal tax e filing 1 Minimum relief amount. Free federal tax e filing Note: Before completing lines 2–9, see Instructions for lines 2–9 of Worksheet C. Free federal tax e filing 1 $10,000 2 Enter the taxable income from line 22 (Form 1041) 2 2,400     3 Enter the distribution deduction from line 18 (Form 1041) . Free federal tax e filing 3 0     4 Add lines 2 and 3. Free federal tax e filing 4 2,400     5 Enter exempt income received after death minus expenses allocable to exempt income. Free federal tax e filing (See Income received after date of death on page 5. Free federal tax e filing ) 5 1,000     6 Add lines 4 and 5. Free federal tax e filing 6 3,400     7 Figure the tax on line 6 using Schedule G (Form 1041). Free federal tax e filing 7 710     8 Figure the tax on line 4 using Schedule G (Form 1041). Free federal tax e filing 8 435     9 Tax on exempt income. Free federal tax e filing Subtract line 8 from line 7. Free federal tax e filing 9 275     10 Enter the total of columns (A)–(C) from line 5 of Worksheet A or line 15 of Worksheet B. Free federal tax e filing If the decedent was not required to file tax returns for the eligible tax years, enter -0-. Free federal tax e filing 10 4,268     11 Add lines 9 and 10. Free federal tax e filing 11 $4,543 12 Additional payment allowed. Free federal tax e filing If line 11 is $10,000 or more, enter -0- and stop here. Free federal tax e filing No additional amount is allowed as a tax payment. Free federal tax e filing Otherwise, subtract line 11 from line 1 and enter the result. Free federal tax e filing 12 $5,457 Note. Free federal tax e filing The amount on line 12 is allowed as a tax payment for the decedent's last tax year (usually 1995 or 2001). Free federal tax e filing Attach the computation of the additional payment allowed or a copy of this worksheet to the original or amended income tax return for the decedent's last tax year. Free federal tax e filing If filing Form 1040, include the amount from line 12 above on the “Other payments” line of the form. Free federal tax e filing Write "Sec. Free federal tax e filing 692(d)(2) Payment" and the amount to the right of the entry space. Free federal tax e filing Also indicate whether a Form 1041 is being filed for the decedent's estate. Free federal tax e filing If filing Form 1040X, include the amount from line 12 above on Form 1040X on line 15, columns (B) and (C). Free federal tax e filing Write “Sec. Free federal tax e filing 692(d)(2) Payment” on the dotted line to the left of the entry space. Free federal tax e filing Additional Worksheets The following additional worksheets are provided for your convenience. Free federal tax e filing Worksheet A. Free federal tax e filing Figuring the Tax To Be Forgiven (For Decedents Who Filed a Return as Single, Married Filing Separately, Head of Household, or Qualifying Widow(er))         (A) First Eligible Year (1994 or 2000) (B) Second Eligible Year (1995 or 2001) (C) Third Eligible Year (1996 or 2002) 1 Enter the years eligible for tax forgiveness. Free federal tax e filing 1       2 Enter the total tax from the decedent's income tax return. Free federal tax e filing See Table 1 on page 5 for the line number for years before 2002. Free federal tax e filing 2       3 Enter the following taxes, if any, shown on the decedent's income tax return. Free federal tax e filing (These taxes are not eligible for forgiveness. Free federal tax e filing )           a Self-employment tax. Free federal tax e filing 3a         b Social security and Medicare tax on tip income not reported to employer. Free federal tax e filing 3b         c Tax on excess contributions to IRAs, Coverdell education savings accounts (formerly Ed IRAs), or Archer MSAs (formerly medical savings accounts). Free federal tax e filing 3c         d Tax on excess accumulation in qualified retirement plans. Free federal tax e filing 3d         e Household employment taxes. Free federal tax e filing 3e         f Uncollected social security and Medicare or RRTA tax on tips or group-term life insurance. Free federal tax e filing 3f         g Tax on golden parachute payments. Free federal tax e filing 3g       4 Add lines 3a through 3g. Free federal tax e filing 4       5 Tax to be forgiven. Free federal tax e filing Subtract line 4 from line 2. Free federal tax e filing 5       Note. Free federal tax e filing If the total of columns (A), (B), and (C) of line 5 (including any amounts shown on line 15 of Worksheet B) is less than $10,000, also complete Worksheet C. Free federal tax e filing Attach the computation of the tax to be forgiven or a copy of this worksheet to the decedent's final income tax return or amended tax return (Form 1040X) for each year listed on line 1. Free federal tax e filing If filing Form 1040X for an eligible year, enter the amount from line 5 above on Form 1040X in column B of line 10 as a decrease in tax. Free federal tax e filing The IRS will determine the amount to be refunded. Free federal tax e filing Worksheet A. Free federal tax e filing Figuring the Tax To Be Forgiven (For Decedents Who Filed a Return as Single, Married Filing Separately, Head of Household, or Qualifying Widow(er))         (A) First Eligible Year (1994 or 2000) (B) Second Eligible Year (1995 or 2001) (C) Third Eligible Year (1996 or 2002) 1 Enter the years eligible for tax forgiveness. Free federal tax e filing 1       2 Enter the total tax from the decedent's income tax return. Free federal tax e filing See Table 1 on page 5 for the line number for years before 2002. Free federal tax e filing 2       3 Enter the following taxes, if any, shown on the decedent's income tax return. Free federal tax e filing (These taxes are not eligible for forgiveness. Free federal tax e filing )           a Self-employment tax. Free federal tax e filing 3a         b Social security and Medicare tax on tip income not reported to employer. Free federal tax e filing 3b         c Tax on excess contributions to IRAs, Coverdell education savings accounts (formerly Ed IRAs), or Archer MSAs (formerly medical savings accounts). Free federal tax e filing 3c         d Tax on excess accumulation in qualified retirement plans. Free federal tax e filing 3d         e Household employment taxes. Free federal tax e filing 3e         f Uncollected social security and Medicare or RRTA tax on tips or group-term life insurance. Free federal tax e filing 3f         g Tax on golden parachute payments. Free federal tax e filing 3g       4 Add lines 3a through 3g. Free federal tax e filing 4       5 Tax to be forgiven. Free federal tax e filing Subtract line 4 from line 2. Free federal tax e filing 5       Note. Free federal tax e filing If the total of columns (A), (B), and (C) of line 5 (including any amounts shown on line 15 of Worksheet B) is less than $10,000, also complete Worksheet C. Free federal tax e filing Attach the computation of the tax to be forgiven or a copy of this worksheet to the decedent's final income tax return or amended tax return (Form 1040X) for each year listed on line 1. Free federal tax e filing If filing Form 1040X for an eligible year, enter the amount from line 5 above on Form 1040X in column B of line 10 as a decrease in tax. Free federal tax e filing The IRS will determine the amount to be refunded. Free federal tax e filing Worksheet B. Free federal tax e filing Figuring the Tax To Be Forgiven (For Decedents Who Filed a Joint Return)       (A) First Eligible Year (1994 or 2000) (B) Second Eligible Year (1995 or 2001) (C) Third Eligible Year (1996 or 2002) 1 Enter the years eligible for forgiveness. Free federal tax e filing 1       2 Enter the decedent's taxable income. Free federal tax e filing Figure taxable income as if a separate return had been filed. Free federal tax e filing See the instructions. Free federal tax e filing 2       3 Enter the decedent's total tax. Free federal tax e filing See the instructions. Free federal tax e filing 3       4 Enter the total, if any, of the decedent's taxes not eligible for forgiveness. Free federal tax e filing See the instructions. Free federal tax e filing 4       5 Subtract line 4 from line 3. Free federal tax e filing 5       6 Enter the surviving spouse's taxable income. Free federal tax e filing Figure taxable income as if a separate return had been filed. Free federal tax e filing See the instructions. Free federal tax e filing 6       7 Enter the surviving spouse's total tax. Free federal tax e filing See the instructions. Free federal tax e filing 7       8 Enter the total, if any, of the surviving spouse's taxes listed in the instructions for line 4. Free federal tax e filing 8       9 Subtract line 8 from line 7. Free federal tax e filing 9       10 Add lines 5 and 9. Free federal tax e filing 10       11 Enter the total tax from the joint return. Free federal tax e filing See Table 1 on page 5 for the line number for years before 2002. Free federal tax e filing 11       12 Add lines 4 and 8. Free federal tax e filing 12       13 Subtract line 12 from line 11. Free federal tax e filing 13       14 Divide line 5 by line 10. Free federal tax e filing Enter the result as a decimal. Free federal tax e filing 14       15 Tax to be forgiven. Free federal tax e filing Multiply line 13 by line 14 and enter the result. Free federal tax e filing 15       Note. Free federal tax e filing If the total of columns (A), (B), and (C) of line 15 (including any amounts shown on line 5 of Worksheet A) is less than $10,000, also complete Worksheet C. Free federal tax e filing Attach the computation of the tax to be forgiven or a copy of this worksheet to the decedent's final income tax return or amended tax return (Form 1040X) for each year listed on line 1. Free federal tax e filing If filing Form 1040X for an eligible year, enter the amount from line 15 above on Form 1040X in column B of line 10 as a decrease in tax. Free federal tax e filing The IRS will determine the amount to be refunded. Free federal tax e filing Worksheet B. Free federal tax e filing Figuring the Tax To Be Forgiven (For Decedents Who Filed a Joint Return)       (A) First Eligible Year (1994 or 2000) (B) Second Eligible Year (1995 or 2001) (C) Third Eligible Year (1996 or 2002) 1 Enter the years eligible for forgiveness. Free federal tax e filing 1       2 Enter the decedent's taxable income. Free federal tax e filing Figure taxable income as if a separate return had been filed. Free federal tax e filing See the instructions. Free federal tax e filing 2       3 Enter the decedent's total tax. Free federal tax e filing See the instructions. Free federal tax e filing 3       4 Enter the total, if any, of the decedent's taxes not eligible for forgiveness. Free federal tax e filing See the instructions. Free federal tax e filing 4       5 Subtract line 4 from line 3. Free federal tax e filing 5       6 Enter the surviving spouse's taxable income. Free federal tax e filing Figure taxable income as if a separate return had been filed. Free federal tax e filing See the instructions. Free federal tax e filing 6       7 Enter the surviving spouse's total tax. Free federal tax e filing See the instructions. Free federal tax e filing 7       8 Enter the total, if any, of the surviving spouse's taxes listed in the instructions for line 4. Free federal tax e filing 8       9 Subtract line 8 from line 7. Free federal tax e filing 9       10 Add lines 5 and 9. Free federal tax e filing 10       11 Enter the total tax from the joint return. Free federal tax e filing See Table 1 on page 5 for the line number for years before 2002. Free federal tax e filing 11       12 Add lines 4 and 8. Free federal tax e filing 12       13 Subtract line 12 from line 11. Free federal tax e filing 13       14 Divide line 5 by line 10. Free federal tax e filing Enter the result as a decimal. Free federal tax e filing 14       15 Tax to be forgiven. Free federal tax e filing Multiply line 13 by line 14 and enter the result. Free federal tax e filing 15       Note. Free federal tax e filing If the total of columns (A), (B), and (C) of line 15 (including any amounts shown on line 5 of Worksheet A) is less than $10,000, also complete Worksheet C. Free federal tax e filing Attach the computation of the tax to be forgiven or a copy of this worksheet to the decedent's final income tax return or amended tax return (Form 1040X) for each year listed on line 1. Free federal tax e filing If filing Form 1040X for an eligible year, enter the amount from line 15 above on Form 1040X in column B of line 10 as a decrease in tax. Free federal tax e filing The IRS will determine the amount to be refunded. Free federal tax e filing Worksheet C. Free federal tax e filing Amount Treated as Tax Payment for Decedent's Last Tax Year Caution: The decedent is entitled to minimum tax forgiveness of $10,000. Free federal tax e filing Complete this worksheet only if the total tax forgiven for all eligible years is less than $10,000. Free federal tax e filing 1 Minimum tax forgiveness. Free federal tax e filing Note. Free federal tax e filing Before completing lines 2–9, see Instructions for lines 2–9 of Worksheet C. Free federal tax e filing 1 $10,000 2 Enter the taxable income from line 22 (Form 1041) 2       3 Enter the distribution deduction from line 18 (Form 1041) . Free federal tax e filing 3       4 Add lines 2 and 3. Free federal tax e filing 4       5 Enter exempt income received after death minus expenses allocable to exempt income. Free federal tax e filing (See Income received after date of death on page 5. Free federal tax e filing ) 5       6 Add lines 4 and 5. Free federal tax e filing 6       7 Figure the tax on line 6 using Schedule G (Form 1041). Free federal tax e filing 7       8 Figure the tax on line 4 using Schedule G (Form 1041). Free federal tax e filing 8       9 Tax on exempt income. Free federal tax e filing Subtract line 8 from line 7. Free federal tax e filing 9       10 Enter the total of columns (A)–(C) from line 5 of Worksheet A or line 15 of Worksheet B. Free federal tax e filing If the decedent was not required to file tax returns for the eligible tax years, enter -0-. Free federal tax e filing 10       11 Add lines 9 and 10. Free federal tax e filing 11   12 Additional payment allowed. Free federal tax e filing If line 11 is $10,000 or more, enter -0- and stop here. Free federal tax e filing No additional amount is allowed as a tax payment. Free federal tax e filing Otherwise, subtract line 11 from line 1 and enter the result. Free federal tax e filing 12   Note. Free federal tax e filing The amount on line 12 is allowed as a tax payment for the decedent's last tax year (usually 1995 or 2001). Free federal tax e filing Attach the computation of the additional payment allowed or a copy of this worksheet to the original or amended income tax return for the decedent's last tax year. Free federal tax e filing If filing Form 1040, include the amount from line 12 above on the “Other payments” line of the form. Free federal tax e filing Write "Sec. Free federal tax e filing 692(d)(2) Payment" and the amount to the right of the entry space. Free federal tax e filing Also indicate whether a Form 1041 is being filed for the decedent's estate. Free federal tax e filing If filing Form 1040X, include the amount from line 12 above on Form 1040X on line 15, columns (B) and (C). Free federal tax e filing Write “Sec. Free federal tax e filing 692(d)(2) Payment” on the dotted line to the left of the entry space. Free federal tax e filing Worksheet C. Free federal tax e filing Amount Treated as Tax Payment for Decedent's Last Tax Year Caution: The decedent is entitled to minimum tax forgiveness of $10,000. Free federal tax e filing Complete this worksheet only if the total tax forgiven for all eligible years is less than $10,000. Free federal tax e filing 1 Minimum tax forgiveness. Free federal tax e filing Note. Free federal tax e filing Before completing lines 2–9, see Instructions for lines 2–9 of Worksheet C. Free federal tax e filing 1 $10,000 2 Enter the taxable income from line 22 (Form 1041) 2       3 Enter the distribution deduction from line 18 (Form 1041) . Free federal tax e filing 3       4 Add lines 2 and 3. Free federal tax e filing 4       5 Enter exempt income received after death minus expenses allocable to exempt income. Free federal tax e filing (See Income received after date of death on page 5. Free federal tax e filing ) 5       6 Add lines 4 and 5. Free federal tax e filing 6       7 Figure the tax on line 6 using Schedule G (Form 1041). Free federal tax e filing 7       8 Figure the tax on line 4 using Schedule G (Form 1041). Free federal tax e filing 8       9 Tax on exempt income. Free federal tax e filing Subtract line 8 from line 7. Free federal tax e filing 9       10 Enter the total of columns (A)–(C) from line 5 of Worksheet A or line 15 of Worksheet B. Free federal tax e filing If the decedent was not required to file tax returns for the eligible tax years, enter -0-. Free federal tax e filing 10       11 Add lines 9 and 10. Free federal tax e filing 11   12 Additional payment allowed. Free federal tax e filing If line 11 is $10,000 or more, enter -0- and stop here. Free federal tax e filing No additional amount is allowed as a tax payment. Free federal tax e filing Otherwise, subtract line 11 from line 1 and enter the result. Free federal tax e filing 12   Note. Free federal tax e filing The amount on line 12 is allowed as a tax payment for the decedent's last tax year (usually 1995 or 2001). Free federal tax e filing Attach the computation of the additional payment allowed or a copy of this worksheet to the original or amended income tax return for the decedent's last tax year. Free federal tax e filing If filing Form 1040, include the amount from line 12 above on the “Other payments” line of the form. Free federal tax e filing Write "Sec. Free federal tax e filing 692(d)(2) Payment" and the amount to the right of the entry space. Free federal tax e filing Also indicate whether a Form 1041 is being filed for the decedent's estate. Free federal tax e filing If filing Form 1040X, include the amount from line 12 above on Form 1040X on line 15, columns (B) and (C). Free federal tax e filing Write “Sec. Free federal tax e filing 692(d)(2) Payment” on the dotted line to the left of the entry space. Free federal tax e filing How To Get Tax Help Special IRS assistance. Free federal tax e filing   The IRS is providing special help for those affected by the terrorist attacks, as well as survivors and personal representatives of the victims. Free federal tax e filing We have set up a special toll-free number for people who may have trouble filing or paying their taxes because they were affected by the terrorist attacks, or who have other tax issues related to the attacks. Free federal tax e filing Call 1–866–562–5227 Monday through Friday In English–7 a. Free federal tax e filing m. Free federal tax e filing to 10 p. Free federal tax e filing m. Free federal tax e filing local time In Spanish–8 a. Free federal tax e filing m. Free federal tax e filing to 9:30 p. Free federal tax e filing m. Free federal tax e filing local time   The IRS web site at www. Free federal tax e filing irs. Free federal tax e filing gov has notices and other tax relief information. Free federal tax e filing Check it periodically for any new guidance or to see if Congress has enacted new legislation. Free federal tax e filing   Business taxpayers affected by the attacks can e-mail their questions to corp. Free federal tax e filing disaster. Free federal tax e filing relief@irs. Free federal tax e filing gov. Free federal tax e filing   For current information on Presidentially declared disaster areas, check the Federal Emergency Management Agency Web site at www. Free federal tax e filing fema. Free federal tax e filing gov. Free federal tax e filing Other help from the IRS. Free federal tax e filing   You can get help with unresolved tax issues, order free publications and forms, ask tax questions, and get more information from the IRS in several ways. Free federal tax e filing By selecting the method that is best for you, you will have quick and easy access to tax help. Free federal tax e filing Contacting your Taxpayer Advocate. Free federal tax e filing   If you have attempted to deal with an IRS problem unsuccessfully, you should contact your Taxpayer Advocate. Free federal tax e filing   The Taxpayer Advocate represents your interests and concerns within the IRS by protecting your rights and resolving problems that have not been fixed through normal channels. Free federal tax e filing While Taxpayer Advocates cannot change the tax law or make a technical tax decision, they can clear up problems that resulted from previous contacts and ensure that your case is given a complete and impartial review. Free federal tax e filing   To contact your Taxpayer Advocate: Call the Taxpayer Advocate at 1–877–777–4778. Free federal tax e filing Call the IRS at 1–800–829–1040. Free federal tax e filing Call, write, or fax the Taxpayer Advocate office in your area. Free federal tax e filing Call 1–800–829–4059 if you are a TTY/TDD user. Free federal tax e filing   For more information, see Publication 1546, The Taxpayer Advocate Service of the IRS. Free federal tax e filing Free tax services. Free federal tax e filing   To find out what services are available, get Publication 910, Guide to Free Tax Services. Free federal tax e filing It contains a list of free tax publications and an index of tax topics. Free federal tax e filing It also describes other free tax information services, including tax education and assistance programs and a list of TeleTax topics. Free federal tax e filing Personal computer. Free federal tax e filing With your personal computer and modem, you can access the IRS on the Internet at www. Free federal tax e filing irs. Free federal tax e filing gov. Free federal tax e filing While visiting our web site, you can: Find answers to questions you may have. Free federal tax e filing Download forms and publications or search for forms and pub
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Many people sell items on the Internet through auctions, classified ads, news groups, and chat rooms.

Know your seller. If you don't, do some research.

  • Check how the auction works. Can you cancel a bid? Don't assume that the rules used by one auction site apply to another. Some sites offer step-by-step instructions that will take you through the bidding process.
  • Find out what protections you have. Does the site provide free insurance or guarantees for items that are not delivered or not what the seller claimed?
  • Follow the strategies used in any auction. Learn the value of the item you are bidding on. Establish your top price and stick to it.
  • Only bid on an item if you intend to buy. If you're the highest bidder, you have bought it. Auction companies often bar those who back out of a deal from future bidding.
  • If the seller can't accept payment by credit card, use an escrow service. Your money is held by a third-party until you get your purchase and approve release of your payment to the seller. There is a small fee, but the peace of mind is worth it.

Remember: if it seems too good to be true, it probably is

The Free Federal Tax E Filing

Free federal tax e filing Listed Property Table of Contents Topics - This chapter discusses: Useful Items - You may want to see: Listed Property DefinedPassenger Automobile Defined Dwelling Unit Other Property Used for Transportation Computers and Related Peripheral Equipment Predominant Use TestMeeting the Predominant Use Test Qualified Business Use Method of Allocating Use Applying the Predominant Use Test Deductions After Recovery Period Leased PropertyLessor Lessee What Records Must Be KeptAdequate Records Reporting Information on Form 4562 Deductions in Later Years Appendix Topics - This chapter discusses: Listed property defined The predominant use test What records must be kept Useful Items - You may want to see: Publication 463 Travel, Entertainment, and Gift Expenses 587 Business Use of Your Home (Including Use by Day-Care Providers) 917 Business Use of a Car 946 How To Depreciate Property Form (and Instructions) 2106–EZ Unreimbursed Employee Business Expenses 2106 Employee Business Expenses 4255 Recapture of Investment Credit 4562 Depreciation and Amortization This chapter discusses some special rules and recordkeeping requirements for listed property. Free federal tax e filing For complete coverage of the rules, including the rules concerning passenger automobiles, see Publication 946. Free federal tax e filing If listed property is not used predominantly (more than 50%) in a qualified business use as discussed inPredominant Use Test, later, the section 179 deduction is not allowable and the property must be depreciated using the straight line method. Free federal tax e filing Listed Property Defined Listed property is any of the following: Any passenger automobile (defined later), Any other property used for transportation, Any property of a type generally used for entertainment, recreation, or amusement (including photographic, phonographic, communication, and video recording equipment), Any computer and related peripheral equipment, defined later, unless it is used only at a regular business establishment and owned or leased by the person operating the establishment. Free federal tax e filing A regular business establishment includes a portion of a dwelling unit (defined later), if, and only if, that portion is used both regularly and exclusively for business as discussed in Publication 587. Free federal tax e filing Any cellular telephone (or similar telecommunication equipment) placed in service or leased in a tax year beginning after 1989. Free federal tax e filing Passenger Automobile Defined A passenger automobile is any four-wheeled vehicle made primarily for use on public streets, roads, and highways and rated at 6,000 pounds or less of unloaded gross vehicle weight (at 6,000 pounds or less of gross vehicle weight for trucks and vans). Free federal tax e filing It includes any part, component, or other item physically attached to the automobile or usually included in the purchase price of an automobile. Free federal tax e filing A passenger automobile does not include: An ambulance, hearse, or combination ambulance-hearse used directly in a trade or business, and A vehicle used directly in the trade or business of transporting persons or property for compensation or hire. Free federal tax e filing Dwelling Unit A dwelling unit is a house or apartment used to provide living accommodations in a building or structure. Free federal tax e filing It does not include a unit in a hotel, motel, inn, or other establishment where more than half the units are used on a transient basis. Free federal tax e filing Other Property Used for Transportation Other property used for transportation includes trucks, buses, boats, airplanes, motorcycles, and any other vehicles for transporting persons or goods. Free federal tax e filing Listed property does not include: Any vehicle which, by reason of its design, is not likely to be used more than a minimal amount for personal purposes, such as clearly marked police and fire vehicles, ambulances, or hearses used for those purposes, Any vehicle that is designed to carry cargo and that has a loaded gross vehicle weight over 14,000 pounds, bucket trucks (cherry pickers), cement mixers, combines, cranes and derricks, delivery trucks with seating only for the driver (or only for the driver plus a folding jump seat), dump trucks (including garbage trucks), flatbed trucks, forklifts, qualified moving vans, qualified specialized utility repair trucks, and refrigerated trucks, Any passenger bus used for that purpose with a capacity of at least 20 passengers and school buses, Any tractor or other special purpose farm vehicle, and unmarked vehicles used by law enforcement officers if the use is officially authorized, and Any vehicle, such as a taxicab, if substantially all its use is in the trade or business of providing services to transport persons or property for compensation or hire by unrelated persons. Free federal tax e filing Computers and Related Peripheral Equipment A computer is a programmable electronically activated device that: Is capable of accepting information, applying prescribed processes to the information, and supplying the results of those processes with or without human intervention, and Consists of a central processing unit with extensive storage, logic, arithmetic, and control capabilities. Free federal tax e filing Related peripheral equipment is any auxiliary machine which is designed to be controlled by the central processing unit of a computer. Free federal tax e filing Computer or peripheral equipment does not include: Any equipment which is an integral part of property which is not a computer, Typewriters, calculators, adding and accounting machines, copiers, duplicating equipment, and similar equipment, and Equipment of a kind, used primarily for the user's amusement or entertainment, such as video games. Free federal tax e filing Predominant Use Test If “listed property,” defined earlier, placed in service after June 18, 1984, is not used predominantly (more than 50%) in a qualified business use during any tax year: The section 179 deduction on the property is not allowable, and You must depreciate the property using the straight line method. Free federal tax e filing Listed property placed in service before 1987. Free federal tax e filing   For listed property placed in service before 1987, depreciate the property over the following period: Class of Property Listed Property Recovery Period 3-year property 5 years 5-year property 12 years 10-year property 25 years 18-year real property 40 years 19-year real property 40 years If you must use the above recovery periods for listed property not used predominantly in a trade or business, use the percentages from Table 16 titled Listed Property Not Used Predominantly (Other Than 18- or 19-year Real Property), and Table 17 for 18- or 19-year real property, near the end of this publication in the Appendix. Free federal tax e filing Listed property placed in service after 1986. Free federal tax e filing   For information on listed property placed in service after 1986, see Publication 946. Free federal tax e filing Meeting the Predominant Use Test Listed property meets the predominant use test for any tax year if its business use is more than 50% of its total use. Free federal tax e filing You must allocate the use of any item of listed property used for more than one purpose during the tax year among its various uses. Free federal tax e filing The percentage of investment use of listed property cannot be used as part of the percentage of qualified business use to meet the predominant use test. Free federal tax e filing However, the combined total of business and investment use is taken into account to figure your depreciation deduction for the property. Free federal tax e filing Note: Property does not stop being predominantly used in a qualified business use because of a transfer at death. Free federal tax e filing Example. Free federal tax e filing Sarah Bradley uses a home computer 50% of the time to manage her investments. Free federal tax e filing She also uses the computer 40% of the time in her part-time consumer research business. Free federal tax e filing Sarah's home computer is listed property because it is not used at a regular business establishment. Free federal tax e filing Because her business use of the computer does not exceed 50%, the computer is not predominantly used in a qualified business use for the tax year. Free federal tax e filing Because she does not meet the predominant use test, she cannot elect a section 179 deduction for this property. Free federal tax e filing Her combined rate of business/investment use for determining her depreciation deduction is 90%. Free federal tax e filing Qualified Business Use A qualified business use is any use in your trade or business. Free federal tax e filing However, it does not include: The use of property held merely to produce income (investment use), The leasing of property to any 5% owner or related person (to the point that the property is used by a 5% owner or person related to the owner or lessee of the property), The use of property as compensation for the performance of services by a 5% owner or related person, or The use of property as compensation for the performance of services by any person (other than a5% owner or related person) unless the value of the use is included in that person's gross income for the use of the property and income tax is withheld on that amount where required. Free federal tax e filing See Employees, later. Free federal tax e filing 5% owner. Free federal tax e filing   A 5% owner of a business, other than a corporation, is any person who owns more than 5% of the capital or profits interest in the business. Free federal tax e filing   A 5% owner of a corporation is any person who owns, or is considered to own: More than 5% of the outstanding stock of the corporation, or Stock possessing more than 5% of the total combined voting power of all stock in the corporation. Free federal tax e filing Related person. Free federal tax e filing   A related person is anyone related to a taxpayer as discussed under Related persons, in chapter 2 under Nonqualifying Property in Publication 946. Free federal tax e filing Entertainment Use The use of listed property for entertainment, recreation, or amusement purposes is treated as a qualified business use only to the extent that expenses (other than interest and property tax expenses) for its use are deductible as ordinary and necessary business expenses. Free federal tax e filing See Publication 463. Free federal tax e filing Leasing or Compensatory Use of Aircraft If at least 25% of the total use of any aircraft during the tax year is for a qualified business use, the leasing or compensatory use of the aircraft by a 5% owner or related person is treated as a qualified business use. Free federal tax e filing Commuting The use of a vehicle for commuting is not business use, regardless of whether work is performed during the trip. Free federal tax e filing Use of Your Passenger Automobile by Another Person If someone else uses your automobile, that use is not business use unless: That use is directly connected with your business, The value of the use is property reported by you as income to the other person and tax is withheld on the income where required, or The value of the use results in a payment of fair market rent. Free federal tax e filing Any payment to you for the use of the automobile is treated as a rent payment for 3). Free federal tax e filing Employees Any use by an employee of his or her own listed property (or listed property rented by an employee) in performing services as an employee is not business use unless: The use is for the employer's convenience, and The use is required as a condition of employment. Free federal tax e filing Use for the employer's convenience. Free federal tax e filing   Whether the use of listed property is for the employer's convenience must be determined from all the facts. Free federal tax e filing The use is for the employer's convenience if it is for a substantial business reason of the employer. Free federal tax e filing The use of listed property during the employee's regular working hours to carry on the employer's business is generally for the employer's convenience. Free federal tax e filing Use required as a condition of employment. Free federal tax e filing   Whether the use of listed property is a condition of employment depends on all the facts and circumstances. Free federal tax e filing The use of property must be required for the employee to perform duties properly. Free federal tax e filing The employer need not explicitly require the employee to use the property. Free federal tax e filing A mere statement by the employer that the use of the property is a condition of employment is not sufficient. Free federal tax e filing Example 1. Free federal tax e filing Virginia Sycamore is employed as a courier with We Deliver which provides local courier services. Free federal tax e filing She owns and uses a motorcycle to deliver packages to downtown offices. Free federal tax e filing We Deliver explicitly requires all delivery persons to own a small car or motorcycle for use in their employment. Free federal tax e filing The company reimburses delivery persons for their costs. Free federal tax e filing Virginia's use of the motorcycle is for the convenience of We Deliver and is required as a condition of employment. Free federal tax e filing Example 2. Free federal tax e filing Bill Nelson is an inspector for Uplift, a construction company with many sites in the local area. Free federal tax e filing He must travel to these sites on a regular basis. Free federal tax e filing Uplift does not furnish an automobile or explicitly require him to use his own automobile. Free federal tax e filing However, it reimburses him for any costs he incurs in traveling to the various sites. Free federal tax e filing The use of his own automobile or a rental automobile is for the convenience of Uplift and is required as a condition of employment. Free federal tax e filing Method of Allocating Use For passenger automobiles and other means of transportation, allocate the property's use on the basis of mileage. Free federal tax e filing You determine the percentage of qualified business use by dividing the number of miles the vehicle is driven for business purposes during the year by the total number of miles the vehicle is driven for all purposes (including business miles) during the year. Free federal tax e filing For other items of listed property, allocate the property's use on the basis of the most appropriate unit of time. Free federal tax e filing For example, you can determine the percentage of business use of a computer by dividing the number of hours the computer is used for business purposes during the year by the total number of hours the computer is used for all purposes (including business hours) during the year. Free federal tax e filing Applying the Predominant Use Test You must apply the predominant use test for an item of listed property each year of the recovery period. Free federal tax e filing First Recovery Year If any item of listed property is not used predominantly in a qualified business use in the year it is placed in service: The property is not eligible for a section 179 deduction, and The depreciation deduction must be figured using the straight line method. Free federal tax e filing Note: The required use of the straight line method for an item of listed property that does not meet the predominant use test is not the same as electing the straight line method. Free federal tax e filing It does not mean that you have to use the straight line method for other property in the same class as the item of listed property. Free federal tax e filing Years After the First Recovery Year If you use listed property predominantly (more than 50%) in a qualified business use in the tax year you place it in service, but not in a subsequent tax year during the recovery period, the following rules apply: Figure depreciation using the straight line method. Free federal tax e filing Do this for each year, beginning with the year you no longer use the property predominantly in a qualified business use, and Figure any excess depreciation on the property and add it to: Your gross income, and The adjusted basis of your property. Free federal tax e filing See Recapture of excess depreciation, next. Free federal tax e filing Recapture of excess depreciation. Free federal tax e filing   You must include any excess depreciation in your gross income for the first tax year the property is not predominantly used in a qualified business use. Free federal tax e filing Any excess depreciation must also be added to the adjusted basis of your property. Free federal tax e filing Excess depreciation is the excess (if any) of: The amount of depreciation allowable for the property (including any section 179 deduction claimed) for tax years before the first tax year the property was not predominantly used in a qualified business use, over The amount of depreciation that would have been allowable for those years if the property were not used predominantly in a qualified business use for the year it was placed in service. Free federal tax e filing This means you figure your depreciation using the percentages fromTable 16 or 17. Free federal tax e filing For information on investment credit recapture, see the instructions for Form 4255. Free federal tax e filing Deductions After Recovery Period When listed property (other than passenger automobiles) is used for business, investment, and personal purposes, no deduction is ever allowable for the personal use. Free federal tax e filing In tax years after the recovery period, you must determine if there is any unrecovered basis remaining before you compute the depreciation deduction for that tax year. Free federal tax e filing To make this determination, figure the depreciation for earlier tax years as if your property were used 100% for business or investment purposes, beginning with the first tax year in which some or all use is for business or investment. Free federal tax e filing See Car Used 50% or Less for Business in Publication 917. Free federal tax e filing Leased Property The limitations on cost recovery deductions apply to the rental of listed property. Free federal tax e filing The following discussion covers the rules that apply to the lessor (the owner of the property) and the lessee (the person who rents the property from the owner). Free federal tax e filing SeeLeasing a Car in Publication 917 for a discussion of leased passenger automobiles. Free federal tax e filing Lessor The limitations on cost recovery generally do not apply to any listed property leased or held for leasing by anyone regularly engaged in the business of leasing listed property. Free federal tax e filing A person is considered regularly engaged in the business of leasing listed property only if contracts for leasing of listed property are entered into with some frequency over a continuous period of time. Free federal tax e filing This determination is made on the basis of the facts and circumstances in each case and takes into account the nature of the person's business in its entirety. Free federal tax e filing Occasional or incidental leasing activity is insufficient. Free federal tax e filing For example, a person leasing only one passenger automobile during a tax year is not regularly engaged in the business of leasing automobiles. Free federal tax e filing An employer who allows an employee to use the employer's property for personal purposes and charges the employee for the use is not regularly engaged in the business of leasing the property used by the employee. Free federal tax e filing Lessee A lessee of listed property (other than passenger automobiles), must include an amount in gross income called the inclusion amount for the first tax year the property is not used predominantly in a qualified business use. Free federal tax e filing Inclusion amount for property leased before 1987. Free federal tax e filing   You determine the inclusion amount for property leased after June 18, 1984 and before 1987 by multiplying the fair market value of the property by both the average business/investment use percentage and the applicable percentage. Free federal tax e filing You can find the applicable percentages for listed property that is 5- or 10-year recovery property in Tables 19 or 20 in Appendix A of Publication 946. Free federal tax e filing   The lease term for listed property other than 18- or 19-year real property, and residential rental or nonresidential real property, includes options to renew. Free federal tax e filing For 18- or 19-year real property and residential rental or nonresidential real property that is listed property, the period of the lease does not include any option to renew at fair market value, determined at the time of renewal. Free federal tax e filing You treat two or more successive leases that are part of the same transaction (or a series of related transactions) for the same or substantially similar property as one lease. Free federal tax e filing Special rules. Free federal tax e filing   The lessee adds the inclusion amount to gross income in the next tax year if: The lease term begins within 9 months before the close of the lessee's tax year, The lessee does not use the property predominantly in a qualified business use during that portion of the tax year, and The lease term continues into the lessee's next tax year. Free federal tax e filing The lessee determines the inclusion amount by taking into account the average of the business/investment use for both tax years and the applicable percentage for the tax year the lease term begins. Free federal tax e filing   If the lease term is less than one year, the amount included in gross income is the amount that bears the same ratio to the additional inclusion amount as the number of days in the lease term bears to 365. Free federal tax e filing Maximum inclusion amount. Free federal tax e filing   The inclusion amount cannot be more than the sum of the deductible amounts of rent allocable to the lessee's tax year in which the amount must be included in gross income. Free federal tax e filing What Records Must Be Kept You cannot take any depreciation or section 179 deduction for the use of listed property (including passenger automobiles) unless you can prove business/investment use with adequate records or sufficient evidence to support your own statements. Free federal tax e filing How long to keep records. Free federal tax e filing   For listed property, records must be kept for as long as any excess depreciation can be recaptured (included in income). Free federal tax e filing Adequate Records To meet the adequate records requirement, you must maintain an account book, diary, log, statement of expense, trip sheet, or similar record or other documentary evidence that, together with the receipt, is sufficient to establish each element of an expenditure or use. Free federal tax e filing It is not necessary to record information in an account book, diary, or similar record if the information is already shown on the receipt. Free federal tax e filing However, your records should back up your receipts in an orderly manner. Free federal tax e filing Elements of Expenditure or Use The records or other documentary evidence must support: The amount of each separate expenditure, such as the cost of acquiring the item, maintenance and repair costs, capital improvement costs, lease payments, and any other expenses, The amount of each business and investment use (based on an appropriate measure, such as mileage for vehicles and time for other listed property), and the total use of the property for the tax year, The date of the expenditure or use, and The business or investment purpose for the expenditure or use. Free federal tax e filing Written documents of your expenditure or use are generally better evidence than oral statements alone. Free federal tax e filing A written record prepared at or near the time of the expenditure or use has greater value as proof of the expenditure or use. Free federal tax e filing A daily log is not required. Free federal tax e filing However, some type of record containing the elements of an expenditure or the business or investment use of listed property made at or near the time and backed up by other documents is preferable to a statement prepared later. Free federal tax e filing Timeliness The elements of an expenditure or use must be recorded at the time you have full knowledge of the elements. Free federal tax e filing An expense account statement made from an account book, diary, or similar record prepared or maintained at or near the time of the expenditure or use is generally considered a timely record if in the regular course of business: The statement is submitted by an employee to the employer, or The statement is submitted by an independent contractor to the client or customer. Free federal tax e filing For example, a log maintained on a weekly basis, which accounts for use during the week, will be considered a record made at or near the time of use. Free federal tax e filing Business Purpose Supported An adequate record of business purpose must generally be in the form of a written statement. Free federal tax e filing However, the amount of backup necessary to establish a business purpose depends on the facts and circumstances of each case. Free federal tax e filing A written explanation of the business purpose will not be required if the purpose can be determined from the surrounding facts and circumstances. Free federal tax e filing For example, a salesperson visiting customers on an established sales route will not normally need a written explanation of the business purpose of his or her travel. Free federal tax e filing Business Use Supported An adequate record contains enough information on each element of every business or investment use. Free federal tax e filing The amount of detail required to support the use depends on the facts and circumstances. Free federal tax e filing For example, a taxpayer whose only business use of a truck is to make customer deliveries on an established route can satisfy the requirement by recording the length of the route, including the total number of miles driven during the tax year and the date of each trip at or near the time of the trips. Free federal tax e filing Although an adequate record generally must be written, a record of the business use of listed property, such as a computer or automobile, can be prepared in a computer memory device using a logging program. Free federal tax e filing Separate or Combined Expenditures or Uses Each use by you is normally considered a separate use. Free federal tax e filing However, repeated uses can be combined as a single item. Free federal tax e filing Each expenditure is recorded as a separate item and not combined with other expenditures. Free federal tax e filing If you choose, however, amounts spent for the use of listed property during a tax year, such as for gasoline or automobile repairs, can be combined. Free federal tax e filing If these expenses are combined, you do not need to support the business purpose of each expense. Free federal tax e filing Instead, you can divide the expenses based on the total business use of the listed property. Free federal tax e filing Uses which can be considered part of a single use, such as a round trip or uninterrupted business use, can be accounted for by a single record. Free federal tax e filing For example, use of a truck to make deliveries at several locations which begin and end at the business premises and can include a stop at the business in between deliveries can be accounted for by a single record of miles driven. Free federal tax e filing Use of a passenger automobile by a salesperson for a business trip away from home over a period of time can be accounted for by a single record of miles traveled. Free federal tax e filing Minimal personal use (such as a stop for lunch between two business stops) is not an interruption of business use. Free federal tax e filing Confidential Information If any of the information on the elements of an expenditure or use is confidential, it does not need to be in the account book or similar record if it is recorded at or near the time of the expenditure or use. Free federal tax e filing It must be kept elsewhere and made available as support to the district director on request. Free federal tax e filing Substantial Compliance If you have not fully supported a particular element of an expenditure or use, but have complied with the adequate records requirement for the expenditure or use to the district director's satisfaction, you can establish this element by any evidence the district director deems adequate. Free federal tax e filing If you fail to establish that you have substantially complied with the adequate records requirement for an element of an expenditure or use to the district director's satisfaction, you must establish the element: By your own oral or written statement containing detailed information as to the element, and By other evidence sufficient to establish the element. Free federal tax e filing If the element is the cost or amount, time, place, or date of an expenditure or use, its supporting evidence must be direct, such as oral testimony by witnesses or a written statement setting forth detailed information about the element or the documentary evidence. Free federal tax e filing If the element is the business purpose of an expenditure, its supporting evidence can be circumstantial evidence. Free federal tax e filing Sampling You can maintain an adequate record for portions of a tax year and use that record to support your business and investment use for the entire tax year if it can be shown by other evidence that the periods for which an adequate record is maintained are representative of use throughout the year. Free federal tax e filing Loss of Records When you establish that failure to produce adequate records is due to loss of the records through circumstances beyond your control, such as through fire, flood, earthquake, or other casualty, you have the right to support a deduction by reasonable reconstruction of your expenditures and use. Free federal tax e filing Reporting Information on Form 4562 If you claim a deduction for any listed property, you must provide the requested information on page 2, Section B of Form 4562. Free federal tax e filing If you claim a deduction for any vehicle, you must answer certain questions onpage 2 of Form 4562 to provide information about the vehicle use. Free federal tax e filing Employees. Free federal tax e filing   Employees claiming the standard mileage rate or actual expenses (including depreciation) must use Form 2106 instead of Part V of Form 4562. Free federal tax e filing Employees claiming the standard mileage rate may be able to use Form 2106–EZ. Free federal tax e filing Employer who provides vehicles to employees. Free federal tax e filing   An employer who provides vehicles to employees must obtain enough information from those employees to provide the requested information onForm 4562. Free federal tax e filing   An employer who provides more than five vehicles to employees need not include any information on his or her tax return. Free federal tax e filing Instead, the employer must obtain the information from his or her employees and indicate on his or her return that the information was obtained and is being retained. Free federal tax e filing   You do not need to provide the information requested on page 2 of Form 4562 if, as an employer: You can satisfy the requirements of a written policy statement for vehicles either not used for personal purposes, or not used for personal purposes other than commuting, or You treat all vehicle use by employees as personal use. Free federal tax e filing See the instructions for Form 4562. Free federal tax e filing Deductions in Later Years When listed property is used for business, investment, and personal purposes, no deduction is allowable for its personal use either in the current year or any later tax year. Free federal tax e filing In later years, you must determine if there is any remaining unadjusted or unrecovered basis before you compute the depreciation deduction for that tax year. Free federal tax e filing In making this determination, figure the depreciation deductions for earlier tax years as if the listed property were used 100% for business or investment purposes in those years, beginning with the first tax year in which some or all of the property use is for business or investment. Free federal tax e filing For more information about deductions after the recovery period for automobiles, see Publication 917. Free federal tax e filing Appendix The following tables are for use in figuring depreciation deductions under the ACRS system. Free federal tax e filing Table 1. Free federal tax e filing 15-Year Real Property* (Other Than Low-Inclome Housing) Table 3. Free federal tax e filing Low-Income Housing* Table 6 - Table 9 Table 6 - Table 9 Table 10 - Table 13 Table 14 - Table 17 Prev  Up  Next   Home   More Online Publications